Consumers embrace Big Tech

These are obviously bad ideas. Yet, they parallel arguments made to break up the Big Tech companies: Breakup proponents say the companies are too big and too successful, their customers are captured by brand names, and they have so much data and money that rivals can’t compete.

Let’s start with the bigness and success issues. When did making customers happy become a bad thing? People choose to use Big Tech’s services. They choose Google 75 percent to 90 percent of the time worldwide. Google isn’t diverting searches from Bing or DuckDuckGo. Nor is Google even offering the search services that Yelp or Facebook provide.

And, according to an article on eMarketer, U.S. online shoppers prefer Amazon over all others 45 percent of the time. Amazon isn’t suppressing Wal-Mart or eBay; nor is it controlling customers: U.S. customers provide Amazon with 206.1 million unique visitors per month but 109.4 million visit eBay.

Some of the market share data that breakup proponents and the media report is misleading. Recently the Wall Street Journal tried to make the case that Facebook is dominant by reporting that 95 percent of young adults on the internet use Facebook. But Pew Research says 35 percent of U.S. teens use Snapchat more than any other social media, and 32 percent use YouTube more than any other. Facebook and Instagram together are most used by only 25 percent of U.S. teens. So Facebook is, at best, number three for this important demographic.

Now let’s look at the value of these companies’ brands. Are the differences real or imagined? eBay is a well-known rival to Amazon—attracting 2 billion transactions per day worldwide, notes Parade.com, compared to Amazon’s peak of 26.5 million transactions on Cyber Monday in 2018, according to Business Insider. But while eBay is significant, 206.1 million U.S. customers choose Amazon over eBay each month. What would happen to these customers if a breakup or regulation forced Amazon to be more like eBay (which is what Elizabeth Warren proposes)? Denying U.S. consumers the Amazon they love would cost them about $167 billion per year.

Breaking up tech companies is a solution in search of a problem. Big-is-bad may have political appeal, but voters would lose in the end.

Most proposals to breakup Facebook suggest spinning off Instagram. But Facebook made Instagram successful: Facebook paid $1 billion for Instagram in 2012, according to Engadget.com, and in seven years made it worth about $100 billion, according to an article on Investopedia. Who loses if Instagram goes back to its old ways? About 75 percent of U.S. businesses plan to use Instagram in 2020, notes an article on Hootsuite, and 1 billion people use it every month. Where would these businesses and users go if Instagram declines? Facebook?

What if the government forced a decline in Google so that it was more like its two nearest competitors, Bing and Yahoo!? Considering the differences between their user satisfaction scores and how much users value search, knocking Google down would cost consumers about $700 billion per year.

Lastly, let’s look at how financial resources drive startups and innovation. When investors decide whether to put money into tech, they consider the profit potential of the winners and the possible financial losses for the about 90 percent of tech startups that don’t make it. The 90 percent number means that the most profitable tech companies need profits that are more than nine times the losses of the biggest financial failures.

So winners not only must make up for their own startup costs, they must make up for the startups that ultimately fail. If the message from the government is that high profits won’t be tolerated, there will be less money for startups.

Breaking up tech companies is a solution in search of a problem. Big-is-bad may have political appeal, but voters would lose in the end.

Mark Jamison is a visiting scholar at the American Enterprise Institute, where he works on how technology affects the economy, and on telecommunications and Federal Communications Commission issues.