How things change

The €2.4B fine on Google handed down by the European Commission stemmed originally from complaints by shopping-comparison sites that changes in Google Shopping that the company introduced in 2008 had amounted to an abuse of its dominance in search. But 2008 was a long time ago in this racket, and shopping-comparison sites have become relatively small beer because Internet users researching possible purchases don’t start with a search engine any more. (Many of them start with Amazon, for example.)

This is deployed (by the Internet giants) as an argument for the futility of trying to regulate behaviour by dominant firms: the legal process of investigation takes so long that the eventual ruling is so out of date as to be meaningless.

This is a convenient argument, but the conclusion isn’t that we shouldn’t regulate these monsters. Nevertheless it is interesting to see how the product search scene has changed over time, as this chart shows.

Source

The obvious solution to the time-lag problem is — as the Financial Times reported on January 3 — for regulators to have “powers to impose so-called “interim measures” that would order companies to stop suspected anti-competitive behaviour before a formal finding of wrongdoing had been reached.” At the moment the European Commission does have powers to impose such measures, but only if it can prove that a company is causing “irrevocable harm” — a pretty high threshold. The solution: lower the threshold.

Amazon and the long game

This morning’s Observer column:

The news that Amazon had acquired Whole Foods Market for $13.7bn sent shivers down the spine of every retailer in America. Shares in Walmart fell 7%, and rival Kroger by 17%. Amazon’s market capitalisation, in contrast, went up by $11bn. So why the fuss? At first sight it seemed straightforward: Amazon wanted to get into food sales, and it fancied having a network of 400 urban stores; and Whole Foods (which some of my American friends call “whole wallet” because of the cost of its products) was ailing. There was also a small political angle: John Mackey, co-founder of Whole Foods, had been enmeshed in a row with an activist investor that threatened to drive him from power; by selling to Amazon, he gets to keep his job. So: small earthquake in food retailing, not many dead?

Er, not quite, and only if you avoid taking the long view. And, with Amazon, the long view is the only one that makes sense…

Read on

Why AI Home Assistants Need a Screen

From MIT Technology Review:

You may control your home with your voice, but having it speak back is often impractical. Asking Amazon’s Alexa to play a specific song, for instance, is a joy. But if you’re not sure what to listen to, the voice-only system can feel limiting. At the same time, voice assistant apps grow in number but go unused because people simply forget about them. Speaking to the [Tech Review] Download, Andrew Ng, chief scientist at Baidu, explained that, while a 2016 study by Stanford researchers and his own team showed that speech input is three times quicker than typing on mobile devices, “the fastest way for a machine to get information to you is via a screen.” He continued: “Say you want to order takeout. Imagine a voice that reads out: ‘Here are the top twenty restaurants in your area. Number one …’ This would be insanely slow!” No surprise, then, that Baidu has been working on a smart assistant device called Little Fish that includes a screen, and Amazon is also rumored to be developing a similar piece of hardware. The AI assistant revolution, it seems, may be televised.

Yep. My experience with Amazon Echo chimes with this.

Digital Dominance: forget the ‘digital’ bit

Some reflections on the symposium on “Digital Dominance: Implications and Risks” held by the LSE Media Policy Project on July 8, 2016.

In thinking about the dominance of the digital giants1 we are ‘skating to where the puck has been’ rather than to where it is headed. It’s understandable that scholars who are primarily interested in questions like media power, censorship and freedom of expression should focus on the impact that these companies are having on the public sphere (and therefore on democracy). And these questions are undoubtedly important. But this focus, in a way, reflects a kind of parochialism that the companies themselves do not share. For they are not really interested in our information ecosystem per se, nor in democracy either, if it comes to that. They have bigger fish to fry.

How come? Well, there are two reasons. The first is that although those of us who work in media and education may not like to admit it, our ‘industries’ are actually pretty small beer in industrial terms. They pale into insignificance compared with, say, healthcare, energy or transportation. Secondly, surveillance capitalism, the business model of the two ‘pure’ digital companies — Google and Facebook — is probably built on an unsustainable foundation, namely the mining, processing, analysis and sale of humanity’s digital exhaust. Their continued growth depends on a constant increase in the supply of this incredibly valuable (and free) feedstock. But if people, for one reason or another, were to decide that they would prefer to be doing something other than incessantly checking their phones, Googling or updating their social media statuses, then the evaporation of those companies’ stock market valuations would be a sight to behold. And while one can argue that such an outcome seems implausible, because of network effects and other factors, then a glance at the history of the IT industry might give you pause for thought.

