I went to Google's biennial Searchology event this morning. This is where top execs unveil their latest advances in search.

This year there was a lot of new stuff, and a lot of it revolved around understanding the semantics of search, to understand the meaning of what users want, rather than what they typed. If you misspelled something, or used a seemingly cryptic search term, GOOG execs said it was their responsibility to figure out what you meant by that.

For example, a search for "sfll playoffs" could mean a misspelling of "nfl playoffs" or, more likely, "San Francisco Little League playoffs." Google is using location data and other factors as part of what it calls "rocket science" search technology to try to determine what the user really meant -- not what they typed.

Udi Manber, vice president of core search, spoke about how difficult it was to determine the semantics of user queries, how to understand what was meant.

The demos they showed were impressive. But, how will Google sell advertising against an increasingly semantic set of results? Currently, Google sells keywords to advertisers, and those keywords trigger advertising served up on the results page.

Keywords are very specific. How will this work when the results that people want, aren't related directly to a keyword they typed? Is there such a thing as a "semantic keyword?"

If Google tries to guess what the advertiser wants and what the user wants, it creates more opportunities for a mismatch. Since Google gets paid on clicks, that could be a problem if it misses the intentions of both user and advertiser.

How do you sell "semantic" advertising?

Eric Schmidt, Google's CEO, loves to tell the newspaper industry what it needs to do to be relevant in today's online world. A sample of recent headlines:

Eric Schmidt Tells Newspapers: Create Products People Want And ...

Google CEO Eric Schmidt to newspapers: Innovate your way out of it ...

Eric Schmidt wishes Google could save newspapers

Google CEO Eric Schmidt to Newspaper Association of America ...

Schmidt to Newspaper Execs: I'm From Google, and I'm Here to Help ...

Schmidt Lectures Newspapers - The Daily Beast

Yes, the newspaper industry needs to get wiser about how to adapt to the online world, but Mr Schmidt's lecturing is the pot calling the kettle black. Google is about as bad at monetizing content as the newspaper companies Mr Schmidt likes to lecture. And Google is getting worse at it! The evidence is hiding in plain view.

Jim Spanfeller, president and CEO of Forbes.com, accused Google of violating its "do no evil" policy and of failing to clean up a web "cesspool."

In an article titled What Google Can Do To Make The Web Less Of A 'Cesspool' | paidContent.org Mr Spanfeller wrote:

... in attempting to "do no evil," Google has done exactly that. I say this not just as someone running a content site but also as an end user. If this inequity of support continues along these lines, we will see a continuing destruction of our journalistic enterprises -- enterprises that are one of the core building blocks of our democracy.

Forbes.com estimated that Google makes $60m per year from directing traffic to Forbes.com. About $24m of that is from selling keywords with that include Forbes brand names. Google is making money from "simply being there."

Koo Bonkwo, reporter for the Korean newspaper Hankyoreh, reports that Google is facing an investigation for its refusal to abide by a law that it must verify the real names of Korean users if they upload files or leave comments.

Google disabled its YouTube Korea site so that no one can upload videos or leave comments and so that it wouldn't have to collect people's real names. Google said the law was against its principles of supporting free expression on the Internet.

It said Koreans could still upload videos and leave comments by using other countries' version of YouTube.

The Korean government however, is reported to be angry by Google's actions. The Hankyoreh reports:

"... Korea Communications Commission Chairman Choi See-joong, a close aide and personal mentor to the president, says he has ordered a legal review of Google. This order follows the company’s decision to voluntarily disable the upload and comment functions of its YouTube Korea site, something he called sang’eop-jeok nun garigo aung, translating to something approximate to a “transparent commercial move." An official with the KCC confirmed that the legal review would investigate whether or not "Google has engaged in illegal activities in any of the various services it operates in South Korea." ..."

Google has a tiny share of the Korean market and it appears to be using its stand against the 'real name verification' law to win new users among Koreans that want to bypass the same law:

"...On Wednesday, the National Assembly Research Service issued a report in which it mentions the possibility that South Korea’s internet portal companies could suffer if the current bills to revise internet regulations are made into law as it may prompt large numbers of “cyber defections” in which Korean internet users flock to overseas portals...."

The South Korean government is trying to clamp down on opponents through new laws that provide its agencies with unprecedented levels of monitoring and regulation. Koreans are worried that the government's actions are harming the country's image:

"...the standing regulations also hurt the Internet industry and are giving South Korea an international reputation for being a country that suppresses the freedom of expression...."

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Please see:
South Korea Could Be Showing Us A Sneak Peak Into Our Future

"...The Koreans are dealing with many issues that result from living in a society that lives far more in an online world than we do. It will take the US several years to catch up.

Hopefully, the Koreans can figure out how to deal with Big Brother governments and other societal issues, before we get to the same stage...."

The Korea Times: Is Korea Turning Into Internet Police State?

"....According to the draft, the National Intelligence Service (NIS), the country's spy agency, gets expanded surveillance power that allows real-time interception of mobile phone and Internet communication, compared to current law that limits monitoring to fixed-line telephone calls.

All communication operators, including telephony carriers and Internet companies, will be required to operate surveillance equipment and save call recordings and log-on records of their users.

The bill also enables law enforcement authorities to collect and monitor location-based information, or Global Positioning System (GPS) records, of civilians. Considering that GPS capabilities are increasingly included in the latest mobile phones and portable Internet devices, a fast-growing number of people would be susceptible to investigators tracking their real-time movements..."

The Hankyoreh: "[Analysis] Google chooses its credibility over profit in South Korea

"...Some analysts have suggested that it would be too burdensome for Google to challenge South Korea’s Internet policies because the government had promised 1.2 billion won (911,200 dollars) in research and development support, and the possibility of more through online advertising business...."

Korean Presidential Office Bypasses Real Name Law - Posts Videos On Foreign YouTube

"Google managed to avoid this law by disabling uploads and comments on its Korean version of YouTube, while at the same time telling people that they could continue anonymous uploads and commentary by accessing other countries' YouTube sites.

It seems that this is the preferred method for the Presidential office of South Korea, the Cheong Wa Dae.

....The Korean newspaper The Hankyoreh reports that the Presidential office, of South Korea, the Cheong Wa Dae, has been using this loophole to post PR videos of President Lee Myung-bak...."

Google Tests The Limits Of Governments - Bars Korean Users From Uploading Videos And Leaving Comments

"....Rachel Whetstone, vice president of Global Communications & Public Affairs at Google, offered in a statement posted on Google Korea's Website the reason why the company has refused to comply to the real-name system. In a statement titled, "Freedom of Expression on the Internet," Whetstone said, "Google thinks the freedom of expression is most important value to uphold on the internet." Whetstone continued to say, "We concluded in the end that it is impossible to provide benefits to internet users while observing this country's law because the law does not fall in line with Google's principles."..."

Updated: Google Says It Is Still Examining Korea's Real-Name Verification Law

"...Google wouldn't have much to lose if it stood up to the Korean government. It's YouTube business isn't profitable, so no shareholders would be hurt. It could argue that its servers aren't housed in South Korea and therefore it doesn't have to comply with the local law.It would be a bold statement and it would focus world attention on the South Korean government and its efforts to curb its citizens from using the Internet to criticize politicians. A bold stand from Google might even discourage other governments from following with similar laws...."

Google has found a loophole in South Korea's law that forces web sites with at least 100,000 users to verify the real names of users if they upload files or leave comments. Google has crippled its Korean version of YouTube (kr.youtube.com) preventing any uploads or comments and thus not requiring real-name verification.

It would have been the first time that Google would be collecting the names of Internet users.

The Hankyoreh newspaper reported:

Rachel Whetstone, vice president of Global Communications & Public Affairs at Google, offered in a statement posted on Google Korea's Website the reason why the company has refused to comply to the real-name system. In a statement titled, "Freedom of Expression on the Internet," Whetstone said, "Google thinks the freedom of expression is most important value to uphold on the internet." Whetstone continued to say, "We concluded in the end that it is impossible to provide benefits to internet users while observing this country's law because the law does not fall in line with Google's principles."

The Korean Times reported that the government is looking into Google's actions:

"We need to further discuss the issue, but if they block the uploading and message board functions of the site, they may no longer be subject to the real-name rule," said an official from KCC's network policy bureau.

Google Korea's blog said that Korean users could upload videos to YouTube by "choosing a version of a different country."

Foremski's Take:

Google has shown it has a backbone. It's executives have often spoken about supporting free expression on the Internet yet then it has always caved in to government restrictions, saying that it seeks to abide by the domestic laws of each country.

However, on the Internet, where are a country's borders? Where does the jurisdiction of governments begin and end?

Google isn't risking much in Korea because it lags far behind domestic search companies. But it is an important stand because it puts other countries on notice that Google's principles take precendence over a "country's law."

That could be a red rag to a bull, especially in China. It'll be interesting to see if Google can get away with this tactic of complying with the letter of a country's law but able to take advantage of the porous ubiquity of the Internet to continue providing its services.

Please see:

The South Korean government has been battling critics on the Internet:

The Korea Times: YouTube User Needs Real-Name

KCC officials explain that such measures were inevitable to curb "cyber bullying" and reduce misinformation on the Internet. However, critics argue that the Lee Myung-bak government is getting overzealous in its efforts to monitor cyberspace, after being repeatedly attacked by bloggers, first over the controversial decision to resume U.S. beef imports, and more recently for its ineptitude in economic policies.

The watershed moment came in January when police arrested Park Dae-sung, a blogger known more widely as "Minerva" and a frequent critic of the government's economic polices, on charges of "deliberately" undermining public interest by distributing fraudulent information.

