Ballmer: Yahoo a tactic, not a strategy


Microsoft Chief Steve Ballmer spoke to the Microsofties today about the companies plans.   For Yahoo merger followers there was nothign much new as he simply reiterated this point:

Related to Google and our search strategy are the discussions we had with Yahoo. I want to emphasize the point I’ve been making all along—Yahoo was a tactic, not a strategy. We want to accelerate our share of search queries and create a bigger pool of advertisers, and Yahoo would have helped us get there faster. But we will get there with or without Yahoo. We have the right people, we’ve made incredible progress in our technology, and we’ll continue to make smart investments that will enable us to build an industry-leading business.

Some would argue that the reason Microsoft needs Yahoo is that their online strategy has so far failed to do very much.   My take is that they have not moved the online market as they’d hoped, but that they also have not worked nearly as hard in this area as they could have because Microsoft (correctly) sees that their huge presence in the software market is where the big money remains, at least for the next few years.    They have chosen in large part to protect their huge revenue ship rather than act more aggressively and nimbly (and expensively) to find online revenues or pull market share from Google.    I think many analysts – especially those in blogging – fail to recognize that Google’s revenues simply pale in comparison to Microsoft’s.   Google has the lion’s share of online money but Microsoft still has the lion’s share of the lion’s share money, which is in software, gaming, and entertainment.      I agree that the power curve is shifting from MS to Google, but MS remains the 800 pound revenue Gorilla.    Money beats buzz to the bank every time, and this point is not lost on Microsoft or Google.

Disclosure:  Long on YHOO

Microsoft Yahoo: Is $32 now the magic number?


Microsoft’s very well played game to win Yahoo at a bargain price is wrapping up even more favorably than Microsoft planned. Yahoo refused the Icahn MS offer today to buy just pieces of the company, though in typical fashion Yahoo did not outline many details of their decision making process, rather they simply asserted it was a bad idea.

Obviously this was a strategic rather than serious move by MS as noted by Henry Blodget, though he’s wrong to think this is just a small play to soften up the Yahoo board before the proxy fight in August.

In fact this is the end game of a very smart plan by Ballmer / MS to aquire everything for less than they have been planning to pay for over a year. Yahoo’s intransigence has simply delayed the process by a few months and saved MS a few dollars per share on what they would have paid.

Over at Silicon Valley Insider we have Henry basically begging for an offer over $31 and indicating support for less.

Yahoo board is now *begging* MS for the $33 they could have had easily a few months ago but may not see again. MS can get it all for less so I’m now guessing the meeting offer will be $31 or $32. That will make MS look generous for keeping to the original plan in the face of a weakening Yahoo, and it will be acceptable to shareholders fearful of YHOO at $18 or lower if this all collapses.

Although this is likely to be resolved at or soon after the upcoming Yahoo board meeting it doesn’t have to resolve to work in MS’s favor. Yahoo’s pretty much exhausted all their options to the extent that it’s either Yahoo in the 30 range with Microsoft or Yahoo under 20 without MS.

Disclosure: Long on YHOO

Googley iPhone Goodness


It is obvious that Google is going to embrace mobile applications very, very powerfully in the coming year and it looks like Google has a great first iPhone effort with their new search application featuring a lot of automated guessing so you can avoid the most painful part of the mobile experience – typing.

Of course things are *really* going to get interesting this fall or early next year when a new Google mobile phone will come out.    Although Google has produced branded hardware for some time in the form of search appliances these had an extremely limited distribution.   The upcoming  “G Phone” will be a *huge* success if it offers iPhone functionality at a lower price.   I think the latest assumption is that a Google phone will be made by HTC for Dell though I have not checked in on this recently.    I think the Google branding factor will be incredibly powerful, and predict that *most* users will choose  a “Google gPhone” over an “Apple iPhone” assuming similar features and cost.    This isn’t to suggest the iPhone market cannot exist alongside a gPhone, and clearly the iPhone is the mobile device to beat, so the game is very much on right now in terms of smartphone competition.     Sprint’s new “Instinct” is an excellent device with many advantages over the old iPhone (e.g. Geolocation), though I think we’ll see functionality in these devices converge as early as next year with no compromises for users.   Computing is rapidly moving to mobile.

