Fall 2021
Dear Friends and Family,
This is segment 3 of the Big Tech & AI series titled, “Big Tech’s Business Model.” The business model simply stated is “Extraction Practiced on a Global Scale.” Extraction of personal data, preferences and any other information that can be monetized.
My Takeaways:
There are four means reported in the excerpts where such information can be monetized:
Next: Segment 4 will dig deeper into social media manipulation plus how it can become an addiction which is present today, most particularly with some children and teenagers.
Happy Learning,
Harley
Dear Friends and Family,
This is segment 3 of the Big Tech & AI series titled, “Big Tech’s Business Model.” The business model simply stated is “Extraction Practiced on a Global Scale.” Extraction of personal data, preferences and any other information that can be monetized.
My Takeaways:
There are four means reported in the excerpts where such information can be monetized:
- Targeted Marketing: From records of past purchases coupled with knowledge of their interests and location forms the basis for individual marketing to get you to buy stuff. Such marketing is much more effective and cost efficient than mass marketing.
- Understanding the Market: By collecting individual information on unmet needs or new ideas and amassing them provides valuable information to guide new business endeavors.
- Individual Manipulation: By controlling the information individuals receive and read plus promoting Big Tech’s narrative they can shape peoples thinking and potentially votes. Selling that is not only profitable but greatly enhances Big Tech’s power.
- Data for Artificial Intelligence: AI algorithms are improved by feeding them more and more data which in turn makes their pattern development far more robust and AI application far more effective. This enhances usage, market share, and profit.
Next: Segment 4 will dig deeper into social media manipulation plus how it can become an addiction which is present today, most particularly with some children and teenagers.
Happy Learning,
Harley
BIG TECH & AI – SEGMENT 3
BIG TECH’S BUSINESS MODEL – EXCERPTS
THE BUSINESS MODEL: Big Tech’s global economic modus operandi had three major elements, adding up to a model of extraction practiced on a global scale. (1) The core business model was built on returns generated by advertising, based on data automatically extracted from users. And it was all done with minimal capital investment by Big Tech. What would be more efficient? (2) Big Tech had become a set of low-labor-cost monopolies subsisting off rents earned with minimal commitment to domestic markets. It was globalized perfection. Big Tech seeks to create a global system of automatic rent extraction from the real economy. (3) Big Tech’s aim was to achieve maximum market penetration the world over; this was a necessity. In a truly worldwide economy, it wasn’t enough to excel in a single nation, even one as large as the U.S. To achieve maximum profit and optimal economies of scale, a corporate concern needed global access to markets, capital and labor.
Source: The Tyranny of Big Tech by Senator Josh Hawley (2021)
THE IMPORTANCE OF DATA: Nothing is more valuable to these companies than our personal data, acquired invisibly from virtually every keystroke we make online. When powerful tech firms keep us glued to our devices, it’s not really our minds they’re after, but rather the data that makes up our consumer profile – a combination of our age, location, marital status, interests, background, education level, political leanings, purchase history, and much more. They then sell this data to third-party marketers, who may in turn sell it to any number of others that want to reach you, from retailers to election manipulators in Russia.
Such data is the oil of the information age, and it fuels the growth of those companies that can run on it—which is, nowadays, almost every company in almost every industry. So far, this data has been obtained via computers and mobile devices. But with the rise of personal digital assistants like Amazon’s Alexa, Google’s Home Mini, and Apple’s Siri – now a third of American homes with triple-digit sales growth a year – the human voice is the new gold. Companies in every industry are counting on such electronic data to spur growth over the next several years. Data-driven artificial intelligence could generate up to almost $6 trillion in revenues for companies that deploy it successfully. Data is the new fuel for growth in multiple industries, from manufacturing to retail to financial services. But unlike other assets, it doesn’t necessarily fuel job growth, but rather profit growth. In 2009, the twenty most valuable companies in America had 1,790 employees per billion in market cap; today they have 656.
The bottom line is that most technology businesses simply don’t require many employees, and this will only become truer with time. It’s been estimated that globally, 80% of all occupations will, in the next few years, be substantially redefined because of new disruptive technologies. Facebook, Twitter, Instagram, Snapchat, and Google’s core business fundamentally depends on data mining by manipulating behavior. These companies truly are attention merchants. We as consumers perceive their services to be free, but in reality, we are paying – unwittingly – not only with our attention but our data, which they go to great lengths to capture and then monetize. Data mining simply involves analyzing large amounts of data to discover trends and patterns in the aggregate. But the idea of tracking people’s individual behavior – what they search for, which result they clicked on, and so on – and then building a database about who those people were so that the information could then be sold to the appropriate advertiser seed anathema.
