As the coronavirus crisis built to pandemic levels in early March, a relatively unknown tech company confronted a defining opportunity. Zoom Video Communications, a fast-growing enterprise videoconferencing platform with roots in both Silicon Valley and China, had already seen its market cap grow from under $10 billion to nearly double that. As the coronavirus began dominating news reports in the western press, Zoom announced its first full fiscal year results as a public company. The company logged $622.7 million in revenue, up 88 percent from the year before. Zoom’s high growth rate and “software as a service” business model guaranteed fantastic future profits, and investors rewarded the company by driving its stock up even further. On March 5th, the day after Zoom announced its earnings, the company’s stock jumped to $125, more than double its price on the day of its public offering eleven months before. Market analysts began issuing bullish guidance, and company executives noted that as the coronavirus spread, more and more customers were flocking to Zoom’s easy-to-use video conferencing platform.
But as anyone paying attention to business news for the past month knows, it’s been a tumultuous ride for Zoom ever since. As the virus forced the world inside, demand for Zoom’s services skyrocketed, and the company became a household name nearly overnight. Zoom’s “freemium” model – which offers a basic version of its platform for free, with more robust features available for a modest monthly subscription fee – allowed tens of millions of new users to sample the company’s wares. Initially, Zoom was a hit with this new user base – stories of Zoom seders, Zoom cocktail parties, and even Zoom weddings gave the company a consumer-friendly vibe. Just like Google or Facebook before it, here was the story of a scrappy Valley startup with just the right product at just the right time. According to the company, Zoom’s monthly users leapt from 10 million to more than 200 million – an unimaginable increase of 2,000 percent in just one month.
Something’s been bugging me about Tik Tok. I’ve almost downloaded it about a dozen times over the past few months. But I always stop short. I don’t have a ton of time (here’s why) so forgive me as I resort to some short form tricks here. To wit:
I’ll never forget a meal I had with a senior executive at Facebook many years ago, back when I was just starting to question the motives of the burgeoning startup’s ambition. I asked whether the company would ever support publishers across the “rest of the web” – perhaps through an advertising system competitive with Google’s AdSense. The executive’s response was startling and immediate. Everything anyone ever needs to do – including publishing – can and should be done on Facebook. The rest of the Internet was a sideshow. It’s just easier if everything is on one platform, I was told. And Facebook’s goal was to be that platform.
Those words still ring in my ears as we celebrate the 30th anniversary of the web today. And they certainly should inform our perspective as we continue to digest Facebook’s latest self-involved epiphany.
(image) Today I had a chance to testify to the US Senate on the subject of Facebook, Cambridge Analytica, and data privacy. It was an honor, and a bit scary, but overall an experience I’ll never forget. Below is the written testimony I delivered to the Commerce committee on Sunday, released on its site today. If you’d like to watch, head right here, I think it’ll be up soon. Forgive the way the links work, I had to consider that this would be printed and bound in the Congressional Record. I might post a shorter version that I read in as my verbal remarks next…we’ll see.
Honorable Committee Members –
My name is John Battelle, for more than thirty years, I’ve made my career reporting, writing, and starting companies at the intersection of technology, society, and business. I appreciate the opportunity to submit this written and verbal testimony to your committee.
Over the years I’ve written extensively about the business models, strategies, and societal impact of technology companies, with a particular emphasis on the role of data, and the role of large, well-known firms. In the 1980s and 90s I focused on Apple and Microsoft, among others. In the late 90s I focused on the nascent Internet industry, the early 2000s brought my attention to Google, Amazon, and later, Twitter and Facebook. My writings tend to be observational, predictive, analytical, and opinionated.
Concurrently I’ve been an entrepreneur, founding or co-founding and leading half a dozen companies in the media and technology industries. All of these companies, which span magazines, digital publishing tools, events, and advertising technology platforms, have been active participants in what is broadly understood to be the “technology industry” in the United States and, on several occasions, abroad as well. Over the years these companies have employed thousands of staff members, including hundreds of journalists, and helped to support tens of thousands of independent creators across the Internet. I also serve on the boards of several companies, all of which are deeply involved in the technology and data industries.
