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Articles by: "Chris Pedigo, SVP Government Affairs – DCN"

Featured Post

Opportunity lies at the intersection of data protection and healthy competition

Over the course of the past year or so, states have significantly ramped up their efforts to hold big tech platforms accountable. In fact, more than a dozen states either have new data protection regulations on the books or in committee. Efforts like the California Consumer Privacy Act (CCPA) and DC Attorney General Karl Racine’s lawsuit against Facebook are examples of states’ attempts to regain some measure of control for consumers. And just this week, 50 Attorneys General from 48 states, Washington DC, and Puerto Rico announced an antitrust investigation into Google.

For those following tech policy, the escalation is not surprising. Google and Facebook have built massive, unrivaled data collection operations. According to research from Princeton, the top 10 domains that track consumers across the web belong to Google and Facebook. This tracking, along with careless data practices, has given rise to a growing tide of consumer distrust that affects the entire internet. At the same time, these activities are a major factor in the widespread adoption of ad blocking.

A broken supply chain

Platform intermediaries with black box algorithms redirect more and more value from the supply chain. As a result, buyers (advertisers) and sellers (publishers) suffer increasing harm.

According to the Association of National Advertisers (ANA), approximately 30% of advertiser dollars go to fraud. At the same time, advertisers have suffered reputational harm as platforms negligently and haphazardly run ads for trusted brands against abhorrent content such as terrorist propaganda and child pornography. Thus, brands and marketers are increasingly wary of these opaque and irresponsible practices.

On the other side of the supply chain, publishers’ share of the advertising pie is shrinking as it is gobbled up by data-fixated platforms. And, given ad blocker adoption, the amount of metaphorical pie being served is also dwindling.  

What’s worse, however, is that rules and expectations of the digital advertising marketplace are being written by and for the big tech platforms. With all of that turmoil, state legislators and state Attorneys General, which tend to be younger and more digitally savvy than their national counterparts, are attempting to rebalance the scales in an effort to empower consumers and revitalize competition.

State led, nationally significant

The history of the United States is littered with examples of states taking the lead on policy issues. This was partly by design as the federal government lacked strong tools for regulating the economy prior to Teddy Roosevelt’s trust-busting campaign and FDR’s New Deal.

However, even in the modern era, states often take the lead. For example, civil rights were won first at the state and local levels. States continue to push the envelope on environmental protections. And now, states are now stepping up to serve as incubators for innovative public policy regarding consumer privacy and competition.

While it is heartening to see states assume their role as early advocates for issues of national importance, it’s more important than ever for the federal government to assume a leadership role in this debate. There are some promising signs: The Department of Justice has launched an investigation into the dominance of tech platforms, which could lead to a levelling of the playing field. Meanwhile, Congress is actively looking at setting a national consumer privacy standard.

Clarifying standards and policy

With more states expected to pass their own privacy standards in 2020, we are likely to see a mismatched patchwork of state privacy laws by this time next year. As a nation (and a global marketplace), we need to mend this situation – and fast. Given that data and competition are not bound by state lines, Congress needs to enact a single privacy standard that would empower and protect all consumers while at the same time paving a clear pathway to compliance for businesses of all sizes. Giving consumers real tools to protect their privacy would improve consumer trust and engagement online. It would also reward good actors and give regulators stronger tools to prosecute bad behavior.

At the same time, we must also expose anticompetitive practices and remedy the impact of monopolies on the digital economy. As we’ve seen over the last decade, Facebook and Google simply bought out their competition with the acquisitions of Instagram and DoubleClick respectively. Those acquisitions solidified their dominant position in the marketplace. They have also squelched the competition that drives innovation. Withouta level playing field, smaller companies and the next wave of innovation will be stunted.

The federal government should look to the states to better understand the issues – and envision the opportunity – before us. Empowering consumers and ensuring a healthy competitive landscape will do far more than help cure what ails the internet. It could usher in a new age of innovation and economic growth.

Featured Post | Perspectives | Policy

The echo chamber effect

Echo Chamber: a room with sound-reflecting walls used for producing hollow or echoing sound effects 
—often used figuratively.

Most of the time, echo chambers are amazing, secret shared spaces, acoustic marvels. See the Whispering Gallery of St. Paul’s Cathedral in London or the famous subterranean chambers at Capitol Studios in Hollywood.

Unfortunately, “figurative” echo chambers just don’t produce the same vibe. A prime example is my renewed optimism every March that this is finally the year for the Washington Nationals. I spend all winter reading and talking with other fans about which free agents the Nats have signed and why this will finally get them over the hump. Players talk about how they incorporated hot yoga into their offseason conditioning program, which I’ll translate to mean there will be a surge in home runs in the hot, humid DC summer. Advanced stats project breakout seasons for practically the entire roster.

