The web is good at echoing the early consensus. When Google results were summarized as a "sevenfold increase in profits" a lot of places picked that tidbit up, including blogs of analysts who you'd think would put a little more critical analysis into the problem.
That "sevenfold" impressiveness is a classic lie with stastics - it's a comparison against one quarter in 2004, and a charge of $201M was made in that quarter to pay off a lawsuit on the Overture patents. In other words, 2004's results were depressed by the one-time charge, which is now making 2005's results look amazing. Without the charge, Google's profits were up around 33% from the same quarter last year.
But when I searched for [sevenfold profits] on Google, I was surprised at the many other companies who have reported such a sizable comparitive increase over some random time period:
If you replicate that search, you may notice that a lot of the citations are from day trader type stock pushers hyping some stock you never heard of, and its recent "sevenfold increase"
Here's the output of the command "uptime" from a Celeron box running the FreeBSD operating system, which I use to host websites on:
9:44PM up 203 days, 22:08, 2 users, load averages: 0.20, 0.72, 0.89
I love FreeBSD!
Newspapers are an advertising supported business, right? The more people that read them, the happier the advertisers will be, and up goes revenue, I'd think.
Then why do many newspapers require registration for their online articles? Are they confused about their business model? I'm sure they think they need to collect demographic information and charge people to access their premium content.
Here's a sample. Click these links to the same basic story, and tell me which newspapers you'd bother to read:
on Game in Live Forum - San Francisco Chronicle (10/25)
Gov. Schwarzenegger Fields a Few Hostile Questions - San Jose Mercury News (10/25)
Schwarzenegger Scores With a Quasi-Debate Performance - Sacramento Bee (10/25)
Governor: Prop. 76 Not a Grab for Power - San Diego Union-Tribune
Two of those links require registration (San Jose Merc and SacBee) - forget about that. I'll check out the same story in the SF Chronicle and the San Diego paper. If ALL of them wanted me to register, then I might check Google news or I'd just forget about reading the article all together.
How hard is this to understand?
Google Blogoscoped breaks the news on the launch of Google Base. Apparently Google Base is a database that you can use to upload anything to - and Google will store it for you and index it.
What makes this more interesting than say, Furl.net or other storage services? It's Google, of course! They are setting up base so the following equation will work:
Base + Froogle + Wallet = Amazon
Or eBay or Yahoo Stores.
Base is a key piece of infrastructure in Google's grand online store system.
The theme of the week is how come Google is kicking Yahoo's butt in paid search? Why is Google twice as profitable in that area and why is their lead growing?
In a post below I decried the throwaway comments of a Citigroup analyst who said "Yahoo really needs to fix the search engine".
What Yahoo really needs to do is fix Overture. The best explanation I can come up with is that Overture's easy-to-understand bid-for-position model doesn't work as well as Google's very hard to understand relevance / quality score model.
Google's model for AdWords takes click-thru-rate (CTR) into account, Yahoo's model does not.
Google's model subtly ensures several things:
It's algorithmically better for the buyer and the seller. It's takes a lot of thinking to get to those three things from the simple inclusion of CTR in the ad positioning/bidding system, but that's what it comes down to.
Upshot: If Yahoo wants to make more money, they need to change their ad system to work like Google's.
Why is Google the darling of the press and Yahoo can't seem to get no love?
Let's go to the tape:
|Who had more revenue?||Google: net revenue rose 110% to $1.05 billion||Yahoo: sales rose 42% to $932 million|
|Profits?||Google: net income rose more than sevenfold to $381 million, or a $1.32 a share||Yahoo: essentially unchanged from net income of $253.3 million, or 17 cents per share|
|Price - P/E Ratio:||Google: somewhere between 75 - 90||Yahoo: between 30 - 35|
That 'sevenfold' increase is mostly due to Google paying Yahoo $201M for Overture patent licenses in 2004. So they're up about 33% from last year without the payment, and up 14% from Q2 2005. Not as crazy sounding...
Google's growing faster, is more profitable and is about 3 times more expensive. Yahoo may be a better deal, but it's not the market leader. Yahoo isn't the overt threat to Microsoft. That's a big reason that Google commands a premium over it's neighbor from
Santa Clara Sunnyvale.
OK, Google puts up pretty good numbers, and the analysts rush to up 'price targets':
First Albany and Lehman Brothers went further, upping their price targets to $450 a share.
Just remember, that I've out-Blodgett'd them all and called Google to $1000 a few months ago.
Of course you may say that my job isn't on the line if I'm wrong. I'd point out that for most analysts, neither is theirs.
Secretly and slowly, the Froogle folks have finally completed the roll-out of their big update. Nicer looking results, more interactive price comparison. And also, a SHOPPING LIST! Wow. Doesn't do anything really, since you still can't buy anything from Google, yet.
Upshot: Froogle looks more like Become.com now. But seriously, Froogle is getting better and better, and you just know they're planning to hook up that Wallet payment system and take on eBay and Amazon.
I wonder if they'll release an API, so I can integrate it into Aytozon.com?
