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Compete To Death, or Cooperate to Compete?

By - January 11, 2012

(image) **Updated at 3 PM PST with more info about Facebook/Google negotiations…please read to the bottom…**

In today’s business climate, it’s not normal for corporations to cooperate with each other when it comes to sharing core assets. In fact, it’s rather unusual. Even when businesses do share, it’s usually for some ulterior motive, a laying of groundwork for future chess moves which insure eventual domination over the competition.

Such is the way of business, particularly at the highest and largest levels, such as those now inhabited by top Internet players.

Allow me to posit that this philosophy is going to change over the next few decades, and further, indulge me as I try to apply a new approach to a very present case study: That of Google, Facebook, and Twitter as it relates to Google’s search index and the two social services’ valuable social interaction datasets.

This may take a while, and I will most likely get a fair bit wrong. But it seems worth a shot, so if you feel like settling in for some Thinking Out Loud, please come along.

First, some abridged background. Back in 2009, on the Web 2 Summit stage of all places (yes, I was the emcee), Google, Microsoft, Facebook and Twitter announced a flurry of deals, some of which were worked out in a last minute fury of negotiations. Early in the conference Microsoft announced it would incorporate Twitter and Facebook feeds into its new search engine Bing. Not to be outdone, Google announced a deal with Twitter the next day. However, Google did not announce a deal with Facebook, and the two companies have never come to terms. Meanwhile, Microsoft has continued to deepen its relationship with Facebook data, to the point of viewing that relationship as a key differentiator between Bing and Google search.

All of these deals have business terms, some of them financial, all with limits on how data is used and presented, I would presume. Marissa Mayer of Google told me on the Web 2 stage that there were “financial terms” in Google’s deal with Twitter, but would not give me any details (nor should she have, frankly).

Fast forward to the middle of last year, when the Google/Twitter deal was set to expire. At about the same time as renewal was being negotiated, Google launched Google+, a clear Facebook and Twitter competitor. For reasons that seem in dispute (Google said yesterday Twitter walked away, Twitter has not made a public statement about why things fell apart), the renewal never happened.

And then yesterday, Google incorporated Google+  results into its main search index, sparking a debate in the blogosphere that rages on today – Is Google acting like a monopolist? Does Facebook or Twitter have a “right” to be included in Google results? Why didn’t Google try to negotiate inclusion with its rivals prior to making such a clearly self-serving move?

Google execs, including Chair Eric Schmidt, told SEL’s Danny Sullivan that the company would be happy to talk to both companies to figure out ways to incorporate Twitter and Facebook into Google search, but clearly, those talks could have happened prior to the G+ launch, and they didn’t (or they did, and did not work out – I honestly have no idea). When Danny pointed out that Twitter pages are publicly available, Schmidt demurred, saying that Google prefers to “have a conversation” with a company before using its pages in such a wholesale fashion (er, so did they have one, or not? Anyway…). He has a point (commercial deals are de-rigueur), but…that conversation happened last year, and apparently ended without a deal. And around we go…

What’s clear is this: All the companies involved in this great data spat are acting in what they believe to be their own self interest, and the greatest potential loser, at least in the short term, is the search consumer, who will not be seeing “all the world’s information” but rather “that information which is readily available to Google on terms Google prefers.”

The key to that last sentence is the phrase “what they believe to be their own self interest.” Because I think there’s an argument that, in fact, their true self interest is to open up and share with each other.

Am I nuts? Perhaps. But indulge my insanity for a bit.

The Cost of Blinkered Competition

Back in the Web 1.0 days, when I was running The Industry Standard, I had a number of strong competitors. It’s probably fair to say we didn’t like each other much – we competed daily for news stories, advertiser dollars, and the loyalty of readers. The market for information about the tech industry was limited – there were only so many people interested in our products, and only so much time in the day for them to engage with us.

My strategy to win was clear: We’d make the best product, have the best people, and we’d win on quality. When I heard about one of our competitors badmouthing us, I’d try to ignore it – we were winning anyway: We had the dominant marketshare, the most revenues ($120mm in 2000, with $21mm in EBIDTA), and the best product.

Then something strange happened: an emissary from a competitor called and asked for a meeting. Intrigued, I took it, and was surprised by his offer: Let’s put our two companies together. Apart, he argued, we were simply tearing each other down. Together, we could consolidate the market and insure a long term win.

I considered his idea, but for various reasons, we didn’t take him up on it. I felt like we had the dominant position, that his offer was driven by weakness, not intellectual soundness, and I also felt that a combination would require that my shareholders take on too much dilution.

Two years later, both of us were out of business.

Now, I’m not sure it would have mattered, given the great crash of 2001. But what is certainly true is that I could have thought a bit deeper about what this fellow was proposing. Back in the days of print-bound information, we were essentially competing on what were publicly available assets: stories, particularly interpretations and reportage around those stories, and people: writers, editors, ad sales executives, and management. Short of combining companies, there wasn’t really any other way for us to collaborate, or at least, so I thought.

