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Tech's Ruling Class Casts a Big Shadow (theverge.com) 74

Veteran technology columnist Walt Mossberg believes that Google, Apple, Microsoft, Amazon, and Facebook, or Gang of Five -- as he likes to call them, are casting a big shadow over how today's startups foster, a phenomenon he believes will continue to happen over the years to come. From his column for The Verge: What we have now in consumer tech, in 2017, is an oligopoly, at least superficially similar to the old industrial-era American corporate groups that once dominated key industries. I think that their enduring and growing power casts a shadow over the Silicon Valley legend that there are lots of great new consumer tech innovations being incubated right now in garages or dorm rooms somewhere that will be taken all the way to becoming great companies, the way each of the Gang of Five was. What I fear is more likely to happen to any such startup is that, if they're good, they get acquired by a member of the Gang, or that their idea is turned into a feature for one of the Gang's products. And, even if that never happens and a startup thrives, too often it can only thrive by being successful on a platform controlled by one or more Gang members, with the big guy maybe taking a cut. For instance, Snap, the parent company of Snapchat, which went public last week, famously spurned a $3 billion takeover offer from Gang member Facebook in 2013. But it depends for its very operation on the cloud services of Google and on the mobile app platforms of Apple and Google. And plenty of other companies which either presented threats or opportunities to the Gang have been snapped up by them. Each of the five companies actively scoops up numerous smaller companies every year, in many cases just for their talent and / or patents. In fact, I'd be amazed if there weren't plenty of startups whose main goal is to be purchased by the Gang.
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Tech's Ruling Class Casts a Big Shadow

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  • by Anonymous Coward

    Many startups dream of getting purchased by the big companies like Yahoo and AOL. They will be around FOREVER!

    • Many startups dream of getting purchased by the big companies like Yahoo and AOL. They will be around FOREVER!

      If your startup gets purchased for a few billion or a few million, just cash out immediately, so even if the acquirer's stock goes to 0 in a few years, you already have money in the bank.

  • The submitter makes it sound like there was no other choice but to rely on one of the "Gang of Five" when that is far from true. And seriously with the Nickname? There is already a GoF (Gang of Four) on tech. Clearly these guys aren't hard core techies.
    • by Gr8Apes ( 679165 )

      The submitter makes it sound like there was no other choice but to rely on one of the "Gang of Five" when that is far from true. And seriously with the Nickname? There is already a GoF (Gang of Four) on tech. Clearly these guys aren't hard core techies.

      Well, when Microsoft (long overdue) drops out, they'll be the Gang of Four, at least in this particular writer's mind... Snapchat is an app, much like FB. FB will also falter, and already is on the slippery slope of Google Wave, Buzz, So.cl etc. Something else will take its place, or it will become the EA of social sites.

      • The submitter makes it sound like there was no other choice but to rely on one of the "Gang of Five" when that is far from true. And seriously with the Nickname? There is already a GoF (Gang of Four) on tech. Clearly these guys aren't hard core techies.

        Well, when Microsoft (long overdue) drops out, they'll be the Gang of Four, at least in this particular writer's mind... Snapchat is an app, much like FB. FB will also falter, and already is on the slippery slope of Google Wave, Buzz, So.cl etc. Something else will take its place, or it will become the EA of social sites.

        For Facebook to falter an entire generation would have to jump ship, typically the next generation coming up. I don't see that happening today. Usually this type of schism is prompted by technology change. Perhaps the next social media landing place will be in VR. But until then, I don't see Facebook being replaced any time soon.

        • Then you might have missed the fact that the next generation do not use Facebook because their parents are on it.

          • by AuMatar ( 183847 )

            Until they get out of college. Those graphs are very well known inside FB- usage goes up from 13, then falls to near 0 due to parents. Then spikes at 18 (friends in other colleges) and again at 22 (friends post college). They still all come onto the platform eventually.

            • by Gr8Apes ( 679165 )
              sadly, if only people would learn the simplest things about email.... you can have everything FB does without all the data gathering and privacy invading aspects of FB if people only learned about distribution lists. Yes, many people have no idea that they can create a simple "joes" list in most of their email clients and drop all their friends into it and voila, stuff just works and they can even control who see what. Simply shocking what this old dinosaur tech is capable of.
              • by AuMatar ( 183847 )

                Not cluttering my email is the biggest feature of Facebook.

                • by Gr8Apes ( 679165 )

                  Not cluttering my email is the biggest feature of Facebook.

                  This only makes sense if you don't go to FB. My email was never that cluttered, because people didn't tend to take a selfie of them entering McDs, standing in line at McDs, ooh, there's the menu!!!, look - formica!!!! Here's the paper wrapper!!! etc crap that makes up what seems like half of FBs "content". They'd send 1 email saying they met joe, and here's a pic.