The folks who run these companies understand this. For if there is one thing that characterizes the leaders of Google and Facebook it is their determination to take the long, strategic view. This is partly a matter of temperament, but it is powerfully boosted by the way their companies are structured: the founders hold the ‘golden shares’ which ensures their continued control, regardless of the opinions of Wall Street analysts or ordinary shareholders. So if you own Google or Facebook stock and you don’t like what Larry Page or Mark Zuckerberg are up to, then your only option is to dispose of your shares.

Being strategic thinkers, these corporate bosses are positioning their organizations to make the leap from the relatively small ICT industry into the much bigger worlds of healthcare, energy and transportation. That’s why Google, for example, has significant investments in each of these sectors. Underpinning these commitments is an understanding that their unique mastery of cloud computing, big data analytics, sensor technology, machine learning and artificial intelligence will enable them to disrupt established industries and ways of working in these sectors and thereby greatly widen their industrial bases. So in that sense mastery of the ‘digital’ is just a means to much bigger ends. This is where the puck is headed.

So, in a way, Martin Moore’s comparison2 of the digital giants of today with the great industrial trusts of the early 20th century is apt. But it underestimates the extent of the challenges we are about to face, for our contemporary versions of these behemoths are likely to become significantly more powerful, and therefore even more worrying for democracy.


  1. Or GAFA — Google, Apple, Facebook, Amazon — as our Continental friends call them, incorrectly in my view: Apple and Amazon are significantly different from the two ‘pure’ digital outfits. 

  2. Tech Giants and Civic Power, King’s College London, 2016. 

The Viking who is taking on Silicon Valley

FT_Vestager

Terrific Financial Times profile of Margrethe Vestager, the EU’s Competition Commissioner, who is really getting up the noses of Silicon Valley’s overlords. Because of public hostility to the craven deal that HMRC negotiated with Google over back-taxes, many people here will be rooting for her. (She’s said that she is prepared to examine the deal.) But if her probe into Apple’s weird tax arrangements with the Irish government results in a colossal back-tax bill for the company, then we will really have moved into new territory.

For one thing, it’ll unravel a crazy system of international tax laws that dates back to 1928. And it’ll open all kinds of worm-cans — Amazon pretending that it’s based in Luxembourg; Facebook, Apple, Microsoft and Google pretending they’re based in Dublin; and so on. And of course the US will be mightily pissed off. Not bad for the daughter of two Lutheran pastors. Just as well that she’s a tough cookie. The FT profile has a nice story about her time as Deputy Prime Minister of Denmark. An opposition spokesman complained in Parliament that her proposed spending plans were “small”.

“Some think it is a rather small plan,” she retorted, with a mischievous grin. “But I am a bit cautious about trusting any judgments on size from men, and perhaps — but this might be a woman’s perspective — I am more interested in the effect.”

Amazon’s Cloud Nine

This morning’s Observer column:

In 1999, Andy Grove, then the CEO of Intel, was widely ridiculed for declaring that “in five years’ time there won’t be any internet companies. All companies will be internet companies or they will be dead.” What he meant was that anybody who aspired to be in business in 2004 would have to deal with the internet in one way or another, just as they relied on electricity. And he was right; that’s what a GPT is like: it’s pervasive.

But digital technology differs in four significant ways from earlier GPTs. First of all, it is characterised by zero – or near-zero – marginal costs: once you’ve made the investment needed to create a digital good, it costs next to nothing to roll out and distribute a million (or indeed a billion) copies. Second, digital technology can exploit network effects at much greater speeds than the GPTs of the past. Third, almost everything that goes on in digital networks is governed by so-called power law distributions, in which a small number of actors (sites, companies, publishers…) get most of the action, while everyone else languishes in a “long tail”. Finally, digital technology sometimes gives rise to technological “lock-in”, where the proprietary standards of one company become the de facto standards for an entire industry. Thus, Microsoft once had that kind of lock-in on the desktop computer market: if you wanted to be in business you could have any kind of computer you wanted – so long as it ran Windows…

Read on

LATER Just came on this — which makes the same point about Amazon’s AWS, only more forcefully.

The concierge economy

My Observer essay on the implications of Uber:

In a way, the name of the company – Uber – gives the game away. It has connotations of elevation, superiority, authority – as in Nietzsche’s coinage, Übermensch, to describe the higher state to which men might aspire. Although it’s only been around since 2009, Uber, the smartphone-enabled minicab company, is probably the only startup of recent times to have achieved the same level of name recognition as the established internet giants.

