BigTech Power, Regulation, And The Early Days Of The Internet

I recently came across a Guardian article looking at the winners and losers from last month’s US Congressional hearings into the power, practices and conduct of various ‘Big Tech’ companies. It got me thinking.

BigTech’s power and urgent need for regulation reminds me of a hot topic back in the early days of the Internet being….the urgent need for regulation.

In Australia during the early 2000s, the approach of business and government to the emerging Internet and associated applications tended to be driven by fear and uncertainty (“let’s sue them, shut them down, and take control of the IP” – major records labels in the music industry) as traditional legal and regulatory frameworks struggled to adapt to the new paradigm and business models began to creak.

Between 2000-2004, I was entrenched in these issues as I wrote and delivered a brand new undergraduate and post-graduate course at Queensland University of Technology called ‘e-Commerce law’.

At the same time, I was in private practice advising Australia’s biggest casino, media and other operators on how to navigate the emerging world of online gaming and meet the increasing demand of Australian consumers (who love to gamble).

Most topics in the course and in practice grappled with the issue of how do the traditional legal frameworks apply to this new technology and applications, from payments and money, copyright (e.g. music file-sharing), privacy (e.g. data protection), and reputation (e.g. defamation).

In 2004, I analysed the Governments prohibition of online casinos in my first academic article published in QUT’s law journal, titled The Prohibition of Online Casinos in Australia: Is It Working?’.

I’ve pasted the introduction here as in the context of the BigTech Congressional Hearings, a few points are still interesting:

Preliminary online research of consumer gaming activity was utilised to develop an assumption that [after 2 years of prohibition] prohibition is not working. A key reason for this is the futility of prohibition given the unique nature of Internet technology. This article will also critique Government motives for prohibition, as arguably, the best approach to deal with interactive gaming was not implemented. The relevant question for public policy appears to be not whether online gambling can be controlled, but the extent to which it can be controlled.

Obviously, 16 years on you can apply this principle to the other areas which BigTech have completely dominated including social media, search, video, browsing, advertising, e-commerce, web services, app stores, personal data, and so on. In the early 2000s, it was a nascent and emerging industry and overall regulation policy needed to be ‘light-touch’ (although exceptions existed especially where consumer harm risk was high, such as gambling, payments).

As converging technologies penetrated (Internet, broadband, OS software, mobile, apps, cloud etc), limited regulation has allowed a handful of companies control the majority of our online data, purchases, browsing habits etc. This will only accelerate given the impact of COVID on our behaviour, and soon that will extend in the last frontier of growth for such firms including health, education, government services, and so on.

Whilst regulation (and disposals or break-up) is clearly required for many different reasons (competition, national security, business and consumer harm etc), it is unclear what will play out given the power of these firms, how politicised the issues have become, and the nature of US anti-trust enforcement and law which historically focused on pricing practices and consumer harm.

In Chairman Cicilline’s wrap-up:

This hearing has made one fact clear to me. These companies as they exist today have monopoly power. Some need to be broken up. All need to be properly regulated and held accountable … their control of the marketplace allows them to do whatever it takes to crush independent business and expand their own power. This must end.

Something needs to be done. But we will have to see what happens after the Nov elections.

Facebook Commerce

Facebook have finally followed in the footsteps on their Asian competitors (e.g. WeChat) and just announced their big play to grab a slice of the accelerating global e-commerce market yesterday. And critically, provide some level of competition to the Gorilla out there (i.e. Amazon). 

Shops started rolling out on Facebook yesterday in the United States and they are set to come to Instagram this summer. With this launch coming during COVID-19, it means commerce and community can finally play nicely together and enable SMEs to better respond to any e-commerce opportunities presented by the pandemic. For many, the online and mobile channel is the only hope for survival.

According to a survey conducted by Facebook and the Small Business Roundtable, a third of SMEs have stopped operating and an additional 11 percent say they could fail within the next three months if the current situation continues.

Here are the highlights (according to Facebook directly):

  • In a live stream, CEO Mark Zuckerberg said expanded e-commerce would be important to begin rebuilding the economy while the pandemic continues. “If you can’t physically open your store or restaurant, you can still take orders online and ship them to people,” he said. “We’re seeing a lot of small businesses that never had online businesses get online for the first time.”
  • Businesses can now turn Facebook and Instagram pages into online shops. They also joined forces with Shopify, who recently released their Shop app, to allow merchants to leverage their shipping, inventory and fulfillment features. The aim is to help new shop owners and small businesses to leverage their existing audiences to compete with Amazon.
  • Shops can be found on businesses’ Facebook pages and Instagram profiles, and they can also appear in stories or be promoted in ads. Items that businesses have made available for purchase will appear within the shop, and users can either save items or place an order. (Some businesses enable users to make purchases directly on Facebook, while others will take you to the business’s website to complete the transaction.)
  • According to Facebook, Shops will improve on the standard web commerce experience by storing users’ payment credentials in a single place that they can then use on any Facebook or Instagram storefront.
  • Businesses can handle customer support issues through Messenger, Instagram, and WhatsApp. Eventually, the company plans to let you browse store catalogs and make purchases directly from the chat window. It also plans to enable shopping from live streams, allowing brands and creators to tag items from their Facebook catalogs so that they appear on the bottom of live videos.
  • The e-commerce ecosystem around this will hot up to help store owners. For example:
    • Elliot creates simple product landing pages with one-tap checkout 
    • Storr is for mobile commerce, so you can set up a store from your phone 

