The advocates of trust-busting could only be heartened by earnings results on Thursday. The astonishing growth and value of Amazon, Alphabet, Facebook and Apple have led to growing calls that Washington step in to constrain their seemingly unstoppable ascent and sphere of influence.
Amazon clocked in with first-quarter revenue of $36bn, nearly a quarter higher than a year ago. Operating cash flow jumped 53 per cent as well. As it closes in on a $1,000 share price, its market value of equity is $450bn. Alphabet revenue was up nearly a quarter and its operating margin inched up to 27 per cent. Its overall market value is now above $600bn.
Have the pair constrained innovation and consumer choice? The string of bankruptcies by traditional retailers has been put at the feet of Amazon's cheap prices and convenience. When it recently said it might jump into home furniture, a small pure-play rival Wayfair saw its shares drop by 5 per cent. A scan of Amazon's earnings release saw it boast of non-ecommerce categories such as cloud computing, logistics, film and television production and sports broadcasting. But rather than extracting monopoly profits, its operating margin was just 3 per cent.
Alphabet is a trickier case. IAB noted that it and Facebook own nearly 90 per cent of the growth in digital advertising. That dominance leaves the pair as the gatekeepers of mass information flow. The string of print publishing failures that has unfolded in recent years means fewer and less diverse voices. The media which are still left have no choice but to play ball with Alphabet and Facebook according to their rules.
Still, the antitrust advocates must note Facebook and Google were born as startups in an era where previous bete noires, Microsoft and Intel, were at their apex. That pair happened to also report earnings on Thursday and they still come in with market values at $530bn and $175bn, respectively. Despite being at the height of their influence a decade or more ago, they still managed to whiff on the rise of smartphones. For all the money Amazon and Google are throwing at AI and drones, upstarts such as Uber or Tesla and mainstays GE and GM are fighting them aggressively on all fronts.
The likes of Standard Oil, AT&T and Microsoft famously were sanctioned by Uncle Sam for their anti-competitive ways. With Apple, Alphabet and Amazon on the path to $1tn valuation, the US government cannot simply avert its eyes. Incremental actions like the recent crackdown on collusive recruiting practices of engineers is one moderate approach. A harsher crackdown cannot be ruled out but it is not quite time yet.
Email the Lex team at lex@ft.com
Copyright The Financial Times Limited 2017
