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Live-Twitting the Search Insider Summit

Written By Drupad Sil | May 19, 2008 | Share This |

Search Insider Summit

Our very own Brooklahn, aka Reprise Media Director of Marketing Anthony Iaffaldano, is attending the Search Insider Summit, held at lovely Captiva Island till Wednesday. With attendees from across the industry, the summit provides some great debate and discussion on search marketing. Follow all the action from Anthony’s twitter feed or get the digested session notes here.

The Dance Will Go On

Written By Drupad Sil | May 19, 2008 | Share This |

Dance

The big news this morning is (surprise surprise) Microsoft’s return to the bargaining table in its bid for some or all of Yahoo. The “some” part represents Yahoo’s search advertising business, which when acquired by or partnered with Microsoft would certainly help Microsoft capture more market share, although still be a far cry from a short-term threat to Google. Indeed, even a full-out acquisition of Yahoo by Microsoft would not be a short-term threat to Google’s domination of the search marketplace, though it would obviously drastically change the landscape and long-term outlook, assuming it survives anti-trust scrutiny. Microsoft issued a statement on Sunday on its return to negotiations:

“Microsoft is considering and has raised with Yahoo! an alternative that would involve a transaction with Yahoo! but not an acquisition of all of Yahoo! Microsoft is not proposing to make a new bid to acquire all of Yahoo! at this time, but reserves the right to reconsider that alternative depending on future developments and discussions that may take place with Yahoo! or Microsoft or other third parties.

There of course can be no assurance that any transaction will result from these discussions.”

Aside from the wincing done by Yahoo shareholders at that last line (ah, $33 a share, we hardly knew ye) the statement, while a reversal from Microsoft’s earlier stated position of having “moved on” from its takeover bid, raises the possibility of a competing partnership offer to the Google-Yahoo alliance said to be in the works and announced as early as this week. Yahoo has not rejected the possibility out of hand, as it released a statement of its own on Sunday:

“Yahoo! has confirmed with Microsoft that it is not interested in pursuing an acquisition of all of Yahoo! at this time. Yahoo! and its Board of Directors continue to consider a number of value maximizing strategic alternatives for Yahoo!, and we remain open to pursuing any transaction which is in the best interest of our stockholders. Yahoo!’s Board of Directors will evaluate each of our alternatives, including any Microsoft proposal, consistent with its fiduciary duties, with a focus on maximizing stockholder value.”

It’s a bland statement with little information, but at least shareholders know that Yahoo’s board will not slam the door on new negotiations with Microsoft (at least immediately, anyway). Indeed, the longer the talks are in limbo, the longer shareholders can enjoy holding Yahoo shares that are at a decent premium over where they were before Microsoft floated its acquisition idea. Originally trading at $19.18 back in late January, Yahoo’s shares closed at $27.66 on Friday, still at a 44% premium despite a large drop the day Microsoft pulled out of talks. Some of this is no doubt due to Carl Icahn and his push to appoint a new board more inclined to be bought by Microsoft, but I think a sizable portion of shareholders felt that despite Microsoft’s vibe of finality on the talks the software giant would return to negotiations at some point. We certainly felt the same way, thought not expecting to happen this quickly. At the time of publication, Yahoo shares are already trading up about 1.5% in pre-market buying, showing that some cautious optimism is being priced in by investors. Some commentary on the deal from the Wall Street Journal:

“While Microsoft’s statement leaves the door open to cooperating with other investors, the company still hasn’t had contact with Mr. Icahn or his team, according to a person familiar with the matter. Still, by not ruling out the possibility of cooperation with other investors, Microsoft has signaled that option could be revisited.

By floating a search pact now, Microsoft is making a defensive move. Yahoo has already held extensive talks about a search-ad partnership with Google, and an agreement between those two companies is close, according to people close to Yahoo. Such a deal would probably preclude cooperation between Yahoo and Microsoft.”

While there hasn’t been any official direct contact between Microsoft and Icahn, Microsoft’s letter outlining the details of its courtship of Yahoo was certainly released with the intention of spurring some shareholder activism. It seems to have delivered. Whatever happens, the conclusion is still the same: Yahoo has lost much of the initiative it had in the search marketplace, and Google and Microsoft are basically toying with the company until a deal manages to hold. Then we can expect some serious anti-trust roadblocks placed by whichever company was left out in the cold. Fun times.

Searchviews: Week in Review

Written By Drupad Sil | May 16, 2008 | Share This |

SearchViews

Each Friday, we bring you a roundup of the last week’s stories on Searchviews and beyond. Happy weekend reading!

