Recommendation algorithms define our online reality. These programmes show us information and products corresponding to our interests on US-based websites such as Google and Amazon. The technology, often so prescient it borders on creepy, has made Chinese counterparts very profitable too. Cue tougher scrutiny from a state intent on trust busting — and controlling citizens’s access to news and opinions.
The algorithms, the “secret sauce” of many tech businesses, are just one target of China’s latest Chinese crackdown on business. Regulators want full disclosure of how tech groups crunch big data and users’ viewing histories to show them products or content.
The move is more nebulous than the recent cyber security reviews for local tech groups hoping to list overseas. Western news reports focused on the dwindling listing options of companies such as TikTok-owner ByteDance and autonomous driving start-up Pony.ai. But potential state interference in algorithms poses a bigger threat to business models.
Ad sales, locally called “online marketing services”, are a core revenue stream for tech groups. They typically account for a substantial portion of turnover, regardless of core business. Tencent, for example, got almost a fifth of its total revenues from ads in 2020 despite its main business being gaming. Ad sales directly correlate to how many users stay on-site, and for how long they do so.
That sets tech groups up for conflict with regulators who want to dilute algorithms they blame for internet addiction and online overspending. News organisations will also face tougher scrutiny for how they channel eyeballs. Regulators will require websites to allow users to switch off algorithmic recommendations.
Watchdogs have set themselves a complicated task, requiring extensive security assessments and inspection of code. Tech groups face losing competitive edge if regulators tweak their proprietary technology or leak algos to rivals. Chinese web users could find officialdom has even greater access to their most personal information.
By seizing control of algorithms, Beijing may have found the most effective way yet to tighten its grip over its tech giants, and its citizens too.
