A measured response to surveillance capitalism

Also published at Resilience.org.

A flood of recent analysis discusses the abuse of personal information by internet giants such as Facebook and Google. Some of these articles zero in on the basic business models of Facebook, and occasionally Google, as inherently deceptive and unethical.

But I have yet to see a proposal for any type of regulation that seems proportional to the social problem created by these new enterprises.

So here’s my modest proposal for a legislative response to surveillance capitalism1:

No company which operates an internet social network, or an internet search engine, shall be allowed to sell advertising, nor allowed to sell data collected about the service’s users.

We should also consider an additional regulation:

No company which operates an internet social network, or an internet search engine, shall be allowed to provide this service free of charge to its users.

It may not be easy to craft an appropriate legal definition of “social network” or “search engine”, and I’m not suggesting that this proposal would address all of the surveillance issues inherent in our digitally networked societies. But regulation of companies like Facebook and Google will remain ineffectual unless their current business models are prohibited.
 

Core competency

The myth of “free services” is widespread in our society, of course, and most people have been willing to play along with the fantasy. Yet we can now see that when it comes to search engines and social networks, this game of pretend has dangerous consequences.

In a piece from September, 2017 entitled “Why there’s nothing to like about Facebook’s ethically-challenged, troublesome business model,” Financial Post columnist Diane Francis clearly described the trick at the root of Facebook’s success:

“Facebook’s underlying business model itself is troublesome: offer free services, collect user’s private information, then monetize that information by selling it to advertisers or other entities.”

Writing in The Guardian a few days ago, John Naughton concisely summarized the corporate histories of both Facebook and Google:

“In the beginning, Facebook didn’t really have a business model. But because providing free services costs money, it urgently needed one. This necessity became the mother of invention: although in the beginning Zuckerberg (like the two Google co-founders, incidentally) despised advertising, in the end – like them – he faced up to sordid reality and Facebook became an advertising company.”

So while Facebook has grandly phrased its mission as “to make the world more open and connected”, and Google long proclaimed its mission “to organize the world’s information”, those goals had to take a back seat to the real business: helping other companies sell us more stuff.

In Facebook’s case, it has been obvious for years that providing a valuable social networking service was a secondary focus. Over and over, Facebook introduced major changes in how the service worked, to widespread complaints from users. But as long as these changes didn’t drive too many users away, and as long as the changes made Facebook a more effective partner to advertisers, the company earned more profit and its stock price soared.

Likewise, Google found a “sweet spot” with the number of ads that could appear above and beside search results without overly annoying users – while also packaging the search data for use by advertisers across the web.
 

A bad combination

The sale of advertising, of course, has subsidized news and entertainment media for more than a century. In recent decades, even before online publishing became dominant, some media switched to wholly-advertising-supported “free” distribution. While that fiction had many negative consequences, I believe, the danger to society was taken to another level with search engines and social networks.

A “free” print magazine or newspaper, after all, collects no data while being read.2 No computer records if and when you turn the page, how long you linger over an article, or even whether you clip an ad and stick it to your refrigerator.

Today’s “free” online services are different. Search engines collate every search by every user, so they know what people are curious about – the closest version of mass mind-reading we have yet seen. Social media not only register every click and every “Like”, but all our digital interactions with all of our “friends”.

This surveillance-for-profit is wonderfully useful for the purpose of selling us more stuff – or, more recently, for manipulating our opinions and our votes. But we should not be surprised when they abuse our confidence, since their business model drives them to betray our trust as efficiently as possible.
 

Effective regulation

In the flood of commentary about Facebook following the Cambridge Analytica revelations, two themes predominate. First, there is a frequently-stated wish that Facebook “respect our privacy”. Second, there are somewhat more specific calls for regulation of Facebook’s privacy settings, terms of sale of data, or policing of “bot” accounts.

Both themes strike me as naïve. Facebook may allow users a measure of privacy in that they can be permitted to hide some posts from some other users. But it is the very essence of Facebook’s business model that no user can have any privacy from Facebook itself, and Facebook can and will use everything it learns about us to help manipulate our desires in the interests of paying customers. Likewise, it is naïve to imagine that what we post on Facebook remains “our data”, since we have given it to Facebook in exchange for a service for which we pay no monetary fee.

But regulating the terms under which Facebook acquires our consent to monetize our information? This strikes me as an endlessly complicated game of whack-a-mole. The features of computerized social networks have changed and will continue to change as fast as a coder can come up with a clever new bit of software. Regulating these internal methods and operations would be a bureaucratic boondoggle.

