The “Big Giants Riddle”

Comments for EIT Digital Kickoff 2017

The business model of Google, or rather, GOOG… Wait! Does it still make sense to talk about Google’s business model? In one sense, they make most revenue from ads, and they offer a whole suite of consumer products to “capture” the foot traffic, e.g. mail, photos, search…

But really we should stop thinking about GOOG the way a startup thinks about creating a business. GOOG is such a behemoth, a mothership, and in many areas run by professional business managers, the corporate machine is extremely good at making a business efficient, at capturing and extracting value. They can go into almost any area, for example, Google Domains, and leverage their resources to build a profitable setup.

Now, let’s start thinking like economists, GOOG mostly applies business activities on an industrial scale — if we look at the oil drilling business, the railway transport business, massive amount of capital outlay, it’s about efficiency, it’s about applying capital at scale. GOOG is not a startup, it has predictable cash flow, it can support exploratory activities like Google X, like Waymo, that balloon internet article is an example. But then, there are rocket startups, whose SKUs are $5M per item https://youtu.be/jKvZPpdGjiM?t=15m25s so maybe startups can also be capital intensive?

Larger companies are able to have a multi-year strategic outlook, in terms of tech, or market readiness: https://youtu.be/1QztwBzcVaw Just try to search on LinkedIn, and you’ll see for a single department, say Amazon Alexa, and just count the recruiters, they have 100s! Most startups play at the levels of a KickStarter campaign, but how many failed devices just like Echo you’ve never heard of? To take a historical materialistic point of view, it’s the larger underlying economic trends that have more explanatory power: https://youtu.be/bNpx7gpSqbY more so than the people, and definitely their ideas.

The better question is to ask “How do new startups in Finland or Europe compete with GOOG or AMZN”?

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