I’ll never forget a meal I had with a senior executive at Facebook many years ago, back when I was just starting to question the motives of the burgeoning startup’s ambition. I asked whether the company would ever support publishers across the “rest of the web” – perhaps through an advertising system competitive with Google’s AdSense. The executive’s response was startling and immediate. Everything anyone ever needs to do – including publishing – can and should be done on Facebook. The rest of the Internet was a sideshow. It’s just easier if everything is on one platform, I was told. And Facebook’s goal was to be that platform.
Those words still ring in my ears as we celebrate the 30th anniversary of the web today. And they certainly should inform our perspective as we continue to digest Facebook’s latest self-involved epiphany.
This is an edited version of a series of talks I first gave in New York over the past week, outlining my work at Columbia. Many thanks to Reinvent, Pete Leyden, Cap Gemini, Columbia University, Cossette/Vision7, and the New York Times for hosting and helping me.
Those of us fortunate enough to have lived through the birth of the web have a habit of stewing in our own nostalgia. We’ll recall some cool site from ten or more years back, then think to ourselves (or sometimes out loud on Twitter): “Well damn, things were way better back then.”
Then we shut up. After all, we’re likely out of touch, given most of us have never hung out on Twitch. But I’m seeing more and more of this kind of oldster wistfulness, what with Facebook’s current unraveling and the overall implosion of the tech-as-savior narrative in our society.
Hence the chuckle many of us had when we saw this trending piece suggesting that perhaps it was time for us to finally unhook from Facebook and – wait for it – get our own personal webpage, one we updated for any and all to peruse. You know, like a blog, only for now. I don’t know the author – the editor of the tech-site Motherboard – but it’s kind of fun to watch someone join the Old Timers Web Club in real time. Hey Facebook, get off my lawn!!!
That Golden Age
So as to not bury the lead, let me state something upfront: Of course the architecture of our current Internet is borked. It’s dumb. It’s a goddamn desert. It’s soil where seed don’t sprout. Innovation? On the web, that dog stopped hunting years ago.
And who or what’s to blame? No, no. It’s not Facebook. Facebook is merely a symptom. A convenient and easy stand in – an artifact of a larger failure of our cultural commons. Somewhere in the past decade we got something wrong, we lost our narrative – we allowed Facebook and its kin to run away with our culture.
Instead of focusing on Facebook, which is structurally borked and hurtling toward Yahoo-like irrelevance, it’s time to focus on that mistake we made, and how we might address it.
Just 10-15 years ago, things weren’t heading toward the our currently crippled version of the Internet. Back in the heady days of 2004 to 2010 – not very long ago – a riot of innovation had overtaken the technology and Internet world. We called this era “Web 2.0” – the Internet was becoming an open, distributed platform, in every meaning of the word. It was generative, it was Gates Line-compliant, and its increasingly muscular technical infrastructure promised wonder and magic and endless buckets of new. Bandwidth, responsive design, data storage, processing on demand, generously instrumented APIs; it was all coming together. Thousands of new projects and companies and ideas and hacks and services bloomed.
Sure, back then the giants were still giants – but they seemed genuinely friendly and aligned with an open, distributed philosophy. Google united the Internet, codifying (and sharing) a data structure that everyone could build upon. Amazon Web Services launched in 2006, and with the problem of storage and processing solved, tens of thousands of new services were launched in a matter of just a few years. Hell, even Facebook launched an open platform, though it quickly realized it had no business doing so. AJAX broke out, allowing for multi-state data-driven user interfaces, and just like that, the web broke out of flatland. Anyone with passable scripting skills could make interesting shit! The promise of Internet 1.0 – that open, connected, intelligence-at-the-node vision we all bought into back before any of it was really possible – by 2008 or so, that promise was damn near realized. Remember LivePlasma? Yeah, that was an amazing mashup. Too bad it’s been dormant for over a decade.
After 2010 or so, things went sideways. And then they got worse. I think in the end, our failure wasn’t that we let Facebook, Google, Apple and Amazon get too big, or too powerful. No, I think instead we failed to consider the impact of the technologies and the companies we were building. We failed to play our hand forward, we failed to realize that these nascent technologies were fragile and ungoverned and liable to be exploited by people less idealistic than we were.
