In the last few years, it seems that even the last person to speak… GAFA and certainly knows what is meant by it.
In the meantime, every single GAFA company is expected to do almost anything when it comes to expanding its own business fields at the expense of established players. Whether it’s banking and payments, autonomous driving, television or much more. The reason is because each of the GAFAs has demonstrated this very disruptive power in the past with the help of technology. But is what has been achieved in the past also the security to maintain this power in the future and to conquer further – new – areas?
We don’t have to look back that long to see that even supposed giants had to lose their relevance and importance within a very short time. Some will still remember one of their first e-mail addresses or messenger accounts. Names like AOL or Yahoo are still familiar to some. Within a very short time, these two giants of the Internet 1.0 have lost their importance and power, although they seemed almost unassailable. Own problems, little focus or even the underestimation of trends have quickly led to the erosion of influence;
Something similar can, of course, the today’s giants happen – in addition, at least three other trends could have a negative impact on the future of GAFAs:
- Asia and especially China is conquering the world markets – if at the beginning it was mainly hardware, now software made in Asia is also coming to the West. TikTok is a good example and also the so-called super apps like WeChat or Ali-express are on the jump or have already arrived with their first services.
- Europe is fighting for independence and sovereignty, especially politically. The just announced digital Markets Act – https://www.spiegel.de/netzwelt/netzpolitik/so-will-die-eu-kommission-die-us-techkonzerne-bremsen-a-9a84fe99-dd09-4144-849b-0b59a07092e8 – certainly has the potential for sustainable change, whereby its own services must emerge alongside its policies – which is perhaps the greater challenge.
- The call for the dismantling of GAFAs in the USA itself is getting louder – both the old and the new incoming administration no longer see the power of GAFAs in a purely positive light and have for some time been giving concrete thought to how the power and influence of digital platforms can be curtailed. https://www.basicthinking.de/blog/2020/10/07/gafa-zerschlagen/ – https://www.faz.net/aktuell/wirtschaft/eu-und-usa-gegen-monopole-und-macht-der-netz-giganten-17105778.html
I think everyone thinks of Facebook first, of course. But why – I’ll try to take a quick look at each of the four.
Somehow Google doesn’t seem to be going anywhere. But the comparison to Yahoo is of course the closest here. Still, I don’t believe in the Yahoo moment at Google, as the company has had many failures like Google+ etc., but still continues to occupy so many core areas of the web very well. Still, there is a risk of breakup here as well, and parts of the European initiatives are clearly aimed at Google’s power as well. Probability for a Yahoo moment at under 10 %.
Apple
For me, Apple is still primarily a hardware provider and thus a different category. Also, unlike the other GAFA players, Apple has been occupying the privacy issue in a “proper” way for some time now. This makes Apple appear in a different light and I see the probability of the Yahoo moment at under 1 %.
As the team correctly described, Facebook is probably the player with the biggest problem. All of the above trends are hitting Facebook – Asia, breakup and Europe. Add to that the dwindling relevance of Facebook itself and I think most of the Facebook services are easier to replace than the other players and we’ve seen myspace, StudieVZ and others come and go. The Yahoo moment probability is 25 %.
Amazon
Again, there is probably a very large potential of breaking up. A breakup into at least two parts. One consisting of the core trading platform business and the other part consisting of AWS.
But does that make Amazon any less relevant? I don’t think so. Amazon as a platform has created the move to mobile well and I’m curious to see if the post-Covid era will still bring about a change in consumption and many people will think about where they shop. However, Amazon has been able to take the way we shop and the increasingly important convenience to a new level.
In doing so, Amazon will have to keep a very close eye on the new players from Asia in addition to the issue of breaking up.
So is Amazon going to be the new Yahoo? I see the probability at under 5 % in the next 10 years.
But I also asked the Payment & Banking team again for their opinion: What do you think which of today’s GAFAs has the biggest fail potential? And which once great company from the 2000s do you miss?