YouTube subject to Korea's real name system :

YouTube enjoyed countless hits during the presidential election last year when one of its users uploaded a video of an interview with lawmaker Park Young-sun, in which he discussed the BBK scandal; the video had been deleted from Korean portal sites. Recently, it is earning many hits thanks to a video of President Lee allegedly fanning Russian President Vladimir Putin, which has also been deleted from Korean Web sites.

[Updated April 5: Maybe Google has a backbone after all. Korean newspapers had reported that Google had imposed the real-name law but Google Korea tells me that's not the case and it is still examining the law.]

On April 1 Google was required by law to ban South Korean users from posting videos or leaving comments on YouTube unless they use real names. The law states that South Korean web sites with at least 100,000 daily visitors must force users to register with verifiable real names. It would be the first time for Google to implement such a system, in any of its operations around the world.

Lois Kim, head of corporate communications at Google Korea told SVW: "We have not implemented a so-called 'real name verification'. It is simple for you to check! - try visiting YouTube site(kr.youtube.com) and you will know. We have examined the law and not decided anything."

Google's corporate philosophy states: "...we have a responsibility to protect your privacy and security." And its top executives and representatives have often spoken about Google's commitment to privacy and free speech on the Internet.

Google is far from being a market leader in Korea. Ms Kim said: "We, at Google do not disclose the specific market share data but you should check the marketshare directly from a third party for the reliable sources. I can say that YouTube, launched just one year ago is very successful in Korea in terms of both marketshare and mindshare."

Google wouldn't have much to lose if it stood up to the Korean government. It's YouTube business isn't profitable, so no shareholders would be hurt. It could argue that its servers aren't housed in South Korea and therefore it doesn't have to comply with the local law.

It would be a bold statement and it would focus world attention on the South Korean government and its efforts to curb its citizens from using the Internet to criticize politicians. A bold stand from Google might even discourage other governments from following with similar laws.

More importantly, it would show that Google has a backbone and will stand up to defend its own principles and the rights of Internet users around the world.

However, maybe Google is too close to the Korean government? Chris Backe who blogs on Chris in South Korea points out:

The government had promised Google 1.2 billion won [about $892,000 USD] in research and development support upon entering South Korea's market

I hope Google's principles cannot be bought so cheaply. Otherwise other governments should make a note.

- - -

Please See:

The Korea Times: YouTube User Needs Real-Name

KCC officials explain that such measures were inevitable to curb ``cyber bullying'' and reduce misinformation on the Internet. However, critics argue that the Lee Myung-bak government is getting overzealous in its efforts to monitor cyberspace, after being repeatedly attacked by bloggers, first over the controversial decision to resume U.S. beef imports, and more recently for its ineptitude in economic policies.

The watershed moment came in January when police arrested Park Dae-sung, a blogger known more widely as ``Minerva'' and a frequent critic of the government's economic polices, on charges of ``deliberately'' undermining public interest by distributing fraudulent information.

YouTube subject to Korea's real name system :

YouTube enjoyed countless hits during the presidential election last year when one of its users uploaded a video of an interview with lawmaker Park Young-sun, in which he discussed the BBK scandal; the video had been deleted from Korean portal sites. Recently, it is earning many hits thanks to a video of President Lee allegedly fanning Russian President Vladimir Putin, which has also been deleted from Korean Web sites.

Brian in Jeollanam-do: YouTube Korea in trouble?

Google, which owns YouTube, hasn't been very successful in Korea. That January KT article I just sited said Google and Yahoo each have less than 5% of the market-share of internet searches.

The Korea Times: Concerns Mount Over Internet Witch Hunt

...The Seoul Central Prosecutors' Office has sought an arrest warrant for a 30-year-old man identified as Park, who confessed of being the real person behind famed Internet pundit, "Minerva," on charges of spreading "groundless" allegations about the country's ailing economy.

Law enforcement officers are eager to punish Park, who they’ve searched for months, claiming that he deliberately created confusion in financial markets by distorting facts.

However, critics argue that Park's detainment is the latest example of the government's inability to handle online criticism properly, with authorities going overboard in efforts to abate the rabble in cyberspace.

"It's difficult to tell whether we are living in a police state or democracy, as Internet users have been put under a gag order," said Jin Jung-kwon, Chungang University professor and popular political columnist...

...The Korea Communications Commission (KCC), the country’s broadcasting and telecommunications regulator, is looking to rewrite media law to have Internet sites face the same restrictions as news organizations, making them subject to libel suits and such.

Enquiring Daily Tribune

Perhaps, in South Korea they will likely change the name from Youtube to Whotube.

Google And Yahoo, Both Trailing In Korea, Join Forces (GOOG, YHOO)

(April 1, 2009) Google has quietly dropped its "Don't be evil" motto as part of a broad strategy to refresh its image. This shift in its corporate PR includes focusing media attention on key executives such as the very photogenic Marissa Mayer, VP of Search Product and User Experience.

Ms Mayer is in the middle of global media tour, and recently appeared on The Charlie Rose Show and she is scheduled to be on Jay Leno's new show next week.

PR Week recently reported that Google has been interviewing several large PR firms to help it spruce up its image, which has become tarnished over the past year with senior executives defecting to Facebook, and allegations by Internet commerce companies that it has been abusing its dominant position in search marketing.

Google's "Don't be evil" motto was first revealed when the company filed for an IPO in 2004. It was part of a letter to investors that founders Sergey Brin and Larry Page published as part of the 350 page IPO document that detailed its business and its ambitions.

In a Letter from the Founders titled "An Owner's Manual" for Google's Shareholders" Mr Brin and Mr Page wrote:

. . .Google is not a conventional company. We do not intend to become one.

. . .Our goal is to develop services that significantly improve the lives of as many people as possible.

. . . Don't be evil. We believe strongly that in the long term, we will be better served-as shareholders and in all other ways-by a company that does good things for the world even if we forgo some short term gains. This is an important aspect of our culture and is broadly shared within the company.

However, as Google has grown larger over the past five years and now has a dominant position within massive online advertising and Internet commerce markets, the motto has become an easy target for its critics.

Signs of a possible change have been evident for a while. Eric Schmidt, CEO of Google has often complained in interviews with the press that the motto has been misunderstood.

Here is a quote from a news story by Reuters' Eric Auchard in June of 2008:

In an on-stage interview with writer Ken Auletta of the New Yorker magazine, Schmidt said “Don’t be evil” is meant to provoke internal debate over what constitutes ethical corporate behavior, rather than representing an absolute moral position.

“We don’t have an ‘Evil meter’ we can sort of apply — you know — what is good and what is evil,” Schmidt said.

Google CEO talks of good, evil and monopoly fears | Reuters

David Krane, a senior spokesperson for Google, told SVW: "I never liked it. I always felt that it would come back to bite us in some way, that we would end up building concentration camps, or something even worse. The universe seems to love irony, why leave ourselves wide open?"

Mr Krane wouldn't say if the "don't be evil" motto will be replaced with something else. But maybe we can crowd-source a replacement.

Here is my suggestion for a new Google motto: "Brush your teeth between meals and try to get 8 hours of sleep."

If Google doesn't manage to live up to this goal, then no harm done, just a little drowsiness and personal hygiene issues. But if it messes up on "Don't be evil", that could harm a lot of people. Let's not tempt the fates.

What do you think Google's new motto should be on this April Fools day?

- - -

Please see:

don't be evil schmidt - Google Search

The Charlie Rose Show interview:

Two years ago I suggested Google should build its data centers in Iceland because of all the nearly-free green geothermal energy. Plus, it's a great location, midway between North America and Europe, with access to high speed submarine data cables (illustration above).

But it's not just Google that is building large data centers. There is growing demand for cloud computing services and that means companies will need to build lots more data centers, and operating costs will play a large role in determining success. Since electric power costs are one of the largest expenses for a data center, Iceland starts to look very attractive as a cloud computing site for many companies.

The attraction is even greater these days. Iceland's economy isn't doing too well following the collapse of its largest banks last year. And its economy continues to worsen with unemployment expected to reach nearly 10 percent in March from 1 percent a year ago.

The economic crisis means that land and labor costs are cheaper than ever. And the government is keen to encourage investment by foreign companies, which means tax breaks and other incentives. Plus the government is investing in programs that would aid the business environment such as its plans for "4000 man-years of job creation." This includes:

. . . supporting an innovation centre in Reykjavík, utilising specialists currently unemployed to assist start-ups, improving the competitive position of start-ups and innovative companies. . .

Part of the government's stimulus efforts include building more hydro-electric and geothermal power plants because only about one-quarter of the green power potential of Iceland has been tapped.

However, generating more electric power isn't very useful because you can't export it. You can't run a power line half-way across the Atlantic.

That means you have to convert the electric power into something that can be exported. Aluminum production requires a lot of electric power and so this has become the main method for Iceland to monetize its abundant green energy.

The irony is that aluminum smelters are anything but green, they pollute the environment and have been linked to increases in the number of birth defects and cases of cancer in local populations. And they don't provide much local employment. This is leading to growing criticism of the government's plans to expand aluminum production and the role of energy executives in selling cheap power to the smelters.

The web site Saving Iceland reports that earlier this month:

...three black dressed individuals, masked with aluminium foil, threw green Skyr (traditional Icelandic dairy product) on representatives of Icelandic energy companies during a greenwash presentation in the University of Iceland.

Skyr Thrown on Greenwashing PR Managers

[Throwing Skyr is a traditional way for Icelanders to communicate disrespect and disapproval.]

