You heard it here first. The two giants of modern media, Google and Facebook, are in trouble and might not even exist in their current form in a few years.
At the moment, these two global behemoths seem to be part of the very fabric of the world. In June, two billion different people used the social media site, and Google remains overwhelmingly the search engine of choice.
But it is not a stretch to say that this might be the peak of their power. This is not just because, as they get bigger, they are running out of new humans to generate growth and new revenue. It is mainly because businesses are by their nature only temporary. Remember MySpace, which once ruled the social media landscape? Don't be surprised if these two modern giants go the same way.
To understand the dynamic, we need to look at what a business is. The first stage — captured cleverly in the film The Social Network — is intensely creative and risky. Often, it is not the inventors who make the business. They are usually left lamenting how they have been cheated, like the Winklevoss brothers were with Facebook. Rather, it is those who understand how to translate an idea into transactions who reap the rewards; that is, the people skilled in creating a business.
Once that initial stage has been completed — whereby the product offering creates sustainable profits — businesses then turn to repetition. The aim is to keep people buying the product at a price that is profitable, over and over. This allows businesses to achieve economies of scale. That is why management is mostly about controlling repetition in order to make it progressively more efficient. After a while, such repetition comes to characterise the business. Creativity has by then been lost.
The approach works for as long as the market doesn't change. But as soon as it does, incumbent businesses have enormous difficulty altering their strategy (despite all the quacking about 'innovation' and 'change management'). It is at that point that decline sets in.
There are very few examples of companies that have been able to genuinely change when confronted with new circumstances. Apple under Steve Jobs is perhaps one instance. But usually companies keep on doing business as usual until they have no business left. And it can apply to entire industrial sectors, as can be seen in the fate of the media industries around