How the consolidation of tech providers is impacting innovation

Big tech companies are dominating both consumer and enterprise markets around the world. We take a look at how this is occurring and whether a regulatory hammer should be brought down.

When Facebook was hit with the Cambridge Analytica scandal in March of last year, the backlash was swift and brutal. The scandal was unlike anything the social media giant had faced before and prompted many users to delete their accounts and boycott the service. Although as bad as the scandal was, now that we're about 12 months since the news broke, there is evidence to suggest that the company hasn't really been substantially impacted in the long run.

While 2018 definitely couldn't be described as Facebook's year, it's monthly active user count continued to grow steadily during the period. To top this off, the company's latest earnings call was fantastic, posting strong ad revenue growth and healthy regional performances. This obviously indicates the company is back on track, despite initial slowed growth, drops in stock prices, and a lot of bad press.

So, Facebook soldiers on, but the fact that it has done so with such speed is nonetheless interesting. While many platforms would have suffered tremendous, almost irreversible top-line damage as a result of Cambridge Analytica - which saw data from 87 million users stolen and used for malicious political campaigns - Facebook has effectively brushed it off, even bearing a widely publicized dour period.

Big pond, gargantuan fish

Noting Facebook's resilience, a question arises over whether Facebook is indeed too big to fail and the truth is that it might be, and it isn't alone. Many of the world's biggest tech companies are inextricably massive and command so much of their respective markets that it can be hard for others to keep up. The highest-value tech conglomerates in Apple, Amazon, Microsoft, Facebook and Alphabet are worth around $4 trillion combined, and they put huge budgets behind ensuring they stay at the top of the pile, through things like R&D spend and acquisitions.

‘big tech' also has an incredible capacity to monitor the market through their huge data-streams, ensuring they stay ahead and outcompete companies that edge into their markets. In the same way, they can use their data streams - or enormous market influence - to prioritise their own services or products. Numerous antitrust suits have been filed against the big players as a result, such as when Google was fined €2.4 billion by the EU for giving priority placement to its own shopping service. Although, while these antitrust fines can be effective, an argument could be made that they aren't enforced enough.

It could also be argued that the very largest don't even compete against each other all too much. Amazon corners retail, Microsoft delivers commercial and consumer software, Apple sells prestigious consumer hardware, Facebook are the kings of targeted advertising and Google offers search-based advertising. Obviously, there are multiple interweaving competitive lines but their predominant top-line sources of revenue always differ, at least slightly.

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