Forget the Internet. You Need to Start Thinking About the Splinternet
The internet is coming apart. Here’s what it means for your business.
PHOTO CREDIT: Getty Images
Right now, most democratic countries see one internet. Not for nothing is it called the World Wide Web, and since its commercialization, its content has been generally accessible to all but those living in authoritarian societies. But a constellation of pending lawsuits and sweeping new international regulations could rewrite the rules of digital business in free societies and dismantle the web in its current form, effectively creating many different "splinternets." Your customers could be treated differently depending on which country they live in--and even from state to state in the U.S.
This didn't happen overnight. When the internet shifted from academia and government to the private sector in the 1990s, we let it propagate freely, instead of treating it like a regulated utility or financial system. Back then, lawmakers didn't think much about how all the data we'd generate on the internet might be used.
Then, early this century, Google started directing people to hyper-relevant webpages; later, Facebook began mining user data to pinpoint ads and paid content to specific accounts. Such uses of data were, and remain, really good for business. A few years ago, a fitness startup began using member data to target new customers and help decide what classes to add. That company--Peloton, which streams cycling classes to connected stationary bicycles--generated $170 million in revenue in 2016. Others, like Fitbit, measure our physical activity; Lyft and Uber track our locations and direct cars our way; businesses from big-box retailers to small shops use customer data to send out mailings, email coupons, and track inventory--the list goes on.
But machine learning algorithms are now really smart, and not all the ways data can be used sit well with consumers. That's why revelations about Cambridge Analytica, which gained access to the data of more than 87 million Facebook users, made such an impact. Political campaigns that used the company's data now allege it wasn't that useful, but it's hard to ignore how easy it was to mine, refine, and package--all without our knowledge.
Meanwhile lawsuits and new regulations are pending worldwide. In Germany, social media sites that don't remove "obviously illegal" posts could be fined up to 50 million per offense. Canada's Supreme Court ruled that Google must scrub search results of pirated products, such as movies. Europe's General Data Protection Regulation, which went into effect on May 25, is a broad set of rules giving European Union citizens more control over their data. Anyone doing business in the E.U. now must comply with the GDPR, which includes proving that users' personal data has been gathered under transparent circumstances and gives them the option to limit its use.
By the time you read this, the Supreme Court may have decided whether online retailers like Wayfair and Overstock are subject to sales tax in every state. This decision could boost businesses in no-sales-tax states like New Hampshire and Montana, which might see customers return for tax savings. But for those doing business in states like California and New York, where the sales tax is high, the opposite could be true.
All this could add up to many different splinternets that look and behave differently from one another according to geography. This might seem appealing to businesses and regulators: Compartmentalization means more ways to control supply and demand, and possibly stifle competitors. But ultimately, splinternets will cause more harm than good. Big tech companies will find it impossible to comply with every legal permutation. Existing filter bubbles will expand to fit geographic borders. All this will continue to unfold slowly. But once it starts, it will be difficult to return to the freewheeling web of today--where, despite many flaws, every business has a decent shot at success.