From corporate venture capital arms investing in start-ups to innovate faster and better, to corporations embedding tech accelerators within their walls to foster more entrepreneurial spirit throughout the company, these relationships are reinvigorating aging brands.
Earlier this week, one of Google’s rock-star engineers left that mammoth company population: 23,000 — for Facebook, which has about 2,000 employees.
The departure of Lars Rasmussen, co-creator of Google Maps and Google Wave, is only one example, but it raises interesting questions about the precarious nature of corporate tech innovation.
The Google Wave team operated like a start-up within that search-engine giant. They set up an office in Sydney, Australia, far from Google’s California headquarters, worked largely in secret (rare at a company known for its internal openness), and agreed upon incentives that would reward them if Wave succeeded — injecting some risk-reward pressure into the corporate mix.
All of that failed spectacularly. Google decided to kill Wave in August, although CEO Eric Schmidt told reporters that Google would adapt some of the back-end technology into other products.
The technology industry is now a playground for giants. Where 10 or 20 years ago we looked to startups as a font of future wonders, today the energy and momentum have shifted almost completely to the big guys. In addition to the many platforms tech giants own already, few are on their way to owning artificial intelligence, voice assistants, virtual and augmented reality, robotics, home automation and every other cool and crazy thing that will rule tomorrow.
Startups are still getting funding and still making breakthroughs. But their victory has never been likely (fewer than 1 percent of startups end up as $1 billion companies), and recently their chances of breakout success — and especially of knocking the giants off their perches — have diminished considerably.
The best startups keep being scooped up by the big guys (see Instagram and WhatsApp, owned by Facebook). Those that escape face merciless, sometimes unfair competition (their innovations copied, their projects litigated against). And even when the startups succeed, the Five still win.
Because today’s giants are nimbler and more paranoid about upstart competition than the tech behemoths of yore, they have cleverly created an ecosystem that enriches themselves even when they don’t think of the best ideas first.
There is perhaps no better example of this dynamic than what has happened to Snap, the company that makes the disappearing messaging app Snapchat. Although it is one of the most innovative consumer-focused internet companies — Snap created a whole new paradigm in social networking, and pioneered the idea that the camera is the future of human communication — it has been battered by the giants.
After failing to buy Snap several years ago, Facebook repeatedly tried to copy its key innovations. This year, when Facebook lifted Snapchat’s Stories feature for Instagram, WhatsApp and Facebook’s main app, it seemed to deliver a death blow.
But Facebook isn’t the only behemoth trying to feed off Snap’s carcass. In January, Snap signed a cloud-hosting deal with Google. It agreed to pay Google $400 million a year for the next five years. Note that Snap booked only about $330 million in ad revenue in the first half of this year. In other words, it’s paying more than half of its revenue to Google.
Whether Facebook wins or looses, Google will end up doing fine.