Facebook is losing friends in Washington and big online technology platforms are under seige.
The social media network, data and advertising company’s share price earlier this week suffered its biggest one day fall of the year.
Investors were spooked by a disturbing Washington Post report about Facebook’s role peddling Russian-funded, highly-targeted misinformation to hurt Hillary Clinton in the election and to inflame racial and social divisions across America.
Silicon Valley stock market darlings are in the crosshairs of government regulators in the United States, Europe, China and Australia.
Big tech’s dissemination of fake news, potential invasion of privacy, oligopoly power, facilitation of terrorism plots and spreading of extremist propaganda are top of mind for politicians gunning for tech titans.
Like the powerful Microsoft in the 1990s, the biggest immediate threat to the tech giants may not be from competitors, but rather heavy handed regulation.
The debate is shifting from a traditional economic question about monopoly market power to growing concerns about the social clout and responsibility of tech platforms controlled by the likes of Facebook, Google and Amazon.
Their sophisticated algorithms perusing people’s personal data from social media posts, clicks, internet searches and online purchases are influencing what news and advertisements we see.
“That obviously impacts how people view the world,” says University of South Florida communications associate professor Kelli Burns.
“People don’t understand the extent to which their data are being interconnected.”
Calls around the world are growing for the Silicon Valley giants to be more strictly policed like traditional media companies, regulated similar to public utilities or perhaps even broken up.
Russian-related entities allegedly spent more than $100,000 on Facebook adds to manipulate American voter sentiment, including by targeting ads to fire up black right group supporters and their opponents in a racially-charged election campaign.
Facebook has caved in to pressure by agreeing to hand over to Congress more than 3000 politically themed advertisements paid for by these Russian operatives during the US presidential election campaign.
Facebook, Google and Twitter executives have been called to testify to the US Senate Intelligence Committee probing how tech platforms assisted foreign interference in the US presidential election.
Twitter executives on Thursday appeared behind closed doors before committee staff and vice chairman, Democrat Mark Warner, said their testimony was “deeply disappointing” and “inadequate on almost every level.”
Twitter “showed an enormous lack of understanding… about how serious this issue is, the threat it poses to democratic institutions,” Warner said.
Twitter disclosed in a blog post that it had uncovered 201 suspicious accounts linked to dodgy Russian operatives, shutting down 22 corresponding to 450 fake accounts that Facebook recently admitted to investigators.
In an odd twist, President Donald Trump meanwhile lashed out on Twitter against Facebook this week, claiming it was “always anti-Trump”, a reference to long-standing perceptions from conservatives that the network’s algorithms give more prominence to left-wing opinions.
Yet the left alleges that Russia’s misinformation disseminated on Facebook helped tip the US election away from Democrat Hillary Clinton.
A besieged Facebook founder, Mark Zuckerberg, felt compelled to respond to Trump this week. In an about-face from his post-election insistence that it was a “crazy idea” that fake news on Facebook influenced the election, the tech billionaire admitted he had been “dismissive and I regret it”.
“We will do our part to defend against nation states attempting to spread misinformation and subvert elections,” Zuckerberg posted.
Australia intelligence agencies are watching the proceedings, aware the local system is not immune to influence peddling from China and other foreign actors.
“We have similar vulnerabilities and it’s led to an active debate in Australia,” Australia’s former top intelligence and defence chief Dennis Richardson said in Washington in September.
“We’ll be really interested in the outcome of the special counsel’s investigations mainly from the point of view of what degree of influence did the Russians seek to engage during your election.”
Traditional media such as newspapers and television are relinquishing power and revenue to these disruptive tech giants.
Facebook and Google annually earn more than $100 billion in advertising revenue.
Facebook has tried to avoid being labelled or regulated as a news media company, but experts such as president Barack Obama’s former cyber security adviser Ben Flatgard say it undoubtedly is.
“Facebook is not just an online software company, they’re a news company as well,” Flatgard says in an interview with AFR Weekend.
Some 62 per cent of American adults access news on social media, according to the Pew Research Center, a think tank.
Google controls almost 90 per cent of the internet search market in Australia and Europe, giving it enormous insight into people’s preferences, habits and behaviour.
The potential of artificial intelligence, in-home and in-vehicle devices and systems such as Apple’s intelligent personal assistant, Siri, and Amazon’s voice controlled system, Alexa, will unearth new opportunities for big tech to know what we are doing, talking about and how we are thinking.
US senators have introduced a bipartisan bill to improve cyber security of the “internet-of-things” that is estimated to include 20 billion devices by 2020.
America’s five largest tech companies are now valued at an extraordinary $US3 trillion.
Despite Facebook’s 4.5 per cent share price plunge on Monday, it is still up more than 40 per cent thanks to this year’s huge tech industry stock rally.
Consumers are so far not revolting with their clicks.
Facebook has a stunning 2 billion monthly active users, up 17 per cent on a year ago.
Yet, as they say, with great power comes great responsibility.
So the drumbeat grows louder for various government interventions, such as the Turnbull government’s push to force Apple and other tech firms to help unlock encryption on devices of criminal suspects.
Google Australia and New Zealand managing director Jason Pellegrino said this week the Silicon Valley giant had improved YouTube after advertisers boycotted the video-sharing platform because their brands were appearing alongside extremist and undesirable content.
In the case of weeding out disinformation online, former Obama cyber security adviser Flatgard, who will arrive in Australia next week for a three month secondment at the US Studies Center at the University of Sydney, says self-regulation by the industry is the best first step.
The industry is nimbler and more knowledgeable than government and can create consistency across international borders.
“Tech platforms and social media companies could look to put together a cooperative organization that would look to tackle the problem of disinformation and foreign influence operations,” Flatgard says.
“This sort of organization could establish principles that member companies voluntarily adhere to, as well as standards of practice for dealing with the problem.”
Google’s Project Owl initiative aims to promote more authoritative content and eliminate fake news stories from its search results.
Over-regulation by governments might verge on censorship and impinge on freedom of speech.
That said, big tech is not perfect in this area either.
A scholarly critic at an influential Google-funded think tank, The New America Foundation, was sacked last month after praising the European Union’s record €2.42 billion fine against the search giant for breaching EU antitrust rules and abusing its market dominance.
Still, there is an open question about whether big tech’s dominance will last.
Eric Goldman, a Silicon Valley lawyer turned director of the High Tech Law Institute at Santa Clara University, doubts Facebook and Google’s current dominance will be sustained over the long-term.
“The media environment is continually shifting and reconfiguring at a very record clip,” Goldman says.
He points to similar concerns 40 years ago that a small number of US national newspapers and television networks controlled the news flow.
Now pay television is being disrupted by cheaper online streaming like Netflix and the newspaper industry has been upended by big tech.
Myspace, the early social media network, was obliterated by Facebook.
Yahoo! dominated the internet search market in the 1990s before Google took over. Internet pioneer America Online (AOL), the software services company that allowed computer users to access the internet community, suffered a similar fate when broadband destroyed the dial-up internet access model.
“We have been here before and we can learn some lessons,” Goldman says.
“I think the drumbeat about the power Google and Facebook have is helpful to remind companies that their decisions have potentially outsized consequences.”