Search

Is Big Tech too big? - Part 1

Updated: Feb 16

Over the last few weeks, the 'Big Tech' companies have all announced their results. They were generally very good, causing people again to question whether 'Big Tech' is too big and asking whether they use market dominance to constrain their opposition and keep out new entrants. This week's blog will look at Google, Facebook and Amazon while next week will examine Microsoft and Apple.


Google

Alphabet's revenue grew from $136.8 billion in 2018 to $161.9 billion in 2019 while income grew from $30.7 billion to $34.3 billion (ABC). Despite these seemingly great results, they missed their targets (Businessinsider). This happened because Google's advertising revenue slowed a little in the last 3 months. Around 88% of Alphabet's revenue is from advertising (Investopedia).


However, there were two major highlights. For the 1st time, Alphabet broke out their performance of Youtube which grew to $15.1 billion in 2019 revenue, up from $11.2 billion in 2018. Secondly, Google Cloud is showing promise, growing from $5.8 billion in 2018 to $8.9 billion in 2019 (ABC). Q4 was particularly strong and points to ongoing growth in 2020.


We shouldn't penalise success but if they use their market power to crush rivals then questions do need to be asked. For example, Google have allegedly shown their own ads more prominently than competitors paying for the ads. Google has also been accused of forcing its own products onto smartphones. The counter argument is that users may want those products (APNews).


However, when Google commands a 92% search market share, it is obvious that they have the opportunity to abuse their market power (Statcounter) and the regulatory bodies should watch them.


Facebook

In Q4 Facebook hit 2.5 billion monthly users up a slowing 2% on the previous quarter. Nett income for Q4 was $7.3 billion with significantly lower margins. Zuckerberg argued that efforts to address safety issues, hate speech, election interference, content moderation and safety issues would be cost a lot perhaps explaining the drop in margin (Techcrunch).


Sympathy for any trouble Facebook has is low, due to the many times Facebook is perceived to have let us down. The Cambridge Analytica scandal embarrassed Facebook yet despite promises from Zuckerberg, the allegations did not seem to change them (Guardian). In July 2019, Facebook agreed to pay a $5 billion settlement due to the Cambridge Analytica scandal. It has been argued that this fine was way too small and won't force Facebook to change their behaviour (NYTimes). Just a few days ago, Facebook agreed to a $550 million settlement for violations of Illinois Biometrics law. Allegedly, Facebook collected face prints, to support its “face tagging” feature (Businesswire).


Amazon

Amazon have just shot the lights out announcing their 2019 results, achieving $232.9 billion in revenue with an income of $14.5 billion. They have over 150 million Prime members (Amazon) all driving the company value up to over $1 trillion (Arstechnica). Amazon's AWS continues to lead the cloud services segment generating $35 billion in sales with 37% growth (Amazon).


However, Amazon is not known to be squeaky clean when it comes to allegations of market abuse. It is alleged that Amazon use their data to gain an edge on 3rd party sellers, selling similar products on Amazon's platform. Specifically, it is alleged that Amazon produced replicas of competitive products and then steered customers away from the original product to Amazon's own product. In Italy, it is alleged that Amazon offered preferential treatment to sellers that used Amazon's delivery mechanisms (APNews). Amazon will argue that they are much smaller than Walmart in the retail space.


Some initial thoughts

It is plain that the Big Tech companies have done amazingly well in the last 2 decades. All have a position of market dominance which allows them to potentially abuse their position. However, we should not take down the company that is better but we can try and stop the abuse of market dominance. Next week will look at Microsoft and Apple and see if we can reach any conclusions.


If you need any career advise, please don't hesitate to email us.



8 views

YOUR NATIVE LANGUAGE

POPULAR SEARCHES

© Parvana Strategic Sourcing (PTY) Ltd. all rights reserved. Reg No: 2006 / 009124 / 07 | VAT No: 4620233207 | Whatsapp | Newsletter  | PrivacyBEE Affidavit