At last year’s Wall Street Journal
All Things Digital conference, Steve Ballmer said,
The world-wide advertising market is a $520 Billion industry, yet only a small fraction of it is online. Their acquisition of an ad server / ad network form last year was telling, but now Microsoft wants to expand its distribution channels. That’s not all. No World Borders believes Microsoft’s dominance of Windows–platform–based applications won’t be enough to sustain the growth of the company going forward. Software as a service (SaaS) is the new opportunity Microsoft sees, and Google has the lead.
News Corp would have a different angle – expanding the search channel with social networking in MySpace, and leveraging its well-respected newspaper brands such as The Wall Street Journal.
- Global spending on Internet advertising rose to nearly $20 billion in 2007, according to PriceWaterhouseCoopers and eMarketer.
- Open source
freesoftware (nothing is free – you pay at least for support) means that more and more companies will innovate and move toward the relatively open playing field of SaaS. The distribution channels are harder to control. Just as song artists who may have been unknowns have used MySpace for visibility and iTunes for distribution, a new
Ubiquitous Weblinked by Semantics (see our posts on the Semantic web and applications of semantics) will enable a renaissance of SaaS innovation.
- SaaS promises to cut licensing cost and make
use of softwareuniversal, rather than tying it to a particular PC or server. No World Borders believes that as Saas permeates web sites, this development will help improve collaboration, collective intelligence, empower sharing of information tools with global populations. Even traditional enterprise software will have to compete with SaaS, with new market entrants such as Coghead, providing asset management and other tools via SaaS. This will mean more competition for Oracle, SAP and other firms who will either innovate toward more SaaS or acquire companies such as Coghead in the future. Big companies like SAP have launched DNA, and Oracle is pushing OnDemand. For big companies, they have to move carefully so as not to blow up their multi-billion traditional software businesses.
- Those economies and demographics that have not had access to expensive Windows based systems will increasingly have access to faster internet connectivity, thus giving them access to Saas. It will lower the barriers to new products and services being viable. Analytical tools, communication techniques, and the ability to publish blogs and web sites reach more people, it will further the proliferation of empowerful individuals and small groups publishing information to the web. A renaissance of creativity and innovation will emerge with the best ideas coming from the best minds, rather than the largest corporations.
- Social networking usage has recently dropped. News Corp, fundamentally driven by an advertising model, would be challenged with the combination which assumes even more advertising revenue. The amount of time the average person spends on a social-networking site has dropped 14% over the last four months, according to Internet research company comScore. The reason: they’re turned off by too much advertising on social-networking sites.
Microsoft’s attempted acquisition of Yahoo, a key gateway to finding new ideas on the web, is a mixed development for innovation and advertising. As a gateway to innovation, Yahoo will be molded into something to protect Microsoft’s core business, rather than be a free-thinking destination for innovation. Fortunately, Google has enough market share that Microsoft and Yahoo plus MSN do not pose a complete monopoly for the marketplace. As a fierce competitor to Google, Microsoft and Yahoo’s competition will likely cause price erosion in paid search advertising and ad placement.
News Corp (parent of the Wall Street Journal) may actually have a more innovative plan between its well-known content assets in news, and the social network momentum of MySpace, but it will have to be careful in the rapidly maturing market about how advertising is presented to users.