Tech

Shira Ovide is a Bloomberg Gadfly columnist covering technology. She previously was a reporter for the Wall Street Journal.

When past technology companies have been overthrown, it tended to be at the hands of rivals or by the proverbial two guys in a garage. Tech titans DEC, Sun Microsystems and BlackBerry were felled by technology changes and their failures to keep up with agile newcomers. 

Today's technology rulers are less likely to be dethroned by outside invaders than they are by their own mistakes. 

Google parent company Alphabet Inc. and Uber are grappling with crises that on first blush don’t look connected but share a common denominator: their failures to properly manage their own supersized power. 

I’ve written before about the great divide between today’s tech industry’s kings and paupers. Apple, Google, Amazon, Facebook and Microsoft -- you can add Uber Technologies Inc. and Airbnb to this list, too -- have as much influence as a gathering of G-20 world leaders.

It's natural for that kind of corporate power to breed resentment, as it did for 19th-century railroad barons. But a handful of technology companies now hold unprecedented sway in business, people's lives and the functioning of countries. How wisely they wield their power will dictate the winners and losers in the next generation of technology. 

Tech Rules
The market cap of the world's five biggest tech companies represent 12 percent of the S&P 500's total value
Source: Bloomberg
Note: Companies listed from highest to lowest market cap.

In Europe, there is a mini-revolt by advertisers irked that their marketing pitches appeared next to YouTube videos featuring unsavory material like terrorist messages. Several companies, including French advertising giant Havas, have said they would temporarily stop buying ads on YouTube or Google more broadly. 

Advertisers can't afford to boycott Google for long. Neither can the company afford to brush off the squabble with its usual promises to do better next time because signs of a rebellion are brewing. An executive from the world’s biggest advertiser, Procter & Gamble, said recently that his company could no longer tolerate the long-standing flaws of digital advertising such as fraudulent ad clicks and erroneous measurement. Walt Disney was spooked when it turned out the company was doing business with a YouTube series laced with anti-Semitic messages. My colleague Leila Abboud has suggestions for what Google can do differently.

This feels different from the many, many controversies Google has weathered over the years, including previous flaps over how it polices material. The pushback isn’t coming from its users, regulators, journalists or the newspaper and television companies that are losing sales to Google. This time, the companies that pay Google’s bills are the ones complaining. (Advertising accounts for 88 percent of Alphabet’s annual revenue and 97 percent of Facebook's.)

The gripes about Google -- and similar finger-pointing about bogus information spreading on Facebook -- aren’t new, but the complaints are growing louder as the companies' power grows. And in part, they have themselves to blame. Google and Facebook boast that their sophisticated technology can pinpoint 100 people who might buy a new pair of jeans. So why can’t those geniuses sniff out when an internet star's videos are laced with anti-Semitic commentary or accurately track how long people watch videos?

Great power requires greater wisdom than Google has shown with its advertising customers. Like Wall Street banking and the stock market, advertising spending relies in part on trust and faith. When that evaporates, the ad money can, too. 

Just 30 miles north of Google headquarters, the near-daily headlines about Uber flouting regulatory rules and riding roughshod over its own employees have aggravated the public image that CEO Travis Kalanick rules over a ruthless and toxic company that misuses its power.

Uber should worry because narratives can be hard to change. Talented workers might opt for a less controversial company. And for Uber to function it must maintain the faith of both supply (drivers) and demand (potential riders).

Riders love Uber, or at least love the convenience of summoning a car with their phones. Some drivers, however, hate Uber. Of course, Uber could tell drivers to take a hike, as Kalanick essentially did in a verbal fight with a driver. But Uber needs drivers as much, or more, than drivers need Uber. That means Uber can bend but can't break its relationship with its drivers and potential ones.  

I'm sympathetic to the tech powers under fire. Even with good intentions, it's not easy to run empires trying to upend health care, transportation, housing, finance, insurance or entertainment industries. Meddling in those areas naturally stokes passions and invites government scrutiny. That's all the more reason for tech rulers to be wise and benevolent. Otherwise the toxic stew of hubris and resentment could bring down their kingdoms. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. It's not uncommon for marketplace companies like Uber and eBay to spark fury among the merchants or drivers that depend on them. 

To contact the author of this story:
Shira Ovide in New York at sovide@bloomberg.net

To contact the editor responsible for this story:
Daniel Niemi at dniemi1@bloomberg.net