Why the Facebook Lawsuit Should Be Celebrated, Even If It's Flawed
BY davidkirkpatrick December 12, 2020Editor's Note: This commentary was originally published on Techonomy.com. There is one unalloyed benefit from the vast antitrust assault unleashed against Facebook this week by the U.S. Federal Trade Commission and 46 states, plus Guam and the District of Columbia: the company will have to finally start being more careful. Facebook has been heedless, and society has been harmed. This has been true over many years but is becoming more and more apparent, especially to government regulators and officials all over the world. Along with many others, they are concerned not just about its failures to compete fairly, but also to protect user privacy and safety, restrain hate speech, fairly govern the flow of information and especially to ensure its services do not harm democracy. For all that, the two antitrust lawsuits filed this week–one by the Federal Trade Commission and one by the states–are relatively narrow in their purpose. They aim to show that the company has taken a predatory approach to competition and has engaged in a pattern of harming competitors, in several key cases buying them to eliminate threats. The plaintiffs want to force Facebook to spin off Instagram and WhatsApp, two major parts of its social-media empire. The cases are compelling in enumerating examples of predatory behavior, and there is no question Facebook has acted improperly in numerous instances. However, it is highly unlikely that in the end government lawyers will succeed in prying Instagram and WhatsApp away from Facebook. And that may be OK. I am not convinced that for all the different kinds of damage this company causes society, its continued ownership of these two properties should be at the top of the list. I am also not convinced that its ownership of these services is the most important way Facebook harms consumers, protecting whom is ostensibly the purpose of American antitrust law. And finally, I am not convinced that consumers–or call them here “voters”–want their government officials breaking apart a company that more than half of all Americans use every day. This doesn’t even address how legally viable is the suit, which many question, or how hard Facebook will fight it—which will be unbendingly. Here’s one reason: eMarketer calculates that this year Instagram will account for almost 49% of Facebook’s total U.S. ad revenues, a percentage that has almost doubled in just the last two years. In some ways Instagram may BE the future of Facebook. (WhatsApp, by contrast, generates essentially no revenue.) Yet other good things could come from this effort, for example new rules about what rights different services, apps, and websites have when they interact on the net. The Wall Street Journal examines that promising possibility. So is this the right lawsuit? Possibly not. Does there need to be massive government pushback against the company? Absolutely. I welcome this lawsuit because Facebook must be forced to pay more attention to the needs and concerns of society. The scrutiny that will now be directed at Facebook for a prolonged period will undoubtedly cause it to move more carefully and deliberately in a variety of realms, not just in its approach to mergers and competitors. While the company ostensibly retired the slogan “move fast and break things,” in reality that psychology remains alive and well at the company, and in the head of its unchallengeable leader. (Photo by Glen Carrie on Unsplash) CEO Mark Zuckerberg’s arrogance and hubris is the primary reason for the company’s heedlessness, and he is able to think and act that way because he has absolute control of the company. His personal voting control over the company’s stock allows him literally to do whatever he wants. When several members of the company’s board of directors in the last two years questioned his judgement on key matters, he simply removed them. The Facebook board today is essentially a rubber-stamp body. If internal governance has failed at Facebook, government governance may be required. In other words, if Zuckerberg won’t sufficiently improve Facebook on his own, he needs to be forced. One of Facebook’s central problems is that Zuckerberg refuses to accept any analysis suggesting his company has made fundamental errors in its public posture or social role. And of course, if there aren’t errors there isn’t need for fundamental corrections. He is completely convinced that the world, including government regulators and legislators in every country, fail to understand the macro benefits of Facebook’s ability to bring people together. He believes that even though there may be shortcomings in Facebook’s behavior or social impact, those shortcomings are far far outweighed by the virtues it brings to the world. Government needs to assert its primacy over Facebook because Facebook risks overpowering government. Facebook, along with several other well-known companies, has an influence, power, and even authority in society that threatens governments’ own capacity to oversee the systems of countries and the safety, security, and health of their citizens. One way this is manifest is Facebook’s disproportionately large impact on the conduct of elections in every country in which it operates. The decisions Facebook makes about what constitutes appropriate campaigning online are often more influential on the outcomes of those elections than decisions of the governments themselves. That has to change. As a major article in the new issue of Foreign Affairs puts it: “Internet platforms cause political harms that are far more alarming than any economic damage they create. Their real danger is not that they distort markets; it is that they threaten democracy.” Does this lawsuit address that? Not really. Setting parameters, though, and even simply slowing the relentless expansion of Facebook, has virtues in itself. The main thing I hope and expect will come from this and other like actions around the world is a more responsible and cooperative stance from the company when it comes to modulating the negative impacts it has on society. This is the first big step in forcing Facebook to operate in a world of rules. So I applaud New York State Attorney General Letitia James, who led the coalition of states, and the FTC. They may not get exactly what they want, but they will slow Facebook down. The fact that government in Facebook’s home country has finally put it on notice, finally stood up in a substantial way to its unreasonable power, is in itself a cause for celebration. David Kirkpatrick, the founder of the conference and media company Techonomy, has covered Facebook extensively since October 2006. He wrote The Facebook Effect: The Inside Story of the Company That Is Connecting the World way back in 2010. His views of the company and its founder have hardened considerably since then.
