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Featured Post | Perspectives | Policy

Here are 3 big changes coming for digital media

In case you haven’t heard, there is an election coming up in a couple of weeks. Regardless of which party wins, the public policy landscape for digital media is likely to undergo some major shifts in the next couple of years. Let’s take a look at three big changes on the horizon:

Google and Facebook will pay for premium content

In 2019, the European Union approved the Copyright Directive and underlying publishers’ right, which gave news publishers legal leverage to demand better terms from platforms. Now, all eyes are on France where a court ruled earlier this year that Google must negotiate in good faith with publishers. Of course, Google will avail itself of all the legal channels to slow down any effort to force them to pay for content. However, it’s likely just a matter of when, not if.

On the other side of the globe, in 2019, the Australian Competition and Consumer Commission (ACCC) to develop a voluntary code to rebalance the relationship between news organizations and big tech platforms. As the latter predictably dragged their feet, the ACCC switched gears earlier this year and moved to the development of a mandatory code, which appears likely to be easily approved by the Australian parliament in 2021.

In response, Google and Facebook have threatened to drop news from their services and/or pull out of these markets altogether. However, we know these are empty threats. For one, there’s common sense. If Facebook’s news feed and Google’s search results were devoid of trusted news organizations, what kind of miserable consumer experience would that be?

Really, given the massive profit margins of these tech companies, and the political scrutiny they are facing on multiple fronts, it makes sense for them to simply buy their way out of this problem. Case in point: Earlier this month, Google launched Google News Showcase, which will pay out approximately $1 billion in licensing fees to a select group of news publishers. As News Corp’s CEO, Robert Thomson, noted, “…the principle and the precedent are now established.” My take: Google sees the writing on the wall and is trying to get ahead of regulators in an effort to set the market.

Also, earlier this month, the House Judiciary Committee issued a lengthy report that summarized their investigation into big tech platforms and laid out a host of legislative solutions. One of those proposals would allow news publishers to collectively negotiate terms with platforms like Google and Facebook. It’s pretty clear which way the wind is blowing. Platforms will pay for premium content in the not-to-distant future.

Consumer privacy laws will impact data collection and profiling, especially programmatic advertising

The EU’s General Data Protection Regulation (GDPR), which went on the books in 2018, was meant to give citizens new rights and protections over their data. Since then, the common narrative from big tech’s apologists has been that GDPR didn’t work. It only resulted in annoying pop-up notices while Google and Facebook cemented their dominance in digital advertising.

I dispute the narrative that GDPR didn’t work. It hasn’t been enforced…yet. The most significant enforcement action to date has been a French court ruling (currently under appeal) that Google improperly gained consent from consumers, which resulted in a $50 million fine. The resolution of that case could have huge implications for the entire industry, not just Google.

Meanwhile, Google, Facebook, Apple, and other companies claim Ireland as their European headquarters, which gives primary jurisdiction to Helen Dixon, Ireland’s Data Protection Commissioner (DPC). Last month, in response to a European court ruling, she announced that Facebook and other companies could not transfer data about European citizens back to the U.S. because the U.S. does not have equivalent privacy safeguards. In response, Facebook sued the DPC and declared that they might pull out of the European market if this ruling stands. (Sound familiar?)

At the same time, there are hundreds of cases pending before the Irish DPC, any one of which could have wide-ranging ripple effects. Adding to the pressure for her to act, the Belgian data protection authority issued an initial finding just last week that the IAB Europe’s Transparency and Consent Framework (TCF) is not compliant with GDPR. While the IAB Europe is expected to push back on these findings, the ruling could have massive implications worldwide for programmatic advertising, in particular the real-time bidding systems for open exchanges.

According to the United Nations, 132 out of 194 countries have enacted some kind of data privacy law – many of which are modeled after GDPR. This November, California voters are likely to approve a ballot initiative called the California Privacy Rights Act (CPRA), which will align California’s privacy law much more closely with the GDPR.

Of course, Google and Facebook have enormous legal and lobbying budgets that they will leverage to forestall regulation and enforcement for a time. But, eventually, the same public pressure that led to the enactment of GDPR and other data privacy laws will lead to the enforcement of these laws, which are primarily targeted at limiting the ability of big tech platforms to collect data about consumers.

Platforms will soon face new responsibilities and liabilities

Policymakers on both sides of the Atlantic seem to be hell-bent to make platforms more accountable for what’s happening across their services. This morning, the U.S .Department of Justice, along with 11 state attorneys general, filed suit alleging anticompetitive practices by Google with regard to the search marketplace.

The suit does not lay out specific remedies but could include breaking up pieces of Google into separate companies and/or imposing new obligations on the company. While the suit is likely to take years to play out in the courts, it dramatically ramps up the pressure on Google while also ensuring the conversation will remain top of mind for policymakers. It’s also widely expected there will be additional suits filed by the bipartisan state attorneys general who have been investigating Google on a range of practices including digital advertising.

Meanwhile, members of both political parties in the U.S. have expressed grave concerns about the anti-competitive practices and dominance of the big tech platforms. Democrats have expressed additional concerns about the impact on democracy, news organizations and vulnerable segments of society. Republicans have lambasted the platforms for allegedly suppressing conservative speech.

Importantly, both parties agree that platforms’ algorithms should be transparent. They think regulators should have greater authority to oversee their actions and mergers. And both sides believe that that Section 230 protections should be significantly narrowed. The CEOs of Google, Facebook and Twitter will likely be walking into a political minefield next week as they testify to Senate Commerce on this sensitive topic under threat of subpoena.

In Europe this month, European Commission Vice President Margrethe Vestager announced plans to move forward by the end of this year with two major legislative initiatives designed to impose a whole new set of obligations on big tech platforms. These big tech companies used to be the darlings of innovation. Now they are nearly uniformly seen as impediments to economic growth and democracy.

What does all this mean for publishers?

Taken together, these three unfolding and inevitable changes should provide a unique opportunity for premium publishers. Obviously, public policy debates are messy. And lawmakers and regulators don’t have the best track record in terms of truly understanding tech.

But, as we’ve seen with enforcement action in Europe, investigations by various competition authorities and hearings before the US Congress, policymakers have gotten a lot savvier and are poised to act in bold, new ways. Going forward, companies that enjoy trusted, direct relationships with consumers and advertisers are likely best positioned to flourish in a world where premium content and contexts will have greater value.

Featured Post | Perspectives | Policy

Taking a bite out of Apple’s trustworthy talking points

Given the recent congressional hearing in which the CEOs of Apple, Amazon, Facebook, and Google testified around the topic, antitrust scrutiny is undeniably intensifying. Each of these tech titans raises distinct competition issues. However, there was an interesting collision of concerns around Apple and Amazon at the hearing. It was revealed that Apple’s seemingly inviolate store terms – long questioned for favoring Apple’s own services and apps – may well bend for those who have sufficient power to wield in their negotiations.

