I’ve really enjoyed writing these weekly emails since the start of lockdown, and I hope you’ve enjoyed reading them, but after today’s email I’m going to put the project on an indefinite pause. It’s been a wonderful exercise, giving me an excuse and a deadline to read, write and understand more deeply some of the ongoing debates and trends I find most interesting. It’s also opened up a few opportunities for me, which I’m going to invest more time in exploring.
So thanks for all the support and kind words of encouragement!
Speaking of break-ups, both Amazon and Facebook have recently become the subjects of unrequited break-up requests, with varying levels of severity.
The European Commission formally opened an investigation into Amazon in what I think is the smartest approach they could have taken. Many were worried that regulators would focus on their “own brand” products. For example, is it unfair that Amazon Basics batteries are promoted above Duracell batteries?
While it’s true that the move has been bad for Duracell, it’s hard to claim that cheaper batteries have been a worse outcome for consumers. If regulators had charged that Amazon Basics are anti-competitive, then surely that would have applied to Tesco own brand, Superquinn Sausages and St. Bernard Cola. (Those last two might be dated references….)
The Commission hasn’t taken this approach and instead have focused on the fact that Amazon is both the host of their marketplace and an actor within it.
To explain how that works, imagine a standard shopping centre, like the Ilac centre in Dublin. Dunnes Stores is the largest store in the centre, but there are also many other stores in the centre who also sell similar products. H&M, Argos, TK Maxx all sell items similar to what you can find in Dunnes, but this is ok. Dunnes might be the biggest store, maybe even the anchor tenant in the centre. Their lease agreement might stipulate that they’re the only supermarket in the centre, but probably not more than that.
Now imagine that Dunnes also owned the Ilac centre. Not only that, but they also owned all the cash registers that the other stores had to use. This is similar to how Amazon works. When you buy a book on the Amazon website (what they call their Marketplace), you might be buying from Amazon the business, or a smaller, separate business who are selling through Amazon.
The commission have charged that Amazon have been using their knowledge of the sales data of smaller businesses on their marketplace to compete with them unfairly.
This would be like if Apple, because they own the App store, are using what they know about an app like Spotify to the advantage of their competing service, Apple Music. Or like Dunnes having knowledge of every item sold by other businesses in the rest of the shopping centre.
Meanwhile, in the US, the Federal Trade Commission, who approved Facebook’s decision to acquire Instagram in 2012 and Whatsapp in 2014 have voted 3-2 to sue the company to undo these acquisitions.
They have charged that Facebook “has used its dominance and monopoly power to crush smaller rivals and snuff out competition, all at the expense of everyday users.”
This has many interesting angles, in particular because it challenges our traditional concepts of anti-trust. It’s clear how Amazon or Dunnes crushing competition would lead to higher prices, which is the usual standard applied, but how do you calculate consumer benefit when the product is free?
The cost implications of lowered competition would be felt by advertisers through the price they have to pay to reach their target audience. In this case, the question of market dominance all depends on how you define the market. While it’s true that Facebook and Instagram combined have close to 100% of social media advertising, that’s probably closer to 50% of digital advertising, which in turn is 25% of overall advertising.
If your target market is 25 year old college graduates, did the Facebook acquisition of Instagram make it more expensive or less expensive to reach them? From experience as an advertiser, the cost has certainly come down compared with press, radio or TV advertising, but it’s hard to know the counter-factual of how this would have run with an independent Instagram.
More importantly still is the question of whether a break-up will fix any of the problems declared? I don’t think an independent Instagram has a more successful time fighting hate-speech, or election interference or bullying? Maybe they compete more aggressively with each-other on feature-sets, but significantly more so than they are already competing with Snapchat, Twitter, YouTube and TikTok?
The US Governments success probably depends on their ability to paint a compelling “what if” vision for what an independent Whatsapp and Instagram could have become, as significant providers of consumer choice that doesn’t exist. This will be a tough challenge and one that is certainly made harder by the growth of TikTok, which is closing in on 1bn active users.
