This week: the five conversations at the heart of #BreakUpBigTech. Sandra Peter (Sydney Business Insights) and Kai Riemer (Digital Disruption Research Group) meet once a week to put their own spin on news that is impacting the future of business in The Future, This Week.
00:45 – Google fined again for anti-competitive practices
08:25 – Facebook stifling innovation and competition
12:41 – Content pollution on Facebook and YouTube
The stories this week
The EU hits Google with a third billion-dollar fine. So what?
Can we to fix big tech without breaking it up
We’re asking the wrong questions of YouTube and Facebook
Other stories we bring up
Our previous conversation around #breakupbigtech
Our previous discussion of Spotify creating create “hits”
How Spotify playlists create fake artists
Spotify files complaint against Apple
Facebook no longer uses age, gender, race bias in ad targeting
Apple’s news service conditions face backlash from publishers
Lina Khan takes on Amazon in Antitrust dispute
Our previous discussion of the fiduciary moat of Apple and Amazon
The fiduciary advantage of Apple and Amazon
Our previous discussion of platform monopolies
Beto O’Rourke wants Bigtech regulated
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Intro: This is The Future, This Week. On Sydney Business Insights. I'm Sandra Peter, and I'm Kai Riemer. Every week we get together and look at the news of the week. We discuss technology, the future of business, the weird and the wonderful, and things that change the world. Okay, let's start. Let's start!
Kai: Today on The Future, This Week: #BreakUpBigTech.
Sandra: Hang on, again?
Kai: Yes, again. Five different ways.
Sandra: I'm Sandra Peter, I'm the Director of Sydney Business Insights.
Kai: I'm Kai Riemer, professor at the Business School and leader of the Digital Disruption Research Group. So Sandra, what happened in The Future, This Week.
Sandra: Well, more of last week happened. So, last week our big story was around breaking up big tech. And we tackled a number of issues in the news, starting with Elizabeth Warren's announcement that she wants to break up big tech and we analysed her plan. We also looked at stories around Amazon and Facebook, and we had an in-depth discussion last week around breaking up big tech.
Kai: And this week there were more stories around big tech that all in one way or the other tie in with this bigger discussion.
Sandra: So, first we thought okay let's do a follow up of what turned out to be one of our most popular episodes ever, since there have been more developments in the past seven days. And we actually picked three stories as we normally do, we have picked a Bloomberg story looking how to fix big tech without breaking it up.
Kai: We picked a Wired story about Google which was fined about 1.5 billion euros by the European Commission for an anti-trust behaviour. And we also picked a New York Times story that comes in the wake of the Christchurch shootings, which concerns the posting of the video of the shooter on Facebook, and the problem that the big platforms such as Facebook and Google have reigning in such harmful content. Which all tie in with the same discussion around what can we do to fix the problems that these big platforms create, that are at the heart of their business model sometimes.
Sandra: So as every morning, we sat down in our coffee shop and started mapping out the conversations around these three articles. And what struck us was that even though these conversations were all broadly about breaking up big tech, they were asking very different types of questions and engaging in very different conversations.
Kai: So what we did is we went over quite a number of the stories in the last couple of weeks, but also things that we've discussed previously on The Future, This Week around problems of these big platforms. And we identified five big conversations that revolve around issues of anti-trust regulations, problems with the business models of these big platforms that all in one way or the other become part of this bigger conversation. And what we want to argue is that it is important to actually pull these apart, because not all of them apply to all of the big companies that have been in the media: Google, Facebook, Amazon, and Apple. And that also they require different kinds of solutions. So what we want to do today is as we go over the three stories for today we want to highlight the different conversations, and also some of the conversations that we haven't talked about last week and that are not part of the stories that we've picked for this week.
Sandra: So, today in a #BreakUpBigTech reloaded/follow up episode/ mark two/take two, we shall try to map out the conversations around breaking up big tech.
Kai: So we'll start with the first story which comes from Wired magazine, 'The EU Hits Google With a Third Billion-Dollar Fine. So What?'
Sandra: So first, what happened? And let's remember, this is not the first time the European Commission has fined Google. In the last couple of years alone, the company paid more than 9 billion dollars to the European Commission for various anti-competitive practices that they have engaged in over the last decade. But last Wednesday, the European Commission alleged, and I quote here, that Google "shielded itself from competitive pressure" by restricting what other websites that wanted to offer a search function powered by Google could display, and also by displaying ads alongside the results that these websites would display. The European Commission does claim that Google's at sounds for search service which prohibited the website publishers from placing other ads from other online broker - and think here companies like Microsoft or companies like Yahoo - prohibited them from placing the ads in the more visible parts of the webpage, meant that Google had engaged in an anti-competitive behaviour.
