Facebook is part of an industry that has changed the world. We face intense competition globally and we only succeed when we build things people find valuable. I’m proud that we stand for American values like giving every person a voice and expanding access to opportunity. As a platform for ideas we’ll always be at the center of important debates about society and technology, which is why I’ve called for new rules for the internet.
II. Facebook’s value and the role of competition
Every day, millions of Americans use our services to stay in touch with friends and family and talk about issues that matter to them. People use our apps to share videos, photos, livestreams, posts and private messages; to join communities, set up fundraisers for good causes, and even register to give blood. These services create a lot of value in people’s lives, and our business model means we can offer them for free.
We also help millions of businesses connect with customers. Facebook gives small businesses and individual entrepreneurs access to sophisticated tools that previously only the largest players had. Now any business can use our services to establish an online presence, reach potential customers and grow.
We’re constantly building new ways to empower people to connect and share. Since Covid-19 emerged, we’ve seen how important this can be. People use our services to stay in touch with friends and family they can’t be with in person; they use our tools to keep their businesses running since the internet stays open even when physical stores cannot.
Facebook supports its mission of connecting people around the world by selling ads, and we face significant competition. We compete against the companies appearing at this hearing, plus many others that sell advertising and connect people. We also compete globally, including against companies that have access to markets that we aren’t in.
Our story would not have been possible without U.S. laws that encourage competition and innovation. I believe that strong and consistent competition policy is vital because it ensures that the playing field is level for all. At Facebook, we compete hard, because we’re up against other smart and innovative companies that are determined to win. We know that our future success is not guaranteed, especially in a global tech industry defined by rapid innovation. The history of technology is often the history of failure, and even industry leading tech companies fail if they don’t stay competitive. This is why we’re focused on delivering better services for people and businesses, and competing as vigorously as we can within the rules.
Although people around the world use our products, Facebook is a proudly American company. We believe in values — democracy, competition, inclusion and free expression — that the American economy was built on. Many other tech companies share these values, but there’s no guarantee our values will win out. For example, China is building its own version of the internet focused on very different ideas, and they are exporting their vision to other countries. As Congress and other stakeholders consider how antitrust laws support competition in the U.S., I believe it’s important to maintain the core values of openness and fairness that have made America’s digital economy a force for empowerment and opportunity here and around the world.
III. Facebook’s History of Innovation
In a competitive economy, innovation leads to improvements that benefit consumers. I understand this is one of the key goals of antitrust law, and it is what Facebook has been focused on since day one. We’ve consistently added new products for people that enhance their ability to connect and share what matters most to them.
Our service began as a text-based website. Today on Facebook you can share almost any type of digital content; read news; broadcast or watch live video; play games; connect with businesses; buy or sell products; send and receive payments; organize groups and events; and raise money for important causes. WhatsApp provides secure and reliable communication, including voice and video calls. Instagram offers photo sharing with tools to connect and create. And the Facebook family goes beyond software, with hardware products like Oculus and Portal.
We built these new products and services because the intense competitive pressures we face push us to experiment with new ideas. We are always working to develop technologies that will change how people connect and communicate in the future, and we invest around $10 billion per year in research and development. We know that if we don’t constantly keep improving, we will fall behind.
Many of our products were new concepts when we introduced them, and they have served as models for other companies and apps that have used and iterated on our ideas — including features like News Feed ranking and the Like button that have become foundational to many competitive services. We have also helped advance nascent technologies like artificial intelligence (AI), augmented reality (AR), and virtual reality (VR).
We actively contribute to the open-source community. For example, we developed the PyTorch opensource project, which has become one of the most successful AI development tools and is now used worldwide to create new AI technology and applications. We also released Detectron2, our computer vision technology which we use for integrity work; FAISS, a state-of-the-art search tool for finding similar multimedia documents; and DensePose, for 3D interpretation of 2D images. We offer hundreds of projects like these on Facebook Open Source and GitHub, where our projects have hundreds of thousands of followers. We also share the results of our hardware research: for example, we developed the world’s most efficient servers and published the plans so everyone could use them as part of our Open Compute Project. I believe sharing our intellectual property this way helps the entire ecosystem move forward and develop new products.
We create technology to enable social good. For example, our Crisis Response tools allow people to let family and friends know they are safe, share information during a crisis, and help communities recover. Our Safety Check tool has been activated in more than 1,400 crises. In 2018 alone, our community used Crisis Response tools for over 300 crises in more than 80 countries. We’ve also developed charitable giving tools that make it easy for our community to raise money for causes they care about on Facebook.
People, nonprofits and verified Pages can collect donations from their friends and supporters on Facebook, and so far our community has raised more than $3 billion. To take just one example, the nonprofit No Kid Hungry has raised over $5 million from more than 200,000 donors to help feed children across the United States. We also invest in our communities, and have committed to making over $1 billion in investments in Black and diverse suppliers and communities in the US.
Like many companies, we’ve both built our own products from the ground up, and we’ve moved others forward through mergers and acquisitions. Our acquisitions have helped drive innovation for people who use our own products and services and for the broader startup community. Acquisitions bring together different companies’ complementary strengths. When you acquire a company, you can benefit from their technology and talent, and when you are acquired you get access to resources and people you otherwise might never have been able to tap into.
Facebook has made Instagram and WhatsApp successful as part of our family of apps. Instagram and WhatsApp have been able to grow and operate their services using Facebook’s bespoke, lower-cost infrastructure and tackle spam and harmful content with Facebook’s integrity teams and technology.
