An unexpected side benefit of industries need to be seen as "green": Google has put up a bunch of pages detailing their datacenter infrastructure.

A long time ago on this blog I speculated about various things in Google's infrastructure:

• How many servers does google have?
• Google's global infrastructure advantage

Now, in the name of Green-ness, Google is telling you a lot about how their infrastructure works, how much power their data centers consume, how they build servers.

I think Microsoft and Yahoo and Amazon EC2 have all contributed to a lessening of the advantage that Google has in infrastructure, but something tells me that if Google is putting this info out now, they have other advances that they are not telling us about.

Labels: google, infrastructure

¶ 11/30/2008

Reportedly, NebuAd's and Phorm's ISP customers are slowing trials of their ad systems based on deep packet inspection. This is where devices are installed at the ISP which can track everything a user does when connected to the internet. The resulting data is analyzed and used to serve more targeted ads.

Except now that Congress and the privacy watchdogs are starting to awaken, apparently the ISPs are scuttling trials or at least slowing them down.

I think that it's likely that these companies will be the proverbial pioneers with arrows in their backs (a bit like DoubleClick, circa 1999). But this technology will eventually be adopted when people aren't so vigilant.

In fact, what company is the big winner if the ISPs can't monetize their packets so easily?

HINT: It starts with a "G" and ends with "ogle".

They have the data that the ISPs have for the most part, and they also have the technology to exploit it, and the marketplace.

So far, for the most part, they've decided they don't need to use that data, and NebuAds and Phorm's political travails mean that Google can defer exploiting ALL of their data for as long as they want to. Or they can deploy so slowly that people don't notice. Either way, they win.

Labels: behavioral targeting, google, nebuad, phorm

¶ 9/04/2008

Uh-oh. The surest sign that the decline of a tech-power is nigh:

Google is going to build a new HQ.

Or at least they are going to do a massive expansion at NASA in Mountain View, on land next to their current HQ.

The land near Google HQ in Mt. View, CA.

This is an old Silicon Valley saw - when companies build giant new facilities, they tend to go downhill soon thereafter. It's a classic "market-top" signal. The litany of examples includes: Apple, Cisco, Intel, 3Com, BEA, Sun, SGI and many others.

And it makes sense - the companies that do this are generally getting too big and prospering in their mid-life. They plan a massive expansion and something happens - maybe the economy slows down, or maybe they lose focus. In any case, building the new HQ is usually done at the peak, and often portends bad times ahead.

Now I'm still bullish on Google, but planning for expansion like this worries more a lot more than anything Microsoft would do.

Labels: google

¶ 6/05/2008

Corporate blog cat fight: Google Code spells out in excessive detail why Facebook is lying about their justification for blocking Google Friend Connect on Facebook.

Background:

1. Google introduces Friend Connect, which basically is a container for managing authentication.
2. Facebook announces they are blocking Friend Connect from being used on Facebook apps, ostensibly due to privacy concerns. Zuckerberg and Facebook claim to be worried that Google could pass your Facebook data around.
3. Google Code Blog details in terms any 3rd grader could understand just what Friend Connect is doing with Facebook data.
4. Zuckerberg says maybe we should talk to Google and work something out.

In short Google shows that it's not doing anything to justify Facebook's holier-than-thou attitude. (Ever see how Facebook collects you Gmail contacts if you let it, or perhaps you recall Facebook Beacon on initial launch?).

Upshot: Google is revealing Facebook's hypocrisy, and doing it with the panache of Dan Akroyd finishing a faux-debate with Jane Curtain: "Jane, you ignorant slut."

Now that's proper use of a corporate blog in my book!

Labels: facebook, google

¶ 5/18/2008

Business Week says that mobile phone usage will be Google's undoing. This could be right - a change in how people use the web. We know Google's not threatened by Microsoft or Yahoo.

But is mobile search adoption happening fast enough? Other than the iPhone, most mobile browsing simply sucks, and people don't use their phones to buy online.

That will slowly change, and Google will have to cope with less screen space for ads and search results.

