Matchmakers: the new economics of multisided platforms free download

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Delivered to clients nor do we publish the papers after sending them our Social media are platforms, not publishers.

They provide the means for large numbers of people to produce and consume information. They are open to both producers and consumers. Social media managers regulate the content on a platform, but the platform does not host everything that is posted on it. The regulation is necessarily ex post.

The number of users and their expectations of immediate publication preclude ex ante regulation. In contrast, publishing involved a small number of people communicating information to mass or special audiences.

Gatekeeping was inherent in publishing; it was relatively closed to producers but open to consumers. The constrained supply of content enabled ex ante regulation of a publication i. Social media are, of course, economic institutions; they need to generate or have a prospect of generating revenue beyond the costs of providing the service. Individuals create a user profile that social media services in turn use to connect individuals to others. Social media thus comprise four groups of people: users who generate content, users who consume content, users who generate commercial speech advertising , and social media managers who host speech.

Each element involves speech: users generate and consume information, and social media services create the forum in which speech happens. Individual speech is highly protected in the United States.

The online activities of social media companies also have considerable protection from government regulation.

The United States highly values individual speech in the public sphere. The Constitution offers strong protections for speech in general and not just for political speech. For many years, legal experts believed commercial speech had fewer protections from government regulation than political or artistic speech. But this lesser standing has been challenged by the Supreme Court and recent scholarship.

Social media companies seem to be dependent on ordinary commercial transactions, the regulation of which is presumed constitutional. Individuals use social media for speech. They are granted access to social media in exchange for data about themselves.

If government blocked prohibited that exchange, speech by individuals would be restricted. The prohibition of the economic transaction would be tantamount to prohibiting speech. The validity of less sweeping regulations would involve discerning their effects on speech. However, this exchange is clearly sensitive from a First Amendment standpoint.

The exchange underlying social media thus implicates both commerce and fundamental rights. Some part of the protection for social media from government action derives from the protections accorded individual speech. The owners of the companies involved may have First Amendment rights that preclude government requiring a platform to carry speech.

Yet social media platforms differ from traditional publishers. One might argue that ex post editorial decisions are less likely than ex ante decisions to involve expression. A company might remove existing content to create a pleasant experience for users that is, for business reasons. Thus, social media content moderation might differ from editorial discretion in publishing and merit less constitutional protection. This objection fails on two counts. First, newspapers need to make a profit to remain financially viable and thus might make editorial decisions for business reasons; they would still enjoy the freedom of the press.

Moreover, an ex post content removal by social media managers could also be expressive. This similarity to traditional publishers might appear to make social media companies liable for defamation or other legal limits that apply to publishers. However, Congress has exempted social media from defamation standards applicable to traditional publishers. Congress might have required social media to police their platforms to enforce accepted public standards for speech e.

But Congress did not do so. At the same time, the section did not protect individuals from public accountability for violating the limited exceptions to freedom of speech, and it did not reduce government authority over those harms. Section neither increased nor decreased government authority over speech on social media. Congress showed in these decisions a preference for private governance of internet speech. Finally, social media are privately owned forums for speech.

The First Amendment protects the freedom of speech from state action. Social media are not government and hence are not constrained by the First Amendment. These platforms are protected by the First Amendment but need not apply it to speech by their users. Social media managers may suppress speech on their privately owned platforms, speech that elected officials could not censor in a public forum. In older decisions, the Supreme Court said private forums had to respect public limits regulating freedom of speech.

In Marsh v. But more recent cases have been friendlier to protecting private forums from public regulation. In Lloyd Corp. Tanner , the Supreme Court overturned Logan Valley, saying a shopping mall did not constitute a public forum and thus need not obey the First Amendment. NLRB , a majority noted that. This elementary proposition is little more than a truism. Pruneyard Shopping Center v. Robins affirmed the proposition that being open to the public did not turn a shopping center into a public forum governed by the First Amendment.

