The Facebook thing?
It's hard.
In the first instance, I should say that, at the time of writing, Facebook Inc (NASDAQ: FB) has blocked access to almost all content on The Motley Fool's Australian Facebook page. So that's going to probably make me biased, even if subconsciously.
(Then again, by my reckoning the media stories are about 99-to-1 bashing Facebook for its decision, and I don't imagine that's free from conscious- or unconscious bias, either.)
On one side are the free marketeers.
By their reckoning, media proprietors are willingly posting their content on social media, without compulsion. If they don't like what Facebook is doing, they could simply stop posting.
I have a degree of sympathy with that view. After all, those same publishers have been setting terms for their journos, production houses and other suppliers on the same basis for years.
Moreover, it's a free, functioning market, and presumably the media houses are getting value in return for posting on Facebook (and elsewhere) so the intervention by government seems heavy-handed and Facebook's response also heavy-handed but perhaps not unreasonable.
On the other hand?
Facebook takes the content and makes a small (actually, large) fortune from it, often with little or no return to the creators. For example, to get a video to work well for Facebook viewers, it has to be uploaded, then Facebook inserts its own ads, making money along the way, usually without a cent to the person or organisation that posted the video.
And journalism isn't the same as the market for baked beans or toilet paper. Society has a vested interest in quality journalism; in holding governments to account, in presenting a diversity of thought and opinion, and in making sure sunlight is shone in appropriate places.
While the focus has been on the big end of town, Facebook's ban also hits the smaller, independent and regional players, too — the ones who don't have the same ad budgets, brand recognition or distribution resources.
As I said, it's hard.
On balance, I think the country is better served by ensuring media sources are available and prominent in our modern day 'town squares'. I'm not sure Facebook should have to pay for it, but I'm pretty sure we're poorer for news being unavailable on the platform.
What's interesting, of course, is that Google is taking a very different approach, having (reportedly) struck deals to pay most of the major publishers and making them part of its Google News Showcase.
(Full disclosure: I own shares in Google's parent company, Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL)).
So we get to see two very different strategies play out. They're not exactly the same as a double-blind controlled trial, but it'll be fascinating to watch.
Will Google get enough value for the money it's paying?
Will the media companies lose too many eyeballs by being off Facebook?
How will Facebook play it, knowing that other countries are almost certainly preparing to hit 'copy and paste' if the Australian Government gets the social network to blink.
And how will the government respond?
There are plenty of people who see the Feds as just doing the media companies' bidding, too. And others who fundamentally disagree.
Talk about a tangled web!
(Pun not intended, but I'll take it!)
I have to say, though, when you can manage to get The Libs, Labor, The Greens, influential businesses and the unions all on the one side — with you as Robinson Crusoe on the other — that's some impressive work!
And the business angle?
Alone, these actual and potential payments are small beer. But if they're repeated worldwide, they'll start to add up, and fast.
Of course, getting on the 'inside', with some commercial skin in the game also probably buys Google a seat at the table for any future changes, too; something I'm sure it'll be quick to remind the powers-that-be.
The large businesses are set for an unexpected but very welcome payday. Getting paid more, for something you already do, is always a nice boost — and in almost all cases will end up flowing almost completely to the bottom line (notwithstanding a government and community expectation that they continue to invest in content, accordingly).
And the smaller media businesses will no doubt be hoping that a few big deals will both soothe Facebook's issues and placate the government, so they can again use Facebook to distribute their content and continue to build and serve their audience. I've seen reports this morning that up to one-third of traffic to smaller outlets is via Facebook. Not great for media diversity.
(While we're not a traditional media company — and I don't speak on behalf of The Motley Fool when it comes to government affairs — I'm also pretty keen that we are allowed back on Facebook as soon as possible to continue to interact with our readers and members, too. Mark, if you're reading this, we'd appreciate it!)
Lastly, it's a wake-up call for businesses that had previously relied on Facebook as a major part of their corporate strategy. They weren't wrong for making hay while the sun shone, but it may have exposed some gaps, too. A recent analogy was the end of the Daigou 'suitcase' trade plied by Chinese ex-pats, which caught Blackmores Limited (ASX: BKL) out, a few years ago. (I own Blackmores shares, too.)
The same lessons also apply to investors.
Never forget to assess a business' reliance on a few, concentrated customers or suppliers. Don't arbitrarily avoid such businesses — they can be very successful — but understand those risks so you can invest accordingly.
And understand the potential for regulatory changes, too. They can hurt (or help).
Sometimes it makes sense to avoid these businesses. Other times, it might impact position sizing in your portfolio, or the way you think about which other companies to include in that portfolio, to mitigate those risks.
And remember not to think about diversification just in terms of product or industry. Think about changes in, say, regulations that might impact otherwise unrelated industries, or changes in currencies, consumer behaviour or interest rates.
In short, break down your current and potential shareholdings into their component parts, and see which factors they have in common and which are different.
That'll best help you sail these sometimes stormy seas.
And that's something we can all, ahem, Like.
Fool on!
