Internet Changes Everything

Chaos by design: Google

Chaos by design - October 2, 2006

The inside story of disorder, disarray, and uncertainty at Google. And why it's all part of the plan. (They hope.)
FORTUNE Magazine
Adam Lashinsky , Fortune senior writer
September 20 2006: 9:29 AM EDT

(Fortune Magazine) -- Spend just a few minutes on Google's sprawling campus in Mountain View, Calif., and you'll feel it right away: This is a company thriving on the edge of chaos. Google (Charts), age 8, is pulling in $10 billion a year in revenue and is worth about $125 billion, but the vibe is far more freshman mixer than profit-seeking firm whose every utterance is scrutinized for deeper meaning.

The 1.3-million-square-foot headquarters is a mélange of two-story buildings full of festive cafeterias (yes, they're all free), crammed conference rooms, and hallway bull sessions, all of it surrounded by sandy volleyball courts, youngsters whizzing by on motorized scooters, and -- there's no better way to put this -- an anything-goes spirit. It's a place where failure coexists with triumph, and ideas bubble up from lightly supervised engineers, none of whom worry too much about their projects ever making money.

An edgy management style

Take the case of Sheryl Sandberg, a 37-year-old vice president whose fiefdom includes the company's automated advertising system. Sandberg recently committed an error that cost Google several million dollars -- "Bad decision, moved too quickly, no controls in place, wasted some money," is all she'll say about it -- and when she realized the magnitude of her mistake, she walked across the street to inform Larry Page, Google's co-founder and unofficial thought leader. "God, I feel really bad about this," Sandberg told Page, who accepted her apology. But as she turned to leave, Page said something that surprised her. "I'm so glad you made this mistake," he said. "Because I want to run a company where we are moving too quickly and doing too much, not being too cautious and doing too little. If we don't have any of these mistakes, we're just not taking enough risk."

When a million-dollar mistake earns a pat on the back, it's obvious this isn't your normal corporation. To figure the place out, I've repeatedly been told the person to see is Shona Brown, the 40-year-old ex-McKinsey consultant who is Google's senior vice president for business operations. That's what it says on her business card, anyway, but she might as well be Google's chief chaos officer. She literally wrote the book on the subject, a 1998 bestseller called "Competing on the Edge: Strategy as Structured Chaos." And fittingly, on the day I'm to see her at the Googleplex, my press escort and I get hopelessly lost. Finding anyone here requires precise navigation and the ability to read color-coded maps. We get so badly turned around -- entering the wrong building's lobby, backtracking through shrubbery to another -- that we arrive 17 minutes late. Even real estate at Google is chaotic.

Click here to read more on Google's leadership

Brown has made a career of arguing that anarchy isn't such a bad thing -- which is why Page, co-founder Sergey Brin, and CEO Eric Schmidt hired her in 2003. A business theoretician in a company dominated by engineers, she considers Google the "ultimate petri dish" for her research, though her job is anything but theoretical. In addition to overseeing human resources (called "people operations"), Brown runs a SWAT team of 25 strategic consultants who are loaned out internally on ten or so projects at a time -- restructuring a regional sales force here, guesstimating a market size there.

The company's goal, says Brown, is to determine precisely the amount of management it needs -- and then use a little bit less. It's an almost laughably Goldilocksian approach that Brown also advocates in her book, co-written with a Stanford business professor. The way to succeed in "fast-paced, ambiguous situations," she tells me, is to avoid creating too much structure, but not to add too little either. In other words, just make it not too hot and not too cold, and you're done. "If I ever come into the office and I feel comfortable, if I don't feel a little nervous about some crazy stuff going on, then we've taken it too far," she says.
A "Googley" approach to business

Crazy definitely trumps comfy at Google. You have to keep your wits about you on campus just to avoid smashing into one of Google's 8,000-plus employees. Meetings typically start on the hour, and young Googlers tend to hover outside scarce conference rooms beforehand. They doodle on hallway whiteboards, contributing inside jokes, such as sinister new ways to expand the company's online advertising program. ("AdSense for Eyelids," reads one.) Celebrity sightings are ho-hum. A couple of years ago I was having lunch at Google's sunny outdoor courtyard when Page and Brin sat down at my table with their guest, comedian Chris Tucker. George Soros lectured at Google the day I met Brown. Google advisor Al Gore shows up often.

Nurturing such an off-the-wall culture is a luxury only a company that's performing stupendously well can afford, and Google is certainly doing that. Two years after going public, its stock is up more than fourfold, and it's so profitable that despite helter-skelter spending on everything from mammoth data centers to worldwide sales and engineering offices, Google is generating more than $800 million in cash each quarter. In the process, Google is thrashing the competition -- in market share, deals won, buzz -- notably Yahoo (Charts) and Microsoft (Charts). It's also cozying up to a growing list of heavyweights you'd think would be warier, including News Corp (Charts)., Viacom (Charts), and ad-agency giant WPP (Charts).

If Google's engine is running fast, then naturally it's also running hot. That sheds light on all kinds of blunders -- many of them dwarfing Sandberg's -- which Google likes to explain away as its Googley approach to business. (Googley being a cloying description these people actually say out loud. Frequently.) The company is figuring things out as it goes, and not quite as effectively as you'd expect from its stellar financial results. Its new products haven't made nearly the splash that its original search engine did. Critics have mocked its self-righteous "Don't be evil" motto when, for example, Google decided to scan copyrighted books for its book search index. Even Google's rocket-ship stock price has been grounded. After a run from $85 in August 2004 to $475 last January, it has puttered around $400 for most of the year. Says Benjamin Schachter, an analyst with UBS: "Investors are saying, 'Enough of what you're going to do. What does it do to the numbers?' "

What concerns investors is whether Google can come up with a second act. There's nothing to suggest that its growth engine -- ad-supported search -- is in trouble. But it's clear from Google's tentative lurches into new forms of advertising and its spaghetti method of product development (toss against wall, see if sticks) that the company is searching for ways to grow beyond that well-run core. It's the reason, for example, that Google requires all engineers to spend 20% of their time pursuing their own ideas. Successful second acts are exceedingly rare in the technology business -- or in any business, for that matter. Microsoft followed Windows with Office. Intel jettisoned its memory-chip line to rule microprocessors. Even Apple, which executed one of the most remarkable rebirths ever with the iPod, had to go through a painful decade to get there.

What emerges from months of interviews with employees ranging from fresh-out-of-college hires to the CEO is that Google firmly believes it has a framework for figuring out the future. It should come as no surprise that the plan is as irreverent, self-confident, and presumptuous as the company itself. Google's executives don't articulate it this way, but the framework can be found in the title of Shona Brown's book: structured chaos. Indeed, along with Googleyness, chaos is among the most important aspects of Google's self-image. Understanding how Google thinks about chaos -- like Page's teachable moment after Sandberg's million-dollar mistake -- is critical to divining where the company goes next. "Are lots of questions hanging out there in the market?" asks Sandberg. "Sure. Because we don't always have an answer. We're willing to tolerate that ambiguity and chaos because that's where the room is for innovation." Good strategy -- if it actually works.

In "Competing on the Edge", Brown describes a sizzling Silicon Valley software company from the 1990s that was confronting the joys and hardships of hypergrowth. She identifies it only with a pseudonym, Galaxy, and it bears a striking resemblance to Brown's current employer, which didn't exist yet. "Galaxy was populated by smart, hip twenty- and thirtysomethings who were chosen for their brains and their attitude," she wrote. "Tour Galaxy and you'll be struck by the college-like atmosphere. Landing a job at Galaxy is hard. The screening process is intense. Once hired, the Galaxy philosophy is to let people 'do their own thing.' " But Galaxy had one glaring weakness: "The firm was living off one set of unusually successful products, whereas the rest of the businesses were much more modest performers."
Finding a follow-up act

What vexed Galaxy is precisely Google's challenge today. For all its new products -- depending on how you count, Google has released at least 83 full-fledged and test-stage products -- none has altered the Web landscape the way Google.com did. Additions like the photo site Picasa, Google Finance, and Google Blog Search belie Google's ardent claim that it doesn't do me-too products. Often new services lack a stunningly obvious feature. Users of Google's new online spreadsheet program, for instance, initially couldn't print their documents. The calendar product doesn't allow for synchronization with Microsoft Outlook, a necessity for corporate users.

Other major initiatives like Gmail, instant-messaging, and online mapping, while nifty, haven't come close to dislodging the market leaders. Much-hyped projects like the comparison-shopping site Froogle (nearly four years in beta and counting) and Google's video-sharing site have been far less popular than the competition. One of Google's biggest misses is its social-networking site, Orkut, which is a hit only in Brazil and -- as Marissa Mayer, Google's 31-year-old vice president of search products and user experience, says with an impressively straight face -- is "very strong in Iran." Sometimes promising new products are buried so deep within Google's sites that users can't find them. "You can only keep so many things in your head," acknowledges CEO Schmidt. "Even if you're the No. 1 Google supporter, you cannot remember all the products we have."

This presents a conundrum: Impose order, and Google becomes just like everybody else; let chaos rule, and run the risk that Google's flailing about hurts its pristine brand and reputation for brilliance. Clarifying its intentions would be a start. "We need to do a better job of communicating which products we expect to be killer apps and which are experiments," Brin told a gathering of journalists in May. There's been progress. In June, Google released its online payment tool, Checkout, as a full-fledged product. Mayer, who has the final word (except for Page) on what appears on Google's home page, has established a war room to piece together a plan for better integrating Google's many products.

It's going to be a battle, though, simply because Googlers are adding features by the bushel -- and more are coming. Niniane Wang, a young engineer who worked on Gmail, is now assigned to a confidential project believed to involve social networking. Louis Monier, a Digital Equipment veteran who launched its AltaVista search engine, recently left eBay to join Google in a top-secret capacity. Katie Jacobs Stanton runs Google Finance, Google Blog Search, and two other projects. This summer she temporarily moved with her husband and three children to Bangalore to get closer to the engineers who built the finance site. Since Google Finance doesn't run ads or any other revenue-generating features, I ask Stanton how long the site can ignore making money. Her response: "Theoretically, forever."

