In 2006, Google acquired YouTube for $1.65 billion, and in 2012, Facebook acquired Instagram for $1 billion. These acquisitions were initially viewed as extravagant purchases, but they served to stifle potential competitors and bolster the market dominance of the acquirers, Google and Facebook.
Microsoft’s recent acquisition of GitHub for $7.5 billion follows a similar pattern. GitHub, a crucial platform for programmers and tech enthusiasts, holds significant importance despite being relatively unknown to the wider public. Microsoft’s willingness to pay around 30 times GitHub’s annual recurring revenue suggests that factors beyond profitability were driving this acquisition. It’s believed that Microsoft seeks to leverage the personal and software development data on GitHub to reinforce its dominance in the software industry. Concerned about the implications of this deal, a group has launched SaveGitHub.com to call for regulatory scrutiny and the imposition of conditions to safeguard consumers and the industry.
Why is Microsoft not yesterday’s news?
Microsoft may not grab headlines like Google, Facebook, Amazon, or Apple, but it remains a potent force in the tech industry with a market capital exceeding $800 billion. The company boasts a diverse portfolio including Office, Windows, Outlook, LinkedIn, Skype, and Azure’s Cloud services, effectively merging data from these platforms for various purposes, including AI and advertising. While this integration can result in more efficient products, it also creates formidable barriers for potential rivals, particularly in the software market.
What is GitHub?
GitHub serves as a crucial platform for programmers and developers to store and collaborate on code. It provides version control systems, offering a repository for software projects and enabling project members to access and track changes.
What problems could this deal cause?
GitHub has become the go-to platform for version control in the software industry, utilized by Microsoft’s competitors as well. It has also evolved into an unofficial social network for the programming community, containing valuable personal information that provides a comprehensive record of top developers’ work history and contributions. Microsoft’s control over GitHub presents insights into the trends and influencers shaping the programming world.
This could pose a competitive challenge, as Microsoft stands to gain access to the substantial user base of GitHub and could potentially steer these developers towards its own ecosystem to optimize profits. Therefore, the hefty $7.5 billion price tag, around 30 times GitHub’s annual recurring revenue, can be seen as a strategic move by Microsoft to solidify its dominance in the software markets by leveraging GitHub’s unique insights into the programming community.
What are some common sense remedies federal regulators could impose?
Instead of outright blocking the merger, federal regulators could impose specific conditions on the acquisition to protect user information and prevent unfair exploitation of GitHub’s unique position for market advantage.
Transparency: Microsoft should be required to disclose any changes made to GitHub, its policies, and account requirements. It should also publish all takedown requests and the ensuing actions, if any, and disclose any data mining of the platform while making the results public. Additionally, it should refrain from selling or disclosing developer information to third parties.
Neutral Platform: Microsoft should uphold GitHub as a neutral platform for all developers and programs, ensuring no preferential treatment for proprietary code or affiliated developers and no discrimination against open-source code or developers. GitHub should not be used to promote Microsoft products or disparage competitors. Users should have the option to “opt in” to communications from Microsoft, rather than being obligated to opt out.
Privacy: A separation must be enforced to prevent the sharing of GitHub users’ private information with Microsoft or any of its business verticals.
