Google vs Telcos: The Tale of the Tape
We are close to finishing our latest research report, The Two-Sided Telecoms Market Opportunity, which outlines in detail how operators can achieve growth by adopting a two-sided business model. We’ve invested a huge amount of time and effort in sizing the opportunity for operators a.) by capability (Identity, Authentication, Security + Advertisng, Marketing, Business Services + E-Commerce + Off-line Order Fulfilment + On-line Order Fulfilment (content delivery) + Billing & Payments + Customer Care) and b.) by vertical industry. This helps us not only show how and why operators should tackle this opportunity (the usual strategic focus of our research), but also demonstrate the potential size of the pot.
We discuss the different functions of 2-sided platforms in the report and then look at Google, Amazon, Monster, iTunes, Betfair and AP Moller-Maersk in detail, pulling out appropriate lessons for telco operators. In this article we explore Google and, in boxing parlance, who measures up better in the ‘tale of the tape’…
Google is interesting because many people feel that it is ‘game-over’ for the operators and Google will merrily extend its dominance of web search into other areas, including voice and messaging and mobile advertising. In the report, we take a fresh look at Google:
- What it has achieved and why
- Its skills and assets
- Its current strategy
Operators and Google both make noises about being cosy partners. But we all recognise that they will also compete in a big way going forward.
Those interested in boxing may notice that the pictures above are of Mike Tyson (Google) and the unfancied British heavyweight Danny Williams (Telco operators). They are taken from a world heavyweight contest in 2004 in Louisville. The assumption of most people at the time was that even a Tyson in decline would brush Williams aside. Instead, Tyson was knocked out in the 4th round. Now, we are not suggesting that the same will happen in the battle between Google and and the operators but we do feel that the operators have plenty of weaponry IF they can use it. And Google thinks this too. This is from the IPO prospectus in 2004 and still holds true today:
We face competition from other Internet companies, including web search providers, Internet advertising companies and destination web sites that may also bundle their services with Internet access.
In addition to Microsoft and Yahoo, we face competition from other web search providers, including companies that are not yet known to us. We compete with Internet advertising companies, particularly in the areas of pay-for-performance and keyword-targeted Internet advertising. Also, we may compete with companies that sell products and services online because these companies, like us, are trying to attract users to their web sites to search for information about products and services.
We also compete with destination web sites that seek to increase their search-related traffic. These destination web sites may include those operated by Internet access providers, such as cable and DSL service providers. Because our users need to access our services through Internet access providers, they have direct relationships with these providers. If an access provider or a computer or computing device manufacturer offers online services that compete with ours, the user may find it more convenient to use the services of the access provider or manufacturer. In addition, the access provider or manufacturer may make it hard to access our services by not listing them in the access provider’s or manufacturer’s own menu of offerings. Also, because the access provider gathers information from the user in connection with the establishment of a billing relationship, the access provider may be more effective than we are in tailoring services and advertisements to the specific tastes of the user. (Our bolding). See the full prospectus here.
Rather than walk you through the case study on Google, I have uploaded in slide format: