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Microsoft says it would invest in its Bing search engine to allow small businesses wanting to transfer their advertising to the platform to do so simply and with no transfer costs.Credit:James Alcock

"It’s a good principle,it makes sense,"Mr Smith toldThe Sydney Morning Herald andThe Age."We should not underestimate the value that journalism and media companies are contributing...and if there is an opportunity to transfer some of this economic value to media and news,that will make the world a better place."

The proposed code will force Google and Facebook into binding commercial agreements to pay Australian news providers for the ability to display news content in newsfeeds and search results.

Failure to do so could cost the companies fines of up to 10 per cent of annual revenues. Microsoft is not currently subject to the code,but Mr Smith said it would be prepared to sign up if it was required to and also said it had the financial muscle to afford to pay publishers.

Google has threatened to turn off its search engine and Facebook has said it would be forced to ban news in Australia due to the code which both have described as “unworkable.” But Mr Smith said Microsoft supported the concept of tech platforms paying media companies for news and would never threaten to leave the country.

"We are comfortable with a model that,frankly,reduces the revenue that is coming to the search service and increases the revenue that is going to news publishers,"he said.

Microsoft generated over $4 billion in revenue and $120 million in profit in Australia last year. It makes most of its money globally from cloud computing and from software such as Office. Bing had a 3 per cent share of the Australian search market in 2019,according to the competition regulator,compared to Google’s 95 per cent.

Treasurer Josh Frydenbergintroduced the bill to legislate the code during the final sitting week of Parliament last year,with a vote expected early this year after a Senate committee delivers its report on February 12.

Australia’s largest media companies such as Nine Entertainment Co,owner of this masthead,and News Corp are urging the government to pass the laws.

Mr Smith said he had been watching the code from a distance for some time,but he and Microsoft CEO Satya Nadella spoke with Prime Minister Scott Morrison in recent weeks due to the uncertainty surrounding Google’s future locally.

"We’re doing this in part because we recognise the importance of this issue in Australia,we’re doing this...because we have studied this legislative proposal and believe it’s thoughtful and sound,"Mr Smith said."We’re doing it in part because of these issues around democracy and frankly,we’re doing it in part,because this is a time when at least one tech company should step forward and say,‘we are committed to Australia’. We wouldn’t threaten to leave Australia any more than we would threaten to leave our own home."

Mr Morrison said earlier this week thathe was confident Microsoft would fill a gap in the market if Google followed through with its threat.

Mr Smith said the company is already working on technology that will allow small businesses to transfer their advertising to Bing with no costs.

Media companies Nine and News Corp have previously said they expect to receive between $600 million and $1 billion in revenue from Facebook and Google. Google and Facebook do not believe news content is worth this much money.

"Are we in a financial position to invest in Bing,to build it into the high quality service that Australia needs? The answer is clearly yes,"Mr Smith said."It will take a matter of months,not years for us to get to the level that it would need...to help small businesses migrate their advertising so that they can reach customers. The key to sharing the kind of money that publishers rightly are looking for is for us to grow being into a service that would generate revenue that can be shared."

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