Germany Calls Facebook's Bluff
Nearly everyone has criticism for German Justice Minister Heiko Maas' proposal to impose fines on social networks and their workers for failure to delete hateful content. Internet freedom advocates hate it for imposing censorship. The European Union is concerned for the same reason and the German union of judges and prosecutors criticize it for not going far enough because the posters of hate-speech themselves escape punishment.
There is room to debate how effective or useful such measures are or where the line should be drawn for free-speech purposes. But the most specious criticism of all comes from the social media giants themselves.
The political motivation of the Maas proposal is obvious. The German political elite feels threatened by nationalist populist propaganda-based successes such as Brexit and Donald Trump's victory. With elections coming in September and a young nationalist, anti-immigrant party poised to get into parliament, the governing coalition of center-right Christian democrats and center-left Social democrats wants to prevent Germany from turning into an arena for this kind of thing.
The social networks' generic argument is that they're merely a conduit for information, not a traditional media where editors serve as gatekeepers. It is unnatural and inefficient for them to police the flow of content through the platforms. They also argue that forcing them to do this -- and Maas, for example, wants Facebook and Twitter to respond promptly to every complaint -- stifles innovation.
Facebook and Twitter would be entitled to their defense if, indeed, they were unmoderated, user-run platforms. But they have given up any claim to that status. Facebook is openly into social engineering, and it curates users' news feeds by using algorithms users don't understand. It has undertaken to fight fake news even in jurisdictions where no laws require it, such as the U.S. Twitter, which is normally less intrusive, recently announced it has suspended more than 376,000 accounts between July, 2016 and the end of the year for allegedly promoting terrorism. If you do censorship in any form, rather than tell authorities they can go after the specific users if they want, you are no longer just a technological platform -- you are a media organization.
Businesswise, the social networks are players on the media market, too. They have successfully redirected advertising revenues from traditional media to their platforms with promises of more precise targeting and bigger audiences.
Those promises were at best misleading: No one knows how many accounts on the networks belong to real users. A recent report by The&Partnership, an advertising agency network backed by global giant WPP, put damage from ad fraud -- the amount advertisers lose when their ads are "shown" to bots rather than real users -- at $12.5 billion, or 20 percent of the entire digital advertising market, in 2016. "The time has come for the Googles and Facebooks to stop marking their own homework and allow specialist, third-party auditors inside their walled gardens – to verify the viewability, non-human traffic and brand safety scores they send back to clients," the report said.
In effect, the social networks have undermined traditional media by rolling out technology that gives them access to enormous amounts of free content, a vast audience that wants to consume it and the means to manipulate audience numbers without being called on it. While the social media companies can exploit their tech for profit, they expect to be exempt from the responsibilities of traditional media. These include being liable for fake content that can be dangerous to reputations and, in some countries, being criminally responsible as organizations if they publish hateful material. They also include being subject to outside audience audits, which determine how much ad revenue newspapers, magazines, TV and radio stations get.
The freedom to make money without being subject to the same regulations as "legacy" predecessors is a common feature of U.S. tech titans. Uber, which first ignores and then fights labor and tax rules that exist for taxi businesses in every country it enters, is a textbook example of "innovation" that has more to do with ignoring rules than with breakthrough tech.
If Twitter, Facebook and other social platforms make money in the same way as traditional media companies, they should be subject to the same legal boundaries as those traditional companies. Europe is a large market for them -- Facebook collected 24 percent of its revenue there in 2016, a large portion of the money coming from Germany. And yet the social networks have somehow managed to avoid being regulated as media, and they've been remarkably hard to sue for any reason. They've even pretended not to have legal representation in Germany, and not to understand documents in German. The big social media platforms are also different from, say, Wikipedia, which has more freedom to reject censorship in principle because it's a non-profit that doesn't need to look for compromises with governments in order to make money.
Granted, Maas's legislative proposal may have emerged for the wrong reasons. It may also unduly limit free speech. But, if passed, it will serve the useful purpose of beginning to explain to Facebook that if it behaves like a media business in many important ways, it must accept the responsibility, and the liability, that comes with it. It has to reconsider its regulation-free entitlement to an 86 percent gross margin. The alternative is to renounce its business model and argue, like Wikipedia, that information flows must be free.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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