Bold Predictions For China Tech Over Next Decade

July 19th, 2010

The past decade have seen the rise of many Chinese Internet companies which have become wildly successful, and which most in the west are only now beginning to notice. These are companies with names like C-Trip, Shanda, Tencent, Alibaba, Taobao, Baidu just to name a few.

For the consumer-facing companies who benefited from China’s rapidly growing consumer spending power, this growth was unrivaled. They rode two waves to maximum advantage: the popularity of tech among Silicon Valley venture capitalists and private equity firms, and with the Chinese government; and with the rise of China’s urban middle class. In contrast to many American firms which really did invest in significant technology, many of these companies had less in terms of technology; preferring instead to spend their investment money on hiring people and building a human salesforce. C-Trip, the popular travel site, was mainly a call center with a website when it went public; Baidu built up a network of resellers which it bought out when it went public, and Alibaba has an aggressive salesforce to work with Chinese SMEs.

Over the next ten years, there will be dramatic changes. Here are some of the trends I see:

  • Growth in the economy will slow gradually at first, then will become more dramatic. The Chinese economy’s period of rapid growth has already passed its peak.
  • Slower growth means that income gaps will widen in the society, along with opportunity gaps for individuals. From a marketing point of view, segmentation becomes more important. Qualified lead-generation businesses will become lucrative.
  • As the economy slows, targeted advertising will become more important for the Chinese Internet. Advertising-based Internet models which did not work well in China previously but worked well in the west will be re-introduced into China. Successful companies will adapt them to the realities of the China market without trying to force a western model.
  • Because of the slower economy, real technology adaption will take place in medium- , and even small-sized, firms. These will focus on working with very large datasets and data mining, and will focus on describing the topology of the Chinese Internet in a way so that other businesses can use this data.
  • Lower disk space and bandwidth costs will mean that even though Chinese companies adopt more technology, their costs will be lower.
  • From a venture capitalist’s and private equity investors point of view, the biggest cost will be the founding team. The best teams will be few and far between, and will be much sought after. Compared to Silicon Valley and the rest of the world, Chinese Internet startups will still be more likely to be led by individual entrepreneurs than by founding teams in the western mold. This is a culture thing.
  • The trend to Chinese government preference for RMB funds and local investors over US- and western-based venture capital and private equity funds will pick up pace. The more unfavorable the economic environment becomes, the more dramatic action the Chinese government will take. This will cause some tension with the US, but the Chinese government will be willing to take the hit because domestic concerns for social harmony take precedence.
  • Some western venture capital and private equity firms are studying the possibility of Chinese IPO exits. Don’t hold your breath waiting for these to happen; they are likely to be few and far between.
  • Hong Kong will gain some advantage because it policies are different from Beijing’s and like China, smart entrepreneurs will look for opportunities in the long tail instead of the large consumer market.

China’s economic development so far is based on two assumptions which will come under pressure over the next decade. The first assumption is that rapid urbanization is a good thing, since that will lead to the development of an urban middle class. The challenge over the next ten years will be how to find jobs for that urban middle class, whose living costs have gone dramatically higher, while the global macro climate has dramatically worsened? This is already showing up in the rise of the ant people, educated white collar workers who cannot make it up all the way to the top of the pyramid. For the first time in its history, the belief that education is the path to success in Chinese society will be challenged.

The second assumption will be a shortage of blue-collar factory workers, which has already begun to show up in southern China in the form of strikes and slowdowns at foreign-owned factories. As China’s working population dramatically ages over the next decade, this situation will worsen. Technology can, to some extent, ameliorate the labor shortage, but it cannot generate demand.

During the next decade, we will find out if China can become rich, on a sustained basis, before it grows old.

If the Chinese government does not succeed, then China will head into a prolonged economic slump after 2020, which will be much like Japan’s, and further adding to what is likely to become a prolonged global economic depression. In addition, the workforce which starts working after that year will have to deal with a worsening environment and dues, in the form of non-performing loans (NPLs), from spending in the high-growth years.

That is why this next decade is make-or-break for China.

