Time to Rethink the Adwords Policy

Just a thought, but when Google starts shutting down a t-shirt company's right to advertise its politically charged wares, something feels rotten in the state of paid search. (The company is Y-Que, the controversy was first reported by boing boing).

This reminds me of the cruise line issue, but for some reason, it feels worse. This is no conspiracy, lord knows I'm not claiming Google is playing politics (I'd feel the same way if the t-shirts made fun of Democrats, and in fact they do have an "anti-Kerry" shirt), but I suggest that Google review their policy w/r/t "advocacy" and "anti-" sites, and drop the whole damn thing, leaving it up to the market and the FCC nannies to figure out what is and what is not appropriate. After all, Google essentially punted in trademarks. Why not here?

• Posted by John Battelle at 8:17 AM
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Lycos Up For Grabs, Will Diller Re-engage?

Cnet reports that Lycos has retained Lehman to advise the company on the sale of its US assets. Cnet claims a possible price of $200 million. That'd be a bargain, a far cry from the billions Barry was willing to offer back in the good old days...

Diller would not need the traffic, though it never hurts. What he does need is integrative search technology. And on that count, Lycos is not a strong player. Side note to Wired News folks: If you're looking to do something new, you know how to get in touch with me...

• Posted by John Battelle at 8:19 AM
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Tacoda To Form AudienceMatch

News broke today that Tacoda (previous post here) is creating a behavioral marketing network called AudienceMatch which will compete with other major ad networks like Google's AdWords or Overture's ContentMatch. Congrats to them, and to Fred, who invested in them.

• Posted by John Battelle at 2:43 PM
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Enterprise Search (Yaawwwwnnn)

Oh, I know, I'm not big on enterprise search, it puts me to sleep. But to be honest, it was the enterprise that got me into this game, nearly 20 years ago, at a now defunct Macintosh weekly called MacWeek. We covered "MVBs" - Macintosh Volume Buyers, and my best sources were big corporate buyers at Anderson and the University of Texas. These guys saw all the cool shit early, and then blabbed about it to me. Our fearless executive editor was a fellow named Dan Farber, who now runs editorial at ZDNet. Anyway, Dan emailed me yesterday and asked what I thought of enterprise search, which is clearly one of the most overlooked stories in search. (His view on it is now up, here). It made me think, and I realized that in fact, enterprise search will probably rise again, and end up being one of the coolest things in search in the next few years. Why? Because it sucks so badly now, fixing it will be the kind of 10X revelation we had when we moved from Yahoo to Google in 1998-99.

Germane to that, here's an interview in the E-commerce Times with Google enterprise search chief Dave Girouard that's interesting.

The funny part is it's easier to find box scores from the 1957 World Series than it is to find last quarter's sales presentation in the enterprise. While Web search has gotten really good, enterprise search has stagnated, and that's why we really believe it's a problem that needs to be solved and that Google has a unique set of capabilities to solve it."

When Google goes public, and it seems that this is most certainly a when, rather than an if, it will have to grow. And once it's hit the plateau of consumer facing businesses, it will turn to the corporate IT market (it's already focused on the problem and is cranking up that focus). That market is still nascent, and there are buckets of money there (just ask Microsoft or FAST.) Mark my words, boring as it might seem, corporate search will be a big deal. And...there will be interesting implications w/r/t transparency and the like once all those corporate documents are discovered by the internal crawler.

• Posted by John Battelle at 9:30 AM
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Search Engines and the DMCA: Don't Be Evil

From time to time you might note, if you are really paying attention, that results on Google have been removed due to the DMCA, in particular a clause known as "Safe Harbor" - it has to do with supposed copyright infringement. If and when you run across such results, Google posts a notice at the bottom of the page informing you, and linking to the DMCA request that led to the result being pulled from Google's index. This is a very fine example of Google being a good corporate citizen, but Joe Hall has a good suggestion for refinement: show this disclaimer at the top of the page, not at the bottom, where many won't see it.

Also on this issue, the Virginia Journal of Law and Techweighs in with a paper entitled "Application of the DMCA Safe Harbor Provisions to Search Engines." Why do you care? Well, this paper concludes that "the burden of complying with the safe harbor procedures should not be placed on search engines. Given these concerns, a better alternative would be for Congress to grant search engines complete immunity from contributory liability for copyright infringing activities by third parties."

To reach its conclusion, the paper argues that "Internet service providers who receive notifications from copyright owners about allegedly infringing content must remove or disable access to that content in order to remain immune from claims for contributory liability. In response to such notifications, search engines have begun to remove links to allegedly infringing content from their search results. Unfortunately, application of the DMCA safe harbor provisions to search engines is problematic. Key portions of the statute refer to “subscribers” and “account holders,” making their application to search engines unclear because search engines typically do not have subscribers or account holders. Also, the lack of a subscription relationship between search engines and alleged infringers seems to make search engines more likely than other types of service providers to remove content overzealously in response to notifications."

If you're still with me, then you may realize what I'm about to say - yup, in the near future, most search engines *will* have subscribers and account holders. A9 already does, as does Yahoo, indirectly. Hate to say it, but this paper is already out of date, even if I agree with its conclusion.

(thanks, JD).

• Posted by John Battelle at 9:37 PM
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A Tale of Two Googles

Another (this is the third in two days) big NYT piece on Google, this one is from Saul Hansell, with great artwork (see left). Saul explores the debate between staying private and going public. And it had this tidbit, which I am embarassed to say I did not know:

Google has hardly been lazy working to manage the timing of an eventual offering. Early on, it split itself into two companies, Google Inc. and Google Technologies, so that each would have fewer than 500 employees, according to a person who had been close to Google. That was important because the S.E.C. requires companies with 500 shareholders and assets greater than $10 million to file financial statements and most of the other information they would have to disclose in a public share offering.

Early in 2003, the two companies were merged, in effect setting the date of April 29, 2004, as the deadline for Google to make the required disclosure. (The law requires a public filing 120 days after the close of a company's fiscal year, in this case April 29.)

I wondered how they got away with having so many shareholders for so long. Dooh!

• Posted by John Battelle at 9:15 AM
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Markoff: Details on Google Filing; Rivlin: Who WIll Get Rich

Interesting: Markoff has a source (link is CC Times, not NYT, it's not reg required) who claims Google will not file an S-1 this week (the standard IPO prospectus) but rather will file ... well...on that the story is not clear. But something. I believe the only thing they could file other than an S-1 is a Form 10, which private companies file when they surpass 500 shareholders and 10 million in assets. Markoff's story does not say that will happen, but that's the implication. There's some good stuff in this short piece:

Google, the Web search company that has developed a huge popular following around the world, is expected to take a tentative first step next week toward a future public stock offering, a person close to the company said Friday. But it is likely to stop short of filing a formal registration to sell shares, he said......

"I wouldn't call it tensions, but there are differences," he said. "I think our attitude is, 'Let's not be too cute.' "

Also, the Times runs a Page One rundown of who will get rich in the IPO. After reading it, I felt...a bit queasy, and I don't know why. (No, I don't own any shares!).

• Posted by John Battelle at 10:48 PM
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Simson's Piece on Akamai and Google: Good Reading

I finally got around to reading Simson's piece in Tech Review. I knew it would be worth the wait, not another me-too package on the IPO but some original reporting and thinking. And I was right. The piece points out that Akamai is in a similar business to Google - the distributed computing business. Then he thinks through the implications. Very Web 2.0, web-as-platform kind of stuff here.

Fun excerpts:

“These numbers are all crazily low,” Farach-Colton continued. “Google always reports much, much lower numbers than are true." Whenever somebody from Google puts together a new presentation, he explained, the PR department vets the talk and hacks down the numbers. Originally, he said, the slide with the numbers said that 1,000 queries/sec was the “minimum” rate, not the peak. “We have 10,000-plus servers. That’s plus a lot.”...

Leighton doesn’t think that Akamai would move into any business that required the company to deal directly with end users.....

• Posted by John Battelle at 2:45 PM
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Good Profile of Moritz

Fortune's Adam Lashinsky has a well done profile of Michael Moritz, one of two VCs to invest in Google back in 1999. (The site is sub only, but I believe you can get the first page if you are not a Fortune subscriber. When, oh when, will Time Inc. realize that blogging is GOOD for them? Maybe when they spin out AOL...)

• Posted by John Battelle at 12:49 PM
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More Google News

It's a Google News Friday. Roundup:

- Cnet reports on Google's safe search, which it claims is too restrictive.

- Google rethinks its policy on hate sites (considering labels. I say, let the community label in aggregate..but what do I know).

- Google is apparently expanding its Gmail beta to users of Blogger. (Thanks, Andy)

- More on the grandstanding California Senator who is seeking to legislate Gmail...

• Posted by John Battelle at 8:40 AM
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Really..Must...Put...Google...On...Cover

Here we go again, this month's Google cover: Businessweek. Oh, they timed it for the IPO, yes they did, but those pesky engineers have yet to make those editors look like geniuses. Godammit!

Well, there's time. It might happen in the next few days, or next week.

Bizweek does the full package. I'll read it, and if there's anything new, I'll let you know. (The site requires registration.)

Thanks for the tip, Jim.

• Posted by John Battelle at 4:25 PM
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Feed Controversy!

Ev and Dave talk rss conspiracies...

• Posted by John Battelle at 4:06 PM
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MSN Earnings Are In...

