Creators, Consumers, and Curators

The Role of Consumers in Creating and Curating Online Organisations

December 5, 2017

Paul MacDonnell, Executive Director, Global Digital Foundation
 

INTRODUCTION

What is the role of consumer feedback in online businesses and platforms? Consumer feedback online is not an electronic doppelganger of consumer feed-back in traditional bricks and mortar organisations. It is a necessary component in the remaking of businesses as online enterprises.

The creation of new ways for people to communicate and transact has been brought about with the help of widespread internet access, better and cheaper data storage, and algorithms that use data to recommend music, books, places to visit, and people to connect with. Shoppers, social media users, suppliers, workers, storage facilities, and content providers are brought together, in increasingly powerful systems—each according to their role, to buy, sell, store, dispatch, author, post, and provide feedback.

Online businesses like Amazon, eBay, Uber, Airbnb, and Facebook have used these developments to transform traditional business models and disrupt whole industries. But awe at their extraordinary growth has eclipsed the main reason for their success. They use organisational and technical tools to give people what they want. Their relationship with their customers and users is so close as to be collaboration in the act of creating the enterprise itself.

Turning the understanding and execution of this relationship into a branch of management science the emerging field of Customer Experience (CX) aims at synergies from combining structured data, such as billing, purchase history, and order-processing with unstructured data such as social media posts and online reviews. Unifying disparate back office processes with information about the customer’s preferences supports the development of a new, coherent and long-lasting relationship.

The tech giants have not only won many consumers, they have kept them by meshing them into these new kinds of relationships. And their example is a harbinger for almost all online organisations whose aim will, increasingly, be to bond with consumers and citizens online. In particular this means engaging them in dialogue on social-media—and listening to their public dialogue with others. For organisations that have successfully adopted this approach there are four outcomes: First, it builds trust and confidence for consumers to transact; second, it resurrects and democratises the relationship the wealthy used to have with stores where knowledgeable sales assistants knew their preferences, could advise them, and charge purchases to their account; third, it uses the flow of online information—comments, feedback, reviews, and conversations—from consumers to design, and redesign products and services; and, finally, it gives consumers and users access to, and a high degree of control within, local, national and international marketplaces for goods, services, information, and social contact.

Innovations brought by online businesses support consistency in consumer experience, transparency of pricing, and simplicity of payment. The major web platform businesses are leading a trend which—as Artificial Intelligence (AI), data processing, and the use of algorithms become less expensive and better understood—will be adopted by more public and private sector organisations.

Thus we have accounts with, are members of, or subscribe to—services provided online. This is an expanding Universe of relationships which is moving beyond books, music, and software into services provided by the likes of grocers, and accountants. Eventually the number of organisations we interact with online will dwarf the number we interact with offline.

So extraordinary and compelling have been the benefits online businesses have brought it is plausible that, if the entrepreneurs behind today’s platform giants had never started their businesses, enterprising consumer, trade, or voluntary citizen organisations would, by now, have launched ventures to do similar things. Woven into online businesses and social media sites is the power for consumers to be heard. This is not only a new era of consumer mass-enfranchisement. It remains, despite recent concerns about fake news and online hate speech, an opportunity for citizens everywhere to have their say too.

MORE ORGANISATIONS ARE ENGAGING ONLINE

The past ten years show that the ground is being prepared for a world where more organisations will evolve to a point where their online engagement will become central to their business model. Whether businesses and governments are ready or not, consumers and citizens will lead them there.

The changing role of social media in particular has been rapid. In 2011 it was reported that only 20% of businesses interacted with customers through their website, while 6% viewed the size a customer’s social network as affecting their perceived value. By 2013 it was reported that 27% of businesses thought that social media was “most important to customers when they engage with brands”. The number of social media users is projected to rise from 2.14bn in 2014 to 2.62bn in 2018 and 3.02bn by 2021.

CONSUMER ATTITUDES TO TODAY’S PLATFORMS

Understanding what consumers think about today’s platform businesess gives us an insight into what they will expect tomorrow from the increasing number of organisations that do business online.

An October 2015 survey conducted by Oxera found that 97% of consumers believe that online platforms offer benefits, in particular improved convenience, greater choice, and increased transparency. Thirty seven per cent of French and 57% of Polish consumers reported having met at least one person through a communication platform or social network. Customers reported that, over the previous month, information platforms had saved them 50 minutes (France and Germany) and 100 minutes (Poland); consumers who compared products and services online said that they had saved, on average, €127 (Poland) and €117 (Germany) in the previous year.

