In March 2000 the original dotcom Bubble 1.0 burst. With hindsight there were lots of reasons that it happened: vastly overvalued stocks in companies that didnâ€™t sell anything and lost cash in truckloads; massive oversupply of advertising space; and the relative naivetÃ© of the incumbents.
In 2004 Tim Oâ€™Reilly declared the coming of Web 2.0, â€œthe business revolution in the computer industry caused by the move to the internet as platform, and an attempt to understand the rules for success on that new platform.â€
Web 2.0 has more to do with the success of Google than with anything else. And Googleâ€™s success depends on Adwords.
The Internet is primarily used for two things: communicating with people, and finding people to communicate with. The former can be achieved via email and chat forums, and the latter through search. Right from the beginning, as the Internet grew phenomenally large, search became essential. Googleâ€™s approach has won.
Search is expected to be free. Googleâ€™s genius was in linking search terms, and user interests, via a dynamic algorithm that allows companies to reach you with relevant adverts. It is this, more than anything else, which has allowed Google to leap away from Yahoo. Google also cleverly shares their revenue with websites who host their ad-streams.
And it is this shared revenue model that has boosted Web 2.0. Websites with no conceivable revenue model now make money by hosting Google Adwords. Suddenly companies can offer user-created content in ever-expanding formats: video, music, chat, blogs, diaries, encyclopaedias, hobbies, socialising, favourite things â€¦ you name it, you got it. An ever-expanding network of social grooming allowing the worldâ€™s (mainly American) youth to connect. Like highly evolved chimpanzees doing the simian equivalent of picking flees out of each otherâ€™s fur; compassionate connection, social grooming, to keep the world safe.
But, you see, the Internet isnâ€™t the thing. Itâ€™s just the package.
The music industry did see the Internet coming but didnâ€™t know how to deal with it. Music is sold in boxes. Music companies sell boxes, not music. First they sold records, then tapes, then CDâ€™s. How do they make money when the music isnâ€™t in a box? How do they keep control of the ownership of that music? So they shut it out and attacked peer-to-peer network sites. It wasnâ€™t until the battle was lost that they agreed, over a barrel, that Apple maybe had a point with their iPod. And it has worked brilliantly for them.
But even that isnâ€™t going to work in the long run. You see, you donâ€™t necessarily want to own the music either. You just want access to it. If you could pay a usage fee, or even a flat monthly rate and then have broadband access to any music at all it would open up a world of opportunities. New groups would simply upload their music into the database. Self-created PodJs would establish radio stations â€“ like current bloggers or podcasters â€“ and introduce you to new music you like. You could make your own, share with others. A whole new industry.
And you donâ€™t necessarily need the Internet for this at all.
What people want from the Internet is becoming more easily achievable through their cellphones. What happens to Internet music downloads when your iPod can do it directly? Social networking makes more sense on a small device or phone that is always with you than on a computer which is fixed in space. And the nature of that small device changes the way you interact.
Politicians in developing countries famously arrive late at parties once everyone else has already decided to leave. â€œI started my own blog,â€ says Ebrahim Rasool, Premier of the Western Cape, â€œbut all I get are responses from white males. We need to do more to democratise the Internet.â€ I enquired as to what his children use: â€œSMS and MXit,â€ he responded. In other words, what a democratically elected leader should be doing to engage directly with his people is fiddling with his cellphone.
In South Africa, a nominally poor country, there are more users of MXit â€“ a cellphone chat-service â€“ than there are Internet users. The vast bulk of MXit users are from the poorer end of society. And MXit charges for every single message sent. Clearly the â€œfreenessâ€ of the Internet is trumped by the cellphoneâ€™s convenience.
The reason this hasnâ€™t cannibalised the Internet just yet (although it certainly has done so in South Africa) is simply a matter of politics.
In Europe and Japan, the other two important Internet markets, local governments have given protections to their historically state-owned telecommunications companies; the companies that offer fixed-line communications. In response the cellular companies have become dynamic and offer astonishing technologies. In many parts of Europe and in Japan cellular services are cheaper than the fixed telephone services. The same is true of South Africa.
Not so in the US where the government physically dismantled their monopolies and created real competition. It is no surprise that Apple, basing their iPhone on US expectations of phones, has none of the specialist services (especially 3G) that European and Japanese consumers take for granted. But it wonâ€™t be long before the US catches up and the youth who so eagerly use MySpace now flock to an American version of MXit for cellular chat and interaction.
And then all those companies that depend on Adwords for their revenue will be in big trouble.
x-posted to whythawk.com
Categories: Media/Entertainment, Science/Technology
If you’re right, then there’s no reason to believe that Google or some other company can’t figure out a way to deliver advertising content to a cellphone just as Adwords does to websites. After all, cellphones with text and chat features are a small part of what a web-equipped phone is truly capable of. Phone-based multimedia will become a serious problem for the web, but I have a hard time buying into the idea that blogs, MySpace, and similar web-based content sites will die off completely because of cell phones. They’ll have to adapt, of course, but even if you could download YouTube videos to your cellphone, most cell phones (in the U.S. at least) don’t provide the sound and video quality, or the screen size, for a serious music listener or video watcher.
Now, when you can get a 17 inch screen out of your cellphone, either via a video out port, projection system, or a foldable organic LED screen, the dynamic will change again.
Agreed, but the central message here is this: if bloggers can say to traditional print newspapers, “Watch out, we’ll eat your lunch.” the same can be said of people wedded to the Internet. It is essential for businesses to figure out their response. Otherwise Rupert Murdoch will wait for the inevitable attrition and buy the best … as before.
Oh, and cellular television seems to be very popular – ask the commuters on the Tokyo exchange.
Thanks for this, Gavin. Sorry it took me so long to respond – after all, I’m a principal in a feckin’ MOBILITY firm.
You’re on the money, and may even be understating. The thing I marvel at most these days is just how behind organizations and companies are. Do any of the prez candidates have mobile yet? Alt media sites? (I’m starting to push these buttons, but the answer is “not yet”).
Hell, one of my partners went to ad:tech last year – the ad industry conference that’s all about tech – and of the thousands of presenters and exhibitors in attendance… Well, here, read all about it: http://commons.iabc.com/branding/2006/08/19/mcluhan%e2%80%99s-cell-phone/