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Gatekeepers Gonna Gate: Apple, Google, and Antitrust (Thinks Out Loud Episode 258) – Headlines and Show Notes
Apple's getting in some trouble for how their App Store restricts access to apps that aren't Apple's. Google's getting in even more trouble with antitrust authorities. And Facebook's not super popular with regulators either, facing scrutiny from a handful of state attorneys general too. We live in a world where it's clear that gatekeepers gonna gate. But is antitrust regulation the right answer? Should Google and Apple and Facebook and Amazon have to reveal all the details of how they do what they do?
The latest episode of Thinks Out Loud takes a look both at the reality that gatekeepers gonna gate and asks a series of questions about what you should expect of these tech giants, both as a marketer and as a consumer.
Want to learn more? Here are the show notes for you:
- How Apple's Apps Topped Rivals in the App Store It Controls – The New York Times
- Google under antitrust investigation by 50 attorneys general – The Verge
- Stop Outsourcing Your Sales & Marketing to Gatekeepers Like Google (Thinks Out Loud Episode 257)
- Why Google is the Beast That Scares Your Industry's 800-lb. Gorilla (Thinks Out Loud Episode 238)
- Digital Gatekeepers and the Death of Organic Traffic (Thinks Out Loud Episode 247)
- How to Compete With Amazon (and Expedia and Google and…) (Thinks Out Loud Episode 221)
- In Digital, Is Google Your Enemy? (Thinks Out Loud Episode 249)
- How Worried Are You About Google Next Year? (Thinks Out Loud Episode 255)
- Digital is Like Gravity (Thinks Out Loud Episode 205)
- Network effect – Wikipedia
- LikeWar: The Weaponization of Social Media: P. W. Singer, Emerson T. Brooking: 9780358108474: Amazon: Books
- AmazonSmile: Information Rules: A Strategic Guide to the Network Economy (9780875848631): Carl Shapiro, Hal R. Varian: Books
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You might also want to check out these slides I had the pleasure of presenting recently about the key trends shaping marketing in the next year. Here are the slides for your reference:
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Recorded using a Heil PR-40 Dynamic Studio Recording Mic and a Focusrite Scarlett 4i4 (3rd Gen) USB Audio Interface into Logic Pro X for the Mac.
Running time: 18m 58s
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Gatekeepers Gonna Gate: Apple, Google, and Antitrust (Thinks Out Loud Episode 258) Transcript
Well. Hello again everyone and welcome back to Thinks Out Loud, your source for all the digital marketing expertise your business needs. My name is Tim Peter. Today is Tuesday, September 10th, 2019. This is episode 258 of the big show. And as ever, I very much appreciate you tuning in. It's funny the name of this show is Thinks Out Loud. Today that title is probably more spot on than most.
Gatekeepers Gonna Gate: Introduction
The reason for that is because I have said for some time that gatekeeper's gonna gate. It's just the way they behave. It's the world in which they live. There are two new stories this week that got my attention around what gatekeeper's gonna gate might look like as we go forward through the rest of this year and into 2020.
The first was a story from the New York Times that noted Apple's apps ranked first, and I'm quoting, "For at least 700 search terms in the app store. Some searches produced as many as 14 Apple apps before showing results from rivals though," and the article continues, "Though competitors could pay Apple to place ads above the Apple results." I mean, that last line is a killer. If we're saying gatekeeper is going to gate, that pretty much sums it up right there.
They note in the article that searches for podcasts don't turn up Stitcher radio, which I talk about here all the time on the show, very popular podcatcher. They note that searches for music doesn't turn up Spotify. That's crazy. So clearly, this is a gatekeeper who's gonna gate and they're gating pretty hard.
The other article, of course, is that Google has been hit with an antitrust investigation from essentially every state's attorney general in the United States. Facebook has been invited to that party by another half dozen or so attorneys general. Which clearly that's a huge, huge step in terms of trying to reshape the marketplace.
Now, the reason that I think these are both interesting is because they're going to shape the landscape of what gatekeepers and you as a user of those gatekeepers, you as a marketer who tries to get your customers, who tries to reach customers using these folks, that's going to shape the landscape of the world you live in for the next couple of years. Now what's really interesting about this is the New York Times stated, this is from the New York Times article about Apple and the app store. I'm quoting this. It says, "Apple and other tech giants like Facebook and Google will not explain in detail how such algorithms work even when they blame the algorithms for problems."
