Bloomberg Opinion — It was not a good day for Meta Platforms Inc. or its investors, but it was a good day for capitalism.
After a quarterly earnings report revealed a decline in Facebook’s (FB) daily active users — a first for the company — Meta’s shares plunged by 26% on Thursday, some $250 billion in market value was eroded, and analysts declared the behemoth all but dead. That prediction may well prove wrong. Regardless, the selloff was a reminder of why Washington’s approach to reforming tech can sometimes miss the mark.
Facebook fell because of signs it’s being outcompeted. TikTok, a video app that barely existed five years ago, is swooping up younger users as it becomes one of the most popular digital destinations in the world. Other services — Snap, Discord, YouTube, Twitch and others — are grabbing more eyeballs. Facebook, like MySpace before it, has simply lost some of its allure.
Although Facebook still commands about a quarter of the digital advertising market, it’s in a heated battle with Google and Amazon, the latter of which has been quickly boosting its share since 2019. And a growing slate of new entrants — including retail networks like Walmart and Target — is likely to shake up this market in the years ahead.
Relentless competition of this kind is one reason why the U.S. tech industry is thriving. It employs more than 7 million people, pays above-average wages, and makes up about 10% of gross domestic product. Many of its most popular products are free of charge. And its inventiveness helped significant elements of the economy to weather the pandemic, as anyone who has used Zoom should understand.
It’s worth keeping all this in mind as Congress advances a variety of antitrust bills that would designate Meta and a handful of its competitors as “covered companies,” in need of new rules to rein in their supposedly impregnable market power. The bills’ supporters say that regulation has not “kept up” as the tech companies have grown and evolved so spectacularly over the past three decades. Lost in the discussion is the possibility that these two facts may be related.
Meanwhile, the Federal Trade Commission is still working its way through a lawsuit about acquisitions that Facebook made — and the FTC itself approved — almost a decade ago, a case that grows less relevant by the day.
There are doubtless instances where laws should be updated for businesses that didn’t exist a generation ago. And it’s fair to ask if these companies now wield too much power in public life. Their role in spreading disinformation is a serious societal concern that Congress has yet to truly grapple with, even as it takes aim at other parts of their businesses. Washington, not unusually, has its priorities backward.
The market is making clear that tech companies are not the invulnerable monoliths some politicians have made them out to be. Any sensible regulation would work first from this principle.
Facebook’s plunge is what Joseph Schumpeter’s “gale of creative destruction” looks like in action. It may be painful for individual investors. But for the country, it’s a sign of progress.
Michael R. Bloomberg is the founder and majority owner of Bloomberg LP, the parent company of Bloomberg News, and UN Special Envoy on Climate Ambition and Solutions.
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