In fact, Google is making money slyly, if slowly, on some of the very products that seem like mere whiz-bang. Consider Google Earth, the ubiquitous cable-news prop and workplace time waster that lets users view incredibly detailed geographic photos from around the world. It started as a satellite-imaging software company called Keyhole. "Sergey [Brin] was playing around with it and got enamored with Keyhole," says John Hanke, Keyhole's original CEO (and now a Google employee) before Google bought it in 2004. "At a staff meeting, he put Keyhole up on one of the projectors and started showing people their houses and flying around." The startup, whose images were confined to the U.S., had been bringing in modest revenue from real estate companies, but that's not what interested Brin. "When we got to Google, one of the first questions Sergey asked was, 'Why can't you look at the whole world at once?' " says Hanke. Two years later the company is integrating ads into Google Earth. Search for "pizza" while hovering above your neighborhood, and you'll get the idea.

Neat toys are about more than creating Web pages on which Google can slap ads. Google Earth has been downloaded more than 100 million times, and embedded in each download is a request from Google to place a toolbar, a Web gadget that includes a search box, permanently on a user's Web browser. That seemingly innocuous query is a gold mine for Google, because the ever present box increases the likelihood users will search on Google. The more people search on Google, the greater the chances someone will click on an advertiser's ads. "We know the lifetime value of a toolbar user," says Mayer, who offers the example to counter the notion that Google isn't trying to profit from its fancy doodads. "So we know how much value we're getting back out of somebody who downloads Google Earth and then subsequently downloads the toolbar."
Strategic Partnering

This virtuous cycle of more users conducting more searches benefiting more advertisers is precisely what makes Google so irresistible to business partners -- even those who feel threatened by it. Martin Sorrell, the chief executive of ad agency holding company WPP, has been outspoken in his fear that Google could obviate companies like his. (Automated ad auctions entail less overhead than armies of schmoozing ad executives, goes the argument.) He titled a section of his latest annual report "Google: Friend or Foe?" In an interview, he suggests the short answer: "The bigger and more successful you get, the more people want to bring you down." But it's not that simple. WPP, Sorrell notes, is Google's third-largest customer, measured by the amount of advertising it purchases on Google for its clients. Sorrell says Google wants to improve its access to WPP's clients, and he's inclined to allow that -- provided there's something in it for WPP. "We represent 20% of media revenue worldwide, and we're definitely not 20% of Google's revenue," he says. "We'll see how we can work together."

Working with Google and grumbling about it is quite in fashion. Viacom's MTV recently signed a deal for Google to distribute its videos to the Web publishers in Google's AdSense network, which lets the publishers run ads supplied by Google's advertisers. Comcast, which has been Google's ideological opponent in an acrimonious legislative battle over government regulation of Net access, is particularly pleased with the revenue it gets from having Google power the search results on its Comcast.net home page for broadband users. In both cases, the older companies profit from Google's superior Internet advertising network. Indeed, after initially scaring "old" media, Google has become the go-to partner for juicing Internet revenues.

Chumminess with the establishment is in the air in mid-August when I meet with Schmidt, two days after Google's announcement of a landmark deal to provide search over numerous News Corp. properties, notably MySpace. (Google guarantees News Corp. $900 million over 3½ years in exchange for an unspecified share of ad revenue.) In our 90-minute interview, I remind Schmidt that at a lunch for journalists in March, he repeatedly mentioned MySpace almost wistfully, seeing how Google had been a bust in social networking.

"We didn't know what to do about it," he says. "Now we know." He explains that Google's new social-networking effort has at least two prongs. The well-known part is the MySpace deal; the other is Google's technology to improve search on social-networking sites, which so far only MySpace has agreed to use. Schmidt's explanation is a bald attempt to declare victory after an obvious defeat, since MySpace trounced Google's Orkut (not including, of course, those triumphs in Brazil and Iran).

The MySpace deal reveals the Google leadership triumvirate's visceral style. The transaction might never have happened, says Schmidt, if Brin hadn't flown to meet with News Corp. executives in Pebble Beach, Calif., where Rupert Murdoch was hosting an A-list bull session on global issues. (Schmidt was vacationing in Europe; Page was in India.) "We sent Sergey because he's very intuitive," says Schmidt. "He goes down there and sort of hangs with them for a while and comes back and says, 'You know, I'm really sure we should do this.' And it's not a numbers argument. It's a feeling of commitment."

Winning MySpace kept the Web's gem of the moment out of the hands of Microsoft and Yahoo, which both privately claim that Google overpaid by several hundred million dollars. Whether that's true won't be known for years. Tim Armstrong, Google's New York-based head of North American sales and the company's point man in the MySpace negotiations, pooh-poohs the notion that Google got taken.

"What people aren't seeing is our ability to model deals," he says. "I would guess that Google was not offering to write the biggest check for this partnership." In any event, the deal created a fan in News Corp., which has steadfastly refused to place any of its Fox shows on Google's video site and yet is positively giddy about its budding advertising relationship. "I actually don't view them as overwhelmingly competitive with us," says Peter Chernin, News Corp.'s president and chief operating officer. "They are trying to sell advertising, and so are we. But at their core I view them as a technology company, and we are an entertainment company. It's a happy and convenient marriage."
Mapping the future

It's great for Google that Murdoch & Co. love it so, but that doesn't change the impression that Google is winging it -- after all, the deal only came together after Brin descended from the clouds to peer into News Corp.'s soul. When I ask Schmidt whether his company actually has a plan, he does what engineers tend to do in situations like this: He gets up and starts drawing on a whiteboard.

A billionaire at 51, Schmidt cuts the typical Silicon Valley figure of somebody's successful, but otherwise average, dad. His khakis-and-oxford uniform is standard, as are his wire-frame glasses and Supercuts-inspired hairdo. Schmidt's doodling, which he's also done recently for the Google board of directors, tells the story of where he sees Google's money coming from for years to come. He draws a series of connected clouds representing the history of the computing industry, from mainframes to minicomputers to PCs to today's mobile devices. The gist of the illustration is that there's practically no money left to be made in computers, not in hardware or software. The money, instead, is all in Web applications, a trend Schmidt had been predicting since his days as chief technology officer at Sun a decade ago. Users won't always be traveling to the Web on the PC, which is why he scribbles lines for cellphones, cable set-top boxes, Treos, BlackBerrys, and so on. Schmidt's most compelling point -- and the most visible glimmer of a method to Google's madness -- is the power behind the not-so-secret data centers Google is building, particularly a 30-acre facility in Oregon whose existence he references without provocation. "That massive investment should translate into the ability to build applications that are impossible for our competitors to offer, just because we can handle the scale," says Schmidt. (Microsoft, Yahoo, and IBM, each of which is spending heavily on similar big iron, would beg to differ.) He's talking about processing-power-sucking Google applications like Gmail and Google Earth -- and unannounced products on the drawing board.

Google has also begun to show how it plans to use that power for advertising services that go beyond search. Brokering video ads for MTV is new terrain, as are the graphical display ads Google plans to sell for MySpace. The company is engaged in an 18-month-old experiment to auction text and graphical ads for newspapers and magazines. It's also in the process of integrating its biggest acquisition to date, a radio-advertising company called dMarc Broadcasting, which Google bought in January for $102 million in cash plus a potential performance-based payout of more than $1 billion. dMarc automates the process for delivering radio ads to about 10% of the country's 10,000 stations. By merging dMarc into Google's AdWords, Google's online system for auctioning search terms, it will offer its advertisers -- who so far hawk their wares in 75 words or less of written text -- the ability to deploy radio ads as well.

It's a bold push. "We see very clear ways to improve advertising for all users," says Armstrong, the sales chief. It's the "all" in his aspirations that frightens anyone in Google's path. Or used to, anyway, before people started noticing that not everything Google does rocks the world. Nick Grouf, CEO of Spot Runner, a well-funded Los Angeles startup that does even more for television advertisers than dMarc does for radio, sees an Achilles' heel. "It's their incredible focus that got them this far," says Grouf. "But all these new initiatives suggest a dilution of that focus."

With so many moving parts, it's natural to wonder if Google is truly a company for the ages -- or whether it's the next Galaxy, that fast-moving, arrogant, one-hit wonder in Shona Brown's book. To believe that Google will find its second act, you have to accept the hubris and the chaos, and that the brainiacs who got lucky once will do so again. Google desperately wants to believe its nonlinear approach is all part of the plan. But as the company's big thinkers are the first to admit, most of the questions about Google aren't answerable. Try as they may, no one can truly control chaos. Top of page
From the October 2, 2006 issue

September 24, 2006 at 01:47 AM in Portals | Permalink | Top of page | Blog Home

Google makes deal with MySpace

globeandmail.com : Google makes deal with MySpace

Associated Press

New York — Google Inc. reached a deal Monday with the owner of MySpace.com to pay at least $900-million (U.S.) in shared advertising revenue and become the exclusive search provider for the popular online hangout.

The deal, which marries the Internet's leading search engine with the top social-networking site, means News Corp. will have essentially paid off the bulk of the $1.2-billion it spent last year to acquire both MySpace and the online video-game company IGN Entertainment Inc.

Under the multiyear deal, News Corp.'s Fox Interactive Media unit will add Google search boxes to MySpace and other sites, likely by the end of the year, and Google will provide search results and keyword ads targeted to people's search terms. Google will also get first rights to sell any display ads not sold by Fox directly.

Because the primary reason people leave MySpace now is to conduct searches on Google, according to Fox executives, letting MySpace users enter such queries directly on the site allows it to retain visitors longer and thus boost its advertising potential.
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The Globe and Mail

But just as importantly for Google, the deal lets the search company benefit from queries at MySpace instead of seeing those ad dollars go to rivals Yahoo Inc. or Microsoft Corp.'s MSN.

August 8, 2006 at 01:02 AM in Portals | Permalink | Top of page | Blog Home

Fuzzy maths

Google | Fuzzy maths | Economist.com

May 11th 2006 | SAN FRANCISCO
From The Economist print edition
In a few short years, Google has turned from a simple and popular company into a complicated and controversial one

MATHEMATICALLY confident drivers stuck in the usual jam on highway 101 through Silicon Valley were recently able to pass time contemplating a billboard that read: “{first 10-digit prime found in consecutive digits of e}.com.” The number in question, 7427466391, is a sequence that starts at the 101st digit of e, a constant that is the base of the natural logarithm. The select few who worked this out and made it to the right website then encountered a “harder” riddle. Solving it led to another web page where they were finally invited to submit their curriculum vitae.

