In The Grand Deflection category, mark your calendars: Where were you the first time you heard the word “tech lash”? They are the spin they’ve been waiting for.
Facebook hires former senior government officials to lobby for Facebook to use its tools for more surveillance capitalism by roiling against the surveillance state that uses their tools to perfect the totalitarian state.
Welcome to The Party.
[Sir Nick Clegg t]he former deputy prime minister [and now lobbyist for Facebook] has said the social network plans to set up an independent oversight board to which people can appeal against content decisions made by Facebook. [But wait…they’re a platform…they’re a publisher…they’re a platform….]
He also defended the company, saying it was the victim of a “tech lash”.
For years, Facebook gave some of the world’s largest technology companies more intrusive access to users’ personal data than it has disclosed, effectively exempting those business partners from its usual privacy rules, according to internal records and interviews.
The special arrangements are detailed in hundreds of pages of Facebook documents obtained by The New York Times. The records, generated in 2017 by the company’s internal system for tracking partnerships, provide the most complete picture yet of the social network’s data-sharing practices. They also underscore how personal data has become the most prized commodity of the digital age, traded on a vast scale by some of the most powerful companies in Silicon Valley and beyond.
The exchange was intended to benefit everyone. Pushing for explosive growth, Facebook got more users, lifting its advertising revenue. Partner companies acquired features to make their products more attractive. Facebook users connected with friends across different devices and websites. But Facebook also assumed extraordinary power over the personal information of its 2.2 billion users — control it has wielded with little transparency or outside oversight.
The social network allowed Microsoft’s Bing search engine to see the names of virtually all Facebook users’ friends without consent, the records show, and gave Netflix and Spotify the ability to read Facebook users’ private messages.
The biggest story of 2017? To my mind, there is no contest — the broad emergence of an awareness that the irresponsibility masquerading as Internet freedom represented a threat to global societies and to cherished aspects of our humanity, and that a course correction was badly needed.
While recognition of the fact that rewarding lack of accountability would likely incentivize anti-social and illegal conduct took longer than it should have, such an awareness came to fruition throughout 2017. Whether motivated by concerns about sex trafficking or the prevalence of other internet-enabled crimes, fake news, foreign government interference in elections, monopoly or monopsony power, or the perceived political or cultural biases of platforms, the question at the end of 2017 wasn’t whether the current legal framework for platform responsibility should be amended, but how.
It became clear that the twin pillars upholding the current lack of accountability in the internet ecosystem — Section 230 of the Communications Decency Act and Section 512 of the DMCA, each of which was adopted at the dawn of the commercial internet, would need to be reexamined and a new framework established.
Facebook pays no royalties for the music that gives significant value to the platform. That’s often a surprising proposition for artists and songwriters, much less the general public.
Yet it is true—hitmakers and new artists, pros and amateurs alike do not get a penny from Facebook and the company doesn’t even attempt to license their work. Why should a multibillion dollar multinational corporation that anchors a large piece of the Internet economy and whose founder is planning on running for President of the United States get to pay music makers in exposure bucks?
The answer is that Facebook, like YouTube and many other user-generated content platforms hide behind the legacy DMCA “safe harbor” and its nonnegotiable, unconscionable, adhesion contract that controls the use of its platform.
Rumor has it that Facebook is evidently coming to the table and is in at least semi-active negotiations with at least some labels and publishers.
One may well ask what took so long—but if it were not for Universal Music Group’s pursuit of Facebook’s infringements through DMCA notices, it’s likely that Facebook would be blithely rolling on its monopolist juggernaut.
On the other hand, this is actually a good time to be negotiating these deals give the Congressional scrutiny of Facebook’s involvement in the 2016 Presidential election campaigns. We have the benefit of public statements by Facebook representatives under oath regarding what they can do and what they so far refuse to do which may come in handy in licensing negotiations.
These negotiations with rights owners may result in what will seem like a very big pop of up-front cash—but is it? And whatever the number, how will that money be distributed to the artists and songwriters that make it happen?
The “Paradise Papers” reveal that Facebook took approximately $200 million of cash investment from the Kremlin. This huge chunk of cash came from the Kremlin’s VTD Bank was “funneled through DST Global”, an investment vehicle owned by oligarch Yuri Millner (known as “космонавт” loosely translated as “the spaceman”). The papers also show that Gazprom (the controversial Kremin-owned energy company) heavily funded an offshore company that partnered with DST Global in a large investment in Facebook.
A story in the Guardian from 2009 about the transactions provides insight into how the deal was structured for Facebook:
[Digital Sky Technology], run by Russian entrepreneur Yuri Milner [“the Spaceman”), has also indicated that it is willing to spend at least another $100m buying out existing Facebook shareholders as part of a plan that would allow current and former staff to sell some of their shares.
Wonder who those “current and former staff” were who got the juicy opportunity of some Gazprom funded liquidity? We do, too.
And then there’s this:
The deal represents something of a comedown for the Harvard drop-out: when Zuckerberg raised a slightly larger amount from Microsoft in late 2007, Facebook was valued at $15bn.
So this transaction was so important that Facebook’s investors approved a down round?
Zuckerberg stressed that his company did not need DST’s cash to meet his plans of reaching a cashflow positive position sometime next year. Instead, the $200m was a “buffer” against further fluctuations in the market. The deal would also give Facebook access to DST’s experience across its five social networking sites in 13 European countries.
These sites – such as Russia’s Vkontakte.ru – make money from the traditional model of online advertising but have also experimented successfully with micro-payments, allowing users to buy and sell items with the site taking a slice of the revenue, and other subscriber payment mechanisms.
