The main reason “disruptive” causes confusion is that it sounds like “major upset,” which suggests that the technological cause should be major as well. This leads us to falsely conflate disruptive innovation with technically radical innovation. So we end up confusing disruptive with radical and sustaining with incremental. The two are orthogonal axes.
My inital reaction was Aha! (or FTW in 2.0-speak). It was originally from Ribbonfarm (see here) so off I duly clicked. Turns out that Venkatesh Rao has similar views to me (ie we are in dire danger of rejecting some of the Christensen Innovators Doctrine). But First, Why and how does disruption happen? In Christensondom its that:
Major breakthroughs, which are called ‘radical’ in Christenson’s model, may or may not be disruptive, while minor, or ‘incremental’ innovations can be massively disruptive. The opposite of disruptive is sustaining.
- A disruptive innovation usually starts as a low-quality differentiated product in a low-volume marginal segment of a much larger mature market, which demands attributes that the mainstream market does not, and which is willing to give up performance attributes the mainstream market is not (example, Wii customers willing to give up sheer processing horsepower for 3d input capability).
- A marginal player occupies this segment and starts growing rapidly, solving initial quality problems while retaining a cost advantage.
- The incumbent mature market leader, no matter how visionary, is forced to ignore the opportunity because it does not meet the growth needs dictated by its larger size, and also because the disruptive product is not yet good enough for its mainstream customers.
- The marginal player goes through a learning curve, solves its quality problems and suddenly starts threatening the market leader in its main markets
- The incumbent scrambles to put together a response, nearly always fails because of the disruptor’s head start and optimized culture, and retreats to a higher-end market
Why this happens is as straightforward as it is inevitable. It is an economic analog to the tyranny of majority rule.
Our studies of disruption and innovation in the media and communications industries over the last 10 years leads to similar conclusions (see here for example as a precis of TV, and I've posted our (now clearly iconic ) chart of Disruption above) to the extent that a lot of our research in the last 6 months has been focussing on the problems of managing such disruption.
One of the major issues is how to combat it. As Rao notes:
Christenson concludes that the only way for an incumbent to pursue a disruptive idea is to separate the new business completely from the culture, processes and market pressures of its old one. This was what worked for the IBM PC. I haven’t yet seen a counter-example to this principle yet.
I'd agree - any others know of any? One of the interesting arguments is whether to set it up as an independent entity, set it up within the old entity but protect it from grasping Stovepipe Barons, set it up as a Joint Venture, or just buy it when you want it (pay more, but at least you've bought something that has been winnowed by the market).
The options, from my research (and fairly ample experience, I must add) are:
Totally Independent Entity
Good News - best chance of an Internal Venture being free of Parental Control
Bad News - best chance of an Internal Venture being culled sooner rather than later as no one cares about it.
Internal but Protected
Good News - best chance of an Internal Venture avoiding the fate of the Independent Entity, with strong charter can still be relatively independent. BT's settup of its Cellnet (now O2 and Internet operations used this model, for example)
Bad News - best chance of an Internal Venture being grabbed sooner rather than later by Stovepipe Barons
I'd still favour Protected over Independent as in my view the entity is more likely to get to adolescence. The next option is:
Joint Venture
Good News - good risk sharing, best chance of potentially getting required skills from a reputable supplier, and potentially two major players as channels and/or suppliers
Bad News - thats two cooks, broth may be spoiled as the squabble
Hulu is a good example of the above, but it has required a strong charter and a tough stance by the Hulu CEO to achieve this. Another corollary example is the spinout, using the companies IP, where the company retains a stake and potentially re-sells the goods as an early customer.
Acquisition when Required
The other option is to watch the Darwinian market and acquire.
Good News - best chance of any Venture of being throigh the learning curve of market survival
Bad News - you will pay over the odds (the Build vs Buy case will look awful) and its hard to integrate.
Google, for example, has acquired a lot of companies which have withered on the vine, and they are not the only ones. Most studies of M&A deals reckon that 2/3 and up go sour.
Overall - on evidence we have to date anyway - is that the well protected Internal Venture or Joint Venture are the most likely to live long and well.
The other thing (and the reason for the original Aha!) is the difference between Radical and Disruptive Innovation. Rao notes:
The principles of disruptive competition work best to explain direct substitute competitions, like CDs for tapes. When innovations change consumer behaviors and force a redrawing of market boundaries, the explanation provided by the model is incomplete. Changes that come from much larger forces, like the Internet, are not well explained by Christenson’s model. Overloading the term by talking of ‘meta disruption’ as some people like to do, seems to me not very useful.