In the past few years my work has focused on the role of the corporation in society, with a particular emphasis on the role technology plays in transforming that role. Given this focus, a natural subject of my work has been on companies that are the most visible exemplars of technology’s impact on business and society. Of these, Facebook has been perhaps my most frequent subject in the past year or two.
Given the focus of this hearing, the remainder of my written testimony will focus on a number of observations related generally to Facebook, and specifically to the impact of the Cambridge Analytica story. For purposes of brevity, I will summarize many of my points here, and provide links to longer form writings that can be found on the open Internet.
Facebook broke through the traditional Valley startup company noise in the mid 2000s, a typical founder-driven success story backed by all the right venture capital, replete with a narrative of early intrigue between partners, an ambitious mission (“to make the world more open and connected”), a sky-high private valuation, and any number of controversial decisions around its relationship to its initial customers, the users of its service (later in its life, Facebook’s core customers bifurcated to include advertisers). I was initially skeptical about the service, but when Sheryl Sandberg, a respected Google executive, moved to Facebook to run its advertising business, I became certain it would grow to be one of the most important companies in technology. I was convinced Facebook would challenge Google for supremacy in the hyper-growth world of personalized advertising. In those early days, I often made the point that while Google’s early corporate culture sprang from the open, interconnected world wide web, Facebook was built on the precept of an insular walled garden, where a user’s experience was entirely controlled by the Facebook service itself. This approach to creating a digital service not only threatened the core business model of Google (which was based on indexing and creating value from open web pages), it also raised a significant question of what kind of public commons we wanted to inhabit as we migrated our attention and our social relationships to the web. (Examples: https://battellemedia.com/archives/2012/02/its-not-whether-googles-threatened-its-asking-ourselves-what-commons-do-we-wish-for ; https://battellemedia.com/archives/2012/03/why-hath-google-forsaken-us-a-meditation)
In the past five or so years, of course, Facebook has come to dominate what is colloquially known as the public square – the metaphorical space where our society comes together to communicate with itself, to debate matters of public interest, and to privately and publicly converse on any number of topics. Since the dawn of the American republic, independent publishers (often referred to as the Fourth Estate – from pamphleteers to journalists to bloggers) have always been important actors in the center of this space. As a publisher myself, I became increasingly concerned that Facebook’s appropriation of public discourse would imperil the viability of independent publishers. This of course has come to pass.
Of course, the potent mix of News Feed and a subset of independent publishers combined to deliver us the Cambridge Analytica scandal, and we are still grappling with the implications of this incident on our democracy. But it is important to remember that while the Cambridge Analytica breach seems unusual, it is in fact not – it represents business as usual for Facebook. Facebook’s business model is driven by its role as a data broker. Early in its history, Facebook realized it could grow faster if it allowed third parties, often referred to as developers, to access its burgeoning trove of user data, then manipulate that data to create services on Facebook’s platform that increased a Facebook user’s engagement on the platform. Indeed, in his early years as CEO of Facebook, Mark Zuckerberg was enamored with the “platform business model,” and hoped to emulate such icons as Bill Gates (who built the Windows platform) or Steve Jobs (who later built the iOS/app store platform).
However, Facebook’s core business model of advertising, driven as it is by the brokerage of its users’ personal information, stood in conflict with Zuckerberg’s stated goal of creating a world-beating platform. By their nature, platforms are places where third parties can create value. They do so by leveraging the structure, assets, and distribution inherent to the platform. In the case of Windows, for example, developers capitalized on Microsoft’s well-understood user interface, its core code base, and its massive adoption by hundreds of millions of computer users. Bill Gates famously defined a successful platform as one that creates more value for the ecosystem that gathers around it than for the platform itself. By this test – known as the Gates Line – Facebook’s early platform fell far short. Developers who leveraged access to Facebook’s core asset – its user data – failed to make enough advertising revenue to be viable, because Facebook (and its advertisers) would always preference Facebook’s own advertising inventory over that of its developer partners. In retrospect, it’s now commonly understood in the Valley that Facebook’s platform efforts were a failure in terms of creating a true ecosystem of value, but a success in terms of driving ever more engagement through Facebook’s service.
