How big tech got so big: Hundreds of acquisitions
You’re probably reading this on a browser built by Apple or Google. If you’re on a smartphone, it’s almost certain those two companies built the operating system. You probably arrived from a link posted on Apple News, Google News or a social media site like Facebook. And when this page loaded, it, like many others on the Internet, connected to one of Amazon’s ubiquitous data centers.
Amazon, Apple, Facebook and Google — known as the Big 4 — now dominate many facets of our lives. But they didn’t get there alone. They acquired hundreds of companies over decades to propel them to become some of the most powerful tech behemoths in the world.
The Washington Post reviewed multiple data sets and studies to show the scope of these purchases, which have drawn the attention of critics who worry the practice will dampen innovation and hurt consumers. In October, the House Judiciary Committee released a report that addressed the dominance and acquisition strategy of these four companies. The Post’s list is likely incomplete because many acquisitions were not public or were too small to be announced.
You may have recognized many of these acquired companies, like Zappos, IMDb, Twitch and Goodreads — all owned by Amazon. You may also have heard about the bigger deals, like Google acquiring Motorola Mobility or Apple acquiring Beats Electronics. (Amazon founder Jeff Bezos owns The Post.)
But the majority of acquisitions involved small start-ups with valuable patents or talented engineers, many of which led to products used today, like Google Docs and iTunes. Some acquisitions resulted in multibillion-dollar ventures, while others fizzled and resulted in products being sold off or shuttered entirely.
For decades, the Federal Trade Commission and the Justice Department have been charged with vetting mergers and acqusitions and challenging them in court if they threaten market health. But now, as the tech giants grow more powerful, critics who accused these companies of using monopoly power to weaken competitors have also called for more scrutiny, saying the acquisitions are not rooted in innovation but total market control — part of a tactic known as “copy, acquire, kill” — to eliminate competition
[FTC will review past mergers by Facebook, Google and other big tech companies]
“These monopolies have exploited the weaknesses of the existing law and lax enforcement to maintain and expand their market dominance by buying up or burying those that they perceive as competitive threats,” said Rep. David N. Cicilline (D-R.I.), who chaired the House committee that reviewed more than a million documents as part of its antitrust investigation into Big Tech.
Once an online bookstore, Amazon quickly grew to become an “everything store.” But the company has moved beyond its e-commerce roots, due, in part, to acquisitions.
To enter the grocery arena, the company acquired Whole Foods Market and its distribution channels and retail locations in one $13.7 billion-dollar gulp. Amazon wanted to be a bigger player in the “Internet of Things,” so it swallowed up several home security companies and the home router company Eero. And as the company dived into the autonomous vehicle industry, it chose start-ups in that space, too.
[Want to borrow that e-book from the library? Sorry, Amazon won’t let you.]
Amazon is everywhere: in your television with Prime Video, in your ears with its Echo smart speaker, and behind the websites and apps you use every day. In 2020, the company made $386 billion in revenue.
The company shows no signs of slowing, with additional acquisitions that included robotics companies to assist workers and artificial intelligence to grow the capabilities of its Alexa virtual assistant service.
Amazon executives have said the company is just a small part of the overall retail industry.
“We operate in a diverse range of businesses, from retail and entertainment to consumer electronics and technology services, and have thriving, well-established competition in each of these areas,” a spokesperson said.
There are few areas of the tech landscape in which Amazon hasn’t found acquisition targets. In a recent securities filing, Amazon described its business as boundless.
“We seek to be Earth’s most customer-centric company,” it wrote.
[Jeff Bezos stepping down as Amazon CEO, transitioning to executive chair role]
Apple, founded a few months after Jimmy Carter’s inauguration, is the oldest company among the Big Four and has a longer acquisition history that can be divided into two periods: before the iPhone and after.
Like its competitors, Apple snapped up companies in the software automation space, such as virtual assistants and health trackers. Apple’s Siri, for instance, started as a government project that was spun off into the private sector.
