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Wow! Time Inc. Gets a Clue

By - January 06, 2006

B2.0-2Way back in 2002, Josh Quittner, who is a pal and also the Editor of Business 2.0, took a risk on a down-and-out dot-com publishing exec and contracted me to write a column for his magazine, the only one left after the Standard and its ilk bit the dust. But when I got the Time Inc. contract (B2’s owners,) I was bereft. I had an issue with the fact that what I wrote would be behind AOL/TW’s paywall. So I requested, nice as pie, that I be able to post my columns here, on this site. Josh agreed, and the rest is history.

Well, all that’s moot now. CNNMoney is picking up my column, and all of B2 for that matter, and it’s all free.

Here’s everything I ever wrote for Josh!

Enjoy, I sure as heck will!

Google's Waterloo

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Gary discovers a Waterloo, Canada based company that Google purchased – mobile software, including browsing and email. I must say, it must not suck to be Google if you’re in charge of biz dev.

Thoughts on Google Video Store, and Google Pack

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As I posted earlier, I had the chance to talk with Marissa Mayer about Google Pack, and Jennifer Feiken, who runs Google Video. I’d have posted earlier, but I was under embargo.

The news is out now, and the analysis begins (live coverage at Engadget here). My two cents on both: Google is now officially a Really Big Company, and is acting like one. Diversify your revenue streams, for one thing. Leverage and consolidate your core strengths, for another. And protect your vulnerable flanks, for yet another.


The ability to sell video is great, but not news. We’ve known that was coming. What is really interesting is the pricing leverage: Google is splitting revenues 70/30 – that’s 70 to the content producer. Also very important is that the producers of content are the ones who set the price – again, totally different from traditional models. Thirdly, Google is doing its own DRM. That’s very interesting, and probably best left as the subject of another post. Producers can decide to not use DRM, as Charlie Rose did, Feiken told me.

This is a major step toward entirely new models of content distribution, and if I were Comcast, DirecTV, the telcos, or frankly anyone in the traditional video business, I’d be a bit concerned. It gives content producers far more power to connect directly to audiences, and the leverage will only increase – in five years, it won’t be 70/30, it’ll more likely by 80/20. Gary has a good roundup of some of Google’s competitors in video. (And Tristan has an overview here that is useful too). Clearly they are not the only player here, and the video/content industry has no interest in insuring that one party owns distribution.

What I really wonder is what the split to producers like CBS or the NBA is with traditional players like Comcast. I’m guessing it ain’t even close to 70/30. This is market disruption at its finest, assuming the service actually works (it was delayed at the time of posting.) And, of course, that a critical mass takes it up on both ends. Feiken told me that they currently have “thousands” of videos up for sale or rent, and about 40 major content partners. She also said she expects that the major movie studios will join up soon.

Another very important part of this announcement is ranking and relevance. I asked Feiken how Google plans to rank Google Video searches – clearly this ain’t no simple PageRank play. Will they rank by popularity? Profitability? Metadata? “We realize this is a difficult problem to solve and we are definitely innovating in this area,” Feiken told me.

Watch this space. From my book (p 241-42):

Google is clearly in the process of declaring its position relative

to the content industry, and it seems to be this: we will become your

distribution sugar daddy. We’ll be Switzerland—allow us to index

your content, and when people find it through us, we’ll enable you

to sell it. This approach became more apparent with the discussion

and disclosure of a 2004 patent application in Google’s name that

creates a system by which media is discovered and then paid for.

In such a system, one can imagine that Google has or will cut

deals with any number of content owners and somehow incorporate

that content into its index (the company has been rumored to be do-

ing just that, but refuses to comment). When you search for some-

thing, let’s say “usher,” the actual content that Usher has created will

come up in the results, and thanks to the distribution deals Google

has cut, you can buy that content right there on the spot. Everyone

gets paid!

With Yahoo, of course, this already happens. But for Google to

put itself into the position of media middleman is a perilous gam-

bit—in particular given that its corporate DNA eschews the

almighty dollar as an arbiter of which content might rise to the top

of the heap for a particular search. Playing middleman means that

in the context of someone looking for a movie, Google will deter-

mine the most relevant result for terms such as “slapstick comedy”

or “romantic musical” or “Jackie Chan film.” For music, it means

Google will determine what comes first for “usher,” but it also

means Google will have to determine what should come first when

someone is looking for “hip-hop.” Who gets to be first in such a sys-

tem? Who gets the traffic, the business, the profits? How do you de-

termine, of all the possibilities, who wins and who loses?

