Meta recently agreed to pay as much as $17 billion to settle claims that its social media platforms were deliberately designed to keep children hooked.
Five days later, the Federal Trade Commission (FTC) sued Amazon over allegations that it secretly manipulated its advertising system to squeeze more money out of businesses.
And earlier this month, Google narrowly avoided being forced to break apart part of its advertising empire.
All three companies are facing very different accusations. But each case centers on the algorithms at the heart of their businesses.
For years, Big Tech has used them to decide what we see, what we click and even what businesses pay to reach us.
And until recently, governments have put few limits on how they can be used.
But that era could be coming to an end.
The Algorithms That Built Big Tech
To understand what’s changing, let’s start with Meta.
Last month, the company reached a massive settlement with 47 states and other U.S. jurisdictions over allegations that Facebook and Instagram were deliberately designed to keep young people using the apps for as long as possible.
Meta didn’t admit wrongdoing, but it did agree to pay up to $17 billion and make major changes to Facebook and Instagram for users under 18.
That includes limits on how long kids can use the apps each day, restrictions on notifications during school hours, overnight limits and changes to features such as beauty filters and visible “like” counts.
Those might sound like relatively small changes. But social media companies make money by selling advertising. And the more time you spend scrolling through their apps, the more opportunities they have to show you those ads.
That’s where recommendation algorithms come in.
Every time you stop to watch a video, click on a post or scroll past something, the algorithm learns a little more about what holds your attention.
Then it uses that information to decide what to show you next.
The goal is to keep you engaged. And companies like Meta have become incredibly good at it.
These algorithms helped turn Facebook and Instagram into two of the most valuable advertising platforms on the planet. So it’s significant that regulators are beginning to put limits on how they can operate, at least when children are involved.
And Meta isn’t the only tech giant facing scrutiny.
Five days after Meta announced its settlement, the FTC and 22 states sued Amazon over the way it runs its enormous advertising business.
When you search for something on Amazon, many of the products near the top of the page are sponsored. Businesses compete for those spots through automated auctions.
That means, every time you search for a new coffee maker or pair of shoes, advertisers essentially submit bids for your attention. Amazon’s software then decides which sponsored products appear and how much the winning advertiser pays.
But according to the FTC, Amazon secretly changed the way those auctions worked.
The government alleges that Amazon used algorithms to increase what advertisers paid without clearly telling them what was happening.
And the numbers involved are enormous. More than one million advertisers were allegedly affected, including hundreds of thousands of small and midsized businesses.
The FTC says Amazon’s practices may have generated tens of billions of dollars in additional advertising payments over seven years. That’s significant because advertising has become a huge part of Amazon’s business. The company generated nearly $69 billion from it last year.
Amazon strongly disputes those claims, yet something similar has already happened at Google.
Last year, a federal judge ruled that Google illegally monopolized important parts of the technology used to buy and sell digital advertising.
The Justice Department wanted Google to sell off part of that business.
Earlier this month, the judge stopped short of going that far.
But Google will still face restrictions intended to make the digital advertising market more competitive.
And this isn’t just happening in the U.S.
Just last week, Australia proposed new rules that would give social media users the ability to turn off recommendation algorithms altogether.
Instead of letting an algorithm constantly decide what will keep you scrolling, users could choose to see posts based on accounts they actually follow.
That would have sounded almost unthinkable just a few years ago. After all, these algorithms have become so deeply embedded in the internet that most of us barely notice they’re there.
But after years of trying to catch up with Big Tech, governments are finally beginning to challenge how they work.
And the timing couldn’t be more consequential.
Here’s My Take
Regulators seem to be getting serious about the algorithms that shaped the internet just as Silicon Valley is building a new generation of AI that could have far more power over our daily lives.
Today’s algorithms mostly decide what information gets put in front of us. They recommend a video, rank a product or choose which ad we see.
But AI agents will go many steps further.
They’ll shop for us, negotiate prices, book trips, hire services and even move money on our behalf.
This will obviously make AI agents incredibly useful. But it also raises questions about just how much control we’re willing to give them.
Because it’s one thing when algorithms influence what we see.
But tomorrow’s could decide what we do.
Regards,
Ian King
Chief Strategist, Banyan Hill Publishing
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