Following its acquisition, Instagram was able to get help stabilizing infrastructure and controlling runaway spam. It also benefited from the ability to plug into Facebook’s self-serve ads system, sales team and existing advertiser relationships to drive monetization, and was able to build products including IG Direct and IG Video that used Facebook’s technology and infrastructure. Before it was acquired, WhatsApp was a paid app with a reputation for secure communications; together we built on that by introducing end-to-end encryption and making it free to use. Since its acquisition, WhatsApp has also been able to develop products such as voice and video calling that were built on Facebook’s technology stack.
These benefits came about as a result of our acquisition of those companies, and would not have happened had we not made those acquisitions. We have developed new products for Instagram and WhatsApp, and we have learned from those companies to bring new ideas to Facebook. The end result is better services that provide more value to people and advertisers, which is a core goal of Facebook’s acquisition strategy.
IV. Facebook Platform
In 2007, we launched the Facebook Platform, a set of tools for developers and businesses to build complementary services on Facebook. Our vision for Platform has always been to foster an ecosystem of apps that build on top of Facebook and create a richer and more interesting experience for people. At the same time, we have developed rules to make Platform work better for everyone and to protect the significant investments we made in capital and talent to develop it. We’ve made changes to those policies over time to deal with issues as they arose, and to protect user privacy and give people more control over their data. We stand by those changes and will continue to evaluate our policies to address any new issues that arise.
V. The Benefits of Scale
I understand that people have concerns about the size and perceived power that tech companies have. Ultimately, I believe companies shouldn’t be making so many judgments about important issues like harmful content, privacy, and election integrity on their own. That’s why I’ve called for a more active role for governments and regulators and updated rules for the internet. If we do this right, we can preserve what’s best about this technology — the freedom for people to connect and express themselves and for entrepreneurs to build new things — while also protecting society from broader harms.
In the meantime, Facebook is working to address problems at scale. From election security to building more privacy-protective products, we are bringing significant technical and financial resources to bear on the challenges we face. For example, we now have more than 35,000 people working on safety and security — three times as many as we had just three years ago. We’ve built sophisticated systems to find and remove harmful content. We’re funding new technologies to tackle emerging threats like deepfakes. And we’re building products to connect people to authoritative information, like our recently introduced Covid-19 and voter information centers.
We have a responsibility to work constantly to keep people safe on our platform, and to make sure we’re investing to fix our issues and get ahead of new risks. Facebook’s size is an asset in those efforts.
VI. Supporting Our Community Through the COVID-19 Pandemic
Our services have supported people and businesses throughout the Covid-19 pandemic. People turn to Facebook to stay connected with their families and friends and get authoritative and up-to-date health information. For many, our services are critical communications tools: group calls in Italy during the early stages of the pandemic jumped by more than 1,000 percent, and in April 700 million people were making video calls every day on Messenger and WhatsApp. Businesses also use our tools to stay connected to customers, shift sales online, and run fundraisers. For many small businesses, being able to operate online is vital and I’m proud that our tools enable this.
We built new products to respond to the crisis. We launched Community Help, which lets people find and offer help in their local area — everything from volunteering to pick up groceries and assisting with errands to sharing goods and checking in on one another. This is the kind of social infrastructure that companies like Facebook are well positioned to provide.
We connect people to authoritative health information and we’re taking aggressive steps to stop Covid19-related misinformation and harmful content from spreading. In January, we started displaying educational pop-ups in Facebook and Instagram connecting people to authoritative Covid-19-related information from organizations including the CDC, regional health authorities, and the WHO. We also launched the Covid-19 information center, which is now featured at the top of News Feed on Facebook and includes real-time updates from national health authorities and global organizations. Through these efforts across Facebook and Instagram, we’ve directed more than 2 billion people to resources from health authorities, and we’re giving millions in ad credits to health authorities so they can reach people.
We’re also using data in new ways to inform the public health response. We partnered with Carnegie Mellon University to launch a Covid-19 Symptom Survey that can help researchers predict the spread of the disease. With millions of responses, researchers are able to get a much more detailed picture of the pandemic. We also contributed aggregated anonymized location data to the Covid-19 Mobility Data Network, a group of 40 health researchers whose work helps governments determine if and where it’s appropriate to roll back social distancing orders. I’m proud that we’ve been able to support people, businesses and the public health effort during this crisis.
VII. Our Responsibility to Our Community
This is an incredibly challenging time, and that’s why it’s more important than ever that people can have conversations on our platforms about the issues that matter to them – whether that’s Covid-19, racial and social injustice, family and economic concerns, or the upcoming elections. We recognize that we have a responsibility to stop bad actors from interfering with or undermining these conversations through misinformation, attempted voter suppression, or speech that is hateful or incites violence. I understand the concerns people have in these areas, and we are working to address them. While we are making progress – for example, we have dramatically improved our ability to proactively find and remove harmful content and prevent election interference – I recognize that we have more to do.
I know our primary goal at this hearing is to talk about antitrust and competition issues, but with four major tech CEOs appearing before Congress, we also have an opportunity to talk about how technology can better serve society. Each of our companies is doing important work to meet our current responsibilities to our communities, while also planning and investing for a time where we are likely to see significant economic and social disruption. I hope at least some of today’s hearing will touch on the future, and how our collective scale and resources could be harnessed to help people and businesses.
For instance, many families are worried about schooling and how to balance home and work obligations going forward. How can we leverage our products to lessen this burden for people? What else can we do to support communities if social distancing orders remain in place? How can we better equip our small businesses to compete, including on the world stage? How else can technology companies assist the public health effort? We don’t have all the answers yet, but I hope that our industry continues to look for innovative ways to support our communities through this difficult time.
Our success rests on our ability to build products that bring value to people’s lives — whether it’s finding a supportive Facebook group, starting a business on Instagram, video calling loved ones on Messenger or staying in touch with a friend on WhatsApp.
