Big Tech’s Legitimacy Problem

The New York Times published an insightful piece on how Facebook sought to navigate its recent crisis series (I also recommend to read the supplement analysis of Ben Thompson at Stratechery). Informed by resource dependency theory and theories on power, Facebook’s strategy and tactics are not particularly surprising – lobbying, using personal ties to influence opinions, etc.
What particularly captured my attention, though, is how one political strategist summarized the communication strategy of Facebook (an approach we can also find in other domains, particularly in politics): proactively spreading good news about yourself, while discrediting your direct competitors, challengers (e.g. activists) or other big players in the industry.
Successful implementation of this strategy may lead to short-term gains for an individual player, however, at the long-term, this strategy – if applied by other players as well – has the potential to cause serious legitimacy challenges for the entire industry. If all relevant players in the industry use the same strategy, it means that the overall volume of negative news regarding the tech industry increases. This, in turn, channels out expected gains from positive news about an individual corporation and increases the likelihood that essential stakeholders (e.g., consumers, politicians) increasingly question the appropriateness of all big tech corporations (and not just of individual players). Ironically, big tech’s communication patterns and fights among each other may complement, if not amplify the voices of their critics (e.g., activists calling for regulation).
But why should big tech care? One could argue that these corporations don´t need to care because they have an oligopolistic/monopolistic market position. And due to their lobbying efforts its unlikely that they face serious threats, particularly in the US. Yes, but – and I draw here on Ben Thompson – increasingly questioning their legitimacy and reputation matters for two reasons:
First, the Cambridge Analytica Scandal for Facebook is the equivalent of the First Surgeon Generals Report on the adverse effects of Big Tobacco. The biggest threat for Facebook and Co are not regulations, instead it is the users turning away from the network (after all, the power of their business model is aggregating consumers on the demand side, which makes it desirable for the supply-side (e.g., advertisers, brands) to pay for getting consumer’s attention). Being perceived as the equivalent of big evil tobacco is not particularly helpful for expanding and maintaining a user base (hence it is not surprising that Google and Facebook launch image campaigns – the various ads in Berlin are witness to that). Second, legitimacy and reputation matters for recruiting talent. Big tech is already facing a crisis in this area – consider how it deals with incidents of sexual misconduct and abuse. While money is an important deciding factor for great talent, we must not underestimate that people want to situate themselves in nurturing environments where their intrinsic motivation and self-actualization flourishes. Who wants to work for a corporation perceived as evil, if other meaningful jobs are a click or swipe away?

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