Where are we heading with Big Tech?

Most of us depend on Google, Amazon, Facebook and Apple in our work and lives – scandals or not. Could they become a force for good? Michael Brennan puts Big Tech under the spotlight

The shine has well and truly come off Big Tech in the eyes of many regulators, politicians, campaign groups, parents and consumers. This is as they strive to reconcile the allure of ultra-convenient digital services with intrusive marketing and the implications for liberty, privacy and personal security.

For many people however – especially those born digitally mobile – it’s business even more than usual, as new applications and channels open up interactive possibilities.

US and EU regulators are scrutinising the behaviours and market dominance of the key Big Tech players as never before. Whether it’s Elizabeth Warren or Margaret Vestager, individual US states, or other authorities, a consistent perspective is emerging.

A key issue is the relative impact of financial penalties on companies of this scale, the limits of which are reflected in calls for the break-up of these businesses (with historic echoes of the enquiries into Microsoft). This, of course, by the very regulators who waived through the Facebook acquisitions of WhatsApp and Instagram.

Data privacy violations

Earlier this year Facebook was fined a record $5 billion by the Federal Trade Commission for its part in the Cambridge Analytica scandal. This was one of a long tail of financial penalties levied against the corporation this year. As for Google, it has received three fines of at least €1 billion each from the EU for anti-competitive practices as well as a €50 million GDPR penalty in January. Apple and Amazon are also under the European spotlight.

New privacy protections are coming through global legislatures, most famously the GDPR now written into law in all member states, and the Californian Consumer Privacy Act. By the law of unintended consequences, these regulations are now said to be benefiting the very companies they were supposed to restrict (including enabling facial recognition data collection).

One reason that politicians may feel so emboldened is the dismal record of these companies on corporate citizenship – the essence of which is the fair payment of due taxes in the countries and states of operation. While individual countries and regions strive to take action to reclaim taxes, there’s a need for a global agreement that covets global digital revenues and operations.

GAFA: the current landscape

Let’s take a look at the current state of play with regard to Big Tech – principally Google, Apple, Facebook and Amazon (GAFA) – before reflecting on the road ahead.

This isn’t to ignore the parallel development of the Chinese digital ecosystem. That’s similarly dominated by a cabal of leading companies including Baidu, Alibaba and Tencent, which share the breadth of ambition that characterises the US leaders. Note the revenues generated by the most recent Chinese Singles Day sales.

Cloud computing

Amazon, Microsoft and Google’s cloud businesses, such as AWS and Azure, are key growth engines today and expand their dominance of the global digital ecosystem. Increasing numbers of businesses are choosing to host more data and analytics on these platforms. Where once this may have been limited to office IT systems, increasingly it includes operational systems across industry, utilities and power generation as well as public and emergency services.

Artificial intelligence

The other key area of investment for these businesses is of course AI, where all are engaged in a race to be the first to develop new techniques and applications. Perhaps the most famous business in this space is Deep Mind, now part of Google’s Alphabet holding company.

The financial resources, computing power and talent accumulated by these companies is transforming the AI research landscape, creating a ‘brain drain’ away from academia and attracting the best businesses and minds.

There’s also quantum computing, with Google recently announcing its quantum supremacy, much to the irritation of IBM among others. Meanwhile the Big Tech players are also upending the computer chip market by developing their own solutions to their AI processing needs.

Of course the fundamental advantage that these businesses have, by virtue of their foresight, first mover advantage and platform economics, is access to vast troves of personal data. Facebook alone is used by 1.62 billion daily visitors, rising to 2.45 billion across a month. That’s perhaps 30% of the global population, rising to more than 90% of key demographics in major markets.

Finance and banking

The year 2019 has seen more moves  into personal finance by Apple and most recently Google, following in the steps of Facebook and Amazon. These came after Facebook’s announcement of plans for a new blockchain-based currency. Libra has not been welcomed by regulators and has been affected by several partners already leaving the founding coalition.

Equally the Apple Card, launched in partnership with Goldman Sachs has come under scrutiny for the egregious sexism apparent in its decision making algorithms – exposed in part by Apple joint-founder Steve Wozniak.

Autonomous vehicles

AI is the fuel behind the development of autonomous vehicles. Google division Waymo is one of the leading developers in this space, while Amazon continues to develop new delivery solutions and Apple remains interested in the vehicle market.

Health and wellbeing

Health and medicine is another key area for AI, and already many applications are being developed and delivering excellent results. The evolution of genetic science has made this a particularly sensitive class of personal data to be collected. Unsurprisingly, this is another area of growth for Big Tech. Apple’s results highlight the growth of wearable revenues, while Google snapped up Fitbit just as new stories surrounding health applications sharing data with Google and Facebook emerged. Not to mention the latest hospital data sharing agreement signed by Deep Mind.

We mustn’t overlook the relationship between Big Tech and human wellbeing. While debates continue over the effects of extended exposure to screens, there is clear evidence of the Big tech approach to developing addictive applications, and the impact of social media on individual mental health and wellbeing.

Warfare

Artificial Intelligence is of fundamental interest to the military and Google has faced internal challenges to its collaboration with US forces in developing AI applications for the battlefield. Last year, Google announced it would withdraw from the deal, but this year it doesn’t sound so sure.

