Of the many challenges Facebook faces its intrinsic parasitism is the biggest

Facebook has recently bemoaned the decline in US local news sources, but a major reason for this has been the collapse in media advertising revenues.

Two companies are largely responsible for this decline: Google and Facebook. As digital replaced analogue as the primary way of consuming media, advertising moved to the main online content aggregators, specifically its dominant search engine and its dominant social media service. Not only did this suck revenue away from traditional media, it forced many media to resort to low-quality ‘clickbait’ journalism in order to drive the volumes of traffic its remaining advertisers increasingly demanded.

By definition aggregators don’t produce their own content and are entirely reliant on a steady flow of third party to keep its users active and the revenues it makes on the back of their searching and sharing flowing. This model is, therefore, intrinsically parasitic and comes with the major problem that parasites eventually kill their hosts.

Facebook has belatedly recognised this dilemma and launched a new initiative called ‘Today In’ late last year, that was designed to bring greater attention to local stuff on the site. On top of that it also said it would throw millions of dollars at local news earlier this year. Despite this, however, Facebook yesterday was moved to lament the existence of ‘news deserts’ in the US and is contributing to research to find out what is the cause of them. Some people seem to think that’s somewhat redundant.

facebook locust tweet

There are, of course, plenty of other threats to Facebook’s business model. The Cambridge Analytica scandal raised profound concerns around the use of all this personal data we’re sharing with Facebook. Meanwhile its role in a wide range of high-profile events ranging from elections to terrorist atrocities have put it under enormous pressure to curate and censor its content much more quickly and thoroughly than it currently does.

The parasitic business model is also at the core of a lot of this. In many ways Facebook operates like a very large media organisation, as it makes money by serving ads against traffic to content on its side. But since it doesn’t produce that content it is currently treated as a platform rather than a publisher, with a consequent freedom from direct responsibility for what it presents to its users.

It’s becoming increasingly clear that websites designed to host user-generated content are neither platforms nor publishers, but something in between. Politicians and regulators are increasingly calling for new rules and laws to address this paradox and it seems highly probable that these will both threaten revenues and significantly increase overheads for these companies.

So great are these challenges to Facebook that the company is already publicly contemplating a fundamental shift in its business model, with more controlled, private sharing as its new focus. This coincides with a its core revenues base, US Facebook users, clearly peaking, as you can see in the following slides from Facebook’s recent quarterly earnings presentation.

Facebook DAUs

Facebook ARPU

While user engagement has peaked in the US, Facebook still derives a disproportionate amount of revenue from that market thanks to its much higher ARPU there. But there is growing evidence that this may be increasingly coming from Instagram rather than the core Facebook product and mobile now accounts for nearly all of its revenues. All this points to the distinct possibility of Facebook, as we know it, being unrecognisable a decade from now as the legacy platform undergoes a managed decline.

Which brings us back to the parasitism issue. Facebook’s long term strategy seems to be to completely exhaust its current host while at the same time cultivating a new one. It’s hard to view all this hand-wringing about traditional media as anything more than a pretence at seeking a symbiotic relationship with it while it bleeds it dry. Independent journalist Tim Pool, as ever, has an instructive take on the broader situation.

 

Europe cools internet monopoly rhetoric

Almost every politician around the world is currently using Silicon Valley as a metaphoric punching bag, but the European Commission will not be drawn into the monopolies debate.

While 2020 Presidential hopeful Elizabeth Warren has painted a target on the backs on the internet giants, Europe has once again proven it will not be drawn into making such short-sighted and shallow promises. Warren is effectively warming up for the world’s biggest popularity contest, and perhaps hasn’t considered the long-term realities of the dismantling of companies such as Facebook and Google.

Speaking at the South by Southwest festival in Austin (thank you Recode for the transcript), Margrethe Vestager, the European Commissioner for Competition, made a very reasonable and measured statement.

“We’re dealing with private property, businesses that are built and invested in and become successful because of their innovation,” said Vestager.

“So, to break up a company, to break up private property, would be very far-reaching. And you would need to have a very strong case that it would produce better results for consumers in the marketplace than what you could do with sort of more mainstream tools.”

Vestager’s point is simple. Don’t punish a company because of its success. Don’t make rash decisions unless there is evidence the outcome will be better than the status quo. While the fence is proving to be very comfortable, it is a logical place to sit now.

Following up with the European Commission press team, Telecoms.com was told the Commission does not have an official position when it comes to breaking up the internet monopolies. Vestager’s comments are representative of the Commission, and it will evaluate each case on its own merit. Effectively, the breaking up the monopolies is a last resort, and will only be done so in extreme circumstances.

This position is supported by a recent report, put together for HM Treasury in the UK by former Chief Economist to President Obama, Professor Jason Furman. Furman suggests new rules and departments need to be created for digital society, but monopolies, when regulated and governed appropriately, can be good for the progression of products, services and the economy overall.

