Will the Apple-Facebook Integration Choke Entrepreneurship?
The speed at which technologies — and technology companies — have grown from seedlings into fully-developed platforms and enterprises never ceases to amaze me. The latest striking example of the speed of maturation is the integration of Facebook into the latest Apple operating system, a new collaboration announced last week by Tim Cook at the Worldwide Developers Conference.
Eight years after it started in a Harvard dorm room, Facebook has evolved into such a foundational and systemic part of the web that even the almighty Apple recognizes its critical role in the consumer experience.
What’s behind this, of course, is that an incredibly high-stakes chess game between Apple and Google is being played out. Another indication of that is Apple’s eradication of Google maps from the iPhone — why give up that much valuable real estate to your competitor when you can own it yourself? “Apple, Google, and the price of world domination” is how Reuters puts it.
There are some real consumer benefits to the Apple-Facebook integration, largely because the blending has created a kind of “app-less sharing” — log in once and you’re in a new, boundary-less ecosystem. The downside, as Larry Dignan of CNET puts it, is a nightmarish scenario in which “people will log in once, forget they’re oversharing and ultimately have a cringeworthy event.”
But let’s take a step back from the immediate consumer experience. From a macro perspective of innovation and entrepreneurship, there are implications of this integration — and the larger smackdown between Google and Apple — that make me wonder. We’re witnessing two parallel structural changes on the Internet: the consolidation of competition and the creation of enormous, but essentially hermetic, ecosystems. In principle, as ecosystems become closed, it becomes increasingly difficult for new entrants to penetrate them and gain exposure. In turn, markets grow less dynamic and innovation begins to suffer.
As a thought experiment, imagine what would have happened if Myspace had become totally integrated into the platforms that existed back then. If Myspace had achieved distribution ubiquity, and had been a default choice on every computer and cell phone sold, it would have been more difficult for Facebook to attract the audience it did as quickly as it did.
Of course, terrific new ideas would eventually get discovered by consumers, and closed-loop systems would eventually be forced to open up, or slowly atrophy. (AOL is still paying a high price for defending its walled garden.) But the rapid transformation into a Google vs. Apple world is not encouraging for entrepreneurs — other than those who want to start a business with the strategic intent of selling it. While that can be a quick path to cashing in, it presents a situation in which these two acquisitive, cash-rich companies overpay for defensive reasons in order to keep the desired company out of the clutches of its nemesis. Now that’s not a path for building large, sustainable businesses.
Apple, Google, and Facebook started as maverick, free-spirited Silicon Valley companies with their own unique missions and challenger ethos. They are now far from challengers. They are giants with a combined market cap of around $750 billion, which is about the size of Turkey’s GDP. And Reuters has it right: they are fighting a global war. The strategies required for a complex struggle of this magnitude involve long-term efforts to muscle your competitors out of the picture, to acquire and hold as much digital real estate as possible, to absorb or crush tiny threats, and to lock in your customers while creating the illusion that their lack of freedom is a benefit.
I get all that. But I also believe that as the number of Internet superpowers diminishes, it will become more difficult for the next Jobs, Wozniak, Brin, Page, and Zuckerberg to do their thing. As I said, innovation is boundless and unstoppable, but the Internet — and the integration of hardware and software — have changed considerably since the early, Wild-West, lower-cost-of-entry days.
Putting Facebook into Apple makes it easier for consumers but likely harder for entrepreneurs. I don’t know if the trade-off is worth it. We’ll have to see.