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Prepare for the Global Corporate State of Facebook?

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Tags Monopoly and Competition

10/31/2014

In the dystopian movie Rollerball, all the world is ruled by one giant corporate state “controlling access to all transport, luxury, housing, communication, and food on a global basis.”

Thanks to popular media and the errors of neoclassical economics, we are trained to accept this scenario, or one similar to it, often when we are told of the latest move by a mega-corporation to extend its market share.

Two recent articles about Facebook have highlighted the social media platform’s influence in determining what news articles you see and when and how you read them. Many publishers have figured out that Facebook drives a large amount of traffic to their sites, prompting many PR pundits to declare that “the home page is dead.” In a Wired article titled “How Facebook Could End Up Controlling Everything You Watch and Read Online,” Marcus Wohlson explores just that. Wohlson’s article was prompted by David Carr’s Sunday article at The New York Times in which Carr writes: “Given the amount of leverage Facebook has, many publishers are worried that what has been a listening tour could become a telling tour, in which Facebook dictates terms because it drives so much traffic. (Amazon’s dominance in the book business comes to mind.)”

Is Facebook a Proto-Amazon?

Note the reference back to Amazon. Wohlson invokes Amazon too in his own article, and this becomes especially relevant when Wohlson suggests even that Facebook will eventually “cut out the extra click” and become the publisher of content as well as the delivery platform.

The Ghost of Amazon thus looms over the equation, since Facebook is now being framed a proto-amazon which moves from “selling” the content of other publishers and becomes a publisher itself, thus controlling the content. The subtext behind this is an assumption that Amazon is itself an evil monopolist who is destroying the wonderful legacy publishers of old.

Frank Foer at The New Republic has declared that  ”Amazon Must Be Stopped” and Paul Krugman followed up with his own article claiming that Amazon  ”has too much power, and it uses that power in ways that hurt America.” The consensus seems to be that amazon is either a monopolist or at least has unjust monopsony power and must be taken down a notch. Interestingly, however, Matthew Yglesias (of all people) has stepped in to point out what every Austrian already knew: Amazon only has the market power it has because it is better at delivering the goods. Moreover, Amazon is not a monopolist at all because it already has several competitors, including the lowly underdog mom-and-pop operation known as Google.

Yglesias outlines the many ways that Amazon will not be taking over the world, and in fact is just replacing the useless and dinosaur-like book publishers of old.

So yes, maybe Facebook is the next Amazon, but as with IBM, Microsoft, Apple, and all the other megacorps that were supposed to take over the world, the fortunes of these companies rely fully on their abilities to actually attract customers from year to year.

In this, Facebook  looks weaker than Amazon. Less than a year ago, the press was declaring that Facebook still had a lock on the next generation of consumers and opinion-molders. Back in February, Pew reported that more than 70 percent of teens were still using Facebook. But only six months later, teen usage of Facebook had plummeted from 72 percent to 48 percent, meaning less than half of teens now say they use Facebook. Those are pretty grim numbers for a “monopolist” seeking to hold onto its dystopian global power.

Will Facebook be able to lure them back? Possibly, but then again, Facebook’s most fierce competitor may not even exist yet. We can’t guess what the future holds in the social media world, and those of us who are old enough to remember MySpace know how quickly reversals of fortune can unfold in this industry.

Ryan McMaken (@ryanmcmaken) is a senior editor at the Mises Institute. Send him your article submissions for Mises Wire and The Austrian, but read article guidelines first. Ryan has degrees in economics and political science from the University of Colorado, and was the economist for the Colorado Division of Housing from 2009 to 2014. He is the author of Commie Cowboys: The Bourgeoisie and the Nation-State in the Western Genre.

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