Sometime in 2017, Apple and Amazon, two giant platform companies, struck a deal where Amazon Prime Video would be available on Apple TV and Apple products would be available on Amazon. As part of the terms of that deal, Apple would reduce its fee for consumers who subscribed to Prime Video from 30% to 15%. For existing Prime Video subscribers, Apple agreed to completely waive its normal 15% fee. The cherry on top for Amazon was that they could use other payment systems outside of Apple.

At least those are the terms of the deal according to an email uncovered by the House of Representatives Judiciary Committee. Neither Apple nor Amazon have ever publicly disclosed the deal. Given that they are the two most valuable companies on the planet, and the huge number of businesses that rely on these platforms, it is remarkable that such a deal has been shrouded in secrecy for so long. Some would point to this deal and say, “It’s the platforms’ world, we’re just living in it.” Frankly, the deal stinks of favoritism at best – and collusion at worst.

Non-negotiable?

Apple’s “non-negotiable terms” have been an issue for some time. The company charges 30% commission on any app store purchase. That fee reduces earnings potential for app developers while also driving up prices for consumers. Most merchants charge a flat fee. Apple takes 30% of the sale of, say, a $25 newspaper subscription. It also takes 30% for the sale of a $500 newspaper subscription. Thus, the more the publisher is able to charge for its service then the more Apple benefits, despite providing the same service.

Notably, Spotify has been banging the drum about Apple’s unfair practices for years now. They have even filed a formal complaint in Europe. Their concern is that Apple charges a fee for any subscription music service on their platform. At the same time, Apple offers its own competing subscription music service, which pays no fee. On that uneven playing field, neither Spotify nor any other music service will be able to fairly compete with Apple on price. The dual role of platform and competitor is inherently unfair.

Recently, Epic joined the fray with a similar complaint. Epic added a feature to its popular game Fortnite that allowed players to purchase V-Bucks in the Fortnite app. It skirted the ‌App Store‌ rules prohibiting developers from accepting payments outside of the in-app purchase system. Apparently, this was a direct salvo from Epic. Just hours after the direct payment option was added, Apple pulled Fortnite from its App Store. And Epic immediately filed suit “to end Apple’s anti-competitive restrictions on mobile device marketplaces.”

Epic released a short mocking Apple shortly after the iPhone-maker removed Fortnite from the App Store for skirted its in-app payment ‌rules.

The chorus of critics is only growing as Apple gets into more vertical business lines – news, shopping, TV, games, etc. Apple even acquired a popular weather app earlier this year.

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The dynamic in the media industry is especially interesting to consider. It’s no secret that advertising revenues for news organizations have cratered over the last decade. As a result, many news organizations have instead emphasized direct audience revenue, (e.g. subscriptions, events, etc.) which tends to better align with trusted brands than the wild west of digital advertising.

Apple also leans into consumer trust as a foundational principle of their business. For years, Safari has blocked 3rd party cookies and other tracking workarounds. Apple has long held the line on encrypted devices in an effort to preserve consumer trust in their products and services.

Paradoxically, Apple’s fees and anti-competitive practices push companies away from direct audience revenue and toward the murky world of digital advertising where a publisher doesn’t have to take a 30% haircut on all customer revenue and keeps all of the upside from its advertising earnings. In some ways, Apple’s behavior actually works to the disadvantage of companies looking to follow their lead on consumer trust.

Fair terms

At a hearing before the Committee on July 29th, Rep. Hank Johnson asked Apple CEO Tim Cook whether the terms between Apple and Amazon are available to other developers. Cook assured the Congressman that they are “available to anyone meeting the conditions.” Interestingly, at the same hearing, Cook talked about how platforms are in fierce competition for developers.

So, this week, DCN’s CEO Jason Kint, wrote to Cook to publicly call for the disclosure of the terms of this deal so that “anyone meeting the conditions” can apply for them. This is a key test for Apple: Will app developers of any size (the ones for which Apple claims to be competing) be able to get the same terms? Did Cook speak the truth before Congress? Will Apple’s behavior match its trust-based branding?

The monopolistic behavior of big tech puts a wide range of industries – not the least of which is the news industry – at a distinct disadvantage. It is laudable that EU and American regulatory bodies are digging in and uncovering these anti-competitive behaviors. Talking trust is not enough. We need to level the playing field and transparency is a critical first step.

Featured Post | Policy

An insider’s guide to next week’s Antitrustpalooza

EDITOR'S NOTE: As of 4 p.m. July 24, 2020
Monday's first-of-its-kind congressional hearing with the CEOs of Amazon, Apple, Facebook and Google was been officially postponed due to a conflict with the memorial services for the late Rep. John Lewis, the House Judiciary Committee confirmed Friday. 

How to watch 
Congressional Hearing: Online Platforms and Market Power, Part 6: Examining the Dominance of Amazon, Apple, Facebook, and Google
Who: Tim Cook, Mark Zuckerberg, Sundar Pichai, Jeff Bezos
Date: Originally, Monday, July 27 / Rescheduled for Wednesday, July 29
Time: 12:00 p.m. ET 
Stream: on YouTube of course!

As CEO of DCN I have the privilege of addressing the executive leaders from our membership at our annual Next: Summit. This past January, my remarks were titled “2020 Vision.” When I look back at my presentation just six months later, it is astounding to me how little we knew about what 2020 would bring.

However, my first slide had a close-up of the eyes of the CEOs of the four companies who have most benefited from the growth of our industry: Google, Facebook, Apple, and Amazon. On Wednesday – halfway through this tumultuous year – we will hear from them directly. “The 4 Horsemen of the Techopolypse” – as Kara Swisher called them in The New York Times – will testify under oath before Congress for the first time, on antitrust matters, an area where they face the most risk to their massive businesses.

Two of the companies, Google and Facebook, are already under highly sensitive antitrust investigations by nearly every state, federal, and international regulator of note. And Apple is being investigated by EU antitrust regulators. So, this is the public accountability portion of the show. Get the popcorn ready, because this is going to be one to watch. 

Tuning in

There is a well-paved road of industry concerns around these four companies. Like many topics these days, they tend to gravitate towards specific concerns of the left or the right. For serious experts, though, antitrust becomes a critical focal point because nearly every one of the grievances is a symptom of too much power and too much control over the design, delivery, data and dollars that fund the media ecosystem. This hearing offers an unprecedented opportunity to discuss these issues with the chief executive at each of these organizations. And while it is clear that everyone involved in these antitrust investigations has become far more knowledgeable on the issues in play here over the past few years, we can’t afford to waste a moment.

Having closely studied prior global testimonies for these companies, I am optimistic the committee will be confined to lawmakers focused on antitrust. But I’ve been thinking a lot about the way these lines of inquiry usually go. And while there are absolute must-ask questions for each of these companies, there are also those that should be avoided. I call the latter group “rabbit hole” and “sand trap” questions.

The trouble with rabbit holes is that – while the question may well be a good one – the answer is likely to be complex, unwieldy, and take the inquiry places that will confuse many and clarify little. As for the sand traps, these are the types of questions that the PR and lobbying machines at these companies adore. They lend themselves to unrelenting spin and little actual insight. And critically for this hearing, they will do little to illuminate the issue of antitrust.

