Another friend of mine posted more incisive questions to my ramblings on Google's precarious Social Network situation. He asked:
"Search Ads make so much money because the focus on "intent". FB/display ads work on 'brand awareness" and "generating intent". Yes, they are important, but monetizing them is hard. If you try too hard(like in Myspace) you end up pissing your users who leave your site.
What happens when this demographic grows up, or when everyone's FB circle becomes sooo huge that it becomes less useful, or if something better comes along? i.e how sustainable is FB?
Let me start off my trying to explain how Google makes money. Google's revenue model is very straightforward. It makes money through:
1. Advertising
2. Search results
3. Sponsored links
4. AdWords/AdSense
I agree that search ads work beautifully because of 'intent'. This means that more people search, more pennies fall into Google's coffers. On FB, people don't 'search'. Yes they do search for friends and groups etc but they don't search the web, they search within FB. So FB cannot monetize 'intent' as neatly as Google can. Regardless, advertising on FB has been growing like a virus in a petri dish. Lets dig deeper and check FB's revenue model in more detail. Those ads that you see on the right side (to the user) of your FB account brought in about $250 million to $300 million Users dont have to do anything on this (well they can click the Like tab and spread the message). These ads can also be custom targeted. For instance, if I am a fan of Beatles on FB, one of these ads could be Beatles' album or a guitar instruction DVD. I think that this revenue model is here to stay. Next, engagement ads, which need user-interaction and sometimes user endorsements brought in another $100 million or so to FB in 2009. These ads need the users to interact with the ad, they could be games that need to be clicked or puzzles or even quizzes (Haven't we all FB boys taken one of those silly "What animal are you" type quizzes at some point or other?). Next, Gifts and virtual goods brought in another $50 or million or so. These could be those ubiquitous and constant birthday reminders and gift suggestions that FB throws at us (quite surreptitiously). Finally, Microsoft which has an agreement in place with FB and sells around $50 million or so worth of banner ads on FB. Please remember that all these ar 2009 numbers.
So if you look really close, you have see that one through three from Google's revenue model above are applicable to FB in one way or another. FB is also smart enough (until now) to not piss us users off like MySpace (what a horrible site that has become) did. Sponsored links will appear as FB as the number of fan clubs and corporate profile pages grow. I think these corporate sites will bring in more revenues in the future. If for instance, Toyota wants to spread a product safety message or market a new technology, FB community would be a great place for such propaganda. A closed private network within the vast Internet. Revenues will keep flowing from that side. What is left is the mega-selling AdWords/AdSense type programs. Here intent plays a huge role, no doubt but I think its probably a matter of time before FB comes up with its own version of FaceWords and FaceSense programs.
Only a certain section of FB users are active on the site. Even if you take that as 40%, it translates to 200 million active users. The site is only a few years old and from what it was it has dramatically changed. As the users grow up, FB will morph itself into something more suitable to that particular demographic depending on the private network within. Basic services such as email, photos/videos uploading will only increase as the Net usage and speed increase. The users will start uploading more and more data to FB and keep throwing it around opening paths to better image searching (on which Google is working hard, even taking cues from rival Bing). So as the demographic matures so will that section of FB along with it, reinventing itself. The bigger the circle of influence gets, the better it is for FB from the perspective of advertisements. True, there could be a lot of chaff in an individual circle but that is users problem not FB's. Whom you add and what you share on your profile is entirely up to you. Such privacy issues will always remain (Whether its email or FB). The onus is on the user to be diligent about what she puts on the network. The safe bet being the assumption that someone somewhere has a copy of that image/document/whatever you put on the Internet. FB is not an exception to this.