This will of course be an unpopular opinion, but it makes sense. Sometimes there simply isn’t the wealth to share around. Monopolies are perhaps needed to create efficiencies and economies of scale to ensure progress is made at a suitable pace. However, the right regulatory framework needs to be in place to ensure this dominant position is not abused. A catch-all position should not be welcomed.

This is where the European Commission has been playing a notable role. Numerous times over the last few years, technology giants have been punished for creating and abusing dominant market positions, take Google as an example with Android antitrust violations last June, though it has not gone as far as breaking up these empires. The key here is creating a framework which encourages growth across the board but does not punish success.

Some would argue success in the pursuit of this delicately balanced equation has been incredibly varied, but this should not form the foundation of rash decisions and potential irreversible actions. Big is not necessarily bad.

This is the marquee promise of Senator Elizabeth Warren. In attempting to woo the green-eyed contradictory wannabee capitalists of Middle America, the Presidential contender has promised to split up the internet giants. The complexities and realities of this promise do not seem to have been thoroughly thought out, and it does seem to be a shallow attempt to lure the favour of those who seek fortunes but are unable to congratulate those who have found them.

That said, there are Presidential candidates who are suggesting good ideas. Senator Amy Klobuchar has suggested companies who monetize data through relationships with third-parties should be taxed. This is somewhat of a radical idea, but we do quite like the sound of it.

Firstly, for those companies who say they are collecting data to ‘improve customer experience’, there would be no impact. If the data is being used to enhance current or create new services, and therefore kept in-house, then fair enough. However, if the company is moving data around the digital ecosystem, monetizing personal information, why not place a levy on this type of activity. It might just encourage these companies to be more responsible when more scrutiny is being placed on these transactions.

This is the challenge we are all facing nowadays; the digital economy is a different beast and needs to be tamed using different techniques, regulations and practices. We all know this, but we haven’t actually figured out how to do it.

This is why we kind of like the non-committal, hands-off approach from the European Commission. For an organization which usually likes to run wild with the red-tape, this seems to be a much more sensible approach. Over regulating nowadays could create a patch-work from hell which would only have to be undone. It might seem like a cop-out, but governments should let business be business, while casting a watchful eye over developments.

When no-one really knows how the future is going to evolve, regulation is needed to hold companies accountable and protections are needed to safeguard the consumer. But rash decisions and ridiculous promises are the last thing anyone wants.

Facebook reportedly facing criminal charges over data sharing

Facebook’s day started off with a major outage and, should reports turn out to be true, it is ending with the social media giant facing a criminal investigation from Federal prosecutors.

According to the New York Times, a grand jury in New York has obtained records from two smartphone manufacturers, via subpoena, which will detail the data sharing partnerships in or previously in place with Facebook. Sources has retained anonymity and it is not exactly clear who the subpoenaed parties were, though Facebook did have more than 150 such relationships in place before winding-down over the last couple of years.

Although the investigation has not been officially confirmed, it will come as a surprise to few considering the scrutiny those dominating the data-sharing economy are facing. Over the last few months, there have been numerous attempts to weaken the influence of the internet giants, with some even suggesting legal force to break-up the empires. The internet giants created a cosy position, but this is certainly under threat.

That said, while the scandals over the last 18 months might lead some to presume the practice of selling personal data would be scaled back, there seems to be little evidence of this. A recent Motherboard investigation suggests various US telcos are still reaping the benefits, and in some cases, scaling up the practice.

What is worth noting is the concept of selling personal information is not illegal, as long as the right consent has been obtained from the end user. This is what Facebook, and the third-parties who entered into such arrangements, are facing criticism for today. Accusers suggest proper content was not obtained or done so in such a complicated fashion it should not be considered valid.

The data-sharing economy is gaining validity across the world, but only when the practice is managed in a fair and responsible manner. This is what GDPR and other regulations intend to enforce. The idea is not to stop the practice, but to ensure the companies involved act in a responsible manner, with the user properly informed and in control of the situation. The data-sharing economy can work, and can benefit everyone involved, as long as no single party abuses their position.

The partnerships which are reportedly being investigated here, however, have come under criticism for some time. Privacy campaigners suggest the partnerships violate a 2011 consent agreement between Facebook and the FTC, after allegations the social media giant had shared personal information in a way that deceived users. At one point, there were more than 150 such partnerships in place, though Facebook has been phasing out most of the agreements over the last few years.

Although this is a retrospective investigation into the company, it could potentially contradict statements from CEO Mark Zuckerberg and other executives suggesting the business was being more transparent and managing user data responsibly. Facebook has been making this statement for several years. This case could prove Facebook mislead the world with these claims as well.

There is a general feeling of ‘if’ not ‘when’ here. Politicians, governments and regulators are seemingly scouring the Facebook business for any cracks, allowing them to slap a significant fine and parade the streets with a victory on behalf of consumer privacy. Facebook’s lawyers have done a pretty good job of wriggling so far, but there is a bit of a feeling the dam could burst at any point.

