Amazon: The Important Number
April 27, 2012
Short honk: I don’t want to dampen the flames of excitement about Amazon’s financial report. You can get lots of happiness. Just navigate to “Amazon’s Q1 2012: Revenue Up 34 Percent To $13.2B, Net Income Down 35 Percent.” I learned:
Amazon just reported earnings for the first quarter of 2012. Net sales increased 34% to $13.18 billion in the first quarter, compared with $9.86 billion in first quarter 2011. Net income decreased 35% to $130 million in the first quarter, or $0.28 per diluted share, compared with net income of $201 million, or $0.44 per diluted share, in first quarter 2011. The company beat Wall Street expectations; analysts expected a profit of $0.07 per share on revenue of $12.9 billion for the quarter.
I want to capture what I think is the important number. Amazon’s costs continue to rise. The company is in a race to invest and buy market share. But it has to convert these gains to big money because the cost of the infrastructure, the new staff, legal hassles, and “inventing” gizmos are going up and fast.
One of the secrets of online is that investments in technology really do not flatten out. Only more big money makes the online business work. Amazon is in a race against costs. Exciting. Neither Amazon nor Google is immune to the online cost rash.
Stephen E Arnold, April 27, 2012
Sponsored by PolySpot
Are Google Display Ads Losing Magnetism?
April 26, 2012
Business Insider recently reported on the latest in Google advertising in the article “Here’s One Reason Why Google’s Ad Prices May be Dropping.”
According to the article, Google’s ad prices are down by 12 percent from the previous year and this is the second quarter in a row that this has happened. The reason for this? One unnamed person who is familiar with Google’s ad business has a theory.
While Google has added new display advertising inventory, the search giant is having trouble getting small and mid-sized businesses to buy it.
The article states:
“With Google’s traditional search advertising, which still makes up the vast majority of its ad sales, a lot of small and mid-size businesses bid on keywords. This tends to drive prices up.
But display ads still have fewer bidders — mostly larger companies, since smaller companies don’t see the immediate and obvious return on investment that they do with search. It’s harder to track, for instance, the many times a user has seen a display ad before they actually click to buy something.”
It looks like Google needs to do a better job of encouraging smaller businesses to purchase display ads if it wants to continue its reign as search king.
Jasmine Ashton, April 26, 2012
Sponsored by PolySpot
Research in Motion Stops Android Sideloading
April 24, 2012
Research in Motion will restrict its users from sideloading Android apps onto its Blackberry PlayBook tablet, so says Alec Saunders, the VP of developer relations. TechNewsWorld reported on the story in “RIM Fishes PlayBook Out of Google’s ‘Chaotic Cesspool.’” The PlayBook’s sales figures have been extremely low and RIM tried to save the tablet with Android apps. RIM allowed Android developers to repackage their apps for the Playbook as along as they removed the name “Android” and all links to the Google Android marker.
For a time it worked, but the VP developed a different opinion:
“Saunders later referred to Google’s (Nasdaq: GOOG) Android Market, which was recently made part of the Google Play store, as a ‘chaotic cesspool.’”
Even though RIM had Android app developers remove all that information from apps sold for the PlayBook, they still allowed sideloading and compatibility with the Android. The agreement went sour with Android security, malware, pirated apps, and low quality apps. Developers loved the agreement, because they got more money, but when users downloaded the apps from unofficial Android stores it cut into the PlayBook’s profits. RIM is pulling out to keep their app market cleaner and so they can keep growing in the app market. RIM has been in the news a lot lately with a stabbing at RIM party and when an executive’s behavior on a plane soured a flight. They’re doing poorly all over the board and now RIM is wiping up the bloodstains. What will happen next? Maybe RIM will go away? We think Google will remember the “cesspool” comment, however.
Whitney Grace, April 23, 2012
Sponsored by PolySpot
Google: WalMart Type Margins Good Enough?
April 18, 2012
For the most part, we all know that Walmart dominated the retail world by cutting or buying out the competition. For several decades they cornered the market with low pricing and an overabundance of locations, weeding out the mom and pop stores of the past.
In the article Asymco: Google makes only $1.70 a year per Android device – Apple 2.0 – Fortune Tech, we can see a very similar comparison between Walmart and Google, where domination and control of specific markets seems to be the approach instead of producing reliable products.
