Thursday, December 3, 2015

Who will disrupt Google and Facebook?

Driving home from a breakfast meeting this morning, I got to wondering who is going to disrupt Google — and how soon.

Those of us who teach strategy know how all about examples of new entrants commoditizing and destroying the revenue models and profit sanctuaries of long-stable, long-established businesses. (The term “disruptive innovation” seems most convenient here, despite the recent controversy over the original evidence of same). Here are a few examples.

  • Craigslist and various Internet portals (such as Google and Yahoo) destroyed newspapers — aided by the latter’s poor business models, some unfortunately inaccurate assumptions about the supply (and thus price) of Internet advertising and key tactical errors along the way.
  • Two entrepreneurs created GrandCentral, a (temporarily) free telephone answering and forwarding service, and in 2007 sold it to Google (where it is now Google Voice). It now has voicemail transcripts and other improvements but is still free. Thousands of small companies and nonprofits (including my own) use it in lieu of an answering service.
  • I learned how to use Google Forms from my friend Mako Hill (and his need to run the OUI conference with limited cash and volunteer resources). Now I use it for most things that other people use SurveyMonkey for.
So the question I mulled over was, who will disrupt Google? Facebook would like to take business away from Google, but it’s not through cost reduction or elimination of revenues. Rather, Facebook imagines that its socially embedded ads will be more valuable than Google’s search context-specific ads.

Instead, I find Facebook ads creepy and sometimes invasive of my privacy, particularly when Amazon ads show up for a book that I looked at (but ruled out buying) five minutes earlier. (Apparent Amazon is not alone). I am appalled at what would happen if I had looked at a socially undesirable product on Amazon (sex toys, a book on bombing government buildings) — even though I know that anonymous browsing without cookies would allow me to ask a question (if not make a purchase) without leaving digital breadcrumbs.

Then when I got home, I saw this wonderful article by Andrew Orlowski of The Register (who I mainly know from his insightful analysis of mobile phone platform wars). One passage (emphasis mine) touched on the same theme:
'Dear Daddy...' Max Zuckerberg’s Letter back to her Father
What do you mean, I can't get off Facebook?

2 Dec 2015 at 13:02, As told to Andrew Orlowski

Comment Yesterday Mark Zuckberg accompanied the birth of his first child, a daughter Max, with a long open letter.

Thanks to the miracle of modern technology, we've found what Max might write back, and we're sharing it with you:

Dear Daddy

Thank you for the letter that your PR and public policy team wrote to mark my Birth, and sent to every news outlet in the World. Most Daddies wouldn’t do this. Heck, most Daddies don’t even have PR and public policy team, and those that do wouldn’t use to leverage a private family event!

That’s why you Daddy, are so special.

You write: "We want you to grow up in a world better than ours today."

Well, duh!

If I discovered that my well-educated billionaire parents wanted me to grow up in a world that’s worse than ours today, I’d already have crawled my way to a phone booth and dialled 911 to alert the authorities.

That goes for "a world without suffering from disease” too. Wow. Where do you get this stuff, Daddy? I heard more original ideas when I was a single cell blastula!

You also write:

"Technological progress in every field means your life should be dramatically better than ours today."

I’d like to think so too, Daddy, but there’s this thing that’s bothering me.

It's called Facebook.

And not just Facebook, it’s the way Silicon Valley companies like yours pile up huge wealth by destroying value in every other part of the economy, as if technological progress were a zero sum game. It’s the way you strip-mine individuals so they have no ability to be autonomous economic agents, owning and trading the stuff we make, so all we have to live on is some feudal digital plantation - and we have to be grateful for it. It's the way some Valley firms place themselves above the law and try to block the work of elected officials who want to defend human rights.

Not you of course, Daddy. Just some of your friends.

I mean, come on. There's a lot to teach children in this modern world I've just been born into. But one thing we've got to learn is that just because you can do something, it's not necessarily morally acceptable to do it. Who's going to teach me that in Silicon Valley?

And Daddy. Connecting people all over the world through an internet website is very cool idea indeed. But it's not that cool or original. It’s as if the guy who invented the bottle-opener wrote a plan to become Emperor of the World. Like, "Remind me who you are again?"

I think that’s pretty weird already. And I’m only one day old!

Well if there’s any of the economy left by the time I graduate, perhaps my generation will be a bit less selfish than yours, Daddy, and we can teach you about it.

Well, I’m kinda tired writing all that. It’s time for nap. Just remember when you’re burping me, do it over your shoulder, that way I won’t puke all down your front.

Your loving baby daughter,

In the Google (and now Facebook) case, I thought about Microsoft. They were a one trick pony that was handed a monopoly in operating systems (and used that to build another one in business productivity apps) that they exploited to the maximum degree possible. But a) they lacked the ability to create new compelling products and business models and b) everybody distrusted them and thus were wary of providing them new monopolies, no matter how good their technology.

So at some point, the shoe will be on the other foot: what happens when Google and Facebook have their profit sanctuaries destroyed? Google — now Alphabet — appears headed towards becoming a diversified technology conglomerate. It has worked (so far) for Hitachi and Samsung, but not for HP or Sony. Thus far, it appears that Apple and IBM have been the masters of re-invention: will the new kings of Silicon Valley be able to replicate such feats?

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