Beware the Big Tech Backlash - Overreaction to content, privacy abuses overlooks real problem: lack of competition
Beware the Big Tech Backlash
Overreaction to content, privacy abuses overlooks real problem: lack of competition
By Greg Ip Updated Dec. 19, 2018 10:58 a.m. ET
This was the year when Big Tech companies were humbled, their reputations tarnished, and their share prices clobbered by a tidal wave of political outrage over misinformation, censorship, and data abuse.
This public flogging may be necessary and even gratifying—but it may also go too far. As the criticism turns partisan, with Republicans upset with Google’s alleged liberal bias and Democrats furious with Facebook ’s complicity in election tampering, the risk grows of interventions that sound satisfying but don’t fix, and in fact may worsen, the underlying problem in this arena: an absence of competition.
Consider the latest revelations that Russian state actors were able to spread manipulative content on the platforms of Facebook Inc., Twitter Inc. and Alphabet’s Google. Russian political interference is a serious matter for foreign policy, but the uproar seems out of proportion to the consequences. Russian-linked content was tiny relative to the total on social media and pales in comparison to traditional news coverage and advertising. Twitter estimates it accounted for just 0.5% of impressions on election-related tweets in 2016.
It’s unlikely this changed any votes given our tendency to use the internet to confirm existing biases. One study found that almost 60% of visits to fake news sites were by the 10% of people with the most conservative news consumption.
“Politics has always had deception and misinformation. It always will,” says Brendan Nyhan, a public-policy professor at the University of Michigan and one of the study’s co-authors. Having government sanctioned overseers decide what content gets taken down smacks of censorship. Even self-appointed overseers, like Mark Zuckerberg’s proposed internal “Supreme Court” to adjudicate hate speech on Facebook, will succumb to political biases despite the best of intentions.
The case for regulating privacy is somewhat stronger. There’s an obvious conflict between customer privacy and the business models of companies like Google, Facebook, Twitter and, increasingly, Amazon.com Inc . , which gather as much information about their users as possible and then monetize it.
Yet as with the political free speech, the solution to privacy concerns should fit the problem. In a recent column, Alec Stapp of the Niskanen Center, a libertarian think tank, notes similar worries accompanied Caller ID and loyalty cards. Around two-thirds of Americans don’t care that much about privacy, he notes. The risk is that overreacting to the needs of the other third may rob everyone of valuable services.
There is already evidence of this. Hundreds of companies compete to place ads on webpages or collect data on their users, led by Google, Facebook and their subsidiaries. The European Union’s General Data Protection Regulation, which took effect in May, imposes stiff requirements on such firms and the websites who use them. After the rule took effect in May, Google’s tracking software appeared on slightly more websites, Facebook’s on 7% fewer, while the smallest companies suffered a 32% drop, according to Ghostery, which develops privacy-enhancing web technology.
Ghostery speculates that Google and Facebook had more resources to devote to compliance, and that website owners dropped smaller advertisers that may have struggled to prove compliance. Either way, the early effect of the rule has been to entrench the advertising duopoly of Google and Facebook. That diminishes the prospect of any ad-supported competitor hoping one day to break their stranglehold on search and social media.
That’s a problem, because that dominance is the root of the controversy surrounding the companies. Google’s alleged liberal bias wouldn’t be an issue if conservatives had a viable alternative, as they do with cable news. Consumers uneasy with Facebook hoovering up their personal data can’t exactly switch to Instagram or WhatsApp since both belong to Facebook.
Moreover, there is growing evidence that these companies use their size to stifle competition. British-released emails show that Facebook decided what access other companies could have to its platform based on their competitive threat; it cut off a Twitter video service’s access to Facebook friends. A study by Feng Zhu and Qihong Liu found that Amazon targeted better-selling, higher-reviewed items sold by third market merchants to sell itself. This is good for customers but crimps the growth of third party merchants, they found.
If there is a case for government intervention, then, this is it: more muscular antitrust oversight. “Google, Amazon, Apple, Facebook, and Microsoft ... have collectively bought over 436 companies and startups in the past 10 years, and regulators have not challenged any of them,” Jonathan Tepper and Denise Hearn write in their book, “The Myth of Capitalism: Monopolies and the Death of Competition.” “Either the upstarts sell out to the bigger company, or they get ruthlessly crushed.”
Antitrust has risks of its own: denying companies synergies they might achieve if free to acquire or exclude competitors. Nor are trust busters free of their own political agendas. Yet these risks seem much less consequential than those that come from regulating content or privacy, and worth taking for the sake of more competition, the most effective antidote to monopolists’ abuses.