March 16, 2008
Google is the assignee of this patent, filed last week:
At a client, a video is received. The video includes one or more advertisement slots. The video is played back to a user. During the playback of the video, an impending advertisement slot is detected. One or more advertisements are requested for placement in the advertisement slot. The one or more advertisements are received and placed in the advertisement slot.
Is this the future of YouTube? From a quick browse, I can't tell how this would differ from the television playbacks, which are now routine.
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January 18, 2008
As Christine notes below, Google.org, the philanthropic unit of Google, announced the focus of its core initiatives and more details about its strategic plan yesterday. The focus on the “venture capital model” that DotOrg (as the NYT reports Google employees refer to it) will be using is not particularly innovative. This model, frequently known as venture philanthropy or strategic philanthropy, has been kicking around for the past 10 years or so. Although it has been embraced primarily by a handful of New York and Silcon Valley grantmakers, the concept’s origins date back to an outstanding 1997 Harvard Business Review article, "Virtuous Capital: What Foundations Can Learn from Venture Capital," by Christine Letts (Harvard Kennedy School), William Ryan (author, consultant, and researcher) and Allen Grossman (Harvard Business School). Here’s a description:
U.S. foundations and nonprofits work diligently on behalf of society's most needy and yet report that progress is slow and social problems persist. How can they learn to be more effective with their limited resources? Foundations should consider expanding their mission from investing only in program innovation to investing in the organizational needs of nonprofit organizations as well. Their overemphasis on program design has meant deteriorating organizational capacity at many nonprofits. If foundations are to help nonprofits be assured of making payroll, paying the rent, or buying a much-needed computer, they must develop hands-on partnering skills. Venture capital firms offer a helpful benchmark. In addition to putting up capital, they closely monitor the companies in which they have invested, provide management support, and stay involved long enough to see the company become strong.
This model as been used by several other grantmakers, including, the Edna McConnell Clark Foundation, Omidyar Network, and even the Goldman Sachs Foundation (my former employer), to name just a few. Although it’s worth noting that critics argue that venture philanthropy is just a new name for old practices that well-run charities and foundations have always employed. Less charitable (no pun intended) critics of the approach describe it as a fad driven by wealthy venture capitalists and dot com types who smugly assume that their skills transfer to a field in which they had no experience.
But what seems interesting and new to me are some of the areas that Google.org plans to “invest” (i.e., make grants). Some of their priorities seem to address important problems/issues that few foundations, at least to my knowledge, are devoting significant resources toward addressing. For example, the Develop Renewable Energy Cheaper Than Coal (RE<C) and Accelerate the Commercialization of Plug-In Vehicles (RechargeIT) initiatives come to mind. As they describe these projects, RE<C is a collaborative effort within the company to produce a gigawatt of renewable energy capacity for less than it costs to produce it by burning coal. RechargeIT will work to reduce carbon emissions, cut oil use, and stabilize the electrical grid by accelerating the adoption of plug-in hybrid electric vehicles and vehicle-to-grid technology.
The most interesting (and innovative) thing about Google.org, however, is its legal status. Unlike every corporate foundation that I’m familiar with, Google.org is not an exempt, nonprofit entity recognized under 501(c)(3) of the Internal Revenue Code. (Although it’s important to note that Google.org manages the Google Foundation which is a 501(c)(3) private foundation facilitating grants to nonprofits.) As such, it will be interesting to see if the DotOrg part of the enterprise uses its status (and the accompanying freedom from IRS restrictions) to innovate bringing both private and nonprofit resources to bear in order to generate societal benefits. It seems to me that the extent that Google.org relies exclusively (or even primarily) on partnerships with or grants to nonprofit organizations (who remain subject to nonprofit law and regulation), the real opportunity for true innovation of the model they tout remains limited. But as of today, the jury is still out.
When Google announced its IPO, it promised potential investors that it would invest 1% of its profits into philanthropic ventures. Google even included this promise in its registration statement. Now, Google has launched Google.org, the philanthropic arm of Google. This branch of the organization analyzes proposals and decides which of many worthy projects will get funding. As has been advertised from the start, the funding the company will provide will resemble venture capital more than traditional philanthropic grants. Recipients will be more entrepreneurial than nonprofit. NYT story here.
November 27, 2007
That's Google's new formula, which means "electricity from renewable energy sources that will be cheaper than electricity produced from coal." When your stock is trading at around $700/share, I suppose you must feel like a master of the universe:
In 2008, Google expects to spend tens of millions on research and development and related investments in renewable energy. As part of its capital planning process, the company also anticipates investing hundreds of millions of dollars in breakthrough renewable energy projects which generate positive returns.
Not exactly sticking to their knitting, but this make sense to some people:
Leave it to Google to try to tackle an industry as seemingly out of their realm as energy. Of course, Google is a massive power consumer, so the connection is easy to make, and the feel-good Google execs haven’t likely felt right about their data center’s contribution to dirty-power generation. But if Google can actually successfully develop clean energy sources that are cheaper than coal and create a business around licensing them (through their investments or their own technology), it would do nothing short of revolutionizing the energy industry. Much like the situation the telecom world is facing with Google’s wireless plans, here’s to the old-world, slow-moving energy industry getting a kickstart from that 20 percent time!
August 22, 2007
This past spring, I posted some rather tentative thoughts on "going Google," i.e., converting from Microsoft software to Google software. This morning, I reorganized my Personalized Homepage, so I thought the time was ripe for an update on my adventure.
