Comment by Certhas
7 months ago
Any examples of this actually playing out with a company as established as Google? You can read comments like this on many companies... Microsoft (70B$ income), Meta (40B$), Oracle (8.5B$), IBM(7.5B$), SAP (6B$), yet none of them seem to ever actually enter the predicted death spiral.
And the internet isn't new anymore. There is no vast landscape of unexplored new technological possibilities, and no garage start up with an engineering mindset that will just offer a better solution.
IBM used to be bigger than MS, it's a 10th of it today.
But most importantly all the above listed companies with the exception of Meta are those that are heavily ingrained in large companies operations. IBM still provides mainframes, MS has Exchange and Windows domains and is successfully transitioning a lot of customers to Azure, Oracle has their databases and other products, SAP their ERP systems.
Once a non-IT company has their internal IT systems and some legacy working they're going to be very very slow in changing them out if it works, companies that provide those and get a critical are going to have very very long runways compared to regular b2c companies if a significant portion of their revenue comes from this.
Google has Chromebooks that are used in schools and some GCP usage but could that save Google long enough if search revenue was cut into a fraction? And GCP is kinda of an also-ran today, people looking at larger options usually look at AWS(nr 1) or Azure (Windows legacy).
In 2023 the revenues of Google Cloud, Youtube Ads and "Google Other" and Google Network Members Ads were 130B combined.
If they could reduce headcount and operating expenditures to 2019 levels without losing that, they would be roughly breaking even without any search. They also have 280B$ in equity to tide them over.
When Google actually sees its business failing, it will have many many many chances to turn things around.
Microsoft and Meta reinvented themselves a few times over. At this point Windows is just an legacy business unit for instance, and Meta literally changed name to mark the turn.
Oracle, IBM and SAP have the advantage(?) of being heavily business focused from the start, and I don't see them ever die a natural death in our lifetimes. As long as they have the money to outbribe the competition they'll be there, and it will require a small miracle to break that loop.
The one thing that has kept Microsoft afloat is their business oriented part. They are deeply entrenched in any company that needs to use Office and only ever hires Windows admins who won't even look beyond Windows. That is pretty much every non tech small to medium company. When things were shifting to the cloud they were smart enough to make sure it would be their cloud, locking customers even deeper into their own technology.
Anything else they do is a bonus.
To add to this, Microsoft is really really good at understanding businesses, in a way Google will probably never be I think.
Having on premise hosting options for Exchange and all their core services is an example of that, even as they're also pushing for 365 in the cloud. I remember them being earlier than GCP to deal with GDPR and the in EU requirements as well but my memory might be failing.
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The point is, if Microsoft managed, why wouldn't Google be able to reinvent itself?
I think many of us are underestimating Microsoft because of how crappy Windows is and keeps being.
But as a business entity they've been ferocious from the start, and succeeded through sheer perseverance where Google gave up after some tepid tries.
Xbox would have been killed by Google in the first year. Exchange would have stayed in beta for a decade, and Office365 would have had no support if it was in GSuite.
If Google were to find a way, I think they'd need a radically different approach, as I don't see them ever fixing their focus problem.
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Reinventing yourself because you imploded your primary market is still an own-goal. If you can capture a new market then you could have had both. And what if the primary market collapses first?
AT&T, GE, AOL, Yahoo, Sony technology (they are a media company now, but they did used to make things that weren't a game console), Time Warner, SGI, Compaq, 3DFx, DEC...
Not only that, most of the other examples are just not at the end of their death spiral yet. Take a look at Windows market share, it's down 20% over the last 10 years:
https://www.statista.com/statistics/218089/global-market-sha...
And that's just desktop. Microsoft ceded the entire mobile market, which in turn now represents the majority of devices. The majority of the company's profits no longer come from selling Windows and Office. If they hadn't pivoted into a new line of business (Azure) they'd be on a trajectory to impact with the ground.
IBM has been bleeding customers -- and business units -- for decades. Their stock is flat, not even keeping up with inflation, compared to +300% over the last decade for the overall market. And they have no obvious path to redemption.
Oracle is kind of an outlier because of the nature of their business. Their product has an extraordinarily high transition cost, so once you're locked in, they can fleece you pretty hard and still not have it cost more than the cost of paying database admins high hourly rates for many hours to transition to a different database. Then they focus their efforts on getting naive MBAs to make a one-time mistake with a long-term cost. Or just literal bribery:
https://www.cnbc.com/2022/09/27/sec-fines-oracle-23-million-...
And even with that, their database market share has been declining and they're only making up the revenue in the same way as Microsoft through cloud services.
Meta isn't a great example because people just don't hate them that much. Facebook sucks but in mostly the same ways as their major competitors, they're still run by the founder and they do things people like, like releasing LLaMA for free.
All of the companies I cited are hugely profitable. They might not be as large as they once were, or as important, but a business that has non-declining net income in the billions is not in a death spiral. IBM has shrunk a lot, but except for the financial crisis in the 90s, they have been profitable every year, and profits are roughly flat since 2017.
This is certainly a completely different picture than Yahoo for example.
And your argument for Microsoft is that they are in a death spiral because they only have 70% of market share on the desktop, and are shrinking by 2% per year, so in, uh 15 Years they might only have 50% of the market share! Also, please ignore that they successfully diversified their revenue streams to other markets (Cloud).
And your evidence is that they failed to capture the mobile market. While you also argue that Google is in a death spiral when Google is actually the company that won the mobile market.
I think you might be using the term death spiral in an unconventional way here.
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statista is locked behind paywall
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AT&T: 15B$ net income, world largest telecom company. #13.0n Fortune 500.
GE, while a reasonable example of a company that declined severely from its peak, was still generating 9B$ in income on 2023 before being split in better focused and profitable successors.
AOL/Yahoo were never dominant in a mature market. They were early to the Internet, but this was an uncharacteristically volatile time with an exponentially growing market.
Sony is also a leading manufacturer in several tech sectors (second largest camera, largest premium TVs). 6B$ net income and rising.
3DFx was never dominant in a mature field but, again, early in a nascent one. They collapsed quickly, not through some highly profitable extended death spiral.
Compaq was never dominant in a highly profitable field. Their market share peaked at 14%.
DEC might be a genuine example, they were never the top of the field, but they did not manage to adapt and turn things around when the world moved in a different direction. Compare to IBM who _were_ in a dominant position in the same field, and have leveraged that position into a sustainable and steady, if smaller and less groundbreaking, business.
Google might be in trouble (relatively speaking) if LLMs disrupt search, but they are not close to being in trouble from being outcompeted in search itself.
Are you really doing this?
AT&T: today is not AT&T. The name was bought. It used to be Cingular.
GE: so your point is that it is a good example.
AOL/Yahoo: A 'mature market'? Are you making up rules so you can disqualify them?
Sony today only innovates in image sensors. They are a financial and entertainment company. Who cares if they sell the most 'premium TVs', this is the company created (off the top of my head) Betamax, CDs, DVDs, Minidiscs, Trinitrons, and made the best consumer tech in the world -- consistently.
3Dfx was the leader of an industry that is now lead by nVidia. That industry wasn't as big then, but everyone knew it would be and it was theirs to lose.
Compaq was the market leader in PC sales in the 90s.
DEC: so, it is a good example.
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Symantec comes to mind.