A Blog by Jonathan Low


May 15, 2016

Dominant Tech Frenemies Find It Increasingly Difficult To Work With Each Other

One of tech's abiding strategic benefits is its ubiquity and interconnectivity. The dominant players have conditioned consumers to expect to get everything everywhere - albeit for a price - plus that they should want it faster and easier.

But as the biggest tech companies increasingly dominate the various sectors of digital life - search, devices, ecommerce, social media - they are finding that the line where one's market share and profits end is no longer clearly discernible from where another's begins. Which means that the cost to them of enabling all this sharing of services may be beginning to outweigh the benefits.

The strategic conundrum, as the following article explains, is that tech is becoming a winner-take-all-game - and so all this connectedness kumbayah which has helped increase sales and profits may now be limiting them for the dominant few. The question is whether they will decide that the greater good for all is the better financial bet or that it's time to promote every platform for itself. This should be interesting. JL

Erin Griffith reports in Fortune:

We expect to be able to conduct a Google search on an Apple iPhone or watch a ­YouTube video within ­Facebook. That means tech’s big guns must play nice with one another, even as they compete in increasing ways. But tech is a winner-take-all-game.

Many investors would rather buy Puerto Rican bonds than try to take on a tech titan in its prime. Amazon owns e-commerce. Google is synonymous with search. Facebook dominates social media. Tech is a winner-take-all game, and as the Internet economy matures, building a winner from scratch looks less promising by the day. Even new categories like on-demand transportation and lodging quickly declare victors. Uber, founded in 2009, is worth $62.5 billion. Airbnb, just a year older, is valued at $22.5 billion.
This ultra-Darwinian environment is bad news for aspiring also-rans, but it hurts you and me, the lowly users of tech products, the most. We’re stuck with whichever services a handful of powerful conglomerates give us. The top 10 apps of 2015 are owned by just three companies, according to Nielsen: Facebook, Apple , and Alphabet, Google’s parent company. Throw in Amazon for good measure, and it’s difficult to imagine using the Internet without the “big four.”
But nothing is simple in the interconnected world of technology, and we consumers want to use services how we choose. We expect to be able to conduct a Google search on an Apple iPhone, for example, or watch a ­YouTube video within ­Facebook.

That means tech’s big guns must play nice with one another, even as they compete in increasing ways. Call them frenemies. The dynamic helps explain why Amazon is trying to crush Netflix with its streaming-video service as it sells the company cloud storage for that service. It also explains why I can’t watch Transparent, a show produced for Amazon Prime Video, using my Apple TV—and why I can’t buy an Apple TV on Amazon.com.
The turf wars between social media companies have been especially malicious. In 2012, Facebook-owned In­sta­gram stopped allowing its photos to show up inside the Twitter app. Twitter pulled a similar move the year prior, excluding its content from Google’s search results after the two companies failed to strike a deal. (Access has since been restored.) Today, Facebook doesn’t explicitly attribute the news items it curates from Twitter, preferring instead to use the vague “social media” as the source.
The reasons behind these moves are often as petty as you might expect. One executive offended another. One company believed a frenemy had copied its work. One frenemy actually did copy another’s work.
And, yes, whining about things like share buttons and platform integrations seems just as trivial. But there are few alternatives to the services offered by the big four. Tech’s giants have trained us to expect what­ever we want, whenever (and wherever) we want it. But in a winner-take-all world full of tech frenemies, the consumer often winds up with little choice at all.


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