There’s something weird happening with the FANGs…
Facebook. Amazon. Apple. Netflix. Google. And I like to include Microsoft… (In fact, Goldman Sachs prefers to substitute Microsoft for Netflix altogether…FAAMG).
Each one does totally different things, right?
Facebook does social media…Amazon does retail products… Apple does gadgets…Netflix does movies… Google does search engines…Microsoft does software.
At least, traditionally, that’s what they’ve been known for…
But as these titans of industry have risen through the ranks of the world’s largest companies…they’re morphing.
All of them.
And they’re all changing the same way…by becoming competitors with one another.
Instead of six specialised shops selling their own products, they’ve all become convenience stores selling the same products.
Want to watch a TV show? Well, there’s Netflix…but also Amazon Prime Video…Google’s YouTube…Microsoft Store…and now Apple TV Plus.
Smart home? Amazon Echo, Google Home/Nest, Microsoft’s Cortana (sorta) or Apple HomePod.
Phone? Google makes the Pixel and Android, Apple makes the iPhone, and Amazon sells all of them plus their own Fire Phone. Microsoft even owned Nokia.
Cloud computing? There’s Amazon Web Services, Microsoft Azure and Google Cloud.
Basically, of the six titans…two are sitting on the sidelines. Facebook’s sticking to social media, and Netflix is sticking to video streaming.
The other four — Apple, Amazon, Google and Microsoft — are hard at battle, trying to do everything at once…and be the top contender in every category.
Reminds me of swimmer Michael ‘The Baltimore Bullet’ Phelps.
To Americans, Phelps is a hero. He’s the most successful and most decorated Olympian of all time, with 28 medals. He holds all-time records for gold medals too. Also, records for gold medals in individual events. Plus, records for medals in general for individual events.
He may very well be the greatest athlete in history.
And I remember watching him in Athens, Beijing, and London in ’04, ’08 and ’12 respectively.
He crushed the competition in every event.
It didn’t matter if you were a 200m backstroke specialist or a 100m butterfly guy…when you saw Phelps strut into the room, you knew you were toast.
Today, we’re watching something similar in the world of innovation…but instead of one dominant hegemon leading the pack, there are four.
Apple. Amazon. Microsoft. Google.
Each one entering the butterfly, the medley, the freestyle, the backstroke…and each one set on dominating every event.
Four Michael Phelps in the same competition.
It’s really quite special.
And it’s also useful for us to understand the direction in which technology is moving…and potentially inroads for us to make profitable investments through those trends.
Video streaming, for example…
It’s one offering shared by every single FAAMG member in some form or another. And as they developed this technology and clashed to be top contenders, they quickly bought up smaller innovators around the world.
‘Facebook buys Vidpresso’s team and tech to make video interactive’
‘Microsoft confirms $8.5bn Skype deal’
‘Amazon’s $1bn deal for video streaming site Twitch is latest battle with Google’
Big fish eat little fish.
There’s an opportunity there. Find the smaller innovators doing something that the big fish aren’t…buy early…and hope that they get bought out. That’s how a lot of growth investors like Mark Cuban or Peter Thiel made their big bucks early in their careers.
There’s also an opportunity on the big fish side…by paying close attention to what their Research & Development teams are working on.
Amazon’s R&D team is called Lab126. Set up an alert for mentions in the news. Try to pick up early indicators of products they’ll reveal in the future. Use that to make educated investments.
Google’s version is Google X. Or if you want a back door into the ideas that Google’s looking at, consider watching Google Ventures (GV). It’s their investment arm for tiny companies making tech breakthroughs.
Most early peeks into Apple’s R&D come from leaks at their Chinese factories. Surprisingly often we’ll see cell phone footage of some new component or device that Apple’s ordering from their Foxconn contractors in Shenzhen. This egg’s a bit harder to crack…but can certainly be done.
But one clever tactic I like to use when researching what the big fish are researching is looking at their job postings. It’s basically a live list of the projects and upcoming projects they have planned. Here’s a snapshot of Microsoft research ads:
Machine learning, natural language processing, AI frameworks…all emerging trends that Microsoft is targeting in their own R&D facilities. Maybe you should be targeting those trends in your own portfolio…
It’d be a smart way to capitalise on this four-man tech race we’re experiencing…and a potentially lucrative way to pick trends early.
Editor, Money Morning New Zealand
PS: If poring over US job boards and reading through obscure Chinese tech blogs isn’t up your alley, you may be interested in my paid service, Small-Cap Speculator. It’s where I do all the investigative work myself…and reveal my findings to subscribers along with local companies to invest in. If you want to learn more, you can read about the research service here.