Too Big To Fail

Last week in a post here called Web Matters, Andrew Jordan (aka @fridayfood and @speedcheese) and I debated web privacy as we are wont to do. We seemed to agree on something important, that our data, things like our location, interests, preferences and connections, is effectively a currency.

At the moment we use this currency, to pay for things like our use of Facebook for staying in touch with friends, showing off and targeting adverts, on LinkedIn for our professional networks, industry information and low cost, high quality recruitment, to Google for search and the placement of adverts and on Twitter for high speed syndication of content, all manner of conversation and as a mine of sentiment and trend (and again for placing adverts).

This makes all these companies a little like banks when you think about it.  You know, they hold our currency and we trust them not to be greedy, take near term views and we also expect them to be secure.

What’s the problem? If we just look at one market, that of mobile advertising, and advertising is the core business of Facebook and so far that of Google, it all gets a little worrying:

“By itself, Google accounts for 56 percent of all global mobile ad revenues. Social giant Facebook takes a much smaller chunk with 13 percent. But together, they own the lion’s share of mobile ad dollars.”

They are global stats, if you take into account that in some markets, e.g. China,  these companies have very little penetration, then their dominance in all other markets is way higher than that already eyewatering ~70%.

I don’t care whether they mean well.  It is simply too much risk in too few hands.  It is inconceivable that it would be allowed in any other market, even in a single country, but we seem quite happy to allow it in mobile internet advertising.

So, back to my bank analogy, are some internet companies then too big to fail?

Your immediate response might be that Google are hugely profitable,  it will never happen. Another response might be that Google do search right?  There is always Bing anyway.  Perhaps Yahoo still do search, who knows!

If Google and Facebook’s retail banking arms hold our private data currency for us, and the interest they pay is rapid access to things we might want or be interested in, then their investment banking arms hold ~70% of the intangible assets of their advertising customers a subset of what we call “goodwill”, on the balance sheets of companies both large and small all over the world.

We need the flow of data to keep modern web enabled markets moving and much of what these giant companies provide us in return is useful and enjoyable.  I have looked narrowly here at the advertising market.  If we were to consider all the power in the data owned by these companies, we might well conclude that so much power being in so few hands is extremely dangerous.

My next post or two will explore some scenarios in which I can see Facebook and perhaps even Google failing, and what we might do about it.

Meanwhile, have we placed too much power in too few hands?  Are what we perceive as handy tools and internet playgrounds, actually too big to fail?