Four Weddings & A Funeral
We witness border skirmishes between big tech firms on a regular basis. This year, one or more will erupt into a shooting war. Just as most wars are not a function of ideology but economics, the armies of search, handsets, and performative posts will begin landing paratroopers behind enemy lines and initiate heavy equipment assaults. Yes, I watch too much History Channel.
Wars also make strange bedfellows. For a hot minute (four years) we fought side by side with the USSR. Upon our collective victory, they promptly became our adversary. A weak DOJ and accretion of market cap for the biggest players make 2020 a year for high-profile acquisitions (weddings) and one spectacular failure (a funeral).
As I’ve written, big tech has no choice but to enter the fields of healthcare and education. These are the only two sectors, other than government, that offer the margin dollars required to sate investors’ growth expectations. Google and Facebook could wipe out the entire radio industry, and they’d still wake up hungry for more profits within 24-36 months based on investors’ expectations.
Every big tech firm must implicitly, or explicitly, assure investors there is a reasonable chance their stock will double in the next five years. Otherwise investors will buy Zoom, Lemonade (which filed to go public this week), or another “disruptive” firm. Big tech is running up against staggering appetites, like Brad Pitt being forced to feed off humans, as rats just can’t sate his thirst. Remember that movie? Pale and a bad haircut …
And. Still. Dreamy.
Anyway, the Four plus Microsoft need to add more than half a trillion dollars to their top-line incomes over the next five years. This will result in them entering new markets, and coming for each other.
Some scenarios — four weddings and a funeral:
Apple acquires DuckDuckGo or launches its own search engine.
The entire world is bifurcating into Android or iOS. Android users are the masses who trade privacy for value. iOS are the wealthy who enjoy the luxury of privacy and status signalling by shelling over one month’s household income in Hungary in exchange for $443 in sensors and chipsets (what it costs to make an iPhone). Even social platforms are distilling to red-state (Android) and blue-state (iOS).
So, Apple will likely divorce from Google, where they receive $12 billion a year for making Google the default search for iOS, and leverage their ownership of the rails in the best neighborhoods. Apple will not be able to monetize search to nearly the same extent as Google, since it can’t make Tim look stupid (“Privacy is a fundamental human right”). Still, they control the tracks, and just as they can get us to watch Murphy Brown at $15 million per episode (i.e., The Morning Show), they’ll be able to shove a search engine that’s 80% as good as Google down our throats. They own the rails.
Twitter acquires media properties in move to subscription model.
Mark Zuckerberg has now become the world’s most visible oligarch, leveraging his proximity to power (Trump) for corrupt economic gain. Facebook, despite their claims to be neutral and not wanting to be “the arbiter of the truth,” is turning red (GOP). Facebook will be the Android of the world, offering a free service in exchange for molesting your privacy. Also, depressing your teens, perverting elections, sowing hate, etc., etc., etc. Btw, Facebook has demonstrated real comfort with being an arbiter, it’s the truth they are allergic to. Specifically, the arbiter of truth for Facebook is … whoever is willing to pay to determine our truths.
Question is … who will be the iOS (blue/Dem) of social? The opportunity to go blue, and capture a smaller but more valuable audience, is Twitter’s. Recent discovery of their testicles (labeling @therealdonaldtrump’s tweets as lies) renders them the MSNBC of social. Their opportunity is to acquire distressed media properties, go vertical, and move to a subscription model. Subscription fees should be based on the number of followers. If @kyliejenner can garner $430,000 per promoted tweet, she’ll pay $10,000 a month to maintain her revenue stream, and @karaswisher (1.3 million followers) would pay $250 a month. Verified accounts with <2000 followers would remain free to maintain critical mass.
If Twitter had a full-time CEO, he or she would have come to this conclusion in half the time. Twitter doesn’t have the scale to compete on an ad model, and their ad tools are substandard. However, they are unwittingly starching their hat blue and could acquire several of the remaining independent media properties (Lee, McClatchy, Condé Nast, Hearst, etc.) or assets from them to buttress the subscription offering.
The B2B market alone would be huge, as Twitter has replaced PR, news agencies, and IR firms. What firm wouldn’t pay $2,000 a month to announce their new SAAS/diet/keto/hemp product? Twitter could take a 40% hit to top-line revenue over the short term, and triple their stock in the next 24 months as they move to subscription.
The subscription model also has a free gift with purchase — identity. People are less awful when their name and reputation are attached. Ad-supported platforms are incentivized to allow bots and Russian interference, and to provide more oxygen to ideas that lack merit but are incendiary. Rage equals engagement, which translates to more Nissan ads. Remember that time when Netflix or LinkedIn really pissed you off? That was Twitter or Facebook.