But I do think that Google has many more years of people using large screens to do most of their shopping research and transactions. And they will adapt in time to increase mobile browsing usage.

Labels: google

¶ 4/28/2008

ComScore (SCOR) is taking some heat for convincing Wall St. that Google's year over year click growth was very low. Kedrosky thinks it was a factor as to why expectations were so low:

I lean to the first bullet: Blame Comscore. As some are pointing out, and as Comscore's aftermarket weakness is showing, this is turning into an acid test for Comscore -- and it's failing.

The funny thing to me is that ANYONE ever believes ComScore any more. Not only have they been demonstrably wrong on query counts, search share, and click growth before, but the people who run Google, Yahoo and other publishers have said as much.

Eric Schmidt gave comScore the equivalent of the Obama finger in yesterday's earnings announcement.

Paid Clicks - Aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of our AdSense partners, increased approximately 20% over the first quarter of 2007 and approximately 4% over the fourth quarter of 2007.

Here's Anand from datawocky describing comScore's methods.

ComScore sets a lot of store on their "panel-based" approach, which collects data from a panel of users, similar to Nielsen's method of collecting data on TV viewing using data from a few households that have their set-top boxes installed. ComScore has been in this business longer than anyone else, and has arguably the best methodology (i.e., algorithm) in town to analyze the data.

I don't think they have the best model, simply because it's been wrong many times before. Here are a few of the ones I've documented in my blog - not a comprehensive list of all of their mistakes, since I gave up whining about this in 2007...

• 11/2005 - How many searches does Google really get?
• 4/2006 - Google VP Peter Norvig Clues Us In
• 4/2006 - Yahoo earnings call (Sue Decker upbraids comScore subtly).
• 8/2006 - ComScore Traffic Numbers - Wrong Again
• 10/2006 - MySpace Demographics

You can find other bloggers who discuss comScore's data in 2007. I believe that comScore has never been very good at analyzing the traffic or click patterns of top 10 web properties like Google, Yahoo and MySpace.

comScore did release a press release two days before the earnings, which seems to provide some cover contra Kedrosky's off-the-cuff "blame comScore":

The data from Comscore, which was not released publicly but provided by Wall Street brokerages, was seen as welcome news for Google after a difficult month in which many financial analysts lowered their expectations for the search company's first quarter.

Comscore last month prompted concern among investors and analysts when it reported weakness in the number of consumers clicking on the Internet giant's search ads in February.

The explanation that the data "was provided by Wall Street brokerages" doesn't make much sense as written - probably comScore secretly provided a CYA set of data TO Wall St... who knows?

Just remember this the next time comScore reports on some key metric.

Labels: comscore, google, yahoo

¶ 4/18/2008

Google prospers while many were predicting doom.

Gross revenue exactly in line with consensus--$5.2 billion, up 42%. Net revenue $3.7 billion, slightly ahead of consensus. Non-GAAP EPS of $4.84 blew away consensus of $4.52.

I was playing golf last week with a friend who used to be CEO at a big software company, but he's not a search geek. He asked what I thought of Google.

I said Google has at least 10 more good years. They are a powerhouse similar to CSCO and MSFT of the 1990s. Financially, what people underestimate is Google's level of control of their own business. Simply put, Google has an algorithmic way to produce money. This means that when they need to, they can control monetization and produce good results.

A simple example of this is the number of search result pages (SERPS) on which google chooses not to place ads. Google optimizes total site review better than MSFT or YHOO which tend to optimize page revenue. If Google needs to be more profitable, it has a fair bit of leeway to do it.

In addition Google still has macro trends in it's favor:

• Search is the most valuable thing on the internet.
• Ad spends are still migrating online.
• Google's competitors suck.

One thing people underestimate is the increasing importance of search. It's value is not declining, it's usage is not going down. Search is becoming more important to the average internet user than any other function - including email.

Similarly, as everyone well knows, ad budgets of large companies are slowly moving online in proportion to the amount of time people spend on line. Those ad budgets will be playing catch up for the next 5 years, and Google benefits.

