For nearly 20 years, we can find that companies operating ToC business live better than companies operating ToB business. However, in recent years, ToC business has gradually reached its peak, and most companies have begun to turn to ToB business. This article analyzes the cross-border expansion process of Internet giant companies, from To B to To C, or from To C to To B?
In the past two decades, there has been a global trend in the technology industry: companies that operate consumer business (To C) generally grow faster and have higher valuations than companies that operate corporate business (To B). Among the five largest technology giants in the United States with market value - Apple , Microsoft , Google , Amazon , and Meta, only Microsoft is mainly engaged in corporate business; powerful To B solution companies such as IBM, Oracle , and SAP often have only a fraction of the market value of Internet giants. In fact, the "Internet" in the Web2.0 era is almost the "consumer Internet".
However, as the mobile Internet penetration rate reaches its peak and the ceiling of consumer business gradually approaches, most Internet companies have begun to operate To B business. In China, companies such as Alibaba , Tencent and even ByteDance have invested hugely in the "industrial Internet", although they may not necessarily have achieved results. In the United States, the leader in To C entering To B is Amazon, which has held a wonderful battle with Microsoftml6 in the field of cloud computing for many years.
Interestingly, observing the development trajectory of Microsoft and Amazon, you can find some kind of "similarity" or "mirror": the former is based on To B and expanding to To C, focusing on games and smart hardware. The recent acquisition of Activity Blizzard highlights this strategy; the latter is based on To C and expanding to To B, focusing on cloud computing. The new generation of CEOs after Jeff Bezos stepped down from AWS. Can we call it "a different path and the same destination"?
So, so far, which of the above parties is more efficient and performs better? To be fair, it's Amazon. We only need to pay attention to the following facts to draw the above conclusion:
- Microsoft began to operate the game business as early as 1995 and began to operate the smart hardware business as early as 2006. After years of exploration, it can only be considered "stand firm" in these two aspects, and it is far from being a "market leader". During this period, Microsoft made too many mistakes and paid a heavy price. It was entirely up to the strong capital accumulated in the software industry to support the To C business not falling. If you change to any other company, you may not be able to pay a similar price, and all investments in the past will eventually become a laughing stock.
- Amazon has started operating public cloud business in 2004 and has almost created the technology and business model of modern cloud computing. In just ten years, AWS has not only achieved self-sufficiency, but has also begun to feed back its own e-commerce business. As an emerging company, Amazon does not have a high fault tolerance rate and basically relies on efficiency and innovative spirit to win this game. AWS's position in the cloud computing industry is far higher than Xbox's position in the gaming industry and Surface's position in the tablet industry, which should be undisputed.
There are too many differences between consumers and corporate customers: the former is more emotional, has a short decision cycle and has extremely high user experience requirements, while the latter is more rational, has a long decision cycle and does not pay much attention to user experience; the sales system for both is not universal, and the appeal of a brand often cannot seamlessly cover both at the same time. In other words, a "big stupid elephant" can do a good job in corporate business, and may even be considered stable and reliable by corporate customers; on the consumer side, the "big stupid elephant" is almost undesirable.
In 2000, Microsoft released the first Xbox game console, which was such a "big stupid elephant": lacking industrial design, big and thick, stuffed with bulky standardized hard drives and DVD drives, and even the name is a bit difficult to describe. Such a device is very unsuitable for being placed in the living room or living room. It is difficult to even carry it, and this one alone is doomed to fail. At that time, Apple was launching one hot consumer-grade product after another through industrial design, but Microsoft did not learn anything from it; the growth and decline of both sides in the next ten years have actually been half decided at this moment.
1. The bulky first-generation Xbox console has too many parts
You may refute: "Xbox not only did not fail, but instead achieved sales of 24 million units, which made a good start for Microsoft's game platform career!" That's right, it was exchanged for endless money - Xbox's pricing is far lower than the production cost, resulting in extremely high cost-effectiveness; before the console was launched, Microsoft acquired a number of game studios and bought a lot of money to the exclusive rights of a batch of games; the overwhelming advertising and marketing offensives also shocked the entire game industry.
