Big Tech Monopolies

After Cambridge Analytica

2018.04

After Cambridge Analytica: The Pitfalls and Benefits of Big Tech Monopolies
Big Tech Monopolies
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I. The emergence of new monopoly licenses

Tech corporations based in the Western United States are global monopolies.

  • Google: Managing more than 7 services with a billion users (Gmail, Android, Chrome, Maps, Search, YouTube, Google Play Store), Google earned a total revenue of 110 trillion won in 2017 while procuring vast amounts of personal information through its calendar, email, payment, and search engine services.
  • Facebook: Providing a social networking service to 2 billion users around the world, Facebook became an overwhelming monopoly in the realms of social media and instant messaging, as Facebook-acquired apps such as Instagram and Whatsapp grew into a service with 900 million and 1.5 billion users, respectively. Facebook possesses an amount of personal information [1]second only to Google, having procured extensive data particularly about users’ daily lives and tastes.
  • Amazon: Amazon has secured approximately 350 million users of online shopping, mainly around the U.S., Europe, and Japan. Among them, users of the paid subscription service Amazon Prime exceed 100 million, proving Amazon’s success in making a profit. Amazon Drive, its cloud service, controls over 50% of the global market. As Amazon builds an impressive competitive edge in its core business ventures, its monopoly is predicted to continuously strengthen.  
  • Apple: Showcasing the powerful influence of Mac operating systems and iOS, Apple secures an exclusive market position in the smartphone, laptop, and PC sectors. Apple has approximately 600 million users around the world, with 1.7 devices per customer, which approximately adds up to a billion active customers. Though Apple is considered not to own as much user information as Google and Facebook, it controls the full value chain related to PC and mobile devices including hardware, software, operating systems, and accessories; in this way, Apple maintains its No. 1 global ranking among tech corporations in terms of market capitalization.
  • Uber: Uber provides over 10 million rides a day in 70+ countries and 600+ cities, threatening the livelihood of taxi companies around the world with its peer-to-peer ridesharing service. Uber recently tested its self-driving cars and expressed an aspiration to open an era where ridesharing is cheaper than taking the bus. (There was, however, a fatal crash involving a pedestrian in Arizona.)  

⇒ Global tech corporations continue to acquire new users while simultaneously using machine learning and big data as foundations for providing user-based information and services, exerting an incredible influence over customers all over the world.



These tech companies are making it difficult for traditional powerhouses that previously dominated the market to keep up.

  • Cisco, IBM, and other businesses that previously led the market in data storage and B2B software are now struggling to hold out, having lost the battle to Amazon and Google.  
  • Nokia, Samsung Electronics, etc. that previously dominated the mobile phone market now have a limited influence over the market under the influence of Google (Android) and Apple (iOS) monopolizing smartphone operating systems and software.
  • Previously successful online search engines ([2]e.g., Yahoo) and distribution businesses (e.g., Sears) are collapsing due to the expansion of Google and Amazon.

Interestingly, current tech companies’ monopolies are developing in a different direction than giant monopolies of the past.



II. Current tech companies’ new monopoly equation: intended effects & side effects

In the past, businesses dominated the market by monopolizing assets and distribution networks as well as creating barriers to entry.

  • Tech companies in the 1980s-90s developed and patented core technology using capital strength as foundation and created strong barriers to entry (e.g., Qualcomm’s 3G and 4G technology patent and royalty fees).
  • Simultaneously, global manufacturers provide many commissions to large distributors, and cover promotion costs, and control customer contacts such as distribution shelves.
  • Ultimately, three or four mega corporations dominate over 70% of the market, collude with each other to fix prices, and shape the market in a way that maximizes their monopolistic profits.
  •  
  • In the market structure described above, customers are forced to buy products at relatively higher prices.

However, tech companies these days are monopolizing customers by providing high-quality freemium services.

  • Google offers a variety of free services such as Gmail, Search, and YouTube, and earns its revenue through advertisements from other companies.
  • Facebook also offers social media services for free, attracting global users and exposing them to numerous advertisements to make a huge profit.
  • Amazon wins over the market majority of users by providing delivery that is 3-5 times more excellent and convenient than previous versions, as well as offering storage service at a 30-50% cheaper price.

