Armed with consent decrees, new laws and new hooks into old laws, regulators around the world appear to be fed up with Google and Facebook. With good reason. The Google Facebook duopoly continues to maintain an unhealthy dominance of the digital marketplace. Nearly all of the growth in digital advertising continues to go to these two companies.
The impact is significant. Revenue that might otherwise flow into a healthy marketplace of known and emerging competitors instead is flowing directly to only two uber-dominant companies. As a result, a well-known strategy for startups was to simply position themselves for acquisition by the duopoly but over time and big tech scrutiny those opportunities have even evaporated resulting now in a “kill zone” where no venture capital will even invest. For more mature businesses, the counteracting strategy has been to merge and, thereby, try to achieve competing scale. So, it’s either get big or get bought—if you can.
Meanwhile, devoid of any real competition, Facebook and Google find themselves increasingly at odds with consumers. A new unappealing revelation seems to hit every few weeks. This is not a healthy environment that fosters growth and stability, much less any sort of ethical data framework that matches consumer expectations.
Here come the Regulators
Recently, the French data protection authority fined Google $50 million euro for violations of the General Data Protection Authority. In its ruling, they took issue with the unlawful way in which Google asked consumers for consent. Essentially, Google appears to offer a take-it-or-leave consent to consumers with pre-checked boxes and little transparency. Particularly from such a dominant company, the regulators said this approach is a no no.
Google’s tech lobbyists will say this ruling is bad for all of industry. But really…it’s just bad for Google. The French specifically noted that Google’s dominant market position played a big part in the ruling. The reality is that there are not very many companies whose business model (or at least the anti-competitive dominance of it) is so utterly dependent on tracking and targeting consumers everywhere they go. Not all of industry wants to be lumped in with the toxic duopoly. Nor should they. Many companies offer a value proposition to consumers (and advertisers) that doesn’t hinge on web-wide tracking.
Then, there is news that the Federal Trade Commission (FTC) is close to issuing a record-setting fine on Facebook for violating a consent decree. The FTC’s previous record fine for a consumer privacy case was in 2012 levied at (you guessed it!) Google for $22.5 million.
At this point, even the state regulators are getting involved. The DC Attorney General recently sued Facebook for failing to protect consumers’ data in their Cambridge Analytica scandal. It’s a simple approach that many other attorneys general may follow.
More than Money is at Stake
All that said, the headlines seem to focus on the amount of the fines. However, what I’m watching most closely are the behavioral or structural changes that come as a result. For instance, will the FTC require tighter oversight by Facebook of their third party partners? Will the FTC recommend that Facebook divest itself of Instagram and WhatsApp, thereby creating instant competition in the social media space? And, how will the EU’s enforcement of GDPR impact Google’s ability to track consumers’ every move?
As the French ruling seems to insist, Google may have to unbundle its requests for consent which would surely lead to fewer consumers agreeing to be tracked by Google. It’s subtler – but if EU regulators are successful in ensuring that companies are plainly and transparently asking for consent for secondary uses of data, will that improve the prospects of companies which have trusted relationships with consumers?
At the end of the day, a $50 million euro fine probably feels like an annoying mosquito bite for a company with over $100 billion in annual revenue. The biggest benefits for consumers and the marketplace will only come if there are changes in how the duopoly operates.