Kai: And even though Google stopped this practice in July 2016, they were fined for the decade prior in which they engaged in this behaviour. And, we also want to point out that Google stopped this practice in the EU alone on the back of this lawsuit, so they are happily doing this in other jurisdictions, still. Which basically ties in with the conversation that Elizabeth Warren has initiated in the wake of her calls to break up the big technology companies. And that is, the way in which these companies use and abuse their power over the channel that they have, in making it harder for other companies to access their platforms, or to exert their power to demand certain prices, for example.
Sandra: So just to get an understanding of the size of Google in the European market to which this particular ruling pertained, in the EU Google's share of the market for online search advertising exceeds 85 percent, and has done so over the last decade.
Kai: So anyone who wants to engage in online advertising, or indeed embed search functionality into their website, doesn't have much choice other than to go with Google. Which leaves them with a fair bit of power.
Sandra: And also leaves the answer to the title of this article "The EU Hits Google With a Third Billion-Dollar Fine, So What?" with...
Kai: Not much. Meaning that yes, they have been fined. And yes, they have, at least in the EU, stopped this practice. But it hasn't really changed much. It hasn't really curbed the power of Google, nor their monopoly status. And that obviously ties in with the discussion we had last week, and the question should we regulate, should we fine, or should we break up these platforms? But since we are in no position at this point to actually answer those questions, what we want to do is pick apart the different conversations, and this, our first article, ties in with the first conversation which centres around the market power that these companies have in restricting access to their platform, or configuring the channels and the supplier networks on their platforms.
Sandra: And as you might recall, last week we saw the Amazon play that centred not only around kicking small vendors off the platform, but also around forcing large vendors to comply with the platform's desire to use its channels, by selling to Amazon first rather than directly to the customer.
Kai: And it's also at the heart of the recent Spotify lawsuit against Apple, where they say Apple is abusing its market power in charging a 30 percent fee for access to its App Store. And that is a conversation that is being highlighted as Apple is about to announce its video streaming and news services, at the heart of which again is a curated platform by which content providers can sell through Apple to customers, again with Apple owning the channel, and each time taking a certain cut out of the transaction.
Sandra: Okay, so let's go to the second story that we had for today, which actually reveals a whole other conversation around breaking up big tech. And our second news story comes from Bloomberg, and it's titled "How To Fix Big Tech Without Breaking It Up".
Kai: It features an interview with Hal Singer who teaches at Georgetown University, and is often heard as an expert witness in anti-trust cases. And he makes the point that anti-trust is generally thought about in terms of consumer welfare. So, whenever a case is heard, judges, and even prosecutors, concentrate very much on whether it affects prices for end-consumers, or access for end-consumers, whether it in any way harms prices or choice at the consumer end. And he says that this is actually jumping too short. And we've mentioned this last week, because we had a prior conversation in last September, when we featured a New York Times article about Lina Khan, a Master's student who has written a thesis to break up this conversation and highlight that there are bigger issues than just end-consumer prices.
Sandra: Because let's remember, consumers access most of these products either for free, or in the case of Amazon, they have benefited from lower and lower prices, and from better and better services. So, what Hal Singer highlights is that what we should be thinking about instead, is the ways in which competition and innovation works around these big companies. So he gives Facebook as an example, and what Facebook has done to maintain their position, has quite often been to steal functionalities from either startups or other players in the market. Probably the most visible example of that has been Facebook copying Snapchat's functionalities, but there are a number of smaller independent apps where Facebook has seen something that they liked, and they have either chosen to copy that and implement it directly into Facebook, or they went down another route which was to acquire that company and either use or shelve the innovation that they saw as a competitive threat.
Kai: And so while Hal Singer points out that in the cases of Apple, Google, or Amazon, we might be able to regulate this. In the case of Facebook, because they are not stealing from, or appropriating from, businesses that engage on their platform, Facebook would indeed have to be broken up. Because, as the article highlights, and I quote, "that venture capitalists are often unwilling to fund companies that can't answer the question: how are you going to deal with Facebook?". Meaning, that if startups don't have a strategy to fend off the risk of Facebook copying their functionalities, venture capitalists aren't interested. Which in turn then, stifles innovation within the ecosystem.
