Facebook tops Google as "most visited web site in the US"

Interesting note in the Potomac Tech Wire today.

Facebook Tops Google to Become Most-Visited U.S. SitePalo Alto, Calif. -- Palo Alto-based Facebook topped Mountain View-based Google last week to become the most-visited web site in the U.S., according to new data from audience measurement firm Hitwise. Facebook claimed 7.07% of all U.S. Internet visits last week, eclipsing Google's 7.03%. Visits to Facebook were up 185% for the week, compared with the same week in 2009, while visits Google rose 9%. Facebook also has wrestled away the top U.S. site ranking from Google on several prior occasions, including Christmas Eve, Christmas Day and New Year's Day. Together, the two sites accounted for 14% of all U.S. Internet visits last week.

The problem is that Facebook doesn't appear to be able to monetize their product as well as Google, nor are they able to add new services/features to grow their relationships with current users. Let me know what you think... Am I off base on my comment?

Two points on Google's Corp Structure:

One of the key benefits of a bureaucratic structure is that it slows down the decision making process which limits the risk of bad decisions. More structure, more rules and processes to adhere to ensure “uniformity”. Typically, you don’t see much bureaucracy in a small company and even less in a “tech” company. It just seems to go against everything that makes them successful. However, many successful companies feel the need to implement more and more bureaucracy as they get larger and larger. Right or wrong, Google has intentionally avoided making that shift. Their goal is to attract the best and brightest, and give them the opportunity to “experiment” with their ideas. Ultimately, it’s not that Google wants a different result than any of their competitors; it’s that they believe there is additional value that can be gained by giving their employees latitude.

The way that Google deals with their investors is another story. Currently, they can get away with being aloof with Wall Street, because they are so successful that nobody really can question what they are doing or how they are doing it. However, I don’t think Wall Street is going to be very willing to put up with this kind of communication if Google makes any strategic mistakes. One bad strategic decision and they will have to change their behavior. Google is big, but Wall Street is bigger and today they can do no wrong, but that could change real quickly.

NetFlix

I love NetFlix. I love the product and I love the business. I just wish I thought of it first... Oh wait, I did... I mentioned in my blog on the BitTorrent case that I was involved in a VoD product development in 2001/2002... The problem was that the market wasn't ready for the product. The studios hadn't worked out how they were going to pay residuals to actors when content was distributed over the internet, when they would release content for VoD, how they would keep it save... blah blah blah...

Now I cry myself to sleep every night because NetFlix did what all good businesses have to do, adjust their business model to the current market conditions. NetFlix never wanted to deliver movies to you and me using snail mail (actually, I am sure that there was a large contingency of very smart people who thought that their model would never work), but they did and they developed a subscription model that had (as far as I know) never been used for major motion picture content. Now NetFlix survived the storm, has the customer base and the brand recognition to become who they always wanted to be... "NetFlix" not "MailFlix"...

What is the lesson of this case? For me it's a lesson in managing a business plan. NetFix had to adjust their business plan to support the current market, while always remaining focused on who they wanted to become.

BitTorrent

In 2002 I was fortunate enough to have developed a product that would have competed directly with BitTorrent. We had met with WB, Sony, MGM, Disney, (even MovieLink). It was for many reasons outlined in the case that we were unsuccessful , not the least of which was their requirement that our revenue model not be a profit sharing model. Our hope was that we could keep our initial investment costs down by convincing the studios to give us all of the digital content for free and we would pay them "royalties" for each view. The network itself was going to be extremely expensive to build (we had designed a content distribution network as opposed to a P2P like BitTorrent) so we were had to include the upfront costs for a lot of infrastructure and when you added in the cost of content, and the risk of a large percentage of that content having to be available but not generating any revenue (being purchased), the model broke quickly.

OK so why was BitTorrent successful in inking this deal with WB? It comes down to one simple business principal, understand the environment in which you are competing.

Architecture and ability to scale - BT knew that the Content Distribution Network (CDN - when the content is stored in locations close to the end user so that when they purchase the digital asset it doesn't have to travel a great distance thus improving the end users experience) wasn't the best design. This is the design I have experience with and the cost models broke when you expanded geographically or scaled the content up. And to be successful you had to do both; expand your geographic footprint (eventually to include the entire world), and scale your content (eventually to have every piece of content ever created available to your customer). That's a tall order and I think BitTorrent identified that issue and addressed it thorough the P2P design (if I understand that architecture correctly, P2P would elevate the infrastructure costs b/c assets would be stored on customer resources and not corporate...like Napster).

Security - I can remember that this was the number 1 issue for every single producer. Not much to say here other than BT took the time to understand the #1 issue and how they could build their product on a platform that would remove that issue from preventing their success.

Competition/Channel Conflict - This was also a very big deal for the studios. They were very conscious of release dates, and in 2002 were not exactly sure how they were going to manage this new channel. At that time they were concerned about Blockbuster and Retail distributors. In the case (which was set a few years later) Blockbuster wasn't mentioned; by that point in time I think the studios realized that the Netflix model was going to crush the brick and mortar model that Blockbuster had built. That meant that the internet could replace the blockbuster release date, but it seemed they were still concerned about how this new channel would disrupt the retail outlets like Wall Mart which accounted for a large volume of sales. I don't think the case adequately discussed the conclusions of the studios on this issue, other than to say that the retail outlets would have to develop an online presence and could use a white label version of the BT platform. I guess the point is moot once you come to the conclusion that very few people will be purchasing "disks" in the future. All content is digital and can be delivered over a network connection.

I found this case very interesting given my personal involvement in the industry, and I think the lesson here is that you must take the time to really understand the landscape of your competitive environment, especially in a new industry...