This week, CBS aired an interview with Facebook CEO Mark Zuckerberg. The executive discussed a broad range of topics in the interview, including the big tech breakup debate. As in his past speeches, Zuckerberg maintained that breaking up big tech companies would be wrong.
In October, The Verge published leaks of Facebook’s internal meetings. In at least one of those meetings, Zuckerberg suggested Facebook could even sue the government to stop a breakup. Zuckerberg also rejected calls to break up Facebook during his visit to Washington for a congressional hearing in September.
Besides Zuckerberg, other senior Facebook executives have come out against breaking up big US tech companies. Nick Clegg, Facebook’s head of global affairs and communications, has repeatedly argued against the matter. In May, COO Sheryl Sandberg also used an interview with CNBC to reject breakup calls.
Facebook is taking breakup threats seriously
Facebook executives’ repeatedly coming out against the possibility of a breakup can only mean the company views it as a big threat. It’s important for Facebook investors to pay close attention to this matter.
Facebook executives have cited a variety of reasons for rejecting the breakup calls. These reasons include the fact that breaking up US tech heavyweights wouldn’t actually solve the problems people might have with them.
Facebook has also argued that breaking up big US tech companies would only give China room to dominate the tech sector. US technology giants compete with Chinese companies on multiple fronts. For instance, Facebook and Twitter (TWTR) compete with Chinese companies Tencent and Weibo in the social media market. Apple competes with Huawei in the smartphone market. Amazon (AMZN) competes with China’s Alibaba (BABA) and JD.com (JD) in the e-commerce market. Google faces growing competition from Alibaba and Baidu in the cloud computing and smart speaker markets.
How losing the tech war to China could affect the company
If breaking up big US tech companies leads to Facebook losing its competitive advantages against its Chinese rivals, then the company might struggle to grow its revenue, generate profits, and create shareholder value. It relies on the advertising market for almost all of its revenue. Chinese companies are bidding hard to dominate the digital advertising market. This year, Chinese companies will take up two spots on the list of the world’s top five digital advertising companies by revenue.
Big tech’s breakup could leave Facebook exposed to regulatory fines
Facebook has also argued that breaking it up would undermine its efforts to rid the Web of unwanted content. Its platforms such as Instagram and WhatsApp coordinate efforts to curb the spread of fake news and other objectionable content. The inability to remove this unwanted content quickly could expose the company to fines and lead to its losing advertising clients.