The cover story in last week’s Economist looked at the growing global dominance of internet giants such as Google and Facebook. This was partly driven by the fact that the European Parliament recently passed a resolution to more tightly regulate internet search and potentially break up Google, as well as by ongoing worries about competition and online privacy.
So are effective online monopolies (Google has 90% of the European search market for example) a good or bad thing?
Obviously in the real world monopolies are viewed with suspicion, particularly when a dominant position is then used to raise prices, unfairly squeeze competitors and generally provide a poor deal to customers. But a monopoly on its own is not enough for regulators to step in. In many niche markets (say chemicals) the investment needed to compete with a dominant incumbent would put off any new entrants, so it becomes a monopoly by default. If it doesn’t abuse its position regulators tend to just monitor the situation without taking action.
So, no-one would argue against the fact that monopolies need to be watched closely. But what is interesting is the difference between the online and offline worlds, in four key ways. Firstly, the cost of entering an internet market is relatively small – you’d don’t need to build an expensive factory, but can rely on scalable, inexpensive cloud-based servers and storage to host your business. This makes expansion easy, particularly given the widespread adoption of the internet and mobile phones across the globe, providing a proven way of connecting with customers.
The second factor that causes internet businesses to grow exponentially is the network effect. Essentially the more users on a service, such as Facebook, the better it is for everyone involved as there are more people to interact with. In turn this attracts more people in a virtuous circle. It can work the other way though – as the fate of early social networks such as MySpace show.
Thirdly, the majority of the internet services being discussed are free to consumers. So they don’t directly see any negative impact from the monopoly (such as a rise in costs). What isn’t immediately obvious to users is the price of free. Essentially their personal data is used to power advertising, direct mail and other marketing campaigns, with many consumers having a hazy understanding of what their information is being used for, or how to increase privacy settings. In fact, it is advertisers that can feel the impact of higher prices, given the online control of the internet giants.
The final difference, and one that The Economist makes much of, is the speed of change in the technology space, and how this makes today’s monopolies tomorrow’s has-beens. Companies find it hard to jump from leading one wave of innovation to competing in a new space. IBM dominated the mainframe market, but has had to reinvent itself in order to survive, while the replacement of the personal computer with tablets and smartphones has dealt a major blow to Microsoft.
However, these are still multi-billion dollar companies and have hardly withered away. Therefore in my view, technology innovation alone is not enough to regulate the internet giants. What is needed aren’t heavy handed rules, but a more measured approach that balances the needs of consumers with the speed of innovation and the potential competitive impact of monopoly positions. It is an incredibly difficult balancing act – and will require give and take from both sides if it is to succeed. Done right and new breakthrough services will be allowed to grow, but without trampling on other businesses. Get it wrong and innovation is stifled, potentially harming consumers and businesses who want to access the latest technology and services.
Intel must have thought it was onto a winner. Invest in building a new system to help Professor Stephen Hawking to speak, and not only does it get lots of media coverage (to help a good cause of course), but it also put one over on arch rival ARM by linking itself with Cambridge’s most famous living scientist.
Unfortunately, it hasn’t quite turned out like that. Headlines are dominated by Professor Hawking airing his worries that mankind will be threatened by the rise of artificial intelligence, with the machines (which Intel obviously makes the chips for) posing a threat to our very existence.
It isn’t the first time a big brand has been caught out by its chosen celebrity undermining its carefully thought out plans. Here’s another five that a quick Google search turned up:
nfare. All was going well until he tweeted to his 12 million followers that his phone had just erased all his data and rebooted itself – hardly the message of reliability that Samsung was looking for.
2. Motorola and David Beckham
Another classic issue is a celebrity being caught using a competitor’s product. Sticking with sports stars, footballer Ronaldinho signed a lucrative deal with Coke – and was then caught on camera sipping from a can of Pepsi at a press conference. Not to be outdone, David Beckham lent his celebrity status to Motorola’s £14,000 Aura mobile phone, only to be snapped by paparazzi with an iPhone in his hand. He later claimed he’d been ‘holding it for a friend’.
