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Gregory Crawford makes it clear where he stands right from the outset of our conversation: “I liked Google before I began to deal with the company in a professional capacity.” Today the competition economist ranks among the fiercest critics of the US internet behemoth’s business practices, which he has monitored and critiqued for years, often in collaboration with the economics of competition grandee Cristina Caffarra.
Crawford has analyzed the business practices of the world’s largest internet company, which boasts a market capitalization of almost USD 2 trillion (2021), and has come to the conclusion that Google and other data giants like Facebook earn billions of profits by fleecing others, first and foremost the users of those companies’ services, followed by advertising clients and media publishers. Crawford finds it particularly problematic that Google is now also muscling in on the healthcare industry. But let’s start at the beginning.
What Crawford has to report is alarming, frightening or aggravating – take your pick. What’s alarming is how data leviathan Google is continually growing and is thus able to collect, combine, and sell ever more – and ever more personal – data. As it grows, the internet titan is constantly reinventing itself. Crawford calls these reinventions the various “incarnations” of the company. With each new incarnation, Google has succeeded in enlarging its pool of data and squeezing ever more profits from it.
Google started out as an internet search engine. The company then acquired YouTube along with the video platform’s user data. That was the first (re)incarnation. Shortly thereafter, Google launched products like Gmail, Google Maps, Chrome and Android, which are all “free” services that we pay for with our user data. That was incarnation number two. Finally, Google got into the online advertising business in a big way. The US-based corporation doesn’t confine itself to just enabling the placement of ads online, but has since come to dominate this complex market.
Following Crawford’s line of argument, one can visualize the online advertising market as a three-layer custard cake. One layer consists of advertising firms that don’t have the foggiest idea about how and where to place their ads on the millions of websites on the internet. The second layer is composed of publishers that don’t know how to approach customers for online ads (the advertising firms). In between there are agents that bring those two layers together. “Google by now dominates all three areas of the market,” Crawford says.
All three layers of the online advertising market were competitive before Google acquired DoubleClick in 2007. DoubleClick provides ad agencies and businesses with technology and services that enable them to better target their online advertising. After the acquisition, Google began to use its market clout to force customers to work together exclusively with DoubleClick, Crawford explains. Google coerces customers by telling them that if they want to advertise on Google or YouTube, they have to use Google’s own vending agent to buy ads on the internet. This strategy is called “bundling” or “tying” in industry jargon, and it means that offerings are packaged together, giving customers the sole option to take it all or leave it. “It’s a popular device that dominant monopolists use to expand their market power,” Crawford explains.
However, bundling and intertwining offerings the way Google does violates the precept of fair and open competition and is illegal because it allows the company to unduly exploit its dominant position in the market. Landmark litigation against Google’s monopoly in online advertising is currently underway in Texas. The State of Texas alleges that Google’s online ad business violates US antitrust laws and that the company has broken consumer protection laws, in part by colluding with Facebook to inhibit competition. Several other US states and the US Justice Department have joined the lawsuit against Google in the meantime.
The litigation in Texas is just one example – investigations into Google’s potentially illegal business practices are also underway in the European Union, Australia and the United Kingdom. It’s a fact that Google dominates online advertising today and brokers deals between ad agencies and publishers in a climate where only Google knows how much advertisers are willing to pay and how much publishers expect to be paid. “The gap in between is pretty big,” Crawford says, adding that “since there no longer is a market to create transparency, Google pockets the difference. The company earns 70 billion dollars a year this way.” The astronomical profits come at the expense of advertising customers and publishers.
The data trails that we leave behind whenever we use the various Google apps and services form the foundation of the company’s ultra-lucrative business model. As a result of those data trails, Google knows who we are, where we live, and what interests us. The company sells that information to advertising customers, which use it to address specific groups of potential customers. Since Google possesses oodles of user data from a vast array of different sources that it has accumulated through its various reincarnations, the company has a peerless ability to utilize and combine the data in unique ways.