Is Facebook a Media Company? That's Not Up to Mark Zuckerberg
BY davidkirkpatrick June 26, 2020Editor's note: this story was originally published on Techonomy.com Facebook is facing, finally, the historic moment that many of its critics, including me, have long expected. Its true customers–advertisers–are saying Facebook cannot continue to pretend to be “neutral” about dishonest and hateful speech. The resulting societal harm is too great. That opinion had already become something of a consensus for many influential societal actors, including government leaders in most democratic countries, human rights advocates, journalists who cover the company, and much of the public. Even many Facebook employees have come to agree. But up until now, the most important and influential group had mostly kept silent. Facebook is a near-miraculous environment for advertisers large and small. Its ability to target users based on fine-grained information about their personality and preferences often yields extraordinary results for companies. That is the primary reason the company’s revenues have grown so quickly—in 2019 they exceeded $70 billion. That, unbelievably, is almost 10X what revenues were in 2013. And Facebook’s net margin last year was over 33%–meaning that for every dollar of revenue it kept 33 cents, after all expenses and taxes. Very few large companies have ever been so profitable. That profit is because of Facebook’s success selling advertising. So if collective dissatisfaction among advertisers were to grow, the company’s response would inevitably be unlike its reaction to pushback from any other quarter. Since it has generally ignored all its other critics, those of us who feel it is genuinely harming society have reason to hope this time is different. And a major movement has emerged. In mid-June a coalition of U.S. civil rights groups including the NAACP, the Anti-Defamation League, and Color of Change called for advertisers to boycott the company for the month of July, in protest. A newspaper ad they purchased said Facebook “allowed incitement to violence against protesters fighting for racial justice in America in the wake of George Floyd, Breonna Taylor, Tony McDade, Ahmaud Arbert, Rayshard Brooks and so many others. They amplified white nationalists…[and] they turned a blind eye to blatant voter suppression on their platform.” The ad concluded with a message for Facebook: “Your profits will never be worth promoting hate, bigotry, racism, antisemitism and violence.” In a statement, Color of Change President Rashad Robinson said, “Facebook’s failure of leadership has actively stoked the racial hatred we see in our country and even profits off its proliferation.” That is a powerful and uniquely resonant accusation in this fraught moment. Outrage has been growing in recent months and weeks as Facebook gave favorable treatment to incendiary posts from President Trump, and seemed generally to bend over backwards to accommodate rightwing speech, even if it contained falsehoods. Twitter, by contrast, attached warnings to several posts by the president, statements Facebook left unchanged. And the company has drawn widespread opprobrium by adopting an active policy, repeatedly defended by Mark Zuckerberg, that politicians are explicitly allowed to lie in paid advertising purchased on the platform. A group of outraged ex-employees wrote a protest letter to Zuckerberg, saying that Facebook “claims that providing warnings about a politician’s speech is inappropriate, but removing content from citizens is acceptable, even if both are saying the same thing. That is not a noble stand for freedom. It is incoherent, and worse, it is cowardly.” At first, a number of important but generally smaller advertisers announced they would join the ad protest–including The North Face and REI, owned by VF Corp., as well as other youth-oriented outdoor goods brands including Patagonia, Eddie Bauer, and Arc’teryx, plus freelance platform Upwork, Magnolia Pictures, and, significantly, Ben & Jerry’s. The ice-cream maker is a subsidiary of global consumer goods giant Unilever. A digital ad agency for Unilever, 360i, part of global ad giant Dentsu, publicly endorsed the boycott, saying “Any social platform that earns profits by amplifying the voices of their community must have a zero tolerance policy for hate.” Then the breakout happened. On June 26, Unilever itself, the 33rd-largest advertiser on Facebook in the first quarter, had pulled ads for all its brands indefinitely, and not just from Facebook and Instagram but from Twitter, too. “Continuing to advertise on these platforms at this time would not add value to people and society,” the