(The Big Disrupt) Spotify: an admission of folly

No stranger to hyperbolic statements, we predicted that Apple, based on their pile of cash and large reach would lay waste to rival music streaming services including Spotify who at the time (and, for the most part now) were losing money by the barrel but four and a bit years later, Spotify is still a top the music streaming heap despite Apple’s best efforts to strangle the Swedish based company’s market leadership. 

Since Apple launched Apple Music Spotify has gone from strength to strength despite Apple’s attempts to undermine the company’s growth which, as Spotify founder and chief Daniel Ek predicted when Cupertino based company stated their intention to enter the marketplace.  

Ek saw what many (in including us) didn’t as he rightly forecasted that apple’s involvement in the marketplace would be a good thing as the company large reach would be exposed to what Spotify had to offer as well as other players in the space. Spotify has truly ridden this wave into global leadership in the marketplace despite Apple claiming a lead in the US. Apple are well behind Spotify when it comes to paid subscribers with spotify registering a whopping 100 million subs compared to Apple’s 60 million. What's more Apple’s growth in the marketplace is slowing while spotify’s growth continues largely because of the company willingness to play with others, a chink in Apple’s outright bulletproof armor. 

However, it’s fair to argue that Spotify has to play well with others as it doesn’t have either the cash or ambition to be as vertically integrated as its main rival which leaves it with no choice but to secure partners that can help combat the still intimidating advantages Apple have over them. Apple hasn’t been shy about using these advantages whether it’s using its app platform to promote its service over what many see as the superior product or levying a “tax”, as Ek called it, on a competitor. Apple’s may have worked as iPhone are more likely to use Apple Music than Spotify on their platform but, with the noise made by Spotify, may have landed the smartphone giant in hot water with the EU who announced that a formal investigation will be launched back last May. 

There are many reasons why Spotify has survived Apple’s attempts to put them out of business and once again bring the music industry to heel, but the main reasons why Spotify has largely thrived is a  massive nine year head start and, at least in the music streaming space, is the superior business as well as product which has won the day for Spotify (for now at least).        

In sum, this is an incredible feat as serves as one of the few examples that first mover advantage still matters in a space where being first to move is usually perilous (just ask yahoo and friendster before Google and Facebook showed up). However, what really makes this special is that Spotify are doing this were good companies such as Netflix is risking bankruptcy to compete despite being a long-time market leader. To wrap up, whatever happens in 2020, it would be no surprise if Spotify humble doubters like us and show us that smart business still has merit.    

(The Big Disrupt) Apple: Why Apple Are Scaling Back Their Driverless Car Plans

With the news of Apple joining Google in scaling back its driverless car plans and focusing on developing driverless car OS software, it's clear that the future of the driverless car won't be lead exclusively by Silicon Valley.     

Silicon Valley is littered with companies that considers its vision of the future before plain economics but when you have two of the most highly capitalized companies in the world take a step back as far as their self-driving car ambitions are concerned, it's quite clear the reality of how capital-intensive designing and manufacturing self-driving cars at scale has would be has hit home for Silicon Valley giants Google and now Apple. 

The only reason why Google and Apple are so interested in driverless cars in the first place has very little to do with changing the way we get around or making roads safer and more to do with expanding their already large and formidable ecosystems. However, it seems (wisely) that neither Google or Apple are willing to waste their considerable resources on designing and producing self-driving cars at scale to expand their ad inventory or head off increasing concerns about their dependence on iPhone sales. 

Add to that the legal, regulatory and even philosophical roadblocks that stand in the way of driverless cars seeing the light of day even if they're road ready at level 4 or 5 capacity in the next five to ten years is enough to give pause to any company managed by executives with their heads screwed on straight. However, what may have been the deciding factor in Apple limiting the scale of their driverless car plans is the muddy economics of making money from the final product. 

It could well take Apple years to make money on billions invested in R&D, acquisitions and political arm twisting in Washington and Brussels just to get a small fleet of driverless cars they would most likely would have subsidise at great cost. Apple would then have to reckon with the rarely addressed fact reflected in just about every car consumer poll that not everybody is dying to get from A to B in a car without a steering wheel or brake.  

