Regulatory pressure isn’t having a huge impact
The European Union recently fined Google $5.1 billion for abusing its mobile software monopoly, which followed a $2.7 billion fine last year for abuse of its search monopoly. (Google is appealing both decisions.) Apple agreed last year to pay nearly $16 billion in back taxes to the European Union over its cozy tax deal with Ireland. (The funds will be held in escrow while Ireland appeals the decision; Apple has disputed any wrongdoing.) Facebook, which has been hauled before lawmakers in Europe and the United States for its role in politics, faces threats of increased regulation and possible fines for mishandling private data.
But Big Tech’s earnings so far don’t show much of an impact from the increased scrutiny. Google paid its fine and still reported a $3.2 billion quarterly profit. Neither Google nor Facebook saw much of an effect from Europe’s new privacy rule, the General Data Protection Regulation. Facebook’s user base declined by only a million users in Europe (367 million people use it every month there). Both companies warned that the law may have a greater effect in the future, but several analysts said both Google and Facebook could benefit from the law, because compliance costs could sink their smaller rivals.
There is also the possibility that regulatory zeal will abate. Google watchers say it’s notable that President Trump tweeted criticism of the European Union’s fine against Google, suggesting, perhaps, that American regulators won’t take up a similar case. (Of course, it is hard these days to really know how much to read into a presidential tweet.)
Or consider the changing dynamics of the digital advertising business, which is dominated by Google and Facebook and has been a top target of antitrust activists. Amazon’s growing ad business poses a threat to both Google and Facebook — which suggests that the ad economy is becoming more competitive even without the government’s help.
“There’s been this fear that advertising was going to become a duopoly owned by Google and Facebook,” Mr. Mahaney said. “Now it’s going to be a triopoly — but if you were worried about the duopoly, you’re probably saying, ‘Couldn’t the third company have been someone besides Amazon?’”
The Five still have a lot more ways to make money
Finally, there are what Mr. Mahaney calls the “green fields” — the nearly endless opportunities that many of the Five have to start minting more and more money from various parts of their businesses.
Facebook, for instance, has experienced a slowdown in the growth of its core social network, but its other properties — Instagram, Facebook Messenger and WhatsApp among them — are still growing quickly, and the company has only just started to make money from them. At Google, there’s a similar opportunity for YouTube, which, like Facebook, will benefit from the billions in TV advertising money that marketers will shift online over the next few years.