Mobile advertising got more (less?) competitive November 9, 2009
Posted by Simeon Simeonov in Advertising, Google, Industry News, Mobile.Tags: AdMob, Google, mobile advertising, Nexage, Omar Hamoui
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Google just nabbed AdMob for a handy $750M. Congrats to AdMob founder Omar Hamoui who got into the space early and executed very aggressively. More details on the acqusition here.
The background story here is of the explosion in mobile browsing and mobile applications driven by the iPhone. That s what fueled a lot of AdMob s growth in the past 18mos. I was at a dinner with Omar about a year ago. He had the numbers in his sights and predicted growth will accelerate.
This is mixed news for the other players in mobile advertising. The gap between the largest player and the next one down just got much, much bigger. Key takeaways:
- Google s reach with advertisers and their targeting technology are likely to improve the performance of the AdMob network measurably. It s difficult to see how others can compete meaningfully on scale.
- Startups main advantage is technical innovation and business agility. Both should be severely discounted in mobile where, in addition to the device & network fragmentation, operators and app store owners exert a significant degree of control which, often as an unintended consequence, slows the pace of innovation.
- There is an opportunity to shift competitive advantage from volume to quality as Quattro has done but that s a tough business to scale even in a growing market. In the end, the biggest risk here is that large players such as Google can always buy your customers with guaranteed minimums.
It s time for mobile publishers to take more control over their inventory by looking at players such as Nexage.
How IBM and Yahoo made Microsoft and Google July 30, 2009
Posted by Simeon Simeonov in Google, Microsoft.Tags: building a great company, Google, IBM, Microsoft, Microsoft-Yahoo deal, strategic mistake, Yahoo
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Here is the five-step recipe for creating the most important software companies of the past 30 years:
- Convince the market leader to give you something big they don’t see the value in for cheap
- Innovate, innovate, innovate
- Make a ton of money
- Eat the market leader’s lunch
- Bet on everything big
Guess which is the most important step…
The case of Microsoft
About 28 years ago, IBM made one the biggest strategic mistakes in its history. Being a company primarily focused on hardware, it didn’t understand the value in the PC operating system. It outsourced that work to a, at the time, little-known company called Microsoft. From Wikipedia, the ancient lore of the computer industry:
On August 12, 1981, after negotiations with Digital Research failed, IBM awarded a contract to Microsoft to provide a version of the CP/M operating system, which was set to be used in the upcoming IBM Personal Computer (PC). For this deal, Microsoft purchased a CP/M clone called 86-DOS from Seattle Computer Products, which IBM renamed to PC-DOS. Later, the market saw a flood of IBM PC clones after Columbia Data Products successfully cloned the IBM BIOS, and by aggressively marketing MS-DOS to manufacturers of IBM-PC clones, Microsoft rose from a small player to one of the major software vendors in the home computer industry.
The rest is history. Microsoft took the job seriously, created a pretty darn good product for the time and used the PC clone explosion as a way to increase its dominance in the value chain. IBM lost it leadership. The DOS and then Windows franchises generated massive cashflow which MS plowed into innovation (often in the form of cross-subsidies lasting a decade) to create often dominant product lines such as Office, the server business (don’t forget that Sybase in a no less brilliant move licensed core tech to MS enabling them to create SQL Server) and others. Now, the company bets on pretty much all large markets in the software space. If it’s big, there is no way MS would ignore it. In fact, from conversations with execs there, it seems like much of new market development planning begins with a process as simple as ranking future market sizes. That’s why Microsoft will relentlessly pursue search and why it was probably willing to do an even better deal with Yahoo. (Jason Calacanis has a good post on the Yahoo-Microsoft deal.)
The case of Google
In the case of Google, the strategic mistake was Yahoo’s. The company didn’t value search. It outsourced it to Google. Google took the job very seriously. They innovated a ton behind the scenes while smartly keeping the simplicity of their user experience. Through AdWords and later AdSense + the DoubleClick quisition, Google gained significant control of the advertising value chain. They passed by Yahoo and never looked back. The search franchise is so profitable that it gives them freedom to bet on everything from browsers to OSs to mobile, something pretty much no other company save for Microsoft can afford. Google’s version of the cross-subsidy is the perenial beta that just keeps getting better. Very, very hard to compete with that.
