How Google, Facebook and Amazon won the world

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How Google, Facebook and Amazon won the world

Is it important that these companies are so successful? Vanessa Baird looks at the effect they have on all of us.

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Mark Zuckerberg (centre) and friends play with virtual reality at an important meeting this year. © Kay Nietfield/Reuters

Wonderful. Mark Zuckerberg, told the world that he and his wife Priscilla Chan will give away 99 per cent of their shares in Facebook to charity in their lifetimes.

This makes us think that tech billionaires are different. Not like the bankers or property billionaires, who don’t care. Zuckerberg is 31. He now has his first child, daughter Max. He said the shares, now worth $45 billion, will help ‘education, curing disease and connectivity’.

Zuckerberg is one of many new ‘techno-preneurs’ who have created the amazing success stories of Google, Facebook, Amazon and others.

These companies are wild and have no limits to their ambitions or money, eg. space travel, robotics, driverless cars, cryogenics.

They are the new, friendly face of capitalism. Their platforms and devices are so easy to use. We all buy them, or get them if they’re free.

It all seems too good to be true ... and it is.

Let's look at the other headlines.

These big tech companies are avoiding a lot of tax. French police are trying to get about $1.8 billion in tax back from Google Paris. Facebook and Google should be neutral, but people say they have a political bias. People who work for Amazon say the working conditions are bad and they do not recognize unions. Uber, the new ‘sharing’ company is banned in several countries.

And many people are worried about the power these companies have.

The European Union is going to fine Alphabet (Google’s holding company) $3.4 billion, after a seven-year investigation into monopoly-abuse. Google has 90-per-cent of the search-engine market share in Europe. They have been changing search results to promote their own products and products from companies they work with. This will now have to stop.

Networks

One example of a big, powerful company of the early 20th century was John D Rockefeller’s Standard Oil in the US. To be fair and be good for people and society in general, big companies like this had to have new anti-trust laws. This stopped them being the only company for one area and made competition possible.

The big new digital companies are technically oligopolies (where a few big companies control the market). But they act like monopolies.

Google, Facebook and Amazon all have very big shares of the market. One in seven minutes spent online in the world today is spent on Facebook. And Facebook is trying to become the most important entrance to the internet, by taking over website homepages; Amazon has 67 per cent of all online book sales (print and digital) and is by far the largest retailer in the US (much bigger than Walmart) and planning to control cloud-computing services now; Google now makes more money than the six biggest advertising agencies in the world (including WPP) together.

This is strange. Cyberspace was planned to be free and open, for many different people. But a few very successful private companies are taking control.

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Pioneers of surveillance capitalism – Google’s Sergey Brin, Eric Schmidt and Larry Page. Mario Anzoni/Reuters

Let’s look at the story of Google to see how this happened.

In 1996, students Sergey Brin and Larry Page created ‘PageRank’. This was the start of the very strong, complex Google search engine. Soon everyone started ‘Googling’, and forgot about Alta Vista and the others.

Google used the ‘network effect’: when more people use a search engine, it becomes better for all of them. And the company that made it.

Chris Anderson (from Wired magazine) said that monopolies are more common in networks like the online world. Places that people visit a lot attract more people.

Google needed to become the only search engine and it did. And because search is so important to our lives today, Google used its control as a search engine to move into advertising.

The start of 'surveillance capitalism'

The dot.com bust (when internet companies collapsed and lost money) put investor pressure on companies like Google. But before that, advertising was simple – the advertisers simply selected search-term pages for their displays.

Google decided to try to earn more money. They used their ability to analyse (using behavioural data eg. from other searches a person has made) to make advertising more relevant. This made the advertising more valuable.

All this behavioural data was not used before then. But it now earnt a lot of money.

Shoshana Zuboff (Harvard Business School professor) explained that Google is the starting point for a new type of capitalism. It makes money from watching what people do and then changing human behaviour. This is a new ‘surveillance capitalism’. We could not imagine it outside Google’s digital universe.

We are the raw material here. All the personal data that we unknowingly provide while we use the internet is worth a lot of money for people who want to predict our future habits, and make us do things they want us to do. That includes companies trying to sell us things or insurance companies trying to predict our behaviour. They make money from future behaviour. Zuboff says this surveillance capitalism uses people. The people are not its consumers or its employees and they mostly do not know how it works.

She says this is very undemocratic.

Governments are jealous of Google’s surveillance power. But, as security expert Bruce Schneier explains, the very big digital companies and governments actually work together more closely than most of us realize.

Investors

And there is another group of people behind the big digital companies – the venture capitalists who invest. They change the impact on what the internet has become today.

Tim Berners-Lee, the British creator of the worldwide web, first thought of the internet as a resource for everyone. He didn’t try to make any money from his brilliant invention and he is still fighting to keep the net open, neutral and free.

Many other early internet companies started with the same ideas. But they could not resist the idea of earning a lot of money. Investors gave a lot of money to companies starting up, and expected a lot of results.