Businesses built on data

For all of these ambitions, and as a result of our increasing dependence on Big Tech across our lives, it’s only right that they are held to account by regulators and society.

At the very heart of their credentials should be their approach to personal data security and transparency, the very asset that drives their market dominance and outstanding financial performance. After all, you might think they’d be especially keen to keep it secure, wouldn’t you?

2019 security incidents

When we look at GAFA’s performances in 2019, a year in which privacy issues have transformed the digital landscape (including Facebook’s claimed pivot to privacy and Apple doubling down on privacy as a brand differentiator) the picture is all too familiar.

It’s not just about losing data of course, they also accidentally acquire data. Just look back to April, when Facebook admitted accidentally uploading 1.5 million people’s email contacts.

Instagram hasn’t had a great year either – at one point it was hit with two data breaches in a week. The lax practices exposed, including a basic lack of password protection, were shocking. But they were not too surprising given the scale of an incident affecting over 500 million individuals and the naivety of another. Facebook is also being pursued for damages arising from failure to notify customers of a breach in 2018.

It’s also worth knowing that for Google-owned YouTube, children’s data doesn’t qualify for any special treatment, leaving it wide open to exploitation. Similar attitudes seem to have prevailed at Facebook too.

We can easily become accustomed to the endless stories and scandals surrounding lax approaches to data protections and security. This, toogether with an opportunistic approach to data acquisition, makes it essential that Big Tech is held to account – for all of our futures.

There has been much discussion of toxic workplace cultures across Silicon Valley and Big Tech more broadly, with several leaders paying the price for their behaviours. It seems clear that much stronger governance would benefit Big Tech companies as they handle significant ethical, social and technological responsibilities. There can be no hiding behind start-up rough edges (move fast and break things) when you are among the most highly valued businesses in the world.

We are already seeing evidence of shifting sands in the digital economy, with ever greater emphasis on first party data, and an assumption against cookies, tracking, re-targeting and more. We expect to see this continue as consumers continue to explore the tools and channels coming online to address different consumer concerns. These include more progress in the development of secure and transparent personal data marketplaces and trusts that can genuinely increase our control and ownership of our data.

Financial results

Facebook is under unprecedented scrutiny, with Mark Zuckerberg’s reputation seeming to diminish with each public audience. Despite this, it continues to outperform the market and deliver record financial results. Silicon Valley rival Google reported slightly more mixed results in the most recent period, but with the fundamentals of its search and advertising business continuing to perform well. As for Amazon, which waded into local politics only to see its candidate fail, the Seattle giant under-performed against expectations for the same period.

Finally, Apple outperformed expectations and delivered revenues of over $60 billion for the most recent quarter, taking total revenues for these four companies alone, for a single quarter, to approximately $200bn. Microsoft added a further $30 billion plus of revenue to the quarter.

Unsurprisingly, these companies also dominate lists of the world’s most valuable companies and brands. They attract valuations that dwarf those generated by the companies that lead other industrial sectors including finance.

Politics

The sophisticated, personalised advertising models and technology developed by these companies, among others, are now being applied in the political arena by state and non-state actors including domestic and overseas agencies with, as yet, unverifiable results.

The Cambridge Analytica story opened Pandora’s box in terms of how such profiling data was being used in the political arena, especially in the USA and UK. Investigations continue (with one complete and curiously awaiting publication) but the Russian state has been clearly implicated in US electoral interference. What we can certainly say is that weaponised social media campaigns are only pouring fuel onto a fiery political climate in many countries.

Beyond changing the rules of democratic politics, the Big Tech giants stand accused of enabling a new generation of control and surveillance. This is exemplified by Chinese leadership in facial recognition technology, and the emergence of a nascent centralised social credit system. Meanwhile the Snowden leaks exposed the scale of surveillance undertaken by Western, principally US and UK, intelligence agencies.

The Big Tech leaders also continue to tread a delicate line in relations with the Chinese authorities among others, all the while seeking to expand access to this giant market.

Harvard Business School professor Shoshana Zuboff coined the term Surveillance Capitalism to describe the industrial-scale commoditisation and exploitation of personal experience that lies at the heart of the Big Tech business model.

Into the future

As we approach 2020 with the roll-out of 5G networks and services, the long anticipated Internet of Things is set to become a reality, especially across industry. With forecasts for tens of billions of connected devices and things, we are shifting towards an unprecedented increase in data traffic from across the globe.

Much of this traffic will be handled by the cloud platforms developed by Big Tech and supported by a network of vast data centres. Such is the anticipated growth, forecasters anticipate that the information and communications technology industries might account for up to 20% of all global electricity consumption and 5.5% of all emissions by 2020.

This requires radical action from the Big Tech giants – and their Chinese competitors – if they are to avoid becoming the industrial pariahs of the 21st century. Already we are seeing steps in the right direction, with Google arguably leading the way. Appropriately enough, these solutions are leveraging AI and renewable energy sources to radically reduce energy consumption across facilities.

If we can successfully harness digitalisation and AI to the challenges of mitigating climate change and increasing global sustainability, that would be the greatest gift that the digital age could possibly bestow. Surely Big Tech won’t let us down?

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Author

Michael Brennan

Consultant, Profusion

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