Fantastic slide-pack with Internet trends and a lot of cases of Internet re-imagining many different things.
From Mary Meeker, Kleiner Perkins Caufield & Byers
The chart via Business Insider seems conclusive on the Google versus Facebook war of who is more relevant for online advertisers.
When people want to buy something they go first to Google. Full stop.
If I want to buy a bycicle to go to work I will go first to Google or Amazon and research. But what if I discover in Facebook that my friend just got an ebike from China, and I did not even know electric bikes existed? What if Facebook shows a banner on a brand of eBikes close to my friend’s post?
The chart neglects the value of discovery. How important is for marketers how people discover their products?
Google is king on search, but social media is king to discover new things. That is gold for advertisers too. Not sure if $50bn worth of it though… At the end I might still search the ebike on Google and check the reviews in Amazon.
Why is Google spending $106 million in purchasing the owner of decaying codecs?
1) Google has high hopes for HTML5, a standard set to handle video natively (i.e. there will a a <video> tag, as there is a <img> tag for pictures now, and no plugin will be required for the browser to play a video, unlike the plugins required now for flash, Windows Media or Real Audio). If Google open-sources the coming VP8 codec from On2, and forces it into HTML5, it would seriously hit Adobe Flash and Microsoft Silverlight proprietary strategies in favor of an open HTML5. Google can put a lot of pressure by incorporating VP8 into Chrome and migrating YouTube to support it.
2) Owning a video codec technology, as online video becomes King in the Web. Although h.264 is an open standard licensed by MPEGLA, Microsoft owns their own propriety Windows Media codecs. Imaging Windows introducing ad insertion, or search within videos, or interactive video objects within the video coding technology ahead of others. What would be the effect to Google’s search and advertising “bread and butter” in a video-centric Web? Can you imagine Google paying licenses to archrival Microsoft?
3) Is $106m too much? Google might be making the simple maths? What would be the impact on their market cap, if Microsoft releases a video codec with ad/search features? What would be the impact on Microsoft stock if Google is able to master the video codec technology and do that first? Note that just the announcement of this acquisition make Adobe shares drop 3.5%!!
It is not the saving in licenses or bandwith what drives this acquisition. This is about strategy, defending from Microsoft, and taking control of its own future. Google will not make direct revenue from this $106m acquisition, but if it succeeds in getting VP8 widely adopted into HTML5, they are going to be better positioned that anyone to defend their Advertising and Search business in video too.
Online 3D video, interactive objects within video, search within video contents. All that will come and Google wants to be the one to bring it and not depend on standard bodies, or worse, its major competitor.
Coverage of this news by other blogs:
GigaOM, Google: You Buy Some, You Sell Some
NewTeevee, Watch Out, Flash; Google Buys On2
StreamingMedia.com, Google’s Acquisition Of On2 Not A Big Deal, Here’s Why
According to comScore and echoed by The Economist, China is the country with most Internet users in the World, accounting for 179.7 million users out of one billion worldwide. The United States of America, until recently the leader, has 163 million users. With a far lower Internet penetration in China than the roughly 50% in the US, we will only see China widening its lead in this chart. Clearly a market not to be neglected.
A good way to enter the year of the Ox that just began.
Happy Chinese New Year! Gong Xi Fa Cai!
Picture from The Economist daily charts.
As usual in bad times, the debate on whether progress creates or destroys value comes back, as questioned in Martin Varsavsky blog, this time referring to how RSS destroys affects to blogs reducing the amount of displayed advertisement.
As Martin writes:
“I once debated Michael Porter at Davos on the overall value creation of the internet. I argued that the internet created valued and he argued that the internet destroyed value.”
Many examples come to mind, where Internet seem to be killing multi-billion industries:
- Skype is dropping the cost of voice to virtually zero. What before was a hefty business of international telephone calls, has been reduced by several orders of magnitude with VoIP.
- Instant Messaging killing SMS. We all know that SMS is terribly expensive in terms of price/byte. At a rate of 5 cents per SMS, considering 140 bytes per message, we are paying at $375 per Megabyte!! As you can imagine, with IM and unlimited data plans becoming popular, in the mid-term SMS will die.
- Music Industry. Used to charge $20 for a CD with 8-12 songs, the labels are struggling as they see the revenues from music downloads far too low to offset the reduction in revenues from CD sales. Music distribution in discs is likely to disappear in a few years, replaced by online distribution.
- Online Newspapers cannibalize sales from print editions, with online ads revenues not always compensating.
Are these examples really showing that Internet is destroying value? or is value simply shifting?
Looking back in history, it is not the first time there is a perception that technology progress destroys value. The Industrial Revolution saw workers protest as they lost their jobs to machines. Demand for unqualified workers doing repetitive activities dropped, forcing workers to get trained and qualified to build, operate and maintain machines. Those machines produced goods (and new machines) that were cheaper and in bigger volumes, deriving in more people benefiting from those goods. What initially seemed like job destruction, in fact it was wealth generation for the society by making goods affordable for more people.
History demonstrates that innovation simply removes inefficiencies, and in its way destroys industries if needed, shifting value to other parts of the economy, not necessarily within the same industry. And Internet is a fine example of that. Internet (and mobile) makes communications affordable to billions of people, and it is one of the engines behind Globalization, making knowledge and information available widespread.
So where is all this value (business) shifting to?
Let’s take the Music Industry. By removing inefficiencies (like physical distribution of information in discs or in print) the Digital Revolution is shifting the value from selling expensive disc copies to improving fan’s experience, by forcing artists to do more live concerts and spectacular shows as Madonna’s latest World Tour. Value is also shifting from the monopoly of recording labels to select the next star, to the most democratic system ever, with Internet empowering all sorts of musicians to publish their work. Labels and intermediaries are clearly losing business, but isn’t the Digital Revolution bringing more value to both fans and thousands of creators?
