In RetroTech: NetLingo Blog

How dominant are Google, Facebook, and Amazon you ask? According to a briefing in my favorite magazine The Week, they are as dominant as Standard Oil, Carnegie Steel, and American Tobacco were at the end of the 19th century.

• Google dominates search, video, and online ads and has an 885 market share in search advertising in the U.S.
• Facebook and its major subsidiaries—Instagram, WhatsApp, and Messenger—account for 77% of mobile social media traffic.
• Almost $1 of every $2 in online retail sales goes through Amazon.

Flush with revenues of tens of billions of dollars, each company has heavily expanded into other industries:

• Google dominates video (through YouTube), mapping, and personal email;
• Facebook is building consumer drones and virtual reality sets;
• Amazon recently bought the upscale grocery chain Whole Foods for $13.4 billion.

Digital enthusiasts once predicted that the internet would democratize business and industry; instead, it’s enabled a handful of firms to have such dominant market shares that it’s almost impossible to compete with them. T.J. Stiles, a biographer of the 19th-century business magnate Cornelius Vanderbilt, says we are living in a second Gilded Age. “Our lives,” he says, “are channeled once again through fewer and fewer companies controlled by a few men.”

So, what’s wrong with monopolies you may ask? When companies control a market, they tend to use their power to eliminate competition—often to the detriment of consumers. They can force suppliers to lower their prices, cutting their profits, and can bankrupt their rivals by undercutting them—or simply buy them out. Massive companies can also use economies of scale to eliminate jobs—particularly in the digital era, when much work can be automated. All this can result in reduced consumer choice, depressed wages, and a concentration of wealth in the hands of fewer people in fewer locations.

And is that actually occurring? Yes...

• Amazon accounts for 52% of all U.S. book sales, 43 percent of all online commerce, and 45 percent of the fast-growing cloud-computing market. The Seattle-based company has put most brick-and-mortar bookstores out of business, and last year had online sales six times higher than those of Walmart, Target, Best Buy, Nordstrom, Home Depot, Macy’s, Kohl’s, and Costco combined! The self-proclaimed “Everything Store” has absorbed many of its competitors, buying the largest online shoe retailer (Zappos), the most popular live-streaming video platform (Twitch), and the market leader in baby products (Diapers.com). When the latter initially refused to sell, Amazon simply slashed its prices for its own baby products until Diapers.com capitulated.
• Facebook boasts 2 billion active users—more than a quarter of the human race. When CEO Mark Zuckerberg saw a social media threat from Instagram and WhatsApp, he spent $20 billion to buy them. A third social media competitor, Snapchat, rejected an offer of $3 billion, so Facebook launched a feature on Instagram essentially replicating Snapchat’s self-deleting videos and photos. Within a year, Instagram Stories has already attracted more daily users than its rival.
• Google’s parent company, Alphabet, acquires an average of one company a week. More than 1 billion people worldwide use Gmail. For Google, Amazon, and Facebook’s stockholders and executives, this staggering level of success has created enormous wealth, and the companies’ customers benefit from the unprecedented convenience their various services provide.

The domination of these tech giants also has produced plenty of losers, such as:

• The newspaper industry is one example. Facebook and Google control more than 70% of the $73 billion digital advertising market in the U.S. Many of those dollars used to go to media companies: Between 2006 and 2016, U.S. newspaper advertising revenue plummeted from $50 billion to $18 billion, and the number of jobs in the industry has been cut by more than half, from 411,000 in 2001 to 174,000 in 2016. Journalism websites, too, are struggling to survive, because Facebook and Google eat up most of the online ad dollars.
• Department stores and malls are another example. Hundreds of major retail stores have shut their doors because of the shift to online shopping, and dozens of malls have gone dark or are half empty. That, in turn, has damaged the vitality of downtowns and surrounding communities. “The communities wither away, and they never come back,” said Howard Davidowitz, an investment banker and consultant to the retail industry.

Is there any pushback? What do you think... in the U.S., not much. The U.S. government generally has used a light hand in regulating tech companies, so as not to stifle innovation and growth in what is now our fastest-growing industry.

Facebook, Google, and Amazon argue that they’re not true monopolies, because their much smaller competitors are only a click away—something that wasn’t the case with, say, AT&T before it was broken up. And the Big Tech beasts spend vast sums keeping lawmakers on their side: Facebook alone poured $3.2 million into federal lobbying in one quarter alone. But this is neither true nor fair to the American public.

Ultimately, consumers will have to rebel en masse against these companies before U.S. lawmakers or regulators will take any action—and there’s no sign that will happen, so one of my New Year's resolutions will be to figure out a way to contact elected officials and educate you as to how the Internet actually works and why Big Tech needs regulation.

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