Facebook is a successful company now, but we got there the American way: we started with nothing and provided better products that people find valuable. As I understand our laws, companies aren’t bad just because they are big. Many large companies that fail to compete cease to exist. This is why we’re focused on building and updating our products to give people the best possible experiences. Provided we continue investing in new ideas and living up to our broader social responsibilities, I’m hopeful that we’ll keep making progress and deliver better products and services — for the people and businesses that use our products, for the wider tech ecosystem, and for the world.
Several years ago, Facebook moved our headquarters to the campus where Sun Microsystems used to be. We kept their sign out front, on the back of ours, to remind us that things change fast in tech. I’ve long believed that the nature of our industry is that someday a product will replace Facebook. I want us to be the ones that build it, because if we don’t, someone else will. Thank you, and I look forward to your questions.
Opening statement from Amazon CEO Jeff Bezos
Thank you, Chairman Cicilline, Ranking Member Sensenbrenner, and members of the Subcommittee. I’m Jeff Bezos. I founded Amazon 26 years ago with the long-term mission of making it Earth’s most customer-centric company.
My mom, Jackie, had me when she was a 17-year-old high school student in Albuquerque, New Mexico. Being pregnant in high school was not popular in Albuquerque in 1964. It was difficult for her. When they tried to kick her out of school, my grandfather went to bat for her. After some negotiation, the principal said, “OK, she can stay and finish high school, but she can’t do any extracurricular activities, and she can’t have a locker.” My grandfather took the deal, and my mother finished high school, though she wasn’t allowed to walk across the stage with her classmates to get her diploma. Determined to keep up with her education, she enrolled in night school, picking classes led by professors who would let her bring an infant to class. She would show up with two duffel bags—one full of textbooks, and one packed with diapers, bottles, and anything that would keep me interested and quiet for a few minutes.
My dad’s name is Miguel. He adopted me when I was four years old. He was 16 when he came to the United States from Cuba as part of Operation Pedro Pan, shortly after Castro took over. My dad arrived in America alone. His parents felt he’d be safer here. His mom imagined America would be cold, so she made him a jacket sewn entirely out of cleaning cloths, the only material they had on hand. We still have that jacket; it hangs in my parents’ dining
room. My dad spent two weeks at Camp Matecumbe, a refugee center in Florida, before being moved to a Catholic mission in Wilmington, Delaware. He was lucky to get to the mission, but even so, he didn’t speak English and didn’t have an easy path. What he did have was a lot of grit and determination. He received a scholarship to college in Albuquerque, which is where he met my mom. You get different gifts in life, and one of my great gifts is my mom and dad. They have been incredible role models for me and my siblings our entire lives.
You learn different things from your grandparents than you do from your parents, and I had the opportunity to spend my summers from ages four to 16 on my grandparents’ ranch in Texas. My grandfather was a civil servant and a rancher—he worked on space technology and missile-defense systems in the 1950s and ‘60s for the Atomic Energy Commission—and he was self-reliant and resourceful. When you’re in the middle of nowhere, you don’t pick up a phone and call somebody when something breaks. You fix it yourself. As a kid, I got to see him solve many seemingly unsolvable problems himself, whether he was restoring a broken-down Caterpillar bulldozer or doing his own veterinary work. He taught me that you can take on hard problems. When you have a setback, you get back up and try again. You can invent your way to a better place.
I took these lessons to heart as a teenager, and became a garage inventor. I invented an automatic gate closer out of cement-filled tires, a solar cooker out of an umbrella and tinfoil, and alarms made from baking pans to entrap my siblings.
The concept for Amazon came to me in 1994. The idea of building an online bookstore with millions of titles—something that simply couldn’t exist in the physical world—was exciting to me. At the time, I was working at an investment firm in New York City. When I told my boss I was leaving, he took me on a long walk in Central Park. After a lot of listening, he finally said, “You know what, Jeff, I think this is a good idea, but it would be a better idea for somebody who didn’t already have a good job.” He convinced me to think about it for two days before making a final decision. It was a decision I made
with my heart and not my head. When I’m 80 and reflecting back, I want to have minimized the number of regrets that I have in my life. And most of our regrets are acts of omission—the things we didn’t try, the paths untraveled. Those are the things that haunt us. And I decided that if I didn’t at least give it my best shot, I was going to regret not trying to participate in this thing called the internet that I thought was going to be a big deal.
The initial start-up capital for Amazon.com came primarily from my parents, who invested a large fraction of their life savings in something they didn’t understand. They weren’t making a bet on Amazon or the concept of a bookstore on the internet. They were making a bet on their son. I told them that I thought there was a 70% chance they would lose their investment, and they did it anyway. It took more than 50 meetings for me to raise $1 million from investors, and over the course of all those meetings, the most common question was, “What’s the internet?”
Unlike many other countries around the world, this great nation we live in supports and does not stigmatize entrepreneurial risk-taking. I walked away from a steady job into a Seattle garage to found my startup, fully understanding that it might not work. It feels like just yesterday I was driving the packages to the post office myself, dreaming that one day we might be able to afford a forklift.
Amazon’s success was anything but preordained. Investing in Amazon early on was a very risky proposition. From our founding through the end of 2001, our business had cumulative losses of nearly $3 billion, and we did not have a profitable quarter until the fourth quarter of that year. Smart analysts predicted Barnes & Noble would steamroll us, and branded us “Amazon.toast.” In 1999, after we’d been in business for nearly five years, Barron’s headlined a story about our impending demise “Amazon.bomb.” My annual shareholder letter for 2000 started with a one-word sentence: “Ouch.” At the pinnacle of the internet bubble our stock price peaked at $116, and then after the bubble burst our stock went down to $6. Experts and pundits thought we were going out of business. It took a lot of smart people with a willingness to take a risk with me, and a willingness to stick to our convictions, for Amazon to survive and ultimately to succeed.