Finally, Google's competition is incompetent. Microsoft and Yahoo are so far behind in search that Google's lead is still 2 or 3 years, and growing. It's not just quality of a SERP for a given query, but brand, traffic growth, international penetration, etc.

People will talk about unsustainable growth, declining click rates, the company becoming too big, etc. Certainly those are all reasonable objections, but they are not enough to stop Google from becoming ever more dominant for the next few years.

Google surprised Henry Blodgett and much of the punditry by not falling apart in a weakening economy. I'm not that surprised given the tremendous advantages Google has.

And I think it will keep out-performing for the next 5+ years.

Labels: google, q1 2008

¶ 4/17/2008

I've been planning to mess with Google App pretty soon.

This dude ported the Google App Engine SDK to Amazon EC2.

No question that Amazon EC2 is the thing you'd actually use to do anything real, but while Google's price is free (for now), it might be fun to mess with.

Update: Re-reading this post, I realize it'd be much more productive to spend time experimenting with Amazon EC2 more, and really develop something valuable on it. It can do everything Google App Engine can do, and a lot more. It's an open garden for production apps, while Google's is much more closed toy playground. I probably shouldn't get distracted by Google's.

Labels: amazon, google

¶ 4/14/2008

Wow. Jeremy Chatfield is one of the few search engine marketers (SEM) bloggers who still publishes substantive research on Google Adwords, and today he rips Google for using search history and personalization in determining which ads to show.

Google’s success was built on delivering search results that matched user expectation. Once again, we see Google acting to enhance revenue, without any concern for advertisers. This time, however, they have screwed the pooch. Users see less relevant results, too. This is not a good idea, as it will decrease the value of the search results page *for users*, and that will inevitably weaken interest in using Google.

Pretty strong words - I mean if it came from Aaron Wall, well, we all know how he loves to hate on Google, but coming from Jeremy, it's pretty sobering. Jeremy also provides a detailed example of the decrease in ad relevance based on recent searches.

And perhaps its one of the hidden factors in Google's recent CTR drops (on the search side - the content side is easily explainable).

I think that the examples above make it clear why keyword search performance has dipped recently, reducing average CTR, reducing conversion rates and making the behaviour closer to that for content match. This is not the precision marketing tool that I was using last year. This is a weaker, more expensive and less precise tool that brings in a wider range of less interested users.

Overall, it's good to have Jeremy still posting real info. Most other SEMs have given up sharing any real info as the industry has become more efficient.

Labels: google

¶ 3/11/2008

Andrew Goodman notes the bearishness of the press on Google's Q4 outlook. The Investor's Business Daily article he casts doubt on is typically crappy reporting on the search engine world.

In the article, they cite Nielsen numbers and claim that the number of searches that google gets is declining, month over month for the last quarter. Here's what they write:

Some evidence suggests a search slowdown. The average number of daily Google searches in the U.S. fell from 4.4 million in October to 4.2 million in November to 4 million last month, says Nielsen.

Holy Dr. Evil, Batman! How order of magnitudinally challenged can one be?

Now the actual Nielsen release covering search isn't too hard to read, but apparently the reporter at IBD isn't good at maths.

Google gets at least 4 BILLION US searches per day you idiots! See the (000) in the table column header? Not 4 million.

Thank goodness those professional business journalists have editors to catch these minor over sights...

Seriously if you want cogent analysis on search engine share, Danny Sullivan is one of the few games in town. Be sure to read the caveats.

Labels: google

¶ 1/28/2008

Skrenta dubs their screed: "The sound of disruption".

Basically they mis-understand the purpose of the thing. One thing Map / Reduce is great at is processing log files. Databases aren't so hot when you have 100M things a day or more to look at.

As I wrote earlier, Google is making efforts to get college kids to learn to think in map / reduce ways. Now they are offering free access to scientific datasets in mapreduce clusters to certain universities.

The upshot is that the web requires parallel processing. No one has really extracted a lot of knowledge out of the terabytes of web usage data that flow by every day.

But the data is out there, and paradigms like map / reduce are how it's gonna be dissected. So if you want to work in the consumer web, with billions of users doing stuff every day, leaving data tracks, you should spend some time learning map / reduce.

