In what could only be described as a Hail Mary pass, Google has agreed to cough up $250 million over five years to fund journalism and AI research in California. This deal was announced with much fanfare, and some might say a dash of self-congratulation. But before we start throwing confetti, let’s take a closer look at what’s really going on here.

The Big (and Not So Big) Picture

On the surface, this deal looks like a lifeline for local journalism. California’s newsrooms have been on life support for years, hemorrhaging jobs and revenue as the digital era reshaped the media landscape. The fund, administered by UC Berkeley’s Graduate School of Journalism, promises to inject much-needed cash into these struggling institutions. 

It helps Google paint itself as the savior of the free press while avoiding a dreaded “link tax” that could have forced the tech giant to pay publishers for linking to their content. This brings to mind California’s Journalism Preservation Act, which proposed to make Big Tech pay for news.

But here’s the kicker: $250 million over five years sounds like a lot until you consider that Google’s ad empire rakes in over $200 billion annually. To put it bluntly, this deal is a drop in the ocean for Google — a PR move dressed up as corporate responsibility.

Why It Matters: The Real Cost of Free News

For years, publishers have watched in horror as their ad revenues dried up while Google and Meta (Facebook’s parent company) turned into digital juggernauts. The relationship between tech platforms and news publishers has always been lopsided. Publishers create the content that drives traffic, but the platforms get the lion’s share of the ad dollars. This new deal doesn’t change that dynamic; it merely delays the inevitable. 

The idea of a “link tax” has been gaining traction globally, with Australia and Canada leading the charge. In those countries, Google and Meta were initially resistant, but eventually, they caved — well, sort of. In Australia, Google opted to pay selected publishers, while Meta briefly blocked news altogether before returning to the table. In Canada, Google agreed to pay $74 million annually to keep news content in its search results, while Meta decided to go the nuclear route and block news links entirely. The global push for Big Tech to pay for news mirrors what’s happening in California.

Google’s deal with the state allows the tech behemoth to avoid the more stringent regulations that would have come with the now-shelved CJPA. The CJPA would have forced Google and other tech giants to hand percentages of their ad revenue over to news publishers. Instead, we get a voluntary fund that’s easier for Google to swallow and far less beneficial for the publishers who need it most. The CJPA could have significantly shifted the balance of power, much like similar legislation in other regions.

The AI Angle: A Trojan Horse?

Then there’s the $62.5 million earmarked for AI research. Let’s not kid ourselves — this deal might seem like a bonus, but it’s worth asking whether it is really about saving journalism. Could it be more about Google bolstering its AI capabilities under the guise of public good?  While the idea of using AI to solve “real world problems” sounds noble, including AI funding in this deal is more about securing Google’s future dominance than helping the news industry.

As Google continues refining its AI-driven search features — like its Search Generative Experience — publishers are experiencing a decrease in traffic from organic search results, directly impacting their revenue. The rise of AI in search is reshaping the landscape, with AI-powered engines like Perplexity.ai offering revenue-sharing models that starkly contrast Google’s approach. 

Google’s move to include AI in this deal is less about journalism and more about maintaining its dominance in the search market. As Scott Messer recently pointed out in his analysis of Google’s latest SEO shake-ups, Google is playing a different game altogether. The company is not optimizing for sending traffic to publishers; instead, it’s focusing on maximizing its ad revenues, often at the expense of the very content creators it claims to support.

Critics, including journalists and labor unions, have called out the deal for what it really is: a backroom agreement that benefits Google far more than it does the struggling newsrooms of California. The Media Guild of the West, representing journalists in Southern California, Arizona, and Texas, was notably excluded from the negotiations, leading them to denounce the agreement as a “shakedown.” This isn’t the first time Google has been suspected of using its financial might to navigate legislative pressures.

Connecting the Dots: What Publishers Need to Know

For publishers, this deal is a double-edged sword. On one hand, any funding is better than none, especially in an industry that’s been in a death spiral for years. On the other hand, this deal sets a dangerous precedent. By allowing Google to dictate the terms of its support for journalism, California has effectively ceded control to a tech giant with little incentive to change the status quo.