And it wasn’t just those early years. In addition to good luck and great people, we have been able to succeed as a company only because we have continued to take big risks. To invent you have to experiment, and if you know in advance that it’s going to work, it’s not an experiment. Outsized returns come from betting against conventional wisdom, but conventional wisdom is usually right. A lot of observers characterized Amazon Web Services as a risky distraction when we started. “What does selling compute and storage have to do with selling books?” they wondered. No one asked for AWS. It turned out the world was ready and hungry for cloud computing but didn’t know it yet. We were right about AWS, but the truth is we’ve also taken plenty of risks that didn’t pan out. In fact, Amazon has made billions of dollars of failures. Failure inevitably comes along with invention and risk-taking, which is why we try to make Amazon the best place in the world to fail.
Since our founding, we have strived to maintain a “Day One” mentality at the company. By that I mean approaching everything we do with the energy and entrepreneurial spirit of Day One. Even though Amazon is a large company, I have always believed that if we commit ourselves to maintaining a Day One mentality as a critical part of our DNA, we can have both the scope and capabilities of a large company and the spirit and heart of a small one.
In my view, obsessive customer focus is by far the best way to achieve and maintain Day One vitality. Why? Because customers are always beautifully, wonderfully dissatisfied, even when they report being happy and business is great. Even when they don’t yet know it, customers want something better, and a constant desire to delight customers drives us to constantly invent on their behalf. As a result, by focusing obsessively on customers, we are internally driven to improve our services, add benefits and features, invent new products, lower prices, and speed up shipping times—before we have to. No customer ever asked Amazon to create the Prime membership program, but it sure turns out they wanted it. And I could give you many such examples.
Not every business takes this customer-first approach, but we do, and it’s our greatest strength.
Customer trust is hard to win and easy to lose. When you let customers make your business what it is, then they will be loyal to you—right up to the second that someone else offers them better service. We know that customers are perceptive and smart. We take as an article of faith that customers will notice when we work hard to do the right thing, and that by doing so again and again, we will earn trust. You earn trust slowly, over time, by doing hard things well—delivering on time; offering everyday low prices; making promises and keeping them; making principled decisions, even when they’re unpopular; and giving customers more time to spend with their families by inventing more convenient ways of shopping, reading, and automating their homes. As I have said since my first shareholder letter in 1997, we make decisions based on the long-term value we create as we invent to meet customer needs. When we’re criticized for those choices, we listen and look at ourselves in the mirror. When we think our critics are right, we change. When we make mistakes, we apologize. But when you look in the mirror, assess the criticism, and still believe you’re doing the right thing, no force in the world should be able to move you.
Fortunately, our approach is working. Eighty percent of Americans have a favorable impression of Amazon overall, according to leading independent polls. Who do Americans trust more than Amazon “to do the right thing?” Only their primary physicians and the military, according to a January 2020 Morning Consult survey. Researchers at Georgetown and New York University found in 2018 that Amazon trailed only the military among all respondents to a survey on institutional and brand trust. Among Republicans, we trailed only the military and local police; among Democrats, we were at the top, leading every branch of government, universities, and the press. In Fortune’s 2020 rankings of the World’s Most Admired Companies, we came in second place (Apple was #1). We are grateful that customers notice the hard work we do on their behalf, and that they reward us with their trust. Working to earn and keep that trust is the single biggest driver of Amazon’s Day One culture.
The company most of you know as Amazon is the one that sends you your online orders in the brown boxes with the smile on the side. That’s where we started, and retail remains our largest business by far, accounting for over 80% of our total revenue. The very nature of that business is getting products to customers. Those operations need to be close to customers, and we can’t outsource these jobs to China or anywhere else. To fulfill our promises to customers in this country, we need American workers to get products to American customers. When customers shop on Amazon, they are helping to create jobs in their local communities. As a result, Amazon directly employs a million people, many of them entry-level and paid by the hour. We don’t just employ highly educated computer scientists and MBAs in Seattle and Silicon Valley. We hire and train hundreds of thousands of people in states across the country such as West Virginia, Tennessee, Kansas, and Idaho. These employees are package stowers, mechanics, and plant managers. For many, it’s their first job. For some, these jobs are a stepping stone to other careers, and we are proud to help them with that. We are spending more than $700 million to give more than 100,000 Amazon employees access to training programs in fields such as healthcare, transportation, machine learning, and cloud computing. That program is called Career Choice, and we pay 95% of tuition and fees toward a certificate or diploma for in-demand, high-paying fields, regardless of whether it’s relevant to a career at Amazon.
Patricia Soto, one of our associates, is a Career Choice success story. Patricia always wanted to pursue a career in the medical field to help care for others, but with only a high school diploma and facing the costs of post-secondary education, she wasn’t sure she’d be able to accomplish that goal. After earning her medical certification through Career Choice, Patricia left Amazon to start her new career as a medical assistant at Sutter Gould Medical Foundation, supporting a pulmonary medicine doctor. Career Choice has given Patricia and so many others a shot at a second career that once seemed out of reach.
Amazon has invested more than $270 billion in the U.S. over the last decade. Beyond our own workforce, Amazon’s investments have created nearly 700,000 indirect jobs in fields like construction, building services, and hospitality. Our hiring and investments have brought much-needed jobs and added hundreds of millions of dollars in economic activity to areas like Fall River, Massachusetts, California’s Inland Empire, and Rust Belt states like Ohio. During the COVID-19 crisis, we hired an additional 175,000 employees, including many laid off from other jobs during the economic shutdown. We spent more than $4 billion in the second quarter alone to get essential products to customers and keep our employees safe during the COVID-19 crisis. And a dedicated team of Amazon employees from across the company has created a program to regularly test our workers for COVID-19. We look forward to sharing our learnings with other interested companies and government partners.