In the physical world, the answer is clear: whoever pays the most

gets the positioning, whether it’s on the supermarket shelf or the bin

end of a record store. As Yahoo also becomes a superdistributor of

media content, I have no doubt the company will figure out some

way to index and distribute media content that is moderated by the

traditional market forces of who pays the most, and what is the most


But Google, more likely than not, will attempt to come up with

a clever technological solution that attempts to determine the most

“objective” answer for any given term, be it “romantic comedy” or

“hip-hop.” Perhaps the ranking will be based on some mix of

PageRank, downloading statistics, and Lord knows what else, but

one thing is certain: Google will never tell anyone how it came to the

results it serves up. Which creates something of a catch-22 when it

comes to making money. Will Hollywood really be willing to trust

Google to distribute and sell its content absent the commercial

world’s true ranking methodology: cold, hard cash?

We’ll see.

Finally, Feiken is not immune to the joints after midnight implications of Google Video. “We see this as a historic event,” she said. I have to agree.

OK, enough said on that point.


Now, Google Pack strikes me as an obvious play for Google, the company has made no secret of its intention to poke Microsoft in the eye from time to time. And honestly, they are right – setting up and maintaining a PC is a right pain in the ass. I very much hope this thing works, and plan to try it out on a new PC Federated Media is buying this week. (More on Pack here at SEW).

I spoke to Marissa Mayer about Pack, and she had some fun stuff to say about it. I noticed no version of Open Office in the Pack, and she reminded me this is just the first version of the Pack, and since it updates itself automatically, why, there might be Open Office in an update shortly. They are in active discussions, I was told.

Pack, if it becomes popular, will bring a whole new set of users to Google, mainly because it includes Toolbar and Desktop, which of course means more searches, and more data, and more money for Google.

“We realize software distribution will have to become one of our core competencies,” Mayer told me.

“Some of (the applications in Pack) will result in increased revenue to us,” she also noted.

Well, I asked, might you ever include Microsoft products in a Google Pack? “If they are interested,” the ever on her feet Mayer responded, “we’d be more than willing to discuss it with them.” Over to you, Mr. Ballmer….

Google and Monster: A Dumb Idea

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Maybe this is true. But I hope not. Would Google want to get into this business so directly? Well, perhaps it would want to mimic Yahoo, which bought HotJobs, but really, honestly, this feels totally out of character. Recall my DNA posts way back, about how the two companies are different in their approach to content and community? Should Google buy Monster, well, next stop would be an entertainment guy running the show. I hear Ovitz has some time on his hands….

Google Video and Pack

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The big news today is clearly Google’s move into selling video (read: an entirely new revenue stream and a very disruptive market force for cable, on demand, DirecTV, etc) and its more aggressive focus on becoming a desktop software distributor (with Pack).

I’ll have more to say on this, but I’ll have to be content with taking a “second day” approach to the story. Why? I’m under embargo. I spoke with Google about this stuff earlier in the week, and agreed to not divulge the contents of our conversation until Google lifted its embargo (in this case, it’s when Page speaks today). This practice of embargo is fine with me, nearly every tech commpany does it. And I always honor them, though I have a policy of writing about things if they break early, as this news did.

But because our conversation had more details than have hit the press, I’m going to wait to post. It’s Friday in any case, and who knows what else might come up?

Recommendation Systems Gone Bad

By - January 05, 2006

Xeni at BB notes an offensive – though not clearly intentional – result at

This product listing on Wal*Mart’s website for a Planet of The Apes DVD suggests films about black historic figures Dorothy Dandridge and Martin Luther King, Jr. as “similar items.”

Reader comments continue:

I recall seeing something like this before. In that case, inappropriate Amazon books were recommended, such as sex guides being shown for people browsing a Pat Robertson book. It was theorized that a large number of people caused this by visiting one page then the other, in order to game the system.

Perhaps the same thing is happening here.

We all know about Google Bombing. But Recommendation System Bombing? That’s a new one to me!

Updated: Net Neutrality: In Peril?

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More noise from the telcos that they want a multi-tiered Internet. Watch this space. Paid Content reports from CES:

Verizon CEO is now on the band(width)wagon…in a Q&A at CES, Verizon CEO Ivan Seidenberg said that providers of bandwith-intensive Internet applications, including Google and Microsoft, should “share the cost” of operating broadband networks. He joins AT&T (then SBC) CEO Ed Whitacre, who last year put his foot in the mouth in a rather harsh interview with BW.

