Henry Blodget Spells out the Google problem that people have been ignoring, brilliantly.
Until recently everyone seemed to blithely assume that Google is immune to an ad spending pullback because its ads are performance based.
Wrong. Blodget points out the 800lb gorilla in the room, via an ad industry source. Google makes its money selling CPC ads not CPA ads.
If the average amount spent per click drops, because people spend less, then the value per click drops and therefore so does the CPC revenue.
A California court order takes Wikileaks down, over a juicy story linking a venerable Swiss bank to money laundering - something that the bank possibly has no idea is a perfect web conspiracy meme.
This makes everyone who has never heard of Wikileaks now know about its existence and at the time of this post, the site, stripped of its domain name, available at its skeletal Swedish IP: http://88.80.13.160/wiki/Wikileaks is now down - not because the court demands it, but because it cannot handle the traffic.
Thanks to the court order, Wikileaks is here to stay, because of the will of the majority, not the powerful or vocal.
In the same way, Wikipedia is refusing to take down pictures of Mohammed and Scientologists have, for the first time, failed to carry through with threats to sue, over leaked videos of Tom Cruise.
However trivial or small scale these examples may seem at the moment, like someone refusing to move on a bus, my bet is that this is a genuine phenomenon with far reaching implications. These actions represent the will of the majority, independent of legal loopholes, swarm democracy with direct rather than elected representation. The middle man of the parliament, congress, assembly or court has been removed. The Internet is redefining the role of many middle men, from music industry executives to realtors, but this is the top of the pile.
It will be interesting to see if it remains benign, swarm democracy rather than mob rule, but if you buy the democracy schtick, then you have to allow it to be tested.
A lot of chatter about this article in Scientific American which discusses research that shows the area of the brain involved with prejudice and the success of focusing on similarity to reduce it.
This is a subject I am fascinated by, if I had to pick a single criterion to judge people by it wouldn't be how nice they are, but how nice they are to people who are not part of their tribe.
I have noticed, for example, that people who belong to very strong social or cultural groups are more friendly than average if you belong to that group, or if you accept the mores of that group. The same people are less friendly if you don't belong or go along, and most intransigent when it comes to personal compromise in order to eliminate personal differences between groups.
This can be anything from what team you support, skin color, religion, nationality or taste.
In other words, a civilized society depends not on the people who are currently the most civilized, but those who are most willing to accept change, as social or cultural groupings change, split or coalesce.
Inevitably this means reasonable people rather than faithful people.
Apple's market cap is currently $119 Billion, at the beginning of the year it was around $175 Billion.
Google's market cap is currently $158 Billion.
The economy looks fragile: housing is a bust and banks have hemorrhaged cash, insurance companies are teetering, employment looks dubious, gas prices are high and consumer confidence weakening.
But in SF and Silicon Valley people are partying like its 1999, because VC money is buying the drinks again. Should they be?
You would think that tech stocks would do well in this market, of cheap exports and Web 2.0 hype, but the reality is quite the opposite.
Amongst the best performing stocks this year, are Walmart and General Motors . Among the worst are tech stocks like Apple.
Even with all the infrastructure requirements of gazillions of video 'bits' flying around the Internet, Akamai and Cisco are lackluster.
But the biggest worry of them all is that Google, the company that looked like it would become bigger than Standard Oil (and it still could be) and which sits right at the top of the Web 2.0 food chain, has lost a third of its value in a few months.
To put it in perspective, Google, the company that for many people IS the Internet economy is worth less than a computer manufacturer, Apple, with less than 10% market share, was worth a month ago.
It may recover quickly, but only after confidence in funding Internet startups has waned, in which case the alcohol fueled, party phase of Web 2.0 will be over and many companies will be running on fumes.
This reaction is bad PR:
1. It gives the impression the company is run by bureaucrats.
2. It makes them look scared and defensive (and it could spook stock holders who will second guess the reasons)
3. Google has demonstrated it can beat Microsoft, their best weapon is innovation not legal knots, which will slow their own innovation down.
A Microsoft/Yahoo deal is good for the software industry, it will guarantee at minimum, a Coke vs Pepsi style duopoly rather than either a Google or Microsoft Monopoly.
Google's reaction is not a conspiracy, but a function of what happens when you hire lots of lawyers - they start doing lawyer stuff all over the place, even if you hired them for another battle.
Having lived in the US for nearly 10 years now, I have come to the conclusion that the whole place operates pretty well, except the legal system requires a complete reboot, from the Supreme Court down.
America's broken legal profession is the reason why health care costs twice as much as most other countries (pro bono work), why free markets are hampered (lawyer lobbyists) and why democracy is imperfect (Supreme Court).
It is also the reason why Google was hiring an army of top lawyers when the rose tinted, public perception was that Google's hiring policy revolved almost exclusively around getting the best engineers.
Google needed these lawyers in a society where a big company will attract hundreds of opportunistic legal challenges from people hoping to get at some of its money and from the inevitable anti-trust action that will eventually come its way.
Unfortunately, expensive lawyers won't just sit around fiddling their hourly sums, waiting for anti-trust action. And being lawyers they are very difficult to argue with.
Until now Google have maintained the image of a confident company with founder vision and a mantra of "don't be evil". With their Chief Legal Officer now issuing company statements has that now changed?
My guess is that they have been temporarily bamboozled by Chief Legal Officer, David Drummond and followed his tactically sophisticated but strategically naive advice.
From watching this PR gaff, Drummond is clearly not qualified to act as company spokesperson and perhaps Google's lawyers need to be reigned in.
The best challenge to any Microsoft threat is innovation, something which Google can be confident about shouting from the hill tops.
May 2007: Microsoft Yahoo is a done deal even if they don't know it yet
This is a great move for Microsoft, but if RIMM stock drops to a reasonable earnings multiple, it would be an almost necessary buy for MSFT too.
The reason:
Smartphones have become an essential business tool, like the desktop computer in the 80s.
In a downturn, in particular, if you buy 500 employees an iPhone you look spendthrift, buy them a Blackberry and you look plain thrifty. Buy them anything else and you might look stupid.
The Apple Mac OS may have been more like the OS that powers business computers today, but the less innovative DOS is what made Microsoft dominate. An overlooked reason is purely psychological, and predated the raft of software that made it a rational one: DOS looked more business like.
DOS succeeded at a time when command line computing seemed like the real deal compared to cartoon-like mouse and icon interfaces.
Similarly, a device like the iPhone looks like a luxury consumer device, while a Blackberry is less innovative and more boring. Like conservative office furniture, it looks right for business and is the best of breed. Smartphone alternatives like Palm increasingly look like also rans. A Blackberry will be the de facto business standard smart phone and therefore it competes on Microsoft's home turf.
Microsoft need Blackberry, because its the right kind of crappy.
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