My name is David Heinemeier Hansson, and I’m the CTO and co-founder of Basecamp, a small internet company from Chicago that sells project-management and team-collaboration software.
When we launched our main service back in 2004, the internet provided a largely free, fair, and open marketplace. We could reach customers and provide them with our software without having to ask any technology company for permission or pay them for the privilege.
Today, this is practically no longer true. The internet has been colonized by a handful of big tech companies that wield their monopoly power without restraint. This power allow them to bully, extort, or, should they please, even destroy our business – unless we accept their often onerous, exploitive, and ever-changing terms and conditions.
These big tech companies control if customers are able to find us online, whether customers can access our software using their mobile devices, and define the questionable ethics of what a competitive marketing campaign must look like.
A small company like ours simply has no real agency to reject or resist the rules set by big tech. And neither do consumers. The promise that the internet was going to cut out the middleman has been broken.
We’re all left to accept that these companies can and do alter the deal, any deal, however they please. And whenever they do, our only recourse is to pray that they do not alter it any further.
Let’s start with Google. Their monopoly in internet search is near total, and their multi-billion dollar bribes to browser makers like Apple ensure no fair competition will ever have a change to emerge.
Google uses this monopoly to extort businesses like ours to pay for the privilege that consumers who search for our trademarked brand name can find us. Because if we don’t, they will sell our brand name as misdirection to our competitors. Google feigns interest in recognizing trademark law, by banning the use of trademarked terms in the ad copy, but puts the onus of enforcement on the victims and does nothing to stop repeat offenders. Unless, of course, the trademarked terms are those belonging to Google itself. Then enforcement is swift and automatic. You will not find any competitor ads for Google’s own important properties.
Google would never have been able to capture a monopoly in search by acting like this from the start. Misdirecting consumers, blanketing search results with ads, and shaking down small businesses. In the absence of meaningful regulation, they’ll continue to extract absurd monopoly rents, while bribing browser makers to ensure nothing changes.
Apple too enjoys the spoils of monopoly pricing power. With the App Store, they own one of the only two mobile application stores that matter (the other belongs to Google!). This cozy duopoly has allowed Apple to keep fees on payment processing for application makers like us exorbitantly high. Whereas a competitive market like that for credit-card processing is only able to sustain around a 2% fee for merchants, Apple, along with Google, has been able to charge an outrageous 30% for years on end.
Apple may claim that they do more than payment processing for this fee, such as hosting applications and providing discovery, but the company undercuts this argument by giving these services away for free to application makers who do not charge for their apps.
But worse still is the draconian restrictions and merciless retribution that Apple brings to bear on application makers who dare to decline using Apple payment services. Even a mere link to an external webpage, that explains how to sign up for a service that doesn’t use Apple’s payment system, can get your application rejected.
Every application maker using the Apple’s App Store live in fear that their next update is denied or even that their application removed. All it takes is being assigned the wrong review clerk who chooses to interpret the often vague and confusing rules different than the last. Then you’ll be stuck in an appeals process that would make Kafka blush.
Finally, Facebook’s industrial-scale vacuuming of the everyone’s personal data has created an ad-targeting machine so devastatingly effective, that the company, together with – guess who! – Google, is currently capturing virtually all growth in internet advertisement. I quote a report in my written testimony that put that capture, between Facebook and Google, at 99% in 2016. Not even Putin would dare brag of an approval rating that high!
Facebook is able to maintain this iron grip on the collection of personal data by continuing to buy any promising competitor. The acquisitions of Instagram and WhatsApp should never have been approved by regulators, and need to be urgently undone.
This creates a marketplace where companies that wish not to partake in the wholesale violation of consumer privacy is at a grave disadvantage. If you chose not to take advantage of this terrifying and devastatingly effective ad machine, your competitors surely will.
