GAFA vs. USA – The Big Fight

GAFA vs. USA – The Big Fight

Big Tech firms earn big profits and lead the geopolitical war for tech dominance, yet the US authorities are jittery 

They are collectively known by their acronym GAFA (Google, Apple, Facebook, Amazon), or sometimes FAANG (Facebook, Apple, Amazon, Netflix, Google; now Alphabet). They are no longer compared with other corporate organizations. With a combined market capitalization of US$5.5 trillion (increasing by the hour) they rival the GDPs of countries like Saudi Arabia, Vietnam or Venezuela. Yet, on July 29, 2020, the CEOs of GAFA will face the US House Judiciary Committee’s antitrust committee which has been conducting a year-long probe into their overwhelming dominance of their respective markets.

This is a paradoxical situation for the United States of America. While they realize that Big Tech is becoming too big for the government to handle, they desperately need the power of GAFA to fight China’s technological might: BAT – comprising Baidu (revenue US$13 billion), Alibaba (revenue US$75 billion), Tencent (revenue US$15 billion). Big Tech will lead the geopolitical war for technological dominance of this century.

Together and individually, GAFA now have the power to sway public opinion, should they seek to do so. They could create nationwide mayhem if any of them collapses, for a variety of reasons ranging from a poor business decision, to malpractices, technological disruptions, entry of more nimble competitors or – most importantly – global competition from Chinese tech giants. In sharp contrast to the US firms, BAT is firmly controlled by the Chinese Communist Party (CCP) through a maze of equity holdings and well-laid-out rules that require their CEOs to formally enlist as members of the party.

Till now most US citizens believed that its free enterprise system was the most efficient and productive in the world, and that Facebook, Amazon, Google and Apple epitomized it at its best. Twenty years ago, Steve Jobs’ digital hub strategy, based on his vision of the home computer and the emergence of mobile devices in the next decade, transformed Apple from a niche computer-maker to the world’s most valuable company of any kind, radically changing the way we work and play. Amazon has used its scale to help small businesses reach millions of customers. Google promised the world that they wouldn’t be evil, and they brought a world of information to our fingertips. Facebook proposed to bring the world closer together, and, in a lot of ways, it has.

Today these promises are a trifle suspect – as fake news that pollute democracy, biased algorithms that suppress competition, blatant misuse of social media platforms for political propaganda threatening free speech everywhere, and above all the overwhelming financial power to muscle out innovation, is coming under the scanner. Amazon controls a third of the cloud business, 44 percent of e-commerce, and a staggering 70% of the smart-speaker market. Google controls over 90% of online search. Facebook has become a conduit for political disinformation, and Apple a symbol of conspicuous consumption and ruthless brand protection. Though tens of thousands of small and not-so-small businesses face bankruptcy in the wake of the pandemic, all four companies continue to thrive.

While GAFA has created the technological edge for the US, it has also throttled innovation and competition with its growth strategy powered by acquisitions. Over the last 15 years or so GAFA + Microsoft have taken over nearly 700 companies. Microsoft leads the pack with 225 acquisitions which include Skype, Nokia (later sold off), LinkedIn and GitHub. Alphabet took over YouTube, Motorola, Nest, DoubleClick; and Facebook bought WhatsApp, Oculus and Instagram.

One of Google’s prized acquisitions was Android. Interestingly, Google had paid less to acquire YouTube in 2006 and lesser to buy the Android operating system in 2005. Be it the Pixel phones, Nest products or other Google products, each of these were acquired by Google gradually and developed into better products and were introduced to a larger user base. Android is the most popular mobile operating system and it has changed mobile computing altogether. Google acquired Android back in 2005 for just US$50 million; one of the best purchases it had ever made!

Google has been extremely smart in its acquisition strategy, going in for the IPs of its targets. It acquired Motorola for US$12.5 billion in 2011 only to sell the handset division to Lenovo later for US$3 billion. However, this deal was a success as per Google, as it got hold of Motorola’s mighty patent portfolio at a cheaper price of around US$3.5 billion. Google’s neural engine and machine learning technologies are powered by several smart acquisitions and DeepMind is one of the major ones. It bought DeepMind for over US$500 million in 2014.

Amazon has been relatively quieter with its buyout of Whole Foods, which gave it a physical presence of stores; Pill Pack – an online pharmacy that gave it entry into the healthcare business; and Twitch – the video game platform. Apple’s buys have been in the technology sector with Dialog Semiconductor as it wants to control the supply chain of this vital component necessary for its products; NeXT – a software development company; and Shazam – a music discovery app.

Indeed, the Judiciary Committee hearings are a wonderful opportunity for GAFA to outline their vision for the future. A vision that is inclusive, fosters innovation and imagination and above all using technology for the good of the planet. The triple bottom-line of ‘people, planet, profits’ have always created sustainable growth and has been the foundation of companies that became institutions.

Founded in 1975, Microsoft is the oldest of the Big Tech companies and it’s not yet half-a-century. Of course, corporate longevity is forecast to shrink to just 12 years by 2027, as per a survey by S&P 500. It found that the 33-year average tenure of companies on the S&P 500 in 1964 narrowed to 24 years by 2016. Those which will endure will be the ones that create genuine social value, be ethical, and above all care about the planet.

With a combined annual revenue of US$773 billion, the GAFA group – sitting on a cash pile of US$420 billion – can deliver meaningful change. They can also be the spearhead in the battle against global authoritarian regimes seeking technological dominance of Artificial Intelligence, Microprocessors, Quantum Computing, Gene Engineering, Space Technologies and Renewable Energy sources, which will define the Fourth Industrial Revolution. It will be naïve to believe that they won’t be used to drive a global geopolitical charter. The epic battle has already started.

Leave a comment

Your email address will not be published. Required fields are marked *

© 2024 Praxis. All rights reserved. | Privacy Policy
   Contact Us