Of course, there are plenty of critics out there to counterbalance my irrational optimism. Some are less articulate than others (hello, Phillies fans!). Even my loving wife cautions that the Nats will break my heart again. But, in the cold, dark winter, I willfully shut out all the haters in favor of my sweet summer dreams. And, yet, here we are still waiting for the Nationals to win their first playoff series.

Public policy is another arena in which echo chambers don’t support balanced, rational thinking. There are two recent prime examples surrounding major tech companies that are suffering from the echo chamber effect:

A more balanced approach

Facebook recently announced that it would develop its own digital currency, Libra. It’s a big swing with grand slam potential. Quite frankly, it makes a ton of sense as Facebook has massive scale and a well-suited combination of services. However, Facebook dramatically underestimated the reputational harm caused by the Cambridge Analytica scandal, its previous settlement with the FTC for privacy violations, a key area for banking and other regulators concerned about the ability of dark money to flow through Libra.

The company also failed to anticipate basic questions from lawmakers such as how much anonymity would be granted to users of the service. Their rollout strategy basically amounted to “we got this, bro!” At a Senate Banking Committee hearing this week, Facebook’s David Marcus was forced to concede that they will not launch Libra until regulators’ concerns are addressed.

Manipulation and the market

The Senate Judiciary Committee also convened a hearing to look at whether (and how) Google tweaks its algorithms to impact speech and profits. Admittedly, there is a lot we don’t know here. Even Subcommittee Chairman Ted Cruz (R-TX) acknowledged that he has only seen anecdotal evidence that Google deprioritizes conservative voices.

However, Google clearly prioritizes its own sites in search as well as the ads that net the biggest profits for Google. As the dominant player in the ad serving landscape, it’s clear that the company’s algorithms are tuned to make the most money for Google to detriment of consumers and competitors.

Free speech

There are major concerns about real and perceived behaviors that have major impacts on a wide swath of democratic discourse and commercial activity. So, against that backdrop, Google’s new global head of government relations wrote and testified that Google’s algorithms do not factor in political views. As evidence, he cited Google’s diverse workforce and one study. But, as Senator Josh Hawley (R-MO) reminded his colleagues, Google has a history of ideological censorship, such as when they accommodated the Chinese government to operate in that country.

Despite the duopoly’s posturing, lobbying, and academic influence, there’s a rising sentiment that they can’t be trusted. In fact, Senator Hawley pointedly asked Google’s head lobbyist “why would we believe you about anything?” Despite direct pleas from Senators Hawley and Richard Blumenthal (D-CT), Google wouldn’t even agree to have a 3rd party conduct an independent audit to ensure compliance with Google’s stated claims of non-bias. The whole interaction underscores the fact that Google has essentially evaded Congress and the industry about how its algorithms work – often to the detriment of competitors and consumers alike.

Both Facebook and Google’s approaches to Congress felt like they had been developed in an expensive, lobbyist-enabled echo chamber. We can shake our heads at the ludicrousness of these situations. But the reality is that these duopoly built echo-chambers yield far greater consequences than the dashed dreams of a middle-aged baseball fan. These two companies shape public discourse throughout the world. They also dominate the digital advertising landscape, raking in massive profits, and deciding the winners and losers in the marketplace. Echo chambers are not the place in which balanced, constructive strategies are conceived. It is time we demand more from Google and Facebook than obfuscation and the raw exercise of market power.

Featured Post | Perspectives | Policy

What policy makers can learn from privacy-focused products

The legal and policy community continues to debate the impact of General Data Protection Regulation (GDPR), the ins and outs of the California Consumer Privacy Act (CCPA), and how (or whether) Washington should regulate consumer privacy. While the debate rages on, we are seeing a stream of consumer-focused privacy-oriented product rollouts. It is interesting to look at what these controls actually do and how they might inform the policy debate.

In a concession to consumer privacy, Google recently announced that it would allow consumers to block companies from tracking them across the web when they are using Chrome. Specifically, they will differentiate between 1st party and 3rd party cookies. As such, they will allow consumers to delete 3rd party cookies while preserving the 1st party cookie, which, for example, allows a website to remember a consumer’s log-in information. In addition, Google will soon roll out features to prevent companies from identifying consumers via device fingerprinting, another method used to track consumers across the web.

Let’s be clear, Google is late to the privacy game given the long history of privacy protections offered by Apple and Mozilla. Apple has famously blocked 3rd party cookies by default in Safari and recently introduced Intelligent Tracking Prevention (ITP), restricting the ability of companies to access cookies when a consumer is not interacting with that company.  