Our Shadow Constitution
Our lack of consideration deliberately aided and abetted the creation of a unratified shadow Constitution for the Internet – a governance architecture built on assumptions we have accepted, but are actively ignoring. All those Terms of Service that we clicked past, the EULAs we mocked but failed to challenge, those policies have built walls around our data and how it may be used. Massive platform companies have used those walls to create impenetrable business models. Their IPO filings explain in full how the monopolization and exploitation of data were central to their success – but we bought the stock anyway.
We failed to imagine that these new companies – these Facebooks, Ubers, Amazons and Googles – might one day become exactly what they were destined to become, should we leave them ungoverned and in the thrall of unbridled capitalism. We never imagined that should they win, the vision we had of a democratic Internet would end up losing.
It’s not that, at the very start at least, that tech companies were run by evil people in any larger sense. These were smart kids, almost always male, testing the limits of adolescence in their first years after high school or college. Timing mattered most: In the mid to late oughts, with the winds of Web 2 at their back, these companies had the right ideas at the right time, with an eager nexus of opportunistic capital urging them forward.
They built extraordinary companies. But again, they built a new architecture of governance over our economy and our culture – a brutalist ecosystem that repels innovation. Not on purpose – not at first. But protected by the walls of the Internet’s newly established shadow constitution and in the thrall of a new kind of technology-fused capitalism, they certainly got good at exploiting their data-driven leverage.
So here we are, at the end of 2018, with all our darlings, the leaders not only of the tech sector, but of our entire economy, bloodied by doubt, staggering from the weight of unconsidered externalities. What comes next?
2019: The Year of Internet Policy
Whether we like it or not, Policy with a capital P is coming to the Internet world next year. Our newly emboldened Congress is scrambling to introduce multiple pieces of legislation, from an Internet Bill of Rights to a federal privacy law modeled on – shudder – the EU’s GDPR. In the past month, I’ve read draft policy papers suggesting we tax the Internet’s advertising model, that we break up Google, Facebook, and Amazon, or that we back off and just let the market “do its work.”
And that’s a good thing, to my mind – it seems we’re finally coming to terms with the power of the companies we’ve created, and we’re ready to have a national dialog about a path forward. To that end, a spot of personal news: I’ve joined the School of International and Public Affairs at Columbia University, and I’m working on a research project studying how data flows in US markets, with an emphasis on the major tech platforms. I’m also teaching a course on Internet business models and policy. In short, I’m leaning into this conversation, and you’ll likely be seeing a lot more writing on these topics here over the course of the next year or so.
Oh, and yeah, I’m also working on a new project, which remains in stealth for the time being. Yep, has to do with media and tech, but with a new focus: Our political dialog. More on that later in the year.
I know I’ve been a bit quiet this past month, but starting up new things requires a lot of work, and my writing has suffered as a result. But I’ve got quite a few pieces in the queue, starting with my annual roundup of how I did in my predictions for the year, and then of course my predictions for 2019. But I’ll spoil at least one of them now and just summarize the point of this post from the start: It’s time we figure out how to build a better Internet, and 2019 will be the year policymakers get deeply involved in this overdue and essential conversation.
Back in December of 2011, I wrote a piece I called “The Internet Big Five,” in which I noted what seemed a significant trend: Apple, Microsoft, Google, Amazon, and Facebook were becoming the most important companies not only in the technology world, but in the world at large. At that point, Facebook had not yet gone public, but I thought it would be interesting to compare each of them by various metrics, including market cap (Facebook’s was private at the time, but widely reported). Here’s the original chart:
I called it “Draft 1” because I had a sense there was a franchise of sorts brewing. I had no idea. I started to chart out the various strengths and relative weaknesses of the Big Five, but work on NewCo shifted my focus for a spell.
This is my 14th annual predictions post. And as I look back on the previous 13 and consider what to write, I’m flooded with uncertainty. That’s not like me. Writing these predictions is something I’ve always looked forward to – I don’t prepare in any demonstrable way, but I do gather crumbs over time, filing them away for the day when I sit down and free associate for however long it takes me to complete this post.
