Internet companies are once again under a microscope. This time it’s Google. A band of attorney generals have issued questions about whether the construction of the Google ecosystem on the Internet constitutes an anti-trust condition. The politicians and regulators are trying to understand how an industry built to economies of scale on a long history of mergers and acquisitions of component technologies has come to be what it is. They wonder whether mega companies like Google control too much of the infrastructure in between producers and consumers. Should these mega companies be broken up? Will government intervention result in improving or hurting the free market system? Does altering the internet ad system in order to supposedly reverse crowding out of older, arguably obsolescent, advertising mediums make sense? Are these attorney generals being forward thinking or simply reacting to lobbying pressures by other special interest groups?

What’s known as the “technology stack” that sits between producer and consumer is a formidable maze of components. Google has a sophisticated system that enables hundreds of thousands of companies to target specific consumers cherry picked out of billions of eyeballs to market and sell their products every second of every day, an incredible sales churn rate. No other marketing engine can dynamically connect that variety of goods and services in real time. None. Not television. Not cable. Not print.

The technology exploits not just direct entries you search for but deeper things Including cookies embedded in your web browsers on every device you own that remember every product page you look at. The algorithm literally knows more about you than you do.

Those pages in turn have embedded interlinks between cooperating engines operated by other companies AKA affiliates that include not just selling sites like Amazon but publishing sites like the New York Times; anyplace you see an ad is collecting information on you. The tech stack also uses geographic location detectors embedded such as those embedded into every smart phone. 

The tech stack also manages a very sophisticated pay to play market that orders and prioritizes which companies ads to show to you first whether you ask for them to be shown to you or not. So-called Search Engine Optimization (SEO) is in fact a marketplace that sells presentation of products to consumers most likely to buy them to the highest bidder. It’s no different than selling 30 seconds of commercials for the Super Bowl; except you’re doing it hundreds of thousands of times a second. The algorithm is powerful, pervasive, and hyper-efficient.

There are gigantic secondary industries that have grown up around that technology stack. Arcane products they never would have seen the light of day in a conventional McLuhan advertising world that turned them into multi-billion dollar a year industries. An entire Internet marketing and advertising industry has been created whose revenues rival or exceed that of the remnants of the conventional advertising industry. It is this ecosystem that would be fundamentally changed and thrown into confusion if an antitrust change to the fundamental ground rules of Internet advertising were to occur haphazardly. It’d be kind of a disaster really. Something not to be treated lightly. The Internet is no longer an innocent playground like it was in the 1990s. It’s very, very big business now. Breaking it will have consequences which is why people anticipate that this potentially slow-moving train wreck will take years to play out.

Humans Fear the Black Boxes

People have come to rely on the internet as if it was a Bible. The fact of the matter is that the internet isn’t even real. It’s virtual reality, entirely made up out of figments of human imagination. The ultimate suspension of belief. It sells things to people. It sells real products you can buy and use. It turns curiosity in to want, want in to need, need into revenue. It’s created a consumer economy with a demand appetite so large it supports the entire US-China trade engine.

The same search engines and social media also sells ideas that feed your confirmation biases. This is just as large a market for information as the tangible goods portion of the internet. It’s done primarily to entice people to volunteer their biases and desires, noble and dark, so that marketing and sales engines can exploit humans to sell them even more stuff. Bottle openers that mount on picatinny rails of AR-15’s. Totally useless stuff but the curiosity, want, need, dollars look to book formula works because Americans will buy almost anything. It is lifestyle expression marketing tailored to insular bubbles on one pair of eyeballs. Btw, the internet does know that when it comes to idea selling, angering the consumer to activate their curiosity works like a charm to initiate the look-to-book value chain.

All of that, the internet industry will claim is just a capitalist marketplace where back office services intermediaries charge you a fee for every transaction. The capitalist rule is that richest buyer gets prime placement. That is a reality whether is a single search engine or multiple search engines all responding to the same underlying economic profit/loss equation. It’s free will by people that they buy into letting themselves interact with the system and be blissfully manipulated the expert system and artificial intelligence programs that chart their way through the maze.

I have argued for a very long time that the world is in a naive phase of interacting with technology. We really are children playing with fire. People are only now beginning to realize that they actually have responsibilities to be on guard when they’re on the net. It’s not a friendly maze that looks out for you like watching Sesame Street listening to the Count go 1 to 10 “ah ah ah”. The humans are beginning to feel the reality But every keystroke and every utterance into their devices triggers hundreds if not thousands of computer programs to update their profile for the algorithms. Harvard Law professor Shoshana Zuboff calls it the surveillance economy. It’s a pretty accurate description of how the back office interacts with ordinary people like you and me that USC sociologist Julie Albright describes as people “Left to their Own Devices”.

