FTC Sues Facebook for Illegal Monopolization

> Unfortunately this is a wildly speculative argument, which is unlikely to find favour with regulators in this case.

I admit it is speculative but the argument encapsulates the abuse of the social network as I see it, which is why I'm running with it. It remains to be seen what angle the regulators will present when proving abuse of monopoly power.

However I cannot separate what Facebook is able to do on its social network without consequence from the idea that Facebook is an abusive monopoly.

> If I improve FB's/Google's ad models, do I increase the cost of all of their users? That seems ludicrous to me, but maybe that seems fine to you.

Consider the "user price of improvement". Suppose that an initial model m1 only needs to regress on a users age, gender and location to guarantee a clickthrough rate of x%. As the social network grows and there are more users, a larger variety of adverts and longer engagements, all else fixed the clickthrough rate will go down if the users start seeing more irrelevant adverts (more ad bidders but same relatively static input features) as well as repeated adverts (longer engagement times but same input features).

In an effort to increase clickthrough rates either beyond x% or at least to maintain x% in a growing network, the model needs more express power. So m1 is expanded to m2 now using accumulated likes. Fine likes are activity which is generated on FB so that's fair game. But there's a small cost in user privacy: suddenly adverts can be targeted based on your likes.

The network grows and clickthrough rates must still be improved. m2 is expanded to m3 by incorporating activity with friends, including mutual likes. Again this is generated on the social network, but there is a privacy cost: adverts are served based on public and perhaps private interactions.

The network grows and clickthrough rates must still be improved. m3 is expanded to m4 using browser trackers, so now your activity outside of Facebook is used to serve adverts: the privacy cost is increased and suddenly becomes real. FB serves adverts to you based on anything you do on the internet.

Back to my argument. Now at this point FB has a strong social network based on your activity and your friends' activity as well as external network effects based on browsing trackers, log-in with FB identities, as well as your friends' external browsing activity.

The transition from m1 to m4 has required using more and more of your personal data (whether public or private) in order to maintain a clickthrough rate of x%.

> This is a trade. You and I may think this is a poor trade, but it's one that many, many users make (and like) daily. In no sense is it a cost.

Each time the model is improved by adding additional features, those features aren't acquired for free. They're acquired by deliberately mining users' personal information. You might not think this is the case, because data is data and data is stored in bits and bytes, but it has representational value that in many parts of the world (most notably the EU) is protected.

In other words, the change from m1 to m4 in order to serve adverts has incurred a cost in terms of the private data a user must give up in order to receive adverts that are relevant to them (ie maintain a clickthrough rate of x% or higher).

So yes in this sense it is a cost.

Furthermore, in the 21st century, data is a clearly a resource, and has monetary value. It can be mined and gathered from users, which is then used to generate revenue from advertising. Users are not compensated for their data but instead are provided with a free service. If the alternative was to pay for the service, what would the monetary value be? That is the opportunity cost of providing data instead. So yes in that sense it is a cost.

Now let's consider consent. Facebook makes all users accept a privacy policy which constitutes as consent (the minimum requirements now may be higher but the tactic is the same). If the user disagrees they can't use the service. In most cases the user agrees because they want to use the service.

However as Facebook has a large social network and users' don't have many alternatives, the incentive for users to agree to the privacy policy becomes stronger.

If Facebook didn't acquire Instagram, then that last effect is weaker because users' have an alternative. If Facebook mined more data then Instagram, then Facebook is more "expensive" to use than Instagram and vice versa. Competition between the two networks would increase supply and reduce the cost of data required to use either network.

By acquiring Instagram and merging social network graphs (inputs to the model), Facebook effectively remove that dynamic, which gives them monopoly power to keep mining more and more data for marginal or perhaps zero benefit (an increase in costs).

Whether that dynamic would actually play out between users in a world where they are competing networks remains to be seen. Maybe it doesn't and for any network its a race to the bottom in terms of privacy regardless of the number of players.

