Is 'This Time Different' Concerning Big Internet Dominance?
from the a-question-worth-asking dept
I've made a similar point a few times in the past, but now that the antitrust knives are out for the big tech companies (mainly Google, Facebook, Amazon and Apple), it does seem worth noting just how quickly the tech landscape seems to change. I moved to Silicon Valley 20 years ago. At that time, the "dominant" companies were: Microsoft, Sun, Oracle, Netscape, IBM, SGI, Intel and Yahoo. Those were still the days of "no one gets fired for buying IBM." Google's headquarters today were once SGI's. Facebook now occupies Sun's headquarters (affectionately nicknamed Sun Quentin, for its resemblance to the prison a bit north of here). A decade or so ago, I remember the general refrain about the startup ecosystem was that there were three "dominant" companies in the marketplace that any startup was trying to sell to. The so-called "GYM" companies: Google, Yahoo, Microsoft. Yet, today, all anyone can talk about is "GAFA" (Google, Amazon, Facebook, Apple) or in some versions "FAANG" (add in Netflix).
The tech market is one of disruption. It's a celebrated term around here -- often mocked by outsiders. But dominance has a way of falling. And falling fast. So I appreciate a recent piece by Ryan Bourne at Cato asking some fairly pertinent questions regarding the new antitrust focus on "GAFA."
Almost exactly the same arguments about how “network effects” might make Facebook or Google entrenched monopolies were used against Myspace, Microsoft’s Internet Explorer and AOL’s Instant Messenger. Analysts worried that web managers optimizing sites for IE because of its high use numbers would ossify the browser market in Microsoft’s favor. In the case of AOL, 40 companies wrote to the Federal Communications Commission asking it to make AOL’s network compatible with others. Of course, Myspace was rendered obsolete by Facebook, Internet Explorer by Google Chrome, and AIM by, well, a lot (there are many apps with instant messaging facilities).
But it’s not just network effects. In 2007 Forbes was running articles about how economies of scale for Nokia would act as a barrier to entry for rivals. The higher profits were generating “more money to invest in research and development.” It was said Nokia’s supposed technological superiority meant “no mobile company will ever know more about how people use phones than Nokia.” That year saw the first iPhone launch.
Today, consumer groups wail against Apple’s supposed “monopoly” power with its app store, saying it’s unfair to bundle it into its phone while prohibiting other means of download. Yet similar arguments were made about Apple’s iPods inability to play songs that weren’t downloaded from iTunes. Of course, developments in the music purchase market, mobiles and speaker technology completely unbundled music purchase from listening devices.
None of this is to say that there can't be antitrust concerns or market-power concerns to watch out for with these companies. But, the burden should be on those insisting that the only obvious thing is to "break up" these companies to explain why this time is different, and why no new competitors will be able to really enter and disrupt the legacy players.
When I first came to Silicon Valley, it was just as the antitrust effort against Microsoft was heating up -- and I totally supported it at the time. In retrospect, it's unlikely that case did much at all. There were other forces at work that limited Microsoft's power (though it's still a very big company doing quite well). After working around here for over two decades, though, and seeing just how much this place changes every few years, I've yet to see a convincing case that "this time is different." Indeed, I see plenty of entrepreneurs who are eager to disrupt the big players.
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Filed Under: antitrust, big tech, dominance, internet companies, monopolies
Companies: amazon, apple, facebook, google
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Is it different?
I see the problem with wanting to break up big companies is that those looking into to future lack the imagination to conceive what might be 'harmful' to the current leading crop. This is not necessarily their fault (or a bad thing), as if they were capable of creating the next big thing, they would be doing so rather than prognosticating about things they know nothing about. And fear. Fear of the unknown and that the unknown will never come to pass.
There is also the problem of trying to identify vulnerabilities in the current crop, as the disruptions of the companies mentioned in the article came from...shall we say 'left field' rather than direct attacks. While the Iphone was targeted at competing with Nokia, the things that made it different and better weren't that it made better phone calls. The things that took out AIM weren't that it sent messages better, but that they weren’t in the AOL silo. The things that brought Chrome and other browsers to their current market positions was that they weren't IE, and focused on things not Microsoft rather than containing themselves to that walled garden.