Much simpler and more effective, I think, would be to abolish the fiction of “free” services that forms the façade of Facebook and Google. When these companies as well as new competitors3 charge an honest fee to users of social networks and search engines, because they can no longer earn money by selling ads or our data, much of the impetus to surveillance capitalism will be gone.

It costs real money to provide a platform for billions of people to share our cat videos, pictures of grandchildren, and photos of avocado toast. It also costs real money to build a data-mining machine – to sift and sort that data to reveal useful patterns for advertisers who want to manipulate our desires and opinions.

If social networks and search engines make their money honestly through user fees, they will obviously collect data that helps them improve their service and retain or gain users. But they will have no incentive to throw financial resources at data mining for other purposes.

Under such a regulation, would we still have good social network and search engine services? I have little doubt that we would.

People willingly pay for services they truly value – look back at how quickly people adopted the costly use of cell phones. But when someone pretends to offer us a valued service “free”, we endure a host of consequences as we eagerly participate in the con.
 

Photos at top: Sergey Brin, co-founder of Google (left) and Mark Zuckerberg, Facebook CEO. Left photo, “A surprise guest at TED 2010, Sergey spoke openly about Google’s new posture with China,” by Steve Jurvetson, via Wikimedia Commons. Right photo, “Mark Zuckerberg, Founder and Chief Executive Officer, Facebook, USA, captured during the session ‘The Next Digital Experience’ at the Annual Meeting 2009 of the World Economic Forum in Davos, Switzerland, January 30, 2009”, by World Economic Forum, via Wikimedia Commons.

 


NOTES

1 The term “surveillance capitalism” was introduced by John Bellamy Foster and Robert W. McChesney in a perceptive article in Monthly Review, July 2014.

2 Thanks to Toronto photographer and writer Diane Boyer for this insight.

3 There would be a downside to stipulating that social networks or search engines do not provide their services to users free of charge, in that it would be difficult for a new service to break into the market. One option might be a size-based exemption, allowing, for example, a company to offer such services free until it reaches 10 million users.

Newspapers, running on empty

Also published at Resilience.org.

There isn’t much news in most community newspapers these days. While it’s common to blame the internet for the woes of newspapers, the crisis in the news business is also a symptom of the faltering growth of our fossil-fueled economy.

Our local newspaper carried a headline this week that caught my eye: “Metroland papers in Durham well read”. The self-congratulatory article shared a number of factoids from a Metroland-commissioned survey. For example: “readership topped 82 per cent” (with “readership” defined generously as meaning a person had “read” at least one of the past four issues of the newspaper and/or its flyers). Or this: the typical issue “is kept in the house for an average of almost four days” (which makes perfect sense, since recycling day varies through the region, but on each street the recycling truck comes once a week).

Metroland is a subsidiary of the Toronto Star (the largest newspaper in Canada by circulation). Metroland is responsible for more than 100 small-market papers in Ontario, including Clarington This Week in my town.

Since moving to Clarington a year ago I’ve read every issue of Clarington This Week, looking especially for news of local politics, economic development and planning. Alas, this is not one of the paper’s strong suits, and I studied the news for months before learning the secret of when the municipal council holds its meetings.

For that, I do not blame local journalists. They work in chronically understaffed newsrooms, and if they wrote up each significant development in municipal politics, management would be hard-pressed to free up any space to print the stories.

Let’s be frank: in community newspapers actual journalism is an essential but minor component of the much larger business of distributing ads, especially ads in the form of flyers.

The most recent issue of our local paper, for example is 48 pages. Measuring the amount of news coverage (defined as all photos, articles, and headlines which are not paid advertising) I found that the newspaper itself is just under 30% news, and just over 70% ads. That makes 14.3 pages of news.

But the flyers total 180 pages (and this at a slow time of year for retail; in the month before Christmas the bundle is far thicker). The newspaper and ads together are 228 pages, so the 14.3 pages of news take up just 6% of the total package.

“Free” media and the shrinking news hole

The most recent edition of Clarington This Week is hard to find among all its flyers.

The most recent edition of Clarington This Week is hard to find among all its flyers.

How did the news get buried in an avalanche of ads? The shift to 100% advertising-supported business models marked an inflection point in a process that’s been going on for decades.

Full disclosure: in my own small way I was an accomplice in this process. As a managing editor at the end of the 1990’s, I helped shift a subscription-supported small-town newspaper to 100% advertiser-funded, “free” distribution. For this misdeed I expect I will be reincarnated at least once as some lowly scavenger – perhaps a carp, or a dung beetle, or a homo economicus.

