Digital Titans Keep Their Business Heads In The Cloud
A steady slog of deals and new product launches, in defiance of the recession, are repositioning leading-edge companies to do more of their business as streaming, "closed" systems in the cloud.
Apple, Google, Amazon, Cisco and Hewlett Packard are among the power players very publicly bumping into each other in a race to control streaming video, data and services from the cloud. They are dragging with them content and ad brokers -- ready or not. Add to that the hubbub over Wired editor Chris Anderson's latest declaration - that the "open," largely ad-supported Web is dead.
The titans who make it possible to access unlimited music, video and text on a postage stamp-sized player or a sleek iPad are rapidly shifting away from costly legacy structures and business models. They prefer to spend time in the cloud, where services, software and content are delivered via the Internet as apps and platforms in a pay-per-use, self-service way, according to Forrester Research.
Though Cisco, IBM, Hewlett Packard, Dell, Amazon and Google have been dabbling with cloud computing for years -- right alongside the federal government and NASDAQ -- these latest moves encompass more of the enterprise and consumer mainstream.
The Apple TV and iPod upgrades aren't just smart holiday selling moves. Everything Apple announced the past week underscores its move from downloading to streaming content within its closed ecosystem. Amazon instantly lowered the price of its streamed TV episodes to match Apple's new 99-cent deals and began seriously contemplating a new video subscription option. Just as important is how they both continue to customize the user-based experience.
At the same time, Google is ramping its fall launch of Google TV, an Android platform as a standalone set-top box or integrated into a Sony Internet TV, as a universal facilitator. All Google wants to do is grab a bigger chunk of global advertising spend by transforming the lowly television screen into an all-purpose monitor for fully integrated Web TV. Google provides the overlay to search and manage stored and streamed video and text from all sources; email, texting and other forms of communications; advertising and commerce. It's up to content and service providers to figure out their own paid schemes as all things video and print move to the cloud.
But it's not just about Google and Apple. Network equipment maker Cisco Systems has been on a buying spree, acquiring video content manager ExtendMedia and wireless grid start-up Arch Rock and looking to snare leading VoIP company Skype for an unconfirmed $5 billion. Hewlett-Packard finally beat Dell in recent days with a $2.1 billion winning bid for 3 Par, a high-level enterprise data-storage company.
Wired's Anderson, who gave us The Long Tail and Freemium, and is a product of the transitioning magazine industry, maintains that the wild Web's days are numbered as companies seek monetizable ways of doing business digitally. For content producers, it is the difference between syndication and electronic subscriptions, customized apps instead of Web pages, and innovating other new ways to be paid.
While consumers are enamored of cool, updated Apple iPods and a palm-sized Apple TV console, they ultimately focus on what they want rather than how they get it. The marketplace is so saturated with devices and services that mimic each other that attention is swinging back to the experience and pricing of content and services.
Digital marketing guru and author Seth Godin's recent decision to exclusively publish his future books electronically and ditch conventional means is an example of the leadership behavior he describes in his latest work, Linchpin. He is leapfrogging what he considers the archaic, often self-serving publishing industry and process to write for and interact directly with his readers. Such a nimble approach can have huge repercussions as consumer and enterprise players scramble for the same interactive users.
Gartner projects the global cloud services market will surpass $68 billion this year, a 17% increase over 2009, which will nearly double over the next five years. The mainstream Web, only about two decades old, generates an estimated $134 billion of revenue compared with the nascent "closed" paid systems of revenue growth projected to grow $18 billion over the next five years, per Needham analyst Laura Martin.
The "open" Web is hardly dead, Martin argues, because it is driving e-commerce, which Forrester projects will reach $250 billion by 2014, or 8% of retail sales, and online advertising, which Magna Global estimates will hit $36 billion by 2014, or 22% of total advertising. By 2014, nascent closed systems will include $20 billion for online gaming, $8 billion each for social networks and for Apple's iTunes/apps, and to $4 billion for online video.
The risks to going the way of the cloud with more closed, paid options are as unique as the opportunities, Martin points out. The brevity of corporate life cycles (which can be a mere 10 to 15 years on the Internet) is being fostered by the low barriers to entry posed by inexpensive technology, the creative churn of developers and ever-fickle consumers. Still, there doesn't appear to be a stampede in the other direction. Seems like there's no time like the present to have your head in the cloud.