Fred Wilson

Venture capitalist Fred Wilson of Union Square Ventures was willing to make some ‘bold’ predictions for TechCrunch’s Disrupt conference – on video no less – as he discussed his vision for the top three Internet companies in 2020.

TC Founder Michael Arrington asked which companies would lead in terms of market cap in 2020 with Apple, Google, Microsoft, and Facebook leading in market cap right now. Wilson’s answer decidedly forecasts both Microsoft and Apple as falling behind the ranks of Google, Facebook, and some currently unknown company. Why Apple? Because they’re too married to hardware, Wilson believes…

“Google, Facebook, and one that we’ve never heard of,” Wilson told Arrington before explaining what will lead to Apple’s fall from market leader over the next five years.

“Because I think they’re just too rooted to the hardware, and I think that hardware is just increasingly becoming more commodity. And they don’t have anything in the cloud, to speak of, and I think the stuff they have in the cloud is largely not good. And I just don’t think that they think about data and the cloud in the way that you need to think about things.”

Wilson later said that Google Glass is “directionally correct” but lacks the correct implementation while invoking the Apple Newton as an example of a product that could later evolve into something better like the iPod or iPhone. Wilson sees everything else Google is doing as making it the most valuable Internet company in 2020…

“I just think it’s about everything that they’re doing. I mean, I just think their strategy of getting all of us to use more and more of their products for free and put more and more of our data in their cloud, and then do more and more machine learning on that, and then provide more and more service to us based on that… it’s just an incredible strategy.”

When pressed about Google’s approach to privacy and utilizing personal data for its products, Wilson had this to say:

“They have done nothing to date that is truly evil. […] The minute they do it, I think they’re going to really screw up their brand and then their company.”

And back to Apple’s problem that its obsession with hardware will devalue its cloud efforts: Wilson later admits his expertise and interest sway toward services (like Kickstarter, for example) and explicitly not hardware…

“If you’re building a hardware product, for example, you shouldn’t come talk to us. We would not have invested in Oculus even though it was hugely successful and it might be one of the most interesting products to have come around in the past five or ten years. That’s not what we do.”

Wilson’s points-of-view certainly present an interesting perspective, but one with which even Wall Street may not agree as Apple’s stock price continues to climb (see today’s news). Just take a look at the last five years which saw the invent of the App Store which hosts millions of apps and iCloud which encompasses a growing number of cloud-based services.

Screen Shot 2014-05-05 at 3.51.57 PM

It’s also interesting to hear Wilson’s dismissal of Apple citing favor for hardware over cloud-based services as the company continues to leverage its software and services as a reason to push more devices to market. But then again, it’s certainly not a fresh argument either is it?

Wilson’s insight (or lack thereof) into Apple’s future picks up at about the 4 minute 30 second mark above.


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54 Responses to “VC Fred Wilson: Apple too rooted to [commoditizing] hardware and too weak in cloud to remain at the top of tech”

  1. you will always need hardware in some form


  2. Well, I wouldn’t call Apple “weak” in the cloud but I am hoping for additional features. I would rather not use GDrive or Dropbox for my computer backups.


    • I would. More generally I would certainly say Apple is very weak in the web services department. To me, there’s little excuse for not having a web interface for iTunes in the Cloud. I have to install iTunes on every computer I want to stream my music to and doing so eats up a limited allocation of authorizations (this is mostly why I duplicate my library and Google and Amazon’s services). Match inside iTunes takes forever run most of the time. iCloud as utility storage is greatly lacking in accessibility and space compared to the competition. From what I’ve seen of the developer APIs Dropbox is a better option for integrating cloud storage/syncing in iOS apps, again, especially as Dropbox is much more accessible. iBooks simply has no answer to Amazon and Google’s services and there is no pure web store for purchasing iTunes content.

      Yes, in my eyes, Apple is very weak in web services.


    • I have to agree with OneOkami. Services in general is one of Apple’s biggest weaknesses.

      The problem is that services and hardware/software/sales operate on a different principle from services. Apple secrecy and once a year upgrade cycle work okay, perhaps well, for hardware and software. It does a good job with sales and support, but could use some improvement in these areas. And those areas are pretty much tied to the corporate environment.

      It is in services where Apple’s corporate environment is a killer. Services need to have constant feedback along with constant openness of direction and improvements. This is pretty much the antithesis of Apple’s whole corporate culture. And their services show it.

