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Facebook monopoly squeezes out online competition

Amy Mihelich, Contributing Writer
March 16, 2014 • 894 views

Mark Zuckerberg recently purchased WhatsApp – a mobile download program that provides users with unlimited texting – for 19 billion dollars. WhatsApp users download the app without charge for one year, and every additional year costs a meager 99 cents. Despite the minimal revenue, Zuckerberg claims this acquisition was quite the steal.

The justification for Mark Zuckerberg’s seemingly extravagant purchase lies beyond the price tag. WhatsApp is one of the most popular applications used around the globe, with half a billion people utilizing its affordable communication technology.

For Zuckerberg, the profit will not come from the number of people purchasing the application, but rather from the information its users provide. The reality is that we live in an information economy, one in which value is no longer limited only to scholarly research and professional journalism but also extends to soft media sources and personal data. Zuckerberg, realizing this perhaps better than any of us, leapt at the opportunity to expand his company’s already-vast collection of user data.

Most tech-savvy students are aware that the Internet has a rather annoying tendency to haunt you with your search results for several weeks. It isn’t a coincidence that when you search online for a new pair of sunglasses, the ad bar on your Facebook page fills with ads offering you deals on the latest fun-in-the-sun accessories.

What many do not know, however, is that new technology is creating ways for companies to discover even more information about their users. Online companies are using a new type of data analysis called “deep-learning.”  This technology goes beyond the algorithms that were typically used in the past to distinguish the overall content of posts and photographs. Rather than searching for solid images or phrases, deep-learning technologies examine the more subtle nuances of uploaded material, such as combinations of individual words or the distinct details of an image that make up the picture as a whole.

Deep-learning has proven to be extremely effective, and as the algorithms further develop, companies such as Facebook will use them to glean information from the posts, comments, and pictures we submit.

A recent Vice article about the Zuckerberg information monopoly explains that a company can be officially classified as a monopoly if it possesses 25 percent of the market. Currently, Facebook caters to the needs of about 30 percent of Internet users. With the addition of WhatsApp, this percentage will increase. In an information economy, a monopoly may not only ensure the unyielding prominence of Facebook, but it may also determine the success and failure of companies that attempt to advertise through online mediums.

When we evaluate the past, we may become distressed by the legendary giants of industry. Our high school history textbooks recall the catastrophic implications of the nineteenth century railroad monopoly. What we neglect to realize is that, in the framework of an information economy, information monopolies could have similar impacts.

The information monopoly brings about at least two main concerns. The first is that  as online media sources gain more information, they can easily target ads for specific audiences, which, while proven to be extremely effective in many cases, also limits the reach of these ads. Recently, an algorithm change concerning news feed advertisements on Facebook greatly decreased web traffic on Upworthy, and other online media sources have reported similar problems.

Secondly, as companies gain more online traffic, they also attract more employees. Successful companies have the luxury of selecting their teams from a large applicant pool, which allows the best and brightest to rise to the top. As certain online media sources become more profitable, less profitable enterprises are finding it more difficult to attract the qualified technicians they need to gain a competitive edge. This information monopoly could have great implications on the future of public media.

Online media users need to educate themselves about these new trends in the process of data gathering and the consolidation of public information. This information will help media users be better consumers of information and advertisements, and it will also make them more aware of the implications information monopolies can have on the future success of entrepreneurial endeavors.

 

Amy Mihelich ’16 (mihelich@stolaf.edu) is from Forest Lake, Minn. She majors in English and political science.

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