The new conglomerates

The study of digital platforms, like any academic field, is influenced by changing material conditions. The rise of Uber and similar services, under the white-washed term of ‘the sharing economy’ led to an influx of research around the real conditions of labour in these new employment models. The debates around automation follow regular cycles that track the emergence of new technologies. And today, the dramatic rise of generative AI is leading to scholarly focus on artificial intelligence ethics, regulations around copyright, renewed focus on infrastructure and hardware, and growing concerns about bias and privacy. There is one phenomenon of the past decade that I think has gone relatively under researched – particularly as an explicit object of study: the return of the conglomerate.

For most firms, their business is to focus on a core product or market and produce goods and services for it. Yet in the 1960s and 1970s, a different form of business came to prominence in the advanced capitalist world. These conglomerates were companies that spanned across multiple industries, with a corresponding proliferation of internal divisions overseeing each distinct market. These were sprawling, massive businesses that offered a wide range of products – more akin to a diversified portfolio of assets than a traditional firm. Over the course of the 1980s though, this business model came to be seen as ill-suited for the economic times. The complexities of managing different businesses were deemed too much, and economists began calculating that the conglomerates were worth less to shareholders than the sum of their parts. (Berger & Ofek, 1995) The conglomerates were taken apart, wilfully at times, forcefully at others, and a new era of focusing on ‘core competencies’ flourished.

Strangely though, despite the warnings of economists and the wishes of investors, the conglomerate has returned in places like the US and China. Companies like Google, Amazon, Alibaba, and Tencent are exemplars of this new conglomerate – digital empires spanning across a wide range of industries. Google, for instance, is a massive advertising system, a major provider of video content, a manufacturer of consumer devices, a creator of scientific advances in AI, a telecoms operator, a driverless car producer, a videogames company (albeit, briefly), and much, much more. The diversity of the company's businesses was so significant that Google itself became relegated to being a subsidiary of the larger Alphabet conglomerate. Google/Alphabet is far from the only company doing this though. And if antitrust thinking is concerned about the size of a company within a market, there has been much less concern about the size of a company across markets.

To be sure, there has been academic attention paid to these expanding empires. Management studies have examined this work in terms of how core firm assets can be redeployed across new industries, of how customers can be ensnared by linkages across business divisions, and by how business model diversification might make strategic sense. (Aversa et al., 2021; Hoberg & Phillips, 2022) Others have looked at how this expansion is carried out. A recent paper, for instance, argues that this occurs through a four-stage process when Big Tech enters a highly regulated industry like education or healthcare. (Ozalp et al., 2022) First, they provide data infrastructure to companies within the regulated industry; then they create partnerships and devices to capture new data within the industry; then they use their expertise in working with data to improve existing products in the market; and lastly, they go on to create new products and services for the industry. There is also closely related research in phenomenon like super-apps that span across a multitude of services, and asset management that focuses on centralised ownership of multiple businesses. (Braun, 2021; van der Vlist et al., 2024) But there is a general lack of critical reflection – particularly on issues of power and macroeconomic implications – and there remain some significant open questions. ¹

Not least there is the question of why investors haven’t treated the new conglomerates in the same vulturish way they did in the private equity past. Sprawling businesses were once seen as ripe for takeover and asset stripping, but today's digital conglomerates are instead rewarded with skyrocketing valuations. What has changed? Is it external factors, or is there something distinct about the conglomerates today versus the past? Modern conglomerates appear to at least have underlying commonalities across their markets – data and infrastructure being key examples – but is this sufficient to account for their different financial reception?

More research could also be done on the drivers of this expansion. While many existing works point to the expansionary nature of platforms, the focus here tends to be on within-market expansion (the monopoly problem) and geographic expansion (the imperialism problem). Relatively few pieces have looked at the logics of specifically across-market expansion. (One notable exception here is (Rikap, 2023).) This latter type of expansion also, in some ways, runs counter to the dominant regulatory focus on competition and antitrust at the moment. For instance, the expansion of platforms into new markets can in fact have nominally competitive outcomes – after all, it adds more economic providers to a given industry.

If orthodox antitrust thinking neglects this aspect of platform expansion, it also entails a blindspot towards forms of power that go beyond price mark-ups and anti-competitive actions. What sort of power accrues to a firm from scope expansion? Market power is generally about using market share to increase prices – but what sorts of interrelationships exist across conglomerates that may enable higher prices? Or bargaining power? Or structural power? Or gatekeeper power? These remain for the most part open questions.

And such questions are all the more important as these companies move into education, healthcare, finance, and the military – key expansions involving not only lucrative markets, but also socially and geopolitically influential areas. Generative AI potentially accelerates this as AI companies actively push for its integration into new markets. In healthcare, AI is being promoted for use in drug development, health management, diagnosis, hospital assistance, and more. In finance, AI is already widely used for financial analysis, algorithmic trading, fraud detection, and so on. Education looks set to be another big sector for the generative AI moment, with the promise of personal tutors and radically transformed teaching, writing, research, and administration. And most worryingly, generative AI is being pushed into the military sector as well, providing infrastructure for weapons systems, decision-making, surveillance, and more.

Uncovering the unique logics of the new conglomerate is an important task for understanding the scale and power being centralised in our digital world. It will require rethinking what a platform business is today, and it will require fully interdisciplinary work to accomplish. For both of these roles, the new Platforms & Society journal will undoubtedly become an indispensable resource.