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American Tech Giants Are Making Life Tough For Startups (economist.com)
An anonymous reader quotes a report from The Economist: Venture capitalists, such as Albert Wenger of Union Square Ventures, who was an early investor in Twitter, now talk of a "kill-zone" around the giants. Once a young firm enters, it can be extremely difficult to survive. Tech giants try to squash startups by copying them, or they pay to scoop them up early to eliminate a threat. The idea of a kill-zone may bring to mind Microsoft's long reign in the 1990s, as it embraced a strategy of "embrace, extend and extinguish" and tried to intimidate startups from entering its domain. But entrepreneurs' and venture capitalists' concerns are striking because for a long while afterwards, startups had free rein. [...] Venture capitalists are wary of backing startups in online search, social media, mobile and e-commerce. It has become harder for startups to secure a first financing round. According to Pitchbook, a research company, in 2017 the number of these rounds were down by around 22% from 2012 (see chart).
The wariness comes from seeing what happens to startups when they enter the kill-zone, either deliberately or accidentally. Snap is the most prominent example; after Snap rebuffed Facebook's attempts to buy the firm in 2013, for $3 billion, Facebook cloned many of its successful features and has put a damper on its growth. A less known example is Life on Air, which launched Meerkat, a live video-streaming app, in 2015. It was obliterated when Twitter acquired and promoted a competing app, Periscope. Life on Air shut Meerkat down and launched a different app, called Houseparty, which offered group video chats. This briefly gained prominence, but was then copied by Facebook, seizing users and attention away from the startup. The Economist goes on to state three reasons why the kill-zone is likely to stay: "First, the giants have tons of data to identify emerging rivals faster than ever before. Recruiting is a second tool the giants will use to enforce their kill zones. A third reason that startups may struggle to break through is that there is no sign of a new platform emerging which could disrupt the incumbents, even more than a decade after the rise of mobile."
The wariness comes from seeing what happens to startups when they enter the kill-zone, either deliberately or accidentally. Snap is the most prominent example; after Snap rebuffed Facebook's attempts to buy the firm in 2013, for $3 billion, Facebook cloned many of its successful features and has put a damper on its growth. A less known example is Life on Air, which launched Meerkat, a live video-streaming app, in 2015. It was obliterated when Twitter acquired and promoted a competing app, Periscope. Life on Air shut Meerkat down and launched a different app, called Houseparty, which offered group video chats. This briefly gained prominence, but was then copied by Facebook, seizing users and attention away from the startup. The Economist goes on to state three reasons why the kill-zone is likely to stay: "First, the giants have tons of data to identify emerging rivals faster than ever before. Recruiting is a second tool the giants will use to enforce their kill zones. A third reason that startups may struggle to break through is that there is no sign of a new platform emerging which could disrupt the incumbents, even more than a decade after the rise of mobile."
That's why the next disruptors will be entirely distributed. Google, FB, Amazon and Co. are todays AOL and CompuServe, plain and simple. They bascially own the web. Cracking that stronghold will likely only happen with fully distributed services. I expect something like this to show up with the next 5 years or so.
In a way I'm looking forward to that.
We suffer more in our imagination than in reality. - Seneca
cease fire stand down, there's moms & babys in every town.. the corepirate nazis will flee with our assets as they attempt to wipe us out... in every sense of the word.. truth+mercy=justice so we never needed overlords anyway?
1. Copying features.
Great, this means we get more features.
It also shows the futility of patents and copyright.
These things only serve the established and dominant corporations because it raises the barrier to entry.
2. Buying competing companies
Great, rewards innovators for their work, motivates more to do the same and also get paid.
This is the free market as it should be.
Much better than in markets where government meddles, actually fucking things up.
The only problem here could be things happen that the writer doesn't like.
1. Copying features. Great, this means we get more features. It also shows the futility of patents and copyright. These things only serve the established and dominant corporations because it raises the barrier to entry. 2. Buying competing companies Great, rewards innovators for their work, motivates more to do the same and also get paid. This is the free market as it should be. Much better than in markets where government meddles, actually fucking things up. The only problem here could be things happen that the writer doesn't like.
Thank you, Bradley Manning, Edward Snowden and so many others, for courageously defending humanity, my freedom and more!
there is no sign of a new platform emerging which could disrupt the incumbents, even more than a decade after the rise of mobile."
Google developed Android strictly as a defensive play to prevent them from getting locked out of the mobile ad market (their overwhelmingly primary source of revenue) by Apple, Microsoft, Blackberry, Nokia, and others. In this they succeeded wildly and it will be very hard to displace them.
