
The Bill Gates Line - dsr12
https://stratechery.com/2018/the-bill-gates-line/
======
cromwellian
It's always surprised me that Yelp, like Flickr, and other early services,
became stagnant when the mobile transition happened, and failed to leverage
the opportunity.

Why didn't Yelp early on see that they could become OpenTable, or GroupOn? In
China, services like Dianping combine all three plus mobile payments:
Restaurant reviews, booking, discounts, and payment, and even delivery
services.

Surely Yelp could have seen how other crowd sourced content farms became
commodities? Yelp is trying to blame their problems on Search, but the real
problem to me is that they failed to adapt their business model in the face of
a sea change in computing and from mounting pressure from competitors like
TripAdvisor.

The Yelp CEO seems to be indulging in the classic approach when your business
model fails to resort to patent lawsuits, copyright lawsuits, or begging anti-
trust regulators for regulatory capture.

~~~
pfranz
It reminds me of the "Sears could have been Amazon" post from 2007[1]. I don't
know if it's selection bias, but asian companies seem to be ridiculously
diverse (Mitsubishi makes cars, elevators, air conditioners, and is a bank.
Yamaha makes pianos, electronics, and motorcycles). US companies seem super
focused on maximizing their core business. I'm sure they have different
incentives that cause this.

[1] [https://www.metafilter.com/62394/The-Record-Industrys-
Declin...](https://www.metafilter.com/62394/The-Record-Industrys-
Decline#1742245)

~~~
JacobDotVI
The US has fluctuated between conglomerates being in vogue and not. GE being
one of the last surviving conglomerates and on it's way out. You can chalk
this up to a variety of reasons including: tax policy, activist shareholders,
etc. Many of the Japanese companies you mention don't have the same pressures
to break up.

This article talks a bit about the conglomerate break-ups of the 70s, which
includes a great graph showing the rise and fall of such:

article: [https://www.cbinsights.com/research/disrupting-management-
co...](https://www.cbinsights.com/research/disrupting-management-consulting/)

graph: [https://s3.amazonaws.com/cbi-research-portal-
uploads/2018/05...](https://s3.amazonaws.com/cbi-research-portal-
uploads/2018/05/07145033/Conglomerate-chart_0-1.png)

~~~
toss1
My understanding is that the Japanese conglomerates are different from US
conglomerates.

The US ones are largely siloed collections of companies across a spectrum of
industries.

The Japanese ones are strongly vertically integrated. I was told when I was
sponsored by Yamaha for international ski racing competition and at one of
their testing camps: 'we mine the ore, make the metal, make the machines that
make the tools, make the tools, and then use the tools to make the products'.
It's about both controlling the quality all the way up and down the value
chain, and also capturing the value-add all the way up the chain (not sure how
much of each).

I was quite impressed by their quality and technology, which was the prime
reason I went with them. At the time, they were one of only two companies
worldwide that could make a pair of skiis that was actually indistinguishable
left/right to racers at our level (the other was Fischer which dominated the
Swiss, Austrian teams and we wouldn't get their best race stock), and Yamaha
had amazing ability to tune the performance properties. I'm quite sure that
they could do it because of their strong vertical engineering and QA
integration.

(Always seemed like a superior model to me, but I'm not a big biz guy, so what
do I know?)

Edit: typos,clarity

~~~
brusch64
What kind of ski racing did you do ?