Converting power electrons into data electrons would be a much better use of Iceland's green energy. Cloud computing data centers would provide high quality jobs, and could help transition Iceland's dependence on polluting aluminum smelters.

The Invest in Iceland Agency has put together a few web pages and a pdf to try and drum up interest in data centers [Please see Iceland: The coolest location for data centers.] Not much luck so far. It probably requires a more direct approach by Iceland's government.

Maybe Google could step in and buy Iceland, which would about double its GDP. It could then relocate the entire Googleplex and many of its data centers. Google would be able to have its own banks, it could rename the Krona currency the Gollar, Googlers could enjoy an amazing number of outdoor activities, cheap housing, long summer days, and surprisingly mild weather. It could end Icelandic whaling, kick-out the polluting aluminum smelters, . . . and be out of reach of any pesky anti-trust lawsuits.

- - -

Please see:

Saving Iceland » More power plants may cause more economic instability

Saving Iceland » The Hall of Shame

Google Invests in Geothermal Energy « Data Center Knowledge

Invest in Iceland Agency - Information centre for foreign investors investing in Iceland

Isn't it time Google dropped the "beta" on GMail and took full responsibility for the email service?

Why is it still hiding behind the "beta" label?

Does this mean the service will continue to be buggy and poor--some of the time? And that "beta" means we can't complain?

We complain when Apple's .Mac online service is buggy. But is that because it is a paid service and it is not in "beta?"

GOOG chose to finance GMail via advertisements, Apple chose subscriptions. Choice of business model shouldn't mean GOOG can shirk its responsibility to offer a solid service.

Over on ZDNet I said:"Drop the beta and take full responsibility Google. That is if you want people to take you seriously, and if you seriously want to be more than just “a search company."

It's seems to have struck a chord and has lots of comments.

It’s time GOOG dropped the beta on GMail . . . seriously | Tom Foremski: IMHO | ZDNet.com

Google Inc. (NASDAQ: GOOG) today launched Google Chrome, a new open source browser intended to create a better web experience for users around the world. Available in beta in more than 40 languages, Google Chrome is a new approach to the browser that’s based on the simplicity and power that users have come to expect from Google products.

Google Press Center: Press Release

Foremski's Take:

Google's new browser will reclaim millions of dollars that it pays to third parties such as Mozilla, the open source organization that develops and maintains the popular Firefox browser, for traffic directed to its sites.

Mozilla received revenues of $66.8m in 2006 and $52.9m in 2005, about 85 percent came from Google payments for each search query conducted by a Firefox user through Google.

Apple also receives substantial payments from directing Safari users to Google. These payments are all part of Google's Traffic Acquisition Costs (TAC), a closely watched number by Wall Street analysts. A small reduction in TAC is always welcomed by a large boost in Google's share price.

Google's payments to third parties such as Mozilla and Apple, have jumped by more than 77 percent over the past year.

In GOOG's most recent second quarter financial report, TAC, not related to its AdSense ad network, was $154m. One year ago it was just $87m.

With its own browser, Google can capture more traffic directly and reduce those payments significantly, which drops straight to its bottom line, boosting its overall profitability. It's an excellent ROI that is bound to please its investors.

Google [GOOG] second quarter financial report disappointed Wall Street causing its shares to fall in after-hours trading. It also disappointed its partner sites that run Google advertising.

Google’s partner sites generated revenues, through AdSense programs, of $1.66 billion, or 31% of total revenues, in the second quarter of 2008. This represents a 22% increase over network revenues of $1.35 billion generated in the second quarter of 2007 and a 2% decrease over first quarter 2008 revenues of $1.69 billion.

Google's own sites did a lot better:

Google-owned sites generated revenues of $3.53 billion, or 66% of total revenues, in the second quarter of 2008. This represents a 42% increase over second quarter 2007 revenues of $2.49 billion and a 4% increase over first quarter 2008 revenues of $3.40 billion.

http://investor.google.com/releases/2008Q2.html

Google makes more money from its own sites because it doesn't have to share the revenue with partner sites. And it continues to make investments that improve revenue from its own sites as opposed to its partner sites. Every quarter Google manages to shift more money to its online properties.

Foremski's Take: What kind of partner is Google? A lot of online media companies, as well as Silicon Valley startups with advertising supported web sites, rely on Google AdSense. The lower revenues from AdSense will hurt a lot of these startups.

This situation could help competing advertising networks, especially if they can offer a better return than Google. Unless Google can improve the performance of its AdSense it risks losing 31 percent of its total revenues. That's a lot of money.

See: Microsoft testing self-serve Adsense rival

siliconvalleynewswire.com » Lawsuit claims GOOG is defrauding advertising customers

Related:

Google Cuts Payments to Publishing Partners by $24m, Beats Analyst Estimates

Is GOOG Shafting Its AdSense Partners?

Reasons Why Media and Bloggers Should Not Run Google AdSense - Just Say No!

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Foremski's Take: What would happen if somebody developed a better search engine than Google? Would it be able to unseat Google? And what would happen to Google?

Nothing would happen to Google. Because if you could build a better search engine GOOG could monetize it way better than you or anyone else.

GOOG would partner with the better search engine because it has the monetization platform, it has the ad delivery network, and ad sales representatives in nearly every country.

The market has moved on--it's not enough to be better than Google in search, you also have to have be better in all aspects of the business.

That's what Microsoft needs to focus on, building a great monetization platform for search - search alone is not good enough even if it's great.

Reuters: Yahoo reaches Google ad deal, Microsoft talks fail

Yahoo said it had agreed to let Google put search ads on its site in what it called an $800 million annual revenue opportunity that would boost cash flow by $250 million to $450 million in the first 12 months.

Yahoo's ads and Google's would be pitted against each other in an auction style process that could make a deal easier to pass regulatory approval.

"Yahoo is being a reseller of Google whenever it makes sense and that is likely to be a lot of the time given how much more effective Google Web search ads have proven to be," Global Crown Capital analyst Martin Pyykkonen said.

This is interesting. Take a look at this excellent news story by Eric Auchard in which Eric Schmidt, CEO of Google, says the company's mantra of "Don't be evil" is often misunderstood.

Reuters: Google CEO talks of good, evil and monopoly fears

In an on-stage interview with writer Ken Auletta of the New Yorker magazine, Schmidt said "Don't be evil" is meant to provoke internal debate over what constitutes ethical corporate behavior, rather than representing an absolute moral position.

"We don't have an 'Evilmeter' we can sort of apply -- you know -- what is good and what is evil," Schmidt said. . .

Mr Schmidt is saying that 'being evil" is open to debate within the company. Usually, "evil" is not an ambiguous term.

I'd love to be a fly on the wall and listen to management's internal debates around evil business practices. Does someone take the devil's advocate role?

Over on ZDNet I wondered if we might get a change to the Google mantra such as:

- Don't be quite so evil

- Don't be really really evil

- Don't be evil-ish...

Or maybe a complete change:

- Evil schmevil

- Evil is just Live backwards.

Please send suggestions or moral pointers to E. Schmidt, Googleplex, Mountain View, CA 94043. Or you can leave them here and I'll pass them on...

Monday morning I was down in Mountain View at the Googleplex, GOOG's HQ for a briefing on new search initiatives and to find out about Google Health - a potentially wonderful and problematic service.

[For the first time, I was using Twitter to "live blog" from the event. Twitter is particularly well suited to such an activity, plus my "Twits" served as a decent note taking device for this post. I'm tomforemski on Twitter if you'd like to follow me.]

A planet sized wiki...

On search there was a lot said about local search and how difficult it is to do because place names are not standardized and some facilities share the same address and phone number. GOOG is very excited by image search because there are about 100 billion photos taken every year and Google loves new content (after all why go back to the Internet if there is nothing new?)

Google is trying to create a 3-D virtual earth. Its satellite and street level imagery are lacking. What it wants is a 3D rendition such as the one for San Francisco, which is very impressive. But I think that Google will have trouble getting users to continue to create that 3-D content because the novelty will subside so it'll have to think up some games and incentives.

Google likes images and the geo-tags that can go with them, but again, this relies on the continuing goodwill of users to upload and tag images, etc.

What this adds up to is a wiki-earth that users create using Google tools, or other tools, and also annotate and tag the locations. It would be a massive project and on top of that it would require fresh content - good luck with that. I just don't see legions of users willing to update Goog's database time and again, and again. Businesses will-- but that's advertising and that doesn't require payments to Google, (there could be a shot in the foot here ...).

Google Health very important...

Google Health is interesting and I would say it is Google's most important business launch since its AdSense/AdWords text-link ads. Not only is this a great way to integrate health data from multiple sources by having the individual do it but it also enables Google to access billions of dollars in pharma and medical services marketing.

Government regulations on health data make it very difficult for medical practitioners to pull an individual's data from many sources. But a Google Health user can consolidate their medical records in a highly secure Google database then authorize sharing that data with their doctor or other third party, and even allow that data to cross-borders. How about MyIndianMD.com...? (Hold on one second while I visit GoDaddy...)

Google Health could reduce health care costs because tests won't have to be repeated, and individuals could choose not to have expensive procedures just because their doctors are trying to cover their legal liabilities.

The problems with this approach is that the individual is being asked to make choices which their doctors would be best at making but because of legal and other issues, they cannot. Similarly, Google has to be careful not be providing medical advice. It gets around that - it provides users with "choices and options."

