Yahoo Finance Why breaking up Facebook will never work
The idea of the government undoing Facebook’s (FB) purchases of Instagram and WhatsApp offers the pleasing simplicity of hitting two keys to reverse a typo—a typo that inflicted massive privacy and security costs.
A hit of the Ctrl-Z “undo” shortcut on those acquisitions could fix two big problems with the social-media market. Those of us who spend time on two or three of those sites won’t have so much of our data going to one place. And foreign adversaries such as Russia and Iran—both busted Tuesday by Facebook for “coordinated inauthentic behavior” across Facebook and Instagram—wouldn’t have one-stop shopping for propaganda campaigns.
But if you want to see Facebook do better, a forced breakup looks like the trickiest remedy available. It would require a government agency to break with decades of precedent, it would leave Facebook itself as big as ever and it wouldn’t fix other problems with concentrated market power online.
A divisive proposition
Perhaps the best developed version of the Facebook-breakup idea comes from the Open Markets Institute, a Washington-based nonprofit that notes its refusal of donations “from any for-profit corporation” and has set up a coalition called Freedom From Facebook with such groups as Public Citizen and Demand Progress.
The coalition’s demands would have the Federal Trade Commission punish Facebook for the massive Cambridge Analytica data leak—arguably a violation of Facebook’s 2011 settlement with the FTC for past privacy violations—by making it choose between paying trillions in fines or reversing its Instagram and WhatsApp acquisitions and spinning off Messenger too.
“Facebook is so vast and it controls so much of the social-media landscape, there’s no longer a market where users can exercise choice,” said Open Markets Institute deputy director Sarah Miller.
Siva Vaidhyanathan, director of the Center for Media and Citizenship at the University of Virginia and a long-time critic of Facebook’s power, agreed on the virtues of forcing Facebook to separate Instagram and WhatsApp.
“It’s really important that user behavior data from Instagram and WhatsApp don’t get mixed up with Facebook user data,” said Vaidhyanathan, who also wrote the book “Antisocial Media.” “No company should have that kind of predictive and targeting power over billions of people.”
Vaidhyanathan added that he’s professionally bound to remain among those billions: “I have to be on Facebook because I write about Facebook.”
It’s complicated
Many Instagram users either use that network as if it were Anti-Facebook—I know far more about some friends from their “Insta” photos than their scant Facebook updates—or outright think Facebook doesn’t own it. But in the advertising sense, Instagram is tightly integrated with Facebook.
“Its advertising system is powered by a massive collection of data with algorithms that deliver very targeted advertising across all platforms,” emailed Lynette Luna, a principal analyst for the research firm GlobalData. “That means behavior from Facebook users can be applied to ads on Instagram and vice versa.”
She wrote that a forced split-up would make online ads more expensive and less efficient for businesses: “I can’t imagine that advertisers would be happy.”
As for making life harder for disinformation campaigns, a security expert doubted that a Facebook-Instagram divorce would help.
“This wasn’t just accounts on Facebook and Instagram; it was on other social media platforms as well,” said Lee Foster, manager for information operations analysis at FireEye (FEYE), which recently identified 652 accounts, pages, and groups tied to Iranian and Russian influence campaigns.
Freedom from Facebook further complicates its dismemberment plan by including Messenger. That sometimes-feared app has never been a separate firm—and personal messaging is such a standard social feature that your social apps easily inflict instant-message overload.
When pressed on that point, Open Markets Institute fellow Matthew Stoller relented: “Maybe Messenger shouldn’t be spun off.”
There’s also scant history of the FTC punishing a company for privacy failures by breaking it up—as Stoller observed, “I’m not sure if the FTC has done this before.”
However renewed that agency may be with a full slate of commissioners after years of vacancies at the top, asking it to create a new punishment precedent may be too much—even if President Trump just called it “very dangerous” for Facebook to not give enough publicity to his supporters.
“I don’t like the idea of putting this all on the FTC’s lap,” complained tech economist Hal Singer. He’d prefer more comprehensive regulation: “I don’t understand why Congress can’t do its job.”
Jason Kint, CEO of the online-publishing group Digital Content Next, wants to watch the effectiveness of the European Union’s General Data Protection Regulation and its permission-oriented regime for personal data.
“We need to let that enforcement play out,” he said. “I think if it does start to curb them, then it increases the pressure for the U.S. to actually step up to the plate.”
What else can we do?
Even stripped of Instagram and WhatsApp, Facebook would still exert massive influence.
“Facebook alone, with 2.2 billion users, still has significant scale so I don’t see it hurting too much,” GlobalData’s Luna said.
New privacy rules would address that still-gigantic company and the rest of the online-advertising industry, but what should they look like?
Importing the General Data Protection Regulation (GDPR), Europe’s new data-privacy rules, is one option that even some Republicans now back. That’s also one of the 20 policy suggestions Sen. Mark Warner (D.-Va.) included in a document released Aug. 1.
But that 23-page essay also notes concerns about the GDPR going too far. OMI’s Miller and Stoller, meanwhile, fear the GDPR’s complex rules may privilege incumbents over startups lacking legal expertise.
Warner’s proposals also suggests such lesser steps as directing the FTC to write privacy rules, requiring that companies provide more transparency about their collection and use of personal data, and mandating that large tech firms provide standard ways for smaller rivals to connect to their services.
That would be a major advance beyond Facebook’s current option to download your data and even its support of the Data Transfer Project, an initiative with Google (GOOG, GOOGL), Microsoft (MSFT) and Twitter (TWTR) to let customers send their information directly to competing services. The Warner report also notes that it could open security vulnerabilities; see, for instance, the openings exploited by Cambridge Analytica and Russian propagandists.
But for any of these ideas to get anywhere, Congress needs to act on privacy instead of writhing in ineffectuality. Until that changes, the gripes about Facebook will continue.
“Facebook’s had problems with privacy since they started,” said OMI’s Stoller. “It’s not like this stuff is new.”
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Email Rob at rob@robpegoraro.com; follow him on Twitter at @robpegoraro.
