Silicon Valley dilemma
WHILE much of corporate America, from airlines to hospitality, has been savaged by the pandemic, big tech is enjoying what can only be perversely described as a good lockdown.
The big four – Apple, Amazon, Facebook and Google’s parent Alphabet – posted combined quarterly sales of £156bn from April to June, and all reported higher profit.
Unsurprisingly, Amazon came out top with a record quarter of £68bn in sales, sending its shares shooting up 4pc. Another £4bn or so was added to the Bezos wallet.
Yet the rise in value of the tech giants was all the more astonishing because it came just hours after their chief executives were grilled on Capitol hill about their alleged abuse of monopoly power and global dominance.
Perhaps just as well that the results did not come out until a day after the hearing, on what was dubbed ‘Super Thursday’ so the congressmen were not armed with fresh proof of just how powerful and profitable they are. And the fact all four reported on the same day meant none could be singled out. Strength in unity, as the saying goes.
As it was, Apple’s Tim Cook, Amazon’s Jeff Bezos, Alphabet’s Sundar Pichai and Facebook’s Mark Zuckerberg squirmed and struggled to defend themselves during what was a combative hearing in which they did not for once have all the slick answers.
Zuckerberg admitted to ‘neutralising’ rivals, and has already described his purchase of WhatsApp and Instagram as a ‘digital land grab’.
even Bezos sweated when asked about a bookseller being taken out by his Amazonian beast.
What a land grab it is. The four horsemen control nearly all that we do on the internet: selling apps, sending messages, pestering us with ads, stealing news, answering people’s questions and buying just about everything one wants.
This is extraordinary power. Fortunately, the US politicians are serious about discovering how this power works, how it is wielded and if necessary cracking down on their reach. The sub-committee of the house Judiciary Committee has been investigating their dominance over the internet for a year now, and came well prepared with ammunition to show how the tech titans have been responsible for bullying and destroying small businesses.
That’s on top of charges that big tech controls how we are surveilled and our data manipulated, that Facebook spreads misinformation and censors, while Amazon handles laundered goods.
BUT what should the policymakers do? Should the big tech behemoths be broken up in the same way Theodore Roosevelt took the axe to Standard Oil and the telephone companies in the 1920s? Or can their power be reined in by higher taxes and stiffer regulation?
It’s a daunting dilemma. On the one hand, there is a strong argument that the West should support rather than demonise these great success stories, because the real threat is China. Nearly half of the world’s biggest online firms – including Alibaba and JD.com – are Chinese, and they are growing fast.
There is another point. Would breaking them up benefit the customer? As most of us could testify, going through lockdown without Facetime on our mobile phones and Amazon to shop online may have been tougher still.
But not impossible. As we also saw during lockdown, small business owners snapped into action and came up with the most enterprising solutions. Now what we need is a fairer environment in which smaller social media outlets or online retailers can compete before being crushed by the big guns.
how can a more level playing field be achieved? Well, US politicians should look to the Australian government for inspiration. It has announced plans to force Google and Facebook to pay news outlets for content in an attempt to prevent the country’s media from being ravaged.
If they don’t pay, the Australian regulators will fine them hundreds of millions of dollars. Facebook and Google have already threatened to walk away rather than pay for news. Good. Let them walk.
Unusually, there is cross-party support for change. Both the Republicans and Democrats want to see big tech reformed, to varying degrees and for different reasons.
But don’t hold your breath, certainly not until after the November US elections. Which is why the share prices of the big tech corporations largely stormed ahead after their results. Investors take the view that the regulators will not be cracking down any time soon.