Ahead of Hearing — Robust Choice & Competition In Social Media
Ahead of today’s hearings that will cover tech platforms and political voice, it’s essential to note that plenty of social media, text, and voice applications exist, and consumers use multiple to communicate on a daily basis. They get news from a variety of on-and-offline sources. Choice and competition are hallmarks of the tech sector, with little-to-no switching costs and no barriers of entry.
In fact, Senator Mike Lee, for example, has argued that a multitude of non-Google options are available to consumers and that government intervention in these private industries was unnecessary: “As a consumer, you can choose to use a different search engine, use somebody else to handle your email. There are other market options available to you.”
Leading tech platforms face competition on multiple sides
For users:
Economist David Evans finds tech leaders compete across 27 different categories and face competition from disruptive innovation. “Online platforms face dynamic competition as a result of: disruptive innovation that provides opportunities for entry; competition from online platforms that have secured a toehold in one area but compete across multiple areas; the fragility of category leadership resulting from the fact that network effects are reversible and entry costs are low; and the prevalence of ad-supported models, which result in seemingly disparate firms competing for consumer attention and advertiser dollars.” (David Evans, “Why The Dynamics Of Competition For Online Platforms Leads To Sleepless Nights, But Not Sleepy Monopolies,” SSRN, 7/23/17)
Citing Pew Research, economists Seth Sacher and John Yun highlight that users of Facebook also get news from network, cable, and local television, news websites and apps, radio, and print newspapers. “Importantly, the statistic that 44 percent of the U.S. population gets news from Facebook is not a market share in any sense. For example, it ignores ‘multi-homing,’ that is the patronizing of more than one platform. Specifically, the Pew Research study finds that 39 percent of Facebook users also get news from local television, 25 percent from cable television, 23 percent from network nightly television, 33 percent from news websites and apps, 23 percent from radio and 15 percent from print newspapers. Thus, the 44 percent statistic tells us very little about Facebook’s market power in terms of news distribution — let alone its ability to foreclose mainstream news organizations. Allcott & Gentzkow (2017) report that ‘only 14 percent of American adults viewed social media as their ‘most important’ source of [2016] election news.'” (Seth Sacher And John Yun, “Fake News Is Not An Antitrust Problem,” Competition Policy International, 12/19/17)
For advertisers:
eMarketer research predicts leading tech services’ share of digital ads will fall as smaller rivals grow quickly, “seeking a larger share of the pie.” “In its latest forecast, research company eMarketer predicts the combined U.S. digital ad market share of Alphabet Inc.’s Google and Facebook will fall for the first time this year, shrinking to 56.8% from 58.5% last year. At the same time, overall digital ad spending in the country is likely to grow nearly 19% to $107 billion in 2018. To be sure, Google and Facebook are still increasing their total ad revenue significantly, and no other competitor even cracks 5% market share. But those smaller rivals are growing more quickly than expected and are seeking a larger share of the pie.” (Alexandra Bruell, “Rivals Chip Away At Google’s And Facebook’s U.S. Digital Ad Dominance, Data Show,” The Wall Street Journal, 3/19/18)
In addition to AT&T-Time Warner, tech leaders face competition from other large players in the converging global advertising space, especially in TV. “Apple has met with a number of companies, including Snap, to participate in an Apple network that would distribute ads across their collective apps. Viacom Inc., 21st Century Fox , and Comcast Corp.’s NBCUniversal are developing OpenAP, a similar industry initiative to AT&T’s effort. Oracle launched the largest business-to-business audience data marketplace in 2016, noting its ability to provide “access to more than $3 trillion in consumer transaction data, two billion global consumer profiles, and 1,500+ data partners.” (“Greenlighting Of AT&T-Time Warner Predicated On Highly Competitive Tech Space”, Springboard, 6/18)
In Fact, Leading Tech Services Are Making It Easier For Start-Ups To Compete By Improving Data Portability
Leading tech services like Google, Facebook, Microsoft, and Twitter have taken steps to ease data portability. “Tech critics have called for increased data portability to boost competition. Before the weekend, Google, Facebook, Microsoft, Twitter, and others announced a new standards initiative called the Data Transfer Project to do exactly that, noting, “Portability and interoperability are central to cloud innovation and competition.” The initiative will allow consumers to transfer data directly between participating services without having to download and upload data. With an open-source code, the initiative further encourages the developer community to help extend the platform to support more data types, service providers, and hosting solutions.” (“ICYMI: Leading Tech Services Increase Consumer’s Ability To Switch Services, While Reducing Entrepreneur Start-Up Costs,” Springboard, 7/24)
Leading tech services do not behave at all like monopolies, with diminishing profit margins, rising wages, and increasing R&D spending
Economist Michael Mandel has found that labor share in the tech sector has increased, while gross margins have decreased, bucking a national trend and non-monopolistic. “Based on new ‘digital economy’ data from a recent BEA working paper, we calculate that the labor share of the digital sector has risen since 2007, while gross margin of the digital sector has fallen over the same period. This result is consistent with strong competition in the digital product and labor markets.” (Michael Mandel, The Digital Sector: Rising Labor Share, Falling Gross Margin,” Progressive Policy Institute, 8/13/18)
Recode reports leaders in the tech industry held all top five spots for R&D spending last year. Tech companies claimed the top five spots in the U.S. for research and development spending again last year, investing a combined total of $76 billion. (Rani Molla, Recode, 4/18)
While President Trump Said He Did Not Want Regulations, It’s Worth Noting Excessive Antitrust Action Could Harm Consumers By Reducing Competition
MIT researchers found overregulation would have negative consequences for innovative startups, stifling competition. “Our results suggest that the commonly used consent‐based approach may disproportionately benefit firms that offer a larger scope of services. Therefore, though privacy regulation imposes costs on all firms, it is small firms and new firms that are most adversely affected. We then show that this negative effect will be particularly severe for goods where the price mechanism does not mediate the effect, such as the advertising‐supported Internet.” (James Campbell, Avi Goldfarb, and Catherine Tucker, “Privacy Regulation And Market Structure,” Journal Of Economics & Management Strategy, 2/10/15)
Economist Timothy Taylor: Unnecessary regulation against leading tech services “could close off new competitors.” “It’s not enough to rave against the size of Big Tech. It’s necessary to get specific: for example, about how public policy should view network effects or online buyer-and-seller platforms, and about the collection, use, sharing, and privacy protections for data. We certainly don’t want the current big tech companies to stifle new competition or abuse consumers. But in pushing back against the existing firms, we don’t want regulators to set rules that could close off new competitors, either.” (Timothy Taylor, “Network Effects, Big Data, And Antitrust Issues For Big Tech,” Conversable Economist, 2/13/18)