There was a clear business case for free distribution. For many years, the proportion of newspaper revenues from subscription fees had been decreasing while the proportion of revenue from ads had increased. By the 1990s, subscription newspapers typically received only about 20% of their income from subscriptions – basically, subscriptions just covered the cost of delivery, while ad revenue covered all the rent, the printing costs, and the staff salaries.

Most advertisers were happier to pay for ads that reached all local residents, not just subscribers. For small-community newspapers, in particular, the shift to free distribution meant more ad revenue, which could easily replace the diminishing income that previously came from subscription fees.

There was one underlying condition: if advertisers funded ever-greater proportions of the cost of newspapers, they had to sell ever more stuff to make their ad expenditures worthwhile. Through the lifetimes of everyone working in the newspaper industry today, this trend was reliable enough that we didn’t have to think about it, until recently.

Almost continuous economic growth for several generations has lead many people to regard continuous economic growth as the natural order of things. But a minority among economists points out that continuous, exponential growth is not the natural order, but instead is a natural impossibility. They further note the past century of rapid economic growth coincides neatly with the rapid exploitation of most of the world’s easily accessible fossil fuels. In this view, the explosive growth in consumer spending for the past century is in large part an artifact of what James Howard Kunstler calls the “fossil fuel fiesta”.

From "Shifts in Newspaper Advertising Expenditures and their Implications for the Future of Newspapers", by Robert G. Picard, July 2008, accessed from academia.edu (click graphic for link to article)

From “Shifts in Newspaper Advertising Expenditures and their Implications for the Future of Newspapers”, by Robert G. Picard, July 2008, accessed from academia.edu (click graphic for link to article)

For the past 60 years, newspaper ad expenditure growth tracked pretty closely with Gross Domestic Product (GDP) growth. And as long as consumers bought more of the stuff that businesses advertised, these businesses could spend more on ads, and newspapers could reduce or even eliminate subscription fees and thereby boost circulation. Gradually, consumers began to think of news and information as “free”.

When internet information providers started to grow in the late 1990s, most adopted this “free” distribution model. That in turn made this model less successful for newspapers. Total ad expenditures continued to rise, but they had to be shared among more media. Ads got much cheaper, and newspapers found it increasingly difficult to price ads high enough to finance journalists’ (diminishing) salaries. When the effects of the Great Recession of 2008 combined with competition from the internet, the crisis for newspapers intensified. The “news hole” – the space left over for news after the paid ads were slotted in – continued to shrink, as newspapers filled up with lower-priced ads which barely covered production costs.

A blizzard of flyers

Back to our local story. At the turn of the millennium when I managed a small-town newspaper, a news hole of 50% or more of the newspaper was still common. And although flyer distribution was becoming a significant sideline for many newspapers, the volume of flyers was still small compared to the size of the newspapers.

In the paper I worked for, we prided ourselves on keeping the news hole above 50%, and bundling only a couple of flyers with each issue. We felt we were still primarily in the news business, instead of primarily in the ad distribution business.

How quaint that seems now. Over the past 15 years, retailers have been increasingly reliant on volume sales of low-profit-margin junk. A half-page ad inside a newspaper doesn’t suffice – each supermarket or big-box retailer wants multiple pages of their ads landing in consumers’ homes each and every week. (Those 75 different flavours of potato chips don’t sell themselves.)

So they’ve demanded ever-cheaper flyer distribution, and newspapers have been in no position to turn them down.

We reached the point where people referred to a local newspaper as just a wrapper for flyers – but we’re far beyond that now. With many community newspapers the pack of flyers is far too thick to fit inside the paper.

The result: newspapers like the one I received last Thursday, with 6% news, 94% ads.

Is the end nigh?

As unsatisfactory as the current media business is to an avid reader, it is also unsustainable. Whether the news provider is Google or Facebook or the local newspaper, providing “free” information only works as long as readers and viewers keep buying more of the stuff that is being advertised.

When the long trend of economic growth stalls, advertisers will no longer be able to fund media. I’m among those who think this change is already well underway.

The economic turmoil of the past eight years will upend many business models that used to sound prudent, back when abundant and easily-accessible fossil fuels helped us to produce and consume more stuff every year.

Top photo: a single issue of a local newspaper underneath all its ad flyers, on the backdrop of the parking lot of the vacant Target store in Bowmanville, Ontario.