Microsoft

Privacy Isn’t Dead, It’s Evolving

by Ryan Radia on August 19, 2010 · 1 comment

in Tech & Telecom

Recent revelations about Microsoft’s internal debate over Internet Explorer’s handling of tracking cookies, as chronicled by The Wall Street Journal earlier this month, have prompted harsh criticism from self-described privacy groups, who’ve called on Congress to investigate Microsoft’s actions. But as Jim Harper pointed out in an excellent WSJ essay, Web users stand to lose a great deal if online tracking is squelched by the hand of government. Data gathering on the Internet is largely harmless, and individually targeted advertising coexists with robust privacy safeguards.

Over on AOLNews.com, my colleague Carolyn Homer discusses these privacy tradeoffs, arguing that Microsoft and other Internet firms have a strong incentive to set privacy defaults that align with their users’ preferences. She points out that most consumers are, in practice, quite willing to live with allegedly “pervasive” tracking in exchange for the enormous benefits that targeted advertising makes possible. While many surveys and polls indicate consumers are very worried about their privacy, the actual decisions that consumers make every day tell a very different story (as documented extensively by Berin Szoka). From Carolyn’s piece:

A body of research reveals a sizable disparity between how much people say they value privacy and how willing they are to actually protect it. In a 2003 Duke Law Journal article, Michael Staten and Fred Cate found that fewer than 10 percent of users exercise their right to opt out and share less. Conversely, if given the opposite choice, fewer than 10 percent of users elect to opt in and share more. The vast middle is apparently indifferent.

If consumers were required to affirmatively opt in before sharing data, the Internet’s prevailing advertising-based business model would be decimated. The effectiveness of online advertising in Europe, for example, fell 65 percent after the European Union in 2002 required a blanket opt-in system. For more than a decade, the Internet has thrived on the assumption that most people believe it is a fair trade to receive free content in exchange for viewing ads. Mere advertisements shouldn’t be equated with gross privacy violations.

She goes on to discuss how privacy settings are evolving as consumer preferences adapt to new technologies and firms experiment with new ways to use and collect data. You can read the rest over at the AOL News website.

Competition in Wireless Communication: Android Edition

by Elizabeth Jacobson on October 26, 2009

in Tech & Telecom

The New York Times reports that several cell phone manufacturers are turning to Google’s free operating system, Android, to run on their upcoming smartphone models. The switch to Android is likely to hit Microsoft and its clunky Windows Mobile platform the hardest, as companies that previously used Windows for their high-end PDA-phones seek to cut costs and offer consumers a more customizable product.

With Google joining the ranks of Nokia, Research-in-Motion, Apple, and Microsoft developing in mobile phone operating systems, the big four wireless carriers signing on to offer Android phones within the coming year, the deployment of 4G networks slated to take place in 2010, mounting consumer anticipation for Motorola’s soon-to-be-released Droid, and reported rumors that Apple is about to end its exclusive distribution deal with AT&T, it’s difficult to take seriously critics’ claims that a lack of competition and carrier-device exclusivity contracts are restricting consumer choice and keeping prices prohibitively high.

Trustbusters should call off fishing expedition in Microsoft-Yahoo deal

by Gary Howard on August 11, 2009

in Legal, Tech & Telecom

In today’s Seattle Times, CEI Information Policy Analyst Ryan Radia and CEI Policy Fellow Jonathan Hillel talk about the U.S. Senate Antitrust Subcommittee’s threat of “careful scrutiny” over the recent Microsoft-Yahoo deal.  Read the piece here or see below.

MICROSOFT and Yahoo want to join forces in Internet search to better compete against Google. But first, they need the blessing of government antitrust enforcers. Senate Antitrust Subcommittee Chairman Herb Kohl, D-Wis., already has threatened “careful scrutiny” of the deal. But trustbusters should not go fishing for problems in the Internet search market. In the relentlessly fast-moving digital economy, government intervention contorts the market and ultimately harms consumers.

Under their proposed decadelong pact, Yahoo searches will be powered by Microsoft’s Bing search engine, which launched this June. The two search firms will maintain separate Web sites, but Microsoft will administer the technical side of both. Microsoft will also gain access to Yahoo’s vast volume of searches and query data. In exchange, Yahoo will receive 88 percent of ad revenues from searches performed on its own site.

As Steve Lohr of The New York Times noted recently, the scale advantages resulting from the arrangement will be significant. By teaming up with Yahoo, Microsoft will gain a much larger share of Internet searches, helping it attract a bigger slice of the $11 billion search advertising market.

An equally important benefit of the deal is “data scale.” Search engines are forever tweaking their underlying algorithms using complex statistics and machine learning. More searches mean more data can be mined – and, therefore, more accurate results. This, too, can fuel ad sales by making targeted placements more attuned to user preferences.

Both Yahoo CEO Carol Bartz and Microsoft Chief Steve Ballmer have admitted that scale is the driving force behind the deal. To antitrust enforcers, however, “scale” is often a major red flag. This is because the Justice Department assumes that in markets where competitive advantage stems from firms’ size and market share, the consolidation of existing competitors thwarts the entry of newcomers.