Finally, I believe that FB has gained so much traction that something else coming up is really tough. There are so many social networking sites, its daunting to even keep a track (for an exhaustive list and the number of users on each network, check http://en.wikipedia.org/wiki/List_of_social_networking_websites). But FB is easily the most generic and famous among all these. Mail apps like Hotmail has about 350 million users (Yahoo around 170 million or so and Gmail 140 million or so) but FB has 500 million and growing. How will it sustain this growth or where the next 500 million will come from is tough to answer. It could acquire other budding social networks in Europe, increase presence in Asia/Latin America where it is weaker. It might also move into a different direction in terms of services/apps offered. I guess the possibilities are endless when you have 500 million registered accounts on a single network.
Thursday, July 29, 2010
Sunday, July 18, 2010
Why Google Needs A Social Network
A good friend of mine posted a very interesting question to my ramblings on Google's hubris. His question is:
"why does it even matter that google hasn't succeeded in social networking in spite of trying? should an aircraft manufacturer also make cars and succeed at it? should a tv network also make tvs or dvrs? some great companies have found it difficult to break into other related ideas. coke used to own a wine business that went nowhere. is there really a danger that google will become irrelevant if it doesn't do social networking?"
I think it matters a lot that Google makes its presence felt in the social networking space. Lets look at an analogy. Think of Microsoft getting into web browsers in mid-90s. Why did it matter to a O/S company to make browsers? It did because at that time Bill slowly realized that the future of IT industry is shifting from desktops to the Internet. Microsoft had to succeed in not only beating Netscape but also in bettering it (although I prefer Firefox to both). It cunningly reverse-engineered Navigator and bundled it in Office. Had Microsoft not gotten into browsers, it would have lost a great opportunity to make its presence felt in the Internet industry. Wonder how the tech world would have been now. Now that cloud computing is here to stay, it only makes MSFT's moves valid.
Google currently is the top dog when it comes to search. And it makes all its money thanks to its efficient search algorithms (thru Adwords and Adsense programs). But the way I see it, the net is growing into an animal the type of which we haven't seen before. For this animal, search will become a menial task. Don't get me wrong, people will still search and search hard for the net is so easy to get lost. We need a janitor who takes us where we want to go. But that's the role of the janitor, it stops there. Social networks offer the higher end services (if not now, in the future) and will make people stay more in their sites and engage users through various apps. Naturally, advertising dollars will shift to places where people hang more. How people navigate will matter less and where people will navigate to will matter more. Hence, its crazily important that a pure web company like Google has a strong presence in social networks, or it will risk becoming a more menial search service provider (not that its inherently bad or anything). This is exactly why Google is scrambling hard with its botched attempts like Orkut, Wave, Buzz and now something else.
If Coke fails in making wine it hardly matters because wine-making is not Coke's forte. But if Coke fails in expanding into other beverages (like filtered water, flavored water, juices, coke variants like coke zero, healthy beverages etc), it will not grow. Now being stagnant is the enemy of Wall St. Already Coke's market is stagnant. It has two basic choices, expand into new markets (China, India, Latin America) and/or move into new product lines. That's why Coke purchased Vitamin water. For Google, geographical expansion is not as important as paradigm expansion. The net's paradigm is shifting through social networks. Google China can take a hit from Baidu but FB has already gained traction across geographies. It does not matter if Apple is not into creating social networks for a business because Apple is not a net company, its a product company. But Google is a pure-play net company who's raison d'etre is the net. So if the net is moving into social networks, it only makes sense for this net company to have a strong presence in the same.
Had Sun gotten into consumer market (since it had some of the best technology/IP/brainpower) and focused on areas that Dell, HP focused on, it would still have existed today. Sun made halfhearted attempts, failed and paid a big price. If Google misses the social networking boat, I believe, that something similar will happen. For Google, the growth will come from controlling as much of the net as possible and its impossible to do this without a strong presence in social media. With FB and Twitter expanding the way there are, its hard to miss their power in Web 2.0.
I could be totally wrong in all this analysis but I sincerely believe in it. My belief only strengthens when I read/hear more about Google's perseverance in making a mark in social media. For a net company, it has to succeed in this space, or it can remain being an usher.
