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Google Billionaires and Their Toys July 7, 2006

Posted by Jerry Bowles in Companies, Google.
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The Wall Street Journal (subscription-required) has an hilarious story this morning about Google founders Sergey Brin and Larry Page squabbling over the size of their beds on a Boeing 767 they were having turned into a “party airplane.”  Seems Sergey wanted a “California king” and Larry didn’t–a dispute that had to be arbitrated by CEO Eric Schmidt (a guy who, if I’m remembering correctly was one of the earliest and most fervent Internet skeptics).  Schmidt decreed  that Sergey and Larry could choose whatever beds they wanted for their individual rooms and it was time to move on.  The designer hired to renovate the plane says there were also some other “strange” requests, i.e., hammocks hung from the ceiling of the plane.  A Boeing 767 is three times as heavy as the normal corporate jet and about ten times as expensive to fly.  Not surprisingly, the whole boondoggle is now tied up in lawsuits. 

Also at my other blog:  Practical Widgets 

The Shark That Didn’t Eat PayPal June 29, 2006

Posted by Jerry Bowles in Companies, Google, Online Banking/Payment Processor, PayPal, Retail, Web 2.0.
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Google officially rolled out Google Checkout, its online transaction service this morning and contrary to much speculation, (including my own, here yesterday) it does not appear to be the shark that ate PayPal afterall.  At least, not for now. 

Google Checkout will fuction as a centralized authorization service for customer purchases but it will not be a bank-like  payment service that will compete directly with PayPal, which is owned by eBay.  While it promises a level of transaction security that many online retailers can’t match on their own, details on how Google plans to protect what will surely become a Fort Knox of credit card information are still sketchy. 

When customers click through to a merchant from Google AdWords, a little blue shopping cart icon that represents the Google Checkout option will go with them.  Clicking on the icon will take the customer to the Google Checkout site, where the customer’s billing information and credit card information will already be on file.  All four major credit and payment card services are participating.

In essence, Google is foregoing revenues in transaction fees in order to boost its targeted advertising sales volume by giving online retailers a major incentive to participate.   Among those who have already signed up are Buy.com, Ace Hardware and the Starbucks Store. 

Is Google’s decision to make GCheckout a marketing incentive rather than a transaction business a good one?  In the short term, at least, it looks like a winner.  Google builds ad volume without offending eBay, one of its best customers, and gets a feel for the banking business.  Like all good sharks know, lunch will still be there if you get hungry later.

Web Payments Smackdown: Google vs. eBay June 28, 2006

Posted by Jerry Bowles in Companies, Google, Web 2.0.
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logo_40wht.gifGoogle is expected to launch an online electronic payment service called GBuy today that will directly challenge eBay’s PayPal for internet shoppers’ transaction fees and could touch off an internet turf war that will make Tony Soprano’s latest brush with the New York gang look like a kids birthday party.   

Unlike so much of the stuff that Google releases in a kind of semi-permanent state of “beta,” there is no doubt how the company plans to turn this one into cash.  GBuy will work in conjunction with AdWords, so that consumers who visit a merchant’s site through a sponsored link will have the option of going to a separate, GBuy checkout site.  The goal, company executives say, is to “automate the advertiser click cycle,” which means that instead of simply handing you off to a merchant when you click through to an AdWord link, a virtual rep from Google will tag along and offer to charge your purchase if you decide to buy.  That will speed up transactions which translates into more money for merchants and, of course, for Google.  

According to widely leaked (some might even say, widely hyped) details, Google plans to charge merchants a 2.2 percent commission, as well as a fee of 30 cents per transaction.   AdSense advertisers will get a discount. 

What turns this into a potential killer app for Google is its apparent link to its newly announced Content Referral Network, an eBay style sales lead generation and transactional commission-based affiliate network that is bound to poach eBay (and Amazon and other online merchants’) customers.  Of course, the nice people at eBay must have seen this coming because they just announced the test launch of AdContext, an  automated, keyword-based contextual ad system for use by its affiliate network which looks suspiciously like it was designed to claim a chunk of Google’s territory.     

Meanwhile, the two companies have to be pretend to be nice to each other.  eBay is one of Google’s largest AdWords customers and, as such, Google delivers a lot of traffic to eBay, and gets a lot of money from eBay in return.  This is going to fun to watch.

The Unbearable Lightness of Web 2.0 June 26, 2006

Posted by Jerry Bowles in Ajax, Companies, Google, Social Networking, Web 2.0.
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The Web 2.0 movement is just a Yahoo or Google away from touching off another round of irrational exhuberance.  Hundreds of Steve Jobs wannabes are once more registering cutsy domain names, writing heavily fictionalized business plans, and waiting–like a edgy band of illegal immigrants in a Home Depot parking lot–for the VC trucks to come around and throw piles of money at the latest, greatest  Ajax-based application or social networking idea.  Suddenly, it’s 1998 all over.

Soon we’ll be hearing the dreaded “mind share” meme again.  Don’t worry about making a profit or even if you have a product that people will actually pay money for.  Create the buzz, ramp up, and leave the hard sell to Wall Street.   Where is Henry Blodgett now that we need him?

The reality is most of these ventures will fail, as most of them always do, despite all the wonderful technical ingenuity on display.  As one who remembers the great crash of 2000 and had dealings with (and, alas, bought a little stock in) some pretty well-financed and solid-looking companies in the peak years, today’s crop of prospects look far shakier than the Calicos, Broadvisions, Manugistics, Claruses and Vitrias did in 1998.

