The Bill Gates Line
stratechery.com
stratechery.com
Why didn't Yelp early on see that they could become OpenTable, or GroupOn? In China, services like Dianping combine all three plus mobile payments: Restaurant reviews, booking, discounts, and payment, and even delivery services.
Surely Yelp could have seen how other crowd sourced content farms became commodities? Yelp is trying to blame their problems on Search, but the real problem to me is that they failed to adapt their business model in the face of a sea change in computing and from mounting pressure from competitors like TripAdvisor.
The Yelp CEO seems to be indulging in the classic approach when your business model fails to resort to patent lawsuits, copyright lawsuits, or begging anti-trust regulators for regulatory capture.
I also learned the current Yelp is the pivot, as per Wikipedia, via Fortune [1].
> One day Stoppelman was looking for a doctor but had no clue how to find a good one. That gave him and Simmons an idea for a convoluted automated system in which people could e-mail friends asking for recommendations on, say, local doctors, and the answers would be logged at a communal site for everyone to see. Levchin floated the duo $1 million to build out the plan. It went nowhere. But the co-founders noticed an interesting tendency among the early users. People were writing unsolicited reviews of their favorite businesses just for fun. So Yelp switched tack. "I remember the moment that Russ said, 'There should be a way for you to write your own reviews without asking questions,'" Stoppelman recalls.
1 - http://archive.fortune.com/magazines/fortune/fortune_archive...
Business Entry > Click the XXX more reviews button (beneath tons of content) > scroll up and then search within reviews
Seems it even highlights the word just like on the website.
I remember I once found this and thought “Wow, their UX people don’t care”.
Their website design has been and remains just as awful as their mobile experience. What matters most, if not the only thing of value at Yelp, is their data and nothing else.
In my not so humble opinion they have never, ever had an enticing UX or product beyond basic reviews. Ever.
Just trying to get small changes in small tools and processes at companies I've worked at has taken a huge amount of effort and and a great deal of "that's not how we do it ... for no reason" resistance.
Long term plans are obviously still in the works but the overall idea I get is that Flickr's mobile experience going forward will be focused on consumption, while keeping most of the community engagement on the desktop site.
[0] http://www.amateurphotographer.co.uk/latest/photo-news/flick...
[1] https://www.metafilter.com/62394/The-Record-Industrys-Declin...
https://en.wikipedia.org/wiki/Keiretsu
US companies tend to use wholly owned subsidiaries for stuff like that.
The steering wheel in my 90s pickup has the United Technologies logo on the casting. That's almost a completely different industry (aerospace and civilian automotive doens't have a as much common supply chain as you'd think).
This article talks a bit about the conglomerate break-ups of the 70s, which includes a great graph showing the rise and fall of such:
article: https://www.cbinsights.com/research/disrupting-management-co...
graph: https://s3.amazonaws.com/cbi-research-portal-uploads/2018/05...
Conversely, when money is cheap, you can just incorporate all your verticals as freestanding entities (aka "startups"), often beneath a decentralized control structure (aka "cabal of venture capitalists who collude with one another") through which you maintain influence over them without incurring any of the unpleasant legal ramifications caused by explicitly linking the verticals together in the eyes of the law. You can do this latter decentralization thing since you're freed from the frequent need to move money between verticals, and can instead just pump money into them (if necessary) every year or two (aka "funding rounds").
However, I have no clue how Asia works.
Other good examples are Unilever, Google, Apple, Freeport McMoran, Tata Group etc. Once you bring China into the equation it becomes more difficult to trace the global connections due to massive state ownership, but I'd be surprised if they didn’t have interests in many global conglomerates.
This isn't really conspiracy theory, this is just how a global economy is evolving amidst multiple conflicting interests and regulatory bodies.
Berkshire Hathaway is an extremely good example. It includes a wide variety of companies that like to spin off cash, such as See's Chocolates, combined with a core insurance company that could need access to very large financial reserves. According to http://www.berkshirehathaway.com/letters/2017ltr.pdf they are operating under the assumption that a $400 billion catastrophe has a 2%/year probability, and they are prepared to weather such an event.