Personalized Homepage. Love it. My efforts this morning were directed at simplifying my homepage. I had succumbed to widget exuberance, creating four tabs of widgets in different categories. Now I have one tab, and it includes only widgets that I actually use. Four of those belong to Google (Calendar, Reader, Gmail, and Notebook), one is for the local weather, and one is a to-do list.
Gmail. The more I use it, the more I like it. I like the fact that it is online, so it is accessible to me from any connected computer. In most instances, finding old messages is easier via search than via folders, though I still use "tags" for important categories of email. The spam filter is great. The conversation threading is wonderful. It is, without doubt, the best email client I have ever used.
Calendar. Outstanding! My whole family is on board with this program. Each of us has a personal calendar and a family calendar. Stuff we all need to know goes on the family calendar, and I can view all of those items simultaneously, complete with color coding. This sure beats the old paper calendar on the refrigerator.
Reader. Incredibly easy to use, whether through the widget or on a dedicated Reader page. I am not sure this is better than Bloglines or other readers, but I like it more than other rss readers I have used. Learn the keyboard shortcuts here. And watch how Robert Scoble processes 622 feeds.
Notebook. This has been the big surprise to me. I didn't think I would use this program much, but I have found that it's a great place to store lists of all kinds: books I want to read, conferences I am planning to attend, potential guest bloggers, travel tips for an upcoming trip, etc. I don't use this as a to-do list, though you could do that. It also seems like it could be a useful research tool, though I haven't used it in this way, yet.
Desktop. I have been moving toward online storage gradually, but my hard drive still has a lot of documents and photos, and Desktop is far-and-away the best way to find these things.
Picasa. I recently moved a boatload of old photos from an old computer to a Picasa Web Album. I don't have much experience with online photo management, though I have accounts at Flickr and Photobucket. Anyway, Picasa seems fine for my needs.
Google Spreadsheets and Docs. Yuck. I still use Excel and Word or WordPerfect.
The bottom line question: is my life better now than it was six months ago because of the software that I use? Yes. Information that I need is easier to access, which leads to greater productivity and less frustration. All in all, I am a happier guy because of Google.
July 19, 2007
Last night I was speaking with one of my new neighbors, who is a successful serial entrepreneur. I asked about his latest venture and whether he might be interested in taking the company public. "That's not for me," he responded. "I don't like living quarter to quarter." See Google.
Google's second-quarter revenues were $3.87 billion, up 58% over the second quarter of 2006 ... and it's stock is plummeting in after-hours trading.
The problem is pretty simple: Google's earnings came in below projections. Valleywag's account of the conference call: "Schmidt fesses up: Google has overhired, causing costs to rise. He says the company is going to be watching headcount going forward."
There's always next quarter.
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May 31, 2007
Since going Google last month, I have been adjusting to Gmail. The more I use it, the more I like it. That's a good sign for any service, especially one based on software.
But there are days when I wonder about email. William Birdthistle has a series of interesting posts on scholarly productivity over at Prawfs (see here, here, and here), and email is one of the villains: "My advice to new professors would be to ration your time on email and the web to the absolute minimum, perhaps even to the point of spending most of your day on an unconnected computer. I found email, in particular, a tremendous way to fritter away days of my life."
Fred Wilson also feels burdened by email, but he is not interested in unplugging. He is looking for options: "text messaging, instant messaging, and site messaging for one to one messaging. And blogging, twitttering, and social networking for one to many messaging." All of that seems like it would send William, already teetering, over the edge. Me, too.
In the end, I suppose this is all about maintaining communities -- or, if you prefer, networks -- right? Each of us is a member of multiple communities, and we need to figure out the best way to maintain those connections. Some thoughts on the relative merits of these technologies:
- At the moment, I use email and telephone for one to one messaging and blogging for one to many.
- I do not like text messaging, though it has the dual virtues of cheap mobility and asynchronicity. I am tempted to go this direction for my family communications, which are getting more complicated by the year with five growing children.
- IM is not asynchronous, which is a big problem for me.
- My children enjoy site messaging with their friends, but that seems like a generational thing. Can you imagine lawprofs communicating via Facebook? Ok, maybe it isn't unimaginable, but like any social networking service, it requires some critical mass before it becomes worthwhile.
- I don't use LinkedIn, either, even though I am registered and receive periodic invitiatons to link. So few people I care about use it that it just isn't worth the effort.
- Finally, I have experimented with twittering, and I like it. I think it has potential.
As always, I would be interested to hear others' experiences and recommendations on this score.
May 23, 2007
Let me try to white-board this transaction for you. Executive at BigCo has a girlfriend with a start-up company. Executive makes loan to Start-Up in the amount of $2.6 million. Then, Start-Up seeks outside investors for Series A financing. BigCo invests $3.9 million in the financing round, and Start-Up repays Executive's $2.6 million loan. Executive and girlfriend marry the same month. The total amount of the Series A financing is undisclosed, but we know that a company controlled by another BigCo director is an investor.
Does this sound like another Andy Fastow transaction, maybe Project Princess Leia? It's obviously not as brazen or large-scale. Is it another example of Jeff Skilling investing $180,000 of his own money in his girlfriend's company, Photofete, while the company was a vendor to Enron -- a transaction jurors later said was particularly damning to Skilling's character?
Nope. This is our beloved Google, and the tale of Sergey Brin and his new wife, Anne Wojcicki. Wojcicki's start-up is called 23andMe. NYT article here. The company's sparse website gives very little information about what the company will actually do, but it does say they are hiring and one fringe benefit is complimentary beverages and honey roasted peanuts. The website's one paragraph on its business plan states that the company will help clients take ownership of their genetic information and seems to promise to help clients map their own genomes. The website lists three people in the "about us" section: Wojcicki, another co-founder and a director. All three have experience in health care industry sales, analysis and investing.
