In the US, the
approaching elections has resulted in the rediscovery of the curse of bigness.
The last major action sought was against Microsoft in the late 1990s and early
2000. However the end result rather than the intended split was a mere rap in
the knuckles for Microsoft. There were threats of action during the Obama
regime but very little concrete action. In contrast, during Obama, the big
technology firms gained in size and market power. Currently, a bipartisan
effort is underway to tame the ‘big-tech’, with most suggestions pinpointed on
the splitting of big-tech.
In orthodox
dialect, big tech refers to Google, Apple, Facebook, Amazon and Microsoft. It
however can be expanded to other firms also. Little dispute exists over the
power build-up of these firms in the last decade or so. Facebook with its
acquistions of Instagram and WhatsApp has virtually become undisputed in the
social media space. Similarly through multiple approaches irrespective of
ethicality or otherwise, Amazon seems to be numero uno by significant distance
in online shopping space besides having extended its predominance in the cloud
space. Microsoft enjoyed a near monopoly in operating systems, found itself
under threat from Android yet makes a sharp comeback through cloud. Apple has
virtually created an own ecosystem tethered and threatening the generativity of
the internet. Google using its dominance in search is wading into waters across
territories. Contrary to John Perry Barlow’s assertion of internet being
hotspot of competition, the pyramid being greasy and thus little scope for
monopolization, the things have turned out differently. The first wave of
internet set up might have waned, its successors have consolidated and seems at
least for the moment comfortably positioned in monopoly positions.
Facebook is fundamentally
in practice an advertising and space selling firm, one who monetizes human
communication and exchange. Humans love to gossip and boast. It goes without
saying, the intrinsic human tendency to tell neighbours and friends about
achievements, shopping purchases, restaurant and movie visits, and gossip about
the next door neighbour’s affairs among others. This exists from time
immemorial, all Facebook has done is enabling scaling up the same and creating
a global reach from the town square addah. The firm tracks the conversations
and monetizes them to numerous marketing firms eager to promote their brands
and product-ware to the customers. Firms
love first and second degree price discrimination and Facebook is a platform
that you unwittingly use to reveal your pricing preferences. To add, Facebook acquired Instagram in what
virtually undisputed acquisition. To be fair, Instagram had such a small base,
very few would have thought about its future prospects. They compounded it with
Whatsapp which primarily depends on cross subsidy from Facebook for revenues.
It faces competition from Telegram etc. Facebook is free but the freedom comes
at a cost. The trade-off Facebook’s ability to monetize the data which invades
the heart of consumer privacy. As a consumer, one would want to keep their
preferences secret but the ability of the marketers to capture the same and
promote tailor-made product offering to consumers could be unnerving. Any
solution to Facebook rather than simple focus on splitting up or analysis on
price front, must look in depth at the data gathered, consumer consent for
gathering of the said data and consumer say in the end usage of the data. If
issues of privacy are believed to disappear post-split, then the authorities
would be performing huge disservice.
In fact the
problem of privacy, monetizing consumer’s private data, and mining behaviour of
consumers to lock in customers in the future seems to be the defining feature
of the emergent digital economy. Almost all firms in the space seek to
capitalize on the same, just that the few scale it up on the global level.
Apple constructed
an ecosystem top-down converting i-appliances away from the generative
internet. Internet at its foundations stood for what ZIttrain describes as
generative nature. By exhibiting conditions of leverage, adaptability, ease of
usage and accessibility, the generative net was supposed to eliminate
investment inertia, facilitate innovation, and generate participatory input
while minimizing legacy costs. Yet the appliancization of Apple strikes at the
heart of the internet founding principles. The appliancization makes people a
part of Apple ‘jail’, a part of walled garden where a guardian would lead to
areas which are freely accessible, partly accessible and completely prohibited.
Apple in extending its software built on a hardware creates new ecosystem, a
system it imagines will be the future of the internet.
Contrast
to Apple, Google is a conglomerate at times what prima facie seems to be of
unrelated business yet all grounded in the data collected through search and
the server farms harvested across the world. To Google, which practically is a
space selling or advertising firm, all its revenues are derived from
advertising. It is not averse to large scale of monetization of the data. Data
mining firms find Google analytics as indispensable in their strategizing to
woo and retain customer base. Google advertising takes it to a different level
the paradigm of AIDA where a firm is able to monitor journey from attention to
action via interest and desire. Google unlike Apple states its belief in an
open system perhaps out of necessity as it sought to challenge Windows on the
new mobile platforms. In fact, 87
% revenue for Google, & whopping 98 % for Facebook come from advertising
and are two of the fastest-growing consumer tech companies, despite being
mature businesses. Wherever Facebook and Google lead, the rest of digital
advertising world will follow.
Microsoft,
building through cloning strategy, and faced regulatory challenges in the past
is redefied avatar seeks to be conglomerate of host of business from Search to professional
networking (Linkedin) to cloud to database management to desktop publishing. Yet to each of these firms, as they operate at
multiple levels of stack, it is not pure monopoly. On some layers of stack,
they compete with different players and on some layers, they are monopolies. The mobile stack is define by simultaneous
competition and cooperation at different layers viz. device layer, operating
system layer, distribution layer and the app layer.
Despite the
above, given the network effects that are in play, the stranglehold of the tech
firms on the consumers is likely to be long lasting. Therefore their power in
terms of increased concentration in the market needs to be regulated to
maximise consumer welfare. Economics rests on the principle of markets
maximising consumer welfare. The near
zero price for many of these offerings by Big-Tech might indicate a sort of
consumer welfare and thus advocates of laissez faire believe these companies
should be left alone. However, the price is not explicit alone. There is
implicit price to be paid in terms of consumer privacy, lock-in etc. However,
the solutions suggested from mild to drastic seem to anchor in the brick and
mortar industrial information era. Given the changed semantics of the digital
era, the solutions to rein in the monopolies of the digital era need very
different solutions. Therefore, curse of bigness to be cured by splits a la
trust busting of early 1900s seems misleading.
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