There are still many things to do to make this World a better place for our children and grandchildren. Let’s put the focus on improving it harnessing the power of innovation that Internet brings.
Internet clearly creates huge value for the society. A different question is, are Internet start-ups with unclear business cases (other than getting funds from VC) sustainable? We got an answer to that question when the late 90s bubble burst. Now we are getting the same answer after Bubble 2.0 is bursting too.
These are the top hottest five topics that we have covered over the past twelve months with the biggest potential for a disruption in both the Communications Industry and in our habits.
1) Mobile Internet, the Internet way.
The iPhone and Google’s Android have revolutionized Mobile Internet in the handset, making web browsing such a cool and better experience that operators have embraced unlimited data plans for the first time, in bundle with these “next-gen” handsets (well, in fact operators did it first with Blackberry for unlimited enterprise email). Downloadable Mobile Apps were already available for Symbian, J2ME, Windows Mobile and Blackberry, but never have they been hotter than they are now on App Store and App Market. The Winners: Apple and Google (and even Blackberry to a certain extent). The Losers: Nokia, Sony Ericsson and Windows Mobile. The short-term winners, long-term who-knows?: The Service Providers that are cashing-in the flat fee Unlimited Data plans, but sacrificing their chances to ever control again the Mobile Internet as they did before.
2) Cloud Computing.
Amazon Web Services, Google App Engine, Google Apps, IBM “Cloud consulting”, or Google releasing Chrome to run complex apps on the browser at full speed, have made headlines in 2008. Startups such as Animoto run on Amazon’s cloud to enjoy flexible on-demand computer scalability (no wonder Amazon is also an investor in Animoto). The hype is such that these days everything is getting cloudy (or re-defined as cloudy) : GPS navigators face competition from the clouds with Google Maps (maps run on the cloud, with real-time info update and interactive recommendations/ads). Even speech recognition now runs in the cloud with Google Mobile App. The Winners: Google getting us to spend more time online, pioneer Amazon that gets economies of scale, and the IT vendors, such as HP or IBM, that will equip clouds. The Losers: Microsoft, for the moment. SaaS running on a browser make the OS less relevant. The catastrophe of Vista has only help the Cloud cause with enterprises eager to consider alternatives. Microsoft is building huge data-centers and will be a big cloud player too. For the moment, the cloud will put pressure on them.
3) Internet TV.
Hulu has brought national broadcast TV shows to the Internet. YouTube has confirmed the revolution of Internet Video, now well into the mainstream. YouTube not only is reaching agreements with content owners to be an ad-based platform for content distribution, but it has been a huge platform for politicians for the US 2008 presidential campaign, and now for President-elect’s change.gov. Not to mention the new habits of kids to search YouTube for information instead of searching Google. The Winners: All of us that now have virtually unlimited video content, including old-time TV jewels, just one click away. The Losers (yet to be confirmed): Broadcasters that will cannibalize higher CPMs revenues of traditional TV, with much lower CPMs prices in the online world. The effect is still small but innovative models will be needed before the cannibalization goes too far.
4) Wireless Broadband. With HSDPA or EVDO widely deployed, the 3G networks are now beginning to deliver on past promises. WiMAX has also seen in the past twelve months many commercial launches, and will play a key role in emerging markets where fixed broadband is not a financially viable option. The Winners: Mobile Operators that will get an additional source of revenues selling Mobile broadband, and opening the door to Machine2Machine applications taking advantage of ubiquitous wireless connectivity. The potential losers (not yet): Fixed Operators will need to keep fixed broadband ahead in terms of performance, to avoid substitution by wireless. Mobile Operators will lose too, as their hopes to make Mobile Internet different from fixed vanish.
Asus EEE PC has been followed by most laptop vendors (supported by Intel low-power low-cost processors such as ATOM) to bring a new class of 1 kg laptops with less than 9″ screens, ideal to enjoy full Internet on the go. Combined with Wireless Broadband, these low-cost laptops are not only a great companion for road-warriors but also are likely to power Internet access in many emerging countries as an affordable PC solution. The Winners: Millions of new Internet users worldwide, as well as Internet addicts. Flash memory manufacturers. The Losers: High-end lightweight laptop makers, that will face competition from low-end machines with enough power for everyday use. DVD/CD writers and disc makers, with discs replaced by memory cards and the disc writer by a card reader.
Internet TV has definitively arrived and it is here to stay. YouTube crossed the chasm for video on the Internet, and Internet TV is now steadily going mainstream. Here is some piece of evidence:
YouTube and Hulu are gaining a leading position in advertising-supported Internet TV. YouTube has reached an agreement with CBS to offer complete TV shows with inserted video ads, which is a different game from current UGC and short clips from TV shows. On top of that, many TV channels are developing their own Internet sites to deliver Catch-Up TV, i.e. broadcast TV-shows offered on-demand. Spanish TVE site is one fine example.
If all this is already posing a serious threat to IPTV and Cable, other over-the-top players are also strongly positioning in Video-On-Demand. Apple TV, Amazon Unbox or even Netflix offers of movie downloads, compete seriously with the VoD that IPTV telcos and cable operators offer.
How can IPTV telcos fight back and win?
IPTV is a platform for a next-generation Pay-TV service. Exclusive content and a wide offering of channels is a key success factors for IPTV, as it was for Cable/Satellite pay-TV operators. Embracing Internet TV as part of IPTV offering is another one.