I spoke with Martin Harris, M.D and Chief Information Officer at Cleveland Clinic, one of the beta test partners for Google Health. He said that one problem was that computer literate users would be the first to benefit. "It's part of what I call the Internet divide," he said. "Ideally we should be able to let people access their Google Health accounts through their TV set top box or through the phone. That will come soon."

I spoke with a couple of people on the Google Health team and they said users would in the future be able to designate "delegates" to administer their Google Health records on their behalf so that the elderly could have their families help them.

Building businesses on top of Google Health . . .

There is also a great opportunity for a range of third party services to be built on top of Google Health and it's open API. Google for example, is offering an application that allows people to monitor how much they walk and will give $100k to charity.

I can think of linking gym machines to my Google Health record, what I ate that day, even what I ate at a restaurant automatically uploaded with calories and vitamin info. How much I slept, etc. This could become many people's home page.

There are some obvious potential problems if insurance companies or employers seek permission to view health records. What about potential spouses opening their hearts . . . and their medical records to each other?

How to monetize search, Google Health . . .

Nothing was said about how Google would make money from the improved search or from Google Health.

I asked about Google's search and if it improves then fewer pages are served. . . and therefore the performance of Google ads has to improve just as fast as search improves.

I was told that the advertising teams are ahead of search, and with better search there will be more search, therefore more pages will be served. I don't see that as being true.

It would have been good to have a presentation about the business side of Google's search and Google Health.

Here is further discussion of the business opportunities: The Google Health Problem...And The Quest For Pharma Gold

- - -

Notes: Google did a nice job pulling together top media and allowing good access to its executives and also to Google Health partners. Its PR people didn't get in the way but facilitated interviews etc. This meant that journalists could each have a chance in coming away with original quotes and material that wasn't part of the general presentation. I always appreciate the opportunity to come away with some unique content.

This morning I'm at the Google Factory Tour to catch up on search and also Google Health. I'll be updating here but most of my updates will be on Twitter. I'm tomforemski on Twitter if you want to follow me - you can access Twitter through a desktop client.

Or you can look at the sidebar on the right which features my Twits and those from others...

Google has asked all hacks to assemble at the Googleplex Monday 19th to hear about the state of search and also Google Health. That sounds like hearing about the health of Google and also its new service Google Health.

Health is a tricky area for Google. I remember chatting about this subject with Wayne Rosing in 2005, at the time he was head of all Google engineering.

We talked about the problem that Google has to do things by machine. That's the secret to understanding Google. Google uses machines and software to produce its results. This is what protects it from any liability that it directly or deliberately produced anything that was a decision by an employee, or an agent of the company, which could trigger a lawsuit or violate a law.

That's what Wayne Rosing spoke about: how do we provide medical information that can make a difference to people and save lives while at the same time avoid the information that is BS and avoid the legal liability of directly advocating a particular medical course of action? Mr Rosing was speaking from personal experience.

Judging by Google's invite it has figured out this problem. It's taken more than 3 years to do it and I'm going to be very interested in seeing how it solved this problem.

And since it has, Google can reap a lot of pharma gold. Just look at the huge amount of money that pharma pumps into TV advertising. I've no idea what "the purple pill" is but plenty of people respond to those ads and they generate a lot of revenue for the pharma companies.

Imagine those advertising dollars used in Google Health, targeted much more precisely at those people that do know what the purple pill is...Pharma advertising via GOOG can potentially result in more sales at a sharply lower cost of marketing. That's a very compelling message.

Take a look at this from Science Daily January 2008:

A new study by two York University researchers estimates the U.S. pharmaceutical industry spends almost twice as much on promotion as it does on research and development, contrary to the industry’s claim.

. . . the U.S. pharmaceutical industry spent 24.4% of the sales dollar on promotion, versus 13.4% for research and development, as a percentage of US domestic sales of US$235.4 billion.

Big Pharma Spends More On Advertising Than Research And Development, Study Finds

My quick calculation shows $57 billion for promotion... GOOG's revs in most recent quarter were $5.19 billion. Clearly there is lots of pharma gold for the picking. Even just the low fruit would substantially boost GOOG's overall business.

But it'll be interesting to see how Google manages to avoid some of the legal issues and just how useful the GOOG virtual MD proves to be.

- - -

Please see: Healthline: The search for pharma online gold - drug makers seeking drug takers.

Google Health Login Page

Official Google Blog: A pilot with the Cleveland Clinic for health information access

Official Google Blog: Google Health, a first look

Elliot Schrage, head of Google's corporate communications team, has left the building. He has joined Facebook. This is one of the most significant departures from Google even though there has been a long string of them. I say that because if the minister of propaganda doesn't believe the message then something must be going wrong inside Google [BTW my Goebbels reference is completely inappropriate.]

I was always impressed by Elliot Schrage and by Google's recognition that it needed a person of his stature, to deal with big issues-- almost as if GOOG saw the need to create a foreign diplomatic corps.[Please see: November 2005 - Google hires squeaky clean human rights/ corporate responsibility lawyer as PR chief]

Here is Thomas Claburn reporting from Information Week [My bold highlight.]:

Another Google Executive Joins Facebook - Yahoo! News

Elliot Schrage: There's a communications strategy where the communications people just answer the phone and dial up and read from a script," said Schrage. "And that just can't work in an environment where the messaging is so decentralized.

There's been some incorrect information about the sort of people that we're hiring, suggesting that we don't want to hire PR professionals. But that's of course not the case. But what it does say is we need people to be as effective on strategic development, on messaging and clarity as on tactical execution.

It seems Mr Schrage is referring to my post about GOOG preferring not to hire PR experts but to get them fresh from school - but it also seems as if that's part of the problem he is referirng to?! [Please see: GOOG Doubling its PR Crew--PR and Press Needn't Apply]

Mass media masses at the Googleplex

Google hires squeaky clean human rights/ corporate responsibility lawyer as PR chief: Is GOOG expecting more trouble ahead? Will Mr Schrage spearhead GOOG's attack on China's human rights abuses?

Last week Google completed its acquisition of online advertiser Doubleclick and now finds itself in a very embarrasing position: it owns Doubleclick's Performics group, which sells search engine optimization services that trick search engines into ranking web sites higher than they normally would.

On my blog on ZDNet I wrote a post saying that Google should do the right thing and close down Performics. [Please see: Google should close down “evil” Performics business]

But maybe closure is not the right strategy. Google could use Performics to help it battle against SEO companies, essentially turning it from poacher to gamekeeper.

A never ending war...

Google is in constant battle against sophisticated SEO techniques. Google will ban or demote any sites it finds going beyond its basic SEO recommendations. It once banned BMW Germany's web site for using hidden text to sway its search engine results.

Not only does egregious SEO pollute the purity of GOOG's search results, but it also competes against its advertising business. Companies that pay money to rank high in search results do better business than if they bought advertising links from Google.

That's because Google's users trust "organic" search results more than they trust the ad links.

The fight against evil...

Google's corporate motto, "Don't be evil" is well known. What is less well known is that "evil" for Google, means the pollution of its search results by companies deliberately trying to trick its search algorithm into awarding a web site with a higher page rank.

As part of its battle against companies trying to game its index, Google regularly changes its algorithm. It's an ingenious way of quickly identifying web sites that have optimised their pages for the specific characteristics of its previous algorithm.

Whenever a new algorithm is released, the SEO forums are full of tales of woe as companies try to figure out why their web sites have experienced a dramatic fall in page rank.

When that happens, companies return to SEO companies such as Performics, to help them regain their position in Google's index. And so the game goes on...

Now that Google owns one of the top SEO companies what should it do?

Danny Sullivan, one of the gurus of the search engine marketing sector, has called on Google to sell Performics. In his recent post Open Letter To Google: Do The Right Thing, Divest Yourself Of Performics, he writes:

Conflict of interest? You bet. And worse from an image perspective, the purchase puts Google in the paid inclusion business, something it dissed as evil back in 2004, when it went public... . . .

It just doesn't feel right. To me, it's the same thing as if the New York Times owned a PR company, where much of that company's main work focused on getting articles to show up in the New York Times. It's a conflict that will hurt Google's trust...

He points to Google's 2004 IPO filing and the "Don't be evil" section:

Google users trust our systems to help them with important decisions: medical, financial and many others. Our search results are the best we know how to produce. They are unbiased and objective, and we do not accept payment for them or for inclusion or more frequent updating...

Our search results will be objective and we will not accept payment for inclusion or ranking in them...

Mr Sullivan advises Google to sell Performics as quickly as possible. But selling Performics would mean that Google is allowing companies to buy their way into a higher page rank. As Mr Sullivan points out, that would harm its stated mission of creating an objective search index free from paid inclusions.

My advice to Google is to turn Performics into an anti-SEO company, use it to learn the tricks and techniques that fool its search algorithms. Use Performics' technology and its workers to create a better search engine.

It would mean the loss of about $70m in revenues that Performics brings in, but that's a drop in the bucket compared with revenues of $16.6 billion Google reported for 2007.

- - -

Other viewpoints on Performics:

Techcrunch - Google Now Selling SEO Services Via Performics

Stephan Spencer's Scatterings - Google to own a SEM and SEO firm?!

SearchEngineJournal - What Will Google Do With Performics?

GOOG to stop climate change
[Newsfactor] "If we meet this goal," said Page, "and large-scale renewable deployments are cheaper than coal, the world will have the option to meet a substantial portion of electricity needs from renewable sources and significantly reduce carbon emissions. We expect this would be a good business for us as well."

Carry a Blackberry? GOOG offers sorta GPS
[NYT] Google today is adding a feature for some smartphones that don’t have built in GPS but can read the unique identifying number of the cell tower they are connected to. By using this information, Google can display a map of the general area they are in.