I agree here, and this is where I think the term "Radical Innovation" really applies. Radical are things that shift the game radically (ie a lot) but there is usually a gap between that and shifting the market, as other things come to bear. For example, the 'Net came alive in 1969, I'd argue that it was 1999 before it was Disruptive. In my models a Radical Innovation, to be Disruptive, has to shift the main factors by two orders of magnitude - which is typically enough to kick a totally new Darwinian niche of Innovation into being. Big ones I have studied in the communications field are:
- Invention of Aircraft - from Gliders to Bleriot in 10 years
- Telegraph and Telephone over c 40 years
- Pharmaceutical and Medical technology in the early 20th century
- World War 2 - pushed so many things so far in 6 years
- the Internet
- The emergence of behavioural analysis so we understand how we communicate so much better
I would argue that Disruptive Innovation tends to follow behind Radical innovation in any one field - first comes the radical new technology, then comes the parallel innovations, recombinations, tinkering etc that makes it disruptive.
At any rate, we believe that this management of disruption will be one of the core issues of the next 20 years or so as a number of technologies - not just the 'Net - are coming out the gate. (DNA and the resulting BioTech industry and its many offshoots, Robotics, and whatever emerges in 10 - 20 years time from Nanotechnology are the next major "Radical" technologies in my view - never mind their combinations like living robots - Androids, living structures and the Internet of Very Small Self Propelled Things - "intelligent dust")
(By the way, this was posted about 18 hours later as I forgot to change the button to "Publish" and didn't notice till now)
Today, Twitter got the news out 45 minutes earlier than any mainstream media that Tiger Woods hit a fire hydrant. As per Twitter, he started off Critical, them Serious, then Injured and now its "admitted, treated and released in good condition" and is now resting safely at home. We wish him well.
Now TechCrunch logged this as:
This Is Why The Internet (And Twitter) Wins
I can see why the Internet wins. That's easy. But Twitter? The question is, is this really real time, real value - ie, in the endgame, when all this stuff is stuff that people will actually pay for, what is the value of realtime sensational inaccurate sleb news on Twitter? Would you pay $0.05 for the Tiger Woods Near Death newsflash 15 minutes early before it hit the Net, or 45 minutes before it hit the wires? $0.5? $5.00?
And then look at its magnificent performance with Jan Moir et al for example.....
What would you pay to get the accurate story first? Or Warnings of real disasters?
I put up the classic 2x2 above, and apart from the vacuous joy of getting whuffie by retweeting the news microseconds before anyone else, its hard to see where the value is in this sort of news once the novelty has worn off.
The issue I'm driving at is this - The value of most of this sort of news is the lowest value media you can imagine apart from what you had for lunch or where your kitteh peed last. ( High value media is stuff that drives big impact things, moderate value media is stuff that you will pay good money to see or know - low value media is what you use to fill in the 5 minutes when you're bored waiting for something more interesting to turn up )
Update - the ongoing Tiger Woods Saga makes it clear that the initial simpering-yet-sensationalist Twitterings were complete and utter rubbish. If spreading complete and utter BS at the blink of an eye is The Ultimate In News, Lordelpus.
Move over Mary Meeker - another Merchant Bank looks like its set to take the Optimistic Overpromotion Crown - Read Write Web:
......we have to wonder about the estimates from Merrill Lynch, which is estimating the cloud computing market to reach $160 billion by 2011.The estimate includes $95 billion in business and productivity applications.
This beats the previous record by Gartner, of $150bn by 2013
One sometimes has to laugh about the estimates by the "Analysis" companies and the Merchant Banks. What they all by and large have is a database with the basic IT components and their estimated growth over N years based on various factor assumptions, by country, by sector etc. They then re-group these component bits together and re-brand them whenever a new "New Thing" like SOA or SaaS or Cloud Computing hits the Hype Curve (pouring the same old wine into new hype bottles). Thus the market forecast for Tech A (Virtualisation, say) moves seamlessly from SOA to SaaS to Cloud, and they make (ever changing) estimates of penetration.
The aim, typically, is to flatter and deceive. Very seldom are the early estimates under-declared, usually (well, nearly always) the early estimates are massively over-egged and then are scaled back as the newly hyped area doesn't quite make it. Mobile is usually the worst.