Not to get too geeky, but to collect these in a single place, here are some key papers to read if you want to understand the google architecture:

• Map Reduce [pdf]
• Bigtable
• Google File System
• Chubby [pdf]
• Hadoop

And a bit of bonus inspiration - the story of how an New York Times blogger converted 70 years of archives (over 11 million articles) to PDF in under a day using Hadoop on Amazon EC2.

Labels: google, hadoop

¶ 1/18/2008

Google VP of Engineering Udi Manber's pre-announcement details just what the hell a "knol" is. They apparently wanted to copy a wiki, but brand it with their own term.

Right now, it's invite-only, and apparently you have to be the wife of a Google VP to get an invite, but it seems like it will be yet another spammers delight (a la Google base, two years ago).

Manber does seem rather selective about who should write a knol:

Our goal is to encourage people who know a particular subject to write an authoritative article about it. The tool is still in development and this is just the first phase of testing. For now, using it is by invitation only.

Can't wait to see those first knols on Ringtones, Viagra, and Online Poker. I wonder if Google is actually too late to the party with this? To me Google Base was late to the classifieds party, and hasn't really taken off. Will the real experts really have incentive to do a knol, rather than contribute to wikipedia.

I guess if Google starts to demote those Wikipedia entries, they might.

Labels: google

¶ 12/14/2007

Today's the day that Facebook unveils their new ad platform. During the past 2 weeks the hype has been huge, with everyone jumping on the idea that Facebook has revolutionary data for doing targeted advertising. Google and Yahoo are paying attention.

Om Malik sums up "Why Google is a Afraid of Facebook":

Facebook, on the other hand, knows a lot more about us [than Google]— who our friends are, what we like, what groups we belong to, and even when we like to use its service. So what can Facebook do with all that information?

Google actually knows all of that, and at least 10X more data about users than Facebook, but hasn't seen the need to really mine the data yet, since search intent has proven to be worth about 100X more than that kind of data so far.

Adsense cookies, myspace profile extracts, toolbar data, google accounts and search engine history are more valuable and far more voluminous than Facebook's data. Google essentially already has the data that the new generation of ISP sniffers hope to get.

Facebook is not very different from MySpace, which Google has been attempting to monetize for the past 12 months. Google has all the data from MySpace profiles that Facebook is talking about exploiting. It hasn't really helped so far.

One of Facebook's beliefs is that they can ask users what they want to see, what products they like, etc. And that this will somehow improve ad perfomance. But the history of consumer polling & research has taught marketers that simply asking customers what they want doesn't necessarily improve ad performance.

Maybe Facebook will find an incremental way to increase eCPM on social networking page views from 15cents to 20cents, but I don't think the pundits and media are correct when they believe the hype about Facebook's new advertising technology.

Labels: advertising, facebook, google

¶ 11/06/2007

So you want to work for Google?

Well, Google wants you to work for them, if you are a halfway smart computer science grad. To see this, do a search on any relevant computer science topic, and look at the ads.

Google is going out of its way to train you for free on their tools before you even get there. Check out this blog post at Google Code and the free tools posted here and at Google Code for Educators.

You can now learn how to use MapReduce and BigTable (actually Hadoop - the open source version of Google's internal parallel computing infrastructure) on your own laptop using VMware, while read the courseware that Google interns used this summer.

If you can master Hadoop, and you can solve some classic programming puzzles that Googlers like to ask in interviews, you too can work at the Googleplex.

If you are not good at interviews, perhaps you can start your own company using Hadoop on rented hosted machines, and just wait for Google to buy you...

In any case, going the step beyond by learning Hadoop won't hurt your chances, and it might prove useful in the future.

Labels: google, hadoop

¶ 9/13/2007

A Google Miss. The second in their history (Remember Q4 2005?).

I can't say I'm surprised at the miss, because Google eliminated a lot of advertiser spend this quarter with their ad quality improvements. In short, they kicked a lot of advertisers out of AdWords.

