We should be worried about the likes of Google, Amazon, Apple, Facebook, Zynga and more entering the financial data space because it’s all about information warfare.
What is information warfare? It’s all about viewing data as though it were capital or labor, a raw material for business. This is key as banks have long held the view that they are data managers. For example Walter Wriston, CEO and Chairman of Citibank from 1967 to 1984, made the statement that: “Information about money has become almost as important as money itself.”
He was and is so right. Wriston had formed this view that the basis for wealth had evolved from land to labor to information back in the 1970s, when technology first hit the banking system and moved us to an information economy. His successor, John Reed, said that “banking is just bits and bytes.” The key to all of banking is this recognition that banking is all about data management and information leverage.
Today, information warfare in banking is critical as financial businesses exist purely as information economies and we fight based upon information leverage. But so do others, such as Google. There are plenty of search engines around – Ask Jeeves, Lycos, Altavista, Bing, etc – but Google won this game early on by making algorithmic analysis of data more relevant and organised. And they continue to do this today by making searches contextual and geographically localised.
And Google is not a monopoly. They have competition – Wolfram Alpha for example – and can only maintain their leadership by innovating information leverage. Facebook is the same. Facebook has had plenty of other players before them – Friendster, Friends Reunited, Bebo, MySpace, etc. – and we very quickly forget these other players when one wins out. However, Facebook is not a monopoly. They have competition such as Diaspora and only maintain their leadership through continual innovation and enhancement of their information management capabilities.
Apple is another example. Apple was almost out of business when John Sculley ran the business.
Steve Jobs returned and it is through his leadership and vision of continually and elegantly innovating that they bounced back – oh yes, and recognising that the MP3 player would be the core of a lifestyle revolution.
The iPod really has been the making of Apple. It gave them back their heart but the real vision of Apple was to introduce iTunes, and iTunes is the engine that provides them their information advantage. The iPod can easily be substituted, as can the iPhone, but iTunes has a unique hold over information.
And that’s where real information warfare begins. Information warfare is all about continual evolution and leverage of data advantage over the potential and unrealised competition. Which leads me to Amazon.
Amazon was all about books, we thought. Sure, that’s where it started, but it soon moved from books to music, films and more. The company then got really smart and started to make data mining its core art form. Data leverage by looking at dataprints – like fingerprints, the unique way in which each of us search, buy and consume – and then relating our dataprints to each other to find relationships.
By doing this, Amazon built its business on finding offers that you might buy because people like you buy it and they know this thanks to our unique dataprints. Soon, Amazon was a behemoth of data, moving into selling anything from white goods to televisions. And it is easy to sell online when you know how to leverage data relationships, which is why even this was not enough.
Recognising its information leadership, Amazon opened Amazon Web Services (AWS) to become the largest cloud computing firm out there. Amazon now adds server systems to AWS every day that would have been the equivalent of the complete server architecture required to run the total retail business two years ago. That’s information warfare: leveraging systems expertise to get more share of wallet, expansion of market, growth of proposition and development of the offer into a range of services with dependency on no one.
If Amazon was still just an online bookshop, it would be dead; Amazon is, instead, an information guerrilla and gorilla. They win in the information-as-capital-stakes game.
This brings me back to banking and the issue we face. The reason we should worry about Amazon, Google, Facebook, Apple and others is because they all know how to use information as capital. They are all now pointing their information leadership at money and, bearing in mind that banking is just data as Walter Wriston pointed out back in the 1970s, we should be concerned:
- Amazon attracts over 700 million visitors to its .com domain annually and has around 65 million customers just on its U.S. website each month;
- Apple has over 200 million active accountholder’s details on iTunes;
- Facebook’s 600 million users like gaming – Zynga’s Cityville reached 100 million users in just six weeks – and all gaming will find that it is mandatory to use Facebook credits from July 1.
I could go on, but the point is that the Internet goliaths really know how to use information as ammunition. If they turned that ammunition on banks, would we be capable of deflecting their bullets?
Mr. Skinner is chairman of the Financial Services Club, CEO of Balatro Ltd. and comments on the financial markets through his blog the Finanser. He can be reached at cskinner@balatroltd.com.
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