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?


One thought on “Too Big To Fail

  1. Google Bank. Now there’s a thought. Not so far fetched, if you follow your line of reasoning to its logical conclusion.

    Think about it.

    We began life, primitive and guttural, using whatever came to hand that was reasonably valuable – stones, leather, elephants, etc. And in doing so, we invented money or at least an approximation of it. Then we decided that bartering was all a bit of a faff and the exchange rate for squirrel pelts or potato mashers (yes, folks: were not what they once were. So currency came into being. There you go, the history of forms of payment in one paragraph.

    And then came Bitcoin.

    Why is he wittering on like this ? Think about it a bit more. We now live in a world where we are surrounded by things that are intangible but which we now put as much value on – sometimes more – as hard cash. I attended an event in LA recently where the Chief Marketing Officer of Facebook was being interviewed. In a recent poll across the US, it was established that 55% of women would rather give up their wedding ring than the internet. FIFTY FIVE PERCENT !!!!! And before the demogogs get hot under the collar, this was a cross-section of gender, ethnic background, age and elephant ownership. So we are putting value on things that used to have no value and/or, up until fairly recently, did not exist at all.

    All of which leads me to my point, well nearly. Google make most of their not-so-hard-earned wonga from selling advertising. There you have it. The Wizarding World of Google is nothing more than a huge firm of ad salesmen. They can predict, fairly accurately, that when some nob from Chigwell wants to buy pies they can serve up all manner of Pukka-dom in response, and charge them a King’s ransom in return.

    But that isn’t why the NSA owns/controls/is flirting with/would like to consummate/eat (delete as appropriate) Google. Nope. They really don’t care that Mr Nob from Chigwell is buying pies. But they DO like the fact that Google is now tracking almost everything in existence with alarming regularity and accuracy. Google, in many respects, is life’s VCR (far more so than Twitter largely down to Phillip Schofield and Dappy hogging it). They introduce Google Now which, with your gracious permission, can offer up all sorts of lovely factets about the traffic in front of you, the weather you can see out of your window, or the prices of all your stocks and shares. Yes, they know so much about you that if Google did one of those Facebook “10 Years in Review” on you, you might be surprised that they know things about you that even you didn’t know about you. (And, for the avoidance of doubt and before you ask, yes they do own the biggest analytical dataset on porn usage in the world.)

    Google is recording human history and it will come as absolutely no surprise that this is very, very, very, very, very valuable. What I think will be interested is at what point the humans in question start to know this en masse and start charging for it. What of Google then ? I actually think the information Google hold on us – with our tacit permission – is far more valuable than cash in the bank, the internet, or Maggie-Sue’s wedding ring from Walmart. It is probably the most valuable thing you own. Except you don’t. And that’s the problem.

    In passing mention, I will bring Facebook into the picture, but only to acknowledge that it is like Elvis in the 70s – bloated, off the rails, still producing some stuff people want to buy, but not very attractive. And certainly not worthy of the discussion above.

    I do wonder where all this will end. Data is getting bigger and more complex and we are no further on in owning any of it. I have therefore turned off Google Now, just to be mysterious for a bit. Go on, try it. Be a devil.

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