The new monopolies

The inexorable growth of Google, Facebook, and Amazon has raised fears these giants are becoming too powerful

Monopoly pieces.
(Image credit: Matthew Woodward / Alamy Stock Photo)

The inexorable growth of Google, Facebook, and Amazon has raised fears these giants are becoming too powerful. Here's everything you need to know:

How dominant are these firms?

As dominant as Standard Oil, Carnegie Steel, and American Tobacco were at the end of the 19th century. Google has an 88 percent market share in search advertising in the U.S. Facebook and its major subsidiaries — Instagram, WhatsApp, and Messenger — account for 77 percent of mobile social media traffic. Almost $1 of every $2 in online retail sales goes through Amazon. Flush with revenues of tens of billions of dollars, each company has heavily expanded into other industries: Google dominates video (through YouTube), mapping, and personal email; Facebook is building consumer drones and virtual reality sets; Amazon recently bought the upscale grocery chain Whole Foods for $13.4 billion. Digital enthusiasts once predicted that the internet would democratize business and industry; instead, it's enabled a handful of firms to have such dominant market shares that it's almost impossible to compete with them. T.J. Stiles, a biographer of the 19th-century business magnate Cornelius Vanderbilt, says we are living in a second Gilded Age. "Our lives," he says, "are channeled once again through fewer and fewer companies controlled by a few men."

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What's wrong with monopolies?

When companies control a market, they tend to use their power to eliminate competition — often to the detriment of consumers. They can force suppliers to lower their prices, cutting their profits, and can bankrupt their rivals by undercutting them — or simply buy them out. Massive companies can also use economies of scale to eliminate jobs — particularly in the digital era, when much work can be automated. All this can result in reduced consumer choice, depressed wages, and a concentration of wealth in the hands of fewer people in fewer locations.

Is that actually occurring?

Yes. Amazon accounts for 52 percent of all U.S. book sales, 43 percent of all online commerce, and 45 percent of the fast-growing cloud-computing market. The Seattle-based company has put most brick-and-mortar bookstores out of business, and last year had online sales six times higher than those of Walmart, Target, Best Buy, Nordstrom, Home Depot, Macy's, Kohl's, and Costco combined. The self-proclaimed "Everything Store" has absorbed many of its competitors, buying the largest online shoe retailer (Zappos), the most popular live-streaming video platform (Twitch), and the market leader in baby products (Diapers.com). When the latter initially refused to sell, Amazon simply slashed its prices for its own baby products until Diapers.com capitulated.

What about the others?

They're no less dominant. Facebook boasts 2 billion active users — more than a quarter of the human race. When CEO Mark Zuckerberg saw a social media threat from Instagram and WhatsApp, he spent $20 billion to buy them. A third social media competitor, Snapchat, rejected an offer of $3 billion, so Facebook launched a feature on Instagram essentially replicating Snapchat's self-deleting videos and photos. Within a year, Instagram Stories has already attracted more daily users than its rival. Google's parent company, Alphabet, acquires an average of one company a week. More than 1 billion people worldwide use Gmail. For Google, Amazon, and Facebook's stockholders and executives, this staggering level of success has created enormous wealth, and the companies' customers benefit from the unprecedented convenience their various services provide. But the domination of these tech giants also has produced plenty of losers.

Such as?

The newspaper industry is one example. Facebook and Google control more than 70 percent of the $73 billion digital advertising market in the U.S. Many of those dollars used to go to media companies: Between 2006 and 2016, U.S. newspaper advertising revenue plummeted from $50 billion to $18 billion, and the number of jobs in the industry has been cut by more than half, from 411,000 in 2001 to 174,000 in 2016. Journalism websites, too, are struggling to survive, because Facebook and Google eat up most of the online ad dollars. Another example: department stores and malls. Hundreds of major retail stores have shut their doors because of the shift to online shopping, and dozens of malls have gone dark or are half empty. That, in turn, has damaged the vitality of downtowns and surrounding communities. "The communities wither away, and they never come back," said Howard Davidowitz, an investment banker and consultant to the retail industry.

Is there any pushback?

In the U.S., not much. The U.S. government generally has used a light hand in regulating tech companies, so as not to stifle innovation and growth in what is now our fastest-growing industry. Facebook, Google, and Amazon argue that they're not true monopolies, because their much smaller competitors are only a click away — something that wasn't the case with, say, AT&T before it was broken up. And the Big Tech beasts spend vast sums keeping lawmakers on their side: Facebook alone poured $3.2 million into federal lobbying in the first quarter of this year. Ultimately, consumers would have to rebel en masse against these companies before U.S. lawmakers or regulators would take any action — and there's no sign that will happen. "Google will do whatever it wants without asking permission," writes Jonathan Taplin in Move Fast and Break Things, "and the results will be so awesome that nobody will complain."

The other monopolies

The tech industry isn't the only one consolidating. More than 75 percent of U.S. industries have experienced an increase in concentration over the past two decades. Eighty percent of plane seats are sold by just four airlines: American, Delta, Southwest, and United. The drugstore and pharmacy industry is dominated by the duopoly of CVS and Walgreens. The effects are obvious. Airlines are shrinking seats and services, charging for baggage and food, forcing passengers to make one or more stops, and raising prices on noncompetitive routes. With the number of big media companies also shrinking, Americans now fork out more than double what Europeans pay for high-speed broadband. Lina Khan of New America, a Washington-based think tank, says, "We are living in a world of extreme consolidation and concentration" — and when there is less competition, consumers inevitably pay the price.

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