company said in a statement. Meanwhile, telecoms giant Verizon, too, had joined. Unilever said its move would last at least through the end of the year, and Verizon said it was stopping “until Facebook can create an acceptable solution that makes us comfortable.” The chief executive of the World Federation of Advertisers told the New York Timesthat this appears to be an “inflection point” for Facebook. Pressure appears to be growing on really big advertisers like Amazon, Samsung, and Procter & Gamble. It is a big deal. Mark Zuckerberg has insisted forever that Facebook was not a “media company.” But media companies like newspapers or television stations, for example, need to ensure that everything they carry reflects well on the company’s environment and brand. A key reason media companies do that is to maintain a safe environment for advertising. Zuckerberg instead says Facebook is a “neutral platform” that is committed to amplifying all voices, and thus bears no responsibility except in narrow cases mostly involving violation of the law. But ultimately, a company that puts viewers in front of advertising to make money is unequivocally a media company. And those advertisers are finally, in this case, telling Facebook that yes, it really is that kind of media company, with the responsibilities that go with it. We ordinary people, the users of Facebook, are often properly described as “the product.” We are what attracts the real customers, the advertisers. For any company, paying customers are ones who can most effectively demand change. Facebook loves to say, as it did in this instance, that it still has “work to do,” to deal with hate speech and socially harmful behavior on its platform. Predictably, communications chief Nick Clegg told journalists this week “we need to do more,” and as usual bragged about “significant progress.” Facebook ad chief Carolyn Everson issued a statement saying “Our conversations with marketers and civil rights organizations are about how, together, we can be a force for good.” But to truly become a force for good, Facebook has to take a stand. There can be no truly neutral platform for speech. So what are its real values? Is it big enough to live up to this historic moment? Is it for protecting people, whatever the cost? If this so-public company cannot answer that question sufficiently during today’s historic awakening regarding racial justice, many may begin to see companies that advertise on Facebook as tantamount to ones with a statue of Robert E. Lee on their front steps. David Kirkpatrick is the founder and editor in chief of Techonomy, a conference series and journalism platform focused on the intersection of technology and the global economy. Kirkpatrick is also the author of the bestselling book “The Facebook Effect: The Inside Story of the Company that is Connecting the World.” He spent 25 years at Fortune, and founded and hosted its Brainstorm and Brainstorm Tech conferences
In Davos, Business Leaders Say They're Tackling Climate Change
BY davidkirkpatrick February 01, 2019Editor's note: this story was originally published on Techonomy.com Christiana Figueres wants to thank Donald Trump. She’s the one who, more than any other person, drove the process that led to the Paris Climate Agreement, as executive secretary for the UN Framework Convention on Climate Change. Now she’s confident the pact’s aggressive carbon-reduction goals will be met, she said at a lunch panel hosted by Bloomberg at the World Economic Forum in Davos in late January. And surprise–she largely credits Trump. “Every time we see some inexplicable attack on someone or some idea, it leads others to double down,” she said. As a result, nations, cities, and citizens around the world are working harder to reduce carbon emissions, she says. Optimism about our ability to beat back climate change was my big takeaway from Davos. But I also got a sense there that for at least some in business, fighting climate change and working to improve the planet was finally becoming not just a hollow “responsibility.” “Decarbonizing is a business opportunity,” said Johan Rockstrom, of the Potsdam Institute for Climate Impact Research, also on the lunch program. He was not the only one making that point. At the lunch, Börje Ekholm, CEO of Ericsson, said digital technologies, especially the enhanced internet of things made possible by 5G wireless infrastructure, will assist humankind in meeting fully 1/3 of the climate goals for 2030. “The business community is way ahead of the political leadership,” climate expert Rockstrom continued. “We are doubling renewable energy produced by solar and wind every 4.5 years. That’s exponential, and