“We have a significant breakthrough in understanding the economics of Android and the overall mobile platform strategy of Google.
P&L considerations were not the only (or even at all) factors in investment for Google,” Dediu writes. “Having a hedge against hegemony of potential rivals, having a means to learn and develop new business and having a role in defining the post-PC computing paradigm is all probably bigger considerations than profitability.”
In the end, you get what you pay for and people are starting to rediscover that philosophy. Issues will eventually arise when companies replace the value of their products and people with their desire for growth and power. Is Google less about becoming Microsoft and more about emulating WalMart? If so, Amazon is a competitor to think about, as WalMart is becoming a yesterday business.
Jennifer Shockley, April 19, 2012
Sponsored by TheTrendPoint
Google and Its Stock Split
April 16, 2012
I pointed out that the big news from the Google quarterly report was the erosion of revenue from Google’s core business.
Other addled geese, poobahs, and mavens found the stock split more troubling. A good example of the reaction is this Reuters real news story: “Google’s Evil Stock Split.” The idea is that Google seems to be perilously close to violating guidelines put in place 90 years ago. Here’s the key point in my opinion:
Google has, now, clearly violated the spirit of the NYSE rules, if not their letter. It took 15 months for the independent directors on the board to be persuaded of this, in long and secret deliberations.
Well, the independent directors * were * convinced.
I also enjoyed this comment in the Reuters real news story:
This move, then, is basically a way for Google to try to retreat back into its pre-IPO shell as much as possible. It never really wanted to go public in the first place — it was forced into that by the 500-shareholder rule — but at this point, Google is far too entrenched in the corporate landscape to be able to turn back the clock. It’s too big, and too important, and has been public for too long. That’s the thing about going public: it might suck, but once you’ve done it, you’ve done it. And at that point, if you try to pull a stunt like this, you risk looking all too much like Rupert Murdoch.
Okay, real Silicon Valley is starting to look like the real news paragon, Rupert Murdoch.
Wow.
My take is very simple.
The Googlers know that revenue softening can no longer be swept under the rug or surrounded with big band music and fancy dancing. The numbers are too big. The declines are double digits. The grousing about Panda and the push to get people to buy AdWords to visible to some Web site operators.
Therefore, the stock play is designed to leave the existing management team in charge as the financial news get increasingly dodgey. The Google senior management team does not want to be looking at a start up to fund without the Google ID card in their pocket.
So the erosion of online ad efficiency is causing the control push. Because this has been going on among the independent directors, I have concluded that the revenue erosion was noticeable in 2010, maybe earlier.
Will control reverse the online advertising money machine’s functioning. Nah, but the days of the “Google can do no wrong” are either over or drawing to a close. Google has these issues with which to contend:
- Legal hassles. Big disc brake applied to some activities.
- Amazon, Apple, and Facebook. Each of these companies has learned from Google. This is The Google Legacy I wrote about back in 2004 or 2005. You might want to check it out because Amazon, Apple, and Facebook have out Googled Google and seem to be gaining strength as Google does the fancy dancing.
- Costs from brute force solutions. Google spends a lot of dough to keep its brute force indexing system up and running. Facebook, on the other hand, can just spider Web urls which its members have posted. No brute force required to get started with an interesting search solution. Amazon has slapped A9 in the AWS plumbing and can move into search niches where Google has not gotten significant traction. Apple, which Google really wants to emulate, keep chugging along with a walled garden and customers’ religious fervor. Do you know anyone with religious fervor toward the Google. Well, I know one company. Oracle. See item one above.
Net net: Blekko/Yandex and Facebook could put the squeeze on the Google with a little luck and some good timing. How will Google respond? No clue. Google is not accustomed to playing defense. Ego is a potent concept. As the Greek tragedian said:
Cleverness is not wisdom. Bacchæ l. 395
Stephen E Arnold, April 18, 2012
Sponsored by Pandia.com
The Netflix of Magazines and How Usage Will Really Work
April 5, 2012
I read “Finally, a Reason to Read Magazines on a Tablet.” The idea seems like a quite fresh one. A group of publishers have teamed up to pool high-value content. Users can buy the content. The idea is that aggregation of full text and a flat fee of $10 or $15 per month will generate revenue. I have not been privy to the discussions, but I have a hunch that the notion of “big money” and possibly the idea of “saving the magazine business” may have crossed the minds of the folks who came up with this 21st century idea. You can read the AllThingsD article and get the nitty gritty.
