Internet darlings from Google, through Facebook to Linkedin and a constellation of other dotcom2 companies with their plethora of metric breaking valuations have entered a new era where the model that made them rich and famous will fast become extinct.
It is clear that the desktop is no longer the main platform for content, it is mobile. What is more this is accelerating.
However retrograde that move might be, the PC/laptop has been superseded by the mobile. The only sliver of comfort is the success of the tablet.
What is more increasingly, personal desktop usage is being pushed out of the office space as companies try to stamp of the pestilence of slacking brought on by Facebook, Youtube et all. This contributes to a fall of the relevance of the desktop machine as an internet traffic generator in what will remain the bastion of desktop usage.
This provides a significant challenge for giant websites because for many their income is derived mainly from advertising in Facebooks reported recently at 88% and for now at least advertising on mobile is not in favour.
However much mobile success is trumpeted CPM’s (impressions) and CPCs (cost per clicks) are just not as valued. This could change but with what looks like a rapid shift away from desktop use underway the original business models of companies like Google and Facebook could become derogated or even obsolete as fast as they became world beaters.
That of course is longer timeframe than most realise but it still amounts to a Damocles sword hanging over mainstream consumer internet companies business models and stock prices.
Linkedin is a nice counter example. Its place in the corporate world is complete, its subscription business model is going nowhere while its push towards other business opportunities, such as recruitment, seem immune from the shift of consumers to tiny screens.
If the mobile wave continues to swamp the consumer desktop then either advertising based web companies must find ways to replace the lost income or they must retrench.
The alternative is to find a way of providing advertising on a small screen that is as valuable as a message from the bigger screen real estate of a desktop. So far its not been discovered.
You might argue, mobile is an entirely different media from the desktop and whether it is or isn’t, there is no guarantee that it can actually support the same revenue generation for content providers as a desktop. Do books generate much in advertising in comparison to the bigger thinner cousin the newspaper? It is an extreme example but a sobering one.
It is always easy to be pessimistic about such highflying businesses but then again it only takes a glance at Snapchat or Vine or for that matter an ever more ad saturated Google to realise that old models are maxing out and new ones are on there way which will need incredibly smart monetisation to replace historic levels of sales.
While internet companies like Amazon and Ebay can easily adapt to a change of screen size pure advertising plays are the most vulnerable to the victory of mobile over computing.
It seems only a matter of time before this threat already telegraphed by Facebook in their quarterlies goes from a risk to a reality.
Ironically there is a kind of safety net of the darlings of dotcom2.
Many of these companies remain valued as blue sky rather than profit making p/e stocks. As such, their perfect positioning for the glorious future may just keep them in and about their lofty orbit.
However the move from the desktop to the mobile is far more threat, than opportunity and the bipolar temperament of the Nasdaq is hard to predict.