Get an unlocked iPhone for $900 (in France)
[InfoWeek] Resellers in Europe, who have already been doing a brisk business selling the iPhone in unofficial gray markets, have said they have been hoping for a low price on the smartphone. Orange has inadvertently obliged, but the $964 price is still higher than the $600 that some resellers have been reported to be charging for a standalone iPhone.

Nigerian sues OLPC over keyboard
[Register] Lagos claims the non-profit illegally reverse-engineered their software drivers to make the OLPC keypad more accent mark friendly to foreign fingers. The initial copyright infringement suit has been filed in Nigeria, and the company plans to press further lawsuits in countries where the OLPC laptop is being vended.

MIT offers $200K for alt energy
[CompWorld] The MIT Clean Energy Entrepreneurship Prize is being funded by utility company NStar Electric & Gas Corp. and the U.S. Department of Energy. "The ultimate goal of this contest is to find innovative solutions to transform today's energy systems into tomorrow's sustainable energy future," said MIT President Susan Hockfield in a statement.

Anybody that employs humans to create content that they want to be paid for through advertising--and that includes traditional media companies and bloggers--should not give up valuable online real estate to Google AdSense.

I've been saying this for about three years, ever since I became an online publisher but I've been saying it mostly offline. Here it is online:

If you want to make a living from your online activities through online advertising do NOT use Google AdSense because:

Running Google AdSense will return pennies per click, you cannot make a living off of AdSense. But by running AdSense you are undermining your own efforts to charge a meaningful amount for online advertising.

By running Google AdSense you have to accept the pricing of the advertising as determined by Google's AdWords advertising network. AdWords is ads run on GOOG's own sites, next to its search box, GMail etc. That is far more efficient that running GOOG adverts next to media such as journalism, and that shows by the smaller amount of revenue Google gets from AdSense.

AdSense is now just a little above one-third of Google's revenues, it used to be 50/50 with AdWords when it IPO'd. That shows you how more efficient Google's advertising on its own web sites is compared with Google ads on other people's sites!

GOOG can sell advertising at a low cost because it doesn't have to pay for the content. Most of the content GOOG uses to place advertising around it, is harvested from the Internet for free. If you pay editors and writers to create content you are at a huge disadvantage because your advertising revenue is determined by GOOG's efficiency at not paying editors or writers to create content. You cannot compete with this business model.

Overall, AdSense devalues content. It makes all content that carries AdSense equal to the value of freely harvested web content.

Remember that Google is a technology-enabled media company. It publishes pages of content with advertising around it.

And Google can change the mix of its payments to its AdSense publishers. Take a look at its recent financial results:

Google Cuts Payments to Publishing Partners by $24m, Beats Analyst Estimates
Foremski's Take: In the third quarter Google AdSense network partners lost $23.99m in revenues because GOOG kept a larger share of AdSense revenues compared with the second quarter.
Here are the numbers:
The percentage of revenue from GOOG's publishing partners fell in the third quarter of 2007 to 34% of total revenues compared with 35% of total revenues in the immediately prior quarter.
Google Cuts Payments to Publishing Partners by $24m, Beats Analyst Estimates
Also:
Is GOOG Shafting Its AdSense Partners?
The most interesting thing about Google's recent quarterly financial report is why there has been virtually no coverage of a fascinating fact in its third quarter numbers.
I wrote about it last Thursday when the report was announced, and got a scoop. Four days later on Monday, Rick Aristotle Munarriz over at "The Motely Fool" noticed it too: Don't get cocky, Google

Is GOOG Shafting Its AdSense Partners?

Shut off AdSense if you pay editors and writers to create content and want to make a living from online advertising, imho.

Technorati Tags: adsense

Microsoft Corp. today announced revenue of $13.76 billion for the quarter ended September 30, 2007, a 27% increase over the same period of the prior year. Operating income, net income and diluted earnings per share for the quarter were $5.92 billion, $4.29 billion and $0.45, respectively.
Source: MSFT

At first glance, the numbers look similar, except then you notice that MSFT reported more in profit ($4.3 billion) than GOOG reported in total revenues ($4.2 billion).

Google reported revenues of $4.23 billion for the quarter ended September 30, 2007, an increase of 57% compared to the third quarter of 2006 and an increase of 9% compared to the second quarter of 2007.
Source: GOOG

We will all end up working for MSFT, mark my words, many already are.

Technorati Tags: Ironic design

The most interesting thing about Google's recent quarterly financial report is why there has been virtually no coverage of a fascinating fact in its third quarter numbers.

I wrote about it last Thursday when the report was announced, and got a scoop. Four days later on Monday, Rick Aristotle Munarriz over at "The Motely Fool" noticed it too: Don't get cocky, Google

But apart from myself and Mr Munarriz, I don't see any of the many-hundred-strong Google press corp investigating a fascinating and potential troubling aspect of its business: Did GOOG beat analyst estimates by fixing the payout to its AdSense partners?

The third quarter numbers clearly show that It kept an extra $24m this quarter compared with three months ago.

I wondered if this was an example of "cookie jar" accounting (which isn't illegal . . . ), in which companies can draw on various financial resources to help them meet Wall Street analyst numbers.

I'm still waiting for an answer.

Let me explain: The key number I look for is Google's Traffic Acquisition Costs (TAC), which is a very large number: $1.2bn in the most recent quarter. Nearly all of that goes to its AdSense partner publishers.

But compared with the prior 3 months, Google reduced the rev share with publishing partners to the tune of about $24m.

In the second quarter Google paid out 78.62% of AdSense revenues to publishing partners or $1.063 billion.

In the third quarter Google paid out 76.70% of AdSense revenues to publishing partners or $1.116 billion.

The difference is about $24m which helped Google beat its earnings estimates. Did GOOG change the ratio of payouts to AdSense publishers to help boost its earnings?

From: ZDNet: IMHO

I looked at the transcript of the earnings conference with Wall Street analysts for some clarity. There was only one analyst that asked about the change in the TAC number and Google's top execs skirted the answer. Take a look:

[Posted from: "Seeking Alpha."]

Benjamin Schachter - UBS

If I'm reading the TAC rates right, it looks like the partner TAC went down pretty meaningfully, and then the TAC associated with Google.com went up as a percentage of revenue. I'm wondering if you could comment on those trends. . .


. . . Eric E. Schmidt

Why don't we talk about TAC rates? George, do you want to start that?

George Reyes

So our AdSense TAC went down slightly, but on the other hand, Google.com TAC went up, and primarily driven by the partner mix.

Eric E. Schmidt

Our next question.

From: Google Q3 2007 Earnings Call Transcript


So, are Google AdSense partners going to be squeezed in the future for the benefit of Google meeting Wall Street numbers? Google needs to explain what is going on otherwise the consequences could be unpleasant for its shareholders.

Achilles' heel?

If GOOG can, and has squeezed AdSense partners, is this a good thing for GOOG investors? AdSense brings in 34% of total revenues, and most AdSense partners could switch advertising networks in three clicks or less . . . [MSFT is waiting, willing, and able.]

Technorati Tags: adsense

Foremski's Take: In the third quarter Google AdSense network partners lost $23.99m in revenues because GOOG kept a larger share of AdSense revenues compared with the second quarter.

Here are the numbers:

The percentage of revenue from GOOG's publishing partners fell in the third quarter of 2007 to 34% of total revenues compared with 35% of total revenues in the immediately prior quarter.

Google's publishing partners operate web sites that are enrolled in its AdSense advertising network. Google's AdWords network serves ads on its own web sites, and that has continued to outpace AdSense growth.

Google has to split revenues with its AdSense partners but keeps all revenues from AdWords. When it went public Google's revenues were about evenly split between its own sites and partner sites. Now 65% of revenues come from its own sites and only 34% from partner sites.

Google reports AdSense payments to publishers as part of its Traffic Acquisition Costs (TAC) which was $1.22bn or 29% of total revenues in the most recent quarter. TAC in the second quarter of 2007 was 30% of total revenues.

In the second quarter Google paid out 78.62% of AdSense revenues to publishing partners or $1.063 bn.

In the third quarter Google paid out 76.70% of AdSense revenues to publishing partners or $1.116 bn.

By reducing the percentage paid to publishing partners Google boosted its financial performance and exceeded analyst estimates. AdSense publishers lost $23.99m

This is a significant amount of money, especially for already troubled media companies who are struggling to build revenue from their online sites.

The Google AdSense business represents a potential "cookie jar" for Google. It could continue to change the percentage of revenue it keeps to help boost quarterly results.

GOOG risks one third of revenues

But his practice risks more than one third of its revenues since AdSense partners could leave and join a competing ad network. How far can Google go in increasing its share of AdSense revenues and still hold onto its partners?

Did Google deliberately change the percentage pay out to improve its financial performance? It is possible that the numbers changed because Google has an agreement to pay some of its larger publishing partners a higher percentage than for smaller publishers. If some of those larger publishers are under-performing while smaller publishers are increasing their performance, Google would pay out less as a percentage of total revenues.

However, there has been no indication that there is a slowdown in traffic at large web sites carrying AdSense ads.

- - -

Why doesn't Google release its financial reports on Google Docs as a spreadsheet? Doesn't it trust its own technology?

Technorati Tags: adsense

Microsoft's acquisition late last week of the AdECN advertising exchange is a smart move. I interviewed Bill Urschel, the founder of AdECN earlier this year.

It is a company that has quietly managed to establish itself as a major real-time exchange for trading online advertising. It is a market that is very difficult to break into once first mover advantage is established because scale and liquidity are the most important attributes for the success of any exchange.