The moral of the story
The moral of the story is that the two most important software companies in recent history were enabled by massive strategic errors on behalf of the market leaders in their respective sectors. It was the market leaders who put the companies on the map, gave them distribution and scale and enough revenue to fuel innovation. IBM and Yahoo nursed the companies that nearly killed them. One could argue that without the explicit support of the market leader, a startup wouldn’t have had the chance to grow at a rate that allows it to have Microsoft’s and Google’s escape velocity.
Kudos to IBM for innovating around its business model and evolving into a company which is still a huge industry player. I’m not sure Yahoo will have that chance.
The interesting question is whether this will happen again… Do you think a market leader will make that type of mistake again? Can you point to where this is happening now or likely to happen in the future?
Interview with Google Ventures co-founder Rich Miner May 1, 2009
Posted by Simeon Simeonov in Interview.Tags: ack09, Google, Google Ventures, Nantucket Conference, Rich Miner
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Scott Kirsner interviews Rich Miner, co-founder of Android who recently switched from Google mobile to start Google Ventures with Bill Maris. (I’ve spent time with both Rich and Bill and I think they are doing many things right at Google Ventures.)
- iPhone is a great Google phone
- Android phones will overtake iPhones bu 2010 or 2011
- Apple has very different views about how mobile app economics should be split than does Google. (Google is attacking Apple smartly through openness and rev sharing with operators.)
- Google Ventures got $100M for its first year. Think of it as a first drawdown on a larger fund.
- They are not a strategic investor. They want to invest for financial return, regardless of overlap with Google’s business.
- They’ll inherit the cleantech investments of Google.org
- A lot of the dealflow is coming from Google employees.
- Google ventures plans to mine the activity stream captured through Google toolbar to catch interesting new trends/startups. Of course, they’ll do this in an anonymous manner. That’s a cool idea. I nearly built something similar on top of Alexa ranks to look for new online startups while at Polaris.
- The goal is to be a “reasonably significant player in the venture space” and syndicate with the top venture firms.
- They are stage-agnostic. Rich likes to do seed/Series A investments.
- Will bring on-board a couple of new partners over time.
Cloudy, With a Chance of Rain June 24, 2008
Posted by Simeon Simeonov in amazon web services, cloud computing.Tags: Akamai, amazon web services, App Engine, AWS, cloud computing, edge computing, Google, Project Caroline, Sun
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Xconomy put together a cloud computing event at Akamai‘s HQ in Cambridge today. The location was appropriate since Akamai was one of the first companies to work on computing in the cloud or, more specifically, at the edge of the network.
I spoke on a panel with Google, IBM, Microsoft and Sun. Their offering are somewhere between vaporware and beta.
- Google recently launched App Engine
- IBM has a big vision and is mastering resources internally
- Microsoft is trying to equate enterprise application hosting and SaaS as cloud services
- Sun recently did a beta release of Project Caroline.
Absent from the discussion due to schedules was Amazon, so I had to be the one to talk about Amazon Web Services. For the record, I like what AWS is doing for the simple reasons that (a) they shipped early and (b) they took a very open approach to the core of cloud computing (EC2 and S3).
The audience focused Q&A on a couple of interesting areas: SLAs/reliability, where is became clear that one-size cloud computing would not fit all, and security/privacy, which is indeed a very interesting topic, especially when one considers, for example, what governments can force your cloud services provider to do with your data.
There are three complementary approaches to both topics or, for that matter, any facet of value-add on top of the core infrastructure-as-a-service cloud computing layer:
- You can architect a solution that achieves your objectives based on core cloud services. For example, since many startups don’t trust Amazon S3 and EC2 not to fail they have made alternative provisions. In another example, one can introduce application-level encryption such that Amazon or Google only keep encrypted data and don’t have access to the keys.
- You can rely on enhanced cloud services, e.g., data encryption add-ins or spreading servers across different zones with an automatic failover layer maintained by the cloud service provider (CSP), etc. This carries potential lock-in implications in exchange for having to solve less of the problem yourself.
- Rather than solving the problem through technology, you can solve it through processes and contracts. For example, failure to meet SLAs can carry financial penalties.