If a billboard can capture the soul of a company, this one did, because the anonymous advertiser was Google, whose main product is the world's most popular internet search engine. With its presumptuous humour, its mathematical obsessions, its easy, arrogant belief that it is the natural home for geniuses, the billboard spoke of a company that thinks it has taken its rightful place as the leader of the technology industry, a position occupied for the past 15 years by Microsoft.

In tone, the billboard was “googley”, as the firm's employees like to say. That adjective, says one spokeswoman, evokes a “humble, cosmopolitan, different, toned-down” classiness. A good demonstration of googley-ness came in the speeches at a conference in Las Vegas this year. Whereas the bosses of other technology companies welcomed the audience into the auditorium with flashing lights and blasting rock music, Google played Bach's Brandenburg Concerto Number Three and had a thought puzzle waiting on every seat. The billboard was also googley in that, like Google's home page, it had visual simplicity that belied the sophistication of its content. To outsiders, however, googley-ness often implies audacious ambition, a missionary calling to improve the world and the equation of nerdiness with virtue.

The main symptom of this, prominently displayed on the billboard, is a deification of mathematics. Google constantly leaves numerical puns and riddles for those who care to look in the right places. When it filed the regulatory documents for its stockmarket listing in 2004, it said that it planned to raise $2,718,281,828, which is $e billion to the nearest dollar. A year later, it filed again to sell another batch of shares—precisely 14,159,265, which represents the first eight digits after the decimal in the number pi (3.14159265).

The mathematics comes from the founders, Sergey Brin and Larry Page. The Russian-born Mr Brin is the son of a professor of statistics and probability and a mother who works at NASA; Mr Page is the son of two computer-science teachers. The breakthrough that made their search engine so popular was the realisation that the chaos of the internet had an implicit mathematical order. By counting, weighting and calculating the link structures between web pages, Messrs Page and Brin were able to return search results more relevant than those of any other search engine.

So far, they have maintained this superiority. Danny Sullivan, the editor of Search Engine Watch, an online industry newsletter, ranks Google as the best search engine, Yahoo! as second-best, Ask (the re-named Ask Jeeves) third, and Microsoft's MSN last among the big four. Google's share of searches has gone up almost every month of the past year. Including those on AOL, an internet portal that uses Google's search technology, Google had half of all searches in March. Excluding AOL, the figure was 43%. This is why people “google”—rather than, say, “yahoo”—their driving directions, dates and recipes.

Mathematical prowess is also behind the other half of Google's success: its ability to turn all those searches into money. Unlike software companies such as Microsoft which get most of their revenues from licence fees, Google is primarily an advertising agency. It does not sell the usual sort of advertising, in which an advertiser places a display on a page and pays per thousand visitor “impressions” (views): it has perfected the more efficient genre of “pay-per-click” advertising. It places little text advertisements (“sponsored links”) on a page in an order determined by auction among the advertisers. But these advertisers pay only once an internet user actually clicks on their links (thereby expressing an interest in buying). This works best on the pages of search results, which account for over half of the firm's revenues, because the users' keywords allow Google to place relevant advertisements on the page. But it also works on other web pages, such as blogs or newspaper articles, that sign up to be part of Google's “network”.
The world brain

These two interlocking “engines”—the search algorithms coupled with the advertising algorithms—are the motor that powers Google's growth in revenues ($6.1 billion last year) and profits ($1.5 billion), as well as its $117 billion market capitalisation. Its horsepower is the reason why Andy Bechtolsheim, Google's first investor (as well as a co-founder of Sun Microsystems, a big computer-maker) still holds on to all his shares in the firm. It's all about advertisers “bidding up the keywords” in Google's auctions, he says. “How far this thing could go, nobody can say.”

Since its stockmarket debut, however, Google has been adding new and often quite different products to this twin engine. It now owns Picasa, which makes software to edit digital photos on computers; Orkut, a social-networking site popular mainly in Brazil; and Blogger, which lets people start an online journal. It also offers free software for instant-messaging and internet telephony, for searching on the desktop computers of users, for (virtually) flying around the Earth, for keeping computers free of viruses, for uploading and sharing videos, and for creating web pages. It has a free e-mail program and calendar. It recently bought a firm called Writely, which lets people create and save text documents (much as Microsoft's Word does) online rather than on their own computers. Google is also scanning books in several large libraries to make them searchable. It is preparing to offer free wireless internet access in San Francisco and perhaps other cities, and dabbling in radio advertising. And that is only the start of a long list.

Whether these are arbitrary distractions or not depends on one's point of view. For Messrs Brin and Page, they make mathematical sense. Mr Brin (“the strategy guy”) has calculated that Google's engineers should spend 70% of their time on core products (ie, the search and advertising engines), 20% on relevant but tangential products, and 10% on wild fun that might or might not lead to a product. The result is that lots of tiny teams are working on all sorts of projects, the most promising ones of which end up on the prestigious “top 100” list that Mr Page (“the product guy”) spends a lot of his time on. Most of the items on that list in theory have something to do with Google's mission, which is “to organise the world's information”. Scanning and indexing books, for instance, brings offline information online.

The outside world increasingly sees it differently. Among Google fans, the company has come to epitomise the more mature (ie, post-bust) internet generation, which goes by the marketing cliché “Web 2.0” (see article). In this context, it is assumed to be working on absolutely everything simultaneously, and every new product announcement, no matter how trivial, is greeted as a tiny step toward an eventual world-changing transformation.

At a minimum, this hypothetical transformation would consist of moving computation and data off people's personal computers and on to the network—ie, Google's servers. Other names for this scenario are the “GDrive” or the “Google grid” that the company is allegedly working on, meaning free (but ultimately advertising-supported) copious online storage and possibly free internet access. Free storage threatens Microsoft, because its software dominates personal computers rather than the internet; free access threatens other internet-access providers.

At a maximum, the transformation goes quite a bit further. George Dyson, a futurist who has spent time at Google, thinks that the company ultimately intends to link all these digital synapses created by its users into what H.G. Wells, a British science-fiction writer, once called the “world brain”. Google, Mr Dyson thinks, wants to fulfil the geeks' dream of creating “artificial intelligence”. Passing the so-called “Turing test”, created by Alan Turing, a British mathematician, to determine whether a machine can be said to be able to think, would be the ultimate reward.
From primes to share prices

But many who deal with Google in their daily lives are getting fed up with such grandiose notions. Google's shares, after nearly quintupling since they began trading, have fallen in recent months. Pip Coburn, an investment strategist, says that “Google was a simple story at one point: online ads on top of the most popular search mechanism on the planet. Simple. But now it is pretty much a mess and to get the stock going again, the company may need to work on its own simplicity so as to match the simplicity of the Google home page itself.”

Mr Sullivan of Search Engine Watch says Google has become distracted. “Oh, give me a break,” he wrote in his blog after yet another product announcement. “A break from Google going in yet another direction when there is so much stuff they haven't finished, gotten right or need to fix.” He points to a rule in Google's corporate philosophy that “it's best to do one thing really, really well,” and suggests that the company is “doing 100 different things rather than one thing really, really well.”

Google is thus starting to look a bit as Microsoft did a decade ago, with one strength (Windows for Microsoft, search for Google) and a string of mediocre “me-too” products. Google Video, for instance, was supposed to become an online marketplace for video clips, both personal and business, but has been overtaken by YouTube, a start-up that is a few months old but already has four times as much video traffic. Google News, where the stories are, characteristically, chosen by mathematical algorithms rather than by editors, perennially lags behind Yahoo! News, with its old-fashioned human touch. Google's instant-messaging software is tiny compared with AOL's, Yahoo!'s and MSN's.

Google is beginning to resemble the old Microsoft in another way, too. A decade ago, Microsoft stood accused of stifling innovation, because entrepreneurs would stay away from any area of technology in which it showed any interest. Google, whose slogan is “Don't be evil”, hates this comparison and wants to think of itself as ventilating rather than stifling the ecosystem of developers and entrepreneurs. “I don't see how they can say that,” says an entrepreneur and competitor who is too afraid of unspecified consequences to speak on the record. Like most of Silicon Valley these days, he finds Google's slogan ridiculous, because “we're not evil either, we just don't go around saying it.”

Entrepreneurs like him are getting annoyed by Google's seemingly endless “betas”, also known as “technical previews”, when new products are not yet officially launched but available, ostensibly for testing and review. Traditionally, beta reviews were meant to last weeks or months and were targeted at testers who would find and report bugs. Google seems to use betas as dogs sprinkle trees—so that rivals know where it is. Google News recently graduated out of its beta after about four years.

In fairness, Google's role today is more complex than Microsoft's was in the 1990s, when start-ups often hoped to “exit” by listing their shares on the stockmarket, and were occasionally expunged by Microsoft before they got there. Today, start-ups (such as Writely, Picasa, Orkut and Urchin) often use Google (or the other internet titans) as the exit, selling themselves to the big guy. It works for individuals too. Paul Rademacher is a software engineer who last year came up with a clever way of combining Google's interactive maps with other websites. Google hired him.

To Google's initial surprise and subsequent chagrin (is it not enough to vow never to be evil?), it alienates more groups of people as it enters more areas of modern life. It appeared to be genuinely taken aback that some book publishers oppose its plan to scan their books and make them searchable. Google also seemed surprised when privacy advocates voiced concerns over its practice of placing advertisements in contextually related e-mail messages on its webmail service, and again this year when it announced a Chinese version that censors the search results.

Slowly, the company is realising that it is so important that it may not be able to control the ramifications of its own actions. “As more and more data builds up in the company's disk farms,” says Edward Felten, an expert on computer privacy at Princeton University, “the temptation to be evil only increases. Even if the company itself stays non-evil, its data trove will be a massive temptation for others to do evil.” In a world of rogue employees, intruders and accidents, he says, Google could be “one or two privacy disasters away from becoming just another internet company”.

Such concerns are forcing Messrs Brin and Page, still in their early 30s, and Eric Schmidt, whom they hired as chief executive and who is in his early 50s, to behave increasingly like a “normal” company. Google recently sent its first lobbyists to Washington, DC. Its decision to build an “evil scale” to help it devise its China strategy was more unusual, but its hiring of Al Gore, a former American vice-president, to aid the process, was just the kind of thing that old-fashioned empire-building firms do all the time.

