On Wednesday, a team of tech giants, including Alphabet’s Google, Meta Platforms, and Qualcomm, teamed up to push for open digital ecosystems in response to new EU tech rules that may also take the edge of possible future legislation. Calling itself the Coalition for Open Digital Ecosystems (CODE), the group wants to promote more open platforms and systems to boost growth and innovation in Europe.
The tech firms’ alliance underscores the growing pushback against the dominance of closed technology ecosystems, which limit consumer choice and stifle competition. It’s an explicit acknowledgment that the tech industry needs a major overhaul to ensure it benefits all users and encourages healthy competition.
For example, the emergence of social media giant TikTok has prompted marketers to shift their advertising dollars from platforms like Facebook and Google to the app, which can be more lucrative and more accessible to measure their returns. That has led to lower ad prices for the established duopoly and a revenue decline that hurts their profits.
It’s no surprise that investors have taken notice. In recent weeks, the companies’ earnings reports have raised concerns about their plans and underlying financial strength. Shares of Alphabet were down 5% on Oct. 29 after it dropped a bombshell announcement about its future strategy. They’re still down 7% for the year. Meta’s stock was down more than 9% in late trading after it reported its third-quarter results on Nov. 1.
In its latest earnings report, Meta reported lower-than-expected ad revenue. She warned that its other bets—which include the unprofitable Project Loon, which was trying to deliver internet via high-altitude balloons—will continue to lose money this year. Its operating margins declined in the last two quarters, and it has a massive debt load.
Shareholders have been showing some dismay with the management of Meta and Alphabet, particularly over the size of executive pay packets and how they compensate directors. In Meta’s latest shareholder vote, Chair and CEO Peggy Alford was opposed to reelection to the company’s compensation, nominating, and governance committee by more than 20% of independent shareholders, and over a fifth of Meta’s independent shareholders also voted against the reelection of three other board members.
Meta’s decision to hold off on releasing its new headset, Threads, in the European Union is a tactic to avoid a fight with Apple AAPL -0.72% over the nascent field of virtual reality/augmented reality (VR/AR). Withholding new products is one of the most potent lobbying tactics available when it comes to policymakers who are crafting digital rules. And it strongly signals policymakers that Big Tech won’t play nice.
