The rumors are flying, hastened by Mary Hodder’s claim on her site. I’ll have much more to say on this later.
The chatter about Google lately, as a stock, is that it is “priced to perfection.” In other words, Wall Street is expecting Google to perform flawlessly over the next year or so. If it does not, the stock will tumble. And what is flawless? Oh, how about a doubling of earnings in one 12 month period – on top of a recent quarter where they already doubled? Would you want to have to manage against that expectation? Nope, me either. This is exactly the kind of pressure that Larry, Sergey, and Eric said they would not pay attention to when they dropped that bomb of an S1 on the world last April. To quote from it:
As a private company, we have concentrated on the long term, and this has served us well. As a public company, we will do the same. In our opinion, outside pressures too often tempt companies to sacrifice long-term opportunities to meet quarterly market expectations. Sometimes this pressure has caused companies to manipulate financial results in order to “make their quarter.” In Warren Buffett’s words, “We won’t ‘smooth’ quarterly or annual results: If earnings figures are lumpy when they reach headquarters, they will be lumpy when they reach you.”
If opportunities arise that might cause us to sacrifice short term results but are in the best long term interest of our shareholders, we will take those opportunities. We will have the fortitude to do this. We would request that our shareholders take the long term view.
Many companies are under pressure to keep their earnings in line with analysts’ forecasts. Therefore, they often accept smaller, but predictable, earnings rather than larger and more unpredictable returns. Sergey and I feel this is harmful, and we intend to steer in the opposite direction.
Now that Wall St. has really put the pressure on, it will be interesting to see what happens. My guess is Google will stick to its original principles, miss analyst expectations, and the stock will go up anyway.
MediaPost reminds us (reg req’d) that thanks to some early deals via AOL (hey, smart acquisition), Time Warner now owns 8% of Google, making it the third largest outside owner. Strategic? Nope, say TW brass.
TIME WARNER NOW HOLDS AN 8 percent stake in Google, according to information filed with the Securities and Exchange Commission on Friday. In Time Warner’s fourth quarter 2004 earnings report released this morning, the company said it “does not consider its remaining interest in Google to be a strategic investment,” but the position makes Time Warner the third largest outside investor in Google after two big fund managers.
Yahoo! right now has a very strong, deep content presence on the Web. We have 16 of these vertical sites, which I call channels — not because they’re like television. It’s not going to be a place where we’re going to do our version of “Alias” or “Lost” or any of those shows. But these places are young on the evolutionary scale of what they’re going to look like. My job is really to define — with this group of executives that I have — what is Internet content going to be? Right now, we’re an aggregator of information with some interesting broadband components. We have these great deals with JibJab and Mark Burnett (for extra content from NBC series “The Apprentice”). There’s going to be more and more of that. But that will represent only the beginning of where this is going to end up.
…THR: What will be the business model for acquiring content for Yahoo!?
Braun: I’ll tell you this. I’m giving great thought that as we construct these models, that in success we are not going to create a system that does exist in television now where there are such crushing upfront costs that the whole weight of the system makes it feel like it’s going to break. We have to be thoughtful not to just look at this business where it is now but where it will be five, 10 years from now. Because once we start establishing these precedents, they get very, very hard to break. I don’t pretend to have the answers to this yet, but I am giving an enormous amount of thought to the issues.
The NYT canonizes that which we knew to be true: Online advertising, in particular search, has taken its place as a major force in all of marketing.
Reuters CEO Tom Glocer wants to build an online broadcast network. Can the venerable newswire take on Fox and CNN?
By John Battelle, January/February 2005 Issue
During its formative days, Reuters was a relentlessly innovative company, using the best tech it could get its hands on to carry the news. Before the telegraph came along, it beat competitors by using carrier pigeons to send information about stock trades. But back in the 1980s, Reuters decided to wholesale its newsfeeds to Ted Turner — and watched CNN become a billion-dollar business. As broadband video blossoms on the Web, Reuters CEO Tom Glocer doesn’t want his London-based company to make the same mistake twice.
In 2003, 10 years after joining Reuters’s U.S. law department, Glocer worked his way to the corner office — the first American and first nonjournalist to helm the venerable company. He immediately restructured it into four customer-focused divisions, a move that’s saving a billion dollars over five years and has sent the stock price up nearly 50 percent in the past year. What’s more, he’s managed to pull this off while sending hundreds of journalists to Iraq and losing some in the line of fire.
Now Glocer is shaking up Reuters’s highly respected newswire business. Think of the newswire as wholesale; Glocer, in essence, is using the disruptive power of the Internet to get into retail. The move would have been unthinkable 20 years ago for reasons of both cost and culture. But Glocer has learned the hard way that you don’t make much money selling your content to others. Successful media companies, he says, make their money either by creating branded products or by controlling distribution. Glocer recently sat down with Business 2.0 to explain how he plans to do both.
Despite the costs of the ongoing conflict in Iraq, your stock went on a tear in 2004.
The market sees Reuters as a classic recovery story. By the end of 2006, we will have taken $1.7 billion out of our costs since we started restructuring in 2000. Our core subscription revenues are still declining, but the Street is increasingly confident that we can return these to growth next year.
Last summer you pulled your news off Yahoo. Why?
For 153 years Reuters has run a wholesale media strategy. We produce raw text, video, and pictures and make it available to the world’s publishers, who in turn slap their brand on it, develop brand loyalty, and aggregate an audience. Go back to 1980 and ask yourself, as I often do: Between Reuters and CNN, who had the greater assets and likelihood to launch an international news network?
Did Reuters consider competing with CNN back then?
I don’t know. I wasn’t there. But I do know that Ted Turner has said that they kept looking over their shoulder because they couldn’t believe their luck. When they were starting out, they really were the Chicken Noodle Network. Reuters had bureaus in 200 places and a hell of a brand name. Who had ever heard of CNN? More recently, Reuters repeated the mistake — we were the wholesaler to Yahoo and others.
But this time you pulled out.
(continued in extended entry)
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So I missed the Google party on Friday night at Davos, as I had to fly back for my best man’s 40th. But this fellow did not miss it. If you feel like a trip down his particular rabbit hole, read on.
In other news, Ask now has a blog (where the feed, Jeeves? – Update – here it is), keyword prices drop for the first time month to month in quite a while, Rivlin has a nice piece on the “half bubble” in today’s Times, and there’s been a lot of interest in Google’s job posting for a strategic partner development manager (as I’ve said again and again, it seems obvious to me that Google will eventually get into the content middleman business.)
More than half a year ago Jeff Weiner, head of search at Yahoo, took me aside and showed me something he was personally passionate about. He called it Search Spots – and the idea was really cool. It’s been done before in various contexts, but the idea was very well implemented and totally integrated with Yahoo and your browser in general – basically, anything you might be reading can become fodder for an inline search. From the email I received from Yahoo PR:
Last Christmas Jeff saw a news headline for the #1 single in the UK and wanted to learn more about the artist, watch the video, maybe buy the CD. It took him about 20 minutes to search for all this information. In a staff meeting he addressed this issue and asked folks around the table how long they felt it should take to access this type of related information – the consensus was it should only take seconds – but the current search experience was so linear it was prohibitive.
In parallel, one of our top engineers (and top search innovators) was off in his spare time creating a prototype to address the exact same pain point that Jeff was sharing with his staff. Y! Q. This product was not on the roadmap for product development but demonstrated such tremendous value to the user experience that it was greenlighted and set into production. With limited resources, he and his team went to work to create what is going to be pushed live late tonight on (next.yahoo.com) as a test product.
Thanks to Rich, founder of Topix, for this heads up, and congrats!