In this post we take a closer look at the paradigm shifts of the web, especially for
the near future. What approaches have dominated the web over the years and which ones failed; and why?
Also, since Facebook is already widely accepted as the next big thing, the new question
is: what is the next “next big thing”? Is it already out there? To start with
check out the graph below, summarizing the Web’s stages up till now and our vision for the future:
As you can see, the current trend is for social interactions to take over
search as the pivot of the internet. But if you’re not convinced, here are a few examples
of why:
- Google and Microsoft’s billion dollar ad partnerships with MySpace and Facebook
respectively; - Yahoo and Viacom’s bets on Facebook;
- Yahoo’s rivals.com acquisition and rumors of Fox offering to sell MySpace to Yahoo! in exchange for a 25% stake.
The Eras of the Web
Age #0 – eCommerce
E-commerce is the most primitive way of making money online. It’s identical to the real
world, where you have some products (real or virtual) and you sell them to consumers and
pocket the money. The only difference from the world we live in is that the “e” prefix
eliminates some frictions and allows this process to get completed faster and easier each
year. That’s why the first age of the Web was full of online sellers; companies got
funded to sell and specialize in a variety of things. Some of them have become successful
because what they sold was aaleable (e.g. Amazon with books), but others failed because
their motivation was “everything can be sold over the internet” – which turned out to be
wrong in some cases. Overall, e-commerce is still a very important component of the
internet’s revenue stream – albeit not as mighty as we once thought it could be.
Age #1 – Single Sign-on
While everyone was building and investing in e-commerce sites, two Stanford students
figured out a new way of making money online. Yahoo started out with a simple web
directory, but their idea was to port traditional media business models to the online
space. They weren’t focused on selling goods, but they brought great services together
and glued them with a single sign-on mechanism. Consequently, they created some sort of
vendor lock-in; because signing up has been the biggest friction that awaits web surfers.
Remember the old tedious sign up processes – they even asked you how much money you make
per year! And note that there was no such thing as OpenID at that time.
The motivation of Yahoo at that time was to keep the visitors as long as they could on
their properties (actually not much has changed). After all, the longer users stay, the
more ads they can view. This seemed like a perfect business model at first, because it
allowed people to get great services for free. Everyone liked it and Yahoo became the
poster child company of the late 90’s.
Age #1.5 – Geocities
While Yahoo was rising, a new service emerged and started to take the lead slowly –
Geocities was one of many sites that provided free web hosting and web site creation
services. However GeoCities was different in some ways. It was more like the social
networking sites of today; the self expression level was high and the weird naming scheme
based on city names gave it a human touch. That’s why we can call GeoCities the first
utterly successful social interaction platform. However, after it was acquired by Yahoo
it became yet another web hosting service provider – and it lost its soul and failed. No
one can blame Yahoo for that though, because that was the first of its kind and at that
time everyone was unaware of the social impact of such a big web acquisition.
Boom
The Boom period (aka Dot Com) is not an age like the others, but is worth looking into.
The reason of the boom was the lack of calibration between the pace of internet
applications and the internet infrastructure. VC firms invested heavily in web sites,
with the dream of being the next Hotmail, eGroups, Viaweb – but the internet
infrastructure didn’t scale well to the increasing production. People were not spending
enough time on the internet and download speeds were slow – therefore the demand couldn’t
satisfy the production. Moreover, there wasn’t any adequate monetization method of the
content spread over the web. As a result, revenues fell short and the market crashed very
badly.
Age #2 – Search
While Yahoo was trying to get people to spend as much time as possible on their
properties in order to maximize their advertising revenues, 2 other Stanford students –
this time Larry Page and Sergey Brin – came up with the idea of excelling at search.
Because they realized that search was the start point of the web. Even though people were
likely to spend time on Yahoo properties, they still needed long tail sites to get
informed and reach other stuff that Yahoo couldn’t offer. What Google did was to offer a
better search service with absolutely no clutter. Their sparse but highly efficient
service opened the doors to big deals and hugely profitable online advertising.
Eventually they became the center of the web. Now, Google’s new purpose is to bring
desktop applications to the internet too.
Age #2.5 – On-demand Video
It’s a fact that humans are born lazy. Yes, we love spending time on the internet and
interact with many things; but still many of us prefer spending our free time on TV and
watching meaningless shows. What the new high speed internet infrastructure did was, in
some sense, bring TV to the internet. And what YouTube and others did, was to bring it to
us. Yes, Google was the center and we were still using it, but YouTube grew sharply too
during this time. We started to spend more time watching videos than mining the internet
for more information. That didn’t only steal time from Google and the long tail sites,
but also stole from the traditional TV networks – because we prefered on-demand TV over
the old linear one.
What happened then is Google saw the potential at YouTube and bought it. This cost
$1.65 B (an amount that Yahoo couldn’t or wouldn’t risk). But actually the number was
surprisingly low for a paradigm shifting company. Couldn’t YouTube become the new Google
by itself, couldn’t they make an IPO and become a billion dollar company? The answer is
unexpectedly “no”. The reason was YouTube’s legal hassles. They knew that they would
confront legal problems sooner or later and that’s why they chose the quick exit and get
under the wings of a well established company. Google could protect them and spend the
required money to fight in courts. In fact, YouTube got sued almost immediately after the
acquisition – Viacom wanted Google to pay $1 B for the illegal videos YouTube published.
This was a big threat, that could’ve allowed other content producers to demand the same
as well.
Age #3 – Social
Actually social interactions have always played an important role in the internet.
GeoCities, Friendster, ICQ, IRC were all signs of the fact that social interactions can
control the destiny of the web. But all of these products had problems and couldn’t make
it to the end. For example acquisitions finished GeoCities and ICQ. Friendster had bad
management problems. MySpace kept growing, but it couldn’t take the necessary steps to
become a real big thing. IRC became obsolete with ICQ. Only one company figured out the
way of putting social interactions to the center of the web and it was Facebook.
Facebook, for the first time, opened the gate and merged all social services into itself.
Now you can integrate your IM (meebo), Twitter, and other services into Facebook easily.
Thus Facebook became a true platform company and is increasingly many peoples start
page.
Bigcos had already realized that social networking sites would eventually become our
start pages and that all of our internet actions will get reshaped there. On the likes of
Facebook, our actions will be shaped by our friends and trusted communities. That’s why
Google signed a billion dollar deal with News Corp to become the default search provider
of MySpace. Their thought was that hopefully this would give them some time before they
needed to reorganize themselves and make an attack in the social world as well. Yahoo
tried to buy Facebook, as it didn’t have this Platform feature yet, but failed. They
ended up by buying a niche site Rivals.com, to create their own Facebook and possibly try to
explore opportunities with News Corp’s MySpace.
Age #4 – Joost ???
It’s hard to guess the 4th phase of the web because we don’t even have the
3rd one yet, fully. But what the past eras (see ages 1.5, 4 and 2.5) show is
that we will end up with the rebirth of online TV. Since we are all born lazy, video on
demand is the way to go. And what Joost is offering is higher quality content (thanks to
their collaboration with big content providers), higher quality watching experience
(thanks to P2P technology) and a legal hassle-free alternative to YouTube, which has
already shown tremendous success.
Conclusion
This is an open ended article. You may not share the same ideas as me, especially
about my Age #4 estimation, because it’s completely subjective. For example some of you
may think that Second Life, meebo or NetVibes is the next next big thing. Please share
your thoughts in the comments. I’m stopping here for the sake of keeping the article
short(ish), but I am ready to discuss in the comments other possibilities.
