Editor’s note: Industry consultant Shelly Palmer is taking his popular newsletter and turning it into an Adweek article once per week in an ongoing column titled “Think About This.”
During last week’s two Democratic primary debates, myriad candidates laced up their fighting gloves, often wildly throwing punches. One that seemed to land from many of the candidates was centered around corporate greed, with one company in particular serving as the punching bag: Amazon.
No one should be surprised that “Break up Big Tech!” is a major talking point for many 2020 presidential hopefuls. The tech-lash has been brewing for years. These companies—Google, Amazon, Facebook, Apple, Microsoft (aka GAFAM)—are both dollar and data-rich and are exceptionally efficient at translating the value of our behavioral data into wealth. And while it could be argued GAFAM are de facto monopolies (the Department of Justice sure seems to think so), it doesn’t mean they don’t vigorously and actively compete on many levels, including for ad dollars with traditional media businesses and with each other.
For example, Amazon is trying to turn the duopoly into a triumvirate, going right after Google and Facebook and snagging about 9% of the digital ad sales market. By 2023, it could take as much as 14% of total U.S. digital ad sales.
No matter how you look at it, you need scale to play this game. How big is big enough? Are we big enough to effectively compete? are questions every manager of every unit across GAFAM ask themselves every day.
Importantly, when you couple the unprecedented decline in ratings with the aging of its audience, television can no longer effectively reach many of the target audiences mass marketers desperately seek.
To compensate, big advertisers are in need of data-driven one-to-one marketing at scale, and GAFAM can put the right message in front of the right person in the right place at the right time precisely because they collect and analyze data at scale. Take away the scale, and the economics don’t work.
So how does a presidential hopeful accomplish dismantling Big Tech when we are using more digital technology today than ever before and will use more digital technology tomorrow than we use today; when technology is way ahead of any policy or law that might govern it and societal norms and mores cannot keep up with our technological progress; when social media addiction is real and social media-empowered tribalism cannot be controlled; when echo chambers are virtual vortexes, escape from which requires exceptional force; when we have granted a small number of very large companies permission to transform the data that we willingly provide them into wealth and those companies are doing so with exponentially increasing efficiency?
As far as I can tell, nothing that’s being suggested by any politician or pundit will do anything to change any of the above.
There are several legal hurdles to breaking up Big Tech. Under the Sherman Antitrust Act, the government must prove that there is “contract, combination or conspiracy in restraint of trade” and “monopolization, attempted monopolization or conspiracy or combination to monopolize.” The Federal Trade Commission Act prohibits “unfair methods of competition” and “unfair or deceptive acts or practices.” Then there is the Clayton Antitrust Act, which plays clean up for the Sherman Antitrust Act. It can help block M&A activity that would “substantially lessen competition or tend to create a monopoly.”
Amazon is big. Some people believe it is an ecommerce monopoly. While it is true that Amazon is responsible for close to 50% of online sales in the U.S., its business represents only 5% of the total U.S. retail market. Making the case that Amazon should be broken up because it owns a relatively small brick and mortar supermarket chain is a heavy lift.
Similarly, while Facebook is the largest collection of human beings on the planet, it offers its services for free. Free is very pro-consumer. It’s hard to offer services at a price that is lower than free. You may counter that you pay for Facebook with your data, so it is not free, and I agree. But supporting a business with advertising so that consumers can enjoy your service for free is a legal business model. It’s how the commercial media business works (television, radio, print, etc.).
Alphabet (Google’s parent company) is already separated into individual units, each with its own P&L, so it already acts like a bunch of separate operating companies. If you ask Alphabet—which could be defined as a “trust” under the Sherman Antitrust Act—to divest itself of its operating divisions, very little would materially change for consumers or the businesses that rely on Google and YouTube for putting their advertising messages in front of the right people in the right place at the right time.
Innovation is America’s competitive advantage
The idea that breaking up Big Tech will somehow allow for more control over technological advancement is a false premise. “Break up Big Tech” may be a great soundbite, but it is not sound policy. No regulation or law or anything other than a return to the dark ages is going to slow down or control the pace of change.
Innovation is America’s competitive advantage. Our country has been the most innovative in the world for more than two centuries. Now we have real competition around the globe. For America to be competitive (and digitally secure), we need tech policies that encourage innovation and reward success.
I’m all for watchdog groups, sensible regulation and laws that protect us from bad actors. I am not in favor of framing Big Tech as one thing that can be “fixed” with a soundbite policy.