By focusing on the worst of the arbitrage, and made-for-adsense type sites, they took a hit. These were the sites that would basically consist of all ads, and so when a user clicked away from a Google ad, they'd go to another site, full of ads. Not the best experience. By eliminating those types of advertisers from the system, they cost themselves money in the name of "better" ads.

I'm sure they planned it - and I'm guessing they look at it as a kind of "weeding the garden". It's hard work, and it cost them this quarter, but they believe they'll have higher quality results, and happier users in the long run...

Labels: google, q2 2007

¶ 7/19/2007

Google would be Hawkeye.

Yahoo would be B.J. Honeycutt.

MSN Live would be Frank Burns.

Labels: google, microsoft, randomness, yahoo

¶ 5/21/2007

In a rather important case testing fair use, and aggregation on the internet, Google has won a decision allowing them to use thumbnails of copyrighted images.

Timothy Lee at arstechica calls it a "partial victory."

Terry Heaton says the decision "strengthens aggregators":

The appeals court overturned a district court ruling, and while there are still other issues to be resolved, this decision adds considerable weight to case law that strengthens the position of web-based aggregators.

In the decision, the court wrote that there’s no doubt the display of such images is a direct infringement but concluded that the use of the images meets the standards required for fair use. Thus, they overturned an injunction against Google issued by the district court.

I'm not the biggest follower of the legal issues around copyright, but I think it's clear that if Google lost this one, it'd have a big impact on both legitimate search usage, and on spammers / sploggers (even though they clearly don't have the same amount of public benefit as Google relied on in this ruling).

So keep 'on aggregatin'

PS. In other internet/porn-related news, the domain "porn.com" sold for over $9.5M. Man, I wish I had that time masheen perfected.

Labels: copyright, google

¶ 5/17/2007

Jeremy Chatfield has not one, but two brilliant posts up about search engine spam and the incipient collapse of the page-rank system.

However, Jeremy should just be hired by Google, because he really "gets" the old-school Google mentality. Here's what he says after explaining how the page-rank citation model is doomed in his second article:

I’ll avoid further describing more problems. If you’ve got this far, you can probably infer what else I’d say. If not, think about it for a while.

That little koan is soo hard-core Googly. Basically that's exactly how the early employees think.

Maybe Google should just hire Chatfield? Put him in charge of the AdWords API. They could get some mojo back if they did.

Labels: google, randomness

¶ 4/24/2007

Yahoo reported yet another depressingly weak quarter. The Q1 2007 earnings conference call is a litany of lame excuses as to why Yahoo can't perform.

One thing Yahoo is good at is plying an excuse. This time it's "Wall St. got ahead of itself on Panama." Of course, no mention of their trick last quarter, bogusly hyping Panama by saying they were launching it "earlier than expected".

The story with Google is getting simpler - each quarter they mint $1B in profits by sticking to traffic and search growth, while having a global, diversified ad system that prints the money.

Meanwhile Yahoo's market share has not grown in the past 3 years.

Yahoo!’s market share has been flat and steadily eroding over the past 4 years, while Google’s has dramatically accelerated. Yahoo! had a 28.9% share in February 2003 (according to Neilsen NetRatings ), compared to 29.5% for Google. However, Yahoo!’s share had dropped to 19.5% as of December 2006, and Google’s had increased to 65.4% (according to Bank of America Equity Research).

In a blisteringly accurate critique, seeking alpha columnist Eric Jackson lays out the reasons for Yahoo's failures, with the money quote being:

Google has grown its shareholder value 21 times more efficiently than Yahoo! over this time period, when the Internet ad market has been booming.

It's a theme repeated over and over. While Yahoo claims to be "leveraging it's audience insight" in order to "be in position" to capture "the growth of the internet", Google has ACTUALLY done it. Yahoo has dithered.

EVERY earnings call for the past 3 years has included Terry mumbling something similar to:

“We are on the cusp of witnessing a significant increase in engagement of consumers on the Internet and believe we are best positioned to capitalize on the many opportunities to which we are exposed.”
from the Q1 2005 call

Unfortunately, the fact is that Yahoo has performed worse and worse since then. Google has eaten their lunch. Even Ebay is coming back stronger than Yahoo.