The game continues in ever increasing cycles over time.......when the whole "New ASP" (remember Application Service Provision - it was the Word 1.0 for Cloud) game started in c 2004 the memory of the abject failure of ASP kept the estimates still "respectably" low. Looking at past Gartner, Forrester reports etc I have, SaaS was to be a $20 - 40bn game (ASP was a $20 - $40bn game at its most breathless). SOA later was to be a c $60- 90 bn game (depending on who/when the report is from) but the inflation of each cycle goes up, till we get into the Clouds.
And each time a new term is coined, the old term's stuff is quietly shifted over. Never clearly of course, so its always difficult to sort out what is which, when.
And each time they fail to live up to promises, and each time its due to the same reason too - its very hard to:
- provision server side software reliably enough for enterprises' critical applications
- persuade them that their data is secure
- design systems flexible enough for every enterprise's different needs
So each time, after some fairly non critical stuff is "Clouded out" it stops there. Then there is the inevitable Large F*ck Up or Service Level Argument or attempt to extort an above market annual maintenance agreement increase, and the enterprise CIO makes a strategic decision to take it back in house.
That's the same CIO that the next saleperson is trying to persuade to let it all hang out in the Cloud, by the way......
For the record, $160bn is about 12% of the total ICT marketplace excluding pure comms and (a movable figure, for sure, but its of the order of $1.3 trillion), so do we really believe Cloud will go from zero to c 12% in about, oh, 2 years - given its still relatively tiny today, 2 years in?
The initiative, which has the working title Front Foot, was launched by the AA last month following research that found that fewer than one in six people trust advertisers.
It is not known how much Google has invested in the Front Foot foundation, which is aiming to raise £2m from a "founding constellation" of organisations. The foundation is understood to have already raised about £250,000.
I wonder how they will persuade us - maybe an Ad campaign?
Does Enterprise 2.0 risk being perverted like this?
I read a recent McKinsey interview with Andrew McAfee, Enterprise 2.0 Impresario Extraordinaire, and was rather struck by the similarities to two bygone eras:
Firstly, on Implementation, the fight between bottom up and top down :
....the debate is typically between people who advocate [a top-down approach and those who
advocate] almost a purely bottom-up approach—in other words, deploy the tools, stop worrying about what’s going to happen, and get out of the way as the management of the company and let it percolate up from down below. Or, if you hear about a grassroots effort, encourage it, support it financially, but, again, get out of the way, let the bottom-up energy happen.
The other school of thought says that you need some top-down energy, or at least
signaling—that this is appropriate, we want this to happen, this is in line with the goals of
the organization. And the top-down school of thought says if you don’t have those signals
from the top of the organization, people are going to sit on the fence for a long time and
they’re going to wonder if this is a worthwhile use of their time, if it will increase their
human capital in the organization or not. And until they have clear answers to those
questions, they’re going to do nothing, or they’re going to sit on the sidelines.
I have a lot of sympathy for both approaches. I find myself agreeing more with the topdown
crowd, though. We know how important it is for management to create culture and
to signal what’s valued inside the organization. These tools are not an exception to that; I
think they’re a great example of it.
I'd agree - near 40 years of experience of system implementation (20 of which I've been around in) tells me that top management support is crucial for anything bigger than a few pilots (and I was around in the early "sneak a PC and a LAN in days)
Secondly, on justification of the project he notes a number of old saws:
- Another failure mode [the first was "build it and they will come"] is to be too concerned about the possible risks and the downsides. If we get wrapped up in those, we’re not going to take the plunge and actually deploy any of these new tools and turn them on and encourage people to go ahead.
- A lot of them [CIO's] see their roles as essentially conservative, though. In other words, “My job
is to not increase the risk profile of this organization before everything else.” That’s a legitimate concern, it’s a legitimate job for the CIO, but all my experience so far tells me that Enterprise 2.0 doesn’t increase the risk profile of an organization.
- I haven’t come across people who have done our old-fashioned technology ROIs1 and are happy with it. What I’ve seen instead is organizations that do a bit of thinking about: What do we want to have happen? What business need are we trying to address? What challenge, what opportunity, are we trying to seize here? And then think about which exact technologies they can deploy to help them with that.