For an advertising-based business model, engagement trumps all other possible metrics. As it grew into one of the most successful public companies in the history of business, Facebook nimbly identified the most engaging portions of its developer ecosystem, incorporated those ideas into its core services, and became a ruthlessly efficient acquirer and manipulator of its users’ engagement. It then processed that engagement into advertising opportunities, leveraging its extraordinary data assets in the process. Those advertising opportunities drew millions of advertisers large and small, and built the business whose impact we now struggle to understand.
Another misconception: Facebook does not “sell” its data to any third parties. While Facebook may not sell copies of its data to these third parties, it certainly sells leases to that data, and this distinction bears significant scrutiny. The company may not wish to be understood as such, but it is most certainly the largest data broker in the history of the data industry.
Lastly, the Cambridge Analytica scandal may seem to be entirely about a violation of privacy, but to truly understand its impact, we must consider the implications relating to future economic innovation. Facebook has used the scandal as an excuse to limit third party data sharing across and outside its platform. While this seems logical on first glance, it is in fact destructive to long term economic value creation.
So what might be done about all of this? While I understand the lure of sweeping legislation that attempts to “cure” the ills of technological progress, such approaches often have their own unexpected consequences. For example, the EU’s adoption of GDPR, drafted to limit the power of companies like Facebook, may in fact only strengthen that company’s grip on its market, while severely limiting entrepreneurial innovation in the process (Example: https://shift.newco.co/how-gdpr-kills-the-innovation-economy-844570b70a7a )
As policy makers and informed citizens, we should strive to create a flexible, secure, and innovation friendly approach to data governance that allows for maximum innovation while also insuring maximum control over the data by all effected parties, including individuals, and importantly, the beneficiaries of future innovation yet conceived and created. To play forward the current architecture of data in our society – where most of the valuable information is controlled by an increasingly small oligarchy of massive corporations – is to imagine a sterile landscape hostile to new ideas and mass flourishing.
Instead, we must explore a world governed by an enlightened regulatory framework that encourages data sharing, high standards of governance, and maximum value creation, with the individual at the center of that value exchange. As I recently wrote: “Imagine … you can download your own Facebook or Amazon “token,” a magic data coin containing not only all the useful data and insights about you, but a control panel that allows you to set and revoke permissions around that data for any context. You might pass your Amazon token to Walmart, set its permissions to “view purchase history” and ask Walmart to determine how much money it might have saved you had you purchased those items on Walmart’s service instead of Amazon. You might pass your Facebook token to Google, set the permissions to compare your social graph with others across Google’s network, and then ask Google to show you search results based on your social relationships. You might pass your Google token to a startup that already has your genome and your health history, and ask it to munge the two in case your 20-year history of searching might infer some insights into your health outcomes. This might seem like a parlor game, but this is the kind of parlor game that could unleash an explosion of new use cases for data, new startups, new jobs, and new economic value.”
It is our responsibility to examine our current body of legislation as it relates to how corporations such as Facebook impact the lives of consumers and the norms of our society overall. Much of the argument around this issue turns on the definition of “consumer harm” under current policy. Given that data is non-rivalrous and services such as Facebook are free of charge, it is often presumed there is no harm to consumers (or by extension, to society) in its use. This also applies to arguments about antitrust enforcement. I think our society will look back on this line of reasoning as deeply flawed once we evolve to an understanding of data as equal to – or possibly even more valuable than – monetary currency.
