Wallen's

Google-Twitter deal: good or bad ?

Techcrunch annouced that Google is in talks to acquire Twitter. While usually these "early stage talks" don't end up into a deal, would this be good or bad news. Obviously it depends from which perspective:

Twitter as a company: very bad
There is really a strong case for Twitter being able to make it very very very big: not only is Twitter the market leader in a new kind of fast growing web usage but also Twitter has the potential to perform a paradigm shift in terms of business model (more on this in another post later). Wouldn't it be a pity not to pursue this adventure. Under Google, Twitter will be just another service among others and will not have all management attention. This will hinder it's development vs. a standalone option (provided they have enough funding until it becomes profitable).

Twitter's founders: ???
It depends on what they want to achieve, on what is their objective: make big money now for sure or building maybe a major company in the web sector ?

Twitter's VC investors: very good
They'll make a hell of a lot of money with this sale... and in those days where VCs are craving for big exits (see Q1 09 numbers here) to show nice numbers to their LP's, it must be one of their only major exit opportunity.
I don't know if Twitter's VC can get a deal through without management approval but this could be (and I say "could be") a good example on how VCs may destroy a company's future due to misalignment of interests and timeframes.  

Google: good
Even if the price tag is very high or even way above Twitter "fair" valuation, they are basically killing a serious prospective competitor in search and thus keeping their quasi monopoly... this has unlimited value for them.

MSFT/Yahoo: bad
Twitter could be a shot for those 2 to come back into the search fight they lost. I wouldn't be surprised if they started an acquisition battle.

Facebook: neutral to good
With it's new design becoming more Twitter-like, Facebook is clearly trying to get onto Twitter. If they can't buy it and that Google hinders Twitter development, they should be happy with this deal

The web sector: very bad
Google again maintaining its predominance in the sector... and the less competition in a sector, the less performance/service/quality/innovation/etc. for all users...

Personnaly, I vote against that deal...for the web sector and for Twitter itself.

Those were my first thoughts. What are yours?

UPDATE: here is an answer by Twitter that doesn't say much except for one sentence "Our goal is to build a profitable, independent company and we're just getting started".

Distribution power vs. network effects

Startable builds today on a WSJ article on Google to discuss about investors and technology entrepreneurs' fear of Google's distribution power:

"The thought among VCs was that, with millions and millions of people viewing the Google search page each day, Google could easily launch and test all sorts of crazy new services, like Google Checkout or Google Finance or Google Base or Gmail. Some of these have really taken off, and with the early(ish) success of Gmail VCs were quaking in our collective boots that Google could easily leverage its distribution power into huge market share for any new product its engineers dreamed of creating.

But maybe Google’s distribtion heft isn’t enough?”

This fear reminds me of our seed fundraising earlier this year when most prospective investors came up with very similar questions.

My answer was that actually Google was the least of my fear: it has failed quite a number of times in the past years trying to compete with start-ups. To name a few, Google's Orkut did not hurt FB nor MySpace. It was successful only in Brazil and India where they were not present yet. Google launched its own YouTube equivalent service... before buying YouTube after the failure of its service. Lively is another recent example, etc. However, iGoogle did compete effectively against Netvibes. The latter had not yet really penetrated the US market and this service has no network effects. Actually, if you look at the list of sucessful services in Startable's post, there is no services with networks effects (except maybe Google Base).

In other words, network effects are an extremely effective barrier to entry against the distribution power of big corporations (... if the latter is slow to come in). Networks effects are not just a Web phenomenon. It's been used in numerous sectors. That's why Google has missed most of the user-generated-content trend.I wonder however why they were systematically so late? Maybe it comes from a "company DNA" skewed towards "the belief in the power of algorithms" (vs. human power)?

Google taking over the Web?

Everybody talks about the Web OS that Google wants to build. However, by building the latter, there might be a “collateral damage” that few people talk about.

Currently Google is one of the entry points to the content of the Web along with other search engines or other types of homepages (e.g., Netvibes, friendfeed, etc.). There is also today an intermediary between the users and these entry points: the browser and its address bar that gives users the freedom to go wherever they want by typing Urls – the users’ space of freedom. The latter allows people to discover, select and ultimately organize their Web as they wish.

Everybody will have noticed that by typing a word in the address bar of Chrome, the corresponding Google search result comes up (or the historical activities), i.e. the address bar of a browser is becoming a Google search bar. That seems to be an improvement. After all, typing urls is not very convenient so one can easily imagine that users will gradually only type words instead of urls in the address/Google search bar. If that is the case, urls would gradually disappear (see also Jeremiah on this). After all, why keep them visible or usable in an address bar if nobody uses them? The above improves the users experience so what’s the problem?

Well, a search engine is not a neutral algorithm. It is a system that organizes the Web by selecting and ranking contents. In other words, by merging web surfs, surfs on Google sites and the device that allows to surf, Google is entering in the heart of the users’ space of freedom. To draw a parallel with another media sector, it is as if a TV network had a monopoly and put forward to all viewers the content to watch as soon as they put on their TV… thus replacing the remote control. By putting forward its own search engine directly and automatically in the address bar, Google is substituting its own view and organization of the Web to the user’s personal one. I don't know if Chrome will become the standard browser used by the mass of the Internet users (definitely “killing” other search engines along the way), but if that is the case, this simply means that Google’s algorithm would be the organizer of the Web with no alternative to it… A lot of “ifs” I admit but that would not be as funny as a comic book…