Where Do Tech Titans Draw the Lines on Data?

June 28, 2018 - 9 minutes read

mobile app developersIt’s difficult to look past Facebook’s recent data abuse scandal involving London-based data analytics firm Cambridge Analytica. We know Facebook’s been reckless with securing their data, especially against developers who take advantage of lax rules set in place.

After all, that’s how the data scandal occurred in the first place.

Data Can Be Dangerous

When CEO Mark Zuckerberg testified in front of Congress a few months ago, South Carolina’s Republican Senator Lindsey Graham asked Zuckerberg directly if there is an alternative to Facebook. Zuckerberg pointed out that Microsoft, Google, Apple, and Amazon offered services that Facebook also offers.

Graham clarified her point: could Facebook be a monopoly since it has no direct competitor? “It certainly doesn’t feel like that to me,” replies Zuckerberg.

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Graham’s question could be applied to Google and Amazon, too; who can compete with these three tech giants that offer unique products and save mass amounts of data on users and their habits? Is a monopoly inevitable?

Tech In the Modern Day-to-Day

Tech giant monopolies (or “alleged” monopolies) aren’t new, and they’re not unique to the 21st century. When IBM and Microsoft were the big players, they sold products that we used daily, but the companies weren’t part of our daily lives themselves.

Contrast this with Facebook’s user engagement, and you’ll quickly find that checking Facebook is a part of people’s daily routines (often multiple times a day). A study by Pew Research Center says 45% of American adults use Facebook to get at least some of their news.

Similarly, most of us don’t think twice when we turn to Google to explain something or solve a debate. And Amazon’s been increasingly clogging up the postal system because we just can’t get enough of free 2-day shipping.

A Self-Generated Gold Mine

What does all of this consumerism amount to? A lot of self-generated data that may not sound too important or beneficial to us but which is very valuable to companies like Facebook, Amazon, and Google.

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These companies start by asking for your permission to collect data to improve your experience on their site. Slowly and quietly, they add more data points to take from your habits, like how long you spend in a session, what you clicked on, and much more. Tech giants can claim to use data for algorithms that create more personalized feeds and results, and most consumers don’t bat an eye.

But what most users don’t realize is that Facebook’s and Google’s ad platforms rake in 75% of all digital advertising dollars spent. Why are their ad platforms more robust than dedicated products? Well, for one, you can build profiles of Facebook users by demographic (age and gender), interests, relationship status, and much more. Without that type of user base, no one can come close to rivaling these capabilities.

No Room for Competitors

Amazon, too, accounts for the majority of e-book sales (over 83%) and nearly all online print sales (almost 90%). Additionally, Amazon’s fast becoming a national e-commerce giant selling a wide variety of items in the U.S.; it generated 44% of all e-commerce sales last year.

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Albert Wenger is a managing partner at Union Square Ventures. Earlier in the year, Wenger spoke at an antitrust conference and said that a top priority for founders and venture capitalist firms alike is avoiding the tech giants’ “kill zones.” These are areas where a tech giant would undoubtedly dominate and crush the competition.

But how many “kill zones” will these companies take over with their growing revenue streams? How can we put an end to this monopolistic behavior? Where is the realistic room for innovative startups to enter the market with fresh ideas? There may be none. And the tech giants have seen to that.

Historically, when a competitor becomes a problem, one of the tech giants bends and acquires the competitor and their user base. Google bought out Waze, a Google Maps competitor. Amazon acquired Zappos, a strong competitor in the shoe arena, and Facebook bought Instagram and Whatsapp.

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In With the Old, Out With the New

Antitrust regulation largely looks to product price to determine whether there is a monopoly. And since, you guessed it, most of these tech giants offer free products, prices haven’t changed for consumers. So these 1980s definitions of antitrust don’t apply anymore, especially not to the world of tech. Instead, if we, for example, put a price on our data, wouldn’t it seem that it has become more expensive for consumers?

As AI investor Kai-Fu Lee wrote, “The more data you have, the better your product; the better your product, the more data you can collect; the more data you can collect, the more talent you can attract; the more talent you can attract, the better your product.”

The European Union’s data protection regulations will help kickstart the data revolution. New rules require that companies who retain user data, like Facebook and Google, must put the user’s data in an easily-transferable document that can be read by any website. By creating a data portability regulation, consumers can keep a close eye on their data, and startups can benefit from faster data acquisition, too.

Each tech giant is walking on a very thin rope. If another data abuse scandal popped up, governments will not be as patient as they were with Facebook’s mishandling of the Cambridge Analytica issue.

A Fine Line

As artificial intelligence (AI) continues advancing rapidly, and as these companies quietly incorporate more robust AI into their algorithms, we’re running out of time to secure our data before more can be leaked out. Additionally, AI offers better experiences for users and better prediction technology for all types of other technologies, like self-driving cars, the Internet of Things, and even drones.

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How could any new startup compete with AI-backed products that have learned from billions of data points that have been collected over decades of user engagement?

Viktor Mayer-Schönberger is a professor at the University of Oxford, and he has an interesting possible solution. What if all companies who had a certain amount of market share were mandated to share data with other firms in their industry, upon request? The data wouldn’t be full of personal information, but there exists valuable data without all of the details, too.

Without an innovative and scalable regulation plan, however, the tech giants are free to do as they please, with minimal legal consequences. It’s obvious that these companies won’t draw the line themselves (after all, that wouldn’t benefit them in the slightest), so it’s time for consumers and governments to step up.

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