Services that care for consumers

When a consumer visits YouTube on Safari, Google can access the cookies they have set on their browser. However, as soon as the consumer navigates to another website, Google can no longer access those cookies. ITP essentially breaks the ability to track consumers around the web.  Apple has also worked to block loopholes where cookies, set by companies like Google and Facebook, pretend to be 1st party but are then used for tracking and secondary use. Unfortunately, it is hard to muster much confidence that Google will be anywhere as diligent as Apple in closing loopholes, given its business model is built on its ability to expertly track consumers.

Mozilla, on the other hand, offers multiple ways for consumers to block third party tracking in Firefox. Mozilla is also considering rolling out a “Super Private Browsing” mode, which would incorporate Tor privacy features into Firefox.

Beyond the most commonly used browsers, a whole suite of new services have popped up. Duck Duck Go, a search engine, and Brave, a browser, offer strong privacy controls as their primary value proposition. As we’ve noted for several years now, more and more consumers are turning to ad blockers to protect themselves and/or improve their web experience. Forcing these massive platforms to once again compete on privacy will be good for everyone, particularly consumers. The question, of course, is whether some of these companies are simply too big to change at this point.

Policy implications

Back to my original question: What can policymakers learn from these new consumer privacy controls?

For starters, consumers increasingly demand more and stronger protections of their data and digital lives or the market wouldn’t be headed that direction. You can reasonably debate whether Google’s recent announcement went far enough. But the fact that a multi-billion-dollar company like Google did anything at all speaks volumes.

It’s also worth pointing out that all of these new controls, which curtail the ability of companies to collect consumer data at scale, are not actually breaking the internet despite the frequent claims of ad tech lobbyists. In fact, given this push to meet consumer demand for greater privacy controls, it’s funny and a little sad to look back at the hysteria from some of these lobbyists.

Meeting consumer demand

The big takeaway is how these companies and their engineers are designing services and features to meet consumer expectations for privacy. This new wave of privacy controls gives consumers the ability to stop companies from tracking them across the web. Yet, these services preserve the ability for websites and apps to collect and use consumer data when the consumer is interacting directly with that company.

This approach makes sense. Consumers share their data so that companies can use it to provide a service or content. In this fair value exchange, the consumer can choose to engage or not. Consumers do not expect companies to track them outside of that fair value exchange and doing so is simply bad business.  

It isn’t a question of whether consumers want their privacy protected, these market moves demonstrate the demand and inevitability. And, as policymakers consider how best to craft consumer privacy protections, it’s worth noting how today’s best engineers have attempted to meet consumer demand and expectations for privacy.

Featured Post | Perspectives | Video

Taking a bite out of Apple News+

This week, Apple announced a new suite of services including Apple News+ and Apple TV+, subscription services for news and video content respectively. It’s an interesting move for Apple, which excels at creating premium experiences, enjoys strong customer loyalty, and has the ability to potentially deliver audience scale. There are, however, serious questions about the revenue split, consumer relationship, app-market dominance, access to content, and Apple’s long-term commitment to publishers.

While few details are available at this point (particularly about Apple TV+), it appears Apple News+ will cost $9.99 per month with Apple taking a hefty 50% cut and distributing the remainder to all of the participating publishers. Tim Cook did not announce a price point for Apple TV+ but it seems likely to have similar characteristics as Apple News+, including a similar revenue split and distribution structure. 

A Lopsided Relationship

With these news services, Apple will control not only the relationship with the consumer, but will also control the data about the consumer.  It’s hard enough to build a subscription business without having another company serve as the middleman between the content creator and their audience.   Moreover, as New York Times’ CEO Mark Thompson put it, “Bundles always dilute the brand.”

More troubling is the fact that Apple runs the app marketplace itself via the App Store while simultaneously offering a media consumption app that competes with publishers’ branded apps as well as those of other aggregators such as Flipboard. An example of the inherent conflict of interest is that Apple places its own apps front and center, pre-installed on more than a billion phones worldwide. Beyond a glaring competitive advantage, controlling the marketplace and delivery mechanism of its competitors’ apps gives Apple unprecedented insights into the transactions of those companies (think Amazon selling its own brands while seeing everyone of its competitors’ transactions).

Market Monopoly

Apple forcing the reported levels of revenue splits and data terms underscores larger concerns about the dominance of platforms.  As Senator Blumenthal, who serves on the Senate Judiciary Committee has stated, “[t]here is much stronger agreement among me and my colleagues that there needs to be more aggressive enforcement action on tech companies.”  Senator and presidential candidate Elizabeth Warren (D-MA) recently called for the break-up of Apple and the other platforms. Senator Ted Cruz (R-TX) has long voiced concerns about potential bias of big tech firms. Members of Congress are concerned that big tech platforms have too much influence and are harmful to society.  Although Apple has avoided a lot of the privacy gaffes of other tech giants, the fact that Apple can boldly propose such lopsided terms shows how the landscape is perilously tilted in favor of the big platform companies.

