[LINK] Times: 'The race to own you'
Roger.Clarke at xamax.com.au
Wed Feb 8 20:36:30 AEDT 2012
[Here's quite a decent populist on the current state of play in the
battle over who gets most control over the channel to consumers'
eyes, and hence takes (or keeps) the biggest margins out of the
biggest percentage of the advertising dollar.
[The author missed the scope for the movie-studios to wake up in time
to compete. And there's still a chance that music-studios may
recover, and eBay may build further off its own base, and some
latter-day genius may rejuvenate Microsoft in time to arrest its
Race to win cyber world
February 06, 2012 12:00AM
UNTIL recently, life in cyberspace was neat and simple. Each of the
"fab four" US tech firms played a distinct role.
Google first helped us to find stuff and then communicate with its
Gmail services. Amazon sold us stuff, first books and then pretty
much everything. Facebook let us find out whether our friends were
:-) or :-(.
Apple sold pretty devices for listening to songs and watching films.
Each of these companies was happy doing its own thing and left the
Now those divisions are breaking down. The big tech firms are on a
cybercollision course. Thanks to new hardware, notably tablet
computers and smartphones, new software and apps and a world
blanketed by wi-fi and 3G (and soon 4G), we work, rest and play
online more and more.
We read newspapers on our tablets, listen to music on our iPods or
MP3 players, book a restaurant table or a cinema ticket on our
smartphones, store our photographs on Flickr and look at our personal
and professional email, documents and calendars online.
As the market for digital stuff expands, doing only one thing,
however well, is no longer so attractive for tech firms because it's
no longer so lucrative.
What Facebook's Mark Zuckerberg, Amazon's Jeff Bezos, Apple's Tim
Cook and Google's Larry Page want to do is to become the sole caterer
to all our burgeoning digital needs.
The more services they can offer, the more users they can attract,
the more services they can sell us and the more advertising revenue
they can generate. The battle to become chief executive of the web is
Zuckerberg's initial public offering is a key part of his attempt to
run the web. Facebook may have more than 800 million users but it is
Last year it had revenues, largely from selling advertisements, of
$US3.7 billion ($3.4bn), as against Google's $US38bn in 2010. To
expand, Zuckerberg needs cash and plenty of it.
In May, after the IPO, he will have a war chest of $US5bn. That will
enable him to join his rivals in the fab four as each spends big to
try to digitise and revolutionise every corner of our lives, taking a
slice out of each transaction that results.
How will they do this? Being successful in Silicon Valley means being
good at keeping secrets, but here are some of the products that
insiders say each firm has hidden up its hoodie sleeves.
Facebook will offer better social networking and communication. It
has copied some of the most lauded features of Google's new social
networking service Google+. It promises a broader, more social
email-style system that Facebookers insist will replace what they
call "old-fashioned" Gmail.
Facebook is flirting with the idea of taking on Google's core
business with its own search service. Not one based on results in
cyberspace, however well sifted by algorithms, but on the data
provided by you, me and our friends.
A Facebook phone, with photos and status updates uploaded to a
Facebook page with a single click, is on the way.
Facebook is joining movie website Netflix, music streaming service
Spotify and games maker Zynga to bring us Facebook TV, Facebook
movies, Facebook music and Facebook games based on our own
preferences and our friends' recommendations.
There are even Facebook credits, a virtual currency bought with real
money that Facebookers use to play computer games. The goal is to
make us live wholly inside Facebook's walled garden, a place
Zuckerberg insists with boyish enthusiasm "is going to be really,
Sadly for Zuckerberg, he has competition from the neighbours and they
have an even bigger stash of cash. Apple, which has $US98bn to spend,
almost as much ready cash as the US government, has the most popular
smartphone model on the market, the iPhone, and the most popular
tablet computer, the iPad.
Cook, who took over Apple after Steve Jobs resigned from the chief
executive job not long before his death last year, is determined to
make them even better. He has, for example, integrated Twitter
throughout Apple's line-up, enabling us to tweet from any app, a
feature clearly aimed at dulling Facebook's mobile growth.
Cook is also working on iPad, iPod and iTunes services that he
believes will trump Facebook's music, movies, TV and games offerings.
He wants to sell us e-books through the iBooks part of iTunes, to
lure us away from Amazon. Apple's new iCloud service enables us to
write and store our documents, spreadsheets, email, contacts and
calendar on Apple's servers and access them on any device we want,
even ones we do not own, in a direct challenge to Google's online
Cook is also readying a web-enabled Apple TV. The idea is that we
will buy programs and films using iTunes. Television is the most
important mass medium yet to be breached by the digital world.
Just down the road from Facebook, Google's whizzo brains have stopped
lounging on beanbags and crunching granola bars while lecturing the
world on the virtues of not being evil and started knuckling down to
the gritty business of grinding Zuckerberg's and Cook's noses into
Google has its own version of the iPhone. It's not a single phone but
any handset that runs its Android software. Android phones
comfortably outsell iPhones, accounting for almost half of all
smartphones sold worldwide. Google has launched a web-based Google TV
service, offering programs streamed via the web. It is using Google+
to make its search results more social, to combat Zuckerberg's social
search ambitions. It has launched Google Music, to offer songs, and
it owns YouTube, where we can now watch or rent TV programs and films.
In development in Mountain View, Google's headquarters, is Google
Wallet, an online payment program that will enable us to buy stuff by
waving our phone at a shop's paypad.
Google already makes mobile phones in partnership with HTC and
Samsung, and recently it spent $US12.5bn snapping up Motorola's
consumer division. It is readying its first own-label, Motorola-built
mobile phones and tablet computers to tackle Apple head-on and is
even flirting with becoming a telephone service provider.
