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  • feedwordpress 23:59:30 on 2018/06/01 Permalink
    Tags: , , , , crypto, , essays, , , , , , , , , , world wide web   

    Do We Want A Society Built On The Architecture of Dumb Terminals? 

    The post Do We Want A Society Built On The Architecture of Dumb Terminals? appeared first on John Battelle's Search Blog.

    God, “innovation.” First banalized by undereducated entrepreneurs in the oughts, then ground to pablum by corporate grammarians over the past decade, “innovation” – at least when applied to business – deserves an unheralded etymological death.

    But.

    This will be a post about innovation. However, whenever I feel the need to peck that insipid word into my keyboard, I’m going to use some variant of the verb “to flourish” instead. Blame Nobel laureate Edmond Phelps for this: I recently read his Mass Flourishing, which outlines the decline of western capitalism, and I find its titular terminology far less annoying.

    So flourishing it will be.

    In his 2013 work, Phelps (who received the 2006 Nobel in economics) credits mass participation in a process of innovation (sorry, there’s that word again) as central to mass flourishing, and further argues – with plenty of economic statistics to back him up – that it’s been more than a full generation since we’ve seen mass flourishing in any society. He writes:

    …prosperity on a national scale—mass flourishing—comes from broad involvement of people in the processes of innovation: the conception, development, and spread of new methods and products—indigenous innovation down to the grassroots. This dynamism may be narrowed or weakened by institutions arising from imperfect understanding or competing objectives. But institutions alone cannot create it. Broad dynamism must be fueled by the right values and not too diluted by other values.

    Phelps argues the last “mass flourishing” economy was the 1960s in the United States (with a brief but doomed resurgence during the first years of the open web…but that promise went unfulfilled). And he warns that “nations unaware of how their prosperity is generated may take steps that cost them much of their dynamism.” Phelps further warns of a new kind of corporatism, a “techno nationalism” that blends state actors with corporate interests eager to collude with the state to cement market advantage (think Double Irish with a Dutch Sandwich).

    These warnings were proffered largely before our current debate about the role of the tech giants now so dominant in our society. But it sets an interesting context and raises important questions. What happens, for instance, when large corporations capture the regulatory framework of a nation and lock in their current market dominance (and, in the case of Big Tech, their policies around data use?).

    I began this post with Phelps to make a point: The rise of massive data monopolies in nearly every aspect of our society is not only choking off shared prosperity, it’s also blinkered our shared vision for the kind of future we could possibly inhabit, if only we architect our society to enable it. But to imagine a different kind of future, we first have to examine the present we inhabit.

    The Social Architecture of Data 

    I use the term “architecture” intentionally, it’s been front of mind for several reasons. Perhaps the most difficult thing for any society to do is to share a vision of the future, one that a majority might agree upon. Envisioning the future of a complex living system – a city, a corporation, a nation – is challenging work, work we usually outsource to trusted institutions like government, religions, or McKinsey (half joking…).

    But in the past few decades, something has changed when it comes to society’s future vision. Digital technology became synonymous with “the future,” and along the way, we outsourced that future to the most successful corporations creating digital technology. Everything of value in our society is being transformed into data, and extraordinary corporations have risen which refine that data into insight, knowledge, and ultimately economic power. Driven as they are by this core commodity of data, these companies have acted to cement their control over it.

    This is not unusual economic behavior, in fact, it’s quite predictable. So predictable, in fact, that it’s developed its own structure – an architecture, if you will, of how data is managed in today’s information society. I’ve a hypothesis about this architecture – unproven at this point (as all are) – but one I strongly suspect is accurate. Here’s how it might look on a whiteboard:

    We “users” deliver raw data to a service provider, like Facebook or Google, which then captures, refines, processes, and delivers that data back as services to us. The social contract we make is captured in these services’ Terms of Services – we may “own” the data, but for all intents and purposes, the power over that information rests with the platform. The user doesn’t have a lot of creative license to do much with that data he or she “owns” – it lives on the platform, and the platform controls what can be done with it.

    Now, if this sounds familiar, you’re likely a student of early computing architectures. Back before the PC revolution, most data, refined or not, lived on a centralized platform known as a mainframe. Nearly all data storage and compute processing occurred on the mainframe. Applications and services were broadcast from the mainframe back to “dumb terminals,” in front of which early knowledge workers toiled. Here’s a graph of that early mainframe architecture:

     

    This mainframe architecture had many drawbacks – a central point of failure chief among them, but perhaps its most damning characteristic was its hierarchical, top down architecture. From an user’s point of view, all the power resided at the center. This was great if you ran IT at a large corporation, but suffice to say the mainframe architecture didn’t encourage creativity or a flourishing culture.

