From Google's April 1 press release announcing Google Romance:
"Our internal projections say Contextual Dating is going to be unbelievably huge, just a total cash cow," said Google CEO Eric Schmidt in prepared remarks placed into the notes section of an executive PowerPoint presentation and intended solely for internal use but promptly leaked onto the web and then roundly mocked on Digg and Slashdot."
Gotta love the self-deprecation ... but come on, now, where's the blockbuster new product announcement!
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| Google's prospects from a Google user and independent investor |
Contextual dating and leaked Powerpoint notes - 4/01/2006 12:23:00 AM
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Google's Vulnerabilities, its Cash Hoard, and Amazon - 3/30/2006 04:53:00 PM
 Google has $8 billion cash in the bank, and it will generate another $2 billion plus in free cash flow this year. Why does Google need to dilute the stock more by selling $2 billion worth of new shares? After $1 billion for the AOL stake and another $1 billion for a rumored distribution deal with Dell, they'll still have $10 billion in cash earning nominal returns. What is Google planning? What's Google gonna do with all that cash? A better question might be, in the struggle against Microsoft and Yahoo, where is Google competitively vulnerable? You can be sure that Google is accumulating cash to patch its strategic vulnerabilities. Vulnerability #1 - Google has no social recommendation engine. Google's done a pretty good job gathering recommendations on everything from movies to restaurants to camcorders from the Web, but there's a limit to how specific you can get. Vulnerability #2 - Google has very limited e-commerce capability. If Google intends to be a marketplace, there are far more capable commerce platforms than the fledgling Base and Payments that Google has created. Google's done some interesting things with Base and Payments, but they're still in early stages of development and will take a long time to build up a user base. Vulnerability #3 - Google has a small user base. Sure, Google has the greatest marketshare in search and search advertising. But how many people does Google really know? How many people have a relationship with Google close enough to set up an account? Gmail users? GTalk users? The numbers are tiny compared with AOL, Yahoo, MSN, MySpace or Amazon. When you look at it this way you can see that investing in Amazon could quickly solve a lot of big vulnerabilities, at a reasonable cost. And Amazon not only has the technology and expertise in areas complementary to Google, but they use similar technology and might mesh well with Google's strategic direction. Rationale #1 - Amazon's strengths complement Google's vulnerabilities. Each of Google's vulnerabilities is an Amazon strength. Amazon is the leader in social recommendation, and that expertise could be applied beyond consumer products to movies, blogs, newspaper articles, photos and other digital content. Remember, conspiracy theorists, "Googlezon" is a required first step to the Google Grid that will dominate global media. Imagine if Google could link advertisers directly to sellers using Amazon's ecommerce and payment tools, and take advantage of Amazon's experience with preventing payment fraud. Google is spending $1 billion for access to AOL's users, so what if Google could introduce Amazon's users to the pleasures of Gmail, Chat, Google Flickr and search history? Rationale #2 - Amazon may be an ecommerce leader, but they're also turning out some very interesting technology that is closely aligned (and possibly competitive with) Google's strategic direction. Gdrive, meet Amazon S3. And have you seen what Amazon's Alexa search engine is up to? Rationale #3 - Publishers like Amazon's book search. And they hate Google's. Amazon knows books, and books are a big part of Google's strategy to organize the world's information. Nuff said. Rationale #4 - Amazon owns important patents. They may seem obvious, like 1-click ordering, but as we've seen in the Overture case and with RIM and Tivo, intellectual property matters. Rationale #5 - Amazon has to do something. It takes a lot of capital to succeed as a global information company, and that never-ending investment makes Amazon investors whine. If not Google, then some other transaction will need to split Amazon's R&D-heavy information capability from its low-margin distribution business. Amazon simply doesn't have the scale to make it long-term. Rationale #6 - Amazon is cheap. With a $15 billion market cap, Google could almost buy them outright. Just as Oracle did with Peoplesoft, Google could gradually acquire a position in Amazon before their intentions are announced and profit from the resulting run-up in Amazon's shares. Rationale #7 - No bidding war. What other company could or would bid against Google in a deal for part of Amazon? Yahoo has $2.5 billion in the bank, and its horizontal stock isn't a terribly attractive currency. Microsoft