When it comes to data services, social networks, cloud computing, mobile and music, market concentration is constantly on the rise. Could this mean the burst of another bubble, once again requiring taxpayers to foot the bill?

Below, we discuss this from a Web 2.0 perspective. In the meantime, to keep up with our latest posts, why not just enter your email below to get the information first?

2010 will bring more players: Defend your turf!
Once upon a time, Nokia released a mobile phone that was basically re-sold by various operators in numerous countries and any subscriber revenue stayed with the operator. Apple’s iPhone revenue sharing deal has changed all that.

Google’s mobile operating system Android is also challenging Apple’s dominance. With this, Google is attempting to make sure that consumers continue to use its search function from their mobiles.

THE BATTLE IS ON: Who owns the customer?
The one that ‘owns’ the customer can provide mobile data transfer, services and devices as well as data storage, music files and so forth. The giants are moving into each others markets and the fight for survival is on.

For instance, mobile operators like Spain’s Telefonica need to protect their healthy revenue growth in the mobile internet use business (see image at right).

Given the above, mobile phone providers certainly did not appreciate the Apple revenue sharing deal they had to submit to.

Nor are retailers and booksellers smiling about Amazon and Wal-Mart stealing away market share by sometimes selling at deep discounts just to gain market share in countries they operate in.

2010 will bring more customer rights and choice: Really?
Google has leveraged computing in the cloud by offering ever more services for ‘free’. Amazon is riding the increasing demand for e-readers as bibliophiles around the globe turn to digital books.

But market dominance can result in consumer rights being violated. For instance, Amazon erased copies of a book title from its clients’ Kindle device in July 2009 (think YOU own the data – think again).

Take-aways: 4 ways to prepare for the inevitable data bust

1. Oligopolies are a bad idea – as the credit card market has demonstrated, having a few players only increases the costs for end-users. Therefore, a wider choice of online booksellers beyond Wal-Mart or Amazon is in the best interest of consumers.
2. Systemic risk increases as a small group of companies become too big to fail – remember the 2008/2009 financial crisis… the case of too big to fail seems to repeat itself in the Web 2.0 world, or can we afford to let Google shut off its servers?
3. Dependability and availability of data are threatened – what happens if a company goes bankrupt or your data have been erased? What impact will this have on a country or economy if the cloud computing infrastructure is out of order for a few hours or a day? Regulators need to get onto this act quickly, because companies and consumers cannot manage this risk alone.
4. Data protection and privacy laws – with cloud computing, nobody knows exactly where data are stored anymore and which national laws apply. Neither the EU nor the US have negotiated an agreement on this issue with such important outsourcing countries as India. If regulators continue to fail to see the writing on the wall in 2010 as the Securities and Exchange Commission (SEC) did in 2006 regarding financial markets in the US, a real data disaster is just waiting to happen.

More resources about cloud computing, power shifts in mobile data usage, and more:

Miranda Mowbray: The fog over the grimpen mire: cloud computing and the law
ComMetrics: Citigroup, RBS and Google: Loads in common
Federal Computer Week: Cloud computing: Is it secure enough? New risks could cancel out potential benefits – are you compliant?
CommMetrics: No free lunch with Apple, Microsoft, Nokia and China Mobile!
Dion Hinchcliffe – ZDnet: Are the iPhone and social networks making the classic Web and intranet obsolete?

Bottom line
With only a few large players, the systemic risk of a crisis increases. Sometime, somewhere this data-bubble-in-a-cloud will bust, leaving us to pick the pieces. Accordingly, if we want to avoid having to turn off the power on server farms or paying for another government bailout involving digital data and cloud computing, we must take action in 2010.

This unraveling may not occur for some time, as easy money and excessive global liquidity will push the value or share prices of these corporations for a while. But the longer we wait to grab the bull by the horns and deal with it, the bigger the fall-out will be from possible digital data losses that will be huge and extremely costly.

Your turn. Are you ready and is your company compliant regarding cloud computing? Do you worry about your rights regarding your e-reader or your cloud-stored data? We look forward to your comments, insights AND opinions on this issue.