The court also concluded that the California Constitution created a right to petition and speech even on private property. Only six states beyond California adopted limited protections for speech on private property. Some Americans may believe free speech should trump private property in forums like shopping malls.

But national judgments run the other way, supporting private governance of speech. The history of public values and social media suggests a strong presumption against government regulation. The federal government must refrain from abridging the freedom of speech, a constraint that strongly protects a virtual space comprising speech.

The government has also generally refrained from forcing owners of private property to abide by the First Amendment. Hence individuals have no expectation that the government will force the owners of social media to refrain from suppressing speech on their platforms provided the owners do not violate civil rights laws.

Those who seek more public control over social media should offer strong arguments to overcome this presumption of private governance. Have they? Some idea of the public interest often undergirds government actions, including regulation of private firms. In other words, policymakers and others see government vindicating a public interest through regulation. A public interest argument comprises two parts. First, it should establish that government action is needed to secure some widely held value; private activity is assumed, in theory or fact, to be inadequate to achieving that end.

Second, it should make the case that government action will achieve the values in question without significant costs to other important values. As we have seen with social media, fundamental values are at stake. The second part of the public interest argument must climb a steep incline.

This section will argue that proposed government regulations of social media fail on one or both criteria. The values pursued by regulation are more important than the restraint of government power. Government action is unlikely to attain the public interest cited by advocates of regulation.

Finally, in some cases, the regulation may only attain some value at an unacceptable price in other rights and values. Some critics argue that tech companies are monopolies. Critics say that tech companies fundamentally practice viewpoint discrimination when managing their platforms. In other words, the companies are said to exclude speakers from their forums because of their views; broadly put, critics argue that liberal employees at tech companies discriminate against conservatives when governing their private forums.

If these firms are indeed monopolies, there would be a stronger case that their content moderation violates the First Amendment.

But if these tech firms are not monopolies, then it matters much less whether their content moderation constitutes a violation of free speech. Private institutions discriminate among viewpoints all the time, and few would wish the government to manage their agendas to assure fairness or balance. Indeed, as we saw, the government may not manage their speech unless in theory they are broadcast media. But if the monopoly claim is true, then bias in content moderation might matter more.

If a private forum such as Facebook owns the only place to speak and to be heard, its discrimination among viewpoints will seem a lot like censorship by the government, notwithstanding its private status. If so, one might think government action rather than constraint would serve the cause of speech and debate. More voices might be heard if one company or a small number did not govern the private forum in question.

However, the question of viewpoint discrimination would matter a lot less if the dominance of current market leaders were insecure and if users and audiences who were excluded from a platform had alternatives. The discrimination argument also matters less if public regulation e. Each of these contingencies appears true: the dominance of current firms is insecure, alternatives exist, and broad regulation seems likely to make things worse.

The tech companies involved in speech are large and successful. The case against the tech companies leans on an older economic theory of network effects. David S. Evans and Richard Schmalensee offer a pithy summary of the theory:. In some cases a service is more valuable if more customers are using it because customers want to interact with each other.

Then, if a firm moved fast and got some customers, those customers would attract more customers, which would attract even more. Explosive growth would ensue and result in a single firm owning the market forever.

The winner would take all. The economics of network effects has turned out to be more complicated than the older theory suggests. Internet companies offer multisided platforms whose network effects are indirect between different kinds of customers say, smartphone users and app developers rather than direct effects between the same kind of customers such as telephone callers. These multisided platforms face a much more difficult challenge of attracting customers; they are much more likely to fail during their startup period than a telephone company, which is the model of the older theory of network effects.

The new firms also must attend more to attracting the right customers than simply adding customers. Finally, network effects can go in reverse; customers may use multiple platforms and migrate to some of the alternatives. Although a few tech companies dominate some markets, that does not mean these firms can never be displaced.

Do alternatives exist for those excluded from social media platforms? The rapid rise of social media might suggest traditional forums for speech no longer matter, but that is far from true. Traditional public forums continue to exist along with traditional media such as newspapers and television.