But perhaps there could have been. It’s been more than a decade since that meeting, and I still wonder: perhaps we could have shared back-end resources like operations, publishing contracts, etc. and saved tens of millions of dollars. We’d compete just on how we leveraged those public assets (stories, people). Perhaps we might have survived the wipeout of the dot com crash. We’ll never know. Since those publications died, the blogosphere has claimed the market, and now it’s far larger than the one we lost back in 2001. Of course I started Federated Media to participate in that model, and now FM has as large a revenue run rate as the Industry Standard, across a far more diverse market.

Why am I bringing this up? Because I think there’s a win-win in this whole Google/Facebook/Twitter dust up, but it’s going to take some Thinking Differently to make it happen.

Imagine Twitter and Facebook offer efficient access to all of their “public” pages – those that its users are happy to share with anyone (or even just to their pre-defined “circles”) – to Google under some set of reasonable usage terms. Financial terms would be minimal – perhaps just enough to cover the costs of serving such a large firehose of data to the search giant. Imagine further that Google, in return, agrees to incorporate this user data in a fashion that is fair – ie doesn’t favor any service over any other – be it Twitter, Google+, or Facebook.

Now, negotiating what is “fair” will be complicated, and honestly, should be subject to iteration as all parties learn usage patterns. And of course all this should be subject to consumer control – if I want to see only Twitter or Facebook or Google+ results in particular searches (or all results for that matter), I should have that right.

And this leads me to my point. Such a set up, regardless of how painful it might be to get right, would create a shared class of assets that would have to compete at the level of the consumer. In other words, the best service for the query wins.

That’s always been Google’s stated philosophy: the best answer for the question at hand. Danny gets to this point in a piece posted last night (which I just saw as I was writing this): Search Engines Should Be Like Santa From “Miracle On 34th Street”. In it he argues that Google’s great strength has been its pattern of sending people to its competitors. And he upbraids Google for violating that principle with its Google+ integration.

It doesn’t have to be this way. It’s not only Google that’s at fault here. Facebook won’t share with Google on any terms, Facebook and Google have not been able to come to terms on how to share data (more on that below*), and Twitter clearly wants some kind of value if it is to share its complete firehose with the search giant. Imagine if all three were to agree on minimal terms, creating a public commons of social data. Yes, that would put Google in an extreme position of trust (not to mention imperil its toddler Google+ service), but covenants can be put in place that allow parties to terminate sharing for clear breaches which demonstrate one party favoring itself over others.

Were such a public commons to be created, then the real competition could start: at the level of how each service interprets that data, and adds value to it in various ways.

Four years ago to the month, I wrote this post: It’s Time For Services on The Web to Compete On More Than Data

In it I said: It’s time that services on the web compete on more than just the data they aggregate….

I think in the end, Facebook will win based on the services it provides for that data. Set the data free, and it will come back to roost wherever it’s best used. And if Facebook doesn’t win that race, well, it’ll lose over time anyway. Such a move is entirely in line with the company’s nascent philosophy, and would be a massively popular move within the ouroborosphere (my name for all things Techmeme).

Compete on service, Facebook, it’s where the world is headed anyway!

Two and a half years ago, as it became clear Facebook’s “nascent philosophy” had changed (and as Twitter rose in stature), I followed up with this post: Google v. Facebook? What We Learn from Twitter. In that post, I said:

 

I think it’s a major strategic mistake to not offer (Facebook’s pages and social graph) to Google (and anyone else that wants to crawl it.) In fact, I’d argue that the right thing to do is to make just about everything possible available to Google to crawl, then sit back and watch while Google struggles with whether or not to “organize it and make it universally available.” A regular damned if you do, damned if you don’t scenario, that….

For an example of what I mean, look no further than Twitter. That service makes every single tweet available as a crawlable resource. And Google certainly is crawling Twitter pages, but the key thing to watch is whether the service is surfacing “superfresh” results when the query merits it. So far, the answer is a definitive NO.

Why?

Well, perhaps I’m being cynical, but I think it’s because Google doesn’t want to push massive value and traffic to Twitter without a business deal in place where it gets to monetize those real time results.

Is that “organizing the world’s information and making it universally available?” Well, no. At least, not yet.

By making all its information available to Google’s crawlers (and fixing its terrible URL structure in the process), Facebook could shine an awfully bright light on this interesting conflict (of) interest.