But this time, well, for the first time ever I have very little idea what’s about to come out of the keyboard. Honestly, when I consider the coming 12 months, so much feels up for grabs that I wonder whether it’s wise to prognosticate. Then I remember, it’s all of you reading these words who keep me writing in the first place – your encouragement, your wise (and sometimes cutting) commentary, and your willingness to spend a little time with me and my thoughts. One of my New Year’s resolutions is to write more – it’s always been how I make sense of the world, and this year, the world feels like it needs a lot more sense making. So I’ll be writing at least a few times a week going forward, starting with this uncertain post.
Let’s see what happens….
1. The bloom comes off the tech industry rose. Two years ago, I predicted that the tech industry would wake up to the power it had accrued and start giving a shit both about its impact on the world, and about the world’s largest problems, with climate change being the most pressing of them. That didn’t really happen, despite truly commendable philanthropic, social, and climate change work done by all of the “Big 5” tech companies (Microsoft, Amazon, Google, Apple, Facebook). As of this writing, the technology industry is now the undisputed leader of the business world. Its power has concentrated into demonstrable oligarchy – beyond the Big 5, Uber and Airbnb are now being called to question because of their potential monopolistic, rent extracting behavior. But the industry’s philosophical outlook remains rooted in its days as a challenger brand. This can’t stand. 2017 will be the year the industry is cast as a villain – for its ravenous and largely opaque data collection practices, its closed and self-serving approach to its own platforms, and its refusal to acknowledge or address the very real externalities, particularly in employment, created by its products and services. Some of this backlash will be unfair – but that’s not my point. Society vilifies those in power who appear to be unfairly profiting from that power. And in 2017, tech will be that villain.
2. The conversation economy breaks out. This is certainly related to #1, if oddly oppositional. The Big Five will be in an all out battle to engage us through conversational interfaces this year. If you’ve been reading me for over a decade, you might remember my predictions around the “conversation economy.” I was a bit early (OK, a decade too early), but the technology and the consumer behavior/expectations are now aligned to allow for a breakout year in user experience to finally occur. This began in earnest last year with the hype around chatbots, and the ascendance of Alexa and Google Home, all of which followed on the heels of Google Voice Search and Siri. But what will really shift the experience will be the explosion of smart chatbots that actually get shit done – I’m with Kik CEO Ted Livingston, chat is the new browser. Combine smart chat with voice, and … well, we’ll start to see a new UX for the web. What’s the economic model for this new UX? Good question! But the key will be meaningful interaction between all these services, instead of attempts to create a vertically integrated, locked-down walled garden. But that will only happen if…
3. Open starts to win again. It’s dangerous to link two predictions, because if one doesn’t work out, the other is likely to fail as well. It’s even worse to link your first three… but what the hell. Tech’s hegemony is so great at this point, that the only way I can see it breaking down is through a return to the open standards which bequeathed us the Internet in the first place. 2017 will be the year that open starts to win again as a business model and an approach to creating a developer (and hence consumer) ecosystem. Google can and should be the leader here, given its core DNA, but I’m not sure that will be the case. Now, what do I mean by open? Well, interoperability, for one. It’s great that anyone can create a chatbot on Messenger, or Kik, or WhatsApp, but true innovation will come when anyone can create a chatbot that works with all of them, sharing data and user profiles across platforms. The same goes for the marketing industry – publishers and marketers alike should be able to consolidate and leverage data across all meaningful platforms, instead of cultivating different patches in every service’s walled gardens. The same goes for consumers, of course – I want to know what data is being used to mold the choices being laid out in front of me (including the ads, and yes, my f*cking newsfeed!). There will be meaningful demand from “users” to have more fluid and intuitive controls of their experience. And if my #2 holds true, then voice becomes a literal lingua franca, rendering platform lock in long-term meaningless, because jumping from service to service will be as easy as saying “Alexa, WhatsApp my pal Chris with the results of my Google search on open platforms.” This year won’t be a turning point in this battle, but it will show meaningful progress, in large part because…
4. Privacy will become a strong product category. These linked predictions are certainly becoming a theme. But last year saw strong growth for a number of stand alone privacy products like Signal and Confide, and the inclusion of strong crypto into massive platforms like iOS (remember the FBI fracas?), WhatsApp and Google (via its new Allo and Duo products). Influencers like Fred and many others are predicting a boon in this field, and I agree. But it’s one thing to encrypt your messaging. It’s another to secure your entire online life. That kind of security is hard to do, mainly because it obviates much of the value of the data harvesting which drives convenience in the consumer tech world. But fear of cyber warfare, fraud, and over-reaching marketers and government will create huge openings for consumer friendly versions of currently opaque products like PGP, password managers, and the like. And it’ll also drive political and consumer pressure for more robust consumer control around algorithmically driven consumer experiences. Smart companies won’t resist this trend, they’ll encourage it.