Ho hum, another stellar quarter for #2 Yahoo.
THESE are the salad days for internet advertising.
I've met a good number of Wall St analysts, and I sometimes wonder how they are able to generate random quotes as easily as they do. At the end of this Investor's Business Daily earnings coverage article, Citigroup internet analyst Mark Mahaney makes some random comments about Yahoo needing to upgrade it's search functionality.
Even as its revenue soars, Yahoo faces hurdles, analysts say.
For one, it needs to improve its search engine to better compete with Google.
That could take time, says Mark Mahaney, an analyst at Citigroup.
"They really need to fix the search engine, and that seems like that's a March quarter event," he said.
One analyst says "they really need to fix the search engine". And he's guessing how long that will take! Of course, it's not clear at all where he's coming from. I used Yahoo to look up a lot of Mahahey's past comments and can't find anything about Yahoo being that much behind in search technology. Then I tried Google and got even less.
How would he determine that Yahoo's search is so obviously behind? Would Yahoo tell him that - and give him the time frame. I seriously doubt it. If anything is behind it's not the search part - it's the PPC ad system. Maybe the search is to blame because the Yahoo/Overture ad system doesn't convert searchers into buyers as well as Google's? Who knows? But that's too much nuance for a quick quote at the end of the article, isn't it?*
This is why I wonder how much the Wall St. analyst guys just make this stuff up RIGHT WHEN the press calls for the quote. And to top it all off, the people that print this random tripe are worse than the analysts who generate it.
*Actually, I'd blame it on the crappy branding of Y!SMS - but that's just me
What they say What they really mean
You could’ve said “no,” though of course then our stuff won’t work. Heheheh.
Someday soon, I will post some original thoughts of my own, but it's so great to be able to link to google blogoscoped in the meantime...
In about 20 years from now, the internet and the TV have been completely merged. That means full interactivity for that innocent little box which years ago invaded humanity’s living rooms. A side-effect not even big media companies did foresee was that most people were actually quite happy with the ease-of-use of sitting on a couch and clicking through channels of mindless TV shows... without any need to manage bookmarks, configure your TiVo, personalize the advertisement, or zapping away pop-ups.
In a previous post, I laid out the mathematical basis for what I call "The law of content conversation."
When you combine that with another aphorism I'm fond of: "If you can think of it, then it's been done on the internet.", you get my new law:
Total value of shit / amount of shit = $1
If this doesn't make any sense, then try it with an example:
Total value of Google maps mashups / amount of Google maps mashups = $1.
Now, isn't that just beautiful?
The usually insightful Adam Penenberg summarizes a years worth of his columns from Wired in this Slate Article about Google.
I love the "free heroin" analogy. And I've blogged bits about many of the issues he's talked about - including the AOL dependency. But the article gets kinda weird at the end, when he wonders if Google's biggest enemy will eventually be the federal government.
Because Google gives away its products for free, it's a good bet that the day a company that charges for similar services gets forced out of business, it will sue claiming predatory pricing. The government probably wouldn't allow Ford to give away cars equipped with satellite radio just so it could pump ads to drivers;
That's just prima fascia absurd-ness!
Greg Yardley captures Omid Kordestani and Sergey Brin back to back from the Web2.0 conference. Kordestani is rather smug in his surety that Google has the click fraud problem under control. Sergey's answer is harder to understand:
Q: Is clickfraud a problem?
A: ... We have fraud teams, a lot of our advertisers (in fact most) care about the conversions, making the sales, and know the exact ROI they’re getting. To them, if there’s a case of click fraud, it’s the same as disinterested clicks - don’t care as much about that, but about the ROI. Doesn’t completely protect people but on the whole clickfraud is kept to a very low level.
When I see that answer, I gotta give Sergey a lot of credit. He's way more honest about it than his lieutenant Kordestani. He's really got a good grasp on things - because he's right - most of his customers know there is a problem, but they are doing well enough that it doesn't matter much to them.
Good stuff from the infamous Henry Blodgett on the real state of Google vs. Microsoft.
Pundits are buzzing about a coming war between Google and Microsoft. The software giant, the story goes, has the web leader in its sights, and it won’t stop firing until it blows Google away.
The “coming war” story is a popular story because it promises an epic battle: two undefeated heavyweights bashing each others’ brains out, with egos, fortunes, and world domination on the line. Alas, it’s also fiction.
[ Conclusion ]
There will be no great war between Microsoft and Google/Yahoo, because despite Microsoft’s vast resources, Google/Yahoo! have already left MSN far behind. ...
Microsoft’s best chance to make MSN the industry leader is to spin it off, most likely in a merger with AOL.
Though I do wonder why all Wall St. analysts only spew in PDF?
I've become hip. I've written a mash-up.
Aytozon.com - search eBay and Amazon side-by-side. Shopping comparison.
Try it out and send some feedback.
It's starting now. PPC costs go up. And the unprepared pay even more during the holiday season.
And to throw a little snark in: I wonder if Google is gonna complete the roll-out of new and improved Froogle any time soon? You'd think Google would know about the shopping season "PPC Wave"...