Thanks to Google’s inclusion of Google+ in its search index, that light has now been shone, and what we’re seeing isn’t all good. I’m of the opinion that a few years from now, each and every one of us will have the expectation and the right to incorporate our own social data into web-wide queries. If the key parties involved in search and social today don’t figure out a way to make that happen, well, they may end up just like The Industry Standard did back in 2001.
But not to worry, someone else will come along, pick up the pieces, and figure out how to play a more cooperative and federated game.
*Update: I’ve heard from a source with knowledge of the Facebook/Google negotiations over integration of Facebook’s data into Google’s search index. This source – who while very credible does come from Facebook’s side of the debate – explained to me that during the 2009 negotiations, Google balked at Facebook’s request that Facebook data be protected in the same fashion as it is in Facebook’s deal with Bing. In essence, Google claimed no way to keep data within circles of friends in the context of a Google search. According to this source: “Senior executives at Google insisted that for technical reasons all information would need to be public and available to all.” But the source goes on to point out that in Google’s own integration of Google+, Google does exactly what it claims it could not do with Facebook data. “The only reason Facebook has a Bing integration and not a Google integration is that Bing agreed to terms for protecting user privacy that Google would not,” this source told me.
Also, and quite interestingly, Google also refused to agree to a clause which stated that Google could not use the data to build its own social network. Now, this is where things can get very dicey. It’s very hard to prove whether or not a company is using the data in particular ways, and had Google agreed to that clause, it might have severely limited its ability to build Google+. What is clear is that Microsoft agreed to Facebook’s terms.
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Twitter Statement on Google+ Integration with Google Search

By - January 10, 2012

The integration of Google+ into Google’s native search results has been at the top of Techmeme all day long. And right after I wrote my post on the subject (about four hours ago), Twitter’s general counsel picked up on it, resulting, I believe, in the most RT’s of a Searchblog post in the history of the site.

Just now I received an official statement from Twitter on the subject. I didn’t ask for it – I think it must have been sent out to a large list of press and bloggers. Here it is in full:

For years, people have relied on Google to deliver the most relevant results anytime they wanted to find something on the Internet.

Often, they want to know more about world events and breaking news. Twitter has emerged as a vital source of this real-time information, with more than 100 million users sending 250 million Tweets every day on virtually every topic. As we’ve seen time and time again, news breaks first on Twitter; as a result, Twitter accounts and Tweets are often the most relevant results.

We’re concerned that as a result of Google’s changes, finding this information will be much harder for everyone. We think that’s bad for people, publishers, news organizations and Twitter users.

Meanwhile, my aside at the bottom of the post wondering about anti-trust has been echoed by any number of well known commentators. I wonder if Facebook is about to make a statement?

For what it’s worth, I wrote about all this, after a fashion, in this post in 2009:

Google v. Facebook? What We Learn from Twitter.

Predictions 2012: The Roundup

By - January 09, 2012

(image) As promised, here are all my predictions in one place. I’ve written a brief overview of each as well.

Predictions 2012: #1 – On Twitter and Media

Twitter will become a force as a media company, not just a platform for others’ media. To do so, it will improve its #Discover feature and roll out something like Flipboard.

Predictions 2012: #2 – Twitter As Free Radical, Swiss Bank, Arms Merchant…And Google Five Years Ago

Every major player on the Internet will have to do a deal with Twitter, and Twitter will emerge as a Swiss like, open, neutral player in the battle for the consumer web.

Predictions 2012 #3: The Facebook Ad Network

Facebook will launch a web-wide competitor to AdSense. I’m already worried they’ll do it in early 2013 and make a fool of me….

Predictions 2012 #4: Google’s Challenging Year

Despite doing well overall, Google will fumble one big play this year. As I say in the post, it’s how they recover that matters.

Predictions 2012 #5: A Big Year for M&A

2012 may well be the biggest year of all for Internet M&A. Expect some really big deals, and a ton of small ones this year.

Predictions 2012 #6: “The Corporation” Becomes A Central Societal Question Mark

We’ll all start to question what role the corporation plays in our society and culture. It’s time for this dialog.

Predictions 2012 #7: Shooting From The Hip

In which I cover ten or so other rapid fire predictions, like Facebook making a billion-dollar acquisition, Xbox/Kinnect taking off on the web, Android coming to heel, and more.

Related:

Predictions 2012 #7: Shooting From The Hip

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This year I tried something new with my predictions, writing deeper posts on each one. I got to six, but I underestimated how long it would take to write 1,000 or so words for each post. I’m pushing past 10,000 words for the past week, and “predictions season” is pretty much over. I think it’s about time I gave all of us a break, and just got down to some rapid fire predictions. This will be my last predictions post, and most likely the one most likely to bring down my year end grade, because I’m just going to shoot from the hip. It’s something I’ve never really done before, but that’s why I’m doing it. These are notions, hunches, itches I’ve not scratched. But what the heck, this is for the fun of it. To them:

- Google’s Chromebook will triple its marketshare by the end of the year. I can’t figure out what its marketshare is now, but it’s pretty small. Another way of putting this is Chromebook will be a success this year.

- Obama will win the 2012 election, thanks in part to the tech community rallying behind him due to issues like SOPA, visas, and free speech.

- Both Apple and Amazon will make billion-dollar acquisitions. More interestingly, so will Facebook.

- Android will be brought to heel by Google, eliciting both massive complaints and cheers, depending on where you sit.

- Microsoft Windows Phone will become the Bing of mobile (IE, move into double digit market share).

- Microsoft Xbox will integrate meaningfully with the web (Kinect is key), and start to compete in social across the digital spectrum.

- IBM will emerge as a key player in the consumer Internet.

- China will be caught spying on US corporations, especially tech and commodity companies. Somewhat oddly, no one will (seem to) care.

- A heads up display for the web will launch that actually is worth using, but most likely in limited use cases.

