How did the digital giants get so big, and what should we do about it?

In recent years a handful of giant digital platforms, including Google, Amazon, and Facebook, have grown in dominance. Each one has a market value of half a trillion dollars or more, and almost total control over some of the key levers in the digital economy: Search, online advertising, retail sales, and social networking. That has had a ripple effect on a number of industries, including the media business, where the lion’s share of ad revenue has been siphoned away by Google and Facebook. How did these companies get so big and as powerful? What responsibilities do they have when it comes to things like disinformation, and are they following through on them? And what if anything should we do about their dominance? Should they be broken up, or prevented from acquiring other startups? Should they be forced to help fund the industries they have helped to cripple?

To answer these and other questions, CJR spoke with Alex Kantrowitz, a technology writer with BuzzFeed and the author of a new book: Always Day One: How the Tech Titans Plan to Stay on Top Forever. We also held a series of roundtable conversations on CJR”s Galley discussion platform with Alex and other technology writers and reporters, including Casey Newton from The Verge, Priya Anand from The Information, Ina Fried from Axios and Mark Bergen from Bloomberg. The central thesis of Kantrowitz’s book is that all of the companies he researched — Google, Amazon, Facebook, Apple, and Microsoft — believe they have to continually reinvent their business or they will die. In other words, it’s “always day one,” a term that Amazon CEO Jeff Bezos is credited with. When asked during an all-hands meeting in 2017 what day two would look like, Bezos said “Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline.”

Kantrowitz says when he first heard the term “always day one,” he thought it just meant that Amazon staffers worked really hard — which is definitely true (so hard that the company has come under repeated fire for poor working conditions). But as he did more research, he realized it was about continual reinvention, which is how Amazon has gone from being just an online bookstore to one of the world’s largest retailers, with a cloud computing business, an entertainment business, a grocery store that has no checkout clerks, and so on. One interesting conclusion suggested by his research, he says, is that Apple — which has a market capitalization of $1.2 trillion — may not be able to extend its dominance because it doesn’t take the “always day one” approach. “Apple is in danger of missing the next computing shift, similar to how Microsoft missed mobile,” he says.

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When it comes to Facebook’s approach, Casey Newton says another way to describe the “always day one” strategy is paranoia, “the suspicion that somebody somewhere out there is inventing the thing that is going to destroy you.” Facebook feels this kind of paranoia deeply, Newton argues, partly because founder and chief executive Mark Zuckerberg has a competitive streak, but also because threats to Facebook can emerge faster than threats to Amazon. “If you want to challenge Bezos, you have to design and build a global supply chain,” Newton says. “But if you want to challenge Zuckerberg, you just have to come up with a twist on existing communication tools and get a bunch of teenagers to download it.” This is why the history of Facebook is a history of acquisitions, of startups that are seen as competitive threats, including Instagram and WhatsApp. Facebook tried to buy Snapchat for the same reason but failed.

This acquisitiveness — paid for by the river of cash from its advertising business — is fundamentally bad for both the economy and society in general, Newton argues. “A result of diminished competition is that the pace of innovation slows. We have to wait longer for the next Evan Spiegel to emerge and give us ephemeral messaging and stories. Or for the next TikTok to come along and give us duets and a feed that works even before you follow anyone.” Kantrowitz notes that one of Facebook’s major flaws is that until recently it didn’t think a lot about how its product could be misused. “To invent new things, you must anticipate how they can go wrong,” he says. “Facebook was so convinced its product was de facto good that it didn’t think about how that could lead to horrific consequences, such as what we saw in Myanmar. That will be a stain on the company’s history for the rest of time.”

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Here’s more on the challenges posed by the digital giants:

  • Break them up? If Google and Amazon and Facebook are so dominant, does that mean we should break them up using antitrust laws? Kantrowitz and Newton both say we probably should. “In my book, I argue that we should seriously consider splitting some of these companies apart,” says Kantrowitz. “Smaller entities would need to compete for suppliers by setting better terms: In Amazon’s case that’s the small businesses that sell things through its website. In Facebook and Google’s case that’s media companies producing the content that fill their feeds.” Newton says he is “generally positive about the idea of Facebook being forced to spin off WhatsApp and Instagram,” although separating them may be more complicated than it seems.
  • Flatten the curve: Although the major platforms say they are taking more action against misinformation on their networks, Harvard researcher Joan Donovan argues in an essay in Nature magazine that they must do more to “flatten the curve of misinformation.” The way that fraudulent sources have latched onto the COVID-19 pandemic reveals how important this job is, she says. “In times of uncertainty, the vicious cycle is more potent than ever. Scientific debates that are typically confined to a small community of experts become fodder for mountebanks of all kinds.”
  • Amazon cuts rates: The online retailer notified members of its affiliate program that it is cutting the commission rates it pays, according to a report by CNBC based on an internal document the network obtained. Members — including some of the largest online publishers such as BuzzFeed and the New York Times — get paid a percentage of the sales each time someone clicks on an affiliate link that takes them to an Amazon product. The cuts differ depending on the category of product, CNBC says: the commission on furniture has been cut to 3 percent from 8 percent, and for grocery products it has been reduced to 1 percent from 5 percent.
  • Google media fund: On Wednesday, Google launched a global emergency relief fund for local news publishers to help them during the advertising downturn caused by the COVID-19 pandemic. Google’s vice-president of news, Richard Gingras, said that the funding is open to news organizations “producing original news for local communities during this time of crisis,” and will range from the low thousands of dollars for small hyper-local newsrooms to low tens of thousands for larger newsrooms, with variations per region. Publishers everywhere can apply for funds via a simple application form, and applications will close on April 29, Gingras said. Google is also giving $1 million to the International Center for Journalists, and the Columbia Journalism School’s Dart Center for Journalism and Trauma.