I want to focus on a fact I learned in my years of working with content in online form. Some of these ideas will strike most of the people under the age of 40 as silly, but the comments below are based on real life experience with commercial information products delivered in digital form via electronic media. I invite comments, but I want to capture the basics before I zoom past this “revolutionary” idea. I have pulled some ideas from my confidential report, “The Physics of Information,” prepared for a government agency a number of years ago. (Some related content is available when you search Beyond Search for “mysteries of online”; for example, Mysteries of Online 3: Free versus Fee Information.”)
The collision of reality and for-fee, high value information services spawns a large number of unanticipated costs. Revenue is usually inadequate to cover spikes, pay overhead, invest in additional development, and expand the user base. Unlike print magazines, digital content is slippery and tough to make pay in the way a successful magazine did in 1975.
First, in any aggregation of electronic content, there will be a variant of the 80-20 rule. In the digital world, four to seven percent of the available content attracts attention. If you have a back file of 100,000 stories and a flow of five new stories a day, the most recent content attracts the majority of the clicks. The “long tail” is an interesting concept, but in the world of paying for digital information, the fresh content and the most recent content has value. Older content for the majority of those seeking information is “nice to have” and will be rarely if ever clicked upon for a fee. As a result, when I am asked, “Do we build a back file of our high value content?”, my answer is, “No.” The money comes from the now content. Back file content unless easily automated or very cheap to acquire is not worth the hassle. Better to put the resources into the now content.
Google Valueless: Craziness from TechCrunch
April 3, 2012
I woke up this morning to an email from a colleague in Madrid, Spain. The goose has been chillin’ due to some excitement here in rural Kentucky. My colleague wanted to know if I had read “Why Google Might Be Going to $0.” Yep, zero, bupkes, zip, zilch.
The write up focuses on a patent matter involving Google and Here’s the paragraph I noted:
Guess what? Google’s patent lawyer is Quinn-Emmanuel. They are defending Google. Oh, and here’s something funny. Guess who Yahoo’s lawyer is? Yahoo is suing Facebook for patent infringement in the search domain. Quinn-Emanuel. So the same lawyer is both defending and accusing in the same domain. Someone’s going to settle. Everyone will settle. If anyone loses this case then the entire industry is going down in the same lawsuit and the exact same lawyer will be stuck on both sides of the fence. I’m not a lawyer but that smells. The trial is October 16 in the Eastern District Court of Virginia and will last 2 weeks. An appeal process can take, at most, a year. I’ve known Ken for 23 years. I’ve been in the trenches with him when he was writing what I thought was his useless software. I watched his company get bought and we’ve talked about these technologies through the decades. I’ve read the patent case. I watched Hal Varian’s video. Also look at this link on Google’s site where they describe their algorithm. Compare with the patent claim. I have a screenshot if they decide to take it down. $67 billion in revenues from this patent. Imagine: double that in the next ten years. Imagine: triple damages.
The idea is that Google is at risk for multiples of its revenue. I am no attorney. I assume that Google’s settlement with Yahoo with regard to the alleged infringement of ad-related systems and methods was made in an informed manner.
Can a court fine Google in such a way that the company has zero value? Sure, anything is possible. Is it reasonable to believe that Google gets a negative ruling? Yep, that’s the excitement of the legal system in the US. Is Google heading for a big zero? Not likely. But the write up is definitely something that warrants publishing on the day before April Fool’s moment in the venture capital sun.
Stephen E Arnold, April 3, 2012
Sponsored by Pandia.com
Newspapers Losing Revenue: Time for a Change
March 30, 2012
Newspaper acquisition time? I was surprised by a headline I landed on while browsing Business Week; an article titled, “Newspapers Lose $10 in Print for Every Digital $1” grabbed my attention.