      Maps is perhaps the most visible of these, but is far from the only one. They incorporated a “report a problem” feature into Maps, but I have heard online from several people who have reported problems and have never seen them addressed. I personally have reported a problem of a local road running through a football stadium on Maps twice since Maps was released. And coming up on two years now Maps still shows a road running right through that stadium. Did Apple receive my report? Is it on their todo list? Do they even care? I don’t know. And that is the problem.

      And that isn’t the only instance. I finally paid for iTunes match a few months back. Went through the process of scanning my entire library. Yadda, yadda, yadda. So, I got to the list of songs it couldn’t find on iTunes and would have to upload. Many of them were songs that I had purchased from iTunes. One of them just earlier that day. I figured that I must have done something wrong. So, to the internet I went. Imagine my surprise when I ran across numerous mentions of this very problem, which wasn’t all that surprising. What was truly surprising was that many of them were from late 2011, a few months after iTunes Match was released. This was a known issue in iTunes Match for over two years, and they still hadn’t fixed it or even made an official announcement that it was a recognized issue. I was left wondering if Apple really cares about iTunes Match. Have they done anything to improve it since it was released or did they just throw it onto the market and forgot about it? Again, I didn’t know. And that is the problem.

      With services you cannot be this hulking ball of secrecy. You have to be open and communicative and responsive. These are not terms that have ever described Apple. And as long as they are they are always going to be second rate in their services.


    • betweentwoparks says:

      Scenario: iPhone user takes photos of 20 alternative Turkish carpets and their price tags. The user wants to send them to a client, but the email would be too large with so many attachments. If the user synchs the photos to Dropbox, the user can create a URL to exactly the selection of photos, email the URL, and delete the URL when it is no longer needed. If the photos are synced to iCloud, the userust share a stream, and the client will be sent a message by Apple saying “your email will be visible to everyone else in the stream; are you sure?”

      That is pretty weak, Apple.


      • Rob Krum says:

        Or you could create a public stream with a shared link which displays ZERO user information except that of the person who shared the stream. And this DOES NOT take up any of you allotment of iCloud storage. I use this feature for EXACTLY the scenario you describe 😉


  3. crichton007 says:

    When was the last time he checked out Apple’s web services? They made a big splash when launched and theory weren’t very good but they are getting better.

    If Android has proven anything there are plenty of people who would rather buy stuff at rock-bottom prices but there are people who care and are willing to spend more for a more robust experience and higher build quality for hardware.

    People have been predicting the end of Apple citing only their prices compared to the competition for a long time now and Apple is still here.

    The only thing that I think I agree with is that there are still companies that do not exist yet (or we haven’t at least heard of) that will be big players in the market in the future.


  4. jpatel330 says:

    hopefully he makes it to 2020 to see the first and only trillion dollar market valuation company.. Apple.


  5. File this comment with the Michael Dell and Steve Balmer quotes.


  6. iTunes/AppStore/iCloud handles insane amount of data.


  7. “Google glass is directionally correct”. That alone says it all for the quality of thinking of Mr. Wilson.

    It’s kinda disturbing that people find attractive the idea that we should end up as cyborgs, relying on the Net for information on this and that (and soon we’ll be relinquishing our decisiveness to those machines).

    Regarding hardware, we’ll see. We’ve heard these words about Apple before, but in the end it’s the excellent cooperation between hardware and software that makes these machines stand out. If you add on top of that the ease of use of iOS and OSX, it’s a win-win situation.

    Maybe Mr Wilson has his reasons for saying whatever he said. But I don’t think that all the creative people within Apple (especially Jonny Ive) are just sitting it out passively out there. So, Mr Wilson, we’ll see who’s right and “what fish you’ll catch” (by throwing this “net”), as we say in my country. 5 years is a short time.


  8. And….we heard the exact same thing back in the 90s/00s when PC hardware was the one getting commoditized. Same pessimism, different decade.

    And yet for some reason, seems all these “cloud” companies are now trying to get into the hardware game.

    Some people just can’t seem to grasp that the technology market is becoming more and more of a products market, where highly differentiated products will be most valuable in a sea of clones. Apple is one of the only technology companies that is a PRODUCT company at its very core. That’s why they’ve managed to thrive lately despite all these lame people calling for Apple’s demise for well over a decade.

    Apple creates products, other companies create technology then try to turn it into a product. This isn’t the 90s anymore, where enterprise adoption drove consumer adoption, and the cheapest commodity products appealed to enterprise. Its now the reverse, where consumer adoption drives everything else.


