Following from our previous article (see Google vs Rupert Murdoch- who will win?), we will look at what is the biggest threat to Google. For those who are interested in investing in the technology sector, this is one of the things to watch out for in your business analysis because it will have major flow-on implications on other technology and media businesses in the long run. For those who are thinking of starting an Internet/technology business, it will determine which sides of the dividing line (information as commodity vs free and expansive information) that you will be supporting (or switch sides to).
For starters, Microsoft’s new search engine, Bing, is not the biggest threat. Bing and Yahoo! are there to keep Google competitive, but they don’t pose a long term strategic threat to Google. So, assuming that information will remain free and abundant for the foreseeable future, what can deal a long term mortal blow to Google?
Remember, in our previous article, we wrote that
… information (collectively) is free and abundant, but consumers’ attention (for each individual information provider) is scarce.
…
And here is the beauty of Google’s business model- it sells access to consumers’ attention.
For a rival to erode the long term competitive advantage of Google, it must be able to:
- Steadily gain more and more attention of consumers over the years
- Shut out Google from what gained the attention of consumers
Any rival that can fulfil these two conditions will undermine and erode Google’s capability to sell access to consumers’ scarce attention. Microsoft’s Bing may be able fulfil the first criteria, but it cannot fulfil the second one. After all, the search engine robots of both Google and Bing trawl in the same playground of freely available information.
But there’s a potential rival in the horizon that fulfils both conditions: Facebook.
At first glance, Facebook and Google seem to compete in two different market space. Some may argue that they complement each other. But there’s one problem for Google- its search engines cannot penetrate through the wall of Facebook and index the consumer-generated content. With each of the 300 million Facebook users who can potentially interact with each of the other 300 million users (via status updatess, posting and commenting of pictures, engage in forum discussions, play games and so on), plenty of content are generated everyday that is outside the view of Google.
Then there’s a disturbing trend that may perhaps be happening right now- as people spend more and more time in Facebook, more and more ‘Internet’ activities are migrating towards it, which in theory can make it an ‘Internet’ within the Internet (we will call the former “Facebook world” and the latter “public Internet” from now on). For example, as Facebook contains more and more interactions between people, more people are using Facebook messages in favour traditional emails to communicate with each other. We can imagine a possible future where Facebook messages supplants traditional emails. Also, it is already possible to host forum discussions at Facebook groups within Facebook world, which in theory, can replace public Internet forums. Software developers can also develop Facebook applications, which in theory, can function as services (in Facebook world) normally found in the public Internet (which is the domain of Google). For example, what is stopping Facebook to host blogs, polls, newspapers, forums and other content inside Facebook world?
Facebook is also intruding into the public Internet. Through its Facebook Connect feature, people can bring their Facebook identity into the public Internet to take part in discussions, which can then be tracked by Facebook. This feature serves to draw people from the public Internet into Facebook world.
Obviously, Google has already seen this threat as you can see from this article. We believe that it is no coincidence that Google’s next big idea product, Google Wave, is a competitive threat to Facebook’s social media function.
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Meanwhile, for those interested in trading the technology stocks, our friends in Market Club has this to say about Nasdaq- Is the NASDAQ Now in Thin Air?.
