Skills and Knowledge and the fall of USA Web Dominance

If we look into history we can see many patterns repeated over and over.   One of the most interesting is the birth and fall of great empires.    Though out history empires empires have risen and fallen.    The egyption empire lasted for thousands of years,  Rome lasted for a mere 1500 years and the UK for a few hundred years, the last great empire the USA will be surprised within 100 years by china.   The one thing that these empires seem to have in common is the greater the skill and knowledge of the average person the more powerful the empire became and the shorter the empire lasted.      Even if a empire is destroyed suddenly, if the people still retain their skills and knowledge/technology it will be rebuilt.   Germany and Japan were destroyed after WWII and had to pay huge war reparations, yet they still managed to become the second and third most powerful economies in the world.

This pattern is repeated with corporations, and markets.   I remember reading that in 1940 the average life span of a corporation on what is todays Fortune 500 was about 40 years.   That has now been shortened to 20 years and is shrinking.

So what does this mean for us?  Well when it comes to the internet, there were many companies created from 95 to 2000 but only a select few made it because of limited ways of monetizing the internet.  This resulted in  a handful of companies virtually controlling the internet. Now here we are a couple of years later and technology has brought us cheap servers and software enabling a new class of companies that can exist and be profitable in a way that they couldn’t be before mostly by using cheap hardware/software and living off of advertising.      What we will continue to see is a steady stream of companies rising and growing to a monster size in a short period of time.   These companies will dominate the markets they created for a period of time only to see their market fragment into niches that will be dominated by multiple large companies.

I think what history will remember the most about this period of the internet is this is when the USA stopped being the dominate force on the internet.    The forces (technology) that created companies like yahoo are now no longer restricted to the USA.    Other countries have high internet penetration,  major drop in technology costs, and software to create many sites can practically be bought off a shelf now.  With technology costs start becoming marginal, all that is needed is a source of skills and talents and many countries have plenty of that.   Just look Canada and plentyoffish.com,   I created site from my apartment.  No funding, no employees and now have the second largest site in a billion dollar industry.    I have proven its possible and many others will follow now that they know it can be done.

If I had to sum it up,  i’d say the internet will see many monster sized markets created out of nowhere, only to see them fragment into niches.   As these niches form, the skills and technology needed to become a market leader will grow exponentially.  This will make it virtually impossible for one company to be dominate in multipul fields.    

68 Responses to “Skills and Knowledge and the fall of USA Web Dominance”

  1. Vincent Chan Says:

    In order to catch up with the US, Chinese need to understand the importance of branding. Right now, Chinese just focus on making profit and don’t care about branding. This is a serious problem for us.

    On the other hand, Japanese companies are fully understand the importance of branding. That’s why you can find a lot of successful global companies in Japan but not China.

    We cannot provide cheap labor forever and our IT development is not as good as India. You are right, 100 years may be good enough for China, if all the chinese talents are willing to go back or give back to their home country.

  2. John P. Says:

    Whoa man, keep that ego in check. You list your one Canadian example as evidence that the USA is starting to fall behind on the internet?

    Your site is hardly famous in the US, and dating sites rise and fall in popularity unlike any other industry. Don’t get ahead of yourself.

    Please read Paul Graham’s “Why startups condense in America”
    http://paulgraham.com/america.html

    Having worked for a foreign company, I’m well aware of the advantages American employees have. Most of them are shared by Canadians and Europeans, but not all.

    Realize that Americans, Germans, and the Japanese have a lot in common when it comes to work ethics and work culture. In each country it is considered perfectly acceptable to be work/money-obsessed. It is not the same in most of Europe, or nearly so much in Canada. We only really occupied those two places for long enough🙂

    And don’t forget that you’re far more American in your style and thinking than most Canadians, just look how arrogant you are🙂

    P.S. Half my family is Canadian.

  3. Markus Says:

    Can’t seem to write anything without getting haters. Its my blog and my site so i’ll use it as an example of creating a site outside of US funding/ US influence.

    North America accounts for 5.1% of the worlds population.

    http://www.internetworldstats.com/stats.htm

    The USA has gone from being the Internet, to only being 21% of it and the slide will continue. In these emerging markets local competitors are dominate. There is no way US companies can continue to dominate the internet unless they go and buy up every major internet company in Asia and Europe.

    As for silicon valley who needs it? This is a new web, and using my example I created my company spending less then $100 before making money. That is the whole point of the post.