Most observers of technology agree that data is a new class of currency in society, yet we continue to struggle to understand its impact, and how best to govern it. The manufacturing of data into currency is the main business of Facebook and countless other information age businesses. Currently the only participatory right in this value creation for a user of these services is to A/engage with the services offered and B/purchase the stock of the company offering the services. Neither of these options affords the user – or society – compensation commensurate with the value created for the firm. We can and must do better as a society, and we can and must expect more of our business leaders.
The week was dominated by Google related stories, but the top dialog had to do with the Internet itself. I’m sensing something of a shift in society’s beliefs about the Internet’s central role in our humanity. Five years ago, no one wanted to talk about Internet access as a basic human right. In 2012, the UN called it exactly that. With access consolidating into what looks like a natural monopoly, might regulation as a utility be far behind?
Real Time (Medium) Another, denser version of previous essays asking whether it isn’t time to call the Internet a basic utility. “..the immaterial organisation of the internet has now become the most dominant force on this side of the planet...” Unfortunately, this piece is too dense. Try this one instead: The Internet Is Fucked (TechCrunch) in which the author enjoins: “Go ahead, say it out loud. The internet is a utility.There, you’ve just skipped past a quarter century of regulatory corruption and lawsuits that still rage to this day and arrived directly at the obvious conclusion.” Of course, that created a rejoinder: More? – “The Internet is an incredibly useful tool in modern society, but it isn’t essential to the basic functioning of society. Utilities are.” My take: The Internet is a basic need now for the info-organism we are all becoming. So I’m leaning toward the utility camp, I’m afraid. There’s a new book on the subject, should you be interested.
The Monuments of Tech (NYTimes.com) A meditation, with far too photos, on the meaning of the campuses built by Google, Twitter, Apple, Facebook. Have you read The Circle yet? Read The Circle. Then read this.
Welcome to Googletown (The Verge) As long as we’re talking tech monuments, here’s a full blown deep dive into the relationship between Google and its Silicon Valley home, Mountain View. As one might expect, it’s fraught. But I’ve spent time in Mountain View before Google got there. Not that much has changed, outwardly. If Google keeps growing the way it’s planning to grow, that won’t be the case.
When quantified-self apps leave you with more questions than answers (The Daily Dot ) Something of a takedown on admittedly kludgy first generation self trackers. “I tweet a lot, but it’s mostly nonsense. I don’t have a whole lot of use for “data” about myself.” I just started using the Nike Fuelband. I’ll post plenty about that I’m sure, as the first week has proven interesting.
Can Privacy Be Saved? (The New York Review of Books) Don’t you love articles that ask questions, then fail to answer them? Me too. This is a review of various government reports and Presidential speeches arising from the Snowden revelations. The essay makes a strong case for – making a stronger case for privacy. It ends by citing Orwell, Dick, and Bradbury. It does not answer the question – which may well be the answer after all.
This week we thought about paid peering, fiber, and privacy in a lot of different contexts. As always if you want to keep up with what we’re reading/thinking about on a weekly basis, the best way is to subscribe to the “else” feed, either as an email newsletter or through RSS. And tweet us links!
Inside The Netflix/Comcast Deal and What The Media Is Getting Very Wrong — Streaming Media
Dan Rayburn clarifies some of the bad reporting on the Netflix Comcast deal: “it simply comes down to Netflix making a business decision that it makes sense for them to deliver their content directly to Comcast, instead of through a third party” and adding that Comcast guarantees certain quality by an SLA.
Comcast is definitely throttling Netflix, and it’s infuriating
Matt Vukas tries to parse what’s going on with Comcast’s alleged throttling of Netflix traffic, playing around with encrypted VPN that masks the video traffic, and pinging the traceroute to see where is packets are coming from. His follow up post describes how hard it is for consumers to understand what’s going on with their internet traffic, especially when CDN peering relationships are part of the problem.
Exploring new cities for Google Fiber — Google Blog
Google expands its experiments in Kansas City and Austin to a few major cities including Portland and the Research Triangle area. This is certainly an interesting step forward, especially as the natural monopoly of cable internet providers expands. So how do we feel about Google controlling the pipes and the content?
