There are already signs of growing tensions in the commercial relationships that enable today’s internet:
- Google is planning a future that does not involve apps – which presents a serious threat to the company’s ad-supported model;
- Apple is heading in the opposite direction – not being dependent on advertising revenue, the company sees a future based on apps on all device platforms;
- More generally, the staggering rise in the use of ad-blocking technologies is a sign that the entire ad-supported web might be delivering too many low-quality ads, which users find annoying and irrelevant. The result might be a steady shift towards paid-for content models and a wholesale clearing out of an entire category of derivative, ad-supported content – made possible by modern programmatic ad-service platforms, most notably the ones operated by Google;
- And at an even higher level, the explosion in the amount of data being collected by billions of connected devices, people, services, companies and sensors, together with the rise of artificial intelligence suggests a huge opportunity for value creation – but is not at all clear that the internet as it stands today is capable of extracting that value.
If we view today’s internet against this backdrop then it is at the very least possible that the entire web could be approaching a point where it starts heading in a completely different direction.
The commercial tensions between the main actors and the rapid advancement of a range of critical enabling technologies are so clear and so powerful that it is almost inconceivable that the internet as we presently understand it can endure without major structural change.
When thinking about the evolution of the web, it’s enlightening to draw comparisons between the internet service model and the mobile content portal model.
What are the similarities?
Firstly, let’s look at the mega-service delivery platforms today: Apple (iOS), Google (Android) or Microsoft (Windows). Users ultimately have to decide which platform they want to join. And once they have made their choice, each platform strives to ‘lock-in’ those users so tightly that they cannot seriously contemplate leaving.
This is a super-sized version of what already exists in other ‘platform’ markets – such as game consoles with Microsoft Xbox Live and Sony’s PSN – where, having made a significant investment in a previous generation console, users are tied to that company’s networks and content. This affects their choice on purchases, regardless of advances and innovations that occur outside that platform.
Companies such as Amazon, Facebook, Apple, Google and Microsoft, are slogging it out in a race to scale – scale in users, scale in breadth of devices and scale in an ever-expanding range of apps and services.
And while we have a steady stream of start-ups coming onto the market trying to shake things up, their investors mostly view the big platforms as an exit route and so there is not much actual shaking up going on at all – what is happening instead is that the big platforms are getting bigger and bigger.
Today’s web service ‘platform model’ is model is eerily reminiscent of platform models that we have seen in the past. For instance, first-generation mobile platforms:
From 2002–2005, mobile network operators similarly aimed for a ‘platform lock in’ by setting up mobile content portals to give their users accessibility to a wide range of content and content-based services.
Through controlling access to content, network operators would – in theory – gain increasing exclusivity, attract mass demand and then achieve profitability.
The thinking was that brands, such as The New York Times, would be forced to make deals with mobile network operators, because that was the only way they would be able to distribute their content. Network operators would then emerge as the only distribution channels for mobile content and, because of their exclusivity, they would be able to demand margins of 20-60%. But as we now know, things did not work out like this.
What went wrong?
The first cracks formed when users figured out how to access third-party services using their mobile data plans. Suddenly, they had the freedom to bypass their mobile network operator’s content portal.
At first the high cost and low performance of mobile data meant that access to ‘off-deck’ content and services was a small problem.
But the introduction of flat-rate mobile data plans and the roll-out of 2.5G and then 3G and then 4G mobile network infrastructures encouraged more content brands and service providers to set up mobile websites that could be accessed directly.
In 2007 – just five years later – when Apple and Google introduced their respective mobile platforms, an initial trickle of leakage had turned into a raging torrent. But while this leakage effect should have been more widely foreseen, another problem that put the final nail in the coffin on the mobile portal model: the portal model represented an innovation dead end: there was no way that a small team of product managers working for a mobile operator could match the collective creativity of thousands of external developers, and so the mobile content portal model failed to be sustainable.
And that is why we have developer platforms today - the platform operator has essentially outsourced the job to service innovation to an army of external developers.
The danger of heading towards and ‘innovation dead end’ is especially relevant to today’s internet because the current ‘mega platform’ model is in my opinion completely incapable of extracting the effectively unlimited value that is locked up in all the data that will be available in the coming years as the internet of things creates a truly unimaginable volume of data.
Essentially, the amount of data that will be being harvested in the coming years - and the commercial value locked up in that data - cannot be fully harvested by a single developer platform – like Android or iOS.
Instead, we will need something new, and it won’t be another copycat developer platform.
Why today’s internet service model is unsustainable
There are two main reasons why the service and application development infrastructures operated mainly by Google (Android), Apple (iOS), Facebook and Microsoft cannot rule on a sustainable basis:
- As the complexity of these platform models increases, so they become harder to manage, slower and less efficient.
- The exponentially increasing data volumes being transferred as a result of mass connectivity will soon exceed what even the biggest platforms can handle.
Eventually the increasingly slow platforms won’t just become frustrating for developers who are desperate to bring new service concepts to market, but they will be suffocated by the weight of data – which, even with machine intelligence, will be impossible for a few senior managers to properly analyse.
Instead, an army of hundreds of thousands of developers will use cloud-based AIs to do their own analysis in order to exploit opportunities themselves.
As with the mobile content portal model, when we see the first signs that it becomes possible for third parties to enter the market and develop apps that can access device and user data directly then a similar trend will take hold.
What next?
In the same way that mobile content portals couldn’t sustain their ‘lock-in’ of content, developers will find themselves being magnetically drawn towards an ever-expanding volume of data: on users, devices and services – and on the relationships between these.
While the big platforms will try to force developers to work via their own platforms, this will prove fruitless in the end. A new generation of entrepreneurs and developers will want to directly harvest their share of trillions of dollars of commercial value that is locked up in a vast trove of data. When the pressure reaches a critical point, a rupture will occur in the fabric of the market.
At this point, I envisage the emergence of a new layer of service-delivery and application development infrastructure that will sit between users and developers – and will be independent of Apple, Google, Facebook and the rest – which will then be regarded as legacy platforms.
Platforms will still be needed, but they will look very different to how they do today.
The infrastructure needed for these new platforms could be put in place by a new platform that gains critical mass by offering a radically different proposition to developers, rather than just offering another version of what existing platforms do. Alternatively, this could come from one or more of the large players in the market who are currently locked out of the Apple/Google service platform market (or who are too dependent on it), such as Amazon, Alibaba, Samsung and Huawei.
Either way, while the big platform providers like Apple and Google will live on as successful, highly profitable companies – just as has proven the case with Microsoft – they will not be able to control the service innovation process indefinitely.
