Barry vs. John - Ugly War Brewing @ IAC

Well, it's Barry vs. John, they used to be friends, but now - not so much. So, it would seem that John & Barry are getting a divorce - a messy one.

Here's a quick recap.Back in the mid-1990's, John Malone handed over Liberty's Stake in IAC to Barry Diller, which included 63.4% of it's voting shares. Things worked out fine for a while, but then the Markets went soft and the ever enterprising Barry Diller decided to make some changes. He's proposed a plan to break up IAC into 5 companies and in the process, unlock some of the latent value of it's key entities.

The proposal would keep adsupported websites including ask.com at IAC, while creating seperate publicly traded entities for HSN , ticktmaster and realestate sites including LendingTree and realestate.com However - in the process - he's cutting Malone's voting pwoer in half. The volume of the legal squabble is likely to increase as IAC reorganizes. It could also represent a big distraction for the highest level executives in the company from the core mission of running the business.

Last month, Diller replaced Ask CEO Jim Lanzone with former Match.com CEO Jim Safka. The intensifying legal battle for control of IAC clouds the outlook for the company until it's resolved.

MSFT Finally Get Some Street Cred

Microsoft delivered strong Q2 Revenue & Earnings. The Company announced record numbers for the Sept - Dec'07 period. Revenues were up 30% to $16.4 Billion. Operating Income was up 87% to $6.5 Billion & Earnings Per Share (EPS) were up 92% to $0.50 per share. It's worth noting that - even in this very volatile financial climate, Microsoft was able to generate strong results in all of it's key Business Units. Below is a breakdown - by division:

• Windows Client (Vista/XP): $4.3 Billion, up 68%
• MBD (Office/SharePoint): $4.8B, up 37%.
• Server & Tools (SQL Server/Visual Studio): $3.3 Billion, up 15%.
• Entertainment (Xbox & Zune): $3.1 Billion
• Online Services (MSN/Live): $863M, up 38%.

There appears to be little fear of a Recession hit in Redmond, as the Management Team offered strong guidance for Q3 which ends in March '08. Revenue is expected to be in the range of $14.3 billion to $14.6 billion. Diluted earnings per share are expected to be in the range of $0.43 to $0.45 and Operating income is expected to be in the range of $5.6 billion to $5.7 billion.

Full Fiscal Year guidance indicates that MSFT could hit the $60B mark in revenue - a figure normally reserved for Large Oil Conglomerates. Full year, operating income is expected to be in the range of $24.2 billion to $24.4 billion and diluted earnings per share are expected to be in the range of $1.85 to $1.88.

In the days ahead, I'll do a general comparison between Microsoft, Google and Yahoo. In particular, I'll hone in on the MSFT/Online Services Group - and provide my commentary how we stack up overall.....

Yahoo Sales Into "Headwinds"

Looks like things are about to get pretty interesting @ Yahoo. The #1 General Interest Portal and #2 Search Engine - released it's Q4 earnings report today - and things aren't looking too good. It reported a 23% drop in fourth-quarter profit and will lay off over 1,000 of its 14,300 employees in mid-February. On a slightly positive note, Revenue is up 8%, US RPS is up 20%, Search Revenue is up 30%, while Query Volume reported a 10% increase. 2008 Net Revenue Guidance is $5.35 to $5.95 billion, versus consensus of $5.9 billion.
Yahoo appears to be focusing on strengthening their core Search Business - in key markets. In doing so, they're doing away with specific partnerships or affiliates which haven't yielded the desired returns. Traffic Acquisition Costs (TAC) rates have been renegotiated 72% to 80%. Interestingly, Yahoo President - Sue Decker, indicated that there was weaker online-ad spending during the quarter among some categories of advertisers affected by broader economic issues. Spending by advertisers in the financial, travel and retail areas declined or grew more slowly in the fourth quarter compared with a year earlier. There are however indications that key online categories including Auto, Pharmaceuticals & Telecoms are projecting growth in online budgets in 2008.

Can't wait to see what type of returns, Google delivers - on Thursday 01/31. Hey Jerry, watch out for those headwinds, they could easily sink your ship, or at the very least - blow you significantly of course and into troubled waters......

Back With A Vengence - '08 Is The Year of New Beginnings

I've been offline for over a month, first enjoying a "well earned" break. I took some time off in December - to reflect and think about '08. This year has started off very fast, much to think about and even more to do. I've plunged myself back into my work - and, so far, it's all good.

