Beyond Facebook Analytica: Privacy Law Explained

Cambridge Analytica was bad, but Facebook’s collection of data is just the way the government wants it

It’s been almost two weeks since the Cambridge Analytica scandal broke for the third time since 2015, so it’s time to zoom out a bit and look more broadly at privacy law in the United States, and what those laws mean for a company like Facebook.

Like many stories that coastal elites and thought leaders make a fuss about, this one begins at that school in Cambridge, Massachusetts.

The idea of a “right to privacy” or “right to be left alone” all began in 1890 when two elitist Harvard law students were concerned about the intrusions upon their lives in high society posed by journalists and the fancy new instantaneous camera. Basically, they were worried their dinner parties would be ruined; so worried, in fact, that they wrote a law journal article about it that I assume at least four people have read. This article laid the foundation for the modern formulation of a “right to privacy.”

Let’s walk across the Harvard Yard (is that what people call it?) and skip forward 110 years to the dorm room of a computer science prodigy known by his Live Journal name Zuck On It. Mark Zuckerberg created Facebook for precisely the opposite reason as those snobby law students: he was an awkward computer geek and just wanted a way to meet girls. So even at first conception, we see the right to privacy (snobby law students) and Facebook (nerdy computer geeks) are fundamentally at odds. Remember, before Facebook, Zuckerberg got himself in trouble for making Facemash (think hot or not), which he built by hacking into the database of each Harvard house and taking the photos from each face book.

Lucky for us, Zuckerberg documented his every move when he built Facemash in 2003. He’s a little intoxicated!

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Spotify, Copyright and the Death of the Album

Together, Spotify and artists have killed the album, perhaps bringing music copyright down with it


Analysis of Spotify’s F1 filing for its impending IPO have all rested on the fundamental assumption that power in the music industry flows from copyright control, and for Spotify to achieve sustained success, it’ll need to either gain leverage such that it can negotiate better copyright licensing deals or it’ll need to acquire its own copyrights.

This is incorrect. In fact, the long-term success of truly disruptive startups has long depended on upending old business models and creating value in new ways.

Spotify lost $1.5 billion in 2017, illustrating the current music industry dynamics that have made it nearly impossible for any digital music startup to build a sustainable business. The “problem” with Spotify has always been that the record labels own the copyright to the music, forcing Spotify to pay nearly 70 percent of its revenue to them in royalties.

Thus, Spotify’s margins are completely at the mercy of the record labels and the deals Spotify must cut with them. Generally, new music is granted a copyright for the life of the artist plus 70 years. The labels’ power stems first from their control of copyright on new albums. From this, they control distribution, marketing, and sales. But, both Spotify and artists may be pushing towards a future—inadvertently or not—where the album format, and thus copyright itself, is no longer relevant. This puts the labels in a precarious position and gives the streaming companies and artists an opportunity to explore new, innovative business models.

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Ring’s Patents and Amazon’s Everything Ambitions

Amazon wants to own your home; Ring’s IP gives it the opportunity to do just that

By now, everyone has heard the news of Amazon’s $1+ billion acquisition of smart-home startup Ring, most famous for its video-enabled doorbell and “failed” Shark Tank appearance.

Amazon’s acquisition of Ring marks its latest move into the smart home/ home security space.

Understanding Amazon

It’s become apparent that the $50 billion home security market is the first real use case or potential “killer app” for the smart home. With the Ring purchase and its recent purchase of another smart home startup, Blink, Amazon is positioning itself to win the space. But for Amazon, “winning” a space doesn’t simply mean gaining a few customers and selling them a bunch of stuff. Time and time again, they’ve executed against a very specific strategy:

  • Invest in a market with massive fixed costs but the potential to benefit from economies of scale
  • Build an integrated solution, justified by the fact that Amazon itself will use it
  • Open up the integrated solution to third parties, providing the “primitives” for continued development on top of the Amazon platform

The Amazon Marketplace (the core ecommerce offering) and Amazon Web Services are the two most prominent and realized exercises of this strategy, but it is actively pursuing the strategy in logistics, food services, and now, the smart home. Notably, Amazon’s moves into all of these markets feed off each other. For instance, its moves into logistics—particularly its goal to solve the “last mile problem”—is directly strengthened by its effort to own the smart home, particularly the home security system.

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When a “Sex Trafficking” Bill Actually Makes Sex Trafficking Worse

The House just passed a bill to address online sex trafficking; it highlights everything that’s wrong with U.S. politics

On February 27, the House of Representatives passed the “Allow States and Victims to Fight Online Sex Trafficking Act” (FOSTA). Unfortunately, the bill with a noble-sounding name is anything but.

At its core, FOSTA is aimed at amending Section 230 of the Community Decency Act, a statute which literally makes the internet as we know it possible. Simply put, it prevents online platforms from being held liable for their users’ speech, except in certain, limited circumstances (e.g. federal criminal activity, IP infringement). Importantly, it also does not punish internet companies for moderating content. They can moderate as much as they’d like, and it won’t be held against them (“you took down this post but not that one!” isn’t something a prosecutor can say). FOSTA would change this, by making websites liable for “knowingly assisting, supporting or facilitating” a violation of sex trafficking laws, which could have two main consequences:

  • Creates a “moderator’s dilemma” for internet platform and their efforts to moderate content, leading to either of two undesirable outcomes
  • Makes it difficult for smaller internet companies to compete with internet giants and their limitless resources

Let’s forget for a second the fact that even the Department of Justice has come forward saying that existing laws are sufficient and FOSTA actually makes it more difficult for prosecutors to prove up cases against internet companies and examine these two issues.