Bringing further voice to the concerns raised by policymakers, Spotify filed suit against Apple claiming that Apple “purposely limited choice and stifled innovation.” Spotify claims that Apple uses its platform to disadvantage competitors in the music streaming business, including by taking a 30% cut of subscription revenue.  While Apple is not proposing to get into the news business, the Apple TV+ product sounds like Apple will be both distributor and competitor.

And, considering the fact that Apple has expressed concerns in how digital advertising works, it seems an ironic choice for the company to favor advertising-based business models over subscriptions for publishers.

Quick Fix or Long-term Success?

Publishers are also rightly concerned about whether Apple will maintain a long-term commitment to this initiative. Facebook famously changes their terms, goals and algorithms about every six months, which makes it extremely difficult for publishers to build a sustainable business. Other social platforms have rolled out paid incentives to content producers only to withdraw them as soon as the programs are off the ground.  Publishers have rightly grown wary of purported platform support.

At the end of the day, Apple needs to make a serious commitment to making distribution work for high-quality news and entertainment. As we have seen in Google and Facebook’s own (hardly altruistic) need to invest in the production of content that their business models undermined, building a model that sustains quality content creation is the bedrock of long-term success.

Featured Post | Perspectives | Policy

Fines are fine. But they’re not enough to shake the duopoly’s dominance

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.

Featured Post | Perspectives | Policy

The Midterms are over: Sizing up what it means for big tech

For the last two years, Congress has increasingly focused on big tech platforms. Lawmakers have summoned executives, consumer advocates, and academics for hearings on consumer privacy, market dominance, data breach scandals and perceived political bias. However, with the exception of a bill to amend Section 230 of the Communications Decency Act to clarify  companies’ liability for facilitating  sex trafficking on their sites, Congress has not yet moved significant legislation to regulate the tech industry.

Some are wondering whether a new Democratic majority in the House means Congress will start legislating, particularly with the President saying that he is interested in discussing with Democrats whether or how to regulate the technology industry. Let’s take a look at how the 2018 midterm election results might impact a few high-profile tech issues.

Market Dominance of Big Platforms

Even before the elections, Democrats and Republicans raised concerns about the outsized influence of Google, Facebook, and Amazon – albeit for different reasons. Many Democrats are concerned about the data surveillance business models of big tech companies. Republicans, on the other hand, distrust social media algorithms, which they believe favor liberal points of view over conservative voices.

I expect both parties’ concerns will only grow, especially as we get closer to the 2020 Presidential election. And those concerns might fuel action on other issues. Congress is not likely to do anything to directly address the dominance of the big technology platforms. The expectation is that the Department of Justice and the Federal Trade Commission will work with Congress to provide guidance on what, if anything, lawmakers should do. Thus far, discussions have focused on how various digital business models function and what remedies or regulations would be needed to enhance consumer experiences.

Net Neutrality

Over the past decade, Congress and the Federal Communications Commission (FCC) have been bickering about net neutrality without final resolution. Most recently, the Republican-controlled FCC rolled back net neutrality regulations promulgated by President Obama’s FCC.

With Democrats set to take the reins in the House, they are more likely to move a bill to reinstate those Obama-era net neutrality rules. But the Republican-controlled Senate is likely to completely ignore any bill sent over by the House. That dynamic could change if the courts rule on the pending challenges to the FCC’s rollback. Until the incessant shouting stops, this is likely an insular technology discussion and fodder for future campaigns.

Consumer Privacy

Congress has held dozens of hearings on consumer privacy over the years. This year was no different. However, the tone of the conversation has changed dramatically just in the past few months. As mentioned before, many Democrats have long advocated for a consumer privacy bill of rights, saying that Congress needs to step in to protect consumers. Now, a few key Republicans agree. Many in the industry are calling for the same as the California Consumer Privacy Act and the EU’s General Data Protection Regulation go into effect.

Just last month, Senate Commerce Committee Chairman John Thune (R-SD) stated, “It is increasingly clear that industry self regulation in this area is not sufficient.” Clearly momentum was building on this issue before the midterm elections and there is reason to believe it will continue. Senator Thune is likely to move into a leadership position in the Senate, thus relinquishing his position as Chairman of the Senate Commerce Committee.

