France's war on Google hots up with new Internet advertising tax

The French Government has released a report that calls for a tax on online advertising revenue to fund subsidies for French culture. This would include subsidies for newspapers, art, music and other products struggling in the digital era. The media has dubbed it the “Google Tax” which is reasonable as the Silicon Valley search engine giant holds the dominant position for search in France. However, the report’s author says the plan would likely target other big players such as Microsoft and Yahoo (some English reports also say Facebook is included, but this is disputed by French media). (photo by mathias poujol rost)

The government commissioned the report into the wake of complaints from media companies that aggregators such as Google are getting a “free ride” on their content. The report called “creation and the Internet” was an outcome from Culture minister Frederic Mitterrand’s new baby called 'mission Zelnik'. The mission takes its name from Patrick Zelnik, CEO of independent music label Naïve, and other members include Jacques Toubon, former minister of culture and Guillaume Cerutti, CEO of Sotheby's France. While their report had 22 recommendations on such matters as increasing spending on digitising books, creating Internet portals to aggregate online content, cutting the tax for online cultural sales, and setting up bodies to ensure that artists are paid for work downloaded from the Web, it is the “Google Tax” that has hogged all the headlines.

Details are sketchy about how it will work but the idea is that France would place a tax of one or two percent on all online advertising revenue in order to raise 10 to 20 million euros. Silicon.fr (in French) wonders how online music sites would make the proposal work and says the Zelnik report proposes a move to collective management of music rights. It says the Society of Authors and Composers (SACEM) says the proposed solution only partially meets their requirements and says web2.0 services such as Youtube, Facebook and Myspace should also contribute to the scheme.

The idea has been rejected by the big internet firms. Critics say the tax would be difficult to implement and Google says it is not the right way forward as it could slow down innovation. Google claims their partnerships with publishers and content creators has distributed more than 4.2 billion euros worldwide last year. “The better way to support content creation is to find new business models that help consumers find great content and rewards artists and publishers for their work,” said Olivier Esper, senior policy manager for Google France.

The move is part of a growing French trend to shackle some of the more extreme elements of the Internet. In October France introduced legislation to cut Internet access from illegal downloaders. Under the law, a new agency will send out an e-mail warning to people found to be illegally downloading films or music. A written warning is sent for a second offense in six months and after a third offense, a judge can order a one-year Internet rights suspension or a fine. But while President Sarkozy was happy with the legislation, Reporters Without Borders called it "a serious blow to freedom of expression on the Internet."

Last month Sarkozy also took on Google over its plans to digitise the world's books. Portraying himself as a defender of French culture in the digital age, Sarkozy’s concern was that the project would “strip France of its heritage”. He has launched a counter-proposal for a French firm to scan the contents of the country’s libraries. Sarkozy’s call was echoed by Prime Minister Francois Fillon who said France would not accept another cultural industry being "threatened by looting."

It is easy to dismiss such tinkering like some do as French “cultural arrogance”. But France does have the right to take measures to ensure its vital and diverse culture is not reduced to an Anglophone add-on. Other countries are beginning to realise that the invisible hand of the US-dominated market does not necessarily lead to good outcomes and local culture is threatened by this as much as local economies. While Google’s ambitions are, in the main, admirable, France is right to hold up its hand and question its outcomes, if not its motives. If being digital means being democratic, then others should have a part to play in the brave new world, not to mention have access to Google’s enormous profits. If the levy puts an end to “enrichment without any limit or compensation”, it will be no bad thing.

Guinness at 250

Guinness celebrated its 250th anniversary with a party in four countries on the weekend. Festivities were at their peak in the beer’s spiritual home Dublin on Thursday, but the anniversary was also celebrated with concerts in Lagos, Kuala Lumpur, and New York. On 24 September 1759, Arthur Guinness signed a 9,000 year lease on the St James's Gate brewery in Dublin and began a beer brand that is the best known in the world. The anniversary party kicked off at 5.59 pm (17:59) in Dublin with a toast to Arthur Guinness, before carrying on long into the night in the other cities (photo of McDaids of Dublin by Derek Barry).

One of the reasons for Guinness’s worldwide success is the quality and quantity of its advertising. Britain’s World War One government can take some of the credit. It passed legislation to reduce the alcoholic strength of beers to promote the war effort. Guinness was hurt more than most by this as it needed the strength to preserve the quality of its extra stout. Guinness consumption decreased so badly by the mid 1920s, the company hired SH Benson advertising agency to turn it around. Benson toured Dublin pubs where most people said they drank it because “Guinness is Good for You”. They also asked thousands of British doctors who confirmed that the beer was a panacea for any ailment under the sun.