Targeted questions and unwanted detours

Here’s my list of burning questions that must be addressed, along with likely rabbit holes and sand traps to be avoided.

What to Watch For – Apple

Tim Cook, CEO 

Burning question: App store terms 
This is of particular concern as Apple rolls into TV, Music, and now News. The company even acquired a weather app last month.

Rabbit hole: Security
Whether it be backdoors for law enforcement, data access by China, or app security, this discussion won’t get anywhere; it leads to a false choice between security and privacy. Consumers deserve both. Period.

Sand trap: Privacy
Tim Cook, on behalf of Apple, has been a unique and powerful voice carrying the torch for the human right to privacy. This is good and favors them significantly, most notably in contrast to the practices of Google and Facebook. However, it is important to remember that Apple doesn’t have an advertising business. So, it is happy to criticize the core asset of Google and Facebook.

What to Watch For – Google

Sundar Pichai, CEO

Burning question: Advertising marketplace
All parties – the UK, Australia, France, the Department of Justice and State AGs – seem to be focusing antitrust investigations on Google’s advertising systems. This includes its vast data collection across its dominant search, operating system, browser and its many adtech acquisitions. An expert economist described it as a “walled garden” yet across the open web. Remember this every time Google champions the “open web” and the small publishers all while taking half of the revenue for itself.

Rabbit hole: Censorship
Republicans would love to nail Google for bias in its search engine. I’m empathetic because all searchers should readily find their trusted news sources in search results. Algorithmic bias is an issue of concern. And censorship is a troubling topic. However, these are complex issues that cannot be adequately addressed in this context. The short answer is that you need competition to provide alternatives, as I testified to Senate Judiciary last year.

Sand trap: Revenue share confusion
In previous testimony and in press reports, there has been significant debate around the “ad tech tax” or the percentage taken by Google whether it be 70/30 or 30/70. Don’t go there. It’s a time suck. Google has powerful spinners working on obfuscating their dominance here.

What to Watch For – Facebook

Mark Zuckerberg, CEO

Burning question: Data collection
As the German courts concluded, Facebook uses its data collection across the web and its own apps to dominate social media. Copious research and leaked documents have shown how Facebook has used this access to data to cut out competition and control markets. Facebook has created an advertising marketplace fueled by its massive data and has turned away from addressing issues of quality of the experiences around it, harming both publishers and advertisers.

Rabbit hole: Content moderation
Don’t get me wrong, the push for Facebook to better moderate its content is incredibly important. But the solution isn’t simply tighter enforcement and arguably outside the scope of this hearing. Mark Zuckerberg will point to EU audits on Facebook policing hate speech and their tens of thousands of “moderators.” Put simply, if Instagram and Facebook were two different competing companies, the incentives to act on issues such as harassed journalists like Maria Ressa, boycotting  advertisers or persecuted people, would be much higher.

Sand trap: Censorship
Zuckerberg would love to have a partisan debate in which Facebook carries the torch of free expression and he cloaks himself in love for the First Amendment. The real conversation Facebook wants to avoid is its algorithmic amplification decisions which provide velocity and reach to the content and advertising on Facebook’s platforms, regardless of its potential harm and without any liability for it. However, this issue is better suited for a hearing on CDA 230. In the context of antitrust, alternative and competitive social platform choices for consumers and advertisers will only drive more quality.

What to Watch For – Amazon

Jeff Bezos, CEO

Burning question: Platform privilege
Did Amazon lie under oath to the committee? Do they use data from retailers to inform their own product decisions as WSJ reported? Do they unfairly control prices and exclude competition? Lawmakers want to know, and Congress should find out.  

Rabbit hole: Getting personal
Anything related to Bezos’s ownership of Washington Post or personal life. It’s his first time testifying and let’s hope this hearing stays on topic.

Sand trap: Pandemic savior
Amazon, more than any company represented, has a critical role in supply chains and is vitally important during the pandemic. While they are certainly the fox in the hen house, they’ll happily talk about how they benefit online small businesses (even launch an entire association to do it!) The fact is that local businesses are struggling mightily during the pandemic while Jeff Bezos is reported to be closing in on $200B as the wealthiest man on the planet. His fortune grew a record $13B on a single day last week – during a global pandemic. That pretty much tells you what need to know about who benefits the most. So, why even go there?

There is so much that we’d all love to see uncovered in the interrogation of these powerful tech CEOs. But this hearing is focused on antitrust. And frankly, there are so many issues with these companies that would be addressed, or at least alleviated, if their unrelenting market dominance was diminished. It is critical that this questioning stay on point and avoid rabbit holes and sand traps. It is clear that each of these companies has been allowed to benefit from rules that were intended to foster capitalism and  innovation – strong American principles that everyone can still get behind. As Scott Galloway has consistently pointed out, real competition is the basis for both of these.

It is time for change.

Featured Post | Policy

The Google antitrust ship has set its course

When DCN created our original chart, where we coined the term “duopoly,” it marked the first wave of what would become five years of interest and activity, marked by intense journalistic investigation – which heats up as antitrust scrutiny does. The line of inquiry often starts with challenging whether anything is new or different. While some industry pundits like to posit that they’ve already “seen this show,” this time around the players are wiser and the stakes are even higher.

In the seven years since the Obama-era FTC issued its decision not to take action against the cool kid in their class, Google, the company has managed to triple its U.S. ad revenues (source: GOOG SEC filings) in line with the overall U.S. digital ad market (source: IAB/PwC Internet Advertising Reports). Put differently, Google has maintained its market share, which is hovering at around 50%.

How on earth has Google maintained share during the same period in which Facebook has grown from virtually nonexistent to the other half of the two-headed duopoly monster? Answer: Pilfering the open web by establishing a walled garden to shift revenues from everyone else to Google’s own properties.

Tired arguments

Yet a small handful of academics, analysts, and influencers (who often fly too close to the sun) continue to rehash the tired arguments that were widely shared back in 2013. They start by broadly painting any scrutiny of Google as a combination of the jealousy of dying legacy media and protectionism by Europe. Often, they claim that news media is manufacturing outrage with an “axe to grind” rather than rightly doing its job of holding the powerful accountable.

They misleadingly suggest that Google makes no revenue from Google News while turning a blind eye to the billions in value they collect from harvesting news content. Much of the value of search would disappear without news content for consumers to find. And when these pundits finally get down to pragmatic analysis, they point out the “gift of web traffic” publishers receive from Google’s free search engine, as if the web, and publishers, couldn’t exist without Google’s pixie dust.

The new wave

However, what these arguments miss is that the voices and minds leading the case in 2020 have evolved their understanding of tech and the marketplace. There is a significant and growing body of consistent research and investigation around the globe about Google’s anticompetitive action from savvy digital thinkers in academia, think tanks, state and federal regulator offices. Say what you want about the various Congressional hearings these days, but they undoubtedly make the committees, public, press, and thought leaders wiser on the topic

Reading long investigative competition reports may not be your cup of tea, particularly during a global pandemic. So, I’ll summarize what DCN is focusing on, what the latest research shows, and what is most important to the health of our members’ businesses.