And the are pretty solid, on first look. From their release (full text in extended entry)

MSN® reported another profitable quarter on robust revenue growth of 16% over last year driven by continued success in growing its advertising business. MSN advertising revenue increased 43% during the quarter, again showing strength in both traditional online and search-based advertising. Customers and advertisers continue to recognize MSN as a worldwide leader in online services with more than 350 million unique users to the MSN network, over 170 million active MSN Hotmail® unique users, and more than 120 million active MSN Messenger unique users worldwide on a monthly basis.

Q1 revenues are reported as $491 million, compared to $427 million last year, and $559 million last quarter. Recall, however, that last quarter is the holiday season. The company did not break out actual profits for MSN.

Microsoft_Investor_Relations_News_Release

Microsoft Reports Strong Third Quarter Revenue
Broad-based Demand Drives 17% Revenue Growth

Redmond, Wash. – April 22, 2004 – Microsoft Corp. today announced revenue of $9.18 billion for the quarter ended March 31, 2004, a 17% increase over $7.84 billion in the prior year. Operating income for the third quarter was $1.28 billion, compared to $2.74 billion in the prior year. Net income and diluted earnings per share for the third quarter were $1.32 billion and $0.12 per share. These results include stock-based compensation expense of $748 million (pre-tax) equating to $501 million (after-tax) or $0.05 per share, and legal charges of $2.53 billion (pre-tax) equating to $1.89 billion (after-tax) or $0.17 per share related to the settlement of the Sun Microsystems Inc. litigation and a fine imposed by the European Commission. For the previous year, net income and earnings per share for the third quarter were $2.14 billion and $0.20 per share, including stock-based compensation expense of $978 million (pre-tax) equating to $655 million (after-tax) or $0.06 per share.

“Broad-based demand and solid execution across all our businesses drove outstanding results for the quarter,” said John Connors, chief financial officer at Microsoft. “All of our businesses met or exceeded our expectations this quarter with the Client, Information Worker and Server and Tools businesses growing a combined 17%. Overall corporate IT spending continued to improve and we expect to see healthy demand through the end of our fiscal year.”

Information Worker revenue grew 18% over the prior year as Office experienced strong sales across all customer segments. Worldwide retail license sales of Office 2003 since its launch in October 2003 were double those of Office XP over its first five months. Office OEM sales grew 35% benefiting from increased adoption of Office 2003 including penetration of the Small Business and Professional editions. Customers acquiring Office during the quarter included Circuit City, Del Monte Foods, Perot Systems, The Thomson Corporation, and Unisys Corporation.

Server and Tools grew a solid 19% driven by healthy demand for Windows®, Exchange, SQL Server™, and Visual Studio® products. Rapid customer adoption of Windows Server™ 2003 continued with new licenses growing 31%. “Windows Server 2003 is our most successful server operating system product ever with customer license sales doubling any previous version over a comparable period since launch,” said Eric Rudder, senior vice president, Server and Tools business. “It is also rewarding to see customers and partners excited about the recently released Windows Small Business Server 2003 product, as is reflected by our early strong sales and already having 47,000 partners trained to deploy and service the platform.”

MSN® reported another profitable quarter on robust revenue growth of 16% over last year driven by continued success in growing its advertising business. MSN advertising revenue increased 43% during the quarter, again showing strength in both traditional online and search-based advertising. Customers and advertisers continue to recognize MSN as a worldwide leader in online services with more than 350 million unique users to the MSN network, over 170 million active MSN Hotmail® unique users, and more than 120 million active MSN Messenger unique users worldwide on a monthly basis.

Business Outlook

Management offers the following guidance for the quarter ending June 30, 2004, which includes stock-based compensation expenses in accordance with SFAS 123:

• Revenue is expected to be in the range of $8.9 billion and $9.0 billion.
• Operating income is expected to be in the range of $2.8 billion and $2.9 billion, including stock-based compensation expense of approximately $750 million.
• Diluted earnings per share are expected to be approximately $0.23, including stock-based compensation expense of approximately $0.05.

Management offers the following guidance for the full fiscal year ending June 30, 2005, which includes stock-based compensation expenses in accordance with SFAS 123:

• Revenue is expected to be in the range of $37.8 billion and $38.2 billion.
• Operating income is expected to be in the range of $15.9 billion and $16.3 billion, including stock-based compensation expense of approximately $2.5 billion.
• Diluted earnings per share are expected to be in the range of $1.16 and $1.18, including stock-based compensation expense of approximately $0.15.

Webcast Details
Microsoft will hold an audio webcast at 2:30 p.m. PDT (5:30 p.m. EDT) today with John Connors and Scott Di Valerio to discuss details regarding the company’s performance for the quarter and other forward-looking information. The session may be accessed at http://www.microsoft.com/msft. The webcast will be available for replay through the close of business on April 22, 2005.

Forward-Looking Statements
Statements in this release that are "forward-looking statements" are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors such as: entry into markets with vigorous competition, market acceptance of new products and services, continued acceptance of existing products and services, changes in licensing programs, product price discounts, delays in product development and related product release schedules, and reliance on sole source suppliers for key components of Xbox that could result in component shortages and delays in product delivery, any of which may cause revenues and income to fall short of anticipated levels; obsolete inventory or product returns by distributors, resellers and retailers; warranty and other claims on hardware products such as Xbox; changes in the rate of PC shipments; technological shifts; the support of third party software developers for new or existing platforms; the availability of competitive products or services such as the Linux operating system at prices below our prices or for no charge; the ability to have access to MSN service distribution channels that are controlled by third parties; the risk of unanticipated increased costs for network services; the continued ability to protect the company’s intellectual property rights; the ability to obtain on acceptable terms the right to incorporate in the company’s products and services technology patented by others; changes in product and service mix; maturing product life cycles; product sale terms and conditions; the risk that actual or perceived security vulnerabilities in our products could adversely affect our revenues; implementation of operating cost structures that align with revenue growth; the financial condition of our customers and vendors; variations in equity compensation expenses under FAS 123, which will fluctuate based on factors such as the actual number of stock awards issued and the market value of the awards on the dates of grant; unavailability of insurance; uninsured losses; adverse results in litigation; the effects of terrorist activity and armed conflict such as disruptions in general economic activity and changes in our operations and security arrangements; the level of corporate information technology spending and changes in general economic conditions that affect demand for computer hardware or software; currency fluctuations; trade sanctions or changes to U.S. tax law resulting from the World Trade Organization decision with respect to the extraterritorial income provisions of U.S. tax law; and financial market volatility or other changes affecting the value of our investments that may result in a reduction in carrying value and recognition of losses including impairment charges.

For further information regarding risks and uncertainties associated with Microsoft’s business, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Issues and Uncertainties” sections of Microsoft’s SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting Microsoft’s investor relations department at (800) 285-7772 or at Microsoft’s investor relations website at http://www.microsoft.com/msft.

All information in this release is as of April 22, 2004. The company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company’s expectations.

Founded in 1975, Microsoft (Nasdaq "MSFT") is the worldwide leader in software, services and solutions that help people and businesses realize their full potential.

##########

Microsoft, Windows, Visual Studio, Windows Server, MSN and Hotmail are either registered trademarks or trademarks of Microsoft Corp. in the United States and/or other countries. The names of actual companies and products mentioned herein may be the trademarks of their respective owners.

For more information, financial analysts only:
Curt Anderson, senior director, Investor Relations (425) 706-3703

For more information, press only:
Rapid Response Team, Waggener Edstrom, (503) 443-7070, rrt@wagged.com

Note to editors: If you are interested in viewing additional information on Microsoft, please visit the Microsoft Web page at http://www.microsoft.com/presspass/ on Microsoft’s corporate information pages. Shareholder and financial information, as well as today’s 2:30 p.m. PDT conference call with investors and analysts, is available at http://www.microsoft.com/msft.

Microsoft Corporation
Financial Highlights
Third Quarter 2004
(All growth percentages are comparisons
to the comparable quarter of fiscal year 2003)

This document contains statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors discussed in this document. We undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in our expectations.

Third Quarter Summary

Three Months Ended
March 31
(In millions, except percentages)
2003
2004Percentage Inc./(Dec.)Revenue$7,835$9,17517%Operating Income$2,744$1,278(53%)
The revenue growth resulted primarily from increased licensing of Windows operating systems through OEMs, Office 2003 and Server products, and MSN advertising revenue. Foreign exchange rates also contributed nearly 5% growth in total revenue for the quarter due to generally stronger foreign currency rates versus the U.S. dollar.

During the third quarter, continued strong PC and Server shipment growth and improved IT spending compared to fiscal 2003 contributed to our overall revenue growth. We estimate that total PC shipments grew approximately 14% from the third quarter of the prior year driven by strong business demand in both mature and emerging markets with consumer shipments growth of approximately 10% for the quarter. Total server hardware shipments have grown 17% in the third quarter of fiscal 2004 per our internal projections, with Windows Server shipments growing faster than the overall sector at 25% compared to the prior year’s third quarter. The net impact of foreign exchange rates on revenue was positive in the third quarter compared to a year ago, primarily due to a stronger Euro and Japanese yen versus the U.S. dollar. Had the rates from the prior year’s third quarter been in effect in the third quarter of fiscal 2004, translated international revenue earned in local currencies would have been approximately $350 million lower. Certain manufacturing, selling, distribution, and support costs are disbursed in local currencies, and a portion of international revenue is hedged, thus offsetting a portion of the translation exposure.

Unearned revenue as of March 31, 2004 decreased $326 million from December 31, 2003. Undelivered elements contributed $123 million of the net decrease in unearned revenue as deferral rates were lower, partially offset by lengthened product life cycles for the underlying products licensed, resulting in a higher proportion of revenue earned. The decline also reflects a net decrease of $248 million in unearned revenue from volume licensing programs as $261 million of revenue was earned from Upgrade Advantage programs.