Another good example is Amazon. They are the humble bookstore that does everything from web hosting to delivering groceries.
The US ones are largely siloed collections of companies across a spectrum of industries.
The Japanese ones are strongly vertically integrated. I was told when I was sponsored by Yamaha for international ski racing competition and at one of their testing camps: 'we mine the ore, make the metal, make the machines that make the tools, make the tools, and then use the tools to make the products'. It's about both controlling the quality all the way up and down the value chain, and also capturing the value-add all the way up the chain (not sure how much of each).
I was quite impressed by their quality and technology, which was the prime reason I went with them. At the time, they were one of only two companies worldwide that could make a pair of skiis that was actually indistinguishable left/right to racers at our level (the other was Fischer which dominated the Swiss, Austrian teams and we wouldn't get their best race stock), and Yamaha had amazing ability to tune the performance properties. I'm quite sure that they could do it because of their strong vertical engineering and QA integration.
(Always seemed like a superior model to me, but I'm not a big biz guy, so what do I know?)
Edit: typos,clarity
I've never heard about Yamaha skis. But I am from Europe so in alpine skiing (FIS races) I just know the European brands (Rossignol, Fischer, Head, Atomic or even more obscure ones like Stöckli).
I'm not sure if Yamaha is still active in racing, but they had some really amazing skis, and they tried out a lot of interesting ideas. One of my favorites was a triple-core construction where two of the cores were a high-energy elastomer pre-stretched in the mold to ~5x their original length. The idea of this pre-load was to have a moderately soft flex but return a lot of energy as the ski un-bent as you exited the turn -- and it worked like crazy -- the best pair of GS skiis I ever had! I also had a pair of 220s to try for DH; they were not fast probably because they had too much energy and vibration on the straights, but they were an absolute blast for hi-speed free-skiing -- just crazy spring out of the turns -- I was sad to have to turn them back in since they weren't going in my race bag.
Fun times...
American companies aren't diversified in the same way because investors realized that breaking up a conglomerate maximizes the stock prices - the underperforming parts put a damper on the stock.
The main goal of having conglomerates is to modularize essential parts, in particular a financing branch that acts as a money pump through the whole group.
So by definition the companies from the same group are defined legally as separate units while fixing deals between themselves and protecting the other companies’ turfs.
https://dqydj.com/dow-jones-return-calculator/ may 1998 - may 2018 = 323.965%
http://www.macrotrends.net/stocks/charts/BRK.A/prices/berksh... May 1998 - May 2018 = 320%.
Is Google or Amazon not at the conglomerate level yet? Is it simply because their services and products are all on the internet?
I've seen the trend go the opposite direction - conglomerates are in now, because they give you nice steady dividends and less shock when one part of the company is failing. If not for AWS, where would AMZN stock be today? I've seen no serious effort on the investor level to break up these companies, and practically none politically (fledgeling movements on the far ends of the spectrum).
The pressure to break up a conglomerate comes from outside investors who don't have a stake in running the businesses. There have been hostile takeovers motivated completely by the anticipated profit from a breakup. I don't see that happening for either Google or Amazon.
But isn't AWS the same as Amazon, just instead of selling a new vacuum, its selling cloud compute? Its still e-commerce, just rebranded as "cloud provider."
- Billing: One bills you before shipping, the other bills at the end of the month.
- Cart: One lets you add items to a cart, the other lets you use products via API.
- Delivery: One requires warehouses all over the world, the other requires data centers all over the world. Only warehouses and data centers are so specialized that they aren't interchangeable.
- 3rd parties: One is a platform for creating online storefronts where 3rd parties can sell. The other is a platform that runs any code you want.
- One has a mass market audience of consumers, the other has a highly specialized market of developers.
Hmm, on second thought, maybe they are not the same business.