Zuckerberg’s vision for Facebook: as privacy-focused as WhatsApp

The Facebook founder laid out his plan for the next steps how Facebook will evolve with a focus on privacy and data security, and promised more open and transparency in the transition.

In a long post published on Facebook, Mark Zuckerberg first recognised that going forward, users may prefer more private communication than socialising publicly. He used the analogy of town squares vs. living rooms. To facilitate this, he aims to use the technologies of WhatsApp as the foundation to build the Facebook ecosystem.

Zuckerberg laid out principles for the next steps, including:

  • Private interactions: this is largely related to users’ control over who they communicate with, safeguarded by measures like group size control and limiting public stories being share;
  • End-to-end encryption: this is about encrypting messages going through Facebook’s platforms. An interesting point here is that Zuckerberg admitted that Facebook’s security systems can read the content of users messages sent over Messenger. WhatsApp is already implementing end-to-end encryption and is not storing encryption keys, which makes it literally impossible for it share content of communication between individuals with any other third parties including the authorities. Zuckerberg recalled the case of the Facebook’s VP for Latin America being jailed in Brazil to illustrate his point.
  • Reducing Permanence: this is mainly about giving users the choice to decide how long they like their content (messages, photos, videos, etc.) to be stored, to ensures what they said many years ago would not come back to haunt them.
  • Safety: Facebook will guard the data safe against malignant attacks
  • Interoperability: Facebook aims to make its platforms interoperable and may extend to be interoperable with SMS too.
  • Secure data storage: one of the most important point here is Zuckerberg vowed not to save user data in countries which “have a track record of violating human rights like privacy or freedom of expression”.

To do all these right, Zuckerberg promised, Facebook is committed to “consulting with experts, advocates, industry partners, and governments — including law enforcement and regulators”.

None of these principles are new or surprising, and are an understandable reaction to recent history when Facebook has been battered by scandals of both data leaking and misuse of private data for monetisation purpose. However there are a couple of questions that are not answered:

  1. What changes Facebook needs to make to its business model: in other words, when Facebook limits its own ability to penetrate user data it weakens its value for targeted advertisers. How will it convince the investors this is the right step to take, and how will it to compensate the loss?
  2. Is Facebook finally giving up its plan to re-enter markets like China? Zuckerberg has huffed and puffed over the recent years without bringing down the Great Wall. While his peers in Apple have happily handed over the keys to iCloud and Google has working hard, secretly or not so secretly to re-enter China, how will the capital market react to Facebook’s public statement that “there’s an important difference between providing a service in a country and storing people’s data there”?

Social media censorship continues to escalate

In recent days another round of restrictions have been imposed across YouTube and Facebook, with social media companies increasingly being used as proxies in a culture war.

Most recently YouTube announced several new measures related to the safety of minors on YouTube. The main driver seems to be the comments people post on videos, which anyone who uses YouTube knows often range from unsavoury to downright deranged. The specific issue regards those comments on videos that feature minors, so YouTube has disabled all comments on tens of millions of such videos.

On top of that millions of existing comments have been deleted, and a bunch of channels judged to have produced content that could be harmful to minors have been banned, which indicates this is not a new issue. YouTube tends to take its most strident action when its advertising revenues are threatened and a recent exposé on this topic prompted major advertisers, including AT&T, to cancel their deals, hence this announcement.

While YouTube has always been quick to protect its ad revenues, it has historically been less keen to censor comments or ban creators outright, so this definitely marks an escalation. The same can’t be said for Facebook, which seems to be the major platform most inclined to censor at the first sign of trouble. An endless stream of scandals over the past year or two have taken their toll on the company, whichis now in a constant state of fire-fighting.

Facebook’s most recent piece of censorship concerns Tommy Robinson, a controversial UK public figure who concerns himself largely with investigating the negative effects of mass immigration. He recently published a documentary criticising the BBC on YouTube, and presumably promoted it via Facebook and Facebook-owned Instragram, because the latter two platforms decided that was enough to earn him a permanent ban.

 

In a press release entitled ‘Removing Tommy Robinson’s Page and Profile for Violating Our Community Standards’, published the day after Robinson released his video, Facebook explained that he had repeatedly violated its Ts and Cs by indulging in ill-defined activities such a ‘organised hate’. This seems to be a neologism for some kind of rabble-rousing combined with perceived bigotry.

“This is not a decision we take lightly, but individuals and organizations that attack others on the basis of who they are have no place on Facebook or Instagram,” concludes the press release. This sets an interesting precedent for Facebook as a significant proportion of the content generally found on social media seems to match that description. As is so often the case with any censorship decision, one is left wondering why some people are punished and others aren’t, as YouTuber Argon of Akkad, recently kicked off micro-payments platform Patreon, explores below.

