Much has changed since September 2016, when I dreamed up a fantasy draft involving America’s most powerful tech companies. Those five firms are now worth hundreds of billions of dollars more than they were back then. Companies that seemed to have a shot at challenging them, like Snap and Uber, have wilted under the weight of scandal or shareholder pressure. Meanwhile the tech giants are getting bolder in their acquisition choices, as evinced by Amazon hoovering up Whole Foods and everyone immediately saying of course, an online bookstore selling corporately branded raw meat at its chain of upscale grocery stores makes perfect strategic sense.
Expect the acquisition targets to get more outlandish as the decade draws to a close. Apple, Alphabet, Amazon, Facebook, and Microsoft are all seeking new business opportunities to justify their outlandish valuations. The Republican tax bill, which they lobbied heavily to influence, will allow them to return profits parked overseas at a lower tax rate, giving them more play money to buy new toys. At the same time, titans in other sectors are trying to preempt their own disruption through mergers. Disney is buying 21st Century Fox to use as a cudgel against Netflix, while CVS and Aetna are partnering so they don’t get blindsided when Amazon eventually enters the pharmacy business. In short, it’s a buyer’s market.
So it’s a great time to organize another draft with higher stakes. I’m upping the salary cap from $50 billion to $100 billion and, to account for the many angry comments and tweets I received last time, I’ll be using a thing that people who actually participate in fantasy football drafts call “snake order.” Here’s a reminder of the rest of the rules:
- The draft has four rounds, with selection order in the first round determined by current market cap (the least valuable company, Facebook, gets to pick first).
- Each company has a salary cap of $100 billion.
- The eligible free agents include all unicorns (tech startups valued above $1 billion) and any publicly traded company valued above $1 billion.
- Acquisition prices are determined by taking a company’s current market capitalization or private valuation and applying a 28 percent premium, which was the average acquisition markup in 2015 according to Bloomberg data.
- Chinese companies were excluded because the country’s regulators would likely bar an American tech giant from acquiring a promising domestic startup.
- Acquisitions that would likely run afoul of antitrust laws were excluded — so no, Apple probably can’t buy Spotify and essentially take over the music streaming market.
- Companies currently in the midst of mergers were excluded—so no AT&T–Time Warner, no Disney-Fox, no CVS-Aetna.
Let the increasingly plausible nightmare of unrestrained corporate power begin!
Round 1
Facebook Buys Viacom for $15.9 Billion
Mark Zuckerberg has said repeatedly that video is the future of Facebook. But “video” has taken on many iterations on the social network, from pre-recorded user clips to livestreamed exploding watermelons to music content from major record labels. Ultimately, Facebook video still lacks a coherent anchor point that makes it a destination, like Netflix or YouTube, rather than a distraction plopped in the middle of the News Feed. Viacom could provide that anchor. The owner of MTV, Comedy Central, and Nickelodeon is the odd media company out in the current Hollywood acquisition spree, but its youth-oriented brands would be a good fit on Facebook. And the fact Viacom’s channels mostly trade in low/middle-brow fare makes more sense for Facebook than a splashy prestige play. Bring Jersey Shore to the people. Bring Viacom to Facebook.
Amazon Buys FedEx for $89.3 Billion
Tech analyst Gene Munster floated Target as a 2018 takeover target, but given a bigger wallet I think Amazon would go for FedEx instead. Amazon’s delivery business generates small profits in the United States, and the company’s second-biggest expense is fulfillment—that is, getting those products from your digital shopping cart to your doorstep. Right now Amazon is paying FedEx, UPS, and the United States Postal Service to deliver the vast majority of these packages, a cost inefficiency that could be stamped out if Amazon operated the “last mile” of delivery itself. Rather than using moonshot money on a fleet of delivery drones that will eventually go full Black Mirror on us, why not just buy the company that already has a robust logistics network.
Microsoft Buys Activision Blizzard for $63 Billion
Every tech giant is now desperate for content, but Microsoft has flopped with both its video and music-streaming ambitions in recent years. That makes video games an even more critical division for the creator of the Xbox. Scooping up Activision Blizzard would give Microsoft control of some of the biggest franchises on consoles (Call of Duty), PCs (Overwatch), and smartphones (Candy Crush), not to mention an inroad into the burgeoning esports phenomenon. The Xbox One seems destined to finish in third place behind the impenetrable PlayStation 4 and the surprisingly popular Switch. That means it’s all about software for Microsoft from here on out, and Activision Blizzard would give the company a slew of new hits.
