I’m working on writing up my thesis on the future of the consumer technology business and have convinced myself that there are 5 companies that stand to dominate. I call them The Five Big Guys. This post lays the ground work for that thesis by discussing these 5 companies.
In 1989 I read the tea-leaves and made the call that Windows was going to dominate and OS/2 was going to fail. I felt I was right so strongly that I bet my career on it by writing apps for Windows. In the intervening 22 years I have not had nearly as much clarity around what was going to happen next in the industry.
But I do now.
Today there are 5 companies who are major forces in consumer technology. There may be a sixth or seventh, and any one of the five I identify here may be dethroned by a black swan, but for now these are it (alphabetic order):
- Amazon
- Apple
- Microsoft
I’ve picked these because I believe they already have unstoppable momentum, or have the necessary components to become unstoppable.
I do not believe anything is black or white; and I do not believe in the idea of “a winner” over the long term in an industry as broad and dynamic as consumer technology. There will be multiple winners and I am willing to be that these five, in 3-5 years, will be regarded as the most important and influential companies.
If you can only choose 5, who else would you put on this list, and who would you knock off?
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I agree with your list, but find it interesting that there’s no mention of Sony, IBM, HP, Dell, Nintendo. Did anyone see that coming back in 1989? I sure didn’t.
Which underscores the difficulty of making predictions like this. In 2000, would anyone have picked Apple to rule the world by the end of that decade? That’s why there should be healthy suspicion that any of the currently obvious candidates will still lead a decade from now. History says they won’t.
I think most companies suck tremendously when they start branching outside of their core expertise, the problem is that with some of these companies, their expertise is actually quite small, and with Facebook, they are so undiversified from a product standpoint that I don’t think they should be on this list right now.
Amazon – cloud king, zero software, hardware only just now developing.
Apple – amazing hardware and software, but sucks at the cloud. Horribly.
Google – own the cloud, so so software, suck at hardware.
Facebook – awesome social, so so software, zero hardware
Microsoft – own enterprise, gods at software, only successful hardware is Xbox
Facebook is a web site*. I’d replace them with Samsung.
*(sung to the tune of “One of These Things is Not Like the Others”)
Google was just a website a few years ago.
Samsung is, at its core, a device manufacturer/hardware company. While huge, this means that there is huge inertia for it to continue to operate as a hardware company. It has almost no (relevant) software or service assets and there are no proof points in history for large hardware companies to become software companies.
If Samsung were on the list *IT* would be the one not like the others.
I fundamentally believe software is far more important than hardware. But don’t go throwing Apple back in my face, because Apple is fundamentally a software company that has mastered hardware (and retail).
I believe Facebook will likely try to diversify, but I don’t know how successful they will be. So +1 to spragued
For Samsung, i’m with Charlie in that I don’t think they want to become a software company.
But this…
“there are no proof points in history for large hardware companies to become software companies”
IBM; Sun Microsystems – Enterprise, certainly, but they start in hardware and move to software.
I think I look at it a little differently than that. I would say that over time companies will gravitate to being whatever it is they get the most money from. From this perspective, Apple is a hardware company, Google and Facebook are marketing/advertising companies, Amazon is a retailer, and Microsoft is the hardest to classify because they have such diversified revenue streams. I would like to say they are a software company, but you could also argue that they are a corporate conglomerate.
From this perspective, I think maybe Apple and Microsoft are the purest tech companies in this list (being primarily hardware and software). Amazon, Google, and Facebook depend on technology at the core of their experiences for sure, but their business models are not purely about developing technology. Amazon uses tech to sell us stuff, and Google/Facebook have the biggest advertising platforms which live on top of technology. Certainly Google and Facebook build technologies which attract people and allow them to advertise to those people. However, in the end they don’t get any money from building the technologies; they get money from advertising.
Good insights.
Sadly, the MS one is probably the one that needs the most justification for inclusion.
I’d replace Microsoft with Baidu.