Rebecca MacKinnon Raises Interesting Issues

June 30th, 2010

Rebecca MacKinnon has raised some very interesting questions which need wider discussion; this has to do with US companies investing in Chinese companies which support censorship. While her testimony has to do with China and Baidu, the issue of what to do when US commercial interests are in direct conflict with values which the US government claims to support is something which should be opened up to intelligent debate and discussion, instead of being swept under the rug.
She is very specific in her criticisms, and does not hold back from naming names, including the two US directors of Baidu. I urge you to download and read her PDF. She goes into some detail about how the Chinese government has adapted in a very smart way to support the Internet in a way which she calls networked authoritarianism, and has set the terms for how it will operate in China. Companies which want to operate in China must help to obey and enforce these terms and conditions. In some cases, such as Baidu’s, these companies have attracted US investors’ money.

Baidu’s Problems: The Other Side of the Equation

December 4th, 2008

Lately, there has been much discussion about Baidu’s problems re the disclosure that they were accepting payments from makers of less than consumer-friendly products for higher rankings. David Wolf has an excellent posting about how Baidu has hurt itself in the public relations battle, with some significant assistance from CCTV and Google. According to David, Google China has positioned itself to benefit from some advertisers who eschew Baidu’s former position of accepting money for high positioning, without taking a second look at some of those companies which paid for those high rankings.

On one level, Baidu is a victim of its own success. Search engines are really mapmakers: they show what’s in the neighborhood. In its early days, before Baidu became pervasive, it may have been alright to take money for businesses to show up on the map without caring too much about the reputation of the business. After all, search was a comparatively new thing, and Baidu, not yet public, wanted to grow as fast as possible, both in terms of its indexes and database, and in financial terms. But now, everyone knows what a search engine does and expects it to basically tell the truth. And if it doesn’t, they are shocked and outraged. (Whether this is real or feigned shock and outrage is another story. We’ll get into that later.) Unfortunately, Baidu’s management failed to take into account their own success, and failed to make the transition to a more open, fair, ethical and transparent model before it became a full-blown shitstorm. Making the change would have hurt the company’s earnings, something Wall St. analysts would not have taken to kindly, so they were stuck. Instead of acting proactively, they took the other path, which was waiting for something to happen to them.

And it happened.

So does this mean the beginning of the end of Baidu’s erosion as search engine market leader in China? Actually, it’s not that simple.

Ultimately, it depends on Robin Li, Baidu’s CEO, and how he chooses to handle Baidu’s salesforce, who have aggressively brought in the bacon so that Baidu would look good for its investors and Wall St. The big question for Robin Li is: “How can he rein in his salesforce just when he needs them the most?” The Baidu salesforce is the main differentiator for Baidu; it has been able to sell keywords to China’s SMEs, getting it far greater penetration than Google in the Chinese tier 2 and 3 cities and in the countryside. Can you imagine Robin calling in his salesforce and telling them to do business and background checks on customers? That would be a very good way to get your salesforce to rebel in a split-second! Can he afford such a rebellion just when global economies and markets are tanking and Chinese are cutting back on spending, and when Baidu is expanding aggressively into e-commerce and other fields?

I don’t think so.

But then, it’s a stalemate for Baidu’s salesforce too. It’s not like they can up and leave and go to Google China, taking their clients with them. Sure, Google China likes the sales numbers they generate, but they cannot accept their sales practices.

Checkmate.

That is why the only thing Baidu can do is stay quiet, and hope the crisis is soon forgotten by its SME customers, and the wider audience, and can get back to business as usual. Of course, Baidu’s challengers will do their best to keep the issue in the public spotlight as long as possible. That is what the public relations battle which is now shaping up will be all about.

Baidu’s strategy of hoping that the issue will be soon forgotten is not a good strategy, but it’s the only strategy left in the eyes of their current management. But a strategy based on hope is not really a strategy, especially when you are under attack.

It’s time for a change.

If Chinese companies were more like most publicly listed US companies, somebody would step forward and take the knife, setting the stage for widespread change in direction and a whole new team. (Except if you are one of the Big Three from Detroit or a Wall Street banker. But, for the most part, those industries are exceptions and their gravy days are over.)

And that is why Chinese companies cannot make dramatic change, just when they need it the most. And, in short, that is why Chinese companies will not become global leaders.

News Galore!

September 19th, 2008

Just in case you had any doubts that the world was going to hell in a handbasket, and that the inmates were running the asylum, you just might have had some of those doubts removed in the past week. And those doubts were removed in a very dramatic fashion, as in frontal lobotomy fashion.

“George Carlin, why did you have to die so soon, just before all the fireworks started? Did you actually think that the world was becoming so ludicrous that you couldn’t take it anymore, or think that you would run out of material?”