So what will be the next disruption? It's not likely that anyone knows now, or they are not far enough along with their development for many to be talking about them yet. Just as with other disruptions it won't necessarily be some new technology competing with existing technology but possibly something that enables a new 'need, or convenience' that we, today, don't know we need, or need easier, yet. We used to listen to radios who programmed our listening, then we carried music around with us, to program our own listening, and now we have moved back to a wireless connection to music that has a greater variety but is still not only programmable but has access to new music as it comes out. There are other nuances to that analogy, buy songs rather than albums, for example.
So the things that will be different are what the marketplace determines is important to them. Those things may or may not exist yet, and whether those things will be accepted by the market, let alone become important to the market will depend not only on the uniqueness of the product/service, and the quality of the implementation of the product/service but whether it captures some link to the imagination of the market. While the actual disruption might be new and different, the process will be the same.
As mentioned above, a big problem is the fear created by the size of the current market dominators. That fear is irrational as, for example, while Microsoft and IBM are are still around, they have been re-imagined or taken some different directions than they had in the past, and aren’t quite as dominate as they were, while competitors are/have developed products/services that filled in the gaps. Who knows what Amazon might turn into, or what convolution of technologies might make it passe (maybe a new product search engines along with emerging delivery technologies that combine to make manufacturer to direct to consumer much more efficient, that then makes Amazon less relevant) or Facebook’s placement of everyone/thing in one place being replaced by some distributed connectivity that allows people to feel/be connected without the intrusion of Facebook’s leering over everyone's every thought and deed. The fear of size and the dislike for dominance which seems to be not able to be overcome has been shown to be overcome-able in the past, and likely will be in the future, even if those seemingly insurmountable obstacles continue to grow. While the process will remain the same, the disruptions will be different, and alike.
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Re: Is it different?
I believe the big question not asked about market dominance is can the market even support a diverse space? And if so under what circumstances?
It seems to have followed a go big or go home trend - while smaller players can enter at any time from a lack of barriers there seem to be three main outcomes - one being to rapidly expand and become a market leader or contender for at least a little while, two to fizzle out and become a joke, or three - stubbornly retain a small niche that makes up 5% of the market if they are very lucky.
Venture capital probably has a role in the first two options and the third is more common with free software or open source. The network effect is also attributed as a factor for the go big or go home part. It seems to be either "everyone" uses it or nobody uses it.
Common protocols could theoretically deliver a more diverse space but they seem to have more geek appeal than mass audience appeal. For now most people tend towards platforms like say Discord rather than IRC. You can always choose otherwise but don't expect to be mainstream.
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I think that's more about how toothless the antitrust judgement was and how completely Netscape had already collapsed by the time it was rendered than because antitrust action wasn't justified. Though given that the US government's approach to antitrust action is much the same now as it was twenty years ago, I don't expect antitrust actions today to end much differently.
And given that it took a company with Google's market power in search and advertising to start threatening Microsoft's market dominance, I can't say that speaks to a thriving competitive market. It's true that fortunes rise and fall, but the problem of market concentration in a few hands doesn't change, even if occasionally a new set of hands comes in to displace another set.
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Re:
Yeah, the Microsoft antitrust case's ineffectiveness was definitely a matter of regulatory capture as far as I understand it. And according to actual people who were working there, being sued does tend to cause you to have to expend effort to deal with it that allows upstarts to sneak in and kick your business in the...whatever.
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Re:
It didn't "take a company with Google's market power" to threaten Microsoft because that's not what happened at all.
It took someone doing it better than Microsoft was, which is what Google did and that's what gave them the market power they now have. No one had any clue who Google was back then. Microsoft lost it's dominance because it sat around, not because anyone was big enough to take them down.
This is the problem with focusing so much on how big these companies are. Their size doesn't prevent someone else from coming in and doing what they're doing better. The fact that no one else is getting as big as Google is is also not a bad thing. Smaller companies existing and being able to try to compete is enough to force the larger players to continue to compete. As long as it is easy for someone else to enter the market and offer their product to the same customer base market forces will be able to replace any big player that behaves badly so quickly they honestly won't know what hit them.