My worry about these - conservative CIOs, boring beanies wanting ROI, careful company men - are that they are the standard saws of the vendors trying to knock down perfectly rational client concerns. As he does admit, it is their job to do so. And everybody's been through Web 1.0 where they heard all this before and those that drank too muck Kool Aid got washed away.
As a parting shot, there is also a lot of breathless hyping of the benefits, very little is heard about the downsides of having all your employees connected al the time. The last wheeze in this gig was "Employee Engagement" (see Dilbert cartoon above) and the easiest way to guarantee failure of Enterprise 2.0 is to give people the feeling that this is just a way of getting all those brain cycles they currently spend elsewhere harnessed to the Corporate Mill.
It would appear that we are not allowed to use the word "Smartbook" unless it belongs to the Smartbook company - TechCrunch:
Smartbook AG does indeed own a trademark on the word smartbook in most of Western Europe, Australia, Singapore, South Korea and a couple of other countries. The company sells laptops that are named Smartbook, so I guess the company is well within its rights to try and protect their trademark in any way it deems appropriate.
In the past, the company has gone after companies like Qualcomm and Freescale, who use the term as a generic denominator for portable Internet-ready devices that are neither smartphones or netbooks in product descriptions
It would appear to have managed to trademark the word Smartbook in a number of countries:
In Germany, Austria, Australia, Benelux, Switzerland, Czech Republic, Denmark, Spain, Finland, France, United Kingdom, Italy, Democratic People's Republic of Korea, Republic of Korea, Monaco, Norway, Poland, Portugal, Russian Federation, Sweden, Singapore, Turkey and Ukraine the word Smartbook is a trademark registered by Smartbook AG. Therefore, in these countries the word may not be used in the sense described in this article.
What I want to know is how you get a Trademark on a word in so many countries that is already prior art (Google has references going back to 2001) , and for example Wikipedia defines a Smartbook as:
A smartbook is a concept of a mobile device that falls between smartphones and netbooks, delivering features typically found in smartphones (always on, all-day battery life, 3G connectivity, GPS)[1] in a slightly larger device with a full keyboard. Smartbooks will tend to be designed to work with online applications.[2] Smartbooks are likely to be sold initially through mobile network operators, like mobile phones are today, along with a wireless data plan.[3]
Irony of ironies, Smartbook itself doesn't actually make Smartbooks - they make laptops which on their own website they called Netbooks
Last night there was a Debate at the House of Commons (In the Mother of All Parliaments) with the intriguing title:
"In digital, data is the only currency"
It was sponsored by the IAB, and proposing it were Matt Brittin MD of Google UK and Louise Ainsworth, MD of Neilsen EMEA, and opposing were Graeme Hale MD of Interbrand and Mark Cridge, MD of Glue. Chair Cheryl Gillan MP bigged them up enough to make a Zulu Imbongi blush - marvellous fun!
First Up - For - Matt Brittin
This was pretty much the GoogleLitany 2.0, everything data is for the best in this best of all worlds:
- Data helps people if it's easy to find, also finding people to talk to.
- Faster, more efficient businesses - and makes some businesses viable. Also allows testing of propositions
- Good for Democracy - (Morales Fark protests example)
- Data is Reithian Plus - entertains, educates and educates - and connects, contextualises and......controls (who said datamining?)?
- Web TV - People watching web tv are 1.5x more engaged than TV
- Kills the "hippo" - highest paid person opinion - noise that the old systems have
First Up - Against - Graeme Hale
Worries that in the real world we may have already lost the debate to Google, but let's look theoretically at what we are giving up. It was an amusing talk in the main, but the main themes were:
- The world is bigger than just data, tendency is to measure what is easily measurable - misses the point
- For lasting impact, progress needs to benefit people over all, not some people all over others
- Example Soviet society. - is it better now that communism is over - yes for some who are wealthy, but not not clear if true for the "Long Tail", How sustainable is this?
- c 2/3 of all net usage is for connection
- Data is not only form of currency
Second Up - For - Louise Ainsworth
This was a more nuanced view (in my view) than the Googleview, and dealt mainly with the issue that part of the resistance to data as a currency was the inability of the old order to make the necessary adjustments. She pointed out that the freeing up of data:
- Drives creativity and individualism...