Let’s look at some of the fun things which happened this week:

  • Sanlu’s dairy products were found to have killed three babies, and caused injury to several thousand others (at least)
  • Baidu was accused of offering to help cover up the scandal by not showing the scope of the scandal in its search results. I wonder what genius came up with the idea that they could cover up a scandal of such immense proportions for a miserable 3M yuan? And who was the genius on the management side who approved such a deal? This would have taken at least two people who had frontal lobotomies. Most of the time, people who come up with dumb ideas like this are only employed in government (Most notably the US government, where they usually run smear campaigns for politicians during elections.) As for Baidu/Alibaba, now Baidu is threatening to sue Alibaba for spreading the Sanlu story. (Isn’t China becoming more like the US every day? At this rate China will be run by lawyers in five years. A sure sign of national dementia.) Are these initial signs that the Americans’ efforts to package and sell stupidity to the Chinese are showing signs of success?
  • Lehman Bros., a US investment bank, declared bankruptcy, and Merrill Lynch sold itself to Bank of America for $50B. I have the utmost admiration for John Thain: Imagine taking a company which was rapidly going down the tubes, whose assets were unclear, and whose non-performing CDOs were increasing by the hour, and he SOLD it for $50B, finding a buyer in BA? Wow, that’s neat! How’d he do that? These bankers are amazing. None of that piddly million here, million there kindergarten dotcom stuff for these guys, we’re talking real money here (even though it’s US dollars).
  • Is it just me, or am I thinking that Imagethief‘s time has come in China? I keep on fantasizing what his first lessons for new official clients might be like. How about this:

    “First of all, let’s get it clear that lies, coverups and people getting poisoned are a necessary part of any nation’s path to greatness. There is no need to deny or cover it up; we must celebrate each event as achieving yet another milestone to greatness! Let’s celebrate it! Let’s roll in it! And let’s become more and more like America with each passing moment! Look at how the Americans don’t discriminate against the mentally handicapped anymore; instead they make them their leaders! If America can do that, then why can’t China! Our goal must be to pollute the global financial system on an even greater scale than the Americans have: this will show the world China’s power!”

    • Hmmm, on second thought…
    UPDATE: Once upon a time, jokes were about comical situations which had a tenuous relationship with reality. Now, the jokes ARE reality.
    DISCLAIMERThe above story is pure satire. Don’t take it as anything else.

How To Discuss User Privacy In China?

September 16th, 2008

One of the fun things about China, and the Chinese Internet, is that new issues can pop up very quickly, and become major issues.

This has just happened with the issue of user privacy on the Internet. With more social network sites, and more users posting real information about themselves, along with contact information, etc. this has become a real issue.

I’m not going to offer a solution to this very complex issue. Instead, I’d like to bring up another issue: “How do you have a productive discussion, where all get a chance to contribute to the debate, get heard, and then come to some kind of agreement about a solution?”

Here is the problem. This issue flared up when many SNS sites started blocking Baidu’s spiders from crawling their sites. The official reason: to protect users’ privacy.

The problem is that there has been no discussion about what user privacy is. The definition of privacy is very different for a 12 year-old girl and her 40 year-old mother and, in turn, is very different for a 22 year-old gay man.

Each of them, or their parent/s, may have very different ideas of what constitutes user privacy. The gay man may not want to reveal his sexual orientation except for his closest male partner/s, and may not want anyone else, including family, to know. The same goes for religious affiliation, etc.

These are very real issues which need to be discussed and thrashed out in the open, and people need to be able to put forth their views for discussion. This is a vital and natural part of what constitutes a civil society, which is what the Chinese government supports and advocates.

Unfortunately, there is no clear mechanism for discussing a very complex issue like user privacy in China today.

Instead, we have companies coming out with thinly-disguised excuses about privacy, when in reality it looks more like a pissing match between companies over whose spiders can crawl over whose sites. Are the two groups going to come up with different, even opposing, ideas and definitions about what constitutes user privacy, and force people to choose one or the other? If that is the case, then it’s not really about user privacy, it’s about choosing between one camp or the other, with every user forced to make a choice.

But that isn’t what the Internet is all about. The Internet is all about empowering people so that they can make their own choices. The Internet is about pushing decisions to the edge, where people make their choices, and if they don’t like them, they can change them later on.

This is what is missing in China. Without this system or mechanism, there is just endless bickering and noise, and what should be a serious discussion with a well-thought conclusion, usually ends up in a lot of noise with the loudest shouters winning.

What is an important issue, usually ends inconclusively.

