Sell Side/Publisher Driven Advertising: A Development

Those of you who thought the idea of sell side advertising was interesting should check out what Ross has found: a French site which seems to be implementing just such a system.

• Posted by John Battelle at 7:17 PM
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Spotlight on Tiger

I'm a Mac guy. That means I pay attention to what Apple does, because it pretty much defines my entire ecology. Yesterday Apple launched Tiger, a new update to its system software. While I realize this does not impact many readers of Searchblog, it's still a big deal, because Tiger has a search feature called Spotlight which, as far as I can tell, is pretty damn cool. Do I have it yet? No. Will I get it? Yup. Stay tuned for more reports. Meanwhile, the strategic importance of search to Apple is summed up in this ComputerWorld piece: "Mac OS X Tiger: All roads lead to Spotlight". From the piece:

"We think that people using Mac OS X Tiger will be in the Spotlight menu all the time," said Brian Croll, Apple's senior director of Software Product Marketing. "You can go there to find documents, pictures, applications or anything else you want. All roads lead to Spotlight."

Spotlight and its ability to create and automatically update "Smart Folders" in the Finder will help users find and organize files on their hard drives. This has become more of a problem in recent years because "hard drives are so big we never throw anything away," said Chris Bourdon, Apple's product manager for Mac OS X.

• Posted by John Battelle at 6:56 PM
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Mo Money From Online Ads

The industry is posting record numbers, quarter after quarter.

From the ClickZ piece:

Online ad revenues for 2004 were up 33 percent to $9.6 billion, the highest level ever, according to the latest report from the Interactive Advertising Bureau and PricewaterhouseCoopers.

New data include finalized revenue numbers from Q3, Q4 and full-year 2004 as reported by interactive advertising sellers. Of the total figure, $2.3 billion was spent in the third quarter; and $2.7 billion in the fourth.

The latter number makes Q4 2004 the most lucrative quarter ever reported for the medium, according to historical IAB/PwC results. That's perhaps not surprising, as the quarter included both the final four weeks of the Presidential campaign and the holiday season. It was the second consecutive year in which Q4 revenues were up year-over-year.

• Posted by John Battelle at 8:22 AM
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GoogleBot

I can't help thinking this is not the best image in the world for Google. On the other hand, I really love the passion and, well, sense of wonder this guy shows in his Google Blog posting.

In essence, he came up with the idea of painting a mural of a massive robot connecting the globe through wires, inspired by Google data centers (the mural hangs in one).

Reminds me of the original, from Paul Ford's classic Google Takes All essay:

• Posted by John Battelle at 8:02 PM
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Media? Search? Technology? Advertising?

Read Jeff here. If you are a long time reader of Searchblog, this will be a nice summary of the long conversation we've been having on this site. Man, things are getting interesing.

• Posted by John Battelle at 7:46 PM
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Tit, Tat

First Google, now Yahoo.

• Posted by John Battelle at 7:38 PM
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Missions and Visions

I had a chance late yesterday to catch up with Jeff Weiner, point man at Yahoo for all things search. Jeff's been a great resource for both this site as well as the book, and it had been far too long since we last caught up. The last time we spoke at length he showed me prototypes for what became Y!Q, so my expectations were high for this chat.

Jeff's always been the kind of guy who not only suffered my fascination with Joints after Midnight topics, he's even encouraged them. This time around he brought one such topic to me: the overall vision statement for Yahoo Search. The statement is not particularly new, Terry Semel referred to it at the beginning of his comments in the last quarterly earnings call, but Jeff wanted to bounce if off me, and by extension, all of you. He also wanted to talk about where search was going, and the implications of the flood of news in this space over the past few months.

The vision statement for Yahoo Search is pretty damn good, if you're into that kind of thing (I'll admit, I am). Here it is, in its entirety:

To enable people to find, use, share, and expand all human knowledge.

Jeff and his team have been testing this phrase at small gatherings and in the press this month, and so far it seems to be well received, if still a bit under the radar. Compare it to Google's mission statement:

To organize the world's information and make it universally accessible.

Interesting, no? Now, I'm mixing my visions and my missions, as many of you may quickly point out. Yahoo Search also has a mission:

To provide the world's most valued and trusted search service.

But that doesn't really have the same ring to it. Google's mission, I think, is really a vision statement in mission clothing, and it feels appropriate to compare it with the Yahoo Search vision.