Though consumers said that they were most concerned about confusing or inappropriate content, privacy and security, a minority cited these as reasons for not using certain platforms. Asked why they did not use certain platforms 20% of French and 30% of Spanish consumers cited these as reasons. Beyond Europe attitudes to privacy and security vary. Generally speaking consumers in Europe are less willing to trade online privacy for convenience than consumers in the U.S. Consumers in Asia and South America are more willing to trade online privacy for convenience than U.S. consumers. This suggests that while privacy and security remain a concern they do not present any kind of threat to the future growth of online organisations.

THE POWER OF CONSUMERS

The way a number of platform businesses have responded to consumer pressure or anticipated potential consumer unhappiness demonstrates how online businesses have taken a radical approach to eliminating dissatisfaction and mistrust. In August of this year Amazon announced a new refunds policy that allows consumers the same terms for returning items to third-party sellers as they already have when returning goods to Amazon itself. This includes a ‘returnless’ refund, a facility Amazon says was requested by third-party sellers, which allows them to provide a refund without asking the consumer to return the product. Amazon’s intent here is to standardise the consumer experience and to eliminate ambiguity over what the terms of sale are to customers who use its platform.

FAKE NEWS AND FAKE REVIEWS

A significant and growing threat to online businesses, especially online platforms, are organisations who post information and reviews that are deliberately misleading. This is, in essence, a challenge to network and platform owners to curate their platforms or risk reputational harm. In October 2016 Amazon banned reviews that were posted in exchange for free or discounted products. The company still allows incentivised reviews on its Vine programme whereby identified and specially invited product experts can post ‘trusted reviews’ about new and pre-release products. This points to the importance for online retailers of curating the perceived objectivity of online reviews that are one of the most important components of its reputational capital.

Similarly Facebook’s very success has contributed to anxiety that organisations are using it to spread false stories. In March of last year Facebook launched a new tool that allows users to flag stories as potentially fake. Thus the company is seeking to enlist volunteers to curate content on the network.

Parallel to fake news on Facebook is the problem of fake reviews on sites like Yelp and Amazon. Fake reviews are, in essence, an attempt to defraud customers of online retailers. And there is evidence that the incidence of fake reviews on Amazon has grown during 2017. Systems, such as Amazon’s identification of reviewers as having made a “verified purchase” have likely gone some way to addressing this problem but it seems likely that Amazon and other retailers will need to consider stronger measures. In the case of retailers, such as Amazon, or Yelp these ought to include measures to empower consumers rather than just retailers to flag fake reviews.

CONCLUSION

Major Internet businesses would never have grown to the size that they have without converting their customers and users into the co-creators of their platforms. From the start this has relied on overcoming the potential for mistrust when doing business online. Without traditional customer representatives, or easy contact points, their strategy has been to pre-empt customer dissatisfaction through inviting consumers to share their experiences online, and through establishing protocols that make default decisions in favour of dissatisfied customers.

Notwithstanding the challenges, particularly those of fake news and fake reviews, the world’s major online businesses have radically exceeded the reasonable demands of consumers to be treated fairly. By doing so they have blazed a trail that, one way or the other, will light the way for more and more online businesses and government organisations. Their continued success and the future success of all online businesses will need the help of consumers to purge fake information from their websites.

END

Views expressed in this post are those of the author and not those of the Global Digital Foundation which does not hold corporate views.

Existing Rules are Enough for Platforms

The European Commission is considering a range of regulatory options that could be applied to the relationship between internet platforms and their businesses users. Based on consultation with stakeholders and a study commissioned from ZEW-Gutachten und Forschungsberichte, it has identified a number of undesirable practices which it says threaten Europe’s successful transition to the Digital Single Market. While the Commission’s study and stakeholder consultation has found some questionable practices, fixing them will not require the more intrusive of the economic regulations which its “Reception Impact Assessment” is contemplating. There are three reasons for this. First, the practices, such as they are, don’t seem to be all that widespread—the evidence offered is anecdotal. Second some of the “problems” may not be problems at all. And third, mechanisms such as existing competition law and self/co-regulation offer a better alternative.

The Commission’s study identifies the following: sudden changes in terms and conditions (Ts & Cs), a lack of transparency in search and ranking results, the delisting of products or termination of an account without warning or explanation, platforms competing with business users, restrictions on what data users can see and what they can transfer, and a lack of access to redress when disputes arise, as the problem areas it wants to tackle. In this list there are areas where platform businesses need to be more responsive to the needs and, contractual rights, of their businesses users. Unexplained delisting of products, or unnotified changes to Ts & Cs that have a material impact on businesses that are, thanks to platforms’ own success, dependent on their service, are indefensible. The Commission is right to take up the cause of eliminating such practices. But before we consider what needs to be done we should first ask two questions.