Such forums are protected, of course, from government censorship. In fact, most people still get most of their news from such sources. Even speakers excluded from major platforms such as Facebook and YouTube can find a home for their speech somewhere else on the internet. LiveLeak, while less reputable precisely because of its willingness to host graphic content, will deliver video to viewers just as effectively as YouTube.

There are also platforms that are not specifically dedicated to video hosting or sharing but are often used to do so. Not only is it important to recognize that alternatives exist, but that alternatives can continue to come into existence to meet user demand for differing standards of moderation. For several months, YouTube rules concerning videos containing firearms have shifted repeatedly with little transparency.

The operators of gun review channels found their videos repeatedly demonetized, and some were banned for running afoul of opaque rulesets. A group of firearm enthusiasts decided to start a YouTube competitor, called Full30, which catered to the tastes of gun owners. Several popular firearms channels on YouTube have moved to the site.

But even if firms dominate their markets, will government regulation deal with the problem or make it worse? The nation has had experience with similar regulation of communications for similar reasons regarding broadcasting. Such regulation reinforced the market dominance of large firms and threatened freedom of speech. The federal government claimed control of the broadcasting spectrum in the s. Between and , the FCC allocated a large part of the spectrum for television broadcasting.

To use the spectrum for television broadcasting required a license from the FCC. Such restrictions inevitably constrain competition for the benefit of incumbent firms. Those changes, however, came after decades of the FCC restricting competition in broadcasting markets. The effects of FCC regulation on freedom of speech may be summarized briefly. The equal time would not be reimbursed, which meant the requirement acted as a tax on the original broadcast speech.

Such stations could not afford to supply a great deal of free time. Kennedy operatives arranged for more than 1, letters to be written demanding equal time at these stations, leading to 1, hours of free broadcasting.

This effort to suppress speech was deemed a success by the administration and continued in the Johnson years. Administration officials threatened the local licenses of the networks both publicly and privately, seeking more favorable coverage.

The public effort appeared to fail, but Thomas Hazlett has shown that privately network officials were quite compliant with the wishes of the administration. The history of broadcast regulation suggests that increasing state control over social media would have a chilling effect on speech.

Over time, both political parties might be expected to threaten any speech they find abhorrent. The monopoly argument for regulating social media has weaknesses. We have reason to think the current market positions of large social media companies may not persist because network effects operate differently than in the past.

In any case, speakers have alternatives if they are excluded from a specific platform. Finally, it should not be assumed that government regulation will produce more competition in the online marketplace of ideas.

It may simply protect both social media owners and government officials from competition. Consider how political speech works in the world outside the internet. People have views about politics. They associate with others to discuss and perhaps debate those views. Perhaps they seek out others with similar views because Americans do not like conflict and confrontation. Such associations reflected other human failings such as confirmation bias and prejudice. This tendency no doubt did harm to society: debates were less rich and less probing than they otherwise might have been, and citizens were worse off than they might have been if they had learned the errors of their ways through a fuller debate.

Yet few called for the government to compel associations to hear speakers with different views. The internet facilitated the exchange of views about everything, including politics. One might see this as a tremendous success both in fostering speech and association or in satisfying individual preferences. Our highest aspirations are said to include meeting the demands of citizenship in a deliberative democracy.

Sunstein denies that freedom in general means freedom from coercion by the state. Individuals might be free of state coercion yet unfree because they make choices that preclude their own development.

Individuals may prefer, for example, to hear only a subset of all views about a political topic. Indeed, they may prefer to hear little about politics. Sunstein offers an extended argument that people online pursue their own interests to the exclusion of public information and debates.

Particularly, they do not come across ideas and arguments they might not seek out. Instead, they form bubbles that filter out opposing views and echo chambers that merely repeat the views already held by the individuals in them. It is even possible, Sunstein notes, that social stability could be put at risk. But the real problem seems more prosaic and political: If diverse groups are seeing and hearing quite different points of view or focusing on quite different topics, mutual understanding might be difficult and it might be increasingly hard for people to solve problems that society faces together.

