How technology has gotten so great
Amazon, Apple, Facebook and Google – known as the Big 4 – now dominate many facets of our lives. But they did not do it alone. They have acquired hundreds of companies over the decades to propel them to become one of the most powerful tech giants in the world.
They all followed a similar pattern. First, they have become dominant in their original business, such as e-commerce for Amazon and Google search. Then they developed tentacles, making acquisitions in new sectors to add revenue streams and outperform the competition.
The Washington Post reviewed several datasets and studies to show the scope of these purchases, which have drawn the attention of critics who fear the practice is stunting innovation and harming consumers. In October, the House Judiciary Committee released a report discussing the domination and acquisition strategy of these four companies. The post’s list is probably incomplete as many acquisitions were not public or were too small to be advertised.
You may have recognized many of these acquired companies such as Zappos, IMDb, Twitch, and Goodreads, all owned by Amazon. You may have also heard of the bigger deals, like Google’s acquisition of Motorola Mobility or Apple’s acquisition of Beats Electronics. (Amazon founder Jeff Bezos owns The Post.)
But the majority of acquisitions involved small startups with valuable patents or talented engineers, many of which led to products in use today, like Google Docs and iTunes. Some acquisitions have resulted in multi-billion dollar businesses, while others have failed and resulted in the sale or complete shutdown of products.
For decades, the Federal Trade Commission and the Department of Justice have been tasked with monitoring mergers and acquisitions and challenging them in court if they threaten the health of the market. But now, as tech giants get more powerful, critics who have accused these companies of using monopoly power to weaken their competitors have also called for closer scrutiny, saying the acquisitions are not based on innovation but in total control of the market – a tactic known as “copy, acquire, kill” – to eliminate competition
“These monopolies have exploited weaknesses in existing law and lax enforcement to maintain and expand their market dominance by buying out or burying those they perceive as competitive threats,” said Representative David Cicilline, DR.I. , who presided over the House. committee that reviewed over a million documents in its Big Tech antitrust investigation.
Facebook hasn’t bought as many companies as its Big Tech peers, but it does have the distinction of making the most expensive acquisition in the group. In 2014, it acquired the WhatsApp messaging app for $ 19 billion. The price shocked analysts at the time because WhatsApp had only 55 employees and was unprofitable.
But WhatsApp had 450 million users and was growing rapidly. It is on this growth that Facebook has thrived, and it has not been stingy in paying to buy new platforms that could pose a competitive threat in the future.
Two years earlier, Facebook had bought Instagram for $ 1 billion, a transaction now considered a pivotal moment in social media history. The company also tried to buy Snapchat for $ 3 billion, but founder Evan Spiegel fended off Mark Zuckerberg.
In emails obtained by the House Judiciary Committee, a Facebook executive said the company would spend 10-15% of its market value every two years to “solidify” its position through acquisitions.
The company owns four of the top five social media and messaging platforms: Facebook, Instagram, Facebook Messenger, and WhatsApp. And while the company may have spent less time and money moving into adjacent markets, it definitely owns its core industry. Facebook remains one of the most used online platforms in the United States, where 69% of adults say they use it, according to a recent study by Pew Research.
Facebook executives have already defended their acquisitions, saying the company has invested billions of dollars in WhatsApp and Instagram since their purchase.
“We are in fierce competition with many other services around the world,” Jennifer Newstead, Facebook’s general counsel, wrote in a blog post in December. “With the growth of the Internet over the past 25 years, the ways people share and communicate have exploded thanks to dynamic competition.”
Google’s path to becoming a giant has demanded its fair share of purchases. Almost every Google product, from Google Docs to Google Earth, involved at least one acquisition.
In its first decade, Google used search to build a powerful advertising business that has generated billions of dollars in revenue – nearly 40% of all online advertising in the United States goes to Google. Then he invested that money to refine his core business and moved on to new ones.
Some, like self-driving cars, haven’t made a lot of money yet. But others, like YouTube and Google’s cloud computing business, are now generating billions in revenue.
Google is not new to antitrust control. European Union regulators have conducted three investigations into the company since 2010, fining it around $ 10 billion in total. But Google’s position in Europe is more dominant than ever. Today, the company faces a new wave of investigations in the United States from state and federal attorneys general.
“Our acquisitions over the years have spurred investment, accelerated innovation and growth, and benefited consumers. The vast majority of our acquisitions are small technology companies that we have invested in to help them grow faster, at a lower cost, ”a Google spokesperson said. .
Once an online bookstore, Amazon quickly grew to be a “store of everything”. But in recent years, it has grown beyond its e-commerce roots, largely through acquisitions.
To enter the grocery arena, the company acquired Whole Foods Market and its distribution channels and retail outlets in a sip of $ 13.7 billion. Amazon wanted to be a bigger player in the “Internet of Things” so it swallowed up several home security companies and home router company Eero. And as the company entered the autonomous vehicle industry, it also chose startups in that space.
Amazon is everywhere: in your TV with Prime Video, in your ears with its Echo smart speaker, and behind the websites and apps you use every day. In 2020, the company achieved sales of $ 386 billion.
The company shows no signs of slowing down, with additional acquisitions including robotics companies to help workers and artificial intelligence expand the capabilities of its virtual assistant service Alexa.
Amazon executives said the company was only a small part of the entire retail industry.
“We operate in a wide range of businesses, from retail and entertainment to consumer electronics and technology services, and have thriving and established competition in each of these areas,” said a spokesperson.
Apple, founded a few months after Jimmy Carter’s inauguration, is the oldest company among the Big Four and has a longer acquisition history that can be divided into two periods: before the iPhone and after.
Like its competitors, Apple has caught companies in the software automation arena, such as virtual assistants and health trackers. Apple’s Siri, for example, started as a government project that was handed over to the private sector.
But Apple has also taken advantage of acquisitions to bolster its “service” revenues, which shareholders say they hope will boost profits as smartphone sales stagnate. Apple’s acquisition of Beats was the perfect example: the streaming service allowed Apple to enter the music rights business, which allowed it to launch a competitor to Spotify, which quickly made iTunes obsolete. . In August, Apple’s market capitalization reached $ 2 trillion, and it is now the most valuable company in the world.
Apple is big, has money to spare, and has spent billions on internal research and development each quarter. It is also an island company that has compartmentalized itself and kept its employees compartmentalized. But even Apple has to call on outsiders to grow and conquer. A company spokesperson declined to comment.
About this story: The Post collected information on business acquisitions from Refinitiv, the American Economics Liberties Project, a US House report on competition in digital markets, studies by Yale University and the University of Utah and reporting.
Since companies are not required to disclose all mergers and acquisitions to the public, the list is likely incomplete. Some acquisition dates are approximate.