How the Frightful Five Shake

How the Frightful Five Shake Down Startups in the Valley Amazon, Apple, Google, Facebook & Microsoft have created an ecosystem that enriches themselves even when they don’t think of the best ideas first

Farhad Manjoo

New York: The tech giants are too big. But so what? Hasn’t that always been the case? As the men who run Silicon Valley will be the first to tell you, a company’s size doesn’t matter here. For every lumbering Goliath, there are always one or two smarter, faster Davids just now starting up in some fabled garage, getting ready to slay the giants when they least expect it.

So if you’re worried about the power of the Frightful Five — Amazon, Apple, Google, Facebook and Microsoft — just look at how IBM, Hewlett-Packard or monopoly-era Microsoft fell to earth. They were all victims of “creative destruction,” of an “innovator’s dilemma,” the theories that bolster Silicon Valley’s vision of itself as a roiling sea of path-breaking upstarts, where the very thing that made you big also makes you vulnerable. Well, maybe not this time. The technology industry is now a playground for giants. Where10 or 20 years ago we looked to startups as a font of future wonders, today the energy and momentum have shifted almost completely to the big guys. In addition to the many platforms they own already, one or more of the five are on their way to owning artificial intelligence, voice assistants, virtual and augmented reality, robotics, home automation, and every other cool and crazy thing that will rule tomorrow.

Startups are still getting funding and still making breakthroughs. But their victory has never been likely (fewer than1% of startups end up as $1-billion companies) and recently their chances of breakout success — and especially of knocking the giants off their perches — have diminished considerably. The best startups keep being scooped up by the big guys (see Instagram and WhatsApp, owned by Facebook). Those that escape face merciless, sometimes unfair competition (their innovations copied, their projects litigated against). And even when the startups succeed, the five still win.

Because today’s giants are nimbler and more paranoid about upstart competition than the tech behemoths of yore, they have cleverly created an ecosystem that enriches themselves even when

ROLLING IN THE DEEP

they don’t think of the best ideas first. The five run server clouds, app stores, ad networks and venture firms, altars to which the smaller guys must pay a sizable tax just for existing. For the five, the startup economy has turned into a heads-I-win-tails-you-lose proposition — they love startups, but in the same way that orcas love baby seals. There is perhaps no better example of this dynamic than what has happened to Snap, the company that makes the disappearing messaging app Snapchat.

After failing to buy Snap several years ago, Facebook repeatedly tried to copy its key innovations. This year, when Facebook lifted Snapchat’s Stories feature for Instagram, WhatsApp and Facebook’s main app, it seemed to deliver a death blow. — NYTNS