Publishers should be wary of becoming too dependent on these kinds of deals. The digital landscape is shifting rapidly, and while Google’s money might keep some newsrooms afloat for now, it won’t fix the underlying issues that have led to the decline of local journalism. With AI companies like Perplexity.ai and OpenAI entering the scene with revenue-sharing models, publishers might need to start exploring these alternative sources of revenue to stay afloat — or, maybe not. The real solutions could lean more towards finding sustainable business models that don’t rely on the whims of Silicon Valley.

The Bottom Line: Google Wins Again

So, what’s the takeaway? Google has once again managed to sidestep regulation while presenting itself as a benefactor of the public good. The $250 million might help some newsrooms in the short term, but it does little to address long-term challenges. This deal is more of a Band-Aid than a cure.

As the dust settles, it’s clear that Google got the better end of this bargain. By agreeing to a voluntary fund, the tech giant has avoided the much larger financial obligations that would have come with the CJPA. Meanwhile, California’s newsrooms are left to grapple with an uncertain future, their fate still largely in the hands of the very platforms profiting from their decline. 

In the end, this deal is a stark reminder of the power imbalance between tech platforms and the news industry. Until that changes, we’re likely to see more deals like this — ones that look good on paper but ultimately fail to address the real issues at play.

The post Google’s $250 Million ‘Gift’ to California News – Is It Really a Gift or Just a Clever Tax Dodge? appeared first on AdMonsters.

Upon proposing the bill, California Assembly member Buffy Hicks said, “The CJPA provides a lifeline for news outlets – large, small, and ethnic – by directing a portion of the ad dollars back to the print, digital, and broadcast media that bear the entire cost of gathering and reporting local news while Big Tech bears none.” 

As digital media evolves, it has become increasingly harder for news publishers to monetize their content. Many are hustling and finding ways to broaden their content and revenue opportunities. It also has not helped that big tech has monopolized news content, according to industry experts. Wicks asserted that big tech was lining their pockets from local news content and emphasized that the bill aimed to compensate the publications generating that revenue fairly. 

Not surprisingly, big tech reacted strongly to this accusation. In 2021, Google and Facebook already threatened to block news content in response to a similar legislative proposal in Australia. Now, Google is adopting a similar stance with California Legislators. 

A Deeper Dive into the CJPA

The CJPA aims to shake up online big tech operations. Under current regulations, these platforms are only required to submit terms of service reports occasionally. But if this bill passes, they’ll have to cough up monthly or quarterly cash to digital journalism providers proportional to how much advertising money they rake in. 

To receive payment, news publishers must verify their eligibility—a process that platforms can challenge. The bill also prevents platforms from punishing news providers who stand up for their rights under the new rules. It stipulates how news publishers should use the funds to invest in news journalists and their support staff.

Additionally, the bill demands accountability. News publishers must publish annual reports detailing their fees, sources, and spending. This transparency applies to both the publishers receiving the funds and the platforms footing the bill. 

Google v. CJPA

On Friday, Google announced that it has begun blocking access to news for certain individuals in California. As a result, an unspecified number of California residents will be unable to access local news through Google searches. While opinions on this bill vary, some liken the Big G’s tactics to blackmail. 

The bill’s supporters argue that while this measure would provide much-needed support to the state’s struggling news organizations, which are experiencing significant job losses, Google contends that being obligated to pay a “link tax” for facilitating access to news articles for California residents is not feasible.

Jaffer Zaidi VP, Global News Partnerships at Google argues that since the search giant assists people in discovering news stories, publishers of all sizes can expand their audiences without any expense. CJPA would disrupt this model. 

The bill would prioritize media conglomerates and hedge funds advocating for its passage. In addition, he asserts that the funds from the CJPA could be used to continue purchasing local California newspapers, depleting them of journalists, and creating additional ghost papers that function with minimal staff to generate predominantly inexpensive and subpar content. 

“To be clear, we believe CJPA undermines news in California,” said Zaidi. “We don’t take these decisions lightly and want to be transparent with California publishers, lawmakers, and our users. To avoid an outcome where all parties lose, and the California news industry is left worse off, we urge lawmakers to take a different approach.”

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