Verizon recently announced its plan to sell Yahoo and America Online (AOL) to a private equity group for $5 billion. Some find the news quaint, even humorous as Yahoo and AOL used to be synonymous with being “Big Tech” in the early days of the internet. Who we really ought to be laughing at are the modern day antitrust hysterics who seek to do everything from banning firms like Verizon from acquiring such properties to breaking-up today’s equivalents of Yahoo and AOL.
Many of us clearly remember that Yahoo and AOL were the titans of their time. In fact, in 1998, Fortune magazine published an article, “How Yahoo! Won The Search Wars.” The article even proclaimed that "some say it’s the next America Online."
AOL was similarly dominant. An article from August 2000 in Computer Weekly said AOL was "on its way to world domination” and that AOL's “monopolistic tendencies are fouling the Net.” That same year, AOL closed the largest merger up to that point in US history, acquiring Time Warner for $165 billion. Many objected to the merger. An article from The Guardian that year discussed how Disney executives pressured the US government to stop the merger, fearing “an internet stranglehold.”
The examples of hyperventilation and pearl clutching over these firms from the late 1990s through the early 2000s go on and on. As recently as 2008, billionaire investor Carl Icahn had to get Federal Trade Commission (FTC) clearance to buy Yahoo stock, following his role in attempting to have Yahoo reconsider being acquired by Microsoft for roughly $45 billion—somewhere between 15 to 20 times what it was just sold for only 13 years later.
One could easily substitute Amazon, Apple, Facebook, and Google into all of the fear-mongering about the Yahoo and AOL of yore and genuinely struggle to tell the difference from the Chicken Littles of today.
Antitrust fever is sweeping both Washington and state capitals, with FTC and Department of Justice (DOJ) investigations occurring simultaneously with the efforts of state attorneys general and state legislatures considering sweeping restrictions. Everyone is looking for a bite of the Apple…and Google, etc. The range of proposed reforms stretches from the reasonable, such as streamlining antitrust enforcement on the federal level, to the ridiculous, such as a wholesale ban on firms above arbitrary market caps making new acquisitions. The latter would have prevented Verizon from acquiring both Yahoo and AOL, deals on which the telecommunications giant has taken an absolute bath.
Current antitrust efforts are fueled by different fears. Some think these firms are doing too much to control markets while others think they aren’t doing enough to constrain the products and speech found on their services. The incoherence is staggering, but all seem to think that this time is different and surely these firms are definitely too big and definitely not going anywhere.
As if the examples of AOL and Yahoo weren’t enough, there are strong signs that history is repeating itself. For example, many claim Google has an insurmountable monopoly in search. There are a number of problems with this argument, the primary one being that Google is an advertising company and most searches don’t lead to transactions. There’s nothing to sell when resolving trivial disputes around the dinner table. Google makes its money through product and service searches. Most product searches start at Amazon. Apple, Google, Facebook, and Amazon all have rivalrous product and service search services, increasingly dominated by voice search devices. This is why Google is losing advertising marketshare.
Amazon is facing increasing pressure from Shopify as well as brick and mortar retailers like Walmart beefing-up their online presence. Facebook’s user numbers in the United States have plateaued and its subsidiary Instagram faces stiff competition from a resurgent Snapchat and the explosive popularity of TikTok, the fastest growing social media service ever. Apple competes against Amazon and Google in hardware and applications, and on a global scale Google’s Android dwarfs iOS as both attempt to fend off the likes of Huawei.
This all goes without mentioning the fact that Microsoft, a company skirting the current populist antitrust fervor, competes with all four companies in any number of markets and is currently worth more than all of them, save for Apple.
AOL and Yahoo were once worth a combined half-a-trillion at their inflation-adjusted peaks, more than any internet service provider today and enough to put each of them in the current global Fortune 50. In 2001, AOL was the ninth most valuable company in America. Mark Zuckerberg was still in high school.
Without rooting for the demise of companies that are currently producing enormous value for Americans and indeed the world, especially during a pandemic, the tech giants of tomorrow are already on their way. We won’t know who they are until it’s obvious, but history tends to rhyme, if not repeat itself. We don’t know who will acquire the titans of today for pennies on the dollar or if we will even let them. And, that’s the folly of applying heavy-handed antitrust regulation to an industry as dynamic as technology.
