…from those of you in the marketing business out there. How many of you would love to promote your product on the home page of Google, in this fashion?
It’s arguably the web’s most valuable ad placement, it’s not for sale, and no one knows how much traffic or conversion it drives save Google itself.
Just one more sign that the Internet Big Five are girding for a massive fight to be the platform for your life. And if you’re shocked, don’t be. Remember when Amazon launched Kindle? The first thing you saw when you went to amazon.com was….what again? But then again, the Kindle was just another product Amazon was selling, right? At least, it seemed that way.
Now, when Facebook does a home page takeover with its own hardware device, then the battle will truly be engaged. Though I’m not convinced the young company has that move in it….Regardless, here we go….
Earlier in the week I was interviewed by a sharp producer from an Internet-based media company. That company, a relatively well-known startup in industry circles, will be launching a new site soon, and is making a documentary about the process. Our conversation put a fine point on scores of similar meetings and calls I’ve head with major media company execs, content startup CEOs, and product and business leaders at well known online content destinations.
When I call a producer “sharp,” I mean that he asked interesting questions that crystalized some thoughts that have been bouncing around my head recently. The main focus of our discussion was the challenges of launching new media products in the current environment, and afterwards, it struck me I might write a few words on the subject, as it has been much on my mind, and given my history as both an entrepreneur and author in this space, I very much doubt it will ever stop being on my mind. So here are a couple highlights:
* We have a false economy of valuation driving many startups in the content business. Once a year or so, an Internet media site is sold for an extraordinary amount of money, relative to traditional metrics of valuation. Examples include The Huffington Post, which sold for a reported 10X annual revenues, and, just this past week, Bleacher Report, which sold for even more than that ($200million or so on revenues, from what I understand, that were less than $20mm a year).
Last December I posted on “The Internet Big Five,” noting their relative strengths and the market cap of each. Since that time, the Five have only gotten stronger, adding a cumulative $272 billion in market cap (much of that is Apple, but Amazon and Facebook – assuming the offering does as expected on Friday – have also increased quite a bit). All in all, nearly 30% increase in value for these five companies – sort of makes me wish I was an investor, rather than a writer and entrepreneur.
I’ll also check the number of engaged users for each platform, to see if there are any significant shifts, though I don’t recall seeing any in the news recently (save Facebook crossing 900 million users). It is interesting to note that Facebook, should it hold its supposed valuation, will be more highly valued than Amazon.
A reminder as to why I’ve made a point of watching the Big Five, from my original and secondary posts:
I’m still in recovery mode after the wave of Apple-defenders inundated me with privacy-related comments over this past weekend, and I promise to continue the dialog – and admit where I may be wrong – once I feel I’ve properly grokked the story. The issue of privacy as it relates to the Intenet is rather a long piece of yarn, and I’m only a small part of the way toward unraveling this particular sweater. (And yes, I know there are plenty of privacy absolutists rolling their eyes at me right now, but if you don’t want to hear my views after some real reporting and thinking on the subject, just move along….). lf you want to peruse some of the recent stories on the subject I’ve been reading, you can start with the Signal post I just finished.
Meanwhile, I want to tell you a little story about advertising and tracking, which is at the heart of much of the current tempest.
While skiing last week at my home mountain of Mammoth (the only place in California with a decent snowpack), my family and I stayed at a Westin property. It’s a relatively new place, and pretty nice for Mammoth – which is more of a “throw the kids in the station wagon and drive up” kind of resort. It’s not exactly Vail or Aspen – save for the skiing, which I dare say rivals any mountain in the US.
If Facebook’s IPO filing does anything besides mint a lot of millionaires, it will be to shine a rather unsettling light on a fact most of us would rather not acknowledge: The web as we know it is rather like our polar ice caps: under severe, long-term attack by forces of our own creation.
And if we lose the web, well, we lose more than funny cat videos and occasionally brilliant blog posts. We lose a commons, an ecosystem, a “tangled bank” where serendipity, dirt, and iterative trial and error drive open innovation. Google’s been the focus of most of this analysis (hell, I called Facebook an “existential threat” to Google on Bloomberg yesterday), but I’d like to pull back for a second.
This post has been brewing in me for a while, but I was moved to start writing after reading this piece in Time:
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.
(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.
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”).
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.
As I work on the book, I’ve come to use a shorthand for five companies that I’ve determined are critical drivers of what kind of society we’ll be living in one generation from now. At the moment I’m focused on just Internet companies, though I also plan on looking at other categories, such as energy, food, and health.
My terminology has evolved in the past week from “the Five Horsemen” to simply “The Big Five.” I’ve got a few reasons for this. First, the Horsemen analogy is a bit negative (given it evokes the Four Horsemen of Apocalypse). Second, there’s a rather fun reference for the “big five” that has to do with personality traits (see this research, or this, for example). One goal of my book, which I should probably explain at a later date, is to tease out the essential character and philosophy – perhaps you could call it the personality – of each of these key Internet players. If corporations are people (in the US, anyway), I wonder what kind of people these companies might be?
I don’t think you’ll be surprised by my choice of the Big Five, but I do hope you’ll find my reasoning for their selection worthy. As you can see from the chart, the five are: Apple, Microsoft, Google, Amazon and Facebook.