Or as the Chinese say 不了了之。

Chinese Internet users deserve something better.

Alimama, Taobao Merger Points To E-commerce, Search Battle

September 7th, 2008

Alibaba has announced plans to consolidate two of its subsidiaries into one company. Alimama is the company’s ad network for Chinese SMBs, and Taobao is the company’s auction platform, which is best known for dramatically driving eBay China out of the China market after eBay bought Eachnet.

This is likely a measure to counter Baidu’s plans to enter the e-commerce market. According to this report from Keso, Taobao has blocked Baidu’s spiders from crawling Alibaba. Spiders from other search engines are not blocked. It is very unusual to hear of one search engine’s spiders being singled out for blocking; I have never heard of this until now.

Can you say hardball?

Spiders are software programs used by search engines to crawl other websites; they detect changes in websites and report changes back to the mothership search engine which are used to update the search engine’s search index.

According to Keso’s report, Jack Ma of Alibaba believes that Alibaba’s SMB e-commerce platform represent the family jewels, and he already has enough users to allow him to make such a dramatic parting of way’s with Baidu. Baidu is currently China’s largest search engine player, with more than 60% market share.

For Baidu, losing the capability to crawl Alibaba’s sites represents a huge loss, and puts more pressure on their nascent e-commerce platform to succeed. Otherwise Baidu’s e-commerce search results will look very weak, just as e-commerce is showing signs of takeoff.

Now, Google China is the wild card which might benefit from the Alibaba/Baidu faceoff. Significantly, Google China’s spiders are not blocked from crawling Alibaba’s sites. Jack Ma has three options:

  • Build his own search engine team which would build its own search engine to crawl Alibaba sites;
  • Make Google.cn the default search engine for Alibaba and its subsidiary companys;
  • Go to Google China and propose a joint venture company which would have a separate search engine to crawl Alibaba sites. Search advertising revenue would be split between the two companies.

From a technology perspective, search engines are more challenging to build. Specifically, they need to continuously update their search index, although if the search engine is only pointed at the Alibaba community, it would not be as difficult. Search engines need to be continuously updated and modified to get accurate search results, although optimization on organic and paid search are very different in how they are updated and modified.

From the SMB users’ perspective, the key to success is providing a smooth and transparent transition between search advertising and online business transactions. Bad user experience has led to the downfall of many a business, most recently eBay in the US, which has continuously raised fees on its auction platform, driving away its originally fanatical loyal user base, and forcing it into a retail model which competes on unfavorable terms with Amazon, the online retail ecommerce leader in the US.

Things are getting interesting…

Google, Baidu and Search Engine Optimization in China

May 30th, 2008

Search engine marketing is the main engine behind Google’s rise as a major online media player, and the product it is offered in is Google Adwords, which allows advertisers to directly target their online ads by selecting keywords, and then targeting them to relevant search results pages and to published pages (using Google’s publisher’s network, Adsense).

In China, the leading search engine company is Baidu, which started in the US, but came to China, and is now the most popular search engine among Chinese Internet users. It has been financially successful, and is listed on the US’s Nasdaq under the symbol BIDU

There are several reasons for Google Adword’s success, and the most important are two: PageRank, which measures the popularity of a web page by measuring inbound links which for the most part, are selected by humans and not computer algorithms, and introducing relevance into the keywords auction model. Under the Google model, paying the highest price for a keyword is not enough to insure clickthrus (for the most part, Google charges advertisers per click, or pay-per-click PPC), but it must be relevant. The more relevant it is, the more clickthrus it will get, and the less an advertiser will have to pay for a higher ranking.

As this excellent article makes clear, Google did not invent the keyword auction model, but it did perfect it. By perfecting the Google Adwords model, Google has become the hugely profitable online media machine it is.

As China becomes more important as a market, more advertisers are looking to sell directly into the Chinese market using Google and Baidu, the two leading search engine firms in the Chinese market. Baidu operates under a very different business model from Google, one which it has adapted to suit the Chinese market.

My understanding is that Baidu does not figure relevancy into its advertising fee structure, Chinese advertisers only pay for higher ranking. As far as I know, Baidu does not have anything like PageRank inbound linking algorithm to count inbound links either. Without these two elements, Baidu’s ad search looks a lot like the GoTo.com ad model. This makes it fundamentally different from the Google Adwords model.

I’m digging deeper into the search engine marketing business in China, and want to hear what you would like to know about. If you have questions, please post them in English or Chinese in the comments below.