By the time the recent financial collapse was in full swing, AIG, Citigroup and Royal Bank of Scotland, among others, represented such a large systemic risk to financial markets that their governments could not allow them to fail. History now has the alarming potential to repeat itself, since Google and Amazon loom so large within their respective markets that they represent a sizeable systemic risk to the dependability and reliability of the Internet. We provide some examples below.

Google helps you with advertising
Google is not only a leader in search services but also online advertising. These days it is trying to expand its reach by getting small companies to sign up for its services. On June 15, 2009 ComMetrics received a letter from Google enticing us to start using AdWords. Small businesses were given a voucher in the amount of about €80 – 120 and the registration fee was waived:

Google AdWords Campaign – download the slick brochure we got from Google

Hence, we went ahead, followed instructions provided by Google, came up with good keywords, a meaningful ad (see image above) and defined our geographical territory to improve our campaign’s effectiveness.

We also improved the landing page at My.ComMetrics, got a high score from Google for our keywords and the pay-per-click rate was fixed.  We thought everything would be fine even though some have raised concerns about Google AdWords, such as:

muppman ==> Magne Uppman Hvordan skal jeg tolke at denne AdWords-annonsen dukker opp på søk etter mitt navn? (How should I interpret the fact that a Google search of my name results in ads with and/or about my name?)

We tested our keywords using a computer in the geographical region we chose to have the ads targeted to by Google. However, Google either showed weird ones and failed to show our ad altogether or showed no ads at all.

As the screenshot to the right shows, we got little to no traffic as a result of our campaign with Google AdWords.

By contrast, giving conference presentations or publishing and regularly updating the FT ComMetrics Blog Index is getting us new subscribers aplenty.

This means that while the system works for Google, which earns nearly £10 million a day from ads alone, a small business such as ours cannot expect much, except possibly wasting our cash and time.

Read also:
Google Ads basics as discussed here as well
How Long Does It Take For A New Google Adwords Account To Become Active?

Google’s effort to digitize books
Besides experiencing Google’s dominance in online advertising and not being too happy with the results, as US copyright holders of books we also had a chance to learn about its efforts to digitize books that are out-of-print. As it stands, the proposed settlement between US publishers, authors and Google tries to allow authors and publishers to maximize revenues while ensuring the widest possible access of out-of-print books. At least in theory.

However, some critics argue that giving Google control over past (out-of-print) books will translate into control over future ones.

The current proposal is such that all non-US publishers’ out-of-print books would be automatically included in Google’s digital library holdings unless the copyright holders opted out. As such the US settlement would remove foreign authors’ and publishers’ rights as enshrined in the Berne Convention for the Protection of Literary and Artistic Works (a nineteenth century international copyright agreement).

A US court hearing is set to formalize the settlement in October. If it is approved, the US regulator will literally be permitting US copyright holders to form a cartel with Google. That certainly would NOT meet any standard of fairness and good governance, since the agreement WOULD:

1) discriminate against foreign copyright holders and authors,
2) violate property rights of authors and publishers in foreign lands as specified in the Berne Convention, AND
3) proper procedures would not be used, such as a copyright holder opting out of the settlement by default unless otherwise stated (see privacy policies that require opting in to allow vendor to send product information).

Google Class Action Settlement – Systemic Risk for Authors and Book Publishers – download 3 pages we got from US lawyers

Bottom line: Risk must be managed properly
The risk now presented by Google’s dominance must be managed properly. And if it’s dominance in the search market, cloud-computing services, online advertising and book-digitization are not examples of a systemic risk as far as the dependability of the Internet is concerned, what is?

The systemic risk that we failed to manage properly in the financial markets was at the heart of the factors that exacerbated, if not caused, the financial crisis. Systemic risk in the digital world refers specifically to the extent to which a service provider like Google could contribute to a general digital media and information crisis. The systemic risk represented by Google or Amazon must first be measured and then managed, unless we wish to repeat Wall Street’s mistakes: if we reach the point where we cannot afford to allow some players to fail, taxpayers will once again be footing a hefty bill. Good governance to the rescue!

Read also:
Will Twitter and Facebook save UBS?
Wall Street: Four lessons learned
Wall Street déjà vu
Amazon with its Kindle disaster

Now it’s your turn. How should we manage the systemic risk to the Internet and its services as exemplified by the ever-increasing market dominance of companies like Google? Suggestions please.