Opinion

Quora Question: Which Tech Giant is Poised for a Fall?

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Facebook logos on the screens of a smartphone (R), and a laptop computer, in central London on November 21. Social networks face questions over how fake news stories appear to their users. JUSTIN TALLIS/AFP/Getty Images

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Answer from Terrence Yang, Angel investor:

I own stock in Google, Apple, Facebook, Amazon and Microsoft, but if I had to pick which tech giant I think will fall first, I would pick Facebook.

That being said, Mark Zuckerberg’s latest moves include:

  • Keeping control of Facebook even after he donated almost all his Facebook stock to charity.
  • Being the only public company CEO to skip Trump's tech summit. I bet most shareholders wanted him to attend.
  • Making his 2017 resolution “to have visited and met people in every state in the U.S. by the end of the year. After a tumultuous last year, my hope for this challenge is to get out and talk to more people about how they're living, working, and thinking about the future.”  Maybe he is sincere in trying to better understand America, given that Facebook, together with Google, account for almost all the online ad revenue.

All of these moves are more consistent with someone laying the groundwork for a possible run for political office someday than with someone singularly focused on growing the Facebook empire. People have speculated before about Zuckerberg’s aspirations to run for president. I believe his actions are an investment risk factor. At the margin, his latest moves drove some investors to sell Facebook stock (raising its cost of capital) and possibly providing cheaper capital to the Facebook’s competitors (if investors sell Facebook and buy Snap, for example).

Other factors:

  • Facebook’s metrics are wrong, though others (Google?) may have the same issue.
  • Robert Scoble says spatial computing will dominate, meaning you will be able to physically walk around in the real world and see virtual items placed on them. Scobleizer - Entrepreneur in Residence. Scoble said he would ask Zuckerberg this: “How are you going to compete with a “mixed reality” release of the iPhone that’s coming in 11 months? I expect that iPhone will sell 60 million in first weekend…" Scoble goes on to say: “That’s more VR sold than all others combined. In one weekend … If I were at Facebook I’d get the entire Oculus team to pivot toward mixed reality glasses. Why? Microsoft’s execs already told me they are betting 100% on mixed reality (with its Microsoft HoloLens product). The strategy at Microsoft is “Cloud + Hololens.” That’s it. The entirety of a $455 billion company is betting on mixed reality.” 
  • Oculus headset sales are low. VR is taking longer to take off than some guessed. VR headset sales by device 2016 | Statista.
  • Instagram is doing a great job copying Snap’s popular features and avoiding the unpopular ones (fast follower). But they don’t have anything like Spectacles yet.
  • Even Zuckerberg’s write-up and videos about Jarvis home AI reveals Facebook’s weaknesses. While Amazon, Google and Apple can combine hardware and software to give you a better, more seamless experience via Echo/Alexa or the Google and Apple equivalents, to date Facebook only has software.

Some others cite Microsoft or Apple as the most likely to fail. I disagree.

Apple has incredible lock-in. People who love the iPhone tend to buy iPads, Watches, or MacBooks—and stay in the ecosystem because of apps they downloaded/paid for, contacts, photos, calendar, etc.

As for Microsoft, I feel popular tech writers keep underestimating how durable Excel, the rest of Microsoft Office, etc. is. I’m not sure they understand how enterprises and governments really work and how wedded to the status quo they are. These lucrative customers want security, reliability and an integrated product and service that already works. The switching costs are massive. Yes, Microsoft lost the cheapest, most cost-conscious software users to Google Docs, etc. That’s not great, but Microsoft’s lock on enterprise software in areas like productivity remains strong among entities with huge IT budgets. And Microsoft seem super focused on making HoloLens and cloud services big successes. Satya Nadella seems to be a great CEO. He made a great move putting Jeff Weiner, the brilliant CEO of LinkedIn, in charge of the integration. That never happens. The acquirer always puts one of their people in charge of integrating the target company into the acquirer’s ecosystem.

Satya is my favorite non-founder CEO. Zuckerberg was my favorite founder CEO with Bezos. But I’m not sure Facebook is Zuckerberg’s favorite. That’s the key reason I think Facebook is the most likely to fail first. Sheryl Sandberg would make a great CEO but it’s just not the same—and not all of that would be her fault.

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