The Importance Of Diversification In Tech

Having just one product is more risky than branching out


When you look back at the history of the internet, the tech companies that now dominate the landscape almost all began with a single product. Facebook’s initially limited social media offering, Google’s search function, Amazon’s book sales - today’s giants began with one offering, but all have developed and evolved into multi-faceted businesses with a plethora of revenue streams and products. Not every avenue will be a hit, but fears of disruption and stagnant growth make diversification a necessary consideration for even the most successful brands. Diversification can be a risky route, though.

Even the most seemingly infallible companies have stumbled over ill-conceived and poorly received products. Facebook is a prime example of a company for which only a handful of products have stuck, and acquisition has been far more successful than in-house product development. The purchases of WhatsApp and Instagram are difficult to criticise even when considering their incredible cost, and Facebook now has an overwhelming market share of both messaging and social media apps in the US and Europe.

Its own products have been less well received - a long-standing tussle with Snapchat has seen Zuckerberg and co. release copycat apps, all of which have failed miserably. Remember Poke? Didn’t think so. Facebook News was similarly abandoned and incorporated into its primary app, and it’s difficult to see its recently announced dedicated Events app taking off. Facebook announced its move into the corporate world in early October when it revealed Facebook at Work, a Slack-style office communication system looking to muscle into the busy environment.

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Google, on the other hand, has been so successful that it stands as a gleaming example for any tech company looking to diversify. Its search tool has been supplemented by countless other products - Google+, Gmail, Google Drive, Youtube, Maps, Chrome, the list is endless. Glass was a misstep, but Google’s hardware output is generally successful, with the recently launched Pixel smartphone set to challenge Apple and Samsung for their dominant positions. The company has driverless cars on the way, is developing products for the connected home, and makes the majority (89%) of its revenue from advertising - if any company can be said to be truly diverse and safe from disruption it’s Google.

Amazon, similarly, has come a long way from selling books. The company has, by a distance, the largest revenue of any internet company, dwarfing that of Facebook, Ebay, Alibaba, and Rakuten, for example. On top of its diversified product range (of just about everything you could ever want or need), Amazon produces its own hardware in the form of Kindle, Fire TV Stick and Echo, amongst many others. The Seattle company has e-commerce in the West cornered, but its movement into media and the connected home represent potentially huge new revenue streams too.

There are notable exceptions to the rule, though, in Apple and Twitter. Neither company has used diversification as a core strategy, with the latter playing catch up against other social media giants. Twitter’s user base has somewhat stagnated in the past two years, and it’s experimenting with ways to get growth back on track. It’s live streaming partnerships with the NFL, the NHL, and the MLB could see Twitter competing with Youtube for the sports streaming market, and it’s courting video bloggers from the video hosting giant. Ads sold on video content could be a life-saving revenue stream for a site that otherwise seems out of ideas of how to grow.

Apple’s product range has been relatively diverse for some time, with the Macbook and iPhone a decade old and nine years old respectively. But the company hasn’t moved too far from its core product, with the iPad and Apple Watch essentially redesigned extensions of its other offerings. Primarily a hardware company, Apple has such a strong standing in both the mobile and personal computer markets that more radical diversification has been all but unnecessary. Apple is secretive, though, and if the iCar comes to fruition it’d represent quite a significant jump.

With small, agile companies looking to reinvent the wheel at every turn, no company can rely solely on its core product for revenue. Facebook is incessantly churning out new products and seems unfazed when they don’t stick, Google has built an empire on diverse products, and Amazon is positioning itself to exploit developments in areas like the Internet of Things. The world’s biggest tech companies are all in on diversification - it is often the difference between success and domination. 

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