Does the following article refer to Oligopoly? Please explain to me why yes or not. What Microeconomics terms can I use to provide a critical review about it?

"Can Big Tech Be Disrupted?"

Over the past decade leading tech companiesnotably Meta (Facebook), Alphabet (Google), Amazon, Apple, and Microsofthave come to dominate their respective segments in most parts of the world. Some stats: Meta, which also owns Instagram and WhatsApp, has 3.5 billion users across its networks. More than 50% of global online ad spending goes through Meta or Alphabet. In search, Google has more than a 60% share in the United States and more than 90% in Europe, Brazil, and India. Apple earns more in annual profit than Starbucks makes in revenue. Microsoft is a top-three vendor to 84% of businesses. And Amazon takes in more than 40% of online spending in the United States and runs nearly one-third of the internet through Amazon Web Services. Collectively, the Big Five earned income of about $197 billion on revenue of more than $1 trillion in 2020, while their market cap rose to $7.5 trillion by year's end.

These companies are so successfuland generate so much consumer data and cashthat it sometimes feels as if they can't be stopped. Not only have they been on the cutting edge of technology, but now they also have the power of incumbency. Yet according to Jonathan Kneewho is a veteran investment banker specializing in media and tech, a Columbia Business School professor, and the author of The Platform Delusion: Who Wins and Who Loses in the Age of Tech Titanseven digital superpowers face threats, from start-ups as well as seasoned competitors. In this conversation with HBR executive editor Alison Beard, he analyzes the strengths and weaknesses of the large tech companies and the strategies they might use to defend themselves.

HBR: So you don't think we're heading toward a world in which the "tech titans" dominate every part of our lives?

Knee: Today many people in the industry, as well as academics and investors, seem to think that the large tech platform companies uniformly benefit from strong network effects, which inexorably propel them toward global dominance. But that is demonstrably false. Let's start with the notion of scale. The traditional view is that it helps companies by spreading fixed costs. The new, sexy scale on the internet comes from network effects, and people argue that it offers an inherently superior competitive advantage. But that's crazy. In the absence of significant fixed costs, any network-effect-driven business is going to attract competition from new platforms that find they can break even at extremely low usage levels. Also, network effects are not the primary driver of competitive advantage at most of these companies. At Facebook, now Meta, yes: The more users it has, the better the experience of connecting and sharing is. For Microsoft, yes: Operating systems are a classic network-effect business. But the original success of Apple, Google, Amazon, and Netflix did not rest primarily on network effects. Apple is a consumer-products business. Google benefits from massive fixed-cost requirements reinforced by continuous learning. Amazon's original retail business, which still accounts for a majority of its revenue, has no network effects to speak of, and neither does Netflix. All these companies will live or die by the same principles of competitive advantage we've long studied. Don't get me wrong: These are all very good businesses, but each is good for different reasons involving multiple reinforcing advantages rather than a uniform silver bullet. And each has its own vulnerabilities.

Walk me through their respective strengths and weaknesses. Let's start with Google.

I'd argue that it's the strongest of all the tech titans, in part because search was an entirely new market without an entrenched incumbent. Although Google wasn't the first search engine, it was the first and only one to achieve massive scale. It also has the best, most well-defended portfolio of reinforcing competitive advantages in that core franchise. But in my view, it sucks to a surprising degree at anything much beyond that business. Yes, it has reorganized and instilled more operating discipline in other areas, but its list of failed launches, from the Nexus smartphone to Google Glass, is long. And its efforts to directly challenge the other tech giants have either collapsed completely or significantly lagged. Google+ was a short-lived challenge to Facebook, and Google Cloud remains far behind Microsoft's Azure in taking on Amazon Web Services. I don't think that's a coincidence. When you dominate one segment of the market so overwhelmingly, you're less likely to build a culture that is optimized to find new ways to grow outside it.

Facebook, now Meta?

It benefits from being the world's largest social network and has for the most part invested wisely internally and managed its acquisitions wellfor example, by snapping up Instagram early and keeping it as an independent platformwhile still expanding its trove of user data and strengthening customer stickiness. But recently exposed internal emails demonstrate that the company is nonetheless well aware of serious threats from competing "social mechanics." We're also still waiting to see any ROI on its $19 billion purchase of the messaging app WhatsApp, which almost a decade later remains unprofitable and lacks a real revenue model, and the $2 billion it spent on the virtual reality firm Oculus. And the company is increasingly under fire for its role in spreading misinformation and hate online, which could cause it to lose credibility among users, advertisers, and the next generation of social networkers.

Amazon?

