TikTok, WeChat and the fragmented internet on The Future, This Week

Intro We'd like to advise that the following program may contain real news, occasional philosophy and ideas that may offend some listeners.

Sandra Stuff is back and so are we.

Kai Yeah. So for weeks now, it was all coronavirus, it was all COVID-19. And while that is still going on the typical The Future, This Week topics have come back.

Sandra So welcome to Season 8 of The Future, This Week. When we started season seven GPT-2, the OpenAI text generator generated our whole trailer.

Kai We have GPT-3 now, but it's not openly accessible, but it's supposed to be pretty cool, available as an API. So for example, it's been used to make tweets now, as if there wasn't enough stuff on Twitter.

Sandra GPT-3 now can come up with a relevant 280 characters or less sentence, given a prompt. So, if you give Zuckerberg for instance, one of the suggestions was "Wild speculation why Zuck doesn’t wear a tie. He plans to one day roll up a tied tie, tightly seal it with superglue and swallow it. Then surgically remove it from his stomach and act like it was bound to happen to all techies".

Kai And while that might sound a little bit out there, the second suggestion that the algorithm came up with is a little bit more believable.

Sandra "Stay far away from Zuckerberg, the most dangerous thing right now is tech companies entering finance.” And that is a bit scary because it sounds pretty legit.

Kai There's been other news. So, big news that we will come back to, not today, is Epic Games picking a fight with Apple. So, you might have seen it in the news. Epic added a payment system to its app, bypassing Apple's App Store guidelines got promptly banned from the App Store predictably. And it turns out Epic was prepared because the day after it ran a big ad campaign inside its Fortnite game, resembling Apple's well known 1984 commercial, which famously it ran during the Superbowl in 1984. positioning itself as the underdog railing against the establishment, which back in the day was big blue, IBM, Epic now turning the tables casting Apple as the big empire to be smashed with a sledgehammer. So that will unfold, and we'll come back to that one.

Sandra For sure, that was a strong contender for our first opening episode. We've tackled the topic as part of our platform competition special, but we will come back to this in the next couple of weeks. Many other topics have also resurfaced in the news, #996 and working from home. In a clash of work/life balance versus 996, working nine to nine six days a week at Microsoft as former employees from Alibaba and Huawei keep the controversial 996 practice whilst working from home in stark contrast to the Microsoft working culture that tries to emphasise work/life balance.

Kai And we've discussed these topics on Corona Business Insights. Obviously, there's a few other things that have made headlines. Spain has implemented Universal Basic Income, Germany also now starting a UBI trial. So these topics that pre-COVID-19 were, at best existing at the fringes now all of a sudden have become mainstream topics. So we'll keep an eye on those.

Sandra And of course, we'll come back to the hype cycle. Every season we've had a go at the hype cycle, which is back, of course.

Kai Yeah, curiously, Gartner released the hype cycle and it hasn't actually made a big splash in the news as it does normally. So we'll park that and have a look maybe next week.

Sandra The hypeless cycle, complete with social distancing technologies on there for the first time.

Kai What do you know? Big future for contract tracing, hey?

Sandra And speaking of under the radar, Airbnb confidentially filed to go public, joining the ranks of Uber, Lyft and the spectacular failure of WeWork.

Kai Another company filing is Asana, which is, of course the project management workflow platform founded by former Facebook employees, becoming really successful in the enterprise sector. So once those companies are filing and going public, it is time for The Future, This Week to be back. And there's also been some quirky tech news. One story sent in by Ashu, one of our MBA students is from BBC Science Focus, and it reports the latest in 3D printing where apparently you can now use your garden soil, add some sodium silicate and use that to 3D print your next house. So how about that? if you're in lockdown presumably you can now you know build an extension without ever leaving because you can just 3D print it at home.

Sandra Or maybe I want to. One of the other things that's been in the news over the past month has been Barbados Welcome Stamp, a new initiative launched by the government of Barbados where you can stay in Barbados for a year and work remotely. So we could be doing this podcast from a beautiful beach in Barbados.

Kai But the story that we should really talk about that has been making news for the past few weeks is the US administration's executive order to ban TikTok and also for good measure WeChat.

Sandra It's got all the ingredients of a Future, This Week story in that there's a story but there's a bigger point behind the story. So let's get started.

Kai Let's do it.

Sandra This is The Future, This Week from Sydney Business Insights. I'm Sandra Peter.

