⇑ THE GOOD ⇑
▲ Tech Superpowers Eat the World: For the first time this year, technology companies at times held each of the top five spots of the world’s most valuable public companies. The combined market value of tech’s Five Fab — Apple Inc., Alphabet Inc., Microsoft Corp., Amazon.com Inc. and Facebook Inc. — was $2.4 trillion as of Dec. 27, or more than 11 percent of the S&P 500’s value. That means tech superpowers are inching toward the 16 percent share of the S&P 500 they held at the peak of the tech bubble in March 2000. The bad news: Big Tech’s growing power makes them a target of politicians worldwide.
▲ Advertising Becomes a Two-Horse Race: Alphabet’s Google and Facebook are popular destinations for billions and their technology makes it easy for carmakers and detergent companies to pinpoint the right people for their product pitches. As a result, the two gobble a combined 58 percent of all the advertising purchased in the U.S. online or on mobile phones. With Google and Facebook as the only companies generating significant digital ad sales, every other company dependent on advertising — from TV networks to news organizations — is rethinking existing business approaches.
▲ Amazon’s Ambition Knows No Bounds: It became clear in 2016 that no industry should be free from Amazon paranoia. It’s a giant retailer of every product and service, a growing entertainment power, and a would-be transportation giant that aims to control land, air, sea and new horizons. In an example of the impact Amazon’s ambitions can have, its Amazon Web Services cloud business — a type of computing Amazon created from nothing 10 years ago — made up more than 100 percent of Amazon’s total operating profit in the third quarter (after accounting for international losses), and it’s not an exaggeration to say AWS has changed the direction of both Amazon and the tech industry.
▲ China Tech Flexes Its Muscles: China’s tech giants Baidu Inc., Alibaba Group Holding Ltd. and Tencent Holdings Ltd. are unimaginably big and broad, cutthroat competition has honed the next-generation stars such as Didi Chuxing, and many novel tech ideas born in China are being copied elsewhere. China’s tech powers are extending their advantages at home and stretching into other parts of the globe, though few have made major inroads into the U.S. yet.
▲ Television Finally Meets Technology: Television’s dominance of Americans’ leisure time and advertisers’ wallets has peaked, and changes are slowly coming to the fundamental nature of TV. Commercial-free binge watching on Netflix, the popularity of nontraditional video on smartphones and the development of new types of online TV services are reshaping entertainment. Will digital “television” simply replicate the TV we’re used to or become something else entirely?
⇓ THE BAD ⇓
▼ Apple Hits a Wall: The decade-long era of Apple’s impossibly fast growth and profits came to an end. Apple’s revenue fell this year for the first time since 2001. The company can’t outrun a changing market for smartphones globally, and it continues to grapple with government resistance to its power on issues such as law enforcement, taxation and manufacturing.
▼ Startups Reckon with Austerity-ish: After two years of seemingly limitless funding for young technology companies, there was a marked retrenchment this year. Money invested in tech startups remains historically high but is on track to decline materially from 2015. Smartly, many private tech companies started to manage for profits — or “profits” — instead of straining to grow at all costs. Otherwise the fallout from the investment pullback could have been much worse.
▼ No Mercy for Yahoo and Twitter: Internet companies have to keep growing, or they die. Yahoo Inc. and Twitter Inc. in 2016 each went through protracted sale efforts — Yahoo found a buyer, Twitter didn’t — and had to deal with the punishing effects of disappearing growth in revenue and users.
▼ Batteries Had the Worst Year Ever: Samsung was forced to end production of its Galaxy Note 7 after reports of fires or explosions caused by faulty batteries. The U.S. also forced a recall of hoverboards because of overheating batteries, and Apple dealt with battery life hiccups for its new MacBook Pro line. The (sometimes literal) battery flare-ups in 2016 show the fragility of one of the essential components of computing in everything from smartphones to driverless cars.
▼ Old Tech Shrinks: The technology industry is brutal to its stragglers (see Yahoo and Twitter above), and that meant painful job cuts in 2016 at some old-guard companies. IntelCorp., Cisco Systems Inc., HP Inc. and others continued to cut back — in some cases drastically — to offset falling revenue or to shift resources away from declining businesses.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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