Alphabet Buys Uber for $61.4 Billion
Uber has things that Alphabet needs—and no, I don’t just mean the driverless car technology that currently has the two companies embroiled in a lawsuit. Google’s parent company is extremely bullish on driverless cars, but still doesn’t have a business use case for the tech. Uber has honed its taxi business over 5 billion rides and has a massive customer base who might be willing to hop in an autonomous vehicle one day. Google has a delivery business called Express that has failed to take off. Uber has an army of more than 2 million drivers who are just as happy to ferry goods around as people (UberEats has been a surprising success for the company). Google is a digital company that is entering the messy business of logistics. Uber is a logistics company that has been honing its digital chops for the driverless future. Combine them (minus Uber’s comically Machiavellian tendencies) and you’ve got the company that finally manages to reorganize bytes as well as bits.
Apple Buys Snap for $23.4 Billion
Facebook no longer needs Snapchat, but Apple could sure use it. Ease of communication remains a key selling point of the iPhone, and Apple has recently been trying to find ways to update the texting app for the Snapchat generation with features like Animoji. Why not just buy the company outright? Snap has ably predicted how people want to communicate in the mobile age, whether through pictures that explode in a moment, video stories that disappear after a day, or faces that are swapped to create grotesque familiarity. That these features have been standardized across other apps is a testament to Evan Spiegel’s vision, if not his business acumen. Get this guy out of the CEO hot seat and into a less pretentious version of Jony Ive’s all-white creativity cocoon, where he can figure out how Apple will use augmented reality to change the way we talk online. What happens to Snap is less important than what happens to the minds that birthed it.
Round 2
Apple Buys Warby Parker for $1.5 Billion
Apple is increasingly embracing its role as a peddler of luxury lifestyle products—hence the lavish stores, the thousand-dollar phone, the pricey wireless headphones. In the near future, it’s widely speculated that the company will try to sell augmented-reality glasses that match form and function in a way wearables haven’t managed quite yet. Warby Parker could help. The eyeglasses e-tailer has built a billion-dollar business out of stylish frames and great customer service. They’ve built a brand that people trust, and as we’ve already observed with Google Glass, an augmented reality system that people don’t trust is destined to fail. Imagine Apple’s AR glasses being mailed out to demo to Warby Parker customers or sold at the eyeglass company’s emerging line of retail stores. It’s a match that bolsters Apple’s core appeal while making a scary new technology seem that much friendlier.
Alphabet Buys CrowdStrike for $1.3 Billion
The battle for tech supremacy is partially a fight over the infrastructure of the internet itself. Alphabet, Amazon, and Microsoft are all vying to host the internet’s vast array of enterprise customers with their cloud-computing products, and Google is losing pretty badly. CrowdStrike could be a differentiator. The cybersecurity startup uses a cloud-based platform to fight security breaches, which it says is safer than traditional antivirus software housed locally. Alphabet’s venture-capital arm is already an investor in CrowdStrike. Why not make the relationship permanent and let customers know if they want the best protection for their online business, they have to go through Google.
Microsoft Buys Slack for $6.4 Billion
Slack’s fundamentals are more impressive today than they were when I said Microsoft should buy the company in the first draft. The startup now has more than 6 million daily users, up from 4 million in 2016. Two million of those users are paid, generating $200 million in annual revenue. More important than the money, though, is the fact Slack is an easy-to-use office product that people actually like. Microsoft could use some products that people adopt out of affection rather than corporate directive. As part of Microsoft’s Office suite, it could scale to become as ubiquitous (but hopefully not as despised) as Outlook or Word.
Amazon Buys Rite Aid for $2.9 Billion
Amazon is heavily rumored to want in on the pharmacy business, but starting from scratch would be tough against such established players as CVS and Walgreens. Enter Rite Aid, the down-on-its-luck competitor that’s currently a steal thanks to years of missed revenue targets and a botched merger with Walgreens that failed to win antitrust approval. For $2.9 billion Amazon gets an established pharmacy network, a customer base in 31 states, and more venues to experiment with shopping technology at 4,600 physical stores. Keep the Rite Aid name or don’t; what matters is the infrastructure.