Here is a demo of the iPhone application at the Google Mobile Blog

Google blog

Google Ranking Needs a Spanking


Over at the Google blog today Amit Singhal has post 1 of 2 that promises an introduction to Google ranking.  As usual I’m disappointed in the way Google maintains what to me is a pretense of transparency while using some very ruthless and mysterious tactics to downrank sites they claim don’t meet quality guidelines.   Google (correctly) sees themselves as warring with spammers for control of the web but (incorrectly) thinks transparency is the wrong approach in this fight.

There were some rumblings last year of contacting webmasters directly about site problems but my understanding is that this would represent only a tiny fraction of total sites under penalty.    Of course, due to so little transparency in this area we can’t know the real numbers.

I’ll hope Amit’s second post is a LOT more specific, because I think he’s already practicing the kind oblique speak that is becoming commonplace when many from Google talk about ranking:

Amit:
No discussion of Google’s ranking would be complete without asking the common – but misguided! 🙂 – question: “Does Google manually edit its results?” Let me just answer that with our third philosophy: no manual intervention.

That statement is false, and he should not say it.   He does try to clarify later in the post:

I should add, however, that there are clear written policies for websites recommended by Google, and we do take action on sites that are in violation of our policies or for a small number of other reasons (e.g. legal requirements, child porn, viruses/malware, etc).

Action?  Yes, of course he means the *manual intervention* he said above does not happen.  Google has a right to pull sites out of the rankings, though it is annoying how much they talk about NOT manually intervening when they do it.    Because of no transparency nobody outside of Google knows how often they manually intervene.    Amit makes  it sound like it’s only for horrors like child porn or malware, but note that the use of inappropriate “SEO” tactics such as “hidden text” can get you removed and even banned from the Google index.   Unfortunately for small sites – e.g. “Aunt Sally’s House of Knitting website”  Aunt Sally may have no idea her webmaster is using these tactics.   How often does this happen?    My guess is that hundreds of thousands of legitimate sites are ranked very improperly due to technical penalties, but due to no transparency (and probably no measure of this at Google) nobody knows.

The big Google problem is that the policies for algorithmic downranking are not *clear enough*.  Many SEO companies prey on this lack of transparency, ironically often using Google’s mystique to lure unsuspecting businesses into expensive “optimization” schemes that don’t work or can get them seriously penalized.

Part of Google’s search algorithm philosphy is that they don’t share details because spammers would exploit them before honest people.   Although a weak case can be made for this idea, a better one is that in  non-transparent systems dishonest folks will do *better* because they invest more energy into finding the loopholes.    For example inbound linking, a very hot SEO topic last year at SES San Jose, has complex rules nobody understands outside of Google.    For example linking between sites in an information network can be advantageous or it can be penalized depending on whether Google (rather than the community or webmaster) sees the practice as manipulative of the algorithm or user-friendly and thus allowable.

Amit – a clear policy is one where the webmaster will know, rather than guess, what they are doing to annoy the Google algorithm or the manual intervention folks.

There is a pretty good source for information about how to approach site architecture for optimal ranking and it is to read Matt Cutts’ SEO related posts here.

Although Matt won’t give out much about the algorithmic penalties that create much of the Google confusion and frustration for established websites, if you follow Google’s guidelines and Matt’s posts on SEO you are unlikely to have serious problems with ranking.     Of course unless you work to optimize a new website you will have the *standard problems* with ranking since your competition is probably doing basic SEO on their site.   I’d argue (along with many SEO folks) that the best way to enter things this late in the game and hope for good ranks is with a topical *blog* to support your website.   Start with several posts about your general area of business, using a lot of the terminology people would use to find your website, and add posts regularly.

I’ll be covering the SES San Jose Search Conference and expect to hear a lot more debate about the issue of transparency, blogging, and SEO.

Lively by Google: Will Lively bring death to Second Life?


Google lively is a very clever social interaction “environment” that is simple to set up and modify, and may appeal a lot to folks who like some visual feedback when chatting with others.   I don’t think this will replace the experience for hard core second life folks, but I’m fairly sure it’ll cut the number of *new registrations* at Second Life by quite a bit.      In fact I’m sure they are now discussing how to handle this major assault on what was a virtual monopoly (literally and figuratively) at Second Live.

I’m unable to embed my Google Lively rooms here, though I just tested and they work fine in blogger blogs.

It’s funny how things come back around.   About ten years ago I got my tourism board of directors to experiment with “virtual meetings” using avatars and within a simple browser framework.   I even forget the program.    The technology was fine – even it allowed chats and a way to “carry” groups of people to different URLs so you could demo new web pages and such.     However the mostly non-tech crowd simply was not comfortable interacting in this fashion and I got very limited participation.    Even now this is the case for many, but I think the growing number of technophiles combined with the current generation of young folks who are very comfortable with virtual worlds will open up this type of “conversation” to include a large segment of the population – enough to make this a significant new addition to the online communication landscape.