All of these big tech companies have VAST amounts of cash available to them. They could easily buy most companies that present a threat to them or buy their way into entirely new industries if they wanted. Apple literally has enough cash to buy both Ford and GM and Fiat Chrysler at their current market capitalization. Microsoft and Alphabet/Google and to a lesser degree Facebook are similarly comfortable.
2. Buying competing companies
Great, rewards innovators for their work, motivates more to do the same and also get paid.
The problem is that very often this is done by the buyer corporation for 2 goals :
- Stop the competitor
- Acquire the talents and mind behind the startup to use them.
It usually doesn't include the goal that interests most end-users :
- Keep the startup's project alive thanks to bigger infrastructure.
- Usually that project get shut down, and the brains reassigned to the corporation other targets/projects.
Facebook's keeping alive competing social networks WhatsApp and Instagram after aquiring them is mroe the exception than the norm.
(Mostly due to very strong generation cycles in that market: Facebook the social network will eventually follow MySpace and die as well, and Mark Zuckerberg has been very carefully planning the follow up by sucessfully buying any upcoming future successor).
So although the devs get money that rewards them for the hardwork, users might lose an interesting alternative, and get a less diverse eco-system.
"Sufficiently advanced satire is indistinguishable from reality." - [Tips: 1DrYakQDKCQ6y52z6QbnkxHXAocMZJE61o ]
Seems appro here.
...they pay to scoop them up early to eliminate a threat.
That's my exit plan. My investors demanded a certain ROI (or I get nothing) - and waiting to go public was snickered at (I was even coached NOT to say that during the presentation!) - and if some Big Corp comes by and makes an offer that gives them the return they want, we're selling.
Bitch and moan all you want about buy and extinguish, but I have no problem with it.
For those of you that do, do your own thing and you stick it out and deal with the pressures from the investors.
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Despite Google claiming their search results are fair, I never saw any Vimeo videos in the video tab...
I don't see what the problem is. If your startup consists of offering trivial technology, you get lots of competitors, including from established players. These companies weren't even the companies that were the first to commercialize their idea, they were simply companies that happened to make a name for themselves.
There are tons of startups that companies like Google, Facebook, and Apple have not been able to clone.
That's why the next disruptors will be entirely distributed.
You're going to have something more distributed than the internet? Good luck with that. I understand your argument and it's not a foolish idea but "more distributed" runs into some real world limits and it has little effect on certain companies including I think some of the ones being discussed here.
Cracking that stronghold will likely only happen with fully distributed services.
Conceivable but unlikely. The risk to each company is different. It's not likely to be something so obvious as a more distributed version of the internet or their particular services. It will have to be something quite different that they don't really perceive as a threat - at first.
I expect something like this to show up with the next 5 years or so.
I'll take that bet. You might be right but I seriously doubt we'll see anything that displaces the bit tech companies in this generation.
Grandstanders, Tthe
If your idea is simple and easily cloned then you didn't have much of a business.
If your idea is simply and *not* easily cloned then hot dog maybe you actually put some work into it.
Except they developed Android at the same time as Apple started developing iPhone and they did not really know about each other...
Google didn't need to know about the iPhone to know there was a threat to their ad revenue from a mobile device maker controlling their ability to reach end users. At the time they were probably more worried about Microsoft or Nokia or Blackberry but the threat was the same. They also probably were concerned about AT&T, Verizon and that bunch too having too much control over the software and ad platforms. Nobody really could have predicted the iPhone would be the smash hit it turned out to be but people were WELL aware prior to the iPhone that mobile was going to be a big thing and there was a lot of money to be made in mobile ads. So Google very astutely developed Android as a defensive play to protect their primary source of revenue. Google didn't need to actually make money on it, they just needed to make sure it kept their cash cow producing.
Same reasoning that Microsoft used in trying to get the XBox to market actually. Microsoft was worried (with some justification) that Sony would be able to supplant the PC by putting a computer on the TV. In hindsight it was obviously less of a threat then they feared but at the time it seemed like a genuine risk because nobody really knew what direction the market would take.
Rockefeller made it easy for anyone to sell kerosene to light lamps in USA? He colluded with railroaders like Vanderbilt and made it impossible for anyone to compete.
Edison's General Electric executives actually ended up in jail for violating Sherman antitrust anti monopoly laws.
Yes, there is probably a kill zone around today's tech giants. But it is a metaphorical. But back in the days, the kill zones were real.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
American Tech Giants Are Making Life Tough For Everybody.