I've never heard about Yamaha skis. But I am from Europe so in alpine skiing
(FIS races) I just know the European brands (Rossignol, Fischer, Head, Atomic
or even more obscure ones like Stöckli).

~~~
toss1
Same, FIS Alpine racing. Mostly Downhill for me, but raced all events. Mostly
on the Europa Cup and NorAm circuits and a bit at WC level.

I'm not sure if Yamaha is still active in racing, but they had some really
amazing skis, and they tried out a lot of interesting ideas. One of my
favorites was a triple-core construction where two of the cores were a high-
energy elastomer pre-stretched in the mold to ~5x their original length. The
idea of this pre-load was to have a moderately soft flex but return a lot of
energy as the ski un-bent as you exited the turn -- and it worked like crazy
-- the best pair of GS skiis I ever had! I also had a pair of 220s to try for
DH; they were not fast probably because they had too much energy and vibration
on the straights, but they were an absolute blast for hi-speed free-skiing --
just crazy spring out of the turns -- I was sad to have to turn them back in
since they weren't going in my race bag.

Fun times...

------
justboxing
Here's the actual "Bill Gates Line" that the title references

> And I remember when we raised money from Bill Gates, 3 or 4 months after —
> like our funding history was $5M, $83 M, $500M, and then $15B. When that 15B
> happened a few months after Facebook Platform and Gates said something along
> the lines of, “That’s a crock of shit. This isn’t a platform. A platform is
> when the economic value of everybody that uses it, exceeds the value of the
> company that creates it. Then it’s a platform.”

------
denzil_correa
> Remember the conditions that led to Facebook’s rise in the first place: the
> company was able to circumvent Google, go directly to users, and build a
> walled garden of data that the search company couldn’t touch.

Umm, not really. In the relatively early days of Facebook, Google allowed
Facebook access to its "Contacts API" which let Facebook peek into your
contacts and find out your GTalk/GMail contacts on Facebook. GTalk was the
popular IM client pre-Facebook Messenger and your "social network" resided
within your e-mail plus IM client. OTOH, Facebook did not allow access to its
"Contacts List" citing privacy concerns (talk about irony!). Google eventually
stopped Facebook from access to GMail/GTalk contact lists [0]. Facebook
complained but did find a work around to export contact lists [1]. Twitter
found a work around to get access to Facebook contact lists - by using the
Facebook app for Twitter [2]. But lady irony died again when, Facebook blocked
Twitter's ability to do so [3].

[0] [https://techcrunch.com/2010/11/04/facebook-google-
contacts/](https://techcrunch.com/2010/11/04/facebook-google-contacts/)

[1] [https://techcrunch.com/2010/11/08/facebook-finds-a-new-
way-t...](https://techcrunch.com/2010/11/08/facebook-finds-a-new-way-to-
liberate-your-gmail-contact-data/)

[2] [https://techcrunch.com/2010/06/23/twitter-facebook-
friends-l...](https://techcrunch.com/2010/06/23/twitter-facebook-friends-
linkedin/)

[3] [https://techcrunch.com/2010/06/23/facebook-blocks-
twitter/](https://techcrunch.com/2010/06/23/facebook-blocks-twitter/)

~~~
jedberg
That's... exactly what the article says. That _Facebook_ created a walled
garden that Google couldn't get to.

~~~
jdminhbg
I think the quibble is that Facebook didn't circumvent Google, they used an
open API that Google themselves provided. It wasn't an end-around, it was just
Google leaving the keys in the door.

~~~
acoard
The "circumvent" part is that Facebook's content isn't indexable by Google.

For example, a website review on Yelp winds up on Google, but a review from
Facebook won't show up. Insofar as they're creating content in a walled garden
that Google can't access, they're circumventing Google.

(It might not be the best usage of the word circumvent, but I still think it's
clear what the author is going for here)

------
eigen-vector
Pertinent to revisit Yegge's famous platform rant[1].

Companies like calling themselves platforms—more so in the modern
times—because they can usually provide one or dimensions of value. For
everything else, they need external entities to bring in value which in turn
brings more users. Facebook, for instance, could have simply been a directory
of friends, maybe with a chat feature and would have continued being that till
the next Facebook took its place. They'd have never been a 'social network
platform' However, to make money and commoditize the swath of data users were
giving Facebook and in turn, make users give them even more data, they needed
other companies to provide value in a few other dimensions—games from Zynga,
articles from publishers, ads from everyone under the sun. For this, they had
to become a platform and market themselves as such.