Other companies are reacting in traditional ways to Google's dominance. Former rivals, such as eBay, Yahoo! and Microsoft, are exploring alliances to counter its influence. When Microsoft tried to buy AOL from its parent, Time Warner, Google's Mr Schmidt flew in for talks that led to Google taking a defensive stake in AOL, thus keeping it out of Microsoft's and Yahoo!'s reach. In response, Microsoft has contemplated buying all or part of Yahoo!, and has recently announced a vague but large increase in research spending which amounts to an arms race. Google is now alleging that Microsoft is unfairly steering users of its web browser to MSN for searches, and is preparing to dispatch lawyers to keep Microsoft in check.

Google thus finds itself at a defining moment. There are plenty of people within the company who want it to play the power game. “The folks who are closest to Larry and Sergey are very, very worried about Microsoft, as well they should be,” says John Battelle, the author of a blog and a book on Google. Yet the company's founders themselves may not be prepared to drop their idealism and their faith in their own mathematical genius. They have always wanted to succeed by being good and doing good. “Never once did we consider buying a big company,” says David Krane, Google's 84th employee, by way of example. It would not be googley. It would, he says, be “yuck”.

May 11, 2006 at 11:28 PM in Portals | Permalink | Top of page | Blog Home

Google Pins Hopes on Calendar

Google Pins Hopes on Calendar

For all of the hoopla surrounding Google's products, the company sure has struggled to generate smash hits outside of Web search. Sure, Google's maps, with their eye-catching satellite imagery, have been a scorching success. But many other ventures, from shopping site Froogle to social networking hub Orkut to Google Talk instant-messaging client, have generated little enthusiasm.

The company hopes to better the record on Apr. 13 when it launches Google Calendar -- a free, Internet-based calendar that helps users keep track of important dates, events, and information.

Early indications are promising. Several analysts who have tried the product believe Google (GOOG) may be on to something. Google Calendar differs from most other online calendar services because it lets users publish and share the information, as well as overlay events from other calendars.

SYNCED SCHEDULES. Google Calendar users, for example, could sync their own calendars with those of a spouse and children to more efficiently plan a summer vacation. "Our goal is to reduce the burden of running a calendar," says Google Product Manager Carl Sjogreen.

That may be just the start. Google's goal is to make this not just an end product, but rather a platform for organizing events and sharing information, analysts say. "Google has rethought the entire role of a calendar," says Forrester Research analyst Charlene Li. "It recognizes you have several calendars to manage and that you have to interact between them."

Calendar could thrust Google into other new areas, including territory occupied by the likes of Evite, owned by Barry Diller's IAC/InterActiveCorp (IACI). Google Calendar lets users plan events, including sending out invitations and reminders, keeping track of RSVPs, and interacting with potential guests.

ADS FOR EVENTS. Although Google has not announced how it plans to make money from the calendar offering, event planning could provide prime real estate for advertisers. A local costume store could advertise in conjunction with an invitation for a Halloween party, for instance. "Events are highly monetizable," says Li.

Google will initially integrate its beta calendar product with its two-year-old e-mail service, Gmail (see BW Online, 10/26/05, "Gmail: Just a Bit Too Quirky"). The fledgling e-mail service could use the shot in the arm that may accompany added features. Despite a sleek interface and free, jumbo-size accounts, analysts estimate that Gmail has attracted about 10 million users. Not bad, but it's less than 10% of the amount of e-mail users at Yahoo or Microsoft's Hotmail, say the analysts.

Elgin is a correspondent in BusinessWeek's Silicon Valley bureau

April 13, 2006 at 12:55 AM in Portals | Permalink | Top of page | Blog Home

Google architecture

Peeking Into Google

March 2, 2005
Peeking Into Google
By Susan Kuchinskas

BURLINGAME, Calif. -- The key to the speed and reliability of Google (Quote, Chart) search is cutting up data into chunks, its top engineer said.

Urs Hoelzle, Google vice president of operations and vice president of engineering, offered a rare behind-the-scenes tour of Google's architecture on Wednesday. Hoelzle spoke here at EclipseCon 2005, a conference on the open source, extensible platform for software tools.

To deal with the more than 10 billion Web pages and tens of terabytes of information on Google's servers, the company combines cheap machines with plenty of redundancy, Hoelzle said. Its commodity servers cost around $1,000 apiece, and Google's architecture places them into interconnected nodes.

All machines run on a stripped-down Linux kernel. The distribution is Red Hat (Quote, Chart), but Hoelzle said Google doesn't use much of the distro. Moreover, Google has created its own patches for things that haven't been fixed in the original kernel.

"The downside to cheap machines is, you have to make them work together reliably," Hoelzle said. "These things are cheap and easy to put together. The problem is, these things break."

In fact, at Google, many will fail every day. So, Google has automated methods of dealing with machine failures, allowing it to build a fast, highly reliable service with cheap hardware.

Google replicates the Web pages it caches by splitting them up into pieces it calls "shards." The shards are small enough that several can fit on one machine. And they're replicated on several machines, so that if one breaks, another can serve up the information. The master index is also split up among several servers, and that set also is replicated several times. The engineers call these "chunk servers."

As a search query comes into the system, it hits a Web server, then is split into chunks of service. One set of index servers contains the index; one set of machines contains one full index. To actually answer a query, Google has to use one complete set of servers. Since that set is replicated as a fail-safe, it also increases throughput, because if one set is busy, a new query can be routed to the next set, which drives down search time per box.

In parallel, clusters of document servers contain copies of Web pages that Google has cached. Hoelzle said that the refresh rate is from one to seven days, with an average of two days. That's mostly dependent on the needs of the Web publishers.

"One surprising limitation is we can't crawl as fast as we would like, because [smaller] webmasters complain," he said.

Each set of document servers contains one copy of the Web. These machines are responsible for delivering the content snippets that show searchers relevant text from the page.

"When we have your top 10 results, they get sent to the document servers, which load the 10 result pages into memory," Hoelzle said. "Then you parse through them and find the best snippet that contains all the query words."

Google uses three software systems built in-house to route queries, balance server loads and make programming easier.

The Google File System was written specifically to deal with the cheap machines that will fail.

"We take our files and chunk them up, then you randomly distribute the chunks across different machines, making sure each chunk has at least two copies that are not physically adjacent -- not on same power strip or same switch," Hoelzle said. "We try to make sure that even if one copy goes away, another copy is still here." Chunks typically are 64 megabytes and are replicated three times.

All this replication makes it easier to make changes, Hoelzle said. Google simply takes one replica at a time offline, updates it, then plugs the machines back in.

Because these chunks are randomly distributed all over, Google needs a master containing metadata to keep track of where the chunks are. When a query comes into the system, the file system master tells it which chunk server has the data. "From there on, you just talk to the chunk servers," he said.

Client machines are responsible for dealing with fault tolerance. If a client requests a file from the specified chunk server and gets no response within the designated time period, it uses the meta information to locate another chunk server, while sending the file master a hint that the first chunk server might have died. If the master confirms the chunk went out, it will replicate the chunks that were on it to another server, making sure that the information is replicated at least the minimum number of times.

"You were vulnerable for only a very brief period," he said.

To enable Google programmers to write applications to run in parallel on 1,000 machines, engineers created the Map/Reduce Framework in 2004.

"The Map/Reduce Framework provides automatic and efficient parallelization and distribution," Hoelzle said. "It's fault tolerant and it does the I/O scheduling, being a little bit smart about where the data lives."

Programmers write two simple functions, map and reduce, to create a long list of key/value pairs. Then, the mapping function produces other key/value pairs. "You just map one pair to another pair," he said.

For example, if an application is needed to count URLs on one host, the programmer would take the URL and the contents and map them into the pair consisting of hostname and 1. "This produces an intermediate set of key/value pairs with different values."

Next, a reduction operation takes all the outputs that have the same key and combines them to produce a single output.

"Map/Reduce is simplified large-scale data processing," Hoelzle said, "a very simple abstraction that makes it possible to write programs that run over these terabytes of data with little effort."

The third homegrown application is Google's Global Work Queue, which is for scheduling.

Global Work Queue works like old-time batch processing. It schedules queries into batch jobs and places them on pools of machines. The setup is optimized for running random computations over tons of data.

"Mostly, you want to split the huge task into lots of small chunks, which provides even load balancing across machines," Hoelzle said. The idea is to have more tasks than machines so machines are never idle.

Hoelzle also demonstrated how Google uses its massive architecture to learn from data. It analyzes the most common misspellings of queries, and uses that information to power the function that suggests alternate spellings for queries.

The company also is applying machine learning to its system to give better results. Theoretically, he said, if someone searches for "Bay Area cooking class," the system should know that "Berkeley courses: vegetarian cuisine" is a good match even though it contains none of the query words.

To do this, the system tries to cluster concepts into "reasonably coherent" subclusters that seem related. These clusters, some tiny and some huge, are named automatically. Then, when a query comes in, the system produces a probability score for the various clusters. This kind of machine learning has had little success in academic trials, Hoelzle said, because they didn't have enough data. "If you have enough data, you get reasonably good answers out of it."

In addition to improving query results, Google uses this learning to better deliver contextual ads for its AdSense service to Web publishers, as well as to more accurately cluster news stories within Google News.

Google's redundancy theory works on a meta level, as well, according to Hoelzle. One literal meltdown -- a fire at a datacenter in an undisclosed location -- brought out six fire trucks but didn't crash the system.

"You don't have just one data center," he said, "you have multiples."

March 13, 2006 at 01:25 AM in Portals | Permalink | TrackBack (55) | Top of page | Blog Home

Yahoo lowers expectations for original content

Yahoo lowers expectations for original content - Yahoo! News

By Lisa Baertlein Thu Mar 2, 7:22 PM ET

SAN FRANCISCO (Reuters) - Web media company Yahoo Inc. (Nasdaq:YHOO - news) wants to lower expectations for how much original programming it will produce as part of its online information and entertainment offerings, the company said on Thursday.

Yahoo will not do a string of one-off projects, focusing instead on combining program content with licensed, user-generated and other content, Yahoo spokeswoman Joanna Stevens said.

Speculation about the company's plans to deliver its own programming has swirled since Yahoo, which is headed by former Hollywood studio chief Terry Semel, hired Lloyd Braun in late 2004. Braun is the former chairman of the entertainment division at Walt Disney Co.'s ABC network.

