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The Internet Wars: Facebook, Google, Microsoft, and Apple

📄 Contents

  1. Microsoft Is for and Against Facebook?
  2. Who Will Buy Yahoo?
  3. Implications for the Future
Facebook and Microsoft are teaming up to take on Google. What are their stated intentions, and how likely are they to cut deeper into the Master of Internet Search? Facebook marketing expert Brian Carter fills us in.
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The Internet has witnessed a long line of websites, each of whom ruled in buzz and traffic for a time, but ultimately declined into irrelevance. Yahoo and AltaVista kicked off search dominance the mid-1990s, along with eBay and Amazon in e-commerce. Google launched in 1998, iTunes in 2000, Wikipedia in 2001, Skype in 2003, Facebook in 2004, YouTube in 2005, and Twitter in 2006. These are the biggest players online, and any newer ones have yet to hit the mainstream in a big way. Some of the fallen (defunct or in extreme decline) over the years include GeoCities, AltaVista, Napster, Second Life, and MySpace.

How do these current biggest players shape up as of October-November 2011? Take a look at the table in Figure 1:

Figure 1 The Internet’s biggest players: A comparison of usage, traffic and value

Facebook, YouTube, and Wikipedia valuations are estimated. Skype was purchased by Microsoft at the above value. Note that the visits are to Google.com while the users are Gmail accounts. (Google Plus accounts and activity are too low right now to be in the same league with Twitter and Facebook.) Some companies have public valuations while others do not. Yahoo is now valued at one-third what is was when Microsoft put in an unsolicited purchase bid four years ago. Perhaps if they’d sold, better leadership would have taken it better places than it now sits.

Smart, young employees tend to switch to the latest, biggest, coolest company—and right now that’s Facebook. The social media giant is sucking up all the talent in Silicon Valley. More than 30 employees move to Facebook from Microsoft for every one person that goes the other direction. Yahoo is losing talent to everybody. Even Apple loses more people to Facebook and Google. Apple only beats Microsoft and Yahoo in the talent attraction game, and they probably will lose more employees now that Steve Jobs has passed the torch to less dynamic leadership (which, to be fair, would be the case no matter who took over the job).

Certainly all the companies mentioned above have differing goals and products, but many of them have been or will be partnered with or acquired by each other. What they all have in common is users, their appeal to users, and their ease of access to user revenue. And a number of them have bridged out of their original area of strength to compete with others. For example: Microsoft took on Google with Bing, and Google took on Facebook and Twitter with Google Plus. The competitive opportunities increase the attractiveness of partnerships. A set of alliances has resulted. Let’s take a look at the current partnerships and competitive landscape.

Microsoft Is for and Against Facebook?

I thought it was interesting recently to see Microsoft ally with Yahoo and AOL in the fight for display advertising revenues, and they’re fighting against Google and Facebook. What’s interesting about that is that though Microsoft has long been at war with Google, it has invested in Facebook, is partnered through its Skype acquisition, and Bing powers Facebook Search’s web results.

So now Microsoft wants to have it both ways. But given that most of the revenue from Internet companies like Google and Facebook comes from their advertising, this is Microsoft kicking Facebook where it hurts. Perhaps Zuckerberg will tolerate competition when it comes only in the form of search-related display advertising, but one wonders if this move might eventually lead to a break-up.

Facebook is predicted to capture 19.4 percent of display ad revenue in 2012, compared to Yahoo and Google each with 12 percent, Microsoft with 4.8 percent, and AOL with 3.9 percent. The merger potentially puts the trio slightly ahead of Facebook, but Facebook’s display ad revenue grew 66 percent in 2011, compared to anywhere between 10.5 percent and 18.7 percent for members of the new alliance. In other words, the innovation and momentum of Facebook likely will still beat any partnership, merger, or acquisition strategy.

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