According to Seidenberg, Verizon and Google are already talking about how such compensation might be structured. While Seidenberg said Verizon “intuitively” believes that the Internet should be open to all applications, he also said that “we need to make sure there is the right economic model,” especially in regards to so-called “free” or advertising-supported applications, which generally do not offer any direct compensation to the network service provider.

Update: Good comments starting to flow below, and this Journal story focuses on the issue, though it’s paid walled. From it:

The phone companies envision a system whereby Internet companies would agree to pay a fee for their content to receive priority treatment as it moves across increasingly crowded networks. Those that don’t pay the fee would find their transactions with Internet users — for games, movies and software downloads, for example — moving across networks at the normal but comparatively slower pace. Consumers could benefit through faster access to content from companies that agree to pay the fees.

Er, EXCUSE ME? Am I not already PAYING these companies for HIGH SPEED ACCESS? That’s what the web services companies are saying:

“They want to charge us for the bandwidth the customer has already paid for,” said Jeffrey Citron, chief executive of Vonage. Customers who already pay a premium for high-speed Internet access, he said, will end up paying even more if online services pass the new access charges to consumers. “The customer has to pay twice. That’s crazy.”

Mr. Citron said he thinks that if the Bells tack on extra charges, cable companies that also provide broadband will soon follow.

Google, Yahoo, and others are in discussions with the telcos. I’d love to be a fly on THAT wall.

Update: I got a call from Google saying that the Journal story got it wrong – Google is NOT in talks with Verizon about a two tiered pricing scheme, and Verizon wants to clarify as well, though I await a call from them. This is a TOUCHY issue, and it will only get more interesting. We’ll tackle it at Web 2.0 this year for sure.

When Might the PPC Gap Close?

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FtdIn conversation with folks equally besotted with all things search and marketing, the talk often turns to click fraud.

After some mandatory clucking of tongues, I go off on my own little riff about the subject – how it’s difficult to prove as a percentage of overall PPC revenue (beyond the anecdotal), and how – for the time being anyway – it really doesn’t seem to matter. Click fraud is something of an ecosystem “tax” – advertisers who are putting $1 into AdSense, for example, are (usually) getting more than $1 back. Whether they get $2.00 or $1.75 is not that important, if, say, 12.5% of the clicks are fraud, who cares? You can always petition Yahoo or Google for a refund (though not all do).

Only when they start getting back 99 cents (or less) for that $1.00 will the “margin pressure” build to “do something about click fraud” in any real sense. In the meantime, advertisers are happy with AdSense, because, well, it works well enough, and there’s no incentive to change it.

This post about a recent earnings release from FTD, written by Jeff Matthews, struck me as a potentially important insight with regard to all this. Matthews likes to stare at corporate behavior and find the stuff that perhaps others have not thought about. From what I can tell, he’s not a search fellow, but, a reader pointed me to his stuff, and it’s good.

From his post:

“During the Christmas season, certain online search engine costs increased significantly over the prior year, and as such we made the decision not to pursue the resulting high cost order volume.”

That comment was contained in the long first paragraph of a press release from FTD Group, the flower delivery people, that was issued at 5:54 E.S.T. last Thursday night, when almost nobody was around to care.

Now, I don’t follow FTD closely, but its business model depends more than you might guess on internet searches—after all, somebody searching for “flowers” on Google is probably not doing deep scientific research into botany. They are very likely a guy, running late, kicking himself for putting it off until the last minute.

…What is also interesting about the FTD release is that the company states that despite a pull-back in online ad spend and the resulting revenue shortfall, the company will still hit its EBITDA and earnings targets…

…This suggests that at least in the floral delivery category of online search, and assuming FTD is not just blaming an innocent bystander like some companies we could imagine, the marginal cost of a new customer has reached parity with the marginal profit from that customer. Which is not something anybody expected happening any time soon.

So what is FTD doing about this turn of events?

“…we have begun making additional investments in our marketing staff to help build a more diversified marketing portfolio. We believe these initiatives will enable us to regain our competitive position in the marketplace and continue to deliver long term bottom line results for our shareholders.”

A possible conclusion? Search marketing may be on its way toward a slowdown, if not a plateau. And while this is entirely anecdotal, and certainly nothing to base decisions upon, it points to the margin pressure idea, and, I think, validates it. At least as far as FTD is concerned…

Thanks, Searchblog reader Philip!