SRnext - Safa Rashtchy

The Fragmentation of the Web- There is Still Room for both Old, stale site, and the new smaller sites to grow. The Web remains highly fragmented. Nearly 50% of the time spend on line is on the very small websites. While the increasing popularity of Facebook and Youtube and a few other have shifted a few percentage points away from the smaller sites, the fact remain that the time people spent online is still highly fragmented. Overall, there are three category of sites:

1. Share of Mind. There are five “portals” that, through their various properties command a significant part of the users’ time, and hence, what I would call a “share of mind”, if not a share of heart: Yahoo, Myspace, Google, Microsoft and AOL. Think of this as a huge, and potentially valuable, real estate – even though g some of these site may resemble emptying shopping centers, they are large centers, nonetheless and a lot of people spend time in them.
2. Share of Heart. There are big gainers of “share of heart” including Youtube, Facebook and Craigslist, all of which have gained more than 60% per year, as of January 2008, on time spent on their sites.
3. Share of Wallet. The final prize, one that investors are most focused on ( too often rather prematurely) is the “share of wallet” which has been unequal – a mix of companies from Google in the first category to some smaller sites , have been gaining this share of wallet, but interestingly, not the group which has been gaining the ”share of heart”. Understandably , there is gap between user popularity and monetization level. I believe this is likely to cause some disappointment for many companies and investors, in the next two years, as most people still equate popularity to monetization, ignoring the change in User behavior that is brought about by the User Revolution.

My conclusion is that with the exception of Google, there are no must-use sites for the overall Internet population ( however, each pocket of demographic may have its own must use sites). As such, the current fascination with, say, Facebook becoming the next big platform to take over other platforms is, to say the least, shortsighted.

Equally important is the value of empty or half empty real estate – people still spend a lot of time in these areas and with the right offering, they can give you a growing share of their heart. As such, writing off Yahoo ( or even AOL for that matter) is throwing away potentially good assets, which reminds me of eBay exiting Japan – a decision that eBay still regrets. Just because it’s so hard to imagine Yahoo or AOL as highly popular site doesn’t mean it can’t be done, or that it couldn’t be highly profitable to do so.

In short, do not underestimate the value of old properties, and don’t overestimate the value of new ones that are gaining share of heart. In the meantime, an even safer place are smaller, niche properties that collectively command the majority of the user’s times.