That said, I'd like to welcome all World Changer readers to 2008. I've labelled this - the "Year of New Beginnings". Certainly - each day of each Year, offers new opportunities to do things better than we did the day before. I hope to post more regularly this year - my commentary will likely cover a broader spectrum of events & Ideas. I've also decided to throw open my blog for comments - so I can start a dialogue with you readers. Perhaps we can build our own distinct online community.

I'd encourage you all to give me feedback on my posts - all feedback is good. My goal is to share my views and learn from everyone else in the process. Happy New Year - and make '08 your year of New Beginnings..............


Rotimi

Canadian Internet Revenue Passes $1 Billion..........

In 2006 Canadian Online Advertising Revenues surged to an unprecedented $1.01 billion dollars for the year. The 2006 actuals represent a 26% increase over the $801 million originally estimated by the IAB for 2006; and an 80% increase over the 2005 actuals of $562 million. Of the $1.01 billion, approximately $208 million or 21 percent of ad dollars were allocated to the French Canadian Online market, representing growth of 68% over the 2005 actuals of $124 million, according to the IAB.

IAB Canada’s projected total for 2007 Online advertising in Canada, is estimated to be $1.337 billion – a full 32 percent more than the 2006 actual of $1.01 billion. The 2006 actual revenues and the 2007 estimated revenues were reached after a comprehensive survey of all major Online publishers in Canada. Interestingly, Online Ad Revenue was spread across a number of advertiser categories including:
-> Automotive - 16%;
-> Consumer Packaged Goods - 14%;
-> Entertainment (Music, Film, TV) - 9%;
-> Financial - 16%;
-> Leisure (Travel, Hotel, Hospitality) - 14%;
-> Retail - 16%;

-> Other - 15%

This trend is consistent with online advertising revenue growth across other key markets around the world, such as France, Germany, United Kingdom and of course - the U.S. One key driver of this trend include Integrated Online Campaigns, new search ad choices, rich media ads. Several new blue-chip advertisers also entered the market for the first time in 2006. Interestingly, Online display ad spending in Canada outpaces search advertising," unlike the United States, where Search Revenue has surpassed display advertising revenue. That discrepancy is likely due to the substantially greater broadband penetration in Canada, at 58% of households according to eMarketer estimates, versus only 46% in the US, making the Canadian market even more valuable to brand advertisers buying display ads. Canada leads all countries surveyed in hours online per month, according to Comscore Networks. Spending on online classifieds and directories showed the fastest growth, up 120 per cent to $273-million in 2006, according to the IAB. E-mail marketing grew 82 per cent to $20-million; search marketing grew 79 per cent to $353-million. And display advertising - the most mature online ad medium - grew 58 per cent to $364-million.

In fact, according to data provided by Comscore, Canadian users out surf US users by 27% to 72% for average usage days per visitor (per month) and average visits per visitor respectively. Canadians averaged 39.6 hours per month online overall, with broadband users spending nearly three times more hours online than narrow band users. While a healthy Canadian economy has seen marketing budgets increase across the board, Internet advertising continues to show the greatest gains.

The Barry Bonds Sagger..........

This past Thursday, Barry Bonds was indicted for perjury and obstruction of justice – an offence that could land him in Prison for a very long time. I find it particularly noteworthy that the indictment came just 3 months after he broke Hank Aaron’s career home run record. This investigation into steroid use by elite athletes has been going on for 4 years and during that entire time, Bonds never identified by Major League Baseball as testing positive for steroids. Then came the indictment - four counts of perjury, one of obstruction of justice; a maximum sentence of 30 years in prison. Bond’s personal trainer, Greg Anderson, has spent most of the last year in jail for refusing to testify against his Barry. Interestingly, Anderson was released from prison after the indictment was handed up and refused comment as he walked out. Coincidence? Well, his attorney, Mark Geragos, said the trainer didn't cooperate with the grand jury. Either way - we'll soon find out.

In August, when Bonds became the career home run leader, he flatly rejected any suggestion that the milestone was stained by steroids. At the time, he clearly stated that his record is not tainted. We know now that all that time, the grand jury was quietly building its case against him. "During the criminal investigation, evidence was obtained including positive tests for the presence of anabolic steroids and other performance enhancing substances for Bonds and other athletes," the indictment said. Prosecutors promised Bonds they wouldn't charge him with any drug-related counts if he testified truthfully. But according to the indictment, Bonds repeatedly denied taking any steroids or performance-enhancing drugs despite evidence to the contrary.