First, how bad is it? The Commission’s own survey reports that seventy six per cent of business users surveyed prefer to use redress mechanisms offered by the platform company rather than an outside mechanism. Eighty per cent of users feel that the Ts & Cs of platforms are fair, neither fair nor unfair, or have no opinion. The 20% who feel that the Ts & Cs are unfair suggests an operational problem rather than a systemic market failure requiring significant regulatory intervention. The report provides different figures for why ‘heavy’ and ‘non-heavy’ users of platforms feel the Ts & Cs are unfair. The dominant reasons for dissatisfaction of this 20% as a rounded % of all users is:

  • No possibility to negotiate or amend Ts & Cs (16% of heavy users, 12% of non-heavy users)
  • Possibility of one-sided changes by the platform (11% of heavy users, 7% of non-heavy users)
  • Limited access to dispute resolution (10% of heavy users, 5% of non-heavy users)
  • Unfair pricing (7% of heavy users, 6% of non-heavy users)
  • Biased or non-transparent search practices (8% of heavy users, 4% of non-heavy users)

These are not compelling figures.

The second (more provocative) question is: Is all of this really a problem at all? The Commission’s research has not quantified the economic effect of the problems that it has identified. The report tells us that the question about impact was ‘misunderstood’ by the survey recipients and so has not been included in the report. This leaves out the most important information of all. Further no cognisance is taken of the impact on consumers. These two facts alone undermine the case for sweeping regulation at the upper end of the Commission’s Impact Assessment menu.

There are, of course, very likely real potential problems behind the figures presented. Platforms that are selling goods in competition with their business customers are in a position of potential conflict of interest. If they are dominant players then they have the opportunity to use pricing and other information gained from their business customers to drive them out of business. If this occurs it is a very questionable business practice. In addition platforms that suddenly change Ts & Cs, with no or little notice, could cause real problems for businesses that have come increasingly to rely on them. Platform businesses are large. Merely because they mean no harm does not mean they can do no harm.

There is no doubt that many of the businesses who responded to the Commission's survey have real grounds for complaint. But how much of the response from business users reflects general anxiety about the move to online trading that many of them have been forced to undertake? How many are simply complaining about an enforced change to their business model that is disruptive to them but not bad for their customers?

For example the lack of ability to negotiate or amend Ts & Cs is only a problem if those Ts & Cs are unfair in the first place. If the Ts & Cs don’t distort competition then there is no case for the Commission to act. Do standard Ts & Cs provide better outcomes for consumers? To what extent do the practices of the main internet platforms protect consumers?

Without any real evidence of impact the Commission would be wrong to conclude that it has found a problem that needs far-reaching intervention.

The Commission’s Impact Assessment offers a menu of responses, ranging from industry-led intervention—essentially something like an industry code of practice—all the way up to an EU-wide platform regulator whose job would be to bring EU competition legislation to bear on platform businesses.

The absence of identified consumer harm or even risk to consumers, the lack of clear evidence that any systemic market failure exists, and platform companies’ capacity to fix operational problems where they occur all point towards the soft rather than the hard approach as the best way forward.

Shopping Online in Romania - Some APC Stats

The Romanian Consumers Association (APC) and the European Consumer Center (ECC) in Romania have been examining  the different experience Romanian consumers have when complaining about defective products bought from Romania on one hand and another EU Member State on the other.  Consumers who complain about defective products bought in another EU Member State typically complain to the ECC, which then contacts its ECC partner in that country.

The Romanian Consumers Association (APC) and the European Consumer Center (ECC) in Romania have been examining  the different experience Romanian consumers have when complaining about defective products bought from Romania on one hand and another EU Member State on the other.  Consumers who complain about defective products bought in another EU Member State typically complain to the ECC, which then contacts its ECC partner in that country.

Forty four percent of complaints made by Romanian consumers to the ECC in 2016 were about goods or services bought online. The figure for complaints from foreigners is 37%. 
The most common problems that Romanian consumers face are:

  • Problems related to delivery of the ordered product (38%); most of these concern the lack of delivery (30%), followed by very late shipping, and then partial delivery of the ordered products.
  • Problems related to quality, that is defective products or products not corresponding to what was advertised, (32%).
  • Supplier unilaterally withdrawing from the contract (10%). Price and supplementary costs (5%).

Concerning the type of products and services, the most frequent complaints concerned:

  • Audiovisual products, photographic devices and information processing products: 27%
  • Personal care products, 12%
  • cultural and sportive services, 11%
  • Clothes and shoes, 10%
  • Home appliances, 8%.

Most of the disputes (70%) were solved by alternative means (amiable), the rest were transmitted to the relevant national authorities.