"We're still at the very, very early stages of what technology can
do," Page says.
"Our ultimate ambition is to transform the overall Google experience,
making it beautifully simple, almost auto-magical."
And what of Amazon, that other West Coast behemoth that nearly
doubled in size between 2008 and 2010 and hit almost $US50bn in
annual revenues last year? It has new hardware, the Kindle Fire,
which helpfully comes loaded with the account details of Amazon
users, making it easier than ever to buy stuff. The Fire also boasts
social networking that connects Amazon users with others who share
tastes in books and films, a direct challenge to Facebook.
Amazon offers a new app shop, a new online payment system, TV and
movie streaming and cloud computing for individuals and businesses.
As they jostle for position, each of the tech titans is as busy
talking down the opposition as it is talking itself up.
Apple has vowed to "destroy" Google's Android mobile phone and tablet
computer operating system, which senior executives dismiss as "theft"
of Apple technology. Apple is suing manufacturers of Android devices
all over the world for patent infringement.
Google's response? "Failing to succeed in the smartphone market, they
are resorting to legal measures."
Facebook hired the PR firm Burson-Marsteller to plant negative
stories about Google. When it got caught, it said sorry.
This is what happens when an entire industry reboots itself. The
great tech war of 2012 marks the start of the third age of computing.
In the beginning, firms battled to sell us hardware. It was IBM vs
Apple vs whatever beige box we liked the look of. Then hardware
became a commodity and firms competed to sell us better software --
Microsoft Windows v Apple OS v Google's online services.
Now, in the mobile internet age, firms are battling to create the
best online platform, offering a vast, seamlessly connected suite of
anytime, anywhere services that we use all day, every day and that
become as much a part of our lives as the air we breathe. Creating
the dominant platform matters so much because it will give the
winning firm the lion's share of the world's eyeballs. More eyeballs
means more direct sales of hardware, software and services, and
advertising. But eyeballs offer something even more valuable,
something tech firms prize more than anything else: data.
Every time you or I log on to Google, Facebook, Amazon or iTunes, we
leave digital fingerprints. With our search queries, our "likes", the
songs we listen to, the TV programs we watch, the books we buy and
our tweets, we reveal who we are. Thanks to our computer's IP address
and location-based technology in mobile phones, we also disclose
where we are.
This accurate, real-life, real-time information is an invaluable treasury.
It enables Google and Facebook to offer advertisers the chance to
reach their target market and even to advertise to them at particular
times of the day and in places where they are most likely to respond.
Facebook, whose data is even more valuable because we tell it more
about ourselves and it knows who our friends are, is desperate to
start using it to ramp up its ad sales to Google-like proportions.
Analysts think the digital advertising sector could be worth $US200bn by 2020.
There's a problem here, of course. Apart from Apple's natty hardware
and all the big players' software and apps, critics say the fab four
create little or nothing. What they do is make all the money in the
world by exploiting other people's stuff.
Most of the content we find when we do a Google search is created by
others, but Google sells ads against the search. The content creators
do not receive a share of the ad revenue.
Google points out that its search engine sends users to the content
creators' websites, where each can try to make money itself.
Amazon sells books at prices lower than publishers and booksellers
say is fair. Facebook does not create the data it uses to sell
advertising. We agree to hand the data over when we sign up and we do
not get to opt out.
Apple pays record labels for the music it sells through iTunes but
keeps a big chunk of sales revenue for itself: iTunes now in effect
runs the music industry.
With an eye to the bottom line, the fab four bitterly resist any
attempt to stop them exploiting one another's content. Each spends
billions on lobbying politicians to drive home their case that any
regulation of the internet would impinge on free speech and free
trade. Who could object to freedom, right?
Well, more and more of us. Newspapers, including this one, have set
up paywalls to ensure readers pay for high-quality journalism rather
than simply getting it free. Hollywood studios, which are battling
piracy, are backing the (now shelved) Stop Online Piracy Act in
America, which aims to make internet service providers do more to
respect copyright. Facebook is facing a backlash from users over its
decision to publish all their posts in a timeline that creates a
permanent online diary of its users' lives for all to see.
In her new book, I Know Who You Are and I Saw What You Did: Social
Networks and the Death of Privacy, Lori Andrews, an American law
professor, calls for a new constitution governing how web firms can
exploit our data and the content generated by traditional businesses.
How do the hi-tech firms respond to critics? They don't care much,
and since they are making more money than god, who can blame them?
For now, regulators show little interest in clipping tech firms'
wings. Most consumers seem pretty happy, too.
Polls -- and sales -- show that our desire for a connected future
vastly outweighs any concerns we may have that we will become slaves
to the machine.
Ultimately, it is you and I who will decide the victor of the great
tech war of 2012. Google, Amazon, Facebook and Apple have gone from
being the dreams of the young and the obsessions of the stubborn to a
place in the dictionary because almost everyone reading this article
uses them. Whichever we keep logging on to will keep growing.
Whichever we lose interest in won't. The choice -- the click -- is
THE SUNDAY TIMES
Roger Clarke http://www.rogerclarke.com/
Xamax Consultancy Pty Ltd 78 Sidaway St, Chapman ACT 2611 AUSTRALIA
Tel: +61 2 6288 1472, and 6288 6916
mailto:Roger.Clarke at xamax.com.au http://www.xamax.com.au/
Visiting Professor in the Faculty of Law University of NSW
Visiting Professor in Computer Science Australian National University
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