I'll admit I'm sitting on the fence, and perhaps ignorant about anti-competitive behaviour in tech. These companies are winning over marketplaces by providing the highest quality, and lowest price services to consumers? Hypothetically, where they slip up in providing the best services, startups could thrive? Or are there elements I'm neglecting as to how large company domination negatively impacts innovation?
In-app payment policies are a major restriction. Apple and Google have unlimited access in offering digital goods and payment methods. Third-party apps are limited in scope and taxed 30%.
If two songs are sold on an iPhone for $1 each, one by Apple and another by [insert music sales app], the small app makes 0.70, while Apple makes 1.30. Lets say each has to pay 0.50 to the label for the sale. The small app profits 0.20 while Apple profits 0.80. That's a 4x advantage for essentially the same purchase.
A different look may be like this: I made an app and I gladly give away 30% (it can be less, btw) for not having to care about setting up and supporting payment, distribution and updates infrastructure, dealing with PCI and chargebacks, etc.
The fact that iOS and Android are the only smartphone OSes did force you to do that.
Unless you mean that you could have made a competitor, but that's inane -- that's a completely different market, with huge barrier to entry.
Apple is using its huge market position in one area (smartphone OSes) to give itself a huge advantage in another (music apps). That's the sort of thing companies have got huge fines for in the past, or were broken in parts for.
Aside from setting up payment, all of those issue are still present with Apple / Google payments. The difference is 3% (MC, Stripe, Visa) vs 30% (Apple, Google). That 27% can easily cover those issues and far, far more.
In fact, it's worse. Payment & fraud disputes are also bound to the marketplace. What are the chances that app devs will end up being the ones eating big losses just to continue to exist?
They buy out companies long before most of them can become a threat. Google used to buy a new company every week a few years ago.
Also, when a smaller company does somehow manage to get known in the industry, it's usually under pressure to raise money or be acquired in order to compete with some other huge competitor.
I think this is mostly a regulatory fail in letting some companies grow so large and acquire smaller players. I think past a certain point, they shouldn't be allowed to do it. Finding out what that point is might be a little difficult, but probably not impossible.
I understand their strategy of neutralizing threats through acquisition. However, for this strategy to be effective, the companies have to consistently turn a profit on their acquisitions. Although it seems absurd for Facebook to spend 19 billion to acquire a 14-person company (Instagram), failing to keep Instagram popular amongst consumers will turn it into a 19 billion dollar writeoff as some Instragram clone captures consumer attention. IBM has a long record of acquiring competitive or smaller companies, but they're doing relatively poorly in the markets as of late. So while it seems clear that these companies might make life a nightmare for a lot of silicon valley entrepreneurs, they're still creating the best net value for society, no?
It’s about control, not size. IBM controlled powerful segments of the market, and would defend or compete by buying technology.
This scales down to small things like parking lots. Real estate guys will buy and operate little surface lots at a loss for years to deny competitors the ability to develop properties that compete with them.
>IBM controlled powerful segments of the market, and would defend or compete by buying technology.
Right, but IBM used to comprise almost the entire hardware and software market. Over time, they failed to consistently deliver the best experiences to consumers and clients, so they definitely declined from their glory days. I understand your comparison about real estate developers, but I don't think it applies here. IBM can buy competitors, but if they can't make sure their acquisitions remain the best in the market, then the acquisition loses profitability, or even becomes a writeoff.
As an anecdote, I used to work on one of their analytics products, which they acquired in one of their biggest acquisitions ever. Nevertheless, we were competing for clients with smaller, leaner, and sometimes better teams in the same field. We had no inherent advantage in development over our competitors either. Sure, IBM could always buy them, but then they'd have another x billion dollar investment to turn around, and still no way to stop new competitors from taking the clients, other than creating the best product - which would be net beneficial for society anyway. In many cases though, IBM's attempts to exert control by acquiring other companies backfired because they failed to provide client value, and the company has had to write off a lot of losses by trying.
Big companies do have access to a kind of data that is not quite public, and gives them an edge Im not sure is fair. For example, a Reddit's founder says he picks which company to invest based on reddit activity by companies in their site.
Im not comfortable with the edge places like facebook, google and reddit have over other companies, knowing what they know about with loosely named propietary data.
Im not too concerned with them buying companies: microsoft used to do that and didnt stop any of these.
