Oct 6, 2006

Blogging In Seattle - What's New In The Internet Realm Today?

So, there's been some talk about YouTube and Google hooking up. I'm struggling a little with this one. If indeed it happens, it would be a big move for Google because tradditionally they've been pretty conservative in their spending. Word is we're talking about $1.5B - now that's a whole heck of a lot of money to pay for a Website with no real revenue. Last time I checked there were no real barriers of entry into the "User Generated" video market. What will this do for Google's bottom line? That remains to be seen - one thing is for sure. This is entirely new territory for Google - and the markets will be watching very carefully to see how they execute. Now may not be a good time to buy Google Stock........

Oct 5, 2006

Can Google Get To The Next Level?

Over the past year, Google has expanded it's Paid Syndication strategy aggressively, branched into Enterprise Search - with some success, and grown it's Search Query share in almost every major region world wide. But is that enough? Is Web Search revenue enough to justify the very high valuations which this company receives on the street? Can a one trick pony - albeit one on steriods, survive and thrive in the online space? What happens when Live Search catches up with Google Relevance and matches it's feature set?
I ask this because, despite a dizzing array of product releases over the last year, Google has little to show for it's efforts. True, rivals get the jitters when Google's nonsearch products grab headlines. But a close look shows that so far, there's not a market leader among them.

When Google launched an instant-messaging program late last year, tech watchers buzzed over the looming confrontation with America Online (TWX ), Yahoo! (YHOO ), and Microsoft. Google's launch of online spreadsheet software in June was deemed a shot across the bow of Microsoft Excel. And when Google prepped for its June 29 debut of Google Checkout, an online payment system that will compete with eBay Inc.'s (EBAY ) PayPal, several headlines blared: "Google Readies PayPal-Killer."

But if you cut through the hype, Google's intimidation factor quickly fizzles. An analysis of some two dozen new ventures launched over the past four years shows that Google has yet to establish a single market leader outside its core search business, where it continues to chew up Microsoft and Yahoo.

Consider just a few examples: Google Talk, an instant-messaging service launched last August, now ranks No. 10, garnering just 2% of the number of users for market leader MSN Messenger, according to comScore Media Metrix. Three-month-old Google Finance, heralded as a competitor to market leader Yahoo! Finance, has settled in as the 40th-most-visited finance site, according to data from Hitwise, a competitive intelligence firm. Gmail, the e-mail service that was lauded at its 2004 launch for offering 500 times as much storage space as some rivals (they quickly closed the gap), today is the system of choice for only about one-quarter the number of people who use MSN and Yahoo e-mail.

Google clearly benefits from the fact that it's a market leader with a very strong brand. Analysts and market pundits love to talk about the ubquity of search and it's great long-term revenue potential, and Google is the Market leader.

I read an interesting quote by Paul Kedrosky, a venture investor at Ventures West Management Inc. "People give Google the victory in the beginning and don't show up later to notice that things didn't go anywhere," They don't know why they're getting into all of these products. They have fantastic cash flow but terrible discipline on products," says Kedrosky. "It's a dangerous combination."

The problem is that every time Google branches out, it struggles with the very thing that makes its search engine so successful: simplicity. The minimalist Google home page offers a stark contrast with the cluttered sites of key rivals Yahoo and MSN. People go to Google to find information fast. So Google can't showcase its plethora of new products without jeopardizing this sleek interface and the popularity that generates a $6 billion geyser of cash from search ads. But the lack of exposure for its new products means only a small percentage of Googlers use it for anything other than Web and image searches.

Google's problem isn't a string of failures, then, but rather the middling performance of many products that survive. In fact, it seems far from achieving even its intended 20% to 40% success ratio. This may be contributing to the internal debate that rages at Google's Mountain View (Calif.) headquarters over how to deliver more search users to the new products. For years, Google has relied on "tabs," the text links that sit above its search box and provide the option to search five different services, including images, news, and maps. There's little agreement, though, over how many tabs should be there and how they should be allocated. "There have been debates since 2001 about how many tabs it is safe to put on the home page before you get the Yahoo clutter," says Doug Edwards, ex-director for consumer marketing, who left Google last year.

One way around the tab problem is to urge more users to create personalized home pages around Google's search engine, an option the company has offered for the past year. A custom-built Google home page can be surrounded by information from Google News headlines, stock quotes, and a list of e-mails from a Gmail account. True, this pushes people toward a busier home page. But at least they can set their own threshold, including only as many add-ons as they wish. This strategy would be similar to the one employed by Microsoft's Live.com experience Google claims that "tens of millions" of visitors have set up customized home pages, though it's not clear how many are actively in use.