Google does invest in start-ups. (Google was very public about its goal to invest in market-based socially responsible projects, but this doesn't seem to fall into that category.) The outside investment part is not unusual. But why this start-up? Obviously, Brin picked a great start-up once, and maybe 23andMe is the next Google. Could be. But doesn't it raise more concerns than necessary? Brin has his own $14 billion to invest in projects. Why not just invest personally? If he believes in the upside of Wojcicki's company so much, why isn't he on the equity side instead of the debt side that just got repaid? Does having Google as an angel investor give 23andM3 some cachet? Even though it's public knowledge that the head of one is married to the head of the other? In today's culture of seeing scandal where none exists, this corporate investment seems to be unnecessary.
Here is Google's Code of Conduct, which includes a section on "Conflicts of Interest." Although the section begins with this "avoid conflicts" language
A conflict of interest occurs when, because of your role at Google, you are in a position to influence a decision or situation that may result in personal gain for you or your friends or family at the expense of the company or our users. All of us at Google should avoid situations that present actual or apparent conflicts of interest; it is our responsibility to act at all times with the best interests of Google and our users in mind. In no way should you personally profit from transactions based on your relationship with Google if it harms the company.
this admonition seems to be clearly waivable by a superior:
Similarly, business relationships with friends and relatives whose interests may conflict with Google's can easily leave you with the sort of conflict of interest that can be difficult to resolve happily. Our rule here is simple: you should not enter into a Google-related business relationship with a close relative, friend or significant other, or a business they manage or control, without first contacting our Chief Compliance Officer or General Counsel.
Obviously, the code is written for management employees who have the ability to steer work to vendors, etc. not for top management who have the ability to steer Google capital to outside investment opportunities -- or to repay loans to oneself with Google capital. According to Google's 8K, probably required under SOX because of the waiver of the Code of Ethics for a senior officer, the transaction was approved by the directors after the Audit Committee received an evaluation of 23andMe. So the transaction was duly approved and duly disclosed. Let's hope that's enough these days.
May 18, 2007
It's just a rumor, but it makes sense. Feedburner fills another niche for Google. Having recently switched to Google Calendar, Gmail, Google Reader, etc., I can see that my life is becoming quite dependent on Google. At least I don't use Blogger.
May 16, 2007
Here.
After tinkering with various searches, I'm not impressed. For example, a regular search of "D. Gordon Smith" brings back my law school bio, my blog, my SSRN page, etc. That's excellent.
But the timeline view returned random dates from the text of an article that cited me (retrieved from JSTOR), a few "Date posted to database" entries from SSRN, and a whole bunch of inexplicable (and non-functioning) links to Amazon.com.
As for the map view, here it is:
Notice no flag in Wisconsin. Those flags are from some of my Conglomerate posts that mention various cites and from other blogs and websites that happen to mention me. Not very useful.
May 09, 2007
Time Warner CEO Richard Parsons was speaking on a panel at the National Cable & Telecommunications Association conference. So did he plan this or was he speaking off the cuff?
The Googles of the world, they are the Custer of the modern world. We are the Sioux nation. They will lose this war if they go to war. The notion that the new kids on the block have taken over is a false notion.
Huh?
May 08, 2007
I do. [Update: For both personal and professional meetings.] But if this W$J poll is accurate, I am in the minority.
May 03, 2007
Paul Kedrosky: "At the same as a number of engineering friends of mine are leaving Google -- most common complaint: too big and bureaucratic -- MBAs have declared it to be their employer of choice. Food for thought, n'est-ce pas?"
Which would you trust as a better leading indicator: engineers or MBAs?
May 02, 2007
With the end of the semester upon us, I decided to take some steps in my plan to "go google." Google has replaced the "Personalized Home Page" with "iGoogle." This seems to be mostly a marketing change, though the new service has themes (that change with the time of day and with the weather) and a gadget maker, which is pretty cool. My new home page includes Google Calendar, Google Reader, and Gmail, among other gadgets.
I am particularly excited about Google Calendar. This afternoon I exported entries from Outlook to Google (using these handy instructions) in about two minutes. The ability to create multiple calendars is a nice feature, and my plan is to start entering "Family" dates tonight. Of course, that Family calendar can be shared with my wife and children, meaning that any of us can view or update it.
The Google Reader displays entries from all of my favorite blogs. The new iGoogle also allows for the creation of multiple tabs, and I plan to gadgetize several pages for other websites that I frequent.
Finally, I have integrated my work email with gmail. This took a bit longer than setting up the Calendar and Reader, but only because I had to track down the server settings. I confess that of all of the Google programs on my target list, Gmail is the one that I find least exciting, though I haven't used it much. Once I get it customized, I suspect that it will work just fine.
UPDATE: Ok, I just discovered something about Gmail that I dislike and (apparently) cannot change. I wanted to send all of my messages from my work email, but when I send a message from Gmail and the recipient reads the message in Outlook, she sees this in the "From" line: "myusername@gmail.com; on behalf of; Gordon Smith [gsmith@law.wisc.edu] <myusername@gmail.com>." According the Gmail Help, that's just the way it is. Yuck!
UPDATE2: As luck would have it, Jeff Nolan blogged today about a hack that loads Google Notebook into the sidebar of Firefox.
April 21, 2007
I usually don't talk about stock investing on the blog, partly because almost all of my (limited) money is invested in index funds and partly because I am a horrible investor. (To remind me of that fact, my Ameritrade account retains an entry for Webvan, which I thought would be a blockbuster!) I have a small fund from my Skadden 401(k) that I use to invest in two or three stocks at a time, just for fun. This is a post about my most recent investments.
