Co-Founder and CEO of Edison Software, a company making consumer email and data-driven research more private and intelligent with AI.
Tech business models are harming consumer privacy and antitrust laws.
Earlier this year, President Biden signed an executive order to address concerns about anti-competitive behaviors occurring across different industries. Big tech was among those listed, and the order urged the Federal Trade Commission (FTC) to “establish rules on large platforms’ use of surveillance and gathering of user data,” as well as on “barring unfair methods of competition” that could harm smaller businesses.
The order arrived following increasing scrutiny on big tech practices that are considered harmful to consumer privacy and antitrust laws — both topics that have recently reached a fever pitch. More awareness than ever before on these subjects has generated thoughtful discussion among industry stakeholders about how to better protect consumers.
Why Preserving Consumer Privacy In Big Tech Is Important
Big tech companies, for example, Google and Facebook, have business models that rely on their consumption of consumer user data to power their advertising-based business models. Both businesses offer consumer products and services free of charge, and they earn their money primarily by advertising to you for other businesses.
By collecting, storing and mining your unique digital behaviors — clicks, likes, dislikes, friends, purchases, comments — big tech can then use the information to influence and potentially modify your behavior. Knowing your name, interests and behavior offers a clear picture of your personal identity and helps businesses determine your exact preferences to target you specifically with their products or decision-making.
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While some may see the convenience of having relevant advertising, there are concerning drawbacks of this unchecked power. For example, Google search results have been scrutinized for their potential to influence consumer opinions, and the company made headlines recently when it was revealed some of its employees abused consumer data for their personal use. Facebook was also “directly linked” to real-world harm in Myanmar when people used the platform to incite violence, spread disinformation or promote hate speech.
Furthermore, in the context of anti-competitive behavior, unlimited access to consumer data offers big tech a lucrative, and some argue unfair, advantage over its smaller competitors that lack the same level of insight.
How Big Tech Anti-Competitive Behavior Hurts Consumers
The FTC’s efforts to revamp and sharpen its teeth to regulate big tech have garnered increased attention this year. Innovation in technology has become challenging for new business entrants as access to capital is limited in spaces in which companies compete directly with a product built by big tech businesses. For example, a new business that wants to create a product that competes with Pinterest will need capital to execute that idea; however, most venture capitalists will turn you down since a large competitor already exists and will make your business unviable. If you cannot even enter a market already dominated by a big tech company, innovation in the space is then threatened.
Newly appointed FTC Chair, Lina Khan, previously published an academic article that also explains problems stemming from only a handful of big tech companies mediating a growing share of online commerce and consumer communications. Because big tech companies have become “gatekeepers” of access to entire markets, for example, Apple’s App Store or Google’s Play Store, competing products are reliant on having a presence in their stores to be viable and compete with other players in their industry or risk failure. The hotel industry experienced this when third-party travel booking websites took over consumer travel planning, and the restaurant industry is now also experiencing this as third-party food delivery services become the dominant preferred platforms among consumers.
By structuring the access to these markets, companies like Apple, Google and Amazon function as both gatekeepers for billions of dollars in economic activity and as competitors to the businesses that use them. But both operating a platform and marketing their own goods and services on it creates a conflict of interest that big tech companies can exploit to further solidify their dominance, thwart competition and stifle innovation. Without any oversight, there is no way of stopping one company from abusing potential preferential treatment over another.
Ultimately, it is the consumer who suffers from a lack of choice in a market, potential loss of innovation in an industry and the possibility of price gouging from the dominant company down the line after competing products have died.
Research-Backed Businesses Offer An Alternative Path To Privacy And Viability
To compete in the era of free products consumers have come to expect and to stay viable as competition to big tech, businesses have a new alternative business model in the form of de-identified and aggregated research.
Most Americans participate in aggregated research throughout their lives in the form of the U.S. national Census, an official count of the population that reports on various trends. Companies like Nielsen and 23andMe in the biotechnology industry are examples of businesses that have sold de-identified and aggregated research while preserving consumer privacy. The nature of this model does not demand influencing decisions to drive clicks or change any behavior. It does not require the ever-increasing supply of user data that advertising does — a small cohort or panel users can be representative of a larger group of consumers.
Consumer services that democratize big data can effectively protect consumer privacy and ensure healthy competition with big tech. De-identified and aggregated research is just one example of an alternative business model that emerging companies can consider, while other solutions have yet to be explored.