Well that's another fine mess...
July was the month when the regulators bared their teeth both in the UK and Europe, and fined the internet giants. But do these fines really make any difference to anyone except the headline writers.
First up, Facebook was fined for its facilitating role in the Cambridge Analytica data scandal in which the details of 87 million Facebook users were shared with Cambridge Analytica, for the purposes of identifying, profiling, and targeting voters in elections. The UK's data protection authority, the ICO, fined Facebook half a million pounds for failing to adequately protect their user's information, and for failing to tell people how their data was being harvested and profiled by apps.
That fine was the maximum that the regulator could impose. Was it really enough to even slightly trouble Facebook? For the fourth quarter of 2017, a time when Facebook was still reeling from the Cambridge Analytica revelations, it reported a revenue of $17.7 billion, of which $4.3 billion was profit. That's over $46m per day, so the half a million pound fine by the ICO represents about twenty minutes worth of profits (not revenue, just profit). Another way of looking at the fine is that it was the equivalent of just 57p per user profile. It is not clear how much Facebook received from Cambridge Analytica and the other companies involved, but various sources claim data for US voters is sold for between 75 cents and $5 per voter.
Facebook's latest financial figures released in July showed that the number of registered users had climbed 11% over the year, resulting in an even bigger profit of $5.1 billion, but incredibly, that was considered such a poor result that the share price fell by 20% within hours of the announcement.
The Facebook PR campaign
Facebook clearly has little need to worry about the size of the ICO fine and is more worried about the bad PR and the impact on its share price. It has turned out some slick TV adverts to address the issues.
That video is a masterclass in propaganda. Notice how it starts "we came here for the friends" and uses "we" and "friends" throughout. It talks about "others just like us", and feeling "a little less alone". Everything in it is designed to make you feel the narrator is on your side, speaking for you, saying what you feel, tugging at your emotional heart strings. "But then", it says, "something happened,... we had to deal with spam,... and fake news". Yes, Facebook paints itself as the victim here, the victim who neglects to mention the absurd amounts of money it makes from selling targeted advertising on the back of all this profiling, spam and fake news.
The video ends with "because when this place does what it was built for, then we all get a little closer". Make no mistake, Facebook was built to make money, and the biggest challenge it faces at present is that it is running out of space on its pages to show you ads.
Waving the stick at Google
If the ICO's fine of Facebook to the tune of half a million pounds lacks bite, what about the colossal £3.8bn fine of Google by the European Union for "serious illegal behaviour" to secure the dominance of its search engine on mobile phones. The Android operating system, which is used on 80% of all mobiles, is supplied free of charge by Google to phone makers, but on condition that the phone makers install Google's apps and maps, and make Google the default search engine. The EU's competition watchdog decided that in doing so, Google used its market dominance to drive out competition.
The Google and Apple duopoly on mobile phones also gives them the control of the app stores. Both corporations are quick to point out that users should only install apps from their official stores, suggesting that other stores may contain malware. Google and Apple are less vocal about the massive 30% commission they take from developers on all appstore sales.
Are record-breaking fines the answer?
As large as this record-breaking fine is, it probably isn't troubling the people at Google HQ, which says it will appeal the decision. Given that there are around four billion mobile phone users in the world, the fine amounts to about one pound per phone user, which is a cheap price to pay for domination of a global market. Google has just announced its financials for the last quarter, and its profit, even after the fine is taken into account, is $2.8bn, news which saw an immediate jump in Google's share price.
For all the headlines generated by these fines, you have to ask two questions. The first is what do they actually achieve? Google still has market dominance and it is too late now for smaller competitors to try to enter the market. The second question is where does the money collected in these fines actually go? It doesn't come back to us, the consumer, to compensate us for lack of choice or loss of privacy. It doesn't go to the phone companies or developers of rival apps and services who were excluded from the market. Where did that £4 billion go?
7th August 2018
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