We used to live in an age where banks dominated the world but since the financial crisis and the rise in innovative technology big tech companies have taken over the reign for domination and it doesn’t seem like it is going to end anytime soon. Remember when Amazon only sell books and Netflix is still lending out DVDs, no one would’ve thought they would become two of the largest company in the world. FAANG (Facebook, Apple, Amazon, Netflix, Google) now make up a huge chunk of the economy and have a whopping valuation at around 5 trillion USD. However, they have gotten so big that they have become monopolists in their respective areas and they are only growing larger and larger by day.
We all know what these companies’ main businesses are but they are still actively trying to expand their reach. Facebook (FB) is planning to invest heavily in the Metaverse and the emerging AR and VR space to complement its Oculus brand’s hardware. Apple (AAPL) is entering the fintech space with Apple credit cards to synergize with its Apple Pay, they are also making their own chips to rival other semiconductor companies. Amazon (AMZN) is entering the telehealth industry by launching its own service and is also rumored to be stepping into the crypto space. Netflix (NFLX) announced that they are entering the gaming industry by leveraging their deep content library that other gaming companies do not have. Google(GOOG) is investing in Waymo which is a leading self-driving vehicle that can possibly compete with the likes of Tesla.
Besides FAANG which is widely known, other tech companies such as Paypal and Salesforce are becoming more and more dominant in their respective space too. Paypal (PYPL) is the leader in the digital payment industry and the latest cashless tailwind driven by the pandemic is further pushing them forward. They also started to dip their foot into the booming crypto space and they are finding success as they are able to leverage their brand recognition. Salesforce (CRM) is a lesser know company but it is the largest CRM (customer relationship management) company in the world. They are growing fast as companies are finding ways to engage with their customers, their latest 25 billion acquisition of Slack, a communication software proves their ambition to further grow their empire. I believe these two companies are on their way to becoming the next two trillion companies in the future as the momentum continues.
Monopoly is concerning because it diminishes the chances of other companies especially start-ups succeeding which is not fair to them. Mega cap companies are able to leverage their existing product or technology to disrupt other companies. Microsoft using Teams to fight against Zoom and Netlfix leveraging their content to enter into the gaming industry are good examples. Besides, these companies have massive cash in hand and are generating tons of cash flow each quarter. If they sense that another upcoming competitor may threaten them they can just buy out the company and take over their in-house technology. Their cash also allows them to do a lot more R&D (research and development) where most companies can’t do, Google developing Waymo, a leading autonomous vehicle company is an example.
The tech space will become very concentrated if this continues and I think regulation might be needed, although I am doubtful whether it can actually do much. I believe smaller companies should have faith in themselves and not give in to big companies even if they receive an offer for a buyout, Snapchat refused to sell and they are now at a market cap of close to 100 billion and may be the only possible threat to Facebook. I am pessimistic about this situation improving in the future but sometimes it is what it is.
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