What's less visible the bigger it gets?

Can you answer this digital riddle: What's less visible the bigger it gets?

Answer: internet dominance.

Last week, gap-toothed Belgian Europhile, Guy Verhofstadt, frothed and spluttered against Mark Zuckerberg about the omnipotence and omniscience of Facebook, exclaiming:

‘You have given the example of Twitter, [and] Google as some of your competitors, but it’s like somebody who has a monopoly in making cars is saying, ‘Look, I have a monopoly making cars, but [you] can take a plane! You can take a train! You can even take your bike!’

In the same vein, I had a meeting with two internet companies recently. The first, a new start-up, was keen to explain how their platform was unique and the only game in town. The second, a bigger player referenced its individually branded components, lest it be accused of being too dominant.

This raises an interesting dichotomy: why is it that companies striving for size must, upon achieving it, then immediately disguise that size? What’s happening here?

The answer is simple: humans celebrate success, but fear dominance. We want checks and balances, safety catches and undo buttons - as evidenced by the ballot box, the board of directors and monopoly commissions. But is that fear well-founded?

In the digital space, there’s been concern for a while now about the size of the ‘GAFA’ tech giants - Google, Apple, Facebook, Amazon. At Wired Live last year I saw Margrethe Vestager, EU Commissioner for Competition, publicly state her desire to closely monitor tech giants, whilst elsewhere much was being made of their swallowing and assimilating of the competition, as Facebook did with Instagram and WhatsApp.

Critics also point to tech giants hiding behind semantics, citing falling consumer prices in order to dodge accusations of being a monopoly - whilst conveniently ignoring the fact consumers are actually paying in other ways - with data and attention. 

But it’s possible to take a more nuanced view. Whilst I can’t advocate corporate hegemony, it must be said that size is often relative, and much depends on what is being compared. Let me explain:

Take Google. Often cited as being dominant in search, their supremacy is undeniable. But their search operation are still only a percentage of total digital ad revenue, and a smaller percentage of total global ad revenue. We often fail to see where they are competing, and what resource they are competing for.

In the same way, we are sometimes blind to the broader interlocking circles of the competitive set these companies inhabit, particularly as they strive to become ecosystems with branches and subsidiaries and networks. People forget that Amazon is a real contender for a slice of those total Google search queries, and in turn Amazon vies, not with just Waterstones or Barnes and Noble for books, but with eBay for electrical goods, and WalMart for groceries.

In reality, it’s this ‘mis-framing’ of the competitive set that can blind-side us to the size and extent of the competition. When we work with the automotive vertical on innovation, we look not just at other garage forecourts to gauge competition, but at companies like Uber, Hyperloop and Waymo. In short: you can only be a monopoly if you’re the only game in town, and these days it's difficult to see where one town ends and the next one starts.

Yet, still many feel uncomfortable with the power these companies wield, and maintain that breaking up the GAFA quartet is a realistic option. A recent Intelligence Squared debate on this very subject saw CNN Global Economic Analyst, Rana Foroohar, extol the virtues of the corporate butchers knife, claiming that carving up companies historically always leads to innovation. But there’s always another angle: Contrarian Peter Thiel has always argued the opposite: that benevolent monopolies are the only thing that truly lead to innovation, as companies are less encumbered by the need to beat their rival’s margins, instead dedicating time and resource to genuine R&D.

Even if you don't buy this argument, and many will not, it is certainly true that size is no guarantee of safety. Many worried in the 90s that the AOL-Time Warner deal came perilously close to a monopoly, yet it collapsed many years later. Also consider Yahoo, once the darling of the Search world until Google arrived. Fast-forward 15 years to see it purchased at a knock down price by Verizon. And only recently, I saw an article about Facebook plateauing, whilst Kylie Jenner wiped billions off the value of Snapchat by tweeting [yes, tweeting!] that she didn’t use it any more.

I understand that this this is unlikely to be reassurance to the powers that be, however, or indeed the general public, because it’s better to be safe than sorry. And of course questions over tax, fake news, election interference, data theft, invasion of privacy, inertia over hate-speech, and poorly paid workers, all help to make their critics case for them. None of those things are in any way excusable and absolutely must be addressed.

But the truth is when Verhofstadt’s compares Facebook to a car manufacturer asking a dissatisfied customer to take a train, he misunderstands much. Unlike car versus a train, there is no difference in the ticket price [the cost of usage], nor the effort in accessing the network on which the service run [users are entirely free to click on one app or the other when opening their phone]. Similarly, to torture the analogy further, the ‘roads’ or ‘rails’ - so separate in Verhofstadt’s comparison - are the SAME roads and rails - the broadband cables of the internet - that ALL traffic traverse along.

So there is a lesson in all of this: First, we should be cautious about conflating size with dominance, or confusing ubiquity with monopoly. Second, trying to understand competition in the digital age will not survive the application of 20th Century analogies, rather it needs a framework that fits and reflects the age in which we live.