- ...but puts pressure on high quality, objective work - what happens when all is left is twitter and the BBC
- Data as a currency is not yet properly valued - for example Digital media needs to be funded, needs data to drive the funding as no one will pay sans click - and yet we pay a lot for display ads in non digital media - need to bring that spend proportionately online
- People who now want "measures of emotional engagement" pushing metrics too far
Second Up - Against - Mark Cridge Glue
Mark got down to the guts of the Real Economics of the post-data digital age:
- Business is actually about generating attention - data is not enough
- The real fight is over emotion and ideas - data is used more to justify emotional decisions
- Thinking purely about data is like looking at marketing as purely direct marketing
- Not everything can be reduced to a transaction
- Data is infinitely makeable so not a scarcity based currency (ie can be inflated, suborned etc at will)
- Data is a commodity that measures the cost of everything but the value of nothing
The Peanut Gallery
And then on to the Questions - actually, this is where members of the audience can get up and make a 3 minute speech themselves. The room we were in had opposing Government and Opposition benches and those hanging microphones (as seen on TV) so your truly had to pop up and orate!
My point was basically that, if data were to be a digital currency, then it needs to be properly measured and mandated because right now theh "Data Banking" system was more like the Wild West. Another person later got up and made similar points, ie Data not ready to be a currency look at financial crisis parallel smart guys no control
Other discussions of note were:
Data as a currency has no gold standard:
- which data is the correct currency eg Nielsen vs Comscore traffic measures which differ
- Relative values of different data eg UGC vs Long Form Video on YouTube
The Google Party - twice when some particularly anti-data point was made a Google employee popped up with a counterpoint, such as:
- Real time data gives real time insight
- Data makes very accurate prediction. Tesco uses offline/ online model can predict sales to temp/season. Google could predict winner of Eurovision
The Google Opposition Alliance - rebutted the Googlepoints as they were made
- Real time data can give real time information but not insight
- Phileas Gage example - had a brain injury so couldn't connect the data processing and the feelings halves of brain - Phileas could calculate but couldn't make decisions as it wasn't linked
Debate ended about 33/67 against the motion, but I suspect the majority was heavily influenced by the view that data was the "only" currency was too strong. Hat tip to Abigail Harrison of TheBlueDoor for dragging me along (here's her post on impressions of the debate for more depth)
Addendum - I got quite interested in the concept of data as a "currency" after this, not just from my thoughts above re managing it as a currency, but the broader thought of what a "currency" is in the digital era. To my mind time (or attention, 2.0-speak) is the "Gold Standard" as that is the valuable asset that cannot be manufactured, and all currencies can be traded against time. Time of course shifts in value - For example, real time is sometimes very valuable, but it can be low value if it is just filling in time waiting for something else. No more deep thoughts at this stage apart from fundamentally disagreeing with a recent Web 2.0 Expo presentation in New York that argues that Web currencies are about the economics of abundance. This topic deserves fuller treatment later.
Stowe Boyd writes about the strategy of a Portuguese newspaper called "i", which is structuring itself differently:
"Our feeling was," said Figueiredo, who came on board at an early stage, moving from Diário Económico, "that people were not concerned about traditional sections any more.
This is how it is structured:
- 1. Opinion is the first section of the paper, based on the key word think. No other Portuguese paper starts out with opinion.
- 2. Radar is the second, accompanied by the key word know. Figueiredo said the assumption was that readers will already know a lot from other sources, but Radar aims to offer a quick overview of everything that has happened in the past 24 hours. The section is eight pages long, and the longest article is half a page.
- 3. Zoom is the third section, connected to the key word understand. The 22-26 page section looks at between eight and 13 topics in depth, with articles taking up one to ten pages. "We deal with these subjects with a lot of care, and we use the best teams," Figueiredo said.
- 4. The fourth section is called More, linked to the key concept feel. This is where anything about people's private, cultural, social lives goes. Figueiredo explained that the team did not want to give the section a more specific name, or the content would be limited. More encompasses the fifth need that the paper wanted to address: sports, about 80% of which is focused on football - "this is very important in Portugal," Figueiredo said.
Or "Think, Know, Understand, Feel". Be interesting to see how it pans out. Reminds me of the TED talk in Long Beach earlier this year when Jacek Utko showed how restructuring a newspaper's look and feel drove a major increase in sales (see embedded video)
Calling the Zenith of any growth curve is always hard, and calling the Zenith of a smart company like Google is one of those "gulp" moments, but I think we are now in sight of it (and by in sight I don't mean right now, but in a 1 - 2 year horizon) - for 4 reasons:
Firstly, the Content Owners are starting to organise themselves.