I don’t know if they had enough to go after him before he broke the record, I do know that by making this announcement AFTER he broke the record – they’ve all but sealed his fate in the annals of Baseball History. Whether or not Barry is eventually proven innocent is probably immaterial at this point. Perjury is difficult to prove beyond a reasonable doubt, and Bonds' lawyers will fight the government at every turn. Most people have already made up their minds anyway - and his career is all but over.

Like Marion Jones, Barry has consistently denied taking Steroids. Unlike Marion though, he’s unlikely to offer a tearful apology, even if proven guilty. I remember reading somewhere that Tim Montgomery – when asked about the consequences of doping, said he would be willing to die after breaking the world record. If indeed Barry did use Steroids – I do wonder if it was all worth it. He was already worth millions back in 2000 and could have gone on to the hall of fame, with an untainted record. At best, he’s guilty of associating with a Personal Trainer who may have received performance enhancing drugs from Balco founder – Victor Conte. At worst, he’s a dope cheat and will go down in history as a fraud.

It doesn’t help that he’s not exactly Mr. Personality and he hasn’t endeared himself to the Baseball fans or the press. Many people underestimate the value of a positive, cheerful personality. Many more – don’t understand the principle of reciprocity or the value of being a giving person. When I think about Barry Bonds career, I’m reminded of another Bay Area star – by the name of Earvin Effay Johnson, Jr. Remember the year 1991, when Magic announced that he had aids? I’ve never seen such an outpouring of Sympathy for an Aids Sufferer who admitted that he contracted the disease by cheating on his Wife. BET even held a special concert to honor him. I don’t impose my religious beliefs on anyone – but you can’t convince me that God didn’t spare that man’s life. I encourage anyone who reads this blog post – to check out his Profile on Wikipedia, especially the HIV Announcement section.

Had Barry been a different person, I doubt that he would face the same level of negative scrutiny. No one’s talking about Jason Giambi – who admitted to Steroid use doesn’t seem to be held to the same standards in the court of public opinion. What about Mark McGwire? I wonder what he's thinking about today.

You’ll recall that when Mark McGuire appeared before the House Government Reform Committee to discuss his alleged steroid use. He offered this tearful opening statement.

“Asking me or any other player to answer questions about who took steroids in front of television cameras will not solve the problem. If a player answers 'No,' he simply will not be believed; if he answers 'Yes,' he risks public scorn and endless government investigations.... My lawyers have advised me that I cannot answer these questions without jeopardizing my friends, my family, and myself. I will say, however, that it remains a fact in this country that a man, any man, should be regarded as innocent unless proven guilty."
When asked if he was asserting his Fifth Amendment right not to incriminate himself, McGwire once again responded: I'm not here to talk about the past. I'm here to be positive about this subject. So, is Mark guilty or not?
While no legal action has been taken against McGwire, in baseball or out of it, his testimony apparently cost him public affection and support. When his Cooperstown eligibility began in 2006-07, McGwire received less than a quarter of the vote from the very same baseball writers who had treated him as an icon.

I think it’s unfortunate that Barry Bonds finds himself in this position – if he’s guilty of doping and lied about it, he should face the consequences of his actions. .

What's The Deal With Google Phone?

So, Google now has it's eyes squarely set on shaking up the wireless market through it's own Brand of Innovative Disruption. It's goal is to make applications and services as accesible on cellphonea s thy eare on the internet.

In essense, Google wants to make it easier for cellphone customers to get a variety of extra services on their phone - from maps to social networking features to video sharing. Within a few weeks, Google is expected to announce software and services which would allow handset makers to bring Google powered phones to the market, sometime next year. You can expect all Google powered phones to feature key Google applications such as Gmail, Google Maps, Video and (from You Tube).

One key element of the Google Phone concept - is the Company's drive to make phones' software open - and available to independent software developers. Windows Mobile OS already gives software developers access to tools which can be used to develop new features and services. Apple Inc recently said it will release similar tools next year which outside developers can leverage in creating new features for its iPhone. Nokia's Ovi is also open to 3rd party applications. So the true value proposition of Google's Innovation - remains to be seen.

Gray Googlers - Striking Gold?

