Friday, August 10, 2018

A 3 Minute Read Gone Bad

Jared Whitley has a piece titled "Facebook Is Not the Bad Guy" which The Weekly Standard ran on July 30. The piece advertises itself, right at the top, as a "3 min read."
Thankfully, it wasn't any longer. Because, say, if it were a "6 minute read," it might have been twice as flawed as it already is.
The premise of the piece is that, when it comes to data privacy and security concerns, the focus on Facebook, and presumably Google, Amazon, and other web giants, is misplaced. Mr. Whitley suggests "the media have been quite gleeful in their cheering of Facebook's recent bad news." Then, he claims "we're picking on the wrong bad guys." According to Mr. Whitley: "Telecom companies – AT&T, Verizon, Comcast – have access to more of our data and treat it with nowhere near the scruples that Silicon Valley does."
Even a cursory read of Mr. Whitley's piece will demonstrate he produces no evidence to support the claim that the "telecom companies" [he means: Internet service providers or ISPs] lack the "scruples" of Facebook, Google, and the other web giants. Mr. Whitley tosses out character-bashing bombs based on nothing more than his assertion "that they're eager to get into the digital advertising space that Google and Facebook dominate."
The reality, whether Mr. Whitley wants to admit it or not, is that Facebook has been in the news because its conduct and practices regarding privacy and data security have been problematic, even if not necessarily unlawful. Facebook's senior executives, including Mark Zuckerberg and Sheryl Sandberg, have acknowledged the company's privacy and data security shortcomings surrounding the Cambridge Analytica matters and other incidents.
My purpose here is not to pile on to Facebook to build a case that it is a "bad guy" – to use Mr. Whitley's terminology. Or to assert that a case has been made for heavy-handed government intervention of Facebook or Google. Rather my purpose is to show that if Mr. Whitley, or anyone else, is concerned about online privacy, it's unwise to ignore the web giants because, to paraphrase Willie Sutton, that's where the market power – and hence money – is.
It may be true, as Mr. Whitley claims, that the Internet service providers like Comcast and Verizon are eager to get into the digital advertising space. Sure enough. But it is also true, as he concedes, that in this space "Google and Facebook dominate."
As of December 2017, Google and Facebook accounted for 73% of the U.S. digital advertising market. And as of July 2018, Google had access to over 86% of all Internet searches in the United States and controlled almost 50% of the web browsing market. Despite its recent troubles, in July 2018, Facebook still controlled 54% of the social media market. The market shares of these web giants indisputably are significantly larger than that of any single Internet service provider.
In a February 2016 paper, “Online Privacy and ISPs: ISP Access to Consumer Data is Limited and Often Less than Access by Others,” Peter Swire and his colleagues stated that 70% of Internet service provider traffic would be encrypted by the end of 2016. Under that scenario, ISPs, at best, only have access to 30% of consumer data. Encryption keeps getting ever more prevalent so, in 2018, ISPs likely have access to even less consumer data. In other words, the Googles and Facebooks of the world, not the ISPs, have far greater access to consumers’ personal information than ISPs.
In the face of this reality regarding market power dominance in the digital advertising space, I'm baffled as to why Mr. Whitley felt the need to portray Internet service providers as the "bad guys" in order to defend Facebook, Google, Amazon, or other web companies. In a two-sided market, ISPs connect consumers to Internet access and web companies like Facebook to deliver content. Both sides have an incentive to collect consumer data to deliver targeted advertising and to respond to evolving consumer demand with innovative, pro-consumer offerings. Done right, this enhances overall consumer welfare.
What we don't want to do (per Mr. Whitley) is to engage in unfounded sweeping generalizations. Instead, we want to have a regulatory regime that emphasizes consumer disclosure and consumer choice. And we want to target bad actors – "bad guys" if you will – for appropriate sanctions if they are found, after proper procedure, to have committed unfair or deceptive practices or other abuses.
And we want to make even a "3 min read," or perhaps especially a "3 min read," accurate, not rife with unfounded accusations.