Why Tech’s Great Powers Are Warring | by Will Oremus | Dec, 2020

The feud between Apple and Facebook enters a new era Photo: Jaap Arriens/NurPhoto via Getty Images An adage of international relations holds that great powers have no permanent friends or allies, only permanent interests. (The original quote, from a 19th-century English statesman known as Lord Palmerston, is a bit less […]

The feud between Apple and Facebook enters a new era

Photo: Jaap Arriens/NurPhoto via Getty Images

An adage of international relations holds that great powers have no permanent friends or allies, only permanent interests. (The original quote, from a 19th-century English statesman known as Lord Palmerston, is a bit less pithy.) It accounts for how the United States and Russia were allies in World War II, then bitter enemies soon after; or how Japan fought with the Allies in World War I but joined the Axis in World War II.

Today, the U.S. internet giants resemble expansionist empires jostling for power, influence, and market position around the world. Each has its impregnable base of power — e.g., search for Google, social networking for Facebook, online shopping for Amazon — but their spheres of influence are so great that they can’t help but overlap. At times, their drive for growth brings them into conflict in outlying territories, such as streaming, messaging, voice platforms, and cloud services.

That seems to be happening more often, or at least more publicly, of late. And it may be because we’re nearing the end of a digital Pax Americana — an epoch of internet history in which lax regulation and unfettered access to global markets allowed the great U.S. tech powers all to flourish at once.

With so many emerging business opportunities and developing markets to conquer, tech’s great powers had more to gain from coexisting peacefully than from calling down public opprobrium or regulation on each other’s heads. But a backlash against the industry, a revival of antitrust oversight, and a tide of digital nationalism, coupled with the rise of Chinese tech firms as global powers, have given America’s internet giants less to gain from business as usual — and, perhaps, less to lose from publicly turning on each other.

The Pattern

Silicon Valley’s uneasy alliances are shifting — and maybe fracturing.

  • Apple is readying new privacy features that could hurt Facebook and others. Starting in the new year, the company plans to introduce on iOS a pop-up that would notify users of a given app — say, Instagram — that it wants to track them across other apps and websites. Users will be able to allow this tracking or disable it. The assumption is that this will lead tens of millions of iPhone and iPad users to opt out, making it harder for companies such as Facebook to target them with personalized ads. Apple CEO Tim Cook tweeted a screenshot of what the pop-up will look like:
New pop-ups will prompt iPhone and iPad users to opt into or out of being tracked by the apps they use.
  • Facebook is fuming. The social network took out two separate full-page newspaper ads this week, portraying Apple’s move as a blow to small business and the free internet. It accused Apple of using privacy as a cover to advance its own interest in driving users to paid apps — which must give Apple a cut of their revenues — instead of free, ad-supported apps. Pulling out all the rhetorical stops, Facebook argued the moves will cripple small businesses at a time when they’re already struggling due to the pandemic. While it’s true that some small developers and advertisers may be affected, it seems transparent that Facebook’s chief concern is for its own business. (Google and other large ad-driven companies could also take a hit, but Facebook is especially reliant on tracking via mobile apps.)
  • That the feud is playing out in public is noteworthy. Such conflicts between tech giants are nothing new. But historically they’ve tended to prefer maneuvering and negotiating behind the scenes to airing their grievances in public. For instance, Google and Amazon have been waging an interoperability battle for years as they vie for the upper hand in voice platforms. But they’ve largely kept their public statements quiet and measured, and avoided dragging regulators into it.
  • In some cases, what looks like an epic battle between tech titans can turn into an agreement that ends up enriching both parties. A striking example of that came to light this week in the form of an allegation in a new antitrust lawsuit against Google. The suit, filed by Texas and eight other states, accuses Google and Facebook of colluding to suppress competition in digital advertising. Gizmodo’s Shoshana Wodinsky has a detailed explanation of the mechanisms involved. Per the allegation, Facebook initially joined a group of adtech vendors developing a practice called “header bidding” to circumvent Google’s ad auctions, prompting Google to pay Facebook off with preferential treatment on its own ad platform instead.
  • This is not the first time Google has been accused of colluding with a fellow tech giant this year. In a separate antitrust suit filed in October, the Department of Justice charged that Google quietly paid Apple huge sums annually to make its search engine the default on iOS devices. Recall also that Google and Apple were among several Silicon Valley companies that were sued earlier this decade over a secret anti-poaching arrangement to suppress tech workers’ wages.
  • Lord Palmerston’s adage about nations seems apt here. Facebook and Google have long been archrivals in display ads, and more recently in A.I., and faced each other head-on when Google launched Google+. But they’re finding more common ground of late, as they share a business model that is under siege from privacy advocates — and now Apple. (Speaking of Apple, its late CEO Steve Jobs once privately vowed to go “thermonuclear” on Google for developing Android to rival Apple’s iOS. And now the companies stand accused of conspiring together.)
  • So why is Facebook taking its battle with Apple so dramatically public? One answer might be that it’s an option of last resort. The last big tech firm to mount a PR blitz aimed at battering a rival’s image was Microsoft, with its “Scroogled” campaign accusing Google of monopoly and privacy invasions. While its effectiveness was debated — and its substance was perhaps wrongly dismissed by the tech press at the time — it seemed clear Microsoft was arguing from a position of weakness: Its Bing search engine wasn’t taking off, and its Outlook email client was losing ground to Gmail, so it went negative. (As Palmerston might have predicted, the rivalry fizzled after Microsoft largely conceded the consumer market to focus on enterprise clients.) Perhaps Facebook is going public now as a last-ditch effort to bring Apple back to the negotiating table, or as a longshot bid to scare Apple into backing down by joining the antitrust movement against it.
  • The bigger picture is that the push for antitrust enforcement and privacy regulation in the U.S., the EU, and elsewhere has changed the incentives tech powers face. As long as regulators were leaving them alone and their industry enjoyed broad popularity, they found it more prudent to resolve disputes behind closed doors than to tarnish each other’s images. At the same time, a weak domestic antitrust regime seemed to lessen the risk of consequences for striking shady deals. Now, with the industry’s image battered and regulators bearing down on all fronts, tech companies are reduced to trying to work the refs. At the same time, they might also see newfound value in playing up their rivalries to suggest to antitrust authorities that they aren’t unfettered monopolies after all.
  • Then again, perhaps Facebook and Apple were simply on an inevitable collision course. I wrote in 2019 that this could be tech’s next big rivalry. Not only did Apple’s focus on user privacy put it at odds with Facebook’s business model, but Facebook’s messaging ambitions presented a direct threat to iMessage, a linchpin of Apple’s lock-in strategy. The New York Times’ Mike Isaac and Jack Nicas had more this week on the companies’ burgeoning feud, and how it boiled over. At its crux is a fundamental conflict between their core interests: “Apple prefers that consumers pay for their internet experience, leaving less need for advertisers, while Facebook favors making the internet free for the public, with the bill footed by companies that pay to show people ads,” they wrote.