Google bought Android when they were already developing a smartphone OS. It originally was going to compete with the Blackberry, as early prototypes had a Blackberry style keyboard and windows-style task switcher. Once the iPhone came out, they redesigned the OS to be touchscreen-based.
Android Pre-iPhone:
https://www.androidcentral.com...
Android Post-iPhone:
https://support.t-mobile.com/_...
My Other Computer Is A Data General Nova III.
Google didn't develop Android at all, they bought it. And Android development predates iPhone.
They bought it and then they developed the crap out of it. Android did not stop being developed after Google purchased the technology. The argument that Google bought Android and didn't develop it is an idiotic argument that only made sense for about a year. There is no real difference between developing a tech in house or buying a company that developed the tech and continuing the development in house after that. ZERO difference.
If Google or Apple fail to invest heavily in Android/iOS development, their platform will fail within a few years, just like all the previous mobile platforms.
Do you seriously think either of those companies is not well aware of that? What exactly is your point?
So what?
Do I really have to explain to you that having enough cash to completely abandon your original business and enter a new one is a big deal? Let's say the iPhone killer comes out tomorrow from MythicalTech Inc and Apple has no response to it. Does that mean Apple is dead? No. They could simply buy General Motors and become a car company tomorrow if they wanted to. That is a big deal.
Back in the '90s, in the so called "long reign" of microsoft, you needed 100s of millions just to set up the infrastructure you needed for your startup.
Nowadays, with IaaS and PaaS, setting up and scaling your initial infrastructure, is a piece of cacke, and cheaper (and tax deductible) to boot...
So no, I think this is a great time to launch a SW startup.
Finally, if a big thech firm acquires you early on, that's a great way to get an exit, which, VCs shuld love...
Now, being out-compteded by a bigger rival, that's never fun.
*** Suerte a todos y Feliz dia!
If all the startup has to offer is an idea like group video chat, it is going to fail. Ideas are cheap and easily copied. That's always been the case, there is nothing new in this "kill zone." There are reams of analysis on how and when first mover advantage translates into long term business success, and one common thread is that you need a lot more than just an idea.
This posting is provided 'AS IS' without warranty of any kind, implied or otherwise.
Group video chat?
Implemented yonks ago in other apps as well. Even google had it.
And all it is is an improvement on existing apps.... which is kinda a bad business model.
Seems to me these guys killed themselves off.
If start up has no technological now how, but just innovative business model or product approach. It becomes just a prototype application for larger corporations. Large corporations are not capable to innovate since they mostly foster and populated by corporate jerks culture, so that product culture is very eager to clone any ideas available on the market in order to stay afloat in the corp.
On developers code side it is quite similar situation, developers steal others ideas and code them into open source publications. So algorithm which took to research several years are almost instantly copied into open source projects over night.
I am working for many years already and the level of copy paste is north american companies is at historical height. Working for last 10 years at one large corp and at 2 medium size start up I have not seen a single original idea produced in the company. Copy pasting is dominating all decisions being made in the company
Google bought Android when they were already developing a smartphone OS.
Makes precisely zero difference if they started development in house or if they bought the tech and continued to develop it. Historical trivia about how the development process happened is unimportant to my point. The important point is A) Google recognized a threat to their business in the mobile market going forward and B) they developed (and yes bought) technology to defend their revenue streams.
First, the giants have tons of data to identify emerging rivals faster than ever before.
This is exactly why MS is buying GitHub, and, news flash, why GitHub even exists in the first place.
They also get data from:
- your facebook mentions, shares, private chats, etc.
- your Google Docs, Forms, chats, emails, etc.
- your twitter/instagram/snapchat/facebook/youtube/etc followers and followees (social graph)
why do you think these things are 'free'? You didn't think it was just about selling ads did you?
If you are developing derivitave shit, like group video chat which has been around for a decade, then of course any big player can come along and do the same thing. Startups should develop new products, not new brands.
Remember when businesses used to talk about competitive advantage? I.e. the thing a competitor couldn't easily replicate? I'm not shedding a tear for a startup that doesn't have one. And again, boo hoo about getting acquired. This is how it works. Take a look at military tech. small companies exist, but basically once you become valuable, you are acquired by one of the 5 big defense contractors because R&D is expensive compared to just buying the winners.
I do security
Not sure what your point is.
Even IBM couldn't develop a successful OS against them.
Such is the way of things.
or have people stopped founding companies to run a business and started doing it just to get bought out? It's not like they have a choice, it's like the mafia. They come in and say, "Nice business you have here, shame if somebody were to copy it and then bury you with patent lawsuits". And if all else fails they come in with several billion dollars since, hey, the cash was just sitting around in an overseas bank account anyway.
