Ciaran just wrote about how everyone is buying Yahoo! including Nokia, the mobile handset manufacturer (something Rebecca talked about as well). We have spent time here speculating about the exact same things. The combination of this train of thought and Rand’s post on what might dethrone Google made me decide to write my thoughts about what kind of company might win in mobile search.
In my mind, there are a few possibilities:
1. an existing large search engine (Google being the obvious choice) 2. a comeback play from a smaller search engine (e.g. Ask) 3. a mobile operator (e.g. Vodafone, Verizon) 4. a mobile operating system / software player (e.g. Symbian, who make the software for Nokia handsets, or Microsoft) 5. a start-up (e.g. ?) 6. something human-powered or with a different business-model (e.g. texperts) 7. a handset manufacturer (e.g. Nokia)
I’m going to deal with my thoughts on each in turn (and then tell you my favourite) but if you want to have your say, cast your vote:
##Existing large search engine
Can Google parlay its dominance in the grown-up web into mobile dominance?
This seems relatively likely in my mind - they know how to do search, and they can certainly work out how to do mobile. They have incredibly strong branding, and association with search. They are also already doing a lot with mobile maps, mobile gmail, mobile reader etc. Finally, as handsets get more iPhone like (if that is inevitable?) more and more people will be using grown-up Google anyway.
They have a huge headstart with their index, technology, branding and manpower. But it’s not a foregone conclusion - for example, they have no particular advantage in the localisation arena or integration into the other features of the handset. Let’s look at the next possibility.
##A comeback play from a smaller search engine
It seems a little unlikely to me. I don’t want to write off the smaller engines as I think there is a lot to be said for Ask’s algorithm, for example, but they just aren’t growing in any sectors at the moment. The skills and technology they would need to win at mobile aren’t that different to the skills they need to stage an online comeback. Unless we see signs that’s happening, I’m going to remain a sceptic on this possibility.
##A mobile operator
We know the operators are desperate to avoid the fate of the fixed line operators, who became “just the pipe” during the explosive growth of the Internet. Remember AOL’s walled garden? That didn’t work out too well, did it?
For the same reason, walled gardens provided by the mobile operators (called ‘carriers’ in the US) have been being gradually rolled back. Consumers want to go where they want to go - they don’t just want the news and sport that the operators want to force-feed them. If it’s not going to be through the walled garden approach, then the operators need to get innovative to avoid the “just the pipe” fate. One way they might try to do this is by going after the search market.
At the moment, many of the operators have relationships with the regular search engines (see today’s T-Mobile announcement), but they might see this as an attractive game to be in. The problem is the same as broadband providers going after the search market (such as we see in some European countries - e.g. free.fr, or such as AOL attempted to do) - even if they win 100% of their users, that is still a pretty small market share compared to what a network-agnostic competitor can achieve in principle. This is enough for me to believe that it’s not going to be the answer here.
##A mobile operating system / software provider
Ah. The classic ‘Microsoft’ route. Use dominance of the platform to leverage your way into a service market.
Hasn’t worked so well for Live search yet (couple of percent market share in the UK and the US despite being the default search through IE7 and the search provider for the MSN properties which are the default homepages of Internet Explorer browsers).
Having said that, the mobile market is a different beast, due to the timescales of market and technology development. For search, the first time round, the timescale looked a bit like this:
1. no-one uses search engines (no, really, we didn’t always have them) 2. search technology arrives but it sucks 3. Google creates something better 4. everyone ends up using Google
Microsoft attempted to grab this market through their desktop dominance somewhere between 3 and 4 with a sub-standard product. This is a tricky time because Google is the darling of everyone for changing their lives.
On the mobile, the timeline is a little different:
1. everyone uses search on the desktop (mainly Google!) 2. search technology mainly rocks (that’s not to say there won’t be significant improvements in coming years) 3. very few people use mobile search 4. ???
Whoever grabs market share (through branding, leverage of online presence, leverage of some kind of market power in a different sphere or however) will presumably have a search engine that works pretty well. This seems to suggest to me that there is a much greater chance of the play working in mobile than it did on the desktop.
The hindrance, of course, is that there isn’t a Microsoft of the mobile world. Microsoft isn’t a Microsoft of the mobile world. Symbian is probably the best contender and they have around 7% of the total market.
Google was a start-up, remember, who came along and ate the lunch of the (at the time) dominant search engines. Therefore in a market that isn’t really that well-defined yet, you would be hard-pushed to bet against the guys in a garage somewhere right now. With the market the way it is, though, you have to wonder if they would be able to stay independent all the way through to dominance, or would they get bought by one of the other players identified here before they got a chance?
##A human-powered solution
Texperts are solving a problem in a fantastic way, but I think it is unlikely that human-powered is going to be the answer for general mobile search in the long-run. Remember that only a tiny fraction of the world’s mobile users are using data / search at the moment - if that is going to grow in the same way as web search has (whereby search is the second most popular activity after emailing) then I reckon the winner is going to be (at least mainly) algorithmic.
##A handset manufacturer
Handset manufacturers would seem not to have the expertise to own the search market on their own. They would presumably need to acquire technology. They do, however, have the route to consumer and offer significant integration capability with other handset technologies (e.g. GPS) that may not be available to other players.
Duncan and I were discussing on the train home the other night about how at first glance, Nokia buying Yahoo! is similar to Microsoft buying Yahoo!. You could argue that Nokia would be foolish to tread down this route since they would be replicating a failed strategy -i n many ways, this option looks more like the Microsoft route of using dominance to leverage growth than the Symbian example above. Having said that, the same caveats that mean Symbian could pull it off (mainly related to the timescale / technology differences) apply here as well.
Similarities between Nokia and Microsoft
- Nokia and Microsoft control platforms (the handset in Nokia’s case, Windows in Microsoft’s)(*) - Both want a (bigger) share of the search market (Microsoft across the whole Internet, Nokia across mobile) - Both have market share and clout (Microsoft have a well-documented monopoly on desktop operating systems and office software and Nokia have nearly 40% of the total worldwide handset market) - Both fear irrelevance (Microsoft fear “not being part of the web revolution”, Nokia fear handsets becoming a commodity like the desktop PC)
(*) I know a better comparison would seem to be Symbian (who make the operating system for many Nokia handsets) and Microsoft, but actually, I think the market power is primarily (at the moment) with Nokia rather than Symbian - most consumers know they have a Nokia rather than knowing they are using Symbian in a similar way to the way most consumers know they use Windows but don’t know whether the box is a Dell or HP.
Having said that, there are a number of differences as well
- Microsoft is a monopoly, Nokia has a large worldwide market share (and only 5% of the US market) - Microsoft is already doing search, while Nokia is ‘just’ doing handsets - Microsoft has the cash pile to buy Yahoo! if it wishes, Nokia would be putting up practically its entire current assets to match the cash portion of Microsoft’s bid and its market cap is only just over half that of Microsoft
I personally quite like the Nokia option (though as noted above, I think it has to happen through acquisition). I don’t think they can build their own search solution from scratch, but as others have noted, they could be an attractive proposition when combined with Yahoo! Even though they don’t have the cash pile Microsoft has:
They have a market cap of 3.5 times YHOO and their shares are looking good:
The possibility of combining some of the localisation technology that Yahoo! has acquired with the direct handset integration and technology Nokia has at their disposal creates some pretty interesting possibilities, to my mind.
After I had written all this, Tom pointed out that Nokia and Google are announcing closer ties. Maybe that answers that question then!