⇒ In sum, customers are able to enjoy the undeniable benefit of receiving a better service at a lower price.



However, tech companies are not just making incredible profits by obtaining and using their users’ personal information; those that have become massively influential are creating new social problems.

  • Global tech companies are learning what customers are doing where, what they like and dislike, how they’re feeling, and other detailed personal information.
  • Not only this, but they are deciding for themselves what kind of information is exposed to customers in the process of providing relevant information, and exerting an incredible influence over people’s lives.
  • This has given way to rumors that “Google manipulated keyword searches to benefit a particular candidate during the U.S. presidential election,” “Facebook is spreading fake news,” etc.
  • Additionally, the leaked user’s information is being misused for the political, economic and social benefits of particular organizations, thereby negatively impacting society.

The recent Facebook leak of personal information is the quintessential example of a large social problem created by Big Tech monopoly.

  • Summary: The personal information of 50 million Facebook users in the U.S. was handed over to Cambridge Analytica (CA), a data analytics and consulting company, through a personality insight app called This Is Your Digital Life, developed by Cambridge University researcher Dr. Kogan. After analyzing the information of 50 million American voters received from Facebook, CA is being accused of illegally providing this information to then-Presidential candidate Donald Trump.
  • Aftermath: On March 21, 2018, Facebook CEO Zuckerberg acknowledged Facebook’s “mistake,” calling it “a major breach of trust.” He also explained that he had received a promise to delete shared data after he learned that Professor Kogan was sharing information with Cambridge Analytica in 2015, but it was his mistake that he did not take firmer actions. Zuckerberg even ran a full-page ad in major newspapers to express his apology, but the situation is magnifying with the global expansion of the #DeleteFacebook campaign.

⇒ Facebook’s leak of personal information is considered an incident that demonstrates the massive political, economic, and social influence that global tech companies’ monopoly of information can have on the entire world.



Furthermore, tech companies’ excessive monopoly is creating side effects such as the hogging of human talent and real estate overheating.

  • Recent global tech companies are offering huge salaries and employee benefits and monopolizing excellent personnel. Accordingly, start-ups with insufficient capital struggle to attract such personnel.
  • Simultaneously, cost of living and real estate around tech company headquarters are skyrocketing; Silicon Valley is considered to be regressing into “a paradise of their own” where only a handful of successful corporations can move in and take root.
  • In addition, start-ups are better incentivized to develop services to be bought out by Google and Facebook rather than designing services for customers, which raises concerns that the number of creative services is decreasing.

However, there are certainly valuable benefits provided by global tech companies’ monopolies that customers could not enjoy in the past.

  • Global tech companies are starting to use its vast amounts of user information to materialize a world where anyone can receive high-quality services, such as AI-based legal and medical services, at a low price.
  • They are laying the foundation for solving traffic congestion and air pollution problems through the development of electric and self-driving vehicles.
  • Numerous startups around the world are advertising at a low price through Facebook and Google, using cheap servers through Amazon’s AWS, and launching apps around the world through iOS and Android. In the ecosystem created by global tech companies, many start-ups are indeed effectively operating their services and creating new success stories.

III. Conclusion

Many people believe that the future of Big Tech companies’ monopolies will greatly influence whether civilization will evolve or degenerate.

  • Big Tech companies are each working on solving diverse social issues currently facing humanity (e.g., aging population, wealth gap, environmental pollution) with their own unique solutions.
  • That said, the future of societies and quality of life will change depending on whether Big Tech companies will wield their influence and power to advance civilization or to maximize profit and maintain power as monopolies did in the past.

Will Big Tech monopolies [3]play out differently than previous monopolies? Where will they be 3-4 years from now? What about our society, impacted by their changes? Will they be able to make people’s lives more efficient while serving their customers from a neutral and objective position? Will they treat their customers with [4]ulterior motives before eventually being shunned by customers and becoming obsolete?


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