Image: Andrew Van Huss (Wikimedia Commons) / Protocol
July 29, 2020
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Good morning! This Wednesday, Big Tech goes in front of Congress, and we have everything you need to know before the hearing starts.
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The Big Story
The big questions facing the big tech CEOs
In theory, today's hearing-by-video-chat in front of the House Antitrust Subcommittee is about competition and antitrust questions. Which means it's not about whether Facebook suppresses conservatives, whether Apple is too close with the Chinese government, if YouTube is radicalizing viewers, or whether Amazon needs to treat its workers better. I suspect the hearing will actually become about some or all of those things, but that's not why it's happening.
If you haven't already, you should read Protocol's blockbuster preview of the hearing. Here, as briefly as I can put it, are the main questions in front of each company.
- Amazon: Does Amazon, by virtue of hosting a marketplace and operating AWS, collect data on sellers and products that it uses to make its own business decisions, including competing with the people who use its services? And does that give Amazon a unique, unfair advantage?
- Apple: Does Apple have an obligation to open up the App Store, police it differently, or collect different commissions, because iOS devices (and the iPhone in particular) are so important and dominant? And when Apple competes with a third party — like Apple Music vs. Spotify or TV+ vs. Netflix — does Apple have an unfair advantage because it runs the App Store?
- Facebook: By virtue of owning Facebook, WhatsApp and Instagram, does Facebook control the social sphere (and effectively, the internet as a whole) in a way that stifles competitors? If it had never bought Instagram, would Instagram, Facebook, and the world in general be better off?
- Google: Google's sort of a mishmash of everyone else, given that you could pick antitrust fights with Android, Search and AdWords. But the big question is, essentially, does Google prioritize its own products and services over its competitors? Are Google's many playing fields even ones?
One of my favorite stats from this hearing will be one borrowed from presidential debates: How many words does each CEO say? Some questions can be answered by "Senator, we run ads," but many of the issues here take more than four words. And it'll be interesting to see who gets the brunt of the questions. (My bet's on Bezos, the only first-timer on the panel, but we'll get to that in a second.)
Each CEO has specific things to answer for, but there are a few issues that cut across the whole group.
- Shopping: Google Shopping and Play Store, Facebook Shops, Apple's App Store, Amazon's whole existence. The question of how people buy stuff, how much the platforms take off the top, and who pays, are central to all these questions.
- Data collection: Less about personal data, more about developer and advertiser data. What can Apple and Google learn from the developers in their stores that they can use to improve their own products? What can Facebook and Amazon learn from ad buyers or brands to do the same?
- Lock-in: An increasing number of Google searches end without users ever leaving the page. Facebook seems to put ever more stuff behind a login page. Apple seems to promote its own apps in search results. Are these companies being fair arbiters of their platforms or putting their thumbs on the scale?
There's lots more, of course. And this likely won't be the last we see of these four CEOs – so Mark, Jeff, Sundar and Tim, I suspect you're going to want to start planning for a follow-up hearing. In which you might be the only one at the table.
For the rest of us: The hearing kicks off at 9 a.m. Pacific, and you can watch it here.
How to prepare for your big day in Congress
Shakeel Hashim writes: Jeff Bezos being a first-timer might put him at a big disadvantage, according to Holland & Knight partner Chris DeLacy, who preps execs for these hearings. That's because with hearings like these, preparation is key.
On average, DeLacy said, executives spend at least two or three days preparing, with a team ranging from three to 15 people coaching them. But when the stakes are high, people might go into overdrive: "I've heard of witnesses prepping for multiple weeks," DeLacy told me.
- It's a rigorous process. Executives are filmed while delivering their prepared remarks so that the team can point out their bad eye contact and posture. They're also taught about the specific questioning styles of the committee members and shown video clips of past hearings to give them an idea of what to expect.
- Then there's the terrifyingly named "murder board." That's where the prep team pretends to be the committee, grilling the executive with all the questions and question-statements they might be asked.
"Typically you break them down at first," DeLacy said. "You try to trip them up at first, and then you build up their confidence from there." That makes it easier to deal with the know-it-all personalities of some execs, he said. "Once they're shown that there's some peril to what they're doing ... they're much more amenable to being coached."
There are some neat tricks, too. DeLacy said executives will often have a "placemat" in front of them while testifying. That's a graph with "happy places" — or comfortable subject matter — in the middle, and trickier questions on the outside. "The placemat is designed to be a visual cue as to how to transition from those more uncomfortable topics to something that's more comfortable," DeLacy said.
Zuckerberg, Cook and Pichai should feel good about one thing: DeLacy thinks having testified before is a huge help. That doesn't bode well for Bezos, whose potential is a "huge question mark," DeLacy said.
- Jeff, if you're reading, DeLacy has a piece of advice for you. "Answer the question you want to answer, not necessarily the question that was asked. I think that's the key to survival."
Still More Hearing
Lessons from the last time
This isn't the first time these four companies have been on Capitol Hill. Last July (which feels like 40,000 years ago), executives from all four were grilled by Congress, and I suspect we'll hear a lot of the same conversation today. Lots of antitrust, but lots of feelings about trust and moderation as well. Here's a good recap.
But if you're still doing last-minute prep and really want a preview of today, I'd go back to January, when executives from PopSockets, Sonos, Basecamp and Tile went in front of Congress to talk about life in the shadow of the tech giants.
- David Heinemeier Hansson, the CTO of Basecamp and the recent loudest person in the App Store tax debate, said that Google's ad practices forced Basecamp to buy ads on its own search results. "It's a complete shakedown and it should not be allowed," he said.
