An Oligopoly, After All This?

Tech is becoming an oligopoly of a handful of titans dominating the subcategories: Google (Search), Facebook (Social), Amazon (Commerce). Then there is Apple (Device). In Software, the picture is a bit more encouraging with Microsoft, Oracle, SAP, Salesforce.com, IBM, and a whole host of other fast growing SaaS companies still maintaining a healthy competitive dynamic.

This week’s issue of The Economist has a couple of great articles on how to manage these tech titans and their anticompetitive impact on the industry: How to tame the tech titans and The tech lash against Amazon, Facebook and Google – and what they can do – A memo to big tech.

NOT long ago, being the boss of a big Western tech firm was a dream job. As the billions rolled in, so did the plaudits: Google, Facebook, Amazon and others were making the world a better place. Today these companies are accused of being BAADD—big, anti-competitive, addictive and destructive to democracy. Regulators fine them, politicians grill them and one-time backers warn of their power to cause harm.

Much of this techlash is misguided.

But big tech platforms, particularly Facebook, Google and Amazon, do indeed raise a worry about fair competition. That is partly because they often benefit from legal exemptions. Unlike publishers, Facebook and Google are rarely held responsible for what users do on them; and for years most American buyers on Amazon did not pay sales tax. Nor do the titans simply compete in a market. Increasingly, they are the market itself, providing the infrastructure (or “platforms”) for much of the digital economy. Many of their services appear to be free, but users “pay” for them by giving away their data. Powerful though they already are, their huge stockmarket valuations suggest that investors are counting on them to double or even triple in size in the next decade.

There is thus a justified fear that the tech titans will use their power to protect and extend their dominance, to the detriment of consumers. The tricky task for policymakers is to restrain them without unduly stifling innovation.

As suggestions, one idea that floats around is breaking up the monopolistic companies into pieces: Facebook (spin out Instagram, WhatsApp), Google (spin out YouTube, Google Cloud, Android), Amazon (spin out AWS, Amazon Marketplace).

Other ideas like increasing content liability, preventing acquisitions that can lead to further concentration of power, utility-like regulation, charging for services and giving consumers the option NOT to sell their data to advertisers – are all on the table.

How the market will evolve remains to be seen yet.

It is clear, though, that policy needs to be in place to prevent the industry from becoming an oligopoly.

What I have enjoyed tremendously in tech is its meritocracy where brilliant ideas emerge, develop, grow, scale, disrupt.

A persistent oligopoly will inevitably take away from this charming and inspiring dynamic of our industry.

The tech titans should recognize this, and make their own moves, including restructuring to break themselves up into pieces.

Photo credit: Mike Mozart/Flickr.com