It is the same case with say Google where they needed companies like Rotten
Tomatoes, or Wikipedia to exist so Google can make search results better.
Platform today isn't what the Bill Gates quote indicates but is just a way for
companies to meet their value providers halfway. I have the data, come build
services on top of it. It is a win-win till it isn't—see the Weather Channel
pulling out of FB videos[2].

Maybe platforms of yore vied to make their value providers richer than they
are, but platforms of today are goldmines for value providers to commercialize
that value. For instance, YouTube creators are the value providers without
whom YouTube isn't valuable, but for those value providers to make money off
the content they create, they are reliant on YouTube. Each YouTube channel is
a company of sorts as many many YouTubers are doing it as their full-time job.
To say that the value providers' companies should be more expensive than
YouTube itself is a funny proposition.

[1]
[https://gist.github.com/chitchcock/1281611](https://gist.github.com/chitchcock/1281611)

[2]
[https://news.ycombinator.com/item?id=17134451](https://news.ycombinator.com/item?id=17134451)

~~~
PantaloonFlames
> To say that the value providers' companies should be more expensive than
> YouTube itself is a funny proposition.

Why? That’s the Gates Line. Why is it funny ?

~~~
eigen-vector
That's my entire comment about. The Gates line made sense when platforms
brought infrastructure. It doesn't when the platform is less about
infrastructure and more about providing an audience for the services built on
top to succeed.

To clarify, maybe these comparisons are not justified when we're comparing
different kinds of platforms altogether. Infrastructure platforms still exist,
like AWS and Azure. The solution is likely classifying—in Ben's terms—
'aggregators' into an entirely different bucket called data platforms.

When dealing with infra platforms, the value providers build things on top of
the platform and that's where the relationship ends. If company A works on AWS
and makes $X MM a year, it could still make the same $X MM if it is built on
Azure (all infra costs being the same). Whereas, a content creator can produce
the same video and would make less money by hosting on Facebook as compared to
hosting it on YouTube. The platform has a direct impact on commercializing the
content/value/whatchamacallit.

------
reaperducer
There's a small mental disconnect at the beginning of this article.

The author accuses 60 Minutes of not balancing the story. But does so
immediately after noting that Google refused to talk to 60 Minutes.

Sounds like 60 Minutes tried to balance it, but Google wasn't interested in or
capable of providing that balance.

An alternative would have been to get industry types to try to explain
Google's side of the story, but that's not usually a good idea since nobody
really knows what Google is up to except Google. Anyone else is just
speculating.

~~~
arebop
They might have done some investigation besides asking the competition to tell
them how bad Google is. For example, instead of asking Yelp's CEO if his
results should be on top, they could have run a UX study to see if non-
interested people find a reordered SERP more or less useful than what Google
serves. Maybe this isn't the best alternative but it seems to me it is clearly
better than the path they chose.

Also, IMO the claim that 90% market penetration = abuse of monopoly power is
very questionable. If the 60 Minutes team wants to run a story taking a clear
position on a controversial issue, they ought to assign a team member to play
the devil's advocate and point out where their key arguments are so flimsy as
this. Then they can either remove or shore up these points. I don't think
every news story has to give equal time to "both sides" of the story, but this
story did appear to give 100% of time and thought to one side with no scrutiny
about whether that side has 100% of the truth.

~~~
bitmapbrother
I find it funny that 60 minutes neglected to mention the Yelp documentary
Billion Dollar Bully that exposes Yelp's business practices.

[https://www.youtube.com/watch?v=l2dkJctUDIs&t=3s](https://www.youtube.com/watch?v=l2dkJctUDIs&t=3s)

------
jonbarker
Please humor me this reductio ad absurdam question: So does that make a
toothbrush company a platform? Because arguably lots of people are avoiding
cavities, and that fact seems more economically valuable than the total dollar
value of all the toothbrushes sold, or the net present value of all the
toothbrush customers in the world. What am I missing here? (I don't think a
toothbrush company is a platform company, for the record).

~~~
andosa
I think in this context it's about businesses built on top of the platform and
their direct revenue. A person brushing teeth is not building a business and
generating revenue.