The global retail market we compete in is strikingly large and extraordinarily competitive. Amazon accounts for less than 1% of the $25 trillion global retail market and less than 4% of retail in the U.S. Unlike industries that are winner-take-all, there’s room in retail for many winners. For example, more than 80 retailers in the U.S. alone earn over $1 billion in annual revenue. Like any retailer, we know that the success of our store depends entirely on customers’ satisfaction with their experience in our store. Every day, Amazon competes against large, established players like Target, Costco, Kroger, and, of course, Walmart—a company more than twice Amazon’s size. And while we have always focused on producing a great customer experience for retail sales done primarily online, sales initiated online are now an even larger growth area for other stores. Walmart’s online sales grew 74% in the first quarter. And customers are increasingly flocking to services invented by other stores that Amazon still can’t match at the scale of other large companies, like curbside pickup and in-store returns. The COVID-19 pandemic has put a spotlight on these trends, which have been growing for years. In recent months, curbside pickup of online orders has increased over 200%, in part due to COVID-19 concerns. We also face new competition from the likes of Shopify and Instacart—companies that enable traditionally physical stores to put up a full online store almost instantaneously and to deliver products directly to customers in new and innovative ways—and a growing list of omnichannel business models. Like almost every other segment of our
economy, technology is used everywhere in retail and has only made retail more competitive, whether online, in physical stores, or in the various combinations of the two that make up most stores today. And we and all other stores are acutely aware that, regardless of how the best features of “online” and “physical” stores are combined, we are all competing for and serving the same customers. The range of retail competitors and related services is constantly changing, and the only real constant in retail is customers’ desire for lower prices, better selection, and convenience.
It’s also important to understand that Amazon’s success depends overwhelmingly on the success of the thousands of small and medium-sized businesses that also sell their products in Amazon’s stores. Back in 1999, we took what at the time was the unprecedented step of welcoming third-party sellers into our stores and enabling them to offer their products right alongside our own. Internally, this was extremely controversial, with many disagreeing and some predicting this would be the beginning of a long, losing battle. We didn’t have to invite third-party sellers into the store. We could have kept this valuable real estate for ourselves. But we committed to the idea that over the long term it would increase selection for customers, and that more satisfied customers would be great for both third-party sellers and for Amazon. And that’s what happened. Within a year of adding those sellers, third-party sales accounted for 5% of unit sales, and it quickly became clear that customers loved the convenience of being able to shop for the best products and to see prices from different sellers all in the same store. These small and medium-sized third-party businesses now add significantly more product selection to Amazon’s stores than Amazon’s own retail operation. Third-party sales now account for approximately 60% of physical product sales on Amazon, and those sales are growing faster than Amazon’s own retail sales. We guessed that it wasn’t a zero sum game. And we were right—the whole pie did grow, third-party sellers did very well and are growing fast, and that has been great for customers and for Amazon.
There are now 1.7 million small and medium-sized businesses around the world selling in Amazon’s stores. More than 200,000 entrepreneurs worldwide surpassed $100,000 in sales in our stores in 2019. On top of that, we estimate that third-party businesses selling in Amazon’s stores have created over 2.2 million new jobs around the world.
One of those sellers is Sherri Yukel, who wanted to change careers to be home more for her children. She started handcrafting gifts and party supplies for friends as a hobby, and eventually began selling her products on Amazon. Today, Sherri’s company employs nearly 80 people and has a global customer base. Another is Christine Krogue, a stay-at-home mother of five in Salt Lake City. Christine started a business selling baby clothes through her own website before taking a chance on Amazon. She has since seen her sales more than double, and she’s been able to expand her product line and hire a team of part-time employees. Selling on Amazon has allowed Sherri and Christine to grow their own businesses and satisfy customers on their own terms.
And it is striking to remember how recent all of this is. We did not start out as the largest marketplace—eBay was many times our size. It was only by focusing on supporting sellers and giving them the best tools we could invent that we were able to succeed and eventually surpass eBay. One such tool is Fulfillment by Amazon, which enables our third-party sellers to stow their inventory in our fulfillment centers, and we take on all logistics, customer service, and product returns. By dramatically simplifying all of those challenging aspects of the selling experience in a cost-effective way, we have helped many thousands of sellers grow their businesses on Amazon. Our success may help explain the wide proliferation of marketplaces of all types and sizes around the world. This includes U.S. companies like Walmart, eBay, Etsy, and Target, as well as retailers based overseas but selling globally, such as Alibaba and Rakuten. These marketplaces further intensify competition within retail.
The trust customers put in us every day has allowed Amazon to create more jobs in the United States over the past decade than any other company—hundreds of thousands of jobs across 42 states. Amazon employees make a minimum of $15 an hour, more than double the federal minimum wage (which we have urged Congress to increase). We’ve challenged other large retailers to match our $15 minimum wage. Target did so recently, and just last week so did Best Buy. We welcome them, and they remain the only ones to have done so. We do not skimp on benefits, either. Our full-time hourly employees receive the same benefits as our salaried headquarters employees, including comprehensive health insurance starting on the first day of employment, a 401(k) retirement plan, and parental leave, including 20 weeks of paid maternity leave. I encourage you to benchmark our pay and benefits against any of our retail competitors.
More than 80% of Amazon shares are owned by outsiders, and over the last 26 years—starting from zero—we’ve created more than $1 trillion of wealth for those outside shareholders. Who are those shareowners? They are pension funds: fire, police, and school teacher pension funds. Others are 401(k)s—mutual funds that own pieces of Amazon. University endowments, too, and the list goes on. Many people will retire better because of the wealth we’ve created for so many, and we’re enormously proud of this.
