It is common for monopolies or oligopolies to treat their customers with disdain, although they usually spend some of their marketing budget pretending otherwise. What never happens, though, is for monopolies to tell a large number of their customers to go away.
By Nazarul Islam
The increasing censorship by the tech monopolies is rightly prompting protests from those who see it as an attack on free speech. What has been less noticed, however, is that the social media companies are adopting one of the strangest, and potentially most self-defeating, business strategies devised ever.
They are telling a large slice of their customer base – possibly as many as 100 million in the US and tens of millions elsewhere – to simply, get lost. It represents a massive opportunity for new players and it seems a near certainty that citizen Donald Trump – who is very much a business person and not so much a politician – will be looking closely at it, as will many others.
It is common for monopolies or oligopolies to treat their customers with disdain, although they usually spend some of their marketing budget pretending otherwise. What never happens, though, is for monopolies to tell a large number of their customers to go away.
It is the equivalent of JD Rockefeller, owner of the infamous monopoly Standard Oil, refusing to sell petrol to anyone who voted for the Democratic Party. What it confirms is that these companies have become political entities rather than businesses, a change of direction that will inevitably weaken them.
The social media company most vulnerable is also the most aggressive. Twitter has deplatformed Trump and is removing, at a rapid rate, users it deems to be ‘contravening the terms of service’ or ‘violating community standards’, or whatever. The company is valued at $57 billion yet its sales are falling and it only started to make profits in 2018, when it recorded a $191 million profit.
By 2019 it was back in the red and in 2020 it came in with a massive $US1.4 billion loss. Although the share price has almost doubled over the last year – as Keynes said, markets can stay irrational longer than you can remain solvent – the vulnerability is unmistakable.
The most common reason businesses fail is that, when faced with new competitive threats, they are unable to innovate because they have become habituated into repeating what made them successful in the past.
That is exactly how Google and Facebook succeeded. When they offered advertisers a more cost-effective option than just space on a page, or a time slot in a program, almost no newspaper or television company was able to respond with a new way of providing value for their advertising customers. They simply went into a tail spin.
The tech giants seem unassailable now; Google and Facebook are two of the most highly valued companies in the world. But no company is invulnerable, and what the social media giants are doing to their customers is, from a business perspective, extremely unusual.
They are no longer just offering users the opportunity to “stay connected with friends and family, to discover what’s going on in the world, and to share and express what matters to them,” to quote Facebook’s ‘vision statement.’ They are telling them what they can, and cannot, say. They are even trying to shape what they think.
It seems a near certainty that well-capitalized business interests will be noticing this – and preparing to eat their lunch. That could significantly affect what at the moment is looking like a descent into an information dictatorship
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