Tech Companies Are Consolidating Like Crazy

Sandra Lee

In the United States, tech giants like Amazon and Facebook are acquiring small businesses at a rapid pace — in other words, they are consolidating to become increasingly powerful. In line with this trend, Facebook purchased Instagram in a $1 billion acquisition deal in 2012 and just two years afterwards, purchased WhatsApp for $19 billion.

Facebook isn’t alone in sealing these multi-billion dollar deals. In 2017, Amazon acquired Whole Foods for $13.7 billion. Although substantial sums of money are sacrificed to purchase these companies, companies like Amazon and Facebook are making these investments in order to gain more consumers and power.

When companies are purchased, their consumer base is also acquired. Acquiring more consumers generally corresponds to acquiring more influence and power, which makes purchasing other companies an economically attractive strategy to companies who can afford to do so.

Amazon’s purchase of Twitch, a popular video game live-streaming service, is an example of this phenomenon. By creating desirable features on Twitch that were only available to Amazon Prime members, Amazon was able to market to Twitch’s substantial viewer base.

In a capitalistic system, corporate consolidation is both legal and economically viable, as it weeds out competitors and often contributes to increased revenue. However, capitalism does not account for the ethics behind this practice and current laws do not prevent these companies from veering towards monopolizing industries.

Although Google, Amazon, and Facebook are all relatively recent innovations, they now hold significant power because so many people use their services. Google’s search engine processes around three billion searches each day. Amazon has around 197 million unique visitors a month while Facebook has roughly 2.32 billion active users each month. As more people use these companies’ increasingly ubiquitous services, monopolization of the digital space will become easier.

“The world has gotten smaller and bigger at once,” said Jennifer Holt, a professor of Film and Media Studies at UCSB who specializes in media criticism. “But we made a lot of trade-offs for that convenience — primarily, sacrificing varying levels of surveillance or the exchange of our personal privacy. We made a lot of bargains in the process of this shift.”

Facebook’s Cambridge Analytica scandal, as well as the monetization of its users information, are an example of a bargain that’s been made. Information has been traded for convenience. Additionally, as companies make more money, they gain more political and social influence, which could contribute to influences on legislation as well as their consumers.

The effects of consolidation are immediate. Whole Foods is a grocery store chain specializing in organic and high quality products, but soon, its customers may not be greeted by fresh-off-the-farm tomatoes and spinach. Instead, they might be greeted by the newest version of the Amazon Echo.