    • This is kinda exactly why I chose apple and still choose their products. I don’t want to buy a phone where the hardware was an afterthought. And I don’t want a phone where someone spent a ton of time on the hardware but then didn’t put any thought into the software either. Having spent time with product company stuff and with commodity products. I much prefer the apple way. Maybe apple is the only company that can pull off a computer that is like a product. Where everything works together nicely.

      I see where Microsoft is trying this with their surface. In theory, windows should work better with Microsoft’s own hardware. The difference is Microsoft can’t decide on a GUI and then fully implement it. They need to stop dual/triple/half implementing things and create 1 way to do things, and simplify their GUI. For the windows 8 control panel, they created an applet that hides half the control panel functionality, or brings you into ‘desktop mode’ for other features. As a GUI it feels disjointed and cobbled together. The finder is a straightforward piece of software on the mac. You have folders, you can link folders to the side to your favorites. And you see devices on the side. It’s instantly accessible because it’s well designed. Now go to explorer. And you will have favorites, libraries, Computer and then network. Mostly it makes sense except for libraries. Libraries should just be removed. Now instead of finding your files in one area, where you put them. You can also find them in libraries. People might not know that libraries are a search and might delete files from it thinking there are copies of their files. It’s not clear because it doesn’t follow any standard computing or even the english language!!! If anything they should rename libraries Live Searches or something that actually tells people how it’s used. But why even have libraries theres a search right on the top. Here’s another thing that’s super simple on the mac, finding networking settings. Click apple button, click system preferences click on network. All the network settings are in there. And that’s pretty much how it always has been. On windows the exact procedure keeps changing with every successive version of windows.

      Apple designs their GUI with a purpose – to be used. Microsoft doesn’t design their gui. They haven’t and they won’t stick to any kind of usability guide. They will change it at a whim, and won’t give a crap if it makes sense to the user or not. With windows 8 they basically implemented half of a completely new design, AND redesigned half the os for a touch interface. Later on they will change it again, add more features. Then they will probably change the GUI again. Like a kid in a room made of lego, they just can’t stop changing things.


    • Rob Krum says:

      Could not have said it better myself!


  9. I love Apple, but I think he is right. Apple is going to become boring if they don’t do anything drastic. The iWatch and iTV are not yelling excitement to me. Google’s problem is that they don’t really know how to implement there innovations, yet their excitement is surrounded by the fact that they are innovating in different fields.


    • joshalfie says:

      Apple is also innovating in different fields. They just don’t tell the world about it until they have a product to ship. You’re confusing secrecy with apathy.

      They spend billions on R&D. What do you think they’re doing with all that money? Nothing?


    • Just wait until the “iWatch” comes out. My guess is that it will be nothing like the smartwatches of today. In fact, I am not even convinced it will be a watch. Not that I doubt it will tell time, but that certainly will not be its primary purpose.


  10. rogifan says:

    And how many times over the years have people claimed Apple is doomed because they treat them like every other commodity hardware maker. Cook & Co. must laugh their arses off when they red this stuff.


  11. I was going to point out that a VC guy basically knows absolutely nothing about product and sales and consumer satisfaction, but then he pointed it out himself. Since Apple is also (again by his own admission) a product company, I would take everything he says with a huge mountain of salt.

    Also, his statement that Google has yet to do anything “truly evil” kind of puts everything he says into question.


  12. Wow, I actually agree with this guy.


  13. Every time an analyst opens their mouth, Tim Cooks screams out laughing!

    I for one am EXTREMELY happy that Apple is taking its time in embracing the cloud. Recent events have shown just how dangerous and insecure it is, and I for one have no issues staying off the cloud for as long as possible.


  14. “Too rooted in hardware.”
    “They don’t have anything in the cloud.”

    Does any of this make sense?

    “A company we’ve never heard from”
    Yes, because a new FB and Google will keep on appearing every ten years!


  15. richardkoo says:

    Mr Wilson famously sold his Apple position in January 2009 at $90-ish a share:


  16. David Bassin says:

    This guy is an idiot…eight years from now is several lifetimes in the tech industry and no one knows what might be invented/discovered by then.


  17. I love direct contradictions within the same sentence. Guy knows nothing. “And they don’t have anything in the cloud, to speak of, and I think the stuff they have in the cloud is largely not good.”


  18. Software is inevitably trending toward free: The long goodbye for Microsoft.
    Users’ data are the product, and advertisers are their customer: Google’s strategy depends on zombies.
    Profits about 1/20 of Apple’s, but almost half of their addressable market already saturated: Facebook.

    I’ll keep my AAPL stock, thanks anyway.


  19. He sees Apple falling behind Facebook… okaaayyyy. Remind me not to take financial advice or any type of advice from this guy.