With its huge market cap and lead in search, Google has time to work out the kinks and a culture committed to learning from mistakes. And it is collecting a wealth of data about what surfers want. Still, the message coming back so far is that it needs to search harder for products people want to use.

Here Comes The Click Fraud Underground Network

Click fraud is getting worse--and advertiser confidence in providers of search-engine advertising, namely Google and Yahoo, might be slipping. The widespread problem, like so many instances of fraud on the Web, is becoming more sophisticated. There's actually a thriving click-fraud underground teeming with small-time players operating large "paid to read" rings that have hundreds of thousands of members each.

Apparently, most click-fraud academics and consultants estimate that 10 percent to 15 percent of clicks are fake, or roughly $1 billion in annual billings. Search engines, of course, then divide these proceeds with any players involved--meaning that some $300 million to $500 million could be headed directly to the click-fraud industry, which would make it about as big as the online video advertising market.
Now customers - large and small are begginning to wise up, labelling click fraud The dark side of online advertising .

Google and Yahoo say they filter out most questionable clicks and either don't charge for them or reimburse advertisers that have been wrongly billed. Determined to prevent a backlash, the Internet ad titans say the extent of click chicanery has been exaggerated, and they stress that they combat the problem vigorously. I think they face a key challenge because they rely on revenue from contextual search features - which is the vehicle through which most click fraud is initiated.

Google and Yahoo are grabbing billions of dollars once collected by traditional print and broadcast outlets, based partly on the assumption that clicks are a reliable, quantifiable measure of consumer interest that the older media simply can't match. But the huge influx of cash for online ads has attracted armies of con artists whose activities are eroding that crucial assumption and could eat into the optimistic expectations for online advertising. (Advertisers generally don't grumble about fraudulent clicks coming from the Web sites of traditional media outlets. But there are growing concerns about these media sites exaggerating how many visitors they have -- the online version of inflating circulation.

I've heard estimates that 10% to 15% of ad clicks are fake, representing roughly $1 billion in annual billings. Usually the search engines divide these proceeds with several players: First, there are intermediaries known as "domain parking" companies, to which the search engines redistribute their ads. Domain parkers host "parked" Web sites, many of which are those dummy sites containing only ads. Cheats who own parked sites obtain search-engine ads from the domain parkers and arrange for the ads to be clicked on, triggering bills to advertisers. In all, $300 million to $500 million a year could be flowing to the click-fraud industry.

Personally, I don't think the numbers are that high, but this is becoming a serious problem and Search Engines need to come together and develop a decisive strategy for dealing with it. Perhaps more stringent conditions have to be put in place to make sure that only legitimate sites are allowed to participate in adSense and other contextual search programs. Of course, this could severely impact overall Search Revenue - but them if even 10% of that revenue is fraudulent, then perhaps such moves are justifiable.

Search Engine Commentary

Clearly - the key Search Engines are locked in a very competitive battle to acquire new users whilst remaining top of mind to their loyal "searcher" base. That said, Google, Yahoo and MSN (with it's Live Search offering) are adopting very similar approaches as they attempt to differentiate their offerings.
So, every major search engine is working hard to deliver intuitive features and complimentary applications to help improve your Search Experience. It's not just the 3 key players who are creating waves. Have you tried ask.com lately? Perhaps, as some in the blogosphere have said, it's time to reconsider Google.

Certainly, ask has brought more skin to the game - in recent months. When I heard that they were working hard to create their own search engine monetization platform, I wondered if that strategy was a wise one. IAC afterall is hardly a technology company and Barry Diller is no tech guru. Lately though, I'm hearing that Barry is having second thoughts, which is probably a good thing.

A Little Chaos Is Not A Bad Thing - is it?

Alright - so my late summer break is over and the WorldChanger is back. There's been much to talk about lately - however, today I'm going to focus on commentary from our friends at Google. In a recent Fortune Article - Google Management seemed to indicate that Chaos in the workplace can be a good thing. It's been obvious for some time now -- ever since the company went public two years ago, in fact -- that Google is trying very hard not to become a giant, slow-moving, bureaucratic organization, even as it hires hundreds of people every month and adds millions of square feet worth of office buildings at various locations around the world.

One of the most obvious attempts to retain the energy of a small startup (apart from the free snacks and scooter races in the hallways, of course) is the 20-per-cent rule, which allows Google employees to spend a day each week working on a personal project. According to co-founder Larry Page, those projects have produced some of the company's most successful new ventures, including Google News.

But then when you dine with the devil........ Financial Markets are not inclined to remain patient with Google if they can't maintain their impressive revenue numbers. During the next 3 quarters, I expect to face more pressure from Financial Markets to either start making money from some of their more "chaotic" initiatives - or scrap them and use the funds to improve Search Revenue.