First, while extremely profitable Microsoft is most excellent in the entetprise, not with consumers. they are furtherst behind in mobile (tablet and phone) and services. Outside of Xbox they also lack consumer mind share.
I think Baidu is one to watch because of how pervasive they are in China. As china grows so will their influence. You already see them bringing Google style ideas to China.
Samsung would be the other company on my list. Its too early to tell, but they have a strong presence across consumer electronics and a solid mobile OS and services.
Venessa,
The Baidu point is well taken. I have a tough time imagining Baidu having a global impact though. For now, I think I will simplify things by just ignoring China (ha, ha!).
As I noted below, while Samsung is doing well, it is a hardware company that continues to struggle building software. You say they have a “solid mobile OS”. I assume you mean Bada. Bada is interesting, but has little traction even on Samsung’s own phones. You mention “services”, but I can’t find any that are in the same ball park as services such as GMail, iTunes, Xbox LIVE, or Facebook.
On Microsoft: What about Windows and Hotmail? 95% of all PCs in the world are running Windows. Sure it is losing share, but to say that there’s a lack of mindshare indicates living in the echo-chamber.
I’ll keep Samsung just below the line…
Yah – I think it’s tenuous at best that Baidu would have global impact, though one could argue that if it takes all of China it will have an impact to at least rival Google’s.
I was referring to Bada from Samsung (at least the numbers I’ve seen show it at higher penetration than WP7, but to be honest I haven’t looked into this). I’ve seen demo’d Samsung services for TVs, and I can only imagine they have a few in the works for other devices as well. They’re weak right now in services, but could leverage their strength in hardware to bolster services very similar to Apple.
I did have a tough time choosing between Microsoft and Facebook.
I’m in two minds about this. Facebook have a very strong position in online identity which is a platform for many 3rd party services. They also have a good number of small businesses using them as their primary web presence, not to mention the 850M users.Yet social networks come and go. We’re already seeing youth abandon Facebook – I wonder if it’s just a matter of time.
To your point about Windows and Hotmail. I don’t know for certain, but I haven’t seen a lot of consumer enthusiasm about Hotmail. Windows could be a different story. When I said ‘mindshare’ I meant more in the ‘people love Apple’ mindshare, less in the ‘I know about the company and it’s products’ sense. I have heard some of this (and expressed some myself) about Windows 7. I worry that OEMs will get in the way of unadulterated Windows love, and that Windows 8 will dramatically hurt the usability of the ‘keyboard and mouse’ variety of Windows.
The other thing Microsoft has going for it is tenacity. Of any company on the list they have shown the ability to try, try and try again. They also have the resources and strong businesses they can soak to keep going until they’re successful.
Perhaps another approach is why I wouldn’t drop any other the other 3.
I think Amazon stays because of the breadth and depth of AWS. They also have very strong business in online retail and are the number one ebook reader and #2 tablet. Apart from Microsoft, they are the most diversified business, and their core retail business doesn’t compete as directly with anyone else in the big 5.
Apple stays because they dominate mobile so heavily. They have a risk in services, but I think are on the right track with iCloud. The other risk is whether they can continue to execute on bold vision and beautiful design without Steve Jobs.
If I had to lose a third company from the list it would be Google. Google is VERY strong in services across the board (search, gmail, youtube, …), and with Android has a compelling position in devices. However, there is a risk of “losing control” over Android, and that impacting the ability to monetize mobile going forward. I also think the #2 spot in tablets has not yet been determined. A year ago I guessed that by end of 2012 we’d see the same Android/iOS marketshare starting to play out in tablets as phones. Now I’m not so sure. I think iOS could grab 80% of the market, with Windows and Android fighting for what’s left. I do think Google is stronger in consumer than Microsoft – this might just be a biased perception. Though I was of the same opinion when I worked at Microsoft.
I’m tempted to also say we should keep a spot open for the two engineers in a garage who are right now inventing what we’ll all be using in 10 years. But that feels like a cop out.
