AdvalancheSource: eMarketer *Estimate †ForecastUnited States, net digital advertising revenue, $bn0204060801001202008 09 10 11 12 13 14 15 16 17 18 * 19 †Google
Facebook
Other companiesworld are technology companies, with a combined market value of
$3trn, gives you muscle. So do the massive revenues which most of
you turn into profits. But the fact that all the figures associated with
your industry are huge—except for your tax bills—is one reason you
have so many enemies.There is one ray of light. Almost all your services remain wildly popular
with consumers; they use your products to communicate, to navigate,
to search for stuff, to buy things and to socialise. They cannot imagine
life without you. This is one reason investors have dismissed anti-tech
rhetoric as political grandstanding. But today’s market sentiment
could change quickly. An analyst at RBCCapital, Mark Mahaney, re-
cently published a list of “top ten internet surprises for 2018”. “Mate-
rial regulatory action” against tech was number one; he rated the
probability as low but “higher than financial markets ascribe”. And
the impact could be huge.“Tech” is not yet a four-letter word, but it could soon become one.BAADD to worse
You are an industry that embraces acronyms, so let me explain the
situation with a new one: “BAADD”. You are thought to be too big,
anti-competitive, addictive and destructive to democracy.Those who dislike you for being big draw on research from The Econo-
mist, think-tanks and academia pointing to the rising concentration
in American business, some of which links high corporate profits to
inequality. The value of your mountains of data is becoming obvious,
especially as you continue to push into new areas that collect more
information about consumers while binding them closer to you, such
as the home microphones you are careful to call home speakers.
Facebook and Google are responsible for nearly 80% of news publish-
ers’ referral traffic. In 2017 they claimed around 80% of every new
online-ad dollar in America. Google dominates as much as 85% of
online-search-ad revenue worldwide. When you combine the stuff
Amazon sells itself with the stuff others sell using it as a marketplace,
the company controls some 40% of America’s online commerce.Many also believe you to be anti-competitive. Amazon is a retailer
which is also a marketplace. Google determines the position that
publishers get in search results and which ads are served to their
patrons—as well as controlling the system that says if the ads were
read and should be paid for. Ms Vestager fined it for hurting rival
online-shopping services; it could face further charges for forcing
smartphone makers using its Android operating system to include
various Google apps.All three of your firms have used insights from the data you gather to
spot incipient rivals and buy them up. Facebook’s little-known app
Onavo, which tracks users’ smartphone activity, helped it spot several
potential threats, including Instagram, a photo app, which it boughtin 2012; WhatsApp, a messaging service, for which it paid a stunning
$22bn in 2014; and tbh, a social-polling app, which it acquired last
year. When Snapchat rebuffed it in 2013, it responded by cloning the
app’s most successful features. There’s a potential lesson from his-
tory here. Microsoft tried to buy the nascent browser company Net-
scape in the 1990s; when it failed, it put lots of the browser’s features
into its own product, making it freely available to all. That got it into a
lot of trouble. Some see the weak share price of Snap, Snapchat’s
parent company, as proof that challenging Google’s and Facebook’s
online-ad duopoly has become nearly impossible.A further charge is that tech firms’ products are addictive. People
argue about this, but many feel that people who spend time on social
media, especially teens, are less happy than peers. Rates of teen
depression and suicide have risen in some places; some adults have
been shown to be more prone to insomnia, depression and anxiety
due to online activities. Two of Apple’s shareholders—the California
State Teachers’ Retirement System pension fund and Jana Partners, a
hedge fund—recently demanded more be done to help youngsters’
smartphone addiction. You know you are in trouble if a Wall Street
firm is lecturing you about morality.In addition to harming mental health, your firms are charged with
damaging democracy. Social-media firms create filter bubbles,
where users are fed information confirming their existing beliefs;
they spread fake news that reinforces political polarisation. After last
year’s terror attacks in London, Theresa May and others pointed
fingers at YouTube, where jihadists promote extremist propaganda.
Russia’s use of social media in America’s 2016 presidential race re-
flected particularly poorly on Facebook, which was seen as doing too
little to stamp out deceptive ads and fake news stories. As for nuclear
braggadocio on Twitter, let’s not even go there.Proposed actions
Was it Sun Tzu who said: “Your most unhappy customers are your
greatest source of learning”? Actually, no. It was Bill Gates. Less good
on an ancient Chinese battlefield: wiser, through bitter experience,
in the ways of antitrust. These days your unhappiest customers don’t
just moan; they go online to discuss innovative regulatory schemes,
some of them quite wacky: Joshua Wright, a professor at George
Mason University, calls this “hipster antitrust”. Hipsterish or not,
here are some of the ideas making the rounds, with the most damag-
ing first:Break up
This has several supporters, especially on the left. One is Barry Lynn
of the Open Markets Institute (he was dismissed from the New Ameri-
ca Foundation last year, allegedly because Google’s Eric Schmidt
disagreed with his take on tech). Tim Wu, who was influential in the
Obama White House—he coined the term “net neutrality”—was
recently overheard telling an Economistjournalist that he is in favour
of a revival of “the big case tradition” of trustbusting. The DOJor the
European Commission could try and force Facebook to get rid of
Instagram and WhatsApp (the deal European regulators really care
about), thus creating three rival social networks. Google could be
split from YouTube (which, kind of remarkably, is itself the world’s
second-largest search engine) or be forced to spin off DoubleClick,
the technology it bought in 2007 that places ads across the web.Such gambits might well fail; but that risk is not the deterrent you
might expect. Mr Wu and others think such attempts serve a greater
good even if their subject survives. Before eventually breaking up
AT&T, which controlled America’s telephones, regulators forced it to
license its technology. Neither IBMin the 1960s nor Microsoft in the
1990s was actually split up. But IBMhad to open its platform to in-
dependent software developers and Microsoft was obliged to disclose
details about the workings of its Windows operating system to rivals.
Some scholars reckon this government-ordained disruption was as
much of a boost to progress as any endogenous “creative destruc-The Economist January 20th 2018 BriefingCoping with techlash 1912