A portrait of a psyche is a powerful thing. It allows companies to predict our behavior and anticipate our wants. With data, it is possible to know where you will be tomorrow within twenty meters and to predict, with reasonable accuracy, whether your romantic relationship will last. Capitalism has always dreamed of activating the desire to consume, the ability to tap the human brain to stimulate its desire for products that it never contemplated needing. Data helps achieve this old dream. It makes us more malleable, easier to addict, prone to nudging. It’s the reason that Amazon recommendations for your next purchase so often result in sales, or why Google ads result in clicks. The dominant firms are the ones that have amassed the most complete portraits of us. Citizens, not the corporations that stealthily track them, should own their own data. The law should demand that these companies treat this data with the greatest care, because it doesn’t belong to them.
Source: World Without Mind by Franklin Foer (2017)
OBTAINING THE DATA: Google: In 2011, 46% of Americans reported that they owned and used smartphones, those small shiny portals to the internet. By 2019, that number had rocketed to 81%, and the trend line was ever upward. That same year, 81% of Americans said they spent time online “every day.” And 28% said they were online “almost constantly.” Break that last number down by age, and the results became even more vivid. Nearly half of 18-to-29-year-olds said they spent the day “constantly” online.
Google and Facebook and Twitter and Amazon were essentially giant computers, whose primary purpose was to monitor their customer’s every move. But didn’t these companies have some obligation to alert their customers, to notify them, about this surveillance? In a word, no. The customers’ loss of control meant more opportunity for Big Tech. That was putting it mildly. Data mining, as in constant, ongoing, unseen surveillance, was to become the lifeblood of the tech industry. Online advertising changed everything. Google had become the essential facilitator between advertisers and consumers. By tracking its users’ every move, Google had accidently invented advertising nirvana: a method for tailoring ads to push individual consumers toward buying. Across its vast array of products, the company painstakingly designed each new tool to gather every possible scrap of information from users and act as a conduit for these new data-driven ads.
Source: The Tyranny of Big Tech by Josh Hawley (2021)
Facebook: But it was Facebook that took the possibilities of “computer mediated transactions” to an entirely different level. Facebook possessed more data on more individuals than any company on planet earth. Those Facebook user profiles and friend lists, were a data treasure trove. Whom did users know? Whom did they care about most? Whom did they trust, and whom could they be made to pay attention to? Layers and layers, veins and veins, of personal data. Each an opportunity to extract and to manipulate the substance of users’ social interactions. Where Google could learn, and perhaps alter, what users thought, Facebook could see and shape what users said.
The users’ “News Feeds” and “Timelines” of posts and comments were based on the personal data Facebook was constantly and secretly amassing – all for the purpose of claiming the users’ attention. Facebook realized the more personalized it made the digital experience the more time users spent online, the more information Facebook could quietly extract and the more advertisements it could sell. The point of Facebook’s customization crusade was not to improve the user experience – the basic product Facebook has offered consumers has barely changed in a decade – but to keep users online and on Facebook longer. As the attention arms race accelerated, platforms like Facebook needed to get users to read and watch things they didn’t want to or didn’t know they wanted before Big Tech helped them along.
The big change Facebook announce today is that now, when you come back, Facebook’s story scoring and ranking algorithm will look at all of the stories you have never seen, not just the stories created since your last visit. In practice, that means if there was a story on your News Feed before, but you missed it because you didn’t scroll down to see it, Facebook will put it up top the next time you visit the site if Facebook believes that story is more relevant to you than all the new ones created since you last checked the site. It was so lovely, so convenient, so … manipulative. This was unprecedented power gained without consent or meaningful permission of any kind. And it was held in the hands of a precious few.
But here was Big Tech, ceaselessly cajoling and nudging and manipulating. Here was Big Tech, attempting to shape the behavior of its users. Here was Big Tech, advancing the interest of a technological, managerial elite, a new aristocracy. Big Tech would entrench that elite for a new era, redefining it around information and data control. The new overclass, the people with the greatest opportunity and the most influence, would be the tech professionals and their allied financiers, corporation and bureaucratic enablers. They would run the country. And where did that leave everyone else, the broad American middle? It left them as consumers rather than citizens, as objects rather than agents; it left them to suffer the effects of Big Tech’s power grab and to absorb the costs of the addiction economy Big Tech had pioneered. And those costs, it turned out, were enormous.