That’s about it for now. My next post will summarize all my 2012 predictions, so there’s one neat URL to refer to for future reference. Have a great 2012!

Related:

Predictions 2012: #1 – On Twitter and Media

Predictions 2012: #2 – Twitter As Free Radical, Swiss Bank, Arms Merchant…And Google Five Years Ago

Predictions 2012 #3: The Facebook Ad Network

Predictions 2012 #4: Google’s Challenging Year

Predictions 2012 #5: A Big Year for M&A

Predictions 2012 #6: “The Corporation” Becomes A Central Societal Question Mark

Predictions 2011

2011: How I Did

Predictions 2010

2010: How I Did

2009 Predictions

2009 How I Did

2008 Predictions

2008 How I Did

2007 Predictions

2007 How I Did

2006 Predictions

2006 How I Did

2005 Predictions

2005 How I Did

2004 Predictions

2004 How I Did

Predictions 2012 #6: “The Corporation” Becomes A Central Societal Question Mark

By -

Amidst all the chaos, tragedy, and tumult that was 2011, I noticed one very clear theme: Most of us are struggling with the role corporations play in our society. The 14th Amendment (yes, the one that banished slavery) established corporations, in the US, as “persons” in the legal sense. In 2010, Citizens v. United sanctified corporations as equivalent to you and I in terms of political speech; in 2011, we began to see the impact of that decision on our political process here in the US (in short, follow the money).  The freedom to “associate in corporate form,” as it is termed in portions of the Citizens decision, is one I sense all of us are not entirely certain about. Corporations are utterly undemocratic organizations, and being a part of one is often not a choice, but a necessity. Does joining a corporation mean that you must defend that corporations’ point of view and now Constitutionally-protected right to speech?

Usually, at least in practice, the answer is yes. That corporation is paying your salary, and keeping food on your family’s table. Speaking out against it would be folly. This creates a tension in society that is clearly starting to surface. We overthrew the feudal system in the 1600s, and the theocracy in the 1700s. But currently, corporations play similar roles in many of our lives, either directly or indirectly.

Certainly the Occupy Wall Street movement is one expression of this tension, but I’m not certain it will be the only one. Corporations are arguably the most powerful institutions in human history, more powerful than all but the largest governments. If that sounds silly, remember that the cash and cash equivalent hoard of the Internet Big Five – $180 billion and counting – is larger than the GDP of all but 50 countries. And that doesn’t account for leverage. The top 1000 corporations in the US are holding nearly a trillion dollars in pure cash.

From a balance sheet prospective, corporations are in far, far better shape than just about every country in the world. Even as our personal incomes shrink on a per capita basis, and the world dips in an out of what feels like an eternal recession, corporate profits are up and up again.

This feels a bit out of whack. And while #OWS is one reaction to that dissonance, I’m not sure it’ll be the only one. I think 2012 is the year we all start to question the role corporations can and should play in our society, and doing so won’t (or shouldn’t) be seen as an indication of some leftist or political agenda, but rather as a reasonable outgrowth of how a thinking person sorts through the solution of some of our most pressing problems. Because at the end of the day, we can’t really solve those problems without organizing ourselves into commercial entities. The question, however, is simply this: Can we organize ourselves into corporations without ending up doing things that, if one were to judge corporations as people, would be considered amoral, evil, or psychopathic?

So far, the results are mixed at best. But I have a strong sense that we can and will do better when it comes to how we manage our corporations. And it starts with the industry we’re all part of. While it can be disputed endlessly as to its specific merits, Google’s informal corporate mantra of “Don’t Be Evil” was a watershed moment in the history of corporations. And as “The Information” becomes the most important currency in our culture, and the ability to code (and create great information-driven products) becomes its most prized skill, we’re seeing the rise of a new kind of corporate leader. Perhaps we’re shifting from corporate skillsets that value profit over all other metrics (psychopathic qualities which arguably led us to the financial crisis) to ones that value, well, doing well by doing good.

It could happen. But I’m not arguing it will in 2012. What I am predicting is that this debate will become central to our political and cultural conversation in 2012. It feels like it’s time to have it, without screaming at each other in the process.

And by the way, this is where corporate marketing comes in, in a critical way, but more on that in another post.

 

Related:

Predictions 2012: #1 – On Twitter and Media

Predictions 2012: #2 – Twitter As Free Radical, Swiss Bank, Arms Merchant…And Google Five Years Ago

Predictions 2012 #3: The Facebook Ad Network

Predictions 2012 #4: Google’s Challenging Year

Predictions 2012 #5: A Big Year for M&A

Predictions 2011

2011: How I Did

Predictions 2010

2010: How I Did

2009 Predictions

2009 How I Did

2008 Predictions

2008 How I Did

2007 Predictions

2007 How I Did

2006 Predictions

2006 How I Did

2005 Predictions

2005 How I Did

2004 Predictions

2004 How I Did

Predictions 2012 #5: A Big Year for M&A

By - January 05, 2012

(image) One of the things that pops out of the “Big Five” chart I just posted, at least if you stare at it a bit, are the places where each company needs to get strong, quickly. Apple is weak in social and one dimensional in ad solutions. Microsoft needs to improve its device products, build out its entertainment distribution muscle, and keep improving search share. Google wants to get better in productivity software, social, and payments. Amazon needs help in devices, social, and OS. Facebook has work to do in many areas, including devices, search, payment, and voice.