has the cash, but Amazon's open-source technology would never work at Microsoft. Who else has the engineering talent, global reach and earth-shattering traffic to extend Amazon's ecommerce and social recommendation genius? Yeah, but would Google want all those warehouses full of books and CDs? Certainly not, after all it's all those low-margin physical assets that are constraining Amazon's profitability and price multiple. Google's mission is to organize information, not to deliver consumer products. It's the technology, the user base, and the page impressions that Google needs. Imagine if Amazon reorganized into an information unit and a distribution unit. Google could buy Amazon's information unit for $4 billion or so (just guessing, I'm not a valuation expert), and continue to run Amazon's systems in exchange for a percentage of sales. The employees wouldn't even have to move. Google could serve ads on Amazon pages, splitting the revenue with Amazon Distribution. Google could also drive traffic to Amazon's properties through ads on Google and Google Network sites. And if you think the one-box search results that expose Google Base items are cool, imagine if all of Amazon's items were available through the same search interface. That's powerful. It just makes too much sense. So in addition to my eBay puts, today I bought a bunch of shares in Amazon. Updated 3/31/06 4:32 AM PST: Fixed some links, minor edits. |
Travel is crap? - 3/30/2006 12:00:00 AM
Greg Linden started a great thread last year called Google Base and getting the crap out. Greg predicted that Google Base would "fill with crap," and he was right. Anybody could post or upload anything, including a bio of Eric Schmidt and a recipe for "crap on a stick." With no barrier to posting and no social recommendation system to surface the good stuff, free resources naturally fill with crap.
Since then, Google's come a long way. Most items expire in 31 days, so it takes a lot of work to keep updating crap in Base. And Google has been aggressive in cleaning the crap out -- Google recently removed a test upload Buygoogle did of US Senators and Representatives, and Google also killed the Eric Schmidt bio and the crapstick recipe. Google has also instituted strict editorial rules on what can go in and what can't. But maybe they've gone too far trying to limit spammy travel crap. I've sold a couple small items on Google Base now, using Google Payments and it's worked really well. Now I'm selling a high-end 35mm camera to see how a bigger-ticket transaction would work. Everything was fine until tonight when I tried to add a link to a related item and Google flagged my description as spammy:  Apparently the word "travel" in the context of "vertical-travel, focal-plane shutter" is verboten. I could request an exemption, but that would take my item offline, and prohibit changes to it until a staffer gets around to reviewing it.  |
Forbes: Google is becoming a marketplace - 3/29/2006 06:51:16 AM
The mainstream media and the analysts are catching on. Google is becoming a marketplace, not just an ad engine.
"Google's M.O. is always to deny that they're competing with anyone head on," says Sucharita Mulpuru, an e-commerce analyst with Forrester. "It's a natural inclination for them to say that they're in their own league, but since they are about to become a marketplace for buying items, they're encroaching on this category." Translation: Google is a marketplace, not just a search engine. Forbes quotes CEO Eric Schmidt: "The quickest way to improve the quality of an ad is to have the ad instantaneously turn into a purchase that is 100% perfect," he said. "We now have a solution that we believe enables advertisers to offer a digital product on the Web so that when people click on it, through a credit-card mechanism, it is automatically taken care of." Whoa. This isn't exactly eBay, but it could be bigger and better than eBay . Forbes also spends a few words on Google's reputation system: And the Google Base/AdWords combination could also help small advertisers buff their own brand via a feedback system that attempts to rank Base sellers' credibility. Once a Google Base seller had established a credibility ranking, it could conceivably brandish the ranking on its AdWords ads. As with the WSJ article two weeks ago, Forbes doesn't get the fee difference right, since they only compare the cost of the payment (where Google is marginally less than Paypal), and they don't show that the entire cost of the transaction is dramatically lower on Google. The Forbes article also focuses on linking Adwords to Google Base, when there's a lot more power in linking search to Base. Conclusion: This could be a powerful new revenue stream for Google, and it's a gathering threat for eBay. Though the puts I bought on eBay haven't panned out, maybe it just takes a while for the market to grasp the fundamental shift that's happening as Google transforms from an ad marketplace to a marketplace full stop. |
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