The latest research

Two key investigative reports have been released: The Australian Competition & Consumer Commissioner (ACCC) July 2019 Final Report and the U.K.’s Competition & Markets Authority (CMA) Dec 2019 Interim Report. If you can only read one, read the latter (and don’t miss Appendix E). The U.K. investigation launched well before those in the U.S. and it offers a solid look into how Google and Facebook are being examined.

I was also delighted to see a Yale professor, Dr. Fiona Scott Morton and co-author David Dinielli, publish “A Roadmap for a Digital Advertising Monopolization Case Against Google” earlier this week. They lean heavily on the U.K. CMA report and did a masterful job of translating hefty regulator documents into a readable form that anyone who has followed our industry will understand. They assert that any eventual court case will demonstrate how Google’s established monopoly in the search business was subsequently leveraged for market power in the design, growth, and capture of value through its intermediation of ads across the open web.

Inside Google’s walled garden

It is important to understand that approximately 90% of Google’s revenue growth (3x over the last seven years) was captured on its own properties (search, Gmail, YouTube, etc.). This led to a shift of Google’s source of revenue to increase from a total of 74% to 84% from their own properties, where their costs to acquire traffic approaches zero. Not coincidentally Google was, all the while, cementing a dominant position in the buying, selling, serving, and measuring of all ads across the open web.

This shift in revenue growth towards areas where Google keeps the most revenue has only been possible because of Google’s market power and ability to see large amounts of data throughout the consumer and advertiser journey, in its own so-called “walled garden.” This allows them to optimize the customer experience in a way that will inevitably keep consumers and advertisers driving the most profit to Google.

Revealing revenue research

Just a few weeks ago, the U.K. advertiser group ISBA published a transparency report. For the first time, the report laid out empirically just how much revenue was captured by intermediaries. Google was, of course, the most substantial player on all sides of the market. (Though there was a curious mystery 15% that the researchers couldn’t lock down.) At this point, it’s beyond hypocrisy each time Google preaches “transparency” but refuses to report both gross and net revenue for its advertising services.

Based on various investigations, Scott Morton and Dinielli expose how Google has achieved this dominance. They examine how Google collects 40% of the revenues across the open web, limits the use of data, and steers consumers to its Google-owned properties with its own higher-margin ads. Google does so while appropriating publishers’ data and audiences for its own gain on its own properties and elsewhere on the web.

Anticompetitive conduct

Morton and Dinielli clearly lay out 20 examples of Google’s potential anticompetitive conduct. Many of them tie to previously published concerns and research from DCN. All will require further investigation and subpoena power – but I’m sure we can agree that they pass the sniff test.

  1. Acquiring Independent Companies To Cement Its Role Across the Ad Stack
  2. Leveraging Market Power in General Search into Display
  3. Designing Auctions That Facilitate Arbitrage and Rent Seeking
  4. Cross-Subsidizing Competitive Functions of the Ad Tech Stack with Monopolized Functions In Order to Rise Rivals’ Costs and Foreclose
  5. Deceptive Gathering and Integration of Data
  6. Strategic Disabling of Interoperability To Disadvantage Rivals
  7. Withholding Interoperability to Steer Demand and Supply Through Its Own Exchange
  8. Providing Exclusive Programmatic Access to YouTube Though Google’s DSP
  9. Retiring the Third-Party Cookie
  10. Disadvantaging Rival Exchanges by Google’s Publisher Ad Server
  11. Undermining Header Bidding Through the Development of So-Called “Open Bidding”
  12. Undermining Header Bidding Through Exclusionary Features of AMP
  13. Designing Analytics to Steer Market Participants to Google Products and Prevent Entry
  14. Resisting Transparency at All Levels of Ad Tech Stack
  15. Obscuring Fees So That Competitors Cannot Enter and Compete Effectively
  16. Using Privacy Laws as an Excuse to Hide Performance Data
  17. Thwarting Publisher Efforts to Understand Source of Payments
  18. Designing Attribution to Favor Search and Disadvantage Publishers
  19. Raising Rivals’ Costs and Foreclosure of Existing and Potential Horizontal Competitors
  20. Capturing Publisher Data in Order to Monetize Their Audiences

Antitrust investigations

Finally, we should still ask whether Google’s lobby and power somehow afford it unique protection in the U.S. market. Only time will tell. But we expect Congress’ antitrust investigation to issue a report in the next 90 days.

Nearly 50 state attorneys general, who previously announced their inquiries, are expected to move forward along with the (not easily intimidated) Department of Justice. Both have broad subpoena power as well as the U.K. and Australian reports to inform their deliberations. Providing further confidence thus far is that the Texas Attorney General office is leading the states’ investigation. They provided Google with an extensive list of nearly 130 questions focused mainly on Google’s advertising business. (Note: DCN received this “CID” through a public records request). It certainly looks like they want answers to Morton and Dinielli’s claims.

The internet has evolved, and it continues to do so. While many of the arguments media pundits and academics may have made a few years ago seemed plausible at the time, that time has passed. It is clear that serious research and reflection is being done that will inform any discussions around the duopoly, antitrust in the advertising ecosystem, and restoring the value exchange between premium content and the “virtual pipes” of technology that control and make money off its flow.

Featured Post | Policy | Revenue

The dominance and obstinance of big tech platforms

Earlier this month, the French competition authority ruled that Google must negotiate in “good faith” with news publishers to pay them for using news snippets in Google’s News and search products. This is the first European country to enforce the European Copyright Directive, which seeks to ensure that there is a more balanced relationship between content creators and platform aggregators.

The issue at hand is the ability of these aggregators to monetize content that they did not create, to the detriment of those who created the content – often at significant cost. The original value proposition was the delivery of a click/consumer to the content creator’s site. However, over time, aggregators have taken great liberties with the quantity of content they display, often negating the need for consumers to visit the content creator’s site at all.

Snipping snippets

The directive was specifically intended to extend copyright protection to news ledes and snippets. In response to French law that memorialized the Directive, Google announced that it would flaunt the new law altogether by removing from Google News and Google Search the snippet descriptions, news organization brand, and photographs associated with the news articles.

Instead, Google would only display the headline and URL putting the content at a disadvantage to other results. Aggressively but maybe not surprisingly, Google said it would reinsert the snippet description, news organization brand and any photographs if the publishers would give a free license. The French authority ruled that this constituted an abuse by Google of its dominant position.

Coming off the heels of the French ruling, Australia’s Competition and Consumer Commission reached a similar boiling point with big tech platforms. For months the Commission has been negotiating with Google and Facebook on a voluntary code to ensure a fairer balance between news publishers and platform aggregators. And, for months Google and Facebook had been reportedly stonewalling.