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It's been going on since the dawn of capitalism. J.P. Getty, John D. Rockefeller etc have been either buying up, or tanking prices to drive out the competition for centuries. If they get "too" big, then it's time to break them up. Standard Oil, Southwestern Bell (At&t)
...distributed.
At minimum they have centralized developers calling the shots, at worse they have centralized 'seed' servers to get you up and running that act as de facto gatekeepers to the network. Both Tor and I2P have anonymity weaknesses that given adversaries with the network access of 5 eyes would not be difficult to leverage to deanonymize both hidden services and end users, at current end user and relay node counts.
Now you can say 'But Tor and I2P are sooo last generation!' but 'Skywire and Althea claim to be next generation' and both of those are tying themselves to virtual currency microtransactions and low latency packet routing which are very likely to have an even wider range of deanonymization techniques used against them before a full understanding of the threat models is worked out in 10-20 years time, at minimum. And by then will there still be a free internet to save, develop, or protect?
As a final parting thought: none of the aforementioned projects have anonymous developers. Most of them are being developed by citizens of first world nations involved in 5 eyes. How can you trust any of them to not be compromised by their respective governments due to their public views, or their yuppie financial lifestyles?
Makes me all eager to do fucking nothing
mouthed know it alls who's only response to workplace complaints is "well if you don't like your employer's rules, then start your own company". If it was truly a free market, companies like Facebook and Microsoft would have a hard time staying so large because they wouldn't have access to rent seeking through lobbying local, state, and federal government.
i am so very tired....
The disruptors are happening, but they are not in the US. China, India, and other countries have their own companies, backed by the government that are breaking ground. For example, Taobao and Single's Day made more revenue than the Christmas holidays. Alibaba, Tencent, and Yandex are booming, while Google is still begging to be let into the party.
Notice when the current giants in the market became giants: after the passage of Sarbanes-Oxley, which made it far more difficult for mid-sized startups to go to the public markets for funding. When the only practical exit strategy left to you is to be bought out by a Facebook, a Google, an Apple or a Microsoft, then the only strategy you have left as an entrepreneur is to figure out what will get you bought out, rather than going head to head with the large companies as Google once did against a Lycos or an Altavista.
Without the additional requirements in Sarbanes-Oxley which made accessing the public markets much harder, would we be talking about Github being bought out by Microsoft? Or would be be talking about Github's IPO?
Things like Diaspora can in theory be made as easy as (legit) BitTorrent. The tricky parts of any distributed communication app are
1. Integration with domain registrars to give your home computer a globally unique name.
2. Integration with UPnP or other home gateway configuration protocols to make your home computer reachable from the Internet.
3. Convincing ISPs to turn on IPv6 so that your home computer isn't stuck behind carrier-grade network address translation (CGNAT) with dozens of subscribers on one IP address.
Well, think about it for a minute. Almost everyone is running their own instance of communication programs.
These programs can make outgoing connections but not listen for and accept incoming connections. This is because most non-technical users aren't in a position to forward ports. Either they don't know how to operate a home gateway's port forwarding interface or they're behind an IPv4 address shared with other subscribers.
I'm sorry, but turning down $3 billion? I would have sold out for a thousandth of that.
(-1: Post disagrees with my already-settled worldview) is not a valid mod option.
This is a classic example of the critiques of capitalism and the failures of an unregulated market. The market by itself will not regulate monopolies on its own.
... that monopolists use their monopoly position to crush potential competitors and bleed their customers dry.
Also, water is wet.
Details at 11:00.
WTF?!?!?!
These monolith corps need to be reigned in. That is what regulations are for.
I suggest a capitalism cap at $100M. Anything after that goes to social services and tax programs.
Self-importance and self-indulgence is the root of ALL evil.
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You seem to be pointing to some things you don't like and concluding "therefore government should step in".
I know you tend to see us Europeans as communi-lefties that want to throw an evil-tyrannical-overreaching government to legislate the shit out of everything, but at no point in my post did I invoke it.
I was simply contrasting the parent poster's positive side of acquisition (usually the dev of the startup can reap the [mostly financial] benefits of their hardwork)
With the negative side : users are usually on the losing side, because the startup's own service/product is actually going to get shut down fast, because most often the corporation are looking to shut down competitors and move brain power to their own project.
(Facebook keeping WhastApp and Instragram alive on purpose is more the exception than the norm.
Google replacing their own failing Google Video with the much more successful Youtube is bordering on it - though its almost not "buying competition" but closer to the "buy someone from a new sector to gain a new market" - see Microsoft buying LinkedIn, Skype, Hotmail, etc.)