However, the next likely chairman is Senator Roger Wicker (R-MS), who signed a bipartisan letter with three other key senators in September saying they want to work with the Administration to “provide consumers with more transparency and control over the collection and use of (consumers’) personal data while preserving the innovation at the heart of the internet.” The House Energy and Commerce Committee is likely to be chaired by Representative Frank Pallone (D-NJ), who included consumer privacy legislation on his agenda for 2019. On top of that, a host of other policymakers, including Senators Wyden (D-OR), Blumenthal (D-CT), and Markey (D-MA), have recently introduced their own legislative proposals. Comprehensive consumer privacy legislation appears to have early bipartisan and bicameral support.

All that said, our nations’ founders intentionally made it difficult to pass legislation. And, 2019 will be no different. For any meaningful legislation to advance through both chambers of Congress, Democrats and Republicans will have to put aside partisan differences long enough to find middle ground. That will be hard for elected officials to do in the current highly polarized political environment. Odds-makers would say the chances are slim that Congress can enact comprehensive consumer privacy legislation, but it’s got a better chance than most.

Featured Post | Perspectives | Policy

Has Google outgrown democracy?

Last week, the Senate Intelligence Committee held a hearing to examine the extent to which foreign actors manipulated digital platforms to meddle in the 2016 elections. To their credit, Committee Chairman Richard Burr (R-NC) and Ranking Member Mark Warner (D-VA) side-stepped the partisan wrangling and focused on how these bad actors attempted to undermine our democracy. And, for the first time, Senators Burr and Warner insisted the top executives from the big tech platforms testify in person. Given the dysfunctional state of the American political discourse, it’s especially remarkable that a group of Senators agreed to tackle an issue in a bipartisan fashion. Facebook agreed to send COO Sheryl Sandberg (Facebook CEO Mark Zuckerberg already testified in the spring). Twitter sent its CEO, Jack Dorsey. Remarkably Google declined to send Alphabet CEO Larry Page.

It’s anyone’s guess as to why Google didn’t feel it needed to participate. Its dominant role in the distribution and monetization of content, through its search and advertising platforms respectively, certainly would have been relevant to the Committee’s work. And that is before you even get to YouTube, which helped make Russia Today its #2 news property through much of 2017 and spread of misinformation in Chemnitz last week. Google certainly has enough lobbyists on retainer to fully prepare. Whatever the reason, the fact that “declining” was even an option demonstrates just how big Google has become.

Data Wars

One area not well understood in Washington is the relationship between data collection and the incentives that allow foreign actors to manipulate them. Damian Collins, the Tory MP of UK Parliament, has led a brilliant multi-party effort to document its findings in this area. Other policy experts have also begun to explore how data protection may help curb disinformation.

Again, this is where Google’s role as the company that collects enormous amounts of data on the public needs to be more clearly explored. A few weeks ago, we distributed research entitled Google Data Collection, by Vanderbilt Professor Douglas Schmidt which, for the first time, cataloged the expansiveness of Google’s data collection machine. Google owns the #1 browser (Chrome), the #1 mobile platform (Android), and the #1 search engine (Google Search). On top of that, Google’s analytics and advertising tools are impossible for consumers or publishers to avoid. All of these touchpoints allow Google to conduct a massive surveillance operation on consumers who have no way to avoid it.

Professor Schmidt’s research shows that a dormant, stationary Android phone (with the Chrome browser active in the background) communicated location information to Google 340 times during a 24-hour period. That’s an average of 14 data communications per hour – with location information constituting 35% of all the data samples sent to Google.

When an iOS device was running Safari in the background, but not Chrome, Google could not collect any appreciable data unless a user was interacting with the device. Conversely, an idle Android phone running the Chrome browser sends back to Google nearly 50 times as many data requests per hour as an idle iOS phone running Safari.

Perhaps the most striking revelation in Professor Schmidt’s research is that approximately two-thirds of the data that Google collects about consumers is collected in passive ways. That’s an incredible amount of information being gathered in the background, where consumers wouldn’t expect it.

Power Play

Google’s pervasive surveillance have enabled the company to rake in massive profits and squash competition in a variety of ways. However, there probably is no surer sign of their dominant position than their ability to decline – with no worry for the consequences – a bipartisan request to testify from the Senate Intelligence Committee.

At the same time they declined to participate in this hearing, rumors began to circulate that Google is creating a search engine just for the Chinese market that will allow Communist leaders to block access to content they don’t like. Google appears to be a willing participant in the suppression of over 1 billion people.

Is it time to start asking whether Google has outgrown democracy?

Advertising | Featured Post | Perspectives

Duopoly dystopia

Google and Facebook’s dominance of the digital advertising market is well documented. Pivotal Research’s Brian Wieser estimated at the end of 2017 that these two companies “accounted for 73% of all digital advertising.” In the same report, he also estimated that the duopoly accounted for 83% of all growth, which means their grip is only getting tighter.

