Face­book ac­tions will lead to reg­u­la­tion

NT News - - BUSINESS -

FACE­BOOK be­came a $US500 bil­lion (AUS$643 bil­lion) com­pany and its founder, Mark Zucker­berg, a $US65 bil­lion man, by shar­ing users’ data so that ad­ver­tis­ers, in­clud­ing po­lit­i­cal ones, could more pre­cisely tar­get ads than ever be­fore.

But it wasn’t un­til Face­book helped get Don­ald Trump elected that the mob de­scended and the search­light of reg­u­la­tion was turned on.

By get­ting caught up in the widen­ing search for some­one to blame for Trump, Zucker­berg has got into far more trou­ble than he ever did by just get­ting rich de­stroy­ing his cus­tomers’ pri­vacy.

Cam­bridge An­a­lyt­ica, the shady firm that ac­quired data on 87 mil­lion Face­book users and sold it to the Trump cam­paign, is now a thread that is be­gin­ning to un­ravel not just Face­book’s own usual im­per­vi­ous­ness but Google’s and the rest of so­cial me­dia as well. It feels like we’re at a tip­ping point for in­ter­net reg­u­la­tion.

The 33-year-old Zucker­berg did pretty well this week, perched on his cush­ion in front of the Sen­ate Ju­di­ciary Com­mit­tee, pa­tiently, care­fully an­swer­ing hours of of­ten dim ques­tion­ing.

On dis­play was the chang­ing world, and if it wasn’t Mark Zucker­berg sit­ting there, hav­ing per­suaded bil­lions of peo­ple to en­ter the de­tails their lives on to his database so that ad­ver­tis­ers could chase them with ads de­signed specif­i­cally for them, it would have been some­one else.

And af­ter all, tar­geted Face­book ad­ver­tis­ing is just the ex­trem­ity of what the me­dia has al­ways done: mar­keters buy par­tic­u­lar TV and ra­dio shows and news­pa­per sec­tions based on de­mo­graphic data to try to bet­ter tar­get their spend­ing to im­prove the re­turn on in­vest­ment.

The prob­lem is that with Face­book the data is per­sonal and of­ten pri­vate, not de­mo­graphic, and now it’s been used in pol­i­tics, not just com­merce.

The ques­tion is what reg­u­la­tion might now be im­posed on Face­book, so­cial me­dia and maybe the in­ter­net as a whole, be­cause it feels like it won’t be noth­ing.

A lot of peo­ple com­plain that Face­book is a mo­nop­oly util­ity and should be reg­u­lated like one, but the dif­fer­ence is that reg­u­lated util­i­ties sell es­sen­tial ser­vices: you can’t not buy elec­tric­ity and ba­sic com­mu­ni­ca­tion, but you don’t have to use Face­book (and a lot of peo­ple are now tak­ing that op­tion).

The fact that the in­ter­net has be­come some­thing of a win­ner-takes-all en­vi­ron­ment con­trolled by mo­nop­o­lies is a mat­ter of brand strength, qual­ity of ser­vice and con­ve­nience for users, not bar­ri­ers to en­try.

One model for global reg­u­la­tion might be the EU’s Gen­eral Data Pro­tec­tion Reg­u­la­tion (GDPR), passed in April 2016 and due to start in six weeks, the essence of which is that all use of per­sonal data must be based on di­rect per­mis­sion.

How­ever some an­a­lysts think this will im­prove the po­si­tion of Face­book and Google. Ben Thomp­son of the “Strat­e­ch­ery” news­let­ter says: “The un­ac­knowl­edged re­al­ity is that the GDPR is go­ing to dev­as­tate nearly ev­ery other ad net­work [than Google or Face­book’s].

“GDPR will be a pain for Google and Face­book, but it will be lethal for many of their com­peti­tors, which means dig­i­tal ad rev­enue postGDPR ... will go to Face­book and Google.”

Emu­lat­ing the Euro­pean GDPR has so far not been se­ri­ously on the ta­ble in the US, but a full range of op­tions is now be­ing dis­cussed and maybe that will be one of them.

David Dayen, writ­ing in The New Repub­lic, sug­gests a ban on tar­geted ad­ver­tis­ing: “Noth­ing tied to a user’s iden­tity should be used to serve them a par­tic­u­lar mes­sage. The ban would re­move the fi­nan­cial in­cen­tive to col­lect data and spy on users. Com­pa­nies still might do it, to un­der­stand what keeps users on their sites. But com­peti­tors can over­come that by de­liv­er­ing com­pelling and use­ful con­tent, which may ac­tu­ally be­come im­por­tant again.”

There’s some ap­peal in the sim­plic­ity of that, but it’s hard to imag­ine US politi­cians go­ing that far, and it would be hard to de­fine and po­lice. Oth­ers have pro­posed even more ex­treme so­lu­tions, like break­ing up Face­book un­der an­titrust laws or forc­ing it be­come a co-op, run by users.

More likely is a more mod­er­ate set of laws re­quir­ing things that Face­book is mostly al­ready do­ing, such as data porta­bil­ity (al­low­ing users to take con­trol of their own data), full trans­parency about how data is be­ing used, and/or con­sent re­quire­ments and opt­ing in.

To some ex­tent the whole thing is an ar­gu­ment about free con­tent ver­sus paid, per­son­i­fied in the pub­lic de­bate be­tween Tim Cook of Ap­ple (sub­scrip­tion) and Mark Zucker­berg


Most pub­lish­ers have been forced to go down the Ap­ple path and erect pay­walls be­cause they can’t com­pete with Face­book’s low ad­ver­tis­ing prices (be­cause of the un­paid con­tent pro­vided by users) and its un­matched abil­ity to tar­get ad­ver­tis­ing and im­prove mar­keters’ ROI be­cause of the data those users type in.

Those things are two sides of the same coin: the con­tent on Face­book is pro­vided free by users and the same ma­te­rial is used by ad­ver­tis­ers to tar­get them. It’s a trans­ac­tion most Face­book users vaguely un­der­stand and ac­cept.

And as a re­sult Face­book has been one of the most beau­ti­ful money-mak­ing ma­chines in his­tory, right up un­til it was used to get Don­ald Trump elected. As the man him­self would tweet: BAD! of Face­book

Pic­ture: AP

Face­book CEO Mark Zucker­berg ar­rives to tes­tify be­fore a House En­ergy and Com­merce hear­ing on Capi­tol Hill in Wash­ing­ton, about the use of Face­book data to tar­get Amer­i­can vot­ers in the 2016 elec­tion and data pri­vacy.

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