In the course of history, many smart people have been scared by the rapid progression of technology and its impact on the way we live. Forget the printing press; Socrates was concerned that even the technology of recording via written documents (i.e. writing) would “create forgetfulness in the learners’ souls, because they will not use their memories”. One need only look at the graphic above, representing swings in market share for tech titans, to see significant change in just the past 35 years.
January has been a difficult month for the stock market, with share prices around the world taking a tumble. A lot of the liquidity in the market rests on the valuation of a growing number of technology firms, whose route to profitability varies wildly. The oft-written about “Unicorns” are seemingly due for some market correction – no bad thing for the tech sector – but what about the bastions of the industry, how are they looking?
Twitter – The firm would have breathed a sigh of relief at the end of last year, when original co-founder Jack Dorsey committed to returning to the company. There were promising sounds at first, but recently it has been mulling a move away from the 140-character limit that defines its modus operandi. It has the potential, according to Forrester, to repackage such long-form fare in the mode of Facebook’s Instant Articles. But attempting to emulate what has already been done cannot hold any hope for actually catching up with its rival. An article in The New Yorker this week derides the social network, calling out its lack of direction, and questioning its relevance in a growing pool of competitors. Twitter’s US penetration has been flat for the past three quarters, and Snapchat is nipping at its heels in terms of engagement. While overall Twitter is seeing steady growth, it’s rate of growth continues to decline
Facebook – By contrast, Facebook is doing well, particularly concerning its financial performance. Its increasing collaboration with telcos as it explores new revenue opportunities pave the way for sizeable rewards in the medium term. And it is slowly learning from the likes of WeChat and Kakao Talk in Asian markets on how to better integrate various functionality into its Messenger app; it’s first foray is working with Uber to allow users to hire a car without leaving Messenger. (This week Whatsapp also begun to get the message, no pun intended). We commented in our last article about how the social network is fast having to adapt to an ageing user base and lower engagement, but Facebook is attempting to combat such trends with numerous tactics. Sadly, its attempt to provide free internet services in developing markets has run into obstacles. In both Egypt and India, government regulators have interceded to stop the network from running its Free Basics service, under the guise of net neutrality (which in our opinion stretches the definition, and the spirit, of net neutrality).
Yahoo – The troubles for this company are more than we can summarise in this short review. Let it suffice to say that Marissa Mayer’s wunderkind sheen has been significantly tarnished since her arrival at the company in 2012. In an editorial in the Financial Times last month, the company was described as a “blur of services and assets of different values”. As her inescapably significant role in the organisation’s lacklustre performance becomes increasingly apparent – hedge fund Starboard Value has issued an ultimatum for her to either leave peacefully or be replaced by shareholder vote come March – reports are that Mayer will have to lay off around 10% of the company. The FT puts it well,
[R]ather like AOL, it is considered a service stuck in internet dark ages. It is what grandma uses to look up the weather. It is not for Snapchatting teenagers. And it is not what investors crave most of all: the prospect of growth.
Amazon – Until this week the company had been faring extremely well, and its most recent concern was not getting investors too excited about its recent profit announcement. And while it’s reporting this week of a 26% YoY rise in sales was welcome, its fourth-quarter profits of $482m were one-third lower than what Wall Street analysts were expecting; the stock plunged 13% as a result. The disparity between rising sales and profits that don’t align to such a rise are nothing new for the company, unfortunately.
Holistic sector frailty – Two excellent articles in The Economist this month reveal a sector that is experiencing growing pains as the current digital era reaches a period of relative maturity. As the hype dies down, what hath such new ways of thinking, making and working wrought? The first article examines the seemingly glamorous role of a techie working in a startup firm, and the pitfalls that come with it. The article reports that “Only 19% of tech employees said they were happy in their jobs and only 17% said they felt valued in their work”. In looking at the explosion of demand for the inadequately named Hoverboard, the second article identifies that globalisation has vastly sped up a product’s journey from conception to delivery at a consumer’s home, at the expense of a proper regulatory system; it is unclear with so many disintermediated players who should shoulder the burden of quality control. The Economist sees such risk as a parable for the tricky place the sector as a whole finds itself in.
In an increasingly homogenous and globalised world, how important is craft?
In some industries, the concept of owning something tangibly has become redundant; an antiquated thought that occupies old minds and outdated marketing and sales strategies. Netflix, the online video rental service, is a prime example of this. Recently the service reported record quarterly profits, with revenue up 31%, adding just under 2m subscribers in the last three months. The service, which started as a way to rent DVDs online, eventually introduced a streaming service, which, as of this month, is now more popular than the DVD part of its offering. This has not been a sudden shift, but rather one that has been happening gradually, helped independently by DVD’s gradual decline since its heyday. Blu-ray is a temporary panacea and will not combat the inexorable shift toward a medium that someday may not exist in hardcopy form. The challenge will be in how to maintain a sense of ownership for the consumer when all their films (as well, of course, as all their books and music), are only visible through an electronic device, rather than being stacked on shelves. Having physical media on your shelves is a statement of sorts, and not merely a tool to show off your intellect. Though by turns irritating and immature, Taleb’s book Black Swan does make a great point about the purpose of a library of books, a metaphor which can be extended to music and film as well. Anecdotally, Zeitgeist doesn’t know a single person who favours the practicality of an electronic book over the unique feeling of owning something tangible. Creating desire for such software [i.e. books, film, music] will be another challenge, one that at the moment is being countered by creating desire for the hardware [i.e. the platform: iPad, Kindle, etc.].
At the same time, other industries, where individuality and provenance are of greater advantage than practicality or cutting-edge convenience, are experiencing a different problem. The Economist this week reports on the problems facing the industrious knitters on Fair Isle, part of the Shetland islands. The distinctive prints they create for their knitwear, which the magazine describes as “in vogue”, has also tapped in to an increasing post-recession desire for “garments that look chunkily lasting and homemade”. In this case, provenance is a hugely significant part of why people would choose to buy this particular product. Ownership of the product is not for the mere intellectual consumption of the product, it is also about wearing something that means something, in the sense of Roland Barthes’ Mythologies. This importance, The Economist maintains, is being diluted as neighbouring knitwear manufacturers unfairly play off the Fair Isle’s name. Following in the footsteps of Harris Tweed and champagne, the cottage industry, like Cornish pasties and Yorkshire pudding, is seeking special protection for exclusive use of it’s name.
So there’s clearly a push and pull going on as to the importance – the essence – of ownership. Perhaps what is needed is a total reappraisal of what ownership means when the content you are talking about is not something tangible that you carry around with you and are free to do with as you wish, but rather something floating in the Cloud, that you merely have access to.