August 02, 2008
The Marginal Utility of Internet Companies
While I have started work in a new company (since it is in the setting up phase), a lot of interest news have emerged. With the plethora of them, I have decided to look at the following ones: (i) Facebook suing studiVZ, a German clone of the social network, (ii) the disastrous public relations disaster of Cuil, the new search engine who claimed to rival Google in indexing and search, and (iii) the launch of Google’s several new apps and initiatives: Knol and Lively (and I have a gripe with Google together with Picassa as well – they don’t have a Mac OS X version). indicates the feel that all the Internet companies are reaching marginal utility and it is a phase where everyone is seeking the next big thing. It reminded me of a question posed to Bill Gates before his departure from an active role in Microsoft during the BBC interview that he thinks that the two people in a Starbucks Cafe working on new internet innovation has now taken over the two people innovating in their parents’ garage. Here are some thoughts about why I believe that everyone is in the marginal utility phase of the web evolution.
- Legal Action as a gesture to stop regional or geographic specific Facebook clones to arise: Why did Facebook choose to sue studiVZ, not XiaoNei (Chinese facebook clone) in China? If you ask me, I was looking at the interface of studiVZ and realized that they have at least changed parts of the interface. At least they bothered to paint it red instead of blue. If you look at the chinese facebook clone, XiaoNei, it is a blatant copy word to word and box to box imitation of Facebook. Guess what, XiaoNei has even cloned Facebook’s approach to open up the platform for developers and not to mention they have raised US$430 M for their funding and they are better funded than Facebook. I am pretty sure that the executives in Facebook must have realized that it is harder to deal with the perfect clone, but it may be easier to take out a German clone where there is clear legislation that favours intellectual property. One thing is beginning to happen if you have been studying the trends of online social networks, is that different countries preferred different social networks. In India and Brazil, people like Google’s Orkut and people in Thailand like Hi5. In fact, there is now an added dimension, the generic social network can now be broken into niches groups. For example, MyYearBook.com, a social network for teenagers (which means that they might grow up with another social networks) just raises US$13M. Of course, Facebook has started to internationalize their portal for other languages as an appropriate response to deal with the regional specific issues, but the generational issue of online social network users will continue to remain a challenge for them.
- The Clone Wars returns and now the Europeans and Americans are cloning each other: We used to like to talk about how the Chinese clones US web 2.0 start-ups and make a killing. Seriously, the Europeans are no better. Think about studiVz, a facebook clone in Germany, and the Europeans are beginning to realize that they can do it just as well with their natural language advantage. In fact, the Amercians are doing it within among themselves. Google has not been innovative recently with Knol, who we know directly competes with Wikipedia except that it does not harnass the wisdom of crowds, and Lively, which can be their first foray to virtual worlds, and guess what they are thinking about what I have said before. Once the blogger gets tools to propagate the virtual as an avatar, the virtual world market may be trigger another web evolution via this line of thinking. Even Google is facing a clone in her backyard with Cuil, but the problem is that Cuil did not ensure that their product and ended in a PR disaster. Without haste, they have started to talk about search quality in their blogs again.
- Marginal Utility, Everyone?: My guess is that every company is having marginal utility including Google, as they have started a venture capital company to find new ideas that they have not otherwise thought of. Of course, unlike the last web bubble, we don’t see any more of the astronomical valuations and given that we are moving along with a credit crisis in the US, people will be conservative, which means investments will flow slowly.
Of course, while the internet web services are competing out there, it might be better to look for a blue ocean where the mobile meets the web or even explore new emerging markets where the clones might succeed.
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