- Sonos CEO Patrick Spence is actually suing Google for infringing on its patents, saying that Google stole the designs under the guise of a partnership.
- David Barnett, the CEO of PopSockets, said Amazon's strategy of working with partners is "bullying with a smile."
This is an evidentiary hearing, in which the lawmakers are looking for evidence for their antitrust case against big tech. In that hearing in January, they got plenty of it, in the form of stories and people that are hard to ignore. The CEOs will want to say it's complicated, that everything is nuanced, that data can be spun a thousand ways, but Congress has some high-profile examples where it seems anything but.
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People Are Talking
Jeff Bezos plans to tell a very patriotic story in his prepared statement today, and then make the case that actually, Amazon isn't a monopoly at all:
- "The global retail market we compete in is strikingly large and extraordinarily competitive. Amazon accounts for less than 1% of the $25 trillion global retail market and less than 4% of retail in the U.S. Unlike industries that are winner-take-all, there's room in retail for many winners."
Mark Zuckerberg, meanwhile, plans to make the case that Instagram was in trouble without Facebook's help:
- "Following its acquisition, Instagram was able to get help stabilizing infrastructure and controlling runaway spam. It also benefited from the ability to plug into Facebook's self-serve ads system, sales team and existing advertiser relationships to drive monetization, and was able to build products including IG Direct and IG Video that used Facebook's technology and infrastructure."
Sundar Pichai will bring up that old Google adage, that competition is just a click away:
- "You can ask Alexa a question from your kitchen; read your news on Twitter; ask friends for information via WhatsApp; and get recommendations on Snapchat or Pinterest. When searching for products online, you may be visiting Amazon, eBay, Walmart, or any one of a number of ecommerce providers, where most online shopping queries happen."
And Tim Cook is going to say that Apple isn't nearly as dominant as it gets credit for:
- "The smartphone market is fiercely competitive, and companies like Samsung, LG, Huawei and Google have built very successful smartphone businesses offering different approaches. Apple does not have a dominant market share in any market where we do business."
Rep. Pramila Jayapal said this tech hearing won't be like ones you've seen before:
- "The other hearings where they've testified have not really been oversight hearings, they haven't been about antitrust and monopolistic behavior. That's not what we're doing. We are investigators."
And Subcommittee Chairman David Cicilline made clear that the whole American-made-job-creator thing isn't going to work:
- "There was an attitude [that] these were great American companies that created jobs and that we should have a hands-off approach and let them flourish. But there are a lot of serious issues we have uncovered over the course of the investigation that weren't apparent when we first began investigating."
On Protocol: Epic's Tim Sweeney said it's about time these companies are getting grilled:
- "I think the bigger, the more impact the company has on world affairs, the more scrutiny is appropriate for it. And I think there are some bad practices that need to change and need to change quickly, and if the companies won't make changes themselves, then it's imperative that some combination of the courts and the legislative branch go about solving these problems."
Scott Weller is Curve's new CFO. He was previously PayPal's finance director and will head to the London-based fintech company to help it scale globally.
Murthy Renduchintala is leaving Intel as part of a shakeup of the company's engineering team after yet another delay in its 7nm parts. Renduchintala's team is actually being split into five teams, each under its own leader.
In Other News
- Here's a better idea than buying TikTok: Just steal all its talent. That's what Facebook's trying to do, at least, offering popular creators big deals to use Instagram Reels when it launches. Every social and entertainment company should be doing the same.
- The U.S. is dropping charges against the Twitter employees and their co-conspirator who allegedly helped Saudi Arabia spy on dissidents through the platform.
- The new theatrical window for movies: three weeks.Universal and AMC agreed to a new deal that means movies can go from theaters to on-demand after just 17 days. Now, that doesn't mean it'll be on Netflix any faster, but those $20 at-home rentals are here to stay.
- Quibi's lawsuit with Eko, the company that alleges Quibi stole some of its technology, is going ahead. Though the judge did dismiss three of the nine claims, and Quibi did just get nominated for 10 Emmys, so I'm guessing yesterday was an OK one for Jeffrey Katzenberg and co.
- Rite Aid has been using facial-recognition tech in parts of New York and LA, including tech from a company with ties to China. It said it quit using the tech, but only after Reuters contacted the company about it.
- On Protocol: CES 2021 is going to be an online-only event. Which is an obviously good idea but wasn't necessarily a foregone conclusion. I'd been getting emails for weeks asking if I was heading to Vegas this winter. Hard pass.
- Have you watched the video that got Donald Trump Jr. suspended on Twitter? I mean, probably not worth the time. But read this story about how the video spread, and why it's been so hard for Facebook, YouTube and Twitter to keep it off their platforms.
One More Thing
The upside of deepfakes
Usually when we talk about deepfakes, it's their scary implications. Convincingly fake porn, making politicians say things they didn't, that kind of stuff. But Tencent makes a surprisingly interesting case that deepfakes are also a massively powerful creative tool. It gives five examples, from improving dubbing in movies to personalizing the whole future of entertainment and commerce. Turns out, "convincingly depicting anyone doing anything, virtually" is both mind-bendingly cool and deeply, deeply terrifying. And we're going to get all of it, faster than you think.
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Today's Source Code was written by David Pierce, with help from Shakeel Hashim. Thoughts, questions, tips? Send them to email@example.com, or our tips line, firstname.lastname@example.org. Enjoy your day, see you tomorrow.