Also, Twitter has the added benefit of being shitty at advertising. Specifically, a move to a subscription model would mean forfeiture of dramatically less revenue than Facebook, which monetizes users at twice the rate of Twitter. They could also hold on to much of their ad revenue during the transition phase, or even settle on a hybrid model that cleans up 90% of the carcinogens.
Microsoft/LinkedIn launches a microblogging platform.
If Twitter doesn’t do this, Microsoft should launch their own microblogging platform as a sub-brand of LinkedIn. If there is any doubt that media is nicotine (addictive) but advertising is the shit that gives us cancer (tobacco), compare and contrast the most successful media firms of the last decade: Google, Facebook, Netflix, and LinkedIn. Two are tearing at the fabric of society, the other two … are not. The difference? Facebook and Google run on rage (ad model); Netflix and LinkedIn are powered on a subscription model (note: approximately 20% of LinkedIn revs come from advertising).
LinkedIn is much of the great taste of Twitter, an interesting feed full of connections and discovery, without the calories — bots pumping TSLA, death/rape threats, and antivaxers. LinkedIn is the social media platform we are all hoping Facebook and Twitter would become.
The two mob families of subscription media merge and control video and music. Gangster. They acquire Sonos (with the sweat off their Tiger brow at $1.3 billion) and establish a vertical beachhead of devices in the wealthiest homes in America.
The funeral: Quibi
In February, I predicted Quibi would be the unicorn that lost the most value in 2020, and would be stillborn. Media analyst @richlightshed wrote a thoughtful, and detailed, response on why I was wrong about Quibi and the streaming wars. Also, a senior exec at the firm called and asked me not to bad-mouth them before their launch, as it was bad form. A fair point, and I’ve been (for me) quiet on the issue.
Ok, no más. It (Quibi) is over. Jesus, that was easy.
Yesterday a reporter called and asked why I was so confident pre launch that it would fail. The answer is obvious, and ageist. To my knowledge, there’s never been a successful media-tech firm founded by people in their sixties. The young brain is crazy, creative, and willing to work 80 hours a week, as young people think they’ll live forever. People in their sixties are not blessed/cursed with any of these things, which makes them decent leaders, great mentors, and shitty entrepreneurs.
In addition, the strategy never made any sense, and the firm showed up to a howitzer fight with a squirt gun ($1.75 billion in funding, vs. SVODs who deploy the defense budgets of Australia, Canada, and the UK).
What happens next? The firm is likely now pursuing assisted suicide, as I believe Ms. Whitman and Mr. Katzenberg find the pain of tech failure unbearable. They (again speculating) are shopping the firm to bigger media platforms so they can pull a Masa Son and save face by blaming their conflation of luck and talent on Covid-19. The firm will be sold for less than the cash on hand, as it’s worth less than zero, having built a business that just eats cash and has no assets — the IP reverts to the creators after four years.
“I attribute everything that has gone wrong to coronavirus.”
— Jeffrey Katzenberg, New York Times 5/11/20
Quibi will be a case study in the hubris of successful boomers and the invasion of Los Angeles by Bay Area tech firms. It will also be confirmation that while software is eating the world, the world of start-ups belongs to a younger generation. Frustrated boomers can take solace, as the government, elected and funded by boomers, still enjoys a staggering transfer of wealth from a younger, more multiracial generation to an older, whiter generation (Social Security, mortgage interest and capital gains tax deductions, PPP, CARES Act, police, prisons, etc.). But I digress.
Stay Thirsty, My Friends
How do we stay crazy and young? How do we demonstrate the fearlessness of young artists, activists, agents of change, and tech founders? I don’t know. I find myself, as I read the above at 1am on Friday, fearful that my arguments are pedestrian, that my words might upset people I care about … or anger people more powerful than me. Everything but the last part of the last sentence is true.
Two things, I believe, keep me crazy/young: Atheism and alcohol. A recognition of the finite nature of life is my superpower. It gives me the courage to love, and write, unconditionally. And then … I drink.
Life is so rich,
P.S. The next Strategy Sprint runs July 14-28. Get MBA insights without the MBA price tag, join us. And episode 6 of my Vice TV show is up — stream at your leisure.
Ugh. Calling any of the major social media companies “red”…
Fascinating as always, but Twitter is “depressing your teens, perverting elections, sowing hate” just as much as that mean old “red” Facebook.
Love reading your brilliant insights
Lemonade? Seriously? Not a real Saas not a profitable and no path to profit. Nice AI but again not patented material. Please note that According to the S1 the founders sold stocks for 5 million dollars at the end of 2019. WeWork 2?
I agree with you about Lemonade, but disagree with you about the Nice AI. Have you ever used Lemonade to get a quote? The quotes are not competitive at all. Also, what ever happened to the onslaught of Gabi commercials? I think insurance is next to be disrupted but more work has to be done on the tech side.
