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The Amazon Business Model and the Risks of Big Data

The battle for digital sovereignty, based on a concept of sovereignty that rests with citizens, involves recovering the internet as a network of peers and reversing the oligopolistic trajectory that has produced a handful of billionaires.

Amazon concentrates 33% of the global cloud infrastructure market; this high concentration poses a competition, oversight and security problem.,(Graeme Jennings/Pool/AFP)

In recent years, the US company Amazon has been called out over how it treats its workers, its efforts to impede the right to organise, its distribution model’s inherently damaging environmental impact and the devastating effects it has on the local economies where it sets up operations. But there is another issue that has so far been given much less attention: the company’s increasingly dominant position as a data platform and web services provider.

The company founded by Jeff Bezos – the second richest man on earth, according to Bloomberg – is increasingly evolving from being a retail company, into a platform with the same business model as the likes of Google, Facebook, Apple and Microsoft. Collectively referred to by the acronym GAFAM, the profits of these top-five tech companies have skyrocketed since the pandemic forced millions of people into online social interaction.

It is estimated that the non-retail sides of Amazon’s business already account for more than 50 per cent of its profits, and the figure is constantly rising. Although the bulk of its turnover still comes from product sales, these account for a much smaller share of the profits than its data trade and the jewel in the crown – Amazon Web Services (AWS), which controls 33 per cent of the global cloud infrastructure market, according to Synergy Research Group.

This rapid concentration of internet infrastructure in the hands of a few companies, with Amazon at the forefront, not only has serious implications in terms of competition and surveillance, it is also a security issue. “The cybersecurity risks are huge. If Amazon Web Services servers go down, half the world stops. If someone were to steal or hijack all its content, it would be a catastrophe on an individual, collective and systemic level. We are putting all our eggs in one basket,” explains Esther Paniagua, journalist and author of the book Error 404: Ready for a world without internet?

From the peer-to-peer network model to the ‘Google model’

The irony is that the invention of the internet itself in the late 1960s was born out of a diametrically opposed idea. “The solidity of the system rests on its decentralised nature: if one of the routes through which the information packets travel is broken, the packet can travel through a different route. AWS or Google represent a rollback or a complete transformation of the internet model – in contrast to the old libertarian dream of decentralisation, today, the data is held by a handful of players,” explains Pablo ‘Manolo’ Rodríguez, a professor at the University of Buenos Aires (UBA) and author of Las Palabras en las Cosas (Words in Things).

The anti-democratic implications are clear.

“These large corporations have as much power as the world’s leading states, but unlike these states, they do not have elected governments, so their power is dictatorial – AWS simply imposes its interests in a whole range of areas that were previously regulated by states, such as the design of the data transmission infrastructure,” says Rodríguez.

Along the way, the GAFAM founders and CEOs have become the richest men in the world: Bezos holds second place; Microsoft founder Bill Gates, fourth; Google creators Larry Page and Sergey Brin, fifth and seventh; Facebook founder Mark Zuckerberg, sixth; and former Microsoft CEO Steve Ballmer, eighth; according to Bloomberg data for 2022.

But, how did we get here? A very specific moment in time helps shed some light on what happened – the battle between Napster and rock band Metallica, in the year 2000. Napster was operating as a peer-to-peer network. With this technology, which was used by Torrent, internet users are able to share music or films, provided that a large number of servers are connected. Metallica started a legal battle against Napster for sharing its songs and the file-sharing platform went bankrupt not long after that. The peer-to-peer model is still in operation but has been overtaken by the model pioneered by Google: culture is digitised, free of charge, and internet users can access all the information simply by using a search engine or – since the advent of smartphones – the Android system, which is also owned by Google.

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In reality, however, access to this vast amount of information and cultural goods is not free: we pay for it with our data. While surfing the web, we leave behind a huge trail of data that platforms such as Amazon, Google or Facebook systematise and monetise. They use it to build user profiles that enable them to engage in targeted advertising; they can also sell the data packets to third parties.

