I recently came across a working paper published by the Becker Friedman Institute titled Kill Zone– https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3555915 . This paper caused me considerable pain—it forced me to consider several challenging areas that I had avoided. One of them (the subject of this post) is the monopoly status of social media companies, especially Facebook.
First, let’s be clear that Facebook and its social media siblings are fundamentally networking platforms. The do not work unless they facilitate connections between their members and they cannot do that without their members being able to network on the platform. And members cannot do that unless their friends are also members. So, by definition Facebook can not execute successfully on one of its primary objectives without “everyone and their friends” being on the platform.
Second, Facebook’s customers are not the folks socialize on the platform. Facebook’s customers are its advertisers. As has been noted too many times to count the social media platforms’ “users” are the product. So, from a commercial point of view, Facebook is fundamentally an advertising platform. That said, very few people would argue that the social media companies have a monopoly on advertising. They are formidable competitors, but not yet monopolists.
Third, having said that, Facebook does have a monopoly of sorts. It has a monopoly on the efficient testing and dissemination of ideas targeted at multiple, segmented (to be receptive to the advertising message), large captive audiences. Some of its advertisers have discovered how to use it as an extremely efficient (and economical) vehicle for the dissemination of propaganda (of commercial, social and political natures) effectively turning it into and powerful brainwashing machine.
Fourth, the monopoly issues associated with the Facebook camp are related to ideas and the mechanisms through which facts, beliefs and opinions are tested and disseminated. Further, there is another camp (Amazon/Apple/Google) whose monopoly related issues can be characterized as economic.
Conflating the monopoly (as I have narrowly defined them above) issues associated with Facebook camp (Facebook and its social media siblings) with those associated with the Amazon/Apple/Google camp confuses the monopoly-related issues associated with both sets of companies and makes finding respective solutions to the issues associated with either of the camps difficult to the point of intractability.
While I have my thoughts (and doubts) about the cases that can (or cannot) be made against either of the camps, I believe that it is fundamentally necessary to understand that the domains are different and need to be analyzed and dealt with in the context of their respective intellectual models.
I would further note that it seems to me that traditional economic measures of monopoly hold for companies like Amazon, Apple and Google because they are fundamentally economic players. The issues with the Facebook et al. are different and, to me, significantly more challenging because they get into the very sticky arena of free speech. These Facebook et al. (free speech) related issues will have to be very carefully unpacked and will demand an approach that is not likely (see the history of rules governing free speech) to please anyone.
I close by noting that the paper referred to at the beginning of this blog sparked a lot of thinking on my part. In that sense, the series of blog posts that I create as I reflect on ideas presented in that paper are a reaction to what they have written. That said, I am not attempting a point by point analysis of that they have written. In fact, some of my thoughts are only tenuously related to what they have written. In others (about techie’s influence on a startups success), I will disagree. To the extent their paper prompted thought (and more importantly some action) on my part makes their effort, in my opinion, worth a read.
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