We noticed a couple of stories over the weekend that are related in a certain significant way. They both tie back to something we wrote about recently on Localogy Insider. And the same topic was discussed on the This Week in Local podcast. And the common theme is Big Tech regulation.
One of the stories that caught our eye is a Wall Street Journal piece (paywall warning) that delves into how Big Tech is sitting on so much cash that it has become a challenge for those companies. Talk about a “woe is me” problem.
One obvious way for Big Tech to put its obscene cash reserves to work is acquisitions. But that option is problematic. And this leads us to the second story that caught our eye. And that involves Alphabet’s (i.e., Google’s) apparent desire to acquire HubSpot.
Because any significant acquisition would draw so much not just regulatory scrutiny (in the U.S. and Europe), but likely resistance, that the big players may well think twice about it.
A Regulatory Theme
This is where it all ties into a recent theme in our coverage. Regulators appear to be so eager to take Big Tech down a peg that there may be some skittishness about doing what otherwise would seem logical. That is acquiring market share or filling gaps in an offering via acquisitions.
The other story that caught our eye was a Reuters piece suggesting this skittishness over acquisitions may not stop Alphabet, which nonetheless appears to be weighing the merits of making a bid on HubSpot carefully.
The Google-HubSpot deal seems feasible on paper. HubSpot, which went public in 2014, has a market cap of $33.66 billion. As of December 2023, Alphabet has more than $110 million in cash and equivalents available. Buy it and keep the change, right?
However, media reports suggest that Alphabet wants to make an offer but regulatory concerns have given the company pause.
Not a Good Time?
As we wrote recently and discussed on E64 of Localogy’s This Week in Local podcast, a lot is going on in the regulatory and antitrust worlds that could make Big Tech a little jumpy.
The two recent examples we cited were the U.S. Justice Department’s antitrust lawsuit against Apple (alleging a smartphone monopoly) and the EU Digital Marketing Act enforcement action against Apple, Alphabet, and Meta.
Reuters reported that it had interviewed several antitrust experts and found the consensus was that there would be no real impact on competition if Google acquired HubSpot. The main reason cited was that the CRM space HubSpot operates in has many strong competitors. These include companies with names like Salesforce, Adobe, Microsoft, and Oracle.
The same Reuters report, citing Gartner data, says that HubSpot only held a 4.9% share of the U.S. CRM market in 2022. By contrast, Salesforce and Adobe each held a 15% share.
Will this be enough to put Google at ease? Unclear. And it seems unlikely that U.S. and EU regulators would consider the views of Reuters’ unnamed sources in the antitrust community. It seems more likely they would take some action to keep one of the biggest players in Big Tech from getting bigger.