A year and a half ago, I made a fair return on investment in Yahoo! Since I sold that stock, it has dropped over $10 per share. Yahoo! has been struggling, especially over the past few weeks, and many think the company is in trouble. Paul Kedrosky and I disagree. So earlier this week, after a precipitous drop in Yahoo!'s share price, I went back in. This is the first time I have purchased shares in hopes that the company would become a takeover target. But I'm hoping that for Yahoo! (Especially since the stock price has continued to decline since I invested.)
Also earlier this week, I was buying some cheese and bread in Whole Foods and thinking about how much I love the food in that store. The last time I checked the company's stock price, it was at a ridiculous level, but when I check earlier this week, it had declined to merely "expensive." So I bought in. Since then, it has increased 3.57%. Not bad for three days.
April 20, 2007
With my impending move to BYU (and the resulting change in my work computer), I am contemplating another change in my work environment: going Google. I have been a Microsoft user from the beginning of time, but this seems like the right time to change some of my software. I would substitute Gmail and Google Calendar for Outlook; Google Spreadsheets for Excel; and Google Presentations for PowerPoint.
Ok, maybe not that last one. Google doesn't have a presentation program (yet), and I am invested in PowerPoint more deeply than I am invested in Outlook or Excel. If Google wants me to use its presentation software, it will need to provide a converter for all of my PowerPoint slides.
By the way, "Mail Fetcher" and "Better Gmail" finally put me over the top on email. I haven't tried Google Calendar or Google Spreadsheets, yet, but my needs in both areas are simple. I also plan to use my Personalized Homepage, Google Reader, and maybe even Google Talk.
If you have taken the Google plunge already, I would be curious to hear your thoughts or advice.
April 15, 2007
Bloggers are buzzing about the Google-DoubleClick deal (alarm:clock has a great roundup), but the most interesting aspect of the case for law professors is the antitrust angle. What is the relevant market? Microsoft and AT&T already have attempted to frame the discussion around "online advertising," but Google CEO Eric Schmidt has responded by claiming that Google and DoubleClick are each "small components of a much larger advertising market." (NYT)
Antitrust is not my forte, so I will defer to Josh or Thom over at TOTM, though my guess is that this will require some debate.
April 06, 2007
Google Voice Local Search launched today. Or so they say. I just called 1-800-GOOG-411 to test the free information service, but I got nothing. Anyone else had luck with this?
April 05, 2007
A few months ago, I was looking for a way to map all of the artisanal cheesemakers in Wisconsin. I found a cool program called "Mapbuilder" and produced this. (Note that the content in the map comes from the Wisconsin Dairy Artisan Network. I am interested in artisanal cheesemakers for a research project. More about that later.)
Google's new "My Maps" makes mashups like this even easier. As a trial run, I created a map of all of the places I have lived. This modest effort does not begin to display the power of the program, but it's a start. I could add photos or videos or text to the entries on the map. I can make the map public (like this one) or keep it to myself.
My only problem with My Maps is that the promotion touts the ability to "publish your map to the web," but I couldn't find this feature.
April 02, 2007
Google released its latest project yesterday: free broadband.
My favorite question from the FAQs: "Can I use TiSP if my home uses a septic system?"
UPDATE: Google's attempt at humor was valiant, but this is knee-slappingly funny. So, does credit go to Eric Talley or Mary Dudziak?
March 21, 2007
I just returned from a fascinating visit with Brad Schell, founder of SketchUp, which was acquired by Google last year. The Sketchup offices are now a mini Google-plex right here in Boulder, complete with exercise balls, lava lamps, massage chairs, a cafeteria ... and more importantly, about 60 creative googlers.
The visit was part of my research on internal branding -- can contracts be used to shape the image of the firm in the eyes of employees and managers? Can contracts shape corporate culture? Is corporate culture reflected in the firm's contracts? As Gordon explains, contracts can serve a number of purposes beyond mitigating opportunism.
As much as I'd like the answer to that question to be yes (cf. Brand New Deal), I'm not so sure now. The longer I look at this question, the more puzzled I am by the absence of contractual mechanisms addressing corporate culture.
We know that corporate culture is an important asset for an organization to cultivate and protect. So why is this asset not protected somehow by contract? Most acquisition agreements have pages of reps and warranties about assets far less valuable than culture. With the exception of the Disney-Pixar merger agreement, however, I have found it hard to find contractual terms directly addressing culture. Why? Any ideas? Is it that it's too hard to reduce the concepts to language? Does writing down a policy somehow change or diminish its value? Would communicating/interpreting/enforcing the policy drive up transaction costs within the firm -- arguably defeating, according to Coasean logic, a key reason the firm exists in the first place?
Any ideas would be welcomed. I'm hoping that if I let this project simmer on the back burner long enough, something interesting will emerge.
January 09, 2007
Fortune has named Google “The Best Company to Work For” in its 2007 list of the top 100 Best Companies to Work For. Google made it to the top (and in its first year of eligibility!) because of its commitment to its employees and the many perks that go along with that, including such things as free on-site laundry facilities, free gourmet meals, free on-site check-ups as well as on-site dry-cleaning, hair-cuts and massage services. The Fortune list was generated based on responses from 446 companies. Companies then received a score associated with their employment environment: two-thirds of the score stemmed from surveys of 400 randomly selected employees from each company and one-third of the score was based on each company’s responses about its culture. I take it part of the survey aimed to determine the extent to which a company’s rhetoric about its culture was consistent with the reality as perceived by its employees.
