Can anyone claim Google's crown?

PUBLISHED : Friday, 17 August, 2012, 12:00am
UPDATED : Monday, 20 August, 2012, 10:11am

When World Wide Web creator Tim Berners-Lee tweeted "This is for everyone" during London 2012's opening ceremony, it was a reminder of how much his invention has changed everyday life.

The companies that own and operate the internet aren't as generous as the British-born MIT professor, but is the future of the digitally dominant - Google clearly being the biggest example - more precarious than it first appears?

If the social media movement really is as important as we're led to believe, could Facebook, Sina Weibo, LinkedIn or Twitter be the future arbiters of the internet? Might Microsoft's Bing browser grow big enough to challenge Google, and could we see Apple further shake up the online environment?

If you need advice on who owns the future of the internet, don't ask the markets. If industry stalwarts Google, Apple and Microsoft are the benchmark in the tech industry, the likes of Facebook (950 million users) and LinkedIn (161 million) don't compare well. For instance, Google generates 10 times the revenue of Facebook and yet its price-to-earnings ratio is a quarter of the social media website.

How does Google make its millions? As well as "per click" charges to companies that advertise alongside its search results, Google puts similar adverts on YouTube, and any website that joins its AdSense scheme. The video uploader or host website gets a share, and Google takes a cut.

Facebook makes its money from adverts on its site, too, but more of us are accessing the site via a smartphone, from which Facebook doesn't as yet make as much money. In short, Facebook is much smaller - and in flux.

"Google and Facebook are businesses that are highly dependent on advertising revenues and yet this fundamental similarity does not flow through to valuations," says Victor Basta, managing director at Magister Advisors, a mergers and acquisitions advisory firm to the tech industry. "LinkedIn and Facebook are incredibly important next-generation internet businesses, but it is absurd to believe they are worth several times, or even several hundred times, more than companies that already dominate their sectors."

Basta argues that Facebook's growth cannot be exponential. When everyone has connected with all of their friends and family, expansion becomes impossible. Off-putting privacy policies could also act as a brake on the personalised data Facebook collects to inform its targeted advertising.

Others think Facebook is heading in an exciting direction. "Everyone is using Facebook, everyone is going mobile … Facebook has become a utility in our daily lives and now it's really about how Facebook executes on that," says Vanessa Barnett, technology and media partner at London-based international law firm Charles Russell.

Although a rumoured smartphone app-cum-browser does seem a no-brainer, Facebook's latest scheme is intended to challenge Google only on advertising. Facebook Exchange is a targeted advertising idea that will show you an advert on Facebook for something you've just searched the web for - perhaps through Google. If successful, it could net Facebook millions of dollars.

Meanwhile, social media success eludes Google. "Unfortunately for Google, Facebook has the largest social presence," says Arnold Ma, founder of Chinese-Anglo digital marketing agency Qumin. "And with the rumours of Facebook entering the search market, Google should rightly be worried."

"Consider the impact Facebook could have on Google if tomorrow it changed its homepage to just one search field," says Paul Childs, CMO and co-founder of Adfonic, a mobile ad platform that is itself attempting to chip away at Google's dominance in that sphere. "Facebook's incredible social database could be used to drive search, and that would be a direct threat to Google."

Other potential rivals to Google in the search sphere include Microsoft's Bing (now the second-most-popular search engine globally), while emerging search engine is fast becoming a favourite among developers and early adopters - exactly Google's demographic back in 1998. Meanwhile, Apple's voice-activated Siri is an attempt to popularise and dominate a whole new way of searching the web.

Despite these challenges, Google's market share increased to 65.5 per cent of global searches last year, but that figure hides a growing threat from China. By far the most dominant search firm in China is Baidu, which boasts 80 per cent of searches to Google's 10 per cent.

"Baidu understands China and enjoys established ties with the Chinese government," says Childs. "So it's unlikely that Google will challenge Baidu in a potentially massive market."

Whoever creates the most popular mobile search experience will control access to the web, but the fact more searches are done from phones and tablets than from desktop PCs is a tidal shift. Google knows the tech business is littered with examples of companies that have monopolised one wave - IBM, Kodak, Nokia, Intel and even Microsoft - only to be washed away by the momentum of the next.