When you think about Yahoo's search mission as an organizing principle, a lot of what Yahoo is doing - 360, MyWeb, Y!Q, the purchase of Flickr - start to fall into place. Weiner calls his vision FUSE (for Find, Use, Share, and Expand) and it's an apt metaphor - using search to fuse a myriad of services and applications, all of which center on knowledge and its application.

As Jeff pointed out to me, at the center of the idea of FUSE is what's happening to media - how every single medium - music, TV, print, telecom, even our first versions of the web - is being remixed and reordered by Web 2.0. It's an old saw, but mass media really is becoming my media - through RSS, podcasting, iTunes, Tivo, blogs, and many innovations to come. And central to navigating a my media world is search. Hence, the FUSE vision holds water for me - search is not just about a web index. It's about my interface to the world.

I like both Google and Yahoo's visions, to be honest, they both augur a future where control lies with us, through the questions we ask and the tracks we leave across the ever expanding web. Yahoo's focus on sharing, I think, is critical, and perhaps a key area where Google's (stated) vision may be lacking at the moment. But with so many recent innovations in that space - search history, Gmail, increased RSS support, centralized account management - I don't expect that deficit to stand for long.

• Posted by John Battelle at 6:01 PM
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Comments Broken on Searchblog?

We've had a problem with the TypePad registration system in the past day. It seems that no one can comment. If you can, please leave a comment on this post, so we can test this, and tell me what browser and OS you're using. I'll assume if there are no comments, that means either A/no one is reading anymore (sob) or B/I got a real issue here. If you want to email me with bug reports, I'm jbat at battellemedia dot com.

UDPATE: Comments are indeed borked, and folks on my end and over at Six Apart are working diligently to fix it. Thanks for all the email, I appreciate it.

• Posted by John Battelle at 7:34 AM
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The State of Video Search

An interesting round up by Mark Glaser at OJR. I just finished an interview with Mike Homer for my B 2.0 column, and I have to say, this whole space very much reminds me of the early days of search - a new frontier, many new players, lots of enthusiasm, not much understanding (yet) of how this might all play out.

I spoke to the author about all of this and he quotes me as the kicker to the piece:

CBS and other media companies are caught in a tough spot, wanting to exploit the technology and bring in ancillary income from "The Long Tail" -- but are also worried that without DRM their content's value will vaporize in a haze of file-swapping. John Battelle, author of the forthcoming book, "The Search," and the Searchblog, says that at least now the entertainment industry sees the opportunity.

"They didn't see it with Napster, but they see it now," Battelle said. "They know that there are copies of 'I Love Lucy' in the content archives somewhere. Each one of those could become annuities that are worth hundreds of thousands of dollars, because of the power of 'The Long Tail.' But they're afraid that [we'd] be swapping our copies of 'I Love Lucy' on the Web. Most of these solutions claim to do that with some flavor of DRM. But if they cut off the forces of participation and the forces of many, it ain't gonna take."

What I mean is this: video search - and its attendant economies (think paid search but with the upfront) will only work if we have millions of people informing our collective knowledge of what is worth our individual attention, and that can only happen if we can annotate, share, and remix video. I very much hope we don't shoot ourselves in the foot on this one - it could be the start of a massive new industry and cultural shift, or we could be stuck with Web 1.0 approaches. I hope it's the former.

• Posted by John Battelle at 7:40 PM
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Titans of Tech Column: Sky Dayton

I personally can't wait till full 3G nets hit the US. I spent some time with Sky talking this and other stuff over recently, and the result is my current column in B 2.0.

TITANS OF TECH
Surfing the Virtual Wave

EarthLink founder Sky Dayton helped connect our PCs to the Net. Now he wants to put Korea's version of wireless broadband on our cell phones.

By John Battelle, May 2005 Issue

For more than a decade, no matter how you've wanted to connect, Sky Dayton has been there with the hookup. The coffee shop owner turned Net entrepreneur started EarthLink and built the Internet service provider into a billion-dollar business. Then he wove a patchwork of Wi-Fi hotspots into a nationwide network, Boingo. Now he wants to reboot the cell-phone business.

All along he's been guided by two ideas: You don't have to own infrastructure to sell service, and customers care about applications, not technology. That's why EarthLink and Boingo thrived while rivals spent hundreds of millions of dollars on Internet backbones and Wi-Fi routers, only to go out of business.