Revenue matters

On Monday, Australian Treasurer Josh Frydenberg pulled the plug on talks and announced that the Commission will release mandatory rules in July to compel platforms such as Google and Facebook to, among other things, fairly compensate news publishers for the use of their content. The move could not come at a more important time as over 50 news publishers in Australia have recently closed shop. Meanwhile, Google rakes in approximately 47% and Facebook approximately 24% of digital advertising revenue in Australia.

The impact could be profound, particularly if the platforms respond as Google did in France. Imagine Google search results, news, or your Facebook feed without any reputable media sources. Clearly, quality news content is valuable to the big tech platforms, just as the ability to reach new audiences is valuable to publishers. As the Commission recognized, the current value exchange is not a fair balance of interests.

Big tech, big flex

Of course, these countries’ frustrations with big tech platforms should not be surprising to anyone. Google has a particularly long track record of using strong-arm tactics to achieve and maintain its dominance. A recent example occurred when the European Union was preparing to enforce the General Data Protection Regulation (GDPR), the sweeping data privacy and security regulation.

While GDPR is intended to give consumers greater control over the collection of their data, Google used it as a land-grab opportunity. Just weeks before enforcement began in May 2018, Google announced to industry (and only after journalists were prepared to break the news) their non-negotiable terms for publishers and advertising in complying with the GDPR. Any company which used any Google service or product would 1) need to get express, affirmative consent from consumers for Google to collect consumer data; 2) would not be told how Google would use or secure the data (which would render any consent invalid); and 3) would be liable for any GDPR violation by Google.

Along with several other trade associations representing publishers, we detailed our concerns directly to Google. Of course, it’s not surprising that Google would attempt to deflect as much legal risk as possible. Liability is often a major point of negotiation in any contract. However, Google is so dominant, that this is not a real negotiation.

Perhaps more surprising is that Google did not even entertain the possibility of restraining its massive data surveillance regime. Under the GDPR, companies that collect and use data only on behalf of the website or app (and do not use the data for an unexpected secondary purpose) are considered “processors” of data. Typically, processors are not required to get consumer consent, instead they can rely on other legal bases such as “legitimate interest.”

Reverting to the role of a processor would have placed Google more in line with consumer expectations and it would have made for a much better user experience (e.g. no messy pop-ups asking for vague consent). Instead, Google dictated its “take it or leave it” terms to the industry and consumers. And it’s data profiling would continue uninterrupted. Sounds familiar.

Titanics do sink

The French and Australian rulings could have huge implications going forward. And they are likely only the tip of the iceberg. Many other regulators in Europe and the U.S. are actively looking at the anticompetitive behaviors of big tech platforms. As we noted above, this couldn’t come at a more important time.

As the Covid-19 crisis continues to impact the world, news organizations are redirecting significant resources and personnel to cover the health and economic impact, separate fact from fiction, and hold public officials accountable. More broadly, entertainment companies are working overtime to create and distribute content to audiences “staying at home.” Yet, these content creators are often swimming up-stream to generate sufficient revenue to fund the news and entertainment that consumers love and need because the digital distribution channels are dominated by the big tech platforms.

We’re glad to see public officials pushing back on the anticompetitive behavior of big tech platforms and helping ensure a more equitable balance of interests. As the current crisis has clearly demonstrated: We need quality, reputable, trusted content more than ever.

Policy

DCN submits comments on CCPA’s revised implementation regulations

Today DCN submitted the final version of comments regarding the proposed revised regulations for implementation of the California Consumer Privacy Act (CCPA) to the California Attorney General (AG). The comments were developed with input from the DCN membership. They are in response to the revised comments the California Department of Justice, Office of the Attorney General released on Friday, February 7, 2020 to address the feedback received on their first draft of regulations, originally published and noticed for public comment on October 11, 2019.

DCN is actively involved and tracking the regulations, created to provide guidance for businesses about what is required under the CCPA, to ensure they take into account the needs of our membership. We’ll continue to review any updates and make sure that our members are up-to-date.

For reference, here are the comments filed by DCN in December 2019 regarding the initial set of proposed regulations.

Featured Post | Policy

Want to clean up Facebook? Don’t listen to Menlo Park

Mark Zuckerberg is reportedly “begging to be regulated.” He has made several statements to that effect, suggesting that he supports state-backed regulation in four areas: elections, political discourse, privacy, and data portability. This week, Facebook released a white paper that outlines the company’s suggested path forward for content regulation. It does little to drive forward meaningful discussion around these serious issues. Instead, it clearly illustrates that Facebook would like to eschew responsibility for some of its profoundly negative effects in these areas while protecting its ability to continue business as usual in others.

As Zuckerberg put it in a recent op-ed, “regulation could set baselines for what’s prohibited and require companies to build systems for keeping harmful content to a bare minimum.” That said, Facebook’s plan suggests that companies like his should be required to have procedures for taking down offensive or illegal posts and to prepare quarterly reports on their efforts. If this isn’t the absolute bare minimum, I don’t know what is.

Clicky content

It is interesting that Facebook’s paper cites the European Convention on Human Rights which supports the needs of governments to regulate speech for “[T]he interests of national security, territorial integrity or public safety, for the prevention of disorder or crime, for the protection of health or morals…”

Some have argued that Facebook’s algorithms and data targeting capabilities, the same tools which have been refined and optimized for immense profits, actually encourage these sorts of activities. The argument goes like this: The algorithms promote content that gets clicks. The content that gets the most clicks is often salacious (yes, even to the point of being false) or highly targeted based on consumer data.

In this way, drug dealers target members of addict recovery groups, for example. Or false stories that reinforce specific bias, racism, or extremist views are targeted at specific individuals. Of course, those Facebook functions would remain very lightly regulated under the company’s proposal.

Competitive advantages

In his op-ed, Zuckerberg said he believes that “good regulation may hurt Facebook’s business in the near term but it will be better for everyone, including us, over the long term.” However, Facebook’s proposal clearly brings with it the added benefit (for Facebook) that the suggested regulations would build barriers and add compliance costs that entrenched companies are best equipped to overcome. It’s already a daunting challenge for a start-up social media company to break through in the current marketplace. This proposal would only increase that burden.

In what is quite possibly the icing on Zuckerberg’s cake, the proposal would grant global immunity to big tech platforms to carry out content moderation policies, which could also be used to shut out competitive services on their platforms. The proposal would essentially reinforce Section 230 of the U.S. Communications Decency Act globally, so that Facebook could claim legal protection for removing offensive posts and adjusting algorithms to disadvantage repeat offenders.

The last thing the world needs exported from America is blanket liability protection for Facebook. But Zuckerberg’s proposed immunity is intentionally broad to allow for all kinds of activity under a content moderation policy, including favoring its own services or certain business partners over others.

Anti-competitive landscaping

Facebook’s proposal includes an entire section about how – even with the proposed content moderation – enforcement of any guidelines will not only be a challenge; it will be imperfect.