When the five largest companies in our space have a lot of needs, they tend to pull out the wallet and go shopping. Sometimes they buy their way into partnerships, but often, they simply buy.

Hence my  fifth prediction for 2012: Expect Internet M&A to heat up, big time. It’s not just going to be the Big Five who drive this trend, it’ll be a whole mess of players looking to consolidate power and press into the double-digit growth market that is the Internet (and by Internet, I also mean mobile and enterprise, of course). Yahoo’s new CEO Scott Thompson knows how to buy companies and has a data focus, for example. That could mean competition to purchase marketing, ad tech, and data companies like Blue Kai, Quantcast, or MarketShare. MediaBank is on a tear and will be on the lookout for similar kinds of companies. IBM has a deep interest in the marketing tech world, expect Big Blue to make some big moves as well. And Twitter will certainly be flexing its muscles, now that it’s bulked up with nearly a billion in fresh capital.

If I had to name a few companies I expect to be in play amongst the Big Five, they would be:

Instagram. This searing hot proof-of-iPhone app is not only a strong social play, it’s a massive image and data goldmine to boot. I could imagine a bidding war for Instagram between Apple (which really needs a social win), Twitter (which could really use a strong photo play), Facebook (which might buy it to keep it out of Apple or Google’s hands), and Google (who would see it as a way to sex up Google+ and Picasa). Of course Yahoo would vie for Instagram as well, but I’m not sure it could win.

Pinterest. It’s social. It’s media. It’s data. Is it a mayfly? Perhaps, but I think it’ll be in play in 2012.

Square. Everyone loves small business, and everyone loves payments. Visa already owns a stake, but that won’t stop Dorsey from landing where he feels the fit is best. That might be Amazon.

Evernote. If any of the Big Five are looking to bolster their productivity suite, Evernote might pique their interest.

These are just off the top of my head, and I’m not a VC (or a daily tech reporter for that matter), so I’ll leave the rest to your imagination. Suffice to say, I predict 2012 is going to be a banner year for tech and Internet M&A. Who do you think will be swept up, and why?

Related:

Predictions 2012: #1 – On Twitter and Media

Predictions 2012: #2 – Twitter As Free Radical, Swiss Bank, Arms Merchant…And Google Five Years Ago

Predictions 2012 #3: The Facebook Ad Network

Predictions 2012 #4: Google’s Challenging Year

Predictions 2011

2011: How I Did

Predictions 2010

2010: How I Did

2009 Predictions

2009 How I Did

2008 Predictions

2008 How I Did

2007 Predictions

2007 How I Did

2006 Predictions

2006 How I Did

2005 Predictions

2005 How I Did

2004 Predictions

2004 How I Did

The Internet Big Five By Product Strength

By -

As I have written in previous predictions, I’ve been focusing on the Internet Big Five lately, and expect that to continue this year, as the group, collectively, are something of a “character” in my upcoming book (as is Twitter, the “free radical”). Other characters include “The Government” and “Corporations,” so expect predictions about those players in the next few days. But today, I want to focus on the Big Five as a whole. I’ve been staring at these companies, trying to understand their strategic imperatives, which is why I found myself making yet another chart.

This one focuses on core product lines where all (or most) of these companies are playing. For me, these product lines, taken together, are the basis of what we might call “the operating system of our lives.” And since the book is about how we will be leveraging our lives over digital platforms in one generation, it struck me as important to assess where each of the Big Five is right now (what they have already built) and where they are weak (what they need to build to compete).

Here’s the chart:

As you can see, I’ve laid out the same five companies, listed top to bottom by market cap. From left to right are columns of various product lines or offerings that I’ve determined are crucial areas that any player in the “OS of our life” must address. I’ve keyed each company against each product line with one of four scores, from “Strong” – where a company already dominates – to “Weak” – where a company either does not play, or has an anemic offering. The terms “Developing” and “Improving” demonstrate that the company is making progress in that area, from either a weak position (“Developing”) or a middling position (“Improving”).

The product lines I determined were worthy of inclusion mirrored many of the territories found in the Web 2 Summit Points of Control map, with some key additions. Starting from the left: If you’re going to be the “OS of life,” it helps if you have experience building operating systems. Next, it’s critical that you have the ability to distribute products and services, in particular entertainment, to folks on your platform. This means dealing with Hollywood, and the Big Five are in various states of disarray with regard to that issue. Third is Productivity Software, which some of the Big Five may well just punt on (Facebook and Amazon, perhaps). Fourth is Advertising Solutions – where all of the Big Five are either major players or developing solutions. Next are Tablets and Phones, which perhaps could also be called a distribution play but are far more than that. After that is Search, which kind of started this whole Web 2 thing back in the day – I gave Apple a “developing” here because of Siri, which I view as a search interface. Next up is Social, which is pretty self explanatory, Payment, a key point of control, and lastly Voice, which I believe (perhaps wrongly) as a critical aspect of user interface.

