New Technology and New Company
September 29, 2010 Leave a comment
The history of IT Industry witness the emergence and the fall down of many famous companies, most of which are labeled with a certain kind of technology. The development of these companies are tightly associated to corresponding technology.
For example, prior to the Microsoft Age, software was rarely considered as profitable, let along become the center of whole IT Industry. It is Microsoft led by Bill Gates that open the gate to proprietary software age. Microsoft teaches people all round the world (may be except China) that software development should be well respected as the other essential part of PC in spite of Hardware.
In the mid 90s, few people realized the power of Internet. Yahoo was one of the first companies that really treated Internet as paramount new media which can totally change the method of information distribution. Since then online AD gradually become the mainstream ad distribution method. Cherry Yang’s efforts greatly damage the traditional media like TV and Newspaper and reshuffle the whole media industry.
Similarly, another Internet giant Google has totally changed people’s way to get information since its setup at 1998. With novel PageRank technology, Google shows web users organized information indexed by millions of key worlds instead of orderless web pages.
Now Microsoft, Yahoo and Google have become the synonym of Software, Online Ad and Search Engine. It is new technology that creates the prosperity of these IT Giants. However, this is not always the case, new technology doesn’t always means new successful company.
Take Netscape as example. The Netscape Navigator represented the advent of Internet Age with rich multimedia content. With this revolutionary product, Netscape became the favorite of the Wall Street and its market value surplus 5 billion dollars in a short time. This situation was totally changed when Microsoft entered the field of web browser. In short 3 years, Netscape suffered from sever defeat in the both web browser and intranet market. Under the giant financial pressure from the Wall street, Netscape finished its brilliant and short life and was sold to AOL.
Compared with the trategy of Netscape, the ending of youtube is more pleasant. The creators sold youtube to Google with a high price, at which time youtube was burning money and didn’t have clear profit model. The two creators gains 300 million dollars respectively. Many other companies have the similar happy ending, like hotmail, doubleclick.
All of these companies hold new technology that has total redefined a market, however some of them succeed at last and some other are sold. We must admit that creators’ characteristics play an important role in the process. But creators’ choice is not the only reason. the characteristic of the technology and market condition have pre-decided the destiny of each company.
To produce a new IT giant, a new technology must has the following characteristics:
1. Foundational Application with huge market demand
Not all technology is enough to support a huge IT giant. OS, online AD and search engine all share a common point: it is a necessity and foundation of whole industry. Every PC needs Operating System and all other software must be build on API of operating system. Online AD is in the base of Internet Economy, no Internet Company without the support of Online AD. Search Engine is the portal of Internet and it directly determine other websites’ flow, which is essential to generate profit.
Although applications like google map is awesome. It is not enough to support a independent company because map service is not a basic application of Internet Industry. It is in the upper layer of online ad and search engine. Map services rely online ad to make profits and search engine to import users. However, no other service is based on map service. Mail serice is similar. That’s the reason why Google Map, Gmail and Hotmail indeed cannot operated by independent company, but only by Search Engine company or Online AD provider.
2. Easy to understand.
No investor want to invest in a program he doesn’t understand. No matter how good the technology is, you cannot even start without the initial investment.
3. Gap with existing technology Or Ignorance of Existing Gaints.
The fall down of Netscape owes to its violation of this condition. Despite its importance, Web browser is indeed a simple software which is easy to reduplicate. At first, Microsoft didn’t realize the importance of web browser and didn’t pay much attention to this emerging market. However, the improper speech of Netscape’s CEO and the alliance of Netscape and Sun, the main competitor of Microsoft at that time, infringed the godfather of software industry. A crazy revenge started when Microsoft bind their own web browser to OS. In fact, it took Microsoft only several months to develop their own web browser and performance of IE caught up with Netscape Navigator in one year. With the profit generated by Windows OS and Office suite, Microsoft had no intend to earn money before Netscape is closed down.
4. Low Monetary Investment At the beginning Stage And Foreseeable Profit Model.
This can be used to explain why youtube is sold to Google. It is well known that online video is a promising mainstream application in the future. And youtube has solidify its own consolidate its leading position in video sharing market. If the cash of youtube is enough to support itself for 3 year or long, there is no need for steve chen to sold youtube. However, online video uses so many network bandwidth that few investor has patience and enough money to wait for such a long time. Besides, if youtube has forseeable profitable profit model which can helps to persuade investors, youtube can walk longer in the way of independent development.
Unfortunately, youtube lacks both of the essential conditions. As a result, it is reasonable to accept the price when Google bids for 1.5 billions.