06 August 2014

Big Fish, Little Fish

The NYT DealB%k has an interesting piece from one of the regulars on the Big Fish eating the Little Fish in the cloistered world of the innterTubes. But Solomon leaves out the lede, as they say in the pubbiz: these Big Fish ain't really conglomerates.
The paradox is that conglomerates outside the tech sector are an endangered species. The 1960s was the age of the conglomerates. ITT, for example, made both weapons and movies, with the idea that smart managers could operate any business and different operations would diversify the business. But that strategy did not work out as planned. The problem was that managers needed to focus on their businesses. If investors wanted to diversify, they could do so by simply investing in the separate companies. And splitting off businesses would discipline managers not to waste extra cash.

What he misses, or simply doesn't want to say, is that Google, et al, of today aren't (structurally) anything like GTE, ITT or the rightfully infamous Gulf+Western of Charley Bluhdorn. Those were real conglomerates, with real divisions (ex-companies) in real, different, businesses. With the possible exception (too soon to tell) of Apple/Beats, the rest are all agglomerations of advert pushing platforms. Despite the appearance of differing users and "products" for those users, the real clients are the advert buyers. And they're (Google, et al) all attempting what the New York Yankees have done for generations: buy up any player who's any good to keep said player from ending up with another team. It takes very little to create an web-based advert platform; WhatsApp was, what, 6 guys? If you're Google, that makes your sphincter kinda tight. 93% of its revenue is from adverts, still (last 10-K). How much of its profit is assigned, I couldn't find, but I'll guess all of it. All of the side projects are just that: on the side.

In any case, these aren't conglomerates, just oligopolists aiming to be the monopolist.

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