For his latest venture, true to form, he's renting out space on cell-phone networks to give American customers something that South Korea has had for years: high-speed Internet access over a 3G (third-generation) wireless network and sophisticated handsets packed with the latest technologies. While DSL is fast and Wi-Fi is fun, both tether you to a limited area. 3G truly puts the Internet "in the air," as Dayton likes to say. EarthLink, where he is still a board member, and Korea's SK Telecom are putting $440 million into the new venture, SK-EarthLink, for which Dayton will serve as CEO while it prepares for a launch of service this year. Business 2.0 sat down with Dayton in his Santa Monica, Calif., office to get a preview of the wireless future.

How did South Korea get so far ahead of us in wireless?

Part of it is technical. They bet on Qualcomm (QCOM) technology, which is now the basis of all 3G networks. Lately they've even overtaken Japan as the hothouse of wireless development. Sprint and Verizon (VZ) and Cingular are just now rolling out the high-speed technology that SK Telecom deployed more than three years ago. We've been living in the past. The other part is cultural. Koreans study and work a lot harder. It's no wonder they got so far ahead.

So what do they have that we don't?

The applications that SK has built are a glimpse into the future -- live video on a handset, multiplayer games, and location-based services. To provide those kinds of services, it created a huge infrastructure: billing, video streaming systems, gaming, mapping systems, all that stuff. We're bringing that over lock, stock, and barrel and plugging it into the U.S. cellular infrastructure.

Why aren't you building your own network?

I have a lot of respect for the capital and focus it takes to be successful at building infrastructure. It's just not my core competency. EarthLink already had mobile virtual network operator agreements with Verizon and Sprint, and we contributed them to the joint venture. We have a foundation to build a house on now.

Which applications will draw users to the service first?

There are many I'm not ready to talk about yet. But there's music and video and location-based services. On my first trip to Korea last summer, I was at a restaurant, and one of the guys was late. I asked his colleague, "Can you call him and see if he's close so we can get on with lunch?" He said, "Just hold on a second." So he flips open his phone, pokes around a bit, shows me a little dot moving on a map on his screen, and says, "He's almost here."

(continued in extended entry)

So you can share your location with your instant-messenger buddy list?

Exactly. You decide who can see you. Let's say you go to a conference. People in your network will just show up on your phone.

What about the phones themselves? How will they be different?

Most phones here have a VGA camera. That would be a doorstop in Korea. They're up to 5 megapixels, which is a high-end camera. Processing power, screens, storage -- the whole thing is on a completely different level. Press the fast-forward button on innovation in the United States -- that's what you have in Korea.

You're targeting customers who spend an average of $600 to $700 a year. That's the BlackBerry-toting crowd, right?

We are not going mass-market. Look at EarthLink's customers -- they're younger, more sophisticated, and the Internet is with them all the time. Talking about the wireless market as one market is a mistake. We buy brands we identify with our lifestyles. Virgin showed that you could target a specific customer with a differentiated product, without a network, and succeed.

Considering the struggle EarthLink has had to get carriage on DSL and cable broadband, aren't you worried the wireless carriers will upgrade their own services first?

With DSL, there's typically a monopoly in a particular area. Wireless is more like dial-up, where there are multiple, overlapping nationwide infrastructure providers. And a builder of infrastructure has a fixed cost where profit is determined by utilization. If you help someone who has built that infrastructure to be more profitable, you create a symbiotic ecosystem. I think it was brilliant on the part of Sprint, Virgin's partner, to recognize this opportunity.

If you're just reselling a network, how different can you be?

We're not doing that. We will have everything a carrier has except cell towers. U.S. consumers are underserved by voice-centric operators today. We're going to make the experience better.

Was 3G a disaster, given the billions spent on licenses?

It just took a lot of time for carriers to roll out 3G. They had to spend the money up front. Then Wi-Fi came out and kind of embarrassed 3G. Suddenly there was this broadband network in most of the places you wanted to use it. And so a lot of people took that and wrote, "3G is dead."

Is Wi-Fi better than 3G?

The networks are good for different things. Wi-Fi is kind of an inside technology -- it's in Starbucks, airports, hotels, cafes, bookstores, McDonald's (MCD). Wi-Fi is always cheaper and faster than 3G, but you have to be in a hotspot to use it. Outside, 3G provides DSL speeds today, but it's expensive. You have better Wi-Fi coverage in your house than you have cellular coverage, right?

Of course. But why is that?

