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Big tech faces tough questions on how to deal with the backlash facing the industry

  • Big tech is on rocky ground and 2018 will be a year when the largest companies in the world will have to tread carefully or risk losing users amid rising "techlash".
  • The signs are that big tech risks losing touch with the users that helped them grow to such a scale.
  • Big tech firms appear to be listening and acting on criticism but any complacency could worsen the techlash, bring closer scrutiny, and ultimately weighing on the business outlook for firms this year.
(L-R) Amazon's chief Jeff Bezos, Larry Page of Alphabet, Facebook COO Sheryl Sandberg, Vice President-elect Mike Pence and President-elect Donald Trump at Trump Tower December 14, 2016.
Timothy A. Clary | AFP | Getty Images
(L-R) Amazon's chief Jeff Bezos, Larry Page of Alphabet, Facebook COO Sheryl Sandberg, Vice President-elect Mike Pence and President-elect Donald Trump at Trump Tower December 14, 2016.

Big tech had a great time last year. Earnings for major players like Apple, Amazon, Facebook and Alphabet were strong and their stock prices rose significantly.

But 2017 was also a year in which the industry was plagued by trust issues. Some of the problems that angered consumers included Facebook not dealing with Russian-backed adverts on its platform, YouTube showing ads next to inappropriate content, and Apple admitting to slowing down older iPhones.

On top of that, worries about increasing automation and job losses are continuing.

Big tech is on rocky ground and 2018 will be a year when the largest companies in the world will have to tread carefully or risk losing users amid rising "techlash."

Already, billionaire investor George Soros has dubbed technology firms a "menace," saying their days are numbered. Facebook even saw a drop in the number of people in the U.S. and Canada who checked the social network every day during 2017's third and fourth quarters.

The signs are that big tech risks losing touch with the users that helped them grow to such a scale.

There are two possible paths from here. Firstly, technology companies move quickly to address the trust issues, essentially self-regulating. Secondly, governments do it for them in the form of regulation. This latter outcome is one Salesforce CEO Marc Benioff recently said could be likely. Benioff told CNBC that social media should be treated like a health issue, similar to tobacco and sugar, calling it "addictive."

"We're the same as any other industry," Benioff said. "(Like) financial services, consumer product goods, food — in technology, the government's going to have to be involved. There is some regulation but there probably will have to be more."

In one sense, Benioff is trying to get ahead of regulation. By anticipating tighter control from authorities, his comments are in some way a warning to the tech industry that it needs to do more. Because the last thing big tech really wants is regulation, similar to what the financial services industry has had, for example.

And that's why Facebook last month announced plans to make changes to its News Feed, with the aim of prioritizing "meaningful social interactions" versus "relevant content." CEO Mark Zuckerberg has realized that keeping people on the platform will be key for long-term profit.

Apple, meanwhile, moved to offer $29 replacement batteries on its iPhone 6 smartphones, or more recent models, to stem any backlash against its software that it admitted late last year was designed to slow down older iPhone models to maintain performance.

So, there have been quick steps to address certain issues and so far it sounds like big tech is listening, just as a rising number of governments talk of increased regulation on the industry. But any complacency could worsen the techlash, bring closer scrutiny, and ultimately weighing on the business outlook for the technology giants this year.

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