Amazon, Apple, Google and Facebook: the menacing march of the tech titans

The companies that changed our lives are now having to answer for the civil and social consequences of the world they created.

Facebook’s Mark Zuckerberg, Apple’s Tim Cook, Jeff Bezos of Amazon and Google’s Sundar Pichai.

In Seattle this week, the world’s richest man, Jeff Bezos, opened the newest building at Amazon’s headquarters with the futuristic flourish that tech ­giants love.

The Amazon founder and chief executive was standing inside the company’s giant glass “spheres”, which boast thousands of tropical plants, treehouse meeting rooms, a river and waterfalls. It is a workspace designed to enhance the creativity of its 20-something, tech-savvy employees. Rather than cut a ribbon, Bezos looked up at the roof of the giant glass dome and ordered the artificial intelligence assistant Alexa to do the honours. “OK, Jeff,” Alexa replied before the lights came on.

It was a moment of corporate theatre that has become synonymous with America’s big tech ­giants: Amazon, Apple, Google and Facebook. These titans thrive on their image of being visionary pioneers presiding over uber-cool workplaces full of laptop-wielding millennials.

But such stunts are fast losing their appeal as the world gets a growing glimpse into the dark side of the tech revolution.

From Washington to Europe to Australia, so-called Big Tech has never been bigger, richer or more powerful. It has also never been more on the nose.

The companies that changed the way we live, interact, work and play are now having to answer for the social and civil consequences of the world they created.

Some say it is too late, the genie has been uncorked and that the good still far outweighs the bad. But with every day the bad ­appears to be getting worse.

These giants are accused of ruthlessly invading our privacy, killing off bricks-and-mortar ­retailers, monopolistic practices, stealing news and advertising from traditional media, allowing nefarious players — from Russian ­intelligence to neo-Nazis — to ­exploit their sites, and refusing to help intelligence agencies ­access encrypted sites to hunt down ­terrorists. The attacks are coming from both sides of politics, from ­George Soros to US President ­Donald Trump.

Meanwhile, corporate reg­ulators, in particular in the US, have been caught flat-footed. They are only now grappling with how they can hold accountable Amazon, Apple, ­Alphabet’s Google and Facebook, which along with Microsoft are America’s five most valuable ­companies, worth an astonishing $US3 trillion.

All eyes are on Australia as the disruption of news media by the tech giants, and how it hurts consumers and publishers, comes under the microscope for the first time. The Australian Competition & Consumer Commission is to release an issues paper for what is expected to be a year-long inquiry.

These tech companies rival in size and influence the oil and railway barons of America’s Gilded Age. In their day, American Telephone and Telegraph and Standard Oil controlled more than 80 per cent of their markets. These days Google controls 89 per cent of internet searches, Facebook products are used by 95 per cent of young adults, Amazon handles 75 per cent of electronic book sales and Google and Facebook have an advertising duopoly accounting for almost two-thirds of online advertising spending. Together, Google and Apple provide an astonishing 99 per cent of mobile phone operating systems.

WEB Inquirer Tech giants table

These tech titans wield a power that is far more ­invasive and unpredictable than that of the robber barons because it derives from their intimate knowledge of our lives via algorithms and data collection. “Facebook and Google have grown into ever more powerful monopolies,” billionaire philanthropist ­Soros told a dinner at the World Economic Forum in Davos last week. “They have become ­obstacles to innovation and have caused a variety of problems of which we are only now beginning to become aware.” He said today’s tech giants had “neither the will nor the ­inclination to protect society against the consequences of their actions (and that) their days are numbered.”

Big Tech knows it is under pressure as regulators move to scrutinise the industry. In Trump’s Washington, Google spent more money last year than any other US company — more than $US18 million — to influence the White House, politicians and agencies on issues from monopolies to tax reform and online advertising. Amazon lifted its lobbying spend in Washington by 16 per cent to $US13m, Apple upsized its budget by 51 per cent to $US7m and Facebook’s lobbying bill rose 32 per cent to $US11m. Microsoft spent $US8.5m. Taken together, the tech giants have displaced the telecommunications, energy and defence ­industries as the top lobbyists in Washington.

Alvaro Bedoya, head of the Centre on Privacy and Technology at Georgetown University, says this sudden and intense lobbying push by the tech giants makes it harder to enact laws and regulations to protect consumers. “Because this is the first time in American history that the giants of industry have as their raw ­material personal data, (tech companies) are going to do as much as possible to protect access to that raw material,” he told The Washington Post.

In 2002 a bitter antitrust battle with Microsoft ­resulted in a court settlement curbing some of the company’s monopolistic practices. But 16 years on, regulators are struggling to apply traditional antitrust and other constraints to these multi-headed, fast-moving tech behemoths.