A few initial thoughts include the following:

  • While Shops are free to create, they could create significant new business opportunities for Facebook in advertising, payments, and other services. Businesses will be able to buy ads for their Shops, and when people use Facebook’s checkout option, it charges them a fee.
  • This shopping rollout will no doubt have big algorithm implications on Instagram and Facebook. Early reports are showing how a “shopping” tab might interact with the “activity” tab on Instagram to increase the focus on commerce for businesses and their followers. Soon I suspect you’ll see Shops appear in stories and promoted ads.
  • Facebook Shops will eventually be integrated with WhatsApp, Messenger and Instagram DMs, so you can browse store catalogs and make purchases through chats. The influencer marketing industry is set to benefit too as live streaming and shopping will be pairing up. 

Facebook has been dabbling in commerce for years. In 2016, it introduced Marketplace, a destination within the app for peer-to-peer buying and selling. Two years later, Instagram began working on a standalone shopping app, though it was later abandoned. Instead, last year, Instagram added in-app checkout.

Given the devastation caused to many traditional physical retailers by COVID-19, hopefully this announcement makes it easier for SMEs to reach existing or new markets (or better serve existing customers).

With billion+ global userbase of the Facebook ecosystem and ongoing pandemic, you would think it will be a slam dunk. That said, I don’t think Jeff Bezos will be having any sleepless nights. But it will be interesting to see how it goes in these E-Commerce Wars. 

HelloFresh

It’s an exciting day today. Our weekly HelloFresh order of 5 tasty meals for the week has arrived..

Prior to lockdown we had started to experiment with HelloFresh. Perhaps a few meals per week every few weeks. Any service which can make preparing tasty, healthy meals easier and more convenient for busy parents will be a winner. Especially in a location (Guernsey) where online food delivery is very limited.

Since lockdown, we are now power-users moving to 5 meals per week, every week. I doubt this will continue, but for now it is our treat given that we can’t easily access supermarkets, restaurants or bars.

IMG_6101

Online Home-Schooling

A few weeks ago I posted here about managing our kids schooling during the first week of schools closures during lockdown. That week didn’t involve specific structure from the schools as they weren’t set up for online.

Last week was the first week of online home-schooling for our 4 year old, Angus (our 3 year old Georgina is at nursery which is closed).

Here is broadly what they did Monday-Friday:

  • Microsoft Teams as the tech platform e.g. comms, activities, resources, calendar
  • 830-9am live class VC welcome led by the teacher
  • 3 x activities to complete per day, led by a parent (Literacy, Maths, Creative)
  • Take a photo or video of each activity deliverable and submit
  • 230-3pm live class VC, typically a story

In short, it was difficult to manage, although we did complete everything each day.

It certainly felt like it was online version of what they actually did in the class each day. This makes sense as the school has only had a few weeks to prepare.

Going forward, it will be interesting to see how it evolves. Obviously the power of online delivery enables different formats, customisation (e.g. advanced vs beginner learning), gamification, digital tools, apps, and other experiences.

Whether this happens (i.e. innovation) is probably unlikely unless lockdown continues for many more months. What is more interesting is whether some aspects of digital learning will be incorporated as part of physical classroom learning. We will wait and see.

Jeff Bezos

“We innovate by starting with the customer and working backwards. That becomes the touchstone for how we invent” – Jeff Bezos

Jeff Bezos is arguably one of the greatest – if not the greatest – founder/CEO’s of all time. What is more unbelievable is that he is only 58, and many believe that the company he founded (Amazon) is only just getting started.

Like many of the best leaders who have disrupted industries or successfully navigated disruptive events or crises, there are many unique leadership traits which characterise Jeff Bezos. However, when I think of one thing, it is this: Customer-obsession.

Below are some ways that Jeff executes this within Amazon:

Leadership principles: It is so important to Amazon that it is the first on their list of 14. Apparently all the other principles are interchangeable, but only one must be first – customer obsession.