5. Adtech has a ripper of a year. Wait, I just predicted consumers will pivot to caring about privacy, but I’m saying the adtech business is going to have a great year?! Well…yes. Embrace the contradictions, because adtech is ready for its second act. It’s really sucked to be a leader in the advertising technology industry – half of the media industry openly hates your guts, and the other half is convinced your days are numbered because of the Google/Facebook oligarchy. But they’re all wrong. Advertising technology is, at its simplest, the ability to apply data to a decision at scale. And the more open and free flowing that data economy becomes, the better and more valuable the companies which enable it become. If my predictions 1-4 come true, then this one will as well: Independent, high-integrity companies in ad/martech are going to have a banner (no pun intended) year, because they’ll tack into the resistance the large platform players have to the trends I’ve outlined above. Watch: Sovrn Holdings*, AppNexus, Acxiom*, Trade Desk, and OpenX.
6. Apple releases a truly bad hardware product. OK, this one isn’t really tied to the others, but I think Apple’s poised to not just have a boring year (as I predicted it would last year,) but to really lay an egg for the first time in a very long time. It may be their answer to Amazon Echo/Alexa, or Google Home/Assistant, or it may be a follow on to the watch, or perhaps something the company has had up its sleeve for a few years that it feels obliged to roll out given its essentially uninspiring last few years of product releases. But in 2017, the press and the public will find a tangible reason to turn on Apple, and the company will likely respond by reorganizing, repatriating its cash (to curry favor with the current administration), and keep buying its way into the markets where it has repeatedly failed (IE, software as a service, entertainment (NetFlix?!!), and possibly social media).
7. A Fortune 100 company will announce its intention to become a B Corp. Large companies are increasingly under pressure from employees, customers, and society to create value for more than just their shareholders. For decades, business was allowed to tax environmental, social, and societal resources in pursuit of profit. A new generation of consumers and employees are demanding that business ladder to more than simple profit, but rather, have a core purpose—one that makes the world a little (or a lot) better place. Of course, there’s already a corporate governance structure that encourages this approach to running a company—the Public Benefit Corporation, or B Corp. (I wrote about B Corps last year here). My money is on Unilever, which has already been publicly discussing such a move. Two dark horses: Walmart and GE.
8. President Trump leaves Twitter. Ever since Twitter launched, I’ve usually included a Twitter prediction. This one sounds crazy, but it strikes me there are a few ways this might plausibly happen. Perhaps Trump will come to his senses and stop trying to run the country through a series of tweets. OK, that’s not very plausible. More likely is Trump will end up in some kind of a feud with Twitter over something utterly ridiculous, claim he’s the only reason the service is viable anymore, and decamp for Facebook, Snapchat, or who knows, maybe VK (that’s the largest Russian social media network, FWIW). Or maybe someone slips a cure for narcissism into his evening flute of Trump Champagne….
