January 08, 2010

The Cloud Is King

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For the last five or six years, the burning question I get is "how did Google pass Yahoo?" 

It's not my favorite discussion, but in the spirit of abundance, I've pontificated. Initially, I thought it was the result of a breakthrough search algorithm (Page Rank). But that wouldn't have sustained them up until today. Next, I concluded that it was leadership and management style (read Peanut Butter Manifesto). 

However, after watching a recent CNBC Special (Inside Google), I finally realized how they rose to the top -- and will likely stay there for a long time. They are focused on the cloud based services: stocking it, mining it, providing access to it, generating value from it. Their main competitors like Yahoo have been focused on content (Bill Gates wrote an article in 1996, Content Is King, that dominated the leadership vision of Web 1.0 and permeated Yahoo speak for years.) 

The "Content Is King" mantra may have been right for the mid-90's, but today with over fifty percent of online advertising (against content) still unsold, it makes you wonder. Yahoo's main acquisitions, with the exception of Overture, were content related: Broadcast.com (audio/video), Geocities (user), Launch (music) and so on. Meanwhile, Google worked on making the cloud's database more useful to users who needed to buy things or hire companies (search). They scanned hundreds of thousands of books, not just for content, but to improve the cloud's research capabilities. They invested in satellite based maps to dramatically improve the cloud's ability to compete with Mapsco's and the like (remember how bad Mapquest was?). 

As Yahoo experimented with a CNBC type show (Finance Vision) and a variety of others (Entertainment, Business, etc.), Google worked on getting our favorites apps out of the software realm and into the cloud. Services like Google docs are "software as services" and only require bandwidth to access and use. 

Finally, consider the issue of wireless phones. Yahoo's approach was to aggregate content for the phone and provide a thin layer of services. Google went all in and developed Android, an operating system for the phone that elevated the competition beyond dotcoms -- to Motorola and Apple! 

I can't say for sure, but I'm willing to bet that certain Google executives have read and digested the book Customer Capitalism (a classic from the early 2000's). This book suggested that to win tough business battles, you need to surround the customer with services that solve all of their problems and leave no value gaps. While Yahoo, AOL and MSN thought wide, Google went deep. Combined with management and the reality that paid search is the biggest win/win in online advertising, the whole picture makes more sense to me now.

Recent articles seem to support my view that content is no longer king, it's likely queen or maybe a duke (Content As Pauper). For entrepreneurs watching from the sideline, make sure your strategy keys in on the issue of web based services and not just content to watch/read or listen to.  

Posted at 8:56 AM in Business Trends , Tech Stuff  |  Permalink  |  Comments (2)  |  TrackBack (0)

Comments

Commentor

When I say that ad inventory is 50% unsold, what I mean is that the average online site has to eat half of it's ads that it displays OR discount them to oblivion.

What does the average publisher do with the unsold? Bonus for the current customers, run of house or promotional. Compare that to 10-15% unsold inventory for radio/TV or 20-25% for mags/newspapers and you see that Content cannot be king for the online play - at this point in time.

Commentor

Hi Tim,

One thing I didn't understand about your post: "over fifty percent of online advertising (against content) still unsold". What does that mean?

Interesting ideas. I read two or three books about Google, and I agree with you 100%. Better search results got Google to be a billion dollar company, but the development of hundreds (literally!) of services (many of which have not been released) allows them to continue to grow and thrive. One look at the stock chart is a clear indication.

So, the development of services is all well and good, but as you conclude, ultimately it boils down to creating value for the customer. That's where Google excels.

I like to look at Yahoo as a good comparison. The home page is littered with content, that is attractively displayed. I can't resist clicking on the interesting news articles. But that is superficial entertainment, with little real value.

What's on Google's homepage? Nothing! Except a logo and a place to start your search.

Chrome is a another awesome example. I finally tried Chrome about a month ago. It was the first time in years I got excited about a software. It is so fast! About 5 times faster than Firefox (and 20 times faster than IE). I tried it once and never used Firefox again. And I was a die-hard Firefox lover.

Anyway, all that to say that I pretty much agree with your conclusion that Google creates more value for their customer: anyone who uses the internet or a mobile device.

Yay Lovecats!


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