Imagine if Instagram were still a separate company. Do you think Zuckerberg would be talking about how it’s too hard to scrub racist and sexist content from the service? Do you think he would offer only muddled, hazy responses about whether foreign governments manipulated his service to impact elections? Do you think he would be complaining that it’s hard to prevent drug dealers from targeting recovering addicts? No. He would be taking aggressive action to clean it up.

In fact, there is documented evidence that Facebook cared a lot more about these issues when they had competition. Acquiring WhatsApp and Instagram were likely a cheaper alternative to changing Facebook’s underlying and unhealthy business. Zuckerberg’s calculation could have been that turning his back on the public’s welfare was more acceptable than turning his back on shareholders.

The compliance question

As Facebook’s own report puts it, “Designed poorly, these efforts may stifle expression, slow innovation, and create the wrong incentives for platforms.” And Zuckerberg should know.  

While Zuckerberg calls for “regulation,” it’s important to consider Facebook’s track record of complying with existing regulations. Their approach to the EU’s General Data Protection Regulation (GDPR) is disingenuous and sometimes misleading. In California, which recently rolled out the CCPA, Facebook is making case the that they don’t “sell” consumer data even under California’s very broad definition.

And that’s the point: Facebook is a for-profit company with responsibility only to its shareholders. Zuckerberg isn’t offering a real plan for regulation that will benefit society and democracy. He’s offering a plan to minimize the obligations and responsibility for Facebook. And this is why the best perspectives on how to clean up the mess that is Facebook are coming from outside of Menlo Park.

Featured Post | Perspectives | Policy

TikTok: How China concerns highlight the lack of US leadership on data

Last week, US Senate Minority Leader Chuck Schumer (D-NY) and Senator Tom Cotton (R-AR) sent a letter to the Director of National Intelligence to request an assessment of the national security risks posed by TikTok. As you may know, TikTok is owned by ByteDance, which is based in Beijing. With TikTok’s popularity surging worldwide, the Senators expressed concerns about the Chinese Communist government’s ability to access consumer data collected by TikTok, censor speech, or even influence elections.

Of course, these concerns are not new. In the past, other policymakers have expressed similar concerns about the Chinese government when there is news about a US company operating in the Chinese market. Recently, Apple and Google among others were criticized for removing apps from their app stores that the Chinese government did not like.

A unified front

Chinese censorship has long been an issue that runs contrary to American beliefs and policy. Across the board, American policymakers agree that free speech is an important principle that should be protected. And this political consensus informs our stance with regard to China. There are questions about the best way to strategically engage with China, but there is no question that America supports the right of people to protest and speak freely.

The Chinese government has also been heavy handed with its use of data for surveillance as well as to monitor public (and private) sentiment. Though it has GDPR-like data regulation, what companies can do and what the government can do under Chinese law are quite different. This becomes a more complicated issue for the U.S. as we lack a federal standard or consensus for what constitutes ethical use or reasonable protection of consumer data by corporate entities or the government.

In 2018, Europe began to enforce the General Data Protection Regulation (GDPR), which provides a framework for the proper collection and use of consumer data. And, in the last year, a handful of states (California most prominently) have adopted consumer privacy laws. For years, individual states have maintained separate and different data security and breach notification requirements. However, federal policymakers remain divided over a national standard for how consumer data should be protected, collected and used. This lack of consensus hinders America’s ability to lead the global conversation about data. And it certainly prevents our ability to take a unified stance on China’s data policies.

Competitive behavior

This year, we have seen multiple investigations opened into the anticompetitive behavior of Google and Facebook. Some have argued against breaking up Facebook and Google because these two companies need to be big enough to compete with China. For me, that argument runs counter to the core American values of democracy and capitalism. Ignore for the moment that monopolies (or duopolies in this case) tend to grow stagnant and stifle innovation. Our answer to China shouldn’t be “let’s be more like China!” Rather, we should be focused on enabling a fair marketplace where small and large businesses can compete, where consumers are protected and empowered, and where ideas and speech are protected.

DCN has long supported the passage of a federal standard for data security and breach notifications and a comprehensive consumer privacy law. Having a single national standard for the protection and use of consumer data would benefit consumers, who currently have no or different laws that apply. It would also benefit businesses, which would prefer to avoid having to comply with multiple and sometimes conflicting state laws.

Now, we have one more reason to unify our policy. A national standard on data security and use would get the US off the sidelines and enable American policymakers to lead the global conversation about data.

Featured Post | Perspectives | Policy

Google continues its offensive, but we’re all smarter now

There is a certain musical rhythm to our digital media industry calendar. If there was a crescendo, I expect it would be in the Fall, as leaders migrate from execution to strategic planning. And with this shift, conference season begins. There are many forces at work shaping these agendas, not the least of which are businesses wanting to get their messages to market.  

As is so often the case, Google sits at the top of the influence food chain and its extensive industry relations efforts impact nearly everyone else’s agenda. Whether Google’s wishes and goals are delivered directly (as they are for a privileged few of their so-called “premium partners”) or through the company’s trade lobbies, press efforts, investments and research, Google’s impact is as predictable as the autumn leaves.  

But this year is different. 

As we wind down 2019, Google is a bit less focused on driving its own profits and a lot more focused on strengthening its fortress against scrutiny. Right now, it seems that Google’s first and only priority is to dispel or confuse any analysis being done on anticompetitive behaviors. This marks a more sensitive and controlled conversation for Google.  

For us, it is important to bear in mind that one of Google’s best defenses can be getting the industry to support its efforts. This is where all of us come into play. We need to be sure we clearly see (and accurately portray) how self-serving Google’s “industry relations” efforts are. The good news is that we are all smarter now. And we – the media industry, the press, and politicians everywhere – are in a position to take informed, proactive action to confront wrongdoing in the form of untenable industry dominance.  

The market today 

Here is what we know about the scrutiny of Google:  

  1. Everyone has upped their game. Everyone. The people involved in the many antitrust investigations have done a lot of homework. This isn’t 10 years ago; it’s not even three years ago. Global scrutiny by international regulators, the press, and the industry has made everyone smarter on the topics. These days, critics are unlikely to get lost in the complexity of Google’s digital business. (As an example, this time around regulators are asking questions about nuanced industry topics like auction mechanics and data rules.) 
  2. Everyone understands Google’s core business. Everyone. Google operates free services in order to devour as much data as possible in order to micro-target advertising to audiences. Investigations appear to be focused on Google’s vertical control over experiences and the entire advertising stack funding them. This is where Google continues to make more than 85% of its revenue. And dozens of Google products work together to enable it.  
  3. Everyone is significant. Everyone. Investigations happening globally from Australia to the U.K. In the U.S., it includes 48 State Attorneys General, Congress, and the Department of Justice. Put another way, a lot of serious antitrust experts across nations, and political aisles, are aligning to explore areas of concern.  

Growing concerns  

These investigations primarily focus on the intersection of Google’s data practices and its market dominance. Both are protected by Google’s command of search and mobile operating systems – two areas where the company has already been found by EU regulators to have violated antitrust law.  

