In recent years, consumers’ concerns for their online privacy has grown substantially. Inaction by the federal government has led several companies, both large and small, to take steps of their own to assuage these privacy-focused woes. Big Tech companies like Apple and Google have implemented privacy features that have been largely well-received. Ostensibly, these changes seem positive; consumers are given more control over how their data is used. In reality, their actions are monopolistic and anti-competitive in nature, and they aren’t quite as good for consumer privacy as they may seem. The features implemented allow these companies to retain their rampant use of consumer data while significantly raising costs for advertisers and potential competitors. Big Tech is using its massive wealth of information to become untouchable monopolies, leveraging ideas of “privacy” for their benefit under the guise of consumer benefit.
We are currently moving towards the next iteration of the Internet, commonly called Web 3.0. However, this will only be fully realized when consumers can take part in the data economy, rather than serve as powerless spectators to their own information. The walled gardens in Big Tech can no longer be the operating model of the future; more equality can be achieved by offering a value exchange to the consumer.
The “Privacy-Focused” Decisions that have Increased Market Dominance
There have been several market-shaking moves by Big Tech that have been presented as being privacy-focused when in fact they serve primarily to increase market dominance. In April 2021, Apple introduced ‘App Tracking Transparency’ with its iOS 14.5 update, recommending their “key privacy update” for all iPhones. This allowed users to opt-out of data sharing to third parties, and resulted in initial 96% opt out rates, which have now fallen to around 62%. Furthermore, Google has stated they will deprecate the third-party cookie from their browser, Google Chrome, in late 2023.
In Apple’s case, its decision to shut out all other companies from being able to collect user data seems profit-motivated. Apple positioned itself as the sole collector of its users’ first-party data, giving it absolute control over what happens to that data. Given its massive market share, smaller businesses and advertisers are at Apple’s mercy if they want to interact with Apple’s users. Others have wondered whether Apple is attempting to push app developers to make their revenue via in-app purchases or subscriptions, of which Apple receives a percentage cut. As cited in developer testimony, Apple has used its App Store data such as preferences and demographics to create its own apps and products that edge out competition.
For Google, there have been similar complaints. The deprecation of third-party cookies will push out advertisers that rely on such technology, while at the same time increasing Google’s power. Google itself does not rely on cookies for its data collection practices, since it is able to gain hordes of valuable information through its services such as its search engine, Maps, Gmail, YouTube, and beyond. Journalist Rick Braddock states that “…Google’s privacy protections will likely result in the company’s own data becoming more valuable as companies struggle to source third-party ad targeting data.” In fact, Google used its data from said services to build Chrome in the first place. As a result, Chrome feeds Google even more consumer data.
The Power of Data Monopolies
In 2020, a House antitrust report outlined the unique power of data monopolies such as Apple, Google, and Amazon. These “data-opolies” squash rival brands, obtain significant advantages in product development, and decrease market innovation. The report found that this behavior is anti-competitive. But whether or not these Big Tech companies actually qualify as monopolies is beside the point. The illusion of choice – the ability to choose a different cell phone, freely download a different browser, or shop more consciously – prevents the government from bringing actions against these companies for being monopolies. Of course, this argument ignores the fact that these companies have become so integral to everyday life that, realistically, choosing other options places a notable burden on the consumer both socially and financially. In fact, since 2000, the Department of Justice has only brought one single monopoly case forward. Yet this is not echoed everywhere. In 2018, The European competition authorities brought actions against what many feel are the four biggest data-opolies: Google, Facebook, Amazon, and Apple. Google was fined a record 2.42 billion euros for leveraging its monopoly position and abusing its dominance.
The power of these data-opolies is undeniable. Their unparalleled collections of consumer data means they essentially set the price of that data for advertisers. This of course imposes burdensome costs on third parties. A report in the Wall Street Journal showed that after Apple’s ios 14.5 update, the cost of customer acquisition for smaller businesses advertising on Meta’s main platforms, Facebook and Instagram, jumped, with some moving their “whole ad budget” to Google ads. Data-opolies can also easily and cheaply choke out competitors by promoting their own products and services over others, degrading the functionality of independent apps and services, and reducing traffic to competitors on their search channels. These behaviors can be easily masked by claiming that the reduction of data sharing promotes consumer privacy as a whole. This is difficult to argue against because in a way, it’s true – overall, it does mean that less companies are gaining access to consumers’ data. But the benefit to the Big Tech company is far greater than that of the consumer, whose data is still being collected at rampant levels and without their say.
The Response from Brands and Marketers and the Potential Solution
In response to the decrease in availability of third-party data, brands and marketers have begun to invest in creating their own zero-party (data consciously volunteered by the user) and first-party databases at levels never before seen. These include as many data points as possible: demographic information, store visit locations, product preferences, return rates, competitor identification, and beyond. Wall Street Journal columnist Suzanne Vranica states that “gathering such data has long been a priority, but there is newfound urgency.” Brands and marketers have begun to utilize a myriad of strategies to gather this data, including loyalty and rewards programs, sweepstakes and competitions, email or text newsletters and updates, quizzes and polls, QR codes, and more. Though these methods have seen some levels of success, compiling and maintaining databases as well as creating engaging content places a significant financial burden on businesses, especially smaller businesses and startups.
So what can businesses do in light of the overwhelming power of data-opolies? It is clear that continued collection of zero-party data and first-party data is paramount. As the availability of third-party data decreases drastically, it is important for businesses to prioritize the creation of relationships with their consumers. Because even though Big Tech’s recent moves have been presented as being privacy-focused, there still remain extremely high levels of distrust for these companies. People feel commodified and dehumanized, reduced to their data.
If brands are able to show their consumers that they are respected and valued, this will foster longer term relationships and brand loyalty. Opt-in value exchange as deployed in loyalty programs and permission marketing is likely to be a dominant strategy as we move towards Web 3.0 . Though the obstacles presented by the Big Tech companies monopolizing privacy are no small obstacle, perseverance by advertisers committed to distributing value to consumers in exchange for their consent to share data are likely to see good levels of success.