This has been but a brief taste of what it’s like to live as a small tech company in a digital world owned and operated by big tech. And I didn’t even touch on the misery that is to attempt direct, head-on competition with any of these conglomerates. But at some point, all businesses will be competing against big tech, simply because big tech is bent on expanding until it does absolutely everything! The aforementioned companies already do payment processing, credit card issueing, music distribution, TV producing, advertising networks, map making, navigation services, alarm systems, cameras, computers, medical devices, and about a billion other things.
Help us, congress. You’re our only hope.
This testimony was delivered before the House Antitrust Subcommitee’s hearing on Online Platforms and Market Power in Part 5: Competitors in the Digital Economy on January 17th, 2020.
17 thoughts on “Testimony before the House Antitrust Subcommittee”
It’s David against Goliath(s). Good luck though. Fingers crossed.
Given David’s clever Star Wars references, I’d say it’s the Rebel Alliance against the Evil Galactic Empire!
Thank you for this, DHH. I’m not a fan a government intervention, because that’s where so much of this power and exclusivity ultimately comes from / came from.
The control exerted on small businesses on the web, though, by Google, Apple, Amazon, Facebook, and Adobe (to a lesser extent) is truly astounding. When I started in the web business back in the late 90s, it truly was a Wild West of sorts, and here in 2020 we find ourselves constantly checking to make sure we don’t alienate one of the Big Guys lest we cease to exist tomorrow.
I completely disagree. The precise lack of government intervention is why we’re in this state.
Companies, and especially multi-billion/ trillion dollar conglomerates, have been largely left to self-regulate sans any effective legislation, and it has been an abject failure on a global scale. If it were a truly free market, no company would be worth trillions because of effective competition. The only ones worth that much have gone nuclear on anyone who had a remote chance of competing.
These companies, despite any feel-good messaging, have repeatedly proven the only thing they give a fuck about is money and increasing shareholder value above all else.
Thank you David, I deeply respect you for all you’ve brought to the Ruby community and the web development in general and my only hope is that more and more people and companies will start to act and join forces. You’ve also left out Amazon, which practically controls the e-commerce and infrastructure.
Small typo: “have a change to emerge” -> “chance”
I wish to work with you at Basecamp one day
Well said. The monopolies you described here are simply toxic to all peoples everywhere, online or not, due to their insanely outsized impact on our societies. They must be broken up.
Compare to Kim Veltman’s paper from Jan 2005 http://sumscorp.com/new_media/computers/internet/news_159.html
Called out! Somebody had to do this, thank you.
“The aforementioned companies already do payment processing, credit card issueing, music distribution, TV producing, advertising networks, map making, navigation services, alarm systems, cameras, computers, medical devices, and about a billion other things.”
@DHH, there’s another enticing market big tech is competing in: politics.
These companies inject massive political donations, then get to decide what democracy looks like by literally controlling what news and information we see and how true it is. No registered political party on earth has a hope in hell of competing with their worldview. And, no voter can hope to receive legitimate and honest information about policies and the state of the nation, especially in the lead up to an election.
Welcome to Zuckverse.
Awesome summary of a truly scary present (and future) with an unchecked Big Tech industry!
DHH, unless I misunderstood what you you meant…
“You will not find any competitor ads for Google’s own important properties.”
This statement is not true.
I don’t believe google allows advertisers to compete on any property that they do business in. IE search (https://www.google.com/search?&q=search), news (https://www.google.com/search?&q=news), maps, etc. Any term you search for that they have a vested interest in won’t have separate advertisements. That may seem fair for “search,” but they do own a-lot-a-lot of businesses and interests.
Wow. Fascinating insight. Glad we have people like you <3
That’s it… I’m switching to Firefox <3
Fascinating insight, however. Glad we have people like you around.
You are mad because of your own self interest. There’s no law preventing you from creating something that disrupts what you are complaining about. Stop asking for government to rescue you. We have enough government as of right now and if you think you home country is better then move your business there. Shut up, suck it up and innovate.
You didn’t get it. You can be as innovative as possible but Google and FB can make it look like your company doesn’t exist and none of us can do something about this. There are antitrust laws but surprisingly they don’t work if you’re a trillion-dollar company.
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