You’ve been FANGed
Technology is no longer an unregulated free space. The social pressure on technology companies to take responsibility for the information that is distributed through their networks is increasing. Add to that a bigger tax burden and more regulation, and you have a lower profit growth. Investors anticipate this.
At Easter, I read Jonathan Taplin’s book Move Fast and Break Things about the monopolistic features of companies such as Google and Facebook. But also, about their dark side as new media enterprises: the ‘right’ to own facts, social compartmentalisation, privacy, addiction and extremism.
The book brought me back to a session at the last Economists Day about the regulation of the Big Four (in technology, not accountants), which – according to many academics – is inevitable. Social media companies often operate as traditional media companies, but they shirk their responsibilities when it comes to the content on their platform and claim only to provide the technology. Traditional media companies don’t have that kind of luxury.
The worrying tendency of avoiding social responsibility alone calls for more regulation. Everyone is entitled to his or her own opinion, but not to his or her own facts. The continuing scandals in recent weeks also seem to demonstrate that. Slowly but surely, this realization starts to sink in.
Concerns about abuse of power due to the significant market positions also play a role in regulation. From an economic point of view, the ‘winner-takes-all’ effect is crucial. The accumulated dominance will lead to a counter-reaction with anti-monopolistic measures, calls for antitrust break ups and a lower profit growth. Consumers will also take a different stand when it comes to giving away free data in their urge to be connected, and advertisers will be more selective in their choice of platforms.
For this reason, these companies must search for other sources of income. The same thing happened to telecom companies at the turn of the century when they, after years of strong growth, had to open up their networks to others. The cost-reducing effect was good for consumers, but not for stakeholders.
The weight of technology in indices is an important driver behind performance differences of stock exchanges. China and the United States are the leading countries. After the recent correction of technology stocks, the stock market seems to have lost its driving force.
It is too early to say that the end is near, but the time of unbridled growth is definitely over. Like other companies, technology companies have to consider their role as stakeholders. And that’s not as bad as it may seem.