Facebook Buys Nextdoor for $1.9 Billion
In his 2017 manifesto about the future of Facebook, Mark Zuckerberg consistently stressed the importance of building online communities that can have real-world impact. Nextdoor has already accomplished that with its neighborhood groups that allow people to trade goods, organize local events, and report crime (which admittedly opens up thorny problems concerning racial profiling). Facebook could snap up this site and use its massive social graph to help expand the connections neighbors are making on it already.
Round 3
Facebook Buys Spotify for $10.9 Billion
Though listening to music is often a deeply social activity, Facebook has yet to make an effort to build out a streaming service. Now that streaming is the go-to form of music consumption in the U.S., it may be too late to launch yet another competitor. Save the time and effort by simply buying Spotify, which has yet to prove it can actually make money and built its user base off social integrations with Facebook anyway.
Amazon Buys OfferUp for $1.5 Billion
Amazon may be dominating e-commerce, but there’s an entire universe of people selling their random junk to others that the company has not tapped. Long the domain of eBay and Craigslist, this sector has recently been invaded by a cadre of sleeker, mobile-first startups attracting lots of users and venture funding. OfferUp is one of the new leaders in the space. Amazon should snap it up and keep operating it as an independent brand, like it already does for IMDb, Zappos, and now Whole Foods.
Microsoft Buys Workday for $27.76 Billion
It was only last year that Microsoft said it wanted to get serious about human resources management software, which seems shocking for a company that embodies the intrinsic boredom of the phrase “human resources management software.” Workday is a leader in the field with customers such as Amazon, Netflix, and Thomson Reuters. Like LinkedIn, which Microsoft bought in 2016, the acquisition would offer the company valuable data on the changing nature of work and hiring.
Alphabet Buys Stripe for $11.8 Billion
The digital payments startup would be a good acquisition for Alphabet, which is as desperate for our collective financial data as the rest of Silicon Valley. Stripe is used to power online transactions across a variety of different websites. The data it houses could help Alphabet better understand what people want before they look for it, a key skill of the search giant. Alphabet will have to break off Stripe’s budding relationship with Amazon in order to get really serious, though.
Apple Buys Sirius XM for $30.6 Billion
Apple is getting left behind by its peers on the quest to infiltrate both the car and the living room. Sirius XM, a profitable, popular business with an affluent customer base, could help Apple gain a foothold in both areas. Apple’s upcoming HomePod speaker suddenly seems a lot more appealing if it’s the only digital assistant that can play Sirius stations inside your house. Similarly, the company’s car operating system could integrate Sirius to make it more attractive to both automakers and drivers. It’s also easy to imagine some cross-pollination between shows on Sirius and Apple Music’s live radio station, Beats 1. If Apple really wants to compete in this brave new world of content, it’s going to cost a few dollars.
Round 4
Apple Buys Roku for $6.4 Billion
Roku is the market-share leader in set-top boxes. The Apple TV was supposed to be the opening salvo in Apple’s master plan to disrupt cable, but that never happened and now it’s a sleek, overpriced streaming device. If you can’t beat them, buy them.
Alphabet Buys Age of Learning for $1.28 Billion
Google’s Chromebooks have invaded the classroom, besting rivals like Microsoft and Facebook. Age of Learning, which creates wildly popular educational apps, could provide Google with more kids-focused software to go along with its productivity suite.
Microsoft Buys Squarespace for $2.2 Billion
While Microsoft has always had a stranglehold on the corporate world, it’s struggled to appeal to more creative types. Buying up Squarespace would give it a web-hosting service popular with small business owners (think wedding photographers or freelance illustrators) and high in brand recognition thanks to Super Bowl and podcast ads. Hook these people in with the web-hosting brand, then upsell them the Microsoft Office products.
Amazon Buys CarGurus for $4.1 Billion
Amazon has a budding interest in building a marketplace for car sales, having launched an automotive portal in 2016. CarGurus, which claims to have 40,000 dealerships on its platform, could help rapidly expand Amazon’s reach.
Facebook Buys eBay for $51.8 Billion
Facebook has been flirting with being a commerce platform for most of the decade, most recently in the form of a dedicated Marketplace tab in its main app where people can browse used goods. Buying eBay would bring greater scale, coherence, and brand recognition to these efforts, and could help Facebook effectively build an e-commerce alternative to Amazon.