On the one hand, Google’s first place rank should not come as a surprise. After all, it touts itself as the “do no evil company,” and all of its corporate documents are replete with rhetoric about its commitment to employees and maintaining a fun work environment. On the other hand, I have been doing a lot of research on rhetoric and that research demonstrates that lots of companies—indeed almost all of the Fortune 100 companies—tout their commitment to employees and their welfare. But in this area, in particular, very few companies live up to their hype. In fact, last year only eight of the more than 90 Fortune 100 companies that expressed a commitment to employees appeared on the list. Thus, Google is distinct not only because of its apparently great employment environment, but also because its talk about that environment is reflected in its actions.
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December 13, 2006
According to the WSJ, Google is giving nonexecutive employees the opportunity to sell vested stock options via an online auction, managed by Morgan Stanley. Prospective buyers are probably financial institutions and other institutional investors. Google is advising employees that they will be able to sell options that are both in the money and out of the money -- once the transferable stock option (TSO) is transferred, the new holder gets a new expiration date, which may be as far away as two years from the transfer date.
I will leave it to Vic to tell us if there are any tax implications. The WSJ article describes the move as primarily a recruiting/compensation one.
October 17, 2006
The NYT reports today that Google will convert unused rooftop space on its headquarters' buildings and parking structures into a solar power system that will provide 30% of the electricity to the company. Google will still be a customer of PG&E, but hopes to see its electricity bill shrink over time as the system pays for itself. As we talk about here, very few acts that we term "corporate social responsibility" are undertaken with the notion that they will create a net loss for the company. Either the action will create good publicity and attract customers, increase employee morale and assist in recruiting, or at the very least create a tax deduction and an opportunistic benefit for a decisionmaker and the decisionmaker's charity. Here, Google states that not only will the system pay for itself over time, and perhaps generate a profit if excess capacity can be resold to PG&E, but this move to solar power will also attract "smart, high-level engineers" to the company.
Large companies, particularly companies with manufacturing facilities, have experimented with ways to cut electricity costs. Some facilities, such as petrochemical plants and even Anheuser-Busch have taken to generating their own electricity by way of cogeneration facilities. Google can't buid a co-gen because it just generates search results, not heat, and it can't harness the power of steam the way a manufacturing plant can. Is solar the New Economy's co-gen?
October 10, 2006
Gordon's post below asks the ultimate question: Why do this? The "this" of course is acquire YouTube, the unspoken "who" is Google. Reports this week have been criticial of this alliance, remarking on the future legal problems inherent in YouTube's business plan and the heavy reliance on advertisers for revenue. Here's a cynical view of "why":
Google has 11 board members. One of those board members is Michael Moritz, a big partner at Sequoia Capital. Sequoia Capital owns approximately 30% of YouTube and stands to turn an $11 million investment into a $495 million take-home. This NYT article explains how Google may be emulating a Japanese business custom of "interlocking relationships" (keiretsu) where "friends sell to friends." Of course, in the U.S., friends may sell to friends, but at some point we have to consider whether these interlocking relationships turn an acquisition into a related-party transaction.
Here, probably not. Although the three Google board members (Schmidt, Brin, and Page) may feel obligated to Sequoia Partners for past investments, a court would probably not look to a historical economic relationship to find dependence. Two of the board members are presidents of Stanford and Princeton. Although both schools' endowments invest in venture capital, unless the schools are current investors in Sequoia Partners (and I can't find any evidence of that), then they will be independent as well.
October 09, 2006
It's official: Google is buying YouTube. The price is $1.65 billion in Google stock.
Is this a good deal? People are saying that the price looks steep, but the opportunity for selling ads seems pretty enticing. YouTube has a high garbage-to-fun ratio, so I never go there, unless I know what I am seeking. For people like me, the bigger news today may be that YouTube will be getting more high-quality content legitimately:
In a prelude to the acquisition announcement, YouTube early Monday announced agreements with Vivendi SA's Universal Music Group and Sony Corp. and Bertelsmann AG joint venture Sony BMG to make their music videos available through YouTube and to allow consumers to use music from the two companies as soundtracks for their own videos on YouTube. The video site also signed a content and ad-revenue-sharing agreement with CBS Corp. related to video from CBS Television Network, Showtime Networks Inc. and CSTV Networks Inc. Google separately announced agreements with Warner Music Group Corp. and Sony BMG to make music videos and other content available for free through its video service and on partner sites.
By the way, this looks like a home run for Sequoia, the VC firm that owns 30% of YouTube's stock.
UPDATE: Paul Kedrosky is all over this story. My favorite line from Paul's liveblogging of the conference call is in italics below:
Why do this when you have Google Video? My answer. Google Video is going nowhere. Eric puts it differently, saying it has "lots of interesting partnerships", possible the most tepid recommendation I have ever heard.
September 23, 2006
Froogle emerged shortly before Google's IPO. It was part of a flurry of new services designed to show that the company was about more than general search. Well, general search has been pretty good to Google, but Froogle has not. It was removed from the Google front page last month, and now it will be "de-emphasized" further as Google turns its energies to the development of Google Base.
Listing a product on Google Base means that it is retrievable through a Google search, according to a Bear Stearns report: "When users conduct a product search on Google.com, they will be [presented] with an additional search box where they can refine their search. When the user refines the search, Google takes the user to a second page, which will be filled with product results only from Google Base."
I like this idea for a number of reasons, but mainly because Google has partnered with Intuit to integrate QuickBooks and Base. Small business users will be able to upload directly from their inventory records in QuickBooks to Google Base. Here is a press release describing the plan.