Scale is the main reason these companies dominate. Facebook has a huge user base, particularly when you factor in its ownership of Instagram and WhatsApp. And let’s not forget its “like” buttons on more than 8.4 million websites, a number Facebook recently disclosed in its answers to lawmakers’ questions during the Cambridge Analytica hearings. Despite lingering legal questions, those “like” buttons continue to collect data about the sites visited by Facebook users regardless of whether those consumers are logged in to the platform. Even more concerning, the buttons also collect data about non-Facebook users. The result is a massive and rich database of consumers’ personal information and activity, which Facebook offers to advertisers for targeting ads to very specific audiences on and off Facebook’s properties.

Google also offers hugely popular consumer services including its search, Gmail, Chrome, and maps applications. Of course, it mines them for very sensitive information about consumers (e.g. personal messages, friend networks, interests, location). Oh, and let’s not forget that Google has a hand in every part of the digital advertising supply chain. Like Facebook, Google is ubiquitous and nearly impossible for consumers to avoid.

No competition

Some might be tempted to argue that these companies serve as competitors to one another. Except that they don’t compete on price. The fact that these services are offered free of charge has enabled their lawyers to shield them (so far) from any antitrust scrutiny in the U.S. What they really compete over is which company can collect more data about consumers. This unbridled competition for data is even more corrosive as it lacks transparency and they offer no effective choice mechanisms for consumers.

Consumer groups assert that this dynamic is bad for privacy. And, they might have a point: Consumer trust is at all time low while adoption of ad blockers continues to rise. Yet, Google and Facebook haven’t felt the impact of this lack of consumer trust. That’s because these companies don’t care where ads are served and they have virtually unlimited places to serve ads (meaning ads can appear near any content, which can create a negative impact by association). Instead, other tech companies, marketers, and publishers bear the brunt of consumer ire.

A dangerous game

But, there is more going on here. Facebook and Google have created a feeding frenzy in the vast, and expanding, data pool. Other companies recognize that have to jump in or risk their ability to compete for digital advertising dollars. Verizon bought AOL and Yahoo! solely to have more ad technologies and inventory. Combined with the significant information about the activities of their user base, this might give them an opportunity to compete for the duopoly-dominated digital advertising dollars. Not to be outdone, AT&T bought AppNexus, the largest independent ad technology company. It’s hard to fault these companies for joining forces given the world they’re competing in.

From my perspective, the duopoly is creating a giant game of musical chairs. If this dynamic is allowed to continue, it’s not hard to imagine that publishers will be forced to pair up with a telecom provider or to form giant conglomerates in order to ensure that they have a chair when the music stops.

Unfortunately, this will have profound effects on well-known premium publisher brands and an even more devastating impact on the ability for new voices to emerge. Ironically, the internet was supposed to increase the number and diversity of voices. Instead, the duopoly is quietly reshaping the web into a dystopian data collection machine.

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Policy

DCN analysis of the California Consumer Privacy Act of 2018

Important Note: If you are a DCN publisher member, please be sure to log in or register to access this special members-only document, which will appear once you have logged in.

Janet Peyton and Bethany Gayle Lukitsch, partners at McGuireWoods LLP, prepared an analysis of The California Consumer Privacy Act of 2018 (AB 375) for Digital Content Next.  The bill, which was was recently approved by the California Legislature and signed by Governor Jerry Brown, provides consumers with significant controls over how their personal information is collected and disseminated by businesses.

Perspectives

Google to publishers on GDPR: “Take it or leave it”

In a blog post a few weeks ago, Google announced how its ad-serving technologies will comply with the EU’s GDPR. In short, Google will control all the data on the publisher site (not just data related to serving an ad) and their publisher “partners” will take all the liability for getting consent from consumers. Oh, and by the way, Google won’t provide any specificity (as required by GDPR) about how they intend to use the consumer’s data. “Google can demand such lopsided terms because they, along with Facebook, dominate the ad-serving marketplace.” But really: This is just another example of monopolists doing what monopolists do.

Looking past the strong-arm tactics of Google, however, this is a deeply flawed approach that does not meet the spirit or letter of the GDPR. We commissioned a legal analysis of the Google proposal, which you can read in depth here.

Let’s touch on the key points:

Google as a Controller

Under GDPR, there are “controllers” and “processors.” A Controller alone or jointly with others, “determines the purposes and means of the processing of personal data” (see GDPR Article 4(7)).

Processors have no independent right to use data because they only process data on behalf and at the direction of a controller. (This is a gross oversimplification of the terms and there are a host of obligations on both kinds of companies. To read the actual text of the GDPR, go here. In the meantime, for the purposes of this post, we’ll move on.)

