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John Kinsellagh
John Kinsellagh
Articles (17) 

Australian Startup Aims to Challenge Google’s Business Model

Will Unlockd prevail in its UK anti-competition suit against Google? Case bears watching, as it may foretell trouble for the tech giants

May 16, 2018 | About:

By now, we all know how the process works: for every link we click on a website, for every photo we post, for every word we type in the search bar, one of the tech giants, most notably Google (NASDAQ:GOOGL) or Facebook (NASDAQ:FB), then sells the data to advertisers for enormous profits.

An Australian app developer called Unlockd thinks this entire process should be scrapped. The company’s business strategy is to disburse a portion of the advertising profits to customers for the use of their private and personal data. Compensation would come in the form of rewards points or other incentives that acknowledges the users’ private information as valuable and unique data. The underlying principle which drives its business model is to pay users for viewing advertisements. Unlockd makes an app for branding that wireless companies and others can use.

Unlockd’s approach to the ad-tech ecosphere is anathema to Google’s lucrative business model. Unsurprisingly, Google has not rolled out the welcome mat for the young startup. This is precisely the reason why Unlockd says Google has been trying to ensure it is unsuccessful.

Unlockd, which has over a quarter of a million users worldwide, has filed a suit against Google in the U.K. on antitrust grounds. Unlockd contends Google’s threat to remove its app from the Play Store was an attempt to unfairly use its market power to stifle Unlockd’s growth and eliminate it as a competitor. Additionally, Unlockd claims Google’s tactics have forced the company to postpone its plans for an initial public offering.

If the history of the past 10 years is any guide, most people would be reading about this small company in the obituaries.

Google’s response to the complaint is telling and utterly circuitous. It contends that Unlockd failed to adhere to Google’s product policies, which in a very real sense could be characterized simply as any business that competes, challenges or conflicts with the company's dominant business model.

None of these arguments have received much attention because Google and Facebook have operated with impunity for the past 10 years in both Europe and the United States, swallowing up or sending competitors to the grave, developing their business processes with no regulatory oversight whatsoever.

The untrammeled power exercised by Google, however, is now going to be monitored closely by European officials when new privacy regulations are implemented next week.

After the Facebook privacy scandal, the business practices of the tech giants, heretofore mostly unknown by the public, are coming to light and many are becoming aware for the first time that Google and Facebook generate staggering wealth for selling and manipulating the private data of those who use its platforms without the customer's knowledge or consent.

It is somewhat significant that Unlockd successfully convinced a judge in the U.K. that it had a likelihood of success on the merits of its case sufficient with which to obtain an injunction, allowing it to remain on Google’s business app platform.

Unlockd launched in 2014. One of the company’s substantial seed investors is Lachlan Murdoch, executive co-chairman of News Corp. (NASDAQ:NWSA) , the owner of The Wall Street Journal.

Unlockd’s suit is unique as well as auspicious in that it will be litigated during a period of heightened scrutiny by regulators and consumer advocates over the business practices of the leviathan Google.

How this case is resolved is significant and merits monitoring by analysts, because it may represent the tip of the iceberg for Google and Facebook in an environment where regulators will be closely monitoring the activities of these social media titans and how they impact others.

Consumer advocates have heartily endorsed the different model offered by Unlockd.

“Getting points to buy things and especially free time for mobile use is a powerful reward,” said Jeff Chester, executive director of the Center for Digital Democracy, a consumer group that promotes responsible interactive marketing practices.

Disclosure: I have no positions in any of the securities referenced in this article.

About the author:

John Kinsellagh
John Kinsellagh is a freelance writer, former financial advisor and attorney. He completed the Boston Security Analysts’ Society course on "Investment Analysis and Portfolio Management."
He has served as an arbitrator for FINRA for over twenty-five years resolving disputes within the financial services industry. He writes primarily on financial markets, legal and regulatory issues that impact the investment community and personal finance.

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