Great stuff, Matt, on the restriction of advertising for FAANG (minus Apple, I suppose).
Nearly all of Google's money comes from advertising. Recently the book laid out how China has been targeting the US. You know all the background as I saw you describe the multitude on Jimmy Dore's show recently. However, the author, Robert Spalding, proposes that China and most of FAANG have the same business model. Data mining of its "citizen's" data. In this case, we are "citizens" of FAANG, as Chinese are citizens of China. We are to be monitored and controlled.
Excluding FAANG from advertising would not only dock their power, but it would also make them responsive to their customers. Right now, they aren't. They simply have too much money flowing to them, and they have undeniable monopoly positions. Usually when we speak of monopoly, we speak of oligopoly. But with FAANG, the monopolies are close to literal.
While you're right in publicizing the power-grabbing buyouts and mergers, trying to bring anti-trust and patent law back into productive control (as the most politically-viable approach at this time), please keep in the back of your mind that there can be advantages to small businesses over even adequately-competitive large businesses in a market.
For example, while the current motive might be to try to stop a Uber/Grubhub merger, keep in mind that those services could be provided by a multitude of local small businesses. Any small economy of scale that Uber/Grubhub may provide is easily offset by the trust and familiarity (and innovation potential) that a local entrepreneur could offer. There's no magic to either of these particular digital businesses. A local tekkie could do either with virtually no capital requirement.
The only reason they don't is that they know the bigger business would instantly put them under, not through competition, but by unfair means (eg, offer the service for free, file a flaky legal claim against them (patent, copyright, unfair business practice, etc,), use social media unfairly to destroy them). But these unfair practices could be counteracted by legislation and public opinion.
Regarding preventing large tech companies from engaging in advertising:
I worked at Google as a product manager for three years and observed (in much the same way as you and Tristan Harris have) how the profit incentive to show / sell more ads (in combination with network and monopoly power) leads to a decline in the value of the tech product. The basic argument is that tech companies profit by getting more engagement from their users. The advertising model (coupled with absence of competition because of monopoly / network effects) means that rather than enhancing the value of the product for users, the companies fastest way to more profit is through making a given product (say YouTube or Google Maps, etc) more "engaging". Since the price we pay for these products is our attention, higher engagement really means higher "prices". (Arguably there is a balance here: higher engagement could be the result of better content, but on average, utilities like Google Maps should *not* be "engaging". Their goal should be to give users what we need (information about routes) and let us get on with our lives. Google's Maps division, however, at one point had a company-level quarterly objective to send five million daily notifications. This objective, rather funnily, came from a new vice president of product who had come over from Tinder. And a more recent launch: those "turn right after Starbucks" commands are actually paid ads.)
As you note, one of the problems here is that we don't directly observe the true prices of advertising and struggle to price our attention, since the products themselves are built to be addictive. In turn it is hard to make a simple anti-trust case, since the standard of enforcement has been whether monopolies are causing consumers to pay higher prices. But most consumers (and Congress) have no idea what they are truly "paying".
Having said all this, what I really wanted to comment on is what "advertising" truly encompasses. In some sense, every non-user-controlled/specified notification (compare "you got a message from X" to "check out this thing"), every promotional email, and even every YouTube or Netflix "recommendation" is an advertisement. It is an *internal* advertisement, but it is an ad nonetheless.
Beyond regulating away the coupling of advertising business model to tech products, we should probably consider even making unsolicited "recommendations" illegal. One idea might be that YouTube must first display "would you like video recommendations" before presenting them. One could argue that this is the sort of "non-micro-nudge" restriction that Tristan Harris proposes.
I enjoy your writing. I'd enjoy exchanging emails with you about some of the Google / tech sphere. I imagine you can see my email after I post this?
Matt, I like how you touched on Google's cross-subsidization of its Meet offering to attack Zoom, and Microsoft's Teams to compete with Slack. I agree that "featurization" allows big companies to use their bundling power to choke off point solutions from smaller competitors. They routinely do this by making point solutions like Meet video conferencing part of a bigger application "bundle". If interested, I wrote about how Microsoft is using this tactic to attack the lucrative cybersecurity market at https://security-economics.com/2020/02/12/the-security-vendor-of-2020-will-be-microsoft/.
"Google and Facebook need publisher content" - how much do they, really?
20 years ago, I remember I read an article called "Content is not king" by Andrew Odlyzko. He argued that connectivity was more important than content. In retrospect it seemed pretty prophetic. In 2001 most internet companies were not terribly "social", but the companies focused on (social) connectivity grew big, at the traditional content giants' expense. The "content" giants cried bloody murder and claimed piracy was the only thing people used connectivity for - but I think Facebook, for all its faults, put that claim to shame.
Even these days, if news articles were somehow impossible to share on Facebook, or even if news were somehow impossible to discuss on Facebook, most of its users would hardly mind! They might even be happy about it.
See section "IV.", subsections 1 (keeping competitors out), 2 (tariffs allowing the development of national competitors that force dominant international players to adapt), and 3 (long-term in-house research by dominant monopolies).
"I don’t know enough to have an opinion on whether countries with strong antitrust eventually outcompete those with weaker antitrust or vice versa.' He writes.
Hi Matt - new subscriber here and I've really enjoyed reading the last few articles and the discussions.
Re: Google vs Zoom - I think the question is whether G Suites is a monopoly in the enterprise productivity apps market. I believe it's in a duopoly with Microsoft 360.
Also - how do you think Alphabet's corporate structure fits in here? It's a holding company with Google as its main subsidiary. To make matters more confusing, Google Cloud (which builds GSuite) has a CEO, even though it's still a department of Google (I think).
Great stuff, Matt, on the restriction of advertising for FAANG (minus Apple, I suppose).
