Internet giants suddenly vulnerable in mobile land grab

2 comments

This year has seen a momentous change in the shape of the global internet. More people now access the web on mobile phones than PCs in China, home to the world’s largest population of internet users. North America and Europe are not far behind in making that digital switchover, as are fast-growing internet markets such as Turkey and Indonesia.

Tech

Video: Mobile app Path succeeds with small social network

Thinkstock

Tech

Video: App good for a bachelor's degree in grilling

This presents a big challenge to today’s Internet leaders – Google and Facebook, as well as Yahoo and Microsoft – that emerged when most of their customers typically used the web while sitting in front of a large, static screen.

Some mobile executives liken accelerating growth in the mobile Internet to the disruption print newspapers faced from readers’ shift online. That creates opportunities for so-called mobile-first startups to potentially unseat the current leaders.

The speed with which apps such as Instagram or Angry Birds attracted tens of millions of users caught many Internet companies off guard and highlights how the ground is shifting under the Internet leaders’ feet.

“I think we are in 1999 right now in mobile,” Dave Morin, chief executive of Path, a mobile social network that competes with his previous employer, Facebook, says in reference to the original dotcom boom.

Instagram had 50 million users when Facebook stunned the industry with a $1-billion takeover offer, just weeks before its stock market debut. Since then Instagram has gained another 30 million users. Games developer Rovio, which claims a billion downloads for its original Angry Birds game, had 100 million downloads for its latest sequel after just three months – figures rarely attained in traditional PC or console gaming.

Dozens of app-centric startups have appeared in their wake to try to capture the virgin territory of mobile before larger, slower companies can learn or buy the specialist expertise required for smartphone mastery.

Companies such as Path and Flipboard argue that they provide a superior user experience to other social networks or magazine apps, with a focus on speed and simplicity that is tough for a regular website, overflowing with features, to cram into the small screen.

As their users flock to mobile, the existing powers of the Internet are being forced into strategic shifts that run much deeper than simply remaking their services for smaller screens or working out how to adapt existing advertising models to a new medium.

Fearing that it would lose direct access to its users, Google has already made a successful move into mobile software with its Android platform. Now, seeking to emulate Apple’s enviable profit margins and its ability to control all aspects of its customers’ mobile experiences, Microsoft, Google and Amazon have all moved into the hardware business.

The upstarts argue that the very fact that they were born native into the mobile world gives them an advantage.

“Not having any other options forces you to not treat mobile as a second-class citizen,” says Evan Doll, co-founder of Flipboard, a mobile and tablet newsreader which made its debut on the iPad in 2010. “We’ve seen the same with publishing, going from print to digital. If you are still holding on to print, you’re going to be starving one child at the expense of the other.”

The Internet giants still have scale on their side – Facebook’s mobile app, though plagued with poor reviews, has hundreds of millions of regular users and is the most downloaded app on Apple’s app store.

But maintaining their ubiquity is proving much more difficult on mobile than on the traditional web, given the barrage of competition from standalone apps.

The problem is compounded by the fact that for now, no one can secure the same income from advertising on the smaller screen. Jeff Zucker’s famous 2008 quote, as chief executive of NBC, that traditional media’s move online swapped “analogue dollars for digital pennies” may also prove applicable as internet businesses go from web to mobile.

Many in the industry argue that because it is still so early in the rise of the mobile Internet, profits today matter much less than securing a sustainable model for the future.

“Mobile is a landgrab at the moment,” says Tom Hulme, design director at Ideo, a design consultancy, and an early-stage tech investor.

Unfortunately for the Internet giants, much of the land-grabbing so far has been done by start-ups designing mobile corollaries to desktop web staples.

Yahoo-owned photo-sharing site Flickr’s mobile app, for example, was outsmarted by a legion of phone-friendly apps such as Instagram, which have attracted tens of millions of users in little more than two years.

Yelp, the local reviews site, is challenged by Foursquare, a “mobile-first” app that highlights friends’ one-line tips of local bars, shops and restaurants, with more than 20 million users. Instant-messaging services from Yahoo, Microsoft and AOL have been elbowed aside on mobile by chat apps such as WhatsApp Messenger.

The Internet groups are stepping up the pace of their response, either through acquisitions or by overhauling their existing services.

Facebook has been racing to remake itself in the image of the mobile Internet. Besides the Instagram acquisition, co-founder Mark Zuckerberg now looks at all new services or features first on a mobile device, according to colleagues, and top executives now routinely repeat the company line that Facebook has become a “mobile-first” company.

With its huge global reach, that has meant first tackling the hard task of giving members ways to access the service on many different lower-end feature phones, not just smartphones, Facebook is now bent on deepening the mobile experience of its users, rethinking its services to make them more suited to the medium.

Dick Costolo, Twitter’s chief executive, told the FT last month that he now sees Twitter’s website as an “entry ramp” guiding users to the “core” Twitter mobile app.

More recently, Google made a tacit admission that its iPhone app for Gmail needed improvement when it bought Sparrow, a popular iPhone e-mail client.

But some question whether such moves will be enough.

“We’ve been working with our companies to underscore that retrofitting a service that was geared to the web to work on mobile devices is just not good enough at all,” says Danny Rimer of Index Ventures. “Mobile is its own computing platform and the service has to be rethought to work natively on the device.”

Security	Price	Change
GOOG-Q Google	873.32	-9.47 -1.073%	Add to watchlist
YHOO-Q Yahoo!	26.33	0.31 1.191%	Add to watchlist
MSFT-Q Microsoft	34.269	0.119 0.348%	Add to watchlist
AAPL-Q Apple	445.15	3.01 0.681%	Add to watchlist
FB-Q Facebook, Inc.	24.3125	-0.748 -2.983%	Add to watchlist

GOOG-Q
YHOO-Q
MSFT-Q
AAPL-Q
FB-Q

Live Discussion of GOOG on StockTwits

Live Discussion of YHOO on StockTwits

Live Discussion of MSFT on StockTwits

Live Discussion of AAPL on StockTwits

Live Discussion of FB on StockTwits

Editors' Picks

Highlights

More from The Globe and Mail

Most Popular Stories

More Top Stories

Video

Photos

Add to Watchlist

We've run into a glitch. Please try again later.

We've run into a glitch. Please try again later.

Customize your reading font