    The mainframe architecture was supplanted over time with a “client server” architecture, where processing power migrated from the center to the edge, or node. This was due in large part to the rise the networked personal computer (servers were used  for storing services or databases of information too large to fit on PCs). Because they put processing power and data storage into the hands of the user, PCs became synonymous with a massive increase in productivity and creativity (Steve Jobs called them “bicycles for the mind.”) With the PC revolution power transferred from the “platform” to the user – a major architectural shift.

    The rise of networked personal computers became the seedbed for the world wide web, which had its own revolutionary architecture. I won’t trace it here (many good books exist on the topic), but suffice to say the core principle of the early web’s architecture was its distributed nature. Data was packetized and distributed independent of where (or how) it might be processed. As more and more “web servers” came online, each capable of processing data as well as distributing it, the web became a tangled, hot mess of interoperable computing resources. What mattered wasn’t the pipes or the journey of the data, but the service created or experienced by the user at the point of that service delivery, which in the early days was of course a browser window (later on, those points of delivery became smartphone apps and more).

    If you were to attempt to map the social architecture of data in the early web, your map would look a lot like the night sky – hundreds of millions of dots scattered in various constellations across the sky, each representing a node where data might be shared, processed, and distributed. In those early days the ethos of the web was that data should be widely shared between consenting parties so it might be “mixed and mashed” so as to create new products and services. There was no “mainframe in the sky” anymore – it seemed everyone on the web had equal and open opportunities to create and exchange value.

    This is why the late 1990s through mid oughts were a heady time in the web world – nearly any idea could be tried out, and as the web evolved into a more robust set of standards, one could be forgiven for presuming that the open, distributed nature of the web would inform its essential social architecture.

    But as web-based companies began to understand the true value of controlling vast amounts of data, that dream began to fade. As we grew addicted to some of the most revelatory web services – first Google search, then Amazon commerce, then Facebook’s social dopamine – those companies began to centralize their data and processing policies, to the point where we are now: Fearing these giants’ power over us, even as we love their products and services.

    An Argument for Mass Flourishing

    So where does that leave us if we wish to heed the concerns of Professor Phelps? Well, let’s not forget his admonition: “nations unaware of how their prosperity is generated may take steps that cost them much of their dynamism.” My hypothesis is simply this: Adopting a mainframe architecture for our most important data – our intentions (Google), our purchases (Amazon), our communications and social relationships (Facebook) – is not only insane, it’s also massively deprecative of future innovation (damn, sorry, but sometimes the word fits). In Facebook, Tear Down This Wall, I argued:

    … it’s impossible for one company to fabricate reality for billions of individuals independent of the interconnected experiences and relationships that exist outside of that fabricated reality. It’s an utterly brittle product model, and it’s doomed to fail. Banning third party agents from engaging with Facebook’s platform insures that the only information that will inform Facebook will be derived from and/or controlled by Facebook itself. That kind of ecosystem will ultimately collapse on itself. No single entity can manage such complexity. It presumes a God complex.

    So what might be a better architecture? I hinted at it in the same post:

    Facebook should commit itself to being an open and neutral platform for the exchange of value across not only its own services, but every service in the world.

    In other words, free the data, and let the user decide what do to with it. I know how utterly ridiculous this sounds, in particular to anyone reading from Facebook proper, but I am convinced that this is the only architecture for data that will allow a massively flourishing society.

    Now this concept has its own terminology: Data portability.  And this very concept is enshrined in the EU’s GDPR legislation, which took effect one week ago. However, there’s data portability, and then there’s flourishing data portability – and the difference between the two really matters. The GDPR applies only to data that a user *gives* to a service, not data *co-created* with that service. You also can’t gather any insights the service may have inferred about you based on the data you either gave or co-created with it. Not to mention, none of that data is exported in a machine readable fashion, essentially limiting its utility.

    But imagine if that weren’t the case. Imagine instead you can download your own Facebook or Amazon “token,” a magic data coin containing not only all the useful data and insights about you, but a control panel that allows you to set and revoke permissions around that data for any context. You might pass your Amazon token to Walmart, set its permissions to “view purchase history” and ask Walmart to determine how much money it might have saved you had you purchased those items on Walmart’s service instead of Amazon. You might pass your Facebook token to Google, set the permissions to compare your social graph with others across Google’s network, and then ask Google to show you search results based on your social relationships. You might pass your Google token to a startup that already has your genome and your health history, and ask it to munge the two in case your 20-year history of searching might infer some insights into your health outcomes.

