According to The Wall Street Journal, Google and Verizon are partnering on a comprehensive search deal that will make Google the default search engine for all mobile subscribers of Verizon, the #2 carrier in the U.S. by subscribers (68M subs). This is a win-win deal for all stakeholders - Google, Verizon and its subscribers - and has the potential of supercharging mobile search in the U.S. It should also be a big boost for data revenue, which would be the main revenue driver for wireless carriers, as discussed earlier.
Google created a whole new industry by developing an innovative advertising-based business model around Web search. The Verizon deal may allow Google to do the same with mobile search, which thus far has been sadly lagging its true potential. According to comScore M:Metrics, 93% of mobile subscribers do not use search on their phones today. Carriers have been trying their organic efforts and/or partnerships with smaller technology startups in order to have a lockdown on the economics and the user. The fear of the Web search giants taking a big piece of the lucrative mobile search revenue prevailed. Carriers' own efforts have failed because they haven't got either the product or the user experience right. Using search on a cell phone today requires booting up a mobile Web browser, finding your way to the search site/function, and then entering a search. The Verizon/Google deal envisions placement of a Google search bar on the screens of all Verizon handsets - a smart move. Users will be the winner from the convenience of an integrated search engine and with both the parties focusing on their individual strengths - Verizon striving to provide subscribers the best wireless network/coverage and customer service, and Google providing the best search experience and monetization potential through its vast network of advertisers, especially local advertisers which are more relevant for mobile search.
Mobile advertising in the U.S. is expected to explode by 28x over the next four years - from $244M in 2008 (per eMarketer) to $7 billion in 2012. As Web search has played a big role in online advertising, mobile search, an untapped potential today, is expected to be a major component of mobile advertising revenue.
No wonder Web search companies have been locking in carriers with exclusive deals during early days of mobile search when users are likely to use the default search engine on their phones. Google has a similar partnership with Sprint, and Yahoo has locked in AT&T. Google is also the default search engine on Apple's iPhone. Yahoo! is working with OEMs too, signing up Nokia to put the Yahoo! oneSearch shortcut on the home screen of Nokia series 60 phones. As user behavior evolves and phones open up over time, users are expected to pick up their search engine of choice as they do today on their PCs.
Google, the dominant Web search engine on the PCs, has also managed to take an early lead in mobile Web search. According to comScore M:Metrics, around 16.7M people in the U.S. use mobile search today. Of these, 63% use Google, 34% use Yahoo, and only 25% use carriers' search product. This does not add to 100% because some users are using multiple products. Google's early lead, without help from carriers, indicates that most users (me included) are simply typing google.com into their mobile Web browser to get to the search engine. The above carrier partnerships should help Google to further extend its lead.
The Google/Verizon partnership seems more extensive compared to other similar deals. Google would be able to distribute other products through its search bar on the phone screens (Google Maps, Gmail, etc), as well as extend its search product on Verizon's Web portal and its FiOS TV service.
Showing posts with label Yahoo. Show all posts
Showing posts with label Yahoo. Show all posts
February 2, 2008
Yahoo + Microsoft = Necessary but not sufficient to beat Google
People with maths background can relate to the "necessary but not sufficient condition" premise used for proving theorems and framing hypotheses. Microsoft's unsolicited $44.6Bn bid yesterday for Yahoo is a perfect case for this premise. The combination is necessary but not sufficient to unseat Google from its undisputed dominance in the online search advertising market. It definitely won't slow down Google's foray into other areas (beyond search) like cloud computing that threatens Microsoft's core desktop computing business where many have tried but failed to challenge Microsoft's monopoly .
The combination is "necessary" because Yahoo (#2, at 19% share of the search advertising market) and Microsoft (#3, 14%), together, stand the best chance to challenge Google's (#1, 56%) massive, and growing, lead in the U.S. online search advertising market. Search represents 99% of Google's total revenue of $16.6Bn in 2007. Yahoo's much hyped new search initiative (Panama) has thus far failed to halt its declining market share. It has practically lost the search battle to Google. Some have even suggested that Yahoo should outsource search across its network to Google, similar to what AOL has been doing. Microsoft, on the other hand, had not until recently realized the importance of Internet in information sharing and computing. It's a late comer in the search advertising business. This short-sightedness in an emerging space is common when your traditional business enjoys monopoly status and drives bulk of the total revenue.
Search has always been a scale business. Scale provides improved monetization as more advertisers in the network positively impact coverage, click-through rates, and pricing. Microsoft's lock on crucial access points through its Windows, Internet Explorer, Office, and Xbox platforms and Yahoo's massive global user base across its network of online properties will provide them several channels to advantageously put their search engine in front of their users. Such an advantage is required to tackle the Google juggernaut.
