What Could Make Tech Platforms Do the Right Thing?

There have been many candidates including pressure from policy-makers and regulators, but thus far no end of congressional hearings or EU fines have done more than dent the stock price. Calls from organisations like Amnesty International and United Nations to Tech to stop supporting genocide and doing mass-surveillance have failed to convince Silicon Valleys’ superstars to clean up their services. Staff protests in the form of “walk-outs” have not changed the direction. The consumer power that is “only one click away” is an illusion. What is left?

This writer can think of two last resorts, one is the advertisers who are the real customers in the world of freenomics. The other would be the investors. Not sure if we should expect Wall Street to put things like democracy, peace, life, health and freedom before the profits, though. But now at last, the ad boycott method has been attempted. Let’s take a look!

Ad-pocalypse Redux

Many big-name advertisers have joined the #StopHateforProfit campaign, receiving attention and applause. In fact, so many that CNN has made a special page with the list of companies. Well-known consumer brands. Will this have an impact on the platforms? A small impact on the stock price has been recorded, but longer term it may have more of a symbolic than financial effect. This Wall Street Journal infographic gives a hint: the top 8 boycotters yearly ad spend (all channels) is only 1% of Facebook’s total annual advertising revenue.

I have written about Metcalfe’s law before, but it might help explain this. The law describes the value of a network, say of fax machines. If two people have fax machines, they can telefax each other. If four people have them, there are not twice but four times as many connections. The value of the network is exponential. 100 Million users are not worth ten times more than 10 Million users, but 100 times more. This is the logic that drives the platforms to dominate their respective niches and makes competition irrelevant. (Why would anyone start a competing auction service? Or search? Or video?)

But Metcalfe’s law not only explains the user side of the market, but also applies to the advertiser side. Sure, big name brands can afford to go to alternative channels like television or billboards or something completely different. But the Millions of small businesses have few or no options. Facebook advertising is how they access the customers. Maybe if they want to reach the millennials rather than the boomers, advertisers can go via Instagram, but that is still Facebook. YouTube is the gatekeeper for video. In practice, there is no place else to go. The platforms control both sides of the market. You can’t argue with Metcalfe.

The #StopHateforProfit is a great initiative and of course it’s better to do something than nothing. But it will not be what turns the tide on tech platforms, who seem to put their efforts into pushing for more exceptions from liability rather than facing up to their responsibility as dominant players.

This is Netopia’s newsletter July 9 2020