9. Snap soars – then sours. I’m increasingly of the opinion that this company is going to force a total rethink of our online culture. In fact, I think most of us have no idea how over our skis we are when it comes to the power that Snapchat has aggregated. I’m not talking about typical tech power, like number of active users or advertising revenue. I mean the power of the platform to engage and exploit our pleistocene-era social brains. I’m not entirely sure Snap Inc. has fully grokked that power. But Snapchat feels like a step function beyond anything that has come before it. I watch my own children use it, and I’ve watched them fall in love with Facebook, YouTube, Twitter, and countless pretenders (though I’m keeping my eye on Houseparty). Nothing compares to what happens when a group of kids connect on Snapchat. It literally becomes their social geography, and that fact will be widely recognized by the business community when Snap goes public. But almost hand in hand with that will come the Snapchat backlash, as scholars, alarmists, parents and school administrators speak out about the impact the app is having on the structure of society. Spectacles? By the end of 2017, those will seem quaint. Side note: There’ll be an amazing science fiction novel that comes out in early 2017 whose main protagonist will be compared to Snap. And yeah, that’s a fix, because I’ve already read it…
10. Human connection commands a premium in the workforce. OK, OK, this has certainly been the case for all of history, at least – ahem – for a certain kind of connectivity. But in an age where it seems every job can be replaced by AI or a robot (or both), we’ll see a shift in how society values previously under-appreciated jobs that cannot be automated away (or if they can, the automated version fails to deliver human connection). Think about jobs that are socially valuable, require direct human contact, but are currently very poorly remunerated: Teacher, nurse/home care aide, waiter, small business owner, musician/artist come to mind. In 2017, we’ll come to realize that we’re valuing the wrong things, and start a conversation about paying people to connect with each other – because if we can automate the other stuff, why the heck wouldn’t we value each other more?! Related: The conversation around Universal Basic Income (or my preferred term, the Citizens’ Dividend) will become white hot (it’s white hot in the Valley at present, but it’ll move into broader circles in 2017).
Well that’s ten predictions, which seems like a nice round number. As I review them, I realize there’s a pretty high chance I could seriously whiff this year. What do you think?!
Twelve years of making predictions doesn’t make writing them any easier, regardless of my relatively good showing in 2015. In fact, I briefly considered taking the year off – who am I to make predictions anyway? And so much has changed in the past few years – for me personally, and certainly for the industries to which I pay the most attention. But the rigor of thinking about the year ahead is addictive – it provides a framework for my writing, and a snapshot of what I find fascinating and noteworthy. And given that more than 125,000 of you read my post summarizing how I did in 2015 (thanks Medium and LinkedIn!), it was really you who’ve encouraged me to have at it again for 2016. I hope you’ll find these thought provoking, at the very least, and worthy of comment or debate, should you be so inclined.
For years I’ve been predicting that mobile apps were a fad – there’s no way we’d settle for such a crappy, de-linked, “chiclet-ized” approach to information and services management. Instead, I argued that a new model would emerge, one that combined the open values of a link-powered web with the mobility, sensors, and personalization of apps. It wasn’t easy to make this argument, because for years Apple, Facebook, and even Google were steadily proving me wrong. Apps (and the mobile platforms where they lived) marched steadfastly to dominance, surpassing the PC Web in both attention and most certainly investor buzz. I mean, who’d ever invest in a “website” anymore?!
Then last week, Google announced App Streaming. This is the chocolate meeting the peanut butter, folks. If this can scale, we may finally be close to breaking the app’s stranglehold on our collective imagination.
In case you missed the news, Google App Streaming is a clever, brute force hack that allows native mobile apps to be streamed in real time over Google’s core infrastructure – no app download required (for details, read Danny here). In other words, App Streaming makes apps act like websites – instantly available through a link, even if you’ve never installed the app on your phone.
It’s interesting to note that this isn’t the first time Google has used its massive infrastructure to surmount a seemingly intractable technical challenge. To stand up its original search service, Google successfully put the entire World Wide Web in RAM – creating its own speedy and super-scalable version of what you and I understood to be the Internet. In essence, to serve us the Web, Google became the Web, along the way creating the fastest growing company in history. It’d be an awful neat hack if Google managed to swallow not just the Web, but also the entire world of apps as well.
I believe that’s exactly what the company is trying to do. This may well be the Web killing apps – something I predicted a year ago. If so, all I can say is good riddance.
Back in 2004 (11 years ago!), I wrote a Thinking Out Loud post about a fanciful idea I called “Google Business Services.” What if Google became a core platform for the creation of all kinds of new third party services?
