Who are the big players
Before going any further on this assumption, it helps to explain who I see as the biggest players:
- At the access level, we are seeing cable companies vs. landline and wireless phone ones
- On the device end, Apple is competing with Google (and its partners) and Microsoft (and Nokia)
- When it comes to transactions, Amazon rules a large segment but has to worry about Ebay (Paypal) and others nipping at it
- Search and information appears dominated by Google but companies like Microsoft, AOL, Time-Warner still represent large chunks of this space
- Entertainment has two giants with Netflix and Hulu but Apple, Amazon, Microsoft, Google and many others aim to dethrone them
- Social may be another large dimension but Facebook still has to contend with LinkedIn, Twitter, Pinterest and others
When looking at it, it becomes increasingly clear that market forces will have a more substantial impact on the leader’s abilities to remain at the top than any kind of government actions possibly could. Within each portion of the market, one may have some level of control but that control is only ephemeral and subject to the whim of the consumer. Let’s not forget that outside of the connectivity market, none of the players at the top had a strong position in that space 15 years ago. A look back on a similar chart would have given us a picture that looks more like:
- Access is controlled by the landline phone providers and cable companies will have a hard time coming in (landline phone providers are now one of the smallest portion of the connectivity market)
- Smart devices are the domain of Rim, provider of the blackberry, Palm, and Microsoft with its Danger sidekick phone. (Rim is floundering; Palm no longer exists but its owner, HP, is trying to stir a new open source effort; and Microsoft discontinued the sidekick over a year ago)
- There is no winner in the nascent transaction space and large retailers like Wal-Mart and Barnes & Noble may be able to stifle Amazon and others (today, Wal-Mart is not thought of as much of a player in the online space; Barnes & Noble is attempting to pivot around its ereader devices as its online store of physical goods never bested Amazon’s offerings)
- Search is dominated by Yahoo, Excite, and Altavista (today, Yahoo has outsourced its search business to Microsoft; Excite and Altavista don’t exist anymore)
- Entertainment will be controlled by Real Networks and Microsoft Windows Player (I’m not sure of when I last heard of anyone using either of those tools in the last 5 years or so)
- 1990s edition: As an individual, your online presence will be on geocities. 2005 edition: myspace will control your social profile. (Yahoo bought and eventually shuttered Geocities; Myspace has changed hands a couple of times and is now a music destination)
In 15 years, every major player at the top has been displaced. If history can teach us anything, it is that incumbents are often disrupted by newcomers.
A balancing act
Each of today’s silo owner aims to break through through to another silo, attempting to leverage its dominant position on one side of the equation to get a large stake into another one. This leads to interesting fights:
- Google has made many pushes in the access space, efforts that have been resisted by the telcos and cable operators. Rumors are that Apple wants to offer something there.
- Google (Android and GoogleTV) , Amazon (Kindle and Kindle Fire), Microsoft (Xbox, Windows Phone) all play in the device space against Apple and rumors are that Facebook is considering entering the space.
- Facebook (Facebook credits), Apple (iTunes store, in-app purchase), Microsoft (Xbox marketplace), Google (Google play, Google wallet) are all trying to play in the transaction space that has been dominated by Amazon.
- Microsoft (bing), Facebook (search), Amazon (a9), Apple (Siri) are all presenting different offerings for search and information, trying to unseat Google.
- Amazon (mp3 store, Amazon prime video), Microsoft (Xbox media store), Google (Google play video store, YouTube), Comcast (traditionally an access company) and Time-Warner (owners of Time-Warner Cable and HBO) are all battling for the crown in the entertainment space.
- Google (Google+), Apple (ping), Amazon (reviews and Kindle public notes), Microsoft (so.cl and Xbox live) all present some attempts at going into the social networking space controlled by Facebook.
What is most fascinating about this pattern is that there is a certain restlessness to each of the players. The net result is that while each of the company could be considered as a massive controlling group, the relative efforts they are expanding to entering new marketplaces presents them as upstarts in their new arena.
One of the most often criticized tool of the monopolist is the concept of tying, whereas customers are required to buy or use a product or service they do not want as a condition to use one that they do want. While this would be a powerful tool, outside of the in-app payment systems (where Amazon, Google, and Facebook could all be considered guilty), we are not seeing those patterns emerge. In fact, it is fairly interesting to see that every major player is treating its new offering almost as a new separate business entity.
Should we treat large companies as VCs?
When looking at the landscape, it would be unfair to treat any effort (no matter how successful) as an attempt at monopoly power. A more accurate view could be that of the corporation as investment vehicle. When a company like Apple launches a new effort aimed at the living room, instead of looking at it through a lens of an attempt at control, one may want to look at it through the lens of business creation. The people in the TV business are probably different than the people in the iphone business, or the ones in the in-app payment ones.
Such a view would more closely align judgment of companies with the kind of judgement one would perform on a venture investors: attempts at moving money around multiple offerings that center on a particular thesis. Today, VCs and angel investors are largely successful because they work on spreading their money and attention around companies that are similar in nature and can realize growth through partnership in a network. Tomorrow’s corporation will reflect a similar model, whereas one business may benefit from association with another. And that is not a monopoly; it’s proper governance in the best interest of the shareholders.