The Great Tech War Of 2012

This isn't an argument for our continued relevance or anything, just fixing your figure :)

[0] http://www.scribbal.com/2011/09/facebook-now-has-800-million...

Apple have no doubt moved or effectively created entire markets and business models over the years. The iPod, iPhone and iPad have changed consumption patterns for a generation, and iTunes is right there in the background. But how much of the future is down to inertia now, even before you consider the impact of losing Steve Jobs? If the Big Four record labels suddenly got it and built their own on-line all-you-can-eat music service at a sensible price point, iTunes could be over in weeks. There are several hardware companies that are close enough to the level of Apple's mobile tech (or already better, in some aspects) that the "serious" segment could desert Apple within a mobile contract cycle (about 18-24 months here in the UK) leaving only the "style" segment. Finally, Apple's developer-hostile policies make them few friends, and I think it's only a matter of time before their business models based on exclusivity and taking huge cuts out of anything sold via their platform become unsustainable in the face of competition.

Amazon have done very well to corner the market as the default on-line retailer, and are the only company on the list I definitely wouldn't be shorting if I were an investor in US stocks. They actually sell useful stuff and have an obvious and sustainable business model, and the barrier to entry for competitors is huge. I don't rate their chances of taking over any form of home-grown content production or becoming a heavyweight on-line media provider any time soon, though; they simply aren't good enough at this stuff or in a position to offer enough value in return for exclusive rights to establish a dominant position given the competition (and their position won't be defensible against that competition if they lean too hard on the kinds of small/independent outfit who could most benefit from working with them on such projects).

Facebook have done incredibly well, but mostly driven by being in the right place at the right time to achieve critical mass in a way that no previous network ever did. That could be their Achilles' heel just as easily, though: the moment everyone has enough friends not on Facebook that they can't just use it as their default communications medium, Facebook is in trouble. And that could happen any time a viable competitor network begins to establish itself, just as Facebook once displaced a couple of formerly huge social networks rather efficiently itself. I don't think Google+ is likely to be that competitor in its current form, but there is no shortage of companies with the will and the funding to do it, and Facebook has to be lucky every time while the entire field of competitors only has to be lucky once. Also, Facebook's advertising seems a very shaky proposition for long-term revenue; I know plenty of people who have used it once or twice, but none who would use it again given how pathetically ineffective it seems to have been in every single case. Also also, before any of that happens, I think Facebook are going to cross the privacy line once too often in one too many countries, and the backlash is going to severely damage them in ways you can't fix just by spending more money.

Google has a search engine, an e-mail service, a video sharing service, and a much more successful advertising model built around them. It also has a mobile OS and a browser to support the above. That at least gives it a strong business model that works, making it the other company here I wouldn't automatically short as a long-term investment. But then it has about 1,000,000 utter failures that would have sunk any other company years ago if it didn't have the Big Three to cover the losses. This situation has not changed for several years, except that the number of high profile failures has increased dramatically. None of those three positions is easily defensible in the face of determined competition, and I suspect it is more by luck (and inertia) than judgement that they have avoided this fate so far. And they are also vulnerable to a backlash against privacy. They're basically in the same position as Facebook, but much better at the good stuff and much less bad at the bad stuff.

In other words, while all of the "Big Four" are no doubt keen to eat a piece of each other's pies, I don't think any of them is nearly as powerful as their reputation (and market caps/claimed valuations) suggest right now. They get a lot of press, but consider that, say, Netflix already make something like half the money that Facebook do, in a much more sustainable way and with obvious growth potential as Internet connections get faster and more content is consumed via different kinds of devices rather than the classic TV+(physical media) combination. A company like HTC moving into the tablet space could give Apple serious competition there. If a quiet giant like IBM or Microsoft decided to attack a consumer market again rather than focussing on big business, they have both the talent and the resources to challenge anyone.

The high-tech world isn't nearly as small as the article suggests.