Jeff Bezos, founder, chairman and CEO of Amazon. Caricature from photo by Steve Jurvetson/Wikimedia
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The latest instalment in our social media series considers the data-driven business model that keeps the big tech firms, unthreatened, at the heart of the global marketplace.
On a Thursday, in early March, Casey Hopkins decided that it was time to bite the hand that fed him. Hopkins, co-founder and CEO of the design company Elevation Lab, wrote a long, righteously angry blog post describing how Amazon.com had repeatedly allowed counterfeiters, probably based in China, to sell knockoff copies of brand-name Elevation products through the site. A counterfeiter had, most recently, created copies of The Anchor, Elevation’s popular headphone hook, using a poorly-cast mold and photocopied box graphics. For five days, Hopkins wrote, the counterfeiter had stolen “all” Amazon sales of The Anchor by undercutting the price of the genuine article.
Moreover, Hopkins said Amazon was “complicit” in the problem, because it profited from the copycat sales, and wasn’t doing much to stop them. Amazon has sold knockoffs of a plethora of innovative, niche products – from phone cases to bedsheet helpers and baby clothes. Each product was crafted with thoughtful attention to an unaddressed need, and in each case, an imitator quickly stole the idea, along with as much as 90% of Amazon sales.
Of course, these niche products and companies might not exist in the first place if it weren’t for Amazon. The retailer’s ability to connect customers to the precise product they want – whether hipster baby clothes or a hook for headphones – is exemplary of the rise of the data economy.
In his new book, Reinventing Capitalism in the Age of Big Data, Viktor Mayer-Schönberger says data-rich marketplaces, such as Amazon, are making commerce drastically more efficient by using trackers and algorithms that predict consumer desires. But Mayer-Schönberger and his co-author, Thomas Ramge, also warn that the nearly-inevitable concentration of digital marketplaces and advertising channels is making society more vulnerable to market breakdowns.
The logic of algorithmic targeting also drives online media such as Facebook, Twitter, and Google’s YouTube, though they’re selling targeted advertising rather than hawking products directly. That slight distinction is what makes the problems of these social media sites more attention-grabbing than Amazon’s counterfeit epidemic.
In building systems that let them find the perfect customers for a headphone hook, social networks also gained the ability to push the specific rage buttons of narrow, vocal social groups. And just as Amazon isn’t structurally punished for selling counterfeits from China, Facebook doesn’t care much if the content demanding user attention is coming from Russia. Facebook CEO Mark Zuckerberg dragged his feet over any admission of flaws in the platform, moving towards reform only after a massive post-election backlash.
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