Last week, the three most valuable companies in tech -- Apple, Google, and Microsoft -- all shared some news that took a bit of the shine off their brands. The tech industry is known for creative disruption, and we're starting to get a glimpse of the pressure these organizations face from upstarts and dramatic market shifts.
If you look at companies, whether they're technology producers or department stores, they dominate for a time and then they reach a point where they begin to fade. I'm not sure the Big Three are in that period yet, but it feels like we're seeing some sort of inflection point. It reminds of the Cold Play song, Viva la Vida:
For my head on a silver plate
Just a puppet on a lonely string
Oh who would ever want to be king?
Apple versus the hardware upstarts
Even though Apple sold record numbers of iPhones and iPads and set a quarterly revenue record to boot, it wasn't enough to satisfy Wall Street, which had expected even more -- particularly iPhone sales. Part of the problem for Apple was that year over year profit remained flat at $13 billion.
The fact is that Apple's profit margins are getting squeezed and the company has to find new ways to generate revenue beyond its current hardware lines. While Apple is surely not standing still, the perception is that they're continuing to ride yesterday's glory with smartphones and tablets, while wearables and the Internet of Things begin to develop around them.
Competitors certainly aren't standing still. Google scooped up Nest for its hardware expertise -- even as it jettisoned all of Motorola except for its advanced research lab. We're also seeing smaller companies like Pebble and Fitbit making plays for the wearable market and all of that glorious data.
Apple needs something new to move beyond products developed in the Steve Jobs era. The company can't rest on past glories forever -- especially not with flat profits. Nor can they afford to cede the data market to Google and others.
Google versus Facebook and the anti-Web
Last week, Google announced the sale of Motorola Mobility to Lenovo for $2.9 billion. The deal looked pretty bleak, considering Google paid over $12 billion for them in 2011, but it might not have been quite as bad as it appeared considering Google got to keep the patents included in the original deal. Google did buy Nest, which could give it a leg up in the Internet of Things data game, but for all that, Nancy Gorhing still argued that its Android empire has started to unravel. A huge proportion of Android devices -- about 25% -- don't contain any links to Google services.
And that's the rub: Although Google competes in a lot of areas, more than 90% of its revenue comes from advertising. As consumers go mobile, that poses a problem. In spite of the ubiquity of the Android platform and all that brings to Google, it appears Facebook, which also reported earnings last week, is doing a better job than Google in the increasingly lucrative mobile ad space. It's also unclear what role conventional search will play on mobile as users turn away from the web and more to apps with their own confined little worlds.
Google is also facing legal challenges around every corner, whether from governments, competitors or disgruntled users. Some have claimed that Google favors its own content over others in its search results. One writer suggested recently it was time to break up the company.
None of this is to suggest that Google is in danger of imminent demise, only that there are some growing cracks in the armor.
Microsoft versus the past
Meanwhile, Microsoft has been making news with the passing of the torch from the Bill Gates/Steve Ballmer era to the Satya Nadella phase. But even as Bill Gates was replaced as Chairman of the Board, it's clear that he isn't leaving -- in fact, Nadella has asked him to stay on as a product advisor, and Bloomberg reported he might have a bigger role in product development.
Gates hasn't been involved in the day-to-day running of the company for years. I doubt very much at this point he has the finger on the pulse of the new markets around mobile, cloud, social, wearables and the Internet of Things. It could be counter-productive to have the old boss looking over the shoulder of the new one
Even as Microsoft pushes forward with a variety of initiatives to move beyond the desktop computer, they face pressure from countless upstarts. Just last week, rumors flew that Box, a company that had made no secret of setting Sharepoint in its sites, secretly filed for an IPO. One of the big appeals of Box is its energetic young founder, Aaron Levie, who is a regular in the press and on the industry event circuit. Contrast that with Microsoft and its stable of veterans, and it's easy to see the energy of the tech industry moving elsewhere. Microsoft has made great progress in cloud computing, but the undisputed leader is still Amazon -- a company from the dot-com era that has deftly expanded beyond its core.
Levie put it succinctly in a tweet this morning: "Microsoft has one final shot to reboot the empire. This is going to be a very interesting decade."
As companies like Levie's try to provide alternatives to these tech titans, they will only see more competition on all fronts -- product, marketing, legal, recruitment, and on and on. I wouldn't count any of them out, but we are in fact in the midst of a very interesting time in the technology industry between what we have now and whatever comes next. The Big Three had better be vigilant because there's always going to be somebody trying to knock them off their perch.