At Amazon, customer obsession has made us what we are, and allowed us to do ever greater things. I know what Amazon could do when we were 10 people. I know what we could do when we were 1,000 people, and when we were 10,000 people. And I know what we can do today when we’re nearly a million. I love garage entrepreneurs—I was one. But, just like the world needs small companies, it also needs large ones. There are things small companies simply can’t do. I don’t care how good an entrepreneur you are, you’re not going to build an all-fiber Boeing 787 in your garage.
Our scale allows us to make a meaningful impact on important societal issues. The Climate Pledge is a commitment made by Amazon and joined by other companies to meet the goals of the Paris Agreement 10 years early and be net zero carbon by 2040. We plan to meet the pledge, in part, by purchasing 100,000 electric delivery vans from Rivian—a Michigan-based producer of electric vehicles. Amazon aims to have 10,000 of Rivian’s new electric vans on the road as early as 2022, and all 100,000 vehicles on the road by 2030. Globally, Amazon operates 91 solar and wind projects that have the capacity to generate over 2,900 MW and deliver more than 7.6 million MWh of energy annually—enough to power more than 680,000 U.S. homes. Amazon is also investing $100 million in global reforestation projects through the Right Now Climate Fund, including $10 million Amazon committed in April to conserve, restore, and support sustainable forestry, wildlife and nature-based solutions across the Appalachian Mountains—funding two innovative projects in collaboration with The Nature Conservancy. Four global companies—Verizon, Reckitt Benckiser, Infosys, and Oak View Group—recently signed The Climate Pledge, and we continue to encourage others to join us in this fight. Together, we will use our size and scale to address the climate crisis right away. And last month, Amazon introduced The Climate Pledge Fund, started with $2 billion in funding from Amazon. The Fund will support the development of sustainable technologies and services that in turn will enable Amazon and other companies to meet The Climate Pledge. The Fund will invest in visionary entrepreneurs and innovators who are building products and services to help companies reduce their carbon impact and operate more sustainably.
We recently opened the largest homeless shelter in Washington state—and it’s located inside one of our newest headquarters buildings in downtown Seattle. The shelter is for Mary’s Place, an incredible Seattle-based nonprofit. The shelter, part of Amazon’s $100 million investment in Mary’s Place, spans eight floors and can accommodate up to 200 family members each night. It has its own health clinic and provides critical tools and services to help families fighting homelessness get back on their feet. And there is dedicated space for Amazon to provide weekly pro-bono legal clinics offering counsel on credit and debt issues, personal injury, housing and tenant rights. Since 2018, Amazon’s legal team has supported hundreds of Mary’s Place guests and volunteered more than 1,000 pro-bono hours.
Amazon Future Engineer is a global childhood-to-career program designed to inspire, educate, and prepare thousands of children and young adults from underrepresented and underserved communities to pursue a computer science career. The program funds computer science coursework and professional teacher development for hundreds of elementary schools, introductory and AP Computer Science classes for more than 2,000 schools in underserved communities across the country, and 100 four-year, $40,000 college scholarships to computer science students from low-income backgrounds. Those scholarship recipients also receive guaranteed internships at Amazon. There is a diversity pipeline problem in tech, and this has an outsized impact on the Black community. We want to invest in building out the next generation of technical talent for the industry and expanding the opportunities for underrepresented minorities. We also want to accelerate this change right now. To find the best talent for technical and non-technical roles, we actively partner with historically Black colleges and universities on our recruiting, internship, and upskilling initiatives.
Let me close by saying that I believe Amazon should be scrutinized. We should scrutinize all large institutions, whether they’re companies, government agencies, or non-profits. Our responsibility is to make sure we pass such scrutiny with flying colors.
It’s not a coincidence that Amazon was born in this country. More than any other place on Earth, new companies can start, grow, and thrive here in the U.S. Our country embraces resourcefulness and self-reliance, and it embraces builders who start from scratch. We nurture entrepreneurs and start-ups with stable rule of law, the finest university system in the world, the freedom of democracy, and a deeply accepted culture of risk-taking. Of course, this great nation of ours is far from perfect. Even as we remember Congressman John Lewis and honor his legacy, we’re in the middle of a much-needed race reckoning. We also face the challenges of climate change and income inequality, and we’re stumbling through the crisis of a global pandemic. Still, the rest of the world would love even the tiniest sip of the elixir we have here in the U.S. Immigrants like my dad see what a treasure this country is—they have perspective and can often see it even more clearly than those of us who were lucky enough to be born here. It’s still Day One for this country, and even in the face of today’s humbling challenges, I have never been more optimistic about our future.
I appreciate the opportunity to appear before you today and am happy to take your questions.
Opening statement from Alphabet CEO Sundar Pichai
Chairman Cicilline, Ranking Member Sensenbrenner, and distinguished members of the Subcommittee, thank you for this opportunity to appear before you today.
At its heart, a discussion about competition is a discussion about opportunity. This has never been more important, as the global pandemic poses dual challenges to our health and our economy.
Expanding access to opportunity through technology is deeply personal to me. I didn’t have much access to a computer growing up in India. So you can imagine my amazement when I arrived in the U.S. for graduate school and saw an entire lab of computers I could use whenever I wanted.
Accessing the internet for the first time in that computer lab set me on a path to bring technology to as many people as possible. It’s what inspired me to join Google 16 years ago. And it’s what led me to help create Google’s first browser, Chrome . . . not because I thought the world needed another browser, but because a better browser could open up the web to more people. I couldn’t have imagined then that, eleven years later, so many people would experience the web through Chrome, for free.