Sandra: And Hal Singer actually goes to point out that this has been a conversation around reasons for breaking up big tech, that has been a long time in the making. He quotes a survey that the Elizabeth Dwoskin had done for the Washington Post, quite a few years ago, that surveyed Silicon Valley firms. And again, the number one reason for venture capitalists not funding a company, was that they were nervous about the potential for Facebook to copy, to appropriate the innovation, or the advantage that the startups were bringing to the market.
Kai: So we want to highlight this as our second conversation around the power of big tech. Which is that they are frequently appropriate ideas and content, think of Facebook displaying news items in their feed, without often linking back to the actual source. Google has been accused of similar practices by news outlets, in the way in which Google just curates and presents news as if their own. Amazon is frequently accused of stealing ideas and creating copycat products from vendors selling on their platforms. And indeed, Facebook shamelessly copying features by other companies. And all of this ties in with fears of lack of innovation that is being stifled by the big companies.
Sandra: So there is a third way people have been talking about issues in big tech, and about reasons for breaking up big tech. And our third story kind of highlights that side of the conversation. Our third story comes from the New York Times, and it's titled "we're asking the wrong questions of YouTube and Facebook after New Zealand."
Kai: This one comes obviously in the wake of the Christchurch shootings, and off the back of Facebook role in live-streaming the shooter's actions, and the propagating of the video in the aftermath of the event, and Facebook inability to actually stop the video from spreading on its platform.
Sandra: So what the New York Times article is arguing is that content moderation is not the conversation we should be having about stopping these sort of videos from spreading, and stopping harmful content from surfacing on platforms like YouTube and Facebook. But that it's rather time to talk about the incentives and the infrastructure that technology companies like Facebook and YouTube provide to extremists or extremist groups.
Kai: So let's unpack this. First of all, the article commends Facebook for its efforts in actually trying to stop what is no doubt harmful content. And it says that the video of the attack was uploaded by users 1.5 million times in the first 24 hours, and that Facebook's automatic detection systems blocked at about 1.2 million of those. Which left roughly three hundred thousand copies of the video floating around its platform to be viewed, liked, shared and commented on by Facebooks more than 2 billion users. Not only does it highlight the limitations of algorithmic content policing, but also the limitations of engaging thousands and thousands of employees to do so semi-automatically.
Sandra: So this is not to say that content moderation is not actually an important and a very significant issue, and that this is not part of the solution. But this is not the whole story.
Kai: And we also shouldn't forget that this is not just about Facebook, because many of those videos were also uploaded to YouTube, obviously.
Sandra: And this is indeed the third big conversation around issues with big tech, and reasons for breaking up big tech. The idea that we have a content pollution problem. And this particular article highlights all the harmful shit that is on these platforms, and this includes not only extremist content, but think anti-vaccination videos, think self-harm videos, and so on. We've also discussed other types of content pollution on The Future, This Week, we've had episodes that spoke about the junk content that this present on these platforms.
Kai: And it also is not just an issue of Facebook or YouTube. John Oliver, in one of his latest episodes highlighted the fact that there is a lot of books on Amazon that come with very questionable so-called medical advice around how to deal with autism. And an experiment they did on the show made it clear that anyone can create self-published books on Amazon, that then show up in the search results. So indeed, we see a lot of this content pollution, even on platforms such as Amazon.
Sandra: Or Spotify, we've discussed on The Future, This Week. The creation of junk elevator music and playlists, that are automatically generated, much like the YouTube videos aimed at children that just remix endless trivial, sometimes illogical content.
Kai: We also have of course fake news on Facebook or click bait on Google.
Sandra: Where content pollution occurs by pretty much hijacking what the platform offers, to put it to various nefarious purposes.
Kai: And this points to another conversation that we want to highlight. So while content pollution and the harmful content, and the way in which these platforms can be hijacked by right-wing commentators, or fake news outlets, to propagate their own ideas, it points at another related conversation which has to do with the way in which these platforms monetise what they do. Which goes to the heart of the business model, especially of platforms such as Google and Facebook.
Sandra: Which brings us back to the New York Times article and to the shift they propose in the conversation, which is that the horror of the New Zealand massacre video is not just the conversation about moderation, but it's a prompt to try to think about the underlying architecture of these social networks. And the types of incentives that are in place, that actually reward people for creating such content, and for sharing the content. So a lot of this content pollution occurs not only out of a desire to share the content itself, but because sharing it can be monetised through the platform. Which is indeed the business model that companies like Facebook in particular rely on.
Kai: And we've discussed this previously when we highlighted the difference between Google and Facebook on the one hand, who make most of their money from advertisers, not from their main users. And Apple and Amazon, on the other hand, which indeed monetise what they sell to their main user and customer group. And we highlighted that therefore Apple and Amazon were in a better position, having a, what the article that we discussed at the time, called a 'fiduciary moat', that shielded them against these abuses and problems that are indeed happening more frequently now on Facebook and Google.
