Thefour internet giants Google, Amazon, Facebook, and Apple are a caseof an oligopoly in the respective markets they operate(Mansell & Javary, 2002).Based on the descriptions of the article, each of these firms hasfeatures that make it a formidable oligopoly in all respects. Some ofthe factors that are synonymous with the four giants are: theeconomies of scale they have, the great reputation that serves as abarrier to new entrants, strategic barriers that some firms such asApple use to close out other entrants, and the legal barriers thatfavor them.
Regulatorsare concerned that the four giants are taking advantage of thefactors mentioned above, which are in their favor, to chokecompetition. Although they offer high quality services to theircustomers, there seems to be no justification, according toregulators, for any tendencies that aim to monopolize the market. Asstated in the market Google has a lion’s share of the search enginemarket both in the United States and European markets. Facebook isalso a quasi monopoly and on a searching spree to purchase anypotential competitor. While it purchased Instagram sometimes back,Facebook went ahead to also purchase whatsapp, another socialnetworking site that could possibly provide competition. Amazonpurchased Zappos, which was also poised to be a formidablecompetitor. Google purchased adMob, which possibly have been analternative search engine for consumers. The giants seem to haveintegrated all their subsidiary services with their primary services,a practice that regulators feel could be deliberate attempts to makeit impossible for start-ups to penetrate the market. As things stand,internet start-ups such as Alibaba will find it difficult topenetrate the market let alone competing with the giants such asGoogle and Facebook. The oligopolistic barriers mentioned abovecreate metaphorical walls that would make it difficult for Alibaba toprovide internet services.
Thereare some similarities between the way Apple and Google are currentlyrunning their oligopolistic affairs with the case of the AT &TCompany of the 1980s before the United States Department of Justicefiled an antitrust case against it (Posner, 2001). The firstsimilarity is using their economies of scale to hoodwink other marketplayers. In the 1980s, AT & T was accused of channeling itsmonopoly revenues from its subsidiaries to bring down the costs ofits telephone network. The Federal Communications Commissionconsidered that a violation of anti-trust laws. Furthermore, AT &T had not specialized in providing telephone services, but also otherservices such as providing internet and computer services. Thus, allthe services were integrated hence, locking out any possiblecompetition. Apple and Google have the same features they graduallyintegrated their services as hardware producers, providers of digitalcontent, and distributors of information at the same time. Althoughit has not yet happened, if the ensuing anti-trust laws againstGoogle succeed, it may end up being compelled to split its servicesinto other firms the same way Ma Bell was compelled to split into thesubsidiary firms. Apple is currently involved in a legal tussle withSamsung over patent infringements (Duhigg & Lohr, 2012). Thedispute is just of the many disputes Apple has with Android, HTC, andNokia.
Theposition of Facebook of the social media market could cast doubts ifthere would be any competitor that can cut into its market share. Ithas been stated that Facebook subscribers are as much as the thirdlargest country in the world. However, this only represents 45% ofthe total number of people subscribed to some form of social medianetwork (Baker & Green, 2008). There are other regionalcompetitors such as Renrein in China, Odnoklassnikki in Russia, andMixi in Japan. The rise of popular regional social networking sitescuts into the global market of Facebook. Google is a noteworthycompetitor since it owns Google + and went ahead to integrate it withthe normal the normal Google mail services. Facebook’s survival isalso not assured because competing companies are becomingincreasingly innovative through services such as enabling users toreproduce discrete capabilities such as micro-blogging and photosharing (Weeks, Moore & Allender, 2011). Who knows, regulatorsmay wake and compel Facebook to concentrate on one market segment aresplit up into subsidiary services.
Marketindicators show that the companies may not hold onto their hugemarket shares for long into the foreseeable future. Apple has Samsungas an able competitor, especially on the global market. The currentSmartphone market is very competitive. While Apple may have capturedthe high-end market, Samsung, Panasonic, Sony, LG Display, and HTCare doing well in both the markets. Facebook is facing regional andlocal competition as mentioned above. Google seems more assured, butthe possibility of litigation may see it lose out to competitors suchas Yahoo, Bing, and DuckDuckGo. Currently, one would feel sorry forBing because the market seems impermeable due to the oligopolistictendencies of Google and other internet giants.
Inconclusion, the internet giants are, indeed, operating inoligopolistic markets. Although there other competitors that canprovide the same services, the firms are well-established and theyuse their advantages to curtail competition. However, the tacticsmay not last forever since regulators are keen to break their marketpowers. As technological innovations continue to grow, there are highchances that the market share of these giants with naturally recedeor by compelled by law to disintegrate their production lines.
Baker,S., & Green, H. (2008). Social media will change your business.Technology,12,01AM.
Duhigg,C., & Lohr, S. (2012). The patent, used as a sword. TheNew York Times,7.
Mansell,R., & Javary, M. (2002). EmergingInternet oligopolies: a political economy analysis(pp. 162-201). Michigan State University Press.
Posner,R. A. (2001). Antitrust in the new economy. AntitrustLaw Journal,925-943.
Weeks,S. M., Moore, P., & Allender, M. (2011). A regionalevidence-based practice fellowship: collaborating competitors.Journalof Nursing Administration,41(1),10-14.