The death of Google (And Facebook)-Riding the gravy train

Perfecting Equilibrium Volume One, Issue 63

It's a hell of a start, it could be made into a monster

If we all pull together as a team

And did we tell you the name of the game, boy?

We call it riding the gravy train

The Web3 Reader, November 3, 2022

The fall of the railroad barons has become a business school cautionary tale: The barons thought they were in the train business; they didn’t understand they were in the transportation business, and so the automobile broke them.

There’s a contrarian take that the barons who bridged a continent understood quite well what business they were in; they just loved trains too much.

Here’s a third take: We tend to forget that the choice wasn’t trading the Southern Railway for General Motors. GM wouldn’t exist for another half-century.

No, your choices in the 1890s when the railroads still reigned were to go with the smart money and invest in the International Automobile Company, which managed to blow through $500,000 in investor money – roughly $17 million in today’s dollars – without actually building any cars. Or take a chance on the odd Daimler Motorized Carriage company. Which was putting internal combustion engines into stagecoaches.

Before it turned into Mercedes-Benz.

But even if you could pick out which weird little company would be a 20th Century industrial powerhouse, that wouldn’t happen for decades.

Through the lens of history we can see the rich railroads of the 19th Century, and the dominant General Motors of the 1950s. Just go from one to the other, no?

That’s like saying here’s the starting line for the marathon, and over there is the finish. Just go from here to there.

That kind of leaves out the hours of running 26.2 miles in between.

You cannot replace tens of billions of dollars in business with another doing tens of millions.

It’s math.

Take Google. Its stock was hammered last month as revenue missed expectations, and net income dropped $5 billion from 3rd quarter 2021.

Everyone has a bad quarter now and again. But this was a bad quarter just before regulation makes things worse.

This is the month the European Union’s Digital Markets Act and Digital Services Act start to take effect. Both are aimed directly at Very Large Online Platforms and Very Large Online Search Engines – Apple, Facebook, Google – and will force them to stop favoring their own products and allow small companies equal access.

So Google should just jump over to Web3, no? Why not?

Perhaps because while Google was hammered for only bringing in $69 billion in Q3, the top 25 Web companies combined had less than a half billion in revenue for the quarter.

Someday there may be a Web3 company with as much revenue as Google. Today is not that day.

Perhaps even more indicative is the dumpster fire that is Facebook this year. The stock of Facebook parent company Meta has dropped 90 percent this year, which means its market cap has dropped more than one trillion dollars since September 2021.

Usage is down. Revenue targets are being missed. Advertisers are fleeing, and so are investors.

But what really has investors upset is that Mark Zuckerberg no longer seems interested in Facebook, despite losing $88 billion in personal wealth. (Don’t feel too bad for him; he’s still worth $37 billion. He won’t have to start flying commercial or anything.)

While Facebook burns, Zuckerberg is focused on the Metaverse. He’s pledged to put $10 billion a year for a decade into this interactive virtual space that users enter via virtual reality headsets.

So far, users…aren’t. Meta projected 500,000 active monthly users on Horizon Worlds, its VR platform.

So far it has yet to reach even half that.

An aside here: Nerds and techies have been fascinated with the idea of living in cyberspace ever since the 1980s wave of cyberpunk novels and the subsequent movies. They don’t seem to understand that all the people who watched The Matrix don’t want to live in it.

But let’s stipulate to Zuckerberg’s premise. Let’s say Meta does invest $10 billion annually for a decade into building Horizon Worlds.

Will it be big enough to replace the business Facebook has lost? Will any Web3 company be that big by then? It took almost two decades for Facebook to get that big.

So why is Zuckerberg doing this? Maybe because he sees that Facebook and Instagram and the rest of the Meta Web2 companies are as big as their going to get and are being jammed up by regulators, so he is using them to fund his move to Web3 while they still have enough revenue.

And before they end up in history’s trash pit with the Southern Railway and the other train titans of the 19th Century.

Coming Next

Friday, November 4: The Week in Review; Plus Somewhat Off-Topic-Help me improve Perfecting Equilibrium.

Dall-E.Feola

Having fun playing with DALL-E. Changing even one word in your description has interesting results.

Christopher J Feola founded PrivacyChain, which provides Data as a Service to Web3 projects and restores the value of content. If you liked this post from Perfecting Equilibrium, why not share it?