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Much of the industry’s attention has fallen squarely on Facebook this week which is now just days away from a ‘mystifying’ press conference. Facebook is generating some sort of positive momentum as investors are abuzz over next week’s announcement which just happens to coincide with shares crossing $30 for the first time since mid-July. Speculation continues to build as analysts clamor over what is next for the social networking service. Theories have included phones, search engines, cloud services, video advertising and expanding its e-commerce platform. Now would seem ideal to launch a new way to monetize its service as interest is high and its user count remains over a billion. Subsequent reactions from rivals will also be worth tracking and considering. Elsewhere, increased regulatory scrutiny is disrupting operations for a few internet outfits in Europe. Google is the latest company to come into the region’s cross-hairs, as EU officials demand changes to the way search results are presented. It is there contention that Google unfairly distorts customer choices and takes business from rivals. Google had been given one month to comply as of December 18th but no formal changes have been made thus far. A statement from Google informed investors that they are cooperating fully at this time. The instance will likely be a hiccup for the internet giant but still worth paying attention to considering international revenues now account for over half of total revenues.
The threat of patent litigation continues to grow in the wake of the Apple vs. Samsung court battles of last year. Any potential overhaul of the patent system is still years away, making it even more likely that patent battles will grab headlines, dent cash reserves and threaten future revenues even for the largest of internet companies.
Data and power management will also be key issues for major internet companies this year. User bases and web traffic continue to balloon, putting pressure on a variety of resources. Google already has a leg up on many of its rivals thus far. At the moment, over 30% of the company’s data centers are powered by renewable energy sources and it invested another $200 million this week into a Texas wind farm. In addition to greater energy consumption, burgeoning data volumes will also require massive capital efforts to keep capacity ahead of demand.
Both Facebook and to a lesser extent, Google, have yet to fully take advantage of mobile device monetization. Smartphone and tablet sales continue to surge and internet companies scramble to capitalize on them. Google’s wallet service is gaining traction along near field communication devices and products. Facebook has done an excellent job of getting its applications into mobile devices but has yet to truly monetize its presence there. Investors will want to keep a close eye on this niche and the industry-wide ramifications substantial progress from a major competitor could have.
Overall, 2013 is shaping up to be another lucrative year for major internet information providers. Mounting competitive pressure, increased importance on resource management, patent litigation and regulatory uncertainty threaten to derail the industry’s momentum but will not likely be able to slow its torrid pace. Facebook’s announcement next week could play a pivotal role in the direction the industry moves in for the rest of the year. Similarly, resolution of accusations for Google could also potentially impact several companies’ approaches to search results throughout the world.