Consider the extraordinary case of Amazon, a company Bezos began in his garage in Seattle in 1994 by selling books over the ­internet. It is now worth $US600 billion ($750bn). Amazon has become the retail juggernaut of our age while spreading its tentacles into credit lending, auction houses, book publishing, film producing, grocery chains, fashion designing and delivery and logistics, among other things.

“Imagine getting your pay-TV service, groceries, banking, ­insurance, etc, all through one company. That’s the threat that Amazon poses,” says Michael Gleeson, of US business analysis firm The Diffusion Group.

Critics say it is not the size of Amazon that scares them as much as the online ecosystem the company is creating, which they warn will inevitably stifle competition.

In the US, Amazon sells more than 400 million products. Because Amazon relies on sales volumes for its wealth, these products are deliberately priced at bare profit margins, a move that has put many bricks-and-mortar ­retailers out of business.

Amazon’s new Spheres in Seattle. Picture: AP

Membership of Amazon Prime, which gives access to streaming TV and movies as well as free ­delivery of a dizzying range of products, has doubled to 80 million in the US in the past two years. Membership makes it more likely that future purchases are also made with Amazon.

“Although Amazon has clocked staggering growth, it generates meagre profits, choosing to price below cost and expand ­widely instead,” writes Lina Khan in an article in the Yale Law Journal that attracted much attention. “Through this strategy, the company has positioned itself at the centre of e-commerce and now serves as essential infra­structure for a host of other businesses that depend upon it. Elements of the firm’s structure and conduct pose anti-competitive concerns — yet it has escaped antitrust scrutiny.”

Khan argues that US antitrust laws cannot measure the impact of a modern juggernaut such as Amazon because they focus on price and output rather than the Amazon architecture, which is ­designed eventually to strangle competitors: “Specific­ally, current doctrine under-appreciates the risk of predatory pricing and how integration across distinct business lines may prove anti-competitive.”

Amazon, which has long sold Kindle books on its Australian website, had its full retail launch in Australia in December, allowing for physical goods, from fashion to hardware, to be shipped from its Melbourne warehouse for the first time.

For Mark Zuckerberg’s Facebook, 2017 was the worst year since he started the site in 2004, and he has vowed that his “personal challenge for 2018” is to fix what has gone wrong. The social network has been accused of failing to prevent the spread of disinformation and violent imagery, of political bias against conservative causes, of distorting news and ­advertising, and of allowing Russian intelligence to exploit its sites to interfere with the 2016 US presiden­tial election. “For those I hurt this year, I ask forgiveness and I will try to be ­better,” Zuckerberg wrote in a post last year.

“For the ways my work was used to divide people rather than bring us together, I ask for forgiveness and I will work to do better.”

Last month Facebook executives made the extraordinary ­admission that the site, which is used by two billion people a month and is one of the world’s biggest distributors of news, could “spread misinformation and corrode democracy”. “Facebook was originally ­designed to connect friends and family — and it has excelled in that,” Samidh Chakrabarti, Facebook’s product manager for civic engagement, wrote in a blog. “But as unprecedented numbers of people channel their political energy through this medium, it’s being used in unforeseen ways, with ­societal reper­cussions that were never anti­cipated. In 2016, we … were far too slow to recognise how bad actors were abusing our platform.”

An investigation by Facebook found that 126 million Americans were exposed to Russia disinformation on the site during the 2016 election campaign. According to Roger McNamee, a former mentor of Zuckerberg, Facebook has yet to admit the problem lies in the very nature of the technology that it relies on for its site.

“The problem with Facebook’s whole position is that the algorithm exists to maximise attention, and the best way to do that is to make people angry and afraid,” he told The Washington Post.

Rupert Murdoch, executive chairman of 21st Century Fox and News Corp, publisher of The Australian, last month expressed his frustration with companies like Facebook and Google. “Facebook and Google have popularised scurrilous news sources through algorithms that are profitable for these platforms but inherently unreliable. Recognition of a problem is one step on the pathway to cure, but the ­remedial measures that both companies have so far proposed are inadequate, commercially, ­socially and journalistically,” Murdoch said.

He said there was a “lack of transparency” in the process and this should “concern publishers and those wary of political bias at these powerful platforms”, and suggested Facebook should support credible news organisations by paying them for content.

News Corp and other traditional news organisations are increasingly concerned about the duopoly Facebook and Google have on online advertising. ­Together they collect nearly half of all global online advertising revenue; in the US — where two-thirds of adults access news on social media — they accounted for 85 per cent of total internet ­advertising revenue growth in 2015 and 2016.

