This is a question I've been asking myself while reading Seeing What's Next: Using the Theories of Innovation to Predict Industry Change by Clayton M. Christensen, author of The Innovator's Dilemma and The Innovator's Solution. The book's tone ranges from brain-achingly esoteric to enlighteningly accessible, and while I might not do Christensen justice, a kernel of his thesis is worth distilling here in reference to search engines and their developments for both consumers and marketers.
The goal of the book is to present a theory that objectively evaluates innovation, and the theory addresses a number of angles: whether the innovation is sustaining or disruptive, whether incumbent companies or startups will fare best in capitalizing on the changes, and what types of consumers are targeted by the innovation. Christensen denotes three types of consumers served by various innovations:
Christensen notes that undershot customers are often served by sustaining innovations from incumbent leaders. Far more interesting to Christensen are the non-consumers and overshot customers. With non-consumers in particular, there's tremendous market opportunity, but originally the market's going to be small enough that incumbents will not take notice. For instance, a $20 million opportunity within a couple of years is a pittance to Microsoft or Google but a major windfall for a startup.
The non-consumers have proven to be an attractive target for many of the startups that have created a name for themselves in recent years. YouTube went after people who weren't yet sharing and watching video clips online. Picasa (now part of Google) offered value to people who took digital photos but had no simple way to organize and share them. Ingenio is targeting both the non-consumers (local businesses that aren't buying into search marketing yet) and the undershot customers (engaging in SEM and craving more). Ingenio's market for non-consumers is wide open, but it faces greater challenges for the undershot customers. The incumbent search engines will aim to serve their undershot customers, and Ingenio's best bet there remains partnering with the engines -- or getting acquired by one of the big three.
The birth of interactive advertising and search marketing firms themselves speaks to a disruptive innovation targeting non-consumers. Advertising agencies were the incumbents in the mid-1990s. When banner ads first arrived, the agencies could have offered interactive advertising services to their clients. Yet the agencies couldn't value the market size, which then was a fraction of a percent of the roughly $275 billion U.S. advertising market, and they didn't have the processes in place to sell such accountable media. The interactive agencies that arose, meanwhile, envisioned one percent of the market, and they aggressively pursued it. The roster of advertisers, none of whom were then advertising online at all, presented a wide-open field, and the land grab began. Similarly, when search engine marketing first arose in the late 1990s, both traditional and interactive ad agencies underestimated it and couldn't readily adapt to the new pricing structures.
One of the greatest challenges Seeing What's Next presents to the reader is deciphering which innovations are sustaining (where the incumbents have the best odds serving undershot customers) and which are disruptive (where startups have a greater opportunity to succeed by serving non-consumers and overshot consumers). Part of the fun of working in this industry is that innovation happens so quickly that we can start seeing what happens next in such short periods of time.
Even more exhilarating is that each innovation, while filling an extant need, opens up new opportunities. Perhaps it's an incumbent moving so far up-market that there's a vacuum in the lower end. Or perhaps it's a startup creating a market where there was only non-consumption before, and thus welcoming other entrants into the fray.
Most exciting of all is that instead of just seeing what's next, most of us are participating in it. Having our vision checked is still a good place to start.