The Mercatus Center at George Mason University has just released my new white paper, “The Perils of Classifying Social Media Platforms as Public Utilities.” [PDF] I first presented a draft of this paper last November at a Michigan State University conference on “The Governance of Social Media.” [Video of my panel here.]
In this paper, I note that to the extent public utility-style regulation has been debated within the Internet policy arena over the past decade, the focus has been almost entirely on the physical layer of the Internet. The question has been whether Internet service providers should be considered “essential facilities” or “natural monopolies” and regulated as public utilities. The debate over “net neutrality” regulation has been animated by such concerns.
While that debate still rages, the rhetoric of public utilities and essential facilities is increasingly creeping into policy discussions about other layers of the Internet, such as the search layer. More recently, there have been rumblings within academic and public policy circles regarding whether social media platforms, especially social networking sites, might also possess public utility characteristics. Presumably, such a classification would entail greater regulation of those sites’ structures and business practices.
Proponents of treating social media platforms as public utilities offer a variety of justifications for regulation. Amorphous “fairness” concerns animate many of these calls, but privacy and reputational concerns are also frequently mentioned as rationales for regulation. Proponents of regulation also sometimes invoke “social utility” or “social commons” arguments in defense of increased government oversight, even though these notions lack clear definition.
Social media platforms do not resemble traditional public utilities, however, and there are good reasons why policymakers should avoid a rush to regulate them as such. Continue reading →
I really appreciate the venture capitalists (VCs) in Silicon Valley subsidizing my soapbox at Twitter. Seriously, it is an absolutely awesome platform for getting a message out to the masses. But at some point I worry that the gravy train will come to an end and that users will have to start picking up part of the tab. After all, will those VCs continue to subsidize Twitter if it never turns a profit? According to the Wikipedia entry about Twitter:
In total, Twitter has raised over US$57 million from venture capitalists. The exact amounts of funding have not been publicly released. Twitter’s first round of funding was for an undisclosed amount that is rumored to have been between $1 million and $5 million. Its B round of funding in 2008 was for $22 million and its C round of funding in 2009 was for $35 million from Institutional Venture Partners and Benchmark Capital along with an undisclosed amount from other investors including Union Square Ventures and Spark Capital. Twitter is backed by Union Square Ventures, Digital Garage, Spark Capital, and Bezos Expeditions.
Again, thank you VCs! But, like them, I do wonder when and how Twitter will bring in some cash. Is there a “freemium” model that could work? Perhaps. “Pro” or corporate accounts have been rumored to be in the works. Getting someone else to pick up the tab that way might bring in enough cash for Twitter to allow the free ride to continue for the rest of us. But what about advertising? It’s been the “mother’s milk” of most online media and platforms for some time now, and Twitter seems perfectly suited to insert a few banner ads or contextual ads here and there. It could be happening sooner than you think. Austin Modine of The Register notes in a new piece, “Twitter ‘Leaves Door Open’ for Targeted Ads,” that: Continue reading →
The proliferation of Web 2.0 social media services has magnified the old problem of cyber-squatting: Every new service represents the possibility that someone else might claim your name, or your organization’s trademark, as a user name before you do! This problem is especially significant where user names correspond to vanity URLs, as with Twitter and, more recently, Facebook.
So I was intrigued to discover that the market is responding to this need: ClaimMyName (CMN) will take care of user registrations on 30 Web 20 services for $329 or on an astounding 300 services for $799. CMN is a “freemium” service offered by DandyID.com, a nifty free service that allows users to organize all their social media profiles for something like 390 services so that buttons for each service can easily be added to an author bio page on a blog, as we’ve done at the TLF. So if I really wanted to make sure that no one else registered http://<WEB2.0service>.com/berinszoka, or /techliberation or /ProgressFreedom, this service would allow me to do so with just a few clicks—at a price of either $10.97/service for thirty or $2.66/service for 300 services.
CMN is essentially a mini-Mark Monitor, the international company famous for protecting trademarks online—except that CMN facilitates self-help by users outside of trademark law: No registration is required; everything is done on a first-come-first-serve basis. Pretty cool.
Regular readers will know that Adam and I have been waging a lonely defensive action in the war on “Free!” (ad-supported) content and services online, pointing out that restrictions on data collection and use for advertising would ultimately hurt consumers by reducing funding for the sites they love (1, 2, 3, 4). In short, there is no free lunch! I’ve also written a number of posts this past week about the dangers inherent in antitrust regulation—arguing that government efforts to make online markets more competitive through antitrust tinkering generally do more harm than good (1, 2, 3).
These two debates have long shared a common thread: Some have argued that effects on privacy should become a part of antitrust analysis and those who consider Google to be “Big Brother” want Washington both to clamp down on data use (“baseline privacy legislation”) and to ramp up antitrust scrutiny of the company.
But a French company has opened a much more direct front in the War on “Free.” Bottin Cartographes has
sued Google for unfair competition (concurrence déloyale—literally, disloyal competition) and abuse of its market dominance. The case is a little more complicated than English language reports suggest: It’s not just that Google is giving away a product (Google Maps) that Bottin charges, or wanted to charge, for. Like Google, Bottin charges enterprise users. But Bottin complains that Google doesn’t show ads on the public version of Google Maps. (Neither does Bottin, but maybe that’s part of why they’re upset.) Bottin’s lawyer claims that Google’s “strategy is to capture the market and squeeze out the competition by creating a monopoly for itself.” He goes on to assert that Google is “ruining the market” for mapping services.
Bottin seeks half a million Euros (plus interest) in damages, but their lawyer insists: “It’s not a question of money. Either Google puts advertising on Google Maps or the company must be forced to pay damages and abide by the terms of fair competition.” The hearing is set for October 16.
This argument, crazy as it sounds, is one Google is likely going to have to fend off repeatedly in the coming years—and not just in Europe, where “unfair competition” is still very much about protecting competitors rather than consumers. Chris Anderson, author of the new book
Free, recently addressed this very issue. Anderson’s book describes multiple ways of supporting “Free” content and services.
Continue reading →
Somewhere between Nick Carr’s “Typology of Network Strategies” and Chris Anderson’s “Four Kinds of Free” is the secret to understanding our new economy:
Carr’s “Typology of Network Strategies”:
- Network effect
- Data mining
- Digital sharecropping, or “user-generated content”
- Complements
- Two-sided markets
- Economies of scale, economies of scope, and experience
Anderson’s “Four Kinds of Free”:
- Direct cross-subsidy (get one thing free, pay for another)
- Ad-supported (third-party subsidizes second party)
- “Freemium” (a few people subsidize everyone else)
- “Gift economy” (people give away things for non-monetary rewards)
Of course, both Carr and Anderson are building on theories and business models previously articulated by many others. A few that come to mind:
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