Tech Giants’ Hill Testimony Reveals CEO Views On Competition — And Innovation

At Capitol Hill hearings, there are scripts.

And then there are the unscripted moments.

The Wednesday (July 29) hearing before a House Judiciary subcommittee promises a lot of the latter for the four CEOs of Facebook, Google, Apple and Amazon — respectively, Mark Zuckerberg, Sundar Pichai, Tim Cook and Jeff Bezos — as they face lawmakers questions that might cover everything from tax strategy to virtual currencies to the benefits and drawbacks of the gig economy.

At the center of it all, as we’venotedin this space in a runup to the hearing, will be scrutiny over how these firms compete in their chosen product and service areas, and how they view competition.

Parsing the opening statements of these titans of tech can be a bit revealing as to how they view the playing field.

Many of these statements include personal stories: Pichai recounts his early years in India, where he had only sporadic access to computers. Bezos trains a spotlight on the fact that his mom was pregnant with him in high school, his dad came to the U.S. from Cuba, and he (Bezos) spent formative summers on his grandparents’ ranch in Texas.

Almost all of these executives championed their firms’ humble roots, and beginnings in the U.S. (and a can-do spirit), a country that rewards ambition and innovation — and where individual success stories of, say Google and Amazon customers are folded into the testimony in efforts to show how tech can help smaller firms pivot and embrace the great digital shift.

For Google’s Pichai, innovation “has been a lifeline for so many businesses, especially during the global pandemic.”  His own testimonycites a Texas-based fitness company that adjusted its digital offerings, with the help of Google Ads and Analytics, and YouTube presence — with the result that the company’s digital revenue and sales soared 3,000 percent through the ongoing health crisis.

“Nearly one-third of small business owners say that without digital tools they would have had to close all or part of their business during COVID,” reads Pichai’s testimony.

Drilling down into market competition, Pichai said global markets are marked by prices that are “free or falling” and said the landscape looks nothing like it did five years ago, let alone 21 years ago, when Google’s search offerings debuted.

To get a sense of the range of competitors, according to Pichai, consumers can ask Alexa questions, gather friends’ recommendations through WhatsApp, or choose from eCommerce providers such as Walmart or eBay. Online advertising costs have fallen by 40 percent over the past 10 years, he said, with savings passed down through consumers across lower prices.

Experiments — And Trust 

At a high level, Bezos maintainedthat firms such as Amazon “have to experiment, and if you know in advance that it’s going to work, it’s not an experiment.” He pointed to Amazon Web Services (AWS) as an example, maintaining that selling computing and storage services had little to do with selling books.

“No one asked for AWS. It turned out the world was ready and hungry for cloud computing but didn’t know it yet,” according to Bezos. “We were right about AWS, but the truth is we’ve also taken plenty of risks that didn’t pan out. In fact, Amazon has made billions of dollars of failures.”

Against that backdrop, he said Amazon has garnered much trust in the U.S. He pointed to polls that show 80 percent of Americans have a favorable impression of Amazon. Like Pichai, Bezos said Amazon’s chosen verticals are fragmented. He said that Amazon accounts for less than 1 percent of the $25 trillion global retail market and less than 4 percent of retail in the U.S.

“More than 80 retailers in the U.S. alone earn over $1 billion in annual revenue,” he said in his opening statement, and Target alone is more than twice Amazon’s size. Walmart’s own online sales grew by 74 percent in the first quarter, and other competitors are seeing growth in online and omnichannel business.

Facebook’s Zuckerberg is likely to face grilling over data privacy and acquisitions. But in his preparedremarks, with an eye on innovation, he pointed to innovation fostered by his firm in part through open-source projects such as PyTorch open-source project, “which has become one of the most successful AI development tools and is now used worldwide to create new AI technology and applications.”

With a nod toward build vs. buy (and the WhatsApp and Instagram deals), Zuckerberg stated that in addition to building products and services,  “when you acquire a company, you can benefit from their technology and talent, and when you are acquired you get access to resources and people you otherwise might never have been able to tap into.”

Apple’s Cooknotedthat Apple does not have a dominant market share in any of the arenas in which it competes, across any of its products. He pointed in this testimony to the smartphone market, where Apple competes with the likes of Samsung, LG, Huawei and Google.

Tackling the competitive landscape of the App store in particular, he said App developers “set prices for their apps and never pay for ‘shelf space’” and said that guidelines are “transparent.” For the “vast majority” of apps available through the App Store, he added, developers keep 100 percent of the money they make.

The only apps subject to commission are those where the developer acquires a customer on an Apple device and the features and services would be experienced and consumed on an Apple device, he added.

He said commissions are lower than rates charged by competitors, and are favorable to the 50 percent to 70 percent commissions that developers paid to distribute offerings before the App Store launched. He maintained that since the store launched a decade ago, Apple has never raised the commission or added on additional fees. Of the 1.7 million apps available, only 60 are Apple software, he estimated.

Cook cited studies that show, per Analysis Group, the App Store ecosystem has fostered half a trillion dollars in commerce, and of that tally, $138 billion has been generated in the United States alone.

“Clearly, if Apple is a gatekeeper, what we have done is open the gate wider,” maintained Cook in his testimony. “We want to get every app we can on the Store, not keep  them off.”

It remains to be seen just what lies in store during the hearing, but the testimony submitted by tech’s fab four gives at least a roadmap — or, perhaps, jumping off point.