"why does it even matter that google hasn't succeeded in social networking in spite of trying? should an aircraft manufacturer also make cars and succeed at it? should a tv network also make tvs or dvrs? some great companies have found it difficult to break into other related ideas. coke used to own a wine business that went nowhere. is there really a danger that google will become irrelevant if it doesn't do social networking?"
I think it matters a lot that Google makes its presence felt in the social networking space. Lets look at an analogy. Think of Microsoft getting into web browsers in mid-90s. Why did it matter to a O/S company to make browsers? It did because at that time Bill slowly realized that the future of IT industry is shifting from desktops to the Internet. Microsoft had to succeed in not only beating Netscape but also in bettering it (although I prefer Firefox to both). It cunningly reverse-engineered Navigator and bundled it in Office. Had Microsoft not gotten into browsers, it would have lost a great opportunity to make its presence felt in the Internet industry. Wonder how the tech world would have been now. Now that cloud computing is here to stay, it only makes MSFT's moves valid.
Google currently is the top dog when it comes to search. And it makes all its money thanks to its efficient search algorithms (thru Adwords and Adsense programs). But the way I see it, the net is growing into an animal the type of which we haven't seen before. For this animal, search will become a menial task. Don't get me wrong, people will still search and search hard for the net is so easy to get lost. We need a janitor who takes us where we want to go. But that's the role of the janitor, it stops there. Social networks offer the higher end services (if not now, in the future) and will make people stay more in their sites and engage users through various apps. Naturally, advertising dollars will shift to places where people hang more. How people navigate will matter less and where people will navigate to will matter more. Hence, its crazily important that a pure web company like Google has a strong presence in social networks, or it will risk becoming a more menial search service provider (not that its inherently bad or anything). This is exactly why Google is scrambling hard with its botched attempts like Orkut, Wave, Buzz and now something else.
If Coke fails in making wine it hardly matters because wine-making is not Coke's forte. But if Coke fails in expanding into other beverages (like filtered water, flavored water, juices, coke variants like coke zero, healthy beverages etc), it will not grow. Now being stagnant is the enemy of Wall St. Already Coke's market is stagnant. It has two basic choices, expand into new markets (China, India, Latin America) and/or move into new product lines. That's why Coke purchased Vitamin water. For Google, geographical expansion is not as important as paradigm expansion. The net's paradigm is shifting through social networks. Google China can take a hit from Baidu but FB has already gained traction across geographies. It does not matter if Apple is not into creating social networks for a business because Apple is not a net company, its a product company. But Google is a pure-play net company who's raison d'etre is the net. So if the net is moving into social networks, it only makes sense for this net company to have a strong presence in the same.
Had Sun gotten into consumer market (since it had some of the best technology/IP/brainpower) and focused on areas that Dell, HP focused on, it would still have existed today. Sun made halfhearted attempts, failed and paid a big price. If Google misses the social networking boat, I believe, that something similar will happen. For Google, the growth will come from controlling as much of the net as possible and its impossible to do this without a strong presence in social media. With FB and Twitter expanding the way there are, its hard to miss their power in Web 2.0.
I could be totally wrong in all this analysis but I sincerely believe in it. My belief only strengthens when I read/hear more about Google's perseverance in making a mark in social media. For a net company, it has to succeed in this space, or it can remain being an usher.
Saturday, July 17, 2010
The Hubris of Google
Google, an integral part of our Web life, is hardly making any dent in the most exciting field of social networking. Totally out-shined in this sphere by FaceBook (FB), Twitter, and even Linkedin, Google seems to be scrambling for new ideas to make a mark in this space. Both FB and Twitter have a minuscule of resources Google has. Whether its brainpower or pocket depth, Google outguns these two companies put together and then some. Harvard folks call it disruptive innovation but the term has become so cliched these days that I shudder using it. Also, I am not sure if FB and Twitter are disrupting Google because they don't compete directly (search business I mean). Yet, the amorphous nature of the new economy makes companies like Sony and Microsoft work closely on a few things while being at each others neck's in other areas (example: gaming consoles). Apple and Google shared a lovely relationship before Android was born and caused a bitter divorce. Friends in the morning are foes at night and so on.
