The Tail That Wags the Dog
Om Malik says, "even Silicon Valley can't ignore what's been going on in the overall economy."
It's an important post. The consumer-spending analysis is not pretty, and it resonates far beyond the tech industry. But something that jumped out at me was the way Malik uses "Silicon Valley" to mean "advertising-supported web businesses."
Including geographically disparate companies like Time Warner and Microsoft is one thing -- that's just using Silicon Valley as a synecdoche for "the technology industry."
But defining the tech industry as the net media business is something else again.
This redefinition is just the latest iteration of a business that thrives on the next big thing. Silicon itself quit being the sexy story long ago, superseded by the boxes around the chips, then the software that ran them, and the pipes that connected them and the communications and commerce that flowed through those tubes, and now the advertising based on all that stuff. (An exception: Apple, which still makes waves with hardware).
Online advertising has been a growth story, and the tech industry (and Wall Street -- itself a flexible phrase) loves a growth story. But in dollar terms, the new Silicon Valley is still a relatively small slice of the pie. Cisco's sales are bigger than those of Google, Yahoo!, and MSFT's ad business combined, for example. Market cap, of course, is a different tale.
And advertising is different from traditional Silicon Valley businesses. It provides value to consumers and businesses, but it's not quite the bold new thing, the cultural touchstone that personal computing and personal publishing turned out to be. It seems a long way from the inventors in a garage, or the coders who created things like blogs without worrying too much about the revenue model.
That's not to say the convergence of the technology and media businesses is not a huge and important story, or that the race to make money off it is not a defining aspect of Silicon Valley today, and tomorrow. Just a little perspective for a summer afternoon.