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Google Is In Danger of Being Shut Out of the Changing Internet
<div align=justify>The upcoming IPO of Facebook, the flak surrounding Twitter’s decision to censor some tweets, and Google’s weaker-than-expected 4th-quarter earnings all point to one of the big events of our times: The crazy, chaotic, idealistic days of the Internet are ending. Once, the Prairies were open and shared by everyone. Then the farmers arrived and fenced them in. The same is happening to the Internet: Apple, Amazon and Facebook are putting up fences — and Google is increasingly being left outside. The old Internet on which Google has thrived is still there, of course, but like the wilderness it is shrinking. Often these days, we sign up for Facebook or Amazon’s private version of the Internet. At other times, we use a smartphone and download an App instead of using Google search. Investors are already placing their bets on who the winners of the new Internet will be: Amazon’s shares are up 11% since the year began; Apple is up by roughly the same amount; by contrast, Google is off 13% from the peak it achieved in early January. It is still the early days of this long-term trend, but my hunch is that this gap in performance will widen over the coming year — and that Google’s long slow decline has already begun. What makes Google’s predicament so serious is that it has little to do with technology and everything to do with business models. You can buy or copy technology, but changing a business model is about the hardest thing any company can do. Google’s business model, and nearly all its revenue and profits, depend on the Internet remaining open. When we search, Google pockets billions from advertising. If the old Internet is changing, Google’s original way of doing business loses value. When Google reported its results two weeks ago, the first headlines focused on the 25% increase in fourth quarter revenues compared to last year. Investors, however, focused on the drop in the cost per click that Google is able to charge advertisers. The main reasons for the decline in this all-important metric is increased competition from Facebook, Amazon, and Apple. Start with Facebook, which has erected a cyber fence around its 800 million-plus users and refuses to share some important data with Google. This means that Google’s searches are not quite as valuable to advertisers as they used to be when the Internet was open and when Facebook was much smaller than it is today. Amazon is increasingly playing a similar trick — but with a twist. Amazon has taken Google’s freely available Android operating system and adapted it for its new Fire tablet. Amazon gets to free ride upon Google’s software, in other words, while the search giant gets nothing back in return. No data, and no advertising revenue. Apple’s land grab, meanwhile, may be the most definitive. The Apple universe is like a cable TV network that owns content or aggregates it. It’s phones, computers and tablets are like the set-top boxes your cable company gives you. The content you consume might be a film that you download, a song, a book, an application or something you buy on line, like a pair of shoes. And none of the data Apple’s customers generate is available to Google. (Amazon basically has the same arrangement going with its Kindle and Fire. The only thing it doesn’t own is the network, but it doesn’t matter: Once you log into Amazon with a password, you’ve left Google’s open Internet.) The danger to Google, in other words, is that as social networking, smartphones and tablets increasingly come to dominate the Internet, Google’s chance to earn advertising revenues from searching will shrink along with its influence. Yes, Google has the Android and Google+, but these may not be enough to fight the shift to the closed Internet. Google+, of course, has just a tiny fraction of Facebook’s scale and there’s currently little reason to think it can catch up. The Android operating system, also an attempt by Google to build its own internet eco-system, is a more conspicuous success. Most commentators focus on the rapid growth of Android and the fact that it has greater market share than the iPhone. But this analysis misses the point: The Android may have market share, but more than half of mobile searches come from iPhone users. Google may have developed Android but, unlike Apple’s iPhone, it does not really control it. Licensees like Samsung and HTC are able to adapt Android software to their own ends. And smart companies like Amazon are getting a free ride on Android while sharing little of the spoils with Google. Don’t get me wrong: Google is still a force. Even its disappointing earnings were huge. But I suspect that enormous earning power has reached its peak with the closing off of the Internet frontier.</div> ''Taken from http://time.com''
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Google Is In Danger of Being Shut Out of the Changing Internet
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