The convergence of the big digital players

Technology and media are converging (technology needs content and vice versa) and it’s starting to form a coherent picture; a “unified stack” of content, services, products and channels. Activate.com’s latest Technology and Media Outlook perfectly captures how Facebook, Amazon, Google, Samsung, Disney or Microsoft are on a collision course.

The Tech & Media unified stack

The larger players are trying to conquer a maximum number of layers in the stack. Therefore, they are slowly, but surely, converging towards offering the same services, despite each starting from a different perspective (Google from search, Amazon from book retail, Apple from hardware, Disney from content).

The multiple layers the big digital players are addressing.

This table is interesting in a number of ways:

• It shows where each player is likely to put energy in the future if they want to offer the full stack of services. For example, if you want to predict the road-map of Google or Facebook, look no further; each empty space is where they will either launch new services or make acquisitions.
• The total absence of European companies is not an editorial decision, it is unfortunately due to the nonexistence of a major player on that continent. The only country that will give the US a run for its money is China.
• Read horizontally, this table gives a nice view of the maturity of the various layers. Content distribution and advertising are super crowded, while intelligent agents are just starting, and few players are actually paying attention to connectivity hardware. Amazon and Samsung are completely left out of messaging, the fourth point of entry to the digital world (after search, social, and apps, see my talk at Next for more on this topic) which is going to come back to haunt them in the near future, unless they acquire one of the remaining independent players.
• You can see the different corporate philosophies fighting for market validation: the full stack players (Amazon, Google, Apple, Alibaba, Tencent), the content focused players (Yahoo, Disney, Comcast, Sony), and Samsung that seems to be the only player focusing on technology while avoiding content.
• Three notable omissions that should have been added to the “products” list:
  1) Virtual reality — Facebook (Oculus), Microsoft (Hololens), Google (Magic Leap) and now apparently Apple are working on providing a solution to what looks to be, with internet of things, one of the important upcoming computer platforms.
  2) Drones — Amazon, Google and Facebook are all working on drone projects.
  3) Cars — At least two of these companies have car projects in the works (Google, Apple), and one is already a car producer (Samsung).

The report’s final slide (below) is a sort of road-map for technology investors. It lists all the independent players that are currently active in fields that the big guys need to start developing in. Expect many of these companies to get acquired in the near future as the big players work on making their stack more complete.

The key independent players — to be acquired soon by the big guys?

The bottom line:

• Tech giants will likely get bigger and more alike in the coming years.
• Increased convergence will bring increased competition. For all the talk we are operating in a “winner takes all market” this seems to indicate heated competition in the near future.
• There will be a wave of acquisitions in the coming months, probably at higher and higher prices as independent companies get scarcer.
• As technology converges, differentiation will come from content, business model (ad supported a la Google vs hardware supported a la Apple), ecosystem (how the different technological pieces fit together) and perhaps factors like level of care for user privacy and proximity to governments that use surveillance.
• The gap between Europe and the rest of the world is likely to widen further — unfortunately.

The full Technology and Media Outlook 2016 report is available on Slideshare here.