When the next generation of Xbox 360 consoles were released, Microsoft not only suffered huge losses due to excessive costs, but also caused a vicious failure of "Death Three Reds" due to poor quality control. Fortunately, its competitor Sony also made a similar mistake, and Microsoft's losses were controlled to a certain extent, otherwise the Xbox series consoles might have ended in the second generation.
In other consumer-grade businesses, Microsoft keeps repeating a vicious cycle: due to poor product design, the user experience is poor, so we have to spend money (reduce prices or buy partners) to solve the problem, and the same problem will appear in the next generation of products. Until there is really no money to spend, or the management is no longer willing to pay, the business will close down or stagnate indefinitely. Such a fate has appeared in Zune music players, Lumia mobile phones, Kinectt somatosensory devices, HoloLens VR devices, and almost appeared in the entire Microsoft gaming business. The large accumulation of
in enterprise-level business should have enabled Microsoft to gain certain technical advantages to form a "dimensionality reduction blow" to the consumer side - this is what many investors have been looking forward to. Unfortunately, enterprise-level businesses often put Microsoft on a historical burden and use the idea of being a corporate product to build a consumer product ecosystem, which led to the tragedy of Windows Phone and Microsoft's complete withdrawal from the smartphone market.
In 2010, the smartphone market was still in its early stages of development, and Android was not yet prosperous. Traditional manufacturers such as Nokiah failed to launch their own software ecosystem in time; and Microsoft has accumulated early mobile operating systems such as Windows CE and Windows Mobile, and theoretically has the possibility of "unification" of PC and mobile terminals with the Windows ecosystem.
However, the short history of the Windows Phone (WP) operating system is a bloody and tears of partners: WP7 abandoned all application ecosystems in the previous version, and third-party developers must start from scratch; WP8 does not support the upgrade of most old devices, which angered third-party hardware manufacturers and old users who support WP the most.
By 2015, the WP system was completely re-replaced to Windows Mobile 10, and the entire application ecosystem was restarted again; but there was no difference anyway, because Microsoft had completely lost the competition in the smartphone market.
Interestingly, since Satya Nadella took over as CEO in 2014, Microsoft's various consumer businesses have recovered to varying degrees. Does this mean that the new management is better at consumer businesses or has transformed the corporate culture to consumers? uncertain. There are two more reasonable explanations:
First, Microsoft has paid tuition fees for so long, but it has finally paid a critical point of quantitative change to qualitative change, and has begun to understand how to serve consumers;
Second, cloud computing has created huge profits and cash flow for Microsoft, , and has enhanced team morale, allowing consumer business to obtain more resources and more relaxed conditions.
If Microsoft's various consumer businesses can continue to achieve good results in the next 3-5 years, we can say that its "from To B to To C" expansion has achieved a comprehensive victory.
On the other hand, why is Amazon's expansion from To C to To B significantly faster and less expensive? Luck factor is important, and this success may not have broad guiding significance—Google and Meta are far less efficient in expanding To B business. However, Amazon's success still has much to learn from, and its core driving force can be called "the natural vitality of consumer Internet companies."
Consumer Internet is the business with the lowest marginal cost, the highest scale effect and network effect in human history.Therefore, consumer Internet companies must be "fast companies" and attach extreme importance to product iteration and customer service efficiency in order to survive a life-long competition. It must be pointed out that enterprise-level businesses do not necessarily require "fast companies", and many corporate customers pay far more attention to stability than efficiency. However, in the new field of cloud computing, rapid response means formulating technical standards, mastering voice, and shaping customer usage habits.
From the initial concept of cloud computing proposed by Andy Jassy, AWS head in the summer of 2003, to the small-scale test of AWS basic cloud services in 2005, it only took less than two years; three years later, AWS's "database, storage, and distributed computing" trinity has been fully formed. It is hard for us to imagine that any company outside the consumer Internet industry can achieve such high efficiency in such an important business!