In the recent brouhaha over instream Ads on Twitter, the Ad.ly CEO wrote a defence of the practice. Overall its a seductive hymn for Twitter to turn its assets over to commercial rapine by a 3rd party (if Twitter do this they are daft in my humble opinion, but that is another story - see my worry that they have Missed The Cluetrain), but one of his points was well made:
3. In-Stream rewards the content producer, Contextual just the technology provider – The funny thing about contextual search like that in Google is that it benefits the tech company and NOT the content producer at all. Think about this – bands and stars helped bring people by the millions to MySpace. Having amassed a following they realized that MySpace was able to put ads everywhere and make all of the money. Same goes with Google. All of us bloggers and journalists create content that gets indexed and allows Google to serve up ads alongside us that we don’t benefit financially from. When a content producer promotes an ad in-stream the revenue flows mostly to the person who published the content.
My Italics, but that is really what has happened for the last 6 years or so - Google has managed to pinch a lot of the surplus from other parts of the value chain. But the others are starting to fight back. The push by News International to get Mainstream media to de-list from Google is the latest and most public salvo in this war but it won't be the last. The Mainstream media is hurting badly, and - given the alternatives are pretty bleak - one option is to force Google to hand some of the surplus back by taking away their bat and ball elsewhere, reducing Google to search the "Long Tail of Crap" that is the rest of the Web (as far as the mainstream market is concerned, anyway). In fact, the latest twist in the tale, that Microsoft and News International are reaching a pact to delist from Google and go exclusively elsewhere, also illustrates the second trend:
Secondly - Better Competition is emerging
Microsoft's Bing search engine, and other niche search applications like Real Time search are starting to chip away at Google's stranglehold on search - and more importantly, Ad revenues. The attempt by Microsoft to de-list News International from Google and pay it to be on Bing is the latest - and by far not the last - foray by other people's tanks onto Google's well manicured lawns. This matters for 2 reasons:
- Google's share of the Ad market starts to decline as others take a greater % of it - this may even add up to a real revenue decline as Google has no other source of income
- The margins of Advertising fall as competition increases
This will hit revenue, increase costs and reduce earnings - so Google stock price falls, market sentiment shifts and a whole load of positive reinforcing loops fall away. It also puts more pressure on Google's main strategic weakness, ie its inability to find revenue elsewhere.
Thirdly - So Far, Google has been unable to make money elsewhere
Google has used its huge surplusses to build out businesses in a large number of other areas, but as yet none have been successful except maybe YouTube ( though it will have to start making money soon as the world moves to far more expensive-to-serve HD formats). Every time Gmail goes down another nail is driven into its Cloud services. Its architecture, though formidable, is optimised for text search so its acquisitions struggle to get integrated and the Google culture seems too strong to allow them to succeed once acquired anyway. (And in fact YouTube highlights something else - most home grown services in other areas are poor - that they now acquire most of their Innovation speaks volumes about their ability to innovate a way out of the Ad Biz.)
Strategically the risk they now face is that they have opened up wars on multiple competitive fronts but funding to carry them out will start to drain away. The problem is, the people they have attacked are now all mustering their tanks and will probably rather relish carving up bits of Google's lawns for themselves.
Fourthly - Consumers are starting to understand the privacy implications of Google's Datamining
Due mainly to the avaricious behaviours of other johnny-come-later companies trying to mine the consumer datastream, a better user understanding is emerging of what user data Google has, and what it does with it. From a slow start, this has started to worry users and they are reacting in 3 ways:
- Using other services that do not seem to compromise them so much, and tools to help (the VRM movement being typical of this counter-cycle)
- Demanding legislation to protect their interests - so far more prevalent in Europe than the US, but this is a trend that won't go away soon
- Asking for open-ness of the data so they can control its use better
All these activities curtail the value-add that Google can put on its Ads.
These trends do not mean that Google withers on the vine of course, just that its 5 year hegemony is coming to an end as the rest of the value chain works out strategies to reclaim some of the surplus, as competitors work out the chinks in its armour, and as customers start to work out what they do want. By and large Google has used its Ad money to subsidize sub-priced entry elsewhere, now others are using the same tactic back to hits its core revenues in advertising.
