Why we haven’t seen the worst of Tech yet

If you hate Tech already wait till they are hit by a downturn

Maybe you’ve already heard about the practices of GrubHub (american food delivery aggregator). If not here are some highlights:

• They bought domains that sound like the restaurants which are listed on their site, build a landing page with the copied logo on it, and linked the visitors to GrubHub’s order dialog. (link)
• They made a deal with Yelp to swap the restaurant’s own number with their hotline number on the restaurant’s profile. (link)
• They billed every call that is placed through that number which ended up being longer than 45 seconds (regardless if the restaurant generated an order or not). (link)

Is this just shady or already fraudulent?

You could say it’s a company specific thing. To a degree, yes. But I’m not buying that all black sheep work for the Uber’s and DoorDash’s of this world while other companies are neatly separated doing good stuff.

Rather, I think it has to do with how hard you are struggling as a business to not go under.

Generally companies struggle in the start-up phase. That’s their nature, but things are getting worse when there’s a not so clean take on morale embedded in the founder culture. Look at this thread by a VC who does a fine job of sugarcoating outright cheating as “fake-it-til-you-make-it”.

Don’t blame the individual founder or team, blame the incentives:

• Lyft was about to race past Uber by not following cab regulations.
• YouTube won against Vimeo because of copyrighted material.

If you see such cases it’s hard to stay ethical.

Even the purest and most emotionally charged brand of them all (airbnb) got off the ground with some shady things. dave gooden did some digging and found automatic Craigslist poaching:

After posting four ads on craigslist in three weeks, I received five identical emails from two young ladies who are raving fans of AirBnB and spend their days emailing craigslist advertisers.

When you scale a black hat operation like this you could easily reach tens of thousands of highly targeted people per day…and quickly gain 60,000 members on the supply-side, which again, is the hardest and most important part of growing a market place.

Of course, now that they’re out of the woods, airbnb took their money to make an ethical stand.

By objective measures big tech companies are doing fine today, very fine actually. Financially speaking, scaling a Startup has been never as easy as in the last decade: Cheap money is flooding the market and companies can stay pre-revenue for a very long time. Which is exactly my point:

You only see if a company’s morale compass is intact when it’s scrambling for its life — but (Big) Tech companies are far away from that very struggle.

I remember vaguely having read a story of Google’s early days which went like this: An engineer comes to Larry Page and shows him how an algorithm change in AdWords would make them more money. Page asks what’s in it for the user, the engineer has nothing. Page denies the change because he won’t do anything that’s bad for the user.

Now call me a romantic, I believe this story. This is why Google’s claim Do no evil was so powerful. But I also believe those days are long gone. I would bet my house that algo changes like that one are made on a weekly basis.

So Google is already tightening their grip despite doing record numbers.

Facebook is already desperate to engage users in their core product: Look at the inflation of notifications you get. Facebook is the exemplar of dark UX patterns:

Something similar could be read into current Amazon: Zack Kanter who praised Amazon for doing the impossible (building an organism that learns on its own without a strong leadership) is worried that Amazon Advertising distorts their feedback loop — because it’s the first change that isn’t in the interest of the customer.

Apple got caught sending voice files from Siri to 3rd party contractors without properly asking or even telling users. Despite their clear positioning as the privacy company.

There you have it, nobody from GAFA is with a clean record. I’m not putting all of Big Tech into the same category as the worst offenders in the Sharing economy, but you could interpret these events as the first visible cracks.

Back to GrubHub. It’s under enormous pressure. Their stock is down more than 60% from the peak. Growth decelerated for the third straight quarter. All the while their revenue is still up 36%.

Apparently that’s not enough for a Silicon Valley startup. I got into the reasoning why in my article about the mechanics of platforms: Wall Street assumes that there will be a winner-take-all in food delivery. That view might be ill-advised, but nevertheless: Stakes are high and some platforms will definitely loose the war for attention.

As with corporations in general, just being in the duty against Wall Street tempts them to act more shortterm instead of longterm. And in general that’s not a good sign. But it’s especially important in Tech, where the trust of your customers is fundamental to your platform. eBay would have gotten nowhere if people wouldn’t have trusted strangers over the internet.

Because of that I long argued that Tech will never sell your data — simply because it’s against their own interest. I’m generally defending Tech against backslashes from the Left and the Right. By defaulting to shady practices, companies like GrubHub ruin consumers trust — crucially, not only in them, but in Tech as an industry. If Tech already behaves like it does now that it’s still growing, what will happen when a significant downturn hits everybody? Will the eventually failed startups simply fade into oblivion?

The entrepreneurial spirit that made those companies rise possible in the first place, also nurtured an executive team that will try all monetization options available before going under. If they got nothing else, they have at least the data about their customers.

And this is why we haven’t seen the worst of Tech yet.