The meaning of Amazon's purchase of Whole Foods

Amazon’s purchase of the U.S. food supermarket chain Whole Foods for $13.7 billion in August may be an historic moment in the digitisation of the economy. To get an idea of how historic, in January, Nielsen, a market research company, reported that online grocery shopping in the US could reach 20% of the $600 billion sector by 2025. In February, Bain insights predicted the share of big supermarkets in the EU could fall from 70% today to as low as 48% by 2025, and that retail margins will fall by up to 40% by 2025. Winners will include discounters and online retailers.

But these figures don’t reflect what Amazon and its imitators might do to speed things along. We can assume Amazon will deploy Artificial Intelligence to better know its market and that it is at least considering an extension of its Amazon Prime Pantry service across the U.S. and to other markets so that it can turn the delivery of groceries into a service. Add in systems supporting feedback, product returns and reviews and we can see how Amazon could work to build confidence in online grocery shopping. Building trust will expand the number of products consumers are willing to buy online.

In other words, mass acceptance of online grocery shopping may soon be here. And as Peter Sondergaard, Gartner's head of research and advisory, says 'once digital revenues for a sector hit 20%...the digital bloodbath begins’.

Much has been written about Amazon’s access to cheap capital. The company can raise finance at little cost because its shareholders have rewarded its relatively low-risk, yet potentially game-changing, innovations by pushing its share price ever higher. The company’s purchase of Whole Foods was financed with $16 billion of unsecured bonds, at rates as low as 1.45 per cent above Treasuries. The stock market views Amazon’s proven ability to combine innovations in AI, logistics, robotics, and delivery, as a vector for the eventual digitisation of all key sectors of the economy. Investors believe that digital innovation can confer first-mover advantage on digital businesses entering traditional industries. Even if it won’t be winner-takes-all, winner-takes-a-lot is enough to motivate shareholders.

Of course there’s is much that Amazon needs to get right. Making money from selling groceries online is hard. One online grocer, Open Taste, relies on a crowdsourced delivery system, like Uber, whose drivers need to be able to make multiple deliveries. But can this approach be scaled to meet the increasing on-line needs of the grocery market? To make money in groceries Amazon will need to consider how it will integrate and implement systems that can anticipate customer needs, manage inventory, and distribute perishable products quickly.

Which brings us to Europe. European policymakers have been getting excited by the likes of Facebook and Google whose business models require the processing of large amounts of data freely given by EU citizens in exchange for free services. The German Cartel Office is forging a new legal doctrine by accusing Facebook of abusing its dominance of a ‘market for social networks’ by breaking German data protection rules. No one had ever heard of ‘the market for social networks’ until the Cartel Office, like a brilliant Mittelstand company milling a bespoke sprocket, invented it and fitted it into its competition case against Facebook. Using a chain of unreason—including a redefinition of data as currency, that would have made Marx proud—the Cartel Office has connected this sprocket to an allegation that Facebook broke Germany’s data protection rules, thereby abusing its dominant position. At the same time the European Commission has determined that Google search has been biased in favour of its ‘shopping comparison service’. Most people under 35 don’t know what a ‘shopping comparison service’ is and most people over 35 can’t remember. Such tortuous legal maneuverings are an attempt to catch the tail of a digital comet. If Facebook and Google get Europe’s policymakers this excited what impact will Amazon have?

It’s worrying that the debate in Europe is so dominated by a discussion about how to either stop or control the impact of digital technology while so little attention is being paid to how we have benefitted from it and how we can continue to do so. For example, the basic business model of ride-hailing and accommodation-sharing apps unlocks capital for the benefit of drivers, homeowners, and travellers. As such these are de facto economic reforms of just the kind that much of Europe needs. Yet many European governments, both national and local, have treated these pro-consumer innovations with hostility.

Amazon’s purchase of Whole Foods is a tectonic shift in the digitisation of our economy. Ultimately European consumers stand to benefit from the changes that will follow when grocers successfully adapt to, and start to shape, the new reality.

Digitisation of the grocery sector is unstoppable. By viewing the likes of Facebook, Google, and Airbnb with suspicion Europe’s policymakers have set a worrying precedent. The stakes in Europe’s grocery sector are much higher. The time for grandstanding is over.

Views expressed in this article are those of the author and not those of the Global Digital Foundation which does not hold corporate views.

Will robots take our jobs? Olivier Colin Explains

Olivier Colin, an Adviser to the Belgian government, has made this 5-minute video podcast — essential if you are looking for an introduction to the question of how digital technology, AI and, in particular, robots will change work.


Olivier Colin is an advisor to the Belgian government where his work includes fiscal policy, finance, health care and the digital economy. He holds a degree in business engineering from the Solvay Brussels School and in economics from the College of Europe.

It’s not about the oil. It’s about who rules in the digital world. Consumers.

