Since the daybreak of the internet, the titans of this industry have fought to win the “starting point” — the place that users start their online experiences. In other terms, the place where they begin “browsing.” The advent of the dial-up age had America Online mailing a CD to every home in America, which passed the baton to Yahoo’s categorical indices, which is now being swallowed by Google’s indexing of the world’s datum — winning the “starting point” was everything.
As the mobile revolution continues to explode in various regions of the world, the battle for the starting point has intensified. For a period of time, people believed it would be the hardware, then it became clear that the software mattered most. Then conversation shifted to a debate between operating systems( Android or iOS) and moved on to social properties and messaging apps, where people were spending most of their time. Today, my idea is we’re hovering somewhere between apps and operating system. That being said, the interface layer will always be evolving.
The starting point, just like a rocket’s launchpad, is merely important because of what goes after. The battle to win that coveted posture, although often disguised as many other things, is truly a battle to become the starting point of commerce.
Google’s philosophy includes a commitment to get consumers “off their page” as quickly as possible…to get that user to form a habit and come back to their starting point. The real( yet somewhat veiled) objective, in my opinion, is to get consumers to search and find the things they want to buy.
Of course, Google “does no evil” while aggregating the world’s knowledge, but they pay their bills by sending purchases to Priceline, Expedia, Amazon and the rest of the digital economy.
Facebook, on the other hand, has become a starting point through its monopolization of users’ day, attention and data. Through this effort, it’s developed an advertising business that shatters records quarter after one-quarter.
Google and Facebook, this famed duopoly, represent 89 percent of new advertising spending in 2017. Their dominance is unrivaled … for now.
Change is urgently being is necessary in market forces — shiftings in customer habits, unbearable rising costs to advertisers and through a almost universal discontent with the advertising simulates that have dominated( plagued) the U.S. digital economy. All of which is being accelerated by mobile. Horrible experiences for consumers still persist in our online experiences, deliver low efficacy for advertisers and fraud is rampant. The procession away from the glut of ad extravagance may be most symbolically seen in the explosion of ad blockers. Further evidence of the “need for a correction of this broken industry” is Oracle’s willingness to pay $850 million for a company that polices ads( likely the best entrepreneurs I know operating this corporation, so no astonish ).
As an entrepreneur, my job is to predict the future. When reflecting on what I’ve learned thus far in my expedition, it’s become clear that two facts can guide us in stimulating smarter decisions about our digital future :P TAGEND
Every day, retailers, advertisers, brands and marketers get smarter. This means that every day, they will push the platforms, their partners and the places they rely on for consumers to be more “performance driven.” More transactional.
Paying for opinions, bots( Russian or otherwise) or anything other than “dollars” will become less and less popular over time. It’s no secret that Amazon, the world’s most powerful company( imho ), relies so heavily on its Associate Program( its home-built partnership and affiliate platform ). This channel is the highest performing kind of paid acquisition that retailers have, and in fact, it’s rumored that the success of Amazon’s affiliate program led to the development of AWS due to large spikes in partner traffic.
When thinking about our digital future, look down and seem east. Look down and admire your phone — this will serve as your portal to the digital world for the next decade, and our dependence will merely continue to grow. The explosive adoption of this form factor is continuing to outpace any technological tendency in history.
Now, appear east and be considered that what happens in China will happen here, in the West, eventually. The Chinese market skipped the PC-driven digital revolution — and adopted the digital age via the smartphone. Some really smart investors have constructed strategies around this thesis and have quietly been reaping rewards due to their clairvoyance.
China has historically been categorized as a market full of knock-offs and copycats — but hours have changed. Some of the world’s largest and most innovative companies have come out of China over the past decade. The entrepreneurial project ethic in China( as praised recently by arguably the world’s greatest investor, Michael Moritz ), the speed of innovation and the ability to quickly scale and reach meaningful populations have caused Chinese companies to leapfrog the market cap of many of their U.S. equivalents.
The most interesting ingredient of the Chinese digital economy’s growing is that it is fundamentally more “pure” than the U.S. market’s. I say this because the Chinese market is inherently “transactional.” As Andreessen Horowitz writes, WeChat, China’s most valuable corporation, has become the “starting point” and hub for all user activities. Their revenue diversity is still much “Amazon” than “Google” or “Facebook” — it’s much more pure. They make money off the transactions driven from their platform, and advertising is far less important in their strategy.
The obsession with replicating WeChat took the tech industry by storm two summers ago — and for some misplaced reason, everyone thought we needed to build messaging bots to compete.
What shouldn’t lost touch is our obsession with the purity and power of the business modelings being created in China. The cloth that binds the Chinese digital economy and has promoted its seemingly boundless growth is the magic combining of commerce and mobile. Singles Day, the Chinese version of Black Friday, drove $25 billion in sales on Alibaba — 90 percent of which were on mobile.
The lesson we’ve learned thus far in both the U.S. and in China is that “consumers spending money” generates the most durable customer industries. Google, putting aside all its moonshots and heroic mission statements, is a “starting point” powered by a browse locomotive. If you do not agree, look at where their revenue comes from…
Google’s recent announcement of Shopping Actions and their motion to a “pay per transaction model” signals a turning point that could eternally change the landscape of the digital economy.
Google’s multi-front combat against Apple, Facebook and Amazon is weighted. Amazon is the most threatening. It’s the most durable business of the four — and its model is unbounded on two fronts that almost everyone I know would bet their own future on, 1) people buying more online, where Amazon makes a disproportionate quantity of each dollar expend, and 2) companies needing more cloud calculating power( more servers ), where Amazon makes a disproportionate quantity of each dollar spent.
To add insult to injury, Amazon is threatening Google by becoming a starting point itself — 55 percent of product searches now originate at Amazon, up from 30 percentage merely a year ago.
Google, acknowledging consumer behaviour was changing in mobile( less searching) and the inferiority of their framework when compared to the durability and growth future of Amazon, needed to respond. Google required a framework that supported boundless growth and one that made a “win-win” for its ad spouses — one that resembled Amazon’s relationship with its merchants — not one that continued to increase costs to retailers while capitalizing on their monopolization of search traffic.
Google knows that with its position as the starting point — with Google.com, Google Apps and Android — it has to become a part of the transaction to prevail in the long term. With users in mobile demanding fewer ads and more utility( demanding experiences that seem and feel a lot more like what has prevailed in China ), Google has every reason in the world to look down and to looking east — to become a part of the transaction — to take its piece.
A collision course for Google and the retailers it relies upon for revenue was on the horizon. Search activity per user was declining in mobile and user acquisition expenditures were developing quarter over quarter. Businesses are repeatedly failing to compete with Amazon, and unless Google could create an economically viable growing framework for retailers , no one would stand a chance against the commerce juggernaut — not the retailers nor Google itself.
As I’ve belief for a very long time, becoming a part of the transaction is the most favorable business modeling for all parties; sources of traffic make money when retailers sell things, and, most importantly, this only happens when users find the things they want.
Shopping Act is Google’s first ambitious step to satisfy all three parties — businesses and business frameworks all over “the worlds” will feel this impact.
Good work, Sundar.