Controller companies need to rely on one of six legal bases to process personal data of an EU citizen. The most talked-about legal basis is consent. Under GDPR, a company can legally process personal data if it gets clear, affirmative, opt-in consent from a consumer for each data use. Google’s proposal claims they will be a “controller” of data in their capacity of serving ads, which probably makes sense since they hold an enormous amount of data that they use to personalize ads and they would like to continue collecting data as they serve an ad to help target ads to the consumer in the future.

However, Google’s proposed terms go a step further by claiming that it will be a “controller” of all the data on a publisher’s site (not just what they need to serve the ad). By declaring itself a controller over all the data on a publisher’s site, Google is asserting independent control of a publisher’s audience data. This is a massive land grab by the already-dominant Google.

Consent

Google’s proposal also requires publishers to get consent from consumers for Google’s activities. Let’s put aside the fact that Google has its own consumer-facing properties where it could get consent. Google says it won’t serve ads on a publisher’s site if the publisher doesn’t get consent for Google and do so in any way that Google likes.

There are multiple problems with this heavy-handed approach. As noted above, the GDPR requires companies to obtain clear, affirmative, opt-in consent for each data use. Yet, Google provides no information about how it would use the data and, thus, publishers are left in the dark while shouldering all of the liability. Even if they could get consumers to give their consent for Google, the consent would surely be ruled invalid because the publisher can’t provide the consumer any transparency about how their data will be used. Only Google can do that, but they won’t – likely for competitive reasons.

The other problem is that this approach conflates consent for Google with consent for other purposes that consumers might be more likely to provide. In practice, when an EU citizen visits a site, the publisher would have to ask consumers for consent for Google (and all the as-yet-unknown data uses) along with consent for email marketing or location information for the purposes of personalizing news. Lastly, under Google’s terms, they re-assign all of their liability for GDPR compliance (and the fines of up to 4% of global revenue) to the publisher. Google is trying to have its cake and eat it too and then send the bill to publishers.

Non-Personalized Ad Solution

In a tiny footnote of the Google announcement, Google promises to roll out a solution for serving non-personalized ads. Presumably, under this solution, Google would simply serve contextual ads at the direction of the publisher. Perhaps they would even relegate themselves to the role of a processor. It’s unclear whether they think they have a “legitimate interest” (another legal basis to process data) to collect data for other purposes. Suffice to say there are a lot of questions about this solution and whether publishers could rely on it.

With a mere six weeks left until GDPR enforcement, Google has unilaterally rolled out terms at the last minute that it hopes the industry will simply accept. Instead of acting like a good partner, Google is offering a “take it or leave it” approach while prioritizing its dominant marketplace position. The GDPR was not intended to be used as a tool to further entrench Google’s dominance, it was intended to provide greater transparency and choice for consumers over how their data is collected and used. Publishers and regulators should call them out and demand terms that meet the spirit and letter of the law.

Note: Opener art adapted from an original created by  Tdorante10 and is used under a Creative Commons license.

Perspectives | Policy

Facebook’s commitment to shareholders trumps democracy

Facebook CEO Mark Zuckerberg has long talked about his company’s goal of “connecting the world.” Clearly, they have succeeded. Families, friends, neighbors, classmates, fans, even employees all around the world connect on Facebook – to the tune of 2.2 billion monthly users at the end of 2017 according to Statista. And more recently, Zuckerberg has attempted to mature this vision with the lofty goal of “building communities.”

But, make no mistake, the platform was also built for advertisers. In exchange for “free” use of the service, people enable Facebook to collect highly personal information about them – information that is used to inform advertising and spread information. As the platform grew in popularity, the tools and information sharing became more innovative – some would even say

When their tools were exploited by foreign agents before and after the 2016 election, Facebook CEO Zuckerberg’s first reaction was denial: “…the idea that fake news on Facebook…influenced the election is a pretty crazy idea.” In hindsight, it’s seems implausible that a company built on data could be so ignorant about the use or abuse of the service. There was evidence that bad actors utilized Facebook to influence the Brexit election just a few months before. Are we to believe that Facebook employees never investigated those activities or considered how the service was being used around elections?

Given that every family has at least one crazy relative posting full time about politics on Facebook, I’m sure there are several teams of Facebook employees dedicated to understanding political discourse on the platform. Yet, ever since it became clear that Russian agents manipulated Facebook to sow discord in the U.S., the company strategy has been mitigation: slow to share data with the public and lawmakers about what happened, slow to roll out changes to prevent future exploitation, slow to take responsibility for what happened on their platform.