    This might seem like a parlor game, but this is the kind of parlor game that could unleash an explosion of new use cases for data, new startups, new jobs, and new economic value. Tokens would (and must) have auditing, trust, value exchange, and the like built in (I tried to write this entire post without mentioned blockchain, but there, I just did it), but presuming they did, imagine what might be built if we truly set the data free, and instead of outsourcing its power and control to massive platforms, we took that power and control and, just like we did with the PC and the web, pushed it to the edge, to the node…to ourselves?

    I rather like the sound of that, and I suspect Mssr. Phelps would as well. Now, how might we get there? I’ve no idea, but exploring possible paths certainly sounds like an interesting project…

    The post Do We Want A Society Built On The Architecture of Dumb Terminals? appeared first on John Battelle's Search Blog.

     
  • feedwordpress 19:30:31 on 2018/05/25 Permalink
    Tags: , , , essays, GDPR, , , ,   

    GDPR Ain’t Helping Anyone In The Innovation Economy 

    The post GDPR Ain’t Helping Anyone In The Innovation Economy appeared first on John Battelle's Search Blog.

    (image)

    It’s somehow fitting that today, May 25th, marks my return to writing here on Searchblog, after a long absence driven in large part by the launch of NewCo Shift as a publication on Medium more than two years ago. Since then Medium has deprecated its support for publications (and abandoned its original advertising model), and I’ve soured even more than usual on “platforms,” whether they be well intentioned (as I believe Medium is) or indifferent and fundamentally bad for publishing (as I believe Facebook to be).

    So when I finally sat down to write something today, an ingrained but rusty habit re-emerged. For the past two years I’ve opened a clean, white page in Medium to write an essay, but today I find myself once again coding sentences into the backend of my WordPress site.

    Searchblog has been active for 15 years – nearly forever in Internet time. It looks weary and crusty and overgrown, but it still stands upright, and soon it’ll be getting a total rebuild, thanks to the folks at WordPress. I’ll also be moving NewCo Shift to a WordPress site – we’ll keep our presence on Medium mainly as a distribution point, which is pretty much all “platforms” are good for as it relates to publishers, in my opinion.

    So why is today a fitting day to return to the open web as my main writing outlet? Well, May 25th is the day the European Union’s General Data Protection Regulation (GDPR) goes into effect. It’s more likely than not that any reader of mine already knows all about GDPR, but for those who don’t, it’s the most significant new framework for data regulation in recent history. Not only does every company that does business with an EU citizen have to comply with GDPR, but most major Internet companies (like Google, Facebook, etc) have already announced they intend to export the “spirit” of GDPR to all of their customers, regardless of their physical location. Given that most governments still don’t know how to think about data as a social or legal asset, GDPR is likely the most important new social contract between consumers, business, and government in the Internet’s history. And to avoid burying the lead, I think it stinks for nearly all Internet companies, save the biggest ones.

    That’s a pretty sweeping statement, and I’m not prepared to entirely defend it today, but I do want to explain why I’ve come to this conclusion. Before I do, however, it’s worth laying out the fundamental principles driving GDPR.

    First and foremost, the legislation is a response to what many call “surveillance capitalism,” a business model driven in large part (but not entirely) by the rise of digital marketing. The grievance is familiar: Corporations and governments are collecting too much data about consumers and citizens, often without our express consent.  Our privacy and our “right to be left alone” are in peril. While we’ve collectively wrung our hands about this for years (I started thinking about “the Database of Intentions” back in 2001, and I offered a “Data Bill of Rights” back in 2007), it was Europe, with its particular history and sensitivities, which finally took significant and definitive action.

    While surveillance capitalism is best understood as a living system – an ecosystem made up of many different actors – there are essentially three main players when it comes to collecting and leveraging personal data. First are the Internet giants – companies like Amazon, Google, Netflix and Facebook. These companies are beloved by most consumers, and are driven almost entirely by their ability to turn the actions of their customers into data that they leverage at scale to feed their business models. These companies are best understood as “At Scale First Parties” – they have a direct relationship with their customers, and because we depend on their services, they can easily acquire consent from us to exploit our data. Ben Thompson calls these players “aggregators” – they’ve aggregated powerful first-party relationships with hundreds of millions or even billions of consumers.

