Data and Goliath (9 page)

There’s a concept from robotics that’s useful here. We tend to be
comfortable with robots that obviously look like robots, and with robots that appear
fully human. But we’re very uncomfortable with robots that look a lot like people
but don’t appear fully human. Japanese roboticist Masahiro Mori called this phenomenon
the “uncanny valley.” Technology critic Sara M. Watson suggested that there’s a similar
phenomenon in advertising. People are okay with sloppily personalized advertising
and with seamless and subtle personalized advertising, but are creeped out when they
see enough to realize they’re being manipulated or when it doesn’t match their sense
of themselves.

This is all going to change over time, as we become used to personalized advertising.
The definition of “creepy” is relative and fluid, and depends a lot on our familiarity
with the technologies in question. Right now, ads that follow us around the Internet
feel creepy. Creepy is also self-correcting. Google has a long and complex policy
of impermissible search ads, because users found some types of advertising too creepy.
Other companies are letting people click on a link to find out why they were targeted
for a particular ad, hoping that that will make them more comfortable with the process.

On the other hand, some companies just hide it better. After the story ran about Target
figuring out that the teenager was pregnant, the company changed the way it sent targeted
advertising to people. It didn’t stop advertising to women it thought were pregnant,
but it embedded those targeted ads among more general ads. Recipients of these mailings
didn’t feel targeted, so they were less creeped out by the advertisements.

Meanwhile, the prevalence of advertising in our environment is making individual ads
less valuable for two reasons. First, as advertising saturates our world, the value
of each individual ad falls. This is because the total amount of money we have to
spend doesn’t change. For example, all automobile manufacturers are fighting for the
profit from the one car you will buy. If you see ten times the ads, each one is only
worth one tenth the price, because in the end you’re only going to buy one car.

Second, we are better at tuning advertising out. Since the popularization of analog
video recorders in the mid-1970s, television advertisers have paid attention to how
their ads look in fast-forward, because that’s how many people watch them. Internet
advertising has waged an even more complex battle for our attention. Initially, ads
were banners on the top of pages.
When we learned how to ignore them, the advertisers placed their ads in the main parts
of the pages. When we learned to ignore those, they started blinking and showing video.
Now they’re increasingly interfering with what we want to read, so we need to deliberately
shoo them away. More than 50 million people have installed AdBlock Plus on their browsers
to help them do this.

The result is that the value of a single Internet advertisement is dropping rapidly,
even as the cost of Internet advertising as a whole is rising. Accordingly, the value
of our data to advertisers has been falling rapidly. A few years ago, a detailed consumer
profile was valuable; now so many companies and data brokers have the data that it’s
a common commodity. One analysis of 2013 financial reports calculated that the value
of each user to Google is $40 per year, and only $6 to Facebook, LinkedIn, and Yahoo.
This is why companies like Google and Facebook keep raising the ante. They need more
and more data about us to sell to advertisers and thereby differentiate themselves
from the competition.

It’s possible that we’ve already reached the peak, and the profitability of advertising
as a revenue source will start falling, eventually to become unsustainable as a sole
business model. I don’t think anyone knows how the Internet would look if the advertising
bubble burst, surveillance-based marketing turned out not to be effective, and Internet
companies needed to revert to more traditional business models, like charging their
users.

NEW MIDDLEMEN CONSOLIDATE POWER

One of the early tropes of the Internet was that it would eliminate traditional corporate
middlemen. No longer would you have to rely on a newspaper to curate the day’s news
and provide it to you in an easy-to-read paper package. You could go out and design
your own newspaper, taking bits from here and there, creating exactly what you wanted.
Similarly, no longer would you have to rely on centralized storefronts to accumulate
and resell collectibles; eBay connected buyers and sellers directly. It was the same
with music promotion and distribution, airline tickets, and—in some cases—advertising.
The old gatekeepers’ business models relied on inefficiencies of technology, and the
Internet changed that dynamic.