Source: The Tyranny of Big Tech by Josh Hawley (2021)
PRICING THE DATA: Targeted advertising would become the key to make money not just for Google, but for Facebook, Amazon (which uses targeted advertising to lure users to its own site and prompt them to click on things they may have been interested in before), and a host of other companies. It created an entirely new model for how to get people to buy things. In 2017, Google and Facebook took 84% of the digital advertising market. As Judge Leon noted on his Time Warner decision, “Facebook and Google’s dominant digital advertising platforms have surpassed television advertising revenue.” Bottom line? Consumers are giving up more value in personal data than they receive in services – indeed, vastly more.
The profusion of data has changed the character of journalism. It has turned it into a commodity, something to be marketed, tested, and calibrated. Perhaps media have always thought this way. But if that impulse always existed, it was at least buffered. Magazines and newspapers used to think of themselves as something coherent – an issue, an edition, an institution. Not as a publisher of dozens of discrete pieces to be trafficked each day on Facebook, Twitter, and Google. The audience for journalism may be large now, but the mind-set is smaller.
It seems scandalous that journalistic institutions would create a whole business based on misleading readers. But the scandal runs even deeper. Editorials increasingly resembles that their message will be heard, or rather mistaken for editorial. BuzzFeed decided to make branded advertising its chief stream of revenue. Andrew Sullivan made a sport of pointing this out. He ran a feature called “Guess Which BuzzFeed is an Ad.” It was damn near impossible to detect any difference – “19 Incredible Things You Didn’t Know About Dunkin’ Donuts,” “The New iPhone Keyboard Changes Everything,” “The Only Post You Need to Read About the PlayStation4.”
Source: World Without Mind by Franklin Foer (2017).
GAINING DOMINANCE: Amazon, Facebook, and Google aspire to alter how we read and what we read. The biggest tech companies are, among other things, the most powerful gatekeepers the world has ever known. Google helps us sort the Internet by providing a sense of hierarchy to information; Facebook uses its algorithms and its intricate understanding of social circles to sort the new we encounter; Amazon bestrides book publishing with its overwhelming hold on that market. Such dominance endows these companies with the ability to remake the markets they control. They want to overhaul the entire chain of cultural production, so that they can capture greater profit. Intellectuals, freelance writers, investigative journalists, and midlist novelists are the analog to the family farmers, who have always struggled but simply can’t compete in this transformed economy.
Source: World Without Mind by Franklin Foer (2017)
PRACTICES UNLIKELY TO CHANGE: As for Google or Facebook fundamentally changing their attention-hijacking practices, it will be an uphill battle. It’s difficult to see them successfully shifting their entire business model to revolve less around data collection and the monetization of attention, and like any legacy company, they are reluctant to change what is already so profitable.
Source: Don’t Be Evil: The Case Against Big Tech by Rana Foroohar (2021).
The unabbreviated version of the above can be found in the pdf document below.
BIG TECH’S BUSINESS MODEL – EXCERPTS
THE BUSINESS MODEL: Big Tech’s global economic modus operandi had three major elements, adding up to a model of extraction practiced on a global scale. (1) The core business model was built on returns generated by advertising, based on data automatically extracted from users. And it was all done with minimal capital investment by Big Tech. What would be more efficient? (2) Big Tech had become a set of low-labor-cost monopolies subsisting off rents earned with minimal commitment to domestic markets. It was globalized perfection. Big Tech seeks to create a global system of automatic rent extraction from the real economy. (3) Big Tech’s aim was to achieve maximum market penetration the world over; this was a necessity. In a truly worldwide economy, it wasn’t enough to excel in a single nation, even one as large as the U.S. To achieve maximum profit and optimal economies of scale, a corporate concern needed global access to markets, capital and labor.
Source: The Tyranny of Big Tech by Senator Josh Hawley (2021)
THE IMPORTANCE OF DATA: Nothing is more valuable to these companies than our personal data, acquired invisibly from virtually every keystroke we make online. When powerful tech firms keep us glued to our devices, it’s not really our minds they’re after, but rather the data that makes up our consumer profile – a combination of our age, location, marital status, interests, background, education level, political leanings, purchase history, and much more. They then sell this data to third-party marketers, who may in turn sell it to any number of others that want to reach you, from retailers to election manipulators in Russia.