What if Google becomes an application server cum platform for business innovation? I mean, a service, a platform service, that any business could build upon? In other words, an ecologic potentiality – “Hey guys, over here at Google Business Services Inc. we’ve got the entire web in RAM and the ability to mirror your data across the web to any location in real time. We’ve got plug in services like search, email, social networking, and commerce clearing, not to mention a shitload of bandwidth and storage, cheap. So…what do you want to build today?”
I was wrong about Google dominating social networking as a service – this was in the pre-Facebook days of Orkut, mind you – but if Google gets its way with App Streaming, Facebook will simply be one more service on the Google platform.
Plenty of questions remain about App Streaming, the most interesting being how it will play with Apple and Facebook. But if you are an app developer, one of your most intractable problems is getting folks past the twin obstacles of download and re-engagement. If Google can prove that App Streaming scales, I can’t imagine any developer who wouldn’t want to take advantage of it.
(image) I’m the father of three children, and two of them are girls. And while my first was a boy, and therefore “broke me in” with extraordinary acts of Running Headlong Into Fence Posts and Drinking Beer Stolen From Dad’s Fridge Yet Forgetting To Hide The Bottles, nothing, NOTHING, prepared me for Girls Behaving Badly To Each Other Whilst In Middle School.
Those of you with girls aged 11-14 know of what I speak: Middle school girls are just flat out BADASSES when it comes to unrepentant cruelty – and they are almost as good at forgetting, often within a day (or an hour) the rationale or cause of their petty behaviors. On one of my daughter’s wall is a note from a middle school friend. It says – and while I may paraphrase, I’m not making this up – “Hey Girl, I’m so glad we’re best friends, because I really hated you before but now we’re best friends right?!” And my daughter *pinned this* to her wall – her ACTUAL wall, in her bedroom!
Anyway, every so often girls in middle school end up squaring off – and the result is an embarrassment of small-minded but astonishingly machiavellian acts of cruelty. Little lies are let loose like sparks on a pile of hay, and soon a fire of social shunning rips through the school. Invitations are made, then retracted vigorously, and in public. Insults are veiled as compliments, and a girl’s emerging character strengths – a penchant for science perhaps, or a love of kittens for God’s sake – are expertly turned against her.
But this post isn’t really about middle school girls. Because we all know middle school girls – with love, patience, and copious wine (for the parents) – eventually grow up and out of such behavior.
Apple and Google? Not so much. And as an avid consumer of both these company’s products, I’m tired of it.
Or – and yes, this is the one that pushed me to write this post – that you have to follow an utterly convoluted five-step process just to make group texting work between iPhones and Android users – only to learn it doesn’t really work every time, and in fact, if you’re expecting an important text from someone with an iPhone, well, you better just man up and buy a f*cking iPhone too, loser.
I’m not even scratching the surface of the bullpucky these two companies are putting us through to create “user lock-in” and discourage consumer choice. I mean, we gave up on the easy stuff, like, oh I don’t know, a universal power cord that can charge any phone. Because, you know, why have standards when you can take forty bucks from some poor loser every time he misplaces his charger? Or, if you wanted to change your default browser to Chrome, you had to root around in Safari to do so (Google has since gotten around this)? And don’t get me started on Apple Contacts and Calendar…and getting them into Google’s universe. Yeah, it’s supposed to work. And no, it really doesn’t, not so much, and not so well. I’m six months and thousands of dollars into trying to make that work. Um, Google – tell me please why there’s no Google Calendar app for iPhone? Is it because…you know, Apple’s not cool anymore? Gah.
I bet I’ve missed tons of examples, but given the state of diplomacy in the Apple and Google worlds, I’m not expecting a solution anytime soon. The two companies clearly don’t want to play nice – Apple’s DNA is to lock you into their pristine, walled garden user experience, and Google certainly isn’t eager to encourage Android users to interact with iOS. Apple has kicked Google out of the default position for mapping in iOS, and many expect search to be next. The walls are getting higher, and the middle school girl behavior is likely to get worse.
To Apple and Google, I say simply this: For the sake of folks who love both of your product lines: Grow up. Please!
