One of the ideas in Tim O’Reilly’s new book is about a cycle in technology. I describe it this way.
Phase 1: a new hardware platform opens up (personal computers in the late 1970s; the Web in the mid-1990’s’; smart phones in this century) Lots of entrepreneurs try to play with it, figure out what to do with it.
Phase 2: competition to become a dominant infrastructure player within the platform: operating systems in personal computers (came down to Windows vs. Mac); the Web portal (came down to Google vs. AOL vs. Yahoo); capturing user attention in mobile phones (still up for grabs, I think, but with Facebook and Twitter as prominent examples today). In this phase, being more “open” is a competitive advantage. Having a bigger ecosystem of other people adding value to your platform is the winner. For example, Google won because it did the best job of incorporating the entire Web into its ecosystem. Amazon has opened its platform to just about any seller.
Phase 3: cannibalization. The winner in phase 2 decides that its revenue has maxed out in just being an agnostic open platform, so it starts to take over profitable niches within the ecosystem. Microsoft creates Excel. Google captures ad revenue from content providers. In some sense, the winner in phase 3 backs away from the “open” strategy and instead tilts the playing field to favor its own offerings in the most profitable areas. But cannibalizing your ecosystem helps to drive ambitious entrepreneurs to move on to the next hardware platform, where they can have more opportunity.
There is a widespread perception that Apple, Facebook, Google, and Amazon are moving to the cannibalization phase. For example, Amazon is creating some of its own brands. Along these lines, commenter Handle and Tyler Cowen recommend this piece by Andre Staltz. I recommend it, also, and I plan to post on it after I read it again.
I have a hard time believing anything written about FANG if it makes no mention at all of China. Alibaba’s Singles Day is bigger than Cyber Monday. WeChat is so big and so evolved past an IM client that the Chinese do all their banking, bill paying, shopping, literally everything inside it.
I suppose you can argue that FANG is “taking over the Internet” if by “Internet” what you really mean is the USA and US ISPs. There’s always going to be another platform that takes over the world, and nothing says it can’t come from China. If enough people in the US want their network connected to China’s network, it won’t matter what FANG wants.
A lot of the problem is that mobile traffic tends to get routed through apps, and apps are dependent on the Google and Apple app stores. Some apps get charged 30-40% fees for transactions through the app store, like Match.com. A solution to that problem is to go back to websites, or design mobile websites to have the same functionality as appss. That way the apps would no longer be dependent on the app store. Alternatively, the DOJ could target the app stores for anti-trust violations. If apps were to be separated from the Android/iOS platforms, then much of the death grip that Google and Apple have over the internet would loosen. But what do I know, I can’t believe that anybody would spend $1000 on a phone.
I don’t think I’d use O’Reilly’s “cycle” as an organizing theme if I were writing a history of say manned spaceflight, or uranium mining, or deep sea mineral exploitation, or car making, or ocean shipping, or farm tractors and implements, or biochemistry, or Linux, or astronomical telescopes, or …
History says a market of 3 dominant companies will not endure. Just as ABC/CBS/NBC lost dominance, so will Google/Apple/Facebook (in my opinion Netflix is the surest 1990s AOL of the bunch). These firms will stumble because they will not be able to respond to every shift in consumer interest. The most immediate threat is simple boredom / saturation. The long term threat is the declining cost of the digital platform will invite ever increasing competition, both in consumer devices and in servers and networks. A related threat will be the question of whether investors will stick with the market leaders if they discern doing so will yield below market returns. Consider this question: Do Apple, Amazon and Google need to be public companies anyways? Maybe Amazon, but Apple and Google seem to have all the capital they ever would need.