Prof G is talking about the Beyonce film
Prof G – Please “digress” on this (below) and put that big brain to work on this problem…. “Frustrated boomers can take solace, as the government, elected and funded by boomers, still enjoys a staggering transfer of wealth from a younger, more multiracial generation to an older, whiter generation (Social Security, mortgage interest and capital gains tax deductions, PPP, CARES Act, police, prisons, etc.). But I digress.” Thanks – A Boomer
Scott, besides Education and Healthcare, isn’t Financial Services, esp Lending, the other big industry with large profit pools for the tech firms to enter. I might even put it at the top of the list.
Hi Scott. I think you might be onto something with your quote, “The B2B market alone would be huge…” I’d argue that Microsoft/LinkedIn acquires a platform like Substack to broaden their business subscription revenue model. As for Twitter, they should go whole hog on B2B as an e-commerce marketing/news and data platform using a subscription model. Twitter should make some tuck in acquisitions (i.e., Hubspot?) so they could clean up and end their reliance on ad-driven revenues from the consumer side of the platform. Nice piece, and save a glass of Makers Mark for me.
Great vision and insight!
I am a Scott Galloway disciple for life. Basically think you are a thought leader for business but more importantly for life. You are fearless but kind. In my mind, if you were a care bear you would be a sunshine bear. Feel better ever time I read or hear your thoughts.
Earned your place in my inbox with this one. Except the end. Excessive alcohol and dope is also for youngsters. Recreational drug use over 40 demonstrates capitulation to circumstances and weakness of body mind and soul. In other words you’re a loser no matter how many people tell you otherwise.
Don’t agree with that at all. Lots of adults drink and smoke pot. It is away for them to relax. Prof G is one of the most productive people on the planet. Not a weakness but something he enjoys. I don’t do either but I see no issue unless it effects you negatively.
I have recently subscribed to your blog and absolutely like the way you analyse. Very clear perspective and so informative. Great learning.
Being a proliferate user of Twitter to vent my frustrations over the Trump presidency, frequently I vow to stop my insanity, but your words “atheism/alcohol/the finite nature of life” reminded me why I stay crazy young. Thanks for a really informative piece.
Can’t wait for the Sprint! I have so many thoughts about all of these topics I am just going to stay quiet and argue with myself during shower… disagree with very little here… life is indeed so rich
LinkedIn should be taking all the corporate background screening! Verify your LI account with your employment education and have employers pay to access this – cutting out all the hire right etc! Saving mountains of paperwork/forms automating the whole process! Been thinking about it for years as a better revenue stream.
I love your posts. Quibi should not even have launched. Too late to the game. Instead, they could have tried and created a YouTube channel (Like Funny or Die or CollegeHumor) before investing in a new platform. I don’t think people are excited to install one more app to watch movies/shows. You are bang on about Twitter. Their ad revenue model is abysmal. Twitter definitely has a bot problem. Having a verified process (like YouTube) would reduce some of that spam.
Quibi in the coffin before birth. LOL!
Well, after a serious bout of unconditional loving and writing us atheists really need a drink. So the sequence is spot on. Brand selection matters too, of course.
Just finished both of Scott’s books. The Four is an interesting read. Happiness is good as well; lots of overlap from the Four. I like Scott’s perspectives. I’ve launched my series “If/Then” to share my perspectives. My 40 years in business was quite rewarding and now I so enjoy giving it all back to my students at a small private college (Sierra Nevada University). Come join me!
You’ve done it again! One of your best. reading your ideas are always captivating. I can’t wait to see what the future holds and for some reason, every time I read your post I feel like I may be getting a better insight to what it may look like!
It would be nice to know a little more why Quibi has failed other than just the elderly CEO who was supposed to enjoy nursing home. On the other hand, it is true. CEO of a start-up has to be young. Unfortunately, I had to experience it very painfully.
This is brilliant. I too howl at the virtual moon on digital platforms, though not nearly as successfully as you. And I worry, at times, about upsetting powerful media titans or former peers. Then I look at the state of the world, and realize I’d much rather have my agnosticism, alcohol, edibles and integrity, than having, everyday, to go along to get along as the dumpster burns. Thanks Scott.
Interesting views on Twitter. If they move to charge the audience builders, do they also need to build tools to help them monetize that audience? Similar to Instagram, perhaps they start building e-commerce solutions? People are already using Twitter to sell their courses, they mas as well get in on the transaction I suppose…
Scott – keep going. Love your work. I think you’re missing one of the most powerful social media and AI platforms on the planet in Tik Tok and their parent company Bytedance. I’d appreciate hearing what you think
“And then I drink.” Poor man. What else is there for an atheist?
dearest Svami, He also smokes POT!!! omg…errr, omng
I’m interested in being part of the July Strategy Sprint. However I live in Australia, how do you guys cater to different time zones?
You made some brilliant points in the article until the last sentence. One maximizes creativity/youth by connecting to source. You might also ask your liver if alcohol is prolonging your life; you need a second opinion.