September 19, 2006
Yahoo! and Google stock are plunging today after Terry Semel, Yahoo!'s CEO told investors at a Goldman Sachs conference, online advertising revenues from automotive and financial services companies are "still growing but they're not growing as quickly as we might have hoped at this point in time."
Is this the beginning of a broader retrenchment in advertising revenues? Too early to tell. But it isn't too early to second-guess a business strategy that depends entirely on the growth of internet advertising.
September 14, 2006
Google announced its for-profit charity today, Google.org, which will be run by Executive Director Larry Brilliant. In Brand New Deal, I argued that when Google structured its IPO as an open auction rather using a traditional book-building method, it was using deal structure to achieve a branding effect. More recently, I've looked at the branding impact of Mastercard's use of a charitable foundation in its IPO.
The structure of Google.org obviously has some branding implications for the firm as a whole. It's an innovative and creative structure, consistent with the overall Google brand. It frees up the "charity" to engage in more deals, perhaps with Kleiner Perkins' "green" venture fund, and to lobby Congress. It blurs the line between profit and charity, consistent with the Don't Be Evil motto.
I'll post separately on the tax implications, which are trickier (and better for Google) than you might think. Google has a high effective tax rate. The operating losses of google.org will soak up income from Google, thereby achieving much the same tax effect as a charitable donation, and without the restrictions that accompany charitable donations. I'm assuming google.org remains as part of Google's consolidated return. I need more detail on the structure, so more to come.
The real benefit of the structure is accountability. Suppose the Google founders gave a hundred million dollars to a traditional, separate tax-exempt charity. Once that money leaves the hands of Google or its founders, agency costs increase, and over time it becomes steadily more difficult to monitor whether the managers of the charity are managing the charity for their own benefit or for the public interest (however defined by the founders). With the Google.org structure, the Google founders and managers can monitor what's going on and exert more control over decision-making.
Of course, with this structure, the founders aren't using their own money, but rather money that belongs to Google shareholders. (They did warn shareholders that they'd be doing this kind of thing when they went public.) So while google.org will be accountable to Google, there's a question of whether Google itself is properly accountable to its shareholders. Is google.org good for shareholder value? Like all corporate charitable donations, it's only good if it can be properly justified in terms of a positive branding impact. Whatever consumption value the founders may get from the organization isn't enough to justify the move. Time will tell, and we'll need to see more detail about what the organization does (particularly regarding green tech and VC firms like Kleiner Perkins). At first glance, I once again think Google's use of deal structure to achieve a positive branding effect is brilliant. Or should I say, Dr. Brilliant.
For more, see also Eric Posner's post at the U Chicago blog, which discusses his paper on for-profit charities with Anup Malani.
August 16, 2006
Here.
August 05, 2006
Google products are a mixed bag for me. I love Search and Maps. The second version of Desktop was much better than the first, and I have just started using a customized home page, which seems nice, too. Gmail is fine, but strictly a backup email. Many other Google products have been disappointing (most recently, Checkout), and I haven't received my invitation to use Spreadsheets. But one piece of software that I am eagerly awaiting is Writely, which allows for real-time, online collaboration. I keep checking the Writely site and Google Labs for news, but things have been quiet.
Just thought I would mention it ...
June 29, 2006
So I signed up for Google Checkout, and I started browsing for a way to spend the $5 credit I earned for registering my Citi card. Unfortunately, I am not in the market for anything from Coffee Bean Direct, FaucetDirect, ToolsDirect, Snorkel Bob, or any of the other thousands hundreds tens of stores in the program.
Google: the not-ready-for-primetime software company.
Jeremy Wright is not so kind.
May 19, 2006
Bill Tancer at Hitwise offers an interesting comparative analysis of market share of three internet heavyweights: Google, Yahoo!, and MSN. Google tops the list for search (47.4%), but Yahoo! dominates email (42.4%) and business/finance (34.9%) and also leads in news (6.3%). The top mapping site is Mapquest (56.3%), with Yahoo! Maps coming in second and Google Maps lagging far behind in third. The biggest surprise to me: Gmail ranks fouth in email, with only 2.54% market share.
UPDATE: I have been writing skeptically about Google's products for a long time, and I know that I am not alone. But it seems like traffic in this genre has picked up lately. Here are a couple of recent posts from Paul Kedrosky (see also here and here) and Om Malik.
May 15, 2006
Unlike some people, I'm a sucker for a good shareholder's proposal. However, Bill Sjostrom reports on a shareholder proposal that I can't get behind. Apparently a union pension fund went to the trouble and expense of putting forth a shareholder proposal to eliminate Google's dual class common stock regime. The proposal stated, among other things:
We believe this disproportionate voting power presents a significant danger to shareholders. As Louis Lowenstein observed in What’s Wrong With Wall Street (1988), dual-class voting stocks like our Company’s reduce accountability for corporate officers and insiders. In our view, the danger of such disproportionate voting power was illustrated by the recent fraud charges brought against top executives at Adelphia Communications and Hollinger International.
That's pretty harsh. Does Google equal Adelphia? Are Larry and Brin siphoning off money from Google? As Bill points out, the market was extremely conscious of the dual-class common situation back in August of 2004; no secrets here. The pension fund bought the stock with full knowledge of the situation. Unless something has changed to make the situation more "dangerous" than it was previously, then why the proposal? The pension fund seems to think that the voting structure enhances the agency problem between the management and the shareholders of Google, but who's watching the agency problem between pensioners and the pension fund that wastes its money on useless shareholder proposals?