“One of the things that was most interesting to me about DST’s portfolio is they have a large number of social networks and each of them monetises in different ways and all of them effectively,” said Zuckerberg. “The bottom line is each of those (sites) is doing well with a different model.”
VK.com – Russia. VKontakte, or VK.com, is the leading social networking site in Russia and Russian speaking territories and a hotbed of illegal distribution of movie, television and music files. The site’s content is popular, searching for content and then downloading it is easy, and the site supports streaming playback through embedded video players. The site is available worldwide in multiple languages, including English, and is easily one of the most visited sites in the world, with a global Alexa ranking of 23 and a local ranking of 2 in Russia. Internet service providers (ISPs) in Italy were ordered by the court of Rome to block VK.com in November 2013. VK.com had 92,640,125 unique visitors in August 2014, which was an 8% increase compared to August 2013, according to comScore World Wide data. The site operates on corporate-owned servers in Russia.
And to this day Facebook has no music licenses. It’s unclear at this point whether any of these transactions involved the Foreign Corrupt Practices Act.
So what was in it for the Russians? Reports show that these transactions may all have started in 2012 when Zuckerberg visited Russia at the invitation of then Russian Prime Minister Dmitry Medvedev.
Russian Prime Minister Dmitry Medvedev hosted an historic meeting Monday with Facebook founder Mark Zuckerberg in an effort to entice the tech-savvy entrepreneur to invest in the country’s IT industry, and perhaps lend an endorsement that would resonate with the world community. “You probably know that here in Russia we have not only oil, gas, gold, and diamonds – there is also an IT industry,” a beaming Medvedev told Zuckerberg as photographers gathered in front of the Gorki residence outside Moscow where the meeting took place. [aka Russian hackers]
“Unlike the United States and much of Europe, Russia takes pride in learning about our citizens to maintain order,” Medvedev noted. “And the government makes no pretense in saying we need Facebook to help us ‘improve’ our own social networks for the good of the people….But with the fall of critical communication services such as Pravda and Tass, and with the demolition of the People’s Ministry of Information, our ability to provide for our citizens has nearly been destroyed,” Medvedev lamented.
“We have no idea what they’re up to or how they might be struggling. During the Soviet period, everybody had jobs, homes and food on the tables. We were a culture of love; we were all comrades, brothers, sisters — because the People’s Government knew what all the people were doing and thinking and wanting. We could prevent social problems before they happened. Now, our tranquility has been replaced by an isolated, selfish free-for-all.”
Yep–Dmitry and his friend Vlad knew a good thing when they saw it.
Late last month, Mark Zuckerberg wrote a brief post on Facebook at the conclusion of Yom Kippur, asking his friends for forgiveness not just for his personal failures but also for his professional ones, especially “the ways my work was used to divide people rather than bring us together.” He was heeding the call of the Jewish Day of Atonement to take stock of the year just passed as he pledged that he would “work to do better.”
Such a somber, self-critical statement hasn’t been typical for the usually sunny Mr. Zuckerberg, who once exhorted his employees at Facebook to “move fast and break things.” In the past, why would Mr. Zuckerberg, or any of his peers, have felt the need to atone for what they did at the office? For making incredibly cool sites that seamlessly connect billions of people to their friends as well as to a global storehouse of knowledge?
Lately, however, the sins of Silicon Valley-led disruption have become impossible to ignore.
Facebook has endured a drip, drip of revelations concerning Russian operatives who used its platform to influence the 2016 presidential election by stirring up racist anger. Google had a similar role in carrying targeted, inflammatory messages during the election, and this summer, it appeared to play the heavy when an important liberal think tank, New America, cut ties with a prominent scholar who is critical of the power of digital monopolies. Some within the organization questioned whether he was dismissed to appease Google and its executive chairman, Eric Schmidt, both longstanding donors, though New America’s executive president and a Google representative denied a connection.
Meanwhile, Amazon, with its purchase of the Whole Foods supermarket chain and the construction of brick-and-mortar stores, pursues the breathtakingly lucrative strategy of parlaying a monopoly position online into an offline one, too.
Now that Google, Facebook, Amazon have become world dominators, the question of the hour is, can the public be convinced to see Silicon Valley as the wrecking ball that it is?
These menacing turns of events have been quite bewildering to the public, running counter to everything Silicon Valley had preached about itself.
[Editor Charlie sez: royalty deadbeat Facebook is making friends all over.]
When Facebook Inc. wants to try something new, one of its first calls is to CNN. It was a key partner when Facebook introduced its news-reading app, Paper, in 2014. When the social network shuttered Paper soon after, transmogrifying it into a series of fast-loading News Feed stories called Instant Articles, CNN remained on board. And last year, when Facebook began focusing on hosting live video, CNN was one of the few parties to which it paid a nominal fee to produce clips of, say, election results being projected on the Empire State Building.
But strain is showing in the relationship. Facebook’s latest pitch to publishers such as CNN is for them to provide a regular stream of TV-quality, edited, original videos that will give Mark Zuckerberg’s company a chance to compete with YouTube to siphon some of the $70 billion pouring into TV ads each year. In exchange, the publishers can share some of the revenue for ads that roll in the middle of the videos. Facebook will control all the ad sales.
It’s getting tougher for CNN and others to view these arrangements as mutually beneficial. “Facebook is about Facebook,” says Andrew Morse, general manager of CNN’s digital operations. “For them, these are experiments, but for the media companies looking to partner with significant commitments, it gets to be a bit of whiplash.” Morse says the financial compensation Facebook offers isn’t enough to convince him that working directly with the social network will be worthwhile in the long term.
Jason Kint, chief executive officer of the industry trade group Digital Content Next, was more blunt. “Media companies are like serfs working Facebook’s land,” he says. [Editor Charlie sez, “Aren’t we all?”]