Google has a miserable presence in the social networking space. First, there was Orkut, then there was Wave, now its Buzz. Through all these avatars, Google failed to build a viable social network. While Orkut could only get popular amongst a certain section in a certain demographic, Wave totally failed to take off, with Buzz being a stillborn. FB has more than 400 million active users, of whom 50% or above log in, any given day and spend over 500 billion minutes per month on Facebook. That's an awful lot of time (even to waste right?) for any company to capture if it wants to. While I don't want to digress into the sociological consequences of this type of usage, its hard not to notice that. Twitter ended 2009 with just over 75 million user account although a majority of Twitter accounts are inactive, with about 25% of accounts having no followers while around 40% or so of these accounts having never sent a single Tweet. But, Twitter is a white-hot medium for companies in their reaching out efforts. FB supposedly captured around $500 million in revenues in 2009 and is projected to be on the path to becoming a billion dollar (revenues) company in 2010. Advertising money is raining on FB. These are massive numbers for a website that lets people interact in a web 2.0 way. Dell and many other companies use Twitter avidly while FB is a darling of many companies (who end their TV commercials directing users to FB). Web is moving from being a search-able vault to being a private network, which allows users interact through any media (audio, video, files) they like. FB and Twitter are succeeding in building these private networks but Google does the menial task of being a search service provider.
If Google never tried in this space, it would have not mattered. But Google tried, hard. Orkut is a wannabe, it never captured a sizable market in the US or Europe. For some reason, its only famous in Asia and that too among a certain demographic. Google Wave (from a user experience) was a confused product, with no proper utility but some cool features. Who cares if it has sexy technology? As a user, its useless for me. Seems like, Google must have thought "wait a minute, what is FB anyway? It lets people share pictures (we have Picasa), it lets people email (We have Gmail), it lets people share videos (we own YouTube), it lets people update their status (they can do that in Gmail too), so lets put it all together and have a whole web in Wave with a search bar that lets users search the web while they are at it. Sorry, does not work. Wave is a confused and useless product that fails to generate any user interest what-so-ever. Next, Google comes up with Buzz. What is Buzz anyway? I still fail to understand it till today. Is is just mixing Gmail with Wave and then adding Picasa with a search bar on top? But that is Wave. I am lost by this point and I give up trying to define Google's social media initiatives. Bottom line, Google has a confused, botched up and muddled strategy in the single-most interesting aspect of Web 2.0
Google also seems to positively hate FB. I am not surprised. Its like Microsoft banning all its employees from carrying an iPhone. Never underestimate the power of denial. If Steve Ballmer says iPhone is trash compared to a Windows Mobile phone, he means it because he is delirious. If Google's triumvirate management thinks that FB is trash and social media is a trend, they mean it too. Its called, disconnection from reality.
The web is moving into a strange direction. Internet is the ultimate democracy. The whole world saw what happened during Iranian revolution, thanks to Twitter. There are more users on FB than there are human beings in the United States. That is something. Its hard to ignore. More recently, its heard that Google is trying to consolidate Orkut, Wave and Buzz under one single umbrella and give it another shot. But the social media train has left the station and Google is left behind. Nevertheless, Google has terrific new areas to be excited about (such as Smart phones through Android and net-book O/S thru Chrome) and also has a vital role to play in web 2.0 thanks to its YouTube acquisition. If Microsoft could be smart enough to invest in FB, why did Google miss out?
Google, being a hardcore engineering company, is filled with some of the best brain power there is on Earth. There is also some amount of justified pride in being Google, for all the greatness it accomplished in the last decade. But pride can easily turn into hubris. By neglecting this vital medium, Google might have shown what ancient writers have seen in great heroes. Because its so good at what it does, Google never looked at the social media seriously enough and that probably why it failed to build a viable presence in social media. I would love to be proven wrong in the coming few years, but for now social media networks seems to be the hubris for this hero, a sore tendon on the great Achilles.