So, I'm flying back to Seattle - from the ELC conference in DC and I happenned to pick up the 10/26 edition of USA Today. On the cover of the Money Section was an article titled - "Gray Googlers" Strike Gold. I remember reading through the article and trying to wrap my head around just how far Google has come - in redefining the Internet as a viable medium for electronic commerce. 10 years ago, the Internet was used primarily as a means of communication - email and messenger were the key drivers. At that time, General Interest portals like Yahoo and MSN were already popular in the United States and gradually becoming key information vehicles in other Countries around the World. In many Countries - General Interest Portal = Global News & Entertainment Destination - with some Communication Tools. Amazon was probably one of the first widely popular ecommerce sites. Although the value proposition was clear - the money only flowed one way - to Amazon. eBay offered a better model - a Win-Win for buyers and sellers alike. Of course - it helped that Buyers could readily become sellers and vice-versa. When Bill Gross founded goto.com and created the original business model to make money from a Search Engine, he couldn't have anticipated what would happen next.

Today, the top 3 Search Engines - Google, Yahoo and Live Search, personify the very essense of electronic commerce. That said, Google is by far themost successful ecommerce vehicle the Intenet has ever produced. Just ask Jerry Alonzy, the 57 year old independent handyman who makes $120K annually from adsense ads on his handyman website. Today, thousands of people are making a great deal of money from adsense and adwords campaigns. No other online entity has a one-two punch like this one - as is evidenced by it's growing revenue and stock valuation

Google's Growth continues to be the subject of several "anaylyst discussions" - truth is no one really knows how this story ends. Google Founders could never have imagined that their model would be so successful. It's taken good execution from Google and a variety of missteps by it's major competitors to get us to this point.

Google's had a 5 year headstart on Microsoft's Live Search - it's only true long term competitor in the Search Engine Wars. What Live Search does not have is a strong global monetization platform. Yahoo bought Overture and for a while, that worked very well - largely becuase their largest and most profitable client was MSN. Now that 3 of MSN's key portals (US, UK and Canada) have transitioned to Microsoft adCentre, Overture's revenue is down significantly and it's parent - Yahoo, does not have the funds to continue to expand it's network of Global Partners. In order to effectively compete with Google - Live Search, Yahoo, Ask or any other would be pretender - would need to do 4 things - very well.

1. Match Google's Search Engine PLT Performance. (i.e the average amount of time it takes for a Search Engine to generate a result for a specific query. Google is by far the fastest Search Engine - amongst the top 3)

2. Deliver more relevant results than Google - for all types of Search Queries - (Including General Interest, Market Specific, Head & Tail Queries). This is becoming especially difficult for certain types of general interest queries -with the advent of Universal or Blended Search

3. Develop differentiating features which encourage users to start using the Search Engine regularly - and which drive increased Search Engagement. (i.e the approximate number of query terms which an indivivdual generates on a daily/monthly basis).
-> Most Internet Users leverage more than one Search Engine today. In order to become a formidable competitor a Search Engine needs to get users to use it's Engine at least as often as they use Google.

These first 3 steps just get you in the game. Yahoo is a good competitor in each of these 3 areas today and Live Search is working hard to breach the gaps in 1 & 2.

4. Many have overlooked the importance of AdWords and in particular, AdSense - as key drivers of Google's popularity, as a Search Engine. The revenue which Google has generated from these great business models has cemented it's reputation as an exciting Global Brand. Any Search Engine which hopes to successfully challenge Google must have grow a successful competitor to AdSense and AdWords in Key Search Markets around the world - including the US, UK, Japan, China, France, Canada, Germany, Brazil and Australia. Google generates over 45% of it's global search revenue - from International Markets. The main battle ground remains the US, but this Search War is very much a global one.

Yahoo has all the tools to compete effectively - but lacks the funds to invest in it's Search Engine and it's Search Monetization Platform - like Google does. Live Search is backed by MSFT's considerable cash reserves - but it's Search Engine is not yet on par with Google's and it's monetization platform is only available in 4 major markets around the world.

The x factor in all of this is Google's brand and the perception users have - that Google is Search and Search is Google. How do you compete against that? Why would anyone stop using Google altogether - if it returns results which are at least as good as it's key competitors? The Gray Googlers article is just one of several articles written every day, which further strengthen the Google Brand and it's legacy. It will take very strong execution on all 4 focus areas and some major missteps by Google - for any other Search Engine to become THE global destination for getting answers to Search Queries.............