Jide Akintunde, Managing Editor/CEO, Financial Nigeria International Limited
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Big tech’s monstrosity 06 Aug 2020
Last week, the CEOs of Apple, Alphabet, Amazon and Facebook were “grilled” during a United States congressional antitrust hearing. But in response to some probing questions posed to them on their perceived anticompetition practices, the super-rich and powerful chief executives offered little beyond hints. They mostly stonewalled. In their prepared opening addresses, they tried to deflect the need for them to change some of their troubling practices, by touting the American jobs they create, their contribution to economic growth, and highlighting the need for US tech firms to remain competitive against their rising Chinese rivals.
The evocation of economic nationalism may be persuasive to the US audience. The country is locked in geopolitical rivalry with China that is set to upstage the US as the most dominant among the world’s economies. However, the US big tech companies are global firms. Their anticompetition practices have far-reaching impacts beyond the shores of the United States. Whereas the US population is about 330 million, Facebook had over 2.6 billion monthly active users in Q1 2020.
The genius of the founders of Apple, Amazon and Alphabet should remain well regarded. The tech firms have also built and sustained a culture of innovation that has continued to support significant market shares. But at issue is whether the big techs are stifling the ability of other innovators and entrepreneurs to sufficiently reap the benefits of their own innovations.
It is now known how Facebook has reacted to a major competitive threat. Internal email correspondences seen by the congressional members revealed that Facebook top executives, including its CEO, Mark Zuckerberg, expressed concerns about the threat posed by Instagram. According to congressman Jim Sensenbrenner, rather than compete with Instagram, Facebook bought it. The implication of the hostile acquisition was that Facebook would not allow a rival to lawfully challenge its market dominance.
WhatsApp is another big acquisition by Facebook. By controlling the big social networking firms, Facebook has remained dominant in the social media sector, in terms of revenue and monthly active users. But this has not necessarily translated to critically acclaimed service quality. On the contrary, Facebook irritates its users on several issues. It makes assumptions about who may be – should be – our friends. Its default settings allow connected users to post things you may not like on your wall, until you adjust the setting. WhatsApp groups are practically impossible to manage. Posts cannot be deleted for everyone, even by the poster, after one hour.
On his part, Jeff Bezos somewhat agreed that Amazon does not adequately govern its rule that prevents it from using data generated by third-party sellers on its platform in making decisions about its own products. In effect, Amazon could leverage its access to the data on rival products on its platform to generate leads and undercut the competition.
Apple, Alphabet’s Google and Amazon in various ways abuse their model of building a shared platform. They systematically undercut third-party participants on their platforms. Whereas the availability of third-party apps is critical to the popularity of its App Store, Apple developed various tactics to maintain a duopoly with Google in the apps market, including by offering the latter lower commission charge compared to smaller developers. Internal communications in the firm revealed Apple was even contemplating raising the commission it charges for purchases on its App Store to 40 per cent, while still competing with the third-party developers.
As for Google, it is undermining the survival of publishers by displaying its own information at the top of the pages for its search engine results. This is reducing traffic to other websites. After leveraging access to information by news organisations, Facebook now suppresses access to contents from news sites, except those contents are promoted at a fee. Indeed, Facebook freely exposes fake news, conspiracy theories and unprofitable chatters than professional media contents to its users.
While hastening the death of professional, traditional news media that have served to inform – rather than misinform – the people for nearly four centuries, Facebook and Google, and generally the big tech companies, are not creating commensurate jobs to their revenue. My compilation of the 2019 revenues and employee numbers by the big tech companies shows that they supported less than one staff per every $1 million revenue they generated. With one million dollars in revenue, Apple supported 0.53 job; Facebook, 0.68; and Alphabet, 0.76. Amazon data is significantly better; it supported three staff with every million dollars it generated in revenue in 2019. But this is significantly lower than 4.2 staff supported by $1 million generated in revenue by Walmart.
Technological efficiency only partly explains the low labour utilisation by the big tech companies. Certainly, Facebook is not investing enough to keep its platform safe for users. Following public complaints, the company has been increasing its fact-checker partners. But given the high-level of disinformation on Facebook on the still-raging Covid-19 pandemic – a disease that has spread to over 17 million people and killed nearly 700,000 people globally at the end of July – it is arguable that the social media giant has not done nearly enough to ensure the public is not misled on its platform.
The big techs are not hiring enough partly because they want to retain more revenue. Some of the incomes are generated through unduly self-serving policies. After three weeks that I have logged a complaint of wrongful billing by Zoom, the fast-growing tech firm has only kept sending me automated emails informing me that the case is still pending attention. Of course, the stated likely resolution does not include a refund.
Breaking up the tech companies is a prospective solution in ensuring they don’t continue to undermine competition. The model whereby Apple Store provides a platform for selling third-party solutions similar to the ones it also develops is evidently dubious. Similarly, Amazon should either operate as an online retailer of its products and those purchased from other suppliers and producers, or as a vendor of only third-party products. Google would also have to separate its search engine business from a new arm that is providing its own contents.
Public scepticism remains days after the congressional hearing on whether effective actions could be taken against the four big tech companies. They are powerful and may be seen to symbolise the success of the American capitalism. But the US capitalism has been very successful well before the tech companies came on the scene. Indeed, competition has driven innovations in the country, propelling it to its superpower status.
It is not in the long-term interest of the US to allow its big tech companies to stifle its innovation culture through anticompetition tactics. If US policymakers would not do anything about the perceived antitrust behaviours, countries affected would not continue to gloss over them, and may be forced to support alternative (local) solutions and platforms.
Happily, agitations against Facebook are already growing in the US, with many major firms temporarily withdrawing their advert placements on the social media platform. The congressional hearing took place at a time that the advertising boycott was still topical, indicating that the congress is on the right path. The government needs to muster the political will to get the big tech companies to implement the necessary corrective measures.