The Internet Association Proves Extreme U.S. Internet Market Concentration

Those who think the U.S. Internet market is competitive, and not extremely concentrated, need to read on.

In a nutshell, for the first time, publicly available evidence shows that the cumulative effect of well-known “winner-take-all” platforms (WTAPs) Google, Amazon, Facebook, and Microsoft, is a “four-winners-take-all Internet sector.” Four different dominant platforms collectively command ~80% of overall Internet market share in revenues, new absolute annual revenues generated, market capitalization, and employees.

Imagine if the 94% of the economy that is offline-based, were as extremely concentrated as the 6% of the economy that is online-based/the Internet sector, per the Internet Association.

That would be an offline economy with basically one information company, one sharing company, one retailer, and one business software company, that collectively commanded 80% revenue share of the 94% of the economy that is offline based with ~4,000 publicly traded companies.

Now you can begin to imagine how extreme the market concentration in the Internet sector has become -- after only ~twenty years of privatization.

Where has antitrust enforcement been? Apparently not anywhere in the vicinity of the Internet for one reason or another.

The findings here should prompt the DOJ Antitrust Division and other antitrust authorities to repeat and confirm for themselves this analysis of publicly available data.

When they do, they will learn that the decade-old, flippant, conventional wisdom that “Internet competition is a click away,” is deceptive and misleading, given how extremely the Internet market has become concentrated via largely unfettered, serial, early-stage acquisitions, e.g. Google 206 acquisitions in 19 years; Microsoft 203 in 30 years; Amazon 77 in 19 years; and Facebook 62 in 12 years.

Seems like someone figured out how to game the antitrust enforcement process in the Internet Age, and shared the secret with some friends.

This out-of-control Internet market concentration matters now, and it will only matter more in the future.

The Internet Association estimated the Internet sector comprised 6% of US GDP in 2014. Given that the Internet Associations members are growing revenues at a collective 20%, the Internet sector’s share may soon be approaching 7% of US GDP.

We know these four WTAPs are growing revenues substantially faster than others – Google +23%; Amazon +22%; Facebook +49%; and Microsoft +8% -- and thus are taking substantial market share overall. And anyone watching the market this last year knows these four WTAPs enjoyed the lion’s share of market gains in market capitalization.

Now we can roughly measure how extremely concentrated the U.S. Internet sector has become, thanks to the Internet Association, the professedvoice of the Internet economy.” Their membership comprises the “world’s leading Internet companies” based in the U.S., and thus it offers us the best proxy universe of the most significant revenue-producing and highly-valued public and private Internet companies based in the U.S.

If we research all the key public-available data, on revenues, revenue growth, market capitalization and other comparable data, what does this group of 39 elite, U.S. Internet Association, companies tell us?

The companies alphabetically are: Airbnb, Amazon, Coinbase, Doordash, Dropbox, eBay, Etsy, Expedia, Facebook, Google, Groupon, Handy, IAC, Intuit, Linkedin, Lyft, Matchgroup, Microsoft, Monster, Netflix, Pandora, Paypal, Pinterest, Rackspace, Reddit, Salesforce, Snap, Spotify, Survey Monkey, Ten-x, TransferWise, Tripadvisor, Turo, Twitter, Uber, Upwork, Yelp, Zenefits, and Zynga.

Of the 39 companies, 22 are public, and two are subsidiaries of members: Microsoft’s Linkedin, and IAC’s Matchgroup. 39% were founded in the 1990s, 39% from 2000-2009, and 22% from 2010-present.

Overall, these 39 Internet companies collectively generated $434b in revenues; $75b in absolute new annual revenues (at a collective 20.5% revenue growth rate); an overall market capitalization of $2.545t; and 699,000 employees. Collectively that’s $621k in revenue per employee and $3.6m in market capitalization per employee.

The top 10% of this Internet Association proxy market are the four winner-take-all platforms: Google in search/advertising; Amazon in retail/cloud computing; Facebook in social/advertising; and Microsoft in software/hardware.

These top four/10% of Internet Association companies generate:

80% or $347b of $434b in total Internet market annual revenues;

77% or $58b of $75b in total new absolute Internet market annual revenues;

77% or 538k of 699k in total Internet market employees; and

81% or $2.059t of $2.545t in public & private Internet market, market capitalization.

Going forward if this Internet market were to continue to generate ~20% annual growth over the next 5 years, it would grow from $434b today to $1.08t in 2021, a cumulative revenue increase of 149% or +$646b that would come largely from cannibalizing offline-economy revenues.

If we do this exercise for just the three most dominating Internet platforms, Google, Amazon and Facebook, five years of 20% annual growth would grow their $260b in collective annual revenues to $647b, a revenue increase of 149% and +$387b – that predictably would largely come from cannibalizing other forms of offline-based advertising and offline-based retail revenues.

In short, the Internet sector is far from a competitive market. It has become extremely concentrated, more than any other sector by far.

So much so, that an outside observer could wonder, do antitrust authorities believe that antitrust laws apply to Internet companies?

The new Trump Administration antitrust team, soon to be headed by Makan Delrahim when he is confirmed by the Senate, faces a big fork in their road.

One path is to let the current trajectory of no Internet antitrust enforcement to run unabated, letting these online winner-take-all platforms cannibalize major chunks of the offline economy -- destroying offline competition, economic growth and jobs, along the way.

The other path is enforcing U.S. antitrust law against online platforms the same way it has been enforced against offline-based companies for over a century.

This should not be a hard call for the Trump Administration antitrust team, if they can see the big picture.



Scott Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration. He is President of Precursor LLC, an internetization consultancy for Fortune 500 companies, some of which are Google competitors, and Chairman of NetCompetition, a pro-competition e-forum supported by broadband interests. He is also author of “Search & Destroy: Why You Can’t Trust Google Inc.” Cleland has testified before both the Senate and House antitrust subcommittees on Google and before the relevant House oversight subcommittee on Google’s privacy problems.

Google (& Facebook) Antitrust Series


Part i: Why Did Google & Facebook Stop Competing with Each Other? [8-3-16]


Part ii: Google’s Information is Power, Info-poly Power [9-18-16]


Part iii: What No Bids for Twitter Tell Us about Google-Facebook & Online Advertising [10-21-16]


Part iv: Five Worst Google Antitrust Decisions [11-4-16]


Part 1: America’s Indefensible Media Concentration Double Standard [12-5-16]


Part 2: The Google-Facebook Online Ad Cartel is the Biggest Competition Problem [1-12-17]


Part 3: Twitter & Snap Evidence Confirm Goobook Ad Cartel Crushing Competition [2-15-17]


Part 4: Look What’s Happened Since the FTC Stopped Google Antitrust Enforcement [3-13-17]


Part 5: Google Antitrust Implications of Makan Delrahim as DOJ Antitrust Chief [3-28-17]


Part 6: Trump Administration Implications for Google Antitrust in EU, US & Markets [4-7-17]


Part 7: 6 Reasons Trump DOJ Will Take Lead from FTC in Google Antitrust Enforcement [4-13-17]


Part 8: Google-Russia Antitrust Deal Has Big Implications for EU Cases, Trump DOJ [4-19-17]


Part 9: Google Takeaways from Trump Antitrust Chief’s Senate Confirmation Hearing [5-11-17]


Part 10: New Evidence Google Facebook Ad Cartel Crushing Competition Market Failing [5-18-17]


Part 11: Alphabet-Google Big Takeaways from Trump Antitrust Chief’s Senate Answers [6-1-17]


Part 12: Trump Administration Lets Last Google Government Guardian Go – Michelle Lee [6-9-17]