Until now, most attention has been on the impact of this dominance on privacy, for example the recent Cambridge Analytica scandal that saw Facebook criticised for failing to tackle the unauthorised use of user data by a political campaigning firm. As a result, some analysts and commentators have called for users to be given more control over their information. But this is a serious mistake.
Google and Facebook make money from their monopoly of our attention, not their access to our personal data. Even if, starting tomorrow, they had no access to our personal data for the purposes of targeting ads, they would still be dominant and hugely profitable because they can advertise to so many people, just like TV networks once were.
Limiting Facebook and Google’s access to personal data of users would make no difference to their monopoly power, or reduce the harmful effects of that power on innovation and freedom. In fact, any further controls on privacy are likely to play into the hands of the dominant firms. It would simply reinforce their monopoly position by increasing the cost of following privacy regulation and making it harder for potential competitors to enter and disrupt the market.
The true source of monopoly power
The tech giant have monopolies because of the convergence of three different phenomena. First, Google and Facebook operate as “platforms”, places where different participants connect. This is an ancient phenomenon. The market in the town square is a platform, where sellers and buyers congregate. Facebook is a platform, originally designed to connect one user with another to exchange content, though it quickly began attracting advertisers because they want to connect with the users too. Google is another platform, connecting users with content providers and advertisers.
Research shows that all platform businesses have a strong tendency to centralise a market, because the more customers they have, the more suppliers are attracted, and vice versa. As the first platform businesses in a sector grow, it becomes harder for new rivals to compete on equal terms. The initial advantages lead to entrenched monopolies and the market converges on a single or small number of platforms.
Owners of marketplaces and stock exchanges make good livings, but they are limited in their scope owing to the physical nature of their platform. But the owners of the vast online platforms are in an entirely different league, because of a second phenomenon – one of the fundamental characteristics of the digital age: infinite – costless copying.
Once someone has a single copy of a piece of digital information they can make as many copies as they wish at the touch of the button at practically no cost. Different versions of eBay, for instance, can be created for every country in the world at practically no extra cost, giving it a reach that goes far beyond a physical auction house.
Expansion is virtually free, with infinite economies of scale. So Google, Facebook and other dominant tech firms have been able to scale up their services at an unprecedented rate, and with unprecedented profitability.
But costless copying would not be so profitable if it were truly unlimited. The final component of these extraordinary businesses is their exclusive right to make the copies. Thanks to intellectual property in the form of patents and copyrights, they control the digital information at the heart of their platforms, such as the algorithms that run Google’s search engine or the software that powers Facebook. Their products and platforms, and the software and algorithms that run them are all protected by laws we have made.
This contrasts with the most famous platform of the digital age: the internet itself. The internet is a platform just like Google and Facebook except that it is open. It is open in a technical sense because its protocols and software are free for anyone to use, but it is also open socially because anyone can connect to it whatever their background or circumstances.
The internet is living proof that we can have the benefits of a single platform without it becoming a monopoly, and it stands as a testament to the creativity and innovation that this fosters.
It also holds the solution to the present monopoly problem: openness. The fact that anyone can use, implement and build on the internet’s platform is what guaranteed its free and competitive opportunities.
So how would this work with platforms like Google or Facebook? At the moment Facebook and other social networks give us platforms on which to communicate and share content with others. Facebook determines who can use its platform and how they can do so. Anyone wanting to build or adapt the platform, for example to block ads or to create a new social network, must do so with Facebook’s permission.
Such permission is rarely granted. If you’re unhappy with the platform you have little option but to reluctantly accept it or lose access. If it were open this need not be the case. Just as with the internet, you could have had one open platform that anyone could connect to and build on. Dislike the ads? Well, you can create a version that does away with these. Only want to message friends and see their photos. That could be possible, too. Openness means you are not restricted by the whims and desires of just one company.
The solution to these platforms’ monopolies is to make the software, algorithms and protocols on which they run open and free for anyone to use, build on and share. In addition, all users, competitors and innovators should have universal, equitable access to the platforms. Doing this is the only way to give everyone a stake in our digital future.