[graeme]

You are google in the analogy. Your friend is someone using google. The coffee shop is the newspaper.

Your friend (the searcher) asks you for a cafe recommendation (searches a current event on google) and you tell them the main street cafe is great and you should buy something there (google says the nyt is trustworthy and you should read their page)

The australian law says you should pay the cafe to send them customers (says google should pay the nyt to send them readers)

It’s really dumb. The cafe wants referrals: why should you pay them? Dunno australian news so I used the NYT as an example.

[mmmeff]

Thanks for breaking this down for us. I wouldn’t say it’s dumb on the surface though - I’m kind of curious to what logical extremes this approach to Google’s business model would look like. It definitely is a very different paradigm. I’m wondering how free market forces will influence rankings when business can set prices for referrals.

[graeme]

The market price for a referral is negative. Businesses would normally pay to seek them out.

The australian law seeks to flip this on its head and make you pay to recommend, and forbids you from declining to recommend.

Right now it only applies to google but the principle is insane. People actively pay google to recommend their sites: it’s the entire basis of google ads!

[throwaway2245]

> The market price for a referral is negative. Businesses would normally pay to seek them out.

By threatening to withdraw from a national market, Google seem to be saying that its business model depends on getting its own users by this mechanism.

As such, it's reasonable to believe that the true market price won't remain negative.

[SR2Z]

> By threatening to withdraw from a national market, Google seem to be saying that its business model depends on getting its own users by this mechanism.

This is not complete, I think. This law would FORCE Google to continue linking to these sites and paying them for as long as Google did business in Australia.

Google threatening to withdraw isn't a sign that these links are valuable to them, because they have to choose between paying to link or not doing business at all.

That this is going to be kind of a difficult choice shows that the value of THESE links is basically zero to Google. If they could keep operating in Australia while not providing links to Australian news, they would.

[graeme]

You missed a beat. Google would prefer to simply stop linking to news. But the australian law forced them to, and to divulge algo changes.

That’s why they’re leaving.