I have put together some thoughts on what I think will be the foundation for the next big opportunity in the digital (internet-mobile) space – the next big evolution since Google created paid search. Over the next few days, we will start with a bit of history and then I will put my thinking on mobiles into context.
The Shift from Internet 1 (Portals) to Internet 2 (Search)
The early days of the Internet were all eyeballs and monetisation via banner (graphical) advertising. The business was about creating portals and destination sites like Yahoo and AOL were doing. There was also some eCommerce going via the likes of eBay and Amazon. These were significant opportunities but they paled into what was created by Google with the simplicity of paid search. Of course, Google did not create the base model – that was done by Overture (GoTo.com) which was later acquired by Yahoo. But Google refined it to perfection. Search captures intent – to find or buy. Google first fixed the search content, by using the link structure of the Web with its PageRank algorithm. This made finding easy and brought Search back in vogue. It then used the keywords that users were searching for as the thing to sell ads on. On the ad front, it did three things: it used auctions to let the market set the pricing, it only charged base on the click (performance), and it created a self-service system for advertisers wanting to buy. All of this created an infinitely scalable, global solution. And an ecosystem of companies around it (the likes of SEO, SEM, etc.). Google did not need to worry about the demographics of its users – the pay-per-click model (as opposed to the impression-based graphical display model) automatically took care of appropriately matching the two parties. This basic system today will account for $30 billion in revenue, of which Google will take three-quarters – all of this has happened in the past 5-6 years. The graphical display advertising, which has been around for a decade, will account for $20 billion in revenue strewn across the rest of the hundred million Internet sites. So, the second version of monetisation on the Internet (paid search) overtook the first set of monetisation ideas (graphical display ads).
[We are now seeing the emergence of the next Internet – built around Social interactions and Media. The standard bearers for this next-generation are sites like YouTube, Facebook, Skype and PayPal. Widgets are also a powerful emerging force, as is Mobile. We will now shift focus to the mobile, because this is an area where India is one of the world leaders in its consumer base.]
(To be continued tomorrow)