FAAMG enough is enough!
Recent news has been bustling with headlines such as: Facebook and Google ramping up competition with Zoom in the video conferencing space, or Microsoft Teams taking on Slack.
How did we get to a point where virtually no industry produces newly minted unicorns that wouldn’t find themselves being squeezed out by the Big Tech cross-vertical competition?
Why is this only the tip of the iceberg and why are there much more sinister trends hidden below the surface?
Let’s take a detailed look at each major industry under the Big Tech ecosystems siege:
Entertainment and streaming:
A perfect place to start is digital streaming. Only a while back it was an industry with a small number of players, and plenty of room to grow. Netflix, Hulu, Roku, Spotify dominated their respective entertainment markets.
Long time coming, Amazon, Apple, and Google all have broken into the market with their independent streaming content services, with a focus on using an ecosystem approach to dominate by co-offering their products. For example, Amazon uses the Prime user base to onboard new customers to use their Amazon Prime Video and Amazon Prime Music services, as well as offering Amazon Fire TV sets with Prime Video content streaming included, and even integrating Amazon Fire TV with Alexa functions into cars (surpassing the hardware characteristics of Roku devices).
While Amazon through ownership and production of Amazon shows successfully sells the original merchandise on it’s Amazon.com e-commerce store, Netflix and Hulu due to absence of rights to the TV shows, and lack of sales channels have been unable to seize the opportunity to generate adequate merchandise revenue stream (according to the studies Netflix TV show merchandise could bring in revenue of up to 1 billion USD per year — ). On the other side of the spectrum, Apple has launched the streaming platform Apple TV+, combining the subscription model with the sales of new devices (starting from Sept 10 2019 all Iphone buyers got a year of Apple TV+ free subscription).
Youtube premium launched Youtube movies section, levering Youtube bidding power for third party content by partnering with Google Play movie store. Access to Google’s Music play has also been offered for Youtube premium subscriptions. While allowing Youtube video ads on Google ad services lead to YouTube's video ad revenue Increase.
Slack, which provides a seamless design and an interface perfect for large teams, has long been a leader in the team collaboration space. Soon it found itself in a more saturated market with competition from Microsoft Teams, Google Hangout Chat, and Workplace for Facebook.
Microsoft Teams combined the service with Microsoft office, OneDrive, Outlook, and offered Microsoft CRM tools integrated in Teams chat function. Leading to a higher daily active user count than Slack itself, and faster onboarding growth.
Google has leveraged the immensely popular Gsuite subscription by offering a free Hangouts chat function for paying customers with Google Drive built into the software , thus making Hangouts a great option for Gsuite existing customers and typical Google Drive users.
Facebook’s Workplace offers another feature synergic with Workplace chat: the iconic Facebook’s group dashboards for large corporations to keep announcements, collaboration, messages, and event planning all in one place.
In the Payment industry the dominance of AliPay, Wechat Pay, Google Pay, Apple Pay and Amazon Prime Payment has been growing worldwide, causing a serious setback to the long-term leader PayPal.
Alipay has integrated with Alibaba’s brick and mortar retail software, delivery services, e-commerce merchants, event booking, and restaurant services. Alipay also combined the services with Ant Financial wealth management’s solutions to offer Zhima credit ranking, consumer product financing, along with deposit free booking services.
In the other markets, Amazon Pay although smaller in size offers merchants a unique access to the Alexa online checkout, provides a larger Amazon e-commerce customer base for businesses using their Payment, and allows customers to use Amazon prime discounts card on third party sites with Amazon Pay. Recently announcing a new offline checkout system, used in Amazon go stores for 3-rd party stores, which is likely to also be integrated with Amazon Pay soon.
While Google Pay integrates with Google Spots (a service which ties in recommendations on Google search, maps, and Chrome) in emerging markets, to allow Google Pay merchant users to list their businesses on Google Spots and use Google Pay’s QR code technology for faster online and offline checkout.
Although Doordash, UberEats, Grubhub, and Instacart have largely been untouched by the growth of tech giants, they are under a constant threat from the Big tech’s expansion, in the US domestic market and abroad.
Amazon recently added Amazon Fresh orders function on Amazon Smart devices, Alexa, and Amazon Dash. Amazon also introduced a streaming cooking show on Fire TV to allow customers to order instant delivery from Amazon Fresh.
Alibaba’s digital grocery chain Hema currently dominates the Chinese market by partnering with the Eleme take-out delivery service. Alibaba offers Hema groceries on the Alibaba delivery app and places Eleme restaurant dark-kitchens close to the Hema stores for more convenient pick up.
This is a trend that Amazon will soon set out to follow with its Whole foods stores, and possible restaurant delivery service.