Aggregating other’s content for searching the web was the original and easiest version of Google’s strategy to understand (and attempt to address). However, the company has extended into new services that exponentially increase its ability to collect data. And, as we now know, a majority of Google’s data collection occurs when users aren’t even choosing to interact with Google.  

So, the roll-out of privacy laws in Europe (and now the U.S.) present escalating risk to Google’s business. As Google attempts to comply with these new data protection laws while maintaining its profits, it needs to avoid tripping more antitrust wires as it did last year in Europe.  

Make no mistake, the cards are still stacked in Google’s favor. Its annual budget for academic research, think tanks, lobbying, publisher support, trade press PR, and event sponsorships likely matches the top lines of revenue for nearly every organization in the industry. No one wants to upset Google and therein lies one of the key symptoms of the problem.  

What can the industry do? 

But in the interest of transparency and support for a fair assessment of Google’s business practices, what can the rest of the industry do to be supportive? 

1. Press scrutiny. I would emphasize that the trade and policy press must continue your great work to cover the company fairly and with the healthy bit of cynicism it deserves. This has shifted significantly over the past few years in a positive way as newsrooms have ramped up their coverage of big tech. We’re seeing fewer instances of the industry press simply rehashing Google’s announcements or sharing its carefully crafted blog posts. Instead, they’re reporting on them with proper context and careful analysis.  

It is important to add that as an industry that seeks to inform, instead of simply propagating the spin of a corporate blog post, we have a responsibility to share the best coverage of issues, even when it’s written by the competition. With the advent of social, proliferating quality information must be one of our highest objectives.  

2. Independent academic research. We saw something remarkable play out this past quarter. Academics at Carnegie-Mellon and Minnesota released independent, empirical research that showed how little publishers actually benefit from third party cookies (around 4%). The research spanned three years and offers critically important analysis as publishers consider changes to data policy. For this reason, it also very much threatens Google’s interests.  

Recently, Google released its own “internal research” consisting of a single data point, which suggested that more than 50% of advertising revenue would be lost without third party cookies. It’s a ridiculous argument. After reporters and academics scorched Google for the claim, they eventually posted a thin three-page summary which they subsequently buried and backed off from (suggesting, perhaps, that they weren’t anxious for another careful analysis of the quality of this “research”). No doubt there are many more examples. 

As an industry, we must continue to question self-serving or corporate-baked research. The onus is upon us to seek out the best independent research and share it widely.  

3. Persistence. When Google’s Head of News put out a blog post defending its practices and unwillingness to pay publishers for use of their content despite competitors’ willingness to pay and new copyright laws rolling out in Europe, that’s not the last word. When Google sends a note to publishers in France extorting them to give Google permission to use their content for free or lose traffic to their website, there is only one answer: “No.” This all happened in the past week. Really, Google is not going to turn off Google News across Europe and they’re also not likely to want to be in an inferior position as other news platforms roll out.  

As an industry, and bound by ethics and the law, we need to continue to hold the line for the proper value of trusted news and entertainment and the trust of the users and advertisers we serve.  

The PR machine rumbles, but its workings are exposed 

Just this week, we witnessed the incredible power of the Google disinformation machine. A senior executive at Facebook and several industry influencers are sharing a piece that uses an arcane analysis of file sizes (yes, as in bytes) instead of referral traffic to confuse the issue of the company’s search dominance and disparage the knowledge of a vocal antitrust proponent. It is disheartening to see this get any air. At the same time, we clearly see that politicians have increased their knowledge of how Google’s business (and PR machine) works. Rather than being buried by obfuscation, we see clear-eyed and immediate push back coming from lawmakers on both sides of the aisle including Senators Josh Hawley and Elizabeth Warren. 

I considered titling this piece, “Winter is Coming” but that’s overused. I’ll just conclude with a note that there are significantly important investigations happening by competent authorities which will impact the future of our industry. And California offers new guidance for how data can be collected and used. Both issues play directly into publishers’ business interests.  

Fortunately, there are positive signs. We see well-informed, reasoned calls for a close examination of technology’s impact and its business practices. Journalists and industry watchdogs have begun to see biased research and self-serving statements for what they are. And that is progress.  

Featured Post | Policy

Confused about section 230? You’re not alone.

Hint: Try thinking about it in terms of user-submitted content

Passed in 1996, the Communications Decency Act includes a line under the Section 230 heading which reads: No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider. 

Written by (then) United States Representatives. Chris Cox and Ron Wyden, that line has been the shield online outlets have used to protect themselves from liability for certain kinds of content posted by users to their websites. It is important to note that Section 230 has nothing to do with content composed by publishers (user comments certainly count, though). Because of this, the law as become mired in the debate about online speech and the role moderation plays on online content platforms. 

The statute is the focal point of the two sides of the American political spectrum—for almost diametrically opposite reasons. Republicans have claimed that it is at the source of infringement of conservative voices on popular online social media platforms. On the other hand, Democrats question why racist or violent content remains online despite calls for increased moderation. 

Resolving these different perspectives won’t be easy. But what certainly isn’t helping things is the recurring problem of statue 230 being misinterpreted and misrepresented. These problems only confound the confusion over this already-complex issue. Corrections have been issued: Vox needed to rewrite a piece back in May with a mea culpa and more recently The New York Times took back a claim that Section 230 protects online publishers of hate speech (that’s the first amendment).

Conspiracy theories

Some have accused legacy of media being behind some sort of coordinated attack to undermine the power of big tech. However, Jeff Kosseff, an expert on the subject, offers another explanation.

“I think the problem, really, is just that it’s a complex issue,” he says. “And people don’t think it’s a complex issue because it’s a short law. I mean, the core of it is 26 words. But the problem here is that it’s not intuitive.”

Kosseff is a cybersecurity law professor at the United States Naval Academy and the author of The Twenty-Six Words That Created the Internet, the 328-page book that tackles the story of Section 230. One thing Kosseff is pretty sure about: there’s no conspiracy. “I seriously doubt that the Sulzburger family is telling the New York Times business section to write that Section 230 protects hate speech. That seems a bit too far fetched for me,” he says.

Historical perspective

That’s not to say all of the media coverage has been wrong either. Kosseff, who worked over seven years as a reporter at the Oregonian, points to pieces in Wired and The MIT Tech Review (both of which cite him) as successfully communicating Section 230’s intricacies. Going forward though, Kosseff recommends that reporters covering the online speech beat develop a better understanding of the statute and its history. 

Although passed in 1996, Section 230 originally came about as a way to carry forward a legal principle decided in the 1950s and apply it to the online medium. Since the case Smith v. California in 1959, distributors of content have enjoyed protections against liability of the nature of content they do not produce, as was found in the California. (At that time “distributor” meant an outlet like a bookstore.) 

The need for further clarity emerged after legal battles in the early 1990s. Two internet companies were targeted by people who felt they were harmed by the content found on the respective services. The cases resulted in two different legal outcomes. The first company, CompuServe, was spared liability for content on its platform as it had decided to not perform moderation. However, Prodigy, which did edit what was found on its service, was deemed liable for the content on its site.

