The logos of Amazon, Apple, Facebook and Google are seen in a combination photo from Reuters files. File picture: Reuters/File Photos
The logos of Amazon, Apple, Facebook and Google are seen in a combination photo from Reuters files. File picture: Reuters/File Photos

The rise of big tech and how it will impact startups

By Wesley Diphoko Time of article published Jul 31, 2020

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If there was ever a doubt about the abuse of power by big tech companies, their appearance in front of the US Congress has ended such doubts about the abusive nature of these companies.

Revelations by the long-running antitrust investigation show that everyone in business who has been dealing with big tech should be concerned. African Tech startups with a potential for global reach should be more concerned.

It is almost impossible to operate in the tech space and reach a global market without using either the Apple App Store, Amazon AWS, and other platforms owned by big tech companies.

One factor that stood out during the hearings is that there’s unequal treatment of companies on the App Store by Apple. One document that was presented during the hearings showed how Amazon Prime was paying fewer fees to Apple for its presence on the App store. This is just one example that shows unfair treatment by the global giant, Apple. If a similar service by an African startup were to exist on the App store it would have a lesser chance of success in terms of revenue earned on the App store.

Acquisitions are another area that should concern many African tech startups. Naturally being acquired by a global tech company excites tech founders who dream of scaling their products. Based on recent revelations and what has been known about big tech companies, African tech founders should adopt a different view of acquisitions by big tech companies.

The story of how and why Facebook acquired Instagram should serve as a lesson for many who dream of being acquired by big tech companies.

It’s a known fact that Kevin Systrom, Instagram founder, had a tough time within Facebook after the app was acquired. We now know that the strategy was always about killing the enemy by acquisition. The same happened to WhatsApp. Facebook is currently working on integrating all these acquired products under Facebook while they maintain their identity. It’s also important to note that the founders of both WhatsApp and Instagram are no longer within Facebook and left the company extremely unhappy. The lesson here is that being acquired by big tech is not always what it looks like. The behaviour of big tech companies is something that should not only concern leading tech startups. Even small guys who are just trying to sell a unique product on Amazon should be concerned. The testimony about Amazon showed how the tech company cannibalizes the very entrepreneurs that sell their products on Amazon by creating similar goods thereby competing or removing them completely. The moral of the story here is that Africa should figure out a way to stand on its own. Reliance on global tech platforms will not lead to global tech entities that are Africa owned.

As long as big tech continues on this trajectory every promising startup will be gobbled and stopped on its tracks by global giants.

The big tech is currently under scrutiny not just in the US. Recently regulators in Australia have accused Alphabet’s Google of misleading consumers to get permission for use of their personal data for targeted advertising, seeking a fine “in the millions. In Africa, however, big tech has been enjoying a free ride.

As African regulators are doing nothing about big tech, African tech startups should find ways of protecting themselves against falls acquisitions and cloning by big tech.

*Wesley Diphoko is the Editor-In-Chief of Fast Company (SA) magazine.

This article was originally published in Fast Company.

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