Anyone concerned with the anticompetitive state of digital advertising, and how to fix it, should focus like a laser on the circumstances surrounding the 2014 FTC’s pass on formally investigating if the Facebook-WhatsApp acquisition would “substantially lessen competition” under the Clayton Antitrust Act.
That obvious FTC mistake in hindsight, triggered a winner-take-all domino effect that not only tipped Facebook to a social advertising monopoly, but also tipped the overall digital advertising market to the anticompetitive digital advertising cartel that evidently predominates today.
[Editor Charlie sez: Now we know why they need so many lobbyists...]
As Facebook sought to become the world’s dominant social media service, it struck agreements allowing phone and other device makers access to vast amounts of its users’ personal information.
Facebook has reached data-sharing partnerships with at least 60 device makers — including Apple, Amazon, BlackBerry, Microsoft and Samsung — over the last decade, starting before Facebook apps were widely available on smartphones, company officials said. The deals allowed Facebook to expand its reach and let device makers offer customers popular features of the social network, such as messaging, “like” buttons and address books.
But the partnerships, whose scope has not previously been reported, raise concerns about the company’s privacy protections and compliance with a 2011 consent decree with the Federal Trade Commission.
Max Schrems, the thorn in Facebook’s side, has returned to launch the first challenges under the EU’s new data protection laws.
The complaints, filed on the day Europe’s General Data Protection Regulation (GDPR) comes into force, take aim at what he describes as Google and Facebook’s “forced consent”.
Under the GDPR, when users are asked to consent, they should be given a free choice – and it should not be a condition of using a service.
But Schrems’ complaints argue that the consent boxes popping up on the screens of users of Google, Facebook and their affiliates does not meet this standard.
They dangle the 4 per cent of annual turnover fines as a maximum possible penalty – €3.7bn, €1.3bn, €1.3bn, and €1.3bn, respectively – though regulators have stressed they won’t be handing out the top level fines willy-nilly.
As early Facebook employees recently told my colleague Nick Bilton,the social network’s rapid evolution into a global power-player has come as a relative shock. “They look at the role Facebook now plays in society, and how Russia used it during the election to elect Trump, and they have this sort of ‘Oh my God, what have I done’ moment,” admitted one. “I lay awake at night thinking about . . . what we could have done to avoid the product being used this way,“ said another. Others in Silicon Valley described [and royalty deadbeat] Mark Zuckerberg as out of touch with reality, unaware of the damage his brainchild has done. While C.O.O. Sheryl Sandberg, Zuckerberg’s indefatigable No. 2, recently acknowledged that “things happened on our platform that shouldn’t have happened,” she maintained that Facebook is not a news organization. “At our heart we’re a tech company,” she said in an interview last week. “We don’t hire journalists.”
[Editor Charlie sez: That’s straight outta The Circle, they don’t hire journalists, they get news feeds for free.]
When Charles Koch founded the Cato Institute in 1974, his mission (in words from Cato’s journal) was “protecting capitalism from government.” That meant the end of public education, Social Security, Medicare, Medicaid, the Environmental Protection Agency, as well as cutting taxes on the rich and government regulations on business. It was a tall order—but now, for the first time in 44 years, Koch and his billionaire libertarian friends like Robert Mercer and Peter Thiel are within sight of their goal of building a true oligarchy (Aristotle’s “rule by the rich”). The current Trump tax cut will deliver billions of dollars into the pockets of the Kochs, the Mercers, the Trumps, and their heirs. Creating a political economy in which the wealthy minority rule over the middle and lower class majority is a hard task. It requires mechanisms that suppress voting and mechanisms for propaganda that convince middle class voters that cultural divisions are more important than economic equality. In both these tasks, Google and Facebook have been a key to the success of the 1 percent.
The role of the internet in propaganda and voter suppression is a two-pronged attack. Aldous Huxley’s Brave New World foresaw our current dilemma—Huxley’s assertion was that technology would lead to passivity. The ease with which we could consume mind-numbing entertainment and distractions would ultimately rot our democracy. And this is exactly what may be happening. In the 2016 presidential election, 94 million citizens who were eligible to vote declined to exercise that privilege (compared to the 136 million who voted), according to the United States Election Project. And a much larger percentage of millennials are nonvoters. As Kevin Drum reported in Mother Jones, “In 1967 there was very little difference between the youngest and oldest voters. By 1987 a gap had opened up, and by 2014 that gap had become a chasm.” Beyond the extreme apathy, Republican legislatures in many states have instituted far more restrictive voter ID laws, which have also contributed to lower voting rates. But Steve Bannon wasn’t content to leave voter suppression to chance. One of his brilliant moves was to circulate memes on Facebook targeting only African American voters with the text: “Hillary Thinks African Americans are Super Predators.” By all accounts it was a successful voter suppression strategy….
We have been here before. But not since the days at the turn of the 20th century, when Teddy Roosevelt took on the monopolies of John D. Rockefeller and J.P. Morgan, has the country faced such concentration of wealth and power.
[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?”]
The European Union imposed a 2.4 billion euro ($2.7 billion) fine on Google last Tuesday for manipulating its search engine results to favor its own comparison shopping service. It is just the latest institution to recognize the increasing monopolization of the technology industry.
Google has about a 90 percent market share in searches, while Facebook has a penetration of about 89 percent of internet users. Economists have a fancy name for this phenomenon: “network externalities.” In traditional product markets, one customer’s choice (for example, a particular car tire) does not directly affect other individuals’ preferences for that product, and competition generally ensures that consumers enjoy the best products at the lowest possible price.
In the market for social media, by contrast, when one customer uses Facebook over Myspace, it has a direct (and positive) impact on other customers’ preferences for the same social network: I want to be in the social network where my friends are. These markets naturally tend toward a monopoly.