Eighteenth Century American Statesman Benjamin Franklin famously said that “in this world nothing is certain but death and taxes.” Companies also die, some having lived a full life of profits made and taxes paid. And, in this cyber-cyclone world, some will die having flown high and never made a dollar of profit or paid a penny of tax. But which corporate deaths will surprise us?
The only fun in making predictions is in avoiding the obvious. We could all predict the death of this newspaper or that magazine or limping retailer or struggling telco. But which of the high flying companies in technology and communications will shock with its demise? So, having established that the only predictions to make are the bold, brave ones, here is my sideways glimpse into the future. I predict the decline, at the very least, of three substantial companies, as follows:
Nokia dating Microsoft
We all remember a time when the Finnish former forest products company was the world’s leading (by far) producer of mobile phones. I am sure they made many mistakes along the way that are awaiting the verdict of corporate obituaries. But missing out on the development of the smartphone was surely the most significant. The Nokia Commander was an ill-judged attempt to muscle in on what was then BlackBerry’s pioneering monopoly of mobile email but it was too brick-like. Other foolish innovations included a games-dedicated phone which lacked the high-demand games or basic value to take off. The company is still truly world-scale with revenues of 41bn euros but profits and margins (down below 3%) have been sliced in recent years. And look at the ominous signs.
Nokia is now trying to use a partnership with Microsoft to make its soggy Navteq map business a force in the fast-growing mobile advertising sector. Last week, the two companies (both laggards in the mobile space, behind a company called Apple) said Microsoft would merge its mobile location and commerce services businesses into Navteq. That was just the latest attempt to reverse two major setbacks in the four years since Nokia bought Chicago-based Navteq. First was the dizzy $8.1bn it paid for the navigation business in 2007. Then came Google’s cut-off-at-the-knees decision to offer similar services online and completely free. The latest Nokia-Microsoft collaboration is the umpteenth for the two companies which said in February that the new Nokia desperate-t0-catch-up smartphones will use Microsoft’s Windows software. And the two companies already work together on Microsoft’s bestselling Xbox games console.
Nokia said confidently last week that the key to mobile advertising was for clients to reach people who physically close to their businesses. While that may be true, the ultimate key is to have a large enough audience of such people in a locality to make advertising worthwhile, ie having enough mobile phone users. So, Nokia is betting on its ability to get back to growing its core phone business. I predict that, like its other recent bets, Nokia will lose this one too. And the long slow decline from being one of the world’s most successful companies in the late 20th century, will continue until it is either acquired (by Microsoft?), changed into something different, or quietly melts away.
BlackBerry going backwards
Research in Motion, the Canadian parent company of BlackBerry, is feeling the pain of having lost half its stockmarket value in the first six months of 2011, and nobody is predicting anything other than further decline for the company which once owned the (sort of) smartphone market first in corporates and then also among Western teenagers. Now, it has been left for dead by the iphone and (in the US) the Google phone, with others coming up fast from behind. And very soon the iphone’s imessage will be matching BlackBerry’s once so innovative BBM messaging, so we will see RIM slide further and faster.
The company is paying the inventor’s price for being unable to stay out in front. The Playbook, RIM’s 7-inch competitor for the ipad has started badly, with poor sales and poorer reviews. Critics assert only a product that (unlike Playbook) is significantly better – and cheaper – than Apple’s runaway product could even hope to catch it. The BlackBerry company’s profits are now heavily subsidised by high-margin ancillary revenues for renting over-flow bandwidth to phone carriers. Its main smartphone business is going nowhere but down, victims of the Apple juggernaut and its own earlier reluctance to get into the touch-screens that now define the market. So who would predict anything other than a merger or divestment – and well before we are reading those obituaries of Nokia. This is one business that is downwardly mobile, whichever way you look at it. Ready, Microsoft?
Facebook fans in a not-so-private world
Forget the recent coverage in the US and Europe of a slowdown in growth at Facebook. This is a huge and highly successful business , certainly as measured by customer ‘interaction’, market share and profile. But there are two significant clouds on the horizon for this wunderkind of the web.
First, the revelation that 22% of all US grandparents are on a social network, mostly Facebook. For all its rising success and scale, this statistic can come back to haunt Facebook, which depends on its unique command of a young difficult-to-reach worldwide audience. Teens and twenty year olds don’t want to share anything, least of all their web lives, with their parents, let alone their grandparents. That kind of pervasiveness is not cool.
Second, next year’s planned IPO could signal the high watermark of Facebook, as the world’s largest social network starts to turn its popularity into profits. Pundits are starting to warn that the increasing volume of subtle and not-so-subtle commercial messages risks turning off the users of a service which for hundreds of millions is a seemingly private world. Facebook senses the risks and is urging its fast-growing list of commercial clients to participate in “conversations” with customers on their Facebook pages rather than resort to brash advertising messages. The result has been an increasing number of sometimes not-so-subtly sponsored “stories” where major brands use a customer’s endorsement of a product in an advertisement and deliver it to the pages of his or her friends. You can almost hear the groans of Facebook users everywhere. And that is before next week’s launch of Facebook Credits, a system which means that all transactions by social gaming or film providers on Facebook will now have to go through the site’s own payment system with Facebook taking a 30% royalty on each deal.
The all too obvious fact is that Facebook’s popularity has had at least something to do with its perceived lack of commercialism. It has almost traded on an informality and quasi-amateurism, not actually contradicted by the Oscar-winning “Social Network” bio-pic. The forces and faces pushing Facebook on and encouraging dreams of a billions-earning international corporation just might reflect on the fate of My Space, once the world-conquering social network that is now dying in front of Rupert Murdoch’s eyes. It may not quite be cause and effect, but News Corporation’s $580m acquisition of the music-led My Space in 2005 was quickly followed by an announcement of a major advertising deal which was said to recoup a big chunk of Rupert’s money in one go. All across the world, My Space fans awoke metaphorically to find “their” site had been “stolen” by aliens from Wall Street, or Wapping, or Madison Avenue. And you know what’s coming.
Facebook, the amazing new wave company that took off by moving to the west coast is surely now set to head south. It will be superseded, perhaps, by a not-for-profit “people’s social network” being developed right now…
Maybe, just maybe.