  4. John P. Says:

    Sorry to sound so negative. I don’t mean to be a “hater”. I certainly like your style and I am impressed by your work. And don’t be discouraged when you make a controversal statement publicly on the internet, allow comments, and get them🙂

    If you just want cheerleaders to respond, just delete the comments of people who disagree, like on TechCrunch.

    The stat of 21% may be true in the absolute number of people _using_ the internet. That’s important. But how many of the most succesful services/sites/providers are American? It’s far more than 21%. You’re saying that’s going to change, and I agree. I just think it will be much less dramatic than you do.

    Unless other countries start promoting a similar (or improved) attitude towards work, money, and technolgy I doubt it it will change very quickly at all.

    The theme of your post was that the “USA’s dominance” is coming to an end. That the bar is amazingly low for starting web companies, or that it’s a game-changing turn of events, is not in dispute by anyone.

    But then you said that you had no US funding or US influence, but don’t you rely heavily on the American Google for a huge portion (all?) of your revenue and traffic?

  5. Mayo Says:

    I think (IMHO) that world is changing, not as fast as i wish but it’s changing, for example our main weak point in Croatia (Central-Eastern Europe) is monopolistic control of internet resources, we have one major telecom company that is in both ways boosting the internet and at the same time stopping the advancement in broadband throughput (while you have normally in major cities 10Mbit/s DL links we have 1Mbit/s DL links). Now i cant compete from home with US startup because the 1Mbit synchronous link is costing 1500$US in cheapest version and that is way beyond US standards, but it’s coming down!
    Ok now to internet hubs: THEY ARE GONE!!! You can contact any, i mean any relevant mind in any field wherever they are! I don’t have to be anymore in Silicon Valley to make it, i can be in Antarctica if i wish to and control one of the biggest websites in the world! The internet is made for that purpose.

    All you need to have is will to learn and to adapt, all the rest will come on by it’s self…

  6. Chris T Says:

    I believe John P’s right that American’s in general have a set of attitudes that give them a leg up. But the infrastructure of the internet is intensely non-local. As Mayo suggests, you can start a company, scale it to thousands of servers pumping many gigabits of traffic, without ever leaving your cozy home in Antartica. Or from a $100 laptop in Africa (which I’m sure we’ll see).

    America’s advantages mean its 5% population make >5% of the contributions, but fundamentally any individual in the world with the skill and the will can start something from anywhere, with only the most modest of capital, serving any market they choose to serve.

    What a wondrous thing that is for all of us.

  7. Dave Says:

    Great post, how many members do you have exactly?

  8. Teddy Says:

    Has anyone (besides, of course, Vincent) been to China lately? It would help in forming your opinions.

    I’m trying not to present this pejoratively, but there is no way; think of a huge, illiterate, listless, and backwards country in which, so far at least, only a tiny fraction exerts its economic muscle and entrepreneurial spirit. So far, China is pretty impressive. A force to be closely watched, if not reckoned with.

    But just wait until even a quarter of its population “gets it”. That’s when we’ll be in trouble.

  9. Mark Says:

    I don’t know about the end of Empire…. But what I do predict is that while yesterday’s language on the net was English, 明天我们都应该用中文写字呀! Will North America loose out? Not if we can adapt. A key component of the Net Culture is the ability to adapt. Imaginative adaptiable North Americans will continue to very well. Borders won’t matter very much… as long as the US doesn’t get stupid and implement protectionist Internet policies.

  10. Mayo Says:

    I think no one has to be afraid of anyone else, you should only be afraid of your self, exactly of you not learning and doing more things!

    I think this is what globalisation means, one big buzzy internet SPRAWL!

    If you get it like Markus and few others got it you will be set for life, not having to fear what will you do tomorrow, no matter if your in US, Canada, China, India, Kenya, Croatia,Brazil, Venezuela,…………. Antarctica😉

    But there is a problem: only 1% out of 100% will make it through (forget about Pareto 20/80 rule, Pareto rule was never real IMO, the 1/99 rule is real), will some of folks here join Markus into internet entrepreneur elite rests to be seen…

  11. Steve Says:

    Markus is right in that high internet penetration and cheaper hardware/software are huge factors in lowering the barriers to entry for existing markets as well as enablers for more easily creating new markets. Really bright people all over the world with great ideas can greatly benefit from this and start new companies like plentyoffish, delicious, digg, etc.

    But many of these companies will not be “one man shows”. A high concentration of bright minds, entrepreneurial spirit and original ideas are important ingredients for economic success. Places like Silicon Valley are notorious for nurturing these characteristics, which is why many startups still originate from there.

    I do agree that a single person or handful of people will continue to make huge waves in the technology/internet sector. But huge economic changes will not be seen.