The idea that internet platform businesses are anti-competitive is the opposite of the truth

The disruptive impact of digital platforms on the traditional news industry offers the best case study for understanding the economics of the Internet. Everywhere we look newspapers are losing market share, laying off workers and, in some cases, moving to digital only editions. At the center of this and most other Internet-driven disruption is the multi-sided, digital platform. Some policymakers seem unable to get their head around the basic economic principles of platforms. Everywhere, politicians, regulators and commentators express anxiety about them. They are accused of cornering markets in personal data, thereby threatening competition, of invading privacy, facilitating fake news, enabling extremist propaganda and more. None of these anxieties is well founded. When it comes to privacy, fake news, and extremist propaganda, regulators and platform companies are in the business of striking balances. Is extremist content being removed quickly enough? Is fake news being flagged as ‘unverified’? Do consumers understand how their data is being used? But the idea that platforms threaten competition is not only ill founded, it is against the interests of the very people competition law is supposed to protect, consumers.

Before we consider what, if anything, should be done about Internet platforms we should understand what they are. Most people see a consumer transaction as a two-sided affair. We, the consumer, pay money and they, the company, give us something in return. But markets can have more than two sides. Since the middle of the 19th century markets with three and more sides have come into being. These include shopping malls (1847), free newspapers (since 1885), and commercial radio stations (1920). These are “free” to access because we, who find them useful, aren’t paying. The businesses that advertise in free sheets and on radio stations pay the publishers and broadcasters. We read and listen at their expense. Retailers pay shopping mall owners so that we can shop with more convenience in one place.

Internet-based multi-sided markets are usually known as platforms. But both the pre-digital and digital varieties have two important characteristics. First, offering one side free participation helps the overall market to grow quickly. Second, greater participation by one side of the market makes them more valuable to all sides. A luxury shopping mall that attracts all of the leading stores in every sector will likely attract more high-spending consumers. And a radio station that increases its listeners is, similarly, more valuable to its advertisers.

But it is the Internet that has brought multi-sided platforms into their own, creating not only the best known U.S. companies but many other giants from around the world. Running on an Internet backbone that includes search engines, APIs (computer code that connects devices to internet services), payment systems, and powerful consumer feedback channels, these platforms generate powerful benefits for all of their sides. Google Android, the mobile phone operating system, for example, is a platform whose sides include, consumers, mobile carriers, app developers, and online businesses. The India-based food ordering and delivery platform, Swiggy, provides not only high quality meals on demand but also enables thousands of independent food producers and delivery workers to provide their services to consumers they would otherwise never meet.

Platforms have succeeded not just because they have taken consumers away from traditional businesses. They have created economic value and consumer relationships that never before existed. An Airbnb host in Prague can unlock the value of her apartment by renting it to a tourist from Africa who, otherwise, could not afford to visit Europe. Facebook allows people to communicate, share information, and get news for free while providing advertisers with access to target groups whose interests and consumer preferences are known. No other organisational model could do this. For millions Internet platforms make earning a living possible. For billions more they make a better life affordable.

So what is the role of data in all of this? Much digital ink has been spilled in attempts to answer this question. The current favourite is that data is the new ‘oil’—the fuel of the post heavy-industrial economy and that the Internet giants are like so many anti-competitive Standard Oil corporations. This idea, endorsed by The Economist, is problematic. First, unlike oil, data is non rivalrous. Consumers can give their data to many companies. And the decision as to who gets it is the consumer’s. The Economist and others who take this view are taking a snapshot of an early stage in an evolutionary process that has a very long way to go. The Internet giants have moved first into those parts of the economy where bigger means better for consumers. Facebook, for example, is an information and interaction exchange. It was not consumers who made Standard Oil dominant in the 1900s. But when it comes to Facebook consumers wouldn’t have it any other way. Data can be described as the new ‘oil’. But only in the specific sense that explains its role in our recent economic history. If we compare the growth of Internet platforms to the early years of the space programme, then data has been the fuel that allowed new business models and consumers’ expectations to escape the gravity of cost and, thus, the tyranny of unaffordability.

But if Internet platforms have a prime mover it is consumers. Consumers are, in fact, their co-creators. This is why the comparison with Standard Oil does not stack up. Compared with traditional businesses digital multi-sided platforms offer consumers the kind of power which, before the Internet, belonged only to the very rich. The ability to tailor travel and accommodation, to buy almost any kind of product from anywhere in the world, to communicate at no cost, and to be confident that their feedback is decisive in ensuring that they get what they pay for has given consumers the real power. The fuel that has driven the growth of platforms, data, has been willingly provided by consumers in return for a huge measure of control over how internet businesses operate. And these benefits include data that consumers have gotten in return. Consumers know about alternative products and services. They can compare prices at the click of a mouse. And they can communicate with other consumers online. And when companies misbehave it is the severe financial consequences of consumer feedback and withdrawal of custom that forces them to think again. That consumers see themselves as primary stakeholders in Internet businesses should not be lost on us.

