Disruptive Players: Facebook, Google and others

Eden Zoller
Principal Analyst, Consumer
+44 20 7551 9294
eden.zoller@ovum.com

Agenda

Google
Some of the threats you face from Google today: consumer services
What to watch out for going forward selected flashpoints

Facebook
Some of the threats you face from Facebook today: consumer services
What to watch out for going forward selected flashpoints

Amazon: make way for a new disruptor

Brace yourself for the next wave

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GOOGLE

A force to be reckoned with

Established web search giant with well oiled advertising machine . Googles
objective is to place advertising in front of as many people as possible, wherever
and whenever it can

Strong consumer brand with popular web applications that have a high degree of
familiarity and good will among consumers

Huge, mutually reinforcing network effects

Constant innovation and extensive, growing assets that squeezes out rivals

Powerful use of search as a front-end to an ever-increasing family of applications

and services

And if Google cant build what it needs it buys it, whether small, medium or large.
Notable buys have included YouTube, AdMob, Android, DoubleClick and Gizmo5

Services are free at the point of consumption hard to compete with this

Targeting users of connected devices beyond the PC. Googles ambition is to

reach all places that the Internet can touch

Focus on the web/cloud services as the primary platform for deploying and
consuming digital services and content

Google has a product portfolio that is second to none in its breadth of applications
functionality (if not always in absolute depth of functionality

Outgoing CEO Eric Schmidt has hailed Google and others like it as ideally positioned to
capitalise on convergence because of the ability of cloud based services to span fixed and
mobile domains

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With a mind-blowing array of assets

Web/cloud assets
Advertising tools: AdWords, AdSense, DoubleClick, Admob, Google TV Ads

Android OS

YouTube

Nexus One smartphone

Android Market

Chrome netbook OS

Google Apps Marketplace

Chrome browser

Google App Engine

Google Gadgets widget application platform

Google Code APIs (including Maps, YouTube, Adsense)

Goolge Web Toolkit (Java toolkit for widget apps)

Google Native Client (browser plug in enabling native apps to run in a web
browser)

Gears (offline data store for web apps

Google Synch

Google Mobilizer (engine for simplying web pages for mobile) i

Google Friend Connect

Google Checkout

Webite management tools: Google Analytics, Google Trends, Zeitgeist,

FeedBurner

Search & discovery applications

Device assets

Content, social & productivity applications

Android Market applications

Google Mobile App (mobile optimised access to Google services like email, maps
etc)

YouTube

Google Listen (podcasts, Internet radio)

iGoogle, Google Gadgets (portal & personalisation)

Google Accounts, Friend Connect, Dashboard (service & ID management)

Aardvark (social search tool)

Orkut, Buzz, Latitude, Google Profiles, Google Groups

Google News, Finance

Google Mail/Gmail

OneBox (audio search)

Google Sites, Profile, Knol, Blogger, Picasa, YouTube (publishing)

Goolge Calender

Google Image Search

Google Talk

Google Book Search

Google Voice

Google Blog Search

Google Wave (collaboration)

Google Web searh

Google Mobile Search

YouTube, Google Video

Google Maps, Earth, Streetview

Google Googles, Sky Map (image recognition and augmented reality apps)

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Telcos have reason to wary of Googles mobile moves

Google is well on its way to becoming a mobile first company, competing with
telcos for services, users and revenues

The importance of Android in Googles strategy cannot be overstated. The

platform has allowed Google to build up powerful ecosystem of mobile devices,
developers and applications spanning smartphones, tablets and going forward,
cross-platform Internet TV & video

Googles mobile highs include:

Android set to become the leading device platform OS although Google needs to
be mindful of fragmentation issues

Android Marketplace has around 100,000 apps, second only to Apple

It has bought its way into the mobile advertising, thanks to Admob

Its heavily focused on mobile location and navigation services, including Google
Latitude, Earth, Google Maps, and more recently Google Goggles augmented reality
application

It is becoming a (the?) dominant search provider in the mobile arena, much as it is

on the desktop

It has a large and growing developer community, although this is not

without tension

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WHAT TO WATCH OUT

FOR FROM GOOGLE
GOING FORWARD

Gearing up for a bigger push on voice/VoIP?

