In 1996 Robert H. Frank published "The Winner-Take-All Society," an explanation of why so few in the wired world do so well and why everybody else falls short. The intervening years have only strengthened his case that, in a networked economy, most sales, profits and other rewards go to a small group of companies and individuals.
Google blew away other search engines. eBay is still the only online auction site most people have heard of. Facebook turned MySpace into a punchline.
Thus the chances for Millennial Media to make it huge in mobile, wireless advertising would seem few. Only five years old, the Baltimore-based startup is less than a hundredth the size of its main competitors, Google and Apple.
Even so, investors will watch Millennial's initial public stock offering, announced last week, more closely than an Angry Birds game. The company is at the core of the next big bang in network explosion — mobile media such as smart phones and iPads. Even though it's losing money, it's growing in the exponential fashion beloved by technology investors.
It has several advantages over its Godzilla rivals. Perhaps the biggest is neutrality. Millennial is the Switzerland of mobile advertising, poised nervously but honestly between two evil empires.
Google and Apple bought mobile-ad startups to complement their existing businesses. Millennial stayed independent, wisely rebuffing reported buyout overtures from Research In Motion that would have been a kiss of death from the waning maker of the Blackberry.
Thus Millennial's advertisers can reach almost any smart phone or tablet operated by any carrier. Clients of Apple's iAd, on the other hand, get eyeballs and clicks only from that company's iPhones or other mobile platforms.
While Google's AdMob places ads on non-Google phones as well as those using its Android operating system, it's hardly a disinterested broker. The mobile-ad divisions of Google and Apple face the same ossification risk of all startups absorbed by giants. Advertisers and mobile-app developers may prefer the flexibility and transparency of Millennial Media and its 200 employees.
As an independent with no airwave spectrum or phone platform, Millennial has a large stake in the debate over Net neutrality, which is about whether the people who own the Web's plumbing can discriminate against certain kinds of content. The government's defense of Net neutrality so far is a plus for the company.
The potential of the mobile-ad market seems to offer grand opportunities for almost any company. The corollary of the winner-take-all principle is the rule of the long tail, which says that, in any digital market measured in billions, even smaller players can do well.
Mobile advertising is still small — less than $1 billion in U.S. spending last year, according to IDC, a research group. But it's growing fast and promises to generate more revenue per reader than traditional Web ads.
Using GPS technology, mobile advertisers can target customers only in certain neighborhoods — those who are nearing a store, for example. Association with specific apps — rather than selling through an all-purpose browser — also lets mobile advertisers aim come-ons more precisely.
Ads on phones are a big step for interactive marketing as companies discover the possibilities of "click to call" invitations. Advertisers are launching mobile-only campaigns. Tablet ads are growing especially fast. Smart-phone users are less adept at Web surfing than people on traditional computers, which means they may be less likely to escape an advertiser's clutches. Active, young customers packing iPads and Droids are more likely to blow money on the spot than desk potatoes sitting behind a Dell.
Never underestimate the ability of multibillion-dollar behemoths to crush creative and fresh-faced rivals through predatory price-cutting and restrictive business alliances. Apple booked $82 billion in revenue through September of last year. Google had $27 billion.
Millennial had $69 million, and even that makes the company look bigger than it should because much of the money wasn't Millennial's but was earmarked for app developers for their ad space.
Millennial CEO Paul J. Palmieri and other executives sold some of their Millennial stock to venture-capital funds in late 2010. Certain so-far-unidentified shareholders are poised to sell more stock in the public offering, according to the prospectus filed with regulators. Neither move bespeaks exuberant confidence in the company's prospects.
Nevertheless, founders and financiers are likely to hold substantial stakes after the firm goes public. IDC says Millennial is solidly No. 2 in mobile ads, with a 17 percent market share, according to Bloomberg News. Google, with 24 percent, is No. 1. Apple holds a 15 percent share, said IDC.
Google, whose core business is online ads, is by far the bigger threat to Millennial. Facebook plans to introduce a mobile ad service this year, Bloomberg reported last month, which could increase the pressure. But Google and Facebook are huge and torn in many directions. Millennial is focused, professional and led by some of the people who built the successful Advertising.com.
Even in a winner-take-all society, the table scraps can sometimes be pretty tasty and filling.