Post #12: The power of influencers - Heptagon Capital – Production

Spoiler alert: this post is nothing to do with Millennials endorsing brands. Rather, it relates to the growing sums spent by big tech businesses on lobbying.

Post #12: The power of influencers

Spoiler alert: this post is nothing to do with Millennials endorsing brands. Rather, it relates to the growing sums spent by big tech businesses on lobbying. When Democrat Senator Elizabeth Warren says that “today’s big tech companies have too much power” and Senator Amy Klobuchar asserts that she wants to make antitrust “cool again,” it should be of no surprise that corporate lobbying budgets are on the up.

The data are startling: last year America’s largest tech businesses spent a combined $77m on lobbying US government entities (per Federal records, published on Bloomberg). Sure, this figure looks small when compared to the $280m spent by the pharmaceutical/ healthcare sector, but tech has now become the second most influential sector when it comes to sums spent on lobbying, overtaking America’s commercial banks (which spent only $64m).

Google is the largest spender within the tech space ($21m), but the rate of change has been most significant at Amazon: the $14.2m spent in 2018 constituted a 10% year-on-year increase. However, over the last 7 years (the date from when information on this topic first became available), Amazon’s spending has grown by some 460%, well ahead of its rivals. Amazon now employs 28 full-time lobbyists in a team led by Jay Carney, former press secretary of President Obama. It also works with 13 external consultancies.

What’s going on? Inevitably, as platform businesses come to penetrate more aspects of our lives, they are facing greater scrutiny. For an opposition politician, castigating the perceived dominance of mega-cap tech businesses is, of course, an easy opportunity. From Amazon’s perspective, there is perhaps an additional agenda attached to increased lobbying when considering, say, the number of federal agencies who have the potential to rent AWS (or Azure, GCP etc.) cloud capacity.  Our view: context matters. Increased political and regulatory scrutiny is not going to go away. If anything, it will increase. However, do not forget, even if Amazon controls over 50% of the US online retail market, it still has less than a 5% share of the overall American retail market. Getting this and other similar messages across therefore matters. Expect the presence (and corresponding power) of influencers to grow.   

Disclaimers

The document is provided for information purposes only and does not constitute investment advice or any recommendation to buy, or sell or otherwise transact in any investments. The document is not intended to be construed as investment research. The contents of this document are based upon sources of information which Heptagon Capital believes to be reliable. However, except to the extent required by applicable law or regulations, no guarantee, warranty or representation (express or implied) is given as to the accuracy or completeness of this document or its contents and, Heptagon Capital, its affiliate companies and its members, officers, employees, agents and advisors do not accept any liability or responsibility in respect of the information or any views expressed herein. Opinions expressed whether in general or in both on the performance of individual investments and in a wider economic context represent the views of the contributor at the time of preparation. Where this document provides forward-looking statements which are based on relevant reports, current opinions, expectations and projections, actual results could differ materially from those anticipated in such statements. All opinions and estimates included in the document are subject to change without notice and Heptagon Capital is under no obligation to update or revise information contained in the document. Furthermore, Heptagon Capital disclaims any liability for any loss, damage, costs or expenses (including direct, indirect, special and consequential) howsoever arising which any person may suffer or incur as a result of viewing or utilising any information included in this document. 

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