Giving people great cellular coverage at home would cost tens of billions of dollars. That's a huge problem for the cellular industry. Half of the broadband households in the United States today have Wi-Fi. So when you get home, you have all this free bandwidth. You get a better signal, and you can download much faster. I don't want to trivialize the quality-of-service problems, but all the pieces are there to integrate Wi-Fi and 3G.

How important is this deal to EarthLink?

The capitalization of this joint venture is nearly half a billion dollars, half of which is coming from EarthLink. It's a big bet.

And how's EarthLink doing?

EarthLink's doing well. Three years ago, dial-up started to decline. Fortunately, we started investing in broadband five years ago, and EarthLink today has the biggest broadband coverage of any company in the United States. A lot of people thought EarthLink couldn't make money because we didn't own the pipes, but broadband's profitable now. And dial-up is incredibly profitable. Dial-up's got a much longer tail than people think.

Does this all feel familiar -- figuring out a better way to connect to the Internet, just like you were doing 10 years ago?

It does feel that way. You hope that we've all learned something along the way.

SIDEBAR:
THE FUTURE OF PHONES
These wireless apps aren't sci-fi -- similar ones are already used in Korea. Here's what tomorrow's souped-up cell might look like.

"THREE FRIENDS NEARBY
(Click to locate)"

Merging instant-messenger buddy lists with GPS will let you find your friends in the real world too.

"IDOL WINNERS -- LIVE!
(Click to watch)"

High-speed networks will carry real-time broadcasts, not just short video clips.

"REMINDER: TIME TO STORM THE CASTLE!
(Click to play)"

Popular online games like Lineage will be ported to cell phones, so you can keep playing anywhere.

John Battelle is program chair of the Web 2.0 conference and author of "The Search" (Portfolio, 2005).

Find this article at http://www.business2.com/b2/subscribers/articles/0,17863,1048993,00.html

©2005 Business 2.0 Media Inc. All rights reserved.
Reproduction in whole or in part without permission is prohibited.

• Posted by John Battelle at 3:39 PM
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Yahoo Launches MyWeb Beta

Man, the pace of announcements is starting to feel overwhelming in the search space. Yahoo today is launching its MyWeb beta, an amalgam and update of many of its personalization features into one service. Yahoo calls it a "personal search engine, " it features improved search history, robust sharing and annotation features, integration with Yahoo 360, and API support. I have not had time to play with it, but I am looking forward to using it.

We're certainly in something of an arms race now, with Google and Yahoo the main perpetrators, and MSN playing catch up to boot. Is this good for the consumer of search and internet services? Surely in the long term, but I worry that the relentless stream of new features and services will start to deaden interest in the space.

• Posted by John Battelle at 6:57 AM
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Also: Google Ads Are Coming to RSS

Says Scoble. From a Longhorn blog he points to:

Q: What is Google doing?
A: I can't talk a whole lot about this yet. I can tell you that this is a pilot program for a new AdSense product that Google is looking into. Like all of their tests, it may disappear for a while, or be discontinued altogether.

Q: Is anyone else currently testing this technology?
A: No. Right now LonghornBlogs.com is the only site running this test. That will probably change in the next few days as their other alpha testers bring their systems online, but for now, we're it.

Q: How are you putting ads in the feeds?
A: I can't talk at all about implementation yet, because the system is not finalized. It's just a test to determine how well the current thought process works, the performance bottlenecks, and to discover any barriers to others using it. I CAN tell you that it isn't using Javascript.

Q: When can I start putting ads in MY feeds?
A: IF Google decides to launch this product, you can expect to see a wider public beta in the next few weeks.

• Posted by John Battelle at 9:54 AM
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Google Image Ads: The Wide SkyScraper and Other Units

In case any of you were wondering what the specs are for Google's new CPM-based image ads, here they are:

We will show the following ad sizes (see examples) on content sites in the Google Network:

* Banner: 468 x 60
* Leaderboard: 728 x 90
* Inline Rectangle: 300 x 250
* Skyscraper: 120 x 600
* Wide Skyscraper: 160 x 600

hat tip: Gary.

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Findory Redesigns

I've started using Findory, finally, so as to grok Greg Linden's well-received service. Findory is a personalized newsservice that watches what you read and adapts what it shows you accordingly. It features blog search and loads of news feeds. This week Greg redesigned the site, his release is here. In it he notes that Findory is growing quickly (traffic doubling every three months) and has crossed a million page views a month. I'll be playing with it over the next week or so...seems like Greg's building some traffic of good intent...