According to the article, newspapers in the United States lost $10 in print advertising revenue in 2011 for every dollar gained online. The article cites a study by Pew Research and blames the 7.9 percent ad revenue loss on competition from tech intermediaries. Newspapers are hurting tremendously in the online arena. Paid news sites and print copies are declining in revenue because consumers want their news fast and free, usually via mobile apps and free news blogs.
Newspaper groups have failed to capitalize on the volume of personalized data available online in the face of increased competition from companies including Google (GOOG) and Facebook, which are selling advertising targeted to consumers based on their interests and demographics, typically at higher ad rates, Rosenstiel said. Newspapers have slowly shifted their businesses online, led in part by the recent success of New York Times Co. (NYT)’s plan to charge readers for access to its newspapers’ websites. Pew’s study estimates as many as 100 newspapers are expected to offer a digital subscription model in the coming months.
No matter how one exercises ingenuity, the newspapers have a broken business model and a customer base indifferent to old information in print or online. Users are not likely to pay subscription fees, even for traditional and trusted organizations, if the material is available elsewhere for free. News groups should reconsider new business models or becoming partners with data-driven companies, or else it could be sell off and go fishing time.
Andrea Hayden, March 30, 2012
Sponsored by Pandia.com
The Risks of Disorganized Data
March 28, 2012
Ah, eDiscovery, you spin a wide web of repercussions. Australia’s Lawyers Weekly reports, “Messy Info Systems Could Cost Firms Millions.” Allison Walton, an eDiscovery attorney at Symantec, spoke recently at the Australian Corporate Lawyers Association’s 2012 Victorian Corporate Counsel Day. Information management company Symantec helps clients with eDiscovery needs, among other things.
The article reports on Walton’s session:
’E-discovery has been a very expensive, painful process in America over the last 15 years and some of that has started to happen in Australia. The same trends of over-collection, having to sort through duplicates, being at the mercy of outside service providers and their bills, and generally not owning the process,’ she said. Walton aims to accelerate that ‘painful process’ in Australia, by giving those who own information within law firms, power over it. ‘That’s the information governance message I want to get across,’ she told Lawyers Weekly.’
Information governance, she says, should take the form of end-to-end archiving across an “electronic discovery reference model” she supplied. See the article for an illustration of that model.
Hoping Aussies learn from the mistakes of US companies, Walton emphasizes that organizations need to let go of the old. Fearing the very real danger of being prosecuted for deleting data they should have kept, many firms just refuse to delete anything. This approach, however, can hamper a system so that retrieving relevant information quickly might be impossible. That’s not much help. Furthermore, it can mean that “tons of different pieces of sensitive information end up getting all mixed up together and probably don’t have the right security parameters around them.” Even less than unhelpful.
Walton informed her listeners that a number of US companies have been very heavily penalized for being unable to produce required records. She cautions that if businesses wish to have offices in the US, they must understand and follow US laws. They should lay the groundwork for efficient compliance from the beginning.
So, now we understand about the cost to lawyers of unkempt information systems, but what about to the clients? Oh, clients. Yep, they can be important. . . .
Cynthia Murrell, March 26, 2012
Sponsored by Pandia.com
More Data about Down Trends in Online Ads
March 23, 2012
This could spell bad news for those depending on online ad revenues. ClickZ reports, “Spending on Digital Ads Fell Sharply in Q4.” According to Kantar Media’s recent data, investments in both search and display ads fell by 6% in the last quarter of 2011. The decline is part of an overall trend, with advertising in all media drooping by 1% from the same time in 2010.
Writer Douglas Quenqua elaborates:
Paid search was down 6.4 percent from the same period in 2010, led by pullbacks from the financial, insurance and local sectors. Display spending dropped 5.9 percent as auto manufacturers, telecom providers and travel companies tightened their belts.
Advertising in television is faring better than in other markets, boosted mainly by investments in sports programming. Interestingly, ads during Fox’s X Factor singing show also significantly bolstered TV’s numbers during 2011’s final quarter.
Magazines and newspapers are faring poorly, particularly Sunday magazines. The article suggests that these dollars may be heading into the digital realm, perhaps into platforms not currently being measured. Television, however, looks like it will continue going strong for the foreseeable future. No surprise there.
Cynthia Murrell, March 23, 2012
Sponsored by Pandia.com
- Subscribe to Beyond Search
Feature archive
News archive
-