Niniane Wang from Google has the intro blog post:
Official Google Blog: Be who you want on the web pages you visit

The New York Times Brad calls this a “Whackier” kind of Google, which I think is a compliment.

Google’s KinderGate: Your kids are welcome here for $57,000 a year.


When I first read about trouble in Google land over child care costs I thought it would be another case of the how super well paid but whiney Silicon Valley parents were unreasonably complaining about a minor bump in their charmed luxury lives. But maybe not.

Google appears to be on a search for the holy grail of child care, and even after charging parents for the service Google wound up subsidizing things to the tune of 37,000 *per child per year* – managing to spend the approximate average national income on every kid lucky enough to reach the nirvanesque kinderplex environment. The solution to this negative cash flow – unusual for the company known for showering employees with benefits like laundry service and free meals – was to raise the child care rates to about 2500 per month per child.

The NYT reports that two kids in Google childcare will run you $57,000. Although Googlers take home an average of something like $140,000 per year this isn’t going to ruin them, but this sure ain’t a page from the Brady Bunch days.

The situation is interesting economically but I think even more interesting as an experiment in Google’s approach to social engineering, which I think argue may be failing because it may not be able to scale in the same fashion as many of Google’s magnificent technological innovations.

Although Silicon Valley employees have historically enjoyed some great benefits, Google shined as the company that outdid everybody with free gourmet meals, free laundry, and great parties all within a context of individual freedom to work pretty much as you pleased as long as you were productively engaged, and even that was defined in some part by the employee.

This approach seemed to be working well, but I wonder how much of this was just an illusion caused by Google’s huge wash of incoming cash. The NYT article suggests that the company hardly even noticed the child care subsidy until recently. I’m guessing that only recently have the Google bean counters been called up from their free lunch to sharpen their pencils and find ways for Google to trim the company budget.

There are obviously two huge human resource pressures on Google now as it grows within the context of providing the world’s best company bennies. First is the fact that the legions of Googlers are for the most part…kidless. As employees age, especially the key folks from the early days, Google will see a lot more departures of key folks and a lot more demands for family time and benefits. Even stronger will be the pressure from the growing number of employees in Google’s empire, far more of whom are likely to be “in it for the money and perks” than in the early days. I remember touring the Googleplex a few years ago with an exec who, when asked about this problem, said it was not happening. But I think that was about 10,000 employees ago and before the level of concern over Google’s KinderGate scandal.

I will be very interesting to see if Google can scale their sometimes pesky human resources as effectively as they have scaled their technological and commercial resources.

I’m guessing…make that strongly predicting….the answer is no.

New York Times Reports

SEO Pseudo Alert: Google Crawling Flash


For many years anybody who knew anything about search engine optimization “SEO”, would scoff at the idea of using more than minor number amount of Flash elements in websites, because for many years those Flash elements were largely invisible to search engines – most notably Google – and therefore sites that used Flash would often rank lower than others simply because Google could not recognize the Flash parts of their content.

Designers like Flash because it offers a very dynamic and attractive way to present information.  It is image rich and context poor.   At least until today’s Google announcement that they have figured out a way to index Flash stuff.

Although this is great news for the millions of sites using Flash that will now probably enjoy somewhat better rankings as their Flash content and navigation (link structure)  is better indexed by Google, I’d caution designers to keep avoiding Flash until this process is much better understood.  I’d guess that one of the key defects of flash sites – having navigation that is opaque to the Googlebot – will continue to be problematic even under the new systems.    A good designer can get much of the same “look and feel” of flash with good use of good images, art, and CSS (Cascading Style Sheets), and from an SEO perspective I think sites are still well advised to note the best observation I’ve ever heard about SEO from Matt Cutts at Google – almost certainly Matt is the world’s most authoritative expert on Google ranking and SEO:

“Googlebot is stupid”, said Matt, so you need to help it figure out your website.

I guess Googlebot is smarter now that it recognizes Flash, but Matt’s advice about this is still very relevant and frankly simpler than most people think.    Here’s some SEO advice for newbies:

1) Think In terms of ranking *properly* rather than ranking higher than sites that are better than you are.   If competitors are more relevant think of ways to make *your site* and *your product* more relevant.