What about Amazon? No wedding for them?
Thanks as always Scott. I laugh and learn with your creativity
Prof G for WarnerMedia Sales President please and thank you.
Interesting but disagree with Android v iPhone personas. Twitter will never charge a scaled sub fee as it will then have to verify every User/ member and if everyone has to pay then their User numbers will reduce dramatically. Very thought provoking re Tech moving into education.
This is so gangster, yet brilliant.
Yes! Gangster and brilliant. Well said. Subscribe! ✅
Fun read. Rose in hand. I shall watch these words unwind. Or not. Who cares?! Scott’s Pen has punch which in this day and age isrefreshing to say the very least. Smile on face. G
I find atheism and long distance running keep me young. Will see which gives out first: My knees or your liver
Scott – Love reading your blogs, podcasts. You frequently speak of your drinking. I’m a drinker too, but do my best to manage it. I want you to be around for awhile, and I’m sure your boys do too. Have you checked your liver enzymes, sonogram, biopsy? Just sayin’. Stay healthy my friend. Cirrhosis can sneak up on you. Take care, Gary
Great article as always, Scott. Interesting suggestion about Netsonify (NFLX/SPOT/SONO.). What about Netrokify instead (Roku!)? I feel Sonos is going to get acquired by Apple instead, it’s such a cheap way to get into the premium home sound market.
Hi Scott, excellent article. I am really curious what you think of Slack. Similar to you, I really like to use my imagination when I invest to predict the future. Right now I have a vivid picture in my head of how Slack can do alot of damage to microsoft and grow like a weed. What is your opinion?
The death of Quibi is the death of the product not the company. The biggest asset still is Katzenberg. Is Quibi’s content bad? Maybe but it’s a lot more compelling at scale than what Disney, Apple and Facebook have done with original content. Is it so crazy that Facebook would pay $4-5 billion to acquire that amount of mobile-first content and keep Katzenberg around to build more content for at least four more years? Relationships are more valuable than money in Hollywood. As much hate as Quibi gets, how many people even know what Facebook Watch is? Apple could also edit all those shows into something that would fit pretty seamlessly on their platform while adding a little star power. Silicon Valley isn’t great at entertainment and LA isn’t great at technology but putting the two together (Netflix) has proven to be a pretty solid formula. I can also tell you on pretty good authority that Jeffrey and Meg haven’t been putting in any fewer hours than their Y Combinator counterparts. The death of Quibi is tied closer to the arrogance of old billionaires than the work ethic of old billionaires.
Agree that in Hollywood, relationships are more important. That said, this product has long been DOA. It’s simply not necessary. They would have been a more fundable and better performing company simply putting their original content on a Youtube channel. That is how unnecessary this product / company is. Let it die. No one’s fault but the arrogance of anyone that thought this was needed and thought legends of Tech and Hollywood could pull this one. Their relationships and past successes aren’t enough to sell a product that’s not wanted. Simple as that. Let it die.
Really don’t think Apple will enter the search engine world… It would be more likely they buy Tesla… although nowadays is completely impossible. kind regards from Portugal!
Until we develop a mindset that says “investors” are just gamblers by another name and deserve nothing, we as a society are screwed. Why can’t a company just make a modest profit and do the right thing by employees and customers? Why should they owe anything to the gamblers? Nobody buying or selling a company’s stock is doing anything to help the company provide service or product. To hell with the gamblers. They deserve what they get. Oh wait. I forgot. All the board and upper management are gambling too and they can load the dice however they want to enrich themselves. Scott, for all the things you see so clearly, why/how do you still champion this distorted system?
WELL SAID, SIR.
Quibi is hubris Spelled backwards. Or, close enough. Plus, does anyone even know what the fuck it is or who for?
Really excellent and entertaining. I follow you BECAUSE you say it as it is, as you see it, and if certain people would see your criticisms constructively they would be better off. Thank you for continuing to shine at least a flashlight on megalomaniacs selling air. Wework, quibi and hopefully one day Amazon Business will understand that greed is just not everything to everyone.
Great stuff, Scott. Truly ‘blue flame’ thinking. What about the chances that the Four come for financial services prior to, or in addition to healthcare and education. Completely agree that they’re coming for the latter two (not that you needed my validation) but it looks like they have banking and wealth management firmly in their sites too, no?
Any inferred cleverness on my part in mistyping ‘sites’ when I might ‘sights’ is accidental…
Great one. Stay crazy and young prof! (or atheist with the right amount of booze, I’m on the right path)
Thanks for an amazing post
Great post as always! I think Apple should get back into social media. I hate the Facebook user experience, and I have no control over who’s posts show up or who of my friends see my posts. Apple already has all my photos! I would gladly pay $5 per month to have a private, advertising free, social media platform that lets me decide what posts I see.