 

Other notable stories:

  • Advance Local followed a number of other media companies in announcing a series of pay cuts and furloughs designed to cope with a significant drop in advertising revenue as a result of the COVID-19 pandemic. The changes include pay cuts on a sliding scale from 2 percent to 20 percent, with higher salaried staff taking higher reductions, effective from May through to the end of the year. Most employees will be expected to take two weeks of furloughs in that period, the company said, and it will suspend matching contributions to employee 401(k) retirement plans. Poynter has a list of all the closures, layoffs and other measures taken by media companies since March.
  • The Financial Times, Guardian and Telegraph media groups have unveiled significant cost cuts in an attempt to survive the advertising downturn caused by COVID-19. Although all say they are seeing record readership levels during the pandemic, revenues have been hit hard, with the Guardian estimating a drop of close to $25 million over the next six months. The cuts include salary reductions for senior management and the use of paid leave for non-editorial staff. The Financial Times said salaries for the top 80 managers and editors will be reduced by 10 per cent for the remainder of this year. Senior executives and board members at the Guardian will take pay cuts of 20 and 30 per cent respectively over the next six months.
  • Akintunde Ahmad writes for CJR about what sports fans have to do now that almost all professional sports have been cancelled. “One of the perks of consuming sports news on social media—as opposed to, say, watching commentators shout at each other about nothing on television—is the ability to interact with other fans in real time,” he writes. “And we can feel closer to the players, too. Among the most delightful aspects of sports to emerge from these quarantined days are Instagram livestreams and recorded video conferences of professional players interacting with one another.”
  • The International Fact-Checking Network, which partnered with Facebook to fact-check news stories on the social network, says it has strengthened its code of principles, which it says is followed by 82 fact-checking organizations operating in 48 countries. The new code bans state-controlled media, demands signatories are focused primarily on public interest issues, and requires a longer testing period. Also, the organization requires that parent media companies with a fact-checking unit must also follow an honest and open corrections policy themselves.
  • The New York Times has launched a new feature called “Those We’ve Lost,” to track people who have died of COVID-19, in the same way that the newspaper’s “Portraits of Grief” feature did for victims of the 9/11 attacks. A number of journalists from different departments have been drafted to help by writing obituaries, according to a report in Vanity Fair. Style staffers Penelope Green, Steven Kurutz, and Denny Lee, as well as food writer Kim Severson, have all been temporarily reassigned, bringing the number of writers there from four to eight.
  • The Writers Guild of America said Wednesday it is filing an unfair labor practice charge with the National Labor Relations Board against NBCUniversal. Almost four years after Peacock Productions, NBC’s in-house nonfiction production company, voted to unionize with the WGAE, and a little more than a year after the company and the union ratified a collectively-bargained contract, the guild says that NBC is now trying to bust the union by superficially reconfiguring Peacock Productions and giving it a new name.
  • A US district court judge has ruled in favor of online news outlet Mashable in a case where a professional photographer claimed the site used one of her photos without paying for it. After the plaintiff uploaded a photo of a mother and child in Guatemala to Instagram, she was contacted by Mashable and asked whether the site could reuse the image for $50. Sinclair declined, but the site used the photo anyway, by embedding her Instagram post in the story. The judge ruled that by uploading the picture to Instagram, Sinclair effectively made it public, allowing Mashable to use it.
  • In a new report on news consumption habits and the pandemic, the Reuters Institute at Oxford found that there are significant political differences in trust in news organisations and in the government, especially in the United States, where people on the left of the political spectrum trust news organisations much more than they trust the government, and people on the right trust the government much more than they trust news organisations. The report uses survey data collected in late March and early April 2020 to document and understand how people in six countries (Argentina, Germany, South Korea, Spain, the UK, and the US) accessed news and information about COVID-19.

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Mathew Ingram is CJR’s chief digital writer. Previously, he was a senior writer with Fortune magazine. He has written about the intersection between media and technology since the earliest days of the commercial internet. His writing has been published in the Washington Post and the Financial Times as well as by Reuters and Bloomberg.