The Bankwatch

Tracking the consumer evolution of financial services

Whats next after clicking ads?

The big debate at the moment is whether we are into another technological bubble.  This is fuelled by the valuations of FaceBook, Groupon and Twitter.  But there is a deeper issue, and this Bloomberg article by Ashlee Vance does a really good job at capturing it.

His general thesis is the differentiation of foundational technologies and those that sit atop the foundational technologies.  He makes the point that there is nothing particularly new about FaceBook, Twitter and Groupon.  He notes that Groupons legacy for the world is cute emails.

Worse, the smartest people in Silicon Valley are the mathematicians and he write about Jeff Hammerbacher.

As a 23-year-old math genius one year out of Harvard, Jeff Hammerbacher arrived at Facebook when the company was still in its infancy. This was in April 2006, and Mark Zuckerberg gave Hammerbacher—one of Facebook’s first 100 employees—the lofty title of research scientist and put him to work analyzing how people used the social networking service.

But …

Hammerbacher looked around Silicon Valley at companies like his own, Google (GOOG), and Twitter, and saw his peers wasting their talents. "The best minds of my generation are thinking about how to make people click ads," he says. "That sucks."

The article speaks about the billions in revenue that are being generated by these new companies and many of the ‘me toos’ that show up every day. 

Perman is a successful entrepreneur that sold web tv to Microsoft many years ago, so he understands add on technology.  When asked about the outcome if the bubble pops;

So if this tech bubble is about getting shoppers to buy, what’s left if and when it pops? Perlman grows agitated when asked that question. Hands waving and voice rising, he says that venture capitalists have become consumed with finding overnight sensations. They’ve pulled away from funding risky projects that create more of those general-purpose technologies—inventions that lay the foundation for more invention. "Facebook is not the kind of technology that will stop us from having dropped cell phone calls, and neither is Groupon or any of these advertising things," he says. "We need them. O.K., great. But they are building on top of old technology, and at some point you exhaust the fuel of the underpinnings."

Relevance to Bankwatch:

After reading this article, you are left to wonder if the real end game of internet is no more than fancy ways to make you click ads.  Will be another foundational change or shift that will be driven out of a bubble popping failure of the current race to ad supremacy, that will be replaced by something we have yet to understand.

There is much talk of big data and Hammerbacher’s new company Cloudera is taking that one step further with an operating system approach to understanding patterns and clues within enormous amounts of disparate information. 

A thought provoking article, definitely worth the time to read.

I can’t say it better than the final paragraph:

There have always been foundational technologies and flashier derivatives built atop them. Sometimes one cycle’s glamour company becomes the next one’s hard-core technology company; witness’s (AMZN) transformation over the past decade from mere e-commerce powerhouse to e-commerce powerhouse and purveyor of cloud-computing capabilities to other companies. Has the pendulum swung too far? "It’s a safe bet that sometime in the next 20 months, the capital markets will close, the music will stop, and the world will look bleak again," says Bridgescale Partners’ Cowan. "The legitimate concern here is that we are not diversifying, so that we have roots to fall back on when we enter a different part of the cycle."

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Written by Colin Henderson

April 28, 2011 at 09:31

Posted in Uncategorized

3 Responses

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  1. Then the question becomes for those search engines how to make profit except the Ads?


    April 29, 2011 at 21:31

  2. That is absolutely the question. At a minimum, it seems to me that the follow on folks who assume ad clicking will provide a business model, do need a plan B.

    Colin Henderson

    April 29, 2011 at 22:28

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