For the full fiscal 2004, we expect PC shipments to grow at rates in the low teens, driven by both consumer and business demand for PCs. We believe the overall server hardware sector and IT spending outlook will continue to demonstrate improvement over fiscal 2003. Our enterprise server products revenue results should be positively affected by the continued shift to lower cost X86 server architecture. As a result, we expect overall server hardware shipment growth for fiscal 2004 to reach near mid-teens growth with Windows Server operating systems licenses growing faster than the overall sector. We believe foreign exchange rates will continue to stabilize during the last quarter of our fiscal year and we will continue to benefit from the U.S. dollar’s position relative to the Euro and Japanese yen.

The operating income decline for the third quarter of fiscal 2004 was due primarily to a $1.92 billion charge related to settlement of the Sun Microsystems litigation and a €497 million ($605 million) accrual for the European Commission fine. Sun Microsystems and Microsoft entered into a series of agreements that settled Sun’s suit against us and resolved other legal claims between the companies. The European Commission fine was imposed as part of its finding that Microsoft had infringed European competition law by refusing to supply work group server interoperability information and by including streaming media playback functioning in Windows desktop operating systems.  We intend to appeal the European Commission’s finding.

We adopted the fair value recognition provisions of SFAS 123, Accounting for Stock-Based Compensation, on July 1, 2003 and restated prior periods to reflect compensation cost under the recognition provisions of SFAS 123 for all awards granted to employees after July 1, 1995. Equity compensation is included in operating expenses as part of headcount-related costs. Total stock-based compensation costs included in operating expenses for the third quarter of fiscal 2004 were $748 million, compared to $978 million in the prior year’s comparable quarter.

SEGMENT PRODUCT REVENUE/OPERATING INCOME (LOSS)

Our seven segments are: Client; Server and Tools; Information Worker; Microsoft Business Solutions; MSN; Mobile and Embedded Devices; and Home and Entertainment.

The revenue and operating income/(loss) amounts in this section MD&A are presented in accordance with U.S. GAAP applied at the segment level. Certain corporate level expenses (primarily general and administrative expenses, including the accrual for the imposed fine from the European Commission, and corporate level sales and marketing costs) have been excluded.

Client

Three Months Ended
March 31
(In millions, except percentages)
2003
2004Percentage Inc./(Dec.)Revenue$2,527$2,92416%Operating Income$1,901$1,605(16%)
Client includes revenue from Windows XP Professional and Home, Windows 2000 Professional, and other standard Windows operating systems. In the third quarter of fiscal year 2004 Windows OEM license units grew 16%, driving an 18% growth in OEM revenue compared to the prior year. Revenue from commercial and retail licensing grew 6% compared to the prior year’s third quarter. The mix of Windows units shipped with the Professional version increased two percentage points to 58% of total Windows licenses compared to the prior year. Client operating income in the third quarter of fiscal 2004 declined primarily as a result of $700 million of legal expenses related to the settlement of the Sun Microsystems litigation, partially offset by growth in revenue.

We anticipate that total PC shipments will grow about 10% for the fourth quarter of fiscal 2004, continuing to influence our growth in Client revenue. Additionally, we do not expect significant future changes in the mix of Windows Home and the higher priced Windows Professional version.

Server and Tools

Three Months Ended
March 31
(In millions, except percentages)
2003
2004Percentage Inc./(Dec.)Revenue$1,827$2,17719%Operating Income/(Loss)$305($635)nm
Server and Tools consists of server software licenses and client access licenses (CALs) for Windows Server, SQL Server, Exchange Server, and other servers. It also includes developer tools, training, certification, Microsoft Press, Premier product support services, and Microsoft consulting services. In the third quarter of fiscal 2004, Server revenue, including CALs, grew $445 million or 36%. The revenue increase was driven primarily by an estimated 25% increase in Windows-based server shipments resulting in 31% growth in new Windows Server license sales as well as growth in SQL Server and Core CAL revenue. Consulting and Premier product support services increased $30 million or 11% compared to the prior year’s third quarter. Revenue from developer tools, training, certification, Microsoft Press and other services decreased $125 million or 38%, due to recognition of $128 million of previously deferred revenue in the prior year’s comparable quarter. The third quarter of fiscal 2004 operating income declined $940 million primarily due to $1.22 billion of legal expenses related to the settlement of the Sun Microsystems litigation, partially offset by the increase in revenue.

Information Worker

Three Months Ended
March 31
(In millions, except percentages)
2003
2004Percentage Inc./(Dec.)Revenue$2,327$2,73918%Operating Income$1,696$1,92614%
Information Worker includes revenue from Microsoft Office, Microsoft Project, Microsoft Visio, SharePoint Portal Server CALs, other information worker products including Microsoft LiveMeeting and OneNote, and professional product support services. Revenue for the third quarter of fiscal 2004 reflected continued momentum from the Office 2003 launch. Benefiting from increased adoption of Office 2003 including penetration of the premium Small Business and Professional editions, OEM licensing revenue grew 35% compared to the prior year’s third quarter. Revenue from volume licensing, retail packaged product and pre- installed versions of Office in Japan also grew 15% in aggregate as Office 2003 sales strength continued post launch. Contributing to the increase in revenue was previously deferred multi-year licensing arrangements revenue, including Upgrade Advantage, and a lower deferral rate for undelivered elements, partially offset by lengthened product lives. Information Worker operating income for the third quarter of fiscal year 2004 increased due to the growth in revenue, partially offset by an increase in operating expenses, primarily headcount-related costs and marketing expenses in the Small and Mid-Market Solutions and Partners group.

Microsoft Business Solutions

Three Months Ended
March 31
(In millions, except percentages)
2003
2004Percentage Inc./(Dec.)Revenue$147$1534%Operating Loss($92)($65)(29%)
Microsoft Business Solutions includes Microsoft Great Plains, Microsoft Navision, Microsoft Axapta, Microsoft Solomon, Microsoft CRM, bCentral and other business applications and services. The revenue increase in the third quarter of fiscal 2004 was primarily attributable to continued growth in licensing of Navision and Axapta products outside of the United States as well as the timing of licensing agreements. Microsoft Business Solutions operating loss for the third quarter of fiscal year 2004 declined due to growth in revenue and lower stock-based compensation expense partially offset by increased sales and marketing costs.

MSN

Three Months Ended
March 31
(In millions, except percentages)
2003
2004Percentage Inc./(Dec.)Revenue$508$59116%Operating Income/(Loss)($139)$107nm
MSN includes MSN subscriptions and the MSN network of Internet products and services. In the third quarter of fiscal 2004, MSN Network services revenue grew $100 million or 43% as a result of growth in paid search and growth in the overall Internet advertising market. MSN subscription revenue declined $17 million or 6% as the number of narrowband subscribers continued to migrate to competitively priced broadband or other ISPs. The number of total MSN subscriptions at the end of March 2004 was 8.2 million, slightly higher than at the end of December 2003, as the loss of narrowband subscribers was offset by the gain of other premium service subscriptions. Subscription revenue may decline in the fourth quarter of the fiscal year as the narrowband subscriber base is expected to continue to decline. The improvement in operating income/(loss) in the third quarter was due to strong advertising revenue and paid search, while operation costs remained flat and customer acquisition expenditures declined.

Mobile and Embedded Devices

Three Months Ended
March 31
(In millions, except percentages)
2003
2004Percentage Inc./(Dec.)Revenue$46$6133%Operating Loss($72)($38)(47%)
Mobile and Embedded Devices includes Windows Mobile software, Windows Embedded device operating systems, MapPoint, and Windows Automotive. The increase in revenue in the third quarter of fiscal 2004 was driven by growth in all businesses. The revenue growth realized by MapPoint has slowed and is expected to grow at a continued slower pace in future quarters, as the first two quarters of fiscal 2004 growth rates reflected the acquisition of Vicinity Corporation toward the end of the second quarter of the prior fiscal year. Mobile and Embedded Devices operating loss was lower in the third quarter of fiscal 2004 compared to the prior year’s third quarter, due to lower operating expenses and growth in revenue.

Home and Entertainment

Three Months Ended
March 31
(In millions, except percentages)
2003
2004Percentage Inc./(Dec.)Revenue$453$53017%Operating Loss($277)($209)(25%)
Home and Entertainment includes the Xbox video game system, PC games, consumer software and hardware, and TV platform. Xbox revenue increased $81 million or 35% from the prior year’s third quarter, with $78 million related to higher volumes of Xbox software and $39 million due to higher Xbox console volumes, partially offset by a $36 million decline related to past price reductions of Xbox consoles and software. At the end of the third quarter of fiscal 2004, we announced a price reduction for the Xbox console in the United States. Overall, Xbox console volumes increased 30% in the third quarter compared to the prior year’s comparable quarter. This increase was partially attributed to low inventory levels of competitive consoles. Xbox’s life to date U.S. games attach rate according to NPD data was 6.8 games per console. Revenue from consumer hardware and software, PC games and TV Platforms declined $4 million or 2% compared to the third quarter of fiscal 2003 due to lower PC games software and PC gaming devices sales.

Home and Entertainment operating loss for the third quarter of fiscal year 2004 improved from the third quarter of fiscal year 2003 driven by revenue growth and improved Xbox console and third party software margins as well as lower marketing costs.

