Big tech ad canvassing takes page from piracy’s book

On Sept. 14, 1723, the cargo ship Princess Galley, on its way from London by way of Africa, entered the Caribbean Sea.

The ship was heavily laden.

Its captain spotted another ship, sails spread, rapidly approaching. The other ship ran up a black flag.

The skull and crossbones was only one of many designs used by pirates of the early 18th century. Other flags featured “bleeding hearts, blazing balls, hourglasses, spears, cutlasses, and whole skeletons.” The purpose of all such flags was the same: “to underline the message that the pirates expected immediate surrender or the consequences would be fatal.”

I have these details from “Under the Black Flag: The Romance and the Reality of Life Among the Pirates” by the naval historian David Cordingly. He tells the sad fate of the Princess Galley, whose attempt at escape quickly proved futile. The pirates spent a full 24 hours systematically looting the ship, seizing everything of value, including food and fixtures. They tortured the ship’s officers to make sure they didn’t miss anything. For good measure they also press-ganged two crew members with useful skills, a surgeon’s mate and carpenter.

While old-style ship piracy still exists (Tom Hanks even made a movie about it), new forms have sprung up to accomplish the same goals without the tar, heaving decks and risk of cutlass wounds.

Consider what are sometimes called “vulture funds.” These are companies that spot vulnerable targets, then board them by taking a big ownership stake, often paying for the investment by burdening the boarded ship with debt. The pirates then systematically loot the company, taking their time, demanding the kind of fat returns that can be achieved only by selling core assets, until the empty hull is sailed into its final berth in bankruptcy court.

But the term “vulture fund” is unfair to vultures, who usefully feed on animals that are already dead. The alternative label “vampire fund” is more descriptive. But whichever term is used, it describes an age-old form of parasitism.

It’s difficult, and maybe even impossible, to think of a money-making scheme that somebody else hasn’t hit upon already. Business practices that seem new today usually have historical analogues, even if most are much less colorful than piracy.

The job of advertising canvasser has existed as long as there’s been advertising, although the only canvasser ever to win lasting fame was fictional. Leopold Bloom, the protagonist of James Joyce’s novel “Ulysses,” wandered around the Dublin of 1904, trying to convince business owners to place ads in the paper he repped.

Facebook, Google and their competitors are, among many other things, ad canvassers. They convince merchants to buy ads to run alongside the material they distribute. Much of that material is generated by users. But some is lifted straight from the websites of newspapers.

Imagine what a great business it would have been, back in Leopold Bloom’s day, to sell ads for newspapers and then keep the proceeds for yourself.

“The United States continues to lose newspapers at a rate of two a week,” according to a recent report from Northwestern University’s Medill School of Journalism. Many factors contribute to the ongoing disaster, from demographics to vampires. But it doesn’t help that a significant portion of the advertising revenue generated by newspaper articles never reaches the papers themselves.

Uber and Lyft are taxi companies that rely on apps instead of the inefficient old phone-and-dispatch system. They avoid capital costs by requiring their cabbies to buy, maintain and garage their own cabs. Those methods are different. But there’s nothing original about the companies’ basic line of business, which dates back at least to the horse-drawn hansom cabs of the Victorian age.

One thing Uber and Lyft have going for them is the flow of new money from investors, which allows them to run at a loss. And what losses! Earlier this summer, Uber reported a quarterly — quarterly! — loss of $2.6 billion.

Uber can afford to bleed out cash because it has so much new cash coming in. Unlike its competitors, the legacy taxi companies, it’s not running a closed system, in which revenues are expected to cover expenses.

The paired terms “competition” and “anti-competitive practices” sound like opposites, but there is no fixed line dividing them. The effect of one, and the object of the other, is to drive other companies from the marketplace. America’s competition laws are written at a high level of generality, giving our courts considerable discretion to decide which particular business practices are condemned as restraints of trade.

But nearly every restraint of trade is, from another point of view, a commercial innovation. And everything old is new again.

Joel Jacobsen is an author who in 2015 retired from a 29-year legal career. If there are topics you would like to see covered in future columns, please write him at legal.column.tips@gmail.com.