Big Tech Facing Creative Disruption
A couple of years ago we were worried big tech had a forever monopoly. Now...
Over the past 30 years we’ve seen big tech grow to dominance and then a worry that they have become this set of unbreakable monopolies. And yet now we’re seeing many of them facing the possibility of being displaced.
Lets take a look at FAANG+MT and see where they are now. And then below, what that means, especially in terms of monopoly regulation.
Facebook (Meta) is one of the two looking at the possibility of shrinking down to a remnant of it’s once upon a time total domination of social media. The direct threats are TikTok and Zuckerberg’s absolute control.
But on top of that there’s a general move toward people spending less time on social media and the time they do spend being spread out across more sites. And the bet on the Metaverse is unlikely to pay off. So Facebook is likely to go the way of MySpace.
Apple is in a really good position at present between their iPhone environment and all the pieces of that from the app store to iTunes. And they remain the best consumer electronics manufacturer by far.
But… nothing new. The app store monopoly is under threat from regulators in the US and EU. Once that is won, iTunes is surely next. They remain strong but over time their centrality will likely dissipate. There’s no Steve Jobs in the wings ready to come out and bring back the creative spark.
Amazon is in good shape with a strong future. AWS is their golden goose and that has every reason to remain the dominant hosting provider. And they continue to have a strong monopoly over online shopping & fulfillment.
They do face anti-trust action from the federal government, state AGs, and the EU. There are various ways this can play out. But they are likely to come out of this continuing to hold most of their advantages.
Netflix is not really “big” in terms of their valuation. But streaming is the future for content and they remain the leader in that. On the flip side, they’re facing more competition than ever.
They will likely figure a way through to continued profits. But this market segment is clearly very competitive and will continue to be competitive. So from the point of view of us consumers, we’re all in a good place here.
Google (Alphabet) - These guys are in trouble. ML (Machine Learning) is going to radically change search, replacing the whole approach to search and finding information. Google is a leader in ML themselves and may well have one of the new solutions. But this new approach by definition is not a natural monopoly and so there will be strong competitors.
And like Facebook & Twitter, Alphabet’s YouTube division is going to be facing gigantic governmental pressure to better handle the negatives in social content. Google has a future, but it is unlikely to include a monopolistic position.
Microsoft used to be the biggest monopoly. And now… not a problem. Windows & Office remain monopolies but they are in market segments declining in importance. Windows time is over (it will remain a sizeable market) and Office is moving to the cloud where it will face competitors.
Microsoft does not have a social media component. There big efforts are in Data/AI and hosting (Azure), very competitive markets where they are a major player (good) but not dominating over all.
So they’re in excellent shape and not facing any serious threats from government action. What a change from 20 years ago when they were the biggest & baddest of all the big tech monopolies.
Tesla is imploding. First off, they’re now facing serious competition from all the other car companies while more and more complaints are surfacing about the quality of their cars. And their self driving mode remains very questionable.
In the midst of all this their CEO is taking time away from running Tesla to run Twitter into the ground shit-posting everyone who hurts his feelings. Musk buying Twitter is the worst thing that ever happened to Tesla.
So what does this all mean? First off, while big tech all had very lucrative monopolies that the government should have addressed earlier, the market is now, in many cases, resolving that issue. Great news.
Second, we’re in the midst of another period of great change. Part of that change will mean several of the big tech companies will go the way of IBM and shrink to sizable companies with a decent market share, but no longer a monopoly nor an issue of great concern.
Third, the issues we have around content & social media aren’t going away, but they are evolving. The issues with companies gaining a natural monopoly aren’t going away, but it will be new (or existing) companies that gain these new monopoly. And when they do, rather than wait 30 years for the market to address it, the government needs to step up and take appropriate action.
Finally, there remains important action the government needs to take now on the remaining big tech monopolies:
End the app store (Apple & Google) and iTunes monopolies.
End, or make a public utility, of the Amazon storefront and the monopoly advantage of Amazon Prime.
As to governmental lawsuits claiming monopolistic behavior against Meta & Alphabet (search part) - drop them. By the time those suits get to court, are fought out, appealed, and are completed - those monopolies they are sitting on will be gone. It will be a better use of resources to instead go after Disney & Monsanto.
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I own a Tesla Model 3.