“Revenues are obtained in exchange for exclusive access to user browsing data. Each person’s online activity is tracked for patterns that match the interests of advertisers – or other third parties – and can be used to make us buy or act the way they want us to,” Paniagua explains. “This tracking includes the collection of private, personal and intimate information: our search history (even if we delete it); everything we look at, watch or listen to; our geolocation, our movements and favourite places; and in some cases even our IP address, a unique identifier that can be linked to our name and surname,” adds the journalist.

This data is then sold to thousands of third parties through real-time online auctions. They are sent to an ad server, then to a bidding system for ad space and impressions, and then to another ad exchange system that connects advertisers’ demand data with ad space data. In the end, one of these personalised ad demands is chosen and displayed to the individual. But the cycle does not end there – the system will obtain new data from those individuals, enabling it to complete the information it already has on them, and so on and so forth.

The Google and Amazon business model now dominates the internet. The peer-to-peer model is still operating, but the model that predominates is that based on the collection and monetisation of user data, even though the associated risks are becoming ever more apparent.

“They know what we are looking for, what we care about, who we interact with; and we accept it because we are hooked and also because, in return, they offer us convenience and better products and services,” says Paniagua. It is indeed easier to go on YouTube than to wait for a file to download on Torrent.

In 2020, the Netflix documentary The Social Dilemma put the spotlight on the risks associated with social media and what goes on behind the scenes; paradoxically, it was released on a streaming platform with the same business model as GAFAM. Experts in sociology, behavioural science and neurology are put in charge of designing mechanisms for these companies that trigger an addiction very similar to that of slot machines.

“They plunge you into vicious circles that encourage you to stay hooked; they are fun loops that encourage impulsive behaviour, that make our brains release dopamine and motivate us to want to keep repeating them,” says Paniagua. That is how we lose track of time when we are scrolling down to keep viewing content on Instagram, often more compulsively than consciously.

Although it is not a social media platform, Amazon works in a very similar way, as does Mercado Libre, which is currently taking over from Amazon in Argentina. “They are companies that started out as retail platforms but moved on to building an environment. People spend time on Amazon or Mercado Libre as if they were in a bar – they browse, look for things, hang around to see what’s out there. This maximises data interaction because while I’m browsing without buying anything on Amazon, I have my WhatsApp and email open, and data is being exchanged without my consent,” says Pablo Rodríguez.

The battle for technological sovereignty

The upshot, says the author of Error 404, is that “we have an all-seeing, all-hearing, all-reading, all-encompassing panopticon. And as well as being a money-making machine, it is the perfect manipulation mechanism. That’s why Shoshana Zuboff calls it surveillance capitalism.” Other authors speak of an attention economy as companies compete for our attention, something Netflix CEO Reed Hastings made clear when he said that sleep was his biggest competitor.

As Pablo Rodríguez points out, the problem lies in the fact that “the profiling and personalisation processes, the way in which algorithms operate to build these profiles, are not transparent”.

This lack of transparency becomes a serious problem when “practically everything can be virtually recorded”.

Hence the growing need for a debate about digital sovereignty or, as proposed in Latin America, technological sovereignty, that is, the need for a legal and institutional framework to ensure that technological advances are geared towards benefiting citizens rather than serving spurious and opaque interests.

In Europe, the 27 European Union member countries are making progress on the Digital Markets Act, a regulation that aims to curb the market power of large technological platforms.

In 1987, in his book The Whale and the Reactor, Langdon Winner posed a thought-provoking question – do artefacts have politics? The conclusion he came to was that they do, and that technology is not politically neutral. Pablo Rodríguez shares this view: “Technology is not just a medium, it is a world that is created; any growing technological system runs the risk of becoming totalitarian.”

The battle for digital and technological sovereignty, based on a concept of sovereignty that rests with citizens, involves recovering the original concept of the internet as a network of peers and reversing the oligopolistic trajectory that has produced a handful of billionaires running a system that is not only built on mass surveillance and the promotion of platform addiction, but also jeopardises the actual stability of a network on which we increasingly rely.

Nazaret Castro is a Spanish journalist. She has been working as a correspondent in Latin America for eight years, contributing to media such as Le Monde Diplomatique, Público and La Marea. She is a co-founder of the Carro de Combate project, which investigates the social and environmental impact of the goods we consume, palm oil among them.  Twitter : @nazaret_castro_

This article has been translated from Spanish by Louise Durkin