> But consider the alternative. FB are blocked from buying IG, so IG need to set up a sales team, an adevertising method and epxand globally. None of these things are cheap or trivial. There does exist a world where IG competes on a level-playing field independently, but I would argue that at least 80% of the time, this hypothetical leads to IG either under-performing or flaming out.

Both of these outcomes are speculative, but I'm not convinced about the 80% figure. I'm not sure that IG needed FB alone to get to a billion users. Many of those users aren't necessarily people and are companies, organizations and other entities which use IG for engagement. It's enough that people spend more time on IG than FB the app or website to convince those entities to engage on IG. Not sure what the proportions are exactly but just giving an example.

Anyway, good points you've made and I've learned something so I'm willing to call it a day. I wrote this last essay simply because many of the points you made were simply too dismissive of what I said, without substantiation. Of course I'm not claiming to be right about how regulators will approach their argument, just stating a viewpoint on how FB is able to increase costs for the user, in terms of privacy, while being able to get away with it.

> Additionally, if (hypothetically) one chooses to make advertising-supported websites illegal, then that leads to FB (and Google) shutting down, which I don't see as a net positive for the world. (Certainly most of their users wouldn't think so).

Not sure why you brought up the prospects of advertising-supported websites being illegal. The purpose of regulation is to control abuse. GDPR in the EU does not making advertising illegal, but rather places limits on what information can be used. In the same way that road rules don't make driving illegal.

From the second link it appears that iMessage is not counted because it is preinstalled on iPhones and is not cross platform:

"4. iMessage

Communication apps like WhatsApp are available on practically all devices, whereas native apps like Apple’s iMessage (and now Apple Business Chat) are limited to one provider.

However, the user base for iPhone is constantly growing in the USA. A lot of adolescents prefer iMessage to apps like Snapchat in order to reach out to their friends.

Since iMessage is a pre-installed service of Apple, there are no official messaging usage statistics as they keep those “in-house”. Looking at the ever-growing demand and distribution of iOS devices though, we can assume that the pool of iMessage users is growing. In the fiscal year of 2017, Apple reached a quantity of 216.76 million iPhones."

> > But consider the alternative. FB are blocked from buying IG, so IG need to set up a sales team, an adevertising method and epxand globally. None of these things are cheap or trivial. There does exist a world where IG competes on a level-playing field independently, but I would argue that at least 80% of the time, this hypothetical leads to IG either under-performing or flaming out.

Both of these outcomes are speculative, but I'm not convinced about the 80% figure. I'm not sure that IG needed FB alone to get to a billion users. Many of those users aren't necessarily people and are companies, organizations and other entities which use IG for engagement. It's enough that people spend more time on IG than FB the app or website to convince those entities to engage on IG. Not sure what the proportions are exactly but just giving an example.

IG had less than 20mn users when acquired, literally nobody cared about it outside of the early-adopter crowd in SF. In general, value comes from execution rather than the idea, and I am definitely not convinced that IG would be anywhere near where it is today without Facebook, which leads me to believe that breaking it off at this point is pretty unfair.

Like, another way FB could have competed would have been to buy IG and let it die slowly. Given this anti-trust suit, that would appear to have been the smarter move, but it definitely wouldn't be overall better.

Lets also note that FB became popular not just because it was good, but because it was good and always stayed up, regardless of user growth. That has probably been one of the major engines for IG growth.

Finally, the success of IG was also driven by the use of free advertising on FB, without that it would have taken a lot longer (and cost a lot more money) for them to reach the scale that they have now.

Again, thanks for replying. I'm still not convinced by your model of the cost of IG/FB, but I appreciate that it's reasonably well thought out.

> you pulled that out of thin air

As opposed to your opinion that is empirically flawless and unquestionable?

Opinion is opinion, thus me explicitly calling it opinion.

My take is honestly supported by the very concept of faulty generalization fallacy - given that you did confirm you based this claim on anecdotal evidence - if you ask me, but maybe that's just me.