This is because of political influence/leadership. Such companies would not have existed unless there was a political will to build large conglomerates like the zaibatsu in Japan (same thing in Korea with Samsung that does about everything). This is hardly free market at work.
Besides, this is not what you think it is. Mitsubishi is actually composed of hundred of sub-group companies that have basically nothing to do with each other, and simply share a larger umbrella brand, but in effect act as semi-autonomous entities.
in markets which are corrupt or there is expectation of weak enforcement of contracts between different companies - the only viable option often is to acquire what you need under your own umbrella. This is an explanation I read somewhere for why conglomerates may have an advantage.
Why would I open yelp when my maps app has five star reviews built in?
Yelp was founded in 2004 and went public in 2012. By the time the mobile transition was really in full swing, they had accumulated a lot of institutional inertia. Their developers had spent years working on a big web app. They had a huge codebase that hadn't been designed with mobile in mind. They had a particular revenue model and brand image.
Turning that ship around requires courageous leadership. You need to recruit or retrain a lot of developers. You need to convince your shareholders to support a major investment that might not pay off. You need to gamble on a new business model that might undermine your existing revenues. You might need to navigate existing internal conflicts or risk creating new rifts within the company.
This is what makes startups so powerful. They're focused, they're not weighed down with institutional baggage and they have permission to fail.
I don't understand where this line of thinking comes from. Yelp has nothing in common with Flickr in regards to their business performance or somehow missing mobile.
Their business also hasn't grown stagnant in the mobile era, it has grown dramatically: 10x sales increase since 2011 (six fiscal years). If that's a failure to transition, it's one every business on earth would like to have.
2011: $83m in sales
2013: $232m in sales
2017: $846m in sales
In comparison, Asian companies tend to be sprawling, essentially having multiple operations. If there is a missing market, they will rather build it themselves than wait for a competitor.
You're implying what they should have done was obvious. Given the fact that none of the 'business listing' companies pivoted to become an Opentable or GroupOn maybe it wasn't that obvious.
Seeing an opportunity, and persuading others that it's a worthwhile opportunity, and executing on that opportunity, is exceptionally hard. Yelp did do a lot of the things you'd expect, but they failed to do them well enough (eg in a way that the market accepted).
> And I remember when we raised money from Bill Gates, 3 or 4 months after — like our funding history was $5M, $83 M, $500M, and then $15B. When that 15B happened a few months after Facebook Platform and Gates said something along the lines of, “That’s a crock of shit. This isn’t a platform. A platform is when the economic value of everybody that uses it, exceeds the value of the company that creates it. Then it’s a platform.”
Umm, not really. In the relatively early days of Facebook, Google allowed Facebook access to its "Contacts API" which let Facebook peek into your contacts and find out your GTalk/GMail contacts on Facebook. GTalk was the popular IM client pre-Facebook Messenger and your "social network" resided within your e-mail plus IM client. OTOH, Facebook did not allow access to its "Contacts List" citing privacy concerns (talk about irony!). Google eventually stopped Facebook from access to GMail/GTalk contact lists [0]. Facebook complained but did find a work around to export contact lists [1]. Twitter found a work around to get access to Facebook contact lists - by using the Facebook app for Twitter [2]. But lady irony died again when, Facebook blocked Twitter's ability to do so [3].
[0] https://techcrunch.com/2010/11/04/facebook-google-contacts/
[1] https://techcrunch.com/2010/11/08/facebook-finds-a-new-way-t...
[2] https://techcrunch.com/2010/06/23/twitter-facebook-friends-l...
[3] https://techcrunch.com/2010/06/23/facebook-blocks-twitter/
For example, a website review on Yelp winds up on Google, but a review from Facebook won't show up. Insofar as they're creating content in a walled garden that Google can't access, they're circumventing Google.