Operating Expenses

Cost of revenue

Three Months Ended
March 31
(In millions, except percentages)
2003
2004Percentage Inc./(Dec.)Cost of revenue$1,274$1,41111%As a percentage of revenue16.3%15.4%(0.9)pp
Cost of revenue includes manufacturing and distribution costs for products and programs sold, operation costs related to product support service centers and product distribution centers, costs incurred to support and maintain Internet-based products and services, and costs associated with the delivery of consulting services. The increase in absolute dollars in the third quarter of fiscal 2004 resulted from an increase in product support and consulting services costs and Home & Entertainment costs related to increased Xbox console units sold, partially offset by lower costs of producing the Xbox console.
 
Research and development

Three Months Ended
March 31
(In millions, except percentages)
2003
2004Percentage Inc./(Dec.)Research and development$1,692$1,538(9%)As a percentage of revenue21.6%16.8%(4.8)pp
Research and development expenses include payroll, employee benefits, equity compensation and other headcount-related costs associated with product development. Research and development expenses also include third-party development and programming costs, localization costs incurred to translate software for international markets, and the amortization of purchased software code and services content. The decrease in the third quarter of fiscal 2004 was primarily due to lower headcount-related costs driven by reductions in stock-based compensation expense, partially offset by increased product development costs.
 
Sales and marketing

Three Months Ended
March 31
(In millions, except percentages)
2003
2004Percentage Inc./(Dec.)Sales and marketing$1,700$1,92813%As a percentage of revenue21.7%21.0%(0.7)pp
Sales and marketing expenses include payroll, employee benefits, equity compensation and other headcount-related costs associated with sales and marketing personnel and advertising, promotions, tradeshows, seminars, and other marketing-related programs. Sales and marketing costs increased in absolute dollars in the third quarter of fiscal 2004 due to marketing programs targeted toward the Small and Mid-Market Solutions and Partners group and $117 million or 13% growth in headcount-related costs.
 
General and administrative

Three Months Ended
March 31
(In millions, except percentages)
2003
2004Percentage Inc./(Dec.)General and administrative$425$3,020611%As a percentage of revenue5.4%32.9%27.5pp
General and administrative costs include payroll, employee benefits, equity compensation and other headcount-related costs associated with the finance, legal, facilities, certain human resources, and other administrative headcount, and legal costs and other administrative fees. General and administrative in the third quarter included $1.92 billion of charges related to the settlement of the Sun Microsystems litigation as described in the segment information and a $605 million accrual for the European Commission fine.

INVESTMENT INCOME

The components of investment income are as follows:
 
Three Months Ended
March 31(In millions)20032004Dividends and interest$ 455$ 500Net gains (losses) on investments2419Net gains (losses) on derivative instruments1593 Investment income$ 472$ 1,012 
Dividends and interest income was relatively consistent for the comparable quarter. Net gains (losses) on investments include other-than-temporary impairments of $5 million in the third quarter of fiscal 2004 compared to $234 million in the third quarter of the prior year. The decline in impairments was due to improved market conditions. Realized gains from investments increased to $424 million compared to $236 million in the third quarter of the prior year.
 
INCOME TAXES

The effective tax rate for the third quarter of fiscal 2004 is approximately 42%.  The increase in the effective tax rate for the third quarter reflects the impact of the accrual for the European Commission fine, which is not tax deductible.   The effective tax rate for fiscal 2003 was 32%, reflecting a benefit in the second quarter of $126 million from the reversal of previously accrued taxes.

STOCK-BASED COMPENSATION

Three Months Ended
March 31(In millions, except earnings per share)20032004Stock-based employee compensation expense$ 978$ 748After-tax stock-based employee compensation expense$ 655$ 501Stock-based employee compensation expense per diluted share$ 0.06 $ 0.05
Effective July 1, 2003, we adopted the fair value recognition provisions of SFAS 123, Accounting for Stock-Based Compensation, using the retroactive restatement method described in SFAS 148, Accounting for Stock-Based Compensation—Transition and Disclosure. Under the fair value recognition provisions of SFAS 123, stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the vesting period. The June 30, 2003 balance sheet has been restated for the retroactive adoption of the fair value recognition provisions of SFAS 123 which resulted in a $13.89 billion increase in common stock and paid-in capital, a $10.00 billion decrease in retained earnings, and a $3.89 billion increase in deferred income taxes.

FINANCIAL CONDITION
 
On our balance sheet, cash and short-term investments totaled $56.41 billion, equity and other investments were $15.16 billion and we have no debt as of March 31, 2004.

Unearned Revenue

Unearned revenue from volume licensing programs represents customer billings, paid either upfront or annually at the beginning of each billing coverage period, which are accounted for as subscriptions with revenue recognized ratably over the billing coverage period. For certain other licensing arrangements revenue attributable to undelivered elements, including free post-delivery telephone support and the right to receive unspecified upgrades/enhancements of Microsoft Internet Explorer on a when-and-if-available basis, is based on the sales price of those elements when sold separately and is recognized ratably on a straight-line basis over the related product’s life cycle. The percentage of revenue recorded as unearned due to undelivered elements ranges from approximately 15% to 25% of the sales price for Windows XP Home, approximately 5% to 15% of the sales price for Windows XP Professional, and approximately 1% to 15% of the sales price for desktop applications, depending on the terms and conditions of the license and prices of the elements. Product life cycles are currently estimated at three and a half years for Windows operating systems and two years for desktop applications. Unearned revenue also includes payments for online advertising for which the advertisement has yet to be displayed and payments for post-delivery support services to be performed in the future.

The components of unearned revenue were as follows:

Dec. 31Mar. 31(In millions)20032004Volume licensing programs$4,579$4,331Undelivered elements2,6242,501Other649694Unearned revenue$7,852$7,526
Unearned revenue by segment was as follows:

Dec. 31Mar. 31(In millions)20032004Client$2,954$2,829Server and Tools1,9452,019Information Worker2,6352,341Other segments318337Unearned revenue$7,852$7,526
Unearned revenue as of March 31, 2004 decreased $326 million from December 31, 2003. The sequential decrease reflected a $123 million net decrease in unearned revenue related to undelivered elements as deferral rates were lower, partially offset by lengthened product life cycles for the underlying products licensed, resulting in a higher proportion of revenue earned. The sequential decline also reflects a net decrease of $248 million in unearned revenue from volume licensing programs as $261 million of revenue was earned from previously deferred revenue from Upgrade Advantage programs.

Of the $7.53 billion of unearned revenue at March 31, 2004, the following table outlines the expected recognition of this balance:

Recognition (In millions)of Unearned RevenueThree months ended: June 30, 2004$2,598 September 30, 20041,660 December 31, 20041,085 March 31, 2005606 June 30, 2005 and thereafter1,577Unearned revenue$7,526
The revenue earned from the Upgrade Advantage programs for fiscal years 2003 and 2004 was as follows:

(In millions)Revenue EarnedThree months ended: September 30, 2002$464 December 31, 2002$480 March 31, 2003$450 June 30, 2003$421 September 30, 2003$379 December 31, 2003$296 March 31, 2004$261

Cash Flow

Cash flow from operations for the third quarter of fiscal 2004 was $4.97 billion, compared to $4.17 billion in the comparable quarter of the prior year. The increase reflects higher net income before non-cash items including stock-based compensation expense and legal charges, and other changes in working capital. Cash used for financing was $1.04 billion in the third quarter of fiscal 2004, compared to $1.21 billion in the comparable quarter of the prior year. Cash used in the prior year’s comparable quarter included a cash dividend payment of $857 million. We also repurchased 49.9 million shares of common stock under our share repurchase program in the third quarter of fiscal 2004, compared to 30.7 million shares repurchased in the prior year’s third quarter. Cash used for investing was $738 million in the third quarter of fiscal 2004, compared to $4.21 billion in the prior year’s third quarter. The decrease reflects the decline in purchases of investments partially offset by impact of other investing activities.

Cash flow from operations in the fourth quarter of fiscal 2004 will be affected by the cash payment of certain legal charges accrued in the third quarter of fiscal 2004.

For More Information:
Curt Anderson, Senior Director, Investor Relations, (425) 706-3703

• Posted by John Battelle at 3:58 PM
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Tickle Searches People

Tickle, the matchmaking/social networking site, announced today a new "people search" feature that lets you find people based on keyword search. The site uses the plethora of data it has on its 18 million registered users to correlate people to search terms. I spoke to CEO James Currier yesterday, and tried out the service a bit to boot. It's a neat idea, but a bit ... odd to see people matched to terms. Take a gander at a search result for "mortgage" for example. And here's what "lawyer" looks like with "everything" chosen - web, people, and sponsored results.

The search works much better if you are a member, Currier said. The engine will then search for folks based on your search term, then correlate stuff like number of degrees away, similar interests, and even scores on the hundreds of tests Tickle makes available to its members. I can imagine this to be a pretty cool way to find, say, a mechanic or a lawyer, if you're a member and have a pretty robust social network.

I think this points in interesting directions.

Full release in extended entry....

Media Contacts:
Amy Bessette/Diane Schreiber Jennifer Hwang
Spark PR Tickle Inc.
415.962-8200 x233/231 415.946.5042
amy@sparkpr.com/diane@sparkpr.com jhwang@tickleinc.com


Tickle Introduces People Search
Adds human aspect to make Internet search more personalized and valuable

SAN FRANCISCO, Calif. - Apr. 22, 2004 - Tickle Inc. (www.tickle.com ) today announced the launch of Tickle People Search, the first Internet search service that not only gives you relevant web results but also links you to people who are experts or interested in what you're searching for. By taking into account who you are and what you're interested in Tickle's innovative People Search technology brings back people results ranked by relevance to you.