Strictly speaking, Google's expansion efficiency in cloud computing business is not low: in 2008, it announced that it will provide storage services in 2010, computing services from 2012 to 13, and since 2016, it will firmly rank among the top three in the global public cloud IaaS PaaS market.
In contrast, IBM only entered the cloud services through acquisitions in 2013, while Oracle did not start providing public cloud services until 2016. The slow response speed has made these two traditional software giants permanently lose the opportunity to lead in the cloud computing market. The situation in China is similar. Alibaba was the first company to embrace the trend of cloud computing, followed by Tencent; among traditional information technology companies, only Huawei responded in a timely manner.
Think from another perspective. In addition to the characteristics of the industry itself, the reason why consumer Internet companies have higher efficiency may also be due to the company's development stage - back then, when Microsoft and Oracle were first founded, they were both famous for their "fast companies"! In the start-up period of any enterprise, the organizational structure is always flat, the management always has a sense of crisis, and the internal friction between departments is not too serious.
As the organization expands, bureaucracy inevitably arises, and management and early employees gradually become complacent and path dependence. Will the Internet industry be as inefficient as today's traditional software industry in twenty years? Maybe it won’t last twenty years?
AWS claims that it succeeds because it can serve customers better, and ultimately because it has what Jeff Bezos calls “first day thinking”: focusing on customers, avoiding bureaucracy, being brave to incubate new abilities, accepting without fear of failure, flexible organizational structure, based on small creative teams, prioritizing long-term value over short-term value, etc.
Is the above "first day thinking" unique to Amazon? Obviously not. Any startup company probably has the "first day thinking" at the stage of initial success; as the organizational structure expands, it inevitably turns to the "second day thinking". In fact, many Amazon employees are also complaining about bureaucracy and organizational failure, and similar complaints may increase in the future.
In China, many investors have tried their best to advocate that "new generation companies" such as ByteDance, Pinduoduo, and Kuaishou have superb execution or organizational efficiency, far stronger than "previous generation giants" such as Tencent, Alibaba, and Baidu ; after the cruel storms in 2021, the above myth has been half broken. Even if the myth is true, it is not difficult to explain that a company with only 10 years of history is more efficient than a company with 20 years of history. The former is likely to encounter all the troubles of the latter.
2. The "Amazon First Day Thinking"
1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Among the five major technology giants, Apple and Microsoft were founded in the 1970s, Amazon and Alphabet were founded in the 1990s, and Meta was founded in the 2000s; however, we can't see that Meta is more efficient than Amazon or Apple.
In a nutshell, the length of establishment is only one of the many variables that affect the efficiency of an enterprise. The consumer Internet is the fastest-growing and most variable industry in the past two decades, and companies in this industry will of course receive certain "efficiency bonuses".As for which industry will be the next "efficiency bonus", it is beyond the scope of this article.
needs to emphasize one thing: efficiency or reaction speed is never the only reason that determines the success or failure of a business competition. Whether in the consumer or enterprise market, customers sometimes like to quickly iterate their products and are willing to accept the flaws of new products; sometimes they like to "slower but more stable" products, and even pay a premium for this.
However, in most cases, it is easier for a "fast company" to reduce the speed, while it is more difficult for a "slow company" to increase the speed. Perhaps this can explain to a certain extent why it is easier to expand from To C business to To B business than to reverse expansion.
Author: Pei Pei (leader of the Internet Monster Thieves Group)
Source public account: Internet Monster Thieves Group, an observer and researcher in the Internet industry.
This article is jointly published by Renren is Product Manager and is authorized by Internet Strange Thieves Group. Reprinting is prohibited without permission.
question picture is from Unsplash and is based on the CC0 protocol.
The views in this article only represent the author himself, , are both product managers and only provide information storage space services.
