You’d be surprised how frequently people throw around the term “monopoly” for companies like Google, Facebook, and Amazon.
However, neither of the companies are monopolies. So, let’s tackle some common misconceptions and figure out what a monopoly is and whether it matches your idea of it.
What Is a Monopoly?
To constitute a monopoly, a company has to dominate its market and become the only option for its consumers. As per the definition, an “absence of competition” is a must.
Thanks to the US antitrust laws, you won’t find many monopolies in the US. Even though many people see them as such, most well-known companies in America don’t meet the definition of a monopoly.
Amazon, Meta, Google, Disney have massive brand recognition, and their services impact almost everyone. That’s enough to have people consider them as monopolies.
Though these companies dominate specific markets, they have competitors too. So, rather than monopolies, it’s more accurate to call them market leaders.
What Are the Benefits of Market Leading Companies?
First and foremost, you need to have a good quality product or service to become a market leader. If you don’t provide that, you can’t truly move to the top of an industry. If consumers keep coming back, they have a reason to do so.
The financial heft of a market leader can lead to innovation, as the security allows them to spend money financing research and development. A company that doesn’t invest in innovation may not last long–think about the fate of Kodak and Yahoo.
You only have to look at the efforts Google and Amazon are making to ride each technology wave. For instance, both are trying to develop delivery drones for everyday use. If Google has smart contact lenses, Amazon has its Dash buttons.
What Are the Downsides of Market Leaders?
Market leaders can also limit innovation within the industry to stifle the competition.
Smaller companies may not have the same resources as the market leader they are competing with. Innovation also needs investment, which puts the smaller companies at risk of being taken over by larger companies.
Whereas Google can afford to pour millions into developing a project, startups and small businesses simply can’t compete with that.
A market leader needs to have a good quality product or service. But, unfortunately, once they reach that status, they may not maintain the initial quality in search of profits that helped them get to the top.
Is the Amazon Model a Monopoly or a Market Leader?
Amazon is dominant in countless industries, but it still allows some competition to happen. It has a major chunk of online retail, but not all retail, as it has to contend with companies like Walmart too.
Today, under its diverse acquisitions, you’ll find that Amazon owns the home security company Ring, supermarket chain Whole Foods Market, live-streaming service Twitch, social cataloging website Goodreads, online audiobook service Audible, and so many more companies.
There are countless other companies under the Amazon brand. As you’ll likely know, Amazon is behind the virtual assistant Amazon Alexa, the Amazon Kindle, and Amazon Fire TV.
It also offers its streaming service Amazon Prime Video and the grocery delivery service Amazon Fresh. Plus, Amazon Pharmacy allows customers to complete an entire pharmacy transaction on a desktop or mobile device using the Amazon app.
As the world’s biggest shopping portal, Amazon makes it tough for non-Amazon affiliated competition to break through on the platform.
Say you become a seller on Amazon offering a product. It’s been reported that if Amazon determines you’re getting a lot of traffic and sales, and there’s demand for your product, the company will copy it.
Amazon creates a similar product, and when shoppers search for it, your shop gets pushed down while Amazon’s product comes up higher in the search results. That begs the question: how can you compete with Amazon on its own website?
At the same time, many people shop on Amazon for its prices and reach. So if you choose a different e-commerce platform, you might lose out on customers based on that.
At the end of the day, whatever your opinion on Amazon, it’s certainly a market leader than a monopoly. There’s still a choice to shop elsewhere, at your supermarket, on another online retailer, or with a small business.
The Unexpected Consequences of Cornering a Market
Meta, formerly known as Facebook, acquired two other major social networking platforms: WhatsApp and Instagram. All three of these platforms help people connect and share their lives with friends, family, and strangers.
The platforms become such an integral part of people’s lives that they’re usually the primary method of communication. Many also use them to run their businesses.
On October 4, 2021, people using Instagram, WhatsApp, and Messenger, were surprised to find the apps not working. Suddenly, all three became unusable. The issue got resolved the same day, but that didn’t stop people from suffering the consequences of the blackout.
Since many people use their Facebook profiles to sign in to various apps and services, while the platform was down, they found themselves locked out of shopping sites and unable to use smart devices. Businesses also suffered as they couldn’t connect to their clients.
Meta is a much bigger part of our lives than we realize, and the blackout goes to showcase this. But Meta’s customers aren’t the only one’s to experience unintended consequences, the company itself is too.
Across the world, multiple competition regulators have called for Meta’s companies to be split up, due to the sheer size the company has. Whether you believe this should happen or not, Meta’s business being split is certainly an unintended consequence.
Are Today’s Market Leaders the Monopolies of Tomorrow?
A company making its way to the top and dominating a market is nothing to worry about by itself. The worries begin when you question whether these market leaders are engaging in monopolistic practices and where that would lead.
Using Amazon to shop is easy and convenient. It also puts money into a company that has been involved in some controversies. Using Meta to chat is, again, effortless. But what’s to stop another blackout from happening?
Are there fail-safes in place? How do you ensure that the companies leading the way today won’t grow to push away any other competition? Does that job fall to the company itself or the government?
The Big Five control and influence more than any other business. Is it time to cut them down to size?
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