The pieces are being put in place:

Google Talk- IM, video and chat plug-in

Google Voice - one number service with some attractive features, eg eg voice
to text transcription of voicemails

Gizmo5 (acquisition: Sept 2009) - VoIP network including PSTN linking to

enable calls to and from landlines
Google purchase Global IP solutions - (high-quality real-time audio and video
including HD voice and super wideband voice, May 2010) essentially a VoIP
based video conferencing solution plus
Android- base for Googles entry into the mobile market

Expect Google to do more than reproduce a standard VoIP model.

Google Voice number portability introduced in the US

Integration with Gmail for voice calls

The companys strategy is to enable search across all platforms and

technologies, and this will extend to voice.
Voice services would be available across a range of platforms: Android
phones, tablets, TVs or any other Internet connected devices.
Build further on the social element that it has started with the integration of
Talk with Gmail
Google could offer voice services for free, based on an ad supported model.

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Coming soon a coherent social media strategy

Google has numerous social media assets to draw on but they are
fragmented, with no underpinning framework or a front end to pull them
together beyond search

The absence of a well-defined social media strategy is one of the

missing pieces of the puzzle for Google and we expect it to address this

Googles social assets include:

YouTube is the big card but social network Orkut is strong with more than 100
million active users worldwide

Alongside this there is Google Friend Connect, Google Groups, Google Blog
Search, Google Profiles, and Aardvark for social search

Google can add location-related services to the social mix: Google Latitude,
Maps and Street View

Google has recently made several acquisitions around social gaming,

particularly mobile (eg SocialDeck, Jambool)

Strong social networks have scale, thriving developer communities, big

audiences, and a monetization strategy based on advertising. This is core to
Googles own interests

Googles emphasis on mobile gaming is canny as social media is increasingly

going mobile while mobile games already dominate app stores

Google Offers, a Groupon rival, is also waiting in the wings and mobile is
an obvious way to enhance a social commerce proposition
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Android Market: must do better

Android Market is growing but even Google concedes its app

store is not as good as it could be. The key issues include:

Fragmentation different versions of Android, different iterations

from OEMS
This could become more pronounced as OEMs customise the
platform more deeply in a bid for differentiation

Quality control of applications in the store

We expect Google to address, particularly as Amazon launches its
own app store and where quality will be made a point of
differentiation

Developers are struggling to make any money

Google must address as a matter of urgency and is introducing inapplication that will help support new business models, including
premium

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Google Internet TV: prepare for a cross platform play

At the end of May 2010 Google unveiled its much-anticipated web TV service

At the moment Android smartphones are being positioned as a remote control first and
foremost, but going forward we expect Android smartphones and tablets to become the
third screen in the Googles web TV mix

Android is one of two developer environments for Google TV, the other being separate framework
specific to web TV services

The focus on Android will Google to build a mobile community around its TV proposition
that will help enhance the overall service proposition, online and mobile.

We expect Google to provide a personalised mobile TV and video experience

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Consistent with Googles vision to control the Internet experience and advertising across as many
devices as possible, leveraging the functionality of its platform and search capabilities

The Movie Studio editing application for Android 3.0 Honeycomb based tablets provides a taster.
The video editing applications most obvious use is for user generated content of the kind provided
by YouTube, which already has a strong mobile play.

And to make it social. Expect YouTube will be more tightly integrated with the overall
Google experience going forward on as it is a key means of blending social into the TV
mix. .

Google will make search capabilities a defining of its web TV experience and this will be
particularly important on mobile devices where the need for easy, intelligent search is
even more of a critical success factor for consumers having to navigate the increasing
amounts of web based video content.