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Re: Re:
And this is why we not only need the entrepreneurs, we need to provide ways they can avoid being squished by the 800lb gorillas, typically these days with Felony Contempt of Business Model charges, although there are other means as well (such as regulatory capture, a reason that meddling with Section 230 to try to "hurt Facebook" is bound to backfire).
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Re: Re:
Sure. That's why everyone uses Opera.
By the time Google became a legitimate competitor to Microsoft in the browser and OS space, it had already become a dominant player in the search space. Where MS was not a serious contender at the time Google was coming up.
You say that as if those two things are mutually exclusive.
They're not.
There's a reason it was Google who finally broke IE's dominance of the browser market instead of Mozilla or Opera. Yeah, Chrome was a better browser than IE. So was every other browser. If you think that being advertised on the Google homepage wasn't a major contributing factor to Chrome's adoption, I don't know what to tell you.
Again, there were a lot of someone elses making better browsers than IE. "Doing it better" is not the sole criterion for gaining a foothold in a marketplace. Lots of products are better than the dominant player, and never make an impact.
Quality is a factor. But so is being funded and advertised by a multibillion-dollar household-name company.
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I thought when politicians make threats to break up industry players it is actually a plea for campaign contributions. Am I wrong?
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Re:
Pretty much, that and playing to gullible voters.
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'Who cares who owns the road, focus on the stores it leads to!'
I've made a similar point a few times in the past, but now that the antitrust knives are out for the big tech companies (mainly Google, Facebook, Amazon and Apple), it does seem worth noting just how quickly the tech landscape seems to change.
Also worth nothing, that for all the interest in bringing the hammer down on tech companies there seems to be a remarkable lack of interest in doing so for internet access companies like Comcast, Verizon and AT&T.
Be nice if the same people freaking out over the 'monopoly' power of Google and company applied that same standard to the companies that in large portions of the US you must go through to even reach those other company platforms/services.
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Handwaving away antitrust concerns with promises that a big disruptor will eventually come around because they always have in the past, saying that what we have right now is fine and that we all need to be patient is absurdly wishful thinking.
The biggest companies today are capable of rapidly copying any features that those disruptive entrepreneurs implement in their products. If they can't copy it, they can just buy the disruptive company out with a ludicrous sum of money. The whole "Disruption happens and these big companies get caught off guard because nobody knows what anybody is going to want in the future because it doesn't exist yet" argument falls apart since these modern tech companies now have enough power to copy any disruption as soon as the market signals that it wants it or acquiring the company producing the disruptive thing the market has signalled demand for.
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Re:
Yeah, you apparently didn't read the article, otherwise you would have seen that Microsoft and MySpace were in the exact same situation back in the day and Microsoft STILL lost the browser war (to the point that they've now just given up entirely and are going to run a Chromium fork) and MySpace lost to a small, disruptive, startup called Facebook.
No one is saying we should ignore anti-trust issues, the article is just saying there is no evidence to support it right now and it's a bit premature to start talking about breaking them up for something that hasn't come to pass yet.
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Re: Re:
The situations are not the exact same.
MySpace had 75 million active monthly visitors at its peak. Facebook currently has an average of, what, 2 billion? And a massive advertising arm making them more money than MySpace could've ever dream of. Facebook owns Instagram and WhatsApp as well. The idea that a plucky startup is going to come along and catch modern-day Facebook off-guard and attract enough users to create enough network effects to become a serious competitor to Facebook before Facebook can copy the startup's features in one of their services they own or before they or another major company can snap up the startup with an acquisition is laughable.
Google: Our current broken system of copyright brought to you by the MPAA et al means that YouTube is allowed to run basically unopposed in its market; any other video competitor would need to build out a ContentID-like system to keep those media companies happy, and they probably don't have the billions it took for Google to develop ContentID. Google used YouTube's dominance to screw over Microsoft's attempts at making Windows Phone a viable competitor that had the same apps as iOS and Android. With Chrome and Chromium, they now control a stupidly large share of the browser market, which makes it easy for developers to thumb their noses at providing reasonable support for anything else. The way that Chrome seamlessly works with all of Google's other must-have services in a way that makes it tough to switch isn't good for competition. Chris Beard says as much in his goodbye letter to the non-Chromium Edge.