This requires a very dangerous assumption: that government will do what you want.
{ The US even has laws against a platform like Facebook, Twitter and Youtube censoring conservatives. }
It's just that laws are implemented to serve the ruling class.
So where do you get the idea that any law will be used to serve the people?
You know there's this thing called "direct democracy".
It works. You should try it sometimes.
The whole idea is that you vote what you want to force your government to do (= direct democracy),
instead of voting for some random idiot making empty promises on the TV, and hoping that he'll somehow keep his promises once in power (= representative democracy).
People choose to keep using Facebook to the extent they feel it provides them with value.
We may not like it, but value is entirely subjective.
Actually, part of my rant went the opposite way :
- Facebook *is starting to provide less and less* value to new generations of customer who know it and eventually decide to go somewhere else (nothing new, same thing happened with any other predecessors in the "social media" category - e.g.: MySpace mostly died out).
- Mark Zuckerberg knows this phenomenon perfectly well.
- That's why he's been buying upcoming startup: He's not actually shutting down competitors and "aqui-hiring" new talent (like most giants), he does indeed buy startups with the purpose of keeping them because he tries to find out the most likely new comer that will eventually succeed to Facebook.
- Giving the current popularity trends of Instagram and WhatsApp (the current day popular trending social networks), he's been indeed successful (he was correct in predicting which "Facebook successors" to buy).
"Sufficiently advanced satire is indistinguishable from reality." - [Tips: 1DrYakQDKCQ6y52z6QbnkxHXAocMZJE61o ]
I'm Dutch and don't see a significant difference between the US and Europe. The US became more and more socialist from 1924 until Reagan. But Republicans love big government too.
Most of Europe here around is paying education through taxes, making it accessible for free for anyone.
On the other side of the Atlantic pond, US still pays universities mostly through horrendously high tuition, making it hard to get education, unless the parents are very rich (slowly evolving to an almost caste-system of 1%ers) or you get yourself in huge debt (hello almost indentured workers).
Most of Europe here around has universally accessible health care (the CH being the oddball out), so that getting sick is just a matter to going to the hospital or the doctor.
On the other side of the Atlantic, US only very recently started to have something approaching a health care system. Usually getting any serious sick is guaranteed to make one financially bankrupt.
We have social welfare programs, to the point that it's not trivial to become homeless : in the US all it takes is financial problems to get you kicked out. In most European country, one need to have psychiatric problem preventing to be able to organize help, making mentally unable to go get social service involved, etc.
Here around we actually have public transportation. In several country you can get around quite easily in every day life and as a tourist even if you don't have a driving permit. In the US, not having a driver license makes life nearly impossible except in couple of densely populated cities.
We actually have laws regarding privacy (though there's strong pressure in several countries to erode them on the grounds of "security").
In several countries we have very strong consumer rights association that make sure that we don't get horribly toxic shit packaged as "food" in the market.
US is the only developed country that is falling back and losing point on several international metric of happiness/well-being/etc.
Safety: Only people in the US seem to think that one needs to always be able to constantly carry around lethal force capable obliterate any random person, just to "feel safe" on the street. Most of European feel safe anyway, thank you very much, no need to have tons of dangerous weapons disseminated around.
Nope. To me there's still quite significant differences.
That's why I said "You seem to", so you don't want government to meddle with this stuff?
No, I'm not interested in the government meddling.
I only wanted to point differences.
Parent posters says acquisition are good for the devs, because they get money.
I'm just saying that acquisition aren't that good for users, as they get useful services shut down.
No more, no less.
Just contrasting stuff. That's it.
With the negative side : users are usually on the losing side
And I explained why you're wrong.
You don't understand. I'm not advocating for anything.
I'm just saying that acquisition leads to competing services getting shut down,
and users are losing because services useful to them disapear.
That's all.
I'm not trying to get government involved, I'm not need you to point out while if government gets involved all hell breaks lose and the end of the world is coming.
I understand why people want government.
If you want my opinion of government : there are things that a free market won't magically solve by itself.
Most people will tend to be driven by very short-term benefits (mostly profit), they won't be paying attention to longer-term problems, large scale problems require coordination of multiple parties, and problem requiring to take action that won't bring some immediate problem.
A government is a form of organization that, despite all its short comings (potential for corruption, administrative bureaucracy, etc.) could still be
"Sufficiently advanced satire is indistinguishable from reality." - [Tips: 1DrYakQDKCQ6y52z6QbnkxHXAocMZJE61o ]