NewCo Daily July 19 2017
The Big Five in tech are eating each others’ lunch
When the top five companies by market cap are all roughly in the same business, they’ll inevitably start going after each other’s core business. As for startups working on adjacent markets? As long as those markets are large enough, or support one of the Big Five’s larger business goals — well they’re just an hors d’oeuvre.
While Facebook has been aggressive in the past (its Instagram and WhatsApp acquisitions all but insured Twitter and Snapchat’s woes), Google takes this week’s crown as the most omnivorous of the bunch. Not only is the company taking on Microsoft’s LinkedIn with its new Hire service, its also shaking Facebook’s core moneymaker — the newsfeed. Yesterday Google announced a new newsfeed product that looks and feels an awful lot like Facebook’s newsfeed product — minus the baby pics and kitten videos (and, one presumes, the fake news). Built on top of Google’s massive knowledge of its customers’ preferences, search history, and app usage, the newsfeed product has a decent chance of stealing valuable attention from Facebook’s core customer set (and, let’s face it, Twitter is most likely not pleased with this development as well).
And while Google takes this week’s crown, Amazon’s also bellying up to the lunch buffet. A report in Quartz this weeks notes that Amazon recently filed a trademark for the tagline “We do the prep. You be the chef.” That sank Blue Apron’s newly minted stock to all time lows —and the beleaguered startup’s only been public for a few weeks. Not content with spooking the entire home grocery market (remember, it recently bought Whole Foods), Amazon also announced Spark, a shopping service cum social network that, you guessed it, takes the form of a feed that looks an awful lot like Instagram. Only Amazon Prime members can post products to Spark, but any Amazon customer can browse and buy from the “shoppable” feed. While press reports focused on Spark as a challenge to Facebook’s Instagram, it’s likely that executives at Pinterest are sleeping less soundly this week as well.
The market for a consumer’s attention (and dollars) is only so large. As the Big Five begin to hit the limit of their natural growth, it’s predictable that they’ll start to flex their muscles in each other’s core markets. This ain’t a bad thing: competition drives innovation, and let’s be honest: There’s not been an awful lot of that in core search, social, and shopping lately.
Everyone Wants to Move to the City. That’s A Problem
For years the tech industry viewed policy and regulations as damage to be routed around. But the undeniable impact of the tech boom on the American body politic is now in full display, in particular in California’s largest cities, notes the New York Times. California is in the midst of a full blown housing crisis, forcing policy makers to reconsider long held assumptions about markets and local control.
The demand for housing in places like Los Angeles and San Francisco is so dire that the state legislature is close to passing legislation that would force local regulatory bodies (like city councils) to repeal policies based on a “not in my backyard” political philosophy. Adding to the tech-fueled problem is a recent trend in corporate America — the repudiation of sprawling suburban-based headquarters for gleaming towers in the city center. McDonalds this week became the latest example of a major corporation abandoning suburbia for more millennial-friendly city center headquarters, but the trend runs deep, according to a report in the Washington Post. When both NewCos and BigCos compete for urban real estate, rents sky rocket, evictions and homelessness spike, and political conflict ensues.
But Mark Studied Mandarin!
Foreign firms eager to do business in China were given a stark reminder of how China’s economy really works this week, when the country’s government arbitrarily shut down crucial components of Facebook’s WhatsApp platform, the company’s only foothold in the world’s most populous nation.
China has long been accused of favoring its homegrown tech companies over western leaders. Google, Uber, and many others have tried, and failed, to establish beachheads there. Facebook’s founder has famously courted the Chinese for years, learning Mandarin and jogging across a smoggy Tiananmen square in the process. Perhaps Facebook is hoping this is a temporary ban, as China is holding its annual communist party congress later this month, and often cracks down on internet use prior to such events.
With that possibly in mind, Facebook has no comment on the news, and that’s what really galls. One has to wonder, at what point will tech companies publicly state what we all know they privately feel? Chinese manipulation of its massive market to the benefit of its own companies is wrong, as is its repressive and relentless censorship of the internet. This is a country that censors Winnie the Pooh, for god’s sake.
The only major tech company that’s profited from Chinese markets is Apple, which this week created a new position to oversee its most important growth market. But while Apple may feel insulated from the vagaries of Chinese approbation (thanks to its focus on hardware, instead of pesky free-speech enabling applications) the company should not be sanguine. There are plenty of native Chinese phone makers, and they wield significant political power. Companies like Apple serve at the pleasure of the Chinese government, and that government has once again proven its willingness to selectively enforce its own brand of western capitalism.
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