From the outside, it might have looked like this: the four most powerful CEOs in the world – Mark Zuckerberg from Facebook, Sundar Pichai from Google, Jeff Bezos from Amazon and Tim Cook from Apple – sit ashamed, under a barrage of accusations from the chosen ones, politely answering even the most difficult and delusional questions (So politely that committee chairman David Sicilini was forced to ask them to stop thanking any legislator for his interesting and important questions in order to save time). But the very next day, when the financial reports of all the companies for the second quarter of 2020 were published, which first expressed the impact of the corona crisis on the giants, it became clear who the boss really was.
As the U.S. economy contracted by 9.5 percent in the second quarter – the largest rate in recorded history – the technology giants, with the exception of Google, all recorded surprising and significant increases in revenue. Together, the companies grew by 20.1% to a value of $ 205.58 billion and recorded a cumulative net profit of $ 28.63 billion. Thus, while the House of Representatives remains part of a failed mechanism that is plunging the U.S. into an unprecedented, economic and health slump, the technology giants are harnessing the crisis in their favor, laughing all the way to the bank.
Internal correspondence revealed disturbing behavior
The official purpose of the House debate was the antitrust practices of the four giants, and quite a few of them did come up there. Zuckerberg was asked about Facebook’s policy of identifying young and promising competitors and acquiring them in order to neutralize future competition, as it did with WhatsApp and Instagram. “We saw Instagram as a competitor and complementary service. At the time it was not clear they would be such a success. There was no certainty that Instagram would succeed. The acquisition was successful not only because of the founders’ talent but because we invested in the company,” Zuckerberg replied.
Bezos has been asked to comment on reports that Amazon is gathering information about merchant activity on its platform to launch competing products under its own brand. “We have a policy against using sellers’ private information, but I can not guarantee that the policy has not been violated,” replied the richest man in the world, “I know the Wall Street Journal article on the subject and we are still checking things out. It’s a problem, Because some of the sources there are anonymous. ”
Apple CEO was asked about the appstore policy, which allegedly discriminates against large companies over small ones, and Pichai was asked to address Google’s practice of promoting its services in its search engine results at the expense of competing services – an activity for which Google has already been fined billions of dollars by the EU.
Beyond that, some interesting documents collected by committee members over the past year were revealed at the hearing. These included internal memos stating that Amazon had launched a targeted price reduction campaign aimed at harming Diapers.com’s activity before acquiring the company in 2010. An email quoted at the hearing and sent by a senior Amazon executive to Bezos read that “we have launched a more aggressive program to beat Diapers.com” through the site’s “appeal of the core diaper business”. Bezos’ reaction to things? “I do not remember many details about that purchase.”
Another document that was leaked was a 2012 Zuckerberg email about a potential acquisition of Instagram or the social network Path (which has since closed), showing exactly what he fears: “These businesses are young, but the network is well established and the brands are already significant,” he wrote. “If they develop to a significant scale they can disrupt us greatly. I’m curious whether we should consider purchasing one of the two.”
In April of that year, Zuckerberg again expressed his concerns about Instagram: “Instagram can hurt us significantly without becoming a huge business,” he wrote. “I have to decide if I want to buy them.” Facebook acquired the app a few days later in a $ 1 billion deal. Another email summed up Zuckerberg’s views on the subject: “One of the reasons people underestimate the importance of tracking Google is that we can probably always just buy a competitive startup, but it will be a while before we can buy Google.”
Apple founder Steve Jobs, who passed away nearly a decade ago, wound up appearing in a guest appearance in emails that did not present him in a positive light, but did not reveal unfamiliar things about his personality or his desire for revenge. In one he instructed his employees to disconnect a key that publicly criticized Apple, and in another he ordered a blockchain to sell any digital books that Apple does not share with its revenue: “You can read books anywhere, but not purchase an iOS subscription without paying us,” he wrote.
A symbolic moment from which one must move forward
Most of the things presented at the hearing were known, and none of the key issues were significantly whitewashed. Each committee member was given only five minutes of questioning in each round, and some chose to turn the time allotted to them into a political purpose display. They asked long and tortuous questions that took up most of their time and when they allowed CEOs to answer, they were quick to interrupt them to move on to the next question. The fact that many lawmakers, mostly Republicans, did not address the issue at all and chose to clash and rage on unrelated issues, contributed To the feeling that the discussion is mostly a sham.