April 07, 2006
Bill over at TOTM is thrilled about his blog's PageRank of 7. He should be! TOTM is only three months old, but it has the same PageRank as Conglomerate ... which has the same PageRank as ProfessorBainbridge.com, Althouse, and the Volokh Conspiracy! I read and enjoy all of these blogs, but they are not roughly equivalent properties. Even a bigger mystery, the very popular Concurring Opinions has a PageRank of 5. Something is out of whack here.
On a side note, did you know that the PageRank trademark is a play on the name of Larry Page, one of Google's founders? I learned that reading The Google Story.
February 28, 2006
Way back in the spring of 2004, before Google went public, I questioned whether the company had staying power because it relied exclusively on internet advertising for revenues. Google proceeded to complete a successful IPO and followed with one quarter after another of startling successes, resulting in an outrageous stock valuation. I have been the first to admit my surprise.
Is it possible that the chickens are finally coming home to roost?
Starting in January, Google's stock began sliding. First there was the Barron's article that said Google could lose half of its value over the next year. Then Google missed is quarterly earnings numbers. This was dismissed as a tax-induced blip, but as people dug deeper, some have concluded that Google is a very cool company without many revenue options. The price of the stock declined by almost $100.
Over the past fortnight, the stock has regained some of that lost ground, but today Google CFO George Reyes said essentially what I was saying two years ago: Google needs to find some new sources of revenue. Google's shares tumbled and are now down over $27 on the day.
Analysts are holding firm, stating that there was nothing new in Reyes' statement. They had the same reaction to the Barron's article. If you subscribe to the W$J, check this out. All of the analysts surveyed on February 1 were pegging Google's price target at more than $400 per share, and half of them were estimating something over $500 per share. The current price is in the $360s.
Now, Google is telling a growth story that relies on something other than search revenues:
Mr. Reyes said the new products Google has been introducing at a furious pace recently will produce "meaningful" revenue contributions in the future. The mobile and local arenas, in particular, offer "a lot of opportunity," he said.
Google will continue to invest heavily in the quality of its search engine and new products, he added, and this will continue to drive a "virtuous circle" whereby product strength causes rising traffic, which attracts more advertisers and generates higher revenue.
"There's been a huge acceleration in the level of innovation in the company," he said. "It's all about risk taking."
Do you believe in the "virtuous circle"? This sounds
more like a startup pitch than a market leader: upward spiraling
revenues from unproven (or unreleased) products ...
I am still a skeptic.
February 18, 2006
Quintura is a free software program that performs contextual searches. Here is the company's attempt to explain the limitations of current search engines:
Google, Yahoo! and MSN are amazingly powerful in its ability to go through billions of pages on the web and find the document based on keywords. The result of any search is millions of documents ranked by a search engine. The ranking depends on keywords count, keywords density, link count and some other proprietary algorithms specific to a search engine. A consumer does not have an easy way to reduce those millions of documents by defining a context or refining the meaning of the keyword. For example, the keyword "windows" will give you millions of documents related to Microsoft Windows, and no easy way to find the best information on windows for your new home.
With today's keyword approach the amount of time and effort required to find the right information is directly proportional to the amount of information on the web. The web has grown exponentially and people are forced to spend more and more time in search for the information they are looking for.
Lack of personalization as well as inability to easily separate commercial from
non-commercial searches is among other limitations of today's web search technologies.
Agreed on all fronts. Actually, I suspect that people in the legal profession are better at conventional searches than most because our legal databases require similar searches. Even so, Qunitura seems like a great advance. And if you are attached to another search engine, you can still use Quintura to enhance your search results by running Quintura through that search engine. It's amazing.
Tip: to get the most out of Quintura, use the "Help" section to learn how to add or exclude words from your context, how to use the mouse, and other useful tricks.
February 16, 2006
Rich Booth has an interesting post comparing Henry Ford and the "Google Guys." Rich begins:
The pronouncement by one of the Google Guys that the company is not run for the long term value of the stockholders but rather for the long term value of the end users, is reminiscent of Henry Ford's decision in 1916 to stop paying dividends in order to improve the lot of workers and customers. Or is it? There are a couple of big differences.
Rich then discusses those differences, focusing on the fact that the Dodge brothers -- who were minority shareholders in Ford Motor Co. -- were undiversified investors. As Rich notes, diversified investors can deal with the ups and downs of company life very well, thank you:
They do not want portfolio companies that try to coddle investors by reducing risk by managing earnings, diversifying through acquisitions, hedging, and other such gimmicks. Investor diversification deals with all that – and for free. So it is a waste of investor money for portfolio companies to do it too. The bottom line is that companies that stick to their knitting – focus on their core business – and do not try to second guess the market.
Exactly right.
But I don't want you to leave with the impression that Henry Ford was showing his contempt for shareholders because he was motivated by his concern for employees and customers. When Henry Ford decided to stop paying dividends so that he could spend the company's money in other ways, he was trying to prevent the Dodge brothers from starting a competing automobile company. This was a freezeout, plain and simple. You can find an extended discussion of the case in my article, The Shareholder Primacy Norm.
February 14, 2006
Which search engine is best? MSN is hoping to win you over with a new contest. Just go to MSNSearchandWin.com and start searching.
In response to my latest post on Google's continuing stock price slide, a commenter observed:
I think Google should be spending more time improving their search engine rather than being so concerned with their bottom line. Over the last year or two I have found their search results to have gotten much worse. I no longer use Google for searches until I have tried Yahoo and MSN. I personally feel both of these search portals offer better relevant content.
I was curious, and I did a modest test.