Part 1: They Were Asleep at the Search Wheel

It's bad enough that Yahoo blew the chance to buy Google, but far worse is the fact that Yahoo wasn't even AWAKE on search strategy until it was too late. There were 3 key failures:

• Failure to focus on search share - instead Yahoo wanted "deep user engagement" and invested heavily (i.e. $500M+) in Hollywood type media with the Yahoo Media Group.
• Failure to focus on search monetization. Management let the Panama delays stretch to 2 years, losing billions in revenue and never setting the ship right at Overture.
• Failure to grow audience. Market share in Yahoo's non-search properties has been flat for the past 3 years.

What has Yahoo done well? For a while, their display ad business was covering for the lagging search ads. No more. In Q3 2006, Semel warned of weakness in Finance and Auto sector display ads. Unfortunately, no matter how good display ads do, they are sensitive to seasonal and cyclic economic factors - more than search is. They can't make up for the loss of share and revenue on the search side. That's partly why the last few quarters haven't looked very good for Yahoo.

Yahoo's Problem is Leadership. Semel.

Note the difference a year makes in Terry's opening earnings call summary:

Q1 2007:
"We have been executing aggressively against our plans to improve our search monetization, strengthen our display advertising business, and seize the opportunities we see in emerging areas like social media, mobile and video."

Q1 2006:
"The strategy that we have talked about for the last couple of years, to lead the shift from mass media to my media is starting to coalesce and the next phase of Yahoo! is becoming much more visible. You can see it through the continued development of communities on our network, the expanded programming of head and tail content and the evolution beyond web search to social search. All while providing personalized services for our users whenever and wherever they are."

In 2007 it's all about search. Only one year ago, search is barely mentioned. Media, Community & Personalization was far more important to Yahoo at the time. Terry talked about moving "beyond web search". HA! Somehow I hope he didn't mean that Yahoo would be losing market share in web search... but that's what happened.

As I've written before, Semel doesn't have the technical chops to lead Yahoo, he was brought into to make Yahoo into a media company. (BTW, did you notice that the Dreamworks studio - the much ballyhoo'd Spielberg, Geffen & Katzenberg collaboration was recently sold for a mere $1.6B? - that should indicate why Yahoo CAN'T be a media company.)

Basically, Yahoo has been pulled into a war they didn't want, with a much more focused and powerful enemy. Semel doesn't have the ability to fight that war.

Why Panama isn't the Answer

Panama is not enough. It is worse than Google's current system in EVERY WAY. It's harder to use, it has worse ROI, the inventory isn't there, and it isn't a global diversified ad system - one that has search, content, and many other forms of advertising built-in. Google has all of that. Yahoo could have that in maybe 5 years...

From a channeladvisor post on initial Panama results:

For example, we have a number of clients with strong national brands. Actual CPCs on Google for these brand terms are $0.01 to $0.06. On Yahoo, the CPCs on the same terms are at least $0.10. So, even though Yahoo sometimes has a higher conversion percentage on those terms, ROI on Google can be two to three times or more what it is on Yahoo (using return on ad spend—ROAS—as the measure of ROI). And, because retailers with strong national brands drive a large percentage of their paid search sales through brand terms, brand term ROAS is a significant contributor to overall ROAS. As a result, overall ROAS on Yahoo is lower.

Beyond ROI, Panama has 3 key problems:

1. Yahoo's inventory is weak - due to declining search share - 30% to Google's 60%.
2. Panama's not rolled out anywhere but the US and Canada
3. It's technically 3 years behind AdWords in functionality.

So Panama, for the rest of the year can be expected to be blamed for disappointing results like it was this quarter. It's not the answer.

Moreover, Yahoo announced a re-org late last year. They still haven't been able to hire an executive in charge of "audience", and this quarter's results pretty much bear out what the consensus was on the re-org: "Deck chair shuffling".

What about Microsoft?

