Internet companies extend tentacles into every corner

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Efficiencies are all very well, but where will it all end?

In perfect 20/20 hindsight, it’s clear that the dominating force in technology in the 21st century have been Google, Amazon, Facebook and, somewhat amazingly, Twitter.

These companies – formerly pure play internet companies – have changed all the rules not just in terms of software, search and the web, but also have extended tendrils into practically all other areas including hardware, operating system, web management and in Amazon’s case it sells just about everything anyone might want.

While little has been done to curb Amazon’s powers by governmental and other regulatory agencies, Google has been on the receiving end of quite close attention. Earlier this week, for example, India announced it would be investigating whether Google had breached any competition rules in the sub-continent, while it also appears that the company which famously “does no evil” is likely to have a full scale investigation launched against it by the US Fair Trade Commission (FTC).

Let’s take a brief walk in the park to explore the business areas Google currently has an interest in.

Google started with search and rapidly made a name for itself, even in the process causing a new English verb to be coined: to google. It has over 32,000 employees world and sales and revenues of $37.86 billion. Its share price currently stands at $608.39. Intel’s CEO, Paul Otellini, sits on Google’s board. Earlier this week, Google’s CIO Ben Friend said at a conference in New York, that the cloud computing economics is driving down costs so fast that he’s scared by it. He’s not the only one that’s scared by it.

Amazon has 56,200 employees, sales or revenues of $48.08 billion. Its share price currently stands at $228.22. In fact, Amazon has a highly developed channel, but it’s not the channel as we know it, Scottie. Third parties sell dozens of different kinds of products through its websites and also makes money from marketing and promotional services, including online advertising.

Cost efficiencies are all very well and everyone now is looking for the best price to be had, but there is a point where something has got to give. We’ve already highlighted the fact in ChannelBiz that you can often buy a product from Amazon at prices that compete or undercut the traditional channel.

Our channel research at our launch in March shows that social networking hasn’t really become the force it could be for traditional channel players. It’s still somewhat hard to believe that Facebook, which is due to float on the US stock market soon, can be worth as much as is being projected. Estimates vary around the $75 billion to $100 billion mark. But then when Linkedin performed its IPO, it did far better after it floated than the market had expected.

Twitter is still adamant that it is not going to go public but it is still unclear how it plans to make its money.

The contrast between Google and Amazon with companies like Twitter is quite instructive. The first two have real business models generating real profits and a track record of revenues and profits. Twitter  so far hasn’t really proved to the world that it is more than an internet phenomena.

Meanwhile, the internet continues, like a tornado, to demolish traditional business models, force down prices, and destroy many existing industries. In circumstances like this, something has to give. Big companies need big margins to support big payrolls and to support research and development for innovation in the future.

Everything can’t be free on the internet, otherwise we’ll all be on Carey Street in no time at all.


Author: Mike Magee
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