Among the projects put on ice by Yahoo is "The Runner," a reality program Braun brought over from ABC, according to published reports.

Stevens declined to give specifics on the number or names of productions that were planned or are being dropped.

"We're focusing on tying all the different pieces together. We won't pursue a project unless we think there is an opportunity to make a sustainable business of it," Stevens said.

"I think they may just be trying to ratchet the expectations down," Forrester Research analyst Josh Bernoff said of Yahoo's plans.

Internet gossip sites recently have suggested that Braun was leaving the company due to differences with Semel, something Braun and other company executives dismissed in an article printed in the New York Times on Thursday.

The New York Times cited Braun saying that Yahoo would embark on only a handful of new ventures this year, not the dozens he had promised, and that his early expectations for what he could do at Yahoo had been overly grand.

"Nothing significant has really changed. We have lots of concepts in development, some will get green-lit and some won't," said Stevens.

Yahoo executives have repeatedly said they do not intend to recreate television on the Web, envisioning instead a new entertainment venue that plays up the interactivity of the Internet.

Online companies like Yahoo and Google Inc. have been aggressively pursuing video content deals -- from licensing agreements to user submissions -- in a bid to expand advertising and other business opportunities.

But investors have become concerned that the red-hot growth fueling those companies is cooling.

"It is not easy to figure out what you do here. Nobody knows the right way to do it," Bernoff said.

Meanwhile, network reality television show producer Mark Burnett is playing the field.

Burnett was the producer of "The Runner" at Yahoo and has done marketing tie-ins for his "Survivor" and "The Apprentice" reality television shows with the Internet company.

He recently signed a deal to produce an online treasure hunt series called "Gold Rush" with Time Warner Inc. Internet unit AOL.

Yahoo is developing its own interactive series called "Treasure Hunt," reportedly with Oscar-winning director Steven Spielberg.

March 4, 2006 at 04:44 PM in Portals | Permalink | TrackBack (13) | Top of page | Blog Home

British video engine to rival Yahoo

Technology, Technology news, Times Online

By Rhys Blakely

Blinkx, the British internet search company, today launched an online video service to challenge Yahoo! and Google, the American giants planning to dominate the fast-developing market.

The privately owned company has formed a partnership with ITN, the news producer, to make video content searchable online. In a first for the search specialist, revenues will be raised through advertising.

Blinkx had been linked to a string of potential suitors, including News Corporation, the parent company of Times Online. However, the move to host advertising has led insiders to suggest that the British company, already lauded as a pioneer in the search market, could now resist any takeover attempt.

"They are not actively looking to get bought and are signing more deals with content providers and are launching new services – such as the advertising model to begin to monetise blinkx," a source close to the company said.

Users of the ITN service will be able to search an archive of video clips through a voice recognition system that blinkx has spent several years developing.

The company hopes its technology, which has been used by the US Department of Homeland Security to eavesdrop on al-Qaeda terrorists, will give it an edge over its much larger American rivals. Google recently ran into problems with its own video search service, which attracted critical reviews from investors when Wall Street analysts found that it frequently broke down.

Blinkx also plans to use the ITN model, where advertising revenues will be split between the two partners, as a base for expansion. The company has deals that do not involve advertising in place with content providers such as Forbes and BusinessWeek, publications based in the print market which have used blinkx to move into video.

Suranga Chandratillake, Blinkx’s co-founder and chief technology officer, told Times Online: "The CNNs of the world already have the technology and the sales teams to launch their own, self-contained products. But there is a significant market for smaller content providers. We believe we can play a major part in bringing them to the web and making them searchable."

The blinkx system will also give advertisers the opportunity to target different consumers with marketing campaigns. Relevant adverts could also be attached to particular news clips, Mr Chandratillake said.

"For example, if there is a story about Luton Airport being out of action, we could run ads showing people how to get to Gatwick."

Online video services are being widely touted as a crucial next step for internet companies. Yahoo!, the internet portal business that owns the world’s most popular website, has already taken the step of commissioning video content to use online.

Meanwhile, Google, the leader in online advertising, was last week hit by suggestions that text-based markets are approaching maturity in territories such as the UK.

As shares in Google slumped 10 per cent after the company failed to hit Wall Street’s ambitious growth targets, analysts looked forward to the revenue potential of the group’s video services.

Analysts from Morgan Stanley said: "The thing we were most excited about was the launch of Google Video … In spite of the glitches, the product is fun, and history has proven that fun can be monetised."

Blinkx already searches content from Reuters, the largest producer of television news, and claims that raw footage from the news agency can be searched on its site within one minute of being shot.

The new service can be accessed at www.itn.co.uk and www.blinkx.tv.

To have your own say on Google, visit the Times Online technology blog.

February 8, 2006 at 08:27 AM in Portals | Permalink | TrackBack (12) | Top of page | Blog Home

Google - The bubbling sound of stock flowing down the plug hole

Google - The bubbling sound of stock flowing down the plug hole

By Paul Hales: Thursday 26 January 2006, 10:42
IT TOOK JUST a week for Google to move from all-conquering hero to bad-ass villain.

Last week, the company founded on a single search algorithm was being lauded for standing up against the US administration’s Big Brother-style thirst for information on its own citizens. The only people then concerned that Google was refusing to open up its databanks to Government snoops were the shareholders, worried the impact of such a move may have on the fatness of their wallets.

This week, Google’s in the dock for daring to allow the authorities in China to control what can be seen on Google’s search pages from the within the People’s Republic. In standing up to the US (hurrah!) while kowtowing to the Chinese (boo!) Google has put itself in the glare of the media spotlight for all the wrong reasons. From here on it, can only get worse.

Ordinary folk who use Google to look stuff up are discovering that Google keeps a file on them. Media darling of the day is Californian Kathryn Hanson, who according to Katie Hafner in the New York Times, panicked after entering the phrase 'rent boy' into Google’s ubiquitous engine, after reading about failed UK Liberal Democrat leadership candidate Mark Oaten’s penchant for pairs of the aforementioned article. So close is Hafner to Hanson that she observed that latter turning "immediately" to her boyfriend, concerned that she could now be, "whisked away to some navy prison in the middle of the night".

Hafner/Hanson was concerned over the US moves to get Google to cough up the search data. She may now be more concerned to learn that Google's professed aim, according to its founders, is to know more about her than she herself does.

For the search favourite certainly likes to record users’ IP addresses. It also likes to employ a lifetime cookie what won’t expire until 2038. Users of the firm’s Gmail service will be aware that they are urged never to throw away a single email. Why? Well it may be of no practical use to the user to have to search - cumbersomely, we might add – through masses of saved mail to find the one or two that may be of some use. But it will be of commercial use to Google to build up a profile of your mailing habits over, say, thirty years. Oh. And is the email service tied to the search engine? Yup? Rent boy worries indeed.

So Google now has a problem on its hands, and one which will cause more shareholders to jump ship that those that already did so last week. For the public will begin not to trust it. No wonder Yahoo, having thrown in the towel as a web search outfit, has decided that it is back in with a shout.

Strange that Google, having risen so high has gotten itself in such a pickle. It’s done a Microsoft and outgrown its boots and begun to alienate its users. Unfortnately for it, the only way is down. Still, it likely has collected more data on individual web users than the CIA. And information, after all, is power – or so they say.

January 26, 2006 at 08:36 AM in Portals | Permalink | TrackBack (14) | Top of page | Blog Home

The personalization of newspapers

1995 paper from Krishna Bharat, who is the creator or Google News, that just came out of beta. Additional background here at "the next big thing".

An interactive, personalized, newspaper on the WWW - Kamba, Bharat, Albers (ResearchIndex)

Abstract: This paper discusses the personalization of online newspapers based on our experience with the Krakatoa Chronicle, an interactive, personalized, newspaper on the World Wide Web (WWW). The personalization of newspapers involves both social and technical issues. In social terms, it is important that users can control the extent of personalization, because newspapers are not only a means to get personally interesting articles but also a way to get information you are not explicitly looking for

Download file

January 24, 2006 at 12:51 PM in Portals | Permalink | TrackBack (9) | Top of page | Blog Home

Yahoo! gives up quest for search dominance

Yahoo! gives up quest for search dominance

By JONATHAN THAW
BLOOMBERG NEWS

Yahoo! Inc., one of the first Internet search companies, has capitulated to Google Inc. in the battle for market dominance.

"We don't think it's reasonable to assume we're going to gain a lot of share from Google," Chief Financial Officer Susan Decker said in an interview. "It's not our goal to be No. 1 in Internet search. We would be very happy to maintain our market share."

Yahoo!'s comments underline the difficulties any Internet company faces in trying to challenge Google's dominance of the Web search industry. Google has at least double the market share of Yahoo! and Microsoft Corp. in Internet search, the largest and most profitable segment of online advertising.

"In some countries, it's already game over in search, with Google the clear victor," said RBC Capital Markets analyst Jordan Rohan in New York. "Google's product development pipeline runs at such a fast rate that it's very difficult for any company, Microsoft or Yahoo! to catch up."

Shares of Yahoo! fell as much as 13 percent Wednesday, the day after the Sunnyvale, Calif.-based company reported fourth-quarter profit that missed analysts' expectations. The stock rose 43 cents to $34.17 Monday in Nasdaq stock market composite trading.

"It kind of makes you wonder about how serious they are about search," said Danny Sullivan, editor of London-based SearchEngineWatch.com, which tracks the search industry. "It really ought to be their goal" to be No. 1, he said. "Whether it's realistic or not."

Yahoo! founded in 1994 as one of the first online directories of Web sites, switched from Google's search engine to its own technology two years ago.

To boost revenue from each search, Yahoo! plans to make ads more relevant to search terms, meaning people will be more likely to click on them. Advertisers pay Yahoo! a fee when Internet users click on the ads.

"We have held our own, and we should gain revenue share in the industry as we roll out these new initiatives," Decker said in the interview after the company reported earnings last week.

advertising
"Our goal has been to hold our share and to be a leading, if not the leading, total marketing platform, which would include both brand and search."

Yahoo! handled 19 percent of global Internet searches in November, a drop from 27 percent a year earlier, according to Web tracker ComScore Networks Inc.

Google's share, by contrast, rose to 60 percent from 47 percent.

Decker last week cautioned analysts on a conference call against taking the ComScore figures too literally, saying the data exclude Asian countries where Yahoo! is "exceptionally strong."