This time it is indeed different. The infinite money-fountains these companies have thanks to their advertising services means that the situation is different. The size of their markets that have reached the billions thanks to smartphones means that the situation is different. Mobile devices (particularly ones running different versions of Google's Android) having become near-essential in the developing world, the fact that WhatsApp has become a nearly mandatory communication tool in developing nations, and Facebook continuing to try and push its walled garden in these places in the form of Free Basics means that this situation is different. Continually using the old MySpace chestnut in the face of all of this is laughable and woefully ignorant.
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Re: Re: Re:
Pretty damn close.
So?
Again, so?
....so?
What's laughable is the sheer amount baseless assumptions you've made in that one sentence.
First off, Facebook was the plucky startup that eventually beat MySpace. There's no getting around that. Most tech companies were plucky startups that ended up trouncing other companies. There is no rule that says "once a company reaches a certain size, it's too big to fail". Sorry, every company can be trounced.
Second off, in order for Facebook to copy features, the startup would have already had to have made their service publicly available. And for Facebook to even want to copy its features in the first place would mean that the startup service is eminently popular, at which point, Facebook is now playing catch up and also has to make sure that they don't infringe on any patents or anything like that.
Third, for a company to buy another company, both have to agree to it. One company can't just come in and say "we're buying you out, tough luck". And a plucky startup that is enjoying a sudden surge in popularity and business is unlikely to agree to a buyout.
Absolutely NOTHING in that statement shows that big companies are an issue. Instead it points to the fact that BECAUSE OF DRACONIAN COPYRIGHT LAWS only large companies (like, but not limited to, Youtube/Google) can survive the cost of complying with said rules. That's not an argument to break up Google, that's an argument to change copyright laws.
And as far as Windows phone goes, Google may have contributed to its downfall by refusing to make it's app available on the Windows phone, but you are ignorant and naive if you think it would have succeeded had it had that app. There were multiple failings on Microsoft's part that were actually the larger contributors to why it failed. Bill Gates even admitted as much.
So freaking what? They aren't the only browser out there and no one is stopping anyone else from making a better browser than Google. Windows has a stupidly large share of the OS market. Microsoft hasn't made a decent browser since ever. It wasn't hard to come along and steal their thunder, and this despite that fact that IE and Edge are preloaded on every single Windows PC. People choose to use a different browser instead.
This is not anti-competitive, this is making a good and valuable service. There's nothing preventing other browsers from making similar integration features and services.
You've yet to give a single shred of evidence as to WHY.
No, it really doesn't. Having a lot of money means jack squat if another company can make a better product than you. Again I point you to Microsoft (who has a crap ton of money) and can't make a decent browser to save their lives. They even have email and other services they could tie into, just like Google, but they didn't. So where is the evidence that having a ton of money is different? You use Microsoft as an example to prove your point but Google was the plucky startup that trounced Microsoft despite Microsoft being in pretty much the exact same position Google is today. Why is that somehow different?
Guess what, IE isn't available for mobile devices. And on PCs where Edge and IE are installed by default and users have to MANUALLY download and install a different browser, Microsoft STILL got owned by other browsers.
Mobile devices are pretty much near-essential in any country, not just developing ones. And because Android is pretty much free unless you want Google's ecosystem, the pricepoint to get into mobile is far cheaper than any other smartphone. Does Apple sell a $150 iphone? What about Blackberry? Android is to mobile what Windows is to traditional computers. So in a developing country where people need to have a mobile device but don't have a few thousand dollars just lying around, what phone do you think they are going to buy? Also, Apple made their own browser long before Google, guess what, not many people use it either unless they have an Apple product.
Pfft. Ha! Really? This is not even close to mandatory in developing nations. But even if it is, do you know why? Because it's encrypted while most others aren't and some of these developing nations are struggling under cruel dictatorships with no freedom of speech that would kill their people if they were able to read their communications criticizing their government or advocating for change or expressing any other unsanctioned speech. Nothing and no one is stopping someone from making another encrypted communication tool. In fact many do and are.
