US Tech Companies Devour Smaller Rivals

The US tech giants Apple, Google, Facebook and Amazon have been on a buying spree for the past few years. In 2009, these firms acquired fewer than ten companies in total. By 2010, their combined acquisitions had quintupled and since then each has averaged around twenty per year. In the past decade, they bought a total of 313 companies, averaging 7.8 per year. Of them, Google has stood out, outperforming Apple, Facebook and Amazon every year except 2017, for a total of 140 acquisitions. The others have had fewer than half as many each. These are the findings of studies carried out by the Centre for European Economic Research (ZEW), Mannheim, on the basis of the Zephyr database of Bureau van Dijk.

There are many factors driving these acquisitions. The targeted companies have been competitors, promising start-ups, or gateways into a new market. In 2017, Amazon acquired the supermarket chain Whole Foods for 13.7 billion dollars. In 2009, the Seattle-based firm bought its competitor Zappos for 930 million dollars, a relative steal.

Apple and Google both purchased promising start-ups with interesting technologies early on and integrated them into their ecosystems. Through acquisitions like these, Google was able to launch Google Docs and Google Maps. Apple used its acquisitions to start Siri. Facebook has been more defensive in its purchases, acquiring companies that threaten its own business such as the photo and video-sharing app Instagram and the instant-messaging service WhatsApp. When it has failed to acquire a potential competitor, Facebook has simply copied its services, as it did with the multimedia messaging app Snapchat.

Increasingly, the acquisitions of tech giants have increasingly been the subject of criticism. “Because of their large reserves of cash, these companies can buy up any competitor that might harm their bottom line. And if they swallow very small companies early enough, it is hard for regulatory agencies to prevent acquisitions and the harm they do to the competition,” explains Dr. Niklas Dürr, a researcher in the ZEW Research Department “Economics of Innovation and Industrial Dynamics”. What complicates the situation further is that many start-ups have an interest in being bought by large tech companies.

For further information please contact

Dr. Niklas Dürr, Phone +49 (0)621-1235-386, E-mail niklas.duerr@zew.de