Even legislators have caught on by now that this poses a problem. So, three years ago, the EU enacted a General Data Protection Regulation (GDPR) that aims to prevent big internet companies from exploiting personal data. Under the law, collected data may only be used to render a specific service, and data from different platforms may not be combined. However, Crawford says, “the data protection law is a flop because it is not enforced.”
Internet companies have no interest in seeing the law get enforced because a large part of their profits comes from combining and marketing data collected from different sources. Ever since its acquisition of fitness tracker manufacturer Fitbit, Google has now also started to muscle in on the healthcare market. That’s frightening. Before the Fitbit takeover was sealed, Crawford organized an ardent appeal to the European Commission to block the deal on competition policy grounds. The petition was signed by prominent economists like Monika Schnitzer, who heads the German Council of Economic Experts, but ultimately fell on deaf ears. But that hasn’t changed Crawford’s stance: “It really worries me that Google is now a player in the healthcare market.”
His concern is twofold. First, the heaps of data on us and our habits in Google’s possession could soon enable the company to dominate the healthcare market as well. Second, Google knows so much about us that it is capable of providing customized insurance policies. That would likely benefit the young and the healthy, but everyone else would have to reckon with having to pay a high price for insurance or losing access to insurance altogether.
But it could all go even further than that if Google, for instance, were to combine our health data with other personal data and sell it to employers. Such a thing mustn’t be allowed to happen, Crawford says: “There are certain data that Google must be barred from accessing, and there are certain data stored in separate silos that absolutely must not be combined with each other.” It’s up to legislators to take action here. If nothing is done, Google will become a kind of Big Brother that knows everything about us and makes loads of money off that knowledge.
What can we do to keep that from happening? And how can we escape Google’s all-seeing Eye of Sauron? Crawford’s answer is simple: “We should stop using Google products and switch to alternatives like the DuckDuckGo search engine.” Aside from that, legislators should do more to give internet users better protection by limiting companies’ latitude to collect and combine personal data and by requiring them to obtain our express permission to do so. And, Crawford stresses, “existing laws should be enforced more stringently.”
It’s aggravating that Google, Facebook, and the like earn billions of profits with our data while we’re left empty-handed. Although we can use the services they offer free of charge, that’s far too little compensation for the data we generate in the process, Crawford says. One estimate from the UK, for example, calculates that Google earned a profit of 500 pounds per household in 2018. “This means that 500 pounds would be the appropriate compensation for using Google products,” Crawford says. Only Google knows what the true figure is.
Here’s where legal philosopher Francis Cheneval joins the fray. He, like Crawford, concerns himself with the question of who is the rightful owner of the profits earned with our personal data. He believes that the answer is plainly evident: those profits ought to belong to us. “One tenet of classic property rights is that whatever I create is my personal property.” This also applies, he says, to personal data that we divulge by using online services and posting on social media. That’s why, according to Cheneval, we should receive a cut of the value creation generated with our data. “That isn’t the case today.”
Our remuneration is the “free” use of online services, but that inadequately compensates us for our data. The multi-billion-dollar market caps and profits of companies that commercialize personal data are a testament to that, Cheneval says. “Internet companies ought to share part of their profits with us,” he avers with conviction. But a legal basis must first be established for that to happen. Cheneval has given thought to what form that might take. He proposes creating a property right of ownership over personal data. “Everyone would hold a personal data account just like we each have a personal bank account.” That would be premised on an ability to track what happens with our data and how it gets monetized. Blockchain technology lends itself to creating that capability, Cheneval explains.
Redistributing the profits earned from the commercialization of our data has enormous potential. Cheneval estimates that several tens of thousands of francs per person would accrue over a lifetime, and he says that amount would tend to increase in the future. Depending on the size of the sum, it could be enough to secure a livelihood for people in impoverished parts of the world, for example, or could at least give a substantial added boost to a person’s pension savings. And it would establish greater equity from a philosophical perspective, Cheneval says: “It would be an ownership revolution ensuring that the rightful owners of data receive that to which they are justly entitled.”
This article first appeared in UZH Magazin 4/22.