By enabling and respecting individual choices, the internet complicates and even undermines both the diversity and the unity needed in a deliberative democracy. More diversity of views would improve the disharmony of the internet enclaves, and more unity across enclaves would militate against social and political fragmentation.

We can imagine people choosing to avoid unpleasant people and views while affirming their prior beliefs. Such choices might be the easiest way forward for them. But the logic of this position does not entail its empirical accuracy. Communications researcher Cristian Vaccari notes that. Whether people use these choice affordances solely to flock to content reinforcing their political preferences and prejudices, filtering out or avoiding content that espouses other viewpoints, is, however, an empirical question—not a destiny inscribed in the way social media and their algorithms function.

For example, several studies published in and earlier indicate that people using the internet and social media are not shielded from news contravening their prior beliefs or attitudes. Did the election change these findings? Several studies suggest doubts about filter bubbles, polarization, and internet use. Three economists found that polarization has advanced most rapidly among demographic groups least likely to use the internet for political news. The cause internet use was absent from the effect of interest increased polarization.

They had panel data and thus could examine how internet usage affected the attitudes of the same people over time. The people who used Facebook for news were more likely to view news that both affirmed and contravened their prior beliefs.

Several recent studies have focused on either the United States and other developed nations or just European nations alone. Perhaps data and conclusions from other developed nations do not transfer to the United States. Even if we put less weight on conclusions from Europe, such results bear more than modest consideration.

In , Vaccari surveyed citizens in France, Germany, and the United Kingdom to test the extent of filter bubbles online. Ideological echo chambers and filter bubbles on social media are the exception, not the norm. Based on these estimates, between one in five and one in eight social media users report being in ideological echo chambers. However, most social media users experience a rather balanced combination of views they agree and disagree with. If anything, the clash of disagreeing opinions is more common on social media than ideological echo chambers.

Another recent study of the United Kingdom found that most people interested in politics who select diverse sources of information tended to avoid echo chambers. Only about 8 percent of their sample were in an echo chamber. The authors urge us to look more broadly at media and public opinion:. Whatever may be happening on any single social media platform, when we look at the entire media environment, there is little apparent echo chamber.

People regularly encounter things that they disagree with. People check multiple sources. People try to confirm information using search. Possibly most important, people discover things that change their political opinions. For Sunstein, the aggregate of individual choices about political speech and engagement on the internet does not serve well the cause of republicanism. Sunstein might disagree, and perhaps a maturing literature will support regulations to fight such bubbles.

But Sunstein proposes restrained efforts to make internet users better citizens. If the literature cited in this report is correct, there is even less reason to regulate social media in the name of democracy. Forcing people to read and interact with views they dislike or abhor implicates liberal values such as free speech and individual liberty. On the one hand, we may wish that people were more and better informed about politics; on the other hand, we may doubt the wisdom of forcing people to engage in public matters.

If filter bubbles threatened popular government, the case for public action might have improved. But studies do not support that proposition. Government traditionally protects the homeland from its enemies. A standard textbook explores the complex meaning of national security:.

The term national security refers to the safeguarding of a people, territory, and way of life. It includes protection from physical assault and in that sense is similar to the term defense. Our concern here is whether the government should increase its power over internet speech to achieve national security.

That question inevitably concerns the relationship of speech to violence. But internet speech may involve other aspects of national security. The clearest example of a threat to national security would be attacks on or occupation of the homeland or its citizens.

Terrorist groups … use the Internet to disseminate their ideology, to recruit new members, and to take credit for attacks around the world. In addition, some people who are not members of these groups may view this content and could begin to sympathize with or to adhere to the violent philosophies these groups advocate.

They might even act on these beliefs. Some have argued for stricter limits on terrorist speech. Posner concedes that his proposed law violates the First Amendment under current doctrine. However, he is hopeful that the current war on terror will permit new restrictions on speech that would have been held invalid in less demanding times.

