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Being big and behaving badly

May 23, 2018 | By Jason Kint, CEO – DCN @jason_kint

On a panel a few weeks ago, Makan Delrahim, a top antitrust official at the Department of Justice, said that “Being big is not a violation of antitrust policy. Being big and behaving badly is a problem.”  

We’ve established without debate that Facebook, Apple, Amazon, and Google are big. As their Q1 earnings showed, they’re extraordinarily big. Rockefeller big. Carnegie big. But how have they been behaving? Rather than make any assumptions, I went to Twitter knowing many of my followers work in the press, inside the beltway, or across our industry and are very close to the behavior of the tech giants.  

The results were surprising to me. Not because Facebook came out on top. But that one out of three voters chose Google over Facebook. (Apple and Amazon didn’t even come close.) 

I thought it was worth examining the parallel paths of these two “winners,” to consider some facts that may not be on everyone’s radar.  

Facebook and Cambridge Analytica

Everyone has had their punch lines about the ineffective ten hours of United States Congressional hearings with Mark Zuckerberg in Washington last month. We can add this week’s meeting in Brussels to the joke. But not everyone has been paying attention to the work being done by the UK Digital, Culture and Sports Committee, which has been digging into the case for nearly 18 months and asking really smart questions. Here are a few facts established as of today. I’ll let you read through them and determine who is behaving badly: 

  • Last month, Facebook disclosed that up to 87 million Facebook users’ data was harvested in 2014 by GSR and then sold to infamous Cambridge Analytica (now being dissolved). These disclosures were made after joint reporting by The Guardian and The New York Times, and after legal threats by Facebook were reported by The Guardian. Facebook later admitted these warnings were not their wisest move and offered an apology 
  • Facebook has refused to clarify exactly when Mark Zuckerberg or Sheryl Sandberg first became aware of GSR or Cambridge Analytica. Though The Guardian first reported on both companies in a report on December 11, 2015 and a Guardian reporter started asking questions in December 2014. 
  • GSR was launched and run by two “equal partners,“Joseph Chancellor and Dr. Aleksandr Kogan. 
  • It was recently disclosed that Facebook signed a confidentiality agreement with Kogan. This confidentiality agreement was signed by Kogan and an undisclosed Facebook executive on June 24, 2016. (Interestingly, this was the date results of the vote on the Brexit referendum were announced.)  
  • Lesser known fact: In November 2015, Facebook hired Chancellor and he signed a confidentiality agreement as an employee of Facebook. Yes, Facebook hired someone who participated equally in what Facebook characterized to The New York Times as a scam and a fraud. 
  • This leaves us with a minimum of 27 months (December 2015 through March 2018) and a maximum of 39 months (December 2014) in which Facebook was aware of the records being harvested and sold to Cambridge Analytica. Yet, they’re still not sufficiently answering questions about the matter.  
What is next here:  

The emerging pattern appears to be a massive cover-up. So far, despite a threat of future arrest, Mark Zuckerberg has refused to give testimony in the UK where the toughest questions will be asked. The Federal Trade Commission is investigating the issue raised by Senator Kamala Harris’s questions about who made the decision and why Facebook didn’t inform its users back in 2015 when they knew the “fraud and scam.” Being big and behaving badly.  

Google and GDPR

For a while now, DCN has been analyzing, advocating, and lobbying on GDPR, which will come in to enforcement this Friday, May 25th in the European Union. The law, which applies to data collection of EU residents, was approved in April 2016 so it’s anything but new at this point. However, despite DCN and publishers inquiring for many, many months, we only found out what Google was up to in the 23rd month of the two-year grace period. And then only after the Wall Street Journal scooped Google on their plans. (Un)fortunately, this news happened in the same week the Facebook and Cambridge Analytica news was breaking so its plan didn’t get the attention it deserved. And to be clear: Google’s plans are fairly offensive. 

Google’s Privileged Position

Let’s take a step back and look at how Google operates as a privileged platform in the advertising marketplace where they can set the rules of the game while also playing and winning the game. What gives Google the most leverage is its market power and unprecedented amount of data collection in this market (all estimates courtesy of Arete Research).  

  • Google DBM (their advertising bidding solution on the demand side) has $1.7B net revenue vs Google’s nearest peer (The Trade Desk) at $308 million. MediaMath is in third place at around $220 million. 
  • Google DoubleClick AdX (their exchange sitting in the middle) has $1.9B revenue vs nearest peer at $155 million. 
  • Google DFP (their solution on the supply side) has $700 million net revenue vs nearest peer with significantly less. 
  • Google’s measurement/attribution solution has $600 million net revenue vs nearest peer at under $100 million. 

In other words, Google is 5-10x its nearest competitor in every stage of the digital advertising supply chain — where Google both creates the market and makes the market. So, the question becomes what is Google’s responsibility in rolling out the GDPR, the most significant data protection law in history? We know our members depend on Google for nearly every component of their advertising revenues (which drive on average 80% of our members’ overall revenues.) It’s a simple fact that nearly every one of DCN’s members use Google DFP as their ad server.   

The Monopolist Move

So DCN was rightly concerned by Google’s vague policy updates where they attempted to retain all of the rights to the data harvested by each and every one of Google’s ad services without details in how they would use this data. And that they did this while the risk was being assigned to the publishers was, as I previously said, fairly offensive. They might as well don a top hat and cane.  It’s the move of a monopolist.  

Taking on Google regarding their policies in protecting one of their most treasured assets, their data collection, isn’t for the faint of heart. So, we worked with three other major global trade bodies representing more than 4,000 publishers and sent a letter of concern to Google CEO, Sundar Pichai. In the month since we’ve sent this letter, Google has continued to set up private meetings with publishers. However, we’ve consistently been told Google is unwilling to commit to the necessary terms for publishers and when they even begin to approach something workable, they will not put anything in writing.  

Hence the open public letter by DCN with our seven key questions. 

We’ve found it unfortunate that Google has refused to answer our questions and has since moved on to public relations tactics including organizing a “collaboration meeting” on May 24th — the last day before GDPR enforcement begins. We took the counsel of the other associations, their members and the legal and legislative experts across our DCN membership and declined Google’s invitation for a private, off-the-record event. 

What is next here:  

At this point, it’s unequivocal that Google has strategically waited until the final months with the goal of protecting its own interests. This serves to push the market towards systems orchestrated by Google and the trade bodies that represent it and protect its interests above the interests of the public and the publishers. Again, given the dominance of Google throughout the digital advertising supply chain, publishers don’t have a reasonable choice to not sign Google’s terms and essentially shut down advertising revenue on May 25.  

The key question will be whether Google and its trade bodies roll the EU regulators. It’s worth noting Facebook’s troubles and a high-profile 60 Minutes report on Google last Sunday won’t help their cause.  Being big and behaving badly. 

When I do the math on these companies’ actions, they both add up to being big and behaving badly. And that’s a big problem. Being big is not inherently bad. Power can — and should — be used for good. But with great power comes great responsibility. And these are not the actions of responsible companies.  

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