It’s even more
true today. AirBnB allows individuals to compete with traditional hotel chains. TaskRabbit
makes it easier to connect people who want to do odd jobs with people who need odd
jobs done. Etsy, CafePress, and eBay all bypass traditional flea markets. Zillow and
Redfin bypass real estate brokers, eTrade bypasses investment advisors, and YouTube
bypasses television networks. Craigslist bypasses newspaper classifieds. Hotwire and
Travelocity bypass travel agents.

These new companies might have broken the traditional power blocs of antique stores,
newspapers, and taxi companies, but by controlling the information flow between buyers
and sellers they have become powerful middlemen themselves. We’re increasingly seeing
new and old middlemen battle in the marketplace: Apple and its iTunes store versus
the music industry, Amazon versus the traditional publishing industry, Uber versus
taxi companies. The new information middlemen are winning.

Google CEO Eric Schmidt said it: “We believe that modern technology platforms, such
as Google, Facebook, Amazon and Apple, are even more powerful than most people realize
. . . , and what gives them power is their ability to grow—specifically, their speed
to scale. Almost nothing, short of a biological virus, can scale as quickly, efficiently
or aggressively as these technology platforms and this makes the people who build,
control, and use them powerful too.”

What Schmidt is referring to is the inherently monopolistic nature of information
middlemen. A variety of economic effects reward first movers, penalize latecomer competitors,
entice people to join the largest networks, and make it hard for them to switch to
a competing system. The result is that these new middlemen have more power than those
they replaced.

Google controls two-thirds of the US search market. Almost three-quarters of all Internet
users have Facebook accounts. Amazon controls about 30% of the US book market, and
70% of the e-book market. Comcast owns about 25% of the US broadband market. These
companies have enormous power and control over us simply because of their economic
position.

They all collect and use our data to increase their market dominance and profitability.
When eBay first started, it was easy for buyers and sellers to communicate outside
of the eBay system because people’s e-mail
addresses were largely public. In 2001, eBay started hiding e-mail addresses; in 2011,
it banned e-mail addresses and links in listings; and in 2012, it banned them from
user-to-user communications. All of these moves served to position eBay as a powerful
intermediary by making it harder for buyers and sellers to take a relationship established
inside of eBay and move it outside of eBay.

Increasingly, companies use their power to influence and manipulate their users. Websites
that profit from advertising spend a lot of effort making sure you spend as much time
on those sites as possible, optimizing their content for maximum addictiveness. The
few sites that allow you to opt out of personalized advertising make that option difficult
to find. Once companies combine these techniques with personal data, the result is
going to be even more insidious.

Our relationship with many of the Internet companies we rely on is not a traditional
company–customer relationship. That’s primarily because we’re not customers. We’re
products those companies sell to their
real
customers. The relationship is more feudal than commercial. The companies are analogous
to feudal lords, and we are their vassals, peasants, and—on a bad day—serfs. We are
tenant farmers for these companies, working on their land by producing data that they
in turn sell for profit.

Yes, it’s a metaphor—but it often really feels like that. Some people have pledged
allegiance to Google. They have Gmail accounts, use Google Calendar and Google Docs,
and have Android phones. Others have pledged similar allegiance to Apple. They have
iMacs, iPhones, and iPads, and let iCloud automatically synchronize and back up everything.
Still others of us let Microsoft do it all. Some of us have pretty much abandoned
e-mail altogether for Facebook, Twitter, and Instagram. We might prefer one feudal
lord to the others. We might distribute our allegiance among several of these companies,
or studiously avoid a particular one we don’t like. Regardless, it’s becoming increasingly
difficult to not pledge allegiance to at least one of them.

