🌌 Reshaped #45
Short edition: the US vs. Google, European digital rules, Facebook vs. Apple, centralized AI research, good and bad IPOs
Welcome to a new issue of Reshaped, a newsletter on the social and economic factors that are driving the huge transformations of our time. Every Saturday, you will receive my best picks on global markets, Big Tech, finance, startups, government regulation, and economic policy.
Unfortunately, one of the most incredible weeks of the year in tech coincided with my busiest period in a while. Hence, this issue is limited to a list of the most significant events of the week.
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Policy
Antitrust
This week, Google was accused of monopoly power in a new antitrust suit co-signed by 38 US attorneys general (CNN). Again, the focus is on unfair practices in online search and search advertising, but it goes even further with the accusation of blocking or downranking “search results from specialized engines in the travel, home improvement and entertainment sectors”. For more analysis, see The Wall Street Journal and CNET. Meanwhile, in China, antitrust authorities have fined domestic giants like Alibaba and Tencent “for not reporting past deals properly for anti-trust reviews” (Reuters), while Australia sued Facebook for collecting user data without permission (TechCrunch).
Regulation
In the EU and the UK, authorities have unveiled a new set of rules “to crimp the power of ‘gatekeeper’ platforms like Amazon, Apple, Facebook, Google and Microsoft” (The New York Times). In the EU, the Digital Services Act and the Digital Markets Act are aimed respectively at improving the quality and the security of online services and preventing digital markets from becoming even more monopolized by few big players (BBC).
The focus of the Digital Services Act is to create a single set of rules for the EU to keep users safe online, protect their freedom of expression and help both them and local authorities hold tech companies to account. It introduces a sliding scale, under which firms take on more obligations the larger and more influential they are. […] The Digital Markets Act centres on the regulation of "gatekeepers" - those behind "entrenched" services that other businesses use to provide their own products. This covers the operators of search engines, social networks, chat apps, cloud computing services and operating systems, among others. […] The idea is to prevent the firms gaining unfair advantages via their elevated positions.
For more on this topic, see the recent analysis by Konstantina Bania. Similar rules were applied by British regulators, which have also set a 10% fine on Facebook, Twitter and TikTok if they “fail to remove and limit the spread of illegal content such as child sexual abuse and terrorist material” from their platforms (Reuters). The reaction of Big Tech companies in front of this new regulatory threat is an even bigger lobbying effort, as reported by Politico in an article that I strongly recommend.
Meanwhile, in the US, the state of California fined Uber for not disclosing the details of violent episodes and sexual assaults (The Verge). Uber will now have thirty days to pay the $59 million fine and answer the questions of the Public Utilities Commission, which could otherwise suspend the company’s license to operate in the state.
Technology
Antitrust regulators are not alone in accusing Big Tech companies of unfair behaviour. Indeed, rivalry among tech companies is intensifying, which is a natural consequence of those companies planning to re-orient their business models to dominate digital markets after this new wave of regulation. Recently, Facebook denounced Apple for its intention to tell users when apps are tracking them online (The New York Times).
Early next year, Apple plans to start requiring iPhone owners to explicitly choose whether to allow companies to track them across different apps, a practice that Facebook relies on to target ads and charge advertisers more. […] Apple executives have expected Facebook’s protests and, in recent weeks, have vowed to go forward with the planned changes.
See also:
The risk of centralizing AI research in tech corporations (Quartz)
Walmart partnering with Gatik to adopt driverless truck fleets in 2021 (The Verge)
Baidu’s plan to enter the electric vehicles market (Reuters)
Electric airplanes getting closer to a commercial breakthrough (Quartz).
On Sifted, Nicolas Colin claims that Europeans are too focused on deep technology instead of new markets discovery. While I agree with the principle that the European tech ecosystem lacks a focused market approach, I think this is quite a naive argument as it fails to recognize that the great challenges he mentions (like carbon storage) have a pressing need for new technologies — even in areas where the cost curve has already started to drastically shift downward, like solar energy.
[…] because European startups have a harder time scaling up (because of the continent’s characteristic market fragmentation), local founders should instead focus on ‘deeptech’ challenges. […] What they should look for isn’t some new fancy technology that will solve a problem such as carbon storage, smart grid balancing or longer battery life. Rather, they should focus on discovering new, untapped markets (think: micromobility, ride sharing, remote work, urban farming) where growth could give birth to new, climate-friendlier usages in production and consumption.
Finance
Wish will probably be remembered as an outlier in the IPO frenzy that recently brought to public markets Airbnb, DoorDash and C3.ai. The e-commerce platform raised $1.1 billion, but it fell 16% below the IPO price of $24 per share in its trading debut (Business Insider). This should not have any major impact on the recent IPO wave — soon to include also the crypto startup Coinbase (Yahoo Finance) — that includes three of the biggest IPOs in the history of US tech companies (see chart below). Meanwhile, Bridgetown, the SPAC backed by Richard Li and Peter Thiel, is in talks to acquire the Indian e-commerce startup Tokopedia for $8-10 billion (Bloomberg).
See also The Economist on the potential return of inflation in the global economy.
Thanks for reading.
As always, I am waiting for your opinion on the topics covered in this issue. If you enjoyed reading it, please leave a like (heart button above) and share Reshaped with potentially interested people.
Have a nice weekend!
Federico