Core value-driver: Jeff Bezos sees that there are 5 main ways of creating shareholder value:

  • Competitor obsession
  • Business model obsession
  • Product obsession
  • Technology obsession
  • Customer obsession

While he acknowledges merits of all the approaches he believes that Customer Obsession is the healthiest approach:

Leaders start with the customer and work backwards. They work vigorously to earn and keep customer trust. Although leaders pay attention to competitors, they obsess over customers. They experiment patiently, accept failures, plant seeds, protect saplings, and double down when you see customer delight. A customer-obsessed culture best creates the conditions where all of that can happen…”

Symbols: Early on in Amazon’s life, Jeff Bezos brought an empty chair into meetings so lieutenants would be forced to think about the crucial participant who wasn’t in the room: the customer. Now that ­surrogate’s role is played by specially trained employees, dubbed “Customer Experience Bar Raisers.” When they frown, vice ­presidents tremble.

Founding value: Amazon’s 1997 shareholder letter is the first documented account of the term Customer Obsession – in the heading Obsess over Customers.

While the whole letter makes an interesting read, not least the growth between 1996 and 1997 of 838% from $15.7 million to $147.8 million. It’s this paragraph discussing their relentless focus on delivering value for customers as the driver of their growth.

Customer obsessed growth has taken Amazon from a start-up in a garage to one of the leading companies in the world and disrupting multiple industries in its wake.

Customer focus vs customer obsession: Gibson Biddle, former VP of Product at Netflix, wrote an interesting blog post explaining how Netflix adopted ‘Customer Obsession’ in his time there. In the post Gibson uses an image to compare Customer Obsession with Customer Focus which properly distinguishes the strategies:

Screenshot 2019-05-17 at 21.39.05

The below is a great short video summarising Jeff’s approach to customer obsession and long-term thinking:

This video provides details on Amazon’s 14 Leadership Principles with footage from various interviews with Jeff:

Other useful articles:

Below I have captured a few must-read resources to gain insight on Jeff’s leadership philosophy:

Forbes article on seven things a highly agile CEO does: Jeff Bezos

Jeff Bezos (2017) on his management style and philosophy 

Havard Business review article on how Jeff Bezos makes decisions

Hal Gregersen on the one skill that made Jeff Bezos so successful: Experimentation

 

 

 

Reed Hastings

As part of the 30 Disruptive Leaders in 30 Days Challenge that I set myself here, today I provide some insight around one of the best examples of a disruptive leader in Reed Hastings, CEO of Netflix.

If there was one word to describe how he demonstrated disruptive leadership, it would be this: Courage

Courage (noun)

  1. the ability to do something that frightens one; bravery.

“she called on all her courage to face the ordeal”

Why?

For almost a quarter of a century, Netflix and Reed Hastings have been in a constant stream of business wars, technology paradigm shifts, business model innovations, consumer habit changes, and multiple economic crashes. Despite this, Netflix has not only survived this chaos with Reed at the helm, but on multiple occasions, come out on top (as at April 2020).

A few examples of courageous (or, audacious, bold, daring, fearless) decisions made by Reed and Netflix during this time include:

  • Decision to bid $100M (at the time a significant chunk of revenue) to win House of Cards from cable rival HBO in 2011, and launch a risky backwards integration strategy into original content production;
  • Decision (2007) to open up its recommendation algorithm to the public and offer $1M to anyone who can improve it by more than 10%

However, it was the game-changing decision in the mid-2000s to pivot the company to invest and scale a streaming model which I believe was the most significant. To execute, the company split into two business units and the management team of the DVD business –  at the time representing 95% of revenue – were allegedly told by Reed to stop attending Netflix senior management meetings (see CNET article here).

Reed explains his thinking below:

“For the past five years, my greatest fear at Netflix has been that we wouldn’t make the leap from success in DVDs to success in streaming,” Hastings wrote. “Most companies that are great at something – like AOL dialup or Borders bookstores — do not become great at new things people want (streaming for us) because they are afraid to hurt their initial business.

“Eventually these companies realise their error of not focusing enough on the new thing, and then the company fights desperately and hopelessly to recover,” Hastings continued. “Companies rarely die from moving too fast, and they frequently die from moving too slowly.”

4 Resources to Learn More About Reed’s Leadership:

CNET article (2012) – A brilliant inside look at what happened during Netflix’s 2011 price-hike crisis which cost it 800k subscribers and stock to crash 77% in 4 months. A few leadership learnings from Reed are below:

  • Do not underestimate the need to manage different businesses separately;
  • Be forthright and transparent with customers at all times
  • Take responsibility, quickly.

TED Interview with Chris Anderson (2018) – A great interview which goes deep into Reed’s leadership style, decision-making, and ethos. According to Reed:

‘…courage is a value which must permeate the organisation. employees to have the courage to speak their mind as otherwise ‘to disagree silently is disloyal. You need the debate but it is not intense; it is more curiosity, to draw people out…’

Netflix Culture and Philosophy – This has been codified on its careers site. Once you read this, you are not left to any doubt as to why Reed – and Netflix – has been able to successfully lead the firm through disruption. More than once.