3. Microsoft and Oprah Winfrey
At least Becks had an attempt at an excuse, unlike Oprah Winfrey. Paid to endorse Microsoft’s Surface tablet, she sent out a tweet extolling its virtues. Trouble was every tweet has the program and platform it was sent from automatically added on the bottom. So “Gotta say love that SURFACE!” was appended by the unfortunate words “sent via Twitter for iPad.”
4. Bacardi and Vinnie Jones
Ex-footballer and professional hardman Vinnie Jones was always a risky choice for an alcohol brand, as Bacardi found out to its cost. After using him as the face of the rum, he had to be hastily removed after he was convicted of a drunken assault on a flight from Heathrow to Tokyo. On a similar, but less dramatic note, car insurer Churchill dropped actor Martin Clunes after he lost his driving licence for speeding. Clunes may have complained, but he should have done his homework – previous star of the ads Vic Reeves was sacked after losing his licence for drink driving.
5. Yardley and Helena Bonham Carter
Perhaps the best example of a brand not doing its homework (and for sheer star insouciance) comes from actress Helena Bonham Carter. Chosen as the face of Yardley cosmetics she admitted in an interview that she rarely wore makeup and couldn’t understand why the brand had chosen her. The deal ended soon after.
All of this puts Professor Hawking (and Intel) in rather exalted company – demonstrating the perils of the celebrity endorsement, no matter how highbrow the name involved actually is.
In previous blogs I’ve talked at length about the UK’s inability to turn a high enough percentage of tech startups into market leaders, compared to countries such as the USA. This may be changing, according to a new report from the Startup Europe Partnership (SEP). This identifies around 400 tech ‘scale-ups’ – essentially startups that have raised more than $1 million over the last three years. 70% of these received funding of between $1-$9 million, with 15 raising over $100m.
Taken at face value this looks like great news – investment is up and the UK is leading Europe when it comes to building viable, long term businesses. However dig a bit deeper into the data and some issues emerge. SEP is upfront that its research just covers what it calls ‘ICT’, and misses out biotech, cleantech and what it calls hard-tech (and there was me thinking all tech was hard).
So the lists of companies named are dominated by companies that essentially use the internet as a platform for their business – such as Wonga, Truphone, Funding Circle and white goods retailer AO World. All, with the exception of Wonga, solid companies that are expanding rapidly, but not really what I’d class as technology companies. The problem is that they tend to attract more capital, and consequently elbow the likes of Ubisense (which raised $14.5 million through its IPO in 2011) from the front page of the pretty graphs. And if you grow organically, without needing additional investment, you don’t show up at all.
Is this an issue? I think it is from both a perception and a valuation point of view. The general public ends up thinking of a startup as being something like Spotify or Just Eat, rather than a company that provides clever technology that may operate invisibly to them, supporting the wider digital economy. This can have a knock-on effect on press coverage, recruitment and ultimately the type of startups that are founded. Additionally investors are motivated by returns, and if they see that the payback is better with less technical, more consumer-focused businesses they are likely to invest accordingly.
It would be rude of me to sound like I’m completely knocking SEP. They are shining a light on the European tech sector and at the same time lobbying to increase the support that startups get, in particular by connecting the fragmented European tech economy. But, if we are to present the tech sector in the best possible light, we need to widen the discussion away from the flashier end of the market and embrace the difficult hardtech area. After all these are the ideas and companies that have the potential power to really change the way we live, work and play, and consequently deliver the biggest benefits to Europe as a whole. We need more ARMs, and fewer Wongas, and to start, more rigorous definitions of what a tech startup – or scale-up – actually is.
There are a lot of jobs I wouldn’t want in PR – helping North Korean leader Kim Jong-un or promoting cigarette companies. But head of PR at lift-sharing company Uber has catapulted itself to the top (or should that be bottom) of my list.
Any disruptive tech company is going to hit the headlines, but here are some of the stories that the aforementioned head of PR has had to deal with:
- Upset cab drivers across the globe, angry with its business model, sparking protests, riots, and bans in countries such as Germany (though some restrictions have now been lifted).
- Consumer complaints about its practice of charging more at peak times.