"Before the Internet, people would research most topics by asking others for advice and information," said James Currier, CEO of Tickle Inc. "The advent of Web search in the 1990's taught us to query text data pages instead of talking with each other. Tickle People Search brings online search full circle, back to letting us find the right people to talk to."

In a survey of 2500 individuals, the Tickle Research Group found that 70 percent of people still rely on both independent research as well as personal referrals from someone they trust before making most purchasing decisions. By bringing people into the search results, Tickle is enhancing the overall online search experience, adding a human touch to an otherwise impersonal process. For example, if your friend Samantha wants to refinance her house and searches for "mortgage" on Tickle People Search, she will get web links for mortgage information, plus a list of people she knows - or people who know people she knows - who have expertise in mortgages. She can then contact them directly for advice, making it much easier and more personal for her to find the information she needs.

Be found when you want to be found
Tickle's People Search results are pulled from over 2 million profiles in the Tickle Social Network. Growing virally at an average rate of 15,000 members per day, the Tickle Social Network is the world's second largest social networking service, in part because it features the deepest, most comprehensive user profiles available on the web. Anyone can create a profile within the Tickle social networking system simply by signing up for a free Tickle membership.

Tickle members who have a knowledge base they want to share with others can simply add relevant information into their profiles so they can be found by individuals looking for their specific capabilities. For example, a mortgage broker's profile might include details about her background, her experience, her employer and more - making it easier for people who need mortgage information to find and contact her. Tickle People Search results will only display details that individuals want to share with others - information people want to keep private will not be included.

Tickle People Search - find the people who can help you
Led by PhDs and experts in social science and psychology, the Tickle Research Group has conducted years of research in human interaction and behavior. By incorporating this research, Tickle has pioneered a proprietary people search algorithm to sort and rank people results by relevance to the person doing the search. Tickle's ranking algorithm evaluates factors such as relationship proximity, background and interests to produce personalized people search results that are meaningful and useful to the individual searcher. Tickle People Search also incorporates web results from the Teoma search engine and Ask Jeeves' sponsored links.

"Tickle has always believed that the Internet is fundamentally about people, not just data," added Currier. "Over the last five years, we have built our science and expertise in optimizing the structure and content of a person's profile as well as in developing algorithms that allows us to rank and match individuals in terms of relevance to each other."

Anyone can start using Tickle People Search today at http://search.tickle.com . If someone doing a search is not a Tickle member or not logged into Tickle's social network, he or she will only receive people results of individuals who have included the search word within a completely public area of their profile.

For convenient access to Tickle People Search and all of Tickle's popular online services, download the Tickle browser bar from the bottom of the Tickle homepage.

About Tickle
Tickle Inc. is a leading diversified digital media company, focused on delivering interpersonal content and services (self-discovery, matchmaking, career and social networking) to more than 18 million active members worldwide. Founded in 1999 as Emode, Tickle is a place where people can use science to make deep, meaningful connections, understand themselves and others, and manage their personal and professional relationships in a way that is fun and enjoyable. More than 50 million people have answered over 6 billion questions at Tickle.com, making the company the online leader in self-assessment testing. Ranked as one of the top 50 most visited web sites by comScore Media Metrix, Tickle is distinguished by a strong foundation in scientific research, a proven commitment to member privacy, and many years of customer satisfaction and financial stability. Tickle is headquartered in San Francisco, Calif. and can be found at http://www.tickle.com .



Julie Keslik
Director, Sparkpr
87 McLea Court
San Francisco, CA 94013
Phone: 415-321-1877
Cell: 612-802-8629
Email: julie@sparkpr.com

• Posted by John Battelle at 3:48 PM
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Another Reason I Like Search...

...19 year olds can put up an engine with some nifty features. Check out FyberSearch.

Gary says:
This engine allows the user to tweak the keyword density portion of its
relevancy algorithm. I haven't seen this option from a general web engine,
I like it! You often find this feature from databases like LexisNexis and
Factiva where the searcher can specify how many times a word or phrase
must be mentioned in a document to be considered relevant. Often, the
syntax atleast(x) is used. An advanced interface and image searching are
available. You'll also notice a link (on search results pages) to
immediately reindex each page. Finally, options to limit your search to
terms in the title, meta tags, and url by simply pointing and clicking.
The default search finds your terms in page titles only. You'll need to
select "content keywords" to search terms on the page.

• Posted by John Battelle at 1:37 PM
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Microsoft: Built From Scratch, The Interface Migrates to the Web

Three things struck me as I reflect back on my trip to Microsoft Tuesday. One, it's not wise to dismiss the company as being "at the first grade level" or "behind" the rest of the pack. Second, the fact that Microsoft came late to the search game just might be an advantage. And third, I need to get some face time with the Windows team, because I went into the day wondering if MSN isn't becoming MSFT's future interface/platform play, with Windows relegated to a supporting role (as DOS was to Windows) and, well, nothing I heard convinced me otherwise. And that certainly can't be right. Or can it?

I met first with David Cole, who runs MSN and has a long history at the company, in particular with Windows and web technology. Much of what we discussed I need to save for my column, but suffice to say we covered a broad range of topics, including Longhorn integration (yes, MSN and search are being built with an eye toward that eventuality), the Web OS meme (while not dismissive of the idea, Cole thought it was just one of many approaches to solving computing and information service problems), and of course, competition with Google and the rest of the field. Cole began by outlining how MSN has shifted to its current strategy, based on building scaled software services that break into two major buckets: communications services (MSN Messenger, Hotmail, etc) and information services (search, content, etc.). Yusuf Mehdi, who I met with next, runs information services, and we had a pretty detailed chat about the present and future of search. That conversation was for the book alone, due to timing issues. I can report, however, that Yusuf was pretty charged up about what they are building.

So why did I leave thinking that MSFT's late start in search could be an advantage? Well, think about it. The company has massive resources, and the folks in charge are pretty smart. So they get to tackle the search problem with no legacy issues and no presumptions with regard to approach. There are any number of hurdles in search - starting with how to scale your infrastructure and moving into how to integrate results with personalized data - and many of these might best be tackled by starting fresh. Plus, on the talent side, MSFT is really the only viable player that can offer engineers unlimited resources and the chance to start from scratch. I know, the Valley mill says MSFT is having a hell of a time hiring, but when I asked that question up in Redmond, I got quite the opposite answer.

I found both Cole and Mehdi personable and open, and willing to listen as much as hold forth. I did ask them any number of questions suggested by Searchblog readers, and I got a chance to talk to Scoble before I went in as well. I asked Scoble what I should ask the MSN execs, and he said he wanted to know when MSFT would launch blogging on MSN, what their RSS strategy was, how they plan to kick Google's ass, and what they were going to buy. I asked those questions and more, and while some of the answers are under embargo for the book, here are a few of the highlights I can report:

- MSN Premium, a new subscription product, already has a rudimentary blogging tool, Cole told me, and blogging will be improved and incorporated in some way across the system.
- 3 degrees, a social networking application that is in testing in the Sandbox, has taught MSN a lot and we can expect to see some version of it attached to MSN Messenger. In particular, watch the music application.
- RSS: Well, Cole was not hip to RSS, but he said he would get hip pronto. (He also was not aware of Scoble, but that's changed now!)
- Google: Very diplomatic on this front as you might expect. Respectful of how the company changed search and the internet for good. It's not often that Gates admits defeat.
- What might they buy? We didn't really get into this one - ran out of time. But I sense that MSFT is pretty into rolling its own right now. When the search platform is stable, I'd wager they might go looking for neat things to plug into it.

On the platform idea (point three), my general thesis is this: Over time, more and more of a typical user's desktop real estate is devoted to web-enabled apps. I am an extreme example of this trend (and I'd wager the same is true of most of Searchblog's readers): at any give moment, I've got ecto (a blogging tool), NetNewsWire (RSS reader), Firefox and/or Safari (browser), mail, and Office open. All these applications are web-enabled (Office is the lamest of the bunch, but not for long). Even OSX makes web calls - if only for software updates for now. So if you look at my screen, at least 80 percent of it is web applications. Compare that with five years ago, where it was just email and the browser, or ten, where it was just email.

Now, all these applications are migrating to the portals, and the portals are migrating to the model Cole described: software-based platforms replete with tools and applications - mail, calendar, blogging, rss readers, the works. At some point (and this certainly is not a new idea) the very idea of the "desktop" will become pretty old school. We're building an entirely new architecture on top of our OSes. So...what does that mean for the traditional OS? In essence, it loses the glory role, in the eyes of the consumer. The OS does the hard stuff - files systems, security, connectivity, etc., but the interface, the stuff the user sees, is migrating to the web. And MSFT's play there isn't Windows. It's MSN. At least, I think it is....

This, it seems to me, is why the company held its nose and lost untold billions through MSN'a rough patches (the service is now on a path to sustained annual profitability). And it also seems to me that this trend has something to do with Longhorn's delays and missteps: how do you build a new operating system when its interface will live on the web, instead of on the desktop? I'm looking forward to learning more.

• Posted by John Battelle at 11:15 PM
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DIY Search

Well, OK, if you're Matt Wells, you can do it yourself. Gigablast is amazing, in that it really is just Matt. Here's an interview that I read on the plane on the way to MSFT yesterday. Talk about dissonance. Matt Wells, one guy in New Mexico. MSFT, well, MSFT. My report on MSFT by the way is held up a bit as I clear some PR issues as to what I can and cannot report right now....stay tuned.

