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Google, Facebook, Apple etc. A political economy of the internet monopoly

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Google, Facebook, Apple etc. A political economy of the internet monopoly

  1. 1. Google, Facebook, Apple etc.! A political economy of the internet monopoly! ! ! ! Nikos Smyrnaios Université de Toulouse
  2. 2. The commonplace Since the advent of Web 2.0 in the mid-2000s: The Internet seen as a “naturally” democratic, inclusive means of communication Driven by the ideal of user participation Offering desintermediated, direct and equal contact with the public for all producers of content and publishers
  3. 3. The reality Restructuring of the media landscape and the cultural industries in favour of a small number of Internet multinationals Concentration of the control of the digital information outlets in the hands of a few players Complexification of algorithmic intermediation in the process of online distribution of information => not desintermediation, but re-intermediation
  4. 4. My goal is to show that: 1.  Google, Facebook, Apple, Amazon, Microsoft etc. are part of an Internet oligopoly that benefits from particularly favourable conditions and shares a number of common characteristics 2.  The main goal of the oligopoly is to control the function of infomediation which is central to the Internet 3.  The Internet oligopoly has great impact on media, cultural industries and, par extension, on the public sphere => thus it’s a political stake
  5. 5. The Internet was built with public investments and against commercial logic. Also its architecture was originally decentralised Since 1994 a process of commodification and centralization has started that climaxed in the Internet bubble of the early 90s The promised convergence between telecoms and content industries didn’t take place, but the basis of the oligopoly was set
  6. 6. A. The conditions of the oligopoly 1. Digital convergence The digital convergence took finally place between the industries of telecoms, software, online services and hardware There is a gradual unification of what Benkler (2006) calls logical and physical layers of the internet (but not necessarily the content layer) This unification allows for horizontal and vertical integration Integration is made possible through buyouts (eg. Facebook vs. Instagram), exclusive partnerships (Samsung & Android) or investing (Google+Uber)
  7. 7. Digital convergence facilitates vertical integration (an arrangement in which the supply chain and infrastructure of a company is owned by that company) Datacenters + networks + + hardware + OS + platforms Google: ISP with Sprint and T-Mobile + Google Fiber, Motorola, Android, Chromebook, Google Play, Android Store Facebook: ISP through satellite with Avanti, Facebook Phone with Samsung and HTC, Facebook Home hybrid between App and OS, Facebook Apps Amazon: ISP for Kindles (WhisperNet), Fire Phone+Tablet, Amazon Appstore, Amazon web services Apple: private content-delivery network for iCloud, iOS, iPhone, Mac, iTunes, AppStore Microsoft: Nokia, Windows, Windows Phone, Microsoft Cloud
  8. 8. Digital convergence facilitates also horizontal integration (a strategy where a company creates or acquires production units for outputs which are alike - either complementary or competitive) email + search + networking + e-commerce + personalization
  9. 9. 2. Financialization, deregulation, globalisation Financialization of the world economy drives enormous amounts of capital to Wall Street => Venture capital, BRICS This creates an imbalance with companies that don’t have access to that kind of investors
  10. 10. Deregulation of the world economy offers numerous possibilities for fiscal optimization Internet companies are in the avant garde of such methods
  11. 11. Globalization allows for outsourcing several activities to countries with low wages Material work such as device production : Apple => Foxconn (China) But also intellectual immaterial work such as content moderation: thousands of oDesk free-lances in Morocco, Philippines, Mexico etc. working for Google, Facebook
  12. 12. B. The characteristics of the oligopoly 1. High profitability The profitability of the internet oligopoly is only second to that of the financial industry Q4 Net profit margin rankings: Google 26.28 %, Apple 24,16, %Facebook 25,04%, Microsoft 22,15% (10,6% average of S&P 500®)
  13. 13. 2. Barriers to entry The Internet oligopoly can raise high barriers to entry to its markets in order to kill competition through: 1)  Extremely high investments in R&D 2) Building gigantic datacentres 3) Buying out competition 4) Cross-promotion 5) Patent accumulation
  14. 14. 3. Worldwide strategies and products Almost the entirety of the Internet oligopoly is based in a small region: the Sillicon Valley These companies are organized on the basis of Matrix management That means that the strategic divisions (finance, marketing, engineering) are concentrated in a small number of decision centres (especially in the US) All the important decisions about new products and services are taken there and implemented locally in the same way Local divisions (eg. Google France) have minimum prerogatives (basically only commercial ones)
