Is It Time To Bust Up The Big Four?

John Thomson


Published: 02/15/2018 02:19:18 PM EST in

Scott Galloway teaches brand strategy and digital marketing at NYU Stern School of Business.  Galloway has been an Internet pioneer since 1992 and has owned and sold several e-commerce companies over the past couple of decades. He is either a visionary champion of our capitalist economy or if you follow Scott Varney from Fox News, Galloway is a raging socialist.

What's caused the riff is Galloway's latest book called The Four where Galloway addresses the rise and...rise of Amazon, Apple, Facebook and Google, and the influence these companies have on the global economy. Galloway's conclusion is that they should be broken up for there near monopolistic power in a similar way that Microsoft was chopped at the knees in the 1990s. Here are some of the stats he shares in his book:

So how big is Amazon? With a current market cap of $591 billion Amazon is worth more to the stock market than Walmart, Costco, T.J. Maxx, Target, Ross, Best Buy, Kohl's, Nordstrom, Macy's, Bed, Bath& Beyons, Saks, Sears, Dillards and JCPenny combined!

If you combine Facebook and Google together, they have a market cap of $1.3 trillion. If you were to merge Disney, Time Warner, 21st Century Fox, CBC, Viacom, AT&T, Verizon, Comcast, Charter and the Dish Network, and then add the five largest advertising agencies in the world - WPP, Omnicomm, Publicist, IPG and Dentsu, according to Stern you would still only be at around 90% of what Facebook and Google are worth together.

How about Apple? Apple is on track to be the first trillion-dollar company with a market cap of $900 billion. In the last quarter alone Apple earned $46 billion, twice the profits that Amazon has earned in its entire history. Ferrari is reported to work on a profit margin of around 29% while Apple's profit margin of 32%. Stern observes that Apple's profits in just one quarter was greater than the total revenue of either Coca-Cola or Facebook in same period. Wow!

So what is wrong with this in Galloway's estimation? In a phrase; too much control in the hands of four companies. These four hold a 24% share of the S&P 500 Top 50 and at a combined market cap of $2.8 trillion are close to the total value of every stock traded on the Nasdaq in 2001.

Perhaps this is simply a sign of the times; Galloway observes the economic success stories of yester-year from companies such as Proctor & Gamble, were achieved from the hands of a massive work-force. P&G with a 2017 market cap of $233 billion employees 95,000 people or analyzed a different way P&G generates $2.4 million per employee. Intel with a market cap of $209 billion, employees 102,000 people or $2.1 million per employee. Facebook with a $542 billion market cap has 24,000 on staff or $23.4 million per employee. To generate $10 million in revenue, Facebook and Google require less than ten employees while ad agency giant WPP requires more than one hundred people to reach the same revenue. Hey, so what? - Should companies that have become efficient be penalized for their success?

Galloway fears of the 84% of the time we spend daily on our phones, we are engaged exclusively with an app owned by Facebook. Google holds a 92% share of the global search market generating $93 billion for Google, more than the value of the whole real estate and development industry in the United States. Amazon holds a 71% share of in-home voice devices and 64% of US households have a prime account. Apple has a 92% retention rate among consumers. In February 2017 79% of all active Apple iOS users had upgraded to the latest software compared to just 1.2% of all active Android users. Is this not an example of giving customers what they want?

Galloway's book is staggeringly fascinating if only for the sheer numbers and speed that these companies have come to dominate our lives. Should they be broken up? Are these four companies the new robber barons? I don't know, but the champion of capitalism in Galloway concludes that more, not less companies, have historically been better for the economy. We have seen anti-trust regulation with railroads, Telco with Bell, and of course with Microsoft among others so are we now prime to see these four sliced and diced? Time will tell. You do read the book feeling that there are those four in one pile and the rest of us desperately seeking a tiny morsel in the other.

As always many thanks for reading.

John Thomson
jthomson@wifihifi.ca

 





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