The Cap Battle: Microsoft’s Platform, Google’s Aggregation

Right now, Microsoft market cap is $752.19 billion, and Google market cap is $754.58 billion. Few days ago, Microsoft overtook Google but Google has since recovered. These two companies are built on different technology genes – platforms and aggregation.

Microsoft is a platform where the sum of the derivable values for companies which use Windows are in many multiples more than the value of Windows/Microsoft. In other words, if you combine all the values which Windows, the best product of Microsoft and its One Oasis, has enabled across industrial sectors in companies that use it, those values are more than what Windows/Microsoft has gotten.

For Aggregation, you are talking of aggregation construct where the key is feeding on raw materials which you have not necessarily created by curating and managing the data, and from there, monetizing it. Aggregators bring order in a web that is unconstrained and unbounded with data sources.

Over the last few years, aggregators like Facebook and Google, typically advertisement-anchored, have created enormous value. In coming years, with new privacy rules like GDPR, many things could change. That could be the reason why people reacted and moved Microsoft ahead of Google.

The GDPR Regulation

GDPR (General Data Protection Regulation) is a new privacy rule [among other things], championed by European Union, will change many things in the EU and around the world. The freemium aggregators like Google would see more tension in their businesses with governments. This rattled some investors on aggregators which traditionally have lousy data privacy policies as they need data to run their businesses: Facebook cannot run ads without understanding users,  Microsoft does not need to know you to sell you Windows. In the table below, I provide major elements of key categories of aggregators.

Interestingly, this new rule would actually make aggregators like Google and Facebook uncontested winners since new companies may struggle to meet the draconian requirements governments have put in place. Yes, only the well-funded companies could comply easily with complex regulations.

Yes, they are fighting for us – to save us from our data which we willingly share with reckless abandon from getting into the wrong hands! But saving us would make it practically impossible to have any challenger to Facebook, Google, Twitter, etc in coming years. And many startups that depend on these ICT utilities would die. I had noted this in a piece in Harvard Business Review few weeks ago. Say it another way, by toughening data sharing, the regulations would kill competition, handing over the trophies to the incumbents in perpetuity. Yes, the option to build upon their existing infrastructures would be heavily curtailed.

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The old web has been bidirectional system where Google and Facebook collect data and then share with others in their ecosystems. Today, that is gone. They have the rights to collect and keep. That is not going to make us better. I expect them to shutdown most APIs which many other entities have depended upon.

All Together

The GDPR will have real implications in digital businesses. And it is very interesting that the region (EU) promulgating it has no representative in the leading Internet companies in the world. Yes, EU has no company in the top 20 of the largest internet companies as noted by Kleiner Perkins Internet Trends Report 2018. If the rule stays without amendment, nothing will change. Whether it is platform or aggregation, they have one unique shared-feature, and that is scale. That scale comes from the positive continuum that marginal cost drops when you have many people using a digital product and the more the users, the better. You may think that using Windows 10 may not affect your neighbor, but the fact that further Microsoft investment on that product is based on the realization that people like the product. And with Cortana and Bing linked/integrated inside Windows, the implication is that it gets better with more people. That is what aggregators enjoy: they get better as they harvest more data which makes more people to find them more useful. So, provided Google and Microsoft are category-kings in their areas of services [they are], they would be fine.

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