Now I want to be really fair. I actually agree with the gatekeepers on this one. I have agreed with this approach forever. There are a couple of good reasons why gatekeepers should not make this information public.
The first is we've all seen how open access allows for trolls and allows for trouble. Look at 8chan or some of the more problematic boards on Reddit, or the rise of, well essentially Nazis on Twitter. There are just all whole host of horrible people out there who look for opportunities to pee in the public pool every chance they get. I've said many times before, quoting the French philosopher Paul DeLillo, "When you build the ship, you build the shipwreck."
Should Google's algorithm or Apple's be fully public? I think that's just going to make it easier for the trolls and troublemakers to game the system. There's a really great book by Emerson Brooking and Peter Singer called LikeWar. It's spelled #LikeWar, where Singer and Brooking say that once, every village had an idiot. It took the internet to bring them all together. And I'd add the same is true for every villages resident troll too.
Trolls used to exclusively live under bridges. Now, thanks to the internet, they coordinate their harassment and their hurt on a daily basis using digital to share tips on how to be the most effective and efficient trolls they possibly can be in their attacks. They have all the incentive in the world to keep doing it, to get better at that. Do we really think it's a good idea to provide them access to understand how to do it better? I don't. So clearly I'm not a fan of making the algorithm public for that reason alone.
I also, even in Google's case, more or less agree with their argument about the importance of keeping the algorithm private as a trade secret. I'm a capitalist. I'm a business guy. I think there's a lot of merit in saying there are things that companies are allowed to keep private. I do think the public good outweighs that sometimes and I will come to that, but Google in my experience is uniquely positioned both as a company that dominates the market place and also as one that could lose it all tomorrow.
Google's Power is Brittle: Is That Always True for Gatekeepers?
I've mentioned before here on the show how their power is brittle because switching costs for consumers are so low. Consumers tomorrow could start searching on Bing or DuckDuckGo in an instant. And it would significantly hurt Google's revenues right now. Last quarter, the company made about 85% of its revenues from paid clicks on advertising. Believe me, they'd notice if a large number of folks started searching somewhere else. Let's be fair about this, even switching from an Android device to an iPhone is relatively trivial, if we think about the history of switching costs.
Now, as for the switching costs argument for Apple and Amazon, I'd say somewhat similar dynamics apply. Though to be fair, you have to think that Amazon isn't a switching cost problem for customers. It's really a switching cost problem for sellers. That dynamic, the differences between Facebook and Google and Apple and Amazon, when we get into these details, underscores why actually it's tougher to look at these tech giants holistically than it might seem at first glance.
As an example of the contrasts, Facebook absolutely plays a huge role in digital media. And while it's free for customers to use, the switching costs for Facebook's users are for all practical purposes, infinite due to its network effects. You can't leave Facebook until and unless all the other people you want to connect with do too. The same is true for them in reverse. All your friends and family and fans and followers would all have to agree to leave at the same time and choose to go to the same place to really break free of Facebook's influence.
Now call me crazy, that seems pretty unlikely. Whereas Google and Amazon and Apple, that same dynamic doesn't exist. But all that said, I think it's safe to say that we should all agree that we don't want trolls to have better understanding of the algorithm, and that varying market dynamics might play a role in determining varying approaches to the differing players here.
"Do Nothing" Isn't a Good Answer Given that Gatekeepers Gonna Gate
Now, all that said, I also don't believe that the right answer is to do nothing. Google's power, no matter how brittle it may be, also is enormous. The same is true for Facebook and Amazon and Apple. They have within their respective spheres of influence, tremendous power over the marketplace. In most cases, it's safe to sow that they exercise either monopoly or monopsony power over some piece of the value chain.
So for me, the questions start to become:
- What markets do they each actually have power in?
- Is their power monopoly power, monopsony power — meaning they're the only place you can sell to, not the only place you can buy from — or is it some combination? Is it both monopoly and monopsony power? And I think in Google's case you can argue they definitely have some monopoly power and some monopsony power.
- By the way, this is straight out of the legal framework, I didn't make these up.