• Posted by John Battelle at 4:33 PM
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Nutch Update

The recent announcement of Mozdex, which is leveraging the Nutch open source engine, reminded me to ping Doug Cutting and see how things were going with the Nutch project. He replied that while Mozdez only crawls a few million pages, it's a start, and he was pleased to see folks starting to use Nutch. He also pointed to ObjectsSearch, another site which uses Nutch.

But Doug said that his focus these days with Nutch is not to try to get a major, open source alternative to Google or Yahoo out there, though that remains a long term goal. Instead, he reports:

I'm opting for organic growth: get some users and developers
will follow.

Combined, these efforts should continue to push Nutch's scalablility at
the same time as build an installed base, all without having to first
find a sugar daddy.

• Posted by John Battelle at 2:50 PM
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MSFT's Sandbox

A sort of consumerized version of MS Research, MSN Sandbox is where they roll out social software and search-related betas for test runs.

(thanks Tara)

• Posted by John Battelle at 8:57 AM
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Hey, Napster's back, why not Netscape?

AOL might have some play left after all. According to this Infoworld piece (hey, didn't there used to be a NetscapeWorld?), AOL is planning to release a new version of the browser, based on Mozilla, and, to quote the piece:

In addition to a browser suite update, AOL has quietly started beta testing a new product called the Netscape Desktop Navigator that offers access to localized Web content -- based on the user's zip code -- through a round user interface that resembles a coaster. The beta version of the Netscape Desktop Navigator is available for download at: http://navigator-stage.netscape.com/.

The content in question will be from AOL and partners. Mozilla is pretty good stuff, especially the browser. I wonder....will this be the start of AOL having a true play in the browsing/search/local ad space?

• Posted by John Battelle at 8:26 AM
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Loads O' News

Getting caught up, in case you missed it:

MSN Newsbot has new personalization features, including search history (hmmm!). (CNET) (Gary has details...)

Lycos' HotBot has a new toolbar that incorporates desktop search. Cool! But...will it gain traction? (SEW)

University researchers are hacking up 3-D image search. (CBS)

Tim Berners Lee gets a cool million .... (Guardian)

• Posted by John Battelle at 10:01 AM
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Search Engine Loyalty, A9 Prognostications...

Mediapost reports fresh search engine loyalty numbers, concluding that "Google gets the gold again" - 65 percent of Google users use only Google, as opposed to just 55 percent of Yahoo users. I'm not sure I buy the whole search engine loyalty thing. I think folks aren't loyal, they're lazy. As Yoda might say, not until a compelling choice they have, switch will they.

Which brings me to A9. Over at his blog, Rex points out I missed the most compelling potential A9 feature, that of collaborative filtering.

To me, A9 is not designed as an Internet search engine, but as a knowledge-searching tool to end all knowledge searching tools.....As you look for information, Amazon will provide you the results that "people like you" have found most helpful when searching for the same information, product, place, answer, etc

He's right, of course, and I should have made a bigger point of this, but I sort of presumed that was the sex in A9 to begin with - it's Amazon, after all. A knowledge-searching tool is exactly what a search engine should evolve towards. But I disagree with this:

I don't think Amazon wants to compete with Google. Google admitted recently that it was a content business. Amazon has no such designs. Amazon, rather, wants to connect you with something you can purchase.

While I agree that Amazon wants to connect you to a purchase, I disagree with the implication that Google does not. The advertising business = the marketing business. and the marketing business = the ecommerce business. This loop, somewhat blurry in the physical world, is nearly seamless online. As I said in my posts, it's two ends (search, commerce) to the middle here. That's what makes it so interesting. And I am pretty sure that Google spiffed Froogle up and put it on the home page last month for a reason...and that the announcement of GMail, which will offer a compelling user lock-in, was not a coincidence. Rex points out, and I second wholeheartedly:

If A9 incorporates the collaborative filtering algorithms that power Amazon's predictive recommendations to customers, it will (and I know this from very, very expensive first-hand experience) produce search results that will astound the user. Just think about it: Your search results will be filtered first by Google algorithms and then through Amazon's collaborative filtering algorithms. In the simplistic metaphor we used at smallbusiness.com, "Your search results will be based on those results found most helpful by people like you. It will be cool. Promise."

Damn straight. That sounds like one hell of a search engine, and if I were Google, I'd be most attentive.

• Posted by John Battelle at 9:47 AM
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Google Innovates for Advertisers

Obscured a bit in the A9 vortex is this announcement that Google is providing a much more granular tool for local advertisers interested in limiting their AdWord buys to specific locales or cities. I find this interesting as it points to Google's willingness to be responsive not only to users, but to advertisers as well. Of course, offering users more relevant, localized ads can also be considered a service.... MediaPost, CNET, and the NYT report. I'm quoted in the NYT piece, seemingly beating on Google, but it's not quite in context - I was saying that Google Local (not the local ad product) is still beta, and that Yahoo has been more aggressive in commercial search than Google to date.

Apparently Google's move to aid local advertisers will really help merchants in Europe, who previously could only target at the country level. Now they can literally target by distance - say within 20 miles of a place of business. This kind of lat/longitude-driven metadata will open up a $12 billion local advertising market (US alone). And it soon will be integrated into the aforementioned Google Local, which was rolled out (as a beta) last month.

• Posted by John Battelle at 11:02 AM
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Interview with A9's Manber up on B2.0

No need to repost it here, as my interview with Udi is up on Business2.com without subscription walls (thanks 2.0!). Includes an intro which gives an overview of the service and the implications. Good for those of you who don't want to wade through my last two posts on the subject...and gives a bit of insight into how Udi's mind works.

UPDATE: The link apparently is now behind reg, so the column is posted in extended entry. (6/21/04)

WEB EXCLUSIVE
Can Amazon Unplug Google?
The online retailer is planning to change the way we navigate the Web. An exclusive interview with Udi Manber, whose newly unveiled A9 engine just may drain the juice from the brightest light in search.

By John Battelle, Business2.com, April 15, 2004

Is Amazon (AMZN) taking on Google? Last fall the giant online retailer announced that it was launching a company focused exclusively on search. Lest anyone miss the implications, Amazon promptly rented an office far from its Seattle headquarters -- in the epicenter of Silicon Valley, near Stanford University. That's where both Google and Yahoo (YHOO) were born.

Tapped to lead the startup was Udi Manber, Amazon's chief algorithms officer and Yahoo's former chief scientist. Widely respected for his elegant approaches to intractable software problems, Manber was a magnet for Silicon Valley talent. (Either in jest or retaliation, Google responded by buying advertisements on its own search engine for the phrase "Udi Manber"; type his name into the search form and the top ad link offers job opportunities at Google.)

Amazon recently took the wraps off its initial public beta version of A9, and we got the first sneak peek. It's easy to see why the new engine might set Google and other search-driven companies on edge: A9 is a credible step toward making a search engine that knows you and acts as your agent online.

By overlaying what you're looking for onto what you've already found -- and, ultimately, what you've consumed -- A9 aims for the holy grail of search and e-commerce. While others have tried to create personalized interfaces, none has worked so far. Users don't like to answer questionnaires about what they like and what they don't; often they lie. But Amazon already knows who you are -- or at least, what you buy. With A9, the company can factor in what you browse and search for as well.

And the best part, from Amazon's perspective, is that the more things you buy at Amazon, and the more you browse with A9, the better the company will know you. Ideally, it's win-win -- you get better results, Amazon gets more sales.

Manber is the first to tell you he's nowhere near his goal of creating the perfect search engine. But A9 -- the name stands for the nine letters in the word "algorithm" -- is a significant evolution. Blending powerful personalization features with clever interface tweaks and a truly useful toolbar, A9 could well do Google one better. Interestingly, it uses Google's search results -- Amazon and Google have a longstanding search deal -- but builds on them with an elegant set of features that, taken together, make A9 seem like a new way to search.

In truth, Amazon and Google are speeding from two ends toward a very fertile middle ground where commerce and search meet. When they get there, they'll have formidable company -- AOL, eBay (EBAY), Microsoft (MSFT), and Yahoo, to name a few. All of these companies have millions of loyal users and business models built on connecting those who seek with those who sell.

And there's an obvious question: Does Amazon honestly think Google will stand by while Manber creates a better way to search?

It's clear he's just getting started. A native of Israel, Manber has an almost elfish grin and the merry intensity born of someone who clearly knows more than he's allowed to tell. John Battelle asked him a lot of questions anyway.

Walk me through what's different about A9 as a search site.

When people come to A9.com, they have the option to install a browser toolbar and register through Amazon's regular registration process. If you're already an Amazon customer, the site automatically recognizes you. If not, you don't have to register, but if you do, you get the personalized features, and if you install the toolbar, you get even better services.

As to what is new, the most obvious feature is your personal search history -- which is integrated into your entire search experience. So your entire search history is available to you, and with the toolbar, that includes all your searches across any search site, as well as all your browsing on the Web. Also, all the interface columns on the site -- personal history, or related books, or the Web search column itself -- are adjustable and the site remembers the settings the next time you come (the default is that Web search only is opened). I'm very proud of our toolbar's diary feature that allows you to annotate each site you visit. And we have integrated Amazon's "search inside the book" feature into the engine, so now all your results include excerpts from related books.

I understand much of the personalization is made possible by what you call a "history server." What exactly is that?

The history server stores -- on our servers -- your history of interaction with us for the purpose of bringing that back to you in a very convenient way. Whenever you come to the site, we can show you what you searched for in the past in a very easy-to-organize fashion. If you want to hide some of that, you can opt out at any time. If you install the toolbar, then all your Web browsing, as well as all your searching, is stored as well. And we are working on many different ways to improve that.