2) Research keywords (or just guess if you are lazy) and make a list of those that you want to rank well for.

3) Make sure your content is rich in the keywords for which you are ranking well.   Make sure your page Titles use those keywords in the Title for the page, and use unique, keyword rich titles for each of your pages.    Make sure the content in the page is very relevant to the query – ie is this something that is going to help the reader out in their journey to enlightenment?    If not, make it so!

4) Links, links, links.    These are the mother’s milk of online success.   Do not buy them, earn them and get them from other sites in your network, sites of friends, etc.    Establish relationships of relevance with others that will get them to link to your website.     Avoid cheap linking schemes – as always think in terms of what creates a valuable resource for your readers.

5) Blog.  Blog more.  Google appears to be ranking blog content favorably and I predict they’ll need to do even more of this as blogs are replacing websites as the freshest and most relevant content on most topics.

Whether you are a mom and pop or a multinational, if you want to rank well online you should be blogging regularly about your topics.   When blogging, follow the rules 1-4 above.

6) Lower your monetary expectations.   Making money online is much harder than offline people think.   Even most Silicon Valley insiders generally only make big money from a handful of projects.    The overwhelming majority of startups fail, often leaving the founders with nothing but the memory of hard work.

7) Raise your personal expectations.  The online world is fascinating, exploding in popularity and significance, and is where you need to be.  Get on board with a blog!

Links and SEO


From a search ranking perspective links are one of a website’s top concerns- probably the most important concern as linking often trumps content in terms of where a site will place for search queries.

As always, a great source for SEO information is Matt Cutts blog over at Google where a careful read of his SEO posts will bring you a lot of enlightenment about Google do’s and don’ts. His post of a few days ago was particularly interesting as it deals with Google’s crackdown on paid links that try to pass pagerank. This is one of the most contentious topics in SEO and an area where I wish Google would be more transparent since there are so many linking approaches that are not paid but may be questionable in the eyes of Google. The fact that they depend so much on reporting of paid links is also a problem as it allows aggressive SEOs to “game the system” by selectively reporting competitors while creating complex and undetectable linking for their own sites.

However my biggest concern about linking is not something Google can fix, and that is the fact that even in the world of what Google views as legitimate, authority passing links, strategic linking to “friend and associate” websites has largely replaced the early approaches to linking where people work to simply link to a great resource for the reader.   As blogging has exploded into prominence and linking importance this problem has become critical, and we now see that early and well established blogs will outrank far better resources that have few incoming links because they are new.   Ideally, the older resources would be better stewards and link out to the good new resources but generally the stakes have become too high as links are now correctly seen as more valuable than advertising and bloggers have become too reluctant to link to other resources unless there is some reciprocal benefit.

Why O’Reilly’s wrong about Arrington being wrong about Yahoo being wrong about Microsoft


What did the normally very insightful Tim O’Reilly and Fred Wilson have for lunch, some free hallucinogenic deserts over at Google?

Both are criticizing Mike Arrington for stating the obvious – Yahoo’s not acting in the best interest of shareholders or Yahoo or anybody except Google, who clearly is the big winner in Yahoo’s squandered megadeal with Microsoft.

Fred very correctly notes that Yahoo’s has faced leadership challenges for a long time, but he says he likes the one option that keeps the current Yahoo board intact and very much on track for much more of the same company crushing behavior. Yes, a clean house is needed and that is certainly less likely to happen *now*.

It seems to me there are two issues and they have it wrong on both counts where Arrington’s got it right.

First, Yahoo’s Google move proved that in terms of shareholder obligations it should have sold to MS. Yahoo cannot reasonably make a case that they will come out of the monetization hole using core values while immediately outsourcing their most potentially lucrative biz to Google. Sure this will make more than Yahoo alone, but nothing like what the MS deal would have offered Yahoo in terms of ad cash plus money to develop the search biz. MS offered a shot at glory. Yahoo took Google’s money so they could keep sitting back and watching the really big search money pass them by.

Is Fred saying there is a Googley path back to $34+ per share? Even if yes, it is nonsense to think it’ll happen fast enough to justify turning down MS’s offer of $34 and their subsequent offer of $35 for 1 in 6 of Yahoo’s outstanding shares.

Second, this just gives Google even more of a near monopoly on monetization. As Mike suggests competiton is lacking and needed in the search space. This is a big step in the wrong direction.

Disclosure: Long on YHOO