    The second group are the thousands of adtech players, most notably visualized in the various Lumascapes. These are companies that have grown up in the tangled, mostly open mess of the World Wide Web, mainly in the service of the digital advertising business. They collect data on consumers’ behaviors across the Internet and sell that data to marketers in an astonishingly varied and complex ways. Most of these companies have no “first party” relationship to consumers, instead they are “third parties” – they collect their data by securing relationships with sub-scale first parties like publishers and app makers. This entire ecosystem lives in an uneasy and increasingly weak position relative to the At Scale First Parties like Google and Facebook, who have inarguably consolidated power over the digital advertising marketplace.

    Now, some say that companies such as Netflix, Amazon and Apple are not driven by an advertising model, and therefore are free of the negative externalities incumbent to players like Facebook and Google. To this argument I gently remind the reader: All at scale “first party” companies leverage personal data to drive their business, regardless of whether they have “advertising” as their core revenue stream. And there are plenty of externalities, whether positive or negative, that arise when companies use data, processing power, and algorithms to determine what you might and might not experience through their services.

    The third major player in all of this, of course, are governments. Governments collect a shit ton of data about their citizens, but despite our fantasies about the US intelligence apparatus, they’re not nearly as good at exploiting that data as are the first and third party corporate players. In fact, most governments rely heavily on corporate players to make sense of the data they control. That interplay is a story into itself, and I’m sure I’ll get into it at a later date. Suffice to say that governments, particularly democratic governments, operate in a highly regulated environment when it comes to how they can use their citizens’ data.

    But until recently, first and third party corporate entities have had pretty much free reign to do whatever they want with our data. Driven in large part by the United States’ philosophy of “hands off the Internet” – a philosophy I wholeheartedly agreed with prior to the consolidation of the Internet by massive oligarchs – corporations have been regulated mainly by Terms of Services and End User License Agreements, rarely read legal contracts which give corporations sweeping control over how customer data is used.

    This all changed with GDPR, which went into effect today. There are seven principles as laid out by the regulatory body responsible for enforcement, covering fairness, usage, storage, accuracy, accountability, and so on. All of these are important, but I’m not going to get into the details in this post (it’s already getting long, after all). What really matters is this: The intent of GDPR is to protect the privacy and rights of consumers against Surveillance Capitalism. But the reality of GDPR, as with nearly all sweeping regulation, is that it favors the At Scale First Parties, who can easily gain “consent” from the billions of consumers who use their services, and it significantly threatens the sub-scale first and third party ecosystem, who have tenuous or fleeting relationships with the consumers they indirectly serve.

    Put another way: You’re quite likely to click “I Consent” or “Yes” when a GDPR form is put in between you and your next hit of Facebook dopamine. You’re utterly unlikely to do the same when a small publisher asks for your consent via what feels like a spammy email.

    An excellent example of this power imbalance in action: Facebook kicking third-party data providers off its platform in the wake of the Cambridge Analytica scandal, conveniently using GDPR as an excuse to consolidate its power as an At Scale First Party (I wrote about this at length here).  In short: because they have the scale, resources, and first party relationships in place, At Scale First Party companies can leverage GDPR to increase their power and further protect their businesses from smaller competitors. The innovation ecosystem loses, and the tech oligarchy is strengthened.

    I’ve long held that closed, walled-garden aggregators are terrible for innovation. They starve the open web of the currencies most crucial to growth: data, attention, and revenue. In fact, nearly all “innovators” on the open web are in thrall to Amazon, Facebook, Apple, and/or Google in some way or another – they depend on them for advertising services, for ecommerce, for data processing, for distribution, and/or for actual revenue.

    In another series of posts I intend to dig into what we might do about it. But now that the early returns are in, it’s clear that GDPR, while well intentioned, has already delivered a massive and unexpected externality: Instead of limiting the reach of the most powerful players operating in the world of data, it has in fact achieved the opposite effect.

    The post GDPR Ain’t Helping Anyone In The Innovation Economy appeared first on John Battelle's Search Blog.

     
  • feedwordpress 13:54:54 on 2017/09/28 Permalink
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    Amazon’s HQ2 Isn’t a Headquarters. So What Is It? 

    The post Amazon’s HQ2 Isn’t a Headquarters. So What Is It? appeared first on John Battelle's Search Blog.

    Crossposted from NewCo Shift.

    Everyone’s favorite parlor game is “where will Amazon go?” Better to ask: Why does Amazon needs a second headquarters in the first place?

    It’s the future! Rendering of Amazon’s new Seattle HQ. The first and original one. 

    Why does Amazon want a new headquarters? Peruse the company’s RFP, and the company is frustratingly vague on the question. “Due to the successful growth of the Company,” Amazon says of itself in the royal third person, “it now requires a second corporate headquarters in North America.”