So there is a massive repository of data, held on an Amazon server, that tracks where I've been on the Web. Isn't that something of a privacy nightmare?

Our privacy policy is very clear on this subject -- we will never share this data with third parties. Also, having the data of what users search for or where they go is not a new concept. Any site that requires registration -- AOL or MSN, for example -- already has this information. What is new is that we're taking this information and giving it back to the users to make their search experience better and more useful. It gives them more power.

Will A9 ever integrate all the information Amazon already knows about its customers -- what they buy, browse, or search -- into creating better search results? If I happen to buy a lot of books on jungle cats, will my A9 search results know to serve me the cat-related search results for the query "jaguar" ahead of the car or the football team results?

We have no plans to do this at the moment. It is very hard to do well. If we do this, we want to make sure to do it in a way that makes the search experience work better for users. But again, I can't predict the future. The whole goal here is to get better customer experience. Whatever I can find to get better customer experience, I'll do it.

How can we square the perception that A9 was going to be a commerce engine with the reality of the site as it debuted, which feels much more like the evolution of a pure search site like Google? Will a shopping comparison engine be added soon?

I can't answer that. As an engineer I don't like to talk about things that I haven't yet built. A9 is a way to experiment with several features that help our users. It's a way to bring more users in, and it's a way to see the feedback they give us using those features. We will later use that feedback to improve search both at Amazon and other sites we partner with. It is clear that search is an integral part of any e-commerce site. It's also clear that search is not a solved problem for e-commerce, or beyond e-commerce.

What happens if A9 starts to steal market share from Google?

We don't talk about other companies, and to be honest, we don't even think too much about competitors. We try to concentrate completely on the users. I don't look at it as who we compete with but rather how much something helps the users.

You've said search is not solved. What are the problems that need to be addressed?

In general, the main problem of search is very simple: Too often people do not get the results they need. Solving that is hard. We cannot read people's minds, but we can do much better anticipating their needs and making the process much easier for them.

What might we expect from A9 in the future?

A9 is going to roll out features over time. This is our first beta test -- the result of a small team working over a short amount of time. We are growing the group as fast as we can. We have a large queue of very good ideas with the purpose of making search better. Our long-term goal is to improve search. We hope to invent new search technologies and use them on Amazon.com and other partner sites.

John Battelle is a visiting professor at the University of California at Berkeley and author of "The Search" (Portfolio, late 2004).

Find this article at http://www.business2.com/b2/subscribers/articles/1,17863,611251,00.html

©2004 Business 2.0 Media Inc. All rights reserved.
Reproduction in whole or in part without permission is prohibited.

• Posted by John Battelle at 9:17 AM
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Searching Is Getting More Complicated

A few weeks ago I spent the morning with Gary Flake, who heads up Yahoo's R&D efforts (Yahoo Labs). He's got some pretty cool stuff in the works over there, though most of it is still in the "I could tell you but then my publisher would kill me" category. One thing he did say which stuck with me had to do with search interface issues - how to solve that intractable problem of figuring out what the user wants, without forcing that user to jump through UI hoops all day. "We just need one more datapoint," Flake said, referring to the original query as the first datapoint. "Just one more interface element to make search better." The problem, of course, is depending on a million factors, that second input might be any number of things, from a "Did you mean...?" clustering question to flicking on a personalization tool that filters results through your zip code, Amazon purchase patterns, search history, social network...etc.

Anyway, this all came up when I saw this eMarketer report today, proving at least the trends are heading - a bit - toward complication. It shows, as has been the case for the past year or so, that searches are getting more complicated - the percentage of searches that have just one word in them is declining, and the percentage of multi-word searches is ever-so-slowly increasing. The graf at the bottom of this post is last year, at the top, this year.

• Posted by John Battelle at 7:48 AM
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More on A9

The blogosphere continues to chew away on A9, and I think it will take some time for the new service to fully reveal its more interesting features. Gary, for example, gives it a less-than-rave response here, and summarizes many of its features in the process.

I wrote about the implications of A9 w/r/t business models in my last post, but I wanted to say a short bit about why I'm so interested in its approach.

To me, the core feature that makes A9 interesting is what Udi Manber calls a "history server" - the technologies behind A9's search history and personalization features. Having your entire search and click history, and if you use the Toolbar, your entire browsing history as well, available on a server side application opens up all sorts of new approaches to solving search, research, and recall problems. Combining that history with what Amazon already knows about you (no, A9 does not do that...yet) creates even more powerful possibilities. Yes, it brings up massive privacy issues, but then, we've seen this movie a few times. Those who don't want to watch can opt out.

(As an aside, I have to say the idea of a complete, lifetime record of a person's searches and browsing history - which by the way that person can edit - is an extraordinary concept. It's taking the idea of the database of intentions to the utmost granular level of history - the individual. What, I wonder, happens to a person's search history when they die? Do they have a right to own it? Does it get passed down as a keepsake to his or her children?)

What gets me thinking is that for those who commit to A9 as a search solution, new and continuous improvements in search are likely to be hacked up, based on the fact that the personalized history can be analyzed and leveraged. For example, Gary and others have noted that the service does not allow you to keyword search within your searches, and display, for example, just those pages you've browsed in the past. I'd wager Giants tickets that will be in the feature set by the end of the year.

A minor example of the power of the history server: when you repeat a search, A9 will show you what links have changed and what links you've clicked on before. This might seem like a minor deal, but it's a pretty effortless feature for A9 to serve up. Imagine what else might be done with the history server. If you can imagine it, you can probably do it - again, I'll wager that Amazon will figure out a way to make the A9 interface API friendly, so that its platform developers can cook up even greater feats.

On the interface side, I am a fan of the collapsable columns for search history, web results, and books (which you can imagine will be all things sold on Amazon and its affiliates before too long). But I do agree that the color scheme is a bit...dull. It lulls me toward sleep. Or maybe that's just my lack of sleep talking.

Manber is quite insistent that A9 is a very early piece of work, the result of 30 folks banging away for 90 days, but that it's quite robust, and will evolve very quickly in the next year. From what I've heard about him from others in the field, and what I can see so far, I am sure it will worth watching very closely.

• Posted by John Battelle at 10:40 PM
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NEWS: A9, Amazon's Search Portal, Goes Live: Reverberations Felt in Valley

A9, Amazon's much discussed skunk works search project goes live today, so I can finally write about it. I saw it last month (caveat: unbeknownst to me until recently, Amazon targeted me as their conduit to break this news - I think they wanted it to move from the blogosphere out, as opposed the WSJ in) and had to keep the damn thing to myself, it was hard, and here's why: On first blush it's a very, very good service, and an intriguing move by Amazon. It raises a clear question: How will Google - and more broadly, the entire search-driven world - react?

My gut tells me the public face will be one of partnership: After all, A9 uses Google' search results and displays at least two paid AdWord listings per result (I've requested comment from Google, you can imagine I'm not the only one...). But I have to wonder: What business is Google in, after all? Is it still in the business of just search - as it was back when it was cutting search provisioning deals right and left, with Yahoo (already ended), AOL (arguable imperiled due to Gmail and other trends), Ask, and Amazon? Is it really still in the business of being an OEM to others, a strategy which allowed it to steal those portals' customers? Or...has it evolved, to a business where it owns a large customer base, one it must now position itself to defend?

It seems to me, Google's position in Amazon's A9 implementation is at best a step backwards. If A9 is as good as it seems to be, every customer that uses and/or switches to A9 becomes an A9 search customer, and, more likely than not, a deeper and far more loyal Amazon customer. (The service incorporates a personal search history and many other really neat tweaks, including a wicked good Toolbar.) In essence, Amazon seems to be making a play for Google's customers. Or it seems that way to me, anyway. Sure, Amazon isn't in the AdWords business. It's happy to outsource that to Google and focus on the entire US retail GDP instead...

Udi Manber, the head of A9 and one of the leading lights of the search community, is understandably evasive when asked about this subject. Google and Amazon have always been friends and partners (despite the fact that "Work at Google" is the top paid link when you search on his name on Google). But as I point out in the introduction to my Business 2.0 interview, to be posted any moment now, one-time partners can quickly become serious competitors in the Search Find Obtain market. And judging from the look of it, A9 is a very direct statement from Amazon: We are now officially in the search business, so get used to it.

One could argue that A9 is a pure commerce play, not a search portal. After all, that's what the folks at Amazon insisted when they founded the company and located it in the heart of Google/YahooLand (ie, Palo Alto). But that argument is disingenuous. First off, take a look at the A9 interface. Where's the commerce? (Answer, it's there, but it's hidden, more on that later when I post on the service itself). And second, I'd argue that you can't really be in the commerce business without having at least a strategy for owning search. The reverse also holds true. It's two ends toward the middle, and by the way, that middle ground is getting damn crowded - AOL, Yahoo, MSN, eBay, IAC, Amazon, Google...

Of course anyone who’s been in this game for a while will tell you that the internet industry is rife with cat and mouse games of cooperation turned to competition. Netscape’s outsourced its early search traffic to Yahoo, thereby ensuring Yahoo’s success. Yahoo paid the favor forward by outsourcing its search to Google, a practice it ended only last quarter. Microsoft built Overture, and crushed Looksmart. And AOL’s advertising business is on the rise again, due in large part to a deal with Google, which just announced a stunning new email service that pretty much decapitates one of AOL’s core differentiators (oh, Yahoo and MSN as well...).

