Facebook is feeling the heat. On 17 June, six major civil society organisations in the US launched #StopHateForProfit. The campaign, rooted in America’s moment of political and sociocultural reckoning following George Floyd’s death, aims squarely at the social media behemoth. The response from advertisers has been swift. As of 7 July, close to a thousand companies had signed up, including giants such as Unilever, Coca-Cola and Verizon. This is an extraordinary revolt against one of the two companies that holds the keys to the digital advertising kingdom globally. Unfortunately for the campaign, the boycott is also likely to reveal the extent to which the duopoly calls the shots.
Like other social media platforms, but to a greater extent, Facebook has come under fire from various quarters in recent years for its policies on hate speech and disinformation. Critics have pointed out that its attempts to control the problem are too incremental and ineffective. Other critics, conversely, have cautioned against handing a tech giant the power to determine what speech is kosher and what isn’t. The #StopHateForProfit campaign has capitalised on the frustration born of rare circumstances — the confluence of the COVID-19 pandemic, economic pain, and social unrest in the US born of the racial discrimination debate — to push Facebook to do more. YouTube faced a similar boycott in 2017, but not at this scale or in such coordinated fashion.
There is an important conversation to be had here about social media platforms and online harms (My colleagues in the Data Governance Network have an excellent analysis of India’s regulatory approach to the issue here). But looking behind the curtain of the digital advertising industry is as important.
Will the boycott succeed?
Unlikely. Facebook CEO Mark Zuckerberg has reportedly said that he doesn’t expect anything to change because of the boycott, and advertisers will be back “soon enough”. He has cause to be confident. Facebook saw about a $60 billion drop in market value over two days as the boycotts mounted, but it has largely bounced back since then. Unsurprisingly, the organisers aren’t getting much traction with him in their meetings.
The social media giant doesn’t have too much to worry about on the ad revenue front either. It has more than 8 million advertisers, and only a few of the top 100 spenders have signed up so far. Bottom line concerns due to the pandemic may well have led some of the boycotters to make a virtue out of necessity in drawing down their ad spending temporarily, besides.
For the small advertisers that make up the bulk of Facebook’s business, the calculus is very different. Opting out is not really possible. The social media giant is their primary, and often, only digital storefront. It’s the same logic that drove advertisers back to YouTube after the 2017 boycott, and then after another boycott in 2019. This is the real issue: the stranglehold the Facebook-Alphabet duopoly has on the digital advertising market.
How do Facebook and Alphabet control the market?
The duopoly accounted for 61% of the global digital advertising market in 2019, up from 56% in 2018. It controls 68% of the market in India and a shade over 60% of the US market. In the UK, the European Union’s largest digital advertising market by some distance, it’s cornered 80% of the market. The numbers aren’t necessarily the issue, though. Network effects and nil-to-low marginal costs mean that the business favours scale strongly. And big isn’t necessarily bad. The problem is the duopoly’s business practices and what that means for competition.
The UK’s Competition Markets Authority launched a year-long investigation into the country’s digital advertising market last year. The final report’s timing is impeccable; it was released on 1 July. It is well worth a read in its entirety; its findings are globally relevant. It shows that the Alphabet companies and Facebook and its properties such as Instagram function as ‘walled gardens’ across the three market segments of digital advertising — search advertising (ads displayed when using a search engine), display advertising (ads displayed on websites users visit) and online video advertising (ads on digital streaming services).
Facebook, of course, has a captive audience by virtue of the nature of its product. It has leveraged that market power in various ways that have come under scrutiny in various jurisdictions. For instance, the CMA report fielded concerns that in the process of using the platform’s advertising tools and single sign-on functionality, businesses surrender information on their user bases and lack the power to establish terms that would restrict Facebook’s use of that data. Facebook is then free to use the harvested personal data as it chooses — whether to improve its ad targeting for other businesses or offer rival products of its own.
Alphabet’s advertising model is, if anything, more problematic. By vertically integrating every stage of the digital advertising process, from display space to data collection, targeting and placement, it has created an ad tech stack that allows it to shift revenue maximisation from one stage to another, crippling rivals, and to dictate terms to advertisers. As a particularly egregious example, its Ads Data Hub “allows advertisers to upload customer data, combine it with search and other data from Google, and devise and advertising campaign, but not to take the data out — unless it is exported to one of Google’s ad tech services”(Morton, 2020). Thus, by removing the middlemen and both owning and operating advertising space with supporting data and targeting tools, Alphabet exerts unprecedented control.
What this means for consumers
The effects of the duopoly’s market power and practices reach well beyond advertisers. They ultimately trickle down to consumers. In an important paper published last year, Katharine Kemp has dubbed such practices, “concealed data practices” where “suppliers’ terms provide weak privacy protections for consumers while the extent of those terms, the resultant data practices and the consequences of these data practices are concealed from consumers” (Kemp, 2019). She has argued convincingly that they vitiate the market — whether in digital advertising or elsewhere — by chilling competition on privacy quality, fuelling exclusionary conduct of the kind Alphabet and Facebook have both indulged in, and hamstringing rivals by raising enormous barriers to entry.
Consumers thus lose out on innovation that could lead to privacy-respecting ad tech. They suffer from information asymmetry about the many ways in which the platforms monetise their data to generate ad revenue. This asymmetry and lack of bargaining power allows the duopoly to set sweeping terms for extracting user data (In some goods news, Germany’s Federal Court put a landmark ruling of the country’s competition authority that deemed such data extraction by Facebook an abuse of market dominance back on track last month). And by surrendering large amounts of personal data, they make themselves more vulnerable to digital attack and harms.
Significant as the #StopHateForProfit campaign is, it will leave these underlying dynamics of digital advertising untouched. Polarising content is merely a byproduct of the need to grab the attention and eyeballs that generate user data, allowing Facebook and Alphabet to maintain market dominance and leverage over advertisers. Civil society action can draw attention to the problem — but it will take careful, measured regulatory action to address it.
Kemp, K. (2019). Concealed Data Practices and Competition Law: Why Privacy Matters. University of New South Wales Law Research Series. Retrieved from http://www6.austlii.edu.au/cgi-bin/viewdoc/au/journals/UNSWLRS/2019/53.html
Morton, F.M.C. and Dinielli, D.C. (2020). Roadmap for a Digital Advertising Monopolization Case against Google. Omidyar Network, 2-5. Retrieved from https://www.omidyar.com/sites/default/files/Roadmap%20for%20a%20Case%20Against%20Google.pdf.