by Anthony Ha
Most of the discussion about "the Internet's Fantastic Four" at the Techonomy conference Sunday afternoon focused on the ways Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Facebook (NASDAQ:FB), and Google (NASDAQ:GOOG) have come to dominate the online landscape. But the panelists were also asked to identify which of the companies seemed particularly vulnerable.
Alec Ellison, chairman of technology investment banking at Jefferies & Company, offered what was perhaps the most surprising answer (at least if you're looking at market capitalization) - Apple. Ellison said that Jeffries is "bullish" on all four companies, but even before the vulnerability question came up, he criticized Apple, saying that of the group, Apple has the least "stickiness" with consumers. In other words, Apple has to continue rolling out cool new products if it wants to keep its lead. Meanwhile, it would be much harder for a competitor to unseat Amazon, Facebook, or Google, even if they don't offer any new innovations.
Apple's stores could become a big weakness, too, Ellison said. Sure, they're a "tremendous advantage" now, but Ellison said IBM (NYSE:IBM) had a similar network of stores, which "became an albatross in the '90s." To reinforce his point, he asked the audience if anyone had set foot in a Disney (NYSE:DIS) store recently, and no one raised their hands, but he said that that question would have gotten a very different answer a decade ago. Apple could follow a similar pattern, Ellison argued. If its product momentum slows, the stores could become a big drain rather than an asset.
Mark Mahaney, formerly an analyst at Citi, argued that Facebook has a big question mark, too - namely, CEO Mark Zuckerberg. Mahaney suggested that Techonomy's David Kirkpatrick has spent more time with Zuckerberg than almost anyone. And that's a bad thing, because it shows how "not to many people really know this person." Some of those questions are inevitable, Mahaney added, because you "don't really know how good these executives are for five or 10 years."
He also argued that Facebook's margins are too high, signaling that the company should go more into "investment mode." Mobile is one area where the company didn't invest enough, Mahaney said - Facebook took a long time to release an iPad app, and its mobile apps have had significant performance issues, supposedly because of the company's bet on HTML5. Bad bets can happen to anyone, but Mahaney said, "They didn't make enough bets on mobile."
The panel also covered the opportunities that these companies create and eliminate for startups. Mahaney spoke about the "deep competitive moats" that each of the big four has around its business, making it very hard for anyone to take them on directly. He suggested that new companies will have a hard time building a broad social network, or a broad search engine, or a broad e-commerce site - instead, the opportunities lie in focusing on specific niches or verticals.
Still, Mahaney predicted that another big online player will emerge in the next few years, and Ellison said it will probably be a company using "a new technology that isn't yet economic." For example, Ellison noted that before early social network SixDegrees.com went bankrupt, the team was debating whether it can afford to let every member upload a profile picture. Obviously, that hasn't been a problem at Facebook, whose growth has been enabled by rapidly falling storage costs.