    It requires”?

    Is this a request for bulk discounts on toner ink? Did Jeff Bezos outsource this momentous and extremely public communication to his purchasing department? Is there really no more room in Seattle?

    So…Why? Why is Amazon doing this? If I were one of the hundreds of Mayors and local civic boosters huddling in meeting rooms around North America, that would be my first — and pretty much my only question. After all, if you don’t know why Amazon is looking for a “second headquarters,” then your response to their RFP is going to end up pretty rudderless. If Amazon’s true reason for another HQ boils down to, say, Latin American expansion, then Chicago, Toronto, and Philly should pretty much pack in in, no?

    While the RFP is comprehensive in requirements (transportation networks, nearby international airports, sustainable office space, etc.), it nevertheless demonstrates a stunning lack of vision — the very vision that once defined “startups” like Amazon. The current accepted mythology about our fabled tech companies, those lions of our present economic theatre, is that they are fonts of vision — driven not just by profit, but by outsized missions to change the world, and to make it better. So what mission, exactly, will this new headquarter actually be charged with? Can anyone answer that? Absent any serious data, the default becomes “to expand Amazon.” And what, exactly, might that mean?

    Amazon’s lists of current and projected businesses include e-commerce (its core), entertainment, home automation, cloud services, white label products, logistics and delivery, and any number of adjacent businesses yet to be scaled. It also harbors serious international expansion plans (one would presume). Any and all of these businesses might inform the “why” of its Bachelor-like RFP. But nowhere in the RFP does the company deliver a clue as to whether these factors play into its decision.

    I have a theory about why Amazon issued such a vision-free RFP — and why the world responded with a parlor game instead of a serious inquiry as to the motivations of “the most valuable company in the world.” And that theory comes down to this: Amazon needs a place to put workers that are secondary but necessary — back office service, lower level engineering talent, accounting, compliance, administrative support. It will move those support positions to the city that has the cheapest cost per seat, and consolidate its “high value” workers in Seattle, where such talent is already significantly concentrated.

    Put another way, “HQ2” isn’t a headquarters at all. But calling it one insures a lot more attention, a lot more concessions, and a lot more positive PR. Maybe Amazon doesn’t have an answer to the question, and is hoping its call for proposals will deliver it a fresh new vision for the future. But I doubt it.

    I’d love to be wrong, but absent any other vision the most likely reasoning behind this beauty pageant boils down to money. It may sound like the cynical logic of a rapacious capitalist — but more often than not, that’s what usually drives business in the first place.

    The post Amazon’s HQ2 Isn’t a Headquarters. So What Is It? appeared first on John Battelle's Search Blog.

     
  • feedwordpress 23:37:52 on 2017/09/15 Permalink
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    This Is What Happens When Context Is Lost. 

    The post This Is What Happens When Context Is Lost. appeared first on John Battelle's Search Blog.

    Buzzfeed Google Ads

    (Cross posted from NewCo Shift)

    Facebook and Google’s advertising infrastructure is one of humanity’s most marvelous creations. It’s also one of its most terrifying, because, in truth, pretty much no one really understands how it works. Not Mark Zuckerberg, not Larry Page, and certainly not Russian investigator Robert Mueller, although of the bunch, it seems Mueller is the most interested in that fact.

    And that’s a massive problem for Facebook and Google, who have been dragged to the stocks over their algorithms’ inability to, well, act like a rational and dignified human being.

    So how did the world’s most valuable and ubiquitous companies get here, and what can be done about it?

    Well, let’s pull back and consider how these two tech giants execute their core business model, which of course is advertising. You might want to pour yourself an adult beverage and settle in, because by the end of this, the odds of you wanting the cold comfort of a bourbon on ice are pretty high.

    In the beginning (OK, let’s just say before the year 2000), advertising was a pretty simple business. You chose your intended audience (the target), you chose your message (the creative), and then you chose your delivery vehicle (the media plan). That media plan involved identifying publications, television programs, and radio stations where your target audience was engaged.

    Those media outlets lived in a world regulated by certain hard and fast rules around what constituted appropriate speech. The FCC made sure you couldn’t go full George Carlin in your creative execution, for example. The FTC made sure you couldn’t commit fraud. And the FEC — that’s the regulatory body responsible for insuring fairness and transparency in paid political speech — the FEC made sure that when audiences were targeted with creative that supports one candidate or another, those audiences could know who was behind same-said creative.

