Houston, we have a problem
Okay, for 'Houston' read Silicon Valley and for 'problem' read massive understatement. IPG Mediabrands' APAC CEO Leigh Terry provides some context to the announcement of the big tech antitrust investigations in US, and the release of the ACCC Digital Platforms report locally.
It is clear that global government policy needs to catch up with the world in which we live. The clock has now started ticking, and Australia’s actions may provide the blueprint for watching regulators around the world.
Firstly some massive positives from the ACCC.
There was positive affirmation of the need for and investment in public-interest journalism, while sadly not recommending more but recognising adequate amounts to the SBS and ABC. There were also increases for regional and small publisher jobs and innovation funds from $20m to $50m and tax incentives/breaks for those producing public-interest content - ensuring that digital does not become a ‘haves and have nots’ issue, in education terms at least; There is also intent to crackdown on fake news and misinformation.
But there were also some key issues that could shape the future of the Australian digital economy – and its currency, data. Per the report:
“The ACCC’s view is that few consumers are fully informed of, fully understand, or effectively control, the scope of data collected and the bargain they are entering into with digital platforms when they sign up for, or use, their services.
“There is a substantial disconnect between how consumers think their data should be treated and how it is actually treated. Digital platforms collect vast troves of data on consumers from ever-expanding sources and have significant discretion over how this user data is used and disclosed to other businesses and organisations, both now and in the future.
“The ACCC is concerned that the existing regulatory frameworks for the collection and use of data have not held up well to the challenges of digitalisation and the practical reality of targeted advertising that rely on the monetisation of consumer data and attention … The volume of consumer data collected, as well as the opportunities to interrogate and leverage such data, are expected to increase. The ACCC considers that the Privacy Act needs reform in order to ensure consumers are adequately informed, empowered and protected, as to how their data is being used and collected. This will increase trust in the digital economy and spur competition between businesses on the basis of privacy.”
Follow the money
The ACCC’s report also quantified the market impact of the two major platforms, stating that Australian digital ad spend in 2018 was $8.8bn, and that of every $100 (excluding classifieds):
- $47 goes to Google (some of which is for the provision of ad tech services)
- $24 goes to Facebook
- $29 goes to all other websites and ad tech
When I arrived from the UK 14 years ago, the Big Five - Ninemsn, Yahoo, Sensis (remember them?), News and Fairfax - seemed to apply a uniform principle: Any digital business that achieved a certain size was subsumed by the digital ‘hungry hippos’ of that time. In hindsight, the scale of those businesses now appears akin to the bugs on the grass that the new hippos actually eat.
The ACCC also estimates that over the past three years, Google and Facebook have captured more than 80 per cent of all growth in online advertising. That development is not unique to Australia, hence democratic presidential candidates and other US senators calling for the break-up of big tech.
Will it happen? As a historian, I’ve always looked to the past as a guide (not necessarily a predictor, especially in technology) to the future.
"A ‘free lunch’ in terms of free services is actually an expensive lunch when those services enable monopolies to amass and horde vast troves of data and potentially impact privacy."
AT&T and Microsoft
Two pertinent examples still relevant today are Bell (telco) in the early eighties and Microsoft in the late nineties.
Bell, which became AT&T, was dominant for most of the last century and broken up into eight smaller companies 35 years ago. Ironically, most of those very companies are now again part of AT&T, as well as other cable TV companies and cellular providers – and AT&T remains the world’s largest telco.
Microsoft ultimately faired little worse when its Internet Explorer (IE) browser was brought into a David versus Goliath fight by Netscape back in 1998. The prospect and fear of Microsoft owning the front door to the web was at the epicentre of the US government's anti-trust case.
The government won the day and there is now no Microsoft Explorer browser monopoly, spawning many of the world’s most popular services. At the time there was an argument that such action would impair innovation in the tech space. However, it was unhindered, and actually coursed.
Crazy to think that there was a very real prospect that if unchecked we could have all been using MSFT search (now called Bing) while Google remained in a garage.
While Microsoft was not broken up like AT&T, it did have some limitations placed on its behaviour as well as being under an increased level of public and regulatory scrutiny. It had to share code and act more cautiously, providing an incubation period for the businesses now, ironically, facing digital platform scrutiny in Australia and around the world.
Price competition is one thing. But seemingly as the ACCC, the US Department of Justice and the Federal Trade Commission have now realised – as have politicians – a ‘free lunch’ in terms of free services is actually an expensive lunch when those services enable monopolies to amass and horde vast troves of personal data and potentially impact privacy.
Based on past anti-trust cases, regulators now have two pathways ahead. As Senator Richard Blumenthal and anti-trust law professor Tim Wu wrote last year:
“The enduring lesson of the Microsoft case was that keeping markets open can require a trustbuster’s courage to take decisive action against even a very popular monopolist.”
This year will be a telling one.