By: Robert Lenzner
There was a message from investors during the two days of Facebook founder Mark Zuckerberg’s testimony to Congress last week: in both of the sessions Facebook stock increased in value despite the fears of possible regulation by the government of this extraordinary digital giant. At the same time the shares of Amazon, Apple and Google were among the widely traded issues, though no longer at their peak valuation. These four stocks had been among the market leaders of the broad Standard & Poor’s index during the ebullient market of 2017. If you add Netflix to the group, it rounds out the formidable FAANG stock market leadership that has received so much publicity in recent years.
The Zuckerberg and Google hearings have raised questions about the future leadership of these digital titans in the American economy. That’s why I read a book about them called The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google, by Scott Galloway, an NYU business school professor that was a New York Times bestseller. I recommend it highly to every investor who wants to understand the powerful pull of these influential companies. The book also has insights into Alibaba, the Chinese online retailer, Tesla, the electric car manufacturer, Microsoft, Wal-Mart and Uber. The book neatly captures the insights that make these giants the favorites of plucky investors as enormous profits have been rung up in recent years.
As everyone should realize by now, “Amazon will win, as it’s playing poker with ten times the chips. Amazon can muscle everyone else out of the game,” writes Galloway, in a book that illuminates why these internet giants are bound to increase your net worth faster than many other investments. Amazon is the “earth’s biggest store,” quips Galloway. “The immense value Amazon has delivered to consumers has created the most trusted and reputable, consumer brand on the planet.”Not only that, but “while the world still thinks of Amazon as a retailer, it has quietly became a cloud company-the world’s biggest.” Most of Wall Street agrees on Amazon’s invincibility.
Apple is Warren Buffett’s newest big stock, a pronounced move into the magical world of elegant technology. Galloway underscores Apple’s beauty as a luxury brand, comparing ownership of an iPhone to driving a Porsche automobile. “Apple,” he writes, “is the first technology company to have a shot at multigenerational success.” It controls 14.5% of the smartphone market, but captures 80% of global smartphone profits. Its special nature is to have an iconic founder (Steve Jobs was to Apple what Jeff Bezos is to Amazon). Add in global reach, a premium price and vertical integration and you have one of the most desirable common stocks that exist today. Much
of Wall Street believes Apple shares are rationally priced as compared to the extraordinary premium involved in Amazon shares today.
“If size matters, (it does),” writes Galloway, “Facebook maybe the most successful thing in the history of humankind. It has 2 billion users worldwide and owns three of the fastest platforms that rocketed to 100 million users he fastest, Facebook, Instagram and WhatsApp… Facebook is gaining influence faster than any enterprise in history.” What has drawn potentially negative attention to Facebook is its ability to target individuals and communicate to others their personal content. To marketers everywhere the one in six people on the planet who are on Facebook every day is nirvana, information that cannot be duplicated anywhere.
Combined with Google, Facebook will control a huge share of the digital advertising growth in the world. “With its global reach, it near-limitless capital and its ever smarter data crunching A1 machine, Facebook, in combination with Google, will lay waste to much of the analog and digital media worlds,” writes Galloway. Together, the two companies are well on the way to reinventing advertising for the 21st century. No wonder so many investors must track what Facebook together with Google mean for global commerce. Nothing their equal has ever been created before. No wonder there is widespread controversy over this concentration of power. No doubt we will be inundated with calls to break up these two powerhouses. This public face may play a role in slowing down the ascent of their common stocks in 2018.