~~~
jonbarker
Well it gets defined in the article as 'economic value' not necessarily
building businesses using the platform company's features.

------
TAForObvReasons
> Gates said something along the lines of, “That’s a crock of shit. This isn’t
> a platform. A platform is when the economic value of everybody that uses it,
> exceeds the value of the company that creates it. Then it’s a platform.”

Funny how the largest tech companies and many silicon valley startups of this
wave are trying to do the opposite.

~~~
matchagaucho
For an Ad-driven revenue company to become a "platform", they must remove
themselves from the actual media content and pay royalties to content
producers.

Neither Facebook or Google are able to do this wholly, because their user
adoption is based on content curation and personalized delivery of repurposed
content (page rank, graph rank, feed).

~~~
empath75
Google is a _content_ aggregator and an _ad_ platform, and a lot of people
have made a lot of money advertising on google.

~~~
matchagaucho
The point of the article is that the money made by others must exceed the
platform.

SEO experts and Doubleclick partners make money only at the whim of Google's
policies. Google can make or break a partner's revenue stream with just one
change.

~~~
adventured
> The point of the article is that the money made by others must exceed the
> platform.

I'd posit that the economic value derived from Google's ad network, exceeds
its own revenue from the ads by several fold at a minimum. The majority of the
ad network value is going to the businesses that are doing the advertising.

Companies overall have used Google's advertising systems to such a massive
degree, because the advertising measurably generates a greater sales/business
return than the money they put into the ads. Google's ad network (which yes
they ripped off from GoTo.com) was the first large scale advertising system in
history to offer such an easy way to judge return on advertising spend.
Previously neither radio, TV nor newspapers could offer the kind of instant
information that Google ads could on performance (and often they didn't offer
any accurate information at all, by which to judge advertising results).
Businesses have been voraciously using it for all these years, because it has
worked extremely well.

------
headsoup
I think the article misses one important point. Google is not _just_ an
aggregate. They are also a publisher/provider and therefore have massive
advantage in placing their products within the results: Home, YouTube, GCP,
Gmail, Shopping(!), Etc.

This is the problem, not that they are an aggregator.

------
stcredzero
_Google has had the luxury of operating in an environment — the world wide web
— that was by default completely open. That let the best technology win_

What is the effect of Google? Is the web now more or less open than it used to
be? Has any of that change been attributable to Google?

~~~
BigChiefSmokem
I am exactly ten years older than the internet and here is what I would say:

1) Google (not Reddit) is the "front page" of the modern world wide web.
Before Google, it was AOL (which was a closed network with access to the open
internet) and Yahoo. The public internet existed some time before the world
wide web, and that was an important distinction back in the mid 90s.

2) Definitely a lot less open and more controlled and regulated in 2018. There
was no dark web back then, it was just one web. My first online purchase was a
pre-order of Diablo II, tax free and it took forever to arrive :)

3) Yes, Google has been the heaviest and richest lobbying power representing
Silicon Valley in Washington for years now, ever since hiring Eric Schmidt and
before debuting their IPO. Whether this is a good thing or bad thing will be
the measure of how open (or closed) you think Google and companies like Amazon
have made the web with their lobbying efforts.

~~~
jholman
> I am exactly ten years older than the internet

Wait wait wait, does InterNet have a precise date of birth?

~~~
sah2ed
Yes, 1969.

[https://en.wikipedia.org/wiki/History_of_the_Internet](https://en.wikipedia.org/wiki/History_of_the_Internet)

~~~
jholman
Why not count NPL? That'd be 1969.

What makes an internet an internet is that it's an interconnection of
networks. In 1969, ARPANet is still only one network; by definition it's not
an internet. So by that conception, maybe we should date the internet from
1977.

