As a companion piece to my last post about the irresistible rise of mobile changing the face of the technology landscape, this piece looks at the big four companies that are succeeding there, but also the volatility and strange logic of the market, even for big social media brand names that are in the thick of and important in the change.  I’m writing against a backdrop of several weeks of speculation about where Twitter is heading, and then today’s dramatic share price drop for LinkedIn – 43 percent down today wiping out nearly $11 billion of market value so far, and the day’s not over yet.  What’s $11Bn?  Well, that’s 60% of the current value of HP…..

Like my earlier mobile post there is a must watch video at the core.  This one has NYU Professor Scott Galloway speaking at DLD16 in Munich a few weeks back on Monday 18th January talking about the Gang of Four – that’s Apple, Amazon, Facebook & Google.  The video went up on YouTube on the 25th January – at this second, 10 days later it has been viewed 520,618 times.  If you haven’t seen it, it’s definitely worth 16 minutes of your time to help you better understand today’s landscape and to learn some lessons from the steps the current titans are making.

Scott Galloway preceded his pitch with a brilliantly self deprecating health warning showing that some of his predictions will be wrong, but hoping that more will be right. Here are some of the things he said about the “four horseman of the apocalypse” Apple, Amazon, Facebook and Google:

• In 2015 their combined market capitalisation rose from the GDP of Spain to the GDP of Canada
• Each of the 4’s 2015 value is so large he compares each with a basket of well known brands in their sector to highlight their position
• Amazon is the number 1 e-commerce player both sides of the atlantic, dwarfing the next 10 players in each market
• Apple added $51Bn in revenues last year – that one year growth is more than the total 2014 revenues of luxury brands Louis Vuitton, Coach, Hermes, Michael Kors, Kering, Richmond and Prada combined
  Facebook and Google are growing at 40.3% and 12% compared to traditional media companies where they range from IAC’s 4.5% to Viacom’s -3.7%
• “The advertising industrial complex is about to come to an end!” – last year 90% of CPG brands lost market share and 68% lost revenue “because advertising sucks!”
• If you’re wealthy you can opt out of advertising with downloads, Netflix, iTunes, Tivo or Sky+
  He has quotes from fashion brand leaders highlighting how the fastest growing brands aren’t advertising in the traditional way
• More venture capital going in to the ecosystem but fewer exits
• The mobile ad market is a duopoly with Google and Facebook controlling 50% of the global market
• Amazon has redefined the way we think about building businesses – it can be profitable any time it want but has made a conscious decision to run at break even because “profits are heroin to investors”, they get addicted to them and if you take them away, they respond negatively – he highlights Walmart’s recent capital investments to compete as the right thing to do, but the markets didn’t like the drop in profits and so the share price has gone down dramatically, where as Amazon is the master of consistency
• Over 90% of the profit from the global smartphone market goes to Apple, then Samsun gets a bit, then the rest fight over the losses (the numbers on the slides don’t add up here, but the message is still clear)
  Apple’s revenue from PC’s is going up, everyone else’s is going down
• If you believe the press, Apple’s Watch is a failure – Apple took away Samsung’s smart watch market share away as soon as they entered the market – ask Richemont and Swatch if they think Apple watch is a failure – he suggests Apple Watch will do $5-10Bn sales this year, but the entire Swiss Watch industry is $25Bn
• He highlights the amazing rate of growth of Facebook, but then goes on to explain how they’ve only really monetised of its assets, and the potential they have with Instagram, WhatsApp and Messenger
• Facebook are spending more per dollar on R&D than any other tech company in history – as well as being incredibly nimble with the number of products and releases they are doing, they’ve gone from 0% to 76% revenue in mobile in only 3 years – that’s a lesson in how to disrupt yourself and pivot
• Scott explains how one of these four will become a Trillion Dollar company in the very near future
  He suggests Amazon should be acquiring bricks and mortar retail chains and become the true mini-channel retailer
• Google needs a bigger business – he postulates they could go after the college education market
  Facebook, Google and Amazon are easy to understand, but what is Apple’s mission? He suggests they “pay an absence of vision tax”
• Globalisation, free flow of capital, and the frictionless environment mean that i’s never been easier to be a billionaire, but never been harder to be a millionaire – it’s the middle classes that are getting squeezed
  With share options and stock being used as a regular motivator for senior people in companies, but look at the markets and the way companies are being valued – he says “there is nothing equitable about equity in a digital age”

Please watch the video to get all of this in his own words and the full story.  I’ll even forgive him the Adele segment:

He finishes excited by the technology opportunities, pleased by the meaningful things we are doing, but wondering whether we are doing anything profound. What all of this highlights for me is that there are key lessons to be learned from the way Facebook, Google, Amazon and Apple are innovating, expanding and addressing their markets that should be adopted by your business and my business, but that the equity markets don’t respond well to some of those moves required. I’m sure that’s why the likes of Dell have gone back in to private ownership, and why “going public” as an exit route is less important in the future plans of any of today’s startups.