This week, Google is on our minds and in the news, cookies are used for surveillance, the ephemeral web isn’t so ephemeral, and we’ve got more friends thinking about our emerging Data Society.
As always, if you want to keep up with what we’re reading/thinking about on a weekly basis, the best way is to subscribe to the “else” feed, either as an email newsletter or through RSS. And tweet us links!
Google’s Road Map to Global Domination – NYTimes
A long read on Google’s continued efforts to map the world. We’ve seen how important the map is to the success of the self-driving car. But is this a question of the map and the territory? “It’s not entirely rational to build a map like Google has.” Includes obligatory Borges reference, of course.
Google Adds to Its Menagerie of Robots – NYTimes
Google is acquiring Boston Dynamics, robotics firm responsible for animal-like robots in BigDog. The company also has ties to DARPA. And the autonomous plot thickens…
State of Deception: Why won’t the President rein in the intelligence community? – The New Yorker
Details the political challenge weighing privacy and security against each other. The interesting takeaway for me was about the illusion of oversight: “People get on this committee and the first thing the intelligence community tries to do is get them to be ambassadors for the intelligence community rather than people doing vigorous oversight. The intelligence community basically takes everybody aside and says, ‘Here’s the way it works. . . .’ There’s no discussion about privacy issues or questions about civil liberties—those usually get thrown in afterward.”
Surveillance: Cozy or Chilling? – NYTimes
This piece explores the bodily metaphors we use to understand legal precedents for surveillance. “This framing question of ‘expectation of privacy’ is how courts currently determine what government behavior is permissible. And surely our metaphors for new technologies are vital to explaining what we ‘expect’ in terms of privacy.”
Data & Society danah boyd et al. are launching Data & Society, a new think/do tank addressing “social, technical, ethical, legal, and policy issues that are emerging because of data-centric technological development.” We’re excited to see more activity like this—keep an eye on this space!
This week, bitcoin seems to have gotten the thumbs up for innovation despite some shady origins, lots of background details came out about the circumstances that approved NSA dragnet, and privacy is declared an anomaly. As always, if you want to keep up with what we’re reading/thinking about on a weekly basis, the best way is to subscribe to the “else” feed, either as an email newsletter or through RSS. And tweet us links!
Bitcoins Bitcoins Everywhere – Brad Feld
On the heels of the bitcoin hype of this week, Feld offers a helpful deconstruction: “It’s possible to separate the functions of value store, unit of account, and transaction mechanism. They fit together neatly and are systemically related, but they’re three different things…As a software person, I think of this as a platform. A new electronic payment platform that may have significant advantages over most of the existing ones.”
The Myth of Virtual Currency – Cyborgology
“Calling Bitcoins ‘virtual currency’ is nonsensical because all currencies are virtual in that they are ‘collective hallucinations’ about measurement of worth, and they are all equally physical because they are held, exchanged and produced in very tangible ways with equally tangible consequences.”
Congress and Courts Weigh Restraints on N.S.A. Spying – NYTimes
How to handle critical response to the NSA is becoming messy, a challenge from the Electronic Privacy Information Center filed directly to the Supreme Court is turned away. It argued that the NSA “exceeded its statutory jurisdiction when it ordered production of millions of domestic telephone records that cannot plausibly be relevant to an authorized investigation.”
Fisa court order that allowed NSA surveillance is revealed for first time – The Guardian
Revealing that the “novel use” of surveillance technology made bulk collection hard to compare to previous precedents. “These definitions do not restrict the use of pen registers or trap-and-trace devices to communication facilities associated with individual users, it is finding that these definitions encompass an exceptionally broad form of collection.”
N.S.A. Report Outlined Goals for More Power – NYTimes.com
On the “golden age of Sigint”: “To be ‘optimally effective,’ the paper said, ‘legal, policy and process authorities must be as adaptive and dynamic as the technological and operational advances we seek to exploit.'”