In the past, he remarks, war has supported such restrictions. Posner seems concerned about two harms caused by speech that favors terrorism: the harm done to vulnerable individuals who end up being punished for materially supporting terrorism and the mayhem caused by the speech. Liberal governments generally do not protect people from the consequences of their beliefs; however, they do protect other people from those consequences if they are directly related to speech.

Hence Posner rightly worries about violence caused by terrorist speech, a concern that informs the incitement exception in First Amendment doctrine. But his example, which is that U. There is little doubt they might cause harm in the future, but we have no evidence they have done so because of hearing speech.

Courts have consistently refused to hold social media platforms liable for terrorist acts. Plaintiffs allege no connection between the shooter, Abu Zaid, and Twitter. More broadly, any standard of liability that might implicate Twitter in terrorist attacks would also capture transport providers, restaurateurs, and cellular networks.

All these services are frequently used by terrorists, though they cannot be seen as uniquely instrumental in the realization of terrorist plots. A Twitter account is not an unalloyed boon to terrorists.

A public social media presence provides opportunities for counterspeech and intelligence gathering. In some cases, state security services have asked social media platforms to refrain from removing terrorist accounts, as they provide valuable information concerning the aims, priorities, and sometimes the locations of terrorist actors.

As Posner notes, social media platforms have policies against terrorist speech. We do not permit terrorist organizations to use YouTube for any purpose, including recruitment. YouTube also strictly prohibits content related to terrorism, such as content that promotes terrorist acts, incites violence, or celebrates terrorist attacks.

Facebook and Twitter have similar policies, though they attempt to limit the subjectivity of terrorism by tying it to violence against civilians. You may not make specific threats of violence. You also may not affiliate with organizations that—whether by their own statements or activity both on and off the platform—use or promote violence against civilians to further their causes. Social media moderation may be more effective than the increases in government power desired by Posner.

But that effectiveness may have been acquired by narrowing the kinds of speech heard on those platforms. However one assesses that narrowing, the case for more government power here remains at best unproven. Electoral Integrity. Many believe that protecting national security also means preventing foreign powers from influencing American elections.

In February , Robert S. Mueller III, a special counsel to the U. Department of Justice, indicted 13 Russians for intervening in the U. Of course, this was speech by foreign agents, which presumably makes all the difference.

But should it? The First Amendment does not refer to speakers but rather to speech , which is protected from government abridgment. It might be assumed that foreign agents seek to do harm to the United States through speech.

Lastly, social media users may have a right to receive materials from foreign speakers. Such a right would belong to a reader or listener rather than the speaker; the Russian speakers in this case have no right. In , the Supreme Court invalidated a law requiring readers to sign at the Post Office to receive communist publications.

The act of signing chilled a presumed right to receive a publication from abroad. It is true that the First Amendment contains no specific guarantee of access to publications. However, the protection of the Bill of Rights goes beyond the specific guarantees to protect from congressional abridgment those equally fundamental personal rights necessary to make the express guarantees fully meaningful … I think the right to receive publications is such a fundamental right.

The dissemination of ideas can accomplish nothing if otherwise willing addressees are not free to receive and consider them. It would be a barren marketplace of ideas that had only sellers and no buyers.

The Peking Daily was printed on paper; Russian speech appeared online. In this case, national security seems to have outweighed freedom of speech. But that conclusion is somewhat misleading. In fact, the United States both censors some foreign speech and permits other speech with disclosure of the source.

We turn first to the case for censorship. Why were the Russian efforts indictable? The indicted were supported by the Russian government and are said to have bought ads advocating the election or defeat of candidates for federal office. The relevant law comes from Title 11, Section A foreign national shall not, directly or indirectly, make any expenditure, independent expenditure, or disbursement in connection with any Federal, State, or local election.

Foreign nationals are prohibited from the following activities: Making any contribution or donation of money or other thing of value, or making any expenditure, independent expenditure, or disbursement in connection with any federal, state or local election in the United States; … [and] making any disbursement for an electioneering communication.

