Aug 13

A Big Break for Small Tech

Theo Normanton
Jul 17, 2020

Image: Thought Catalog via Unsplash.

Big tech’s most powerful players are facing a reckoning – could this be the opportunity their smaller rivals have been waiting for?

It has been a bumpy six months for big tech companies. Wednesday’s attack on high-profile Twitter accounts is only the most recent of a series of blows for the internet giants as they grapple with flagging reputations and widespread calls to address security and ethical concerns. As the likes of Twitter, Facebook, Google, and Amazon come under scrutiny, consumer appetite for their smaller rivals is likely to grow, threatening to topple the monopolies of the industry’s largest players.

Big tech under scrutiny

The COVID-19 pandemic was supposed to be a boon for the titans of tech. As cities closed down and populations went into isolation, a good deal of work, school, and leisure all moved online. Netflix gained 16 million new subscribers in the first quarter as housebound workers faced the prospect of staying at home indefinitely. Tinder reported a record 3 billion swipes on 29 March as entire populations ensconced in their homes tried to adapt to a new dating reality. And activity on Zoom jumped 30-fold in April as lockdowns made in-person meetings impossible. The hegemons of big tech seemed well on track to extend their dominance over their respective sectors. But the last few months have seen many of them embroiled in conflict, controversy, and a backlash against their monopoly that could finally give their smaller competitors the chance to challenge them.

The first big upset came when Zoom admitted to sending traffic through Chinese data centres in April as it struggled to cope with a huge increase in demand. This triggered greater scrutiny of how data is processed not just by Zoom, but by social media platforms Facebook and Tik Tok as well. The EU sought the creation of a single data market to break its dependence on big players like Amazon, Google, and Facebook. Now the bloc is honing in on the companies’ alleged anticompetitive behaviour with a raft of proposed regulations compelling them to pay higher taxes and censor the material users put on their platforms.

This debate around content fed into the more recent Facebook controversy, in which the Stop Hate for Profit campaign accused Facebook of allowing hate speech to go unchecked and incite violence. As part of the campaign, over 400 companies withdrew their adverts from the platform. In a sure sign that the giant is on the defensive, the company is now mulling a ban on all political adverts in the run-up to America’s November presidential elections, a move that would deprive it of a sizeable revenue stream. For Facebook, the real threat comes not so much from the side of advertisers as from users themselves. If the protest and ensuing reputational damage can induce users to start quitting the platform too, then Facebook is really in the soup.

Now American watchdogs are considering joining the growing chorus against the unfair advantage of tech giants as the US Justice Department weighs a lawsuit against Google parent company Alphabet, which owns 90% of market share in some areas. The latest Twitter debacle, in which the accounts of prominent figures like Barack Obama, Elon Musk, and Jeff Bezos were hacked, is unlikely to help the case of big tech.

The rise of the underdog

As calls to take tech giants down a peg grow louder, their smaller competitors are receiving a welcome boost. New users are flocking to ethical search engines like Duck Duck Go and Ecosia, with the former seeing a new record number of searches per day during lockdown, and the latter becoming a default search engine option for Google Chrome in March. Even ethical social media alternatives are beginning to gain traction. Mastodon, which presents itself as a safer version of larger competitors, got a huge influx of Indian users at the end of last year when Twitter was criticised for not doing enough to address hate speech.

Amid growing support for internet underdogs and scrutiny of their domineering rivals, the launch of upstart internet streaming service Peacock promises to be an interesting test case. Its 20,000 hours of programmes and films became available to US audiences for the first time on Wednesday. Peacock’s reception may be perceived as something of a litmus test for small new competitors in fields dominated by the monoliths of big tech.

The Peacock launch comes at a tough time, however. In a YouGov survey conducted for Variety in June, only 27% of respondents had heard of Peacock, compared to 93% for its more established rival Netflix. Peacock has also suffered from the cancellation of the Tokyo Olympics, its flagship live sports event, where regular TV adverts between competitions were intended to promote the platform’s launch.

Yet in spite of the odds, the company is still expecting an ambitious $2.5 billion in revenue by 2024. Maybe this is because the spike in demand for online entertainment during the COVID-19 pandemic means that there are simply more viewers to go around. Or perhaps the optimistic targets stem from Peacock’s confidence in its unique model, which allows users to surf over 30 channels, and offers both free and paid subscription options.

Either way, a successful launch for Peacock in the midst of a global crisis will surely be taken as a broader indication that the hegemony of internet giants like Netflix is truly under threat. In fact, Netflix warned investors yesterday evening that it was expecting a slowdown in new subscriber numbers. It may not be a coincidence that this announcement came on the day of Peacock’s launch.

It remains to be seen whether Peacock will gain the subscriber numbers it anticipates. One thing is clear, though: competition in tech markets is beginning to heat up. And as new and established players start to jostle for position, it’s the businesses who can convince users of their integrity and security that will gain the upper hand.

Theo Normanton

Theo Normanton covers tech, ESG and the circular economy, with a particular interest in the markets of Russia and the CIS.

Tweets at: @TheoNormanton

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