The suit to break-up Microsoft in the early 2000’s had a similar challenge. Everyone used excel because everyone else used excel. Nobody wanted to use a competing spreadsheet, or word processor, or presentation tool, because they wouldn’t be compatible with Microsoft Office. Splitting Microsoft Office apart from Microsoft Windows probably wouldn’t have changed that – they would have just become two companies with monopoly positions in operating systems and productivity software, rather than one.
More targeted rules to force interoperability and data sharing, to restrict specific anti-competitive practices rather than broad calls to “break them up” will have more positive effect, I would presume. The European approach rather than the US one.
Even those are a difficult balance to strike. I’m old enough to remember when the worst thing social networks could do was share data with third parties for privacy reasons, but now the FTC wants Facebook to stop “imposing anticompetitive conditions on access to APIs and data.”
New challenges and interesting times! This is certainly an interesting set of developments to watch unfold.
The general scheme of the Online Safety and Media Regulation Bill has been published ahead of being brought to the house. The bill will look to replace the Broadcasting Authority of Ireland with a Media Commission, which covers both traditional TV and Radio and video-on-demand services. This will mean the RTE player and Netflix will abide by the same rules as TV broadcasters, including the obligation to create News and Current Affairs programming. We’ll also be implementing an EU rule that “video on-demand services to meet a quota of 30% European Works,” which sounds very French.
This org will also have an Online Safety Commissioner, who works with online platforms to fight harmful behaviours. The bill aims to give it some teeth – the ability to criminally charge senior management and fines of €20m or 10% of turnover (which would be $16bn for YouTube, which seems steep!). Link.
Vaccine Priority. The Department of Health have release their list detailing how people will be prioritised for the Covid-19 vaccine. Good to see that they’ve detailed the rationale and ethical principles used to arrive at each cohort’s position on the list. Link.
Pornhub, the largest host of online pornography, updated their policies to further discourage abuse on the platform. Videos, which could previously be uploaded by anyone, can now only be uploaded by verified users. They’ve also beefed up their moderation efforts, licensing tools from YouTube and Microsoft to help identify and remove illegal content proactively. This is a positive move, if they implement it properly, with much room for improvement still left. I’ll stay sceptical until they publish results. It mirrors the broader trend away from a wild-west, laissez-faire internet. Link.
Warner Bros have announced that their entire 2021 line-up of movie releases will each be released in cinemas and online at the same time. This is a dramatic move because of the pandemic, but it’s also the acceleration of a trend that had been happening long before this year. Link.
Privacy vs Security. It’s a painful reality that every time a company allows people to share files online, someone will use it to share child abuse images. Every service that allows people to message each other, someone will use it to groom or blackmail children. These companies actively scan messages and files for this content, but new EU privacy rules will make much of this scanning illegal as of Dec 20th. All policy involves trade-off, but this one is one of the most difficult ones we’ll face over the next few years. Link.
Snapchat Lottery. YouTube pays video creators a portion of the ad revenue it generates on their videos. Most other social platforms don’t pay creators. Snapchat, in an effort to attract creators from TikTok, has announced a lottery. It will give $1m per day to the most popular video on the platform. It’s a very cool approach, I always love to see experiments like this. Link.
💡 Interesting Links
Cities in 2021. As the end of the pandemic slowly comes into view, a prediction that cities will bounce back — but they won’t look like the places we lived in before we’d ever heard of COVID-19. Link.
Digital Charity. How Venmo and Cash App upended a century-old charity model. Link.
Protein Folding. The way a protein folds is very important to the way it functions, or so I’m told. So to understand the fundamentals of that branch of science, I presume it’s important to be able to predict the way a protein will fold. This has been a known-impossibility for the last 50 years, so scientists seem excited that Googles “AlphaFold” AI project has cracked the puzzle. Link.
Written for Robots. The National Bureau of Economic Research says companies are now writing their corporate filings in such a way that bots which scrape and summarise them will generate more positive summaries and conclusions. What a time to be alive. Link.
Breakup Songs. In keeping with today’s theme of breakups, the song “rät” is Penelope Scott’s breakup love letter to Elon Musk and Silicon Valley. Listen on Spotify, YouTube.
In South Africa the lotto numbers last week were 5, 6, 7, 8, 9 and 10! There were 20 winners. Link,