Yet the law may not proscribe all Russian speech concerning American elections. It restrains them only from a certain form of expressive activity closely tied to the voting process—providing money for a candidate or political party or spending money in order to expressly advocate for or against the election of a candidate.

Here we discern a descent toward incoherence. On the one hand, a foreign national is prohibited from spending money on American elections, including advertising. On the other hand, that ban extends only to spending on express advocacy for or against a candidate. As noted earlier, most of the spending by the Russians in involved issue advocacy and not express advocacy. What about internet speech by Russian agents? They were presumably paid to speak, so the same distinction applies; speech about the issues would be permitted.

A foreign national spending money on speech that advocates the election or defeat of a candidate apparently threatens the integrity of elections. A foreign national discussing the issues debated during an election does not pose the same threat. This distinction may belie an assumption that using money to support speech would enable a foreign power to coordinate direct influence over voters and thereby affect the outcome of an election.

Observations by random foreign nationals would not likely be effective. The assumption is paternalistic and contravenes many of the justifications for freedom of speech found in Supreme Court decisions about freedom of speech.

At the same time, voters are assumed to be capable of dealing with issue advocacy by foreign nationals. So there is a tension here that reflects badly yet well on the United States.

Speech by foreign nationals is not just a threat to national security. If it were only a threat, that threat would be countered by banning all foreign speech. But speech by foreign nationals also offers benefits to Americans, so banning all foreign speech would involve significant costs. For this reason, foreign speech is often regulated but not prohibited. FARA required agents of foreign powers to register with the federal government; in short, people who are paid by a foreign government must disclose that relationship.

To protect the national defense, internal security, and foreign relations of the United States by requiring public disclosure by persons engaging in propaganda activities and other activities for or on behalf of foreign governments, foreign political parties, and other foreign principals so that the Government and the people of the United States may be informed of the identity of such persons and may appraise their statements and actions in the light of their associations and activities.

Policy and law are likely the most important contexts for the speech of foreign agents. Foreign governments, acting on behalf of their citizens, need not represent only the interests of foreigners. For example, an exporting nation might wish to make the case against American protectionism. Note that such advocacy might also favor consumers in the United States. Such speech hardly threatens U. In other cases, the interests of governments and peoples diverge, and the speech of foreign agents may run counter to the interests of the American people.

Even though this speech could be divergent and a potential security threat, it does not require censorship. Public officials, including members of Congress and the executive branch, often meet and hear the arguments of foreign agents. Apparently, registering and thereby disclosing such agents sufficiently protects American security in those situations. Censorship is also apparently not necessary to protect public opinion. The TV channel RT, which is funded by the Russian government, has been required to register as a foreign agent.

The content of the speech on RT might be similar to or even the same as an advertisement purchased or speech otherwise uttered by a foreign agent. Even though RT is funded by the Russian government, it was required to register as a foreign agent rather than go silent.

Apparently, voters can sort out the propaganda on a television network funded by the Russian government but not the advertising paid for by it. In sum, American law permits some speech by foreign nationals during an election. The law may permit issue advocacy by foreign nationals. It does not permit foreign nationals to spend money directly on elections, especially by buying advertising that supports or opposes a candidate. There is little evidence that the Russian efforts had much effect on the American voters in But as Brendan Nyhan, a professor of public policy at the University of Michigan, indicates, political science research shows how hard it is to change votes even with significant spending.

And divisive speech is not illegal for Americans. In this case, however, the Russian money made the speech illegal. Federal law seems needlessly incoherent. Allowing foreign nationals to buy ads with disclosure of their participation would vindicate freedom of speech. It might be objected that allowing such spending would permit a hostile foreign power to fund and coordinate a propaganda campaign capable of affecting the outcome of an American election. But allowing foreign nationals to fund lobbying efforts has not subjugated policymaking to foreign interests.

Policymakers are assumed to be capable of sorting out arguments and interests. Perhaps voters are not as capable of doing so, although the unpopularity of RT suggests otherwise. The Mueller indictment may never move to trial because the indicted are unlikely to come to the United States.