The only internet related company performing worse than Yahoo at this time is Microsoft. If Panama hasn't lived up to hype, Microsoft's search and AdCenter products have been total, complete miserable failures. Full of spam, and losing traffic daily, despite huge platform advantages (IE7) that should have propelled them higher.

So it's now possible that these two failing companies will get together, with Microsoft wanting to buy Yahoo to compete with the new boss: Google.

That would be a complete disaster. The only good thing would be getting rid of Terry Semel. However, Microsoft is more lost than Yahoo, and folding Yahoo's 12,000 strong workforce into MSFT's 73,000 people would pretty much kill any chance Yahoo has of growing into competing with Google.

Is There Any Hope for Yahoo?

If Yahoo had a technical leadership injection, it could get back into the game. Things are broken, and Semel clearly can't fix them, but Yahoo does have some strength.

Certainly Jackson's recommendations - designed to get Yahoo's stock back up, mostly should be considered:

• Terry Semel, Robert Kotick, Roy Bostock, Ron Burkle, Eric Hippeau, Arthur Kern, and Gary Wilson should be Immediately Replaced on Yahoo!’s Board of Directors.

However, I think the key to Yahoo's recovery is to figure out how to get advertisers to split their budgets closely between Google and Yahoo.

Yahoo mainly needs more inventory. They need to copy Google's strategy of being the ad system for ALL media by 2010. They need to be able to say to big advertisers: "We can give you better deals, better service, better reach than Google."

It's possible to say that because Google is on it's way to becoming incredibly dominant, and it has no shortage of arrogance in dealing with customers. Eventually it will screw up, and piss off big advertisers. Yahoo already has relationships and it could prosper as a strong #2.

However, the likely scenario is probably Microsoft buying Yahoo.

In that case, you should load up on YHOO stock now, in hopes that you get 30%+ premium over the next year on the buyout. And you should buy GOOG like crazy too. Because if Microsoft does win Yahoo, the combined incompetence will ensure that Google ends the biggest winner of all.

Labels: 2007, google, q1, semel, yahoo

¶ 4/20/2007

In fact, the earnings call WAS pretty boring, with the Google team practicing serious message discipline, everyone emphasizing that they really DO CARE about search and especially advertisers.

Gross revenue increased 63% over Q1 of last year to $3.7 billion. Revenue from Google properties was $2.3 billion, representing strong year-over-year growth of 76%. We experienced healthy traffic growth in our Google.com business both domestically and internationally.

Now turning to cash flow, operating cash flow was strong at just over $1.2 billion. Free cash flow, a non-GAAP measure which we define as cash flow from operations less CapEx, increased to $623 million.

In the tradition of Arsenio Hall, here are some thoughts - things that make you go "Hmmmm".

• Quality Score is working. It means Google is showing fewer ads per page that are "worth more".
• They said paid clicks on Google and its partners' sites rose 52% from a year ago. Wow.
• Google spent $597 million dollars in capital expenditures- mostly on servers and data centers. I think the technical term for that is: "shitload". Seriously, it probably equates to something like 250,000 servers.
• Fast growth in UK is coming from attention to big "named" accounts and a successful sales team. Interestingly, the Google team thinks that rapid UK online ad spending growth may stem partly from the more limited TV advertising landscape in the UK (i.e. the BBC doesn't soak up as much ad spend as the US networks)
• Toolbar users search more - a lot more. Google has been very successful in toolbar distribution
• Google has deals to show ads on 15 of the top 20 social networks in the world.

Overall, three things really strike me: 1) Google is making a lot of these gains with big advertisers. 2) Unlike Terry Semel, who says that Yahoo is "well-positioned to take advantage of future internet growth", Google is actually taking advantage of current internet growth in a massive way. 3) Google looks insanely strong internationally. By comparison, Yahoo's over-hyped Panama ad system is NOT live in any countries besides the US and Canada.

Even though every analyst currently has "buy" ratings on Google, which doesn't leave a lot of room for upside surprises, Google's financial performance and increasing dominance should be able to power the stock through the $500 - $600 level.

Labels: 2007, earnings, google, q1, yahoo

¶ 4/19/2007