Pichai and Zuckerberg were accused, without real basis, of deliberately silencing conservative voices. Google has been accused of supporting the health authorities’ position and submitting false information about Corona from YouTube (which is true, but it is not clear what’s wrong with it), and even made false allegations about its alleged decision to withdraw from the Pentagon’s cloud contract while conducting projects with the Chinese military. Right).
If there is hope for actual results that will emerge from the discussion, then it is more related to what it symbolizes. The testimony of the four CEOs came after about a year of work on the issue by the committee, which also included an extensive collection of documents some of which were unveiled at the hearing. This indicates that lawmakers are taking the issue seriously, and may be looking for more than a short video to humiliate the CEOs. . The question now is what next.
In light of the negative image of technology companies in the US and in general, it is possible that the committee will work to promote operational measures against the companies, which even if not reached dissolution may still include tighter regulation. On the other hand, the US is now in the midst of a dramatic election Will also include a change of government. This is at least half a year during which it is difficult to advance significant moves, and as the corona crisis in half a year has shown the world may turn upside down again.
The effect of the crisis is marginal or positive
24 hours after the hearing, Edio was buried under the publication of the financial reports of the four giants. All were good in relation to the crisis, and in some cases were also absolutely good and thanks to him. Amazon recorded a 40.2% jump in revenue over the same quarter to $ 88.9 billion. Thanks to growth in Corona-era product sales as it became the main consumer conduit for many Americans, and thanks to rising demand for its cloud services, which benefited from the surge in moving to work from home, net income jumped 99.7% to a record $ 5.34 billion.
Apple’s revenue grew 10.9% to $ 56.7 billion and net income swelled 12% to $ 11.25 billion thanks to growth in all product categories. Much of the growth came from sales of Mac products (a 21.6% jump) and the iPad (+ 31% +), which are enjoying increased demand thanks to extensive closures and the expectation of resumption of studies in many countries online only.
The advertising market has suffered a significant blow in recent months as a result of the contraction of many economies, but the blow suffered by Facebook, whose main advertising revenue was particularly light, was only reflected in a slowdown in growth. Facebook’s revenue in the second quarter of the year increased by 11% compared to the corresponding quarter to $ 18.7 billion, compared to an increase of 18% in the first quarter of the year compared to the corresponding quarter. Facebook attributes the growth to an increase in the volume of user activity due to closures in various countries. The consequences of the advertisers’ boycott imposed on the company during the month of July, as such, will be reflected only in the results of the third quarter.
On paper, Facebook’s net profit jumped 98 percent to $ 5.18 billion, due to significant deductions that hurt the company’s results in the same quarter last year. In the second quarter of last year, $ 2 billion was deducted from a $ 5 billion fine imposed on the company in the Cambridge Analytics case as well as $ 1.1 billion in income tax expenses following a federal court ruling. Had these deductions been weighted in the profit of Facebook in the corresponding quarter, its net profit in the current quarter would have fallen by 9.4%.
Google, also a company whose revenue comes mainly from advertising, was the only one of the four giants that did not record an increase in revenue and in fact for the first time in its history recorded a decrease in them. However, this decrease was also small and at a rate of only 1.7% to $ 38.3 billion. Net income suffered a more significant hit of 59.8% compared to the same quarter last year to $ 6.96 billion. The decrease in revenue is mainly due to the reduction in advertising revenue while other activities such as the company’s cloud services are growing. And yet the Google revenue contraction is smaller than the contraction of the U.S. economy as a whole.
In a sense, the proximity between the technology giants’ hearing and its stated goal and their financial results tells the whole story: the power of companies, which are proving to be immune even in the days of the greatest economic crisis of the last 100 years, and the allegations against them that predate them in the first place. The seeds of the extraordinary quarterly reports were sown in the email correspondence revealed in the House of Representatives and documented attempts to block and crush potential competitors.monopolySea, they may even find themselves contracts in the technology giants dismantling the entire American economy.