    But that neat framework has been thoroughly and utterly upended on the Internet, which, as you might recall, has mostly viewed regulation as damage to be routed around.

    After all, empowering three major Federal regulatory bodies dedicated to old media advertising practices seems like an awful lot of liberal overkill, n’est ce pas? What waste! And speaking of waste, honestly, if you want to “target” your audience, why bother with “media outlets” anyway?! Everyone knows that Wanamaker was right — in the offline world, half your advertising is wasted, and thanks to offline’s lack of precise targeting, no one has a clue which half that might be.

    But as we consider tossing the offline baby out with the bathwater waste, it’s wise to remember a critical element of the offline model that may well save us as we begin to sort through the mess we’re currently in. That element can be understood via a single word: Context. But we’ll get to that in a minute. First, let’s go back to our story of how advertising has shifted in an online world, and the unintended consequences of that shift (if you want a even more thorough take, head over to Rick Webb’s NewCo Shift series: Which Half Is Wasted).

    Google: Millions Flock to Self Service, Rise of the Algos

    Back in the year 2000, Google rolled out AdWords, a fantastically precise targeting technology that allowed just about anyone to target their advertisements to…just about anyone, as long as that person was typing a search term into Google’s rapidly growing service. (Keep that “anyone” word in mind, it’ll come back to haunt us later.) AdWords worked best when you used it directly on Google’s site — because your ad came up as a search result right next to the “organic” results. If your ad was contextually relevant to a user’s search query, it had a good chance of “winning” — and the prize was a potential customer clicking over to your “landing page.” What you did with them then was your business, not Google’s.

    As you can tell from my fetishistic italicization, in this early portion of the digital ad revolution, context still mattered. Google next rolled out “AdSense,” which placed AdWords on publishers’ pages around the Internet. AdSense didn’t work as well as AdWords on Google’s own site, but it still worked pretty well, because it was driven by context — the AdSense system scanned the web pages on which its ads were placed, and attempted to place relevant AdWordsin context there. Sometimes it did so clumsily, sometimes it did so with spectacular precision. Net net, it did it well enough to start a revolution.

    Within a few years, AdWords and AdSense brought billions of dollars of revenue to Google, and it reshaped the habits of millions of advertisers large and small. In fact, AdWords brought an entirely new class of advertiser into the fold — small time business owners who could compete on a level playing field with massive brands. It also reshaped the efforts of thousands of publishers, many of whom dedicated small armies of humans to game AdWords’ algorithms and fraudulently drink the advertisers’ milk shakes. Google fought back, employing thousands of engineers to ward off spam, fraud, and bad actors.

    AdWords didn’t let advertisers target individuals based on their deeply personal information, at least not in its first decade or so of existence. Instead, you targeted based on the expressed intention of individuals — either their search query (if on Google’s own site), or the context of what they were reading on sites all over the web. And over time, Google developed what seemed like insanely smart algorithms which helped advertisers find their audiences, deliver their messaging, and optimize their results.

    The government mostly stayed out of Google’s way during this period.

    When Google went public in 2004, it was estimated that between 15 to 25 percent of advertising on its platform was fraudulent. But advertisers didn’t care — after all, that’s a lot less waste than over in Wanamaker land, right? Google’s IPO was, for a period of time, the most successful offering in the history of tech.

    Facebook: People Based Marketing FTW

    Then along came Facebook. Facebook was a social network where legions of users voluntarily offered personally identifying information in exchange for the right to poke each other, like each other, and share their baby pictures with each other.

    Facebook’s founders knew their future lay in connecting that trove of user data to a massive ad platform. In 2008, they hired Sheryl Sandberg, who ran Google’s advertising operation, and within a few years, Facebook had built the foundation of what is now the most ruthlessly precise targeting engine on the planet.

    Facebook took nearly all the world-beating characteristics of Google’s AdWords and added the crack cocaine of personal data. Its self service platform, which opened for business a year or so after Sandberg joined, was hailed as ‘ridiculously easy to use.’ Facebook began to grow by leaps and bounds. Not only did everyone in the industrialized world get a Facebook account, every advertiser in the industrialized world got themselves a Facebook advertising account. Google had already plowed the field, after all. All Facebook had to do was add the informational seed.

    Both Google and Facebook’s systems were essentially open — as we established earlier, just about anyone could sign up and start buying algorithmically generated ads targeted to infinite numbers of “audiences.” By 2013 or so, Google had gotten into the personalization game, albeit most folks would admit it wasn’t nearly as good as Facebook’s, but still, way better than the offline world.