Sandra: So this leaves us with four conversations around issues with big tech, and reasons to break up big tech. The first conversation out there is the one market power and platform access, and that as we discussed earlier revolves around the politics of the platform, the pricing of the platform, and really about access to the platform. The second conversation out there is the conversation around innovation and competition. And that revolved around A: the stealing, or the appropriation of ideas that entrepreneurs or other market players might have, or the acquisition of such startups, or competitors, and the concentration of power again in the hands of big tech. The third conversation that we've seen has been around content pollution, and that content pollution could be around harmful content, but it could also be around junk content, or really just about hijacking the platform to promote fake content. The last conversation that we identify out there, is the one around conflicts of interest. And this really goes to the heart of the business models that the big tech have, and around what and how is being monetised on these platforms.
Kai: And those four are accompanied by a fifth conversation that we've actually highlighted last week, in the discussion of Mark Zuckerberg's musings of Facebooks future. Of repositioning Facebook as a privacy-first company, and whether or not this is actually a genuine move, given how much the business model is based on selling customers' privacy to advertisers and partner businesses. And so, the fifth conversation really centres around data and privacy abuses. First of all, highlighting the length to which companies such as Google and Facebook go to learn just about everything about their users, swooping up data from partnering businesses and apps, purchasing data-sets from data aggregators, and also tracking everything users do on the platforms, and indeed across the Internet. So, the data-collection issue. And off the back of that, also, the use of that data for micro targeting, biased targeting. Facebook has just come out to say that they do no longer allow advertisers to target advertisements based on age, race, or gender, but that indeed the targeting can be done in such a micro-way that it ties in with the conversation around content pollution, the hijacking of conversations by various actors, as in the US elections. So, it leaves us with those five conversations: market power/platform access, stifling innovation, content pollution, conflict of interest at the heart of the business models, and data and privacy abuse issues.
Sandra: Which takes us to the important take-away for this follow-up podcast on breaking up big tech.
Kai: Obviously we have no solution to offer at this stage whether to regulate, break up or fine these companies.
Sandra: But we need to clarify terms for the sake of even having an informed conversation. Quite often the conversations we have around breaking up big tech, miss the point altogether, as people seem to be arguing very significant, but different issues.
Kai: So for example in the US presidential race, Beto O'Rourke, another Democratic contender, came out disagreeing slightly with Elizabeth Warren on what to do with big tech. But, making a completely different argument. While Elizabeth Warren makes her argument on the basis of platform access, Beto O'Rourke was actually making the data privacy argument. Hence coming to different conclusions for how to deal with it.
Sandra: So in our view all these five major issues deserve attention, and they need to be tackled in their own right. So, next time someone talks about breaking up big tech, think about what conversation they're in, and think about how you can engage productively with the issues that that conversation raises.
Kai: And also those five conversations do not apply equally to each of those tech companies. So while Apple, for example, can be accused of abusing market power, and playing politics around margins, in listing other players in their Appstore, they have been very vocal in protecting customers privacy, and using the data in certain ways.
Sandra: And while mergers and acquisitions have been a huge issue for a company like Facebook, with the acquisition of Instagram and WhatsApp, Apple's acquisition of Beats by Dr Dre hasn't been as significant an issue for competition.
Kai: So five conversations that we have identified, centring around issues with big tech, that all have to be taken on their own merit.
Sandra: And, that's all we have time for today.
Kai: I'm sure we will come back to these topics in the future.
Sandra: But not this week.
Kai: No, next week. See you soon.
Sandra: On The Future.
Kai: Next week.
Sandra: This week?
Kai: Yes, but next week.
Outro: On The Future, This Week. Next week. Thanks for listening.
Kai: Thanks for listening.
Outro: This was The Future, This Week made possible by the Sydney Business Insights team, and members of the Digital Disruption Research Group. And every week, right here with us, our sound editor Megan Wedge who makes us sound good, and keeps us honest. Our theme music was composed and played live on a set of garden hoses by Linsey Pollak. You can subscribe to this podcast on iTunes, Stitcher, Spotify, YouTube, SoundCloud or wherever you get your podcasts. You can follow us online on Flipboard, Twitter or sbi.sydney.edu.au. If you have any news that you want us to discuss, please send them to firstname.lastname@example.org.
Sandra: And what struck us, and what stucka, and what's trucka, and what's tuck, and what stark. And what we noticed...