Do you how many people have said to me “Bob, you have not posted a blog in a long time!”?  None.  Despite this dispiriting lack of encouragement from you the reader, I soldier on knowing how you really feel!

Sky-High Platform Value Creation

For most of 2016, the articles about major software platforms (e.g., the FANG stocks, such as Facebook, Apple, Netflix, Google, AirBnB, Uber, Amazon, etc.) were about value creation.  And, don’t get me wrong, these articles continue.  For instance, ICYMI, the New York Times recently ran a great article on the best investments since 1926 with the following graphic:

Software platform market capsI’ve taken the liberty of highlighting some of the key software platforms driving valuations in the last 20 years.  (By the way, Mastercard, another platform winner must have just missed the list. Mastercard debuted with a market cap of $5 billion in 2006 and now sports a market cap of $150 billion!)  Of course, the private companies Uber and AirBnB do not appear on the chart.  They reportedly have valuations of $30-$70 billion+ and have been around 8-9 years without going public yet.

To High Profile Investigations

But lately, most of the press about these high profile software platforms has been about their possible “abuses of power”.  Hence, the bad pun that the FANGs are out!

  • Uber, of course, has led the way with scandal after scandal, including London revoking their license and  the latest governance mess
  • Facebook, Google and Twitter are all involved in the “Russian-interference-in-our-election-ad-mess”
  • Google is reportedly moving Google Shopping to a be a standalone unit after being fined €2.4 billion by European regulators for antitrust violations. Google is also under pressure from publishers to change their policies towards publishers with paywalls.
  • AirBnB is facing a grass-roots, semi-covert campaign by the hotel industry to regulate it (see here)
  • Amazon and Ebay face accusations of avoiding VAT taxes by MPs in Britain.

From Congress to Europe to US town halls, it is now fashionable to question the size, scope, and business practices of these gigantic FANG companies and other upstarts.

With Great Market Concentration, Comes Great Oversight

None of this is especially surprising if you know your business history.  Or if you understand the the “winner-take-most” dynamics of software platforms.  But the swiftness with which the tide seems have to have turned on these giants is rather remarkable.  There has been a perfect storm of events to focus attention on the power of these FANG platforms and others like them:

  • Election of a populist president
  • Russian involvement in the use of several FANG platforms to help elect this president and an initial dismissive reaction by at least Facebook
  • The Equifax mess (part of another oligopoly)
  • Uber-arrogance (pun intended)
  • Increasing awareness that the software industry creates tremendous wealth without creating a broad middle class (unlike previous industrial waves)

It all goes to remind you that if you are lucky enough to create one of these platforms, you not only need to gain the trust of and keep the multiple sides of your platform happy, you have to do the same for the “outside world”.  That outside world often includes many constituents whom your platform may have dis-intermediated or crushed with your success.  They really are out to get you!

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