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These dominant internet companies possess incredible network effects, thanks to their billions of users.
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It would be an almost impossible task to create similar platforms from scratch to compete with them.
Investors are familiar with the so-called “Magnificent Seven” stocks. These are extremely innovative and disruptive businesses that operate at the forefront of various secular trends. They have commanded a greater share of the stock market’s entire capitalization in recent years.
It’s worth taking a closer look to figure out if there are any opportunities here. It will be exciting for investors to learn that when it comes to a specific characteristic, there are two companies within this elite group that stand out.
Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) has billions of users across its various platforms. Meta Platforms (NASDAQ: META) is in a similar boat, as its social media apps are extremely popular.
Those social media apps, as well as Alphabet’s Google Search and YouTube services, benefit from incredible network effects. With more usage and users, the businesses collect data that further improve the quality of these platforms, and there’s more information and content to display. It’s a positive feedback loop that makes their competitive positions unassailable.
It would be a daunting task to create a widely adopted search engine, video streaming service, or social media app from scratch. The barrier to scale up to billions of users is insurmountable.
So, while it seems that technological change is occurring faster than ever these days, investors can rest assured that Alphabet and Meta are almost immune to the threat of disruption.
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