Global technology companies like Amazon, Apple, Facebook and Google dominate their markets, from e-books and smart phones to search advertising and social-media. These companies have taken the winner-take-all approach and have left several competitors in the dust. Their dominance is indisputable. Google’s share of U.S. internet search advertising is about 88 percent. Facebook accounts for about 77 percent of social media traffic. Apple takes more than 60 percent of high-end smartphone sales globally. About 43 percent of all U.S. e-commerce sales and 53 percent of all book sales go through Amazon.com.
Their dominance has brought the discussion of monopolies into the forefront once again. The lawsuit against Microsoft in the 1990s over its PC software dominance was the last major monopolization case. Gaining a monopoly position from superior products or better management is considered a reward for success in the marketplace. But it’s illegal for a monopoly to take predatory steps to stop rivals that might threaten its dominance.
And so, the question is – Do these FAANG (Facebook, Apple, Amazon, Netflix, Google) companies fit the definition of a monopoly?
Future Wealth’s View
The term “monopoly” gets thrown around a lot but never positively and rarely accurately. Finding a monopolistic industry is pretty easy. Just follow bad customer service, and you will also find an industry with little competition. Cable service providers, airlines, utilities, cell phone providers among others, fit the profile accurately.
Unlike the industries mentioned above, the barriers to entry in the businesses of search, e-commerce, entertainment and social media are pretty low. One could argue that the FAANG’s are successful because of the quality of their offerings i.e. their dominance may not be about predatory practices as much as the nature of competition in the digital marketplace, where new technologies create new products and services that attracts more people and as more people use them, the more useful and dominant the platforms become.
It is true that newspapers, department stores, movie theaters and retail outlets are going out of business due to the likes of Amazon, Netflix and Google. But, technological progress and disruption of existing methods comes at price – does it not? The same people who are complaining about monopolies would be the first to agree that the convenience of watching latest movies at home or having groceries delivered to their house has freed up time to do other things, raising productivity and quality of life.
But, for a few – “The key to winning in Monopoly (the board game) is not to play”.