January 24, 2006 at 12:42 PM in Portals | Permalink | TrackBack (8) | Top of page | Blog Home

Yahoo tumbles on profit news

TheStar.com - Yahoo tumbles on profit news

Jan. 18, 2006. 10:50 AM
MICHAEL LIEDTKE
ASSOCIATED PRESS

SAN FRANCISCO — Yahoo Inc.'s shares dropped more than 11 per cent early Wednesday as investors expressed their disappointment with the Internet powerhouse's inability to reap bigger gains as advertisers shift more of their spending to the web.

Yahoo's shares plunged $4.66, or 11.6 per cent, to $35.45 (U.S.) in early trading Wednesday on the Nasdaq Stock Market.

he selloff came after Sunnyvale, Calif.-based company reported late Tuesday that its fourth-quarter profit nearly doubled but fell shy of analyst expectations.

It marked the second consecutive quarter in which Yahoo reported earnings growth that investors interpreted as a sign that the company isn't capitalizing on the online advertising boom as well as its rival, online search engine leader Google Inc.

"Yahoo has a good story going; it's just not as good as Google's," said Internet industry analyst Safa Rashtchy of Piper Jaffray. "We would expect to see faster growth in a growth market that seems to be on fire like this one."

Yahoo earned $683.2 million, or 46 cents per share, during the three months ended in December. That represented an 83 per cent increase from net income of $372.5 million, or 25 cents per share, at the same time in 2004.

The 2005 results included a $310-million gain triggered by a complex deal that left Yahoo with a 40 per cent stake in Alibaba.com, China's largest e-commerce company.

If not for that gain and other accounting items unrelated to its ongoing operations, Yahoo said it would have earned 16 cents per share. That figure fell a penny below the average estimate among analysts polled by Thomson Financial.

Revenue for the quarter totalled $1.5 billion, a 39 per cent increase from $1.08 billion in the comparable 2004 period.

After subtracting the advertising commissions that Yahoo paid to other websites, the company's fourth-quarter revenue stood at $1.07 billion, in line with analyst estimates.

Although Yahoo's profits have been steadily rising in recent years, the company has struggled to develop an automated system that's as effective at serving up moneymaking ads as Google.

"Frankly, Google has done a better job than us," Yahoo chairman Terry Semel acknowledged during a Tuesday interview.

Both Yahoo and Google display text-based ads on hundreds of websites in addition to their own, but only get paid when the links are clicked on.

Google's knack for enticing clicks has generated a long stretch of stellar earnings growth that has eclipsed Yahoo's. As a result, Google is currently worth twice as much as Yahoo, even though it started three years later.

"It's like we built our house first and someone came along and built an even better house," Semel said.

Investors have been betting Google will surpass analyst expectations Jan. 31 when it's scheduled to report its fourth-quarter earnings.

January 24, 2006 at 12:08 PM in Portals | Permalink | TrackBack (11) | Top of page | Blog Home

Google throws bodies at OpenOffice

Google throws bodies at OpenOffice | CNET News.com

By Stephen Shankland
Staff Writer, CNET News.com
Published: October 31, 2005, 4:00 AM PST
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Google plans to hire programmers to improve OpenOffice.org, a demonstration of its affinity for open source initiatives and one the company believes also shows sound practical sense.

OpenOffice has its roots in Sun Microsystems' StarOffice suite of programs. Five years ago, Sun turned its proprietary software into an open-source project. Only recently, however, has the competitor to Microsoft's Office attracted serious attention.

Now Google believes it can help OpenOffice--perhaps working to pare down the software's memory requirements or its mammoth 80MB download size, said Chris DiBona, manager for open-source programs at the search company.

"We want to hire a couple of folks to help make OpenOffice better," DiBona said.

Google has shown an affinity for open-source software, which are programs developed in the open and available for free. Many of the company's programmers came of age in the open-source era, so advancing the open-source agenda comes naturally, DiBona said. But the company also has business reasons to justify its open-source embrace.

"We use a fair amount of open-source software at Google. We want to make sure that's a healthy community. And we want to make sure open source preserves competitiveness within the industry," he said.

Earlier in October, Google and Sun announced a partnership to boost several software projects, but released few details. Asked about OpenOffice collaboration, Google CEO Eric Schmidt said at the time only that the search engine power would "work to make the distribution of (OpenOffice) more broad." But OpenOffice, like the other software projects the partners intend to work on, competes directly with Microsoft software--a point that has not gone unnoticed.

As one of the most-watched companies in the industry, Google's involvement has helped Sun draw attention to OpenOffice.org. And there are other reasons the software is taken more seriously as an alternative to Microsoft Office. For one thing, OpenOffice.org 2.0 was just released with a modernized interface and some new features. For another, OpenOffice.org supports OpenDocument, a standardized file format that many endorse as a way to break the lock-in of Microsoft's proprietary formats.

DiBona didn't mention a wider competitive perspective in giving Google's rationale for investing time and money on nonproprietary software. "We were looking for ways to work with Sun and ways to help users. This is a good place to spend some resources," he said.

Google's heavy use of open-source software for its operations has kept its developers in touch with cutting-edge technology, but the do-it-yourself approach has also meant that its employees have technology maintenance responsibilities that most companies leave to others.

Some believe Google eventually will have to settle with a more conventional approach: buying technology instead of building it in-house. Among them is Brian Stevens, chief technology officer of Linux seller Red Hat. He said many customers began with their own versions of Linux before turning to Red Hat for support.

"With most customers, we have a relationship that started that way. Every financial services company, the Department of Energy--almost everyone got Linux in a nonstandard way on their own," Stevens said. But Google probably won't keep its in-house Linux version, he predicted. "That's not where their competence is. They've got a lot of other problems than building Linux distributions."

A peek under the hood
Google is notoriously reluctant to describe the particulars of its search-computing data center, which served the demands of 380 million people in August. But DiBona did discuss some details.

The company uses the Linux operating system for its mainstay search service, he said. Its Linux core begins not with software from a company such as Red Hat, or Novell's Suse Linux, but rather from the version that project leader Linus Torvalds posts periodically to the kernel.org Web site.

Among the open-source technologies used by Google are the Python programming language and the MySQL database, he said. In addition, Google's Blogger site uses Apache Web server software and the Tomcat package for running Java programs on the server.

The GCC compiler software, used to create nearly every open-source program in existence, also is widely used at Google.

Sun's Java also figures prominently, even though it's not open-source at its center. "We make great use of Java at the company," DiBona said, including for Gmail. The company claims the Web-based e-mail service has millions of subscribers.

Sun hasn't released the fundamental part of Java--the virtual machine component--as open-source software. However, the Apache Software Foundation is working on an open-source Java effort called Project Harmony, an initiative that now has IBM developer support.

"I think they'll succeed wildly," DiBona said of Harmony. "They're so good at this. They say, 'We're going to write this software,' and it gets done."

Despite Google's liking for open-source software, plenty of programming at the company is proprietary.

"We're never going to open-source PageRank," DiBona said, referring to the algorithm the company uses to choose which search results to present. "It's the thing that makes Google Google."

Open-source output
Google isn't only an open-source software consumer. It's an open-source producer as well: For example, employees submit software to the Apache Axis Web services project, DiBona said.

The Mountain View, Calif.-based company also employs some open-source notables:

• Sean Egan, leader of the GAIM project for instant messaging software;

• Alex Martelli, a leading Python developer;

• Greg Stein, the Apache Software Foundation chairman and a manager of the Subversion source code management software.

• And Ben Goodger, the lead programmer of the Firefox Web browser project, as well as a few other Firefox programmers.

Google also has published several open-source projects, including tools for debugging software, improving its performance, monitoring MySQL databases and using the AJAX software for richer Web page interfaces.

But so far, there is a significant limit to the group-programming facet of Google's projects: The company doesn't yet accept outside contributions.

Some developers have offered the company contributions meant to improve Google's open-source software--for example, to add 64-bit support to 32-bit software. That cooperation is awkward right now for reasons relating to intellectual-property control, DiBona said.

"We've been slow in being able to accept outside patches," he said. But the company is working on a contributor license that lays out patent and copyright terms for outside contributors. "It's something that pays to be very, very careful about."

The company has helped outside open-source projects, though. Through a $2 million program called the Google Summer of Code, the company sponsored 400 college-age students to work on open-source projects last summer. Each got $4,500 if they met their goals, which 84 percent did. Another $500 went to each of the several open-source projects that helped organize the effort, DiBona said.

Open-source software is good for young programmers, DiBona said, noting that it gives them real-world problems to solve and teaches them self-management skills.

"We think open-source is pretty important," DiBona said. "Without it, the industry would not be as good as it is now to newcomers."

January 15, 2006 at 05:15 PM in Portals | Permalink | TrackBack (28) | Top of page | Blog Home

European Tech Giants Craft Search Engine

European Tech Giants Craft Search Engine - Yahoo! News

Wed Jan 11, 9:46 AM ET
By ANGELA CHARLTON, Associated Press Writer
PARIS - Quaero is billed as Europe's answer to Google, but it has a lot to live up to.

The awkward word — which means "to search" in Latin — is unlikely to flash across the continent's computer screens anytime soon.

So far Quaero is just a scattering of top tech minds in labs across France and Germany, working on what they hope will be the world's most advanced multimedia search engine.

Quaero epitomizes European ambitions — especially for French
President Jacques Chirac — of creating alternatives to U.S. technological prowess. But facing off against super-rich, super-talented U.S. companies may prove daunting for the cumbersome consortium of European companies and public agencies hatching Quaero.

"We must meet the global challenge of the American giants Google and Yahoo," Chirac said in an address last week laying out his policy priorities for 2006.

"Today the new geography of knowledge and cultures is being drawn. Tomorrow, that which is not available online runs the risk of being invisible to the world," he said.

Designers insist that Quaero will not just be a search engine but a set of tools for translating, identifying and indexing images, sound and text.

The technology would work with all platforms — computer desktops, mobile devices and even televisions — and be sold to television companies, filmmakers, post-production facilities and anyone who creates or uses audiovisual content, according to France's electronics giant Thomson.

"Yes, it's highly ambitious," said Jean-Luc Moullet, who oversees the Quaero project at Thomson. "There's nothing to compare it to."

But details are scant. None of the key players — including Thomson, France Telecom and Deutsche Telekom — would comment on cost.