In other words, to have a viable alternative to Google in search advertising, a combination of Yahoo and Microsoft is "necessary."
Now, whether the Yahoo + Microsoft combination is "sufficient" to beat Google is a different question altogether. Firstly, we're talking about merging operations of two huge companies with significant overlaps in almost all global markets where they compete against each other. Consummating the merger and realizing the expected $1Bn is annual savings will be a big distraction in the short to mid-term - the duration during which Google can continually focus on improving its core search technology and widening its market lead.
I believe the biggest advantage Google has got over either Yahoo or Microsoft is its employees and its ability to continually attract and retain better talent. Google, at heart, is an engineering firm first. Product and technology folks at the company enjoy more power than folks on the business side. Yahoo has never been treated as a technology firm - it's an online media firm, competing in an emerging space where technology is the differentiator. It's still "cool" to work at Google (the coolness factor however is dwindling as Google looses its "startup charm" and grows in size - its employee base stood at 16,600 at the end of 2007, adding 6,000 during the year). Yahoo, on the other hand, is laying off employees and is suffering from a morale issue. Confidence at Microsoft 's Internet divisions has never been very encouraging, if we talk about the desire to be #1. Internet business for Microsoft's management, until recently, had been an afterthought. It is now trying to buy its way into the search advertising market through a series of recent acquisitions, leading up to the announcement of its bid for Yahoo, the biggest of them all.
Lastly, Google will still have almost double the market share in the search advertising market compared to the combined share of Yahoo and Microsoft. That's a big lead to overcome. Google has earned user's mind share, and it's unlikely many will suddenly switch their search behavior going forward unless the alternative is significantly better.
In short, a merger between Yahoo and Microsoft will not guarantee Google's displacement from the top, hence it won't be "sufficient."
Finally, a comment on the chances of the merger going through. I think initially we may see some game-playing by Yahoo to get the bid up, but ultimately Yahoo would accept the offer. It realizes that it needs serious help in overcoming the challenges it's facing, reflected by its languishing stock price and recent top management upheavals. I also doubt the U.S. Justice Department would block the deal, though the scrutiny may be closer in some of the global markets.
For the time being, let's sit back and enjoy the public drama that would be played in coming weeks as Yahoo responds to the Microsoft offer and other potential bidders emerge for one of the largest technology mergers ever.
The combination is "necessary" because Yahoo (#2, at 19% share of the search advertising market) and Microsoft (#3, 14%), together, stand the best chance to challenge Google's (#1, 56%) massive, and growing, lead in the U.S. online search advertising market. Search represents 99% of Google's total revenue of $16.6Bn in 2007. Yahoo's much hyped new search initiative (Panama) has thus far failed to halt its declining market share. It has practically lost the search battle to Google. Some have even suggested that Yahoo should outsource search across its network to Google, similar to what AOL has been doing. Microsoft, on the other hand, had not until recently realized the importance of Internet in information sharing and computing. It's a late comer in the search advertising business. This short-sightedness in an emerging space is common when your traditional business enjoys monopoly status and drives bulk of the total revenue.
Search has always been a scale business. Scale provides improved monetization as more advertisers in the network positively impact coverage, click-through rates, and pricing. Microsoft's lock on crucial access points through its Windows, Internet Explorer, Office, and Xbox platforms and Yahoo's massive global user base across its network of online properties will provide them several channels to advantageously put their search engine in front of their users. Such an advantage is required to tackle the Google juggernaut.
In other words, to have a viable alternative to Google in search advertising, a combination of Yahoo and Microsoft is "necessary."
Now, whether the Yahoo + Microsoft combination is "sufficient" to beat Google is a different question altogether. Firstly, we're talking about merging operations of two huge companies with significant overlaps in almost all global markets where they compete against each other. Consummating the merger and realizing the expected $1Bn is annual savings will be a big distraction in the short to mid-term - the duration during which Google can continually focus on improving its core search technology and widening its market lead.
I believe the biggest advantage Google has got over either Yahoo or Microsoft is its employees and its ability to continually attract and retain better talent. Google, at heart, is an engineering firm first. Product and technology folks at the company enjoy more power than folks on the business side. Yahoo has never been treated as a technology firm - it's an online media firm, competing in an emerging space where technology is the differentiator. It's still "cool" to work at Google (the coolness factor however is dwindling as Google looses its "startup charm" and grows in size - its employee base stood at 16,600 at the end of 2007, adding 6,000 during the year). Yahoo, on the other hand, is laying off employees and is suffering from a morale issue. Confidence at Microsoft 's Internet divisions has never been very encouraging, if we talk about the desire to be #1. Internet business for Microsoft's management, until recently, had been an afterthought. It is now trying to buy its way into the search advertising market through a series of recent acquisitions, leading up to the announcement of its bid for Yahoo, the biggest of them all.
