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The Facebook monopoly – TechCrunch

Facebook is a monopoly. Right?

Mark Zuckerberg appeared on national TV today to make a “special announcement.” The timing could not be more curious: Today is the day Lina Khan’s FTC refiled its case to dismantle Facebook’s monopoly.

To the average person, Facebook’s monopoly seems obvious. “After all,” as James E. Boasberg of the U.S. District Court for the District of Columbia put it in his recent decision, “No one who hears the title of the 2010 film ‘The Social Network’ wonders which company it is. About.” But obviousness is not an antitrust standard. Monopoly has a clear legal meaning, and thus far, Lina Khan’s FTC has failed to meet it. Today’s refiling is much more substantive than the FTC’s first foray. But it’s still lacking some critical arguments. Here are some ideas from the front lines.

First, the FTC must define the market correctly: personal social networking, which includes messaging. Second, the FTC must establish that Facebook controls over 60% of the market — the correct metric to develop this is revenue.

Though consumer harm is a well-known test of monopoly determination, our courts do not require the FTC to prove that Facebook harms consumers to win the case. As an alternative pleading, the government can present a compelling case that Facebook harms consumers by suppressing wages in the creator economy. If the creator economy is accurate, then the value of ads on Facebook’s services is generated through the fruits of creators’ labor; no one would watch the ads before videos or in between posts if the user-generated content was not there. Facebook has harmed consumers by suppressing creator wages.

The problem

According to the court, the FTC must meet a two-part test: First, the FTC must define the market in which Facebook has monopoly power, established by the D.C. Circuit in Neumann v. Reinforced Earth Co. (1986). This is the market for personal social networking services, which includes messaging.

Second, the FTC must establish that Facebook controls a dominant share of that market, which courts have defined as 60% or above, selected by the 3rd U.S. Circuit Court of Appeals in FTC v. AbbVie (2020). The right metric for this market share analysis is unequivocally revenue — daily active users (DAU) x average revenue per user (ARPU). And Facebook controls over 90%.

The answer to the FTC’s problem is hiding in plain sight: Snapchat’s investor presentations: Snapchat’s stories? Facebook has ruthlessly copied features from the most successful apps on the market from inception. Its launch of a Clubhouse competitor called Live Audio Rooms is only the most recent example. Twitter and Snapchat are ab olutely competitors to Facebook.

Messaging must be included to demonstrate Facebook’s breadth and voracious appetite to copy and destroy. WhatsApp and Messenger have over 2 billion and 1.3 billion users, respectively. Given the ease of feature copying, a messaging service of WhatsApp’s scale could become a full-scale social network in months. This is precisely why Facebook acquired the company. Facebook’s breadth in social media services is remarkable. But the FTC needs to understand that messaging is a part of the market. And this acknowledgment would not hurt their case.

The metric: Revenue shows Facebook’s monopoly

Boasberg believes revenue is not an apt metric to calculate personal networking: “The overall revenues earned by PSN services cannot be the right metric for measuring market share here, as those revenues are all earned in a separate market — viz., the advertising market.” He is a confusing business model with the market. Not all advertising is cut from the same cloth. In today’s refiling, the FTC correctly identifies “social advertising” as distinct from “display advertising.”

But it goes off the deep end, trying to avoid naming revenue as the specific market share metric. Instead, the FTC cites “time spent, daily active users (DAU), and monthly active users (MAU).” In a world where Facebook Blue and Instagram compete only with Snapchat, these metrics might bring Facebook Blue and Instagram combined over the 60% monopoly hurdle. But the FTC does not make a sufficiently convincing market definition argument to justify the choice of these metrics. Facebook should be compared to other personal social networking services such as Discord and Twitter — and their correct inclusion in the market would undermine the FTC’s choice of time spent or DAU/MAU.

Ultimately, cash is king. Revenue is what counts and what the FTC should emphasize. As Snapchat shows above, revenue in the personal social media industry is calculated by ARPU x DAU. The individual social media market is different from the entertainment social media market (where Facebook competes with YouTube, TikTok, and Pinterest). And this, too, is a different market from the displayed search advertising market (Google). Not all advertising-based consumer technology is built the same. Again, advertising is a business model, not a market.

For example, in the media world, Netflix’s subscription revenue clearly competes in the same market as CBS’s advertising model. News Corp.’s acquisition of Facebook’s early competitor MySpace spoke volumes on the internet’s potential to disrupt and destroy traditional media advertising markets. Snapchat has chosen to pursue advertising, but incipient competitors like Discord are successfully growing using subscriptions. But their market share remains a pittance compared to Facebook.

Gemma Broadhurst
Gemma Broadhurst is a 23-year-old computing student who enjoys extreme ironing, hockey and duck herding. She is kind and entertaining, but can also be very standoffish and a bit evil.She is an Australian Christian. She is currently at college. studying computing. She is allergic to milk. She has a severe phobia of chickens

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