Big Tech is now more than just big. It’s mammoth—and continuing to thrive. Facebook and Google already account for more than 60 percent of digital ad spend in the U.S. Then there’s Amazon, which already dominates nearly 50 percent of the U.S. ecommerce market. It’s the duopoly’s biggest digital advertising competitor at less than 7 percent of digital ad spend, but experts anticipate it will gobble up more digital ad dollars in coming years.
Their domination across many sectors of the U.S. economy—not just advertising—has caught the attention of legislators. Sen. Elizabeth Warren (D-Mass.) made headlines in March when she called for the breakup of companies like Amazon, Facebook and Google, which she said were hurting small businesses and stifling competition. Warren’s plan would entail spinning off some of those companies’ marketplaces and exchanges, plus reversing recent tech acquisitions, like Google adding DoubleClick and Facebook acquiring Instagram and WhatsApp.
Additionally, Rhode Island Rep. David Cicilline, a Democrat who heads the House Antitrust Subcommittee, recently declared that the Federal Trade Commission should investigate Facebook, suggesting an appetite for the kind of major antitrust action that the U.S. hasn’t seen in decades. The FTC in February created a task force dedicated to looking at Big Tech, including reevaluating mergers in the sector found to have anticompetitive effects. Across the pond, European regulators are slamming companies like Google and Facebook with fines over anticompetitive business practices.
All of that has made marketers—whose advertising dollars feed Big Tech’s massive profit margins—wonder when the hammer might drop on the lucrative marketing platforms. But it’s not time to panic just yet. The road to a Big Tech breakup is long, winding and full of complications before regulators slice Facebook in half. If it does happen, it will force marketers to think differently, and some experts see a path where they could even benefit from a breakup.
Breaking up big tech won’t be easy
For the last 35 years, U.S. antitrust law has been evaluated relatively narrowly, based only on whether consumers are harmed. The approach, associated with academics from the University of Chicago’s economics program, usually determines consumer harm based on price increases, and wouldn’t immediately account for Big Tech companies that let consumers use their products for free.
Rosa Abrantes-Metz, a former economist for the Federal Trade Commission and professor at New York University’s Stern School of Business, said it’s unlikely that even the biggest tech companies meet the present standard for major antitrust action.
“The concern of antitrust policy is consumer welfare, not consumer and producer welfare,” said Abrantes-Metz, who studied at the University of Chicago’s school of economics. “… These small businesses that people like Senator Warren are concerned about, those are not consumers. They are producers. Those are competitors. And that doesn’t, in my view, fall in the context of antitrust policy.”
The companies also haven’t reached a size in the market in which they operate to set off regulators’ alarm bells. In recent antitrust cases, like one brought against Microsoft in the 1990s, regulators didn’t step in until corporations controlled up to 90 percent of the market, Abrantes-Metz said.
That could change. Tech companies could engage in potentially violating conduct, like price discrimination, or balloon to a size concerning to regulators. There are efforts to once again interpret antitrust more broadly, paving the way for more aggressive antitrust action. In the meantime, some academics are working on applying existing antitrust interpretation to Big Tech’s business practices.
“There are a huge number of ways to get to the same goal … but the actual details of what a fix look like remain to be worked out,” said Barry Lynn, the executive director of the antimonopoly think tank Open Markets Institute. “Will the ultimate fix result in a restructuring of these organizations? I believe yes. And will it result in a new form of behavioral restrictions, somewhat in the form of the net-neutrality and common-carriage restrictions we already have in this country? I strongly believe yes.”
Roger McNamee, an early investor in Facebook who has become one of the company’s fiercest critics, said economists and academics are building a legal argument that trading personal data for services counts as a barter. By extrapolating the financial value of consumer data, economists may be able to evaluate the worth of the barter to determine whether the deal has harmed consumers.
McNamee said the antitrust division of the Department of Justice and the FTC have both indicated they are open to seeing more on this type of legal argument. (Spokespeople for the Justice Department and the FTC declined to comment.)
“It’s not a commitment to actually follow through,” McNamee cautioned, “but it is an invitation to do the work.”
What does this all mean for marketers?
So if—or when—a breakup happens, will it spell disaster for marketers? The details are fuzzy, but experts agree that it’ll change the way marketers do business. Antitrust action on tech companies could mean tech platforms face limitations on how they collect and use consumer data. If portions of tech companies are spun off from each other, those platforms may no longer be able to combine certain kinds of data. Both options could make hyper-targeting less effective, and some experts anticipate it will most certainly spell the end for the current state of hyper-targeting.
“If you break up these companies, it’s going to be more difficult to achieve these hyper-personalized results, because a lot of companies right now rely on Google and Facebook to achieve that level of precision,” said Enza Iannopollo, a senior analyst on Forrester Research’s security and risk team.
If bringing Big Tech to heel will lead to less precision and less hyper-personalization than current digital marketing strategy, it might instead push marketers to rely on segmented audiences, Iannopollo predicted. Marketers may also be incentivized to engage with customers directly and seek out permission to use data, which Iannopollo said could lead to more valuable engagement.
“I don’t think the interest on data or insights is going to end, or that advertising is not going to use it anymore,” Iannopollo said. “They’re just going to use it in a different way.”
McNamee said a breakup might encourage brands to embrace traditional brand-building strategies of consumer goodwill and trust instead of bombarding consumers with targeted ads.
“It’s likely you’ll see marketing return to something that’s closer to the model that we had 10 years ago, where there is at least some respect for the rights of the consumer,” McNamee said.
Dare we suggest that the advertising industry might even benefit? Abrantes-Metz said “two or three similar-size Facebooks” could mean more competition for ad dollars, driving down the price of ad space while allowing advertisers to achieve similar scale. McNamee and Lynn said a breakup could help brands have a better understanding of what’s working instead of relying on the platforms, whose own measurement tools have left marketers less than satisfied.
Lynn, McNamee and Iannopollo agreed: No matter the kind of regulation that might be coming, it’s in a brand’s best interest to treat consumer expectations of privacy with respect.
“This is one of those rare political issues that’s not about right or left, it’s about right and wrong,” McNamee said. “It’s been this Wild West and there have been no rules, but now that people know, there’s no going back.”