You do realize that they are failing miserably at that right? Because people recognize what a crappy service it actually is. So tell me, how is a failing service, that nobody wants, and very few people use, proof that things are different? Especially since Free Basics is only used by people in developing nations that don't have actual internet service and anyone in developed nations just has regular old broadband and gives a giant middle finger to Facebook's walled garden AND once those people in developed nations get actual broadband service they end up ditching Free Basics. Hm?
Right back at you. You might try actually researching some of what you say before spouting it. Otherwise you are just going to continue to end up looking like the ignorant one.
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Re:
The biggest companies today are capable of rapidly copying any features that those disruptive entrepreneurs implement in their products.
I hear this all the time, but I've rarely seen it play out that way in reality. Big companies are frequently slow to act and don't do a very good job of "copying features" (often that's because it's not "the features" that are the issue, but other, less evident factors). Yes, Facebook successfully copied Snap's key features, but that's one of the rare examples where that worked, and a lot of that had to do with the fact that Snap was a buggy, crappy product.
Microsoft tried to copy Google, but how many of you use Bing? Google tried to copy Facebook, but Google+ is gone. Google also tried to copy Yelp and Wikipedia. And neither have been particularly successful. Merely copying features of smaller companies doesn't guarantee success, and quite frequently fails for a huge variety of reasons.
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IF a new company comes to challenge facebook, it wount come from europe,
where the laws will are tilted to favour legacy ip holders ,
and in 2 years time every image, video, will have to be filtered.
facebook is the no1 social media service, theres no way it should have been
allowed to buy instagram .
it monitors all startups in the social media space ,any app that becomes popular it will buy the company.
The legal action against microsoft helped the consumer , it realised it needed competition,
it invested in apple., it made space for google to compete.
young people may not remember windows was the no 1 os, internet explorer was the no1 browser,
websites were optimised for ie .
Chrome or android were yet to be invented .
There are many free video websites,
no one is even close to youtube in terms of daily users .
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Re:
Why?
Do you have some inside knowledge of how the company operates or can you just predict the future?
Really? How? What outcome did that achieve that has negatively impacted Microsoft and helped other companies compete?
Are you serious right now?
Ok. And how did that change anything?
How? Nothing Microsoft did or didn't do back then would have prevented or enabled Google to compete. Especially since back then all Google was was a search engine. Chrome didn't even come on the scene until 2008.
It still is. At least as far as traditional computer operating systems are concerned. Mobile is Android. But go to any computer store and tell me what 95% of their desktops and laptops they are selling are running.
And nothing Microsoft did or didn't do would have prevented Chrome and Firefox from making IE irrelevant.
Because at the time IE was the only viable browser. The anti-trust case didn't do anything that suddenly made competition in that space more viable for Google and Firefox. Google didn't even get around to creating a browser until YEARS later.
As stated, Chrome wasn't even invented until LONG after that case was over and it didn't really enable anything. Android is a mobile OS and doesn't directly compete with Windows in any way, so I don't see what your point is here.
So? They are doing it better than everyone else and users have made that clear. Microsoft still has over 80% of the desktop/laptop OS market share. You could say the same thing to lots of other companies. What exactly is your point here? As you even admitted, there are many other competitors. What's the problem?
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When I ask the people I know who use Apply why (when in my opinion there are cheaper alternatives that suit their needs perfectly)
They tell me it's not because of different UI or anything they actually like about the new Apple products..
Instead they cite hurdles against data migration and because they "would have lost" their apps/ other digital purchases if they ever switched devices to any of the competing phone manufacturers. When I ask how much more Apple could charge over the competition before they thought it was worth switching.. They start mentally adding up how much it would cost to replace their apps and media and which ones they can live without...
But I'm sure that is just the people I know.
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The problem is these companies can ignore all economic reason with a bag of money.
It's difficult to compete if you're working to pay this months rent and the competition has lots of money they can loose.
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Re:
Well, it kind of depends on how you are trying to compete. Mozilla doesn't have near the money coming in that Microsoft does, yet they still managed to make a better browser.
All the money in the world won't save you if someone can do something better than you can.
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