Such data is the oil of the information age, and it fuels the growth of those companies that can run on it—which is, nowadays, almost every company in almost every industry. So far, this data has been obtained via computers and mobile devices. But with the rise of personal digital assistants like Amazon’s Alexa, Google’s Home Mini, and Apple’s Siri – now a third of American homes with triple-digit sales growth a year – the human voice is the new gold. Companies in every industry are counting on such electronic data to spur growth over the next several years. Data-driven artificial intelligence could generate up to almost $6 trillion in revenues for companies that deploy it successfully. Data is the new fuel for growth in multiple industries, from manufacturing to retail to financial services. But unlike other assets, it doesn’t necessarily fuel job growth, but rather profit growth. In 2009, the twenty most valuable companies in America had 1,790 employees per billion in market cap; today they have 656.
The bottom line is that most technology businesses simply don’t require many employees, and this will only become truer with time. It’s been estimated that globally, 80% of all occupations will, in the next few years, be substantially redefined because of new disruptive technologies. Facebook, Twitter, Instagram, Snapchat, and Google’s core business fundamentally depends on data mining by manipulating behavior. These companies truly are attention merchants. We as consumers perceive their services to be free, but in reality, we are paying – unwittingly – not only with our attention but our data, which they go to great lengths to capture and then monetize. Data mining simply involves analyzing large amounts of data to discover trends and patterns in the aggregate. But the idea of tracking people’s individual behavior – what they search for, which result they clicked on, and so on – and then building a database about who those people were so that the information could then be sold to the appropriate advertiser seed anathema.
A portrait of a psyche is a powerful thing. It allows companies to predict our behavior and anticipate our wants. With data, it is possible to know where you will be tomorrow within twenty meters and to predict, with reasonable accuracy, whether your romantic relationship will last. Capitalism has always dreamed of activating the desire to consume, the ability to tap the human brain to stimulate its desire for products that it never contemplated needing. Data helps achieve this old dream. It makes us more malleable, easier to addict, prone to nudging. It’s the reason that Amazon recommendations for your next purchase so often result in sales, or why Google ads result in clicks. The dominant firms are the ones that have amassed the most complete portraits of us. Citizens, not the corporations that stealthily track them, should own their own data. The law should demand that these companies treat this data with the greatest care, because it doesn’t belong to them.
Source: World Without Mind by Franklin Foer (2017)
OBTAINING THE DATA: Google: In 2011, 46% of Americans reported that they owned and used smartphones, those small shiny portals to the internet. By 2019, that number had rocketed to 81%, and the trend line was ever upward. That same year, 81% of Americans said they spent time online “every day.” And 28% said they were online “almost constantly.” Break that last number down by age, and the results became even more vivid. Nearly half of 18-to-29-year-olds said they spent the day “constantly” online.
Google and Facebook and Twitter and Amazon were essentially giant computers, whose primary purpose was to monitor their customer’s every move. But didn’t these companies have some obligation to alert their customers, to notify them, about this surveillance? In a word, no. The customers’ loss of control meant more opportunity for Big Tech. That was putting it mildly. Data mining, as in constant, ongoing, unseen surveillance, was to become the lifeblood of the tech industry. Online advertising changed everything. Google had become the essential facilitator between advertisers and consumers. By tracking its users’ every move, Google had accidently invented advertising nirvana: a method for tailoring ads to push individual consumers toward buying. Across its vast array of products, the company painstakingly designed each new tool to gather every possible scrap of information from users and act as a conduit for these new data-driven ads.
Source: The Tyranny of Big Tech by Josh Hawley (2021)
Facebook: But it was Facebook that took the possibilities of “computer mediated transactions” to an entirely different level. Facebook possessed more data on more individuals than any company on planet earth. Those Facebook user profiles and friend lists, were a data treasure trove. Whom did users know? Whom did they care about most? Whom did they trust, and whom could they be made to pay attention to? Layers and layers, veins and veins, of personal data. Each an opportunity to extract and to manipulate the substance of users’ social interactions. Where Google could learn, and perhaps alter, what users thought, Facebook could see and shape what users said.
The users’ “News Feeds” and “Timelines” of posts and comments were based on the personal data Facebook was constantly and secretly amassing – all for the purpose of claiming the users’ attention. Facebook realized the more personalized it made the digital experience the more time users spent online, the more information Facebook could quietly extract and the more advertisements it could sell. The point of Facebook’s customization crusade was not to improve the user experience – the basic product Facebook has offered consumers has barely changed in a decade – but to keep users online and on Facebook longer. As the attention arms race accelerated, platforms like Facebook needed to get users to read and watch things they didn’t want to or didn’t know they wanted before Big Tech helped them along.