- Taking out full page ads plugging the service on the same day that a mass demonstration of London cabbies brought the City to a halt.
- Claims by rivals such as Hailo that it tried to squeeze out potential investors in its service.
- Accusations of dirty tricks, such as getting its employees to book, then cancel rides with competitor Lyft in order to waste driver time and company resources.
- Safety concerns, focused on the lack of driver vetting at the company, with reports of female abductions and a lack of concern for passenger safety.
And now it faces charges that, at a private dinner attended by journalists, its senior vice president of business, Emil Michael mooted the idea of spending a million dollars to hire a team to dig up dirt on reporters that had written negatively about the company. He has since tried to retract the comments, and a spokesperson has helpfully pointed out that “these remarks have no basis in the reality of our approach.” CEO Travis Kalanick has also issued a rambling, multi-Tweet apology.
But aside from the cosmic stupidness of airing such views at a dinner attended by journalists (and showing that, yet again, there’s no such thing as off the record comments), Uber needs to understand that few things bring journalists together more than an attack on one or more of their number. Not only has the row sparked fresh bad press, but it will have also impacted how journalists see them. And that’s not as the plucky David against the Goliath of the global taxi industry (as Kalanick claims they are), but as a playground bully trying to buy its way to success. More Jerktech than technology leader.
So what would my advice be to the PR team at Uber? To start with, realise you aren’t in a war and everyone isn’t automatically out to get you. Be more open and take on board criticisms and start a dialogue rather than using heavy artillery. If your service and approach are innovative enough you don’t need to bully the opposition so blatantly, risking bad feeling from your customers and the wider world. Essentially, stop acting like a stroppy teenager and grow up. And, above all, never try and threaten a journalist, whatever the circumstances.
Rumours are currently rife that Apple is about to open an office, albeit a small one, in Cambridge. The research and development centre would initially employ 20 people, so while it is a coup for the city, it is obviously a drop in the ocean compared to the estimated 54,000 tech employees in Silicon Fen. I’d imagine more people currently work in the electronics department of the city’s John Lewis selling iPads and iPods.
The move comes on the back of Qualcomm buying CSR, HP acquiring Autonomy and the opening of research and development centres by Microsoft and AstraZeneca in the area. Taken together these investments can be seen as a real demonstration of the importance of the ideas and skills within Cambridge – and, the potential benefits (business and PR) of associating with the Cambridge Phenomenon.
However, I think there are positive and negative sides to the interest from tech giants in Cambridge. On the plus side, it reaffirms the city’s strengths as a hub, attracts more skilled staff to the area and, in turn, spawns new startups as employees with ideas leave corporate life to launch out on their own.
But there are also two downsides that potentially impact the good news stories. Firstly, there is a risk that with big investment the tech culture can become too corporate. After all, a lot of Cambridge innovation has come from finding solutions to problems in quirky, very different ways. For example, Intel wouldn’t sell Acorn chips for its new range of computers. The company couldn’t afford to build a billion dollar factory to make its own chips, so came up with the first fabless design. Acorn spun off this knowledge as ARM, now Intel’s biggest competitor.
Before that Clive Sinclair built a scientific calculator that used clever algorithms to run calculations on a single, relatively standard chip. Rivals such as HP used five chips and consequently built machines that were much more expensive. The SureFlap microchip controlled cat flap was created by a physicist who didn’t want neighbourhood moggies invading his house. All of these are examples of the lateral thinking that Cambridge is famous for – but could potentially be stifled by corporate politics (and, ironically too much money).
However I think that while the Cambridge culture may change, it won’t unduly impact its DNA. After all, in Silicon Valley enormous behemoths and nimble startups co-exist with people moving between the two. What is more serious is the second threat of a lack of infrastructure, particularly affordable housing within the city and its locality. It is currently as expensive to live in Cambridge as in London, but with less in the way of facilities. There are plans to build 33,000 more houses by 2031, but the majority are outside the city. And if people live further out and commute by car, rather than bike, it will add to congestion and put further strain on key roads.
Obviously Apple’s 20 researchers aren’t going to add too greatly to current housing woes, but as Silicon Fen grows, now is the time to address infrastructure concerns – or risk losing the city’s status as a tech hub to better equipped rivals.
