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Social media year in review

Sinan Aral, "The Hype Machine" Author joins the Yahoo Finance Live panel to discuss Social Media year in review Regulation into 2021 and Section 230.

Video Transcript

- It has been a rough 12 months for Facebook and Twitter among the social media companies from allegations of censorship, to calls for increasing regulation. And 2021 may not be a smoother ride. Let's bring in Sanan Aral. He's the author of "The Hype Machine."

And Sanan, I guess if we break it down here, in many ways, 2020 was the year of the investigation for social media companies. Over the last few weeks, we've gotten a number of lawsuits that have already been filed. How does 2021 shape up for these social media companies in the face of these lawsuits they're already facing?

SANAN ARAL: Well, I mean, I think that obviously, the antitrust case against Facebook is front and center. This was a huge deal ending the year, even after Facebook and Twitter made a number of reforms during the election in order to try and control election manipulation and fake news. I think the antitrust case is a really important case. My-- my perspective is that it's not the right solution to create competition in the social media economy.

What we need are structural reforms that have to do with interoperability legislation and social network portability akin to number portability in the cell phone market, and what we did with AIM Instant Messenger, when AOL merged with Time Warner. That's what's really going to create competition. The antitrust case has hurdles. The three complaints are obviously, Instagram and WhatsApp acquisitions, as well as use of the API.

But remember, those mergers were approved during oversight. And even though the federal government said we have reserved the right to revisit this, it sends a chilling message if they approve mergers, and then 8, 10 years later, after hundreds of billions of dollars have been invested to say actually, you know what? Those mergers were anti-competitive. This case is going to be an uphill battle for the federal government, in my opinion.

- Yeah. You know, when we talk about the uphill battle-- we were just spotlighting one and Mitch McConnell's move to maybe tie this repeal of Section 230 to the next round of upping those stimulus checks from $600 to $2,000-- obviously, both sides are pretty critical of these tech companies. Both sides talking about repealing that Section 230 here, or at least putting pressure on these tech companies to do more to protect you know, the content on their platforms. When you look at it though, how much of a poison pill do you think it actually is? Because it's a lot of talk.

And it's obviously a lot of political points to hit big tech. But when it comes to repealing Section 230, seems like a different thing entirely. So what do you make of maybe that move, and what it means to get this through?

SANAN ARAL: I think that tying this kind of political hot button issue to stimulus relief and you know, stimulus checks is-- is negligent policy-making, in my opinion. When it comes to Section 230, you know, it has nothing to do with whether or not Americans get a $2,000 check, which they desperately need. And if you were talking about reform or repeal of Section 230, people who understand the digital economy may advocate for reform, but very few of them advocate for repeal.

And the reason is because if you repeal Section 230, one of two things is going to happen. Either the platforms are going to moderate nothing, so that they don't have to take responsibility for any moderation decisions. And social media is going to become even more of a swamp than it is today. Or they're going to, in a draconian way, moderate everything, where legal has to sign off on every single thing that is said on social media. And that's going to create dramatic censorship.

Repeal of Section 230 is a disaster for the digital economy. Reform of Section 230 could be done in smart ways, for example, the Congress passed the Stop Sex Trafficking Act nearly unanimously that said one type of speech that we think is harmful is advertising sex trafficking on social media. If we can find the specific instances of harmful speech and reform around them, it is a much better solution than repealing Section 230 entirely.

- Sanan, one of the other social media companies that faced a lot of scrutiny this year, TikTok. There's been a lot of concerns, at least, under the Trump administration about data gathering by these Chinese social media companies. TikTok was sort of used as an example here. Does the approach change you think under a new Biden administration, or are some of these Chinese companies, particularly the apps that are still gathering user information, are they still going to face a lot of fire, you think, because of the way they are perceived to be tied to the Chinese government?

SANAN ARAL: Well, I mean, I think that the Biden administration is going to face a lot of pressure to be tough on China. I think that TikTok is going to be an important part of that, not the exclusive or only part of that pressure. I do think that it highlights the need for federal privacy legislation in the United States. Currently, we have a hodgepodge of 50 states' different policies. It's a difficult regulatory environment for businesses to operate in.

And if there were standard rules at the federal level for privacy, then we could force international companies that operate with United States citizens or users in the United States to abide by those rules that that's the appropriate way to rein in data collection from apps run in foreign countries. We don't have that legislation now. We need experts and policymakers to work together to draft a legislation that takes advantage of the benefits of the GDPR in Europe, but avoids a lot of the pitfalls. Because we've seen some of those too.

- All right, Sanan Aral, author of "The Hype Machine," appreciate you taking the time here to chat. Be well and happy new year, sir.

SANAN ARAL: To you as well.