Regulators and economists are right to ask questions about the role of data in the Internet economy. Should it be protected? Yes. Are consumers being harmed by new platform-style economic models? Not that anyone, least of all consumers themselves, can see. Could problems of market dominance arise in the future? Maybe. The best approach is for regulators and policymakers to listen to consumers. As it is the main impetus for the regulation of data as a competitive good is coming not from them but from industries who need better ideas than calling regulators down upon their competitors. It’s not about the oil. It’s about who rules in the digital world. Consumers.

Better Technology Means Ad-Blocking Should Disappear

Some reflections on the Reuters Institute 2016 Digital News Report (II)

The Reuters Institute Digital News Report for 2016 is not happy reading for news organisations. A ‘perfect storm’ has hit traditional news companies and new digital players as consumers move to online platforms and digital devices for their news. The widespread use of ad-blockers, said to be much higher amongst the under 35s, is threatening both traditional online news providers and their new all-digital rivals. Also, the number of people willing to pay for online news is very low—under 10% in the English-speaking world. The results include missed financial targets and layoffs in print publishers like UK’s Independent and online news organisations like Buzzfeed and Mashable.

The contract between consumers and online publishers—you get free news and we show you ads—is under pressure. A quarter of consumers in the U.S. and Germany use ad-blocking. In France the figure is 30%, and in the UK it is 21%. Ad-blocking on mobile devices is lower but the Reuters Institute believes that it is likely to rise. Publishers are resorting to other strategies, like the use of branded content. Often outsourced to organisations like Taboola and Outbrain, this mimics regular news and so avoids ad-blocking.

The issue is acute for traditional news organisations mainly because the Internet has reduced barriers to entry to the industry. They have responded by paying more attention to branding their online platforms as sources of reliable news and, either charging for access to them or requiring users to create a free account. This helps them capture consumer information that, in turn, helps them sell online advertising. The current online news industry is segmented into paid subscription services offered by the likes of The Economist and The New York Times, free online subscription services offered by the likes of Mail Online, and, soon, the BBC, and content offered entirely for free by organisations like Buzzfeed and The Guardian.

What does the future hold? Getting around ad-blockers is a big challenge for news organisations. Ad-blockers are a consumer response to ads that are sometimes annoying and irrelevant. Or, rather, annoying because they are irrelevant. But if consumers wish to continue to enjoy free news then they will need to be persuaded to provide more data about themselves. Otherwise they will continue to see advertising that, like an annoying friend, offers unwanted company at inappropriate times. Consumers will likely be offered the opportunity to give news platforms more access to their online shopping preferences, purchase history, and even opinions. In turn news providers will need to ensure that targeted advertising designed on the back of this data really is relevant to consumers. They will also need to reassure consumers that their data is safe and will not be sold to less scrupulous third-parties.

The evolving relationship between consumers and online news providers will depend upon improvements in technology. The use of Artificial Intelligence will help news organisations and advertisers on their platforms to better understand consumers, possibly to a point where consumers will experience a highly personal online service. This begs other questions. Will this ‘personal’ service extend to news that is selected entirely according the consumer’s own preferences? It will depend. Consumers are less likely to wish for tailored news on ‘hard’ than ‘soft’ news platforms. As discussed in the post below (Dalai Lama picks Jeremy Corbyn as Successor) consumers are attracted to mainstream ‘hard’ news platforms such as the BBC and The Guardian precisely because they offer professional first-hand reportage and high quality analysis. They generally trust hard news organisations to break new stories. As the Reuters Institute 2016 Digital News Report suggests consumers are able to tell the difference between ‘hard’ news even when they find it less interesting and ‘soft’ news such as celebrity gossip that they may find more interesting.

The challenge for consumers and news providers is to live without ad-blocking. There is every reason to think that advanced technologies will improve online news services to the point where consumers no longer believe that ad-blocking is necessary.

Dalai Lama picks Jeremy Corbyn as Successor

Some reflections on the Reuters Institute 2016 Digital News Report (I)

Where consumers get their news is changing. Over half of the respondents to a survey by the Reuters Institute reported that they use social media as a news source each week. Twelve percent reported that Facebook was their ‘main source’ of weekly news. Increasing reliance on social media for news is a cause of anxiety for two reasons. First, because Facebook gives users the option to prioritise news and opinions that their friends are reading, it is thought that users can create their own echo chambers of agreeable opinions, putting them at greater risk of normalising extremism. Then there is the appearance of fake news on newsfeeds. The timely placement of falsehoods in newsfeeds has created fear that social networks have become the Achilles heel of democracy, prey to manipulation by dark political forces.