For one thing, much of that earlier wave of innovation was focused on supply chain and procurement management software for enterprises–categories that require a lot of developers and marketers and other highly-paid humans for success.  That meant large capital investments.  Despite the fact that most of these ventures were well-financed and had the brightest people on board, only Ariba and a handful of others have survived. 

Many, perhaps most, of the players in the Web 2.0 wave are not really companies at all.  They are clever applications with cute names waiting to be discovered by people with money, business plans, and management skills.  Virtually all are one-trick ponies.  New development tools like Ajax and the ability to leverage the huge equalitarian reach of the web to create buzz have lowered the financial barriers to entry.  Anybody with a idea can attract attention.  Whether the ideas are good, or useful, is another matter. 

Some of the larger social networking sites like MySpace are well-funded but you have to think that side of the Web 2.0 revolution is quickly getting over-saturated.  How much more time do teenagers have to spend online avoiding their parents.

This is not to say there are not young Steves and Bills and Larrys out there in the new crop of contenders who have the vision to take some breakthrough ideas and build great companies.  But, when even a giant like Google can’t figure out how to monetize half of the stuff it creates you have to wonder if we’re not racing toward a new bubble that is far sillier than the last one. 

Web 2.0 For Dummies June 23, 2006

Posted by Jerry Bowles in Companies, Google, Microsoft, Web 2.0.
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Okay, so you think Ajax is a sink cleaner and a mashup is the freeway fender bender that made you late for work this morning.  Your eyes glaze over when you scan the latest heavy-breathing geek porn at web sites like Scripting News or Slashdot.  Everything you know about social networking you learned from typing “babe” in the MySpace search box.

But, let’s get real. How much of this Web 2.0 stuff do operational managers and workers—people in finance and accounting, HR, marketing and so on—need to know or even understand?   The answer, at this early stage, is probably not a lot.  Big companies today are cloistered in gated communities and they like it that way.  They view the web as a great place to visit and sell products and services but you wouldn’t want to have your enterprise applications live there.  At least, not yet, until you’re absolutely certain that it’s as safe and reliable as your IT infrastructure behind the firewall.  For now, the still-unsolved problems of  security, reliability, transaction integrity, scalability and performance preclude any large-scale movement of strategic enterprise applications to the web.

All that will change over time.  The Internet simply offers too many competitive advantages–global reach, round-the-clock access, richer applications with deeper, real-time features and lower application development and IT infrastructure costs–to be ignored.  Serious, grown-up open source web development companies like Nexaweb and OpenLaszlo and many others are hard at work, sprucing up the neighborhood, setting standards, and fixing the potholes. 

Ironically, the Internet grassroots movement to preserve so-called “net neutrality” may hinder the development of the enterprise web because if it is  successful infrastructure providers will have no financial incentive to develop and offer the enhanced levels of security and reliability that large companies require, which means they will invest less in infrastructure.  Ultimately, that is a bad thing for everybody.

The first companies to benefit from Web 2.0 are the web natives, companies built from the ground up to perform functions that leverage the huge web marketplace and its real-time immediacy and e-commerce capabilities.  Traditional enterprises will get there but not that much and not that soon.  The old saying about a leader being the guy out front on the horse with the arrow in his chest still holds true

So, cheer up, Mr. or Ms. Tech-Challenged.  Play with your Excel spreadsheet and waste an hour trying to find a missing e-mail by searching with the Outlook “find” function.  But, if you really want know what the revolution is about,  sneak a copy of Google’s free Desktop Search on to your machine when your resident geek isn’t looking, type in a couple of words that you remember from the missing e-mail, and see how startling fast it appears on your screen.  That’s what all the cool kids at Microsoft do these days.

What Business is Google In Anyway? June 22, 2006

Posted by Jerry Bowles in Companies, Enterprise Mashups, Google, Web 2.0.
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If you think the Evil Empire of Redmond works in paranoid ways, consider the case of Google, the undisputed heavyweight champ of next generation web technologies.  Seldom has a company become so big and so powerful without explaining to investors exactly why it does what it does and how it plans to make money in the future.

The $64-billion question is:  Will Google continue to focus on its core search and keyword-based advertising business or is it gearing up to  try to replace Microsoft as the main provider of productivity applications to enterprises and average computer users?

Company executives deny or deflect such speculation but you have to think that it didn't introduce an online word processor, calendar, e-mail manager, instant-messaging program, photo manager, web page creator and, most recently, a spreadsheet just for the heck of it. 

The reality is that Google is the only company big enough and Web-dominent enough to challenge Microsoft, not only in the office tool space, but also in the larger goal of transforming the web into a universal OS.   Nobody ever bought a Windows machine because they loved the Windows operating system.  Most users go with Windows because that is what you need to run Outlook and MS Office and most of the other most-widely used desktop software. Its dominance in office productivity applications made the Windows OS standard and gave Microsoft its so-called network effect. 

Perhaps, as a result of being the unchallenged market leader for a very long time Microsoft has become bloated and risk-adverse and its products seem more dated and clunky by the day.  We have now reached the point where the quality of office tools available as online applications is approaching parity with Microsoft's Office line.  The long-predicted concept that the network is the computer is finally coming true.   Google is the company best-positioned to benefit from this profound shift.  

And let's face it; an all-out innovation slugfest between Microsoft and its homies and the Google gang would be good for the industry, good for web users, and great fun to watch.  It might also save Microsoft from a long and nasty slide into irrelevance.

But, before all this can happen, Google has to decide what it wants to be when it grows up.