Last week the IPA hosted James Schad, Founder of We Grow Startups, who took the audience through his popular SXSW talk GAFA – The Relentless Rise of the Tech Giants. Although the talk has since been renamed The Relentless Rise of the Tech Giants because, as James pointed out, nobody is untouchable (we’re looking at you MySpace and Nokia). Firstly, James established who GAFA actually are and what makes them quite so dominant:
- Google: controls over 90% of the search market in Europe
- Facebook: 1.9bn members (and growing faster than any competitors)
- Apple: receives 91% of global smartphone profits
- Amazon: 43% US online retail
In short, they’re all doing alright for themselves. Although it’s not necessarily all clear skies ahead- the sectors these four live in evolve at a tremendous rate and as each continue to grow there will be new challenges to overcome. James stuck his colours boldly to the mast and proclaimed that Amazon were in pole position to face these upcoming challenges and rise to the top of the GAFA pile. Here’s a couple of reasons why:
- Diversity of revenue: a key struggle for Facebook and Google
Facebook and Google earn 97% and 86% of their revenue from advertising respectively, making them both incredibly reliant on digital revenue. For Google, all’s well and good so long as people keep searching visually. However, by 2020 it’s expected that 50% of searches will be voice activated – dramatically removing the need for Google’s current search browser because voice search will simply serve the top result, removing CPC bidding. Brands are also beginning to demand more transparency from online advertising with Mark Pritchard, CMO at P&G, saying the fact that Google effectively mark their own homework is troubling and would be ludicrous in most other industries.
- Facebook is getting creepy
Marky Z recently released a 5000-word manifesto that set out Facebook’s ambitions over the coming years. For many, it read more like a Presidential manifesto than a tech founders’. This is all well and good, but Zucks is an unelected figure with potentially too much power for the public. Facebook have also received negative press from; monitoring what you type but don’t actually post, using face recognition on all the faces in the background of your images and continually letting an appalling amount of Fake News onto feeds. Whilst individually none of these are too devastating, they all start to build a picture of a company which knows us a bit too well.
All of the big four have been rapidly buying up smaller, competing companies in the last few years as well as creating a huge amount of their own patents, from AI to hardware to software. They’ve all also been investing heavily in content; Apple’s $1bn investment has so far been fairly successful, and hiring Jay Hunt, the guy who commissioned Sherlock at the BBC and brought GBBO to Channel 4, shows their commitment. However, it’s Amazon that have seen the most lucrative ROI in this space, with major shows coming out of their staggering $4.5bn investment. This aggressive stance shows no signs of slowing with plans to infiltrate the English Football Premier League duopology held by BT and Sky.
A lot of Amazon’s success comes from their ability to create. Where Facebook mainly steal (often from Snapchat) and Apple iterate and (slowly) diversify, Amazon are constantly entering new markets and sectors: their Ad revenue has started turning a profit, with offering tracking from search to purchase being a big selling point and their web services made a tidy $10bn in 2016, making Amazon the no. 1 cloud computing company in the world. Their products often seem to be both better and cheaper than major competitors- Amazon music costs less but has 25% more songs than Spotify. They’re also beginning to make their own products under new labels such as Iris Lilly and they’ve already made their money back on Wholefoods simply through the drop in competitor share price when the news of the buyout broke, not to mention a whopping 65% of US homes have Amazon Prime.
So, what were James’ top tips for following in Amazon’s footsteps? Firstly, find a niche space and dominate it. Secondly, be customer focused- mirror desires of real people, don’t decide for them. Thirdly, be an astronaut. Jess Bezos and Elon Musk are essentially building companies simply to fund their dreams of going to space. A tactic which is turning out pretty well for them!