Looming demise of tech brands and new opportunities

I’m not an economist. Neither am I a soothsayer. I avoid making irresponsible predictions. However, a constellation of recent developments in the tech industry leads me to believe that a major sea change is forthcoming, perhaps as early as 2019.

This, however, is not me trying to be merely alarmist. I’m not a doomsday prophet.

News 1: The FAANG and its oversized power in stifling unpopular online speech

FAANG refers to Facebook, Amazon, Apple, Netflix, and Google–the five largest multinational digital media corporations. Collectively, these five companies own massive amount of consumer data and wield an oversized power in regulating what gets to be online and what doesn’t.

A few days ago, Tumblr announced a ban on “adult-oriented” contents by its users. For many years, Tumblr has been one of the favorite platforms of self-expression and peer support among the younger LGBTQ+ population. Tumblr (a brand owned by Oath, a subsidiary of Verizon) was forced into this decision because Apple refused to allow Tumblr to publish its app on the iTunes store.  Facebook, then followed this week by one-upping Tumblr: now Facebook no longer allows its users to even discuss sexuality. This new “community standards” by Facebook has an adverse impact on sex workers who may be exchanging safety-related information (such as “bad dates”), socially isolated queer youth who are in need of peer support, and even social service organizations whose mission is to advocate for or educate those who are in the margins of society.

This new puritanical initiative by FAANG, while possibly in response to the new U.S. federal law known as FOSTA/SESTA (an amendment to the Communications Decency Act), is also about protecting the advertisers’ and shareholders’ interests before the interests of free speech. Apple and Google, the de facto duopoly of all mobile apps, can now dictate what contents other digital media companies may permit on their platforms.

In addition, FAANG and other digital media companies have been waging a fierce battle against all kinds of alternative media outlets–both conservative and progressive–ostensibly in response to the debacle of the 2016 U.S. presidential election.

News 2: Many online media companies are failing

Ten years ago, the news was the (somewhat exaggerated) death of print media. Some newspapers, such as the Seattle Post-Intelligencer, quit printing and went 100 percent online. Other newspapers simply went out of business. The print media outlets are remarkably resilient. Many weekly and monthly magazines are still in print (alongside paywalled Web sites and digital editions), and since 2016, the New York Times and the Washington Post are gaining more subscribers than ever in recent history. The lasting brand value of prestigious and established publications cannot be downplayed.

On the other hand, the “new” digital media companies are failing. Vice, Vox, Mic, BuzzFeed, and others are either downsizing or looking for buyers. There are layoffs and shutting down of offices like the newspaper companies went through between the Great Recession and the earlier half of this decade.

News 3: Gig economy e-commerce giants are facing challenges

Whether you call it “sharing economy,” “P2P economy,” or “gig economy,” it is the networking platforms and their brands that matter more than those who utilize them as a source of income.

Uber, Lyft, Airbnb, VRBO, Hipcamp–and the granddaddies of P2P economy, eBay and etsy–all build their brands on the back of individual, independent contractors who benefit from the power of a global online network that connects them to customers.

The problems with these companies are manifold: there are always bad actors who exploit the platforms and create scandals; there are many complaints against both sellers and buyers, that the corporate cannot easily control or prevent; then there are nagging questions of business ethics–Does Uber harm the taxicab drivers? Would Airbnb contribute to housing shortage and negatively influence the neighborhoods? Do “gig economy” companies really care about workers’ rights, or are they indifferent to them simply by calling them “independent contractors”?

Uber continues to lose billions of dollars, despite the high brand value and all the investor hypes. Then these companies are also losing the initial freewheeling optimism inherent in the startup culture; legislators and bureaucrats are eager to regulate and tax them to death, and in so doing, changing the very characteristics of such companies that make them innovators and disruptors.

These companies may not survive much longer, especially if another recession hits. Along with it, many people who have come to rely on their platforms for income will have to find alternatives to market themselves, something an average gig economy participant is capable of. They will be left out on the street to rot.

