Tuesday, November 3, 2009

Disrupting the disruptors

In the early nineties, as Internet usage began to spread, the word “disintermediation” was widely used to describe the power of online businesses to transact directly with their customers, removing the need for a middleman or broker in a wide variety of transactions. Take online securities trading for example – set up an account with Schwab or E-trade and there’s no need to deal with a human stockbroker. The same holds true for travel: Kayak, Expedia, Tripit, Orbitz and the rest have removed the travel agent from the equation.

As Internet technologies evolved, disintermediation gave way to wholesale disruption. Wikipedia defines “disruption” as a term used in business and technology literature to describe innovations that improve a product or service in ways that the market does not expect. Disruption has caused the fall of huge industries that have given way to cheaper, more effective innovations enabled mainly by the Internet.

There are many examples: the way we buy music (iTunes store); the way we read news and magazines (online and for free); where we place classified ads (Craigslist instead of newspapers); the way we research information (Wikipedia instead of Encyclopedia Britannica); the way we search for real estate (Trulia, Zillow and other real estate websites); making overseas calls (Skype); the way we purchase books (Amazon), the way we buy all sorts of stuff (Ebay), and the list goes on. I enjoyed Tom Foremski’s thoughts on this subject in his post “The Internet Devalues Everything it Touches”.

But what is the term given to the process where the disruptors themselves are being disintermediated?

Google has recently released a plethora of new products, and this week announced the release of two new products that have attracted widespread comment.

The first is Adwords Comparison Ads. This is a new type of sponsored ad on Google that formats the ads in a special layout that allows users to easily make side-by-side comparisons. The comparison ads are limited to mortgages for now, but Google has plans to extend this to other products. My colleague ran a search on mortgages with Google and with Bankrate, and Google returned more mortgages at a lower rate. They also asked for more information so it's probably better customized than Bankrate.

With this service, Google could potentially spell trouble for online mortgage comparison sites like Lending Tree, Mortgage Marvel, Zillow and the newly launched home-account.com. If they extend to other products, like consumer electronics, many comparison shopping sites might feel the heat too.

The other product launched in the past several days is turn-by-turn navigation on the Android platform. This is a free navigation system from Google that makes use of the smart engine behind Google Maps which runs on every Android 2.0 phone. The map layout includes a satellite view for better visual reference, plus many other great features. So where does this leave the SatNav companies? How can they compete not only with the Google Maps engine, but with “free”. Short answer – it’s going to be tough.

Google is disrupting the disruptors. Now what’s the new term for that?

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