On Searchviews:

Elsewhere:

Begun, the Data Wars Have

Written By Drupad Sil | May 16, 2008 | Share This |

MySpace

In the last week, we’ve seen a host of announcements relating to data portability. MySpace kicked things off by revealing a data partnership with Twitter. Facebook followed with Facebook Connect, and Google got in the act with Google Friend Connect. Essentially, it’s an arms race between these three groups with two objectives: to get the most users to store their data centrally, and to build partnerships with popular sites to incentivize users to store their data with one site over another (basically, “look at all the other cool sites you can export your data to if you pick me”). In the spirit of data portability, one might have expected that the three sites would be ‘open’ (pun intended) to letting their users share data across the competing products. Facebook quickly corrected that little assumption with an announcement yesterday. From the Facebook Developers’ Blog:

“In the past, when we found applications passing user data to another party (for instance, to ad networks for the purpose of targeting), we suspended those applications and worked with those developers to ensure they respect user privacy. Now that Google has launched Friend Connect, we’ve had a chance to evaluate the technology. We’ve found that it redistributes user information from Facebook to other developers without users’ knowledge, which doesn’t respect the privacy standards our users have come to expect and is a violation of our Terms of Service. Just as we’ve been forced to do for other applications that redistribute data in a way users might not expect or understand, we’ve had to suspend Friend Connect’s access to Facebook user information until it comes into compliance.”

The above (innocuously posted under a heading of “Thoughts on Privacy”) represents the first salvo in what is turning into a battle over user data. Apparently sites that are partners in the OpenID initiative can be somewhat open, but not entirely open, leading some to question if these products represent the coming of real data portability. There’s an interesting post by David Recordan at O’Reilly radar on the topic:

“…MySpace said that due to their terms of service the participating sites (e.g. Twitter) would not be allowed to cache or store any of the profile information. In my mind this led to the Data Availability API being structured in one of two ways: 1) on each page load Twitter makes a request to MySpace fetching the protected profile information via OAuth to then display on their site or 2) Twitter includes JavaScript which the browser then uses to fill in the corresponding profile information when it renders the page. Either case is not an example of data portability no matter how you define the term!”

So, what’s Facebook’s motivation in doing this, other than drawing a line in the sand for its users and competitors? Why do they feel threatened by Google, which doesn’t have a social network of its own in the traditional sense? Michael Arrington at TechCrunch lays it out nicely:

“[MySpace and Facebook] know that to keep users happy, and to stop them from entering in all that friend data into other sites, they need to make their data at least somewhat portable. Not too portable, mind you. That means they’d lose control. But just portable enough. That’s why they are launching their products…

Google is a little different. They don’t have a social networking presence in the U.S., so they are trying to get in the middle between the guys with the profiles (like Facebook) and the sites that want the data. Their Friend Connect product does just that, and makes them an important data middle man. That position can later be leveraged intensely. In fact, in many ways Google can become the most important social network without actually having a social network. Facebook, of course, doesn’t want this. And that’s the real reason why they blocked them today (although the rumor is that the two companies are talking tomorrow about some sort of compromise).”

Who’s right and who’s wrong in this specific instance is debatable. There are those who believe that Google is wrong for creating an app that shares data in such a way and supposedly has “stale” information. And there are those who argue that Facebook has no right to determine what applications can or cannot be utilized by users to share their personal data. Regardless of who ultimately compromises on this round, this type of skirmish is only indicative of the beginnings of a full-blown user data war.

The Value of Persistence

Written By Drupad Sil | May 15, 2008 | Share This |

MediaPost

How many times have you seen a seasonal-ad on TV, forgotten about it for a few days (or weeks) and then gone to research it on the Internet only to find that, well, it’s impossible to find? There’s a perception among many marketers that once a campaign’s objectives have been met, it’s time to dial back the presence until they have another benchmark to hit, missing out on a chunk of their potential customers who search for their products during this downtime.

Reprise Media’s own Joshua Stylman, Managing Partner, extols the Value of Persistence in search advertising in this article at MediaPost:

“The solution is maintaining a persistent search presence, sometimes referred to as an evergreen campaign. There’s little risk associated with maintaining this type of campaign: After all, you only pay when a qualified prospect clicks through to your site. It’s efficient and effective, allowing marketers to continually stay top of mind with their potential customers.

Furthermore, search engines reward campaigns for running over a long period of time. Performance history is a key factor in determining an ad’s Quality Score – the algorithm that Google and other engines use to set minimum bids for their keyword auctions. Consistent campaign performance can often lower your bid prices over time, making it even more economical to keep those campaigns active.”

Get the rest of the article.

Mid-Week Crisis

Written By Drupad Sil | May 14, 2008 | Share This |

No News

A very slow search news day, unfortunately. Here are some stories in the technology and online space that got coverage today:

If Search is Settled, Will History Repeat Itself?