• Posted by John Battelle at 8:47 AM
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TrustRank, GoogleVillage

SEWand now /. have threads on Google's recent trademark applications in the area of "TrustRank" and "Advertise on the Neighborhood Wide Web." TrustRank is interesting because it may represent another approach to solving the vexing problem of spam, the NWW concept reminds us how important local is to the future of search. Gary notes that Google owns the domain "GoogleVillage.com."

• Posted by John Battelle at 8:39 AM
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Open Media Network Launches

Mike Homer, of Netscape and now Kontiki, and Marc Andreessen, of Netscape and now Opsware, have launched the Open Media Network, a free platform for the storage and distribution of public video and audio content. I spoke to Homer about the new network, which uses Kontiki's video serving system on the back end. The system is a mashup of sorts between Tivo and BitTorrent - it has a well considered interface and employes a secure P2P network for file distribution (it doesn't actually use Tivo or BitTorrent technology). Homer has seeded OMN with public TV content, podcasts, and more, but the service is free for anyone to use, and includes a Force of Many recommendation and filtering system. This is similar to OurMedia.org and Google's recently launched video project, but this has a slicker implementation (well, so far Google does not have an implementation!).

The system is not yet fully functional, but Homer seems dead serious about making it so. So is this just a publicity play for Kontiki? Perhaps, but it's an audacious (and expensive) one if so. And OMN is not without a business model, despite its non profit status - Homer plans to incorporate a payment system and keep a small percentage of the revenues to cover operational costs.

Chronicle, Cnet coverage.

• Posted by John Battelle at 7:44 AM
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Another Social Network Search Play

New, interesting engines are coming fast and furious, here's Multiply's launch. Main play: social network search.

• Posted by John Battelle at 11:31 AM
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Doubleclick Goes Private

Coincidence that Google announces its CPM/image play today? Yes, but one hell of one. From Reuters:

Internet marketing company DoubleClick Inc. (DCLK.O: Quote, Profile, Research) said on Monday that it agreed to be acquired by San Francisco buyout firm Hellman & Friedman LLC for roughly $1.1 billion.
.....
"It's a fair valuation, given the company's outlook," said Janco Partners Inc. analyst Martin Pyykkonen. "There's a feeling that general ad serving is somewhat of a commodity business."

• Posted by John Battelle at 11:23 AM
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Brilliant Shopper Launches

SEW has a review of Brilliant Shopper, yet another vertical shopping engine, from folks who know plenty about the space.

• Posted by John Battelle at 9:29 AM
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Google Moves Into Branding Business

Google announced today a "limited beta" for AdWords/AdSense that pretty much declares Google's intentions in the advertising business: The company is going to compete with everyone, on every front. The beta will be taken off in the "coming weeks" Patrick Keane, head of ad sales strategy at Google, told me late last week.

The new program allows advertisers to select where their ads might run and, just as importantly, let advertisers run image ads, a feature that has been in testing, but never as a CPM buy. Advertisers can also run animated gifs.

Not to put too fine a point on it, but this is Google as DoubleClick, Web 2.0 style (ie with an auction and with massive scale). Any pretense this has to do with search should be put to rest. This is an advertising play, pure and simple.

This move also shows Google is growing up, acting more like a business with its own agenda, as opposed to a engineering-driven playground where the coolest idea wins.

The Merc reports.

Update: I now see the Times piece. Well, it sure makes me out as anti-Google. I did say everything that I am quoted to say, however the context is off on the first section. I am quoted as saying:

"This drives the nail into the coffin of the idea that Google is a search business," said John Battelle, the author of a coming book on Google called "The Search."

"It is an advertising business that has nothing particularly to do with search."

In fact, I was speaking of the new AdSense features, not all of Google, when I said that last bit. Just to be clear. Even the Times can miss context.

• Posted by John Battelle at 8:01 AM
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AdMoolah: List your AdSense Results

A reader has started a site for folks to input their AdSense results. Right now it's quite bare, but he hopes folks will fill it up, and the site will become a resource for marketers. Admoolah.com.

• Posted by John Battelle at 9:05 PM
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The Mobile Web S*cks

Russell rants, and he's right. I have my own rant about this, at its core is the open/closed issue. On the one hand you have an open platform, the web, that sports a robust ecology with all sorts of innovation and competition. On the other hand, over in the mobile world, you have this carrier-driven crap that is driven by one thing and one thing only: the carrier's desperate desire to lock you in.

