The Big are all aiming to get BIGGER but do you ever ask yourself why?
When you consider the evaluations of these acquisitions you also must ask yourself why. Charlene Li - Josh Bernoff write: "As Stacey Higgenbotham/GigaOM points out, the $850 million price comes out to about $21.25 for each of Bebo's 40 million members. That's a bargain compared to the $27.62 per user price News Corp paid for MySpace back in July 2005. Excepting Facebook's $15 billion inferred pricing thanks to Microsoft's strategic investment (which puts it at roughly $300/user!), we're starting to see a rough valuation for today's social networks."
"Will this start a frenzy of acquisitions in the space? I believe so, but not necessarily at this valuation. That's because there's tremendous downward pressure on valuation because of the unproven business model, namely advertising. We're in the trough right now, because while there's tremendous consumer uptake of social networking sites, marketers still haven't figured out how to tap into all of that energy and enthusiasm."
So What is Motivating the Big to Get BIGGER?
Consider the following and think beyond today's environment.
The social web is changing rapidly and with each change innovators and early adopter users are gaining more power, presence and pull. However when we use the term "users" we must put this into context. As of November 2007 there was 1,262,032,697 worldwide users of the internet out of a population of 6,606,970,166 representing close to 20% of the world population using the internet. Now of the 20% using the internet roughly half, or 600 million, use some form of "Web 2.0″.
Using Geoffrey Moore's technology adoption curve the roughly 600 million users of "Web 2.0″ could be categorized as follows:
- Innovators: 10% or 60 million could be considered as those actively and aggressively learning and applying the "new tools of the trade" and creating new markets, new commerce and leading edge innovative thinking.
- Early Adopters: 15% or 90 million active participates follow the innovators after hearing the value created by the Innovators
- Early Majority: 25% or 150 million are semi active and less informed but waiting for solid evidence of value
- Late Majority: 25% of another 150 million infrequent participants waiting for numerous case studies proving the claims of value
- Laggard: 25% or another 150 million may have a profile one one network but don't see or are aware of advancing technology or any value in using it regularly.
Then there is the other 600 million people on the internet but yet to be aware of or use Web 2.0. The total collective mesh or people represent significant commerce, just consider Internet transactions now total close to $2 trillion a year and growing 24% per year! In addition Global Internet ad spending grew by 28.2 percent in 2007 representing $24.5 billion and $31.3 billion next year. It will hit $42.7 billion in 2009.
So the BIG understand the dynamics of the internet, both now and in the future, as well as the nature of human behavior. Web 2.0 and beyond will bring new markets created and facilitated by the innovators whom are followed by the early adopters. However, the early majority, late majority and laggards will migrate to large "portals" that make use of the web easy, simple and attractive to the larger audience of "part time users". These "part time users" will generate significant revenue from the multitude of product and service offerings targeted at the audience with intelligent software agents that search the users store house of data contained and manipulated within these portals.
The BIG know the power and economics of the internet. They know a large percent of the population simply wants someone else to lead them into the future and make the future easier for them to adapt and converse. Whether one user represents $21 or $300 in valuation today is a mute point for the BIG. Given the dynamics of human behavior, the advances in technology, the growth of the web and the trillions in commerce it represents the BIGGER the BIG get the BIGGER slice of the TRILLIONS of dollars flowing through their "network" which is supported by the BILLIONS of dollars from advertising revenue.
So we wonder why the BIG want to be BIGGER. It is simply a game of economics, the larger the audience the larger the commerce and ad revenue. The BIG don't want a relationship, they want your money. If the people think relationships matter then the future of the web, and all the related commerce, will create significant shifts but it will take time......maybe.
What say you?