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DTW
During the Week, US president appointed Lina Khan as new chairwoman of Federal Trade Commission (FTC).
And pulse rate of almost all technology leaders went up in anticipation of a tough life ahead. Why would leaders of FAANG be worried of 32 year old former Associate Professor? Lina shot to prominence after her seminal paper in Yale Law Journal, Amazon's Antitrust Paradox, which The New York Times described it as "reframing decades of monopoly law". Now, when she is the chair for federal authority responsible for preventing anti-competitive, tech industry leaders have cause for concern. There have been murmurs of big action against the technology firms by USA and Europe Union authorities over last few years but nothing substantial has been accomplished other than small fines and an occasional reprimand.
Tim Wu-one of the foremost thinker on anti-trust- writing in his seminal book The Curse of Bigness warned us of increasing economic concentration across the world. Monopolies across sectors have amassed tremendous power - economic and market. They have become too big and have been accused of using this scale to suppress competition, squeeze suppliers and possibly over charge customers.
I wrote earlier about the problem of regulations and platforms in 2 Big 2 Ctrl newsletter. Please click on the link to read how issue of platform and regulations could be understood from three different perspectives- Regulation of Platforms , Regulations on Platforms and Regulations by Platforms.
In an even earlier piece on Platforms and Nation States , I had jokingly warned about how Platform Skynet looms ! Nations have to think out-of-box to deal with platforms as their relationship is going to become ever more complex. We are entering a new world where seemingly unrelated events in far off countries can have damning consequences for millions far away in time and space. Technology and globalisation have increased the potential of platforms acquiring power that they should not have and can not control !
We should examine the monopoly like behaviour of Big Tech firms including the AAFG in USA and BAT in China. This could be done through four perspective- Predatory Pricing; Vertical Integration; Threat to Customer Welfare AND Preservation of Open Markets. I would talk about these issues in subsequent two newsletter but before that let us quickly discuss the platform features which make them big and powerful- user side network effects and commoditisation of users/suppliers. Theoretically, every garage-entrepreneur could build tomorrow’s Facebook or Amazon. But the aforementioned features help the platforms overcome the risk of overbuilding which is an ever-present danger to their existence.
User Side network effects help platform create a defensible moat when every new user joining the network improves its offering for all users. They are most pronounced in social media networks where a new user brings more connections to all the users. Facebook with its siamese siblings Instagram and Whatsapp benefits a lot from being the biggest network encompassing over two billion users. E-commerce companies like Amazon benefit from user side network effects as it helps them to get better data to train their algorithm as well as reducing the delivery cost owing to buyers density. Apple gets to benefit from user side network effects by tightly integrating the user experience of iMessage and AppStore reviews mechanism.
Commodification or undifferentiated suppliers make platforms immune to supplier bargaining power. Apple and Facebook have millions of suppliers on its AppStore and Advertising platform respectively. Apple current battle with Epic Games and Spotify highlight the pain of being a vendor on AppStore and uphill battle for growing businesses. With 9 million+ advertisers on the platform, Facebook didn’t suffer a major adverse effect of the ads boycott following the Black Lives Matter controversy. This is important as more than 100 top brand including Walmart, McDonalds, Geico, Disney etc stopped advertising on Facebook and related platforms.
To conclude, moats of user side side network effects and commodification of suppliers make platforms monopolies in their respective markets. They might want to further consolidate their position by becoming more vertically integrated and venturing into adjacent markets by leveraging their existing moats. That’s why Miss Lina Khan might want to look at them with more intensity than her predecessors. I would discuss these issues in next two issues.
Of course, sometimes the predator can become prey as evident by plight of Facebook when it faces a powerful platform like Apple. So, you might see Facebook get into the wearable to be able to access their customers directly bypassing an iPhone or an android device.
OTW
Over the Weekend, I watched episodes of two web series based out of Australia. We have such a narrow world view of spy/thriller content as most of it is in context of USA (New York to be specific). Over last few weeks, I have watched fictional content from UK and now Australia where the main villain happens to be China and USA is more of a frenemy. BTW, The Secret City and Pine Gap have amazing visuals of Canberra and Australian hinterland respective. Friends from down south should share some pictures/visuals.
Stay Safe. Get Vaccinated ASAP.
I Love You
Shailendra
OTM
Opportunities through MountainSpeak are available through sprINTERNship. I would request my readers in corporate world to share small live projects for my current students.
Idea of sprINTERNship is to create sprint internship version of live business projects focusing on marketing and strategy. These engagements would be mostly remote work involving social media, market research, data analysis and landscaping reports. Current plan is to have a SPRINT of about 40 days aggregating 100 hours. Companies would receive insights via a 2000 words report and 10 slide deck. Interns would be issued a completion certificate and may be a reasonable honorarium.
Please use the following google form to share interesting projects.
https://forms.gle/ZXJGTktn4Xhn9fUj9