The money the companies could make when they went public (in share prices and investment etc.) was far more than the real money the companies could bring in.

The people starting internet companies learned from the investors that they needed to make their company sellable, not sustainable. Douglas Rushkoff (digital economics writer) said that people often thought they were creating new technology, but they were actually moving capital.

The digital industry is now in this growth trap. ‘All apps have to have a plan to take over the whole market,’ says Rushkoff, ‘or they can’t justify the investment they have accepted.’

Twitter was very useful to journalists and activists in the Arab Spring and Occupy movements. But now there is a lot of pressure on it from its rich investors (eg. Goldman Sachs and Saudi billionaire Prince Al-Waleed) to grow and get a bigger share of the advertising market.

Last year people complained that the company would not reach its ‘100x growth potential’ and its CEO Dick Costello had to leave. Rushkoff thinks that if Twitter had to to pay back 100 times the investment in it, it would need to become a corporation bigger than the economies of several nations.

One way to grow is to eat up other companies. Facebook and Google used to be small. Now they take over more businesses than they start up internally. Since 2001 Google has taken over more than 190 companies (now listed under Google’s holding company, Alphabet). Facebook has taken over 50 since 2005.

Political

Big internet companies now have a lot of political power because they have money and are part of national economies.

Their bosses talk at important international meetings eg. the World Economic Forum or the G8. Governments want to work with these companies. And the companies want governments not to regulate them too much, to reduce their tax and not to notice as they try to monopolize.

Facebook tried very hard for months to make an agreement with President Narendra Modi of India to control the internet access of millions of new users. But India activists fighting for the net to be neutral stopped this at the last minute.

A new US Campaign for Accountability (CfA) report shows how Google now has more power in Washington. Google executives visit the White House more than once a week on average (according to Anne Weismann of the CfA).

Now it looks like Google is trying to get this level of influence in Europe. This is to try to stop anti-trust action and attempts to tighten up online privacy. The research suggests that Google has hired at least 65 former government officials from inside the European Union in the last ten years. They have hired about 28 officials from important departments in the British government. And Eric Schmidt, chair of Alphabet (Google), is on prime minister David Cameron’s Business Advisory Council.

Tamasin Cave (from the British campaign group Spinwatch) says: ‘We need to rethink how we see Google. It’s not a search engine, it’s involved in politics and decision-making eg. health and education, where there is more privatization through technology. The public must ask what effects Google’s involvement in the National Health Service and schools will have on them. What are the consequences, and who benefits: us or Google?’

What can we do?

We are at an important point now. A new world, the ‘Internet of Things’ is starting: nearly all home appliances and systems will be online; and everything in life will be ‘smart’ eg. Google’s android system will control our smart watches, smart cars and smart thermostats. Evgeny Morozov (Silicon Valley critic) says that this means Google is ‘between you and your fridge, you and your car, you and your rubbish bin. So the National Security Agency can get all its data from one place.’

By 2020, about 25 billion devices will be connected in this way. There are so many opportunities to watch people (for companies, governments and also criminals and terrorists eg. they can disable car brakes remotely). They can control what we do more and more.

We have to do something now if we want to change our relationship with the big digital companies who control this technology and our data, and who want to carry on doing so in the most unregulated way possible. The power is not balanced – because of capitalism.

To fight against this, we must know our rights. The Madrid Privacy Declaration of 2009 states some of those rights and there have been some important legal victories in the Court of Justice of the EU. But it’s a slow process.

We need an independent international body to check and control digital companies and to take action against monopolization. We need new laws forcing companies to collect minimum data, for a minimum time, and more securely than now. And we need to know what the companies are doing with our data.

There are some campaigns to give us more power. Some of us might be able to change to more ethical platforms.

But service providers can treat their users well. They can respect their privacy, autonomy and need for security. They can do business differently – they can co-operate more and exploit less. For example, Amazon could share profits with the companies that supply them, instead of destroying these companies.

They can see cyberspace, not as private space they need to control, but as a space for everyone. Activists have always wanted net neutrality and open-source, but everyone needs to fight for this more now.

Tim Berners-Lee tells us, in the documentary film foreveryone.net, to fight for an internet that is free from the control of businesses or governments. This is a human right, like water.

Real change needs a change in society. We need to understand that the billionaires who give us things ‘so very cheap’ or ‘free’ are trying to control us. This is not democracy.

And is Mark Zuckerberg’s really so generous? $43 billion is a lot of money. But Facebook does not pay enough tax. They use ‘Double Irish’ arrangements to pay only two to three per cent or less tax on all international earnings. If they paid the tax, it could go to ‘education, medicine, connectivity’ in the many countries where Facebook is making money. And it would go to the projects the governments we choose democratically choose. Not the projects Zuckerberg likes. He is giving away his shares, but keeping the right to vote as a shareholder.

NOW READ THE ORIGINAL: https://newint.org/features/2016/07/01/smiley-faced-monopolists/ (This article has been simplified so the words, text structure and quotes may have changed).