Mr Urschell said that there is probably only room for about three ad exchanges.

A neutral MSFT

An important aspect of AdECN is that it is neutral, it is not competing with advertising networks for ads, it trades the ads themselves, linking buyers and sellers, along with demographic, regional, and time-based delivery of advertising.

This neutral model could be a feather in MSFT's cap because Google is competing with its own publisher network. Advertising on Google's own sites has climbed to 64 percent of total revenues when it used to be evenly split with third-party publishers.

MSFT's AdECN exchange combined with its ad server technology could position MSFT as a preffered advertising partner for some publishers because it is not a direct competitor.

- MSFT recently won a major client, Digg, the community powered news aggregator.

- MSFT recently won EA, the world's largest gaming software company, to serve ads in online games.

MSFT is less of a competitor

- MSFT's own sites aren't doing that well, so it could claim that its own sites aren't competing against its publishing partners.

- In contrast: GOOG's own web sites grew 9 per cent in revenues in the most recent three months compared with no growth over the same period for its partner sites - GOOG 2Q 2007.

- Microsoft could sweeten deals with aggressive revenue sharing offers. It could potentially pay out more than 100 per cent of advertising revenues to publishers.

Google and Yahoo have tied up some of the largest online publishers into multi-year deals, however, most of the publishers in their ad networks can leave at anytime. Billions of dollars in online advertising revenues could switch to MSFT in an instant from GOOG and YHOO. It is a huge vulnerability for those companies.

A bonanza for publishers?

A battle for online publishers among GOOG, YHOO and MSFT could result in a bonanza for content producers. The revenue sharing agreements would favor the publishers and it could help some struggling newspapers and magazines.

(From my ZDNet blog: http://blogs.zdnet.com/Foremski/?p=186)

Silicon Valley is teeming with established companies and startups whose services and products require communications services.

Some of the startups are called Web 2.0 companies, or social networking companies, social media companies etc. It doesn't really matter what they are called, they all require a communications component to unlock the value they create.

This is also true for Silicon Valley's largest companies such as Google and Cisco, they are all increasingly reliant on being able to quickly get to their end user.

Whether it is a text message, or email, or sharing a video clip, or a myriad other many-media forms of communications--they all have to go through one of the big telecommunications or cable companies.

Last mile = Gold Mile

This Telco/Cable cartel sits smack-dab in the middle of Silicon Valley's innovation efforts. The Telco/Cable cartel control the communications gateways, they control the wireless services, and they are the most backward element in our society in terms of resisting technological progress in the US.

And control of these gateways means that it costs end users about $50 plus taxes, or about $60 per month minimum to be able to receive wireless or wired data comms. This is too much money per node and it limits the reach of Silicon Valley's companies, which effectively  places a limit on innovation.

For example, Intel (a sponsor of SVW) has managed to push down the price of computing devices to levels that make them affordable to larger numbers of people than ever before. It has done this with the help of Moore's Law, by being able to reduce the number of computer components to smaller numbers of chips.

And with growing support for the Linux open source operating system, computing devices will become even cheaper.

But without cheaper data communications linking the computer devices, the development of innovative services will slow to a crawl. And the digital divide that separates the rich populations from the poor, in this country and across the globe, will shift at a snail's pace.

This is why Silicon Valley has to, and will, break the back of the Telco/Cable cartel so that communications services become cheaper and more accessible to everyone, and so that innovative companies can continue to compete based on the level playing field of net neutrality.

So how will this happen? The clues are all around us...

- - -

Please also see:

CIO Today: New Rules Could Change Wireless Forever

Financial Post: Google: You ain't seen nothin' yet

and...

SVW 2005: What's Google up to? It's going to become a wireless telco with its own fat backbone...

Google said searches will now combine all other types of results such as video, images, books as well as web pages.

It is a move away from silo search engines that focused on video, images, etc. Marissa Mayer, VP Search Products & User Experience, said that it was confusing for users to pick from search engines. "You almost needed a search engine for search engines."

Foremski's Take: This is bad news for the huge SEO industry because there is less space to get web pages into the first page, new opps for video placement. The focus now is on the first two results...

Notes from Search]ology:

I'm at Google's Search]ology event for media, at the Googleplex, for presentations showing that search is still very important to the company. Last week Google announced its new tag line: Search, Ads and Apps and so it wants to make sure it is not drifting away from search.

Search is not spoken about much, "We are a victim of our own success," said Elliott Schrage, Head of Global Communications. We are promised a peak at new search technologies.

So far, the two morning sessions have been numbingly boring, Search 101 for kindergardners. We got to know about pagerank and the importance of links...(!)

Craig Silverstein, Technology Director, and Google employee #1 talked about early Google history, how it was set up in a dorm room, etc, nothing new.

Ben Gomes, software engineer and Kerry Rodden, senior user experience researcher talked about how the first two results on a search are very important and have to be highly relevant(what happened to finding the one most relevant result?).

Then they talked about importance of links, etc. And how a spell checker improves search results.

Udi Manber, VP Engineering, on the Next Step in Evolution of Search: Some basic examples of "not what you say but what you mean." Queries figure out chances of results matching the query (is it Bayesian?).

Mr Manber is now juggling oranges and apples to demonstrate how GOOG has to compare like with like...(!) And compare against different types of media, it is a difficult problem...

Marissa Mayer, VP Search Products & User Experience:
Five minutes about how wonderful and smart Craig Silverstein is.... She tells us that search should be easy, intuitive, simple.

We have two steps that make search even simpler...

We are announcing universal search instead of seperate search engines. (Technorati has already been offering this kind of capability...)

Here is a demo, I'm a huge fan of Steve Jobs...

Next demo: Nosferatu. Here you can watch the entire movie on Google Video...

Next deom: I have a dream. See the video of Dr. King... (Seems not about universal search but about video next to search...)

More and more video examples from YouTube...

New Scoring Function!!! (Just mentioned briefly but this means PageRank is changed because of Universal Search!) We have a new algorithm, and it is based on personalisation.
(This is bad news for SEO'ers trying to get their clients on the first page of results because now, with Universal Search, the page results are crowded out by video, news, blogs, and other results!)

Next announcement: Google Experimental, allows signups and automatically keeps users logged in on future visits...

Now a Q&A panel and Sergey Brin is up on the panel along with the others...

I ask about personalisation data and ethical issues in countries such as China...

Ms Mayer says users can look at their entire search history and see what information Google has about users. And yes, ethical issues are considered. Mr Manber says personalisation data is personal in the aggregate not individually...(!)

It is now over, time for lunch. Overall, a very content-lite experience.

....
Add Info:

WHAT: Live webcast of Google's upcoming invitation-only Searchology™ press conference to be held at its Mountain View, Calif. headquarters.

WHEN: Wednesday, May 16th, 9:30am – 12:30pm PDT

WHERE: http://google.client.shareholder.com/visitors/event/build2/mediapresentation.cfm?MediaID=25550&Player=1

WHY: Google to highlight the latest news on search innovations. Featured speakers will include Marissa Mayer, VP of Search Products & User Experience; Udi Manber, VP of Engineering; and Craig Silverstein, Technology Director.

In my recent articles about Google's publisher network, AdSense, I said that there is a conflict of interest at work. I'm not saying there is any wrong doing, it might be better to say that Google is "conflicted" because of the greater profitability of advertising through its own sites, through its AdWords network.

Since 2004 Google has increased the percentage of total revenues coming from its AdWords network by 24 per cent. 

In the most recent quarter AdWords grew 76% from a year ago, but AdSense grew just 45%.

It makes sense to grow revenues through AdWords because Google keeps 100% of the revenues.  Google keeps about 20% of its AdSense revenue.

Since GOOG has a fiduciary duty to its shareholders to maximize profitability, it is conflicted in where best to invest its resources. Should it invest in boosting revenues through AdWords or AdSense?

The answer will always be: invest in boosting AdWords revenues.

And as its own sites get more efficient at advertising, its Google's partners will see less revenues coming their way. Google is competing with them for advertising dollars and getting better and better at it--as its financial results clearly show.

This opens up a market opportunity for independent advertising networks that do not own properties that compete with those of their customers.

And it is a huge market opportunity: Google's AdSense partner network generated revenues of $1.35bn in just the first three months of 2007.

The original article is here:

Over on New Rules Communications I was writing about Google's ad networks and the bad economics for media companies. 

Link to: This Is Why Online Ad Nets Can't Save Media Companies

I noticed that there is an interesting conflict of interest emerging at the heart of Google's business model.

Please check my reasoning:

Google makes almost all of its revenues from two ad networks:

-AdWords: Customers advertise on Google web sites.

-AdSense: Customers advertise on Google partner sites, which includes many media companies.

Google's revenue in 2004 was about evenly split between AdWords and AdSense.

Since then, Google's revenue from its own sites has grown by 24 percent to 62 percent of total revenues. AdSense has fallen.

And this makes sense because Google makes far more money from its own sites than from partner sites. It is better for Google's shareholders that it channel more of its revenues through its own sites because:

-Google gives back about 80 per cent of AdSense revenues to its partners.

-It keeps all of its AdWords money.

And this is where it has a mammoth conflict of interest:

Which advertising network should Google invest in?

-A dollar invested in its AdWords produces far more profit than invested in AdSense, its partner network. Management has a fiduciary duty to its shareholders to maximize profits.

-Google can boost overall profits by undercutting AdSense at anytime it wants, say  by offering a discount on AdWords compared with AdSense. A 20 percent discount on AdWords would make more money for Google than the corresponding loss of business through AdSense partners.