  15. 15. 4. Segmentation of labour Production is segmented in distinct layers of labour on order to minimize costs 1st layer: high value labour (finance, marketing, engineering), performed internally, very well paid, privileged 2nd layer: secondary labour (industry workers, drivers, cleaners etc.), outsourced with low wages either internationally (China) or through precarious subcontracts 3rd layer: digital labour/free labour (communities of developers, ecosystems of applications, User Generated Content, personal data)
  16. 16. 5. Extension outside the Internet The Internet oligopoly performs “creative destruction” (Schumpeter) It accelerates the destruction of existing activities and creates new ones (eg. Newspaper ads => sponsored links) In order to maintain high profitability the oligopoly pervades sectors outside the internet (transportation, health services, energy production) Final frontier: the artificial intelligence
  17. 17. 6. Intellectual property Contrary to the Cultural Industries the Internet oligopoly doesn’t need to control copyright It concentrates on the control of patents on digital technologies It also guarantees copyright implementation on behalf of the Cultural Industries as well as revenue sharing (systems of automated copyright infringement detection, revenue sharing on platforms such as YouTube, AppStore)
  18. 18. 7. The function of Infomediation “Connecting information supply with information demand and helping both parties involved determine the value of that information” (Hagel III, Rayport, 1997, p. 9).   Infomediaries operate a mix of aggregation & distribution of 3rd party content Based on algorithms and social interactions, financed by ads and/or commissions Google but also Facebook, Twitter, Apple, ISPs etc.
  19. 19. Coopetition = simultaneous cooperation & competition between publishers & infomediaries Mutual dependency: Google needs publishers for the content, publishers need Google for the traffic But the balance of power largely in favour of Google. Competition for online advertising revenue and symbolic antagonism: who’s rules follow the news ? In France: 2003-2008 conflicting period 2013 Google agrees to pay €60M over 3 years In the meantime publishers “enslave themselves to Google” The exemple of Google
  20. 20. Newsworthiness for Google Ranking in Google news For news sites: productivity, reactivity, popularity, completeness For news topics: cluster size, novelty, sources For news items: novelty, originality, click-through rate, mentions in social media, sources 2 traffic sources: Google for archives Google News for hot news
  21. 21. Journalistic practices Proliferation of “Keyword:…” style headlines (Google loves them) e.g. 2 headlines (rarely used) : 1 for Google, 1 for readers Shovelware: re-writing of press agency and PR material (time consuming, low value for journalists) Use of Google Insights to know most searched subjects Use of analytics to appreciate audience performance These are mandatory practices that depend on the context. But they are on the rise
  22. 22. SEO for news Insourcing : SEO specialists inside all main French publishers’ online newsrooms Internal position: close to management, better paid than journalists, no hierarchical power over journalists but “technical” influence (through management) External position : represent publishers towards Google -  use of Sitemaps, meta-tags, microdata -  articles behind a paywall become free access via Google, -  massive use of internal links, -  influence on publishing timing -  Keyword centered landing pages -  Re-publishing with changing headlines
  23. 23. Business strategies Publishers’ business strategies towards Google as a compromise: revenue /dependency/deontology Does Google privilege his advertising partners ? Market share on Google News’ Top Stories (February 2014) Google Ads
  24. 24. Organic reach on Facebook diminishes drastically Facebook pushes paid reach Launch of Public Content Solutions (PCS) dedicated to media partners Apple imposes draconian Terms & Conditions Gets 30% commission Newsstand dedicated to publishers
  25. 25. Conclusions Online media are highly dependent on infomediaries Google is still the most important one for publishers SEO specialists are mediators between journalists, marketers, managers & Google There is an important impact of SEO on journalism (practices, work routines, editorial choices) Nevertheless this impact depends on the context (journalists capacity of negotiation, business models, professional ethics)
  26. 26. Political issues The Internet oligopoly incarnates post-fordist informational capitalism. Therefore it fosters ideology « Californian Ideolology » (Barbrook & Cameron, 1996, Turner, 2006) Technological Solutionism (Morozov, 2013), Radical transparency (Zuckerberg, Schmidt) US foreign policy (Assange, 2014) Libertarianism

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