Undercurrents

Under-the-radar trends, stories, and random anecdotes worth your time.

  • Social media verification is having a moment. Following a New York Times exposé, which I wrote about in the Dec. 5 Pattern Matching, Pornhub announced this week that it was taking down all unverified content, amounting to millions of videos uploaded by anonymous users. That left only videos uploaded by official content partners, marking what Vice called “a fundamental shift in the way one of the largest porn sites in the world operates.” In essence, it seems to be going from a user-generated content platform to something more like a media platform. Also this week, Twitter announced its plans to relaunch and revamp its verification program, which famously bestows blue checkmarks on certain users to authenticate their identity. Twitter will remain very much a user-generated content platform, but it clearly sees value in differentiating between verified and unverified users, perhaps in new ways. In Slate, Robyn Caplan of the Data & Society Research Institute writes that we’re on a path toward a “verified internet,” with a “shift in content moderation away from content and toward sources.”
  • Sony pulled Cyberpunk 2077 from the PlayStation Store and offered refunds to customers, a disastrous development in an already troubled rollout for one of the most anticipated video games this generation. Microsoft also offered Xbox customers refunds, though it stopped short of removing the game from its marketplace. Cyberpunk launched on December 10, nearly a full decade after its initial announcement in 2012, and consumers quickly found that it is borderline unplayable on consoles thanks to an array of technical problems. (A recent edition of the Highlight Reel video series showcases plenty of glitches, even on high-end gaming PCs.) The game was delayed three times this year, and its developer, CD Projekt Red, instituted mandatory overtime in September as the title approached its release date, making it just the most recent high-profile example of “crunch” in the video game industry. On Friday, Bloomberg reported that the staff is now in revolt, claiming that the rushed launch date was forced by CD Projekt Red’s board of directors. Whatever follows from here, Cyberpunk 2077 will stand as one of the great consumer tech failures of the Covid era, and it may force a referendum on development cycles in the video game industry.

Bad Idea of the Week

Bad Idea of the Week, Honorable Mention

Bad Password of the Week

  • “maga2020!”, which a Dutch hacker correctly guessed to briefly take over Donald Trump’s Twitter account earlier this year, Dutch prosecutors confirmed this week.

Counterintuitive Take of the Week

Pattern Matching will be on holiday hiatus for the next two weeks, returning on Saturday, January 9. Thanks for being a reader, and here’s to a happier new year.

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