Google, Facebook, Amazon and the new era of monopoly


Should technology be turned into a kind of “utility” like electricity or water?

Imagine a not too distant future when the antitrust agency asked Facebook to resell Instagram and WhatsApp. Imagine when Amazon’s storage and shipping services are dominating the market, the company has to be divided like AT&T. Imagine search engine Google or YouTube becoming a monopoly service with regulation, just like electricity and water.

Margins, market dominance, and the influence of Facebook, Google’s parent company Alphabet, and Amazon, according to economists and historians, show that these companies are evolving into New style monopoly empire. There may not be a need for strong regulatory action yet, but once they consolidate their market control, the negative consequences for innovation and competitiveness are becoming more apparent. time is over.

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For example, there has been historian comparing Amazon, Facebook to Standard Oil, because these companies all want to beat their competitors and even their suppliers through.

Richard du Boff, emeritus professor of economic history at Bryn Mawr University said, Google, Facebook and Amazon are like another monopoly, Western Union, the “giant” of the telegraph industry.

“What Western Union has always done is wipe out competitors in the market, whether it be acquisitions or whatever. The main motive, as far as I can see, is monopoly in the market.”

Microsoft President Bill Gates was asked to testify before Congress in 1998 about whether his company was monopolizing the software market. Image: Jessica Persson / Agence France-Presse / Getty Images.

However, experts do not equate Apple with new monopolistic empires. Similar to Microsoft or Intel, Apple is considered to be vulnerable in the state of the market being torn apart, despite the fact that it is the world’s leading technology company in terms of revenue, profit, and capitalization. market.

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Today, the monopolists are a far cry from ancient loot tycoons because they don’t quite act like Andrew Carnegie: having the armed security team open fire on the workers participating in the strike. And managers don’t particularly care if a company becomes a monopoly unless it harms the community or hinders innovation. But with these positions, many people accuse that there is a collusion between rulers and oligopolistic firms. Look at how Google and Facebook dominate user data collection, or Facebook’s ethically dubious decision to disclose large amounts of customer personal information to developers.

Facebook and Google

The reason the electricity you use comes from a controlled source is that building a grid is expensive, but delivering more electricity to new customers is not. Another way of assessing monopoly situation is the barrier to entry.

Google and Facebook together hold 73% of the online advertising market in the US. This may not be something you often think of, but this success is largely based on the fact that both have invested a lot of money to build data centers and are fully equipped with hardware and software. designed by the most elite engineers. In this way, they are similar to the “giants” of the postal industry with such huge investments in infrastructure that no emerging company can match them.

They also benefit from an unprecedented historical precedent: the ability to use users as a huge source of free labor. Their systems operate on personal information, but instead of looking for them, users are willing to provide them.

Google and Facebook together hold 73% of the online advertising market in the US. Photo: James Martin / CNET.

Glen Weyl, senior researcher at Yale, also lead researcher at Microsoft Resaerch, said that social media is also a way to capture the market, and Facebook is the most successful. Fundamentally functional, the social network has remained largely unchanged for a decade, but has reaped enough profit to acquire (Instagram, Whatsapp) or imitate (Twitter and Snapchat) heavyweights. mine.

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There is preliminary evidence that the size of the online advertising market can grow faster than the growth rates of Google and Facebook. Research firm eMarketer predicts that the market share of these two advertising companies will decline for the first time in March.

“We are facing fierce competition as new technologies change the way people connect with each other. Facebook is just part of an ecosystem of dozens of properties,” said a Facebook spokesperson. messaging products, photo-sharing apps, and other services. Popularity does not mean market dominance, and market share does not guarantee future success. “

Amazon

With its expansion and ambition, Amazon has shown us what it means to be a classical monopoly, says Kim Wang of the Sawyer School of Business at Suffolk University. Amazon seems determined to expand its dominance from cloud computing and online retail to retail through store, shipping, computer control via voice, and a host of other industries. .

Amazon now accounts for 44% of the e-commerce market in the US, and is growing rapidly in previously failed markets, such as brands and foods. This has persuaded previous competitors to partner with Amazon, integrating the business from order to shipping – and possibly, one day, incorporating production.

Amazon currently accounts for 44% of the e-commerce market in the US. Image: Ken James / Bloomberg.

If Amazon’s rapid growth continues to invade other areas of business, it’s hard to imagine how this monopoly can be broken.

Jeff Wilke, Amazon’s director of business with global customers, said Amazon has “incredible competition” across all areas of the business.

Recently, he told the Journal: “In the global retail market, we have less than 1% market share. I don’t think any competition in these areas is like a football game, where there is only one winner. “

Apple

Although Apple can increase its huge margins in the mobile industry, it’s difficult to see Apple as a monopoly just by judging market share, experts say.

“Network effects” occur when adding new users creates value for a product – whether it’s a fax machine or a Facebook page. For Apple, the size of the customer base appeals to developers, and it is themselves that add to the value of the iPhone and iPad.

Catherine Tucker, professor of management and marketing at the MIT Sloan School of Management, said Microsoft used to have a platform with a similar dominance, and many believe that the network effect of its broad customer base and power Being attractive to developers can help the company maintain its unique position.

According to Dr. Tucker, we misjudged the “network effect”, and we did not realize that this effect could also help startups destroy the position of giants like Microsoft. . “Network effect” makes smartphones like the iPhone quickly become popular, this affects the foundation of Microsoft’s Office and Windows.

Even Apple’s ownership of iTunes, which is synonymous with taking over the music industry, is testament to a fleeting trend, as Spotify and other online services take the throne.

The Apple iPhone X model was on display during a product launch event in Cupertino, California, last year. Photo: Stephen Lam / Reuters.

Beginning step

Not everyone agrees that Facebook, Google, or Amazon, with such powerful potential today, need more control.

Dr. Wang: “There will be a day when Amazon also dies. Very few companies can maintain their position every time new technology comes out.” Technology gives firms an advantage, she says, that ultimately lies within the reach of competitors.

In the history of all monopolistic industries, whether oil, railway, steel or home appliances, even the most ambitious competitors took decades to consolidate their share of the market. Even with the current growth rate, it is still just the beginning of the “big” technology.

“Firms often go in one of two ways – some jump into sectors where margins decrease with size and they are controlled by this very law of the market,” says Dr Weyl. can be controlled when turned into a “public service” like electricity or water. Until then, they also reap terrible profits “.

Minh Trang / WSJ
* Source: Young intellectuals

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