Why on earth did I go to the trouble of doing this? Well, because it helps me Think Out Loud about how these companies are going to play out over the next couple of years. If you buy that all of these companies need strategies in most of the areas I outline above, then looking for relative weaknesses and strengths of each is an interesting exercise. In fact, if you really squint, you may well see some patterns in future M&A (the subject of my next prediction post, in fact).

I could go on for pages about how I came to each score. For example, I gave Facebook a “developing” in OSes, even though the company really doesn’t have an OS like Windows or iOS. Why? Because I view Facebook as an OS layer on top of the Web, though of course not in the classic sense. And why did Amazon get a “developing” in Voice? Because it just bought a company in the space, just like Apple did with Siri in 2010. I’ll spare you the details of all the rest, but very much invite your comments on the chart. I labeled it “Draft 1″ for a reason. What categories of product did I miss? Were my scores fair? Comment away, please!

Update: I spaced on Xbox/Kinnect, and have updated the chart wrt to Ent/Dist for Microsoft, thanks for the input!

Predictions 2012 #4: Google’s Challenging Year

By - January 04, 2012

By some Mayan accounts, 2012 is not going to be a good year for any of us. But in this prediction, I’m going to focus on one company that will have a pretty crazy year: Google.

Now, I’m not predicting the company will lose revenue or profits in its core business of search, but rather that Larry Page’s first full year as CEO will be challenging, due in part to decisions made (or not made) back in 2011, and in part to the inherent complications of the businesses where Google now plants its flag.

I’ve got candidates for what those decisions were (Google+ real names’ policy, buying all of Motorola Mobility, not elegantly stewarding Android, muddying the search waters by favoring its own properties), but I think they all boil down to one core thing: Google has often brought products to market before they were fully ready, then played catch up with the competition against a roiling tide of conflicted partners, grandstanding policy makers, and confused consumers. It all adds up to a massive challenge that I think will come to a head in 2012.

Witness Android: the platform needs a strong and steady product-driven hand behind it, but seems at the mercy of handset makers and carriers. There’s hope in the Galaxy Nexus, but that phone is way ahead of the Android pack, and I’m not sure the ecosystem behind Android is going to follow Google’s lead here. Not to mention the goat rodeo that is the patent mess in mobile – an enervating and expensive battle that is always one court order away from throwing a wrench in Google’s plans. In short, Android is a wonderful counterpunch to Apple’s iOS, but it’s also a massive cat-herding challenge.

Or ChromeOS/Book/Apps: Google’s basically taking on the entire netbook marketplace here (Macbook Air and Windows in particular), but is the company really ready to play the game that its competitors have owned for decades? Sure, you can change the rules (Google’s really selling a cloud-based approach to work, rather than a PC-based one), but you can be right on theory and wrong in practice: hardware and the enterprise don’t move as fast as the web in terms of adoption. The company’s strategy of partnering (with leader Samsung, in this case) is elegant, but not at scale. At the same time, Google is taking on Microsoft in cloud software, and while it’s got some impressive wins under its belt, this is not a market native to Google’s strengths. In short, it will be a massive challenge to manage this business to scale and succcess in 2012.

Or Google+: Google is justifiably proud of how quickly this service has scaled (reportedly to more than 60mm unique users a month, in just six months), but questions remain as to the service’s staying power. If you are Google, and you integrate your new service into everything you own and operate (Android, Docs, Search, YouTube, Picasa, etc), it’s not going to be difficult to get a ton of folks to try the service out. I’m pretty sure that Googlers made their “social bonus” last year, given the good initial numbers, but again, it’s going to be a real challenge to turn those initial visits into long term active users who forsake Twitter and/or Facebook.

Or GoogleTV (and by some extension, YouTube): Probably the poster child for “not market ready,” GoogleTV now has very high expectations for 2012, thanks to Chairman Schmidt’s recent comments. But while the company can cut deals to integrate GTV into every new digital set on earth – and through its Motorola purchase, into every Motorola box to boot – it can’t force the kitty-with-a-ball-of-yarn ecosystem of cable companies and Hollywood to get out of the way of making a great consumer product (and Hollywood is still hoping to win its legal battles with YouTube). Again: A massive challenge, one that I doubt anyone (including Apple) will figure out to great success in 2012.

Or even Google core search: Google’s bread and butter is a massive profit and revenue engine, and I don’t expect that to change in 2012. However, it’s slowly losing share to new modes of discovery like Twitter and Facebook, and Google  has struggled with how to incorporate those signals into its search service. It can’t come to terms with either of the two major social services over data usage (and presumably money), meaning it’s losing ground in relevance, freshness, and depth. Then there’s the shift to mobile and apps: the world of apps is not easily crawled (and like Facebook, Apple is not eager to let Google do so), meaning an entire new digital frontier is lost to Google’s spiders (I lament this for other reasons as well, but more on that later). And then there’s the need to promote core Google properties, from Places to Google+ to Finance to YouTube to…well, you get the picture. Even though the company claims no bias in its results, the fact is that its partners aren’t buying it anymore (Yelp comes to mind). Lastly, there’s Bing, which isn’t going to stop trying to steal share. Back in the glory days of Web 2, the Web was the only game, and Google was everyone’s dashboard to it. Again, it will be a major challenge to keep Google’s core search business ahead of the game – because the major underlying rules are changing.

