BeatThatQuote's Judo Move: How To Outdo Google
As the European Parliament approves the break-up of Google, and Europe across the board targets US internet firms with regulation, we are failing to think deeply about how Europe (and the rest of the world) can win, not just lose less quickly and not as devastatingly.
The Judo Move is to out Google Google. But to do that, you must first understand Google, not just be afraid of them as Axel Springer's CEO is reported to have said, or to worship them as much of the tech and venture capital world, even governments of Europe do. I got a glimpse into the giant by selling a firm to them in March 2011 for 122 EBITDA multiple. I learned a lot about how they think and operate.
Google say they organise the world's information. They, in fact, do a lot more than that actually. They organise the economics of the world's information. They aggregate your and my data anonymously as a critical component of their business model, building a market capitalization in the multiple billions. But here's the rub: they don't recognize the economic value of that data to us in their business model. Oh sure, they give us free search. But no economics.
I long felt that their Achilles Heel would be if someone organised a better business model recognising the value of that data in the business model and giving the consumer an economic upside. I found that entrepreneur. His name is John Paleomylites, and was running a business called, BeatThatQuote, a financial services price comparison here in the UK.
What John and his team were doing was actually very simple, if stunningly effective: they were incentivising users through cash backs to give them more data.
So when Google can hunting for financial services vertical market plays to acquire, they ended up talking to BeatThatQuote. One would have thought it would have been MoneySupermarket or one of the big ones, but they were playing a different game – more traditional.
BeatThatQuote had been the fastest-growing business in its early years, but hadn't raised the capital to spend millions on TV advertising and other campaigns. So, it had to be more clever. It was playing a business model game instead of a marketing game, and in doing so, it started to catch the attention of Google. Google ultimately paid £37.7 million for BeatThatQuote which had only £250,000 of EBITDA. Why? It had a lot to do with the strategic value of what BeatThatQuote threatened to do if left unleashed in the market.
BeatThatQuote demonstrate the Judo Move: out-maneouver Google by bettering them at their own game.
Consumer data is the new entrant into every business model today. It's just that not everyone understands that yet. However, across all industries – retail, financial services, transportation, media, health, telcos – those companies who listen and respond to their consumers and enable a feedback loop: i.e. tell me more about what you want, and we'll give it to you, are gaining ground by the richness of their new asset: consumer data.
This has been shown most recently again by the grip that Apple has on understanding consumer behavior. Banks used to control the bank networks, but with the emergence of Apple Pay, Apple have cut a set of economics in the payments space – just because they could. Actually, because they 'control' the consumer – a huge number of them. The banks should have seen it coming. Apple shifted the center of the music industry to MacWorld by creating a consumer experience that was valued, but more importantly actually, by organising a clear set of economics for all participants in the ecosystem.
So what does this mean for me if I'm an insurance company, radio station, transportation firm, health care organization or telco?
Well, there's a lot of evidence that the US Internet firms intend to take over every industry. Their way of operating is pretty clear, as stated above: use our data, give us no economic upside.
Simply put, if you are a bog standard, traditional, non-technology incumbent of any kind in any industry, your fight back strategy is to give an economic upside for the use of your consumers' data. Over time, customers will migrate to where they are 'getting more' – better experience and better economics or value. But the benefits to companies are even greater because by developing a super set of economics for their industry – more clear and inclusive of consumers' right to have value for their data, you force Google or indeed Apple or Facebook to react.
This beats the display of impotency on show at the European regulators' offices. No one surely believes that Google will indeed be broken up because Brussels would like to see it.
Winning would require a persistent and systematic onslaught of the Judo Move. It would require the confidence of European management teams to say in all of their different company culture's ways: 'we recognise everyone involved in the transaction. Why don't you?'
Always take a gun to a knife fight.
But ultimately, why is this really important? As we approach the end of 2014, non-technology corporates are probably becoming more wise to how the digitalisation of their value chains is happening. The sad reality though is that the escape velocity of the US Internet Platform firms (Amazon, Apple, Facebook and Google) is increasing their distance from the rest of the 'old world'. If you are running a bank, retailer, airline, gaming company etc, you've probably moved backward relative to their exponential growth. But it's not game over yet.
The world is a global commons. And it doesn't have to be a tragedy of the commons. The difference between people who live in London and pick your favourite poor country is that most of us have assets, and they most of them don't.
If we Europeans establish for the benefit of the planet, rich and poor alike, that an individual's data is their data, then they have a starting point from which they can build their personal balance sheets, and start to move up Mazlov's pyramid. All services and revenue will be generated from consumer data in the near future, so if you use it, you have to compensate it.
And that's why this is important. Data has the greatest power to transform the world, leveling the playing field fundamentally if all healthcare, financial services, telecoms data that an individual generates is understood to be theirs, and commonly accepted that they should be economically compensated (not just incentivised) for its use in future services and the resulting revenue.
For a business whose motto used to be 'Do No Evil', Google will have a hard time explaining why they won't follow suit and share the upside that they make from us, every day, in every transaction.
The winners in this digital age are those companies who organise the economics of their ecosystems. I call this Ecosystem Economics. This is what Google, Facebook and Apple have done, and this is a strategy available to all. It's not easy to implement, but it's important that the good guys win.