Should we be worried? Not very. Take the echo-chamber argument. First, concerns about the role of social media in creating news and opinion echo-chambers free from ideas and information that challenge us ignore how we use social media for news. Consumers distinguish between what the Reuters Institute calls ‘primary’ and ‘secondary’ news sources. ‘Primary’ news sources include mainstream news organisations like the BBC or the Guardian. Secondary sources include distributed news platforms like Buzzfeed, Twitter, Google News, and Facebook. When consumers want to know what’s happening around an important event they will generally go to primary sources—usually established news gathering organisations with a long heritage of accurate first-hand reporting. When they want to check what’s going on in a more general sense they are more inclined to look at secondary sources. Secondary sources are the online equivalent of window shopping or scanning the horizon for anything of interest. Consumers’ preference for primary sources as a source of serious or ‘hard’ news strongly suggests that, being less inclined to take what they read on secondary sources as seriously as what they see on the BBC or the Guardian, they are less vulnerable to the potential selective bias of secondary news on social media.

Second, consumers distinguish between ‘soft’ and ‘hard’ news. ‘Soft’ news is often about celebrities and lifestyle. It is also more closely associated with secondary sources of news, like Facebook, or Buzzfeed. ‘Hard’ news concerns important public events such as terrorism, or general elections. Consumers looking for hard news tend to find it from primary news outlets like the BBC or the Guardian. One in five consumers who say they are more interested in soft than hard news report that social media is their main source of all news. This is telling. The number of all consumers across the 26 countries surveyed by the Reuters Institute who report that social media is their primary source of news is only half this—one in ten. This suggests that it is the strengths of secondary news sources as a source of ‘soft’ news that commends it to consumers. It does not follow that consumers who rely on social media as a main source of all news treat this news as seriously as those who watch the BBC. They may simply be not all that interested in hard news. Therefore it seems likely that any weaknesses of social media, as a secondary news source, are more likely to be priced into consumers perceptions of how ‘hard’, i.e. serious or reliable, this news is. Again this suggests that they are less vulnerable to the weaknesses of social media platforms as a source of reliable news.

Finally ‘fake news’, because it appears exclusively on secondary news platforms, may not be as dangerous or influential as is commonly believed. Secondary, and some primary, news platforms already use outsourced or promoted news sources that are vulnerable to clickbait, that is stories that are placed for the purpose of generating Internet traffic and, thus advertising revenue, for their originators. Fake news stories may simply be regarded by consumers as an (even more) debased variant of clickbait. Only this time the object is to spread false information. Social media companies already work to remove clickbait and fake news. But a sense of proportion is needed. Fake news is not new. The fake news story that linked Hillary Clinton to a fictitious paedophile ring at a Washington Pizzeria is in a long dishonourable tradition of scurrilous rumour-mongering designed to attack the reputations of the powerful. Whether it made a difference to the U.S. November 2016 general election is unclear. It seems the best response is to flag stories as ‘unverified’ or, better still simply allow millions of other Internet users to respond with the facts.

However social media companies should resist calls to be too heavy handed. Demanding that they do not host child pornography or acts of violence that are posted as propaganda for terrorist organisations is one thing. Requiring them to remove all false stories is quite another. Removing all stories flagged as ‘false’ could easily evolve into a form of censorship. An essential, if counterintuitive, aspect of political freedom is that people have the right to believe in falsehoods. Further it is this right that allows us to understand the difference between what is true and what is false. Banning speech that is ‘false’ could do to our political system what banning the work of scientists whose experiments weren’t successful on every occasion would do to the advancement of knowledge.

What the Internet has provided are many more channels of news and much easier ways to consume, and curate its political slant. There is no evidence that this will result in more ignorance. The Internet’s power to spread falsehood is easily matched by its ability to empower people to propose new insights and fact-check the work of others. Seneca’s observation in the first century, Errare humanum est—to err is human—wasn’t, even at the time, an original thought.

The Internet and its social media platforms are a huge marketplace of discovery. Social, just like natural science needs ideas that can be falsified. Attempts to remove online content that go beyond dealing with blatantly criminal behaviour are a threat to democracy. Those who would ‘clamp down’ on the Internet seem to be as selective about what they see on it as anyone else.

 

 

 

Why a Digital Consumer Hub?

The debate about digital technology and its impact is between optimists and pessimists. Optimists believe that technology’s innovations, which include new types of economic organisation, will solve many problems, from eradicating poverty to curing disease. Pessimists believe that ‘innovation’ has come to mean disrupting our societies and eroding traditional economic models. What better way to test our hopes and fears about digital technology than to see the world through the eyes of its consumers? Unfortunately much discussion about the impact of digital technology either ignores them or assumes that their role in the digital economy is passive.