The big change Facebook announce today is that now, when you come back, Facebook’s story scoring and ranking algorithm will look at all of the stories you have never seen, not just the stories created since your last visit. In practice, that means if there was a story on your News Feed before, but you missed it because you didn’t scroll down to see it, Facebook will put it up top the next time you visit the site if Facebook believes that story is more relevant to you than all the new ones created since you last checked the site. It was so lovely, so convenient, so … manipulative. This was unprecedented power gained without consent or meaningful permission of any kind. And it was held in the hands of a precious few.
But here was Big Tech, ceaselessly cajoling and nudging and manipulating. Here was Big Tech, attempting to shape the behavior of its users. Here was Big Tech, advancing the interest of a technological, managerial elite, a new aristocracy. Big Tech would entrench that elite for a new era, redefining it around information and data control. The new overclass, the people with the greatest opportunity and the most influence, would be the tech professionals and their allied financiers, corporation and bureaucratic enablers. They would run the country. And where did that leave everyone else, the broad American middle? It left them as consumers rather than citizens, as objects rather than agents; it left them to suffer the effects of Big Tech’s power grab and to absorb the costs of the addiction economy Big Tech had pioneered. And those costs, it turned out, were enormous.
Source: The Tyranny of Big Tech by Josh Hawley (2021)
PRICING THE DATA: Targeted advertising would become the key to make money not just for Google, but for Facebook, Amazon (which uses targeted advertising to lure users to its own site and prompt them to click on things they may have been interested in before), and a host of other companies. It created an entirely new model for how to get people to buy things. In 2017, Google and Facebook took 84% of the digital advertising market. As Judge Leon noted on his Time Warner decision, “Facebook and Google’s dominant digital advertising platforms have surpassed television advertising revenue.” Bottom line? Consumers are giving up more value in personal data than they receive in services – indeed, vastly more.
The profusion of data has changed the character of journalism. It has turned it into a commodity, something to be marketed, tested, and calibrated. Perhaps media have always thought this way. But if that impulse always existed, it was at least buffered. Magazines and newspapers used to think of themselves as something coherent – an issue, an edition, an institution. Not as a publisher of dozens of discrete pieces to be trafficked each day on Facebook, Twitter, and Google. The audience for journalism may be large now, but the mind-set is smaller.
It seems scandalous that journalistic institutions would create a whole business based on misleading readers. But the scandal runs even deeper. Editorials increasingly resembles that their message will be heard, or rather mistaken for editorial. BuzzFeed decided to make branded advertising its chief stream of revenue. Andrew Sullivan made a sport of pointing this out. He ran a feature called “Guess Which BuzzFeed is an Ad.” It was damn near impossible to detect any difference – “19 Incredible Things You Didn’t Know About Dunkin’ Donuts,” “The New iPhone Keyboard Changes Everything,” “The Only Post You Need to Read About the PlayStation4.”
Source: World Without Mind by Franklin Foer (2017).
GAINING DOMINANCE: Amazon, Facebook, and Google aspire to alter how we read and what we read. The biggest tech companies are, among other things, the most powerful gatekeepers the world has ever known. Google helps us sort the Internet by providing a sense of hierarchy to information; Facebook uses its algorithms and its intricate understanding of social circles to sort the new we encounter; Amazon bestrides book publishing with its overwhelming hold on that market. Such dominance endows these companies with the ability to remake the markets they control. They want to overhaul the entire chain of cultural production, so that they can capture greater profit. Intellectuals, freelance writers, investigative journalists, and midlist novelists are the analog to the family farmers, who have always struggled but simply can’t compete in this transformed economy.
Source: World Without Mind by Franklin Foer (2017)
PRACTICES UNLIKELY TO CHANGE: As for Google or Facebook fundamentally changing their attention-hijacking practices, it will be an uphill battle. It’s difficult to see them successfully shifting their entire business model to revolve less around data collection and the monetization of attention, and like any legacy company, they are reluctant to change what is already so profitable.
Source: Don’t Be Evil: The Case Against Big Tech by Rana Foroohar (2021).
The unabbreviated version of the above can be found in the pdf document below.
| 3l_big_tech_business_model_--_segment_3.pdf |