 

There is a growing body of research that points to many of these decisions having a political or cultural bias. Quillette, an independent site that publishes analytical essays and research, recently ran with a series entitled ‘Who controls the platform’, which culminated in a piece headlined ‘It Isn’t Your Imagination: Twitter Treats Conservatives More Harshly Than Liberals’.

The piece detailed some statistical analysis undertaken by the author to see if there is any solid evidence of bias. Using stated preference for a candidate in the 2016 US presidential election, it was concluded that Trump supporters are four times more likely to be banned that Clinton ones. The piece also highlights some examples of apparently clear braking of Twitter’s rules that nonetheless went unpunished, once more calling into question the consistency of these censorship decisions.

Investigative group Project Veritas, which had previously claimed to have uncovered evidence of ‘shadowbanning’ – i.e. making content from certain accounts harder to find without banning them entirely – has now moved on to Facebook. From apparently the same inside source comes the allegation that Facebook indulges in ‘deboosting’, which seems to amount to much the same thing. You can watch an analysis of this latest report from independent journalist Tim Pool below.

 

Nick Monroe, another independent journalist whose preferred platform is Twitter, recently reported that “A UK group called Resisting Hate is trying to target my twitter account.” Resisting Hate apparently compiles lists of people it thinks should be banned from various platforms and then coordinates its members to send complaints to the platforms about them.

 

It seems likely that this mechanism is a major contributing factor to any imbalance in the censoring process. All social media platforms will have algorithms that identify certain stigmatised words and phrases and automatically censor content that contains them, but as even the UK police have shown, that is a very crude without the ability to understand context. They therefore rely heavily on their reporting mechanisms, a process that intrinsically open to abuse by groups with a clear agenda.

And it looks like calls for censorship are starting to spread beyond just single-issue activist groups into the mainstream media – the one set of people you would previously have imagined would be most opposed to censorship. Tim Pool, once more, flags up a piece published by tech site Wired that, quite rightly, flags up the inconsistency of the censorship process, but then takes the step of calling out some other ‘far right activists’ it thinks Facebook should ban while it’s at it.  

Twitter CEO Jack Dorsey recently did the interview rounds, including with several independent podcasters. While he was generally viewed as being a bit too evasive, he did concede that a censorship process which relies heavily on third party is flawed and open to abuse. The problem is there is now so much commercial, regulatory and political scrutiny on the big social media platforms that they have to be seen to act when ‘problematic’ content is flagged up.

You don’t need to spend much time on social media to realise that it’s the battle ground for a culture war between those in favour of (selective) censorship and those who want speech to be as free as possible. There is unlikely to ever be a clear winner, but there is little evidence that censorship ever achieves the outcomes it claims to desire: protecting people from harm.

Nobody is forced to consume any content they don’t like and censorship never changes anyone’s mind – it just drives speech and ideas underground and, if anything, entrenches the positions of those who hold them. To sign off we must give a nod to the hugely popular podcaster Joe Rogan, who recently conducted a 4-5 hour live stream with Alex Jones, a polarising figure that has been kicked off pretty much every platform. You can watch it below or not – it’s your choice.

 

UK sets out battle plan to tackle Silicon Valley’s ‘Digital Gangsters’

Facebook is only the tip of the iceberg, but Parliament is coming after Zuckerberg and his Silicon Valley cronies in the long-standing battle to understand and curb the influence of social media.

Featuring representatives from both sides of the political aisle led by the Department for Digital, Culture, Media and Sport (DCMS), this perhaps set the scene for one of the most aggressive stances against the social media giants. If all the recommendations are followed up on, there could be some major disruption on the horizon.

New regulations, new definitions for the business model, a new regulator, new fines, new competition investigations and new levies against the internet players, the outcome certainly justifies the months spend investigating the complex and diverse tapestry of social media and its impact on today’s society.

“We hope that the Government will include these considerations when it reviews the UK’s competition powers in April 2019, as stated in the Government response to our Interim Report,” the report states in its concluding statements. “Companies like Facebook should not be allowed to behave like ‘digital gangsters’ in the online world, considering themselves to be ahead of and beyond the law.”

Such is the pace of the legislative machine, nothing will change in the immediate future, but this is an important first step into the red-tape maze of regulation. This parliamentary committee, and the subsequent report, are laying the foundations for the future. The scene has been set, with the committee painting a complex picture of deception, greed and mistrust, readying bureaucrats for an assault.

To understand how we have gotten to this point you have to go back to Cambridge Analytica scandal. Until this point the data economy was thundering along relatively undisturbed, free from the worries of regulation and oversight, however this scandal pulled the curtain back ever so slightly. The data machine was slightly exposed, but ever since politicians have been clawing to understand the cogs and levers.

But what does this report recommend? Firstly, new regulatory mechanisms. The parliamentary committee has suggested the formation of a new regulatory body, which will be funded by levies placed on the internet companies wishing to operate in the UK, which would have greater insight and powers to pry open business models and processes. Another interesting recommendation is the creation of new definitions for the internet economy.