Then came Rob Goldman’s epic, Facebook says rogue, tweet storm. Special counsel Mueller’s indictment of 13 Russians for their role in attempting to undermine the 2016 election contains a detailed narrative of how Facebook was manipulated. Goldman’s tweets show that Facebook is STILL in denial. Goldman contends that Russians’ main objective wasn’t to influence the election contrary to Mueller’s indictment and, quite frankly, common sense. 44% of the ads were run before the election. Goldman even admits that the Russian-bought ads were pro-Trump. Worse, Goldman’s defensive tweets focused entirely on advertising, ignoring how foreign actors may have abused other Facebook tools.  All of this bluster is intended to deflect blame, muddy the waters and shield Facebook from taking real responsibility (aka liability).

Ironically, Goldman’s tweet confirms that Russian actors used the Facebook platform to sow discord after the Florida high school shooting. Apparently, the solutions that Facebook has rolled out aren’t working to clean up their platform. One wonders whether the solutions were actually intended to appease lawmakers and regulators as opposed to actually solving the problem. We need to maintain the pressure on Facebook to deliver on it’s lofty rhetoric.

Perhaps we shouldn’t be surprised that Facebook’s first responsibility is to its shareholders, not our democracy. But, with the 2018 elections just around the corner, we need to continue demanding more from the dominant platforms of Facebook, Google and Twitter. At the moment, it seems they’re still playing the PR game when they should be protecting the “community” they have built.

Perspectives | Policy

No, Apple isn’t destroying digital advertising. It’s meeting consumer expectations…again

Apple recently announced that iOS 11 will include Intelligent Tracking Prevention (ITP) in Safari. In a nutshell, ITP will go beyond merely blocking 3rd party cookies by segregating any cookie after 24 hours without interactivity on its parent domain’s website. The segregated cookie could still be used for log-ins, but not for tracking and/or retargeting purposes.

Despite a chorus of cries that this move will “sabotage” the current economic model of the internet, I actually think this is just Apple trying to keep up with consumer expectations. For years, Apple has attempted to block 3rd party cookies, although ad tech companies have worked to bypass Apple’s efforts. The thinking has been that consumers only want to be tracked by companies with which they have a relationship. ITP simply ensures that consumers can only be tracked by the companies with which they have a current relationship. There are some kinks, for sure, but overall it makes sense.

After reading some of the reactions to Apple’s move, I had to step outside just to make sure the sky wasn’t actually falling. The response from the ad tech industry has not been surprising. The ad tech lobby has a long track record of protecting legacy models, even when they are probably not the best path for long-term success. However, calling Apple’s move one that will “harm consumers by distorting the digital advertising ecosystem and undermining its operations” seems pretty far off base.

Given the industry’s fear of government regulation, I’m surprised the tech giants aren’t more supportive of private sector moves like Apple’s that seek to address underlying consumer concerns. As we see in the EU’s forthcoming General Data Protection Regulation (GDPR), governments can and will step in if the industry does not demonstrate that it can effectively self-regulate. When our trade bodies fail to step up and put into place strong guidelines that address customer concerns about important issues such as privacy, we put ourselves at risk of increased government scrutiny (many states already have privacy bills in the works.)

Instead, ad tech companies have dedicated massive amounts of capital and resources to developing new ways to track consumers, build larger and more sensitive profiles of consumers and deliver highly targeted ads. For the most part, the returns for investors have been terrific. For consumers – not so much. The well-documented reality is that digital tops the list of consumers’ least favorite forms of advertising. And tracking (aka “targeting”) is one of the aspects of digital advertising cited as particularly irksome.

Think about it: Right now, 67% of digital ads are direct response ads designed to get consumers to click. This is the equivalent of the junk mail cluttering your email inbox and those direct marketing ads that stuff your mailbox and end up in landfills. On top of that, digital ads are often overloaded with calls to unknown 3rd party servers, which dramatically slow the down the page. Worse, on mobile, it not only damages user experience, it soaks up more of a consumer’s data plan.

It’s no wonder consumers are downloading ad blocking software at higher rates each year. It’s no wonder that almost no one ever intentionally clicks on an ad. Suffice it to say that the claim that reducing the persistence of tracking cookies will harm the user experience is absurd. And frankly, a model that relies on these cookies to create an experience that’s driving ad blocker adoption is not one we need to defend.

Contrast that dynamic with Apple. Countless books have been written on how Apple is dialed into the wants and needs of consumers. The company boasts a loyal customer base and for good reason: Consumer experience is the priority. ITP is an extension of Apple’s consumer focus. Given the company’s track record as compared to the current state of digital advertising, ITP is likely to join the long line of successful consumer-friendly features developed by Apple. And if we want to have the same kind of success in the digital ecosystem, respecting the consumer and creating an experience they enjoy must be at the foundation of our advertising efforts.

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