While the success of the subsequent campaign was legendary, Guinness’s health claims continued to be argued throughout the years. The company is now careful to make any medical claims for its drinks. It has not been able to use the “Guinness is Good for You” slogan since the 1960s and it has not appeared on a poster since 1937. However 2003 research from the University of Wisconsin found that a pint of Guinness at mealtimes is good for the heart, unlike a pint of lager. It found that Guinness was full of flavonoids (also found in dark fruits and berries as well as red wine and chocolate) which reduce damage to the lining of arteries.

But Guinness is more than about health. In 2004, a British survey named the Guinness can widget as the greatest technological invention of the last 40 years. It was invented in the 1980s by a Guinness brewer named Peter Hildebrand who created a jet of foam instead of a jet of air inside a can. The plastic molded device that sits on the top of each can with a small amount of beer and nitrogen, trapped in the widget. When the can is opened, the nitrogen is forced out through the beer, which creates the creamy head. The resulting Draught Guinness in Cans saw the brand take off again in Britain and had the side effect of increasing pub sales too.

Guinness is now brewed in almost 50 countries, with ten million glasses drunk around the world every day. It is made from four natural ingredients: barley, water, hops and yeast. Its dark colour and distinctive taste come from the roast barley. The Guinness family have not been directly involved in the management of the company since 1992 although they retain a financial interest in the business. In 1998 Guinness merged with Grand Metropolitan to form Diageo, now the largest drinks company in the world. Among the brands owned by Diageo are Smirnoff, Baileys, Johnny Walker, J&B, Gordon’s, Captain Morgan, Bushmills and Bundaberg Rum.

The background of Arthur Guinness is shrouded in mystery. Although a Protestant, he appropriated the coat of arms from an aristocratic Catholic family named Magennis. Through this sleight of hand, it allowed his family to inherit the title of Earl of Iveagh which gave later family members great prestige. Guinness began in 1759 by brewing several beers and ales at St James Gate in Dublin. On a visit to London he saw porters enjoying a new drink which was a mixture of beer and ale and named after their occupation. When porter was introduced to Ireland, Guinness decided to beat the British at their own game and brewed his own version. It took decades to establish but he eventually abandoned all his other products to concentrate on the porter he named after himself.

He exported the first shipment of Guinness to England as early as 1769 but the stout did not travel well. By the 1830s British factories had taken over the bottling and distribution and helped turn it into an international brand. By the 1890s, Guinness began to get serious with its brand and insisted all its products had uniform labelling and trademarks. By then, the Guinness brewery in Dublin was the largest in the world, and the company, Arthur Guinness and Sons was floated on the London Stock Exchange. But it wasn’t until 1950 that Guinness gained control of its global export business. They had immediate results and increased sales of its export product from 35,000 barrels to 300,000 barrels in ten years.

The name Guinness remains indelibly linked to Ireland in general, and Dublin in particular (rebel city Cork prefers Murphy’s stout or Beamish). When renowned writer and frequent Guinness drinker Brendan Behan was asked “hasn’t Guinness been good to the people of Dublin?” he supposedly replied “haven’t the people of Dublin been good to Guinness.”

But Behan left unanswered the question whether Guinness taste better in Dublin than anywhere else. This writer is one of the many who think it does (for what its worth, my favourite Guinness pub is Mulligans of Poolbeg Street). But as Mark Griffiths writes in “Guinness is Guinness”, I and countless others are probably wrong. He quotes Guinness Ireland Brand Controller Mark Ody who says it is a myth, up to a point. “A pint in Dublin might not be a week old [whereas] in England it can be two months in the chain,” he said. “It’s pure myth and speculation – but fresh is fresh is fresh”. No matter, wherever you are having a Guinness this weekend, enjoy. Here’s to the next 250 years. Sláinte go léir.

Google launches Fast Flip as first response to content pay plans

Google released Fast Flip to the world today to mixed reviews. Many reviewers saw it as a throwback to earlier ways of accessing information while others praised it for exactly the same reason. Silicon Republic said Google has initially partnered with three dozen major publishers, including the New York Times, the Atlantic, the Washington Post, Salon, Fast Company, ProPublica and Newsweek to provide content in fast-loading newspaper or magazine style. They saw it as a way of a good way of avoiding waiting for content rich sites to load when all users want to do is “skim through the paper”.

