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Is the FTC kneecapping VR before it even gets off the ground?

In a courtroom in San Joe, California today, the US government squared off against a social media company and grilled that company’s CEO about its investments in another technology company, and its general business strategy for the new field of wearable virtual reality.

The app in question, the fitness VR app Within, is poised to be acquired by social media giant Meta (formerly Facebook) for use on its virtual reality headsets and ecosystem.

The deal itself has not yet been finalized, but that hasn’t stopped the nation’s antitrust agency from flexing its muscles in Silicon Valley.

When Meta CEO Mark Zuckerberg took the stand today, lawyers from the Federal Trade Commission aimed to pepper him on the overall business strategy of Meta’s well-known pivot to the metaverse, or virtual reality space, and whether his plans were about…business success?

If the FTC succeeds, it will halt Meta’s purchase of the workout app Within, developed by Los Angeles developers beginning in 2014. While that may put smiles on the faces of some regulators and populist politicians in Washington, D.C., it will do nothing for consumers. And it may even harm the future development of this entire sector.

At last estimate, the entire “metaverse economy” is projected to one day be worth either $800 billion or even trillions by 2030. Meta itself has poured in an ungodly $10 billion in the last year alone, and its own products are still rather limited in terms of user adoption.

The fact that the FTC and other regulators are trying to kneecap virtual reality, before it really even begins, is more startling than anything else.

If the last two decades of economic growth and innovation from Silicon Valley have taught us anything, it is that capital, talent, and business acumen are crucial ingredients for success and user satisfaction, but it isn’t everything. A supportive infrastructure, an investment-friendly climate, and a high demand for developers and skilled employees are also necessary and bring with them exponential benefits.

The companies and firms that have spun off from talent formerly of giants like Google and PayPal — not to speak of Elon Musk, Peter Thiel, and the rest of the PayPay Mafia — have undoubtedly made consumers’ lives better, and helped our economy grow beyond leaps and bounds.

Among those successes, there have been thousands more failures, but those have been at the hands of consumers and users rather than government agencies and federal lawsuits by regulators. And if the media coverage surrounding this case gives any indication, it seems much of this action stems not from antitrust law or precedent, but rather as a kind of payback.

The Associated Press ran a bizarre “analysis” last week, framing the FTC v. Meta/Within case as some kind of retribution for Facebook’s acquisition of Instagram in 2012. Back then, that decision was largely panned by technology journalists and never received a peep from regulators. Since then, it is grown to become one of the most popular apps found in app stores.

Considering Instagram’s success in the last decade, thanks to investments and entrepreneurial prowess by Meta, as some kind of evidence to halt all future mergers and acquisitions of a company that over a billion global consumers is not only wrong, but it begs the question of why the FTC is even involved in the first place.

Consumers benefit when competitors compete, when innovators innovate, and when laws provide regulatory clarity and guidance to protect consumers and police bad actors.

But this case seems more like a hunt for ghosts of Christmas past rather than protecting us from any real harm. And it may do more damage than regulators estimate.

My colleague Satya Marar summed this up in RealClear last month:

Start-ups depend on millions in investment to develop and deploy their products. Investors value these firms based not only on the viability of their products, but on the firm’s potential resale value. Larger firms also often acquire smaller ones to apply their resources, existing expertise and economies of scale to further develop their ideas or to expand them to more users.

Making mergers and acquisitions more expensive, without strong evidence they’ll hurt consumers, makes it tougher for start-ups to attract the capital they need and will only deter innovators from striking out on their own or developing ideas that could improve our lives in an environment where 90% of start-ups eventually fail and 58% expect to be acquired.

The job of the FTC is not to protect consumers from innovations that have not yet happened. That should be the furthered thing for its mission. Rather, it should be focused on consumer welfare, punishing bad actors that take advantage of consumers, break laws, and promote real consumer harm.

Mergers and acquisitions provide value for consumers because they match great ideas and technology with the funding and support to scale them for public benefit. Especially considering the metaverse is so new, it is frankly bewildering that we would be wasting millions in taxpayer dollars to chase down an investment before it even bears fruit — just because a company was too successful last time.

