The new lords of the net

While the internet has transformed entire industry sectors, spawned a myriad new  business models and changed social behaviour, it has at the same time created its own list of giants and dominant players So does this mean that while certain vested interests are being demolished and others push to redefine themselves, the old guard is giving way to a new breed of conglomerates?

Only time will tell but there is no doubt that the internet has established a much larger and more level playing field and made it possible for smaller, nimbler players to take market share and revenue away from the traditional incumbents. It seems unlikely that there will be a return to the days before the internet; and so in general terms the outlook for a much more open and competitive market place remains optimistic.

Equally interesting to observe is how, a decade or so ago, some of those vested interests in the telecoms and media world unsuccesfully tried to transcribe their traditional business models over to the online environment. They simply tried to create another walled garden business for their businesses, only this time on the internet. Most of the telcos set up their internet shopping malls and later on the mobile operators did the same with their portals; we saw media companies set up their e-magazines with shopping malls. However, these walled gardens were not popular with their customers  and most simply jumped over the wall onto the free and open internet.

What the incumbents failed to grasp was that a more prudent model would have been to establish vertical portals, with very deep content. Several of these highly specialised sites are still operating around the world, some based on language differences; others on niche markets, unique products and services, special interests, etc; and the number of such ‘long tail' sites continues to grow.

The new heavyweights

Based on this vertical portal concept we saw very interesting further developments led by Amazon – perhaps the single best shopping experience on the net, now with a vast range of products.

Google took a similar approach. Originally just a search engine it moved vertically into maps, social networking and mail.

Apple's iTunes is by far the largest music store anywhere in the world. It dominates the music industry and, like Amazon, is now venturing into a range of other online products.

Facebook is another online giant dominating the social media scene, from where it also is venturing into a whole new range of advertising-based applications.

These companies have fine-tuned customer interaction on very user-friendly open systems and due to their sheer size they are able to attract new products and services to their platforms, forever increasing their reach, size and power and thus further consolidating companies and services on the internet.

Obviously the hundreds of thousands of other internet-based services are not going to go away, but at least for the moment it looks as though a handful of giants are dominating a significant percentage of internet activity.

One-stop experience

At the same time the enormous volume of services plays into the hands of the larger ones, as they are able to offer a one-stop experience, with easy to find products, services and applications, based on user-friendly platforms that customers are familiar with. There is no doubt that these companies will continue to make it as easy as possible for customers to use more and more services. And as the internet adds its next billion users, so will these giants grow alongside it.

The power of these companies becomes even more apparent when looking at Google. Their future depends heavily on people having access to very high-quality broadband, and in order to stimulate the development of infrastructure for such services Google even moved into investing in submarine cables, FttH networks and Wi-Fi networks. For a similar reason it bought Motorola, simply to get access to patents that would allow it to improve its online businesses and to ensure that mobile devices will be able to access its services seamlessly.

Another sign of the power of these companies is linked to so-called ‘Big Data'. By having access to as much data as possible in relation to customers, their behaviour, interests, jobs and so on, these companies are able to offer unique advertising products. While in general there is nothing inherently wrong with this, these companies do need to be very careful with that data as it borders on areas such as privacy and security and could therefore easily become a target for government regulations. In particular, the massive amount of data on literally hundreds of millions of customers makes these companies very powerful indeed – to put this into perspective, all of these companies individually know more about the citizens than the governments of the countries where the people live.

Paul Budde is the managing director of BuddeComm, an independent telecommunications research and consultancy company, which includes 45 national and international researchers in 15 countries.