I skimmed that very article before asking my question. The internet isn't the
kind of thing that really can be said to have one birthday, unless there's
some kind of artificial-but-nonetheless-widespread consensus to declare one.

------
Quanttek
It's ironic that the report criticizes 60 Minutes for being biased while
showing its own bias in the same paragraph

> The 60 Minutes report was not exactly fair-and-balanced; it featured an
> anti-tech-monopoly crusader , an anti-tech-monopoly activist, an anti-tech-
> monopoly regulator, and Yelp CEO Jeremy Stoppelman

Characterizing these people, especially Margrethe Vestager, as "anti-tech"
(i.e. simply _being_ against technology) when they're just critical of certain
aspects and developments in the industry and don't paint such a rosy picture,
is very misleading.

~~~
adventured
Not anti-tech.

Anti tech monopoly. Against technology monopolies.

There's a critical difference.

~~~
Quanttek
Thank you! That's exactly my point

~~~
DogPawHat
Yeah, I didn't like the barb aimed at Vestager either, mostly because as I'm
Irish and appreciative of her making our Government collect taxes properly.

------
abalone
The underlying reasoning about Yelp's argument here is not that great:

 _> There are three problems with this argument [that the answer box is
anticompetitive]... First, the answer box originally included content scraped
from sources like Yelp and other vertical search sites; under pressure from
the FTC, driven in part by complaints from Yelp and other vertical search
engines, Google agreed to stop doing so in 2013._

This is not really a problem with the argument. Scraping content is just
another form of anticompetitive behavior.

 _> Second, in a telling testament to the power of being on top of search
results, Google’s ratings and reviews have improved considerably in the two
years since that video was posted..._

Also not really a problem. Blocking your competitors is probably going to help
you gain more market share, which is a major factor in the quality of
crowdsourced content.

 _> Third — and this is the point of this article — what Yelp seems to want
will only serve to make Google stronger._

So, Google is incapable of engaging in anticompetitive behavior by blocking
Yelp because they're really only hurting themselves in the long run _if you
really think about it_? This is contorted reasoning. Even if blocking
competitors is an ill-advised strategy, it is still anticompetitive behavior.

~~~
amarkov
The question is what specific anti-competitive action Google is taking. It
would be very strange to decide that, simply because Google's made a really
good service everyone prefers to use, they should be forced to pay Yelp for
permission to display Yelp's content in their results.

------
rdlecler1
I’m not sure I buy this thesis. If companies were not making more money than
they were spending then they wouldn’t be advertising. This suggests that the
vast majority of the value is captured by the ecosystem and not Facebook or
Google. Moreover, how many billions of people get value from Google and
Facebook every day?

------
cryptoz
From a user of both services, and not a lawyer - Yelp has burned all benefit
of the doubt by seemingly basing their business on deception. I find using
Yelp to be extremely difficult as I end up frequently reading an advertisement
instead of a review despite double-checking first (!), I find myself locked
out of Yelp content frequently (I have an account! Maybe I'm not signed in?
Who knows? Or am I trying to use the website and not their app? etc).

Yelp frequently leads users to believe they have information right in front of
them when the user has no such thing. Given that this is the current state of
affairs, and has been for years (always?) I would think Yelp would have
exactly 0 credibility when it comes to them trying to make things "fair" in
search results.

Why should a society bend for Yelp when Yelp has done everything in their
power to deceive us through poor UI, poor UX, misleading links, what I would
even call false advertising? We shouldn't.

\--

Edit: As a point of comparison, on Google you know when you're reading a
review and when you're seeing an ad right away, there's no confusion or
deception or lies there.

~~~
lerchmo
The app wall is extremely frustrating for me.

~~~
choward
It makes no sense. Why do I need a separate app to view a web site? That's
right. I don't. I always have to switch the the desktop version on my phone.
They had to go out of their way to hinder their mobile web site and make it
nag to install the app.

------
bo1024
Hmm, this is interesting but not completely clear.

In this paradigm, what's the difference between a platform and a tool?