Netflix, Hulu, Roku, Spotify, Slack, Paypal, Doordash, Uber eats, Instacart, as well as a few other unicorns are the lucky few to survive the Big Tech squeeze.
In other industries where there are no longer any examples of stand alone companies presenting any meaningful competition- the battle has simply been lost, and the new startups get run out of business by the same 4 market leaders.
The current game steaming industry no longer has any players that are not a part of the Big Tech Ecosystem. Twitch, the game streaming first comer that got acquired by Amazon, was quickly connected to the Amazon Prime ecosystem. A new service called Twitch Prime now offers exclusive loot for gamers, chats for TwitchPrime members, as well as the regular Amazon prime Movie and music streaming content.
YouTube Gaming offers the gaming streaming services as the part of the wider platform, with all video production, editing, and management features created by the Google parent company.
Facebook gaming -a more recently developed service swiftly moved in to take significant market share within the last 2 years. Facebook gaming connects Facebook, and Instagram social media profiles of streamers to their live streams, also offering game walkthroughs tailored to the huge Facebook in-app mini-games user base.
And last but not least Microsoft’s- Mixer which uses Microsoft’s Xbox gamer audience to acquire a 2.6 percent game streaming market share.
Today, there are virtually no independent game streaming companies left, that isn’t a part of a wider tech umbrella.
The current landscape of the Gaming industry is a good example of a market already lost to the Big-Tech giants ecosystem.
The voice speakers global market is also fully dominated by Google, and Amazon powerhouses, the exception being the Chinese domestic market. (Here Alibaba and Baidu supported by the regulation banning foreign content, have been successfully using the ecosystem approach. )
Using the same ecosystem development approach Alexa has been integrated across all Amazon divisions: Amazon streaming, Amazon e-commerce orders, Amazon home IoT devices, and online ebooks.
Google Assistant has leveraged integrations with Nest home IoT devices (acquired by Google), Google search, Google pay, Google maps, shopping search results, as well as with Youtube and Music play content.
Therefore, with the voice speaker integrations and capabilities of Amazon and Google there is no room for the other voice speakers hardware players such as Samsung, or Apple, and independent voice assistant developers with their own voice assistants devices.
So how can the independent startups survive and not be prematurely taken over by the Big-tech companies ?
Here are a couple of examples how some startups by following the approach of finding partners to offset the vertical and horizontal monopolies have managed to hold back the aggressive expansion of those Big Tech players
Stripe works together with SquareSpace to allow website builders to integrate their checkout experience with Stripe, and launch a digital business faster- providing pushback to the website creation tool Google sites and Google pay checkout options offered as part of google’s wider Gsuite ecosystem. On the other hand Stripe established a partnership with e-commerce platform Woocommerce — to help compete with the Amazon e commerce integrated — Amazon Payments.
Zoom is in fact also a prime example of a company using the strategy of synergy partnerships to weather any potential Big Tech entry into the Video conferencing market. When it seemed that Microsoft’s Skype, and Google’s Hangout services were already the leading once, with no room for others — Zoom quickly broke into the market, partnering with Dropbox to offer document collaboration, on par with the integrations by Microsoft and Google. Zoom also managed to connect exclusive conference hardware, by partnering with the likes of Yamaha and Lumens, and Slack to compete with Microsoft Teams chat feature.
How can other independent startups progress, following the above success stories, and safeguard their market place from the Big tech ecosystem competition?
The simplest approach is to look for partnerships outside of the direct verticals, and attempt to find synergies beyond your immediate industry.
Startups should be tying a value add of their fundamental services, with businesses that offer unique connecting points, to ensure that the multi product in-house integrations of larger players, won’t beat the variability of services that your startup will partner with both vertically and horizontally.
That way no matter how many industries your larger competitor breaks into, you would still provide a wider set of integrations. Turning from a standalone unconnected business, losing out to the monopolies that offer the full customer journey. Into an independent engine that connects to a wider ecosystem- making the niche focus an advantage for unlimited partnership capability that will always beat in-house products.
But where should those startups find those life saving partnerships?
Venture Capital funds are naturally positioned as the tech ecosystem builders, having access to all of the portfolio startups.
Venture backed startups can get an early lead, by using Coopsight Ecosystem software to unlock this essential resource. Connecting with other portfolio companies to access new synergic alliances, corporate LPs to reach their vast established customer bases, and using the Venture Funds incoming deal-flow to an advantage of a constant feed of potential allies, finding their detailed synergy insight before they join the portfolio.
You can ask your Venture Fund to sign-up to Coopsight today at https://www.coopsight.com/beta-signup, giving free access to all VC portfolio companies.