Internet wars intensify
The battle for control over the Internet is intensifying with Google, Microsoft and even the network providers trying to gain a bigger slice of the pie.
This battle is, however, not only limited to trying to create or own Internet properties like the most successful search engine, the biggest web mail platform or the largest video hosting website. The war has spilled over into the software and even telecoms network markets.
To fully understand why these companies are investing heavily in various aspects of the Internet without a clear return on investment, it is valuable to view the “Internet” as having three layers: network, hardware and software, and websites.
The argument is simple: For any user to receive an Internet service – typically viewing a website – the website is served from a webserver, carried through the network layer and displayed on the user’s hardware and software platform.
Without some control over each of these layers an Internet business is running the risk of being at the mercy of companies who control either the network layer or the hardware & software layer.
The reason why hardware and software can generally be viewed as a single layer is because hardware such as a PC or mobile phone is typically pre-loaded with an operating system and an Internet browser. And usually, with the exception of the more technically advanced users, the default settings are likely to remain unchanged.
The popularity of Microsoft’s Windows operating system is therefore the main reason why Internet Explorer is the most popular Internet browser.
Many new players are however trying to increase their Internet browser market share, including Mozilla Firefox, Apple Safari, Opera and Google with its recently released Chrome browser.
Google’s entrance into the browser market surprised a few observers, but considering the risks it faces from relinquishing control over the hardware and software component of the Internet to a competing company like Microsoft it is not all that surprising.
Recent reports suggested that a new privacy feature in Internet Explorer 8 may mean that some website advertising – the main revenue stream for Google – may not display.
Ad blocking is unlikely to be included in a final IE 8 release, but the mere suggestion of this type of development should be of great concern to Internet companies who generate most of their revenue through online advertising.
Ad blocking is however nothing new. Many applications, including using Firefox and its ad blocking plug-ins, can prevent Internet advertising from appearing on websites.
A very small percentage of Internet users are currently blocking ads through the use of browsers like Firefox and Opera, which is the only reason why the traditional display advertising systems like DoubleClick and Google Adsense is still successful. This can change overnight if a new version of Internet Explorer comes with ad-blocking enabled by default.
Considering the relative power that companies such as Microsoft and Mozilla have over Google in terms of browser development and ad blocking is hardly surprising to see Google launching their own browser. This is in addition to the myriad of other advantages of having Internet users using your software to access websites.
While browser-based ad-blocking pose a significant risk to websites funded by online advertising, it is not the only risk. Network operators such as Vodacom and Telkom also have some power over the display of a website.
Vodacom’s recent decision to convert all websites to display better on mobile devices is a good example. Mobile website rendering was changed without website owner’s consent, and Vodacom added its content at the top and bottom of the screens – valuable real estate for any website.
Vodacom made it possible to whitelist websites, but the fact remains that Vodacom – as a network operator – has control over the display of websites.
In a more recent development some Vodacom subscribers did not see all online advertising on websites like MyBroadband. This was not a planned decision by the network operator, and has since been resolved, but it again points to the control network operators have over websites.
And with many traditional telecoms players worldwide starting to reinvent themselves as telecoms and media players this control may become a concern to online players like Google and Yahoo.
Keeping in mind the power of network operators and hardware/software companies in the display of websites it is hardly surprising that Google is spreading its wings and is becoming more involved in the hardware/software and network layers of the Internet.
It should also come as no surprise that the first Google handset is set to launch in December and that Google committed billions of dollars to bidding in spectrum auctions. And also not that Google partnered with HSBC to bring affordable Internet to emerging markets.
To control all aspects of Internet traffic and activity is the holy grail of the online space – similar to Microsoft’s control over desktop operating systems and applications.
So Google’s increasing activity in the hardware/software space and telecoms arena is less that surprising. It would, in fact, be irresponsible for companies like Google and Yahoo to leave control over their main revenue streams in the hands of companies who is likely to compete head-on with them in future.
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