This is part of the issue today and the reason internet giants have so much freedom. Rules have been designed for different types of organizations for a bygone era. To compensate for the inadequacy of the rulebook, new clauses have been built on top. The issue has been compounded, creating a complicated red-tape maze with loop holes, secret corridors and grey areas for lawyers to expose. The shaky foundations have not provided a suitable mechanism to hold the segment accountable.

The report states what many already know but little has been done to correct. These social media companies are no-longer simply ‘platforms’ and neither are they ‘publishers’, therefore they should not be regulated as such. A new definition should be created, with rules specific to this segment. It’s amazing to think it has taken this long to come to this conclusion, but the committee is pushing for specific rules for specific circumstances.

The report also calls for a new ‘code of ethics’, designed by independent experts and overseen by the newly created regulatory body, to hold the internet giants accountable. Using the same principle as Ofcom uses for the regulation of broadcasters, these rules would be specific to the case. It would be a square peg for a square hole.

This new approach may also be extended to the murky world of political campaigning also. After the ICO called for a pause of political spending during election periods last year, the committee has responded by suggesting new powers which would:

“…define digital campaigning, including having agreed definitions of what constitutes online political advertising, such as agreed types of words that continually arise in adverts that are not sponsored by a specific political party.”

Again, this is a criticism of the sluggish nature of regulation, not recognising the world has evolved. New rules should reflect the new digital landscape, the changing methods of promoting messages and microtargeted political campaigning. More transparency will be suggested, “clear, persistent banners on all paid-for political adverts and videos, indicating the source and the advertiser”, as well as new transparency metrics for campaigns to declare such activities.

Perhaps a more dangerous area which has finally been addressed is the in-direct campaigning which benefits or detracts from parties and individuals. These are organizations such as Leave.EU, which had no direct link to political bodies but presenting questionable materials to individuals through the hyper-targeted advertising model offered by social media companies. This takes the committee into the nefarious world of foreign influence also.

Finally, the committee is also tasking the Competition Markets Authority (CMA) to conduct an extensive investigation into the power and influence of the social media companies. Again, this means little for the moment, but it could be the first step towards identifying potential ‘monopolies’, providing justification to break up the gathering empires.

This aspect of the report leans on documentation sourced by Six4Three, a tech company which is suing Facebook for in-appropriately influencing the success of its products.

“Given the contents of the Six4Three documents that we have published, it should also investigate whether Facebook specifically has been involved in any anti-competitive practices and conduct a review of Facebook’s business practices towards other developers, to decide whether Facebook is unfairly using its dominant market position in social media to decide which businesses should succeed or fail,” the report states.

The content of this report should not be dismissed as busywork for boresome bureaucrats but a direct threat to the success of Silicon Valley. The internet companies should be very worried about the content of this report, the conclusions these politicians have drawn and the potential implications of any recommendations. This is a political hot point right now, and we suspect there is enough ill-feeling towards the internet players to take these suggestions forward.

Facebook is the company which is constantly attracting the headlines, but this company is just one of many. The mentality has spread throughout the digital ecosystem, but Facebook is the scape goat. Unfortunately for all those involved, Facebook CEO Mark Zuckerberg has continued to antagonise politicians by refusing to show up to briefings, compounding the problem and rallying political enemies towards a single cause.

Although these recommendations are only the first steps into the complicated world of regulation, there is potential for significant disruption. With GDPR bubbling away in the background, and further privacy regulations in the pipeline, the basic business model of the internet giants is being challenged here. This document could be a defining factor in the future of the digital economy.

User backlash after Tencent’s Reddit interest

Chinese internet giant Tencent is reportedly leading the pack for Reddit’s Series D round, with the social media giant aiming to raise between $150 and $300 million, but not everyone is happy.

Reddit, a social media platform for news aggregation, web content rating and conspiracy theories, has been beating its chest to the press over the last couple of weeks to drum up interest for the funding round. According to Alexa website rankings, Reddit is the 17th most visited website worldwide, while it claims to have 330 million monthly active users, 138,000 active communities and 14 billion page views a month.

And it appears to have caught the attention of one of the worlds’ fastest growing internet businesses. According to TechCrunch, Reddit is hoping to raise between $150 and $300 million, which would value the platform between $2.7 billion and $3 billion. Details are thin for the moment, but what is worth remembering is the Tencent stake would be relatively minor.

That has not stopped criticism on the platform from users however. Many are linking the Chinese distaste for free speech with the demise of Reddit. Some are using the freedoms afforded by the Reddit platform to voice their concerns that Tencent might be able to block certain conversations and impose some levels of censorship. Reddit is currently blocked by the Great Firewall of China, though some fear with Tencent’s involvement the censorship could be extended elsewhere.