  20. garytreible says:

    Apple makes huge profits on hardware sales. I don’t see that ending anytime soon. They also have a lead in 64bit mobile which is an investment in the future.

    I would not call Apple “weak” in the cloud, but I think Apple’s vision of the cloud is different than most. I don’t see Apple offering anything like Dropbox for instance. I think that over time all content created in OS X or iOS will seamlessly be stored in iCloud and most if not all of Apples productivity apps will have web versions. I’m not sure there’s much more to the cloud than that.

    I would agree that Microsoft and Google are forces to be reckoned with, but Facebook is still a one trick pony in my view. They have yet to demonstrate they can manage the companies they buy, or even have any real ideas beyond social networking.


  21. standardpull says:

    VC will always pump his own mystery company and call it “better than Apple” and “peer of Google”. Yeah, good luck with that. Maybe you sold some private stock with this nebulous statement, but everyone else sees you as another sleazy salesman.


  22. gregzx says:

    So this guy’s argument is basically that because of Kia, there is no market for BMW.


  23. G4Dualie says:

    When the software becomes a choke point, you’ll need hardware to sidestep the status quo. In other words, Apple’s hardware can be used to bypass the morass.

    Imagine if the internet were AOL?


  24. Software and services are becoming more and more important, but that doesn’t mean that companies should give up on hardware or focus on creating cheap products, it is incredibly hard to create good software and in many cases, capitalize on it, plus Google is only as powerful as it right know because of how their Android strategy that puts the os on a hundreds of smartphones and tablets at every price point, but the smartphone makers barely make any money, if Apple, which makes a ton of money more than Google, Facebook and Microsoft gave up on hardware right now and started focusing on software their brand would suffer, Apple is very well known for it’s software but nothing beats its hardware, you know an Apple product when you see it, everyone does, everyone understand its worth and that isn’t going away any time soon, if anything Google hardware is looking worse and worse everyday.


  25. As a college student who owns an iPhone, iPad and a Mac I love how I have all my iWork files on iCloud, I absolutely love that, it’s flawless in my opinion, I like photostream, I could see myself loving an Apple version of Dropbox, but as far as I’m concerned their cloud services are awesome.

    Plus having contacts, notes, calendar, passwords… stored on iCloud is also really nice. Sometimes people don’t appreciate iCloud because it’s not about what you can do with it, it’s about you having a few Apple products, really investing and probably only having Apple products and having your content ready for you when you need it, you don’t have to think about it.

    Because iOS and OS X are exclusive to Apple products, iCloud doesn’t need to be more than what it is, if it worked across multiple platforms, then it should be a totally different product.


  26. b9bot says:

    And once again Apple will prove this guy wrong like all the rest.


  27. drtyrell969 says:

    Get that lucid nah sayer out of here!!!!! How dare he! The Emperor looks great in his …. what you call our imagination.


  28. I agree on Google getting even stronger in the future with their diversified activities. They are trying a lot and take risks. About Apple falling behind and even put it in the same sentence with Microsoft? That’s not the smartest projection. At the end companies have to make money and Apple surely does with their products..not only hardware! iCloud is actually working pretty good and I use it for a lot of things. It has potential for some new features of course. Anyways, the whole statement typical VC…but they are a good indicator of what to do…the opposite :)


  29. drgeert says:

    I agree with him about Apple’s weakness in the cloud. It’s actually nothing short of amazing how bad it is, if you consider that they’ve been trying to build something good since the early 2000s.

    But I also suspect that quite tech investors have a blind spot for touchable stuff, while they get too dreamy when it comes to software concepts.


    • drgeert says:

      Actually I don’t totally agree with myself

      The way Apple’s cloud connects different kinds of Apple hardware is very very good.

      And I think Apple’s cloud data is way more intimate, reliable and focused on people with money than Google’s.


  30. pwramirez says:

    His comments about Apple’s cloud access (iCloud) are curious. With the introduction of Mavericks (OSX 10.9.x), many things are now shared through iCloud, not just backing up your iOS devices. I can open, edit and save documents on ANY of my Apple devices that I pull from iCloud. I can share, stream and push media content anywhere I desire. So if this isn’t enough for people, exactly what does he want from his cloud computing? Wash his clothes? Walk the dog? Wipe his bottom?


  31. Apple is a company about personal computers, it’s all about hardware, u have to get the hw in the buyers hands then you get them used to the software, which in Apples case is easy. I believe Apple already has this planned out and you will see the software upgrades in services, everyone acts like they don’t know Apple takes their time. The acquired a lot of companies just a year ago that focus on web services, so we know they are working on something. They tell you themselves it’s not about being out first is about getting it right. Cant rush quality.