Written By Drupad Sil | May 13, 2008 | Share This |

Google-Microsoft

A lot of talk on Google today, probably spawned in the wake of the failed Microsoft-Yahoo (MicroHoo?) merger. First up is a fantastic Financial Times article written by Richard Waters that discusses Google’s business outlook now that the company’s greatest short-term threat is out of the picture. From the article:

“The scale of Google’s victory over Microsoft in online advertising, sealed by the failure of the Yahoo takeover approach, is hard to exaggerate. By next year, half of the world’s online advertising – set to reach $55 bn in total – is expected to flow through Google’s systems. Of that, slightly more than two-thirds will come from advertisements that run on Google’s own websites. The rest represents advertising that the internet company, acting as a broker, places on other companies’ sites in return for a small cut of the action.

It is a stunning victory that raises two overriding questions. Will Google be able to use the respite provided by the disarray at Microsoft and Yahoo to carry its dominance of search over into other areas of online – and broader digital – advertising? And should it now be a cause for alarm that one company is in a position to control so much of the lifeblood of the internet?”

Even if Microsoft and Yahoo weren’t in disarray, it would be difficult to keep up with the sheer volume of projects that Google seems to be working on. Google has been sticking its fingers in every pie imaginable, from social networking to WiMax and mobile technology. Adding these to the already-placed bets on the growth of display advertising and online video with its acquisitions of DoubleClick and YouTube, Google is reminding some observers of one of its biggest competitors… Microsoft.

This has spurred some speculation as to which company will be bigger in the long run. Henry Blodget at the Silicon Valley Insider claims that Google Search will be bigger than Microsoft Windows in 2009 for the following reasons:

“Both products are natural monopolies. Google’s share of the search market should continue to approach Microsoft’s share of the operating system market (90%+).

Both products are wildly, fantastically profitable. Microsoft’s Windows business has operating margins of 75%-plus. So does Google’s search business (once you factor out the billions Google is spending on products that produce zero revenue).

Google natural monopoly is growing a lot faster than Microsoft’s. Google’s search business should be bigger than Microsoft’s Windows business by early next year (at the latest). Google is also growing faster than Microsoft’s two monopolies combined – Windows and Office. Google has yet to develop a second huge, fantastically profitable monopoly - the Office equivalent – but AdSense is getting there.”

While I certainly agree with Blodget’s general analysis, I think he’s missing a couple points. First off, I think the barriers to entry are a little more complex than described here. On the one hand, you could make the argument that barriers to entry in online search are low – there are a large number of engines out there with significant market share, especially outside the US market (Baidu comes to mind). However, the counterargument here is that while producing engines may be relatively simple, getting people to pay for ads on their pages is another story entirely. With Google dominating the online space the way it is, its conceivable that more and more people will have to turn to them to deliver the search volume required, leaving other engines out in the cold. And, as we learned in the late ‘90s, it actually takes real revenue to build a successful company, not just a cool idea.

That being said, people dismissing anyone else’s chance at competing with Google are forgetting the lessons of the not-so-distant past. After all, it wasn’t that long ago that Yahoo was cruising out in the lead. Then Google appeared with its streamlined search results and quickly crushed the apparent king. In order to avoid the same fate, Google has wisely diversified its services beyond just search, increasing the company’s long-term profitability and causing talk like that at SAI and this at HipMojo by Ashkan Barbasfrooshan:

“So in 2010, Google’s current historical growth rate projects a revenue figure of $34 billion, with 25% profit margin of $8.2 billion, and with a P/E of 35, could technically command an enterprise value of $287 billion. It currently boasts some $10 billion, so at these levels it would carry enough cash to push up its market cap northwards of $300 billion.

Today MSFT has a market cap of $284 billion, and that includes a wallop of cash.

Tale of the tape: Google $287 billion; MSFT $284 billion…

There you have it. Told you it’s not a bubble, we’re actually talking revenues, profits and P/E.”

That last was a posted estimate from 2006, but the general sentiment is echoed by many observers. While I agree that Google’s outlook is definitely strong, there’s a real danger in extrapolating historical data points to predict future performance, especially in Google’s case. The company hasn’t made a mistake yet, but there’s no guarantee of this going forward. Getting complacent, pushing a shoddy product out the door, a poor acquisition – these are all very real possibilities. Even the highly touted purchase of YouTube hasn’t generated serious cash yet, a la NewsCorp and MySpace. Furthermore, the company’s reputation may begin to create more problems than goodwill. Despite longstanding positive perception of its brand, Google’s growth and massive access to data have brought this angelic standing under some fire, both from individual supporters, who are starting to worry about the privacy of their data, or the monopolistic power the company is starting to wield, and companies it works with in other domains, like phone companies hesitant to partner with Google to serve ads on mobile networks. Today, however, Google is making all the right moves and is a tech story for the ages, but it’s still premature to declare victory, even just in the search domain.

