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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.

Advertising | 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 | Video

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.

Featured Post | Perspectives | Policy

Behavioral advertising: The mirage built by Google

Important new research was recently presented at a major economics conference and reported on by the Wall Street Journal. The comprehensive study was conducted over nearly five years by Veronica Marotta, Vibhanshu Abhishek and led by Alessandro Acquisti, who is globally recognized for his work studying behavioral economics and the impact of privacy on digital society. The bottom-line: Acquisti’s team found that behavioral advertising, as measured and delivered based on third party cookies, increased publisher revenues by a mere 4%.

If you’re nodding your head unsurprised by this statistic, then you’re likely in the 67% of publishers surveyed recently by Digiday who answered that behavioral advertising doesn’t help their business. But make no mistake, the findings are profound as to how they inform the future of digital advertising. They will also have a strong influence on the next steps in US privacy legislation. Put simply, nearly all of the growth touted by the industry benefits intermediaries rather than the publishers who provide the news and entertainment. And for the first time ever, there is empirical research to dismiss long-touted industry arguments that privacy rules will kill the golden goose that pays for free content.

Implementing new rules

This empirical study makes it clear that the absence of rules has overwhelmingly benefited intermediaries. (This would also explain the market caps of a few of the biggest intermediaries.) And now, there remains a singular challenge: No individual publisher can change tactics unless all significant publishers move in lock step. That’s because individual companies would lose significant revenues moving on their own, even on behalf of consumers. Therefore, the bar must be raised equally, through a combination of tech and regulation.

Google is the most critical company with the most to lose and will have a seat at the head table no matter where the market or regulators take us. It will be critical for individual publishers to be able to move in the best interests of consumers and their fellow publishers without being held back by Google’s stronghold. Reuters reports that “Google has repeatedly said that it acts in the best interest of its users and offers sufficient warning to industry partners potentially affected by its moves.” We’ll see.

Recent experience suggests that Google will not cede ground. A friendly reminder that when GDPR rolled out last May in order to better protect the privacy interests of EU citizens, Google waited until the final days to push through its own interests. Global publishers had to send a formal letter of concern to Google’s CEO. They also filed a copy with every major competition authority in the western world.

Built on a shaky foundation

Much of the digital advertising marketplace and Google’s business have been built on direct-response advertising in which clicks and audience targeting are valued more than the media that surrounds it. This presents a challenge for media companies which have invested heavily in high-quality, premium news, and entertainment environments. Unfortunately, the largest part of the digital advertising market was whittled down to little more than an efficient delivery vehicle for cookies auctioned off to the highest bidders. And little has been done to dismantle this poorly-built foundation. Rather, our entire industry – data brokers, ad tech platforms, agencies and publishers have fueled these direct-response metrics by doubling down on them through behaviorally-targeted advertising.

The premise? That the new capabilities to collect and use browsing data across the web eliminate the waste in advertising, giving marketers their long-sought dream of one-to-one targeting with real-time measurement and publishers a share in the spoils to help fund their digital growth. And, through these same data reservoirs, advertisers could focus on cherry-picking consumers as efficiently as possible. This spawned a slew of sites optimized not for long-term relationships with loyal audiences but instead for their ability to create diverse cookie pools for these real-time markets.

The 800lb gorilla

Google was a company built for the direct response economy post-2009. Due to several years of belt tightening after the 2008 financial crisis, chief financial officers had more pressure to ensure that marketing investments met the quarterly demands of shareholders. And boy did Google deliver. Google did everything it could to maximize the personal data in its coffers and to minimize friction for advertisers who wanted to micro-target people based on it.

Some history:

  • When web browsers were on the cusp of consumer privacy innovation by restricting tracking cookies, Google lobbyists hindered industry progress.  At the same time their own browser, Chrome, took a dominant seat in the market.
  • When consumer ad blockers became a risk to Google’s data collection, Google began a series of secretive deals and payments in order to whitelist their own data collection tags and later commandeer a browser solution to protect its own ad formats. This saved the company billions in revenue while everyone in industry took a hit.
  • When a more privacy-focused mobile environment emerged from Apple, Google continued investing in its privacy-porous Android device. It earned a $5.1 billion fine for its efforts. Google also launched its own code layer in AMP. This provided the company deeper influence on what can be on publishers’ websites.
  • Google wrestled control and influence over the ad tech supply chain used by competing publishers through a series of targeted acquisitions.

Market dominance

The fruit of its labors is an advertising market optimized for its own interests.

  • Who conducts the most bids to buy advertising in these real-time markets? Google.
  • Who offers up the most bid requests to sell advertising in these real-time auctions? Google.
  • Who operates the most negotiations between buyer and seller? Google.
  • What is the most valued asset in digital advertising? Personal data.
  • Who owns the most personal data? Google.

Put another way. Google is the largest buyer, seller, and transaction vehicle for digital ads that leverage personal data. And Google has by far the most personal data. At this point, it should hardly be a question whether this is a rigged market.

The numbers are startling. In the past decade, Google’s SEC filings show that the advertising revenues Google delivers across its vast network of millions of publishers have barely doubled, having grown from $9 billion in 2010 to $20 billion last year. However, in the same ten years, Google has quadrupled its owned and operated advertising revenues from $28 billion to a whopping $116 billion last year.

Search was (and is) the monopoly that privileges entry into any other business by Google. However, the rich interest profile that can be assembled by harvesting personal data across its operating system, browser, ad services, analytics, and its own properties comprises a behavioral advertising fortress.

The anticipated Department of Justice decision to investigate Google is the company’s worst nightmare in terms of timing on these issues. Already we’re seeing influencers and former competitors begin to open up about bad conduct in Mountain View. Inevitably, there will be more details and more reports. It’s critical to the process—and the future of digital media—that light be shone on their activities.  

Without a doubt, the investigation means that Google will have a harder time finding friends in the publisher and ad tech communities. However, it’s unlikely you’ll hear publicly from many of them. And therein lies the ultimate symptom of antitrust: No company wants to cross Google. But the word “frenemy” will cut in a different direction now: You won’t find anyone watching your back when you’re under the regulatory microscope.

The rise of ad tech intermediaries

All of this said, Google wasn’t alone in its attempts to reap the spoils of the behavioral advertising marketplace. In the period between 2010 and 2016, hundreds (if not thousands) of new companies spawned in the ad tech wild west. By my count, there were 78 ad tech companies starting with the letter “A” in 2016 and today 64 of the 78 have either been acquired or disappeared from the industry. History will determine whether most (if any) of these companies had a lasting impact on the industry.

The core proposition of nearly all of them was to serve a burgeoning programmatic marketplace in which third parties could be inserted into the supply chain in return for value. The typical webpage went from dozens of third parties to hundreds. This triggered a real-time competition for eyeballs, most often represented by third-party cookies.

Personal data was collected by these third parties without consumer knowledge or control. The data was then used to target consumers across the web, as cheaply as possible. All of this was done outside of consumer expectations which led to the “adtechlash” with the rise of ad blockers, various levels of tracking protection launched into Chrome’s “competition” web browsers Safari, Brave and Firefox, and new privacy laws like 2018’s GDPR and CCPA rolling out in 2020.

Now we find ourselves on the eve of new laws globally to better align with consumer expectations. Publishers need to be fierce defenders of these consumers and protecting their experiences. Ultimately, the fight to defend behavioral advertising likely isn’t worth it. At the very least, every publisher and their representative organizations should make certain whose interests they’re fighting for. This will determine who benefits over the next ten years.

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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 | 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?

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