Kai And I'm Kai Riemer. Every week we sit down to rethink and unlearn trends in technology and business.

Sandra We discuss the news of the week, question the obvious, explore the weird and the wonderful and things that change the world. So Kai, what happened in the future this past few weeks?

Kai Well, there's many stories around this topic, but we'll pick one from the New York Times to get us started. It's titled "Trump's Swings against TikTok, WeChat".

Sandra So this is of course, one of the many stories that have to do with President Trump's executive order, explicitly blocking TikTok and WeChat which is set to take effect over the next month and which is pretty broad in language but singles out TikTok and WeChat for collecting data and the content of the communication that goes on on these two platforms. So a ban will take effect on the 20th of September to supposedly protect American people from this information and to protect their privacy.

Kai So while a lot of outlets have spent time focusing on whether this is a sensible thing to do, whether there is something to these allegations, we want to ultimately focus on what this story reveals about the broader makeup of the internet and how things have proliferated very differently in different parts of the world.

Sandra But we do need a few basics, especially for people who might not be actively using TikTok and WeChat, for whom seemingly this is not such a big imposition.

Kai So the media has very much focused on the ban of TikTok because TikTok is hip. It's used by young people. It's in the media recently a lot. It's of course a platform for creating and sharing short videos, funny, entertaining, with music, with memes. And so, this has been very much in the news.

Sandra And let's not forget TikTok is the fastest growing social media company in the world. It's got about 800 million active users and it's been downloaded over 2 billion times on the App Store and on Google Play.

Kai And so TikTok is owned by a Chinese company ByteDance. It's the western equivalent of a similar Chinese platform called Douyin. And it has grown a bit of an influencer economy around it, there's not only content creators, many of which are also active on YouTube, but also an ecosystem now of agencies that market these influences to brands for product placement and the like. So it has created a bit of a commercial ecosystem around it.

Sandra So the question is, why would a social media company would 50 second videos be seen as a potential threat to national security?

Kai And there's two reasons. One is that much of the content presentation to users is done by an algorithm that is fairly untransparent, not well understood. So there are concerns now that this company might feed millions of users content in ways that lack any transparency, and there's also concerns that content on the platform is curated or censored to standards that are non-transparent.

Sandra And more than that there are concerns around the type of information that TikTok gathers. Much like Facebook, it gathers as much information about its users as it can, from your IP address to your location information to your contacts, and so on everything that you give it access to it will curate but unlike Facebook, which is a US company, TikTok is a subsidiary of ByteDance, which is a Chinese company. And even though it stores most of its data in the US, or in places like Singapore, its privacy policy states quite clearly that they may share your information with a parent subsidiary or other affiliates of the company, which means that the company may disclose any of its information to the Chinese government.

Kai And so the solution to this apparent problem now seems to either be a ban, or as it has been suggested, or promoted really by the Trump administration, a purchase of the American assets of TikTok by an American company. And there's, as far as we know, three companies that are jockeying for position Microsoft, Oracle, and even Twitter has thrown its hat in the ring. And while it might be obvious why Twitter might be interested in TikTok, being a social media company, it's not quite clear now why Microsoft or Oracle might be interested. There's rumours that both companies might look at promoting their cloud business by sporting TikTok and its large volume of content as one of its major clients.

Sandra And whilst TikTok and what might happen to it or who might acquire it has received all the attention in the media, there was less focus in the media on the other app, and that is WeChat, which has far bigger implications for business than TikTok could ever have. And let's remind people whilst WeChat is often perceived as a messaging app or as a social media, it's actually an entire internet ecosystem in one allowing for digital payments.

Kai So WeChat in China really is the internet for many people. It's an app that you download to your phone, which then becomes basically an operating system for going about your daily lives. You hail taxis on the platform, you make small payments, the markets, their payment system. You buy movie tickets, yes, you message, you advertise on the platform, you really do just about everything on WeChat.

Sandra Even Sydney Business Insights has a presence on WeChat. Rather than having a website, you have a WeChat account on which you market your wares.

Kai And so if you're not on WeChat basically in China, you do not exist.

Sandra And that's not just for business purposes, but it's also for paying your utility bills or checking your school transcripts or booking a parking spot or registering with the local government.

Kai And so, not having WeChat for people in China or for anyone who wants to have any dealings with China, be it to stay in contact with relatives or doing business with China not being on WeChat is not an option. And that makes a potential ban in the US, or really a ban of any dealings of a US company with WeChat a really big problem. Not just for people using WeChat, but also potentially for many businesses.