Meanwhile over at Online Journalism Blog, Paul Bradshaw calls it “an analogue-mindset concept” that will further weaken the news sites that serve it. Google will run ads alongside the Fast Flip articles and will give an undisclosed share of the profits to the news providers. But Bradshaw says that Fast Flip screen shots may be sufficient for a lot of users who will no longer click through to the sites. This may be particularly true when users are on the run - Joshua Gans says its sideways scrolling motion works better on the iPhone than on a computer.

Webware agreed with Bradshaw that it would take advertising away from publishers but called Fast Flip a “platypus of news readers”. The author said it was an intermediate online form which recreated the experience of reading microfiche. “Fast Flip is a good solution for putting a magazine or newspaper online, and it makes scanning even a more modern Web feed really fast,” he said. “But it still feels forced.”

Perhaps it has been forced upon Google in reaction to news paywall plans which are gathering pace. Google have been conspicuously silent on the plans of Murdoch and others but they are surely worth watching as a party with a strong vested interest in its outcome. Google does not rely directly on subscriber services – it makes its money on advertising. In 2008 Google had revenues of $21.8 billion of which $21.1 (97 percent) was advertising. That amounted to a profit of $4.2b which at 20 percent wasn’t bad for such recession year (it is improving again in 2009).

But Google’s founders know how quickly that could change if they don’t stay ahead of the game. In his book “Linked” Albert-Laszlo Barabasi talks about how he met Larry Page in March 2000 when few people had heard of the search engine. The pair were speakers at an Internet Archives workshop in San Francisco. The event attracted an eclectic mix to hear about digital trends. Page gave a short talk about the search engine and bought his audience with a box of T-Shirts that had Google’s tag written on them: “I’m Feeling Lucky”. Barabasi says he tried out his t-shirt when he got home and also tried the search engine. He, like many others after him, became quickly addicted to Google’s product.

According to Barabasi, whose specialty is networks, Google should not have had the success it had as it violated the prediction of scale-free networks. Older sites such as Yahoo and Alta Vista had the advantage of becoming hubs quicker. But Google’s fitness for purpose gave it a commercial advantage that exponentially outweighed the disadvantage of their relative youth. To users, he says Google is easily tens of thousands of times more useful than any one web page.

Google has been busy adding to its stable of products since its t-shirt days. It offers services across a key range of products include email, images, video, blogging, RSS, maps, documents, advertising and news aggregation. With Google News the search engine behemoth faced claims of parasitical activity by the news industry. Google’s response is that it does not sell adverts on Google News, it a the major source of traffic to news websites, and publishers don’t like it they can simply turn off the flow with simple HTML script.

Margaret Simons reiterated that last point in her welcome return to blogging at The Content Makers. She says Google hasn’t broken into news sites. “The newspaper companies have allowed it in – and indeed hung out a 'welcome' sign, and they have done so because it suits their purposes,” she said. “Google has built their site traffic.” They may now decide they want to be paid to access that content but it is also highly likely that companies such as Google will opt to pay for the right to index and link to the content. In other words, Google might choose to be part of the club, and thus bring us all in. One possible way of doing that might be by linking Google News to micropayment systems.

In his book “We the Media” journalist Dan Gillmor said he was a fan of Google News even though it generally doesn’t acknowledge news content from the sphere of grassroots journalism. Google News was the brainchild of Krishna Bharat who realised after 9/11 it would be useful to see news reporting from multiple sources on a given topic assembled in one place. Bharat told Gillmor Google News has one basic rule; news requires editors and Google News is displaying what editors think is important at any given moment. Bharat saw Google News as complementary to what newspapers do. While Gillmor acknowledges it wouldn’t exist without news reporting from elsewhere, he said in 2006 it could become the front page for the rest of us.

From a distance of three years hindsight, that hasn’t yet happened (though it is being increasingly wrapped into products such as iGoogle). But perhaps the announcement of the new product today may yet prove Gillmor right. Fast Flip is a more visual representation of Google News. It also seems to tap into the “tabbed browsing” zeitgeist and as Gans says, is likely to prove especially popular on cell phones. Fast Flip may indeed be a platypus, but it is likely that higher-order products won’t take long to evolve.