        • You seem to have forgotten the time when MySpace was the 800 pound social network gorilla that Facebook is now. Then the fickle winds of what's cool changed direction and it went from being the dominating player to a whithered husk in about a year. The only real advantage that Facebook offered was blocking the stupid CSS tricks people used to "pimp their MySpace". And that would have been trivial for MySpace to offer themselves. Otherwise, Facebook's entire position is based on being where the cool people h

          • by DarkOx ( 621550 )

            I submit that facebook and mySpace are quite different. facebook is much much more about interaction, and mySpace was a lot more about publishing. To that end its hard to extricate yourself from facebook. When your friends put out invitations as facebook events, when your relatives check their E-mail once a month but their facebook messages ten times a day, when all the photos your wife have been stored their for 10 years, its hard to leave.

            Actually even today's kids use FB not the way their parents do b

            • by Gr8Apes ( 679165 )

              I submit that facebook and mySpace are quite different. facebook is much much more about interaction, and mySpace was a lot more about publishing. To that end its hard to extricate yourself from facebook. When your friends put out invitations as facebook events, when your relatives check their E-mail once a month but their facebook messages ten times a day, when all the photos your wife have been stored their for 10 years, its hard to leave.

              Actually even today's kids use FB not the way their parents do but they still regularly login which is what the ad men care about so FB is just fine going forward even if the interactions change.

              First, FB and myspace were similar when FB came out. It wasn't that much interaction. The exodus has started already - the younger generation, those that even have FB pages, don't log in much anymore. They're on Instagram (also FB now) although that's soooo last year already, Pinterest, Snapchat, and other stuff that suits their style of communication better.

              It's relatively easy to extricate yourself from facebook. Just delete your account, if you really want to be gone, or just stop logging in. Delete al

        • My kids never use Facebook. It's not dynamic enough for them and they think it's for their parents to find out about the next family picnic.
  • by xxxJonBoyxxx ( 565205 ) on Wednesday March 08, 2017 @03:31PM (#54001525)
    This newb sounds like a babe wet behind the ears.

    >> "I'd be amazed if there weren't plenty of startups whose main goal is to be purchased by the Gang."

    Welcome to the industry, er, Walt.
  • by SvnLyrBrto ( 62138 ) on Wednesday March 08, 2017 @03:44PM (#54001631)

    Seriously, he's been around long enough to know that every single one of his "gang of five" got where they are by starting up out of nowhere, blindsiding a dominator of a key industry, and knocking the fromer king of the hill off his perch. Apple and Microsoft have even been blindsided themselves, knocked down before (Apple almost to bankruptcy), and shifted gears to become dominant again.

    If Mossberg's notions were correct, none of the five would exist now in the first place. They'd all just be sub-divisions of IBM.

    • by swb ( 14022 ) on Wednesday March 08, 2017 @04:49PM (#54002105)

      I think the so-called Gang of Five learned the lesson from IBM experience. Keep a massive pile of cash on hand and simply bribe into submission with stupid amounts of cash any innovator who will potentially disrupt your business model if you can't use or suppress their technology.

      Another reason why tech companies with massive piles of cash should have it taxed away. They're not "investing in innovation", they're suppressing innovation by buying the innovators off and maintaining their hegemony. Without massive piles of cash hanging around, they would have to actually *innovate* -- improve their products or come up with new ones. Now they can simply buy off competition and not bother investing in their hegemonic products.

      They've turned innovation into something of a lottery -- it encourages not ideas that are good, but ideas that big companies will want or *need* to buy.

      Of course, some competition sneaks through, like Snapchat, but probably not because someone at Facebook or Google didn't try. The founders gambled that whatever stupid amount of money they were offered was less than what they could make in an IPO, and they were right. But there's probably not enough long-term business model there, which limited how high the big players were willing to go in paying them off.

    • In the end, it's about the money. Of these five companies, only Facebook is not in the top five of companies with the largest market cap; they're all top 15 though, with a combined market cap of some 2 trillion USD. Much of it is in liquid cash. That's a lot of money and power sitting around to buy up, sue away, push out smaller competitors. Not even IBM controlled that amount of money and power in their heyday.
    • Microsoft, IBM, and Apple were not tech innovators outside of their main fields for any measurable amounts of time, they were monopolists (each to a degree). Google if you remember came about because Search Engines were not that good and all trying to generate clicks and ad revenue, where Google was supposed to do away with that. Facebook had so much free advertising that it was impossible for a business like MySpace to compete, and Facebook still receives huge amounts of free advertising. Amazon was com

    • by ghoul ( 157158 )

      The difference is when they were disrupting IBM the govt actually cared about competition. This was the era of Airline deregulation and breaking up AT&T. Now the big 5 have lobbying budgets to rival defense contractors and have completed regulatory capture. The Microsoft Anti-trust case was the tuning point where the tech firms realized its cheaper to pay the Danegeld to the govt lobbyists than compete in an open market. Note how Google has not been attacked for trust busting even though it is far more

