When I was at the Saïd Business School in September for the Oxford Social Media Convention 2009, I heard Matthew Hindman (author of The Myth of Digital Democracy) say that Google has spent more in the past six years on R&D than was spent on the entire Manhattan Project (figures adjusted for inflation: ‘constant 2002 dollars’).
In my opening remarks I strenuously disagreed with other presenters’ claims that the Internet provides for “low barriers to entry.” Different barriers to entry? Sure. Low barriers in 1995? Of course. But low barriers today? Not in any of the mature part of the Web, and certainly not in the niches that I study.I thought of this again whilst reading John Naughton’s column on Sunday morning. If you have seven minutes to spare, watch this first: John Naughton summarises:
The sting in the Android tail was also unveiled this week: Google has launched GPS navigation for the new handsets. It does everything that TomTom, Garmin et al do, and a lot more besides. For example, you can talk to it: tell it to “navigate to the museum with the King Tut exhibition” and it will do an instant Google search and present you with a list of options. Its maps are continually updated because they’re not held on the phone. It’ll give you live traffic data for your route. And when you get close to your destination it switches to Street View to show what it looks like. And it’s free.That same day, in my Delicious network stream, Bill Gurley’s (now much lauded) post, Google Redefines Disruption: The “Less Than Free” Business Model, popped up, in which he reflects on Google’s progress from licensing data owned by the mapping duopoly of Tele Atlas and NavTeq to today’s state of independence:
… as a venture capitalist it is imperative to understand ways in which a smaller private company can gain the upper hand on a large incumbent. One of the most successful ways to do this is to change the rules of the game in such a way that the incumbent would need to abandon or destroy its core business in order to lay chase to your strategy. … when I read this week that Google was including free turn-by-turn navigation directions with each and every Android mobile OS, I had an immediate feeling that I was witnessing a disruptive play of a magnitude heretofore unseen. … Rumors abound about just how many cars Google has on the roads building it own turn-by-turn mapping data as well as its unique “Google Streetview” database. Whatever it is, it must be huge. This October 13th, just over one year after dropping NavTeq, the other shoe dropped as well. Google disconnected from Tele Atlas and began to offer maps that were free and clear of either license. These maps are based on a combination of their own data as well as freely available data. Two weeks after this, Google announces free turn-by-turn directions for all Android phones. … To understand just how disruptive this is to the GPS data market, you must first understand that “turn-by-turn” data was the lynchpin that held the duopoly together. … Google’s free navigation feature announcement dealt a crushing blow to the GPS stocks. Garmin fell 16%. TomTom fell 21%. Imagine trying to maintain high royalty rates against this strategic move by Google.There’s much more to read there about the implications of Google’s move. Much, much more. Including the irresistible new ecosystem that will open up:
Google is apt to believe that the geographic taxonomy is a wonderful skeleton for a geo-based ad network. If your maps are distributed everywhere on the Internet and in every mobile device, you control that framework. Cash starved startups, building interesting and innovative mobile apps, will undoubtedly build on Google’s map API. It’s rich, it is easy to use, and quite frankly the price is right. In the future, if you want to advertise your local business to people with an interest in your local market, chances are you will look to Google for that access.(Yesterday, talking to some business savvy students, I was struck by how much they already knew about this and how they lapped up Bill Gurley’s article for its navigation of the very far reaching implications of Google’s move. That breath on the nape of your neck? The next generation, coming up fast.) Gizmodo reflected on this in Google and the Deadly Power of Data:
This is not an attack of Google’s business practices, but an explanation of the sort of destructive innovation that has made them so huge so fast. (It’s also a warning to consider carefully any entities that gets this strong, especially if you plan on going into business with one.) Though predecessors like Microsoft experienced similar explosive growth, and grew a similar sudden global dependence, we’ve never seen the likes of Google. The GPS business isn’t the only one that will be consumed by its mighty maw before it’s had its run. We’ve already seen the devaluation of the office apps that make Microsoft rich; we’ve already seen how Google’s experiences with Apple and others helped it create telecommunications platforms (both mobile with Android and completely virtual with Google Voice) that threaten its former partners’ existence; we’ve already seen how Google converts photos, videos, news wire stories and other former commodities into freebies by smashing the false notion of scarcity that “service” providers had literally banked on.Meanwhile, pundits remain fascinated by the economics of YouTube and the same edition of the Observer, in an article about Google’s ContentID system, repeated the line that, ‘Three years after Google bought the site for $1.65bn, it has yet to turn a profit and there are concerns the division is devouring the internet group’s cash reserves’. Last month, Eric Schmidt said, ‘We’re starting to make signifigant money off of Youtube’. But it was a recent Wired piece that held my attention:
… a new report from Arbor Networks suggests that Google’s traffic is approaching 10 percent of the net’s traffic, and that it’s got so much fiber optic cable, it is simply trading traffic, with no payment involved, with the net’s largest ISPs. “I think Google’s transit costs are close to zero,” said Craig Labovitz, the chief scientist for Arbor Networks and a longtime internet researcher. Arbor Networks, which sells network monitoring equipment used by about 70 percent of the net’s ISPs, likely knows more about the net’s ebbs and flows than anyone outside of the National Security Agency. And the extraordinary fact that a website serving nearly 100 billion videos a year has no bandwidth bill means the net isn’t the network it used to be.(According to Chad Hurley, CEO and Co-founder of YouTube, YouTube now serves ‘well over a billion views a day’.) More here on the Internet Observatory Report from Arbor Networks (I’d really like to get hold of the report itself and scrutinise the details), from whence this:
Evolution of the Internet Core: Over the last five years, Internet traffic has migrated away from the traditional Internet core of 10 to 12 Tier-1 international transit providers. Today, the majority of Internet traffic by volume flows directly between large content providers, datacenter / CDNs and consumer networks. Consequently, most Tier-1 networks have evolved their business models away from IP wholesale transit to focus on broader cloud / enterprise services, content hosting and VPNs. Rise of the ‘Hyper Giants’: Five years ago, Internet traffic was proportionally distributed across tens of thousands of enterprise managed web sites and servers around the world. Today, most content has increasingly migrated to a small number of very large hosting, cloud and content providers. Out of the 40,000 routed end sites in the Internet, 30 large companies – “hyper giants” like Limelight, Facebook, Google, Microsoft and YouTube – now generate and consume a disproportionate 30% of all Internet traffic.About the Wired piece, Ian commented on Delicious, ‘Another way to put it: Unless you own massive infrastructure, you will *never* be able to compete with Google. Welcome to the new net, indeed. Meet the new boss…’. The field certainly ain’t level. All of which made me do what I’d a while ago grown bored of doing and once more note down something here (as a marker for myself) about … Google. Creative destruction.