The Four Internet Ages
Now that I’m between startups, I’ve spent a lot of time thinking about what I want to work on next. I like thinking in frameworks, which makes it easier to evaluate new opportunities and create my own theses around where technology and business is heading. My previous analysis on the Product vs Distribution Framework focused on the core traits a company needs to ultimately succeed. This post looks instead at the macro trends of the Internet itself.
Each phase of the Internet’s growth was enabled by key platforms, and had key successes that were able to level those platforms and other trends to create huge businesses. Each phase also built on the previous phases, and would not have been possible without the foundation created before it. And because of this improving foundation and growing user base, each phase enables bigger opportunities that can be reached faster than before.
The diagram below shows the four key phases of the Internet, as the platforms and successes in each, as well as the worldwide desktop and mobile Internet user base. Note that the timeline for each is a general approximation of that trait as the defining leading edge of the web, and there exists considerable overlap in the general use cases and impact of each.
1 – The Early Internet
The first Internet phase saw the early growth of users. This growth (and perceived future growth) was so explosive that it led to the great Dot-com boom and bust. It was built on the proliferation of the web browser (Netscape and later Internet Explorer), increasing penetration of desktop computers with Internet access, and standardization of web protocols. In the early days, there were not a lot of users or content, so the most logical way or organizing available content for a limited user base was simply an editorial listing of interesting content, thus the birth and proliferation of portals like Yahoo.
2 – The Searchable Web
The second phase of the Internet saw an explosion of content, which was built on the key enablers of the first age (desktops, browsers, web standards). Once the volume of content exploded beyond the early manageable levels, lists and portals were no longer sufficient to access this content. This led to search becoming the only feasible way to harness the incredibly expanding volume of content.
Google emerged in this era as the key platform because of it’s simple, powerful, and fast search capabilities. This dominance led to a web that was organized through the principles of PageRank, and created the SEO and SEM industries. It also opened up a new world of long tail e-commerce, where small companies could have a much bigger footprint than ever before, and cheaply reach customers across the world.
3 – The Social Web
The third phase of the web was based on saturation of online penetration among the general population. A true social web can only existing once online penetration begins to saturate the population, reaching 70% adoption or more. Interestingly, most developed countries started reaching this penetration level around 2003-2005, coinciding with the birth and growth of social networks. This is in stark contrast to the Searchable Web, which is valuable to users even with low adoption rates as long as there is enough content to search.
In this phase, Facebook has emerged as the defacto social platform. This platform has facilitated the creation and growth of two of the fastest companies ever to reach a $1B revenue run rate: Zynga and Groupon. Both of them used the Facebook platform to grow faster and more cheaply than ever before due to the incredible low friction that social networks have to get new users. Zynga reached 100 million users faster than Facebook itself, mainly because most of the users were ALREADY on FAcebook, making them much easier to acquire.
4 – The Mobile Web
The fourth phase if the one we are just entering, which is being enabled by ubiquitous mobile computers (e.g. smartphones). Inherent to this phase is not just the mobile computer itself, but the fact that they are increasingly always with us, and are location aware (know where we are). The combination of ever-present mobile computing, plus a rich location layer, seamlessly integrated with the social graph and the searchable web creates enormous opportunities.
The key platforms in this space have are clearly iPhone and Android, but there is still room for winners on the customer side. Foursquare appears to be one of the early companies to succeed while specifically leveraging mobile + location, but there will certainly be more.
What does this mean?
What’s interesting about these trends as I pointed out earlier is that each phase gets progressively bigger than the one before, and leads to faster growth for companies that are well positioned. You can bet that new companies will emerge will get to $1B in revenue faster than Groupon and Zynga.