Nice top level summary of a really big and interesting space.
So big and interesting that Google, the company with the largest market cap, is the dog. Regardless I think Jim Crowley, the CEO of BuyWithMe, pretty much got it right when he told Crain's "There is room for six of seven large players as well as niche players."
But Google the underdog? How do you suppose they are going to change that? If I were Jim Crowley I know what my answer would be.
This chart does a nice job of showing how local ad spending is expected to continue to shift online to move more in line with now people are spending their time.
The money quote was in the eMarketer Daily.
"The proliferation of online advertising channels over the past few years has made it easier for local businesses to transition ad dollars from pricier, traditional ad formats to cost-efficient interactive channels like social media, search and email marketing."
As online local marketing channels continue to grow and offline marketing channels contine to shrink it's a trend that is sure to continue.
eMarketer has a nice article out today about how advertising dollars are still not following online and mobile useage. It's nice but does not really do a good job of quantifying the online marketing opportunity. This chart, from a presentation by Mary Meeker last November does.
That's $50 billion dollars with a "B" as defined by the most renown Internet industy analyst on the planet. Here is Mary's (who left Morgan Stanley to join Kleiner Perkins Caufield & Byers as a partner) entire presentaton "Ten Questions Internet Execs Should Ask and Answer".
"We cracked that local ecommerce nut, and it’s a serious nut. There wasn’t even a good form of customer acuiqsition (sic) before the Internet, for local businesses. I mean, advertising on radio and in local newspapers was about spending money upfront, to buy exposure, and then cross your fingers."
I believe Mr. Mason is partially right. First of all I am not so sure that GroupOn is actually a customer acquisition play. But putting that aside for the moment there is a little more to this than meets the eye. The reality of the situation is that the options to buy advertising on local mediums such as radio and newspapers are rapidly diminishing. If you are a local merchant and want to advertise your offline options are going away.
Neighborhood papers that used to end up on your drive or in your mailbox? Gone.
Yellow pages? Straight from the porch to the recycling bin.
Classified ads? Craigslist is free and has much broader reach.
City newspapers? An expensive medium to begin with that now has diminishing readership and page count due in big part to the profit hit from the demise of classified ads.
The point being that most forms of local advertising that used to be available via traditional media are going away. Print publishing is in sharp decline. Terrestrial radio audience is flat at best and efficiency is challenging on a small budget.
So if you are the girl that used to own the bar that advertised in the local entertainment print weekly you have a big problem. Much fewer people are reading these things. You have no choice. You have to take your offline marketing effort online.
And that is what is driving the local ecommerce nut. All that money, and it is a lot, that used to be spent on local print needs to find a new home. Classified. Coupons. Display. Yellow pages. Each category is a large market. Add them all together and things get real serious. Serious to create the mother of all Internet wars.
There have been quite a few wars in the history of the commercial Internet. But I think that we are gearing up for the start of the biggest one yet in 2011. Before I get to that a brief review of some of the past battles is needed.
The 1st Browser War Perhaps the most infamous war of all. Netscape versus Microsoft. In 1996 Netscape Navigator dominated the Web. Over 80% of the browser market. Mark Andreessen was the poster child of the Internet. Microsoft's launched Internet Explorer and offered it for free with marketing dollars available to companies that distributed it. They bundled IE with Windows. With the exception of a little anti-trust lawsuit the battle was over. Microsoft was the clear winner with over 90% market share by 2002.
The Retail War About the time Andreessen was posing for magazine covers in his shorts, Jeff Bezos was founding Amazon. Not so much of a war as the execution of a Manifest Destiny. Amazon today is by far the largest online retailer.
The Access War In the early days of the commercial Internet there was a land rush to get people online. America Online, now AOL, won this battle by spewing discs across America. At it's apex AOL had a 34% market share, over four times that of EarthLink, it's closest competitor.
The Search War In 1998 while AOL, Excite, MSN, Yahoo! and a few others were battling the portal wars a company called Google was formed. While portals focused on content aggregation, communications (email and instant messaging), and search, Google just wanted to do one thing. Search. They win building to over 70% market share. AOL, MSN, and Yahoo! remain major traffic destinations.
The Social War. Jonathan Abrams and Peter Chin of Friendster. Reid Hoffman of LinkedIn. Tom Anderson, Josh Berman, Chris Dewolfe, and Brad Greenspan of MySpace. Jack Dorsey, Biz Stone, and Evan Williams of Twitter. Have any of these guys been named Time Person of the Year? No. But Mark Zuckerberg has. He and Facebook have much more than our minimum amount of attention. And Facebook has over 60% market share.
The Mother Of All Internet Wars Look at the companies that came out on top in these battles. Microsoft, Amazon, AOL, Google, and Facebook. These companies have a combined market capitalization of over $500 billion. And there is another little company out of Chicago called GroupOn with a $15 billion valuation that is in the scrap too. And they are all, along with every media company known to man, starting to turn their resources to one thing.
This is going to be fun. But I am not sure, unless you already have some well established position to defend (good for you) or a new and step function better technology that can focus on a specific vertical (bring it on) that I would want to enter the battle at this point. It's going to be a big one and a lot of startups are going to get killed.
Not like I really need it after a three day snowcation but I am heading out to Utah for a real vacation. As I mentioned in my time off the grid post, I am leaving the laptop at home. The first trip I have taken in over eight years without one. I am taking my iPhone, loaded up with Iron Man 2 for the flight out. But I am turning off the mail accounts. I would not take it at all but my kids need a way to reach me. If anyone has a solution for that other than a separate bat phone I would love to hear it.