But Apple has also used acquisitions to bolster its “services” revenue, which stockholders say they hope will stimulate profits as smartphone sales go stagnant. Apple’s acquisition of Beats was the perfect example: The streaming service got Apple into the music rights business, allowing it to launch a competitor to Spotify, which was quickly making iTunes obsolete. In August, Apple’s market cap hit $2 trillion, and it’s now the most valuable company in the world.
Expect Apple’s acquisition rate to continue or even accelerate in the future.
The company lags behind competitors in automation software that powers popular voice assistants like Amazon’s Alexa and Google Assistant, and it needs to bring in companies and talent to catch up. Apple may use acquisitions to help expand into other areas, too, like video on-demand, autonomous vehicles and health care.
[With AirTags, Apple launches a new product — and invites antitrust scrutiny]
Apple is big, has cash to spare and has spent billions on in-house research and development every quarter. It’s also an insular company that has walled itself off and kept its employees siloed. But even Apple needs to bring in outsiders to expand and conquer. A spokesperson for the company declined to comment.
Compared with Apple, Google is relatively young. But its path to becoming a giant has demanded its fair share of purchases. Almost every Google product, from Google Docs to Google Earth, involved at least one acquisition.
In its first decade, Google used search to build a powerful advertising business that generated billions of dollars in revenue — nearly 40 percent of all online advertising in the United States goes to Google. Then, it invested that money fine-tuning its core business and move into new ones.
Some, like self-driving cars, have yet to make serious money. But others, like YouTube and Google’s cloud computing business, are now generating billions in revenue.
Google isn’t new to antitrust scrutiny. European Union regulators ran three investigations into the company since 2010, fining it about $10 billion in total. But Google’s position in Europe is as dominant as ever. Now, the company is facing a new wave of investigations in the United States from state attorneys general and the federal government.
“Our acquisitions over the years have spurred investment, accelerated innovation and growth and benefited consumers. The vast majority of our acquisitions are smaller technology companies that we’ve invested in to help them grow faster, at lower cost,” a spokesperson for Google said.
The company’s products, most of which are free, are used by billions of people worldwide. Google Search is central to most people who use the Internet, and AI breakthroughs made by its researchers could lead to medical advances that save lives. But the company’s sheer dominance in several key markets makes it hard to imagine new companies cropping up and competing meaningfully against Google.
Take digital mapping, for example. Google has about 80 percent of the market, according to a Royal Bank of Canada report cited in the House’s antitrust report. It got there not only by building its own tool and popularizing it but by buying Waze in 2013, an upstart competitor that had gained a loyal following.
“It protected that market power, that monopoly power dominance through a series of acquisitions that eliminated any meaningful competitive threat,” Cicilline said.
Facebook hasn’t bought as many companies as its Big Tech peers, but it does have the distinction of making the most expensive acquisition among the group. In 2014, it acquired messaging app WhatsApp for $19 billion. The price tag shocked analysts at the time because WhatsApp only had 55 employees and wasn’t profitable.
But WhatsApp had 450 million users and was growing fast. That growth is what Facebook has thrived on, and it hasn’t been stingy about paying to buy new platforms that could pose a competitive threat in the future.
Two years earlier, Facebook bought Instagram for $1 billion, a deal now seen as a key moment in the history of social media. The company also tried to buy Snapchat for $3 billion, but founder Evan Spiegel famously rebuffed Mark Zuckerberg.
In emails obtained by the House Judiciary Committee, a Facebook executive said the company would spend 10 to 15 percent of its market value every couple of years to “shore up” its position with acquisitions.
The company owns four of the top five social media and messaging platforms: Facebook, Instagram, Facebook Messenger and WhatsApp. And while the company may have spent less time and money moving into adjacent markets, it indisputably owns its core industry.
Facebook remains one of the most widely used online platforms in the United States, where 69 percent of adults say they use it, according to a recent Pew Research study.
Facebook executives have previously defended their acquisitions, saying the company has invested billions of dollars in WhatsApp and Instagram since buying them.
“We compete fiercely against many other services across the world,” wrote Jennifer Newstead, Facebook’s general counsel, in a December blog post. “As the internet has grown over the last 25 years, the ways in which people share and communicate have exploded thanks to dynamic competition.”