Google China Launches Earthquake Disaster People Search

May 17th, 2008

Google China announced their launch of Google China People Search in the Google China blog to help victims and their relatives get in touch with each other. I have chosen to translate the announcement in full, and have included the original hyperlinks in the story.

Aside from the human tragedy, this is an excellent study in how Chinese Internet users turn to the BBS (all of the links except for the disaster area search platform below are to BBSes) during times of emergency.

As of this morning (May 16), there are 19,579 casualties, and total fatalities are estimated to total more than 50,000. Many families are continuously looking for their loved ones, in the hope that they will be able to find them safe.

Google China’s engineers, after working more than 24 hours, have created the disaster area search platform. We have attempted to gather information from across the Internet to make it easier for users to get information. Our objective is to create a platform where bravery and hope can meet.

We hope that your loved ones are not among the long list of fatalities. Maybe they are searching for victims in ruined buildings, maybe they are caring for the injured in a hospital, maybe they are feeding a child somewhere. Maybe they will hear our call and know that they are not alone in this disaster.

If you have any information about people you know who are involved in this disaster, please post their information to Tianya Laiba, Baidu Tieba, Soso Search, Sina, and Netease. You can also send email to us. Our engineers are at work 24 hours and we will regularly update our information.

Google’s influence in China is small, so we have made this code available to everyone. Any blog and website can include this code in their website so that more people and websites can join in this search.

This is a long recovery process and there is much more work to be done. May heaven protect China, and we hope that your loved ones will be safe.

寻找灾区的亲人

More on China Mobile and Baidu

April 29th, 2008

This article is a follow-up posting to my previous article about why China Mobile should buy Baidu.

One of the rules for mergers and acquisitions is that if one company wants to be acquired by another company, they have to be moving in generally the same directions. This way, less management attention needs to be spent on changing direction and redirecting resources.

If we take a look at China Mobile, they are a Chinese company which has been looking aggressively outside of China. With 500M+ mobile phone subscribers in China, it has the user base and cash flow to be truly a world-class company. China Mobile is proposing to set up a development lab with Vodafone and Softbank to work on widgets and others services to offer China Mobile and Vodafone subscribers. From the surface, it appears that these two leading carriers are trying to wrestle some of their technology dominance back from Apple’s iPhone, which will offer its own Apple App Store, selling mobile apps directly to Apple iPhone users beginning in June.

Interestingly, Vodafone is helping to bring Apple’s iPhone into the Indian market. According to a recent article, Apple may be discussing launching the iPhone officially in China with China Unicom. (Note: I disagree the author’s tone about Apple not getting it right in selling in China, I think that Steve Jobs knows very well what he is doing, and is biding his time until the 3G iPhone comes out in June. China is another piece on his chessboard, albeit a very important one.)

On the business side, China Mobile has been most agressive in Pakistan, following on its purchase of Paktel in 2007, and has just launched its Mobile Zone in the country. This looks like a test learning market for China Mobile. There are not many companies which can afford to “test” in a country with a population of 180M, China Mobile is one of them.

Based on this, it would be fair to say that China Mobile is leaning forward into overseas markets. It has enough money in its coffers to expand more quickly, but the most serious barrier is lack of international management talent who can execute in non-Chinese markets.

In contrast, Baidu is much more focused on the Chinese domestic market, where it continues to grow and pull ahead of Google. Everything suggests that the Baidu management believes that there is much more room for revenue growth domestically in China. The only tentative step Baidu has taken outside of the China market is with Baidu Japan (baidu.jp), which has only 0.3% of the Japanese search market.

Compared to Google, Baidu still continues to go after the easy money in China. Google continuously introduces and refines it search algorithms which are the secret sauce of its success. In comparison, Baidu relies less on search algorithms, instead using human search to assist in search results.

Baidu’s search results are also fundamentally different from Google’s. While Google’s search results strictly differentiate between unpaid organic search and PPC advertising, Baidu makes no such differentiation. The end result is that unpaid search results are pushed further back in position on the search results pages.

If there is one challenge in Baidu’s reliance on human-assisted search (as opposed to automated search algorithms as Google uses) and giving preference to paid advertising over unpaid in search results, it is that while it boosts revenue in the short-term, it is not extensible outside China, except for some of the other East Asian markets (Naver.com in South Korea is one such example. It would be nearly impossible for Baidu to oust Naver.com from its leading position as the home-grown leader in that very nationalistic market.)

