Don't Shoot The Message Board: A Data Driven Look At The Impact Of Section 230 On Innovation And The Economy

from the these-things-matter dept

Read our new report on intermediary liability »

We've obviously been talking a lot about Section 230 of the Communications Decency Act over the past few years -- and it is often credited as being the most important law for the internet. Jeff Kosseff's recent book calls it "the 26 words that created the internet," while David Post once declared that Section 230 probably "created a trillion dollars or so of value." We've talked a lot about how the real benefits of Section 230 are not to the internet companies themselves, but to the public's free speech rights, but over the last few years it's bugged me that there wasn't a better attempt to measure the actual economic impact of Section 230 and other intermediary liability regimes.

Today, in partnership with NetChoice, we're launching our new report: Don't Shoot the Message Board, that attempts to explore what the data shows concerning the economic benefits of Section 230. We chose the name because it's perfectly fitting. Section 230 was, literally, written and pushed by (then) Reps. Chris Cox and Ron Wyden in response to the awful ruling in the Stratton Oakmont case, which suggested that any company hosting a message board could be found liable for any of the content on that message board. Similarly, the common phrase is "don't shoot the messenger," which is very much about not blaming the party merely delivering the message, as opposed to creating or causing the message. Putting liability on intermediaries is very much about blaming the messenger for actions of someone else.

To provide some actual data for this debate, the report first compares a few different intermediary liability regimes to see what we can parse out. It starts with looking at the US vs. the EU. In the US, we have CDA 230 for most platforms, and DMCA 512 for copyright-related platforms. In the EU, they have the E-Commerce Directive (and soon they'll have the implementations of the Copyright Directive, but this report looks at the state of things before that). In many ways the intermediary liability in the E-Commerce Directive is much more similar to the DMCA in the US than CDA 230. Using a variety of datasets and comparison points, we found that CDA 230 appears to have resulted in significantly higher investment in US internet companies who rely on CDA 230. Our data suggests CDA 230 alone is probably responsible for two to three times more investment in the US than the EU. It also drove much higher levels of investment as companies in our sample were five times as likely to raise over $10 million in the US and nearly ten times as likely to raise over $100 million than their counterparts in the EU.

Tellingly, when comparing copyright-focused platforms, where the liability standards are similar (or, at least were similar, prior to the Copyright Directive), we found EU companies did much better compared to their American counterparts. In other words, it appears that different choices for liability regimes can have a major impact on the types of investment and how much is invested. One reason why many of the big music platforms may have come out of the EU, rather than the US, is that the US's decisions on intermediary liability no longer gave the US an advantage for those kinds of platforms. In short: the decision to offer fewer liability protections in the US drove those investment dollars elsewhere.

The paper also compares the DMCA and the CDA in the US alone, to see if there's a major difference in spurring investment -- and we found clear evidence that having these two different regimes resulted in much more investment focused on platforms that rely on CDA 230 (social media, communications platforms) as compared to content based platforms where the DMCA is of greater importance. There is obviously overlap, as many platforms rely on both laws, but when breaking out music companies vs. cloud computing, cloud storage, e-commerce and social media companies, we found over and over again that the latter received more investment, were more successful in the long run, more likely to have a successful exit and less likely to shut down. In other words, having the strong protections of CDA 230 seemed to help lead to more successful companies, and thus, more innovation.

To back up these findings, we looked at a variety of countries where a major change -- either from a key court ruling or changes in the law -- created a sudden shift in intermediary liability protections, and then did a before-and-after analysis of the impact on investment and startups in those markets. Once again, the findings were more or less what we expected. When a country strengthened the protections for intermediaries, investment went up, the number of startups increased and there was greater innovation. When a country removed or weakened such protections, investment dropped. Noticeably.

I should note that there were some exceptions to this rule -- and that happened mostly where there wasn't an existing strong startup ecosystem (such as Argentina). There, when intermediary liability laws were strengthened, there was little evidence of a sudden influx of investment. So, that suggests that strong intermediary liability protections are important, but not the only important thing, in driving greater innovation and investment.

As we note in the paper, this is not meant to be the definitive look at these issues. There are many, many different factors and variables that play into the startup and innovation ecosystems. However, there was so little data on the direct impact of things like Section 230 that we thought it would be helpful in furthering the debate to at least have some data-driven research into the impact.

At a time when politicians around the globe are suddenly increasingly interested in weakening intermediary liability protections, they should at least consider what that might do to investment, innovation and jobs. Our new report suggests weakening such protections may very well be "shooting the message board."

Unable to embed the PDF file. Please try accessing it directly.

Filed Under: cda 230, data, dmca 512, don't shoot the message board, e-commerce directive, eu, innovation, intermediary liability, investment, section 230, studies, us


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  • This comment has been flagged by the community. Click here to show it
    identicon
    'Mass Psychosis' Nick, 25 Jun 2019 @ 9:45am

    "the public's free speech rights" SUBJECT TO CORPORATE CONTROL!

    "created a trillion dollars or so of value" not for The Public but FOR CORPORATIONS that now CONTROL and want MORE!