At Google, we take pride in the number of people who choose our products and services; we’re even prouder of what they do with them — whether it’s the 140 million students and educators using G Suite for Education to stay connected during the pandemic . . . the 5 million Americans gaining digital skills through Grow with Google, part of our $1 billion initiative to expand economic opportunity . . . or the millions of small business owners connecting with customers through Google products such as Maps and Search.
Our work would not be possible without the long tradition of American innovation, and we’re proud to contribute to its future. Founded in Silicon Valley, we now employ more than 120,000 Googlers around the world — more than 75,000 here in the U.S., across offices and data centers in 26 states. PPI estimated that in 2018 alone we invested more than $20 billion across the U.S., citing us as the largest capital investor in America that year. It’s also ranked us in the top five U.S. investors for the last three years.
An important way we contribute is by building products that are helpful to American users in moments big and small, whether they are looking for a faster route home, learning how to cook a new dish on YouTube, or growing a small business. Survey research found that free services like Search, Gmail, Maps, and Photos provide thousands of dollars a year in value to the average American.
Many are small business owners who have used our digital tools to grow. For example, Fat Witch Bakery is a New York City-based bakery that for decades has been known for its delicious brownies. For over 17 years, Fat Witch and its founder Patricia Helding have been Google Ads customers. The Fat Witch team uses free tools like Google My Business to interact with their customers and to keep them informed, with over 200 reviews on their prole and counting. They also use free tools like Google Analytics to track the selectiveness of their marketing spend.
Online has been a lifeline for so many businesses, especially during the global pandemic. For example, by the time COVID-19 forced Texas to shelter in place, Kettlebell Kings, an Austin-based fitness company, had already been investing in Google Ads and Analytics for nearly a decade. When the lockdown orders led to a surge in sales for home fitness equipment, Kettlebell was prepared to adjust its digital offerings to capture the market, and its YouTube Channel grew 20%, helping them to grow their digital revenue and sales, which are up 3000% since COVID hit. Nearly one-third of small business owners say that without digital tools they would have had to close all or part of their business during COVID.
I am deeply proud that because of our tools, businesses on Main Street can compete in a way that wasn’t possible 20 years ago, including globally. For example, Berry Digital Solutions is a digital marketing firm in Urbana, Ohio, that supports local small businesses. They use Google tools to work remotely during the pandemic, coordinating meetings through Google Calendar and collaborating on content in Google Docs. They help their clients use Google Ads, and they appreciate that you only pay when someone clicks on your ad. The Berry Digital team also uses Google Analytics to learn more about the customers of their clients and how they can better serve them.
Another way we contribute is by making deep technology investments in America’s future. Every year, we are among the world’s biggest investors in research and development. At the end of 2019, our R&D spend had increased almost 10 times over 10 years, from $2.8 billion to $26 billion. We’ve invested over $90 billion over the last 5 years.
Through these investments, our teams of engineers are helping America solidify its position as the global leader in emerging technologies like artificial intelligence, self-driving cars, and quantum computing. For example, last fall, our team of researchers based here in the U.S. was the first to reach a quantum computing milestone, a discovery that could eventually lead to new breakthroughs in medicine and more efficient batteries.
Just as American leadership in these areas is not inevitable, we know Google’s continued success is not guaranteed.
Google operates in highly competitive and dynamic global markets, in which prices are free or falling, and products are constantly improving. Today’s competitive landscape looks nothing like it did 5 years ago, let alone 21 years ago, when Google launched its first product, Google Search.
For example, people have more ways to search for information than ever before — and increasingly this is happening outside the context of only a search engine. Often the answer is just a click or an app away: You can ask Alexa a question from your kitchen; read your news on Twitter; ask friends for information via WhatsApp; and get recommendations on Snapchat or Pinterest. When searching for products online, you may be visiting Amazon, eBay, Walmart, or any one of a number of e-commerce providers, where most online shopping queries happen. Similarly, in areas like travel and real estate, Google faces strong competition for search queries from many businesses that are experts in these areas.
A competitive digital ad marketplace gives publishers and advertisers, and therefore consumers, an enormous amount of choice. For example, competition in ads — from Twitter, Instagram, Pinterest, Comcast and others — has helped lower online advertising costs by 40% over the last 10 years, with these savings passed down to consumers through lower prices.
We also deliberately build platforms that support the innovation of others. Using Android — a product I worked on for many years — thousands of device makers and 3 mobile operators build and sell devices without any licensing fees to us or any requirement to integrate our products. This greatly reduces device prices, and today billions of consumers around the globe are now able to afford cutting-edge smartphones, some for less than $50. And in doing so they are able to access new opportunities — whether it’s sharing a video with friends and family around the world, gaining an education for themselves or their children, or starting a business.
Competition also sets higher standards for privacy and security. I’ve always believed that privacy is a universal right and should be available to everyone, and Google is committed to keeping your information safe, treating it responsibly, and putting you in control of what you choose to share. We also never sell user information to third parties. But more must be done to protect users across industries, which is why we’ve long supported the creation of comprehensive federal privacy laws.
To this day, I haven’t forgotten how access to innovation and technology altered the course of my life. Google aims to build products that increase access to opportunity for everyone — no matter where you live, what you believe, or how much money you earn. We are committed to partnering with lawmakers, including the members of this Committee, to protect consumers, maintain America’s competitive technological edge in the world, and ensure that every American has access to the incredible opportunities that technology creates.
Opening statement from Apple CEO Tim Cook
Chairman Cicilline and Nadler, Ranking Members Sensenbrenner and Jordan and Members of the Subcommittee, thank you for the opportunity to offer testimony.