- But the next question is, are they unduly leveraging that power to hurt competition or consumers or again, both?
- And assuming the answers to those first three questions lead in this direction, how do you best remedy the situation?
Now it's clear, it's apparent given that 50 states's attorneys general think it's worth investigating Google for antitrust, that at least, when it comes to Google, the answers to some of those questions are problematic. At least again, a half a dozen states attorneys general agree that the same is true for Facebook. So there's something there that we need to be paying attention to. I don't think we need states attorneys general tell us this. I think we see it both as consumers and as marketers every day.
Now in the book Information Rules, which I cite regularly here on the show, economist, Carl Shapiro and Hal Varian argue that these dominant players are a natural consequence of digital. I think they're right. Hell, I think the history of the last two decades has proven their point. By the way, I always have to point out that Hal Varian who wrote that book is now the chief economist for Google. So he didn't just put the writing on the wall. He read it and said, "I know where I want to be." But I think we need to look at this and say, "Okay, does this mean we can't compete?" And I'd say the answer's no. Because in that same book we do see you can be a differentiated player. And again, we see example after example where people pull that off or people accomplish that.
So I think we need to think about this in terms of are we competing effectively? The right answer for almost everybody who's going to listen to this show is not to compete by trying to be the dominant player in an information space. It's to be a differentiated player. It's to own your niche and own your customer more directly. It's, as I talked about last week, not to outsource your sales and marketing to any one of these folks. We are all better off when there is a Google and an Apple and an Amazon and a Facebook and whatever else comes down the pipe to help us ensure that no one of them becomes the single dominant player.
I think we have to start asking very serious questions about what role do we want government to play in shaping these remedies. What is an appropriate remedy. And is an inappropriate remedy throwing open the commons to everybody? Because as we've seen with comment boards and we've seen with 4chan and 8chan and things like that, I don't think that's really what we want. I don't think we really want to turn all the power over to the trolls because they have every incentive to take it and ruin it for everybody.
We also have to agree that that can't be the reason just because there might be a shipwreck is no reason to not invent a ship. Right? I mean we've got to be able to turn that phrase around. The reality is we need to take control of the commons in a way that makes sense for us. We need to come up with some basis for agreeing on where it's appropriate to say, "Okay, somebody got too much power and that's making it problematic for everybody." But also they have to be free to make use of their power where it's appropriate to to create a better space there too, and to compete commercially. Because maybe someday we'd like to be those folks.
I opened by saying, "This one's going to be something of a thinks out loud." I don't know that I know the answers. But I do think the right first step in coming up with the right answers is asking the question. And the questions are where do we want this to go? What kind of world do we want to live in? And how do we want to shape the environment in which we compete in a way that's better for everybody? Because if we get that right, all the rest of this takes care of itself.
I'd love to hear your point of view on this. I've mentioned every week that you can email me at firstname.lastname@example.org. Again email@example.com.
You can find me on Facebook at Facebook.com/TimePeterAssociates. You can find me on Twitter using the Twitter handle @TCPeter. You can find me on my website and send a contact message, whatever you prefer. But I'd love to hear from you about what you think the right thing is here, and how it is that we make sure we're inventing the ship as well as a shipwreck, and making sure that if gatekeepers going to gate we understand where those walls are and where those gates are and which ones we're comfortable with. Because it may be true that gatekeepers are going to gate, but I think it's fair to say that we get a voice and a vote in terms of where those gates can be, and which tolls we're willing to pay and when it is that it's appropriate to actually break those gates wide open.
Now looking at the clock on the wall, we are out of time. But I want to thank you again so much for tuning in. I genuinely do appreciate it. I want to remind you that you can find the show notes for today's episode as well as an archive of all our past episodes by going to TimPeter.com/podcast. Again, that's TimPeter.com/podcast. Just look for episode 258. While you're there, you can click on the subscribe link in any of the episodes you find there to have Thinks Out Loud delivered to your favorite podcatcher every single episode.
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With that, I want to say thanks so much for tuning in. I very much appreciate it. I hope you have a great rest of the week, a wonderful weekend, and I will look forward to speaking with you here on Thinks Out Loud next time. Until then, as ever, I want to remind you to please be well, be safe and take care everybody.