2014 was the year the industry woke up to the power of mobile app installs, and the advertising platforms that drive them. Facebook’s impressive mobile revenue numbers – 66% of its Q3 2014 revenue and growing – are a proxy for the mobile economy at large, and while the company doesn’t divulge what percentage of that revenue is app install advertising, estimates range from a third to a half – which means that Facebook made anywhere from $700 million to more than a billion dollars in one quarter on app install advertising. That’s potentially $4 billion+ a year of app installs, just on Facebook. Yow. That kind of growth is reminiscent of search revenues a decade ago.
But as I’ve written before, app installs are only the beginning of an ongoing marketing relationship that an app publisher must have with its consumer. It’s one thing to get your app installed, but quite another to get people to keep opening it, using it, and ultimately, doing things that create revenue for you. The next step after app install revenue is “app re-engagement,” and the battle to win this emerging category is already underway, with all the major platforms (Twitter, Yahoo, Google, Facebook) rolling out products, and a slew of startups vying for share (and M&A glory, I’d wager).
From time to time I have tracked what I call the “Internet Big Five” – the key platform technology companies that are driving the Internet economy. Nearly three years ago I wrote the first of this series – The Internet Big Five. I identified Apple, Google, Microsoft, Amazon, and Facebook as the “big five,” and compared their relative strengths in financials, consumer reach, and technology strengths. Some of the metrics were admittedly subjective – ranking relative offerings in “engagement” and “data,” for example.
It seems about time to take another look at the Big Five, and to consider a changeup – the introduction of Alibaba as a public company in the US certainly merits consideration. But before I do that, let’s quickly take a look at how the companies have fared over three short years.
The first thing to observe is this: The top five Internet companies had a combined market cap of nearly one trillion dollars three years ago, a very large base to be sure. But in those three short years, the group managed to almost double their market cap – to $1.8 trillion. That’s impressive growth, and a testament to how central the markets believe these companies to be in our economy. Also, in terms of relative market cap, the Big Five have stayed pretty constant, with Facebook lapping Amazon, but not reaching the heights of Google, Microsoft, or Apple. It’s interesting to see that the market still values Microsoft above Google, something I imagine might change over the next three years.
Stock prices show a similar trajectory. You’d have almost doubled your money if you had invested in these five companies back in late 2011:
Clearly these companies are killing it at a very large scale. And Alibaba, at a market cap of nearly $300 billion, can now claim its place comfortably on the list above both Facebook and Amazon.
Pulling back, it strikes me that the chart needs a refresh – something I hope to do during the more reflective down time of the coming holidays. I’d also like to add in Alibaba. But a quick scan of this two year-old chart shows some interesting developments.
In Operating Systems, Social, and Entertainment, each company’s position has pretty much remained constant, but Facebook’s Oculus purchase bears watching in all three fronts. In Productivity Software, Google’s position has strengthened, as has Apple, but I’d give the edge to Google, whose Apps suite has gained serious traction. In Advertising, Facebook is now very strong, Amazon has also strengthened, and it seems Apple has determined that advertising is a necessary evil not worth pushing very hard. “Tablet” doesn’t feel like a category to break out separately anymore – in the next rev, I’ll probably just call it “mobile devices.” In that category, Microsoft keeps trying but not gaining traction, Amazon flopped with Fire Phone but holds steady with Kindle and Fire tablets, and Facebook seems uncertain if it wants to play. Google and Apple remain the kings. Search as a category that bears scrutiny – what is “search” in a post mobile world, anyway? This question is fundamental to the next five or so years in computing, I’d warrant – expect more posts on that over the holidays. In Payment, Apple has strengthened, And in Voice, almost all the players have improved as well.
All of these companies have shifted over the past three years, some in unpredictable ways. With Page back at Google, the company has broadened its scope to include wearables, transportation, health, and energy. It’s become what I’d call the world’s first information-first conglomerate. Apple has kept its narrow hardware focus, expanding slowly into wearables (the watch) and shying from bets outside its clear wheelhouse. The market seems to be rewarding this focus. Facebook has made some big bets with drones and VR, and its advertising business is on a tear. Amazon hasn’t have any breakaway hits over the past three years, and I sense the company is uncertain how to proceed given the maturity of its core market.
In fact, one way to think about these behemoths is to identify and explore their core cash cows, and then map their strategies to diversify from that core. To wit: