Monday, 7 May 2012

The danger of the new digital oligarchies

Last week Samsung launched the Galaxy S3. The handset has been almost universally applauded for its innovative feature set and fantastic application of the Android OS for smartphone. What it also means is that it has effectively consigned Nokia, Sony and other former major mobile telephony players to the margins. Many are also saying it sets up a duopoly in the hardware market between itself and Apple with the iPhone.

This trend is becoming increasingly prevalent in the digital world and even more so online. If you look closely at the traffic on the web, there is a monopolistic trend emerging.

Think social networking, think Facebook, which now controls over 1 in 7 online minutes .

Think search, think Google. Think video delivery, think Youtube. Think shopping, think Amazon. Think reselling, think ebay.

This is not necessarily a huge surprise given the prevalence in Palo Alto of these huge web properties. What is more concerning is just how interconnected (or should we say nepotistic) these companies have become and how reliant successful new startups have become on those company connections. This great mashable infographic  shows just how entangled the big companies and the huge start-ups are.

If you take the recent acquisition of Instagram, Kevin Systrom was an ex. Google employee with strong connections to Facebook and the $1bn purchase price had the feel of a deal made over a chat in a coffee shop -  rather than a full due diligence led process that resulted in a realistic market value.

There is no doubt that many of these services are highly innovative and massively valuable. But, as the industry increasingly eats itself, there is a danger that the dream of an open democratic web where all players have their say and an equal platform, is becoming almost the opposite. The fact that companies are now so reliant on Google and Facebook for their future online success should be a worry. It means that companies are no longer in charge of their own online destiny.

The recent switch by Facebook to timeline is a classic example of the control the platform can exert. Companies had no choice but to spend, in some cases, hundreds of thousands of dollars re-engineering their Facebook presence, so that it existed effectively post-timeline implementation. In turn it means that web users start to experience a very limited view of the world as their experience is controlled through a myriad of different behavioural techniques applied by these key players.

So far, so depressing. Of course there's always a positive side and in this case it comes in the form of this very interesting analysis that came to my attention last week tracking the rise and fall of the web's huge superpowers, since its inception 20 years ago.

The Rise and Fall of Online Empires

While we should be wary of these emerging monopolies,  online empires have already come and gone and as is the case with most things online, it happens far more quickly than in the offline world.

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