The world is coming after Silicon Valley. Tech companies must evolve to survive

March 31, 2019

The European Union instituted sweeping privacy laws over the past several years and launched multiple antitrust probes into Big Tech companies, including Alphabet and Facebook. On Wednesday, the European Union fined Alphabet subsidiary Google $1.7 billion for abusing its dominant position in online search advertising.

 

Turkey's competition board is investigating Google's search market dominance.

    A UK competition panel found that Big Tech has gotten too big, and the country's antitrust regulator said it would investigate the online advertising market.

     

    US Democratic presidential candidate Senator Elizabeth Warren wants to break up Google, Facebook (FB) and Amazon. US prosecutors are reportedly conducting a criminal investigationinto Facebook's data sharing deals. And President Donald Trump on Tuesday said that social networks should be investigated for anti-conservative bias.

     

    The public's commitment to Big Tech's platforms has been tested, and a vocal minority is questioning whether these companies are forces for good. People are turned off by Facebook's inability to stop data breaches and Russian misinformation campaigns, rampant abuse and hate speech on Twitter, terrorism recruitment videos on YouTube and conspiracy literature on Amazon(AMZN). Last week, the attack on two mosques in New Zealand was livestreamed on Facebook and reposted on YouTube.

     

    Tech faces serious threats to its business. Companies could be broken up. People could flee the services. Silicon Valley has survived previous bouts with antitrust regulators in the past. But its bad behavior and inability to control the content on its various platforms might have reached a turning point. There's a big difference between restricting internet browser choice — as governments have sued Google (GOOGL) and Microsoft (MSFT) for in years past — and social networks providing an unpoliced platform for terrorists.

     

    Changing the tech industry from within won't be easy. Mark Zuckerberg and Google founders Larry Page and Sergey Brin have a stranglehold on their companies by giving their shares more votes than other stockholders. Snap and several other tech companies have similar stock structures that give their founders massive, unchecked power. Lyft, which will soon sell public stock for the first time, will be organized in a similar way.

     

    But if tech companies want to retain control of their messaging, image, brand — and makeup of their business — they need to get serious about change.

     

    Twitter (TWTR) took what could become one of tech's most innovative steps: The company this week unveiled a new test app that serves as a playground for Twitter to experiment with new features. So far, the experiments aren't that radical: Redesigned tweet threads, colors and buttons. Only iPhone customers can test the app, and it's by invitation only.

     

    But the new app, named "twttr," after the company's original name, could become the place where Twitter tests ways to solve its myriad problems. The company has been unable to overcome abuse on its platform, and dramatically changing the way its app works may prove the only solution to get ahead of the issue.

     

    That's the tactic Facebook might take. Facebook announced last week it would reposition its business as a "privacy-focused" platform. In a blog post, CEO Mark Zuckerberg said Facebook wants to build "the digital equivalent of the living room" by increasing the amount of encrypted, private messaging on its platform.

     

    That kind of radical strategic reimagining is what Silicon Valley needs. Whether Big Tech will deliver on those changes remains to be seen. Tech has a long history of upstarts disrupting big, entrenched businesses. But the list of companies that successfully reinvented themselves is very short.

      Tech companies might not have long to adapt. As General Motors CEO Mary Barra said about the massive changes coming to the auto industry in the next few years, "Time is not our friend," in an interview with CNN Business last month. Barra laid off tens of thousands of workers and shifted the company's resources to electric vehicles, SUVs and self-driving cars to ensure GM doesn't fall behind. It continues to be a painful, unpopular and expensive decision, but it could ensure GM has a future in the age of Uber and driverless vehicles.

       

      If the tech industry wants to survive this wave of regulation and public outrage, it will have to take bold action to fix its mistakes.

       

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