After all, customers get a lot of value in having feudal lords. It’s simply easier
and safer for someone else to hold our data and manage our devices. We like having
someone else take care of our device configurations, software
management, and data storage. We like it when we can access our e-mail anywhere, from
any computer, and we like it that Facebook just works, from any device, anywhere.
We want our calendar entries to automatically appear on all of our devices. Cloud
storage sites do a better job of backing up our photos and files than we can manage
by ourselves; Apple has done a great job of keeping malware out of its iPhone app
store. We like automatic security updates and automatic backups; the companies do
a better job of protecting our devices than we ever did. And we’re really happy when,
after we lose a smartphone and buy a new one, all of our data reappears on it at the
push of a button.

In this new world of computing, we’re no longer expected to manage our computing environment.
We trust the feudal lords to treat us well and protect us from harm. It’s all a result
of two technological trends.

The first is the rise of cloud computing. Basically, our data is no longer stored
and processed on our computers. That all happens on servers owned by many different
companies. The result is that we no longer control our data. These companies access
our data—both content and metadata—for whatever profitable purpose they want. They
have carefully crafted terms of service that dictate what sorts of data we can store
on their systems, and can delete our entire accounts if they believe we violate them.
And they turn our data over to law enforcement without our knowledge or consent. Potentially
even worse, our data might be stored on computers in a country whose data protection
laws are less than rigorous.

The second trend is the rise of user devices that are managed closely by their vendors:
iPhones, iPads, Android phones, Kindles, ChromeBooks, and the like. The result is
that we no longer control our computing environment. We have ceded control over what
we can see, what we can do, and what we can use. Apple has rules about what software
can be installed on iOS devices. You can load your own documents onto your Kindle,
but Amazon is able to delete books it has already sold you. In 2009, Amazon automatically
deleted some editions of George Orwell’s
Nineteen Eighty-Four
from users’ Kindles because of a copyright issue. I know, you just couldn’t write
this stuff any more ironically.

Even the two big computer operating systems, Microsoft’s Windows 8 and Apple’s
Yosemite, are heading in this direction. Both companies are pushing users to buy only
authorized apps from centralized stores. Our computers look more like smartphones
with every operating system upgrade.

It’s not just hardware. It’s getting hard to just buy a piece of software and use
it on your computer in any way you like. Increasingly, vendors are moving to a subscription
model—Adobe did that with Creative Cloud in 2013—that gives the vendor much more control.
Microsoft hasn’t yet given up on a purchase model, but is making its MS Office subscription
very attractive. And Office 365’s option of storing your documents in the Microsoft
cloud is hard to turn off. Companies are pushing us in this direction because it makes
us more profitable as customers or users.

Given current laws, trust is our only option. There are no consistent or predictable
rules. We have no control over the actions of these companies. I can’t negotiate the
rules regarding when Yahoo will access my photos on Flickr. I can’t demand greater
security for my presentations on Prezi or my task list on Trello. I don’t even know
the cloud providers to whom those companies have outsourced their infrastructures.
If any of those companies delete my data, I don’t have the right to demand it back.
If any of those companies give the government access to my data, I have no recourse.
And if I decide to abandon those services, chances are I can’t easily take my data
with me.

Political scientist Henry Farrell observed, “Much of our life is conducted online,
which is another way of saying that much of our life is conducted under rules set
by large private businesses, which are subject neither to much regulation nor much
real market competition.”

The common defense is something like “business is business.” No one is forced to join
Facebook or use Google search or buy an iPhone. Potential customers are choosing to
enter into these quasi-feudal user relationships because of the enormous value they
receive from them. If they don’t like it, they shouldn’t do it.

This advice is not practical. It’s not reasonable to tell people that if they don’t
like the data collection, they shouldn’t e-mail, shop online, use Facebook, or have
a cell phone. I can’t imagine students getting through school anymore without Internet
search or Wikipedia, much less finding a job afterwards. These are the tools of modern
life. They’re necessary to a
career and a social life. Opting out just isn’t a viable choice for most of us, most
of the time; it violates what have become very real norms of contemporary life.