How the computer giants could become the new media moguls

6 May 2010

Anyone who kept an eye on the spat last week between Apple CEO Steve Jobs and digital media software company Adobe would realise that a seismic shift is happening in the computer industry.

Ostensibly, the bitter words where Jobs blamed crashing Macs and the iPhone’s poor battery life on Flash and praised a new video standard called HTML5 was all about technology, right?

Wrong. What’s really happening is the technology companies of today are positioning themselves to be the media companies of tomorrow.

Money from advertising

Those people you buy computers and phones from will quite soon be advertising at you. Advertising on the new Apple iPad tablet computer and next-generation iPhone 4 devices is expected to cost brands anything between $1m and $10m on Apple’s new iAd platform.

Apple began this transition a decade ago, starting with the iPod and music and now it is selling apps. Last week it began selling movies to iTunes users in Ireland. Advertising is the next step.

Think about it. Who are the two biggest media companies on the planet today? They are not newspaper companies and they are not TV companies. Those companies are Facebook and Google. They don’t employ journalists, they employ software engineers, and they are making a fortune out of advertising.

The technology industry’s quest to drive additional revenue from media and advertising is leading to the demise of good old desktop computers and you will instead see investment in smaller, more versatile laptops and netbooks, smartphone devices and tablet computers. But it will go beyond that. Technology makers like Microsoft also want to be embedded in the home, in your digital TV and for good measure, maybe even your fridge. It’s called ubiquitous computing.

HP and Palm

Hewlett-Packard’s $1.2bn acquisition last week of Palm wasn’t just a move to get its hands on the company’s smartphone devices. The move was calculated to get its paws on Palm’s webOS operating system so that it could place it in all manner of devices.

Last week Microsoft unveiled a new version of its Windows 7 operating system called Windows Embedded Standard 7 that it will sell to original equipment manufacturers who want to put intelligence into all manner of domestic devices and connect them to the web and drive media and entertainment wherever you go.

Industry analyst Strategy Analytics estimates the potential market opportunity for web connected set-top boxes, digital video recorders and flat-panel TVs to grow 50pc a year to 2014, growing from 40 million units to 360 million.

At the Mobile World Congress, Google CEO Eric Schmidt proclaimed that from here on in everything Google will develop will be done ‘mobile first’.

Weeks later Google Europe boss John Herlihy announced that in three years’ time the desktop will be irrelevant.

Small wonder then that already Google Android phones are selling at the rate of 60,000-70,000 a day, catching up on the Apple iPhone, which is selling at the rate of 95,000 a day.

Google, Google everywhere

Google is very soon to launch its first Chrome-based netbook and in recent weeks Intel demonstrated how Google’s Android operating system can run on its Atom processor. What this means is Google, or its partners, will very soon begin selling Android-powered tablet PCs to compete with Apple and, of course, drive advertising at you.

“Because there’s more information and because it will be hard to sift through it all, that’s why search will become more and more important. This will create new opportunities for new entrepreneurs to create new business models – ubiquity first, revenue later,” Herlihy said.

In fact, the disruptive effect that Sergey Brin and Larry Page had on the internet when they were maxing out credit cards in 1998 to buy servers to build their search engine haunts Google to this day.

“The fear is the next Sergey and Larry will come up with a disruptive technology or service that will eliminate the need for Google. That spurs us on to deliver the best-quality return on investment to advertisers in an open and transparent partnership that works for them.”

Google has every reason to be afraid. It after all created this dynamic. Now others like Apple, HP and Microsoft are studying ways to use the connected world to connect new services with billions of new consumers.

By John Kennedy

Photo: ICT giants like Apple and Google realise that consumers want affordable net-connected devices, not complex, expensive computers. Put these devices into the hands of millions and it’s a marketer’s paradise

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years