Umair Haque / Bubblegeneration

Wednesday, November 30, 2005

qwning the Googleplex, Pt 1

I've been meaning to wite a series of quick notes outlining how to (really) compete against Google, since it's something I'm asked all the time lately.

Since John Battelle has kicked off a discussion about whether Google's hitting a turning point, here's a quick part one.

One way to qwn Google is through connected consumption. Google has proven time and time again that it doesn't have a real competence in community. Most of it's community-based initiatives are also-rans (Orkut, News, etc).

But communities are huge sources of value creation in a post-network economy - especially when they scale. That is, they realize increasing returns via viral and network economies of scale. So, for example, rather than Yahoo (etc) trying to roll it's own communities, a much smarter play would be to begin acquiring vertical communities and build nonlinear returns to scale, because each acquisition price won't reflect network benefits.

Vertical communities create value in two ways. First, they're hyperefficient attention allocators. Second, that's because they've built huge knowledge pools about their verticals. Check out Basenotes for a quick example. The trick is that few of them realize much value now, because their networks haven't reached scale.

But the economics are clear: both of these sources of value creation are deeply disruptive to traditional consumer-facing industries. Where newspapers are today because of micromedia and ambient media, so tomorrow most consumer-facing industries will be because of communities - think magazines, department stores, and other mass players. And that means that a community roll-up player can exert huge market power over complementors - like Google - because it will own the edge of the value chain.

Of course, looking at communities this way means disregarding the standard corporate notion of communities as "consumer-generated content" or basically, just resources to be exploited/cashflows to be discounted, which is how suits usually think about communities today - and which is why they fail to realize much value from them.

-- umair // 11:30 PM // 3 comments

Comments:

Orkut an also-ran? Not if you live in Brazil :-) (Although whether Google understand the value of that remains to be seen.)

What do you mean by "acquiring" when you say Yahoo would be better off acquiring existing communities?

Should they *buy* the company that runs an existing community site? Or would they just be better off working out how to get something out of that existing community (eg. create services to sell to existing communities.)

For example, suppose Yahoo were to vamp up Yahoo groups. Or create a "community management dashboard" application which could manage and do new things for existing Yahoo groups (or any other group).

Semi-related. Google's search business *is* being disrupted : http://platformwars.blogspot.com/2005/12/google-and-rss.html

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phil jones // 1:51 PM

At this point in time there are over 300 different community software builds on the internet. There are countless communities siloing content as fast as the users can inspire each other. In a world mixed up with chaos and cinnamon kisses, inspiration is easy, but directing the attention to a growing/developmental capacity like contribution of personal content isn't necessarily first on the list. But it will be. Some day.

GYM, go contribute to an open source (Drupal)...and then host it! For free! And share revenue! Are you listening? Let folks like myself (aka content community inspirationalists and peer production masterminders) do our thing! Instead of wrestling with software kludges like what Yahoo provides in groups.yahoo.com that silo content and increase switching costs in order to force loyalty.

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Alex Rollin // 5:28 AM

A great post Umair; fully agreed.

My summary ... Google owns the URL ... if your model tries to also own the URL (del.icio.us etc), then sorry, but you're screwed, or at best an acquisition target.

I'd add to your list that they suck at anything "client-centric"; google is a server-centric play (hence the box and the cube). This strategy flies in the face of conventional wisdom of smart clients on dumb networks. In the p2p & desktop space, google suck. On OSX, they suck. There's lots of room to compete with them when you think about it.

Build anything with MS's new SSE that is not hub & spoke topology & you won't have to worry about google either. And if, on the next internet, SSE becomes as ubiquitous as RSS, goog may not even be a player ... but they're probably working on that.

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David Gibbons // 7:07 PM