What is worth noting is Tencent is not acquiring the business but investing in it. Depending on the total amount pumped into Reddit, Tencent will certainly gain some influence from a strategic and development perspective, all investor do to a degree, but it will be very limited. Another factor to consider is that depending on the type of shares which Tencent acquires, it might not even be granted a seat on the Board of Directors.

That said, such is anti-China rhetoric around the world, this deal will catch the attention of politicians. There is perhaps little which can be done to prevent the investment, though the involvement of a Chinese business might bring greater scrutiny down on Reddit. While it has not be the centre of any scandals to date, it certainly does have the capability of influencing a wide, deep and highly engaged audience. The success of the business will partly rely on the management team’s ability to manage this new dynamic with politicians.

While Reddit is one of the most popular social media platforms on the internet, it is rarely considered in the same bracket as sites such as Facebook or Twitter. The number speak for themselves, though as the site does not look anywhere near as polished and as it does not feel as overtly commercial, it has snuck under the radar to escape the same scrutiny which is placed on the other platforms. We suspect this will change over the coming months however.

Recently the business has been going through somewhat of a refurbishment to take it into the big leagues. With a site redesign, the introduction of a native video player and the team has started to sell cost-per-click ads in addition to promoted posts, cost per impression and video adverts, it is starting to get the feel of a genuine internet business. This, alongside investment from a Chinese company, might bring it more to the attention of governments and regulators, many of whom are attempting to crack down on internet companies.

For Tencent, this is an investment which makes sense. Having created a monstrous business in China, primarily through the influence of WeChat and QQ, the team is looking to spread its wings in the international markets. There certainly has been some organic growth into the international space, though Tencent has certainly not been shy about investments and acquisitions.
Over the last few years Tencent has invested in several game developers including a minority stake in Robot Entertainment, videogame developer and publisher Glu Mobile paying $126 million and 84.3% of Finland-based developer Supercell for $8.6 billion. The firm also has holdings in Riot Games, Epic Games and Activision Blizzard. All of these titles have increased the presence of the firm in the international arena, as well as its influence in the data economy.

While expansion into the international arena is nothing new, attempting to muscle into the social media and news aggregation segment has got a few people anxious. Considering the Chinese approach to freedom of speech, Tencent’s involvement in Reddit has gotten a few users asking questions, while governments are bound to wade into the equation sooner rather than later.

Germany has a swing at Facebook advertising platform

German regulator Bundeskartellamt has made a fresh attempt to curb the powers of the internet giants, this time targeting the data processing capabilities of Facebook.

The case built by Bundeskartellamt is based on what it has deemed market abuses by the dominant social media player in Germany. With Google+ shutting down, the regulator believes Facebook has a dominant position in the market, though it has not effectively informed users about the process of combing third-party data sets with information taken from the core Facebook platform to improve the detail of user profiles for advertising purposes.

This has been deemed inappropriate and Facebook has been ordered to shut down the process. This is not the first time this practise has been criticised by the regulator, but this is the first concrete ruling to for Facebook to desist.

“With regard to Facebook’s future data processing policy, we are carrying out what can be seen as an internal divestiture of Facebook’s data,” said Andreas Mundt, President of the Bundeskartellamt. “In future, Facebook will no longer be allowed to force its users to agree to the practically unrestricted collection and assigning of non-Facebook data to their Facebook user accounts.

“In future, consumers can prevent Facebook from unrestrictedly collecting and using their data. The previous practice of combining all data in a Facebook user account, practically without any restriction, will now be subject to the voluntary consent given by the users. If users do not consent, Facebook may not exclude them from its services and must refrain from collecting and merging data from different sources.”

Facebook has already stated it will appeal the decision with the Düsseldorf Higher Regional Court, though this should come as little surprise considering the attack on the foundations of the social media giants business model. The reason companies like Facebook and Google have been so successful in the early days of the data-sharing economy is because of the accuracy of advertising. This ruling could have a notable impact.

Not only does Facebook collect information about you from its core platform, but by supplementing this picture with more detail from third-party sources, a hyper-targeted advertising platform can be created. It’s seemingly one of the reasons advertisers have stuck by Facebook despite numerous scandals over the last couple of years; there are very few other platforms or businesses which can offer advertising services on par.

Although it is now common knowledge platforms such as Facebook sell ‘you’ to advertisers to fuel the spreadsheets, Bundeskartellamt believes the firm should obtain consent from the user should it want to use additional information to create a more detailed user profile. This data could be taken from sister platforms such as Instagram or WhatsApp, or third-party websites and applications which have ‘like’ or ‘share’ buttons embedded.

“By combining data from its own website, company-owned services and the analysis of third-party websites, Facebook obtains very detailed profiles of its users and knows what they are doing online,” said Mundt.

The practise becomes a bit more nefarious however. Even if there is no Facebook symbols or embedded buttons on the page or application a user is viewing, data might still be flowing back to the social media giant. This is not what anyone would consider transparent and should be addressed in all markets, not just Germany.