Sandra So over the past couple of weeks, we've seen in the US intense lobbying by companies like General Motors or Target or even Walmart that have made it clear that WeChat is the platform they use to reach consumers in China. Normally, Chinese users would not be going to a website, would not even be going to Amazon, to access company information or to access products or services. Hence, removing the option of doing any business on WeChat would be quite detrimental not only to companies like Apple who sell the devices but also to all other companies trying to reach a Chinese consumer base.

Kai So since the first announcement of the ban, the White House has clarified that no, the ban will not as far-reaching as preventing Apple from having WeChat in any of its App stores worldwide, which would have affected basically any consumer buying an Apple device in China. But it is still bad enough that WeChat would be banned in the US as 19 million daily users reported of WeChat in the US, many of them are Chinese immigrants, and they use WeChat even locally, so any business in the US marketing to the local Chinese population draws on WeChat. WeChat is also a preferred channel for these people of course to stay in contact with their former home country.

Sandra And for many who are part of the Chinese diaspora the only way to stay in contact with people in China. Let's remember that Facebook and WhatsApp are banned in China, leaving very few options for not only taking part in business but also staying connected to loved ones making payments online and so forth. We've seen here in Australia, for instance, that during the summer bushfires, Chinese migrants in Australia used it to stay in contact with loved ones but also to raise funds and mobilise people to make donations and help out. During the COVID-9 pandemic, Chinese Australians returning to Australia have used WeChat to discuss self-isolation, provide mobile support, but also to mobilise thousands of volunteers to deliver goods and services, groceries, to stay in touch with those who were isolated and were in need of help. And the New York Times has previously reported that for many journalists or activists in the West connecting with people in China, for example, to lend Chinese voices to reporting in the West about China, something that is often badly lacking. WeChat really is the platform to connect with Chinese people directly. So a ban of WeChat in the US would have a strong adverse effect on journalism, for example. So it's this connection, or rather the great disconnect, that we want to focus on. The impending ban on WeChat and indeed, on TikTok further highlights and further deepens the fragmentation of the internet. We don't often think of just how fragmented the internet really already is. So we thought we'd take this opportunity to revisit a little bit what the internet really looks like.

Kai So the internet today already is a far cry from the way it started out to be this place that is open to everyone where everyone could create a website, connect with everyone. So back in the day, the internet came in and overcame the fragmentation that existed at the time with you know, platforms such as CompuServe or AOL where you had to be a member and pay a fee to access content. The internet was supposed to be this great liberation. With the advent of social media and much of interactions and even business activity going on on platforms such as Facebook, and later apps coming in, further fragmenting, creating these little bubbles of well-bounded activity within these apps. The internet has already become fragmented. And so over time, what we see in the US with its laissez faire, very market-driven environment, is the emergence of these big tech companies, a big Facebook with its platforms, Instagram, WhatsApp, Facebook, a big Google with its online platforms, Amazon for commerce very much dominating e-commerce and so off the back of this growth. They have been able to export this success to much of the Western world to Europe to Australia in similar places. And this is usually how we think about the internet, right? So we have this view of these large big tech companies with all its benefits and drawbacks that have also recently been in the news.

Kai And up until now, this also meant that the US has been quite open to foreign companies coming in. Whilst it's made it very difficult for other jurisdictions to have any control over American companies and over the way they, for instance, collect data. The European Court of Justice recently said there are serious privacy issues associated with data collection by US companies such as Facebook, which is incidentally what the US is now claiming about TikTok and WeChat. It's also meant that foreign companies could easily come into the US. Now the fact that the American companies have had such a strong home base and hence made a significant amount of money in their own home market meant also that they could export their model overseas. And we've seen American companies being quite successful in places like Europe but also initially entering China. However, for the past well over 20 years, China has pretty much embraced a different system with very strict controls over content and over data, and increasingly over access by Western companies, which has meant that companies like Facebook with WhatsApp, Google have not been able to make inroads into the Chinese market, but also meant that this lack of international competition has fostered the Chinese home market.

