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Shares of US tech companies have been under pressure in recent days amid concerns over increased regulation of tech giants, but companies that have had to follow Big Tech rules should benefit from increased scrutiny of the government.
The Evercore ISI analyst Benjamin Black wrote Wednesday that the Match Group Inc. dating app.
MTCH, + 3.53%
would be "winner" of a scenario in which the US government would take a closer look at the results of Apple Inc.
AAPL, + 1.46%
and Alphabet Inc.
GOOGL, -1.07%
GOOG, -1.14%
practical app-store. Application stores represent "potentially the fruit at hand" for regulators, and any action to limit their high costs could create a more favorable environment for mobile application manufacturers in general.
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"Our simple view is that existing antitrust systems in the US, based on price and consumer choice, have a hard time dealing with the factors that allow the technology giant to dominate the market," Black wrote. "However, if we had to identify an area that could be dealt with under the existing regime, these are the application stores. In our view, these companies have many of the defining characteristics of common carriers, which have long been regulated in the United States. "
Companies like Netflix Inc.
NFLX, + 0.47%
and Spotify Technology SA
SQUARE, + 3.35%
have recently taken steps to avoid their exposure to the so-called App Store tax, or the fees that developers must pay to Apple or Google when a consumer makes an in-app purchase on a mobile device . Netflix and Spotify are now trying to direct new customers to their websites if consumers want to buy subscriptions, bypassing apps. Companies are still paying huge fees to Apple to take into account existing users who were buying subscriptions to the old method, a practice that has also attracted the attention of European regulators, especially since Spotify, based in Stockholm, is doing so. directly compete with Apple for streaming music.
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For Match, Black estimates that about half of the online dating company's revenue is subject to shop fees. "As such, in a scenario where these costs would be capped, Match would see a substantial improvement in profitability," he wrote. "Of course, some of these savings could be reinvested in sales and marketing to increase the number of customers in the company."
See more: Almighty Facebook is now the oppressed in the world of dating
IAC / InterActiveCorp
IAC + 2.00%
could also benefit from increased regulation, as the company has a major economic interest in Match. And Black sees mobile gaming companies as "obvious winners," pointing to Zynga Inc.
ZNGA, + 0.75%
and Activision Blizzard Inc.
ATVI, + 1.99%
Zynga generates about three-quarters of its revenue from mobile app purchases, while Activision receives about a quarter.
Match shares are up 2.7% in trading on Wednesday, while shares of Zynga are up 0.5% and those of Activision Blizzard Inc. by 2%. Match has seen its stock increase by 64% since the beginning of the year, the S & P 500
SPX, + 0.65%
increased by 12%.
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