News 4: Start up is no longer cool

Only a few years ago, the ultimate aspiration of many Millennials was to start up a tech business. They would go to many events to pitch their ideas, go on Kickstarters or Indiegogo in search of investors, and there were enough angel investors and venture capitals who were eager to take well-performing startups under their wings.

But it appears that the startup boom is over.

The Wall Street Journal puts it bluntly: young American entrepreneurs are an “endangered species.” The percentage of under-30s who own a business has reached the lowest in a quarter-century, according to WSJ’s own research.

The Atlantic explains it further: most Millennials simply don’t have such a kind of money to fund their own business. Most entrepreneurs self-fund their startup, and the Millennials in general tend to be risk-averse. Despite their interest in coding schools and business schools, they’d rather prefer Corporate America and climbing up its ladder.

What this means

Consolidation is the trend. Digital media contents are published by a smaller and smaller number of corporate media, while those who exist outside the big corporations will continue to face censorship, economic disadvantage, and invisibility. This is a 180-degree shift from the Internet of the 1990s and early 2000s, whose premise was that an average Joe would have the same level playing ground as the big guys. The big corporations, in tandem with the censorship-happy surveillance-regulatory state, can literally block anyone from accessing the market and information by simply creating an online choke point. Censorship, even when done by proxy private corporations in the name of “compliance,” “copyright protection,” or “safety,” is still censorship (notwithstanding the U.S. Constitution not specifically applicable to censorship by private entities as part of a contractual relationship) and is just as toxic and has a chilling effect on free speech and stifles innovation and creativity.

After having exploited everyday people in the post-recession, “jobless recovery” economic paradigm, the gig economy ecosystem is also facing a day of reckoning. They too are becoming too consolidated and too powerful. Gig economy is also facing the prospect of heavy-handed government regulation, which could cripple many small-time operators financially while at the same time leading to an excessive intrusion into their privacy. Inevitably, such measures could lead a large percentage of operators to drop out.

New opportunities ahead?

People are looking for genuine sense of community and human interactions, as well as a platform for self-expression and community-building around their interests, identities, and values.

Even as the major social media giant becoming a quasi public utility (and mass surveillance and mass advertising system), the underlying human needs that made such social media companies grew so fast did not go away.

In addition, despite everything seemingly online and digital these days, most people are looking for organic, in-person experiences. A significant portion of Facebook is being used for organizing events, finding dates, and making real (off-line) friends. Indeed, two of the biggest victims of Facebook’s latest censorship measure are (mostly LGBTQ+ and kink community, as well as sex workers, survivors of abuse, and others) peer support groups on Facebook, as well as so-called “cruising” or dating groups on Facebook.

If I use these news and trends as proverbial tea leaves, I can identify several new opportunities ahead:

  • Intentionally close-knit online communities and membership clubs that serve a very specific demographic or interest group, independent of FAANG. Such enterprises must be membership fee based and establish clear anti-censorship and pro-privacy policies (with obvious limitations that are clearly, narrowly, and unequivocally defined).
  • Membership- or subscription-based news and opinion service that curates and analyzes the news and information, creating a relief from the incessant wave of information overload and information fatigue. Such services can also encourage a development of well-rounded and deep civic discourse, while protecting customers from the onslaught of demagoguery and fake news.
  • Experience-based products and services as an antithesis of “micro-targeted” mass consumerism epitomized by Amazon, Facebook, and Google. Such businesses can capitalize on the sense of wonder, curiosity, and serendipitous discovery, striking a balance between creating an immersive, experiential space and allowing self-led activities for customers to build their own experiences.

There will definitely be a bumpy ride ahead, but it will be a start of the new Web 3.0 era of decentralization. New opportunities will present to entrepreneurs who are paying attention, whether they would choose to continue operating on the incumbent Internet, on a new alternative to the Internet that may come into existence in the future, or entirely off-line in their neighborhoods and local communities.