You are not Google’s customer
I’m going to write one of those posts where many of you will already understand my point. In fact it might be old hat for a majority of my readers, yet it’s still important enough for me to mention just in case there are a few people out there who don’t know how the modern business model is set up.
Namely, like this. As a gmail and Google Search user, you are not a customer of Google. You are the product. The customers of Google are the ones who advertise to you. Your interaction with Google is, from the perspective of the business operation, that you give them information which they harvest so they can advertise to you in a more targeted way, thus increasing the likelihood of you clicking. The fact that you get a service from these interactions is great, because it means you’ll come back to give Google and its customers more information about you soon.
This misunderstanding, once you see it as such, can be clarifying. For example, when people talk about anti-trust and Google, they should talk about whether the customers of Google have any other serious choice. And since the customers of Google are advertisers, not gmailers or searchers, the alternatives aren’t hotmail or Bing. Rather they are other advertising outlets. And a very good case can be made that Google does violate anti-trust laws in that sense, just ask Nathan Newman.
It also explains why something like the recent European “right to be forgotten” law seems so strange and unreasonable to the powers that be at Google. It’d be like a meat farm where the cows go on strike and demand better food. Cows are the product, and they aren’t supposed to complain. They’re not even supposed to be heard. At worst we treat them better when our customers demand it, not when the cows do.
I was reminded about this ubiquitous business model yesterday, and newly enraged by its consequences, when reading this article entitled Held Captive by Flawed Credit Reports (hat tip Linda Brown) about the credit score agency Experian and how they utterly disregard the laws trying to protect consumers from mistakes in their credit reports. The problem here is that, to the giant company Experian, its customers are giant companies like Verizon which send credit score requests millions of times a day and pay for each score. Mere people, whose mortgage application is being denied because of mistakes, are the product, not the customer, and they are almost by definition unimportant.
And it seems that the law which is supposed to protect these people, namely the Fair Credit Reporting Act, first passed in 1970, doesn’t have enough teeth behind it to make the big credit scoring agencies sit up and pay attention. It’s all about the scale of the fines compare to the scale of the business. This is well explained in the article (emphasis mine):
Last year, the Federal Trade Commission found that 5 percent of consumers — or an estimated 10 million people — had an error on one of their credit reports that could have resulted in higher borrowing costs.
The F.T.C., which oversees the industry along with the Consumer Financial Protection Bureau, has been busy bringing cases in this arena. Since 2000, it has filed 18 enforcement actions against reporting bureaus; 13 were district court actions that generated $25.7 million in penalties.
Consumers have also won in the courts, on occasion. Last year, an Oregon consumer was awarded $18.4 million in punitive damages by a jury after she sued Equifax for inserting errors into her credit report. But the fines, settlements and judgments paid by the larger companies are not even close to a rounding error. Experian generated $4.8 billion in revenue for the year ended March 2014, and its after-tax profit of $747 million in the period was more than twice its 2013 figure.
Million versus billion. It seems like the cows don’t have much leverage.