Reed’s Top 10 Rules for Success (see below). This is a compilation of advice from various interviews Reed has conducted. It is nicely put together. Key themes are :

  • Be Authentic
  • Edge of Chaos
  • Create Joy
  • Known Your Mission
  • Be Honest
  • Keep Improving
  • Think Long Term
  • Focus
  • Strong Values
  • Patience

 

 

 

Disney+ Launch

Today we signed up to Disney+ after it finally launched in the Channel Islands. We have been waiting for this day since Disney announced the service in 2019. We are big film fans but haven’t been too keen to pay £12-15 per title to stream a Disney film.

As such, we haven’t been able to introduce our 3 and 4 year old to animated classics including Aladdin, 101 Dalmatians, and Beauty and The Beast. With the lockdown and homeschooling due to the Corona Virus pandemic, the £5.99/mth represents unbelievable value.

The performance of Disney+ has been extraordinary, but not surprising. CEO Bob Iger’s M&A strategy to bolt-on franchises including Pixar, Lucasfilm and Marvel is now paying tremendous dividends across its digital and physical assets (e.g. theme parks).

On 3rd February 2020, the company had signed up 28.6 million global subscribers (since US launch in November 2019) with many more markets to launch. By comparison, Netflix has 149 million paid subscribers (see chart below):

disney v netflix

Despite limited content, Apple TV+ has around 33million US subscribers, although it is unclear how many are paid. Amazon Prime has also been very serious player for some time. These firms both have the deepest of pockets and serious ambitions. It will be interesting to see how these streaming wars play out.

 

Zooming

I came across an article this week here which asked whether Corona Virus (CV) could present a tipping point for virtual events. This reminded me of a pre-CV experience at the end of 2019. I attended a virtual conference hosted by marketing guru Seth Godin.

Afterward I was amazed at how far VC technology has come in being able to easily manage large numbers of people in an interesting and organised way which adds-value to both sides. He ran it using Zoom, had over 300 attendees from 50 countries, used self-managed break-out rooms over the course of the 2hrs, and created interactivity (which game them market research) with Q&A into the chat boxes.

Whilst it wasn’t perfect, it was impressive. I would certainly attend more of these, and reconsider in-person ones. Until this time, I had only ever used VC tech for standard corporate meeting use cases with just a few people. Now, I am recommending my parents to set up Zoom as an alternative for traditional B2C options (Skype, FaceTime).  Although that may change if the firm can’t get a handle on Zoom-bombing.

Despite some negative scaling side-effects and challenges, Zoom’s stock has post-IPO gone through the roof (actually, through the atmosphere). This gives them a massive window to place new bets and scale-up new products, value-added services, and M&A.

It is not often a newly public firm gets to invest for the long-term, but now is the certainly the time to accelerate investments into becoming a key player within the enterprise (and B2C?) ecosystem. Vertical, horizontal and hybrid platform solutions across many sectors and use cases will likely emerge as it has with IoT. It will be interesting to see how it plays out, how Zoom responds, and how long until its market capitalisation falls back down to earth.

Internet Regulation

 

2018 has been a significant year for internet regulation. The EU’s GDPR has significantly raised the bar for data protection & leading technology companies have been hammered from all sides due to various scandals & Congressional investigations. Today more than ever, citizens & governments are rightly concerned about personal data & issues including privacy, security, payments etc. Whether or not the regulators & consumers will be able to force the requisite amount of change on the leading tech companies, we shall see.

Interestingly, these issues were hot topics way back when the internet was early but going mainstream. Between 2000-2004, I wrote and delivered a brand new university course called ‘e-commerce law’ with key modules covering these issues. In 2004, I analysed the Governments prohibition of online casinos in my first academic article published in QUT’s law journal, titled ‘The Prohibition of Online Casinos in Australia: Is It Working?’. If you fancy a read, access it here.

I’ve pasted the introduction here as a few points are still interesting:

Preliminary online research of consumer gaming activity was utilised to develop an assumption that [after 2 years of prohibition] prohibition is not working. A key reason for this is the futility of prohibition given the unique nature of Internet technology. This article will also critique Government motives for prohibition, as arguably, the best approach to deal with interactive gaming was not implemented. The relevant question for public policy appears to be not whether online gambling can be controlled, but the extent to which it can be controlled.

These issues are still relevant in today’s online world where a handful of companies control the majority of our online data, purchases, browsing habits etc. Whether the current local & global regulatory frameworks and user tools go far enough to balance that control – and whether enough users actually care about this – only time will tell.