Kilian Thalhammer
Quite an audacious statement – none. GAFA’s are now so broad – in terms of societies as well as products and markets. Google is no longer just search, Amazon is no longer just online shopping. I believe in the “breakup scenario” – be it centrally controlled – the first example we see in China with the “Ant Financial IPO blown off 5 minutes before closing” or even from within the companies/conglomerates themselves. ALphabet is already going in that direction. Then the business models within GAFA’s will see themselves competing once again – who can survive without the “power of search” (to use Google as an example)? – and who can’t? – How much “bacon” have the GAFA’s put on? – Where is a “horse cure” needed? – And where are the synergies between AWS and Amazon, for example? – Wouldn’t Amazon Pay work better in the free market? (PayPal – eBay) Effect. Is Apple a hardware company or a software company? – Does it make economic sense to develop everything yourself? (See M1 Chip) – or do higher values and efficiencies come from specialization approaches.
Also, from a shareholder value perspective, there are certainly areas where 1 + 1 = 3 – i.e. where the parts are worth more than the whole. The whole is too opaque – and the view from the outside is no longer clear. “People” (be it the analyst, the client or the partner) want a simple explanation or view of companies. This is no longer possible and will lead to “bite-sized” fragmentation.
Last but not least – I think we will see “more and more” GAFA’s – Microsoft – the Asians – the Chinese. I also don’t give up on the European hope yet – maybe it will be a little more small – but that doesn’t mean less powerful.
Jochen Siegert
When I look at Yahoo, they were overtaken by a more innovative player (Google) with a better product in the core business and tried to compensate for the decline in relevance in the core business through various investments in other startups. Instead of reinventing themselves through this, they never really integrated the investments, but instead pushed the founders over the edge, so that they left the company. Accordingly, the investments were dragged down by the stumbling parent company. The rest is history.
The parallels to Facebook are there. Facebook is being overtaken in its core business by other competitors (e.g. Instagram) and cannot find an answer to this. They were very smart in acquiring startups (Instagram, WhatsApp, Oculus) but have not de facto integrated them until today and, of course, the founders of these startups quickly left the company. So while the other GAFAs have reinvented themselves over time, Facebook is still Facebook.
Due to the market power, new acquisitions in the style of WhatsApp and Instagram are probably no longer allowed by regulatory law and Facebook must now drive innovation and reinvent themselves, which they did not manage before. Even if the comparison with Yahoo is limping, Facebook has the strongest tendency to at least not be able to keep up with the growth of Google, Amazon, Apple, Microsoft, Salesforce and Co as US West Coast stars.
Maik Klotz
Facebook. Facebook can do data analysis to perfection. Only this is not a product benefit, ergo no innovation for the customer. Since the beginning, Facebook has been more or less unchanged. Now Facebook isn’t just Facebook, it’s Instagram and WhatsApp, but the air is getting thinner there too. Networks, like TikTok are growing faster than Instagram and WhatsApp is also seeing a lot of competition. On top of that, there are sometimes borderline business policies. Facebook is boring on all levels and even if they don’t have an incredible mass of users, the party takes place outside of Facebook. In short, Facebook is the Yahoo of the 2020s.
Miriam Wohlfarth
I don’t believe in a medium-term breakup at the moment. But I can imagine that the orientation will change in the next few years. The big tech companies in the US and Asia are so successful mainly because they all have extremely large amounts of different data in their ecosystem.
They have one thing in common. They bring that data together to a standard and use that data to make predictions. This allows them to evaluate faster and develop better customer-focused products. They are making these products more relevant every day. Yahoo has somehow slept through this evolution and has failed to evolve.
For a long time Americans almost laughed at Europeans for how sensitive they are when it comes to data protection. Since it became known that Cambridge Analytica had hacked 87 million Facebook user data and used this information to feed Donald Trump’s 2016 presidential campaign, that has changed.
Since then, Facebook and co. have been under fire and Marc Zuckerberg had to admit last year that the future is private.
With a lot of power comes a lot of responsibility and more and more the question arises where all this leads to and if these mega companies are managed correctly.
Whether antitrust suits against technology monopolies are helpful here, I can’t really judge.
My personal wish would be that Facebook and Co are run with more responsibility and more ethics in terms of power and profit. We need open and inclusive platforms where people have sovereignty over their data. In Europe, we have created a very good framework with the DSGVO and PSD2. They could allow Europe to become a leader again in the current privacy debate in terms of data protection and data use. What we need is a European standard to make companies competitive again and enable them to share their data, giving them the opportunity to develop better and more relevant products.