Even automakers are realizing the economic viability of driverless cars are murky at best which is why Ford recently announced that they plan to have a driverless fleet ready by 2021 which would put it in direct competition with rideshare companies Lyft and Uber. However, such an announcement only highlights the questions surrounding the potential profitability of getting driverless cars to market. Both Uber and Lyft are losing money with Uber reported to have made an eye watering $3 billion loss last year. While much of Uber losses have been driven by the cost of paying human drivers a larger cut of fares collected from customers, it's still no guarantee Apple could see a return on what would be a sizeable investment.              

While Apple have pockets deep enough to eat large losses to expand their ecosystem, it's no surprise Apple are taking a step back as it would be cheaper to simply buy an automaker, most likely General Motors or Tesla, to mass produce driverless cars in the future. A big acquisition in the driverless car space looks almost inevitable as automakers don't have the cash or reach to take Apple or Google on directly and neither Google or Apple seem keen on becoming car manufacturers which is why automakers and tech companies have been partnering up left and right. 

What this all means is that we may have to wait a little for our first ride down the block in a driverless car.

(The Big Disrupt) Amazon: The Four - What To Do by @l2

(The Big Disrupt) Amazon: Is Amazon about to be broken up?

It's long been held that the first rule of business is that " the customer is always right" but of late the first rule of business looks like it needs a reappraisal that sounds something like "don't fuck with Amazon" 

with Amazon virtually sabotaging meal kit company Blue Apron IPO coming out party and wiping billions off the market caps off big box retailers with a few well-placed press releases, there has been a lot of talk that Amazon is becoming too powerful to exist in its current state which has led to predictions that the Seattle based behemoth may be broken up. 

Predictions of amazon's fractured future looks ominous as it even begins to make significant inroads on fellow giants Facebook, Google, and Apple (often described as the four horsemen) in key markets particularly cloud and voice where Amazon is beating them. Amazon is even threatening the Google and Facebook ad duopoly with  ad agency WPP and L'Oreal upping their ad spend on the platform as Amazon is quickly becoming the venue where consumers are searching and buying products on the net.  

However, the nature of US antitrust law means Amazon's dominance will largely go unchallenged as unlike the European antitrust tradition, US anti-trust law are geared towards protecting consumers rather than seller or producers from dominant firms who exercise their market power unfairly. 

However, this hasn't stopped Amazon running afoul of the Federal Trade Commission (FTC) which is currently under intense pressure to review Amazon game changing acquisition of high end grocer Whole Foods for just under $14 billion dollars. Whether the FTC succumbs to the pressure or not, it's hard to see what the FTC can do to stop or stall the acquisition given both companies represent a near negligible portion of the massive $700 billion grocery market and with Amazon almost certainly planning to lower Whole Foods notoriously high prices, the FTC have no real grounds to nip the acquisition in the bud. 

But the FTC, as Cleveland State University Law professor Chris Sagers pointed out in an article he wrote for Slate, can probe whether Amazon's dominance in is stifling innovation. Indeed, the FTC could have a field day probing the four horsemen on the grounds of stifling innovation as for all the idealistic rhetoric that comes out of Silicon Valley about disruptive innovation, it has suddenly become very dangerous for budding startups to even mildly challenge the four horsemen dominance, Amazon and Facebook in particular.  

Just ask Blue Apron, who at the time of writing are still trading below their IPO price and Snapchat who are hovering just above it how much it sucks going up against a company that can shamelessly copy your most innovative features or launch their own version of your service sending your stock in a tail spin because they have the reach, cash, and customer base to drive you and your direct competitors out of business before you've even started. 

Even successful and well-run companies such as Spotify and Netflix are feeling the heat of horsemen Apple and Amazon breathing down their necks forcing them spend more and more on content and attracting new customers like they're new players in the marketplace despite being market leaders by some distance.  It's now gotten to a point where startups are finding it hard to even compete without dealing with the four horsemen as they have by far the largest business ecosystems which means startups have often to compete against each other and the four horsemen while becoming part their large business ecosystems. 

The same thing is happening to companies that aren't even part of tech world such as CPG brands who increasingly have to do business with Amazon whether they like it or not even as Amazon embraces private label brands and takes a commanding lead in voice which poses a threat to the idea of brands altogether. We've seen similar relationships develop between publishers and the Google/ Facebook duopoly where publishers are increasingly being pulled into the orbit of Google and Facebook ecosystems just to get revenue they already lost to the duopoly in the open market. 

In sum, whoever Trump decides to lead U.S. competition policy will have tough time bringing a strong case against the four horsemen, particularly Amazon despite their dominance.