In the online space, we've already seen MySpace -- once the king of social networking sites -- shrivel considerably. Bebo looks like it's losing a lot of users to Facebook, too.Who else is under threat? And how can they avoid serious contraction?
I think that three companies, in particular, face huge challenges this year and next year. They are Philips, Nokia and Microsoft. Here's why.
1. Philips: In Ireland, Philips ruled television set sales. As recently as 2006, Philips had over 50 per cent of the entire market here. Today, that has shrunk considerably, mainly due to competition from Samsung, LG and lower-cost brands (Sony and Panasonic have remained steady, while JVC and Mitsubishi have tapered off). When you walk into a store to buy a television now, how many Philips sets do you see in front of you? Not nearly as many as you used to. Its marketing seems to have disappeared, too. In fairness, Philips is a fundamentally innovative company. But to compete with the Korean, Taiwanese and Japanese companies, it needs to cut its prices or re-invent its design (or both).2. Nokia: there was a day, not so long ago, when 80 per cent of all the best new innovation in mobile phones came from Nokia. It pioneered usable web-browsers, mobile business applications, powerful cameras and 3G connectivity. Then, three years ago, the iPhone launched. All of a sudden, touchscreen was in, mobile apps became the innovative metric and the industry took a different turn. Although it kept an eye on all of this, Nokia continued on its own path, concentrating largely on updating versions of its existing products and services. At the same time, emerging markets became a very important segment for the Finnish company. Belatedly, Nokia has begun to turn its attention to mobile applications through its Ovi internet strategy. At the moment, it is losing vital ground in this area, which will be very hard to make up next year or the year after that. Nokia will remain a huge player in mobile phones for some time to come. But it would be a massive achievement were it able to retain its more than 50 per cent Irish market share in 18 months' time.
3. Microsoft: For all its diversification in recent years, Microsoft's major corporate achievement was to lodge itself as the default operating system for PC manufacturers. Windows has never been pretty, but the world has used it anyway, thanks to inertia and the lack of a talented, willing alternative (Apple still refuses to play on the same pitch as Windows). In its most recent quarterly figures, Microsoft shows again just how reliant it is on its computer operating system business. While the roll-out of Windows 7 licences has been very healthy, its online businesses -- the bits Microsoft associates its 'innovation' with -- make pretty horrible losses. It's not that Microsoft's online stuff doesn't work, it's just that none of it is quite as nice or compelling as rivals'. its other great crutch is Office 2010. This has been the default word-processing and 'productivity' software for business for years. Joe Officeworker has just gotten used to it.
The trouble for Microsoft is that both of these bulwarks are starting to look really, really vulnerable. The threat doesn't come from Apple -- a leisure-time mobile device company -- but from Google. When Chrome OS launches, there will be a completely compatible alternative ecosystem for companies and home users to choose. And it will cheaper (as in, free). Microsoft looks like it is adapting a little, especially with its plans to roll out a basic free version of Office 2010. But ultimately, to remain dominant, it will have to slash the prices of both Windows and Office. When it does that, its core revenue streams will shrink. So far, it hasn't come up with much else that makes money.