Yahoo

Yahoo's core business has been essentially flat ever since Google rose up to dominate its niche. Given the performance of most of Yahoo's competitors from the 1990s, Yahoo is an unabashed success story, but compared with Google, Yahoo is just another also ran.

Yahoo's board of directors seems to have finally figured out that something big needs to happen and it has undertaken a reorganization at the very top of the business. But the company's scatter-shot approach to the release of this information to the media and the absence of anything more than idle speculation lends credence to a reserved take on the situation.

Yahoo's new advertising platform has generated a great deal of attention on Wall Street, but Internet marketers know that Google has a stranglehold on this market. Without the ability to leverage search dominance in the same way that Google does, many analysts have suggested that Yahoo just outsource search to Google and concentrate its resources on a more profitable niche. Even a combination with MySpace is unlikely to give Yahoo the ability to beat back the behemoth.

Overall Ad Spending Flat; Online Ads Continue Their Tear

CNNMoney.com reports that total ad spending fell 0.7 percent while online ad spending rose 16.7 percent in the first quarter. Television and radio both dropped over 2 percent but newspapers lost 5 percent of their ad spending.

The continuing transition from traditional media to the new digital communication medium is having larger impacts on society than sending Google shares soaring. The legal and ethical framework that control the way information is vetted and then conveyed via television, print, and radio simply don't work effectively online.

The ongoing implosion of the nation's newspapers is wrecking havoc on the traditional punditry. Fifty years ago, the vast majority of people read the Sunday paper and watched the evening news to get their information. Consequently, the information available to people was both much more homogeneous and significantly more limited. Now that a profusion of Internet news organizations and blogs offer more in-depth, more opinionated, and more questionable "news".

The information consumer of today is at once more informed and more misinformed than at any time in history. The ultimate effect of online communication is unambiguously positive, but the growing pains of the medium are potentially dangerous.

Companies like Yahoo stand to profit enormously from this long-term trend, but Google looks like the biggest near-term winner. With its unassailable lead in Internet search, Google controls the pathways most users travel to find information online. If no one defeats Google in its core business, Google will reach outward like a giant octopus to grasp for ad revenues across everything on the Internet. And while Google promises to do no evil, the temptation is only going to grow.

Adsense Arbitrage and Internet Advertising

The Computer Business Review Online is reporting that Google is shuttering the accounts of people who use Google's Adwords program to "buy" viewers and then direct them to websites full of high paying ads. Since on average only 1 or 2 viewers in a hundred clicks on an ad, these arbitrage opportunities only work when the price differential is fairly large. Apparently, savvy web developers have found lots of these situations. The best example of this situation is where the website purchases traffic related to "digital watches" very cheaply and then has many ads for Rolex watches which are worth a great deal.

Moral arguments about arbitrage in general aside, Google is foregoing significant revenue here in order to increase the quality of users' searches. Google makes money every time someone uses either Adwords or Adsense, effectively running both sides of this arbitrage for the website developer. Google is clearly gambling that the overall quality of the searches they provide to users is more valuable to their business than this revenue.

The real implication here, however, is that those engaging in arbitrage don't have a good alternative to use now that Google has shut them down. In particular, Yahoo! and Windows Live don't control enough of a fraction of the total web search market to replace Google. When Microsoft re-branded their search engine, they actually lost ground and Yahoo! has been unable to catch Google.

Advertising is turning into the second viable industry on the Internet, after the vices like adult entertainment and gambling. Hopefully, the Internet will be able to keep it clean.

Google Goes to Court

Reuters reports that Google is going to face a jury trial that could potentially put its entire business model at risk. The lawsuit centers around an alleged trademark infringement inherent to Google's Adwords program, which is responsible for 98% of Google's revenue. This isn't the first time someone has sued Google over its business model, but Geico settled out of court and Louis Vuitton sued in French court. Having never faced a jury trial before, Google's performance in court could change the face of the Internet economy.

The case was originally filed in 2003 by American Blinds and Wallpaper Factory Inc., the top reseller of window blinds. The suit centers on the ability of American Blinds' competitors to buy the company's name as keywords to link to their sites.

No relevant case law exists to cover keyword advertising, so even if the court finds in favor of Google the appeal process in likely to set the relevant rules of Internet advertising for years to come.

The suit will be heard in San Francisco, which should generally favor Google as the tech savvy community is full of people who love to use Google's various products. But American Blinds is obviously serious about this case given their tenacious pursuit of litigation.

The American legal system is in many ways built on the notion of trial by jury, and now twelve jurors are set to determine the fate of Google's business model and with it much of the Internet economy. Let's hope they're paying attention.

Green Tech Gets a Big Leg Up

The EE Times reports that IBM is planning to spend $1 billion on energy saving technologies that are designed to cut power usage 42%. This is potentially a much larger savings than it might seem at first blush, because IBM's technology is critical to many data centers. These data centers, which drive the digital economy, are power guzzlers that have been growing exponentially. Saving more than 7000 tons of carbon emissions per year would be good if IBM alone could do it, but IBM's technology will be leveraged across many companies.

Google is one of the world's largest users of data centers. With a presence in 13 states, Google is expanding geographically into areas with cheap power. This can most clearly be seen in Google's move to Council Bluffs, Iowa. The key to Google's methodology is hooking thousands of low-cost boxes together to create the essentially instantaneous search results that the world has come to rely on. The upshot is that as the individual machines wear out or break, they are constantly being replaced. If IBM can achieve significant power savings, these power savings will likely be implemented immediately.

In the money hungry technology world, one billion dollars doesn't last as long as might be hoped. The so-called "burn rate" required to keep up will the bleeding edge is frighteningly large and rising all the time, but IBM's outsized commitment to green technology is a sure sign that the movement is achieving real change.