Did it disrupt Walmart? Absolutely. But Walmart is still a major competitor today, and Amazon is fighting against not only incumbents with established brick-and-mortar footprints and growing online sales (with free shipping to rival Prime) but also focused start-ups like Chewy and direct-to-consumer producers. Retail remains a difficult, highly competitive business where sustainable advantage is limited. The company has also made some questionable acquisitions: Whole Foods, when grocery is a structurally challenged category, and MGM, in an ill-advised bid to make Prime Video a real rival to Netflix. Investors may think MGM is worth it if only to halt Amazon's relentless increases in wasteful spending on original content. Yet despite missteps Amazon has a culture of relentlessness and unlike the other tech titans has built some wildly successful unrelated businesses, such as Amazon Web Services, that do lend themselves to strong competitive advantagein contrast to e-commerce. AWS generates a majority of the overall company's profits and will probably continue to do so for the indefinite future.

Why did you look at Netflix, too?

Netflix is a minor player relative to the rest of FAANG [Facebook, Amazon, Apple, Netflix, and Google] but is often mentioned alongside the others because it's number one in a spacestreaming mediathat they all think they need to be in. Netflix also has an intense culture of operating excellence. But its business model is nowhere near as strong as the models that the traditional cable channels it is increasingly replacing used to enjoy. At one time those businesses had fabulous high margins because they benefited from long-term contracts and capacity constraints. Direct-to-consumer streamers like Netflix, by contrast, face relentless customer churn and constant competition from new entrants, including Apple and Amazon and old-timers like HBO, Disney, NBC (with Peacock), and CBS (with Paramount+).

And what about the elder statesmen of the Big Five: Apple and Microsoft?

Personal technology was a thriving business before the Big Tech era. Apple did not and does not lead by market share in the key product categories. But in its primary business, smartphones, while it's not the biggest, it is the biggest moneymakercommanding more profits than the rest of the smartphone industry combinedand has the highest market cap, more than $2 trillion. The App Store and Apple ecosystem have created extraordinary shareholder value by monetizing its high-end niche.

Apple's expertise lies in developing revolutionary, sleek devices, but the people who created the ones that define the company are gone. The fact that the company is trying to get into the health care and automotive industrieswhere it has no track record and innovative incumbents aboundsuggests that it realizes it needs to plan for its next act. Though it's had a terrific run, in the absence of the next generation of revolutionary gadgets, Apple's continued financial dominance is by no means assured.

Microsoft, unlike the other tech giants, has always concentrated on B2B rather than consumer markets. After losing its way and ceding the mobile OS market to Google and Apple, it has refocused on improving its core software offerings and expanding its footprint within its corporate customer base while aggressively embracing the cloud. It has established credibility by using data from cloud-based applications to increase its responsiveness and continuously improve. But it faces new competitors that are both massive and nimble, such as Salesforce, whose acquisition of Slack threatens Microsoft's ambitions in workforce productivity applications.

What advice would you give executives or entrepreneurs trying to topple a tech titan or at least take a portion of its business?

I'm a big believer in starting small. You want to focus on customer pain points within clearly identifiable, manageable communities where you can quickly build scale and earn loyalty. The growth paths of most great businesses look like ringwormthey started with an inner ring and built out to the next ring of customers and then the next. When you have a targeted market, there's also a greater chance that it won't attract or support competitors and that the specialized data collected is more valuable. Often these are customers that the giants can't effectively serve. Consider 1stDibs, a marketplace for luxury antiques, art, and designer furniture, or Etsy, where people sell handmade crafts. Both eBay and Amazon have tried to attack those markets, but neither the merchants nor the consumers drawn to 1stDibs or Etsy want to navigate a more general marketplace. Those younger companies might have plenty of serious competitors in the futureChairish is already onebut Amazon probably won't be among them. TikTok is another great example of a start-up that found a niche product (short videos) and a demographic (Gen Z and now Alpha) that allowed it to effectively compete with all the Facebook (or Meta) platforms, Twitter, and YouTube. And if Microsoft had developed a product as solid as Teams in an earlier time, no one would dare try to take it on, yet today it must contend with Slack in team collaboration tools and Zoom in videoconferencing.

And what would you say to leaders of tech giants about defending against disruption?

Watch your flank. Be vigilant about getting niched to death. Competitors will try to gain relative scale within certain interest groups, demographics, or geographies, so you need to be constantly innovating and releasing new versions of products that leverage your strengths while serving narrower communities. I'd also tell them to manage their ecosystems in a more constructive way so that the people up and down the value chain have a vested interest in their continued success rather than going to sleep every night hoping for their destruction. That's an underappreciated aspect of long-term strategic survival.

Finally, I'd suggest they be proactive and thoughtful in engaging with governments and helping them achieve their policy goals. All these companies have incredible resources that might help solve some of society's biggest problemsincluding those they had a hand in creating. To always be in a defensive postureor lobbying for as little regulation and taxation as possibleis a lost opportunity. Together or separately, the tech giants should partner with the public sector on projects that in the short term might be financially costly and limit flexibility but will yield longer-term benefits.

Beard, A. (2022, February 1). Can Big Tech be disrupted? Retrieved from Harvard Business Review: https://hbr.org/2022/01/can-big-tech-be-disrupted