Mountain View, California-based Google Inc. wants to become a lot more than an Internet search engine.

It's already introducing an array of new software and offering telecommunications services that move it well beyond its roots. Google also has been aggressively seeking ways to import offline media, such as books and television shows, into its Internet search engine.

Quaero is hardly the first attempt to develop a compelling alternative to Google, which has emerged as one of the world's best known — and most valuable — companies just seven years after its inception in a Silicon Valley garage.

Even U.S. technology powerhouses like Yahoo Inc. (Nasdaq:YHOO - news) and Microsoft Corp. haven't been able to erode Google's dominance, even after spending tens of millions of dollars to improve their search engines. Through November, Google held a 40 percent share of the U.S. search market, up from 35 percent in the previous year, according to comScore Media Metrix. Google's lead outside the United States is believed to be even larger.

Quaero is the latest in a string of largely French-led efforts to compete with America's dominance of the global marketplace, a theme of Chirac's foreign policy.

French broadcasters are planning an international television network aimed at presenting a more French view of world events than CNN and the British Broadcasting Corp. The network, CFII, will broadcast in French and English to Europe, the Middle East and Africa beginning sometime in the next year.

Europe launched a satellite last month aimed at rivaling the U.S. Global Positioning System. France has also launched an effort to put libraries online, a response to an ambitious book-scanning project at Google.

Techies are cautious about Quaero's prospects.

"Europe has a lot of catching up to do," said Jerome Bouteiller, editor of the French online magazine Neteconomie.

January 12, 2006 at 01:21 PM in Portals | Permalink | TrackBack (38) | Top of page | Blog Home

Logo with a look for every occasion

Britain, UK news from The Times and The Sunday Times - Times Online

By Fran Yeoman
IT IS perhaps the most-viewed two square inches of advertising space in the world, and for those lucky enough to feature on it results can be dramatic.

Google’s homepage logo lost its letters for the first time this week and changed to a coded series of dots in the company’s signature colour scheme of blue, red, yellow and green in honour of Louis Braille’s birthday. As a result, the Royal National Institute of the Blind’s website, which was listed on Google’s links for more information, recorded a million hits — four times more than the previous day.

The Google masthead is altered to mark special occasions about 50 times a year, with the chosen subject brought to the attention of millions during its 24 hours of fame. All this makes Dennis Hwang a very powerful man. Mr Hwang, 27, has a highly technical day-job as a webmaster for the search engine. But he is also the “Google doodler”, a role he first took on when still a trainee at the company’s headquarters, Mountain View, California, in 2000.

Mr Hwang’s first creation was for Bastille Day, but the logos idea originated when Larry Page and Sergey Brin, the founders of Google, went on holiday the year before. They posted a drawing of a Burning Man to alert Google’s then-modest band of users that they would be at the festival in the Black Rock Desert in Nevada, and would not be in to answer the telephone if the website crashed. Mr Hwang has since adapted the logo to mark everything from World Aids Day to the Transit of Venus.

James Joyce has been in a Hwang design, on Bloomsday, June 16, the day on which Joyce’s novel Ulysses is set. Mr Hwang said: “It is surprising and gratifying to hear that an organisation like the RNIB can benefit that much from something as simple as a logo.”

Unsurprisingly, competition to appear on Google’s worldfamous homepage is fierce. “As soon as you do one organisation they all clamour for a logo,” Mr Hwang said. The space, he said, is “not for sale”, and will never feature a commercial subject.

The RNIB was delighted with the Google effect. Margaret O’Donnell, RNIB’s web manager, said: “We couldn’t have bought that kind of awareness or advertising.”

Mr Hwang does have to beware of political correctness and national sensibilities, however. Logos can be restricted to one country to avoid offending another, such as when the first “O” in the word “Google” became a poppy for Remembrance Day in Britain, but Mr Hwang’s doodles have on occasion caused complaints.

Irate e-mails soon alerted him to the existence of Belgian Flemish speakers when he commemorated the birthday of Queen Beatrix of the Netherlands on the Dutch-language site, while autumn leaves on a Thanksgiving design prompted an e-mail from Australia pointing out that it was spring there.

Google’s influence is so extensive that “googling” has become a verb for internet searching, and last week the company was voted eighth in a BBC Radio 4 “Who Runs Britain?” poll, ahead of Gordon Brown, the Chancellor.

January 7, 2006 at 11:47 AM in Portals | Permalink | TrackBack (8) | Top of page | Blog Home

Google to 'launch own PC'

Google to 'launch own PC' | The Register

Windows-free, of course
By Tony Smith
Published Tuesday 3rd January 2006 11:59 GMT
Get breaking Reg news straight to your desktop - click here to find out how

Google is planning to provide an own-brand Windows-less PC and sell the low-cost system through a partnership with retail giant Wal-Mart. The machine and/or the sales deal could be announced as early as this coming Friday.

So claims the Los Angeles Times, citing unnamed sources. Whether they've seen the text of Google co-founder Larry Page's Consumer Electronics Show keynote, which he'll make in Las Vegas on Friday, isn't clear, but it's suggested that the talk will cover the new box.
Click Here

As the paper notes, analysts from investment house Bear Stearns last month claimed Google was preparing a box capable of shuffling digital Internet-sourced media content around the home across local wireless or wired networks.

Crucially, the rig is said to be based on Google's own operating system - most likely Linux in Google clothing - rather than Windows.

Yes, that old chestnut. But while it has been often claimed in the past that Google wants to get into the OS business, there's been no compelling reason given why this would be a good idea. Google's strengths are internet advertising - which is were its money comes from - and its search engine brand. Whether the latter is strong enough to translate into a very different arena - computer hardware - is open to question. Beyond any licensing fee it makes from its manufacturing partner, what's the gain?

Pissing off Microsoft? It might, but releasing a Google OS is a very long way from displacing the Beast of Redmond from its PC throne, particularly in the desktop segment. Apple hasn't done it and Linux hasn't done, and both have had many years to try. Google wouldn't exactly be short of competition on the hardware side either.

The idea of a low-cost, consumer-oriented information processing system isn't unattractive, but it's been tried before and largely failed. In part, that's because the offerings didn't have a backer of the wealth of Google behind it, but unless the vendor seriously limits what the thing can do, sooner or later the support calls start flooding in and the cost of helping non-technical buyers install new software and updates start mounting. All this just to get a few more ads in front of a few more eyeballs, which is the motivation Google is perceived to have behind launching its own PC? ®

January 4, 2006 at 12:59 PM in Portals | Permalink | TrackBack (11) | Top of page | Blog Home

Google's parents watch their 'child prodigy' taking on the Earth

The Australian: Google's parents watch their 'child prodigy' taking on the Earth [January 02, 2006]

The undisputed king of search is growing at breathless speed with stock trading at 95 times earnings, Paul Durman reports
January 02, 2006

IN his letter to shareholders in Google's last annual report, Sergey Brin, one of the company's founders, compared the search-engine company to a seven-year-old child. "Google was born in 1998. If it were a person, it would have started elementary school last summer. While it may seem we have come far already, this is just the beginning of a lifetime."

It was in 2005 that Google grew up. In only its first full year as a public company, it became the world's most valuable media business, a testament to the explosive growth of pay-per-click advertising. By last Friday, its shares valued the business at $US124 billion ($169 billion) -- five times its value on flotation in August 2004.

As Google's revenues continue to double year-on-year -- sales for 2005 look set to reach $US6 billion -- it has become increasingly hard to ignore the company's impact on the wider economy. This is certainly true for traditional media groups. Newspapers are suffering from weak sales of classified advertising, while television broadcasters are struggling with a fragmented audience that is spending more time online.

The seemingly endless ambition of Brin and co-founder Larry Page poses a challenge for other industries, too. Google Talk and the Gmail e-mail service represent a first tentative step into telecoms. Google's proliferation of web-based services is also perhaps the biggest threat to Microsoft in the software giant's 30-year history.

The strong growth in online advertising -- and Google's increasing share of that business -- is the principal reason the company's share price has soared from $US193 a year ago to $US415 last Friday. Brin and Page, still both only 32, have taken advantage of the rise, each cashing in $US1.3 billion of shares.

An aura of invincibility has grown up around the internet company, fostered by the pace of its product innovation. One of the most stunning examples was the June launch of Google Earth, which uses satellite pictures to allow users to "fly" through space to see views of places of interest.

The company has also introduced video search; cleverly integrated its mapping and local-search services; launched a desktop search tool; and announced the creation of Google Talk, its response to the fast-expanding area of internet telephony.

Many of the new products have yet to generate much in the way of revenue. Google's shares already trade on dizzying multiples -- 95 times its earnings in 2005.

Google remains heavily dependent on its original activity, the one where it is the undisputed king -- search. Many of the firm's newer products encourage more online searching, thus creating more opportunities to display its pay-per-click ads.

Critics suggest that Google is more vulnerable than is immediately apparent. Its pre-Christmas agreement to pay $US1 billion to Time-Warner for a 5 per cent stake in AOL underlined the importance Google places on securing online traffic from the internet service provider. With 26 million subscribers, AOL is the single biggest source of Google's search inquiries, and hence its revenues.

The company faces many challenges. They include coping with the sheer pace of its growth, and the inevitable impact on its culture, noted for its lack of hierarchy and its emphasis on employees' enjoyment and self-fulfilment.

Google began last year with 3000 employees; by the end of September it had almost 5000. It is hiring at breakneck speed in every part of its business. Until recently, it had only a skeleton sales and marketing operation in Europe. Now it has 800 employees, and is looking to recruit 100 software engineers in Zurich.

Despite this rapidly rising payroll, Google openly admits that it lacks experience operating outside of the US.

The first signs of a Google backlash are already visible. The company's rapid hiring, bidding up the cost of the best software talent, has raised hackles in Silicon Valley.

The Google Print initiative -- a bold attempt to digitise the world's books -- has angered many authors and publishers who fear that the company's plans amount to wholesale copyright infringement.

There are also concerns that Google's business could facilitate an invasion of privacy. This issue first arose in 2004 when Google launched Gmail, causing outrage when people realised it planned to display ads based on the content of emails.

As Brin could plausibly argue, these are the difficulties of a business growing up in the full glare of global publicity. In last year's annual report, he pointed out that "if Google were a person, it would graduate from high school in 2016. Today, it would only have seen a glimmer of its full potential".

