Long-term the aim is to find profitable uses for its stockpiled information
The problem with regulating technology companies is that, faced with tough new rules, they can eventually innovate their way out, often by switching to newer, unregulated technologies. The risk of targeted regulation informed by little other than economic doctrines might even be fuelling a corporate quest for eternal disruption: instead of surrendering to the regulators, technology firms prefer to abandon their old business model.
Its through this lens that we should interpret the likely fallout from the 2.4bn fine imposed on Alphabet, Googles parent company, by the European commission. It arrives after a lengthy, seven-year investigation into whether the company abused its dominance to promote its own online shopping service above search results. The commissions case seems sound; the sad fate of small online retailers, unable to compete with Alphabet over the past decade, suggests as much.
However, one should not mistake the factual correctness of the commissions case for an informed strategic vision: if it has a clue about effective ways to limit the power of data platforms, its not showing it. The reality is that even though advertising-powered search still accounts for the bulk of Alphabets earnings, the companys real focus these days is on finding lucrative and creative uses for the troves of data that it has already extracted, processed and turned into artificial intelligence. Alphabets future revolves around information-intensive services, not around running matchmaking platforms for advertising.
Here, Alphabets long-term strategy has been twofold. On the one hand, it wanted to learn as much as possible about each user; for that, it was prepared to offer us heavily subsidised services that, while not yielding a lot of revenue, did yield a lot of data. That data trove allows Alphabet to predict our information needs in a way that does not always require us to type in a search query. Location or even more advanced conceptual cues a travel itinerary in our mailbox or a meeting on our calendar would do the trick. The requisite information will find us wherever we are on our smartphone or smart TV or inside our smart house in a way that makes search obsolete.
In addition, Alphabet has leveraged all the data harvested from its users to build advanced services, many of them based on artificial intelligence, that can be sold to governments and corporations. Here, it is Alphabets scale that makes the difference. Given how much data it already possesses and the services it has built with it, it will be far ahead of the competition in the race to identify malicious cyberattacks, find a cure for cancer or slow down ageing. Armed with advanced data-intensive products and services, Alphabet can sell them like any normal company the new economy, with its promise of free stuff, be damned.
One could glimpse this future in a curious announcement that Alphabet made right before the fine was announced. The company said that, while it would continue showing us personalised ads, it would stop scanning our emails in order to further refine them. Alphabet believes that its business customers which purchase corporate versions of Gmail, Google Docs, Google Calendar and other services have concerns about the confidentiality of their communications, as they fear that they are scanned for advertising purposes. This was the case only with personal accounts but even there Alphabet decided to pull the plug.
Now, what does this tell us? First, that Alphabet has so much data on each of us that any new incoming email adds very little additional context. There are, after all, diminishing returns to adding extra pieces of information to the billions it already possesses. Second, its evident that Alphabet, due to competition from Microsoft and Amazon, sees its paying corporate clients as critical to its future. And its prepared to use whatever advantages ithas in the realm of data todifferentiate itself from the pack for example, by deploying its formidable AI to continue scanning the messages for viruses and malware.
Efforts to push Alphabet to remove certain services (such as online shopping) from its search results are, thus, besides the point. After all, Alphabet will one day get rid of the search box altogether. This, however, will not weaken its grip on society, for there are many other ways to serve our informational needs without dabbling in such brute and inelegant mechanisms as actually asking us what it is we are searching for.
Its true that the combination of search and advertising has given Alphabet an effective way to extract as much data as possible, but this was just an early stage in the companys evolution. The next stage might preserve some of these elements but its likely to rely heavily on the combination of AI and charges, with someone the taxpayer rather than the user paying for the service. Who do you think will pay for smart healthcare powered by Alphabets artificial intelligence?
The European commissions fine, then, does little to address this evolution, not least because it seeks to rein in the Google of 2010 and not the Alphabet of 2017, let alone of 2020. Ironically, it might even incentivise Alphabet to accelerate its transition from stage one to stage two. After all, why bother with serving confusing results if most of us are looking for specific answers? More data about each of us combined with advanced AI means that Alphabet will eventually furnish those answers as it already does with its personal assistant making search unnecessary.
Europe will, undoubtedly, use this ruling to tout its lofty values; given the non-existence of a similar debate in America, theres probably some truth to that. But one could also accuse the European commission as a whole rather than just its competition chief Margrethe Vestager of shortsightedness. For its approach doesnt account for the actual source of Alphabets long-term power: data.
Data is not like any other commodity and data markets are not like any other markets. Its true that a market where a single widget manufacturer controls 80% of all widgets might lead to the abuse of market power; its also true that a market where five companies control 20% of all widgets might be a better outcome. But data is not like widgets, for the more of it one has the better ones services: a company that controls 100% of the worlds data can do things that a company that only controls 20% cannot (not least in artificial intelligence, which thrives on data).
Of course, thats no reason to abolish competition law or surrender all our data to Alphabet. But we should apply competition law at the right and, in this case, much higher level of analysis. If we really want to exploit all the insights that come from putting different data sets together, its obvious that data should belong to just one entity, but it does not have to be a big tech firm like Alphabet.
All of the nations data, for example, could accrue to a national data fund, co-owned by all citizens (or, in the case of a pan-European fund, by Europeans). Whoever wants to build new services on top of that data would need to do so in a competitive, heavily regulated environment while paying a corresponding share of their profits for using it. Such a prospect would scare big technology firms much more than the prospect of a fine.
The current approach lets have big tech firms swallow as much data as they can and apply competition law to how they design their websites is toothless. Fixing online shopping is important but not if it accelerates the transition to a perverseform of data feudalism, where the key resource is owned by just one or two corporations.