    As an aside, I agree with Mayo’s 1/99 comment. A lot of the companies we are talking about are ad revenue driven. Meaning they need a huge user base to become financially successful. It is a game where many will try but few will succeed.

  12. Sam Moorcroft, ChristianCafe.com Says:

    This is totally going off on a tangent, but I am sure Marcus will relate (being a fellow Cdn): re: John P and your comment, “…It is not the same in most of Europe, or nearly so much in Canada. We only really occupied those two places for long enough…”

    Umm, when exactly did the US occupy Canada? I seem to recall us burning Washington, DC to the ground (not once, but twice) during the War of 1812 and burning the White House so badly they had to paint it white (hence the name) to cover up the smoke stains.

    hehe

  13. John P. Says:

    @ Sam

    1. I may have worded it badly, but only a simple person couldn’t guess that I was referring to the US occupation of Japan and Germany post-WWII.

    2. The British attacked and burned some buildings in Washington D.C., including the White House. Not “Canadians”.

    3. It was called “The White House” before it was ever burned.

    I’m guessing (from your site) that you are highly religious, so I doubt you will even care about these facts anyway. I’m sure believe and remember what makes you feel good.

    Good proof that it’s not just Americans who are blissfully ignorant and uneducated.

    @ Others

    It’s true you can run a large internet site from anywhere in the world. But currently, and for the near future, those servers you have will be either in the US, owned by a US company, or going over US network links. And if you’re global, most of your revenue will come from the US (even with less traffic from there).

  14. Markus Says:

    It really doesn’t matter where servers are hosted etc. Its like saying American’s can’t build tanks without buying Cannons from germans, or americans are unable to drive cars make plastic etc without buying oil from other countries.

    The money has never been in raw materials, but instead its in finished and semi finished goods Who cares if you need to pay 10k/ month to host your site somewhere but you make 100 million a year?

    As for countries like china, Europe and Japan, no one in their right mind would put servers in the USA mostly due to lag, and SEO penalization, or partner with US companies to sell advertising. US companies simplely don’t have the market presence in other nations.

  15. Sam Moorcroft, ChristianCafe.com Says:

    John P, us people of faith, we’s just plain dumb! We’s not interested in facts at all!;-)

    This was meant in good fun, although I am gathering from your response that you need some lightening up there, cousin.

    Sorry to have to use facts on you. Just who were you fighting to the north of you in the War of 1812? The British? I thought my country was called Canada;-) So, logic follows that those you were fighting (and lost to) were Canadians. Certainly, you lost to the Brits, too -and a lot of Indians. Your White House was called that before we burned it? Yeah.

    Your revisionist history would have you believe that you what – won that war?

    Sam
    P.S. Some of my best friends are Americans. LOL.

  16. Sam Moorcroft, ChristianCafe.com Says:

    (several hours later) John P., I stand corrected – you’re right about the White House being called that prior to us burning it…I just got back from our annual Christmas party, where I asked our resident atheist (me being highly religious and all, so pretty much clueless about facts and stuff) about this. Apparently it’s one of those urban myths and not true. So, my apologies.

    ‘course, everything else I said in my last post is correct (we didn’t just attack and burn “some buildings in Washington D.C”; it was a little more than that, actually), but, I was wrong on that one point .

    To bring this back to the topic at hand, I agree with you that if you’re global, most of your revenue will come from the US. In fact, one of the things that has made the US great is its unparalleled expertise when it comes to making money. Nobody can touch you! If it wasn’t for you, our great neighbours to the south, none of us up here could survive beyong being hewers of wood and drawers of water…I certainly wouldn’t enjoy the lifestyle that I have without you. And, for that, I am forever grateful!

  17. eoinpurcell Says:

    In some ways both sides of the 1812 debate are right and both are wrong.

    Canada was still a realm within the British Empire in 1812. It only gained independence starting in 1867 (See Wikipedia for more http://en.wikipedia.org/wiki/Constitution_Act%2C_1867).

    From the perspective of who was fighting the British side certainly had a mix of Imperial and local forces and while there was no official state or nation, the local forces considered themselves Canadians!

    On the main point regarding the decline of America’s internet empire I think one should consider the decline a relative one rather than an absolute one. America will be a smaller part of the internet as a whole but will remain the largest element of the English speaking/reading web. What is more the influence of America will be felt even when the largest element is China or India!

    As for the ability to innovate and to grow sites and services outside of the US Markus has a good point but one that I think is a reflection of the generally easier environment for web commerce and development.

