Big Isn’t Always Bad
Philip Ellison 19 June, 2015 at 11:06
We’re living in the age of Goliath, or GAFA if you’re up on common parlance; that’s Google, Apple, Facebook and Amazon. Over the last fifteen years we’ve seen one tech company after another grow from a single dude’s hobby into a multinational juggernaut – but does the digital world breed a culture of dominance? In a Digital Summit session entitled ‘Tech Giants: Does Monopoly Have To Be A Dirty Word?’, chaired by BBC business editor Kamal Ahmed, four panellists fought it out.
Former Microsoft VC leader Bindi Karia, dubbed the ‘UK’s queen of start-ups’, doesn’t see a problem; in her eyes, these companies tend to hog their spaces because they are good at what they do, and because people are adopting their product.
Meanwhile, author and self-proclaimed ‘controversialist’ Andrew Keen believes that “ the digital economy lends itself to even more excessive monopolies.” Keen says these monopolies are “incredibly problematic” when it comes to competition, innovation, and entrepreneurs, as the “winner-takes-all economy” doesn’t even have two companies occupying the same space, as demonstrated by Google, Facebook, and Amazon.
“Competition is necessary to promote diversity, choice, innovation and quality,” says Adam Cohen, Google’s head of economic policy in Europe. More than lending itself to natural dominance, Cohen believes the internet is ripe for constant, rapid disruption. Fifteen years ago, Yahoo was a dominant player in search, and Google replaced it almost overnight. “The existence of Facebook hasn’t stopped networks like Twitter and Snapchat emerging,” he says, “there’s no stopping that process.” The history of the internet is one of hubris; companies may be on top for a while, but users’ freedom and readiness to switch platforms means that monopolies can soon crumble in the face of superior competition.
Of course, disrupting the world of search in 2015 would be a very different story. In fact, it would be almost impossible for a new pretender to topple Google the way that Google did Yahoo; nowadays a company would need millions of dollars and vast amounts of data in order to usurp the top spot in search.
What about the little guy?
“This isn’t just the story of users,” says Pasquale, “but also of advertisers, and third parties who are affected.” His concern is that there are companies who rely on Google for the entirety of their traffic, who can be wiped off the search results if it looks like they’re starting to rival certain core properties. For example; between 2007 and 2014, traffic to price comparison websites went down by over 75%, while traffic to Google Shopping went up 200%. Additionally, Google’s stranglehold on advertising real estate in search, like Facebook’s in social, means that it is guilty of price fixing.
Of course, it is possible to make an argument for omnipresent platforms like Google and Facebook. It could be said that a universal familiarity with Google’s interface, among both consumers and marketers, actually presents brands with a straightforward, equal opportunity means of reaching customers in the emerging global middle class.
Keen’s axe to grind (one of them, anyway) is that monopolies enable organisations like Google to colonise other fields; “Companies use their dominance in one vertical to build businesses in other verticals, and that’s what the regulators in Europe are rightly looking at, that anti-competitive behaviour,” he says. He worries that GAFA’s disproportionate resources will oppress other innovators in the artificial intelligence “arms race” in Silicon Valley, and stifle new products and services in the ecommerce space which might have the potential to yield more effective ways of doing business.
In Karia’s VC experience, the majority of entrepreneurs don’t see the ubiquity of major players as a barrier; “they’ll simply continue to grow and develop the product they’re building.” And while it seems that every start-up of note is soon snapped up by Google or Facebook, Karia says it is entirely down to the founder. While there are some which agree to be bought out, there are also plenty which have refused – we just don’t hear about them. Ultimately, she says, “the motivation of the VC is to get a return, whether that be through getting bought by Facebook or through an IPO.”
“Big is not by nature bad,” says Cohen. He points out that success is not the enemy, but rather complacence, and highlights the importance of continually asking: “What is a potentially dominant company doing in terms of quality and innovation? We’ve seen cases where that subsides once they reach a position of market power.”
In addition to fears that market dominance will result in creative asphyxia, inequal regulation tends to lean in GAFA’s favour. For example, no standardised rules exist for the provision of services; telecoms firms like O2 and AT&T are heavily regulated, but a relative newcomer like WhatsApp can get snapped up by Facebook and therefore find itself exempt, despite offering consumers equivalent communications facilities. This means that consumers, brands and other tech companies must essentially rely on these monopolists to self-regulate. Not a comforting thought, when you consider Amazon’s history with the tax man.
Levelling the playing field
Keen and Pasquale agree that regulation has a critical role to play in the equalisation of the online marketplace. “We’ve got to have regulators involved,” says Pasquale, “so that when you search for something on Google you’re not immediately rerouted to Google-affiliated properties at the top of your search.”
Karia, however, isn’t so sure. Having lived through a period of heavy regulation at Microsoft from 2005 to 2012, she questions whether such rigorous, restrictive enforcement is conducive to genuine innovation. As Ahmed puts it; “Are you simply regulating against success?”
“The internet economy is no different from any other,” says Keen, “the problem with big internet companies is that they think they’re different. They need to be treated the same way, under the same laws… We need more regulatory investigation of these dominant companies for the sake of innovation and entrepreneurs.”