Feature MARIANA MAZZUCATO, PROFESSOR IN THE ECONOMICS OF INNOVATION AND PUBLIC VALUE AT UNIVERSITY COLLEGE LONDON, IS FOUNDING DIRECTOR OF THE UCL INSTITUTE FOR INNOVATION AND PUBLIC PURPOSE/PROJECT SYNDICATE
Big Tech Must Stop Hiding A major reason why Big Tech firms have achieved such scale and become the gatekeepers to entire markets is that they have been able to obscure most of their financial and operating data. There are obvious steps that regulators can take to close the reporting loopholes that the industry has been exploiting 24
March
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n 2021, Alphabet (Google’s parent), Amazon, Apple, Meta (Facebook’s new alias), and Microsoft were among the world’s largest companies in terms of revenue and profit. These five companies alone increased their market capitalization by an amount greater than Italy’s GDP ($2.5 trillion vs. $2.1 trillion). Big Tech now accounts for nearly a quarter of the S&P 500’s index and a quarter of research and development spending by US publicly listed non-financial firms. Amazon is the world’s fifth-largest employer, and it is still growing. What can be done about these firms’ growing market dominance? For starters, the situation demands a more proactive regulatory agenda, so that public authorities are not constantly playing catch-up. What we have now is a case-by-case regulatory “war of attrition,” frequently waged by litigation against past business practices. After a lengthy appeals process, the result almost always amounts to “too little, too late.” The problem is exacerbated by a lack of disaggregated financial disclosures from the Big Tech companies. Their aggregated disclosures no longer come close to explaining how they operate. Investors and regulators need to know more. How many people use WhatsApp each month, and for how many hours? What is the Apple App Store’s profit margin? What is Microsoft Azure’s share of the cloud computing market? Yes, sometimes one can find approximate answers to such questions on Google Search, but only when they have been revealed by a company whistleblower, an unredacted court document, or a private estimate from a website traffic company. The answers certainly cannot be found in Big Tech’s public 10-Ks, the annual financial performance reports that all US publicly listed companies must file with the Securities and Exchange Commission. These omissions follow from two features of Big Tech’s powerful platform business model. First, a platform’s utility is often underpinned by “free” or subsidized products that drive user adoption. Even though these products are eventually monetized – either indirectly through advertising or directly through subscriptions, sales, and fees – they do not have to be included in the 10-K as long as they remain largely “free” to the consumer.
