90 PERCENT Portion of independent retailers who say that Amazon has hurt
their business, according to a 2017 survey of 850 owners of such businesses
conducted by the trade association Advocates for Independent Business.
Google. Those giants say they give startups what they crave—
instant access to vast markets, e;cient ads, cheap and reliable infrastructure. This isn’t a fiction. Tech startups once
bought servers; now they rent Amazon’s and Google’s cloud-computing power. Facebook is the most cost-e;ective marketing tool in history. Apple’s and Google’s app stores let
developers reach hundreds of millions of customers overnight; Amazon Marketplace does the same for makers of
physical products. “You can get wind in the sails for an early-stage idea much faster, and at lower cost, than ever before,”
says Justin Hendrix, executive director of NYC Media Lab.
The platform players want to see companies take wing,
because they impose a tax on everything those companies do.
Apple, the world’s most profitable company, takes 30 percent
of every sale in the App Store; merchants pay Amazon
$40 per month or more to sell there—and don’t forget those
Facebook and Google ads and AWS fees. The tech giants
plow those profits into ever more new businesses, where
they compete with their own customers. Like Edberg, more
and more entrepreneurs now understand what that means:
the leviathans using market power to favor their own o;erings. A 2016 investigation by ProPublica found Amazon’s
search algorithm steers users away from bargains, often to
Amazon’s white-label o;erings, which yield fatter margins.
Google saw Yelp building a nice business around restaurant
reviews. So it created its own listings and privileged them in
searches; Yelp’s stock price was halved.
Facebook, Google, Apple, and Amazon “are developing a
concentration of power that fosters the premature death of
big companies and infanticide for small firms,” says Scott
Galloway, a professor at NYU’s Stern School of Business and
author of The Four, a new book about digital monopolies.
“A press release with ‘Amazon’ on it has the power to bring
down the value of an entire industry within hours.”
Economists like Marshall Steinbaum of the Roosevelt
Institute agree. They point at these quasi-monopolies as
a cause, if not the main cause, of the recent slowdown in
American startup creation. Once confined to old-line sec-
tors like retail, this sluggishness has recently spread, alarm-
ingly, to technology.
Edberg believes taxes and regulations most discourage
startup formation. But he recognizes the platforms’ power.
Their profits permit high six- and even seven-figure compensation packages for engineers; to anyone considering
a startup, “that kind of money is hard to walk away from.”
And the rewards of risk taking are diminishing. “
Companies are getting bought earlier and having smaller exits,” he
says. “The big companies come in and say, ‘We can buy you
or crush you.’;” This influences which startups investors
back, and how those startups conceive themselves.
Opportunities to build large businesses are still there,
but mainly in the weedy patches between those already in
existence, and those patches
shrink as the biggest players
expand. Instacart, the grocery-
delivery business, claimed a key
advantage with its exclusive
partnership with Whole Foods.
Then Amazon launched its own
grocery delivery service and
acquired Whole Foods. Competition, increasingly, happens
only between the giants.
It’s been decades since the
federal government has seriously
policed market concentration.
Too bad: Even inconclusive or
threatened antitrust actions can
create space for new entrants.
There’s a good chance Google
wouldn’t exist were it not for the
Justice Department’s clumsy tilt
at Microsoft in the mid-’90s.
Dick Reisman, an entrepreneur
and investor who worked at Bell
System before a federally mandated breakup in the 1980s created the modern telecom
industry, sees the need for similar
action now. “You have these
monolithic platforms. They need
to be made more modular”—by,
say, splitting Facebook and Instagram, or divorcing Amazon’s
retail business from its sellers’
That’s the last thing the leviathans want, of course, so they
present themselves as champions
of the new entrepreneur. Programs like Microsoft for Startups
and Google Launchpad have put
hundreds of millions of dollars
into accelerators and other
resources for new firms. That
may be as much for politicians
and regulators as for entrepreneurs, but that’s not to say the
sentiment behind them isn’t
sincere. Big tech loves small
business. Just as long as it
Additional reporting by SONYA MANN.
of a once-
by one or two
of the Big
Portion of digital ad
spending in the U.S.
that went to Facebook
and Google last year
of all online searches
of all e-commerce
Sources: eMarketer, Bloom-