Nearly all of Google's money comes from advertising. Recently the book laid out how China has been targeting the US. You know all the background as I saw you describe the multitude on Jimmy Dore's show recently. However, the author, Robert Spalding, proposes that China and most of FAANG have the same business model. Data mining of its "citizen's" data. In this case, we are "citizens" of FAANG, as Chinese are citizens of China. We are to be monitored and controlled.
Excluding FAANG from advertising would not only dock their power, but it would also make them responsive to their customers. Right now, they aren't. They simply have too much money flowing to them, and they have undeniable monopoly positions. Usually when we speak of monopoly, we speak of oligopoly. But with FAANG, the monopolies are close to literal.
Matt,
While you're right in publicizing the power-grabbing buyouts and mergers, trying to bring anti-trust and patent law back into productive control (as the most politically-viable approach at this time), please keep in the back of your mind that there can be advantages to small businesses over even adequately-competitive large businesses in a market.
For example, while the current motive might be to try to stop a Uber/Grubhub merger, keep in mind that those services could be provided by a multitude of local small businesses. Any small economy of scale that Uber/Grubhub may provide is easily offset by the trust and familiarity (and innovation potential) that a local entrepreneur could offer. There's no magic to either of these particular digital businesses. A local tekkie could do either with virtually no capital requirement.
The only reason they don't is that they know the bigger business would instantly put them under, not through competition, but by unfair means (eg, offer the service for free, file a flaky legal claim against them (patent, copyright, unfair business practice, etc,), use social media unfairly to destroy them). But these unfair practices could be counteracted by legislation and public opinion.
Regarding preventing large tech companies from engaging in advertising:
I worked at Google as a product manager for three years and observed (in much the same way as you and Tristan Harris have) how the profit incentive to show / sell more ads (in combination with network and monopoly power) leads to a decline in the value of the tech product. The basic argument is that tech companies profit by getting more engagement from their users. The advertising model (coupled with absence of competition because of monopoly / network effects) means that rather than enhancing the value of the product for users, the companies fastest way to more profit is through making a given product (say YouTube or Google Maps, etc) more "engaging". Since the price we pay for these products is our attention, higher engagement really means higher "prices". (Arguably there is a balance here: higher engagement could be the result of better content, but on average, utilities like Google Maps should *not* be "engaging". Their goal should be to give users what we need (information about routes) and let us get on with our lives. Google's Maps division, however, at one point had a company-level quarterly objective to send five million daily notifications. This objective, rather funnily, came from a new vice president of product who had come over from Tinder. And a more recent launch: those "turn right after Starbucks" commands are actually paid ads.)
As you note, one of the problems here is that we don't directly observe the true prices of advertising and struggle to price our attention, since the products themselves are built to be addictive. In turn it is hard to make a simple anti-trust case, since the standard of enforcement has been whether monopolies are causing consumers to pay higher prices. But most consumers (and Congress) have no idea what they are truly "paying".
Having said all this, what I really wanted to comment on is what "advertising" truly encompasses. In some sense, every non-user-controlled/specified notification (compare "you got a message from X" to "check out this thing"), every promotional email, and even every YouTube or Netflix "recommendation" is an advertisement. It is an *internal* advertisement, but it is an ad nonetheless.
Beyond regulating away the coupling of advertising business model to tech products, we should probably consider even making unsolicited "recommendations" illegal. One idea might be that YouTube must first display "would you like video recommendations" before presenting them. One could argue that this is the sort of "non-micro-nudge" restriction that Tristan Harris proposes.
I enjoy your writing. I'd enjoy exchanging emails with you about some of the Google / tech sphere. I imagine you can see my email after I post this?
Matt, I like how you touched on Google's cross-subsidization of its Meet offering to attack Zoom, and Microsoft's Teams to compete with Slack. I agree that "featurization" allows big companies to use their bundling power to choke off point solutions from smaller competitors. They routinely do this by making point solutions like Meet video conferencing part of a bigger application "bundle". If interested, I wrote about how Microsoft is using this tactic to attack the lucrative cybersecurity market at https://security-economics.com/2020/02/12/the-security-vendor-of-2020-will-be-microsoft/.
"Google and Facebook need publisher content" - how much do they, really?
20 years ago, I remember I read an article called "Content is not king" by Andrew Odlyzko. He argued that connectivity was more important than content. In retrospect it seemed pretty prophetic. In 2001 most internet companies were not terribly "social", but the companies focused on (social) connectivity grew big, at the traditional content giants' expense. The "content" giants cried bloody murder and claimed piracy was the only thing people used connectivity for - but I think Facebook, for all its faults, put that claim to shame.
Even these days, if news articles were somehow impossible to share on Facebook, or even if news were somehow impossible to discuss on Facebook, most of its users would hardly mind! They might even be happy about it.
Scott Alexander of Slate Star Codex is talking about monopolies a bit in his post yesterday on the analogy of biological evolution "adaptive fitness landscapes": https://slatestarcodex.com/2020/05/12/studies-on-slack/
See section "IV.", subsections 1 (keeping competitors out), 2 (tariffs allowing the development of national competitors that force dominant international players to adapt), and 3 (long-term in-house research by dominant monopolies).
"I don’t know enough to have an opinion on whether countries with strong antitrust eventually outcompete those with weaker antitrust or vice versa.' He writes.
Hi Matt - new subscriber here and I've really enjoyed reading the last few articles and the discussions.
Re: Google vs Zoom - I think the question is whether G Suites is a monopoly in the enterprise productivity apps market. I believe it's in a duopoly with Microsoft 360.
Also - how do you think Alphabet's corporate structure fits in here? It's a holding company with Google as its main subsidiary. To make matters more confusing, Google Cloud (which builds GSuite) has a CEO, even though it's still a department of Google (I think).