I am going to be offline for six days. I expect to come back more refreshed than if I stayed connected. We will see.
It just seems to never end. Emails, IMs, DMs, status updates, checking in. Even voice mail my god. The stream of stuff coming at you just never seems to end. And the attention that we give to all this electronic stuff seems to be increasing at an ever increasing rate. I am willing to bet that since the summer of 2002, when I was on a bunch of little islands that did not even have dial up, the max amount of time that I have been disconnected from the Internet is less than 48 hours. There is not enough time to think and spend quality time with real people.
So inspired by Brad Feld's off the grid algorithm and aided by Georgia Tech's winter break shut down, I decided to spend the time between December 24 and January 3 offline. Granted I cheated a little. I had my iPhone in my pocket. But I pretty much kept my laptop closed. The only exception was a small window on the morning of January 30 when I had to setup some product requirements and a use test for an application that I am working on. But beyond that my laptop was turned off. I sent a total of 16 emails during those 10 days. One status update. Zero blog posts.
And you know what. It's was all good. Great even. Almost excellent. Despite all the pressures to the contrary it is not necessary to be connected all the time. It's refreshing to shut it all off. To forget about some things and focus on others for a few days.
Perhaps I should have gone completely cold turkey, but that seemed too daunting at the time. I do know that when I go on a ski trip in a few weeks I am taking it one step further. I am leaving the laptop at home.
Today is a pretty important day for the Internet. FCC Chairman Julius Geneachoski has asked for his organization to adopt rules to protect the open Internet. Net neutrality rules. The draft rules that Geneachoski is proposing have not been seen in public but I do believe something needs to be done.
The reason why I believe this is pretty simple. Internet access has evolved to a duopoly in most markets. You have a choice of getting access from either your cable or telco provider. That's generally it. And the reason why is due to earlier decisions around "open access" that essentially stifled access provider competition. The arguments made then are essentially those being made by those opposing net neutrality today. Net neutrality will inhibit capital investment, deter innovation, and raise the duopolists operating costs which will in turn raise prices.
Hogwash. What it will do is protect the interests of the duopolists allowing them to limit competition and charge more for less service. Evidence of this can be seen in the market for Internet access itself. People in the United States pay much more on a megabit basis for Internet access than those in other countries. At the same time we have much slower access available by a factor of at least five.
A policy needs to be put in place that both encourages innovation for all companies regardless of their position of network ownership while at the same time encourages further investment in faster and more affordable Internet access. I believe it is possible to create such a policy and do so in a way that takes advantage of the architectural underpinnings of the Internet. But first a little background.
The architecture of the Internet was created back in the 1970s by DARPA. What DARPA created was a framework of computer network protocols called the TCP/IP model. The TCP/IP model is also known as the Internet Protocol Suite. Both of these models are comprised of four layers. The layers from top to bottom are referred to as application, transport, Internet, and link. The net neutrality issue that we are facing today essentially has to do with the changing nature of the application layer and how it effects those layers underneath it.
With that out of the way here is what I believe to be an obviously brilliant approach. In a paper entitled "Network Neutrality: What a Non-Discrimination Rule Should Look Like", Barbara Van Schewick director of The Center for Internet and Society at Stanford Law School proposes that "legislators and regulators should enact a non-discrimination rule that bans all application-specific discrimination, but allows all application-agnostic discrimination." This approach would ban the practice of "like treatment" where network providers have to treat all traffic the same. It would enable network providers to treat classes at the application layer differently as long as they treat all the specific applications in the application class the same.
Bravo. This non-discrimination approach seems to be a smart way to continue the innovativeness that we are seeing from new companies at the application layer while protecting the interests of the more entrenched network providers and maintaining the integrity of the core architecture of the Internet.
Rapleaf is one of the companies involved with the latest Facebook privacy snafu. The company, an online data gathering firm of sorts, was linking specific Facebook user information that it obtained from Farmville, Texas HoldEm Poker, and the like to its own database of Internet users. Rapleaf also transmitted the Facebook IDs to about a dozen other firms according to the Wall Street Journal.
The reaction from people when they learn about digital marketing is very bi-polar. The shock of Ms. Twombly on one end and the so what of the sophisticated Internet crowd on the other. So what exactly is Rapleaf collecting and sharing?
Well a user can go to Rapleaf, register an account then see and manage their info. Here is what it shows for me with some commentary. The most notable aspect is that the data it is not that detailed and not that accurate.
Nothing really that telling. I am a bit surprised with displayed interest in animation and television. I hardly watch anything on TV that is not HBO and does not end with a score. Which makes me surprised there is no reference to sports.
Pretty basic stuff. The age, sex, location, and marital status information is correct. I have two children and the income is off by a significant factor.
Rapleaf seems a little consfused about where I have been working. Duplicates of some job activities. Some occupational information is missing. The social networks are dead on. Interesting that they do not have my blog info.
So while I really do not care so much for Rapleaf and dozens of other companies monitoring my activity every time I visit a web site this information seems both inaccurate and harmless to me. If you feel differently you can always go opt out. But to me sharing personal information with marketers that allows for free Internet applications and may one day result in a more personalized online experience is a tradeoff I am willing to make.
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DISCLAIMER
The opinions expressed here are mine and mine alone (with the exception of comments by others of course). They do not represent the opinion or position of any other person or entity. All postings adhere to my personal values.
