Google’s acquisition of Motorola Mobility will be a milestone in the ongoing re-shaping of the information business. As I blogged before, the big data wave and cloud computing are tearing down business and data walls, creating a new landscape, the seven Cs formed by the shift from analog to digital—Create, Communicate, Curate, and Consume–and by the shift of focus from the sheer volume of data to discovering its value—Context, Circles, and Coordination.
Eric Schmidt outlined for us a few months ago the battle for this new information landscape when he talked to Walt Mossberg and Kara Swisher about “the gang of four”:
“If you look at the industry as a whole, there are four companies that are exploiting platform strategies very well. One of them is Google; the other three being Apple, Amazon and Facebook. We’ve never had four companies growing at the scale that those four are in aggregate, in customers, cash flow, reach, partners, software development tools and so on. These are global companies with reach and economics that 10 years ago or 20 years ago, one company had—typically, Microsoft, or before it IBM.”
What Schmidt left out is the key difference between these four. Google and Facebook derive almost all of their revenues from advertising; Amazon and Apple do not.
The four are also different in where they originated on the 7Cs map. Apple is rooted in the “Consume” category, the part of the information business that is responsible for the tools (hardware and software) that give us access to information and facilitate its use. Amazon established itself first in the “Coordinate” space, where you find companies and organizations that provide platforms for collective action, exchange, and transactions (eCommerce). Google got its start in the “Curate” space, where the management of information is the focus, as it wanted to index and organize the world’s information. And Facebook rose to prominence by dominating the “Circles” category, which includes the providers of both the tools for creating and maintaining communities of interest, influence, relations, and localities and the tools for mining and exploring social identities, affinities, affiliations, and rank.
Still, with Facebook linking up with Bing and Google launching first +1 and then Google+, most of the discussion in the last couple of months focused on Google vs. Facebook and their fight over advertising spending. It was about adding “social” to search and even more targeted advertising (see, for example, Ben Elowitz in “How Facebook Can Put Google Out of Business,” and Hussein Fazal in “Prediction: Facebook Will Surpass Google In Advertising Revenues”).
To me, this is the back to the future battle (earlier drafts of this post were titled “social search is so 2004”). The battle for dominance in the Age of Big Cloud Data (ABCD) will be over discovery, not search. The battle for the future—for Google and Facebook–is about finding new revenue streams independent of advertising and possibly replacing advertising as it has been practiced for centuries (isn’t it amazing that two of the most talked about companies of our time are making money the same way some enterprising ancient Egyptians did?).
Google’s recent acquisitions may be about acquiring patents (with Motorola) and talent (with smaller acquisitions). But they are also (mostly?) about revenue diversification which will be achieved through moving into and establishing positions in more spaces on the 7Cs map.
The Motorola acquisition is a big move into the Consume space (not Communicate, which is where you find network-related companies such as Cisco and Skype), where Google will now have direct ownership of information access devices.
On a much much smaller scale, the recent Fridge acquisition is yet another stake for Google in the Coordination space, as Fridge brings to Google experienced talent in small group coordination, possibly even collaboration (is Ben Elowitz’s company, Wetpaint, next to be acquired—by Google or Facebook—establishing themselves further in this space?) .
Last week, Google moved in a big way into the Create space where you find content publishers, including game developers. But Google also acquired recently the former CEO of Salon.com, saying Richard Gingras will run Google News and “other upcoming products.” Meaning what, original content? “Google Channels”?
While diversifying into new spaces, Google is also enhancing its original position in the Curate space by moving from organizing and managing information for individuals to organizing and managing information for enterprises. But so far it has let Amazon take the lead in encroaching on traditional IT vendors’ territory. Why?
In the interview quoted above, Schmidt was asked why he left Microsoft out of the Gang of Four. His answer: “Because Microsoft is not driving the consumer revolution in the minds of the consumers. Microsoft has done a very good job of getting itself locked into corporations and much of their profits now comes from the union of Windows server and the clients, which they do very well at.”
Consumer vs. enterprise is an old and soon-to-be obsolete distinction. If Google will not take away some of Microsoft’s (and IBM’s, etc. for that matter) “enterprise” revenues, someone else will.
At stake are the $1.5 trillion spent annually by enterprises on hardware, software, and services. If you include what enterprises spend on IT internally (staff, etc.), you get at least $3 trillion. A big chunk of that will move to the cloud over the next fifteen years.
Compare this $3 trillion to the $400 billion spent annually on all types of advertising worldwide. Why leave money on the table? Should Google also acquire the other Motorola, the one that caters to “enterprises”?
The acquisition of Motorola Mobility is no doubt a great leap forward for Google, not just in terms of positions on the 7Cs map, but in getting faster to a business based on diversified revenues.