Will Big Tech Ever Get Too Big?

Some internet Big Techs almost have the influence and financial backing of many governments, but are they likely to falter as markets change and regulators get to grips with them?

These Big Techs are global brands that impact on nearly everyone’s lives.

Apple, Google, Facebook, Amazon and Netflix.

Their founders are multi billionaires and they earn more than the economies of many small to medium sized countries.

These multinational corporations have had a rough ride. Google has shelled out millions to settle market abuse claims in Europe. Politicians in the US and UK have hauled senior executives over the coals over the tax the corporations pay on profits and issues like managing fake news are under discussion.

Free or cheap services

Investment experts argue these massive companies benefit from the ‘network effect’ where the value of the service increases as the number of users grows.

Once a user base has reached critical mass, rivals find attracting them away from the Big Tech firms almost impossible.

Google increases efficiency with each search. Amazon is vital to consumers and businesses and grows more so as the number of vendors and buyers increases, says investment firm Schroders.

Many of the Big Tech services are free or cheap – Google and Facebook are funded by advertising. Google gives back Android, the free smartphone operating system and Google Docs, Maps and the ubiquitous search engine.

They make money from packaging user data for advertisers. If they treat that data with respect, users will carry on allowing them to do so.

Disruptive competition

“We do agree that in hindsight it was too lax of regulators to allow Facebook to acquire Whatsapp and Instagram, both of which could have gone on to become potential competitors,” says Schroders  Katherine Davidson, Portfolio Manager, Global & International Equities.

“Disruptive competition cannot emerge if the tech giants can subsume all possible rivals.

“We also have more sympathy with the view that flouting of copyright laws by YouTube is damaging to the creative industries.”

The conclusion is big is never too big if the corporation have a ‘social value’ measured by their contribution to free products and innovation.  And that’s good news for investors.

Leave a Reply