-Google can undercut AdSense in other ways, and is already doing it, by investing in technology that improves AdWords conversions over AdSense. Google can apply technologies to its own sites that make them more efficient at selling ads. It can't do that with partner sites. And partner sites don't have the resources to improve their advertising conversions at a similar pace.

Which means AdSense revenues for media companies will continue to fall because AdWords is more efficient.

---

Media companies that partner with Google in its AdSense program do it because they don't know what else to do. The economics of partnering with Google are poor and the relationship is unsustainable because of the inherent conflict of interest.

Why Would GOOG Maintain AdSense?

-There are strategic purposes, it forces media companies in its network to compete with its far more profitable business model which weakens them as potential competitors.

-Also, it keeps third-party sites out of rival ad networks.

-AdSense is a great "cookie jar" because if GOOG ever needs to meet its numbers for its quarter, it can push more ads through its own sites rather than through partners.

UPDATE: Independent Advertising Network Advantage 

Independent advertising networks, which don't compete with their publisher partners, such as Blue Lithium, Federated Media, and others, will be able to attract partner sites away from Google because they can invest in technologies to improve revenues for the entire network.

But how much freedom do large publishers have in leaving the Google network? Some have contracts with Google that could tie their hands for years.

Outcast PR's CEO Dinner was good this year, much better than last year. I didn't write about it last year because I had nothing much to say about it, this year was different.

I've got lots of interviews, lots of video to publish from the event. And I have lots of stories to tell too, which will appear over the weekend and over the following days.

Here are some teasers:

-ZDNet advertising/marketing services will unveil a new business model. Buy our marketing services and we will write your corporate blogs as part of a sponsorship deal. 

"It is going great," said Chris Jablonski, a former ZDNet blogger, who is now in the marketing department at ZDNet. "We've set up blogs for Computer Associates and other large IT companies. If they don't have a writer we will write their blogs for them." The blog posts are not identified as ZDNet authored. It is similar to how public relations companies ghost write for clients.But will it work in this context? Is it a new and viable media business model? UPDATE: The blogs are labelled as sponsored blogs. Here is an example: http://blogs.zdnet.com/Dice/ The blog is written by ZDNet on behalf of Dice. ...   

-Sam Whitmore from Sam Whitmore's Media Survey. This time I interview Sam instead of the other way around.

-Come back to hear Sam's take on the implosion of the East Coast IT trade media.

-Plus, there is an upcoming merger in the works for Sam.

Don't miss:

• -Video interview with Satish Dharmaraj, CEO of my favorite, favorite, Web 2.0 company: Zimbra.
• -Tim Turpin from Outcast interviews me and my hush hush project.

I'm still getting used to toting a video camera around with me, so some of the interviews might be a little experimental in quality. I will do better next time around, and the time after that too, I promise  :-)

Google filed its answer to Viacom's lawsuit over copyright infringement on YouTube yesterday. No surprise that Google's theory is the DMCA's safe harbors provision. But anyone who thought that this suit was headed for a quick settlement will probably be disappointed. The AP reports that Google has hired Philip Beck as outside counsel, the lawyer who represented Bush in the 2000 election battle. Google demanded a jury trial in proceedings yesterday and the two sides are not in settlement talks.

In its response to the suit, Google said the suit "challenges the careful balance established by Congress when it enacted the Digital Millennium Copyright Act."

Under the safe harbors provisions of the act, Internet companies don't face civil liability for copyrght infringments of it users. Google said Viacom's attack on the DMCA is ironic considering entertainment and television companies were behind the law's passage in the first place.

"They were at the table when these things were being negotiated," he said. "Suddenly they don't want to live with the other end of the deal," said Google counsel Michael Kwun.

Michael Fricklas, general counsel for Viacom, said the DMCA doesn't apply to Google for several reasons.
"The DMCA doesn't apply if you have knowledge of an infringement," he said, noting that Viacom has sent Google more than 200,000 takedown notices. In addition, Fricklas said Google is deriving a financial benefit from Internet traffic generated by the attraction of copyrighted works.

Recently I wrote "Is Search Broken" about the amount of help search engines need to find and index web pages. Now Matt Cutts, GOOG's chief evangelist in the blogging community, has asked people to report web sites which are selling paid text links.

Those web sites would then be given a lower pagerank and might even be banished from GOOG's index.

It seems a bit rich for Google, the world's biggest seller of paid text links, to ask for help in identifying sites that sell paid links.

Threadwatch.org, a leading site about search, weighs in:

Google is still indexing those lolita preteen results, ranks all these .edu ringtone pages, and lets not forget that Google continues to deliver AdSense ads on sites they banned for being spam.

If Google doesn't CLEARLY mark their own paid links, encourages publishers to blend them into content, and doesn't police their own network, why do they think they have the right to police other sites?

Google Wants Reports of Paid Links ... What a Joke | Threadwatch.org

Paid links can confuse Google's pagerank system which pays attention to links in web pages to help find relevant search results. Mr Cutts says that Google has some technology in the works that will identify paid links.

In the meantime, he wants webmasters to clearly identify paid links, and also content that has been paid for.

You could put a badge on your site to disclose that some links, posts, or reviews are paid, but including the disclosure on a per-post level would better. Even something as simple as “This is a paid review” fulfills the human-readable aspect of disclosing a paid article.

Matt Cutts Gadgets, Google, and SEO » Hidden links

Does this mean if a magazine publisher pays a freelancer to write a review and to mention specific companies this has to be clearly marked? Does it make the review less trustworthy or less worthy of being indexed? There's a potential Pandora's box of issues here if you start applying this to mainstream media...

Over at Threadwatch.org, the paid links issue continues to rankle:

The more I think about it the more I realize why Google doesn't like the various flavors of paid links. It has nothing to do with organic search relevancy. The problem is that Google wants to broker all ad deals, and many forms of paid links are more efficient than AdWords is. If that news gets out, AdWords and Google crumble.

The Real Reason Google Doesn't Like Paid Links Threadwatch.org

Yahoo has come under considerable criticism from shareholders and politicians for turning over data on its users to foreign governments. In China, the information has been used to imprison a journalist for ten years.

To help it figure out appropriate behavior, Yahoo today announced a $1m gift to Georgetown University to establish a Yahoo! International Values, Communications, Technology, and Global Internet Fellowship Fund.

"This commitment is another step in our efforts to be actively engaged on issues that arise at the intersection of human rights and the Internet," said Jerry Yang, Yahoo! co-founder.

The fund will support the education and research activities of an annual Yahoo! Fellow in Residence and two Junior Yahoo! Fellows who will study the link between international values and Internet and communication technologies.

Yahoo! is currently participating in a multi-stakeholder dialogue that includes industry representatives, human rights groups, leading academics, and socially responsible investors.  This diverse group has made a formal and public commitment to creating a set of global principles and operating procedures on freedom of expression and privacy to guide company behavior when faced with laws, regulations and policies that interfere with human rights.

Why doesn't Yahoo know that it is not right to collect data on its users in countries where political speech can be treated as a crime? Why does it take "eight years" of research at Georgetown University to figure it out? It'll be 2015:

Georgetown’s first Yahoo! Fellow in Residence and Junior Yahoo! Fellows are expected to begin their research on campus during the fall 2007 semester. They will study how international values impact the development and use of new communication technologies such as how the operation and regulation of the global internet affects personal privacy, freedom of expression, education, socio-cultural change and cross-national contacts among civil society groups. The fund, which will support annual Yahoo! Fellows housed at the School of Foreign Service’s Institute for the Study of Diplomacy (ISD) over the next eight years, builds upon the School’s mission to foster academic-practitioner collaborations around key foreign policy issues.

...

GOOG fighting pension funds' anti-censorship proposal

New York pension funds are calling on Google and Yahoo to resist censorship and to stop hosting customer data in certain host countries. Rebecca MacKinnon points to the proposal in Google's notice of annual meeting and proxy statement for their...

Hong Kong Lawmaker Continues Attack on Yahoo over Journalist Jailing in China

Hong Kong's privacy commissioner said there wasn't enough evidence to show that Yahoo's Hong Kong office revealed private information to Chinese authorities that jailed Chinese reporter Shi Tao for ten years.  Hong Kong lawmaker Albert Ho criticized the report and said Chinese...

Chinese Dissident's Wife to Sue Yahoo

The wife of Chinese dissident has come to the US to sue Yahoo for turning over her husband's emails to Chinese authorities. He was sentenced in 2003 to 10 years in prison for publishing "subversive" articles on the Internet,...

US Tech Firms Lame Excuse on China Business

U.S. Tech Companies Urge Washington to Confront China on Internet Censorship WASHINGTON (AP) -- American technology giants urged the U.S. government Tuesday to do more to confront China and other countries about Internet censorship. Microsoft Corp., Yahoo Inc. and...

New York pension funds are calling on Google and Yahoo to resist censorship and to stop hosting customer data in certain host countries. Rebecca MacKinnon points to the proposal in Google's notice of annual meeting and proxy statement for their 2007 sharedholder meeting, May 10 at the Googleplex.

The funds are making a similar proposal for Yahoo's meeting in June. (YHOO hasn't filed its 14A for that meeting yet.)

Google's board of directors is recommending that shareholders vote against this resolution at Google's May 10th shareholder meeting. They give no explanation why.