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FACEBOOK

Do not underestimate the threat posed by Facebook

Operators typically view Facebook as a

benign presence compared to Google and
there are benefits in partnerships with the
social network

But Facebook is not always a telcos best

friend. It much more than a social network
with huge reach - this is just the starting point
and its actual domain spreads much wider

Facebook is better viewed as an increasingly

rich communications and content platform

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It wants to integrate with everything and be

the main way that people consume and share
information, anywhere and on any device

And one that has a powerful gravitational

effect

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Facebook is a growing force in mobile

Facebook has over 500 million users and half of them are
interactive with the service via mobile devices
This compares with about 70 million a year ago, which shows
how quickly Facebooks mobile reach is ramping up (check)

Official Facebook apps already dominate app stores across

all smartphone operating systems

INQ and HTC smartphones ptimized to support Facebook

In February HTCs unveiled new Facebook phones with the
Android-powered ChaCha and Salsa.
Deep integration with Facebook via a dedicated hardware key
that brings up a contextually relevant Facebook menu in any
application (e.g. a send to Facebook command when a
picture is viewed).

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Is phone from Facebook the next step?

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And not just in the high-end

Facebook is making a concerted effort to ensure its services

are supported on less highly specified feature phones
Important for the mass market in general and emerging
markets in particular

Facebook Zero (0.facebook.com). A mobile version of the

site service designed with emerging markets in mind. The
text only service has stripped out components that would
require fast networks and high-end devices

In Jan 2011 an updated Facebook for Feature Phones

application introduced with Java app developer Snaptu

In February 2011 Facebook revealed the first Facebookenabled SIM cards from Gemalto, designed to bring basic
Facebook functionality to even the lowliest of handsets
The service requires no data contract (it uses SMS as a
bearer) or application download (the software is embedded in
the SIM).

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Facebook as a rich communications and content

platform

Integration deal with Skype for voice communications and in

November 2010 took the wraps of revamped new
messaging that has an added an email like service to the
SMS, IM, chat mix

Building up a strong applications and content porfotio,

initially in the shape of virtual gifts but now across the
spectrum with particular strength in games where it has
several big names on board including Zynga.
Facebook claims to have over 2.5 million developers and
partners applications currently on Facebook Platform, while
every month 70% of Facebook users engage with Platform
applications

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Is a Facebook app next?

It is turning increasing attention to location-based services

with its Places platform and is pushing into mobile
advertising in the shape of the Facebook Deals check-in
service

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WHAT TO WATCH OUT

FOR FROM FACEBOOK
GOING FORWARD

Keep a watching brief on

Facebook Credits

Supporting premium payments de facto for

Zynga

Expect Credits to ramp up over the next 12

months to the point where it becomes a major
payment mechanism on Facebook

Advertising of course!

Offers advertisers the most engaged users online

and increasingly via mobile

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Its own data shows that people spend over 700 billion minutes
per month on Facebook and that the average user is
connected to 80 community pages, groups and events - the
latter being great news for viral marketing opportunities.

Facebook is also proving a major force in driving

online search traffic to other sites, begging the
question of when it might move to directly harness
search advertising revenues.

Pushing into mobile advertising in in the shape of

Facebook Deals expect more in 2011

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Keep a watching brief on

A bigger play on video services

A large portion of YouTube videos already viewd on Facebook
Warner Brothers adds Facebook to its online distribution
network

A privacy back-lash
Facebook is always pushing the boundaries of user privacy. In
February 2011 it was forced to backtrack on an initiative
designed to share the home addresses and phone numbers of
its users with its third party developer community following
pressure from users

A show-down with Google

User data as the initial battle ground

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AMAZON AND THE NEXT

WAVE

Make way for a powerful new disruptor

A big consumer brand behind a hugely successful online

store that set the bench mark for recommendation

Amazon is increasingly positioning as a digital content

and media company
The Amazon brand is already proving a powerful draw in
the area of ebooks via the popular Kindle device and store
Provides a full track music download service
In January 2011 Amazon acquired full ownership of
Lovefilm, a web based European provider of rentals for
DVD s, games and streamed video. Lovefilm has around
1.6 million subscribers
Preparing to launch its own Android application store.
Payments via Amazons one-click payment system (which
already has tens of millions of credit cards on file), though
developers can integrate whatever transaction system they
want into the app itself

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And brace yourself more disruption is on the way

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Thank you!
Eden Zoller
Principal Analyst, Consumer
+44 20 7551 9294
eden.zoller@ovum.com