Overall, the Bundeskartellamt believes Facebook is abusing its dominant market position to the detriment of the other side of the equation, the user. While this will be escalated to higher courts, should the regulator win favour from the judges Facebook would have to obtain consent from every single one of its 32 million German users. It certainly will be able to obtain consent from many, but it would be a dent to the increasing under-fire advertising machine.

This is of course not the first time Germany has taken a run up at the internet giants. Germany has consistently been one of the leading nations attempting to tackle the power and influence of the internet players, creating a more tightknit regulatory framework which you would naturally expect in business. However, the social giants and their slippery lawyers are doing their best to resist.

Back in 2016, Facebook was told to stop collecting WhatsApp data from users and delete all the information it has already collected, due to the fact proper consent had not been obtained. It has also been investigating whether the Google+ data breach during the latter months of 2018 violates GDPR. Germany has also been one of the leading voices in the prolonged battle to ensure the internet giants pay fair and reasonable taxes across the European bloc.

What we are seeing in this case is another example of a regulator cracking down on the freedoms granted to Silicon Valley. For years, the internet players have been sliding between rules designed to parallel industries, exposing the grey and unregulated areas, as rule makers consistently struggle to keep pace with technological progress. There are numerous governments attempting to create more accountability, though it has been an uphill struggle so far.

The next couple of months will certainly be an interesting period in Germany. With judges considering the Facebook appeal, a win for the Bundeskartellamt could at as a springboard to wrap up the OTTs in more red-tape. We hope there is enough wiggle room left to innovate, but the last two years of scandals have shown the dire need to more strictly regulate Silicon Valley.

Premier League giants take baby steps toward digital economy

If you’ve ever been on any sports’ club website you would be forgiven for thinking these guys are technophobes, but Intel is predicting a new era for sports broadcasting and fan engagement.

“We’re going to find ourselves in a couple of years’ time looking back and wondering how we ever got by,” said XXX of Intel.

The sports industry, and football in particular, has never really been at the forefront of technology. For an industry which defines itself, and almost entirely depends, on fan engagement little has been done to embrace new technologies and ideas. However, the last couple of years have seen a few rays of hope.

A couple of the more innovative clubs in the football industry, ones who just so happened to be partners of Intel, featured on a panel session to discuss the glaringly obvious opportunities which are being presented to sport clubs and the progress being made in shifting incredibly traditional businesses.

“We have been seeing a convergence of technology and sport and this has been accelerating over the last few years,” said Damian Willoughby, SVP Partnerships at Manchester City FC.

“Technology is impacting all of us and from our perspective, we are looking at how we can create fan engagement or fan experience, whether it is at Anfield or anywhere around the world,” said Billy Hogan, Chief Commercial Officer at Liverpool.

“What isn’t changing is the popularity of the English Premier League,” said Peter Silverstone, Commercial Director of Arsenal. “What is changing is the consumer appetite for how they consume the English Premier League as a product.”

What you have to take into consideration, and why it is so baffling that football clubs and the industry on the whole have been so slow to react to new technologies, is the global reach. The English Premier League (EPL) official Facebook and Twitter pages have 42 million and 18 million followers respectively. Another 23 million follow the competition on Instagram.

Below you can see the social media reach of each of the clubs on show during the event:

Club Facebook Twitter Instagram YouTube
Liverpool 32.2 million 11 million 12.4 million 1.1 million
Arsenal 36.9 million 14 million 13.3 million 1.1 million
Man City 36.7 million 6.6 million 10.4 million 1.6 million

This is a truly global industry and while these numbers are certainly impressive, the challenge now is how to best capitalise on such significant assets. This is where the Intel partnership and content play a role.

As all three of the executives point out, the idea behind technology implementation is to offer a greater variety of ways for fans to consume content. This might be through virtual reality, player POV footage, more in-depth analysis, behind the scenes content or partners stories. The idea is to create content which came be customisable, interactive and varied. Each user can create their own story on-demand, building interactions which are more suited to them.

Looking at Intel’s True View product, one of the technologies which will be used to deliver this enhanced experience, XXX highlighted 38 5K sensors will be installed in each stadium, allowing the team to capture footage which is eight times the definition of HD. The cameras capture volumetric data (height, width, and depth) using voxels, a 3D pixel, delivering a new experience for the consumer.

Collecting this data will allow the three clubs to introduce 360 degrees replays, allowing the consumer to decide how the content is viewed, player POV footage and new content on laser wall screens. Intel believe this sort of technology is addressing a supply/demand chasm in the market; consumers are demanding a different type of experience, yet few in the world of sports seem able to deliver it.

Creating all of these experiences has another excellent impact on these clubs; it allows them to match the globalised nature of football. The worldwide footprint of the Premier League is pretty unmatched in the entirety of sports, especially over the last decade with clubs targeting fans on distant shores. These are three clubs which have certainly fit this mould.