While the environmentalist movement's mindshare is indisputable, many people still question the case for global warming. Yet even if global warming is the greatest hoax since time began, the business case for reducing power consumption is quite strong. The power infrastructure in the United States is very old and running at nearly 100%. Achieving more computing power with less energy is a sure way forward. It takes decades to get power plants out of the planning stages and into everyday production, and it has become clear that the pipeline of power plants ready to come on line tomorrow is empty.

More energy means more pollution, but it also means more money. IBM plans to spend money to make money, but in the process they will save everyone else a great deal more.

Paid Links and Gaming Google

Due to Google's stranglehold on the online advertising market, businesses absolutely must get a top 10 ranking for their relevant keywords if they are to generate substantial traffic to their websites. And the payoff to a top 10 ranking just keeps getting bigger as more and more people come to rely on Google.

One way to get a higher ranking from Google is to develop your site naturally. Unfortunately, this may take years and if a business is in a competitive industry there is no way to be sure it will ever happen. This is due to Google's practice of tracking the number of inbound links to websites. If a site lacks lots of people linking back to it, it won't rise in the search engines.

One way to overcome this hurdle is to pay bloggers to consider a website. Bloggerwave is a Danish company that connects advertisers with bloggers in order to maximize their search engine rankings. Bloggerwave allows a business owner to overcome the formerly tedious process of getting listed in search engines and move straight to addressing the needs of customers.

Challenging Google and Finding a Business Niche

Google has achieved such total dominance in the general online search market that businesses everywhere should seriously consider ways to reduce their reliance on the behemoth. It may be cost-effective to advertise solely through Google, but ultimately giving up control over everyone's Internet presence to one company is a recipe for disaster.

One company that has stepped forward to offer businesses a reasonable alternative is masterseek. Masterseek specializes in connecting businesses with other businesses, to leverage new supply chain connections and consider investment opportunities.

This company is not even trying to replace Google, but by moving a specific type of highly valuable searches away from Google a company could meaningfully reduce its reliance on Google.

DiscountClick - Search Engine Optimization for Online Business

Operating a web-based business in today's fast-paced world requires the ability to get noticed. Google has taken such complete control over the Internet that more than 60% of all the searches conducted today are run through their service. The implication for business owners is clear - get noticed as the first or second result on Google or get run out of business.

DiscountClick offers specialized search engine optimization tools and promotion for as little as $50 per month. Compared with the cost of being listed in the yellow pages, DiscountClick is a profound value proposition.

Marketing doesn't happen overnight, but in as little as 2 weeks DiscountClick can dramatically increase the ranking of any website. Google's dominance of the search engine market only means that businesses can't afford to wait to get noticed.

Google Turns Evil

The IHT reports that Google has purchased DoubleClick, quite possibly the most evil company in the history of the Internet (yes, it's worse than Microsoft). Google won what was apparently a bidding war with Microsoft over leverage in the Internet advertising business.
Google spent $3.1 billion in cold, hard cash for DoubleClick, significantly more than the $1.65 billion it spent on Youtube.

DoubleClick is a very valuable company to anyone who wants to know what you've been doing on the Internet. Advertisers are obviously interested, but so are privacy activists. DoubleClick is probably responsible for 1/2 of the spyware currently on the Internet. Basically, the company's business model is built around tracking what users do on the Internet, largely without their knowledge.

Most realists recognized that Google couldn't remain forever the perfect company, able to mix phenomenal products with high margins and social goodness. But this acquisition, literally beating Microsoft at its own game, just signals the extent to which Google has changed. One of the great criticisms of Microsoft is that it doesn't develop anything in house, but rather acquires smaller, more innovative companies and milks their products for revenue. Google is at least still paying lip service to its core competency by concentrating on advertising, but the writing is on the wall.

An intriguing side note is that private equity has infiltrated another giant deal. The connection this time is a San Francisco private equity firm Hellman & Friedman, which bought DoubleClick for $1.1 billion in 2005. Not a bad return for such a short investment. Watch for other private equity firms to develop companies with the express purpose of selling them to Google for a big profit. As long as Google retains control over the Internet through its search dominance, Google will have lots of cash from advertising to invest in other businesses.

Ironically, in much the same way that Microsoft used its dominance on the desktop to crush Netscape, Google is poised to use its search dominance to muscle into other areas.

Zell takes on Google

The Washington Post reports that Samuel Zell, the billionaire in the process of purchasing Tribune Co., doesn't think news outlets can afford to continue to give away their content online to companies like Google. His opinions carry significant weight because the Tribune Co. owns such important newspapers as the Chicago Tribune and the Los Angeles Times in addition to other properties like the Chicago Cubs.

Zell is upset because while the average consumer of news is increasingly getting their information online, his personal slice of cyberspace is not making any money. His concern regarding internet revenues is important to the newspaper business because the crown jewels of the news world, the Chicago Tribune and particularly the Los Angeles Times, are actually losing circulation. This overall trend has been going on for at least the past decade and seems to be accelerating.

Zell's comments regarding Google aren't really even specific to the newspaper industry. Search engines like Google essentially freeload off the content that everyone else on the internet generates. If all sectors of the economy defended their intellectual property with the vigor of book publishers, Google's business model would implode. In a real sense, Google receives a significant subsidy from all the content they index.

Zell obviously wants a larger share of the advertising revenues derived from viewers of his newspapers. The outcome of his push for compensation could have implications for the rest of the internet. Content is king, but also largely free. If a spat over the distribution of advertising revenues gets too intense, content providers may move in the direction of a subscription-only model. And that would be a shame, because information just wants to be free.