Back in 1999, the U.S. Department of Justice filed an antitrust suit against Microsoft for the way it pledged to “choke off the air supply” of rival Netscape. In the 1990s, individual users had to purchase a way to get onto the still-emerging Internet. Netscape was a company that offered one such ISP service. Microsoft, of course, already had established a monopoly with its Windows software, but then it decided to “bundle” its own browsing tool, Internet Explorer, with Windows, for free. In effect, Microsoft had a platform that it could use to beat back competitors. I covered all this as a senior writer for U.S. News & World Report.
What we’re seeing today from Facebook, Alphabet (parent of Google and YouTube), Amazon and Apple is very similar. Facebook in particular is in the news today because it announced a new application that mimicks what an existing competitor is offering. A company called Houseparty offers a video app that lets people hang out over live video on a smartphone. Facebook’s version of Houseparty is called Watch. The Wall Street Journal today says Facebook is “stalking the company (Houseplay), part of the social network’s aggressive mimicking of smaller rivals.”
Like Microsoft had more than 20 years ago, Facebook has a platform that it can exploit to the detriment of its competitors. Much is being written these days about how the five major technology companies (Microsoft, Facebook, Alphabet, Amazon and Apple) are enjoying major surges in their stock prices, fueling the whole stock market.
But what they’re doing is in some ways controversial. Anyone who builds one of these platforms attracts users and the platform learns more about the users, allowing the platform to offer better, more targeted services. Their algorithms learn. The more data that Facebook and others can gather about their users, the better their services become and the more users they attract. Their monopoly-style positions allow them to subsidize new offerings in adjacent spaces that have the net effect of reducing competition. In some cases, these platforms may simply choose to acquire a competitor, as Facebook did with WhatsApp.
In a Trump administration, it’s unlikely that the Justice Department of Federal Trade Commission are going to launch investigations or file suits. But let everyone be clear: Facebook and friends are following Microsoft’s methods of choking off their competitors’ air supply.