(It might not be the best usage of the word circumvent, but I still think it's clear what the author is going for here)
Companies like calling themselves platforms—more so in the modern times—because they can usually provide one or dimensions of value. For everything else, they need external entities to bring in value which in turn brings more users. Facebook, for instance, could have simply been a directory of friends, maybe with a chat feature and would have continued being that till the next Facebook took its place. They'd have never been a 'social network platform' However, to make money and commoditize the swath of data users were giving Facebook and in turn, make users give them even more data, they needed other companies to provide value in a few other dimensions—games from Zynga, articles from publishers, ads from everyone under the sun. For this, they had to become a platform and market themselves as such.
It is the same case with say Google where they needed companies like Rotten Tomatoes, or Wikipedia to exist so Google can make search results better. Platform today isn't what the Bill Gates quote indicates but is just a way for companies to meet their value providers halfway. I have the data, come build services on top of it. It is a win-win till it isn't—see the Weather Channel pulling out of FB videos[2].
Maybe platforms of yore vied to make their value providers richer than they are, but platforms of today are goldmines for value providers to commercialize that value. For instance, YouTube creators are the value providers without whom YouTube isn't valuable, but for those value providers to make money off the content they create, they are reliant on YouTube. Each YouTube channel is a company of sorts as many many YouTubers are doing it as their full-time job. To say that the value providers' companies should be more expensive than YouTube itself is a funny proposition.
Why? That’s the Gates Line. Why is it funny ?
To clarify, maybe these comparisons are not justified when we're comparing different kinds of platforms altogether. Infrastructure platforms still exist, like AWS and Azure. The solution is likely classifying—in Ben's terms— 'aggregators' into an entirely different bucket called data platforms.
When dealing with infra platforms, the value providers build things on top of the platform and that's where the relationship ends. If company A works on AWS and makes $X MM a year, it could still make the same $X MM if it is built on Azure (all infra costs being the same). Whereas, a content creator can produce the same video and would make less money by hosting on Facebook as compared to hosting it on YouTube. The platform has a direct impact on commercializing the content/value/whatchamacallit.
The author accuses 60 Minutes of not balancing the story. But does so immediately after noting that Google refused to talk to 60 Minutes.
Sounds like 60 Minutes tried to balance it, but Google wasn't interested in or capable of providing that balance.
An alternative would have been to get industry types to try to explain Google's side of the story, but that's not usually a good idea since nobody really knows what Google is up to except Google. Anyone else is just speculating.
Also, IMO the claim that 90% market penetration = abuse of monopoly power is very questionable. If the 60 Minutes team wants to run a story taking a clear position on a controversial issue, they ought to assign a team member to play the devil's advocate and point out where their key arguments are so flimsy as this. Then they can either remove or shore up these points. I don't think every news story has to give equal time to "both sides" of the story, but this story did appear to give 100% of time and thought to one side with no scrutiny about whether that side has 100% of the truth.
Google knowing not to give them material for their hit piece is just a sign that Google's press management is at least slightly competent.
So it would be a platform if you had a dominant company whose brushes would require certain kinds of pastes. Since most toothbrushes are completely interchangable as are pastes created by those same companies, there's nobody really building their business on top of any of those particular "platforms".
- you knew when a person was out of toothpaste and going to the store to buy it
- you could implement differential for customers, singling out the customer(s) who have run out of toothpaste
- you could control pricing for all stores at which customers could buy toothpaste
Then yes, you could extract the full value of your toothbrush product.
Whether this makes it a platform would remain up for debate. I'd just call it a toothpaste monopoly.
You're mistaken about what Gates meant by "economic value".
Funny how the largest tech companies and many silicon valley startups of this wave are trying to do the opposite.
Neither Facebook or Google are able to do this wholly, because their user adoption is based on content curation and personalized delivery of repurposed content (page rank, graph rank, feed).
SEO experts and Doubleclick partners make money only at the whim of Google's policies. Google can make or break a partner's revenue stream with just one change.
I'd posit that the economic value derived from Google's ad network, exceeds its own revenue from the ads by several fold at a minimum. The majority of the ad network value is going to the businesses that are doing the advertising.
