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Tuesday, October 18, 2011

What Exactly Is a Tech Company?

Posted By on Tue, Oct 18, 2011 at 11:45 AM

Fast Company has published what might be the best, clearest look at the how the contours of the tech landscape are shaping themselves, and how that landscape has come to be dominated by four companies.

I was alerted to the article via a tweet by Chronicle tech reporter Casey Newton who characterized the article as a "great, thorough overview of the big four tech companies and their competitive strategies." Before clicking, I guessed what the "big four" tech companies might be. I got only one of them right -- Apple.

My guesses were: Apple, Cisco, Microsoft, and Hewlett-Packard (or Intel, or Oracle), but they acutally are: Apple, Facebook, Google, and Amazon.

Which shows just how out of the loop I am.

Or maybe it just shows that people have different ideas about what a "technology company" is or at least that such definitions are increasingly hard to apply. To me, it has always meant a company --  the primary product of which is some kind of technology, including software or hardware. Of the four companies featured in the Fast Company article, only Apple really meets that definition, and even then, Apple is selling technology partly as a way to sell other stuff -- music, for example. But still, most of its revenue comes from selling gadgets and software to people. That's not the case with the other three.

The writer of the article is Farhad Manjoo, best known for his work at Slate. He might be the best tech writer in the country, and the article is predictably brilliant. He doesn't directly address the question of how we decide what is and what is not a "tech company," but in describing how his "big four" have come to dominate our technological lives, and how they are increasingly battling each other for dominance, he makes such a good case that my fusty old definition might be beside the point. What, after all, could be more beside the point than Hewlett Packard?

"There was a time, not long ago," Manjoo writes, "when you could sum up each company quite neatly: Apple made consumer electronics, Google ran a search engine, Amazon was a Web store, and Facebook was a social network. How quaint that assessment seems today."

Quaint, but still apt to some degree. All of those definitions, while incomplete, are still accurate. Still, the question isn't an academic one. Google has, for years, resisted the notion that it is a "media company" and insisted that it's a tech company. This even though Google makes the great bulk of its revenue from presenting information to the public in return for advertising dollars -- the very definition of a media company. Google's insistence is, no doubt, rooted partly in how differently investors value media companies and tech companies. You can't blame Google for wanting to be known as the latter, with its implications of wide profit margins and growth.

Also, in both hardware and software, most of the innovations that have the most impact on people at this point are coming from the big four and companies like them. Microsoft might still dominate the market for computer operating systems, but both money and attention are increasingly being diverted from desktop computers to smartphones and tablet computers. People use those devices mostly to communicate, consume media, play games, and buy stuff -- not to perform the tasks we normally associate with "computing."

Even if the technological innovations coming from the big four are created mainly to sell digital downloads, retail goods, and advertising, they are still innovations that directly affect the people who use them.

Amazon isn't selling Kindles to make money on Kindles, but to make money on books, music, and all the other stuff it sells. That's why it's pricing the new Kindle Fire so low. Similarly, Amazon's cloud-computing service exists mainly to support the company's other businesses, but it's still a technology service it sells directly to companies.

Of the four, Facebook is furthest from actually being a technology company. Manjoo, though, thinks that could easily change. CEO Mark Zuckerberg, he writes, "needs to maintain a direct line to the pockets of Facebook members, and that's why you can discount his repeated dismissal of rumors that he'll enter the hardware business."

In the end, the definition of what a "tech company" is might come down not to whether a company's end product is technology, but to how big an impact a company has on our technological lives. By that definition, it's hard to argue that the big four are not much more powerful tech companies than Microsoft, HP, or Cisco are. 

Dan Mitchell has written for Fortune, The New York Times, Slate, Wired, National Public Radio, The Chicago Tribune, and many others.

Follow us on Twitter at @TheSnitchSF and @SFWeekly

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Dan Mitchell


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