‘Techlash’ that never was: how internet giants rode the wave
It was supposed to be the year of the “techlash” – a political, cultural and regulatory backlash against the world’s biggest technology companies. Yet 2019’s tidal wave did not quite break.
The movement has long been predicted: indeed, “techlash” was awarded digital word of the year by the American Dialect Society last January. It also made the shortlist of last year’s Oxford English Dictionary (OED) words of the year.
Industry fears of a techlash were all the rage in late 2018 and well into 2019. From the fallout of the Cambridge Analytica scandal to shareholder revolts against Facebook, the phenomenon was perhaps most visible in the repeated grilling of technology chief executives before the US Congress and MPS in Parliament.
But the techlash faltered before it could truly take hold.
Facebook was slammed with fines, but they hardly made a dent on its income. The tech giant received a slap on the wrist from the UK’S Information Commissioner’s Office of £500,000, the maximum it could receive, for failures related to Cambridge Analytica. When it was slammed with a $5bn (£3.8bn) fine from the Federal Trade Commission, it barely blinked and its share price went up. In March, Google was hit with its third $1bn-plus fine by the European Commission.
Yet collectively, Big Tech has continued to soar this year. Facebook shares are up more than 50pc, Google nearly 30pc. Facebook has continued to pile on new users; it now has 2.5bn in total. The social networking giant is expected to post revenues of $70bn this year, up from around $56bn in 2018. Hardly signs of a crippling slowdown.
Following Facebook’s fine and an order from the FTC last summer, former Facebook head of security Alex Stamos says: “This is a natural consequence of the shallow nature of the techlash.” The real problem, he says, is a lack of meaningful competition against Facebook and a failure of US privacy laws.
While politicians have railed against technology firms, it can be argued that their grip over users’ digital lives has only grown stronger. On average, Brits spend three hours and 15 minutes each day online. Despite concerns about “fake news”, more people are getting their news from social networks. Across the pond, 52pc of US adults get their news from Facebook, according to research from Pew.
In the advertising sector, some data suggests that technology giants have actually consolidated their power since new data regulations such as GDPR came into effect. The smallest advertising technology companies lost market share after it was introduced, but Google only grew.
Thomas Philippon, a professor at NYU Stern and author of The Great Reversal, a book on competition, says: “In the US, we have seen a steady decline in enforcement in antitrust and regulations. Now there is a shift towards finally acknowledging there is a problem in digital markets.”
He adds: “Everyone understands there is a problem, but maybe some are paying just lip service.”
Europe has certainly been ahead of the curve in cracking down on technology giants. While some people accuse Brussels of unfairly targeting US firms, many of its reforms are being copied in the US at a state level.
“The one regulator that has taken a more active stance is the EU competition commission,” says Florian Ederer, a professor at Yale. “But more radical people argue that its billiondollar fines are just a slap on the wrist.”
Philippon reckons there has been a change in attitude in the past year, particularly in the US, where heavy regulatory changes could be on the way. Democratic Senator Elizabeth Warren has demanded rules to break up Apple, Google and Facebook if she is elected president next year.
Furthermore, investigations into the activities of Google, Facebook and Amazon are under way. The FTC is now thought to be considering an injunction against Facebook to stop its efforts to merge its Facebook, Messenger, Whatsapp and Instagram services – a move that critics claim is an attempt by the technology giant to stop it being broken up. Even the Republicans have turned their ire on Facebook and Google, accusing them of suppressing free speech by demonstrating bias against conservative voices.
“It’s quite an achievement by Facebook that they are one of the only things policymakers in Washington agree on,” says Philippon. “They are the only people in the US who can encourage a bipartisan agreement.”
Could 2020 actually bring reforms that curb the power of GAFA [Google, Apple, Facebook and Amazon]?
The UK may be heading that way: the Competition and Markets Authority recently launched a consultation on proposals that could break up part of Google. In Whitehall, there are discussions surrounding a new Digital Markets Unit to be a technology regulator.
Theresa May’s Government floated plans for a regulator that could perform a duty of care and tackle malicious content, while Boris Johnson’s manifesto in the recent election proclaimed a desire to make the UK the safest place to be online.
Germany has taken matters further. The Bundestag is currently preparing its digital competition laws – the Digitalisierungsgesetz – which would make control over data a key factor in determining if a company is behaving anti-competitively.
According to law firm Hogan Lovells, there are as many as 450 pieces of legislation or rules proposed in 2019 that could fall on Big Tech in 2020. But as the decade draws to a close, there are perhaps even more pressing challenges – and more radical solutions – that could emerge.
Calls to break up Big Tech will most likely be a key battleground of the 2020 US election. “What is weird about this market is it is critical to everyday life and national infrastructure, but it is all funded on an advertising model,” says Professor Diane Coyle of the University of Cambridge. “That’s not sustainable.”
Even fiercer regulation, such as classing services such as Facebook as utilities, could emerge, she suggests.
Meanwhile, technology companies are not standing still. AI, autonomous machines, facial recognition and surveillance are playing an increasing role in their power and influence. Regulating these growing technologies and practices may require something far more seismic than this decade’s so-called techlash.