Beware the Big Tech Backlash
20 December 2018 - 1:16AM
Dow Jones News
By Greg Ip
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.
Write to Greg Ip at greg.ip@wsj.com
(END) Dow Jones Newswires
December 19, 2018 09:01 ET (14:01 GMT)
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