I could go on (I haven’t even delved into privacy, intellectual property, and international policy issues, or competition in the ad stack from Facebook and others), but I think I’ve made the point: Google has entered a phase in its corporate life where its future rests on bringing elegant products into markets that are goat rodeos on good days, and snake pits on bad ones. Telecom, entertainment, social, search, advertising? Yikes. “Challenging” seems like a euphemism.

On the other hand, if any company has the resources, the talent, and the willpower to execute in so many challenging markets at once, it’s got to be Google. But this is a prediction post, so let me end with one: Given all Google is trying to do, it will have a major fumble in 2012, one that beats anything the company has done in its long (and mostly fumble-free) history. But hey, every good team fumbles, it’s how you recover that matters.  If I had to chose a shortlist for the ball dropping, it’d include Motorola, GoogleTV, and yes, even Google+, which given its high expectations might be set up for disappointment. We’ll see if I’m right a year from now.

Related:

Predictions 2012: #1 – On Twitter and Media

Predictions 2012: #2 – Twitter As Free Radical, Swiss Bank, Arms Merchant…And Google Five Years Ago

Predictions 2012 #3: The Facebook Ad Network

Predictions 2011

2011: How I Did

Predictions 2010

2010: How I Did

2009 Predictions

2009 How I Did

2008 Predictions

2008 How I Did

2007 Predictions

2007 How I Did

2006 Predictions

2006 How I Did

2005 Predictions

2005 How I Did

2004 Predictions

2004 How I Did

Predictions 2012 #3: The Facebook Ad Network

By -

For my third prediction of the year, I’m going with one just a tad bit less obvious than “Facebook will go public.” There seems to be no doubt about that event occurring this year, though I’ve certainly heard intelligent folks argue that Facebook can and should figure out how to stay private. I’ve argued that Facebook ought to be a public company, if only to be held (somewhat) accountable given all the data it has on our lives.

But this prediction has to do with Facebook announcing and then launching a web-wide advertising network along the lines of Google’s AdSense. I’ve talked about this for years (short handing it as “FaceSense,”) and I’ve asked Mark Zuckerberg, Carolyn Everson, Bret Taylor, and Sheryl Sandberg about it on stage and off. The answer is always the same: We’re not interested in launching a web ad network at this time.

I predict that line will change in 2012. Here’s why:

- Once public, Facebook will need to keep demonstrating new lines of revenue and growth. Sure, the company already has the attention of 1/7th of all time spent “on the web.” But there’s a lot more attention out there on the Independent Web, and the default ad service for that other 6/7ths is Google’s AdSense, a multi-billion dollar business.

- Facebook already has its hooks into millions of websites with its Open Graph suite – all those Like, Recommend, Share, Connect, and Facebook Comment plugins. These buttons are pumping data about how the web is being used directly into Facebook’s servers. That data can then be combined with all the native Social Graph data Facebook already has, making for a powerful offering to marketers across the entire web. Think of it as “social retargeting” – marketers will be able to buy attention on Facebook.com, then know where folks are across the web, and amplify their messaging out there as well.

- Because Facebook is already integrated into millions of sites, it’ll be a relative snap for the company to start signing up publishers to offer their inventory to the social giant. It will be interesting to see what terms Facebook offers/requires – I’m assuming the company will match Google and others’ non-exclusivity (IE, you can use any ad network you want), but don’t assume this will be the case. Facebook may have an ace or two up their sleeve in how they go to market here.

- Lastly, let’s not forget that the team who built and ran AdSense is now at Facebook (that’d be Sheryl Sandberg and her ad ops chief David Fischer, oh, and one of the “fathers of AdSense,” Gokul Rajaram).

Critical to the success and rollout of Facebook’s web ads will be two key factors. One, the structural underpinning of the system: AdSense scans the content of a page and delivers relevant ads (though many other factors are now creeping into its system). This leverages Google’s core competence as a search engine (it’s already scanning the page for search.) Facebook’s core leverage is knowing who you are and what you’ve done inside the Facebook ecosystem, so the key structural construct for its web ad network will turn on how the company leverages that data. I imagine the new ad network might initially roll out just to sites that have Facebook Connect installed, so that visitors to those sites are already “inside” the Facebook network, so to speak.

The second issue is what may as well be called the “creepiness factor.”  Search display retargeting is still a gray area – a lot of folks don’t like being chased across the web by ads that know what sites you’ve recently visited or what terms you’ve searched for. Cultural acceptance of ads on third party sites that seem to know who your friends are, what you ate for dinner last night, or what movies you recently watched might provoke a societal immune response. But that’s not stopped Facebook to date. I don’t expect it will in this case either.