In December the Nine Network, Fairfax Media and News Corp Australia announced a partnership to fight Facebook-Google advertising domination.

“As the media sector evolves, there are growing concerns that digital platforms are affecting traditional media’s ability to fund the development of content,” ACCC chairman Rod Sims said in ­December when announcing the commission had been formally asked by the Turnbull government to examine the impact of digital platforms.

While US regulators are also looking more closely at the tech giants, they have lacked the push shown by regulators in ­Europe. Last year the EU levied a record $US2.7bn fine against Google for favouring its own services in the results it presents to users.

Facebook has also been fined by European privacy watchdogs for breaking data protection rules, and in 2016 Apple was forced to pay Ireland more than $US15bn in uncollected tax.

Soros says of Facebook and Google: “They claim they are merely distributing information. But the fact that they are near-monopoly distributors makes them public utilities and should subject them to more stringent regulations aimed at preserving competition, innovation and fair and open universal access.”

Privacy concerns have increasingly plagued Google and other tech giants as people become more aware of the vast amounts of information they suck up. These range from the political views of users to their purchase and search histories and their locations.

New York-based digital magazine Quartz startled some in ­November by reporting that smartphones carrying Android software can gather data about your location even when they don’t carry a SIM card and ­location services are turned off.

“The result is that Google … could access data about individ­uals’ locations and their movements that go far beyond a reasonable consumer expectation of privacy,” the magazine wrote.

In the US, politicians appear to have been more active on these ­issues than the regulators. Democrats, with the backing of Republican veteran John McCain, have introduced legislation that would require greater disclosure of web platforms that run political advertising — a move designed to prevent a repeat of Russia’s hijacking of Facebook. In a separate move, a Senate panel called executives from Facebook, Twitter and YouTube before a panel last month to ­answer questions on what they were doing to prevent the posting of hate speech and extremism.

The debate over Amazon’s size has taken on a physical as well as digital dimension. The company has grown so fast that it now employs 40,000 people in central Seattle, up from 5000 in 2010, making it easily America’s largest company town. The company occupies 20 per cent of office space in the city across 45 buildings. Cranes dot the skyline, erecting even more buildings for Amazon.

When Inquirer visited, the city was caught in a fierce debate over whether Amazon was ­already too big for it. While its growth has brought in thousands of new and well-paid jobs, it has also led to the fastest rising house prices in the country. This has led to a spike in homelessness, traffic gridlock and even an identity crisis.

“If you ask me, as a Seattle ­native, I’d say we were better off in the 90s before Amazon got big,” local author Knute Berger tells ­Inquirer. “Clearly, the tech economy has dramatically impacted rents, real estate values, homelessness, displacement and affordability in general. Amazon has had a big hand in that by the rapidity of its growth.” Others such as Ed Lazowska, professor of computer science at the University of Washington, disagree. “Look at that,” he says, pointing to a street full of Amazon-owned buildings. “There was nothing here but empty warehouses and carparks before Amazon moved in. Some cities would kill to have this sort of investment.”

And indeed they are. Two hundred and thirty-eight towns and regions across the US put forward bids to be chosen as Amazon’s second US headquarters.

HQ2, as Amazon calls it, will ­receive an investment of about $US5bn and create 50,000 jobs.

As Bezos was ­instructing Alexa to open his new building this week, only a block away, hundreds of homeless men, women and children were ensconced at a former Day’s Inn hotel. Critics say many of them have been displaced by the rise in rents caused by Amazon’s growth. But Amazon has also come to their rescue, allowing them to live rent-free in a building it owns while donating food from the cashier-free Amazon Go store down the road. It seems that even in adversity, Amazon is a one-stop shop.

Locals say Seattle has become a living symbol of the good and bad of the tech revolution.

But as Soros said in Davos, it is time to confront the dark side. “These companies have often played an innovative and liberating role,” he said. “(Yet) social media companies exploit the ­social environment. This is particularly nefarious because social media companies influence how people think and behave without them even being aware of it. This has far-reaching adverse consequences (for) the functioning of democracy, particularly on the ­integrity of elections. The exceptional profitability of these companies is largely a function of their avoiding responsibility for — and avoiding paying for — the content on their platforms.”

Soros believes something harmful and maybe irreversible is happening to human attention in the digital age. “Social media companies are inducing people to give up their autonomy. The power to shape people’s attention is ­increasingly concentrated in the hands of a few companies. It (now) takes a real effort to assert and defend what John Stuart Mill called ‘the freedom of mind’.”

Cameron Stewart is also US contributor for Sky News Australia.