Free the mobile web! Only when it's connected, seamlessly and freely, to the real web will it blossom.

• Posted by John Battelle at 6:58 PM
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Tivo+Google Maps

Matt shows you how.

• Posted by John Battelle at 6:54 PM
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Google = Walmart?

No. But Wired makes an effort to draw a comparison anyway.

• Posted by John Battelle at 6:53 PM
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Vertical Search in the IT Space

Given its subject matter, it's surprising we don't have six of these! IT.com. ClickZ reports.

• Posted by John Battelle at 11:53 AM
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BizWeek Does Blogs

Cove story in BizWeek this week features the impact of blogs. I've covered it over at my FMP site.

• Posted by John Battelle at 11:20 AM
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You Know the Internet Has Come of Age...

When the two highest paid CEOs in business are Barry Diller (IAC) and Terry Semel (Yahoo.). Hummm.

• Posted by John Battelle at 10:44 AM
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GOOG Earnings are In: Big. Big. Big.

Revenues up 93% year over year. Cash from operations was $516 million in the quarter. Crashing on the final, no really, final edit of the manuscript. So here is the story from Reuters.

UPDATE: Safa has raised his price target to $275 on the earnings results.

GOOGLE ANNOUNCES RECORD REVENUES FOR THE FIRST QUARTER OF FISCAL 2005

MOUNTAIN VIEW, Calif. - April 21, 2005 - Google Inc. (Nasdaq: GOOG)
today announced financial results for the quarter ended March 31, 2005.

"This was a very strong quarter for Google. We continue to execute
well and we have been able to take full advantage of the growth in
online advertising" said Eric Schmidt, Google chief executive
officer. "In addition, we performed well across our operations with
our engineering and product teams delivering dozens of new products and
features for Google users around the world."

· Google reported record revenues of $1.256 billion for the quarter
ended March 31, 2005, up 93% year over year. Google reports its
revenues, consistent with GAAP, on a gross basis without deducting
traffic acquisition costs or TAC, the portion of revenues shared with
partners.

· Income from operations, on a GAAP basis, was $443 million, or 35.2%
of revenues for the quarter ended March 31, 2005 compared to $155
million or 23.8% of revenues for the first quarter of 2004.

· Income from operations includes a $49 million non-cash, stock-based
compensation charge compared to a $76 million non-cash, stock-based
compensation charge in the prior year's first quarter.

· Net income on a GAAP basis for the quarter ended March 31, 2005 was
computed based on the following income statement or condensed income
statement line items. Revenues of $1.256 billion less TAC of $462
million, less both other costs and expenses before stock-based
compensation of $303 million and stock-based compensation of $49
million, increased by other income of $14 million and then reduced by a
provision for income taxes of $87 million.

· Net income on a GAAP basis in the first quarter of 2005 was $369
million or $1.29 per share on a basis of a diluted 286.6 million
weighted average shares outstanding. This compared to net income for
the first quarter of 2004 of $64 million or $0.24 per share on a basis
of a diluted 264.2 million weighted average shares outstanding.

· Some Wall Street analysts use non-GAAP measures to analyze our
operating results. For instance, they may subtract TAC of $462 million
from revenues of $1.256 billion to arrive at a net revenues amount.
Also, certain analysts may arrive at net income before stock-based
compensation by subtracting traffic acquisition costs of $462 million,
other costs and expenses before stock-based compensation of $303
million, adding back other income of $14 million and subtracting our
provision for income taxes of $87 million from revenues of $1.256
billion.

· Net cash provided by operating activities for the three months
ended March 31, 2005 totaled $530 million as compared to $208 million
for the first quarter of 2004, an increase of 155%.

· Adjusted EBITDA, which is an alternative measure of liquidity to
GAAP net cash provided by operating activities (and is defined as
income before interest, taxes, depreciation, amortization, the non-cash
stock-based compensation charge and in-process R&D), increased by $293
million or 115% to $ 548 million (or 44% of revenues) in the first
quarter of 2005 from $255 million in the first quarter of 2004 (or 39%
of revenues).

Financial Highlights

Revenues - Revenues in the quarter totaled a record $1.256 billion,
representing a 22% increase over the fourth quarter of 2004 and a 93%
year-over-year increase. This revenue increase reflects strong traffic
and monetization growth in the quarter as well as advertisers'
growing recognition of the Internet as an effective advertising medium.

