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Consumer boycott power and the new web

One might expect that a firm like GoDaddy, a privately held company which is also the world's largest domain-name registrar, would have some ability to shrug off criticism. In a very real way, it's the biggest 'landlord' on the internet, offering server space, domain names and other web services to tens of millions of sites.

Of course, the hosting firm can't just take registrations and domains away from those who disagree with or criticize the firm - but customers absolutely can walk out the door if they're upset with the company. On the (relatively) open, democratic field of the internet, far more power vests in customers or users who can access an unprecedented level of information, extraordinary choice and many venues to voice their complaints.

Last week, GoDaddy found itself humbled by its customers for picking what users saw as the wrong side in the ongoing battle over the Stop Online Piracy Act, often dubbed SOPA. The bill, sponsored by Texas Congressman Lamar Smith, would dramatically increase the the power of the Department of Justice to intervene over complaints of copyright infringement. Indeed, the powers granted to the DoJ are unprecedented in the history of American cyber-policy, with comparisons made to China's massive web censorship regime.

The federal government could shut down an accused business or site's interactions with payment networks like Google Checkout and Paypal, block search engines from linking to those sites or even stop access at the internet service provider level, cutting chunks out of the vital network of Domain Name Servers which allow users to browse the internet with words rather than IP addresses.

Almost everyone who is anyone on the web opposes the bill. Massive firms like Google ( GOOG ), Facebook, eBay ( EBAY ) and Twitter arrayed themselves against the legislation. They see the potential for massive liability and damage to their core businesses: Google crawls vast swathes of the web, and could end up mired in legal battles over every single offending result. Any unauthorized shares, tweets and "Likes" of streaming copyrighted music, TV and movies could similarly ensnare the social networks.

GoDaddy was the most notable web-based defender of SOPA; of course, the major content publishers like Time Warner ( TWX ), Sony ( SNE ), Disney ( DIS ) and Viacom ( VIA ) all support it as well. GoDaddy, however, found itself uniquely vulnerable, because its endorsement stirred up a volatile group of website owners and operators.

Via networks like reddit, users quickly organized a boycott, tech reporting site Ars Technica wrote. The company initially fired back, issuing a statement which read in part "US businesses are getting robbed and US consumers are getting duped...Not only is there no First Amendment concern, but the notion that we should turn a blind eye to criminal conduct because other countries may take oppressive steps in response is an affront to the very fabric of this nation."

Within 24 hours, the threat of losing its business to eager competitors and affronted customers won over. In what is probably a record time for a boycott achieveing its aims, the hosting giant issued a statement saying that while it still supported efforts to combat piracy, it no longer backs SOPA.

The whole episode carries important lesson for firms doing business on the web. The more a company relies on web users and their networks to do business, the more vulnerable they are to consumer backlash. Manufacturing and logistics firms can 'get away' with more than can the service-based businesses which make up much of the new economy .

The content producers feel that they have no choice but to support legislation like SOPA, even if it ends up as a wild overreach. Those opposed to their practices already register their discontent - or total disinterest - by using BitTorrent and other sharing utilities to pirate music, movies and video games. It would be hard for the companies to further alienate those customers, so they feel they've got nothing to lose.

Politically, predicting the future of SOPA is a mug's game. Bipartisan opposition to the bill seems unusually high, with the libertarian right and the ACLU-inflected left both opposed, while corporate-dominated interests in the center back the bill. The opposition of web titans like Google and the Wikimedia Foundation may help opponents prevail, but the MPAA and RIAA still have massive lobbying clout.

President Barack Obama remains the wild card - he's supposed to be friendly to the idea of the open web, since social networks and online donations helped sweep him to victory in 2008. The White House still hasn't stated whether it would veto a final version of SOPA either way - but if it does land on his desk, he can expect reactions an order of magnitude greater than GoDaddy's boycott.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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