Consumers are, of course, to be found among the optimists and pessimists. To ask someone for an opinion about how digital technology could change their life is to encourage an expression of hope or anxiety—or more often a mixture of the two. But to evaluate public policies, much of which aim to protect consumers, we need to learn more about how digital services are changing their lives now. How do they feel about dealing with digitally-enabled services? How has digital technology affected their interaction with loved ones and friends? Has it given them more job satisfaction? Has it taken away their job?

We have established the Digital Consumer Hub to answer these and other questions. Our aim is to better understand European consumers of technology products and services, and to support consumer groups and policymakers as they seek to design public policies to promote the consumers’ interests.

Individuals matter

Humanity is increasingly meshed with digital systems of every kind. The websites and apps that we use have flattened a once himalayan terrain of old economy giants and old world assumptions. This has not only changed the meaning of what it is to be an organisation it has changed what it means to be an individual. In particular it has made it easier, perhaps necessary, for people to blend multiple roles. An individual can be simultaneously a worker, a student, a job seeker, an entrepreneur, and retired. Similarly, consumers in the digital era are often active users who contribute in different ways to shaping services and products. The assumption that a person has only one role is a prejudice from an earlier era. Furthermore it casts people as passive consumers of whatever organisations and governments choose to give them. But society is increasingly defined by the roles that individuals choose to play, and the groups they choose to form, including what James Meek has described as ‘flashmob commonwealths of mutual interest’. (James Meek, ‘Short Cuts: Fan-Owned Politics’ London Review of Books, June 1, 2017)

The Digital Consumer Hub wishes to answer the questions What do consumers and citizens think? What is their experience given their multiple roles? How will they shape the future of the digital economy? We will examine research from the perspective of different disciplines and analyse public policy to speculate on where the interests of consumers and citizens really lie. We will invite informed individuals as well as representatives from consumer organisations, governments, industry, to respond to our thinking, to each other, and to introduce new topics.

Upcoming posts will spotlight policy announcements, private sector initiatives and the work of governments and supranational institutions. Over the next few weeks we will take a look at the following studies / surveys to see if we can find some first answers to the above questions. But the Consumer Hub does not stop here, and this is only the beginning of a new policy network.

Use of mobile and internet services grows in Europe—but not much competition in mobile

On April 11 ETNO, which represents European telcos, published the results of a European consumer survey commissioned from IPSOS.

The survey’s findings include:

  • 65% of Europe’s consumers see services provided via telecommunications as ‘crucial’ to their daily lives.

  • Over one third of Europeans stream music or videos and over one fifth of these expect to increase their use of streaming in future.

  • 45% say they expect to increasingly use online services to make calls outside their own country.

  • The “main drivers” of consumers’ decision to choose a mobile provider are “quality” rather than “price”. We are told that 82% of consumers regard mobile network coverage as the most important factor

The survey tells an important story about consumers’ expectations that they will increasingly rely on Europe’s fixed and mobile communications infrastructure to shop and amuse themselves online. Another important, if unsurprising, finding is that broadband coverage in Europe is good and appears, in the eyes of consumers, to offer reasonable value for money.

Two findings are striking, however, for what they say about Europe’s market for voice telephony. First, international calling via the web is high, irrespective of age, and consumers say that they expect to increase their use of online calling. Second, when choosing a mobile provider 82% of citizens believe that network coverage is more important than price. ETNO presents this latter as part of an overall story of satisfied consumers. This is surely a questionable conclusion.

Using mobile phones in Europe represents a high marginal cost for young Europeans—22% of whom are unemployed. Families that subsidise or pay for their children’s smart phone contracts are also paying a high proportion of income on these services. It seems unlikely that ‘network coverage’ is all that important when choosing a carrier. One reason why the ‘network coverage’ may be identified as the most important factor in determining a mobile carrier may be because for Europeans price competition in mobile telephony is poor. Europe neither has a single market for mobile carriers nor the will to create one. Rather the EU has many national oligopolies with a few local carriers who do not compete on price. It is not likely that the abolition of roaming costs by the European Commission in June of this year will make any difference as mobile carriers will still have the right to impose roaming tariffs if the use of a phone abroad is for longer than a brief period. One sign of a lack of competition in price was the fact that Ireland’s mobile network Three announced that it would increase its monthly standard contract for all its customers, whether they use their phone abroad or not, by €5 in order to recover revenue lost due to the abolition of roaming charges. Other national carriers were reported to be considering a similar move. Price competition it isn’t.