Google-Sites Revenues - Google-owned sites generated $657 million or
52% of total revenues. This represents an increase of 116% over the
first quarter of 2004.

The Google Network - Revenues generated on Google's partner sites,
through AdSense programs, contributed $584 million, or 47% of total
revenues, a 75% increase over the Network revenues generated in the
same quarter last year.

TAC - Traffic Acquisition Costs, the portion of revenues shared with
Google's partners, increased to $462 million. This compares to total
payments to partners of $271 million in the first quarter of 2004.

Income from Operations - Income from operations in the first quarter,
on a GAAP basis, was $443 million or 35.2% of revenues, and included a
non-cash charge of $49 million for stock-based compensation. This
compares to income from operations of $155 million or 23.8% of revenues
in the first quarter of 2004, when the stock-based compensation charge
was $76 million. This improvement in operating margins was primarily
due to decreases in both stock-based compensation expense and TAC as a
percentage of revenues.

Income Taxes - Google recorded a provision for income taxes of $87
million in the first quarter of 2005, an effective tax rate of 19% as
compared to a $92 million provision for income taxes and a 59%
effective tax rate in the first quarter of 2004. The provision for
income taxes in this year's first quarter was reduced by $49 million
related to ISO disqualifying dispositions. The effective tax rate for
the remainder of 2005 is expected to be less than 30%. However if
future revenues recognized by Google's Irish subsidiary are not as
proportionately great as expected, Google's effective tax rate will
be higher than expected.

Net Income - Net income on a GAAP basis increased to $369 million or
29.4% of revenues in the first quarter of 2005 as compared to $64
million or 9.8% of revenues in the first quarter of 2004. Earnings on
a diluted per share basis were $1.29 in the first quarter of 2005 as
compared to $0.24 in the first quarter of 2004.

Cash Flow - Net cash provided by operating activities increased 155%
to $530 million for the three months ended March 31, 2005 from $208
million in the three months ended March 31, 2004. Free cash flow is an
alternative non-GAAP measure of liquidity to GAAP net cash provided by
operating activities and is calculated as operating cash flows less
capital expenditures. Capital expenditures were $142 million in the
three months ended March 31, 2005 as compared to $86 million in the
three months ended March 31, 2004. Free cash flow for the three
months ended March 31, 2005 totaled approximately $387 million as
compared to $122 million for the same period in 2004, an increase of
217%.

Adjusted EBITDA - Adjusted EBITDA is defined as income before
interest, taxes, depreciation, amortization, the non-cash stock-based
compensation charge and in-process R&D. It is another alternative
measure of liquidity to GAAP net cash provided by operating activities.
Adjusted EBITDA increased to approximately $548 million in Q1 2005 (or
44% of revenues) from $255 million (or 39% of revenues) in Q1 2004.

The reconciliations of free cash flow and adjusted EBITDA to net cash
provided by operating activities, the GAAP measure of liquidity, is set
forth at the back of this release.

Cash - As of March 31, 2005, Google had a cash, cash equivalents and
marketable securities balance of $2.507 billion.

On a worldwide basis, Google employed 3,482 full time employees as of
March 31, 2005, up from 3,021 as of December 31, 2004.

Webcast and conference call information

A live audio webcast of Google's first-quarter earnings release call
will be available at http://investor.google.com/news.html. The call
begins today at 1:30 p.m. (PDT)/ 4:30 (EDT). This press release, the
financial tables as well as other supplemental information including
the reconciliations of certain non-GAAP measures to their nearest
comparable GAAP measures, are also available at that site. A replay
of the call will be available beginning at 7:30 PM EDT through midnight
Monday, May 2, by calling (888) 203-1112 in the United States or (719)
457-0820 for calls from outside the United States. The required
confirmation code for the replay is 1993546.

• Posted by John Battelle at 2:28 PM
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Too Much News, Not Enough Time...

Briefly noted:

A9 rolls out its nifty Yellow Pages in five more cities.

Podscope - search within a podcast - launched Monday. The CEO of TVEyes, which is behind it, pinged me about it. It sounds really cool.

Blinkx launched new varities of its Smart Folders feature, as well as a promotion with the Hitchhiker's Guide movie.

A CS grad emailed me with a new engine, and I'm a sucker for solo projects. it's called DigPeople, another people search engine.

Gross has yet another search company in the news, this time it's Insider Pages, a local play, driving a million dollars in its first month.