Google has a miserable presence in the social networking space. First, there was Orkut, then there was Wave, now its Buzz. Through all these avatars, Google failed to build a viable social network. While Orkut could only get popular amongst a certain section in a certain demographic, Wave totally failed to take off, with Buzz being a stillborn. FB has more than 400 million active users, of whom 50% or above log in, any given day and spend over 500 billion minutes per month on Facebook. That's an awful lot of time (even to waste right?) for any company to capture if it wants to. While I don't want to digress into the sociological consequences of this type of usage, its hard not to notice that. Twitter ended 2009 with just over 75 million user account although a majority of Twitter accounts are inactive, with about 25% of accounts having no followers while around 40% or so of these accounts having never sent a single Tweet. But, Twitter is a white-hot medium for companies in their reaching out efforts. FB supposedly captured around $500 million in revenues in 2009 and is projected to be on the path to becoming a billion dollar (revenues) company in 2010. Advertising money is raining on FB. These are massive numbers for a website that lets people interact in a web 2.0 way. Dell and many other companies use Twitter avidly while FB is a darling of many companies (who end their TV commercials directing users to FB). Web is moving from being a search-able vault to being a private network, which allows users interact through any media (audio, video, files) they like. FB and Twitter are succeeding in building these private networks but Google does the menial task of being a search service provider.
If Google never tried in this space, it would have not mattered. But Google tried, hard. Orkut is a wannabe, it never captured a sizable market in the US or Europe. For some reason, its only famous in Asia and that too among a certain demographic. Google Wave (from a user experience) was a confused product, with no proper utility but some cool features. Who cares if it has sexy technology? As a user, its useless for me. Seems like, Google must have thought "wait a minute, what is FB anyway? It lets people share pictures (we have Picasa), it lets people email (We have Gmail), it lets people share videos (we own YouTube), it lets people update their status (they can do that in Gmail too), so lets put it all together and have a whole web in Wave with a search bar that lets users search the web while they are at it. Sorry, does not work. Wave is a confused and useless product that fails to generate any user interest what-so-ever. Next, Google comes up with Buzz. What is Buzz anyway? I still fail to understand it till today. Is is just mixing Gmail with Wave and then adding Picasa with a search bar on top? But that is Wave. I am lost by this point and I give up trying to define Google's social media initiatives. Bottom line, Google has a confused, botched up and muddled strategy in the single-most interesting aspect of Web 2.0
Google also seems to positively hate FB. I am not surprised. Its like Microsoft banning all its employees from carrying an iPhone. Never underestimate the power of denial. If Steve Ballmer says iPhone is trash compared to a Windows Mobile phone, he means it because he is delirious. If Google's triumvirate management thinks that FB is trash and social media is a trend, they mean it too. Its called, disconnection from reality.
The web is moving into a strange direction. Internet is the ultimate democracy. The whole world saw what happened during Iranian revolution, thanks to Twitter. There are more users on FB than there are human beings in the United States. That is something. Its hard to ignore. More recently, its heard that Google is trying to consolidate Orkut, Wave and Buzz under one single umbrella and give it another shot. But the social media train has left the station and Google is left behind. Nevertheless, Google has terrific new areas to be excited about (such as Smart phones through Android and net-book O/S thru Chrome) and also has a vital role to play in web 2.0 thanks to its YouTube acquisition. If Microsoft could be smart enough to invest in FB, why did Google miss out?
Google, being a hardcore engineering company, is filled with some of the best brain power there is on Earth. There is also some amount of justified pride in being Google, for all the greatness it accomplished in the last decade. But pride can easily turn into hubris. By neglecting this vital medium, Google might have shown what ancient writers have seen in great heroes. Because its so good at what it does, Google never looked at the social media seriously enough and that probably why it failed to build a viable presence in social media. I would love to be proven wrong in the coming few years, but for now social media networks seems to be the hubris for this hero, a sore tendon on the great Achilles.
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