“Some of these people will never get the chance to go to Anfield, but we can deliver this experience,” said Hogan, referencing fans in Indonesia, China and the US.

Although there certainly have been positive steps forward in converging the worlds of technology and sport, this is only the beginning. Looking forward, there are some genuinely exciting technologies in the pipeline, each of which has the potential to completely revolutionise the experience.

Virtual reality is one which is constantly discussed, and while there might be some applications and hardware on the market which offer some sort of experience, this is only the tip of the iceberg. VR is very much an embryonic technology for the moment, though the fast decreasing price of hardware and the approaching 5G euphoria could take this technology to the next level.

Another area to consider is the delivery of content through holograms. A couple of months back Vodafone delivered one of the best 5G demos we’ve seen, live-streaming a hologram from Manchester to its Newbury HQ of England Women’s football captain Steph Houghton. The image was crisp while latency was pretty much non-existent. Slumbering journalists very bolted upright by genuine innovation.

Imagine sitting in your living room and experiencing a Premier League Football game as if you were sat on the halfway line and seeing replays through the eyes of the players. Or how about a boxing match hosted in Las Vegas, but live-streaming holograms to hundreds of venues throughout the world. The viewing experience could be completely revolutionised.

What these three clubs are doing are the first baby steps into digital transformation, a buzzword which has plagued us for years. However, it might not be too long before the sports entertainment world morphs into a completely unrecognisable beast.

Q4 2018 earnings roundup: Facebook, Qualcomm and Microsoft

It’s that time of the quarter when all the earnings announcements come at once, so here’s a brief look at three US tech heavy-hitters.

Facebook is never too far from the headlines, but this is attention investors won’t be too disappointed in receiving. Facebook’s quarterly figures suggest that while the world might disagree with its ethics, morals and basic decency, we just can’t stop telling people about the snow or posting pictures of a deconstructed Shoreditch coffee.

Over the last three months, total revenues stood at $16.9 billion, a 30% year-on-year jump, while net income jumped 61% to $6.8 billion. We might not trust Facebook, but we can’t stop using it.

Daily Active Users were 1.52 billion on average for December 2018, an increase of 9% year-over-year, while Monthly Active Users were 2.32 billion as of December 31, another 9% increase. Facebook estimates 2.7 billion people now use Facebook, Instagram, WhatsApp, or Messenger, while 2 billion use at least one of the services once a day.

“Going into 2019, we’re focused on four priorities: first, continue making progress on the major social issues facing the Internet and our company; second, build new experiences that meaningfully improve people’s lives today and set the stage for even bigger improvements in the future; third, keep building our business by supporting the millions of businesses, mostly small businesses, that rely on our services to grow and create jobs; then fourth, communicate more transparently about what we’re doing and the role our services play in the world. And I want to take a minute talk about each of these,” CEO Mark Zuckerberg said during the earnings call.

Qualcomm is another company which is never too far away from the headlines, but for quite different reasons.

The last quarter proved to be another which saw the legal battle with Apple take another incremental step forward, but this does not seem to have weighed too heavily on the business. Over the last three months, the chipmaker beat market expectations and signed a new interim patent contract with Huawei Technologies.

The deal with Huawei is perhaps an important one as it lessons the strain placed on the over-worked Qualcomm legal team. Under the new deal, Huawei will pay $150 million per quarter for three quarters, providing a bit of breathing room as the pair look to rectify a licensing dispute. Qualcomm believes this is less than it is owed but indicated this is progress.

In terms of the figures, the last quarter brought in $4.8 billion, a decline of 20% year-on-year, though net income stood at $1.1 billion. Forecasts for the next quarter see the company offering a range of $4.4 billion and $5.2 billion, meeting analysts’ estimate of $4.80 billion, with the market reacting positively to the news. Revenues might be down, but there is a lot of potential on the horizon.

Finally, onto Microsoft, the only one of this trio which seems to have a positive reputation across the wold.

Satya Nadella might not be the most rock n’ roll CEO on the technology scene right now, but you certainly can’t argue with the results he delivers. Microsoft had another positive three-month period, with the Intelligent Cloud business claiming the plaudits.

“Our strong commercial cloud results reflect our deep and growing partnerships with leading companies in every industry including retail, financial services, and healthcare,” said Nadella. “We are delivering differentiated value across the cloud and edge as we work to earn customer trust every day.”

Total revenues increased 12% to $32.5 billion, while the boost to operating income was 18% as the bean counters revelled in $10.3 billion. Looking at the individual business units, revenues in Productivity and Business Processes was $10.1 billion, up 13% year-on-year, Intelligent Cloud jumped 20% to $9.4 billion and More Personal Computing was up 7% to $13 billion.

You might not want to go clubbing with Nadella, but if he carries on this trajectory he’ll never have to buy a drink again.