Record profits put new bull’s-eye on tech giants

Record profits put new bull’s-eye on tech giants
© Hill illustration

Facebook, Amazon and Google are racking up record profits following a year marked by public controversies over their privacy and business practices.

The strong bottom lines have sparked frustration among lawmakers and tech industry critics, who say the numbers drive home the need for tougher federal regulation to rein in web giants. They worry the companies have little incentive to change their business models or policies on their own.

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Lina Khan, a senior fellow with anti-monopoly think tank Open Markets Institute, told The Hill that the record profits show “bad publicity is not turning consumers away.”

“If anything, this shows their degree of dominance,” Khan said. “These firms are too deeply entrenched in the day-to-day of our lives. ... In many ways, they’re essential communications services, essential information services.

“They’re not the kinds of services where you can expect individuals to boycott or to take their consumer business elsewhere,” she added.

Facebook last week announced $16.9 billion in revenue for the final quarter of 2018 and $55.8 billion for the year, a 37 percent increase from 2017.

Amazon also reported record profits for a third consecutive quarter, generating $3 billion in net income. Amazon’s income is up 66 percent from 2017.

And Alphabet, Google's parent company, reported $39.3 billion in revenue for the fourth quarter of 2018, marking a 15 percent jump from the previous quarter and 22 percent from the same quarter in 2017. Alphabet's net income for the final quarter of 2018 was $8.9 billion. 

The profitable numbers pose a challenge for consumer advocates and lawmakers, who have watched the companies, in particular Facebook, weather storm after storm.

Facebook faced a barrage of scandals last year over its handling of personal data and saw CEO Mark ZuckerbergMark Elliot ZuckerbergFacebook says it may have 'unintentionally uploaded' up to 1.5M users' email contacts Tech companies must act to stop horrific exploitation of their platforms The Hill's Morning Report — Combative Trump aims at Pelosi before Russia report MORE testify before Congress on the Cambridge Analytica scandal.

Sen. Mark WarnerMark Robert WarnerDems reject Barr's offer to view Mueller report with fewer redactions GOP senators divided on Trump trade pushback Hillicon Valley: Trump unveils initiatives to boost 5G | What to know about the Assange case | Pelosi warns tech of 'new era' in regulation | Dem eyes online hate speech bill MORE (D-Va.) told The Hill he believes it is on Congress to hold Facebook accountable.

“We must put laws in place to hold social media platforms accountable,” said Warner.

The company’s critics acknowledge that efforts to bring public pressure to bear on Facebook have fallen short.

Last year, a #DeleteFacebook campaign gained attention after a New York Times report found that Facebook granted major tech companies Microsoft, Amazon and Netflix access to users’ personal data, including their private messages, without consent.

But the company’s latest numbers indicate the campaign, promoted by media figures and celebrities, did not make a significant dent in its user base.

“Pretty much in every region this quarter, [Facebook] increased their daily active user count and their monthly unique visitors keep going up,” Andy Taylor, associate director of research at marketing agency Merkle, told The Hill.

Google last year also agreed to shut down its Google+ app, after discovering a bug that affected 52.5 million users. Amazon fired employees who allegedly provided merchants with company data to aid in selling scams. The Pentagon is also examining a possible conflict of interest regarding Amazon Web Services in the competition for a $10 billion defense contract.

Beyond the data issues, lawmakers on both sides of the aisle and President TrumpDonald John TrumpImpeachment? Not so fast without missing element of criminal intent Feds say marijuana ties could prevent immigrants from getting US citizenship Trump approval drops to 2019 low after Mueller report's release: poll MORE have raised the prospect of antitrust action on tech giants, which critics say function as monopolies.

“The fact is, each of these firms has been dominant for over a decade,” Khan said. “The reason for it is they’ve been using their dominance to stifle out competition, to cycle out competitors, to cycle out the next Google or Amazon or Facebook.”

The new chairman of the House Judiciary subcommittee dealing with antitrust issues, Rep. David CicillineDavid Nicola CicillineDem lawmaker: 'Quite clear' Trump committed impeachable offenses Dem lawmaker shares threatening voicemail he received after speaking out on the Mueller report Dems attack Barr's credibility after report of White House briefings on Mueller findings MORE (D-R.I.), has vowed to look into the issue, saying that Facebook “cannot be trusted to regulate itself.”

Trump in August floated an antitrust probe into tech giants but declined to comment on the most drastic potential penalty, breaking up the companies. His own officials, though, have shown a reluctance to take such action.

Facebook pointed The Hill to a recent statement by the head of the Department of Justice’s (DOJ) antitrust division, Assistant Attorney General Makan Delrahim.

“It’s really easy to get a headline by saying Company X is bad, just because they’re too big, because it’s very popular to say that,” Delrahim said at an event last month.

Tech industry players insist they are changing their practices on their own and welcome the scrutiny. Google, Amazon and Facebook have all called for federal data privacy legislation.

Amazon pointed The Hill to a comment by CEO Jeff Bezos.

“My own view on this is that all large institutions of any kind ... deserve to be inspected and scrutinized. It’s normal,” Bezos said in June. “Inside Amazon, we talk about this, I say, ‘Look, we are a large corporation, we deserve to be inspected. Don’t take it personally.’ ”

Facebook in a blog post reiterated that it agrees with lawmakers who say, “we need more regulation of the internet.”

Google CEO Sundar Pichai on an earnings call Monday said the company is “continuing to build privacy and security into the core of our products, keeping users’ data safe and secure with the industry’s best security systems.”

Rep. Darren SotoDarren Michael SotoAlexandria Ocasio-Cortez and Puerto Rican politics Statehood bill could make Puerto Rico a state before 2020 Florida lawmakers pitch bipartisan Venezuela amendment for Dream Act MORE (D-Fla.), a member of the House Committee on Energy and Commerce, told The Hill that he is working on legislation to create a “social media bill of rights.” 

He said he will introduce the legislation after the committee holds a few hearings on issues related to data and privacy.

In the meantime, the web giants are pushing ahead with ambitious plans.

Last month, Facebook announced plans to merge Messenger, Instagram and WhatsApp, a move that would allow users of all three services to message one another. Though the company says the messages would be encrypted end-to-end, European privacy regulators have already raised concerns about privacy risks.

Tech watchers say regulators in the U.S. are still playing catch-up.

“In Congress ... a lot of the people don’t totally understand how a lot of the platforms work,” Taylor said. “There’s going to be a lot of education that’s going to have to go on.”