Consumer Technology: Customers vs Shareholders
When do the interests of customers lose out to the interests of shareholders?
When I wrote my last piece, about how bad calendar software is, I began to see a pattern that lead to a whole different rant: this one. How do you explain the phenomenon that companies get to a certain size and profitability and appear to ignore things that their customers think are obvious?
When I wrote about calendar software, I was talking mostly about Apple ($600B), Microsoft ($500B)and Google ($550B). These are immensely profitable companies, so profitable that they can afford to provide calendar software for their customers without charging for it. (Microsoft does charge for its Exchange server, which manages their calendar software as well as email and other functions.) Wouldn’t it make sense to provide the best calendar software, so that customers would be happy and appreciate the service?
When I was writing that piece, I read a story about the valuation of Snap Inc., the company responsible for Snapchat. The company is apparently planning to sell shares to the public some time in 2017; but “investors” are concerned that Snap Inc. might not be sufficiently mercenary to grow their revenue and profits fast enough to justify the anticipated IPO valuation of $20–25B. Snap appears to still be motivated more by acquiring users (making them happy!) than monetizing users (making Wall Street happy).
The pattern? Companies achieve success by making customers so happy that they are willing to use products that make those companies really successful. But once the companies achieve phenomenal success they inevitably focus more on making their shareholders happy than their customers. In the past, this phenomenon was more hidden because technology companies tended to serve corporate customers more than consumers.
You could call this the maturity cycle. Computer companies achieve maturity when they decide their customers’ data is more important to their own future than it is to their individual customers. Apple, Microsoft, and Google clearly passed this milestone years ago.
Facebook ($350B) passed it sometime in the last two years , when it discovered it could make a lot more money from native mobile applications than web-based HTML applications. I used to look forward to opening my Facebook page to see what was in my news feed (something the company basically invented). Now I dread it; I feel like I have to go to Facebook, but it is stuffed with people’s opinions about Donald Trump, with things Facebook wants me to see (including advertising), with “news” that crowds out what I originally thought was so much fun to read. Indeed, I am wondering if I can stop using Facebook, which is an interesting reaction to have to something I have spent so much time using.
I thought at one point that this phenomenon has something to do with the leadership of the companies. For instance, when Apple was run by Steve Jobs, he had a fierce focus on the details of its products. Would he have allowed the Apple Magic Mouse to have its recharging port on the bottom so that you can’t recharge while you are using it? I think he would have fired the product guy who thought that was a good idea!
Certainly Jeff Bezos has lead Amazon ($350B) through amazing short term pressure to serve the perceived interest of shareholders by focusing on the long term interest of customers. The stories of his personal involvement in the development of products like Kindle and Echo, not to mention Fresh and Prime, are legendary.
In other words, my thesis is that the company has to have strong, even unreasonable leadership to resist the siren call of the short-term interests of shareholders to focus on the short term interests of customers. But Google (OK, Alphabet!) is still run by Larry Page. And Facebook is still run by Mark Zuckerberg. So there must be another element at work here: I’m at a loss to identify that element. Perhaps Larry and Zuck have become so successful and personally wealthy that they are no longer focused on customers as much as on strategy and the future?