I’ve always tried to keep my blog apolitical, criticising politicians from all parties equally. But, given the seriousness of the rise of UKIP, I’m suspending my impartiality for a week. Why? Put simply, I believe that Nigel Farage’s party is the biggest threat to face the UK (and in particular Cambridge) tech sector for many years.
First off, I don’t seriously believe that UKIP will garner enough MPs in the 2015 election to be part of a coalition. But what it has done is to shift the debate sharply to the right in two key areas (immigration and the EU), causing the Tories to talk about curbs on the free movement of workers and set a date for an in/out EU referendum. And given that the Tories are likely to be a central part of a future coalition that is potentially very damaging.
Aside from the general business problems that limiting immigration and leaving the EU would bring, it would hit Cambridge and the startup tech scene in four distinct ways:
Many of the highly skilled individuals currently working at or building tech companies originally came from overseas to study in Cambridge. It is already more difficult to get a student visa, and making it harder will simply put off the brightest and the best, who will head elsewhere. And every clever student who goes elsewhere diminishes the wider Cambridge academic population and impacts its reputation and attractiveness to new students.
Pretty much every Cambridge startup I’ve worked with has an incredibly diverse workforce, with employees from every corner of the world. They’ve chosen to come here, or have remained after study, and helped build amazing success stories with their skills. These are incredibly sought after and mobile people – limiting entry for them to the UK will mean they simply go elsewhere.
Charles Wang, the founder of US software company Computer Associates once had a policy of only employing first or second generation immigrants in management roles. Wang himself was born in Shanghai and moved to New York when he was 8 years old. His reasoning was that immigrants had drive, entrepreneurialism and a desire to make something of themselves. Given they often arrived with nothing, they had no safety net, unlike established citizens who had never faced the dangers of real failure. Wang’s view is limited – I know plenty of driven, successful entrepreneurs from stable British families, but he has a point. Limiting immigration removes these potential entrepreneurs and the benefits they bring to their adopted country when it comes to jobs, taxes and the wider economy.
A tech cluster like Cambridge isn’t about individuals, no matter how skilled they are. It is about how they interact together and share and develop ideas, based on their own knowledge and experience. Diversity is key – if you bring together a group of people with similar backgrounds and experience you’re unlikely to get the range of ideas that comes from a wider group. Ideas play off each other and grow – take away diversity and you severely weaken the idea gene pool.
In answering my points, critics may well make one of two arguments. Firstly, that we’ll still let in the best, most skilled people – it is the jobless benefit seekers that we want to turn away. That may be true but will they want to come to a country that appears so unfriendly to outsiders? And, how do you spot the entrepreneur or Nobel Prize winning physicist to be? They could be the yet-to-be-born child of immigrants that initially came over here to work in agriculture or to escape persecution in their home country.
Secondly, people will point to the US, which has restrictive immigration policies, yet the biggest tech/entrepreneur sector in the world. The difference is that the US is a country built on immigration, with a culture that rewards risk-taking and encourages people to try again after failure. We still don’t have that attitude in the UK, and we need free radicals to act as a catalyst to help change things.
The last 20 years have seen a huge expansion in the Cambridge tech scene, driven by the combination of ideas, skills and experience of people from many different backgrounds. Cutting off or limiting the flow of entrepreneurs, workers, students and researchers from outside the UK would completely change this energy and dynamism. It would still survive, but would be weaker, more insular and less exciting. That’s why it is important to tell politicians of all parties that we want to encourage responsible immigration and EU membership to build a successful Cambridge tech sector that benefits us all.
One of the innovations of the last election was the first ever televised leadership debates in the UK. Indeed, many credit Nick Clegg’s TV performance with the Liberal Democrat’s dramatically raised share of the vote and subsequent kingmaker role in the coalition government.