Clutter's underbelly: SBS and advertising

I’m trying hard to enjoy the new second series of Underbelly on Channel Nine but am finding the number of ads are making it almost unwatchable. As a general rule, I avoid watching the free-to-air commercial channels live - their ad breaks are too destructive to the momentum of any program. So I pre-recorded Underbelly. But even then, I was annoyed by the number of times I had to fast-forward through the clutter of fifteen second ads. Ad buying in such numbers is huge business for broadcasters, but has the potential to destroy audience by over-saturation.

Advertisers themselves are aware of the problem. The dilemma is that few of them are prepared to pay premiums of up to 40 per cent to ensure fewer ads. Nine also admits there might be a problem but are hiding behind the early success of Underbelly’s 2.4 million audience. “We may need to take a position on the price of 15-second ads to reduce the clutter, “ Nine's network sales boss, Peter Wiltshire told the SMH. “But judging from Monday night's [ratings] performance, people are not too worried about it." The question, Peter, is whether 2.4 million will be still watching after another two or three weeks of this over-exposure.

Over at the Special Broadcasting Service (SBS), the marketers are convinced high clutter ads are counter-productive. The state owned station has regulatory limitations on how much commercial airtime and claims this makes it attractive to advertisers. Last week they launched a trade press campaign called “avoid the clutter”. The campaign urges advertisers to switch to SBS because their commercial breaks are the shortest on Australian free-to-air (excepting ABC), and therefore, claims SBS, the advertisers will “get 83% better recall and an audience that’s 45% more engaged.”

The press release does not reveal where those percentages are sourced from, but it is a clever ploy to turn a necessity into a virtue. SBS has become a much savvier commercially-aware network under managing director CEO Shaun Brown. While his innovations since taking over in 2005 (most notably introducing in-program ads) have divided the station’s audiences, he has been steadfast in his desire to reposition the station. Under his leadership, ratings have become a critical measure of the station’s performance - though they remain stuck in the five to six percent region. Nevertheless, as his publicity manager Mike Field said of him, “Brown likes numbers”.

Brown first arrived at the station two years earlier as head of television. He told the authors of “The SBS Story” that when he started he found an organisation captive to the “Anglo arthouse” camp. He criticised the station’s focus on documentaries and foreign movies. “I’ve got no problems with any of those programs, but they are not exactly defining of our charter,” said Brown in the book. Instead he wants an emphasis on locally commissioned content and a shift away from international acquisitions to meet its charter obligations.

The problem is that a major point in the charter is the need to “contribute to meeting the communications needs of Australia's multicultural society.” Firstly with radio and then with television, SBS has become the key cultural institution for ethnic communities in Australia for the last 30 years. But while movies, documentaries and sport have long been core multicultural programming on SBS TV, that type of content has been threatened by the new delivery platforms of the 2000s. New competitors in the form of Pay TV, broadband Internet, DVDs and digital TV have led to a general decline in television viewing (particularly among the young).

SBS has responded in three ways; by programming more populist, imported English language shows (Mythbusters, Top Gear, South Park), enhancing the brand’s online presence, and most crucially, giving greater prominence to advertising. Brown defends these measures by saying the channel must become more relevant “for all Australians”. As he said in his speech to the Press Club in 2007 (attachment of speech opens in document format): “How can we be relevant, justify the public expenditure and meet our Charter obligations if only a fraction of Australians are tuning in?”

The question of public expenditure becomes relevant again later this year as SBS Triennial funding comes up for renewal. The review has re-opened SBS’s whole raison d’etre. A couple of years ago, Paul Sheehan ruffled feathers when he called the station “an indulgence we don’t need”. He said the international news, sport and entertainment pay TV channels didn’t exist when SBS TV was conceived in 1979. Sheehan said the Government could raise billions by selling SBS and its digital spectrum. “SBS is now standing in the way of quality,” he said.

Brown disagrees and argues the new SBS model creates quality content. He says the advertising revenue generated by programs such as Top Gear cross-subsidises innovative locally commissioned content. For him, commercialism enhances the station’s public service mandate. But there is a tension between the two that must be negotiated. SBS’s core principles of difference and diversity remain valid. In-program ads not only increase revenue but also allow for effective cross-promotion of other SBS programs. The problem is that the station may sacrifice its distinctiveness in the search for all-encompassing advertising revenue. Perhaps the clutter argument is an acknowledgement is that less is more for a public broadcaster.

Note: article cross-posted at my new Wordpress blog