Facebook, Google running low on fans

It’s time to drop the habit of calling Facebook and Google “tech firms”, as if they are public-spirited pioneers at the frontier of global R&D.

Google and Facebook are highly profitable digital billboards reaping the rewards of monopoly revenues as a result of stumbling upon digital technology and eating up the competition. Picture: AP

It’s time to drop the habit of calling Facebook and Google “tech firms”, as if they are public-spirited pioneers at the frontier of global R&D.

Airlines, banks, newspapers all use technology. Every big company needs technological expertise to thrive.

Google and Facebook are highly profitable digital billboards reaping the rewards of monopoly revenues as a result of stumbling upon digital technology and eating up the competition. They make more than 90 per cent of their $US130 billion ($184bn) in revenue from advertising.

And Facebook is also a publisher, though it conveniently escapes legal responsibility for anything published by its users.

The Australian competition regulator’s inquiry into the market power of the digital platforms, due to make final recommendation later this year, hasn’t come soon enough. It highlights a global change in attitude to the two digital giants, reflected in a series of inquiries around the world.

In the US the Federal Trade Commission is ramping up its own investigation, hiring 17 lawyers — around the same number as on the investigation by Robert Mueller into Russian interference. It says it will reconsider past mergers and takeovers, such as Facebook’s buyout of Instagram and WhatsApp.

Since 2005 Google has made around 200 acquisitions including mobile phone interface Android, YouTube, and advertising technology firms AdMob and DoubleClick, ensuring its dominance of the advertising and search market.

Rule changes are pending to give newspapers the ability to negotiate collectively with Google and Facebook, which is currently illegal, owing to anti-trust rules designed generations ago. News Corp, owner of The Australian, is at the vanguard of publishers globally wanting a fairer slice of the revenues generated in part on the appeal of access to the production of news.

One of the key reasons Facebook and Google are so widely used is because of the access they offer to news. They have enjoyed that access for free.

The Obama administration’s infatuation with the so-called tech giants has abated. Indeed, between his first inauguration and the end of 2015, Google employees and associated firms visited the White House 427 times, including 21 small, intimate meetings with the president, according to analysis by Luigi Zingales of University of Chicago.

How times have changed. Senator Elizabeth Warren, who has started campaigning for the Democratic nomination for US president, has recommended this week breaking the titans up.

The European Commission, which fined Google €4.34bn last year, is increasingly seen as a regulator pioneer.

US President Donald Trump is not a fan.

Some Republicans are angry that Google and Facebook have escaped censure for abetting pornography and other unsavoury material, hiding behind section 230 of the US Communication Decency Act.

In Britain the Competition and Market Authority is inching towards setting up its own review of the two firms’ power. French authorities have planned their own inquiry.

Breaking up Facebook and Google is probably impractical, especially in Australia. But the ACCC’s final report, due in June, could include far-reaching recommendations to strengthen publishers’ negotiating positions and require fair compensation for publishers for use of their material.