So, you’d think that leaders would be keen to repeat (or even extend) this experiment given that it was proven to engage with voters and give a chance to discuss the issues head to head. Err, no. Broadcasters have proposed an extended series of three debates, with one featuring Cameron and Miliband, the second Cameron, Miliband and Clegg and a third adding UKIP leader Nigel Farage to the mix. The reaction has been muted from the main parties, while the Green Party (who currently have the same number of MPs as UKIP) taking legal advice regarding their exclusion.
Leaving aside my personal antipathy to Farage and the xenophobic, unthinking attitude he represents, there are multiple reasons for including him in a set piece debate. We have freedom of speech in the UK, he is the leader of a national party with one MP, and I’d hope that the political strategists of the three major parties can come up with a range of counter arguments (that don’t pander to the same baseless xenophobia) if they want to impress the public at large. I do agree the Greens should be involved in some way, but that is just a detail to overcome, rather than a reason to call off the whole exercise.
What is more worrying is the complete lack of interest in a rival proposal (from The Guardian, The Daily Telegraph and YouTube) to host debates that would be streamed live on YouTube. The Digital Debate campaign points out that a similar set of four debates at the last US election garnered 27 million views. More importantly it allowed politicians to engage with younger voters, half of whom primarily get their news online. While the exact form of the event is not yet set (and no party has formally agreed to it), streamed debates lend themselves well to sparking discussions on social media, are easy to share and create an online event that will engage voters.
Given that there is widespread dissatisfaction at the limited real world experience of politicians, surely anything that potentially engages them with the electorate can only be a good thing? A quick search on the internet finds that even the candidates for Sherriff of Jackson County in Mississippi were happy to debate online – why then has there been an overwhelming silence on the proposals from the UK’s politicians?
As a PR person I know that there are times when you have to turn down a good idea just in case it leads to unintended future consequences. But at a time when the electorate are so fed up with anodyne career politicians that many will either not vote or will support UKIP, it is time to be brave. Political spin doctors, and their masters, should embrace the online opportunity as a chance to rebuild the political process, rather than shying away from it. Be bold, be modern and make 2015 an online election.
The news that HP is splitting itself in two (ironically a few years after a previous CEO lost his job for proposing the same idea) made me think about the size and structure of tech companies. Some companies invest in growing rapidly and aim to be biggest in their field, others focus on niches, while a third group aim to be a jack of multiple trades, spanning diverse sectors.
HP was previously in the jack of all trades camp, with its fingers in lots of different pies, from enterprise software and services, through servers and networking equipment, to consumer PCs and printers. It will now become two companies, one focused on the enterprise and the other on PCs and printers. Sadly, it has missed the chance to name one H and the other P, going instead for the more prosaic Hewlett Packard Enterprise and HP Inc.
While the two companies will be smaller, they will still each have over $50bn in revenues, and are likely to be hard to disentangle. At the same time eBay has announced it will divest its PayPal subsidiary, following pressure from shareholders and the entrance of Apple into the payments market. I must admit to being cynical about efforts by many tech titans to refocus themselves – it can look suspiciously like a random throw of the dice that keeps investors happy but has no real long term strategy behind it. After all, the world’s most valuable tech company, Apple provides software, hardware (mobile and desktop) and music and video content, alongside payments, maps and health data. And no-one has yet pressured it to split.
However there are definitely optimum size and types of company, depending on the maturity of the market they are in. Emerging sectors, such as the Internet of Things, change fast, so a company needs to be flexible and focused, with the ability to pivot quickly and respond to market conditions. It stands to reason that smaller players will be able to do this faster than legacy behemoths.
Mature markets run less on innovation, with much tighter margins. You are selling a replacement piece of software/hardware and any new features are likely to be incremental not transformative. Consequently the bigger you are the greater the economies of scale when dealing with suppliers and customers. The car industry is a perfect example outside the tech industry, where you need to be big to have a chance of profitability.
The tech industry is going through a rapid wave of change, driven by the move to the cloud and the rise of mobile devices. Previous shifts (such as from the mainframe to the minicomputer and then the server) have led to market leaders falling by the wayside – does anyone remember the likes of Data General for example? In fact HP has done well to survive so long, with a heritage that dates back to 1939. What will be interesting to see is if can make it to its 80th birthday in 2019, or whether it will be carved into even smaller chunks before then………..