I searched my own name in all three search engine. First Google:
Senator Gordon Smith (Oregon) should be the first result, and I have no complaints about following guitars and surfboards. But the Psychic Barber, "the UK's most accurate medium"?
The most troubling aspect of the results is that they display a redirect from my old Venturpreneur blog. That redirect has been in place for a year and a half, and neither Yahoo! nor MSN includes the site at all.
And I wonder: should my Conglomerate persona precede my official law school webpage? Google lists the official site first, even though Conglomerate undoubtedly gets more traffic. Still, if people are searching me by name, I suspect that they would prefer the official site to Conglomerate.
Now take a look at Yahoo's results:
Trying to figure out whether to prioritize commerce over politics or research has always been a challenge for search engines. Yahoo! was inspired to create Mindset to address this problem. In my search, Senator Gordon Smith followed the surfboard version.
Also, notice that my Conglomerate persona precedes my official law school page.
Finally, here is MSN:
Obviously, this one is my favorite. I rank higher and my presence is greater in these results than in either of the other two. Nevertheless, if someone is searching "gordon smith," I'm not sure how often they would be hoping for such a heavy emphasis on me.
The big issue here, of course, is not how well the three major search engines locate me, but whether Google is likely to retain its traditional advantage in search. The foregoing results are not impressive for Google, and these results jibe with my experience over time. Google is not the superior search engine that it used to be, and if Microsoft makes a big push to convert users, my guess is that they will succeed.
February 13, 2006
Trading sliced another (almost) $17 off Google's stock price today, and the price declined even further in after-hours trading. This time, the cause was an article in Barron's. According to the W$J:
Shares of Google continued to drop, sliding 4.7% after a critical Barron's article that said shares could fall by more than half due to increased competition and concerns about fraud in the online-ad market. Google's shares are down 27% since their all-time closing high of $471.63, set on Jan. 11. The drop has sliced nearly $40 billion off its market cap. The search engine's decline steepened after it missed fourth-quarter earnings forecasts widely two weeks ago. (emphasis added)
So, is Google still a buy? After Google missed its earnings targets two weeks ago, analysts kept a stiff upper lip. Now two weeks and $40 billion of market cap later:
[A]nalysts who cover Google said concerns pointed out in the [Barron's] story aren't anything new -- and certainly not enough to cause shares to fall by 50 percent, as the story suggested. In fact, a number of analysts even reiterated stock price targets that top $500.
The main concerns in the Barron's article: competition from Yahoo and Microsoft and reduced advertising rates. The analysts are right about at least one thing: these are not new concerns. We have been harping on them here for a long time.
February 07, 2006
Last week, after Google missed its quarterly numbers, I asked, "How Low Will Google Go?" We still don't know. Yesterday, Google's shares declined by another $17+.
But here are two positive developments:
(1) Google's shares rose slightly in after-hours trading.
(2) Dell is testing pre-installed Google software on Dell computers.
January 31, 2006
Google was down over $50 in after-hours trading. Net income was up over last year, but not as much as analysts had expected. The excuse? Taxes:
Google squarely blamed its tax rate. "Compared to the [financial] models that people have out for Google, the big difference was a different tax computation -- but the revenue and profit growth were all very strong and at or above the models," said Chief Executive Eric Schmidt in an interview. The company said its effective tax rate during the fourth quarter was 41.8%, bringing its 2005 effective tax rate to 31.6%. In October, it had said it expected its effective tax rate to be around 30% for the year.
The higher tax rate applied, Google said, because the company allocated more expenses than expected to its international operations, resulting in its paying taxes on a greater percentage of profits in the U.S., where tax rates are generally higher. "These estimates are complex," said Chief Financial Officer Georges Reyes, forecasting a 30% effective tax rate for 2006. Keeping with its practice, Google didn't provide other detailed financial forecasts.
Google is still optimistic about its future, of course, citing international markets and brokering radio commercials as growth areas. In the end, however, it's still just advertising all the way down.
UPDATE: Business Week tentatively suggests that "a new era of Google scrutiny may be dawning."
January 20, 2006
This week, the privacy wonks are talking about the DOJ subpoenaing Google for information on searchers and searches in an effort to enforce the Child Online Protection Act. (Dan Solove here, and keep scrolling downward; I've only been paying half attention because (1) it's not my area of expertise and (2) I'm not a child pornographer. But this morning I realized that if Google coughs up the info, then I may be on that list!
According to the language of the subpoena (that Dan links to, so I won't re-link here), the DOJ wants a random sample of one million searches from one week between June 1 and July 31 of last year. Gulp. As readers may recall, I was doing a fair amount of research on illegal internet gambling at that time. I found many sites using the Google search engine. Wait. It gets worse. To combat an argument that having gambling via internet in the home is harmful to children, I needed to do a fair bit of research on pornographic sites -- what could a child find online before having to use a credit card or other payment mechanism. Let me tell you, you can see anything you want. I also wanted to see what legal pornography is available, so I went to sites I assume are legal, such as Playboy, etc. In the name of research. Research, people!
And you don't even want to know what I checked out from the Whitefish Bay Public Library. But I guess the DOJ will. It's just a matter of time now.
January 17, 2006
This morning, Google announced that it would acquire dMarc Broadcasting, Inc., a company that provides an online platform for buyers and sellers of radio advertising time. The stated rationale for the acquisition is that Google wants dMarc's technology for its AdSense program. Interestingly, even though Google stock is trading near all-time highs ($467), Google is paying the acquisition price in cash, $102 million. The price also contains future payments contingent on certain milestones. The future payments could reach $1.136 billion over the next three years