Endeavour Partners - Blog

Earlier this week I was in Oslo, giving a presentation on the future of the digital ecosystem on behalf of Innovation Norway. There is a huge shift in value underway, triggered by the advent of the app phone, and now extending across the whole of the digital ecosystem: communications, computing, consumer electronics and content. While this is creating lots of new opportunities, one of the key challenges facing any entrepreneurial venture is the clash amongst three titans – Google, Microsoft and Apple – all of whom have market caps north of $150 billion and see this as a death match.

Market capitalization of the three titans

There’s a great picture of the clash on DataViz today:

Clash of the Titans

My colleague, Moe, posted a fascinating chart from Alexa.com comparing page views for Google and Facebook. I dug a little deeper and made three observations:

Users look at more pages on Facebook (data from Alexa.com)

People spend more time on Facebook (data from Alexa.com)

It's Facebook that has the link

About 18 months ago I was at a wedding on the West Coast with some folks from Google.  An interesting topic of conversation was about “Who could unseat Google?” and, generally, the importance of search.  A major theme of this discussion was about how as technology and user behavior changes, the leaders in one era rarely make effective transitions to become winners in the next era.

Google bested Webcrawler, Northern Lights, and other online search companies, but – more importantly – search beat out directories such as Yahoo! and AOL as the preferred way to find and access information on the Internet.  Our little group agreed that none of the search contenders (Ask.com, etc. – there was no Bing yet) had a chance.

I argued that social networking in general and Facebook in particular were the biggest threats.  Hours and hours of online activity are occurring on Facebook where Google has no sway, no advertising opportunities, and no information about what users are doing.  More importantly, Facebook is becoming an important mode of content discovery:  People recommend books, sneakers, music, and movies to their friends.  It is also becoming an important method for spreading breaking news.  Facebook is, for example, how I found out about the Ft. Hood shootings.

Today, I saw some extremely intereresting data on Alexa.com that shows how this battle is playing out.  The following chart shows how each week Facebook and Google flip-flop as the Internet leader in total pageviews.  Facebook rules on the weekend; Google rules during the week:

Each weekend Facebook passes Google in pageviews; during the week Google reclaims the lead (data from Alexa.com)

This has been going on since Facebook caught up to Google back in August:

This pattern has been repeating since August of 2009 (data from Alexa.com)

Let me know what you think.  Will social networking displace search as the default approach to discovery on the Internet?  What are the implications for Facebook and Google if this occurs?

(By the way, this is the second time that Facebook caught Google in share of total pageviews.  The first time was during the 2008 Presidential Election.  After the election, Facebook’s pageview share dropped precipitously and took about six months to recover to their prior level.)

One of the key themes of the way the web is changing is the decline and demise of mass media. One facet of that is a battle over access to content, and some recent work has led us to the conclusion that the current business models are doomed.

Perhaps the scariest presentation from a great recent event on the West Coast was the guys from First Paper, who came across as dinosaurs from another era. What does that make Rupert Murdoch?

This interview on Sky News, reported through mUmBRELLA, definitely goes in my “didn’t you get the memo?” file (along with Microsoft being late on the UI work for WinMo 6.5 and Palm being late with the SDK for the Pre and WebOS):

Rupert Murdoch has suggested that News Corporation is likely to make its content unfindable to users on Google when it launches its paid content strategy

Murdoch claimed that readers who randomly reach a  page via search have little value to advertisers.

[youtube=http://www.youtube.com/watch?v=M7GkJqRv3BI&color1=0xb1b1b1&color2=0xcfcfcf&feature=player_embedded&fs=1]

Wrong! We’re actually going in the opposite direction: the advertising apocalypse involves adspend inexorably migrating to channels that are targeted (such as by a search term – duh!) and which provide feedback to the advertiser.

Just saw the Fan Check virus scare posted by a Facebook friend:

Like many virus scares, Fan Check appears to be a hoax.  But this is the first such post I’ve seen on Facebook and it strikes me as an important milestone.  Viruses, virus scares, identity theft and even those annoying chain letter people are moving from the world of email into the world of social networking.

Facebook identity theft threats are particularly worrisome.  In some cases, imposters have taken control of people’s identities on Facebook.  In others, thieves have used Facebook to get at security details and passwords.

But the bigger implication from all this is that the scammers have recognized that social networking is where the money is.  Look for advertisers to figure this out, too.

Google is the leader in Internet advertising because it is currently the king of discovery.  Google search allows people to find nearly anything fairly quickly.  But search is only one form of discovery.  Amazon.com and other sites use referrals and recommendations to aid in discovery, but this is built on automation and algorithms:  People with similar likes and dislikes are analyzed to help identify things you may find interesting.  Facebook is positioned to revolutionize this approach, turbo-charging word of mouth as recommendations come from trusted friends.  The question is how to harness this massive network of friends without breaking down the level of trust?

If advertisers are half as creative as the crooks and thieves, then things should get interesting.

One of my pet peeves is when people who should know better mis-spell Vodafone and Vodaphone. Shortening it to Voda is OK, but makes me think of the Star Wars Jedi Knight – and then the Weird Al song. Anyway, one of the things that makes competition in high-tech so interesting and challenging is that it is often not just ‘horizontal’.

Let me illustrate this with an example from DigiTimes this morning:

MediaTek and Vodafone have jointly announced that Vodafone has selected MediaTek chipsets for two new devices. The strategic partnership with MediaTek provides Vodafone with the opportunity to offer the Vodafone 340 camera phone at a very affordable price as well as its first entry level, low-cost touch screen device for prepaid customers – the Vodafone 541, Vodafone said.

Vodafone 541

This is one of eight Vodafone branded ‘phones launched today.

‘Horizontal’ competition is two similar businesses competing with one another for market share:

• Vodafone competing with FT-Orange in the UK
• Verizon competing with AT&T in the US

‘Vertical’ competition is when businesses compete for value capture, their share of the pie, rather than for market share amongst customers. Here Vodafone is partnering with MediaTek for chipsets, but effectively competing with other mobile phone vendors, such as Nokia, for some of the value created.

Competition can in fact be ‘diagonal’ or asymmetric, when it is amongst businesses that have fundamentally different scope of activities, or business models. Think Google giving away stuff free to generate ad revenue, competing with Microsoft’s packaged applications business.

Much of the competition in the mobile and broadband sector now takes this form; watch this space for more commentary…