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It pays to be a monopolist
The Alphabet gains were excellent, and that's really saying something. A few weeks ago, the European Union condemned the Mountain View company to a record fine of 4.34 billion euros, a penalty for payments to OEMs to include Google Search as default search option to access Google Play.
The acrimonious quarrel with the EU has become such a constant financial concern for the company that it now includes a line of "European Commission fines" in its consolidated statements of income.
Still, we can not help but come back in awe at a company whose results show the total lack of teeth of existing antitrust law, be it here in America or anywhere else in the world. Alphabet's revenues increased by $ 6.6 billion, far more than the record fine that the EU imposed on the company. Net income for the quarter was $ 3.2 billion even after the fine was deducted as an expense . The Alphabet Slot Machine remains as solid as ever.
The EU fine was of course a component of the antitrust authorities' plan. There are structural remedies, namely that Alphabet must stop and refrain from exploiting Android to cement its market share in research. But at this point, what exactly are the alternatives for handset manufacturers? DuckDuckGo? Bing?
My colleague Natasha Lomas, along with many other journalists, discussed the EU 's potential to demand the destruction of Alphabet. Yet even a cleaver of meat of a structural remedy would seem to be useless at this stage. Google Search is essentially out of the box, and it is unlikely that he will have one in the near future. It has a brand image, a fairness in data, important capital investments and trade secrets. No structural corrective action, except the complete destruction of the business, will reduce these burdens to competition.
These fines are therefore less about punitive behavior – after all, they do not deter potential monopolists from doing business. Instead, they act primarily as a surplus profit tax, a means of targeting only extraordinarily profitable technology companies without changing corporate general taxes.
Even when we extend our anti-competitive enforcement objectives to data sovereignty issues like GDPR, Alphabet is again positioned to be a winner. As I have already written, Alphabet and Amazon are probably the only companies that are important enough to start managing the myriad laws and regulations around the world with respect to data sovereignty. Far from empowering consumers, these laws essentially guarantee that there is now an additional impediment to competition in these markets.
The Next Billion of Netizens Will Ultimately Determine the Ceiling of Alphabet Revenues
For me, there is only one force today that could threaten the complete and continuous domination of Alphabet, and that is China and its ambitious technological industry. Transsion's subsidiaries dominate the African smartphone market, and with other smartphone players like Xiaomi, they have targeted India and its burgeoning middle clbad. If the next 1 to 2 billion Internet users rely on Chinese Internet services instead of Alphabet, this could be a serious competitive hurdle for the company.
One of the legacies of GDPR could simply be to force big tech companies to double in the US and Europe at a time when they should have focused on global expansion. Alphabet broke the $ 5 billion revenue mark for the Asia-Pacific region for the first time this quarter, but that's only 15.6% of the company's revenue. Meanwhile, Facebook, which occupies Cambridge Analytica's imbroglio, has begun to restrict the expansion of its Free Basics Internet access system.
These distractions offer Chinese companies a rare opportunity to focus exclusively on global expansion. Certainly Huawei and ZTE have taken this course. Although they are largely stranded in the US market and as Australia prepares to ban 5G deployments, both have had tremendous success in developing markets, with infrastructure products and services. handsets often significantly cheaper than their competitors. American or European consumer, but this may limit the growth of Alphabet and other large technology companies. As TechCrunch pointed out yesterday, there has been a race to see who will break the billion-dollar market capitalization barrier among the major players in technology. Alphabet sits at $ 865 billion and a trillion is not far away. But could it grow well beyond that? For me, it depends on these new developing markets, and the race is much more competitive.
As these results show, the antitrust jaws do not have teeth, and the competitive dynamics could compel Alphabet to become a $ 1 trillion company. . He pays – again and again – to be a monopoly.
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