Elon Musk was delivered a rude shock last week. After spending US$44 billion buying Twitter, Meta gained more than 100 million users within five days of launching its competing app, Threads.
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Musk was not pleased, tweeting that he'd be "up for a cage fight" with Zuckerberg. But the bigger surprise was just how easy it was to bring a competitive threat to Twitter.
When Elon Musk bought Twitter just a few months ago, we were told in no uncertain terms that he was acquiring significant market power: a monopoly with control over politics, business and free speech. How quickly times have changed.
Twitter isn't the first time we've got it wrong when talking about the level of competition in tech industries.
We were told for years that Netflix, which launched in Australia in 2015, was building a monopolistic fortress; that locking in contracts with major TV networks and film studios would cement it in as the sole supplier of streaming services for years to come.
This prediction, again, did not age well. Today, Netflix faces brutal competition from Binge, Disney+, Amazon Prime, Apple TV and Paramount+, to name a few.
Even Google - the company which has dominated internet search - has faced the heat recently when its distant rival, Bing, beat it to the punch in adding ChatGPT to its search engine.
We've seen a similar increase in competition in everything from ride sharing, food delivery and dating apps through to messenger services and social media platforms.
In each instance, we were originally told that the market was controlled by an unbeatable monopolist, until they were beaten.
The record for the fastest growing app seems to be broken every few months now, not every few years.
And the time it takes to get to 100 million users is much shorter. Instagram took 2.5 years after its 2010 launch, TikTok took 9 months, ChatGPT took 2 months from its November 2022 release, and Threads took less than a week.
These examples show us that the tech sector might be more competitive than people think, particularly in regards to what economists call "barriers to entry": the things that stop new firms from entering an industry to compete with the incumbents.
For years it's been assumed that the tech sector had very high barriers to entry. This has increasingly been showed not to be the case.
One reason for this is that "network externalities" proved to be much more fragile than first thought. Network externalities are when there are benefits from having lots of people using the same system (they are the reason why dating apps aren't much fun in small country towns).
Turns out, getting lots of people to switch from one product to another might not be as hard as first thought.
These can be a barrier to entry because the only way you can compete with the incumbent business is if you can get enough people to use your service.
It was assumed that Facebook, for example, had substantial market power simply because they had so many users. That was, until, users all started migrating to Instagram, Snapchat and TikTok. The same is true for Twitter users migrating to Threads, and Tindr users migrating to Bumble and Hinge.
Turns out, getting lots of people to switch from one product to another might not be as hard as first thought.
The other common argument was that tech companies weren't just competing in a market, they were owning the market and that this gave them significant power.
But the birth of Threads, Facebook Marketplace and ride sharing services should make us pause for thought in assessing how hard it is to start-up a competing market.
There's also the thorny question of how we define these markets in the first place. Take cars as an example. Does Toyota compete with Lamborghini? Do secondhand cars compete with new cars? Do cars in Perth compete with cars in Melbourne? Do cars compete with motorbikes, pushbikes and scooters? These aren't simple questions, and the way in which we define markets determines how much competition regulators judge there to be..
The same is true in the tech industry where many of these questions are even more complicated given they are often free, global and cut across multiple services.
It's also a useful reminder that many tech businesses are often a source of new competition.
Think of how much competition Uber has brought to the taxi industry, AirBnB to the hotel industry and digital payment platforms to banking and finance.
Of course, none of this is to say that there aren't competition issues in the tech industry. There are.
The so-called 'kill zone' where innovative start-ups get bought-up by the big incumbents is of growing concern.
Tech firms that disadvantage the services of competitors on their platforms is similarly worrying.
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The tactical use of regulation to build protective moats or to build walls claiming to be about data protection also come to mind.
But we need to recognize that the tech sector isn't homogenous.
Acronyms like 'MAMAA' (Meta, Amazon, Microsoft, Apple, Alphabet) miss the point that, when it comes to competition, tech industries differ widely from one to the next, and tech firms vary to an even greater degree.
Like it or not, the tech sector is one of our rare sources of productivity growth at the moment.
As we start rethinking our competition laws, policies and regulations, let's make sure we don't throw the baby out with the bathwater.
- Adam Triggs is a visiting fellow at the ANU Crawford School and a non-resident fellow at the Brookings Institution.