    So how does Facebook’s ad system work? Well, just like Google, it’s accessed through a self-service platform that lets you target your audiences using Facebook data. And because Facebook knows an awful lot about its users, you can target those users with astounding precision. You want women, 30–34, with two kids who live in the suburbs? Piece of cake. Men, 18–21 with an interest in acid house music, cosplay, and scientology? Done! And just like Google, Facebook employed legions of algorithms which helped advertisers find their audiences, deliver their messaging, and optimize their results. A massive ecosystem of advertisers flocked to Facebook’s new platform, lured by what appeared to be the Holy Grail of their customer acquisition dreams: People Based Marketing!

    The government mostly stayed out of Facebook’s way during this period.

    When Facebook went public in 2012, it estimated that only 1.5% of its nearly one billion accounts were fraudulent. A handful of advertisers begged to differ, but they were probably just using the system wrong. Sad!

    Facebook’s IPO quickly became the most successful IPO in the history of tech. (Till Alibaba, of course. But that’s another story).

    (Meanwhile, Programmatic.)

    The programmatic Lumascape. Seems uncomplicated, right?

    Stunned by the rise of the Google/Facebook duopoly, the tech industry responded with an open web answer: Programmatic advertising. Using cookies, mobile IDs, and tons of related data gathered from users as they surfed the web, hundreds of startups built an open-source version of Facebook and Google’s walled gardens. Programmatic was driven almost entirely by the concept of “audience buying” — the purchase of a specific audience segment regardless of the context in which that audience resided. The programmatic industry quickly scaled to billions of dollars — advertisers loved its price tag (open web ads were far cheaper), and its seemingly amazing return on investment (driven in large part by fraud and bad KPIs, but that’s yet another post).

    Facebook and Google were unfazed by the rise of programmatic. In fact, they bought the best companies in the field, and incorporated their technologies into their ever advancing platforms.

    The Storm Clouds Gather

    But a funny thing happened as Google, Facebook and the programmatic industry rewrote advertising history. Now that advertisers could precisely identify and target audiences on Facebook, Google and across the web, they no longer needed to use media outlets as a proxy for those audiences. Media companies began to fall out of favor with advertisers and subsequently fail in large numbers. Google and Facebook became advertisers’ primary audience acquisition machines. Marketers poured the majority of their budgets into the duopoly — 70–85% of all digital advertising dollars go to the one or the other of them, and nearly all growth in digital marketing spend is attributable to them as well.

    By 2011, regulators began to wrap their heads around this burgeoning field. Up till then, Internet ads were exempt from political regulations governing television, print, and other non digital outlets. In fact, both Facebook and Google have both lobbied the FEC, at various times over the past decade or so, to exclude their platforms from the vagaries of regulatory oversight based on an exemption for, and I am not making this up, “bumper stickers, pins, buttons, pens and similar small items” where posting a disclaimer is impracticable (sky writing is also mentioned). AdWords and mobile feed ads were small, after all. And everyone knows the Internet has limited space for disclaimers, right?

    Anyway, that was the state of play up until 2011, when Facebook submitted a request to the FEC to clear the issue up once and for all. With a huge election coming in 2012, it was both wise and proactive of Facebook to want to clarify the matter, lest they find themselves on the wrong end of a regulatory ruling with hundreds of millions of dollars on the line.

    The FEC failed to clarify its position, but did request comment from industry and the public on the issue (PDF). In essence, things remained status quo, and nothing happened for several years.

    That set the table for the election of 2016. In October of that year, perhaps realizing it had done nothing for half a decade while the most powerful advertising machine in the history of ever slowly marched toward its seemingly inevitable date with emergent super intelligence, the FEC re-opened its request for comments on the whether or not political advertising on the Internet should have some trace of transparency. But that was far too late for the 2016 election.

    The rest, as they inevitably say, is history in the making.

    Time will tell, I suppose.

    So Now What?

    Most everyone I speak to tells me that last week’s revelations about Facebook, Russia, and political advertising is, in the words of Senator Mark Warner, “the tip of the iceberg.” Whether or not that’s true (and I for one am quite certain it is), it’s plenty enough to bring the issue directly to the forefront of our political and regulatory debate.

