The disinformation-tackling industry is a blatant example of market failure
date
Mar 5, 2024
slug
2024-disinformation-tackling-industry-is-a-blatant-example-of-market-failure
status
Published
tags
market failure
disinformation-tackling industry
surveillance
business model
audience
type
Post
summary
Almost nine in ten citizens in Europe agree that disinformation is a major threat. Then why none seems to be ready to spend money with the problem?
In the previous post, the comments of a senior officer from a British watchdog raised a concerning situation that may be placing the UK - the cradle of free speech - under surveillance. But there is more to it. The British government appears to be hiring private companies to monitor online environments, employing former civil servants with expertise in information issues. This may not seem significant, but it is a symptom of a systemic failure: there is no market for companies to tackle disinformation.
Madeleine Stone, Senior Advocacy Officer at Big Brother Watch, states that the government has hired Logically, once one of many startups in the disinformation-tackling scenario, to do online monitoring or “identify problematic content, actors, and activity.” According to Stone, Logically hired former UK civil servants with expertise handling information and at least one US Homeland security official, who had been fired after compiling dossiers on journalists and activists. A few years ago, Logically’s mission was to fight disinformation and promote healthier debate, but if the situation is as described, we may be witnessing a pivot in the disinformation-fighting model that creates Big Brothers for hire.
Factmata, a London startup that raised money from high-profile investors like Mark Cuban and Biz Stone, is another example. Factmata was sold a little more than a year ago to Cision, a company that sells the service of “online monitoring,” a euphemism for surveillance - but for brands. Factmata was legitimate, and its founder, Dhruv Ghulati, was genuinely seeking solutions against disinformation. However, he and virtually all companies focusing on fighting disinformation probably stumbled upon a problem: the struggle to find a sustainable business model, especially as the pandemic began to wane and investors who had flooded the market with money started to press for regular revenue.
What happened then is that the industry seemed to have noticed one thing: individuals say that they are concerned with disinformation, but very few are willing to pay for a service to fight it, among other reasons, because they think they know better (even if they don’t, as people who consider themselves well-informed are more likely to fall prey to disinformation). The conclusion is simple: this is not a problem that the market will solve by itself, unless the right incentives are put in place.
Do users refuse to pay for something they deem valuable? Often. Here's a similar situation. An oil company executive's statement today that the addiction to fossil fuels is due to customers that are not keen on paying more for clean energy caused an uproar among climate experts. The Exxon executive is undoubtedly being cynical, but there is a point: how many citizens would agree to pay multiple times more for fuel, stop using cars in favor of public transportation, and accept a steep increase in the prices of virtually everything? Exxon, its lobby, and policies have much more blame to shoulder, but still, individuals need to take action before society moves with a severe attack on climate change and its causes.
The shift that Logically and Factmata underwent is not an isolated incident and was not driven by greed. It's essentially "the market". I will avoid the mistake of using the phrase "the invisible hand of the market" because Adam Smith was referring to foreign trade, not internal markets determining their size. Definitions aside, the pivot from tackling disinformation to more profitable areas like brand safety or "online monitoring" is simply a sign that customers liked the idea, but not enough to put some skin in the game. If individuals overwhelmingly agree that it's a serious problem (85% of respondents in a poll conducted by the EU said so), why don't they feel like they should pay for it?
The answer involves multiple factors. First, individuals believe they are knowledgeable enough to avoid disinformation (which they aren't, but that's a separate issue). Second, interrupting one's media consumption to verify information elsewhere is impractical (let alone paying for it). Daily habits won't change unless it simplifies their lives, not complicates them. Third, there's little consensus on who should determine whether something is disinformation. In some US demographics, less than 10% consider fact-checkers reliable, indicating the difficulty of achieving universal agreement. Lastly, given the current levels of polarization, where even professional journalists engage in identitarian rhetoric, an app determining content validity seems almost pointless. The issue lies in the environment's toxicity, not in a single article.
The question we should be asking right now is: why do we have governments spending money trying to tweak the discourse in their favor, pretending that it’s an action against disinformation with our money? Well, that’s because the whole coverage of disinformation by the press is irremediably biased. Left-leaning press points fingers at conservatives and vice-versa. It seems we are on an endless Twitter thread trying to see who screams louder, and while we do it, populists can do their best to sell the most convenient truth - the one that will take them to office.
Startups, despite being born from innovation, are primarily driven by profit. The narrative we hear from companies about their commitment to transparency and justice is often illusionary. Some companies recognise the value in genuine commitment, but society cannot wait for a massive shift that forces capitalism to adopt principles for the greater good. That's where policymakers step in.
The scarcity of European funds aimed at countering disinformation is just one example that a “disinformation-tackling” market won't appear overnight or ever. Awareness of the problem is not synonymous with the availability to spend. Funds for risky ventures in Europe are meager (it's no coincidence that Factmata investors Mark Cuban and Biz Stone are American), leaving Europe with slim chances of making a breakthrough against disinformation. All the European Union can do is fine companies after the damage is done. Ironically, these fines often boost stock prices as they are insignificant to profitability and demonstrate how toothless EU watchdogs are. We are currently facing a crisis of trust, purpose, and vision. The wars in Ukraine and Gaza, the impending crisis in Taiwan, and populists preaching irrationality around the world are signals of it. Markets usually develop on their own, but occasionally, policymakers have to intervene. This is very much the case now.