My friends at O'Reilly (partners in the Web 2.0 conference) have launched O'Reilly's Radar blog. Cool!

Besides its new search history feature, Google announced upgrades to its Advertising Professionals Program and announced a deal to syndicate local results on accuweather. Watch this space.

• Posted by John Battelle at 11:35 PM
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News: Google Launches My Search History

This is big news, readers know how much I like the concept of search history, pioneered by A9 and others. I spoke to Marissa Mayer about this last night, and I asked her why Google was finally doing this. Her response: "It was overdue."

I totally agree. I'm on deadline right now for the final manuscript of my book, but the site is here. Once you sign up, your search history will be integrated into every Google search you do. This is a major move for Google, and I'll have an essay as to why later.

• Posted by John Battelle at 12:20 PM
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Fortune on Gates and Google

Fred Vogelstein has penned a piece on MSFT and Google for Fortune (sub required) and taken the tack of Google's push into software, generally. A good overview of a subject covered often here - the idea of search becoming the interface to all data, and therefore, the "Windows" of the web platform. He's got Gates on the record on Google, which is a pretty big deal.

From the opening:

He was poking around on the Google company website and came across a help-wanted page with descriptions of all the open jobs at Google. Why, he wondered, were the qualifications for so many of them identical to Microsoft job specs? Google was a web search business, yet here on the screen were postings for engineers with backgrounds that had nothing to do with search and everything to do with Microsoft's core business—people trained in things like operating-system design, compiler optimization, and distributed-systems architecture. Gates wondered whether Microsoft might be facing much more than a war in search. An e-mail he sent to a handful of execs that day said, in effect, "We have to watch these guys. It looks like they are building something to compete with us."

Other tidbits:

All of which helps explain why inside Microsoft, the battle with Google has become far more than a fight over search: It's a certifiable grudge match for king of the hill in high tech. "Google is interesting not just because of web search, but because they're going to try to take that and use it to get into other parts of software," says Gates as he leans forward in his chair, his body coiled as if he could spring to his feet at any second. "If all there was was search, you really shouldn't care so much about it. It's because they are a software company," he says. "In that sense," he adds later, "they are more like us than anyone else we have ever competed with."...

...Forced to watch Google's stock soar the way Microsoft's used to, and Brin and Page enjoy their roles as tech's new rock stars, Gates brings to the fight a ferocity that nobody has seen since the Netscape war a decade ago. Their popularity gets under his skin. "There's companies that are just so cool that you just can't even deal with it," he says sarcastically, suggesting that Google is nothing more than the latest fad, adding, "At least they know to wear black."

...Trying to build a Google killer, however, has turned out to be truly humbling for Microsoft. The effort has taken longer, cost more money, and exposed more big-company problems at Microsoft than anyone imagined.

BTW, I have to say, I HATE the Time Inc. sub wall. I am a subscriber, and it NEVER remembers me, and I always have to re-register. It's deeply lame, in too many ways to mention. Time Inc. folks reading this, get your shit together and join the point to economy, please!

• Posted by John Battelle at 10:35 AM
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Yow. GOOG 250

Safa Rashtchy, whose opinion I value, just came out with a his first report on Google (so far I only have the PDF), setting a price target for GOOG of 250. The stock has been moving up alot, it went up on anticipation of Yahoo's good numbers yesterday, and today it's up again, to nearly 200. But 250? Safa says why:

Initiating with Outperform rating and a $250 price target;

We believe Google will become the segment leader and the must-own stock in our sector, as sustainable growth pattern becomes clear to investors;

We believe there is substantial new revenue opportunity for Google as it leverages its major technology and brand assets, beyond current search revenues;

Google remains the No. 1 company in search with more than 50% global market share;

Global search revenues will reach $22 billion by 2010; growth continues to be robust.

• Posted by John Battelle at 10:18 AM
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Rojo Officially Launches

Chris Alden and his team have been laboring over Rojo for nearly two years, and have learned quite a bit during the site's beta phase, which required an invite. The site is now public.

Rojo is an RSS feed reader with a community twist - it allows its users to search, share, tag, and publish the content they read. Learn more about it here, to sign up head to rojo.com. Congrats to Chris.

• Posted by John Battelle at 7:15 AM
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Yahoo Earnings Jump

It looks like everyone will have a good quarter in the search sector. Google reports Thursday.

• Posted by John Battelle at 2:19 PM
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