This is partly because Uber is arguably the most aggressive tech startup in recent history and partly because it has attracted a lot of bad press. But mainly it’s because a colossal pile of American venture capital is riding on it. Its most recent investment round valued the company at about $40bn, which is why every MBA graduate in California is currently clutching a PowerPoint presentation arguing that his/her daft idea is “Uber for X” – where X is any industry you care to mention.

What lies behind the frenzy is a conviction that Uber is the Next Big Thing, fuelled by the belief that it is the embodiment of what Silicon Valley values most, namely “disruptive innovation” – as in disruption of established, old-economy ways of doing things…

Read on

LATER

Om Malik has a very thoughtful essay which starts with a meditation on a conversation he had with an Uber driver, and then moves into a meditation on the apps economy.

Keith [Malik’s Uber driver], who aspires to be in the fashion business was pretty ruthless in his assessment of the company and brought up many questions that have coursed through my mind. He appreciates the financial flexibility Uber has provided him — his luxury car rental business wasn’t enough and he has benefitted from this augmented income. He isn’t the first one who felt that Uber look some pressure off their back — the other day I met a $12-an-hour bouncer at a Tenderloin music venue who is happy dealing with traffic rather than drunks and strung out addicts. “It was worth $19 billion three months ago and now it is worth $41 billion,” says Keith, “isn’t that something. And yet they don’t care about their contractors.”

Still, like many others Keith is befuddled by Uber’s treatment of its contractors. Many of the rule changes seem arbitrary and he too is confused by the tone-deafness of the company. He laments the recent directive (later modified) by Uber to classify all cars before 2010 as a UberX and thus relegated them to lower money making tier. When I point out that as a customer if I am paying premium prices, why shouldn’t I get a premium experience. Today, you end up riding in “black cars” who are a pale imitation of their real self. Shouldn’t the car upgrades result in better cars and through process of elimination bring fewer, but better drivers on the road? Like most drivers, Keith agrees, but points out that logic and reality of being a contract driver are two different things.

It is very hard for people to understand that it isn’t easy to upgrade your car, especially when you are trying to make a living driving an Uber in an intensely competitive marketplace where there are more cars on the road and the pie is getting sliced into thinner and thinner slices. Still, Keith said that he was planning to upgrade, though he didn’t care much for Uber’s financial plans or deals with car companies — he is going to get a Mercedes as part of the upgrade. During our conversation, Keith points out that Uber is good for helping him and others make money in the near term, but the current model doesn’t allow much optimism for the future, thanks to too many cars, too many rules and demand which isn’t rising as fast as the cars.

LATER STILL: this:

Dan Sperling, Founding Director of the Institute of Transportation Studies at UC Davis, says that while Uber “will continue to do battle with local and state authorities, it’s pretty clear that they’ve got a very good business model, they’ve got a lot of momentum, and they’ve got a very good product that people love. They’ll figure out a way around the challenges because it’s clear they provide a valuable service. And that’ll force regulators to reassess their rules, some of which were written up years ago and make absolutely no sense today.’’

As Sperling sees it, “while it’s true that taxis are way over-regulated, the answer is not to smother all the babies competing with them; the answer is to regulate the Ubers of the world better while you deregulate the taxi industry.’’

And what about that $40 billion price tag? Uber and its rivals “are entering a marketplace that has seen almost no innovation in many decades,’’ according to Sperling, who says adding courier and food-delivery services could make Uber even more of a behemoth. “There’s a lot of pent-up demand for real-time, on-demand-type services, so there’s huge upside potential here.’’

Books like running water

This morning’s Observer column

Once upon a time, 12 years ago to be precise, David Bowie said something very perceptive. “Music itself is going to become like running water or electricity,” he told a New York Times reporter. “So it’s like, just take advantage of these last few years because none of this is ever going to happen again. You’d better be prepared for doing a lot of touring because that’s really the only unique situation that’s going to be left. It’s terribly exciting. But on the other hand it doesn’t matter if you think it’s exciting or not; it’s what’s going to happen.”

I thought of Bowie and his perceptiveness last week, when – in a rare piece of corporate carelessness – Amazon inadvertently provided a fleeting glimpse of what it has in store for the publishing industry. A new page appeared on its website only to be very quickly withdrawn, but not before it had been cached by Google and spotted by a hacker website.

What was on this elusive page? Why, nothing more or less than an introduction to a new service called “Kindle Unlimited”. Subscribers will be invited to “enjoy unlimited access to over 600,000 titles and thousands of audiobooks on any device for just $9.99 a month”. One commentator described it as “Netflix for books”. David Bowie would doubtless have said that it’s the turn of books to become like running water or electricity.

Read on

Amazon has now confirmed the launch of the service.