Related:

Predictions 2012: #1 – On Twitter and Media

Predictions 2012: #2 – Twitter As Free Radical, Swiss Bank, Arms Merchant…And Google Five Years Ago

Predictions 2011

2011: How I Did

Predictions 2010

2010: How I Did

2009 Predictions

2009 How I Did

2008 Predictions

2008 How I Did

2007 Predictions

2007 How I Did

2006 Predictions

2006 How I Did

2005 Predictions

2005 How I Did

2004 Predictions

2004 How I Did

Predictions 2012: #2 – Twitter As Free Radical, Swiss Bank, Arms Merchant…And Google Five Years Ago

By - January 03, 2012

My predictions this year will be pretty focused on the Internet Big Five (Google, Microsoft, Apple, Amazon, and Facebook) but the first two focus on Twitter. Why? Because Twitter is poised to become a critical “free radical” whose presence affects the actions of all the Big Five players. And 2012 will be the year this becomes readily apparent. In short: In 2012, every Big Five Internet company will need to have a clear Twitter strategy. At the moment, not all of them do.

What do I mean when I use the term “free radical”? Well, taken loosely from molecular chemistry and biology, free radicals are particles with open shells or unpaired electrons – they cause change in otherwise stable systems. I take the term with a bit more license, however – to me Twitter is the only Internet service at scale that has yet to ossify into a predictable platform with a massive revenue base to protect. This fact, plus the company’s liberal philosophical bent toward free speech, positions Twitter as something of a shape-shifting arms merchant in the ongoing battle between the Internet Big Five. Believe me, any one of the Five would kill to own Twitter, several of them have tried to buy the company over the past few years. It’s now clear that Twitter’s path is one of independence. To succeed, it must become the Swiss bank of social intent, providing its services in some kind of useful way to each and every one of the Big Five.

2011 has already set the table for how this year is going to play out. In short, Microsoft and Apple embraced Twitter, Google and Facebook rejected it, and Amazon stayed on the sidelines, for the most part.

Last year, Google allowed its search deal with Twitter to expire (not for lack of trying, I am sure), and then rolled out Google+, which is clearly a Twitter competitor (sure, it’s also a Facebook competitor, but let’s keep this post focused, shall we? Google+ replaced Twitter in Google’s search service. Enough said.). Microsoft, on the other hand, was happy to renew its deal. It’ll do more with Twitter in 2012, to be sure.

Last year was the year Facebook pretty much copied everything Twitter does, up to and including the “Subscribe” feature, which is pretty much a full copy of Twitter inside the Facebook walled garden. Meanwhile Apple embraced Twitter wholeheartedly, with a deal that clearly benefited from Facebook negotiations gone south. And as I said earlier, Amazon didn’t see much reason to work with Twitter, save adding a few new handles to its corporate identity.

In 2012, every Big Five player is going to have to reckon (again) with Twitter. And it’s my hope that Twitter’s approach to these Internet behemoths is to force them all to play by the same rules. In other words, no exclusive deals for any of them. If Google wants to integrate Twitter natively into Android (the way Apple has with iOS), why, great. Twitter won’t refuse to do so because Apple objects. Should Microsoft care to build Twitter natively into Xbox Live, again, no problem, but sorry Microsoft, Twitter keeps the right to allow Sony or Nintendo (or, gasp, Facebook proxy Zynga) the same option. When Amazon starts publicly acting like a full-blown media company (and not just a distribution or ecommerce player), it will cut a deal with Twitter for distribution and data, quite possibly in the advertising network space. Amazon’s competitors will have nothing to say about it. And if Facebook ever wakes up and realizes that Twitter might play a part  in its strategy in some important way, Twitter will be more than happy to figure out a deal, even if Google objects.

In short, the Internet Big Five need a neutral player they can all draw on for value and features that any one of them can’t (or won’t) do – for any number of reasons. This is the role Google played in the first five years of Web 2.o (but increasingly can’t play due to conflicts with owned and operated properties like YouTube, Android, Google+, Places, etc.). For now, Google and Facebook still think they can out-Twitter Twitter. Microsoft and Apple have already punted on competing directly. I’m predicting 2012 is the year Google and Facebook come around and work with Twitter in some new, significant way, as will Amazon.

This is a pretty risky prediction to make, to be sure. Sitting here in January of 2012, it’s quite easy to argue that the folks at Facebook and Google see absolutely no reason to work with Twitter. But there’s an important reason to work with Twitter that hasn’t become quite evident, yet. And that has to do with the concept of openness and the need for third party validation in the eyes of government and consumer scrutiny. More on that in a future prediction.

Related:

Predictions 2012: #1 – On Twitter and Media

Predictions 2011

2011: How I Did

Predictions 2010

2010: How I Did

2009 Predictions

2009 How I Did

2008 Predictions

2008 How I Did

2007 Predictions

2007 How I Did

2006 Predictions

2006 How I Did

2005 Predictions

2005 How I Did

2004 Predictions

2004 How I Did