means 50% of the world’s energy will be produced from renewable sources by 2030, even with business as usual.” That same evening, I went to a reception hosted by Unilever’s departing CEO, Paul Polman. As much as any big business leader, he has made a conscious commitment to global betterment a central element of doing business. The reception, attended by hundreds of his friends and fans, was focused on how business can help achieve the UN’s 17 Sustainable Development Goals for 2030. Like Rockstrom, Polman sees working towards the goals not as a burden for business, but as an opportunity, along with an obligation. He said 1800 CEOs have already committed to integrating the SDGs into their companies’ work, and that achieving them would create at least 380 million jobs. Our theme here at Techonomy in 2019 is Collaborating for Responsible Growth, so I was heartened to hear Polman call for companies to stop talking about corporate social responsibility, and instead begin pursuing “responsible social collaborations.” Working across boundaries between industries and between business, civil society, and government is the only path to addressing the scale of the world’s problems. My final day in Davos, I attended the annual lunch hosted by Salesforce CEO Marc Benioff in a giant white geodesic dome in the center of town. This year the lunch, too, was focused on combatting climate change. Benioff moderated a panel including Figueres, the primatologist and conservationist Jane Goodall, Will.i.am, Bono, and Kengo Sakurada, CEO of Japanese insurance company Sompo Holdings. In his inimitable earnest fashion, Benioff asked the panelists a very non-corporate question: “How can we bring our light into the next five years? Look into your heart.” Figueres proclaimed “This is the moment of choice on climate, and on everything.” Goodall said business must ask how it can perform for the good of the planet. Will.i.am, much of whose focus these days is on entrepreneurship around AI and speech, said we need to pair our efforts at creating smarter machines with parallel efforts to insure people are better educated. Bono was in fine form, as if composing lyrics: “We have to decide if we’re firefighters or arsonists…Businesses, like species, will become extinct if they don’t evolve to changing environments… Consumers are waking up to the power they have in their pockets. They realize it’s political power.” The idea that consumers are voting as much with their wallets as in the ballot booth was a nice corollary, or even an explanation, for Rockstrom’s point that business is ahead of politicians on climate change. But the coup de grace was delivered by a 16-year-old climate activist named Greta Thunberg. Benioff, presumably knowing what he was doing, handed her the mike. What we heard was not typical Davos fare. Thunberg quietly thundered: “Some people say that the climate crisis is something that we all have created, but that is not true, because if everyone is guilty then no one is to blame. And someone is to blame. Some people, some companies, some decision-makers in particular, have known exactly what priceless values they have been sacrificing, to continue making unimaginable amounts of money. And I think many of you here today belong to that group of people.” Facing that accusation, the audience first gasped, then applauded. “The future is in your hands,” Thunberg proclaimed in conclusion. Former Trump economic advisor Gary Cohn, sitting in my line of sight, who had been fidgeting and focusing on his phone during most of the panel, did not applaud. That night, at a dinner in a restaurant back room hosted by my friend Matthew Bishop, the author who is now a managing director at the Rockefeller Foundation, a debate broke out among the assembled journalists, activists, and businesspeople. Several said the World Economic Forum was just a bunch of plutocrats scheming to maintain their wealth. Yes, partly, it is, as Thunberg had pointedly noted. But there were also plenty of more productive threads to this tapestry, I insisted. I left Davos inspired to help continue those at our own Techonomy conferences in 2019. Join us May 14-15 in New York to hear some of those same voices, which I am more determined than ever to assemble here. David Kirkpatrick is the founder and editor in chief of Techonomy, a conference series and journalism platform focused on the intersection of technology and the global economy. Kirkpatrick is also the author of the bestselling book “The Facebook Effect: The Inside Story of the Company that is Connecting the World.” He spent 25 years at Fortune, and founded and hosted its Brainstorm and Brainstorm Tech conferences