When it comes to our regulatory agencies, we have to ask who they are looking out for when it comes to consumer wants and wishes: the consumers that wish to benefit from future innovations.? Or incumbent players who want to slay the largest dragon in the room.

In this case, it seems the FTC has stretched a bit too far, and consumers may be worse off for it.

Latest round of online deplatforming shows why we need increased competition and decentralization

Another week means another politically-charged rampage of deplatforming of social media profiles and entire social media networks.

Following the storming of the U.S. Capitol by some of his supporters, President Trump was promptly suspended from Twitter and Facebook and later dozens of Internet services including Shopify and Twitch.

Even the image-sharing site Pinterest, famous for recipes and DIY project presentations, has banned Trump and any mention of contesting the 2020 Election. He’ll have to go without sourdough recipes and needlework templates once he’s out of office.

Beyond Trump, entire social media networks have also been put in the crosshairs following the troubling incursion on Capitol Hill. The conservative platform Parler, a refuge for social media dissidents, has since had its app pulled from the Google and Apple stores and had their hosting servers suspended by Amazon’s web service company AWS.

This pattern of removing unsavory profiles or websites isn’t just a 2021 phenomenon. The whistleblower website Wikileaks – whose founder Julian Assange remains in prison without bail in the UK awaiting extradition to the United States – was similarly removed from Amazon’s servers in 2012, as well as blacklisted by Visa, Mastercard, PayPal, and their DNS provider. Documents reveal both public and private pressure by then U.S. senator and Intelligence Committee Chairman Joe Lieberman was instrumental in choking Wikileaks off from these services.

Then it was politicians pressuring companies to silence a private organization. Now, it’s private organizations urging companies to silence politicians.

However the pendulum swings, it’s entirely reasonable for companies that provide services to consumers and institutions to respond quickly to avoid risk. Whether it’s due to governmental decree or public backlash, firms must respond to incentives that ensure their success and survival.

Whether it’s Facebook, Twitter, Gab, or Parler, they can only exist and thrive if they fulfill the wishes and demands of their users, and increasingly to the political and social pressures placed on them by a cacophony of powerful forces.

It’s an impossible tightrope.

It is clear that many of these companies have and will continue to make bad business decisions based on either politics or perception of bias. They are far from perfect.

The only true way we can ensure a healthy balance of information and services provided by these companies to their consumers is by promoting competition and decentralization.

Having diverse alternative services to host servers, provide social networks, and allow people to communicate remains in the best interest of all users and consumers.

Such a mantra is difficult to hold in today’s hostile ideological battleground inflated by Silicon Valley, Washington, and hostile actors in Bejing and Moscow, but it is necessary.

In the realm of policy, we should be wary of proposed solutions that aim to cut off some services at the expense of others.

Repealing Section 230 of the Communications Decency Act, for example, would be incredibly harmful to users and firms alike. If platforms become legally liable for user content, it would essentially turn innovative tech companies into risk-averting insurance companies that occasionally offer data services. That would be terrible for innovation and user experience.

And considering the politically charged nature of our current discourse, anyone could find a reason to cancel you or an organization you hold dear – meaning you’re more at risk for being deplatformed.

At the same time, axing Section 230 would empower large firms and institutions that already have the resources to manage content policing and legal issues at scale, locking out many start-ups and aspiring competitors who otherwise would have been able to thrive.

When we think of the towering power of Big Tech and Big Government, some things can be true all at the same time. It can be a bad idea to use antitrust law to break up tech firms as it will deprive consumers of choice, just as these companies are guilty of making bad business decisions that will hurt their user base. How we respond to that will determine how consumers will continue to be able to use online services going forward.

All the while, every individual Internet user and organization has it in their power to use competitive and diverse services. Anyone can start up an instance of Mastodon (as I have done), a decentralized micro-blogging service, host a private web server on a Raspberry Pi (coming soon), or accept Bitcoin rather than credit cards.

Thanks to competition and innovation, we have consumer choice. The question is, though, if we’re courageous enough to use them.

Yaël Ossowski is deputy director at the Consumer Choice Center.

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