It’s the era of giants in the digital economy. Massive digital superhubs such as Alibaba, Alphabet, Tencent, Apple, Baidu, Facebook, Amazon, and Microsoft are capturing a colossal share of internet activity. It’s a long way from the internet’s initial promise of democratizing commercial activity online.
Instead of making a more level playing field so that smaller businesses get an equal voice in the marketplace, the internet’s ruled by a small number of monopolies.
This power structure is being continuously reaffirmed as these giants expand their scope. The behemoths of the internet are expanding into new areas: Alibaba bought news outlet the South China Morning Post, Microsoft bought LinkedIn, Facebook bought WhatsApp and Alibaba’s getting into financial services.
They’re increasingly owning access to the web: Apple owns the devices many of the world’s wealthiest consumers use to access it and Alphabet (Google’s parent company) is now invested in high-speed internet services.
They’re also investing in R&D to create their own new technologies. Google’s getting involved with self-driving vehicles and getting serious about hardware, while Tencent’s deep into AI and cloud services.
The end result is that web giants not only own vast areas of internet activity but they also own the hardware used to access the net. They’re online gatekeepers too; owning access to consumers by controlling their progress around the net.
If you’re trying to reach a customer for your digital product, Google can charge you a toll for reaching them, dictate the data you gather and control the flow of information back to you.
Global marketplaces can connect your business to huge audiences, but you have to abide by the terms set out by Alibaba or Amazon. In fact, it’s very difficult to do anything online without having to rely on these gatekeepers for support and access.
Amplified voices
Politically, these big brands have big voices. Founders such as Alibaba’s Jack Ma have access to decision-makers and they’re invited to speak in high-profile places and at key events. When it comes to critical issues such as net neutrality, their voices are amplified. There’s an assumption that they speak benevolently on behalf of their vast user populations – an assumption that may not be entirely correct.
Advantages of scale continue to benefit the digital hubs because they have access to colossal amounts of data from right across the internet. Ownership of different areas of activity really helps the hubs gain insight into how consumers behave online, helping them optimise their strategies.
Because they also own the conduits between hubs via control of the advertising market, portals and search engines, they also control the flow around the internet and who sees what.
The preponderance of these digital hubs leaves companies vulnerable when they are trying to assert themselves online. Brands rely on these hubs to deliver customers to them. If your brand is advertising online, it’s inevitably using either Google or Facebook’s ad offering to do so.
You’re writing content to please their search engine preferences, and building your site to accommodate their crawlers. Playing by the rules can make or break your business, but these rules are set arbitrarily and with no right to appeal the hubs’ decisions.
When the hubs change their rules, small companies can suffer greatly. A change to the search algorithms can make your site vanish overnight. Facebook can (and does) hide your carefully-crafted posts from your followers, or give you a nice little boost if you accidentally please the algorithm.
Small stores can find themselves booted unjustly from Amazon’s platform, or find the platform is undercutting them to sell the same products.
There’s also a lack of transparency about the way these companies control the visibility of your organization. Algorithms change all the time and stay ever mysterious. Facebook changes its mind about what type of content it favors, often giving best visibility to content created using its own latest tools such as its own proprietary live streaming service.
Because the digital hubs stretch the length and breadth of the internet, even the smartest digital strategists can’t make a plan that doesn’t leave your brand vulnerable to their whims.
It’s hard to craft an advertising strategy without using Google or Facebook. It’s hard to get found without Google Search. If your site isn’t built for Mac and for key internet browsers, then you’ll be accessible to a much smaller audience.
If your app isn’t in one of the major app stores then it’s going to struggle to be found. Whilst brands can try to dodge some major internet hubs, this just gives greater visibility to rivals who then have a greater share in the hub they are eschewing.
The fight back?
Perhaps the only power possessed by the small-fry of the internet is to exploit the vulnerability of the major hubs to increase competition. Favouring rivals to the giants can help challenge the larger incumbent.
Deutsche Telekom avoided using Amazon Web Services for its cloud computing, partnering instead with AWS rival Microsoft Azure to challenge Amazon’s dominance in this arena.
Retailers can offer a wide range of payment systems to avoid enabling one major payment system to dominate, at which point they become vulnerable to their dependence. But few companies are large enough to really challenge the pre-eminence of digital hubs, many of which feature in shortlists of the world’s largest companies.
One of the key aspects of monopolies is that the company holding the monopoly can set advantageous prices. In a more competitive market, businesses have to compete on price which means prices are lower compared to in a monopoly market.
In a monopoly market, businesses pay more. This means higher ad prices, higher hosting costs, higher marketplace fees. Businesses trying to market themselves online would be better off in more competitive markets. In some types of market, buyers are better off organizing themselves to team up against the monopoly seller.
By acting in a united manner, buyers increase their collective voice and sway. But it’s hard work to organize peers into a collective bargaining agreement, particularly when they are competitors.
Ultimately your business is unlikely to have much leverage against the hubs of the internet. Your sole remaining option is to understand and try to profit from the competition between rival hubs.
In areas where the competition between digital hubs is most intense, the consumer can often find advantages. Facebook sees YouTube as a great rival for consumer attention. That’s why businesses posting using native video on Facebook are gifted with much better reach than if they’d shared a YouTube video on their page or created another type of content, such as a static image.
Using Facebook’s own video tools gets the best advantage for the user. But it’s a small crumb of consolation for businesses trying to battle in unfair monopoly markets online.