GigaOM Pro

Summary:

After the rapid expansion of the next generation web market over the past few years, the first quarter of 2009 proved to be something of a handy crib sheet on the business strategies of many of the major players.

As consumer adoption of new web tools increases and businesses models develop, so does the chance for consolidation and for winnowing out weaker players. Therefore, while the pie as a whole is getting larger, there are fewer forks trying to take a slice — that is, the upward trajectory of leading companies often came at the expense of their rivals.

The first impact of this market shakeout is that each of the broad stroke areas that represent the activity streams space — social networking, real-time web, geolocation and other forms of media sharing — now count just a handful of major players that often cross into each others’ territories. This has not only underscored which companies are in the strongest positions, but it has also given them the opportunity to develop significantly in both a strategic and financial sense.

With the rollout of advertising deals, media partnerships and other cash-generating plans, the social and fiscal viability of many NewNet companies took a significant turn for the better over the past quarter. In turn, as the top tier of startups begin to prove that they have the potential to deliver positive financial or competitive results, larger corporate competitors are taking serious notice.

Companies like Microsoft, Yahoo — and particularly Google — are now launching or developing their own rival services, or attempting to build systems that allow them to harness their significant resources and existing market penetration. However, they are finding it tough to compete with fleet-footed startups. Fortunately, the largest industry players have long realized that there are areas that small companies will struggle to compete, however nimble they are.

Chief among them is the surging importance of mobile, which offers significant players the chance to operate vertically, by controlling the device and software, as well as encouraging development of mobile applications.

Apple’s increasing market share is a result of its dominance in the application market — something which owes a great debt to the next generation strategies of the NewNet — but its increasing conflicts with developers, large rivals and smaller competitors indicates that the race towards convergence is not yet over.