    Those combine and overall effect is that mega-corporations control and monetize what you call "free speech" but in which "the public" isn't at all guaranteed of "platform" nor First Amendment Right!

    You've become very preachy and screechy and repeat this topic because the law is simply not so clear nor the benefits so good as you claim.

    We'd all be better off without Section 230. More clear law can be written to guarantee all the good you claim while removing all the bad of actuality.

    reply to this | link to this | view in chronology ]

    • icon
      Toom1275 (profile), 25 Jun 2019 @ 9:57am

      Re: "the public's free speech rights" SUBJECT TO CORPORATE CONTR

      [Asserts facts not in evidence]

      (unlike Mike)

      reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 25 Jun 2019 @ 10:01am

      Dude, the post barely went live before you posted your crap. Normal people keep an eye on sites like this to read the news/takes on the news. You apparently watch it to rabidly post your insanity and hatred for all things TD.

      Get. A. Better. Life.

      mega-corporations control and monetize what you call "free speech" but in which "the public" isn't at all guaranteed of "platform" nor First Amendment Right!

      Ding ding ding! We have a winner! "Free speech" and the First Amendment only applies to the government. There is nothing in the Constitution or laws that says a private corporation can't dictate your speech on their platform. If you don't like that you're welcome to advocate to change it but as it stands it is perfectly legal.

      We'd all be better off without Section 230

      You've yet to explain why.

      More clear law can be written to guarantee all the good you claim while removing all the bad of actuality.

      Section 230 is very clear, it literally says you have to blame the actual bad people, not the innocent people who weren't involved. What more do you want?

      reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 25 Jun 2019 @ 10:29am

      Please don't feed the troll.

      Flag their post, ignore them, and make a constructive comment about the contents of the article instead.

      reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 25 Jun 2019 @ 11:57am

      Re: "the public's free speech rights" SUBJECT TO CORPORATE CONTR

      Don't you support corporate copyrights, which are used to legitimately censor speech?

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 25 Jun 2019 @ 10:28am

    Meanwhile the Chinese via their ally the Persian are contemplating banning all oil shipments through the Strait of Hormuz.

    reply to this | link to this | view in chronology ]

  • icon
    ECA (profile), 25 Jun 2019 @ 11:41am

    Why?

    It seems strange that corps would rather goto a location that OTHER corps can sue you into the ground..
    the Internet is a Bag of Worms all trying to get out.
    Every nation trying to sue each other and each corp in each Land/nation is having fun, sending DMCA that SHOULD NOT be legal in another nation.
    I can see the RIAA/MPAA going to China/Japan, after the trade agreements we made to Worship IP/CR...and China Loving it.
    (Philips Cigs, did this so they could Sue Gov. in Australia..)

    I looked up info a Stocks and What they can say, and was amazed..Its a contract and they can Say anything they wish.
    I have listened to the trade agreements WE/EU/UK/../.. make and wonder WHAT TRADE?? its all about IP/CR and who can sue who...That aint trade.

    reply to this | link to this | view in chronology ]

  • identicon
    DocGerbil100, 25 Jun 2019 @ 11:56am

    Excellent work, Mr Masnick. :)

    reply to this | link to this | view in chronology ]

  • icon
    That One Guy (profile), 25 Jun 2019 @ 3:24pm

    In related news, water is wet and fire is hot

    Our data suggests CDA 230 alone is probably responsible for two to three times more investment in the US than the EU. It also drove much higher levels of investment as companies in our sample were five times as likely to raise over $10 million in the US and nearly ten times as likely to raise over $100 million than their counterparts in the EU.

    This really shouldn't be surprising to anyone, and you'd think that politicians would keep it in mind when trying to hamstring the internet to score PR points.

    If a platform is more likely to be sued people are less likely to want to tie their money into it. Conversely if a platform is less likely to be sued people are more likely to be willing to tie their money to it.

    This should be basic knowledge for anything who spends any time on the subject and as such not even needed to be said anymore than 'Don't stick your hand in a fire, it hurts', yet sadly these days with politicians left and right(pun intended) tying to gut liability protections to force platforms to moderate 'correctly' it is worth pointing out both the short-term and long-term consequences likely to result from their actions, and how they go from bad to worse respectively.

    reply to this | link to this | view in chronology ]

  • This comment has been flagged by the community. Click here to show it
    identicon
    SA C.P. Distributor, 25 Jun 2019 @ 10:23pm

    re: child porn hot potato

    re: “is very much about blaming the messenger for actions of someone else”

    ...and, so is paternity in the case of mothers who carry a child to term against a fathers wishes.

    And, child pornography prosecutions for that matter, because each is "carrying " something.

    I wonder whats you take on that, Mike?

    Cuz, for the children! ?

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 26 Jun 2019 @ 6:46am

      Moron

      ...and, so is paternity in the case of mothers who carry a child to term against a fathers wishes.

      Frigging what?

      You can't even compare the two. This goes beyond trying to compare apples to oranges, you're trying to compare fruit from two different universes.

      Not to mention that's very sexist of you. The mother gets ABSOLUTELY NO SAY in whether or not she wants to carry a child to term? Buzz off. If the guy is really that worried about it, he can make sure he always wears protection, or gets a certain procedure done, to prevent this from happening in the first place.