Net not neutral

These two distinct outcomes are likely at the root of a common misinterpretation of the law: that a content platform needs to be a neutral party to defend itself from any legal claims. That is not the case. Section 230 was written so that content providers could decide what was added their sites by third parties without the risk of legal action.

According to Kosseff, this misinterpretation could be connected with  the way the legal departments of news sites have historically navigated the law in relation to examples like crowdsourced projects, user-submitted reviews, and comment forums . “A huge misconception that even lawyers at news organizations have is that if you make any edits or moderate user content, you lose your Section 230 protections,” says Kosseff.

This point of confusion has manifested itself in the debate between the roles of publishers versus platforms. A May op-ed authored by GOP Senator Ted Cruz explained that Facebook risks losing its protection as a neutral platform and instead risked the liability of being a publisher. Except Section 230 specifically means that if you allow third party posting, you do not count as a publisher of that content (with some exceptions like content breaking federal criminal and intellectual property law). The difference between publishers and platforms is “not really a distinction under the law for Section 230,” says Kosseff.

In addition to encouraging reporters on the topic to do their due diligence, Kosseff recommends that publishers retain legal council with the most up to date knowledge. That’s the key to not only reporting correctly on topic of Section 230, but also managing news and other media websites with user generated content, as there could be negative consequences in the most common misunderstanding the law.

“It’s terrible for business reasons,” says Kosseff. “Because if you’re just sort of voluntarily keeping up all the worst content, you’re going to be driving readers away. And there’s no reason for you to do that.”

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 | Policy

Kids digital video is a perilous place and regulation may not be keeping pace

As children’s digital content consumption has come under the microscope and parents are realizing the extent to which popular online video services fall short of their expectations, federal regulators have voted to take away some of the guarantees protecting traditional sources of educational media. At the same time, others are calling on the Senate to leverage COPPA to reign in platforms’ approach to digital video and to enact new legislation to better keep pace with the rapidly evolving digital video marketplace. Clearly, the industry is at a crossroads and children are increasingly dodging traffic in the form of data collection, ad targeting, and unconscionable content—all of which would be unthinkable in the carefully moderated world of kids TV. 

Unsurprisingly, YouTube is often found in the crosshairs when talking about objectionable digital experiences for kids. With issues stemming from lackluster privacy protections enabling extensive collection of childrens’ data to recommendations algorithms pitching inappropriate videos, the video social media network faces pressure from the Federal Trade Commission to turn around its platform. One idea from the company is to double down on its YouTube for Kids platform and effectively quarantine kids content from the rest of the site. However, to date, that approach has had some significant problems of its own. 

Of course, it’s easy to see why parents like the service: It’s got tons of available content, it’s easy to find, and probably most appealing of all, the large majority of it is free.

Other services, from new market entries to the larger video services like Netflix, Hulu, and Amazon Prime Video (as well as upcoming competitors like Disney+), to traditional media networks have implemented features to better safeguard children. Companies like SuperAwesome are developing video platforms that take the risk out of kids content online for parents and advertisers. And Superawesome demonstrates the level of interest in this space, having raised $13 million in funding earlier this year, led by Harbert European Growth Capital. It was also ranked one of the U.K.’s fastest growing companies. 

What’s changed

While YouTube holds great appeal and attracts massive audiences, it has yet to unseat one medium that has been guided by rules to protect children’s content for almost 30 years. That would be broadcast television. “It’s certainly the most powerful way to reach the biggest audience. You know, the demise of linear TV has been greatly exaggerated,” says Harold Chizick CEO of Chizcomm and Beacon, the largest media buyer in the children’s programming sector. 

While the digital offerings from content companies are more robust than ever, and kids end up watching on more screens, Chizick says that there is a key difference: cowatching. Parents and kids are more able to catch content together when it’s on a larger screen where broadcast TV is usually found.

Additionally, the advertising industry has taken advantage of the dearth of younger eyes. And, in practice, kids end up not being able to avoid targeting technology that leverages collected personal information. That’s challenging as there additional protections for kids and their data under the Children’s Online Privacy Protection Act (COPPA) which advocates say the federal government is not doing enough to enforce. 

Kid Vid

Although the online kids programming business doesn’t necessarily feel ready for prime time, the Federal Communication Commission voted this week to change the rules and regulations surrounding “Kid Vid” or the broadcast licensing requirements of children’s programming called. The changes were originally larger in scope when first proposed by Republican commissioner Mike O’Rielly last winter, in a vote of three to two among the commissioners, the FCC decided to enact an earlier start time for the programming (6 a.m. instead of 7 a.m.), removal of a mandatory 30 minute length for individual programs, and a reduction in reporting requirements for the broadcasters. Broadcasters will still need to air at least three hours a week of educational and informative content.

These changes make sense because broadcast stations need more flexibility to air other important content like local news and coverage of community events, as O’Rielly said in an op-ed at The Hill. As well, encroaching modernity has heralded the shift from linear TV to digital options meaning the burden of regulations falls only on part of the industry. “Notwithstanding this extensive competition in the video marketplace, local broadcasters are the only ones forced to operate under our Kid Vid rules,” he wrote.

In her dissenting opinion, Commissioner Jessica Rosenworcel said that she was concerned about the reliance on algorithmic recommendations for kids who watch content online. “This [proposal] follows on the heels of reports that automatic recommendation systems can present disturbing videos on the screen, one after the other. As a mother, I am not at ease when my kids before the computer and rely on algorithms to deliver their next video,” said Rosenworcel during arguments before the vote.

Modern regulation

Early on, the changes to Kid Vid had children’s programming advocates—and more recently a group of Senate Democrats—concerned. “The FCC’s assumption that children’s television guidelines are no longer necessary because programming is available on other platforms is simply wrong,” as three children’s television groups said in a fall 2018 filing to the FCC. “To obtain access to non-broadcast programming, households must have access to cable or broadband service, and be able to afford subscription fees and equipment. Many families, especially low-income families and families in rural areas, cannot access or afford alternative program options.” 

Christopher Terry, assistant professor at the University of Minnesota Hubbard School of Journalism and Mass Communication agrees. In a phone call, Terry levied criticism at the shifting motivation behind the changes. Originally proposed as a first amendment issue in 2018, he said that was unlikely to fly due to the fact that the FCC has full mandate to regulate the content found on broadcast channel as licensing conditions. The reframing of the changes as a competition problem in an era of changing viewing habits, only came later. Even then, Terry questions who is actually benefiting from more competition. 

“There is absolutely no upside for the people who use this programming in this proposal,” says Terry. “The only people who benefit from this is the FCC—they’ve got less paperwork to deal with—and the companies that are going to have more opportunities to figure out ways to get around this.”

With the FCC’s new rules moving forward nonetheless, the need for mature, responsible online platforms for kids content delivery is more critical than ever. Regulators want people to embrace the new online platforms, so there should be a destination which protects the interests of kids and their parents equally as any bottom line.

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