The future of Internet markets

Kevin Werbach wrote a very thoughtful post on Web 2.0 market trends for the big Internet companies. He thinks we're potentially entering into an era of "competing integrated fiefdoms," much like the online services of the early 90's - AOL, Compuserve, Prodigy, Apple's eWorld. In other words, the big Internet companies are beginning to cover a range of Internet services and this may lead to closed proprietary Web systems like AOL was in the early 90's. The bigco's are no longer just specializing in one thing. Kevin explained:

"The concept is that connectivity, applications, and content are distinct technical, business, and regulatory spheres. [...] infrastructure businesses (ISPs), application businesses (search, advertising, and e-commerce), and content businesses. The only company that seriously spans all those markets today is AOL Time Warner... and look where it got them."

He goes on to say that most of the major Internet companies will probably become "hybrids of two or more layers". His examples:

• Google and eBay will span infrastructure and applications.
• Yahoo! and News Corp. will be applications and content.
• Telephone, wireless, and cable operators will be infrastructure and content
• Microsoft and Time Warner will span all three levels.

Google is most often touted as the ultimate Web platform vendor, with innovative web services like Gmail and Google Maps. But people often overlook the massive open source server farms that Google relies on to deliver those services. And with news they're building an optical fiber network, it's apparent that Google wants to be the means to transmit huge amounts of multimedia to end users. They're not in the content game, mainly because content requires humans to create it - and Google isn't good at dealing with humans (like most geeks, I suppose). Google's strength is machines.

Yahoo! though is heading for the media content platform, which is an exciting one because it brings them into competition with 'old media' like News Corp.

It's interesting that Microsoft is spanning all 3 of the levels Kevin identified. Whenever I think of Microsoft and Web 2.0, I always think of the Media Center. The digital hub of the living room is how it's promoted. For that to happen they need to definitely control the applications (e.g. Xbox), but also have some degree of control over the content (e.g. Xbox games) and infrastructure (how the living room is wired). 

In a later post about "the fragmenting Internet", Kevin wonders whether we're heading down the path of several Web platforms - rather than one open and common Web. My view is that we've dealt with that threat before, in particular with Microsoft's tactics in the mid to late 90's against Netscape. But the open Web has always won - it's very resilient. Microsoft itself has finally come to the realization that if you can't beat 'em, join 'em - having integrated MSN with the Windows platform and announced a "server equals service" strategy.

I think there's plenty of room for all of these companies. And more importantly, there's enough competition to ensure that none of them become their own proprietary Web systems. If you don't like the Microsoft Media Center, you can always tune into Google TV or the Yahoo! media experience. As long as the user continues to have those kinds of choices, the Web won't get fragmented.