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Simon Andrews 

Mobile Fix - Everything is driven by the GAFA

Simon AndrewsSimon Andrews, founder of the full service mobile agency addictive!, says a number of events have happened this week to reinforce the view that the GAFA is in charge (and also demonstrate how the big four - Google, Apple, Facebook and Amazon - are going to keep bumping in to each other)...

Everything is driven by the GAFA

We've talked before about how the web is coagulating around a handful of key players. Google, Apple, Facebook and Amazon have the user base and the cash to make it hard for anyone else to emerge as a significant challenger.

Sure GroupOn turned down Google and seem to want to go it alone - but at this early stage would you bet against Facebook Offers and (Amazon funded) LivingSocial eating their lunch at some point?

And yes the mobile network operators have a lot of power - but we see little evidence of them using it wisely - yet.

This week, a number of events reinforce our view GAFA is in charge and also demonstrate how these four tectonic plates of TMT are going to keep bumping against each other.

We've finally got our hands on the 2011 version of Nothing But Net, the very well respected annual report from JP Morgan analyst Imran Khan and lots of thinking and data from there support this view. At 415 pages we haven't read it all yet, but there is lots of good data. Some quotes we liked are woven around this weeks news.

...failure to establish mobile leadership & understand the mobile audience could be dangerous for content aggregators, publishers & advertisers - Nothing But Net

Google - Mobile Only?

Monetisation of mobile search is a critical factor for Googles growth; we estimate Google generates ~15% of its query volume from mobile devices, yet mobile searches contribute just ~3% of revenue - Nothing But Net

With a change or responsibilities at the top (Larry Page takes over as CEO and Eric Schmidt becomes executive chairman) Google reported good financials yesterday. And in the Harvard Business Review, Schmidt suggests Google have gone from Mobile First to Mobile Only - the big initiatives at Google in 2011 are mobile focused. Faster networks, mobile money and better cheap handsets are all high on their agenda.

A sort of skunk works team in Google are going to develop lots of mobile apps around social and location. Led by the guy who has driven their dominance of maps, this should be interesting. With Google royalty running location we believe Google want to own this area, not least to preserve their lead in mobile search. Don't forget they bought DodgeBall - the prequel to FourSquare - in 2005 and tried Latitude in 2009.

Apple - Rosy Future or not?

Overshadowed by the sad news of Steve Jobs health, the Apple financials were very good - selling 16.24 million iPhones and 7.3 million iPads is fantastic, and with the US market opening up as Verizon starts to sell iPhones for the first time, their immediate future looks good.

There is a suggestion that Apple have passed Nokia to be the largest phone company in the world.

Long term things don't look quite so rosy - a new survey suggests the app market will grow to be worth $25 billion by 2015 (up from $6.8 billion last year) but that Apple will only take a 20% share. Considering how dominant Apple is right now, that's a big shift.

Right now, comScore estimate that subscribers are pretty evenly divided between accessing content through browsing, applications and SMS. As we expect users to test these various platforms, we think both content publishers and advertisers will uilise all three platforms - Nothing But Net

Facebook - a machine for making money?

We view the social sites (especially Facebook) as network platforms, like Visa/Mastercard. As such they don't necessarily need to monetise directly from their customers; they can enable applications such as casual games (or payments, or Ecommerce or virtual gifts) and collect a small fee as the providers of the networks - Nothing But Net

At an interesting get together of the great and the good of the UK media and ad community this week, we were surprised by the general shock over Facebook getting a $50 billion valuation from Goldman Sachs. This was driven by a questioning of their business model - apparently reinforced by a senior figure from ITV (at another event) saying she didn't understand the Facebook business model either.

In a week when eMarketer reported Facebook made $1.86 billion in 2010 - predicted to double to $4 billion in 2011 - it's interesting that the people who control where the majority of brand money gets spent don't know that much about the Facebook opportunity.

As a self serve model, being primarily used by DR clients chasing acquisition costs, it's not that surprising that senior media people aren't au fait with Facebook - it took Google a long time to build strong understanding of their offer among brands and agencies.

However, Facebook is really effective at driving traffic.

So consider this - those advertisers already using Facebook tend to be very impressed. Facebook don't monetise their huge mobile traffic at all (yet) and they are fast developing a more traditional sales approach. So when all those factors mature, we will see huge advertising revenue for Facebook.

Plus, there is all the money they make as a platform, as their virtual currency and social commerce grow. As an example, our friends at ASOS have launched their Facebook shop this week.

And Facebook have just announced another tactic in their desire to grow their mobile audience - through a partnership with London-based Snaptu they are rolling out a Java based app extending the reach of their service to the vast majority of phones.

Amazon acquisitions

Some people question our inclusion of Amazon at this level of influence - they see them as a great ecommerce player, but not as a platform like Google, Apple and Facebook.

We believe their huge footprint makes them hugely influential. They're a key player in tablets with Kindle, their web services makes them crucial to many companies (from start ups to very well established firms) and Alexa is one of the key measurement tools for the web. People forget they even launched their own search engine - a9.com - which is now used by many ecommerce brands.

They also make smart strategic investments as two bits of news this week show. They invested $175 million in local deals company Living Social last year and this week helped them boost their customers numbers by allowing them to sell $20 Amazon Gift Certificates for $10. As you might guess this excellent offer went down well - and they sold 1.3 million.

And here in the UK, Amazon announced they were buying the rest of UK start-up Lovefilm - a company they invested in a couple of years back - giving them a strong position in the emerging market for streaming film. Now they are a dominant player in digital books and movies, we have to wonder what they might do to challenge Apple in digital music - Spotify, We7 or SoundCloud would all be loose change for Amazon given their share price is up 52% since last summer.

Mobile phone scale on par with TV = huge ad opportunity - Nothing But Net

Click here for your full Mobile Fix (complete with links to background articles).

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