Last week’s blog about the potential demise of FANGs (acronym for Facebook, Amazon, Netflix and Google + Apple) got quite a response. Going Digital requires imagining different futures. Try this.
Last week we explored what might bring one or more of the FANGs down. Seemed a little outrageous since they make up over 10% of the S&P 500’s market cap. But, the argument was straightforward. The S&P is a very volatile place where creative destruction reigns and half of the 500 will be gone in the next ten years, so why not some of these boys?
I got lots of “constructive” feedback – mostly, I was too far out on a limb with this one. In one discussion a colleague challenged me with being more specific with what could really do it. Clients often wrestle with this challenge. They can’t imagine how their business would be transformed by a new (often digital) approach. So let’s try to. Where’s the pivot point that affects all the FANGs?
Over half of Apple’s revenue comes from iPhone sales. With this premium product they extract almost all the profits out of the smartphone market. Google’s Android operating system powers the rest of the world’s smartphones with almost an 82% market share. Google, of course, “gives away” Android as part of its strategy to drive users to Google’s other, for profit, services. Seems to work, nearly 67% and growing of Google’s digital Ad revenue comes from mobile, primarily smartphones.
Facebook has 1.15 Billion Mobile Daily Active Users (DAU) and derives 87% of its advertising revenue from this market. Netflix’s fastest growing viewer segment is on smartphones, outpacing all other platforms. The statistics on these dominant players are overwhelming: billions of users, billions and billions of dollars in revenue and they all cross in the palm of your hand, in the smartphone. Now, imagine the smartphone goes away. What! Don’t be ridiculous!
Stop and think. The smartphone is becoming old school. It has been around for ten years. Really do you need a new one or is it becoming like your laptop – the technology is good enough, no need to buy a new one for the newest bell and whistle. But can you actually envision it losing its prime position.
What would take its place? How could you stay connected (or distracted depending on your point of view)? Do you own a smartwatch? No? You are not alone. Most of us don’t because their features and functions are not rich enough. There are estimated to be 2.3 Billion smartphone users in the world today but only maybe 75 Million smartwatch users.
At first blush nobody is buying smartwatches to replace smartphones. Yes, not today they aren’t, but something just happened that might signal a change. Apple’s recent product announcements of the iPhone 8 and iPhone X also introduced the Apple Watch 3. The earlier versions of the Apple Watch, like its competitors, just didn’t seem to do much in sales. But the Version 3 got some pretty favorable reviews because it finally seemed to stake out new territory.
Sure it’s got some bugs, battery life could be better, etc. but with it you no longer need a phone. Most of the functions you need (sorry no camera) are there and you access it mostly though the intelligent agent Siri. Some could argue that this has been Apple’s strategy all along. They have been preparing for the commoditization of smartphones and their decline by building the next platform.
It has taken them a few years and there are still things to shake out but consider that the user now has a device that is in constant touch with their body and that the primary interface is through speech. (Let’s face it; you can’t put much on that screen.) Once you had a phone or a tablet you pretty much stopped carrying your laptop everywhere. As phones got better you increasing left your tablet behind. If your watch does most of what you need will you leave the phone behind?
Imagine the impact on social media. What does that mean for Facebook? All those distracting notifications will be shunted to some other device. Or how about search, how will that get done? Probably the way we use Siri and Google today. You’ll ask a verbal question and get a verbal answer. There are no ads today. How many ads do you think you will listen to in the future?
But what if you want to watch a flick? You’ll still have a screen of some kind. Maybe they will become just for viewing videos and an incredibly cheap commodity. Or maybe this is where eyeglass-like wearables will come into use.
There could be all sorts of outcomes. In some, a few of the FANGs might stay winners but not in all. Now try this sort of exercise in your industry or profession. Oh, and don’t worry about being outrageous.