THE HIGH COST OF FREE SERVICES – TECH

Google and Facebook have long been known for offering up “free” tech services to consumers.

What has largely been missed in the rush to get something for nothing is that the services are far from free, it’s just that consumers don’t pay for those services in the traditional way.  The “free” business models currently being used by these tech companies compels them to extract all the personal data that’s being produced on their sites online and prioritize user growth over the health and privacy of individuals and society (ref WSJ).  Your personal data that these companies accumulate is sold as well as used to generate more advertisers, who unitize these data.  Money is made by the tech companies based on the attention of their most devoted users.  As a number of governmental agencies and Congressional committees begin to ask the question of whether the economy actually benefits from the unfettered use of the “free” model, it will be important to determine the actual costs of what the model extracts – such as disinformation that’s infused into society along with an ability of those who are interested in this process to communicate with family and friends, using a third party, “free” website.  The touting of “consumer benefit” has allowed these companies to acquire monumental revenue as a result of those processes.  And, this situation has led to what critics see as anticompetitive practices such as buying up competitors (as in Facebook with Instagram) or fighting other competitors by copying their approaches then beating them with the larger scale and resources (for example, Facebook’s use of Instagram against Snapchat).  If there had been regulations in place that prevented Facebook’s ability to buy Instagram, and if the migration of a large number of young people to Instagram had continued, then we might have seen true competition between the two companies as well as the ability of the fledgling Snapchat to stay in the game, as well.  Google has used similar processes in their searches, advertising and maps and has been fined 3 times for those anticompetitive actions in Europe since 2017.  One of the possible upsides of the large tech arrangement is innovation – it’s said that as companies grow, they foster more innovation.  But, the opposite is also true – when they become a monopoly, they tend to lose the motivation for continuing to create innovation.  The question that will be before the various oversight and regulative agencies, therefore, will be: where these companies are in the range of usefully and purposefully big to monopolistic. Historical antitrust efforts have prevented a range of companies – from banks to railroads to television-communication companies – from expanding into lines of business that would compete with their own customers.  Applying that example, then, would mean that Google would have to stop making its own apps; Facebook would have to stop buying companies that use its services and rely on it for advertising revenue, and all tech companies would have to refrain from getting into every business available.  We’ll see how it all works out; what we know for sure at this juncture is that the tech companies’ services are far from free.

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