The cost of being woke, Google edition

For more than a year now prominent conservative YouTubers — such as Carl Benjamin, a.k.a Sargon of Akkad, who just recently became a Ukip candidate — have been alleging that Google and other social media platforms have been engaged in a systematic campaign of silencing rightwing voices.

The preferred method of censorship, the vloggers allege, comes by way of “demonetisation”: a classification YouTube applies to content deemed unfit for participation in the internet behemoth’s revenue-sharing programme.

YouTube’s justification is usually some sort of breach of company terms and conditions, especially with respect to hate speech or offensive language. The demonetised content, they say, doesn’t tie in with the values of advertisers who have paid for space on the platform, which is logical and fair. But many conservative YouTubers argue demonetisation disproportionately impacts conservative or libertarian voices, while more liberal voices who break similar rules are often left untouched and free to keep monetising their content.

Since most of these controversial YouTubers are at least partly dependent on the income streams they receive from their channels (some of which have millions of followers), it’s clear demonetisation is an effective strategy for deplatforming these voices, as opposed to simply banning them.

The problem is, the internet was born on the principle of free access for everyone. And all internet growth projections and future monetisation expectations are structured around this base case.

If the future of the “monetised” internet, however, is based on blacklisting voices that don’t appeal to the moderate middle, then these sorts of projections may be adversely impacted and may have to be rethought.

Case in point, note Alphabet’s overnight miss on revenues. Via the FT:

Shares in Alphabet fell more than 7 per cent in after-market trading on Monday after the company reported revenue growth of 17 per cent in the first three months of the year — a huge figure for a company whose quarterly revenue has now hit $36.3bn but still about $1bn less than most analysts had expected.

The underperformance has left many perplexed. On the investor call, however, Google chief executive Sundar Pichai, and chief financial officer Ruth Porat, make the following points.

First, Mr Pichai (transcript courtesy of Sentieo, with our emphasis):

Next, our video platform, YouTube. YouTube’s top priority is responsibility. As one example, earlier this year, YouTube announced changes that reduce recommendations of content that comes close to violating our guidelines or that misinforms in harmful ways. There are a lot more improvements, which we will be rolling out in the next few weeks and our work is ongoing. We’ve also expanded the content offering availability and the functionality on some of our newer YouTube experiences.

And Ms Porat in response to an analyst question about what drove the deceleration in click growth:

Doug Anmuth, Analyst
Yeah. Thanks. Sorry about that. So two questions, just following up on Eric’s [question] on the revenue growth. Ruth, can you just give us a little bit more detail on the pay click growth, the decel that we saw to 39% from the 50s and 60s last year, is that just a comp issue or something more specific? And then just on the spending side, want to understand a little more just how you’re thinking about spending relative to three months ago. I know you talked about both Capex moderating and then also headcount moderating three months ago. Just curious, at least if headcount is still in that camp per your thinking, just given that it seems like there is a pretty big ramp expected under the new Cloud CEO? Thanks.
Ruth Porat, Senior Vice President and chief financial officer
OK. So starting with clicks and CPCs, as we’ve discussed on prior calls, the biggest driver affecting both CPCs and click trends is YouTube engagement ads, with YouTube clicks representing the vast majority of total clicks. And so while YouTube clicks continued to grow at a substantial pace in the first quarter, the rate of YouTube click growth decelerated versus what was a strong Q1 last year, reflecting changes that we made in early 2018, which we believe are overall additive to the user and advertiser experience. And then in terms of your two spending the investment questions. In terms of headcount, first, we do continue to expect the growth rate to moderate slightly in 2019 from the

Analysts are befuddled. For instance, Morgan Stanley’s Brian Nowak notes it’s “unclear what changes Alphabet made in the quarter that drove the deceleration in growth, and this is something the Street must figure out.”

The suggestion that the changes were “additive to the user and advertiser experience” seem in keeping with YouTube’s ever-progressing demonetisation policy, which Polygon covered in detail here last year.

Policing the internet for non-woke content may be the principled thing to do, but it looks increasingly like it is also going to be costly for corporates who follow this strategy. (Much like corporates who commit to ESG).

Conservatives are consumers too, and boycotts of any sort are missed market opportunities. As Milton Friedman used to point out, it's the non-discriminatory and political neutral aspect of the free market that actually makes it a friend of minority groups. Indeed, in his magnus opus Capitalism and Freedom, Friedman went on to use this logic to explain that it makes zero capitalistic sense to boycott wider markets to appease a radical minority (or even majority) that doesn't want to do business with x or y because of religious, racial or heritage grounds.

From Friedman:

... an impersonal market separates economic activities from political views and protects men from being discriminated against in their economic activities for reasons that are irrelevant to their productivity — whether these reasons are associated with their views or their colour.

Of course, as the Google factor possibly shows, the same principle applies the other way around too. It's why rules and regulations brought in to keep bad actors out of the system are so hard to police. If the cost benefit is worth it, chances are — especially in a free market — someone will create platforms and businesses to service the unserviceable. We see that in banking, and we will likely see that in social media platforms too.

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