President Trump’s recent Executive Order, aimed at Twitter, has brought up the question of the power of Big Tech.
For most of us, the COVID-19 crisis has been truly awful. But for Big Tech, it’s actually been pretty good, if markets are anything to go by, with demand soaring and governments turning to tech to help. The Trump administration’s focus seems to be narrowly focused on immunity from prosecution, aimed at social media in particular.
If we take the broader perspective, clouds of potential regulation seem to be dispersing for now. But is the newfound love for Big Tech misplaced?
Question of ownership
While data, IT, geolocation and AI will be key to recovery, serious questions arise - whatever happens with the social media pushback from the US administration. New services, digitally provided and ushered in by COVID-19, are becoming increasingly important.
Who should offer them? How should we set the rules of the game, in terms of who can control the data and access the insights? Some say “leave it to the market”.
In China, insurer PingAn leveraged its superior customer knowledge to expand into healthcare, becoming the trusted provider for customers lost in a maze of options. Tencent and Alibaba have created similar webs covering a vast array of individual needs.
Given the sensitivity over privacy, Big Tech in the West has been more circumspect, despite well-funded healthcare subsidiaries. Yet Amazon can be a true force in healthcare; like Google’s Verily, its goal is to revolutionize healthcare B2B and B2C.
Facebook is already active in preventive healthcare.
Tracking the dominance
We live in a world increasingly dominated by technology platforms and their associated business ecosystems. By making us even more dependent on virtual connections, COVID-19 is hastening this shift; Facebook just ventured into e-commerce to challenge Amazon.
Yet where does customer convenience end, and competitive dominance begin? Beyond privacy, how does data relate to competition?
To tackle dominance, we’ll need to focus on the business models of the platforms that aspire to run every aspect of our lives. The economics of digital businesses, with easy scalability, lock-ins and “winner-take-most” dynamics, can lead to a minefield, as recent reports from the UK and the EU demonstrate.
To “follow the money”, consider Big Tech M&A. Microsoft paid $8.5 billion for Skype and $26 billion for LinkedIn, while Facebook spent $22 billion on WhatsApp.
These massive investments helped acquirers cement their hold over their respective ecosystems and snuff out the threat from a potentially competing platform. The problem is that today’s antitrust playbook is ill-prepared to deal with the new rules of digital platforms and ecosystems.
From Alphabet’s tally of 150+ acquisitions over the last decade, EU and US competition authorities opened a case for six and acted on none. Is Google really so pro-competition? Or are we working with outdated ideas of what competition and power really are? This is by no means an idle question.
Right now, Google, Apple and Facebook are sitting on combined cash reserves of $570 billion, or three times the GDP of my native Greece. They can buy anything they want, given the looming contraction. Should we really allow this, or should we try to foster more competition between ecosystems?
Recently, LBS, UCL and the WEF co-organized a workshop on the regulation of platforms and ecosystems, involving several heads of European competition authorities and Big Tech leaders. The event highlighted a systemic unease and growing calls for a rethink of intra-platform competition and how all-powerful orchestrators manage members of their ecosystems.
The current stock market valuations of Big Tech suggest their power will persist and raises questions about our entire regulatory apparatus. Whether we intervene or not, our choices today may set the stage for the competitive landscape for decades to come.
Keeping encroachment at bay
A number of initiatives are bubbling up that may sound rather technical, or even geeky, but could still shape the business landscape of the future. GAIA-X, started in Germany, proposes a neutral way to connect players in industry and public sector so that they do not have to become subjugated to any Big Tech giant. In the (hot) healthcare sector, firms such as Phillips are advocating a new template for sharing healthcare information.
Technology can bring us important new solutions, as long as we find the right way to connect players and leverage data. In healthcare, for instance, what role should healthcare providers and insurers play? And what about telcos, handset makers (which include Samsung and Huawei) or the providers of mobile OSs?
How do we feel about the service-ization of data, and the generation of advertising revenues? If we do turn our backs on Big Tech, how can we justify neglecting its prodigious, potentially life-saving power? If we don’t, how can we ensure a level playing field?
The point of regulation is not to protect outdated incumbents, but to facilitate dynamism while addressing the real risk of excessively powerful firms- an agenda we’re ill prepared to serve.
While President Trump’s Executive Order may focus on the responsibility of social media firms in terms of content, and may lead us to revisit their responsibility in polarizing society. There is a broader agenda at play that can shape our economies for a long time.
The force majeure of coronavirus has granted us a brief détente with Big Tech. But as we will soon see very clearly, the big questions raised by the shift to a platform-based economy have not gone away.
Every technological choice we make has profound ramifications for strategy, competition, social welfare and the individual. If we want solutions that will meet all those needs, both during the crisis and long afterwards, it’s time we updated our playbook.
- Michael G. Jacobides is Professor of Strategy and Entrepreneurship, London Business School.