THE BLOG
06/11/2013 08:49 GMT | Updated 23/01/2014 10:52 GMT

Terminal Tech Theory - (Or Why the Twitter IPO Will Be VERY BIG)

The other day, the very nice and clever Patrick Bergel of Animal Systems popped in to the Fearlessly Frank offices for a coffee and a chat. I needed a nice sit down having been on my feet talking at a series of investor meetings.

Right at the very end of our chat, just when I was convinced we had put the digital world to rights, he dropped in a Giant Redwood of a comment.

"Take a look at Pioneer Species and Climax Species ", he said, as he was putting on his coat. "They give some interesting clues about who will survive in the mega tech ecosphere".

I did and I now coin a new expression: Terminal Tech Theory.

It goes like this. Just as in forests, where one type of tree colonizes quickly and more effectively and grows to deny food and light to competitor trees and shrubs, so the eco-systems of the Internet develop and champion tech products that tower over their competitors. Sometimes they are hardy companies with no competitors; sometimes they are just generic species, but with a humungous number of customers.

The point being, in the Internet forest, do we really need another Facebook? It is already a 1.1billion strong community. Its managers have to tackle some of the problems governments deal with.

Do we need another Amazon? By that I mean a catchall online retailer. We still enjoy the digitalised versions of our analogue High Street friends, John Lewis, Argos and Marks & Spencer. But why, how, would you replicate Amazon?

Google, Facebook, Amazon, EBay, Skype, YouTube, LinkedIn, Wikipedia, Yahoo (aka Tumblr + Flickr) are the giant trees. They are established. Their customer roots go deep. They starve out competitors by eating up their various customer bases voraciously.

Different forests support different trees. In the USA it's Giant Redwoods, in England it's Oak. Maybe in a distant tech forest similar species are growing completely separately from each other. Completely different forest, completely different scenario. For example Tencent's QQ and its messaging app WeChat, looks like a close cousin of Facebook. When two near-identical brands start working the same neighbourhood, you get cross-pollination and then the trouble really starts - the likelihood is that only one will survive. (In fact, look out for Tencent. In just four months between May and September 2013, its overseas users have doubled from 50m to 100m.

Twitter has no competitors. In comparison to Facebook updates, Tweets are like the wind to Facebook's water. Tweets move fast and are genuine trend indicators. Facebook is more sedate and forms a river, timeline, of personal fixed events. But Facebook wasn't designed to do what Twitter does. What Facebook does it does very well. What Twitter does, so single-mindedly, it does superbly.

Twitter will terminate all me-too upstarts through sheer size and momentum. It has an established customer base and therefore a valuable and certain ad revenue. That's why its projected high value is headline news the world over.

Lower down the food chain are tech species that that the "tall tree" brands are allowing to exist, or simply don't care about.

Travel sites, dating sites and comparison sites, for example. Often these are parasitic sites, surviving because they live off the backs of the big boys.

Although not giants they will suffer the same ecosystem rules; smaller, weaker (i.e. less visited) sites will start dying off quickly.

There is still room for imaginative new entrants into the tech forest but I'm sensing from the investor meetings, that non-tech investment is going to grow, particularly as paid Apps are in decline.

So, curiously, these are exciting times for both the mega tech brands and the tiny non-tech brands.