I also briefly flirted with WordPress, but it doesn’t have the breadth or revenues of any of the other players, despite having a strong impact on the overall Internet.
The other player I flirted with including was ‘Open Source’, as a bucket for all things that seem to continue pushing technology forward. From the LAMP stack, to WordPress, to Open street map, to Android sans Google to Mozilla. It’s less cohesive, and a more jumbled bucket of services, but I think stands in stark contrast to the proprietary or open/closed offerings from the Big 5. I think this one has clear ‘unstoppable momentum’, and transcends any individual company.
A list of five is easy. Narrow it to three, and you’ll have to make some decisions worth justifying in a blog post.
The first thing that comes to my mind when discussing these topics is AOL. There certainly was a time when one would have thought that AOL would be an unstoppable force forever. Reflecting on AOL, CompuServe, etc. makes me think Facebook won’t be around forever.
And Google doesn’t have much in the way of product that contributes to their bottom line. It seems to me that if some genius comes up with a better way to do search, that could hit Google in the same way Google hit Yahoo, AltaVista, and others.
While I think those two might at some point be vulnerable to a “black swan,” there are no companies that come immediately to mind as replacements.
I feel weird calling Facebook a technology company because they aren’t, no more than Yahoo or Google was a few years ago. Their back end may be powered by technology, but what modern web presence isn’t these days, as none of Facebook’s tech is visible to their users or even developers.
Facebook is like Twitter, a social media company on steroids. If Facebook tried to release of piece of hardware, it would flop.
As such, I’ll agree with what someone else posted and stick Samsung up there instead. They drive nearly all of the hardware innovation that we use today, from the processor foundries that make up modern SoCs to displays, memory, and batteries.
I’ll nominate two to get knocked off. First, Microsoft should never have made the list. The great majority of its revenues come from businesses. More than all of its profits, since essentially forever. So it already is not a consumer-focused company. They make fine products for businesses; no question (I’d be lost without the dozens of servers that my multiple screens connect to), but how do rock-solid SQL servers or Office translate into a good way to call my daughter in Indonesia? (Or worse: for her to call me on a WinPhone running Skype, which I’ll have to have running in foreground???) It’s as if somebody has some screws loose.
My other candidate is Facebook. I recognize that my infrequent personal use is hardly a bellwether, but I just don’t see how they monetize people showing photos of the new grandson. Yes, they do make money, but think: a service that’s all about connecting people with one another, gets zero revenues from the devices — smartphones — that are purpose-built for connecting us.
You’ve tweeted about them building their own mobile so they can have kick-butt HTML, but that’s just showing that they today have zero business plan for actual consumer services and products; they don’t even have a way of monetizing mobile since ads are so miserable on mobile and games are hit by the AppStore tax. But why should they get any share of the revenue? Facebook provides zero value-add to somebody playing a third-party game over an anonymous carrier, interacting on a $600 iPhone with somebody they knew before Facebook existed. (As BS Hall notes, the mobile story has quickly morphed into “Apple, Samsung and Amazon,” all of which DO have business plans for how to succeed).
I’ve never understood how ads pencil for most Americans. Advertisers now pay only a small fraction of the time value of anybody comfortably above minimum wage. (Yes, I *AM* a snob.) Until ads become much more effective, it will only get worse, but how much more effective can data-mining become?
If Facebook is up against a monetization wall, it’s doubly so on mobiles, which don’t have the bandwidth for ads, but are becoming the primary computer for the US population. See the Pew research: in the last few years, a shrinking share of users connect via a home computer. This is your future, one in which Facebook derives essentially zero revenue.
I think Google is up against the same conundrum, but they are a fast-pivoting, impatient company. They have decent odds of holding on.
Ah, the MS OS/2 2.0 fiasco. I could write an entire article with the details, but to summarize, Microsoft ended up using unethical tactics to attack OS/2 that ended up being worse than working with IBM under the JDA.