Some glimmer.

The Times

January 1, 2006 at 12:58 PM in Portals | Permalink | TrackBack (83) | Top of page | Blog Home

Yahoo Revamps Search Ad Plans

RED HERRING | Yahoo Revamps Search Ad Plans

The media giant’s search marketing business wants to be numero uno in the field it helped create.
December 26, 2005

Yahoo Search Marketing’s getting an extreme makeover.

Earlier this year, Yahoo re-branded its online marketing unit. What was once called Overture became Yahoo Search Marketing in a move to more closely identify the group with its corporate parent. Next step: the unit moved from Pasadena, California, into fancy new offices in Burbank, California, home of Walt Disney and other high-profile media companies.

And now, its executives are launching an aggressive assault to regain some ground lost to search leader Google in an area they had once pioneered.

Among the key moves this year, the Yahoo unit in August expanded its Publishers Network, the network of sites that it serves up ads on, to include small-sized publishers (see Yahoo Treads on Google Turf). Until then, Yahoo had primarily worked with large publishers like CNN, The Washington Post, and ESPN to display ads on their sites.

By opening up the network to the wider publishing community, it hopes to expand its reach to rival that of Google’s. In the four and a half months since the network opened up to small publishers, blogs have rapidly grown into the most common publisher category.

Yahoo’s moves come of course as the Internet media company seeks to carve a bigger piece of the online advertising pie, which is expected to amount to $19 billion by 2010, according to JupiterResearch. Search advertising will make up about $7.5 billion of that, the research firm estimates, and Yahoo wants to build its share.

Willan Johnson, vice president and general manager of the Publisher Network, says his team is looking to work with publishers to give them a say in picking ads that would show up on their web pages.

Under the new program, publishers of blogs and other web sites can give Yahoo the categories of industries for which they think their audience would want to see ads. Of course, Yahoo’s systems would also continue to generate ads based on the content of their sites.

“They’re trying to do a lot of different things to provide for a variety of needs out there,” said Greg Sterling, an analyst with The Kelsey Group. “They’ve had mixed success. But there’s a lot of creativity and they’re striving to capture more advertisers.”

Waiving Fees

Casting a wider net for publishers isn’t the only step Yahoo has taken. The online marketing unit has also waived its requirement for advertisers to spend a minimum of $20 per month for sponsored search, a move that makes it more competitive with Google, which doesn’t charge minimums. In sponsored searches, businesses pay to have their names come up when users input certain key words in a search box.

Steve Mitgang, senior vice president of product marketing at Yahoo search marketing, says he knows he’s got a huge opportunity in front of him.

“I don’t think we’re short on vision or opportunity,” said Mr. Mitgang. “It’s being able to take advantage of that and being able to lead the market.”

That may be what investors are looking for. Yahoo’s stock has declined recently, trading on Friday at $40.65, off the $42 range it reached in late November.

Beating Google

Yahoo clearly has its challenges. In the past, analysts have said Yahoo isn’t as nimble as Google at executing services and applications. Until very recently, Yahoo’s new services and products would often hit the market without much fanfare, analysts say.

In many cases, Yahoo managed to launch key products before its rival, which is located just a few miles away in Mountain View, California. But the media and the blogging communities have overlooked Yahoo’s innovation as soon as the search giant launches the same service.

That was the case in November, when Google said it would allow people to bid for ads on content sites separately from bids for search-based ads. Yahoo’s advertisers have had that option for more than a year, according to Mr. Mitgang.

YSM’s Longish History

Yahoo Search Marketing has been around for eight years—though with a different name. Overture was born at startup incubator Idealab in 1997. A year later, it came up with the concept of sponsored search, which refers to the practice of a search engine pulling up paid-for listings in response to a query.

It also developed the model of having advertisers bid on keywords to figure out where the ads would be placed. Yahoo, formerly a client of Overture, bought the Pasadena, California-based company in 2003 for $1.63 billion.

Search companies like Yahoo and Google, which grossed revenue of $3.6 billion and $3.2 billion respectively last year, have built their fortunes on search-based advertising.

Google is clearly the search leader, getting more than a third of all search queries, according to comScore Media Metrix. That means it has a wider audience when it comes to search.

And as Google continues to grow its revenue, which is almost completely advertising-based, with each passing quarter, Yahoo needs to go on the offensive.

On the plus side, Yahoo has extensive global reach. In the United States alone, it had 125 million unique visitors in November, up from 116 million a year ago. It has a lot of information on its users, due to the fact that most of them have to register—and even subscribe—for some of the services.

Integrated Media Campaigns

For Yahoo to really take on Google, it will need all the help it can get from its search marketing unit, which is the foundation its revenue stream is built upon. And as it comes up with innovative ways to capture ad dollars, it needs to look to solutions like integrated media campaigns, which refer to campaigns that blend the offline and online worlds.

That Yahoo is a portal that offers search as well as various consumer-oriented vertical niches, such as travel bookings, auto sales, and health information, to name a few, works to its advantage.

Honda, for example, used YSM to run an integrated media campaign when it launched the Ridgeline truck in January. In addition to TV spots, print ads, and direct mail, the ad agency bought a bunch of keywords that would pull up Honda’s Ridgeline at the top of search results.

People don’t use the web to buy cars in droves—less than 1 percent of all auto sales take place online—but using search helped Honda increase the number of visits to its site.

Online ad budgets at offline industries are beginning to increase as businesses realize the web can help them generate buzz and do what traditional print and TV ads used to do.

But no matter how you look at it, search-based advertising is in many ways still in its infancy. And it will evolve over time as advertisers increasingly come on board.

“These are still very early days,” says Mr. Mitgang. “A lot of marketers still have to start to participate [even as] a lot are moving beyond experimentation into optimization.”

December 27, 2005 at 09:48 AM in Portals | Permalink | TrackBack (9) | Top of page | Blog Home

AOL to stick with Google

AOL to stick with Google | CNET News.com

By Stefanie Olsen and Elinor Mills
Staff Writer, CNET News.com
Published: December 16, 2005, 2:39 PM PST
update Google may pay $1 billion for a 5 percent stake in America Online as part of an exclusive deal with Time Warner that would strengthen ties with the search giant instead of dumping Google for Microsoft.

As part of the current negotiations with Google, AOL would be able to sell additional ads for its search engine also powered by Google on top of those provided by Google, according to a report Friday in The Wall Street Journal Online. Google also could promote AOL Web sites among sponsored links in search results, according to an unidentified source in the report. The report said the deal would not be finalized until after Time Warner's board meets on Wednesday.

Representatives at AOL parent company Time Warner, AOL and Google did not return calls seeking comment. A Microsoft representative declined to comment.

AOL was in talks with Microsoft this year about forming a strategic partnership, with negotiations at one point touching on a potential buyout or a Microsoft investment in AOL, a person familiar with the negotiations, who asked not to be identified, told CNET News.com.

The talks escalated in recent months to focus on a broad, long-term partnership that News.com's source described as a "game-changing deal for the media business." Under the proposal, Microsoft and AOL would have combined their advertising forces to form a massive global advertising network, selling multimedia, brand- and search-related ads for their own Web sites and third-party sites on the Internet. The deal also would have included joint promotions and content-sharing between the sites.

Then, AOL suddenly told Microsoft early on Friday that the deal was off the table, opting to forge stronger ties with its current advertising partner, Google. The Dulles, Va.-based media company has been interested in selling its own search-related ads, which are currently provided exclusively by Google, the source said.

The shifting negotiations apparently put an end to a heated and closely watched contest between Google and Microsoft over a key source of Google's advertising revenue. According to filings with the Securities and Exchange Commission, Google derives as much as 10 percent of its advertising revenue and traffic from its partnership with AOL through sponsored listings within its search engine. And although that percentage has dropped from 12 percent a year ago and will likely continue to fall, the estimated $400 million in revenue isn't likely easy for Google to give up.

The reported Google-AOL deal would give AOL a valuation of $20 billion. Time Warner shares closed at $18, giving it a market capitalization of nearly $84 billion, compared with Google's $430.15 a share close and more than $127 billion market cap. Microsoft, meanwhile, saw its stock close at $26.90, giving it a market cap of more than $286 billion.

Google had 48 percent search market share in October, compared with 22 percent for Yahoo, 11 percent for Microsoft's MSN and 7.2 percent for AOL, according to Nielsen/NetRatings.

JPMorgan analyst Imran Khan predicted the deal would have a slightly positive or no impact on Google's earnings and would make it harder for MSN to have a strong advertising network.

"We believe this deal makes it more difficult for MSN to develop a strong advertising network as scale is very important in order to attract (advertisers)," he wrote in a research report. "By tying up AOL, Google has made it more difficult for MSN's ad network to reach critical mass."

Piper Jaffray analyst Safa Rashtchy said the proposed deal delivers the most benefit to Google, as opposed to AOL. If the deal goes through, Google will retain its search relationship with AOL, as well as its revenue source, and stave off Microsoft in its quest to acquire AOL as a partner. Finally, Google will be able to use AOL's network as a test lab for new services, such as its banner and display advertising sales. Google, for example, could sell a display ad for AOL pages and maintain its search engine's signature spare look.
In other news:

* Merging the laptop with a cell phone
* Theater owners think digital
* Shedding light on Flickr
* New 'Kong' monkeys with game industry

In contrast, the deal doesn't necessarily help AOL greatly, Rashtchy said.

"AOL's biggest challenge is still to reposition the company" as a player in the Web content business, he said. "This would be more of a cash infusion for that than anything else."

Yahoo and Comcast reportedly were in talks with AOL at one point too, but dropped out of the race, leaving heavyweights Google and Microsoft to duke it out.

AOL was initially a huge success, bringing millions of Americans online with its ubiquitous subscriber CDs and Internet-made-easy campaigns. After Time Warner and AOL's $109 billion merger in 2001, AOL began weighing on the old media company's stock as AOL lost dial-up Internet subscribers to faster broadband connections.

AOL recently had a makeover and a huge shift in its business model, launching a new AOL.com portal and opening up its formerly walled-off content to the Internet at large. The move was designed to help grab some of the dollars going toward Google and others in the fast-growing Internet advertising market.

The changes weren't fast enough to suit billionaire Carl Icahn, who directly and indirectly controls 3 percent of Time Warner shares