Google and Facebook need more regulation, but the focus should be on user protection rather than market competition. And the people behind the regulation need to have a far better knowledge of how digital advertising works.
The report, ‘UK advertising in a digital age’, includes plenty of useful recommendations: clear up the programmatic ecosystem, anticipate changes related to Brexit, help the news industry to adapt, develop suitable skill-sets for future careers within digital advertising, tackle ad fraud, ensure that the UK sustains its position as a world-leader in the advertising industry.
But they are crucially wrong on the subject of Google and Facebook’s market dominance. Instead of asking the Competition and Markets Authority (CMA) to assess the so-called ‘duopoly’, they should be focusing on how to protect individuals within such a rapidly changing environment.
And they should also be rethinking their entire model of regulation - clearly, they can’t expect to keep pace with the exponential technological growth of the digital era. Something fundamental needs to change in the way new laws are created pertaining to the internet, or any other consumer technology.
We need a new model for internet regulation
Mark Zuckerberg recently addressed the US Senate regarding his company’s data leak. Some of them had to ask what an iPhone was. I can’t help seeing a parallel with this House of Lords investigation.
If there is going to be regulation of something so fast-moving as digital advertising, social media, advertising technology, then it will need to come from people that have an intuitive knowledge of it. We can’t expect people outside of the industry to understand it in enough depth to make good decisions.
I’m fully aware of the fact that the House of Lords summoned advice from senior industry leaders, academics and industry trade bodies. But not nearly enough to offset the inexperience of the various barons and viscounts of the committee.
Regardless of the people involved, the biggest issue is speed. The GDPR, as much as I admire its aims, has taken years and years to complete. By the time it comes into effect, there will a host of new issues related to data - just think of emerging technology like smart speakers, which the regulation does not really cover.
To successfully regulate the internet, we will need a regulatory body that is much faster. Otherwise, the internet will be forever self-regulating, and the law basically redundant.
Google and Facebook’s dominance requires no interference
This is for several reasons. Firstly, Google and Facebook have earned their position by creating an excellent user experience. They didn’t get there because of government subsidy, or through underhand corporate manoeuvres; they just built the best platform within their channel and outcompeted all of their rivals. Do we really want to create an advertising industry where excellence is punished?
Disrupting Google and Facebook’s businesses would be bad for consumers and businesses. Together, they have helped businesses of all sizes to grow by providing outstanding digital advertising services. Facebook has more than two billion users, who are there because Facebook has continually optimised the platform to make it work for their customers.
Google, through their search console, and through their investment in AI research and driverless cars, are at the forefront of some of the most beneficial consumer technology in history.
Despite all of this, due to the nature of the digital economy, their reign will not last forever. It may not even the last the rest of the decade. There are threats everywhere, from Amazon’s ongoing investment into advertising, to big changes in consumer behaviour. Google’s business is heavily dependent on its Search advertising revenue. What if Search stops being important? What if Facebook doesn’t appeal to the next generation (which early signs suggest it will not)?
Google and Facebook will be disrupted at some point in the not too distant future, so let’s allow the market to follow its natural course - this is the only way to protect consumers in the long run. I mean, would anyone really want to clip Amazon’s wings? They’re just so damn good at what they do.
Lastly, many seem to take it as read that an oligopoly is a bad thing. If you want a counter-example, look at the ‘notoriously murky’ (to quote the report) programmatic industry. Why is it so murky? Because there are thousands of competitors within it, each with slightly or very different ways of measuring performance, and an overwhelming range of advertising technology.
What programmatic needs is another Facebook or Google - someone to set the standard, and to become so successful that everyone is scrutinising it. That’s part of how you end up with platforms as brilliant as those created by Google and Facebook.
By all means clean up the internet, but first of all we need to revamp the means of legislation. And instead of punishing excellence, let’s focus on what’s best for the consumer.
Google and Facebook are good for businesses and consumers
They’re leaps ahead of many other companies in terms of research and development, with Alphabet’s R&D spend at $13.9bn in 2017 and Facebook’s at $5.9bn. They’re developing groundbreaking research into AI and machine learning, such as Facebook’s Detectron object recognition software and Google’s acquisition of AI startup DeepMind. Another area is Natural Language Processing, exemplified by the Google Cloud Natural Language tool or Facebook’s Voiceloop text-to-speech.
That’s not even to mention their research into robotics, science, sustainable energy, and the many other projects on their radars.
They’re both paving the way for global internet connectivity, as members of the Alliance for Affordable Internet (A4AI) coalition for cheaper internet access in the developing world and with initiatives such as Google Station.
As the two giants of digital media, Facebook and Google set the example for accountability in the industry. They are constantly the ones taking the first steps in this ever-changing landscape, and when they slip up, they take responsibility. Facebook is launching a research group on election influence on social media, and is developing AI tools to catch fake accounts and identify fake news on their platform.
As far as oligopolies go, we’re pretty lucky to have Google and Facebook as the dominant companies in digital advertising. Attempting to break them up would be a mistake.
Dan Gilbert is chief executive and founder of BrainLabs