Google, Facebook, Amazon, Disney and Apple.
We talked about how they rose to dominance, but where are the headed next and can anyone stop them from getting there?
We’re probably a touch bias since it’s our industry, but we see Disney as the most vulnerable of the five.
We use the term “vulnerable” in loose terms, obviously.
That said, Disney is least aligned with the technology that will drive the world’s future.
First off, people will always need entertainment, so Disney is in good standing there.
But we see the form of entertainment changing drastically in the coming years.
People are unbundling their cable and cutting the chord.
Attendance is down at sporting events and so are ratings.
Fewer and fewer people are going to the movie theaters – same with amusement parks.
The reasons can be debated, but the fact that traditional entertainment is in decline can’t.
Snapchat, Instagram, Virtual Reality, YouTube, Netflix – people have more and more entertainment options these days.
And that’s not to say Disney doesn’t know this and has a plan to shift its business model.
In a lot a ways, it already has – with the acquisition of 21st Century Fox, which gives Disney a controlling stake in Hulu and thus (with ESPN already under its control and its own streaming service in the works) a firm grasp on the streaming market.
But there are two problems here.
First, it’s the same form of old entertainment just delivered differently.
Second, and more importantly, it faces competition from every single one of the other Big 5 in this arena.
Google has YouTube Red.
Amazon has Prime TV.
Apple has iTunes.
Facebook has Facebook Live.
Not to mention that if Disney becomes serious players in new forms of entertainment – VR, Video Games, etc, they’re going to be further competing with the Big 5 – and they’ll have to play catchup.
That’s going to become a larger theme in this analysis – the convergence of the Big 5, and in this way, Disney is at a disadvantage.
If Disney is the most vulnerable, Facebook might be the most tenuous.
Of the Big 5, Facebook has relied more on acquisitions than any of the others to remain dominant.
That’s not necessarily a bad thing – Google, after all, acquired some of its core services like Gmail and Google Docs, but it has to be a bit disconcerting that the innovation is slowing down.
Facebook’s biggest source of revenue is ad revenue – by far. Much like Google.
Again, that’s not a bad thing on its face, but it is when you consider that Facebook’s click through rate on ads is minuscule when compared with Google’s.
Facebook isn’t the place you go when you’re looking for something.
It’s where you go to hang out.
Facebook is akin to old malls where people occasionally bought stuff, but would go to just hang out even if they didn’t want or need something.
Google is like Walmart. You go there when you want or need something. You don’t go there to hang out.
Facebook had the foresight to get ahead on VR with its purchase of Oculus, makers of a VR headset.
And although it has been slow to take off, it is well-positioned to take advantage of the shift in entertainment.
Facebook still does not have great original content, though, so it lags behind the others in that front as well.
The advantage Facebook has over all of the others is that it knows more about the population than anyone.
So it is well positioned to recognize changes in the wind and jump on them – which has served them will in their acquisitions.
Speaking of Google, the search giant isn’t going anywhere.
Ad revenue drives this behemoth as well, and we see that only growing.
Google learned a hard lesson nearly a decade ago about directly competing against one of the Big 5 when it tried to go head-to-head with Facebook.
But since then, the king of search has expanded into operating systems for mobile, tablet and PCs, hardware and even Internet fiber.
Google does face competition from Apple in the handheld market and the smart home market from Amazon and Apple, but search is its bread and butter and they have no challengers there.
Unless the Internet itself is replaced, Google will remain the way people find stuff on the Internet and thus keep it strong and growing for years to come.
We said Apple has a firm lead on the way people access the Internet.
Between the iPhone, iPad and various Mac products, Apple is the device maker of the planet.
We have touched on other areas were Apple has been making in roads – entertainment and smart home, to name a couple, but Apple’s core competency is building devices.
That’s not going away soon, but Apple better get a win in one of the new markets its competing with the others in.
Whether that’s the smart home or entertainment, Apple needs to expand because Google is cutting in on the device market and everyday people are moving away from laptops and desktops as means to access the Internet.
That brings us to Amazon, whom we see as the jewel in the Big 5’s crown.
The King of the Hill, so to speak.
The retail giant has more tentacles than any of the other despite having a few chopped off by Google (when Amazon tried to cut in on the search market) and Apple (when Amazon tried to cut in on the phone and tablet market).
Despite those loses, Amazon has done the best job of focusing on its core business (retail) while securing its future by expanding into other areas (groceries, IT with AWS, smart home, entertainment).
Amazon is right up there with Google as being as firm and safe as possible.
As long as people buy things, Amazon will be on top.
And Amazon will grow what those “things” are.
As mentioned, those things now include IT infrastructure and groceries and soon to be pharmaceuticals and maybe even health care.
Amazon has such safe and robust revenue streams, it can afford to make mistakes – even big mistakes – on its path to world domination.
As we mentioned, in-fighting could reduce the number in the Five, but in order for all to fall, we would need to see something more seismic than we can imagine.
The downfall of the United States, perhaps, but even then, we think these countries would survive.
As crazy as it sounds, Tesla/SpaceX may be in the best position to overthrow them all…. by establishing itself as the Big One on Mars.