Strategically, this puts them on a back foot. Here are some predictions for the next 3-5 years:
- Increased spend on Marketing and Lobbying - every embattled incumbent reaches for legislation, Google will do so too. The Net Neutrality loony fringe will go into overdrive, as will the "MSM are dumb sh*ts" chorus and the "Ads are Good and Natural" apologists, but the real work will be on limiting the impact on data storage and mining.
- Exiting some of the areas they have been in - so far they have tended to cull them, but we may see them spinning stuff off or out, or even joint venturing in attempts to create value from sunk investments.
- Start buying "real" businesses with non Net-Ad revenue streams while its share price is still very highly valued (When this happens, that is the main sign that this analysis is accepted by teh company itself)
- Company culture shifts from Geeks to Commercial people, from innovation to sales, and operational excellence (aka cost cutting) takes a bigger role. The bright young things leave for newer, shinier things, but every blue-blazered MBA wants to join like they once wanted to be in P&G.
Its all part of the inevitable circle of (economic) life, the difference is that when it happens to Google, then a few Internet Economy myths will hit the floor too - Free(Con)omics, Network Effects, Do NO Evil Corporations - will all be shown to be things that happen in times of early rapid growth, before Darwinian competition for a profitable niche emerges.
We could be wrong, of course....but I think we've called it about right, give or take a year it will seem clear.
Update - nice rebuttal by the very clever Graeme Pietersz, essentially arguing the competitors won't be good enough and consumers will always be just dumb sheep. May be right, but in my view the competition sucks a lot less than just a year ago and consumers seem to be slowly waking up. As I said, we'll know in a year or so - the Ad market will be the driving factor,
About 2 years ago Facebook announced a 100 year revolution in Media, called Beacon. It was a way of trying to inject Ads into your friendship group and conversation stream. It also used the resulting transactions to build a database about you to on-sell. It went down very well. Not.
Well, Twitter has been moving that way, with 3 new steps:
(i) Registering twts on Google and Bing - for money.
(ii) Allowing the API to be used for Ad insertion by new Ad brokers (see our article earlier today)
(iii) and now, the New Retweet which essentially reards its most popular users and injects them into your twtstream without the context your friends can put on. It also acts like a "vote" system forr twts, so its more like Digg, and, as O'Reilly Radar points out, the Rich Get Richer and the proles get, well - lets just say that Twitter slides more towards Social Feudalism.
Mash this all together and you get some wonderful services - RT Ads into my stream and I can't avoid them (well, I can - I have to individually turn off the ability to see every person's RT individually - in my case that 400+ accounts to be updated.) No mass setup button there! And of course, all the transaction data can be mined and sold on.......
I rather loved this quote by a defender of the New, from Gawker:
"We are not trying to turn Facebook and Twitter into one giant spam network. All we are trying to do is get consumers to become marketers for us."
I just knew that this would happen when Dick Costolo came on board, he did much the same for (to?) Feedburner, which was later bought by Google then quietly put to death when (surprise) it's once rapturous audience started to desert it.
Will this happen to Twitter? I don't know, it has a few architectural features that have allowed users to win the spam race so far:
(i) Unfollow people who are vexatious to your soul - but this won't help with RT spam
(ii) An open API so some smart people will no doubt soon start building Ad and RT blockers into 3rd party Twitter Readers
(iii) No doubt some enterprising soul - or a group - will use it in a new way that makes the Mindless RT'ng, Ad chomping people irrelevant. Redefine how to retweet, develop new social mores equivalent to telling your friends "look, if you come here advertising M&M's again you're out on you ear matey"
The question is, why is Twitter doing this so quickly with so much money in the bank to give it time to figure things out? Well, Mr Costolo's last trick was to stuff a datafeed business full of Ads and flog it to Google, so.....
A little while ago the Cluetrain Manifesto celebrated its 10th birthday. It was supposed to guide people towards a happier, more respectful attitude towards service users. Well, clearly Twitter - like Facebook before it - is no longer on the same page, or there is a ClueTrainwreck evolving slowly and it was all bollocks. The smart money seems to voting that its bollocks.
I wonder. As a customer I don't like the new RT, don't like Ads served to me surreptitiously, and am unhappy that Google and Bing are indexing every twt. Not so much "Ambient Intimacy" as "Ambient Interdiction". And other smart users seem to be saying the same....
) chart of Disruption above) to the extent that a lot of our research in the last 6 months has been focussing on the problems of managing such disruption.