    Eoin

  18. PPC Keyword Tool Says:

    Markus, very interesting read. I find this shift in online potential pretty exciting stuff. I guess its what keeps me creative on the web.

    I’m in the asia-pacific region, and most of the various international webmasters and entrepreneurs I’m in contact with have their servers in the US, and make most of their income from a mix of US and UK companies.

    I think I’d have to agree that the potential for rapidly accelerating growth in online ventures will continue to threaten some traditional business models, but the sheer bankroll that many (most?) of those very same traditional big businesses control, will give them a great deal of clout for sometime to come. But the fact that individuals are ever more enabled to move on them *at all* will make things very interesting indeed.

  19. Mayo Says:

    “America will be a smaller part of the internet as a whole but will remain the largest element of the English speaking/reading web”

    You make me laugh!😉 How much of the world population is reading and speaking English (more or less fluent)?? How do you think French, German, Croatian, Spanish et. al. citizens get together with each other?? Esperanto?? NO … English!! English is today what before was Latin, Greek and French, lingua franca!

    So you cant say US will be the dominant English speaking/reading population, because it isn’t! As i said it will be the GLOBAL Sprawl, only made out of LOCAL MARKETS!!!

  20. Jon Frate Says:

    The USA has gone from being the Internet, to only being 21% of it and the slide will continue.

    what % of the internet industry’s revenues are owned by American firms?

    what % of the internet industry’s ebitda/profits are owned by American firms?

    what % of the top 1000 profitable companies on the internet are American firms?

    Markus, this ‘new’ net that you speak of, is built on the ‘old’ net, and the old net is built by the telecom industry. From network, to equipment vendor, to chip level designer, to fibre optic research — what percent of the ‘old’ net’s revenues/profits/ebitda/innovation is owned by American firms?

    I’m happy your company is doing well… but maybe it’s time for a reality check?

  21. Mayo Says:

    Hmm….. ???
    It is in majority DESIGNED in US, but it’s manufactured in China, Taiwan, South Korea,….. EU…. South America…

    Do you know where is the main AMD FAB??? Dresden, Germany. European companies are buying US companies and vice versa. Now what you guy’s need to understand and i say it constantly that it’s not US centric world any more (at least in IT industry), it’s true that we buy Cisco routers, Apple computers and other gadgets, but it’s also true that i’m typing on IBM Thinkpad that is no more US product, but a Lenovo – a Chinese co. that bought US knowhow and now is cutting through market.

    Unrelated, look at Toyota, they are surpassing GM and becoming No. 1 in car industry. Sure it took them 80 years, but hey US citizens are buying Japanese and European cars more and more, although foreign majority are made in US….

    I won’t give a s#%t about where is my company, is it Croatia, Delaware, Belize, Hong Kong, Sydney….. or whose infrastructure it is using, the most important part is that i am making money(until that day i have to keep coding, and preparing ground🙂 ) and thats all to it! It doesn’t account if my future wife will be Croatian, Chinese, US, Brazilian or Eskimo😉, all that matters is that me and people around me are happy!

    Most of people will feel ground slipping under their ground, and those guy’s/gal’s (mostly guy’s) will see that their life is shaped by people with other nationalities. Oh and what will happen when less and less people transfer to US in seek of better life, when Indians, Europeans, Chinese,… stop to flee their mainland to go to US? Where will US companies find qualified workforce then?? As it seems shortage for qualified people is pressing GLOBALLY, and US workforce won’t change into HQ IT workers so pretty soon… only way will be to pay exorbitant fees to foreign minds abroad, and i can assure you that those minds will less and less want to transfer overseas, i.e. US will pay for IT advancement in India, China, Europe, and soon enough you will have next IT Toyotas popping all over the world….

  22. Jon Frate Says:

    ^ it doesn’t matter if a company is a ‘multi-national’. that’s just exploiting good wage relations. what i’m talking about is that the majority of the shareholders remain american, and that’s waht really matters.

    before you start ringing the death knell for american internet companies, maybe you should throw out some numbers about the distribution of revenues and ebitda’s by american owend companies vs. rest of teh world?

  23. Mayo Says:

    Good point Jon, it will surely be interesting to get that data out! Anyone that has some interesting fact proof data let us know!

    Not related to IT industry:
    http://bea.gov/bea/newsrelarchive/2006/intinv05_fax.pdf

    Anyone who has some stats how much international investors pour into US IT companies and vice versa let us know!

  24. Mayo Says:

    Here are some optimistic 2026. ramblings from Kiwi-land:

    http://www.nzherald.co.nz/section/story.cfm?c_id=5&ObjectID=10412769

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