Tell me if this story sounds familiar.
A small company has an innovative idea. Its innovation results in a flourishing business. As business flourishes, its lone supplier cuts off all access and copies that innovative idea to its complete exactitude. With no other options, that small company shuts down.
Most of us would wonder, “Well, why doesn’t this small company go find another supplier?” After all, free enterprise demands competition:
- That no one supplier is privileged over another in the marketplace
- That any business be able to choose from a multitude of potential partners
- That no big player abuse its power.
Four app developers allege that Facebook removed API access in order to cripple their business. Their class action lawsuit describes Facebook’s behaviour as “the most brazen, willful anticompetitive scheme in a generation.” Whether or not this is true, one fact cannot be denied.
Facebook’s monopoly of user data is absolutely anticompetitive.
The Horrifying Truth about Social Data Barrier to Entry
Facebook is renowned for its aggressive collection of user data, which it often collects without user consent. This is to build an impossible Socal Data Barrier to Entry (SDBE) for any of its competitors. How does an SDBE work in practice?
Imagine if only one company manufactured and supplied telephony equipment. Imagine if this company was also the only company that granted users access to initiate and receive calls. Now also imagine if this same company had the ability to listen in on all your phone calls and logged them in perpetuity, and sold that information to the highest bidder.
This power is re-inforced by SDBE, and the reality that a telephone system’s power comes from all-pervasiveness. In other words, the more a company controls social data, the higher the barrier to entry for competitors.
This abusiveness is horrible, in and of itself, to users. No company should have that amount of power. In the past, the US government broke up the Bell system to curb potential abuse.
A monopoly is even more devastating to business
Anticompetitive behaviour doesn’t just inflate the cost of doing business, it also handicaps innovation. After all, one of the greatest innovations in business is the Internet itself. Yet the Internet would be impractical if every ping to a remote server resulted in long distance fees.
Without the break up of the Bell system, would Amazon, Netflix, and even Facebook be feasible in the modern age? Not at all.
Yet today history repeats itself. Facebook’s quest to collect maximal social data is a disaster for free enterprise. Since Facebook controls 80% of social network activity, and bought two of its most relevant competitors, the cost to access that social data is out of reach for almost all innovators who require that data.
This doesn’t even take into account just how easy it is for Facebook to replicate other companies’ innovations with impunity. Just ask Snapchat.
Hence why it’s important to disrupt Facebook’s SDBE. The best way to hit the reset button on the SDBE is to build technology that respects data sovereignty.