Interesting debate at the Royal Society Monday night, 9 November 2009, on behalf of The Stone Club - http://www.yougovstone.com/the-stone-club.aspx Brent, myself, Google, and a number of media folks talking about who has more influence Google or Murdoch. This morning in Australia Murdoch claimed in Sky that he would take all of his content off Google [no doubt to try to reduce the ability of Google to play the total aggregator role that they enjoy], and this afternoon Google announced the purchase of AdMob [extending their triangulation of the consumer, advertiser and themselves into the mobile world].
Fascinating to phrase the question that way in particular – man against a billion dollar company; sort of shows Murdoch’s power just in the phrasing of the question. And of course fascinating that Microsoft is not mentioned. They would have been just 10 years ago.
Gordon Brown in GQ this month says that Murdoch or The Sun is trying to be a political party, and one could be frustrated with Murdoch because of his politics, but I chose to frame the question around three points:
1. Who has the closest relationship to the consumer? Always the place to be.
2. Who makes the most money? Can be indicative of strength, but can also be a short-term position
3. Who can you avoid? Ubiquity and monopolistic power are at play here.
So Murdoch’s strength today is that he is closer to the consumer in that he/she is his customer. That gives a sense of power.
And Murdoch is rightly trying to win in the Paid Content battle; he wants the consumer to pay for content developed by his companies etc. But to frame this as a battle over Paid Content is to miss the big shift, the bigger point, the real battleground. Today everything in business has a fundamental network orientation. This goes far beyond the fact that Facebook is important. Everything which was linear is not network-oriented, and the winners are those companies who can align the economics for the ecosystem.
The winners are those companies who align the economics of their ecosystem. That can be a start-up hellbent on destruction or an established player with vision.
The important thing to remember is that the innovation that Google had was the business model - -not the search technology. Alta Vista was the better search engine, and Yahoo the more dominant one, but Google stole the business model, and that twist of fate gave them a clever ruse to control without looking in control, to establish massive network effects not by organising the world’s information as they claim but by organising the economics of the world’s information.
That’s why they are winning. They are aligning the economics of the new information ecosystem. However, they are vulnerable in one very important area, and that is that while they give lip service to doing no evil, and professing that the consumer will win out of their handiwork in the market, ultimately the transaction that they organise [every search is a transaction] is skewed towards them. [We in the investment industry fail to appreciate how every business model is ultimately a transaction business model – advertising especially, and the twist again of making money through advertising where someone else pays for my utility has been the game-change here].
When the consumer wakes up to understand the value of their personal information [that they give away through the process of browsing and searching the web], then they too - like every artist or any creator of content will want not only a cut of the value of the transaction, but they will shift to any new paradigm of organising the economics of the world’s information which gives them their fair share of the value, and in doing so, protects the privacy of that information.
For the most radical thing out there is the link between IP and identity. And I have seen several start-ups who understand this, and I am paying attention to them. They know who they are, and some of them are backed by entrepreneurs who have had breakthroughs before which makes it even more interesting and subtle. Always watch for the blackmarkets - that's where the uncontested new markets are.
So we saw Obongo, my fellow First Tuesday co-founders, built and sold to Time Warner which had a piece of this vision in 2000, and Brent mentioned Jellyfish which Microsoft acquired which he said didn’t work, but long –term, never bet against the entrepreneur in the generic sense. There are many failed attempts, but eventually there is a breakthrough, some guy who by design, stumbling or theft will see the next paradigm, and that my friends is how the consumer protects their identity in an IP world, and is cut in on every transaction where the value of their IP is leveraged. The entrepreneur – in their mafia style J - will take care of it.
We laugh to think of Google fearing cannibalisation of its status quo, but they have an Achilles Heel like everything under the sun. If they don’t do the above, someone will, and they will fall slowly then all at one.
So long-term [by which we mean medium term as none of us really ever thinks long-term], you can’t avoid Google, but long-term, bet on the entrepreneur and the on-going process of innovation.
Today at lunch I participated in a presentation of Debate Mate http://www.debatemate.com/ run by Margaret McCabe which develops verbal skills in young people. Very impressive organisation.
And noted that Niklas has settled with Skype, and Index has been cut out of the deal which the FT called a severe blow to Index Ventures. I wondered how a franchise whose business it is to back entrepreneurs would take on one of – if not the – most important entrepreneurs in Europe – Zennstrom. Fascinating. Strike for the Entrepreneur.