Before I begin, I want to recognize the life and legacy of John Lewis. I join you in mourning and hero and someone I knew personally. Getting to host Congressman Lewis at Apple was one of the great honors of my life, and his example inspires and guides me. Every American owes him a debt, and I feel fortunate to hail from a state and a country that benefitted profoundly from his leadership.
My name is Tim Cook. I have been Apple’s chief executive officer since 2011and a proud employee since 1998.
Apple is a uniquely American company whose success is only possible in this country. Motivated by the mission to put things into the world that enrich people’s lives, and believing deeply that the way we do that is by making the best not the most, Apple has produced many revolutionary products, not least of which is the iPhone.
We do this, in part, by making ourselves and our customers a promise—a promise that we will only build things that make us proud. Apple’s founder Steve Jobs used to put it a little differently: we only make things that we would recommend to our family and friends.
Since 2007, the iPhone has been one such product. The iPhone has redefined the mobile phone through its seamless integration of hardware and software, its effortless user experience, its simplicity of design and a high-quality ecosystem.
To our customers, these are essential to why they choose Apple—and why the keep coming back. We focus ceaselessly on our users and their experience, and we see the iPhone’s 99% satisfaction rating in consumer surveys as not only a key driver of the product’s growth over time, but also our best measure today that we are still on the right track.
As much as we believe the iPhone provides the best user experience, we know it is far from the only choice available to consumers.
The smartphone market is fiercely competitive, and companies like Samsung, LG, Huawei and Google have built very successful smartphone businesses offering different approaches.
Apple does not have a dominant market share in any market where we do business. That is just not true for iPhone; it is true for any product category.
What motivates us is the continuous improvement of the user experience, and we focus relentlessly on and invest significantly in new breakthroughs, innovative features and deepening the principles that set us apart.
Privacy and security are key examples of this drive. This is true for the iPhone and for every device we make. We build products that, from the ground up, help users protect their fundamental right to the privacy of their personal data. This principle is foundational and touches everything else we do.
We created the App Store in 2008 as a feature of the iPhone. Launching with a little more than 500 apps, it was our ambitious attempt to drastically expand the features and customizability of every user’s device. We wanted to create a safe and trusted place for users to discover apps—and a means of providing a secure and supportive way for developers to develop, test and distribute apps to iPhone users globally.
Curation has always been one of the App Store’s chief features and sources of value for our users. We held a quality department store as a model: a place where customers can find a great variety of options, but can feel confident that the selection is high-quality, reliable and current.
But we held ourselves to an even higher standard. In our pursuit of improving the user experience, we wanted to provide a venue for creators large and small to not only bring their ideas to life, but to reach many millions of users and build a successful business in the process.
When the App Store was created, the prevailing distribution options available to software developers at the time did not work well. Brick-and-mortar stores charged high fees and had limited reach. Physical media like CDs had to be shipped and were hard to update.
From the beginning, the App Store was a revolutionary alternative.
App Store developers set prices for their apps and never pay for “shelf space.”
Apple continuously improves, and provides every developer with cutting-edge tools like compilers, programming languages, operating systems, frameworks and more than 150,000 essential software building blocks called APIs. These are not only powerful, but so simple to use that students in elementary schools can and do make apps.
The App Store guidelines ensure a high-quality, reliable and secure user experience. They are transparent and applied equally to developers of all sizes and in all categories. They are not set in stone. Rather, they have changed as the world has changed, and we work with developers to apply them fairly.
For the vast majority of apps on the App Store, developers keep 100% of the money they make. The only apps that are subject to a commission are those where the developer acquires a customer on an Apple device and where the features or services would be experienced and consumed on an Apple device.
Apple’s commissions are comparable to or lower than commissions charged by the majority of our competitors. And they are vastly lower than the 50 to 70 percent that software developers paid to distribute their work before we launched the App Store.
In the more than a decade since the App Store debuted, we have never raised the commission or added a single fee. In fact, we have reduced them for subscriptions and exempted additional categories of apps. The App Store evolved with the times, and every change we have made has been in the direction of providing a better experience for our users and a compelling business opportunity for developers.
I am here today because scrutiny is reasonable and appropriate. We approach this process with respect and humility. But we make no concession on the facts.
After beginning with 500 apps, today the App Store hosts more than 1.7 million—only 60 of which are Apple software. Clearly, if Apple is a gatekeeper, what we have done is open the gate wider. We want to get every app we can on the Store, not keep them off.
More than 1.9 million American jobs in all 50 states are attributable to the App Store ecosystem—from Fortune 500 companies that got their start on the iPhone, to small independent developers and students bringing the next big idea to life.
An Apple-commissioned study by economists at the Analysis Group found that, in 2019 alone, the App Store ecosystem facilitated over half a trillion dollars in commerce worldwide and $138 billion just in the United States. This is nothing short of an economic miracle in a relatively brief span of time.
We continue to invest heavily and constantly in the App Store’s improvement, giving every developer access to the very latest technology. We relentlessly evangelize coding education at all levels, from elementary schools to community colleges. We do these things not out of obvious financial interest, but because we realize that we have a long-term stake in the health, dynamism and vitality of the whole system.
We recognize that with pride in what we have built, comes responsibility for what it contains. Our users expect and deserve the highest standard of privacy, security and quality in what they discover on the App Store.
I share the Subcommittee’s belief that competition is a great virtue, that it promotes innovation, that it makes space for the next great idea and that it gives consumers more choices.
Since Apple was founded, these things have defined us. The first Mac brought opportunity and possibility into the home. The iPod created new opportunities for musicians and artists to share their creations and be paid fairly for it.
The legacy does much more than make us proud. It inspires us to work tirelessly to make sure tomorrow will be even better than today.
Thank you very much. I look forward to answering your questions.