  32. There are so many that geeks prefer to stay away from Google and just use plain hardware.
    I choose to pay rather than be a sheep.


    • I agree. I have deactivated every single Google service except for Gmail, which I now use as my dumping email whenever I have to sign up for something stupid on the internet.

      The problem with losing the geeks is their inordinate influence factor. They are the ones who their friends and family turn to when they have tech issues. And when they are telling these same friends and family that Google isn’t to be trusted and then point out alternatives and help them get those alternatives setup. Well, it isn’t good in the long run.

      Google may not have done anything “truly evil” (although one has to wonder what a VC defines as truly evil). They have been towing that line a little too hard, too much lately.

      I don’t trust them, and I think that anyone who does is fooling themselves. No corporation is your friend, not Apple, not Microsoft, and certainly not Google. The difference between the three is that Apple and Microsoft are upfront about it. You pay to use their products. Google is duplicitous about it. Here, use this service for free, aren’t we great guys. Oh, by the way, we are going to grab as much of your data as possible and monetize it in ways that you will never know about.

      Nothing is free.


  33. Apple is poised to get into a few major fields that I think this gentleman is very much glossing over.

    The first is health. I think that this is more what the “iWatch” is about then making an also ran smartwatch. They will also be in a much better position to leverage this then Google ever was. Only people who REALLY trust Google are willing to hand over their medical data to a company who makes no bones about profiting from their data. Apple’s strength in this field is that it makes its profits from their hardware and store. The data that you put into it is simply a service you get for buying their hardware. I expect that you are going to see a huge push into not just a health device, the “iWatch”, but into Apple building an entire health ecosystem. Third party certified health devices to interface with their hardware/software. An online store to purchase health apps. The whole shooting match. Heck, some of this already exist, but I expect to see Apple streamlining it and make it much easier to use. That is after all what they do best.

    The second is purchasing. There has been a lot of noise being made lately about Apple having more credit card numbers than Amazon linked with iTunes accounts. I expect that Apple will move into mobile payments big time in the next few years. Heck, I wouldn’t even be surprised to see them move into issuing their own virtual credit cards, basically become a credit agency. After all, why should the credit card companies get a slice of their pie, and they do have more cash on hand than virtually any bank. So, after the get the kinks worked out of TouchID and perhaps leverage some of that research they have been doing into iris scanning and link it into their secure enclaves of their proprietary chips, then couple that with a HUGE supply of people with credit card numbers tied to their devices. Well, that is the makings for a big disruption in the payment methods of the future. Think about what happened when credit cards mostly replaced checks and cash. Now, think about what is going to mostly replace credit cards? Apple is poised better than anyone to be a major player in that market. After all, they have enough cash reserve to partner with the major chains to integrate the systems on their end and they have a customer base of well over a hundred million customers who will have all that they need in their pockets for their end. All just waiting for an iOS release to active it all.

    Nobody else in the world is positioned as well to break into these markets in such a big way. Android is too fractured. Microsoft just doesn’t have the hardware base. Amazon is the most likely real competitor, but they will have to get a serious mobile phone on the market and fast. Facebook isn’t even a contender in this market since they have no hardware initiative at all.

    Mr. Wilson may not see the value in hardware, but I can assure you that Apple does. And more to the fact it is whoever controls the marriage of hardware to software to storefront. It is about the ecosystem. And at present Apple has the strongest ecosystem in existence.


  34. Tallest Skil says:

    He’s completely wrong, period, and saying this with 35 years of evidence to the contrary should raise red flags as to his further employment anywhere.


  35. gargravarr says:

    I’m sure if Mr. Wilson is proved to be wrong, he will explain why in great detail. Yes, that’s sarcasm. People like Fred Wilson are never wrong – they just “misjudged the market”.


  36. Brian says:

    Fred Wilson has been claiming Apple would fail for a VERY long time. It’s gone in the opposite direction. I guess that perhaps his short isn’t working out so well right about now.


  37. I think his admitted biases make him most wrong on his assessment — Facebook may very well tumble if it continues to annoy users at the rate it presently is. As for Google doing “nothing truly evil,” I’ll just agree to disagree on that. He’s broadly right about Apple’s cloud services (they’re good but could be a lot better) but dead wrong on the value of hardware and software integration.


  38. desdizzy says:

    This is the idiot that sold Apple @90 in 2009! I would keep a low profile from shame if I were him!