Scale may make Microsoft and Yahoo more competitive, but it hardly guarantees them success. Indeed, history tells us that innovation, not scale, is the one true silver bullet in Internet search. Google earned its crown nearly a decade ago by revolutionizing search technology, devising the revolutionary PageRank system for indexing the Web and toppling AltaVista in the process. More recently, Microsoft’s Bing has made inroads by combining a clever cataloging system with alluring design.

In the same way, the firm that ultimately dethrones Google will likely do so by offering superior search technology, not simply more of it.

The Microsoft-Yahoo deal has also raised concerns over “network effects.” This refers to the phenomenon whereby a technology becomes more valuable to its users as the size of its user base grows. Concerns over network effects were at the center of Microsoft’s antitrust woes beginning in the late 1990s.

Yet online search is not a network market. The reason Google attracts so many users is not because it already has lots of them, but because it gives the best search results. Once again, innovation, not scale, is the real trump card in the Internet search market.

Farhad Manjoo of Slate recently observed that search engines including Cuil, Wolfram Alpha, Topsy and Bing all emerged as viable players in Internet search despite Google’s supposed dominance. To be sure, none of these search engines have yet threatened Google. But since Web users can switch search engines with a few clicks of the mouse, sustaining market share over time is impossible without continual innovation.

Antitrust policing lags far behind the rapid-fire evolution of dynamic Internet markets. It is no accident that Web search depends on innovation; rather, this is the very nature of the modern information economy. The Justice Department should stop worrying about scale and keep its hands off the Internet search market.

Justice Dept. Should Leave the Microsoft-Yahoo Search Deal Alone

by Gary Howard on July 29, 2009

in Economy, Legal

Statements of Ryan Young and Wayne Crews

Washington, D.C., July 29, 2009 – Today, Microsoft and Yahoo announced a ten-year partnership of their search businesses in order to better compete against Google. The Department of Justice, citing antitrust concerns, is likely to investigate the deal before allowing it to go through. Competitive Enterprise Institute technology policy experts Wayne Crews and Ryan Young argue that regulators can best serve consumer interests by leaving well enough alone.

Ryan Young, Fellow in Regulatory Studies:

“What is there to investigate? Microsoft and Yahoo are trying to outcompete Google. To succeed, they will need to put together the best search engine they can. The firms believe their announced partnership will help them achieve that goal. They should be allowed to try – their own money is at stake if they fail. Either way, Internet users stand to benefit. Bing and Yahoo Search should improve from the proposed partnership, which will also force Google to make its own search engine better, lest it be left behind. This is how a competitive, contestable market works. The goal of antitrust policy is to benefit consumer welfare, but there is nothing regulators can do to make an already fiercely competitive market even more so.”

Wayne Crews, Vice President for Policy and Director of Technology Studies:

“This administration is already suspicious of allegedly ‘dominant’ firms in the high tech sector – but consumers are better off when regulators let markets evolve naturally, rather than guiding them from above. The Microsoft-Yahoo alliance has the potential to offer great value to consumers. The dangers of arbitrarily blocking such voluntary business arrangements, or needlessly delaying them, are severe. Regulatory intervention in the high-tech sector thwarts the natural evolution of the market. Worse, it distorts the response of competitors. Antitrust investigations steer the market in unnatural directions, creating instabilities in entire industry sectors.

“Consumers have more to fear from government bureaucracies that have the power to stop progress cold than they do from free enterprise looking to create the next big thing. Should the Microsoft-Yahoo partnership not pan out, rivals, partners, consumers, investors, advertisers, and even global competitors are perfectly capable of dealing with any challenges to competition. Consumers stand to lose if Washington gets involved.”

The “Small Business” Exemption Distortion

by Fred Smith on April 21, 2009

in Deregulate to Stimulate, Economy, Odds & Ends

Many of the federal regulatory and tax laws include a “small business exemption” – politicians displaying an aversion to crippling a politically powerful constituency.  Often this is done by a cap – “This law will not apply to businesses having net annual sales less than some amount.”  Years ago, I saw one consequence of this law in the organization of the US scrap industry.  A prospering scrap firm would approach the cap ceiling and re-organize into two smaller businesses — sometimes one brother would head one firm, another the other.  Nothing wrong with this, save the transaction costs of creating two organizations rather than one.  But these costs may indeed be large – duplicate job slots in the firms, separate marketing and production departments and so forth.

The value of small businesses is that some do not stay small.  Those that grow – for example, the Microsofts of tomorrow – are not benefited by laws that artificially penalize growth.  Like caps on welfare and other redistribution programs, they can encourage firms to avoid the risks — and the benefits — of growth.

LibertyWeek 14: Conviction Spooktacular

by Richard Morrison on October 29, 2008 · 1 comment

in Podcast

Prepare yourself for the latest episode of the best free market podcast around, LibertyWeek.

Your hosts Richard Morrison and Cord Blomquist discuss the looming presidential election, Halloween, the conviction of Alaska Sen. Ted Stevens, the continuing economic unease, tough times for the U.S. Postal Service, American companies react to Internet censorship abroad, Cox’s new wireless service, Microsoft’s new web-based OS Azure, and all the finest Olympic News.

Listen now!