Lastly, Google will still have almost double the market share in the search advertising market compared to the combined share of Yahoo and Microsoft. That's a big lead to overcome. Google has earned user's mind share, and it's unlikely many will suddenly switch their search behavior going forward unless the alternative is significantly better.
In short, a merger between Yahoo and Microsoft will not guarantee Google's displacement from the top, hence it won't be "sufficient."
Finally, a comment on the chances of the merger going through. I think initially we may see some game-playing by Yahoo to get the bid up, but ultimately Yahoo would accept the offer. It realizes that it needs serious help in overcoming the challenges it's facing, reflected by its languishing stock price and recent top management upheavals. I also doubt the U.S. Justice Department would block the deal, though the scrutiny may be closer in some of the global markets.
For the time being, let's sit back and enjoy the public drama that would be played in coming weeks as Yahoo responds to the Microsoft offer and other potential bidders emerge for one of the largest technology mergers ever.
October 25, 2007
How can a Platform succeed in the long-run?
The rage in Silicon Valley today is all about platforms - platforms which are vying to become industry standards in their respective categories. Apple is pushing iPhone (cell phone applications) and iPod/iTunes (discovery, purchase and consumption of music and video). Google, Yahoo, Microsoft and AOL want their products (online advertising, maps, widgets/gadgets, etc) to become platforms in their respective categories. Facebook is hoping its social networking site to essentially become a communications platform on the Internet.
Here are three key criterion any company has to meet in order to make its product (platform) an industry standard:
General Motor's failed experiment with its OnStar system to make it a standard platform in the automobile industry for a wireless system that can provide new communication capabilities to vehicles is an example where customers and industry players agreed with the value (criterion #1) but GM's competitors could not trust it on the third criterion.
Facebook has checked the boxes on all the three above criterion. Its ability to succeed on (3) is however still questionable because it's too early to judge how Facebook will balance the very fine line and the difficult task of profiting from its own innovations on its platform while letting 3rd parties have unfettered and equal footing access to the Facebook platform in the long run - the economic incentives for the two to happen simultaneously can clash very easily. Then, Facebook is operating in a space where it is competing with the ultimate industry platform, the Internet itself. No points for guessing the winner in that fight.
Similarly, Apple has failed thus far in playing win-win with content firms whose content it needs to sustain early success of its iPod/iTunes platform in the long run (3rd criterion).
MIT's Michael Cusumano, along with Annabelle Gawer, wrote The Elements of Platform Leadership in 2002, a book that I'd recommend folks to pick up given its relevance in the industry's current love affair with Facebook & Apple. The book provides lessons from Intel, Microsoft and Cisco - pioneers in their respective industries, which succeeded in establishing their platforms as industry standards.
Here are three key criterion any company has to meet in order to make its product (platform) an industry standard:
- Solve a problem for users and players in your industry.
- Allow 3rd parties to easily build on top of your platform in order to continue innovation and expansion of the value the platform creates.
- Fairly share the created economic value with 3rd parties which are developing products on top of the platform and thus enhancing platform's value to its users - the most difficult of the three criterion to execute successfully.
General Motor's failed experiment with its OnStar system to make it a standard platform in the automobile industry for a wireless system that can provide new communication capabilities to vehicles is an example where customers and industry players agreed with the value (criterion #1) but GM's competitors could not trust it on the third criterion.
Facebook has checked the boxes on all the three above criterion. Its ability to succeed on (3) is however still questionable because it's too early to judge how Facebook will balance the very fine line and the difficult task of profiting from its own innovations on its platform while letting 3rd parties have unfettered and equal footing access to the Facebook platform in the long run - the economic incentives for the two to happen simultaneously can clash very easily. Then, Facebook is operating in a space where it is competing with the ultimate industry platform, the Internet itself. No points for guessing the winner in that fight.
Similarly, Apple has failed thus far in playing win-win with content firms whose content it needs to sustain early success of its iPod/iTunes platform in the long run (3rd criterion).
MIT's Michael Cusumano, along with Annabelle Gawer, wrote The Elements of Platform Leadership in 2002, a book that I'd recommend folks to pick up given its relevance in the industry's current love affair with Facebook & Apple. The book provides lessons from Intel, Microsoft and Cisco - pioneers in their respective industries, which succeeded in establishing their platforms as industry standards.
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