Europe’s War against US Tech Giants is seeing increasing Friendly Fire incidents

Feb 20, 2015
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It’s not news that France is in a hot war against digital US companies – even Barack Obama is in the loop. The two-fold motivation of foregone tax revenue for the government by digital goods being sold from tax havens, as well as the foregone revenue by incumbent local leaders who are seeing their very way of life changed, is enough to make any aristocracy cringe. This week, France’s cultural minister and former digital minister Fleur Pellerin announced that Amazon’s Kindle Unlimited service, which provides a Spotify-like model for reading books, would be declared illegal, as it is seen as abusing the rights of authors. Inadvertently, of course, the model also puts a noose around the neck of local French startup Youboox, which raised €1.1 Million back in 2013 to push their ‘Spotify for Books’ model.

There are many reasons to call into doubt the economic model – increased pushback from artists like Taylor Swift on Spotify have called attention to the fact that “just because you can do it, doesn’t mean it’s a good idea.” The economic for content creators on the internet is constantly being called into question, repackaged, and delivered – the largest problem is that the Internet delivers value to two things: large amounts of data & difficult-to-reproduce services. Content – audio, written, or video – is neither of these two, and its ability to monetize is directly related to that.

The War on US Tech Giants

This isn’t the first that France & Europe have fought against US Digital Giants. Whether it’s funding government-backed cloud storage providers to get data off of Amazon Web Services (while ignoring existing alternatives like OVH or Clever Cloud), or trying to build a Made-in-Europe Google search competitor that isn’t sure whether it’s a Google competitor or not, France, and Europe as a whole, are clearly dealing with a digital inferiority complex. Let’s not forget Uber, of course.

Europe welcomes hardware manufacturers, along with the jobs and sales tax that it provides; however, when it comes to digital companies, perceived (correctly or incorrectly) as siphoning revenue out of the European economy, they just won’t have it.

France & Silicon Valley – a tale of two Tech Hubs

France’s sordid relationship with the Silicon Valley is a tale straight out of Oedipus: France coined one of the first inter-computer communication systems, Minitel, in 1978, which was rolled out across the country 7 years before Time Berners-Lee would invent the World Wide Web that we know & love today, which leveraged the US’s own APPANET research which started in the 1970’s between Menlo Park, California’s SRI & UCLA, as well at HTTP protocol and other elements.

France’s richest tech billionaire, Xavier Niel, made his first millions off of a Minitel dating service; however he made his first billions by undercutting telecom providers in the early 2000s, who were already in the process of winding down the now defunct Minitel, charging both arm & leg for Internet access.

France flies high in the history of many of of the Silicon Valley greats – you can’t read through Steve Jobs’ biography without being fluttered with references to France, whether Jean-Louis Gassée or Jobs’ post-Apple vacation in Paris where we realized he would always be a builder (just not in France).

French president Francois Hollande visited last year the 50,000 French residents living in the Silicon Valley, a region known for its relaxed culture, love of sun, wine & great food – something the French can relate to. The French can also relate to the Silicon Valley’s inherent Aristocracy, its ecosystem which promotes an oligarchy of winners in a market that can buy out potential competition, and its male-dominated society.

An Image problem

France suffers from a poor image – often merited, sometimes not. For example, startups are, indeed, taxed early on in their life, if they don’t quickly adapt to the French bureaucracy & apply for the JEI tax-exemption status. On the other hand, Silicon Valley’s loudest critics of France (i.e: Frenchies in California) very easily jump between discussions around the difficulty in retaining top talent in Silicon Valley, and the difficulty to get rid of employees in France, as if the two aren’t diametrically opposed points of view.

No other country has a more intertwined history with Silicon Valley. Studies continue to state that France, along with most of Western Europe, is slipping out of relevance; meanwhile, international investors are pushing into the market, French companies are acquiring US startups (Criteo & AuFeminin, this week alone), and French engineers are closing the gap between R & D.

A Marketing Problem

However, France isn’t the only place suffering from an image problem. While the French are often quick to praise blogs like the Rude Baguette for bringing a positive attitude to the startup scene, they are also quick to judge foreign companies, big & small. The perception that selling oneself implies betrayal with regards to the actual value of the product or service sold holds France’s greatest tech companies from being #1 instead of #2, and it holds them back from seeing that multinational companies invest more in countries that know how to sell themselves – UK, Ireland, Israel – than in countries who refuse to sell what they perceive as generally understood qualifications.

France continues to go head-to-head with intangible concepts – “US Capitalism,” “Digital companies” – and avoids addressing the larger changes that need to be made from within (although I personally applaud the recently passed Loi Macron, which the executive body forced through the Assembly & House, which will loosen regulation across many sectors). I would’ve rather seen Pellerin go one step further and find a way for unlimited book-reading to benefit authors further, rather than say ‘as such, it does not work, so we will put a stop to it.’ France needs less barriers, and more high-speed rails, so to speak, for its companies and innovation. It’s a disappointing sign to see the same Minister who fought to bring the French Tech label to light suppressing the very same innovation when it is still a work in progress.