What makes this particularly noteworthy is that A9 is built quite literally on top of Google. In short, Amazon has taken the best of Google, and made it, to my mind, a lot better. Sound familiar? Yup, it's what Google did to Yahoo, Yahoo to Netscape...you get the picture.

It all reminds me of a quote in a recent AP story from Google employee #1:

(The ongoing threat of competition) has helped keep Google from becoming complacent, said Craig Silverstein, the company's director of technology. "If someone should come along and do a better job than us, we know people will switch in a heartbeat."

Something tells me the hearts are beating a bit faster at Yahoo and Google HQs today. Will Google renew its deal with Amazon? Will Bezos and Schmidt put a good face on it and call this a partnership? I have no idea, but man, things are certainly getting interesting in this neck of the woods. More after I talk with folks and get a second order view of the landscape.

(I'll also have a much more complete posting on A9, including a tour of its features and a discussion of its strategic implications later tonight.)

PS- for a tour of what's cool in A9: Click here.

• Posted by John Battelle at 11:24 AM
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More Open Source Search: Mozdex

Mozdex launched recently, it's an open source search engine that uses DMOZ as its seed corn.

Cool: Every result has an "explain" button that shows the ranking code. Now that's interesting.

It's a tad slow, and new so it's incomplete, but I hope takes off...and I hope Nutch will as well. (My 2.0 column on Nutch here...)

UPDATE: Gary, ever alert, notices this:

A quick check shows that the owner of GetHitsfromUS.com owns the
Mozdex.com domain.
http://www.whois.sc/mozdex.com

This may be a pure ad play, in other words. More when I know for sure.

• Posted by John Battelle at 4:30 PM
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Findory Featured...

Newsearch engine Findory is profiled in this Seattle Times article. Like Topix, this engine creates personalized news pages based on your interests. Findory watches what your read and presents related stories. The founder, Greg Linden, cut his teeth in Amazon's personalization foundry...

• Posted by John Battelle at 4:04 PM
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I'll Take Mesothelioma for $100

Lawyers lick their chops at the chance to prosecute a mesothelioma case. That's why the rare form of cancer caused by asbestos is a high-value keyword. Apparently the term has hit $100 a click, according to this UPI report.

• Posted by John Battelle at 7:42 AM
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Claria Clarified

Perhaps I was being a bit too off the cuff in my last post on Claria. Full disclosure: A good friend went to work for them recently. This person admitted the company's past, but said that in fact it was mending its ways. New management has come in, folks with a good track record at Excite, pre-bust. I'm looking forward to learning more soon. On that note, look for my post on IntelliTXT shortly.

• Posted by John Battelle at 9:00 AM
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Referrals and the Yahoo Switchover

Yesterday's SEW (yes, I'm behind, was on deadline on a story that is so damn good, but...damn, it's under embargo) has a good story comparing Yahoo and Google referrals, using WebSideStory data. This chart shows that Google still has the lion's share, and in fact grew a bit year to year, but that Yahoo has not slipped during the changeover from using Google to using its own search. The chart is for March, 2004.

• Posted by John Battelle at 10:57 AM
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The Future of Search

Computerworld does the honors this time and has some interesting new stuff, including a crawler that is domain (ie, subject) specific. This could help build the Specific Web, which I sort of outlined in this post on GlobalSpec. Thanks to Gary for the tip, and a good summary of the article here.

• Posted by John Battelle at 10:41 AM
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Revenue Science

New model in an emerging market. Big name investors. Strong management. Product launched today. Big name customer, too (WSJ...) On my To Grok list.

Update: Fred points out that Tacoda was in this space first and, to my mind, sports Big Name Investors as well, namely, Fred and Jerry...

(thanks, Gary)

• Posted by John Battelle at 11:37 AM
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Yahoo: New Brand Image ("Life Engine"), Distribution Wins

Yahoo will launch a new brand marketing campaign this week, according to a lengthy report in Media Daily News. It's the first major effort by the new CMO, Cammie Dunaway. The theme is "Yahoo is the life engine" and it features a number of "minor celebrities" like former CA governor Gray Davis.

Perhaps the most charming of the initial group is a spot featuring former California Gov. Gray Davis paired with a junior high school student who uses Yahoo! mail to convince her schoolmates to elect her as eighth-grade treasurer. With "Hail to the Chief" playing in the background, Davis introduces himself and says he's using Yahoo! to look for an agent, suggesting that if a former actor can be governor, maybe a "former governor can be an actor," although he doesn't think "action/adventure" would be his genre. The spot closes with Yahoo! as a "Job engine, mail engine, life engine." The creative strategy presents the audience with two different demographics, each using Yahoo! to achieve a task or to enrich a passion.

In other news, Yahoo and its Overture subsidiary won some new business last week, including stealing CNN's search biz from Google, and adding a deal with the WSJ and renewing and extending its deal with ESPN. Release in extended entry.

Overture Extends and Expands Search Agreements with CNN.com and ESPN.com, Signs New Deal with The Wall Street Journal Online
 

Company Adds Three New Content Match⎪ Agreements and Provides Yahoo! Search Results to CNN.com

PASADENA, Calif., April 5, 2004 - Overture Services, a wholly-owned subsidiary of Yahoo Inc. (NASDAQ: YHOO) and provider of essential online marketing services, today announced that it has extended its existing agreement with CNN.com and has expanded it to include additional Overture and Yahoo! products.  In addition, the company announced that it has signed a new distribution agreement with the Wall Street Journal Online (WSJ.com) and that it has extended and enhanced its existing agreement with ESPN.com. All three deals are multi-year agreements.

"Today, CNN.com, ESPN.com and The Wall Street Journal Online - three of the world's leading online brands - are confirming their commitment to search through their relationship with Overture," said Bill Demas, senior vice president and general manager, Overture’s Partner Business and Solutions Group. "Our comprehensive suite of sponsored search, Content Match and Yahoo! Search products enables us to offer partners the customized search solutions that meet their individual needs.”

As part of its enhanced agreement with CNN.com, Overture will replace CNN.com’s existing Web search listings with results generated by Yahoo!’s Search Technology. In addition, Overture will begin to provide Content Match, its contextual advertising product, to multiple CNN sites and has extended its term of service as CNN.com’s exclusive sponsored search provider.

"We're delighted to expand our relationship with Overture. CNN.com has consistently been the number one online news publishing site. Overture’s strategy for creating a premium marketplace for contextual links fits perfectly with our goal of aggregating and serving a highly desirable audience,” said David Payne, senior vice president and general manager, CNN.com. “In creating this new marketplace and in providing search result functionality, Overture and CNN.com are able to jointly leverage and monetize our valuable audience and tremendous traffic numbers."
Under the terms of its new distribution agreement with WSJ.com, Overture will deliver Content Match results to WSJ.com’s more than 689,000 online subscribers worldwide.  In addition, Overture will provide sponsored search results to users of the WSJ.com’s site search.

“We are very pleased to partner with Overture to add their sponsored search and Content Match capabilities to our site,” said Randy Kilgore, vice president of advertising, The Wall Street Journal Online.  “We selected Overture because of its flexibility, support and integrated solutions, and look forward to working with them to provide our subscribers the most up-to-date, relevant information possible.”

With ESPN.com, Overture has renewed and extended its existing sponsored search agreement to include Content Match. The enhanced relationship offers users a more robust keyword search, ESPN.com site search and comprehensive Web search experience.

“We are excited to extend our relationship with Overture to add its contextual listings to ESPN.com, which will provide even more relevant information across our site," said John Kosner, senior vice president and general manager, ESPN.com. "Having multiple search products with our content allows us to offer far more customized information to our users.”

“These partnerships will greatly benefit advertisers and users alike. By establishing and deepening relationships with leading publishers like CNN.com, ESPN.com and WSJ.com, Overture can now provide advertisers even more ways to connect with customers,” said Demas. 

About Overture
Overture Services, Inc., a wholly-owned subsidiary of Yahoo! Inc., offers essential marketing services for companies doing business online. The company's search-based products and tools help businesses connect with highly motivated customers. Overture is based in Pasadena, Calif. with U.S. offices in New York, Chicago and San Mateo, CA. The headquarters for Overture's non-U.S. business is in Ireland, with offices across Europe, Asia, and Australia. For more information about Overture, visit www.overture.com. Overture is a service mark of Overture Services, Inc.

• Posted by John Battelle at 9:16 AM
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Google Changes AdSense Pricing Strategy

AdSense is Google's contextual ad product for publishers - the one folks can sign up for and have up and running on their own site in minutes. Google's advertisers have long complained that AdSense ads are far less valuable to them than AdWords ads (the ones that run on Google's site), as folks who are reading content on any given site have far less intent to buy than folks who are actively searching for something on Google's site. Google steadfastly mixed the two and would not offer variable pricing, until now. But their plan is not to split the purchase, but rather "monitor performance" and offer a better rate if conversions are low. Cnet reports. Overture already offers a split pricing service.

This move is widely seen as "Google giving in to advertiser demands." Interesting. Jarvis sees it another way: He says publishers - in particular bloggers - are getting shafted by an ever more powerful Google. He's hoping to drive interest in alternatives via his session at Bloggercon.

• Posted by John Battelle at 11:07 AM
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Kinja Launches (No Fooling, I think....)

Meg and Nick's creation launched today. It's a "blog of blogs." A "blog portal." AN "RSS reader (of sorts) for people who don't know what RSS is..."
The Times has a piece here.
Nick blogs the background here.
Congrats to them both!

• Posted by John Battelle at 7:47 AM
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