If this doesn’t terrify you… Google’s computers OUTWIT their humans – The Register
Despite the link-baity headline, pretty interesting to think about when we can no longer understand how our algorithms work…”This means that for some things, Google researchers can no longer explain exactly how the system has learned to spot certain objects, because the programming appears to think independently from its creators, and its complex cognitive processes are inscrutable. This ‘thinking’ is within an extremely narrow remit, but it is demonstrably effective and independently verifiable.”
A Palimpsest of Code – Snarkmarket
The Google books ruling is all about turning the physical into digital: “Similarly, Google Books is also transformative in the sense that it has transformed book text into data for purposes of substantive research, including data mining and text mining in new areas, thereby opening up new fields of research. Words in books are being used in a way they have not been used before.”
This week, we dig deeper into the political implications of NSA revelations, we think about how we live with technology, note that self-driving cars are safe but driving under the influence of Glass is not, and bitcoin goes mainstream as a transaction protocol.
As always, if you want to keep up with what we’re reading/thinking about on a weekly basis, the best way is to subscribe to the “else” feed, either as an email newsletter or through RSS.
It’s time for Silicon Valley to ask: Is it worth it? – Pandodaily
Evoking David Foster Wallace’s question: “Where and when was the public debate on whether they’re worth it?” we have to wonder where these trade offs between security and privacy and overly broad law leave us.
The Real Privacy Problem – MIT Technology Review
Passing privacy legislation won’t solve the real civic problem, argues Evgeny Morozov. “How can we make sure that we have more control over our personal information?—cannot be the only question to ask. Unless we learn and continuously relearn how automated information processing promotes and impedes democratic life, an answer to this question might prove worthless, especially if the democratic regime needed to implement whatever answer we come up with unravels in the meantime.”
Waiting for the Next Great Technology Critic – The New Yorker
On the event of Pogue’s and Mossberg’s respective departures from their papers, Matt Buchanan explores the kind of consumer tech criticism we need now that goes beyond describing consumption of beautiful gadgets: “The questions that consumers face, in other words, are less about what to buy than about how to live.”
Data Shows Google’s Robot Cars Are Smoother, Safer Drivers Than You or I – MIT Technology Review
Google is beginning to share data on how its self-driving cars are better drivers than humans. That same data will likely be used to change how liability gets determined: “We don’t have to rely on eyewitnesses that can’t act be trusted as to what happened—we actually have the data…The guy around us wasn’t paying enough attention. The data will set you free.”
Bitcoin Pursues the Mainstream – NYTimes
Entrepreneur Jeremy Allaire enters the bitcoin ring with his latest start up, Circle, and calls Bitcoin as significant as the web browser.
Bitcoin as Protocol – Union Square Ventures
Bitcoin’s is changing the way transactions are represented in a “distributed public ledger.” Much like HTTP, TCP/IP and DNS, this protocol will be a building block for further innovation.
Finally, an Art Form That Gets the Internet: Opera – The Atlantic
The challenge of depicting drama as a digital media is taken on in this Opera, Two Boys. “This is an opera that is essentially set on the Internet,” says Mark Grimmer. “And we don’t know what the Internet really looks like.”
This week, we’re excited about what the new M7 sensors mean for iPhone activity tracking, we’re thinking about how to rebuild trust in the internet and tech companies post-Snowden, and we’re listening to some music that plays with the boundaries between analog and digital. As always, if you want to keep up with what we’re reading/thinking about on a weekly basis, the best way is to subscribe to the “else” feed, either as an email newsletter or through RSS.
Government Secrecy and the Generation Gap – FT
Bruce Schneier writes that the culture of loyalty and secrecy that intelligence agencies relies on is breaking down with generational differences. Expect more whistleblowers.
Dawn of Midi – Radiolab
This Radiolab short features Dawn of Midi, a band that plays with the boundaries between acoustic and electronic music production. We’ve gone from analog to digital and back again. Worth a listen for the music, and for the description of the process we’re going through as our tools expand our understanding of what we might be capable.