From a social cultural sense, we are coming out of grade school and entering our teenage years on the Internet where we must face the angst that things are not fair. But we’re not yet mature enough to properly process it wisely. The questions investigators are asking now are about what happens next. We are walking into uncharted territory.

Is it Really Anti-Trust or the Next Chapter of Post-Industrial Evolution?

In the 1990s when the Internet first emerged out of the Department of Defense and University laboratories, all the elite intellectuals at the time argued vehemently that the Internet should not be regulated. They said that this new medium must be allowed to flourish unfettered. At the time, politicians and regulators place their faith in the council of these academic elites. They placed very little regulatory requirements in front of the internet. It did indeed flourish unfettered. Many generations of innovation, radiation and consolidation later we have an environment perfectly tuned to isolating an exploiting every individual on earth. You’ve got to be careful what unfettered really means, because it’s going to happen.

So, a couple of years ago, I attended a conference where these very same academic elites came together again to lament what happened because policymakers and regulators heeded their counsel to let the “Digital Tornado” do whatever it wanted. They went on and on about how everyone was now being used by the Internet machines and the companies that own them. It was 1984 surveillance with no Big Brother; instead, it was run by something they called the Big Other.

So naturally at this conference, as it is with all academic conferences, the discussion went from technology to organizational design to social policy to Marxism. Being somewhat of a curmudgeon in those circles, and wary that their new counsel to massively regulate the Internet could have just as dire a set of consequences as their first recommendation, I noted that they forgot the proper epilogue to all such elite conferences that ultimately when it comes to Marxism, Groucho trumps Karl.

But clearly Ivy League elites are listened to in this world. Policymakers and regulators begin to use whatever tools they have to hammer away at the problem. And that’s how we get to fifty attorney generals from US states and territories asking antitrust questions about the advertising practices of Google. And not surprisingly, a couple of days later, a US congressional committee copycatting and asking the same question more broadly for the biggest members of the Internet cabal asking whether they constitute a systemic antitrust risk to the nation. It’s exactly the recommendation of the let’s stick it to Big Other contingent at the last digital tornado conference. I don’t believe for a minute that many people in positions of power thought this up individually. Do you? Well, it has been sometime since the academics weighed in, wrote their novenas, and started making the rounds with the powers that be.

These investigations, once initiated, will go on for years. The arguments about whether or not portions of the Internet infrastructure should be turned into regulated utilities and others turned into regulated services with strong public access and local access rules will begin and nothing can stop the inevitability that they will ultimately change The Internet we know today into something else.

I find it ironic in a way that what we’re really doing isn’t removing the surveillance economy from our future but turning the control of it away from private industry to government regulatory control. That’s exactly what part of the Orwellian 1984 Big Brother future is described to be.

It’s also interesting to me that both conservative and progressive factions of the American political spectrum seemed to want the Orwellian future to happen, at least for now anyway. Who knows whether that will hold as people begin to learn what the true consequences of this next chapter of our learning curve living with the machines will be? I’m pretty sure we’re still just as naive as the first time we tried this.

What I do know is who the financial winners are going to be in this next step of post-industrial evolution. The breakup value of companies like Alphabet, Inc., the owners of Google, You Tube, Double Click and other companies as well as the other Internet giants like Facebook and Amazon is massive in comparison to their vertically integrated corporate organization models now. Their shareholders are going to be many times richer than they are today as policy makers and regulators tinker. The markets will love it. Investment bankers and traders will get many nice bonuses. All will be well with the world, as long as it doesn’t flash crash of course.

The other winners will be these US companies’ international competitors that will not be broken up by US regulators. It shouldn’t be lost on anyone that the worlds largest online retailers is not Amazon, it’s Ali Baba. They live in China. Just saying man. There may be layers on national interest and international economic conflict in the road ahead that our American myopia hasn’t even put on the radar screen yet.

Personally, I don’t think the surveillance economy intrusion into the lives of individuals will change one little bit even as the change in control of the Internet goes from the private sector into the government sector. The economics of exploiting tangible goods marketing and virtual Confirmation bias marketing will still be controlled by algorithms that need to make money in a competitive environment where more companies that are smaller in more desperate to stay alive will implement these algorithms more harshly and pointedly at the humans then we see today.

Hang on to your hat. It’s going to be a bumpy ride.