Companies overall have used Google's advertising systems to such a massive degree, because the advertising measurably generates a greater sales/business return than the money they put into the ads. Google's ad network (which yes they ripped off from GoTo.com) was the first large scale advertising system in history to offer such an easy way to judge return on advertising spend. Previously neither radio, TV nor newspapers could offer the kind of instant information that Google ads could on performance (and often they didn't offer any accurate information at all, by which to judge advertising results). Businesses have been voraciously using it for all these years, because it has worked extremely well.
This is the problem, not that they are an aggregator.
What is the effect of Google? Is the web now more or less open than it used to be? Has any of that change been attributable to Google?
1) Google (not Reddit) is the "front page" of the modern world wide web. Before Google, it was AOL (which was a closed network with access to the open internet) and Yahoo. The public internet existed some time before the world wide web, and that was an important distinction back in the mid 90s.
2) Definitely a lot less open and more controlled and regulated in 2018. There was no dark web back then, it was just one web. My first online purchase was a pre-order of Diablo II, tax free and it took forever to arrive :)
3) Yes, Google has been the heaviest and richest lobbying power representing Silicon Valley in Washington for years now, ever since hiring Eric Schmidt and before debuting their IPO. Whether this is a good thing or bad thing will be the measure of how open (or closed) you think Google and companies like Amazon have made the web with their lobbying efforts.
Another oldtimer here. My internet use predates the web. I've been using it since the late 80's.
Wait wait wait, does InterNet have a precise date of birth?
What makes an internet an internet is that it's an interconnection of networks. In 1969, ARPANet is still only one network; by definition it's not an internet. So by that conception, maybe we should date the internet from 1977.
I skimmed that very article before asking my question. The internet isn't the kind of thing that really can be said to have one birthday, unless there's some kind of artificial-but-nonetheless-widespread consensus to declare one.
> The 60 Minutes report was not exactly fair-and-balanced; it featured an anti-tech-monopoly crusader , an anti-tech-monopoly activist, an anti-tech-monopoly regulator, and Yelp CEO Jeremy Stoppelman
Characterizing these people, especially Margrethe Vestager, as "anti-tech" (i.e. simply being against technology) when they're just critical of certain aspects and developments in the industry and don't paint such a rosy picture, is very misleading.
Anti tech monopoly. Against technology monopolies.
There's a critical difference.
> There are three problems with this argument [that the answer box is anticompetitive]... First, the answer box originally included content scraped from sources like Yelp and other vertical search sites; under pressure from the FTC, driven in part by complaints from Yelp and other vertical search engines, Google agreed to stop doing so in 2013.
This is not really a problem with the argument. Scraping content is just another form of anticompetitive behavior.
> Second, in a telling testament to the power of being on top of search results, Google’s ratings and reviews have improved considerably in the two years since that video was posted...
Also not really a problem. Blocking your competitors is probably going to help you gain more market share, which is a major factor in the quality of crowdsourced content.
> Third — and this is the point of this article — what Yelp seems to want will only serve to make Google stronger.
So, Google is incapable of engaging in anticompetitive behavior by blocking Yelp because they're really only hurting themselves in the long run if you really think about it? This is contorted reasoning. Even if blocking competitors is an ill-advised strategy, it is still anticompetitive behavior.
Yelp frequently leads users to believe they have information right in front of them when the user has no such thing. Given that this is the current state of affairs, and has been for years (always?) I would think Yelp would have exactly 0 credibility when it comes to them trying to make things "fair" in search results.
Why should a society bend for Yelp when Yelp has done everything in their power to deceive us through poor UI, poor UX, misleading links, what I would even call false advertising? We shouldn't.
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Edit: As a point of comparison, on Google you know when you're reading a review and when you're seeing an ad right away, there's no confusion or deception or lies there.
https://searchenginewatch.com/2016/04/27/do-50-of-adults-rea...
Google's entire search engine design is based around deceiving users into clicking on ads they thought were search results.
In this paradigm, what's the difference between a platform and a tool?