Google Friend Connect Makes Any Site Social

Written By Drupad Sil | May 12, 2008 | Share This |

Connect

Last week we discussed MySpace’s move to position itself as a central web hub by allowing the portability of user data to a host of other social networking sites. Facebook quickly responded with Facebook Connect and its partnership with Digg, and today Google has revealed a similar feature, aptly called Google Friend Connect. From the release at the Google Press Center:

“Websites that are not social networks may still want to be social – and now they can be, easily. With Google Friend Connect, any website owner can add a snippet of code to his or her site and get social features up and running immediately without programming – picking and choosing from built-in functionality like user registration, invitations, members gallery, message posting, and reviews, as well as third-party applications built by the OpenSocial developer community.

Visitors to any site using Google Friend Connect will be able to see, invite, and interact with new friends, or, using secure authorization APIs, with existing friends from social sits on the web, including Facebook, Google Talk, hi5, orkut, Plaxo, and more.”

Naturally, in the end this move is all about controlling user data, despite what Google may claim about liking a healthier Web for everyone. We spoke to this a couple weeks ago with this post on Google locking in user’s files and preferences data, another form of control. This slew of announcements shows that these companies are rushing to be that one website that users choose to store their data at and export it from. Unfortunately for Google, they don’t have the millions of user profiles that Facebook and MySpace do simply because they aren’t a social network (outside of Orkut), but this may not as limiting as it appears at first glance. Michael Arrington at TechCrunch explains why:

“Google may be keeping a tighter reign on data, requiring third parties to show it directly from Google’s servers in an iframe. By contrast, MySpace and Facebook are sending data via an API and trusting third parties not to abuse it. That flexibility also allows those third parties to do more with the data, including combining it with their own data before displaying it.

But what’s clear is that Google wants to get in between social networks and the web sites that want access to their data. By controlling the flow through Open Social and the new Friend Connect product, they can effectively become a huge social network without actually having a, well, social network.”

It’ll be interesting to see which of the Big Three is able to become central for more people, but if Google manages to stay in between Open Social and end users, they may turn out to be the big winner, again.

Searchviews: Week in Review

Written By Drupad Sil | May 9, 2008 | Share This |

SearchViews

Each Friday, we bring you a roundup of the last week’s stories on Searchviews and beyond. Happy weekend reading!

On Searchviews:

Elsewhere:

MySpace Joins DataPortability Project

Written By Drupad Sil | May 9, 2008 | Share This |

MySpace

Some news that broke late yesterday. MySpace announced that it had officially joined the DataPortability Project, an initiative that pushes for user control over personal data access and use by other applications, open source solutions, and bottom-up distribution solutions for said data. From the official DataPortability blog:

“MySpace joins other existing corporate members such as Google, Facebook, Microsoft, LinkedIn, SixApart, and Digg. We are excited that MySpace will join the rest of the community to continue the design, documentation, and implementation of a set of best practices for inter-operable Data Portability between trusted applications and vendors.”

MySpace’s announcement basically stated that they are embracing the DataPortability best practices and had already started data sharing partnerships with Yahoo, Ebay, Twitter, and Photobucket. Eric Eldon at Venturebeat explains what the data sharing entails for users:

“Users will be able to do things like update their own photos on their MySpace profiles, then have those photos automatically update on other sites that use MySpace photos. Besides photos, information that will be shared will include publicly available basic profile information, MySpace TV videos, and friend networks…

If you want to be able to control what information goes from MySpace to Twitter, you will be able to access a central control panel that will be provided on the MySpace site, that will let you stop information from going from MySpace to Twitter.”

This seemingly small change has major implications for online social networking. Michael Arrington at TechCrunch explains:

“Historically MySpace has lagged Facebook in terms of innovation. But they definitely “get it” this time. Sharing user data so openly (with user permission) is a terrific way to incentivize users to store all their core data at MySpace to begin with. Users eventually need one place on the Internet to store their data, or lots of places to store different types of data. But what they don’t want is today’s world where they are recreating and storing the same data over a plethora of social networks just because all those sites refuse to share. We’re starting to see the floodgates open and the idea of data sharing become a reality…

By acting first, MySpace takes the lead and has a shot at being the long term winner – meanings lots of people use MySpace as their place to store data, and share it out to other applications from there. Look for Google to make their move next.”

It’s definitely an overdue concept, and timely for MySpace as NewsCorp owner Rupert Murdoch went on record as stating the social networking site had missed his financial targets. We’ll have to see if the world’s biggest social network can get any bigger.

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