Online advertising down

NYTimes today  - down 2.4% compared to last year. Talks about low value/commoditisation of advertising networks and that blogs/video will eventually work as advertising conduits.

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Former employee on Google management style

Came across this blog from a former Google employee

http://steve-yegge.blogspot.com/2006/09/good-agile-bad-agile_27.html

Ignore the first few paragraghs and scroll down to the section titled "The Good Kind".

He describes the practice of "Theory O" inside the Google world......

Google Local Gets Broken Into

Sept 2008 - yes last month. Looks like Google Local was subjected to 'social engineering security attack'. Slightly like Pallin and Yahoo eail.

Article from Miriam Ellis in Search Engine Guide

Quote:

From my perspective this is like a scenario where Google has the keys to your shop, they agree to watch over it for the afternoon. On their coffee break they stepped out and forgot to lock the door. During that time, a thief broke in, stole some flowers and left his calling card taped to the door.

Google, returned for the afternoon after coffee and upon closing, forgot to alert you to the theft and they left the thief's calling card where he left it, covering your sign on the door.

Google gets no pass on this one.

Google Answers - RIP

http://answers.google.com/answers/

Competing on the Edge - Shona Brown

The book referenced earlier, 'Competing on the Edge' by Shona Brown. Shona Brown is the 'Senior Vice President, Business Operations' at Google.

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Google Scenarios

Greg has done a lot of scenario building based on scanning.

However not letting any details get in the way I'll take a crazy stab at scenarios. Didn't look at 'strategic gap' (Ansoff) or market growth rates specifically.

Optimistic scenario: Positive marketing environment and transition to on-line spend grows internet advertising market. Google diversifies into other media, becoming a single source supplier for many customers. Development of web-platforms e.g. the Chrome browser, Gears, Andriod lead to ubiquity of the web and in particular web-search. Google's applications successfully become content drivers adding to conversion into clicks. Applications become carriers for Google's advertising and thereby capture a large proportion of software spend. Google provides an end-to-end solution for marketing, tying themselves into marketing supply chains. Google also manages to provide a purchasing directory, thereby tying themselves into consumers supply chains.

Pessimistic scenario: Google gets surpassed by searchme.com with advertising conversions falling to negligible levels (20% of existing?). Worldwide economy falters with marketing spend fulling dramatically in key Google markets, e.g. U.S.. Internet media consolidates into a model more resembling a traditional publishing model with a few significant players - not Google. Hubris at Google results in them spending to 'invent their way out of trouble' compounding the liabilities that expensive fixed-cost platforms have become. Specialist providers have picked of effective platforms such as YouTube, which was never quite consolidated into a coherent part of the Google organisation. Google is forced to charge $25 a year for gmail, obtain revenue through ever more detailed profiles and on-sell 'anonymised' content profiles to Sharman Networks and Mark Zukerberg which coupled with rising unreliability results in mass defection and the sale of the Google brand for $1 to Murdoch.

Gmail-Picassa-Docs etc/storage options:

10GB - $US20/yr | 40GB - $US75/yr | 150Gb - $US250/yr | 400Gb - $US500/yr

Neutral scenario:

These are the revenue growth figures from the Google 2007 Annual report:

Revenue	2002	2003	2004	2005	2006	2007
Y/Y Growth rate	409.00%	234.00%	118.00%	92.00%	73.00%	56.00%

Clearly the rate of growth is decreasing. As Hamel says – rapid growth leads more quickly to constraints to growth.

I was looking in the y/y growth rate crystal ball. Our hypothesis is that the growth rate needs to be high so as justify share price (P/E 21 in this financial market), to justify expectations and offset a high rate growth rate in costs (69%, 2007). Admittedly the first line starts at a high 50%. Data came from Google investor site.

I can't imagine the 2008 annual growth being too much higher than the Q2 growth rate of 39% given global economics. Growth rates should be able to be compared quarterly, ignoring seasonal factors. Open office 'power regression' (guess that is the -1.19 bit) give me an equation f(x) = 4.56x^-1.19 and an r value of 98 as the closest fit to these numbers. Equation gives 45% growth for 2008, 38% for 2009 and 20% for 2014.

If we took the negative model and mapped linear, Google would be negative in 2007 (r = 0.77).

For costs, I could not get a good model, the 2003 figure probably should be discarded. In 2005,2006, 2007 the rate of growth actually increased to sit at approximately 70%. This is higher than the growth in revenue at 56%

Divergent:
a) Google finds the long-lost patent for the hyperlink and purchases it. It uses this patent and address translation software to become the middle-man in all accesses to internet resources.
b) Big media and authoritarian regimes limit access to freely available sources. The only access is through media company or national portals.

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Our Central Theme - Future Sighted Google

I guess it did come down to Hamel - companies are often criticised for being short-cited. Not Google - they are always looking at 'blue sky' and repeating the success with targeted search advertising with something else equally impressive.

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