  • One question i've been hearing from more and more venture capitalists is 'do you have a patent' Which makes me angry, since 10 years ago software patents didn't even exist. If Google started today, they'd be destroyed by patent trolls before becoming big and successful. Even if they managed to succeed in court without loosing all their money, they would be bought up by Yahoo or Bing so the company could acquire the tech, and of course the patents!
    • How are you with patents for physical devices? Almost anything today can be trivially copied and some things take years to be developed (like tuning a circuit to control plasma).
      • Are the patents on physical devices still limited to 7 years? If so then I guess I'm not against them (as in, i don't like it, but not gonna get off my couch to do anything about it), but patents are government enforced monopolies, which in general I think are bad things.
        • Without patents, what would prevent large corporation with a large manufacturing base from buying a product from a startup competitor with limited resources, run it through a 3D scanner and mass producing a 100% clone of product that took $4million to develop? This isn't the 1950's anymore.
  • You had a few large tech companies and everything revolved around them until PC's came along and killed their businesses?

  • Nothing new, wrong, or irregular about that.

  • According to The Innovator's Dilemma [wikipedia.org] , this is the goal of starting most businesses.
    • Value to innovation is an S-Curve: Improving a product takes time and many iterations. The first of these iterations provide minimal value to the customer but in time the base is created and the value increases exponentially. Once the base is created then each iteration is drastically better than the last. At some point the most valuable improvements are complete and the value per iteration is minimal again. So in the middle is the most value, at the beginning and end the value is minimal

      Incumbent sized deals: The incumbent has the luxury of a huge customer set but high expectations of yearly sales. New entry next generation products find niches away from the incumbent customer set to build the new product. The new entry companies do not require the yearly sales of the incumbent and thus have more time to focus and innovate on this smaller venture.

  • I'd be amazed if there weren't plenty of startups whose main goal is to be purchased by the Gang.

    Back in the dot-com fast times of the late 90's, I was with a start-up and floated a draft expansion plan for the servers.

    But was told, "Forgettaboutit, our main goal is to get purchased by a bigger co, not grow."

    Neither happened. They died a painful death.

  • It sounds a lot like the 90s, except in the 90s it was just Microsoft who was the ostensible gatekeeper.

    I am worried about the dominance of the Gang of Five, but a Gang of Five is a far, far better situation than a Gang of One.

    • by epine ( 68316 )

      Microsoft, Intel, Dell, Cisco, Sun/Oracle, HP/Compaq and even Apple/IBM were all pretty powerful in their own corners of the industry during the nineties.

      That said, social+mobile really was a game changer on ultimate scale.

  • How they foster what? Orphan kittens?

    Indglish at his most jolly fine.

  • by jgotts ( 2785 ) <jgotts AT gmail DOT com> on Wednesday March 08, 2017 @06:16PM (#54002685)

    I've been a programmer for 30 years and I've seen tech companies come and go. Google and Facebook and to a lesser degree, Amazon, run their companies on Linux. These are Internet-only companies. There was no Linux 30 years ago, and there was no Internet as it exists today. Linux was created 26 years ago. The general public joined the Internet around 22 years ago. There was no Google, Facebook, or Amazon 30 years ago, and none of these companies would have made any sense 30 years ago.

    30 years ago, Commodore was the dominant player in the computer market. Microsoft was seen as small potatoes compared to IBM. Apple existed and the Apple II was fairly popular but the Mac was a machine regular people couldn't afford to purchase so you saw them mainly at schools, where they were discounted.

    In 30 years, the present day landscape will be radically different. Maybe all of those companies will exist in some form but I see Facebook as the most likely to not make it, as people's tastes in online computer bulletin board systems are fickle. Facebook is today's Internet BBS. Some companies will exist in different forms. There will certainly be new dominant players.

    If your window into the tech world is only 10 or 15 years then you need to do a little bit more research. It's not like I'm an old man. I'm only 41. The tech world did not come into being in the year 2000.

    • by ezdiy ( 2717051 )
      Rather than saying "things will be different" (duh), try to extrapolate how from past cycles. The wild west internet era is gone - as was the early 8bit PC era of the 80s, replaced by MS monopoly of the 90s, same happens with internet now. Open computing platforms progress towards closed gardens because consolidation is more efficient before it implodes into actual monopolies. The question is, what will surpass todays computing and internet to usher new wild west era, and open opportunities for the small gu
    • A Dilbert cartoon sometime in the late 1990s talked about how the .com boom used to be driven by companies that sought the IPO, but now the real goal was just to be bought by Microsoft. I think this pattern has been around a loooooong time.
  • GAMAF is politically correct however AMFAG makes me laugh.

  • by Anonymous Coward

    Time to bring out the anti-monopoly laws and shatter each of these corporations into two or more competing firms.

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