      And, child pornography prosecutions for that matter, because each is "carrying " something.

      I'm sorry, what? Who is carrying what in this instance? And who is being prosecuted? The people actually involved in this disgusting practice? What exactly is your point here?

      I wonder whats you take on that, Mike?

      A quick search of TD shows EXACTLY what his take is.

      Cuz, for the children!

      Well apparently yours is "cuz for the bigots, sexists, and vile human beings!".

      reply to this | link to this | view in chronology ]

  • icon
    Teamchaos (profile), 26 Jun 2019 @ 8:55am

    New laws may be required...

    While I support Section 230 and applaud efforts to quantify the impact of it, we are facing an atmosphere of censorship by the very corporations who benefit from it. Google, Facebook, and other social media giants are censoring content that doesn't align with their political views.

    Certainly within their rights as private corporations but dangerous to our freedom because of many have amassed almost monopolistic power. I don't think breaking these companies up, as some have suggested, is the correct answer. I do think that if these companies want to continue to benefit from Section 230, they must stop blocking content based on their political views. If you support free speech, then support free speech and not just speech you agree with. If you want to start censoring content based on your political views - fine, but then you must take responsibility for all of the content on your site and you lose the protections of Section 230.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 26 Jun 2019 @ 9:45am

      First off, as you even admitted, they are well within their rights to moderate speech on their platforms as they wish. If you don't like it there are a plethora of other services out there to choose from.

      Second, this sounds dangerously like you think they are blocking speech from a particular group of politically inclined people. Such things have been regularly debunked and shown to not be true EXCEPT in the cases of banning outright disgusting and hateful speech that puts down other people.

      we are facing an atmosphere of censorship by the very corporations who benefit from it

      Their platform, their rules. I see no problem with this.

      Google, Facebook, and other social media giants are censoring content that doesn't align with their political views.

      So? See above. Also, this has been proven to be false many times over.

      Certainly within their rights as private corporations

      So why are you complaining?

      but dangerous to our freedom because of many have amassed almost monopolistic power

      No, it's not. I do not have to worry that corporations will come and lock me up or execute me for what I say or do online. Nor can corporations restrict me from saying what I want on other platforms that do allow me to say what I want, or set up my own site. Governments on the other hand can absolutely do this if not kept in check.

      I do think that if these companies want to continue to benefit from Section 230, they must stop blocking content based on their political views

      This contradicts your earlier statement that you support Section 230. Political views is not a protected class and as such they are free to set up sites with whatever political leanings and moderation they wish. If you want to go down that road, then no one will ever be able to set up a site dedicated to their specific political views because they will either have to be "neutral" (whatever that is) or be held liable for everything on it, including what other people put there.

      If you support free speech, then support free speech and not just speech you agree with.

      Literally right back at you. Just because you don't agree with some sites' moderation policies, does not mean they are violating or restricting freedom of speech. Freedom of speech INCLUDES the right to NOT agree with other forms of speech. And saying "we only want to allow this type of speech on our site" is also speech. By your own statement, you should support all forms of free speech, including the freedom to choose what to speak about, not just neutral speech.

      If you want to start censoring content based on your political views - fine, but then you must take responsibility for all of the content on your site and you lose the protections of Section 230.

      And again you contradict your opening statement. And again, the freedom to not host certain speech is part and parcel of freedom of speech as a whole. Freedom of speech does not require private platforms to be neutral in regards to it. It's just as silly to say that a Star Wars fan site can't block people from talking about Star Trek or else lose their Section 230 immunity. There is literally no difference.

      reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 26 Jun 2019 @ 9:45am

      Re: New laws may be required...

      If people are not flocking to gab, then that tells you something about how popular the views promoted on that site are. Just because you cannot attract an audience does not entitle you to try and hijack audience built up by others.

      reply to this | link to this | view in chronology ]

    • icon
      That One Guy (profile), 26 Jun 2019 @ 1:47pm

      'How about 'no' Scott?'

      Yeah, you're not fooling anyone. 'I support 230, but if sites want to actually be covered by it they shouldn't be allowed to kick people off their service.'

      The least you could do is be honest, don't pretend that you support companies having control over their own platform and then turn around and say they should be punished if they use that control in a way you don't agree with.

      If you support free speech, then support free speech and not just speech you agree with.

      As for this tired old tripe, supporting someone's right to free speech does not require you provide them a platform to speak from. I can support losers like the KKK or self-identified nazi's being able to speak(the better to expose how pathetic and repulsive they are) without thinking that any private business and/or platform should be requires to host them while they do it.

      reply to this | link to this | view in chronology ]

      • icon
        Teamchaos (profile), 17 Jul 2019 @ 11:11am

        Re: 'How about 'no' Scott?'

        Are social media platforms public forums, where free speech should go unfettered, or publishers who have the right to edit and censor the material they dispense?

        reply to this | link to this | view in chronology ]

  • icon
    ArnoldLawson (profile), 27 Jun 2019 @ 6:06am

    Nice article
    A lot of people have to think about it

    reply to this | link to this | view in chronology ]


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