First published in Techonomy, 2/26/19 -- and more timely than ever...
There is a growing
consensus that we need to regulate Facebook, Google, and other large
internet platforms that harm the public in large part because they are driven
by targeted advertising. The seductive idea that we can enjoy free
internet services — if we just view ads and turn over our data — has been
recognized to be “the
original sin” of the internet. These companies favor the interests of
the advertisers they profit from more than the interests of their billions of
users. They are powerful tools for mass-customized mind-control. Selling
their capabilities to the highest bidder threatens not just consumer welfare,
but society and democracy.
There is a robust debate emerging about how these companies
should be regulated. Many argue for controls on data
use and objectionable
content on these platforms. But poorly targeted regulation risks
many adverse side-effects –
for example abridging legitimate speech, and further entrenching these dominant
platforms and impeding innovation by making it too costly for others to
compete.
But I believe we need to treat the disease, not just play
whack-a-mole with the symptoms. It’s the business model, stupid! It
is widely recognized that
the root cause of the problem is the extractive, ad-funded, business
model that motivates manipulation and surveillance. The
answer is to require these companies to shift to revenue streams that come from
their users. Of course, shifting cold-turkey to a predominantly
user-revenue-based model is hard. But in reality, we have a simple,
market-driven, regulatory method that has already proven its success in
addressing a similarly challenging problem – forcing automakers to increase the
fuel efficiency of the cars they make. Government has for years required staged
multi-year increases in Corporate Average Fuel Efficiency. A similar
strategy can be applied here.
This market-driven strategy does not mandate how to fix
things. It instead mandates a measurable limit on the systems that have been
shown to cause harm. Each service provider can determine on their own how
best to achieve that. Require that X% of the revenue of any consumer data
service come from its users rather than advertisers. Government can
monitor their progress, and create a timetable for steadily ratcheting up the
percentage. (This might apply only above some amount of revenues, to
limit constraints on small, innovative competitors.)
It is often said of our internet platforms that “if you are
not the customer, you are the product.” This concept may oversimplify,
but it is deeply
powerful. With or without detailed regulations on privacy and data
use, we need to shift platform incentives by making the user become the
customer, increasingly over time.
Realigning incentives for ads and data. Advertising
can provide value to users – if it is targeted and executed in a way that is
non-intrusive, relevant, and useful. The best way to make advertising
less extractive of user
value is by quantifying a “reverse meter” that gives users credit for
their attention and data.
Some services already offer users the option to pay in order to avoid or reduce
ads (Spotify is one example). That makes the user the customer. Both
advertisers and the platforms benefit by managing user attention to maximize,
rather than optimize for exploitive “engagement.”
What if the mandated user revenue level is not met?
Government could tax away enough ad revenue to meet the target
percentage. That would provide a powerful incentive to address the
problem. In addition, that taxed excess ad revenue could fund mechanisms
for oversight and transparency, for developing better solutions, and for
remediating disinformation.
Can the platforms really shift to user revenue?
Zuckerberg has been a skeptic,
but none of the big platforms has tried seriously. When the platforms
realize they must make this change, they will figure out how, even if it trims
their exorbitant margins.
Users increasingly recognize that they must pay for digital
services. A system of reverse metering of ads and data use would be a
powerful start. Existing efforts that hint at the ultimate potential of
better models include including crowdfunding, membership models, and cooperatives.
Other emerging
variations promise to be adaptive to large populations of users with
diverse value perceptions and abilities to pay.
A growing focus on customer value would move us back towards
leveraging a proven great strength of humanity — the deeply cooperative
behavior of traditional markets.
A simple mandate requiring internet platforms to generate a
growing percentage of revenue from users will not cure all ills. But it is the
simplest way to drive a fundamental shift toward better corporate behavior.
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Coda, 7/24/19:Since the original publication of this article, this issue has become even more timely, as the FTC and Justice Department begin deep investigation into the Internet giants.
- There is growing consensus that there is a fundamental problem with the ad- and data-based business model.
- There is also growing consensus that we must move beyond the narrow theory of antitrust that says there can be no "harm" in a free service that does not raise direct costs to consumers (but does raise indirect costs to them and limits competition).
- But the targeted strategies for forcing a fundamental shift in business models outlined here are still not widely known or considered.
For more information see my Open Letter to Influencers Concerned About Facebook and Other Platforms.
- It primarily focuses on these business model issues and regulatory strategies (including the auto emissions model described here), and how FairPay offers an innovative strategy that has gained recognition for how it can generate user revenue in equitable ways that do not prevent a service like Facebook or Google from being affordable by all, even those with limited ability to pay.
- It also links to a body of work "On the deeper issues of social media and digital democracy." That includes Google-like algorithms for getting smarter about the wisdom of crowds, and structural strategies for regulation based on the specific architecture of the platforms and how power should be modularized (much as smart modularization was applied to regulating the Bell System and enabling the decades of robust innovation we now enjoy.)