Kai So it has basically allowed the BAT, Baidu, Alibaba, Tencent to grow pretty much unencumbered by international competition building out its own platforms with its own unique ways of using them. China pretty much leapfrogged email, for example. So much of communication was already tied to the mobile phone, which explains the success of platforms such as WeChat, which were then able to morph into these all-encompassing platforms for doing commerce and just any kind of social and business interactions. So pathways that are very unique and very different to how the internet emerged and evolved in the West, where everything sort of emerged from the browser as the platform in China, everything emerged mobile-first, pretty much. Which has led to quite strong presence in the app-based market, which then also allowed Chinese companies to export their apps internationally into other markets, such as the US with TikTok, but also into Africa or other parts of Asia.

Sandra And since we're talking about fragmentation, it's important to also bring up the EU market which is again, a very different The Internet space in that there are very strong regulations that protect consumers things like GDPR, or the Copyright Directive, which have meant that European Union has relied on very strong regulation but hasn't been able to foster the same type of growth that the Chinese market has seen. Whilst in China, the fact that there was a very big coherent market with a lot of freedom for local companies, the European market imposed the same strong regulations on local companies, which were thus far unable to compete with the likes of Google and Facebook. Hence, we haven't seen the emergence of big European tech companies.

Kai And so Europe always has been much stronger in protecting individual user and its citizens from overreach of platforms bringing in much comprehensive privacy legislation, which on the one hand, kept local upstarts down making it harder to compete but also resulted in the fact that European has always been treated as more of a secondary market for the US companies.

Sandra And we must stress that this fragmentation continues to occur, with last week's decision to strike down the Privacy Shield framework negotiated by the European Commission and the US International Trade Administration, further deepening this fragmentation. And often forgotten in these conversations is also the other big model. So when we think about fragmentation of the internet, India is yet again a very different model, where the focus has been for a long time on regulating infrastructure. So tariffs on electronics, no foreign direct investment in e-commerce, and increasingly banning attempts from foreign companies such as Facebook to introduce things like free basics or WhatsApp payments, increasing restrictions on Amazon's e-commerce operations, and recently the outright ban of TikTok, WeChat and the banning of a total of 59 Chinese apps.

Kai And India is apparently contemplating banning another 275 apps, including games, which would add a new dimension. And it's widely considered that games also collect a large number of user data. And let's not forget that bestsellers such as League of Legends, or even Fortnite to 40% are owned by Tencent, the mother company to WeChat. And so it remains to be seen if a similar move will be contemplated in the US as well gaming being big business. But the move to ban TikTok and WeChat is already a step in the direction of a further fragmentation and it is a curious move, especially because of the antitrust scrutiny that is being placed on big tech platforms such as Facebook, considering that TikTok was for the first time a serious competitor to its business, and Zuckerberg was one of the first to call out TikTok for data security breaches. So it's an interesting development that TikTok should be banned, therefore reducing competition in this market, leading to a further fragmentation and decoupling of the US ecosystem from the Chinese one.

Sandra And this great decoupling of what is now different ecosystems, not only different software, but also different hardware. And in turn, a different internet, as we've just discussed, also leads to much more significant changes in how we consume the internet. So whilst consumers might have different devices and different social media apps and apps ecosystems, they will also end up using the internet quite differently. We've discussed on a number of episodes how people shop differently.

Kai In China, for example, we saw streaming services being used to do commerce, for example, even sell fruit, apples,

Sandra But also in how people pay differently for things online and how they purchase things differently, but even how they date differently, and we've also discussed dating on The Future, This Week.

Kai Communicate differently, for example, in India, WhatsApp and the group feature of WhatsApp is much more common to, you know, create social circles and use it as a form of social media, a form of use of WhatsApp that is quite different to how most people in the West use it, where it's more like an instant messaging point-to-point with contacts.

Sandra And most likely this splintering will continue in the implementation on use of artificial intelligence, different ways of collecting and different ways of using the data and by different players in the market.

Kai Which really begs the question, do we actually talk about one internet still, or are we seeing a slow death of the original idea of the internet as a global open connection that spans national borders and different devices?

Sandra That's all we have time for this first week.

Kai Yeah, Season Eight of The Future, This Week is back. See you next week.

Sandra Thanks for listening.

Kai Thanks for listening.

Megan Sandra Peter is the Director of Sydney Business Insights. Kai Riemer is Professor of Information Technology and Organisation here at the University of Sydney Business School.

Outro With us every week is our sound editor Megan Wedge and our theme music was played live on a set of garden hoses by Linsey Pollak. You can subscribe to The Future, This Week wherever you get your podcasts. If you have any weird and wonderful topics for us, send them to sbi.sydney.edu.au.