Photo by Rachael Crowe on Unsplash

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Ad Blockers, AT&T and Weird Antitrust Questions

Chrome’s new ad blocker raises antitrust concerns; a new consumer right to control grounded in an old AT&T rule may help

On February 15, Google’s Chrome browser began blocking certain types of advertisements. Many news outlets have raised legitimate concerns about the limited scope of Chrome’s new ad blocking efforts in addition to the “process” through which Google arrived at its implemented solution (the process was basically this: Google creates “Coalition for Better Ads”; Google performs research about most annoying types of ads for new Coalition; Google “forgets” to test annoying pre-roll YouTube ads in research; Google blocks 17% of ads tested; Google will not address issue of user tracking, raising privacy concerns).

Many of the reactions to Chrome’s ad blocker have suggested potential antitrust issues associated with the internet’s biggest advertiser using its market-leading browser (59% of internet users use Chrome) to dictate which ads are shown to users. And they’re right: Google didn’t test YouTube’s pre-roll ads in its initial “research” even though the Coalition has said these are “least preferred” and Chrome’s ad blocker has set out to block other such pre-roll ads. There’s an argument to be made that this is an anti-competitive move by Google, leveraging its market dominance to suppress competing advertisers.

If it looks like a banned ad and smells like a banned ad, it’s probably just one of those annoying YouTube ads that Chrome conveniently forgot to block.

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Bourgeois Culture is Dead, So Let’s Stop Talking About It

The internet is bad and boujee, and it’s only accelerating the pace of change

Dear Professor Amy Wax,

I remember when you burst onto the scene as a free speech victim late last year with your op-ed, “Paying the price for breakdown of the country’s bourgeois culture”. Let’s first put aside the irony of an article featuring a photo of John Wayne — a notorious womanizer who was divorced twice and had at least as many affairs — proceeding to talk about how people used to get married and stay married and that was good for society or something. The op-ed itself has been dissected and re-dissected ad nauseum by now.

It’s great to have you back this week with your Saturday Essay, enumerating the ways in which you’ve been oppressed since the op-ed was published. It’s another piece ripe for being ripped apart, but I’ll leave that to others (for the record, your basic point — that we must be able to engage in logical reasoning and civil discourse if we’re to survive is a society — is indisputable). The bigger point to be made is that none of this debate over “bourgeois culture” matters one bit. Technology, namely the internet, has fundamentally changed our society, and longing for 1950s values (or any form of “Make America Great Again-ism”) isn’t going to change that. To your credit, you (and Trump, for that matter) identify the core issue facing our country, perhaps accidentally, then proceed to arrive at exactly the wrong conclusion.

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Uber, Waymo and the Future of Transportation-as-a-Service

With Google and Uber settling their lawsuit, there might yet be room for a partnership of competitors

By now, everyone has heard that the Waymo-Uber trial came to an abrupt close after the two reached a settlement. It was Waymo’s case to prove, and reports were their case was lacking a “smoking gun”. From the Verge:

So who gets what? Waymo gets 0.34 percent of Uber’s equity at the company’s $72 billion valuation, which works out to a value of around $245 million (…)

According to a source familiar with the matter, Uber cannot use any of Waymo’s hardware or software trade secrets as one of the conditions of the settlement. That’s interesting, especially since the trade secrets at the heart of the case were all related to hardware (emphasis mine).

Not enough attention has been paid to the ways in which the long-term business strategy may have impacted the litigation strategy on both sides. There are the obvious points: Uber wanted to clear the deck for its impending IPO, and Waymo (owned by Google/Alphabet) wanted to protect what many believe to be market-leading self-driving technology. But, the reality is both companies possess critical components of self-driving technology, leaving the field open for competition or collaboration in the future.

The Verge calls out perhaps the most important point: Uber cannot use any of Waymo’s hardware or software trade secrets. Given that the trade secrets at the center of the case were hardware related, protecting their software seems like a major win for Waymo. After all, Google is still a software company; they’ve shown limited ability to succeed in hardware of any type (No, selling 4 million Pixel phones doesn’t really do the trick).

Remember, Google Ventures invested in Uber in 2013, and owns about 7% of the company overall. Google also invested $1 billion in Lyft in late 2017. In addition, Google’s Waze is piloting a carpooling app in select geographies. In short, Google has its money (and technology) placed on multiple bets in the self-driving and ride-hailing market. It almost calls to mind the strategy SoftBank has taken on an international level, investing not only in Uber, but also in Uber competitors Didi Chuxing (China), Grab (Southeast Asia) and Ola (India).

This gets to the unifying thesis underlying SoftBank’s $100 billion “Vision Fund”: data collection. Ride-hailing companies are all collecting massive sets of location and logistics data, crucial in building the connected fleets of the future. The New York Times did an excellent write up on SoftBank’s strategy, calling out the enormous amounts of date they all its portfolio companies collect that will be needed to power the automated machines of the future. Google’s self-driving efforts similarly reflect an ethos of data collection; and which company better knows what to do with massive quantities of data than Google? Google is playing the long game: these various companies all provide potential routes to market for its self-driving technology. And while Google may provide both the hardware and software for this self-driving future, its expertise would seem to lie on the software side of things. In particular, Google’s mapping and image recognition capabilities are unmatched.

Through all this, it’s important to remember that as self-driving cars come to market, Uber’s business model will likely change dramatically. We’re currently experiencing Uber 1.0; at some point in the future, an Uber x.0 will be powered by a self-driving fleet of cars, always on call. It’s also important to remember that Uber (or Google) isn’t the only company pursuing this future: from Detroit to Silicon Valley, everyone in the car industry wants a self-driving play. How will consumers navigate the many options that may exist for us to get from point A to point B in a self-driving future? I’ll give you a hint: the same company that helps us navigate the internet now may just be the answer.

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