    Now the news is coming fast and furious: At what was supposed to be a relatively quotidian regular meeting of the FEC this week, the commissioners voted unanimously to re-open (again) the comment period on Internet transparency. The Campaign Legal Center, launched in 2002 by a Republican ally of Senator John McCain (co-sponsor of the McCain Feingold Bipartisan Campaign Reform Act of 2002), this week issued a release calling for Facebook to disclose any and all ads purchased by foreign agents. (Would that it were that simple, but we’ll get to that in the next installment.) One of the six FEC commissioners, a Democrat, subsequently penned an impassioned Op Ed in the Washington Post, calling for a new regulatory framework that would protect American democracy from foreign meddling. The catch? The Republicans on the commission refuse to consider any regulations unless the commission receives “enough substantive written comments.”

    Once the link for comments goes up in a week or two, I’m pretty sure they will.

    But in the meantime, there’s plenty of chin stroking to be done over this issue. While this may seem like a dust up limited to the transparency of political advertising on the internet, the real story is vastly larger and more complicated. The wheels of western capitalism are greased by paid speech, and online, much of that speech is protected by the first amendment to our constitution, as well as established policies enshrined in contract law between Facebook, Google, and their clients. There are innumerable scenarios where a company or organization demands opacity around its advertising efforts. So many, in fact, that if I were to go into them now, I’d extend this piece by another 2,500 words.

    And given I’m now close to 3,000 words in what was supposed to be a 600-word column, I’m going to leave exploring those scenarios, and their impact, to next week’s columns. In the meantime, I’ll be speaking with as many experts and policy folks from tech, Washington, and media as I can find. Suffice to say, big regulation is coming for big tech. Never in the history of the tech industry has the 1996 CDMA ruling granting tech platforms immunity from the consequences of speech on their own platforms been more germane. Whether it’s in jeopardy or not remains to be seen.

    This is not a simple issue, and resolving it will require a level of rational discourse and debate that’s been starkly absent from our national dialog these past few years. At stake is not only the fundamental advertising models that built our most valuable tech companies, but also the essential forces and presumptions driving our system of democratic capitalism*. Not to mention the nascent but utterly critical debate around the role of algorithms in civil society. And as we explore solutions to what increasingly feels like an intractable set of questions, we’d do well to keep one word in mind: Context.


    *Ask yourselves this: Are the advertising platforms behind Alibaba and Tencent worried about transparency?

    The post This Is What Happens When Context Is Lost. appeared first on John Battelle's Search Blog.

     
  • feedwordpress 03:56:25 on 2017/06/15 Permalink
    Tags: , essays, , , the valley,   

    Uber Does Not Equal The Valley 

    The post Uber Does Not Equal The Valley appeared first on John Battelle's Search Blog.

    Uber Protest

    Now that the other shoe has dropped, and Uber’s CEO has been (somewhat) restrained, it’s time for the schadenfreude. Given Uber’s remarkable string of screwups and controversies, it’s coming in thick, in particular from the East coast. And while I believe Uber deserves the scrutiny — there are certainly critical lessons to be learned — the hot takes from many media outlets are starting to get lazy.

    Here’s why. Uber does not reflect the entirety of the Valley, particularly when it comes to how companies are run. As I wrote in The Myth of the Valley Douchebag, there are far more companies here run by decent, earnest, well meaning people than there are Ubers. But of course, the Ubers get most of the attention, because they confirm an easy bias that all of tech is off the rails, and deserves to be taken down a notch.

    Such is the case with this piece in Time — painting all of Uber’s failures broadly as the Valley’s failures. And to a point, the piece is correct — but only to a point. While the entire Valley (and let’s face it, Congress, the judiciary, the Fortune 500, nearly every public board in America, etc. etc.) has a major race and gender problem, Uber has far more troubles than just gender and race. Far more. And painting every company in the Valley with the tarred brush of Uber’s approach to business is simply unfair.

    To that bias, I’d like to counter with Matt Mullenwegg, from Automattic, or Jen Pahlka, from Code for America, or Ben Silbermann, from Pinterest, or Michelle Zatlyn, from CloudFlare, or Jeff Huber, from Grail Bio. Sure, their companies aren’t worth billions (on second thought, Pinterest, CloudFlare, and Automattic are, and Grail may be on its way), but they are excellent examples of game changing organizations run by good people who, while they may not be perfect, are driven by far more than arrogance, lucre, and winning at all costs.

    It’s certainly a good thing that Uber has been chastened. There are still far too many frothy startups driven by immature, bro-tastic founders eager to “move fast and break things” and “ask for forgiveness, not for permission.” Kalanick and Uber’s fall from grace is visceral proof that they must change their ways. But the Silicon Valley trope is starting to wear thin. Let’s not forget the good as we excise the bad. We’ve got a lot of important work to do.

    The post Uber Does Not Equal The Valley appeared first on John Battelle's Search Blog.

     
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