Here lies the challenge: China Mobile is looking outside of China now, and Baidu is still looking to grow revenue on the domestic market, while nearly ignoring the overseas market.

Is there room to narrow the gap and create a new company for mobile search advertising and location services, first in China and then which can be extended overseas?

That is the challenge.

Why China Mobile Should Buy Baidu

April 26th, 2008

A few days ago I read an interview with Steve Jobs published in Fortune in March. One of the ideas which Steve Jobs put forth is that you really need to understand the technology issues, then follow how they will roll out in order to be successful. Apple has a certain advantage because it owns the operating system and the hardware. This means that the hardware and technology can be integrated much more tightly together.

This makes me think that one of the issues with the current media and advertising space in China is that there is not enough understanding of the integration of the hardware and software. Basically, DoubleClick came up with the idea of the banner ad, then Google came up with the idea which came from came up with the idea of PPC advertising on the search results page, and the algorithms which would optimize the system to become a money machine for Google. For too long, players in this space have come from the media space, offering a “me too” solution full of buzzwords but with little real content to differentiate.

What did Google do which was so different from Yahoo!, the leading Web 1.0 portal? They got very close to the technology, to the point where they built the servers and disks, and created MapReduce, Google’s search technology which could run on huge clusters.

Now, I hear a lot of talk about all the startups in China, but most of the time, I don’t see how any new technology is used to take a whole new look at how advertising should be delivered over a complex network. Most are consumer plays which do not deliver anything spectacular. That would not be an issue if they had a good feel for the marketing process, but more often than not, they do not. As a result, most advertising buys gravitate to the big online media companies, which include Sina, Sohu, Netease and QQ, as Kaiser Kuo frequently talks about in his blog at Ogilvy China Digital Watch.

In fact, we are just at the beginning of a whole new wave for technology and advertising: this is the mobile wave. Handset makers now only pay US$15 per handset for software, and with the upcoming development and launch of Google’s Android, per handset payouts are going to go down even more. This means only one thing: there will have to be a steady advertising revenue stream to finance all the content. The mobile network though is not one network, it will have to be two:

  • The search and search results network including GPS location-based detection
  • The network delivery system

In software development, there is the MVC or model/view/controller system for software design. The rules are defined at the model level, there is the presentation end for how the viewer sees the content (Apple is now taking a grab at this with the Apple iPhone) for view and the controller, which connects the rules at the model level with the view, and handles delivery.

Basically, Apple is trying to leverage its control of the iPhone audience at the view level to get leverage with the carriers, who act at the model level. In some markets it has been successful, but not with China Mobile so far. The handset makers such as Nokia, Samsung, and LG have solutions, but since their product lines are spread across so many products, they have little leverage unless they came up with their own operating system and hardware as Apple has. What are the chances of that happening? Microsoft has a solution with Microsoft Windows Mobile, but it is just one among many players and does not have a dominating position on any of the model, view and controller levels of the mobile network.

China Mobile has made no secret of its plans to control the platform as much as possible by virtue of its near-monopoly role in this space. Ultimately, it will have to make marketing choices about what audience it wants to serve: the casual youth market or the productivity worker, and how to maximize revenue from the market they choose. The only way for them to avoid having to make this choice is to offer contextual advertising on the mobile network. It would make a lot of sense for China Mobile to buy Baidu to protect its mobile advertising revenue stream from Google, and then make a serious technology effort to combine improved search algorithms with location services. Search technology involves a great deal of non-trivial technology which cannot be easily replicated, even by a company as huge as China Mobile.

As for smaller players, they will have to come up with ways to get revenue from a market which has been bombarded with a huge amount of free content.

Google has a tremendous advantage with the Google Android operating system, which will have hooks built into it for search and location services. If you think that they are giving a mobile phone OS away for free just because they are nice people, you are delusional. They are offering a new mobile ad platform with other services to attract developers.

I expect that the mobile network will very soon become the “smart network” compared to the PC-based network, which will become the “dumb network” because it does not have location sensitivity. (Of course, newer computers will have location sensitivity. This will then combine with Google’s current services to deliver ads which will make the current ad networks look like something from the Stone Age.) The PC network will continue to be good for banner and brand advertising, but if you really want smart contextual advertising which operates on a PPC basis, mobile will be the leader.

The smaller mobile players will have to pay “toll fees” to the model (China Mobile, China Unicom, etc,.) and view (Apple) players. It will be much harder to get onto the technology ramp for mobile than it is for the PC, at least in the beginning.