Here's the text of the proposal:

Whereas, freedom of speech and freedom of the press are fundamental human rights, and free use of the Internet is protected in Article 19 of the Universal Declaration of Human Rights, which guarantees freedom to “receive and impart information and ideas through any media regardless of frontiers”, and

Whereas, the rapid provision of full and uncensored information through the Internet has become a major industry in the United States, and one of its major exports, and

Whereas, political censorship of the Internet degrades the quality of that service and ultimately threatens the integrity and viability of the industry itself, both in the United States and abroad, and

Whereas, some authoritarian foreign governments such as the Governments of Belarus, Burma, China, Cuba, Egypt, Iran, North Korea, Saudi Arabia, Syria, Tunisia, Turkmenistan, Uzbekistan, and Vietnam block, restrict, and monitor the information their citizens attempt to obtain, and

Whereas, technology companies in the United States such as Google, that operate in countries controlled by authoritarian governments have an obligation to comply with the principles of the United Nations Declaration of Human Rights, and

Whereas, technology companies in the United States have failed to develop adequate standards by which they can conduct business with authoritarian governments while protecting human rights to freedom of speech and freedom of expression,

Therefore, be it resolved, that shareholders request that management institute policies to help protect freedom of access to the Internet which would include the following minimum standards:

1) Data that can identify individual users should not be hosted in Internet restricting countries, where political speech can be treated as a crime by the legal system.

2) The company will not engage in pro-active censorship.

3) The company will use all legal means to resist demands for censorship. The company will only comply with such demands if required to do so through legally binding procedures.

4) Users will be clearly informed when the company has acceded to legally binding government requests to filter or otherwise censor content that the user is trying to access.

5) Users should be informed about the company’s data retention practices, and the ways in which their data is shared with third parties.

6) The company will document all cases where legally-binding censorship requests have been complied with, and that information will be publicly available.

Have you ever wondered if different web site design would earn you a few extra bucks from Google AdSense? Well, now you can try out different designs and the Google Website Optimizer™ will let you know which ones result in more clicks on ads.

Google is very keen on improving your web site. After all, it wants the ad conversions as badly as you do.

Google Website Optimizer is designed to help website owners increase conversions such as sales, sign-ups or downloads. This multivariate landing page optimization tool enables marketers to test different ideas for web page content such as different headlines, promotional copy, or images. The application provides easy-to-read reports that enable advertisers to see which variation resonated best with their site visitor. It is a self-service application that enables website owners to set-up and run multivariate landing page experiments.

Google Website Optimizer is a beta application that is integrated with the Google AdWords™ program and free to AdWords advertisers. Advertisers can sign up immediately at www.google.com/websiteoptimizer.

The only shame about this tool is that Google advertising pays so poorly. Unless it's a web site with very high traffic, it pays peanuts.

It's probably not worth it for many web sites to put the time and effort into optimizing their web sites for Google advertising. Optimize for readers is a better bet. Then, when there is a decent business model for pageviews, you'll be golden.

UPDATE: Tom Leung, the product manager for GWO writes:

just a clarification, you can define conversion for an optimization in any way you want so the tool is well suited for a variety of scenarios. e.g., ecommerce sites (conversion being purchase), lead gen (conversion being filling out a contact form), or even pure awareness (conversion as watching a flash demo or some such). net, net, we think any page can be optimized for whatever the site owner's goal happens to be.

Even before the explosion of the anti-Hillary Vote Different parody, Google had gotten the idea: Political campaigns are using YouTube as an advertising medium. Google wants to make sure they maintain their platform - and, of course, find a way to monetize, the LA Times reports.

A newly formed political sales team made a sales pitch to some 80 politicios in Washington earlier this month, pitching not just YouTube but how to get sites appearing higher on Google's search engine.

"They're more keen to the desires and the needs of the political campaigns," Eric Anderson, online marketing director for the Republican National Committee, said after attending the company's seminar.

Elliot Schrage, the company's vice president of global communications and public affairs, said the company is "now recognizing that this is a segment that we have to pay attention to in a way that we hadn't."

Of course, many net companies like to dress some properties up in political clothing - MySpace launched a channel featuring pages from 10 campaigns and Yahoo launched a mini-portal, election.yahoo.com. But Google is the most aggressive with its political marketing.

"There's probably a lot less (money) than they think initially, but Google plays for the long term and they're smart to be there," said Phil Noble, founder of PoliticsOnline, a site that provides Internet tools and strategies for campaigns. "The Internet and politics is a revolution, and Google and these guys are not going to lead the revolution, but they don't want to get shot in the back either."

"Relative to all of the dollars in advertising, I don't think political advertising is going to be particularly profound in the foreseeable future," he said. The company hopes to learn from how campaigns use Google's tools and simply wants to help the democratic process, Schrage added.

As campaign spending continues to ratchet up - and as it continues to move from expensive TV spots to more targeted online avenues - Google will be ready to reap the benefits.

"The Google network allows you to do very interesting things with targeting, with messaging, etc., in a way that you could never pull off with a 30-second TV spot," Derek Kuhl, who is leading a New York-based political sales team that will have three or four people, said.

In the aftermath of Viacom's $1 billion suit against Google, News Corp. and NBC Universal announced plans to build their own online video site to compete with Google's YouTube. In a sign of somewhat getting it, the plan includes distribution deals with Yahoo, Microsoft and AOL, as well as MySpace, the LA Times reports.

Naturally the odds of this working are weak, mostly because the studios will screw it up by trying to control it too much. But the participation of MySpace makes it more likely that something will stick. Making videos available on Yahoo, etc., though is less than enthralling. This will be just one more Yahoo licensing deal for which they will create some boring portal.

The thing about net video is that it is part and parcel of the texture of the blogosphere. It is YT's sharing and embedding features that make it possible not merely to point to a specific video but to include it in your own work, in the moral equivalent of <blockquote>. The key thing the content owners should understand is that "The Daily Show" gets uploaded to YouTube not so that people can avoid paying cable bills but because they want to tell their friends (broadly defined) about, say, Jon's Net Neutrality segment.

We say that blogging is a conversation. Video is part of the conversation. When someone does something great, or witty or stupid, we want to be able to talk about it and to show it. We've always talked about the Net as the place where you don't have to believe what the newspaper reports because, here is the source file - look at it yourself.

The other important thing is Larry Lessig's point that people want to use digital media - other people's creations - as the building blocks of their (post-modern) creations. They want to quote and reference, with a knowing wink. (See Vote Different.)

YouTube and social networking enables all these things. It's really not about stealing the content in the Napster way. This stuff is going onto YouTube because people want it out there, want to embed it, want to talk about it.

So it's a positive step that studios want to get their stuff out there. I really don't care if they do it on YouTube, some other service, or their own. If they want to control it, monetize it, brand it, I don't care (as long as you don't have to watch 100 seconds of ads before you get to the clip), so long as they offer the same social networking/blogging aspects that YT does. So long as they are letting people do what they want with the stuff, rather than getting in our way, the new project will do just fine.

If not, it will be just one more Hollywood flop.

My colleague Richard Koman  blogged about Google's latest foray into monetizing online content: GOOG's unveils Pay Per Action advertising.

The gist: Advertisers will decide on what they will pay for a specific user action such as filling out mortgage application forms, or a questionnaire, or anything.

This goes beyond pay-per-click, Google's main advertising service,  because it potentially involves bringing someone closer to a sale, and so it is more valuable to the advertiser,  and to Google, and to the publisher of a web site.

Also, as part of this Pay Per Action model, Google offers a way of embedding links within a web page of content, which brings up an issue of content designed for advertisers.

This is typical of Google's observations of what works on the Internet. It always recommends to web site publishers that the format of its advertising links blend into a web page.  With Pay Per Action, website publishers can potentially further blend the content with the advertising.

Online content publishers are not doing all that well and so they might be tempted to blend advertising and editorial content but that is dangerous because it could undermine their editorial integrity. Google's advertising models might further erode the editorial integrity of online sites.

And it is open to spammers and fraudsters.

Filling out a form and getting paid $40 or more,  is easier to hide, and easier to do than having people commit click-fraud on pay-per-click ads. 

You could buy a CDROM of thousands of names and addresses, and within specific demographic groups, and have an offshore army of Pay-Per-Action form fillers. Yes, you'd need to spoof an IP address or two, which is easy,  and two forms filled out would pay for a couple of day's worth of scams.

How will GOOG guard against such easy pickings? Especially since advertisers are increasingly sophisticated about marketing in the online world. If the ROI doesn't match, the spending will stop very quickly.

Google's Vint Cerf and its Southeast Asia VP of marketing both came out and said Google won't be entering the cellphone hardware business (as I predicted), according to Newsfactor.com.

The comments are so similar as to indicate that both are speaking "on message" and that the rumors have gotten far enough out of control that Google needed to speak up. I don't read this as Steve Job-style subterfuge.

Vinton Cerf dismissed reports that Google is collaborating somehow with Apple on new handset hardware. Cerf, one of the founders of the Internet and Google's chief Internet evangelist, said that "[b]ecoming an equipment manufacturer is pretty far from our business model." However, Cerf added, Google is "quite eager" to be part of the growing mobile sector, and "is very interested in the platforms other people are building."

Richard Kimber, Google's South-East Asia managing director of sales and operations, told attendees at the Search Engine Room conference in Sydney that the company is currently focused on mobile applications and not hardware. He added that Google is very interested in finding ways to bring its search technology and other applications to all mobile devices.

YouTube announces the YouTube Awards for best videos created in 2006, says AP.

YouTube Video Awards to recognize the best-user created videos of 2006. The awards will be handed out in seven categories: most creative, most inspirational, best series, best comedy, musician of the year, best commentary and "most adorable video ever."

The nominees, picked by YouTube, are compiled in a gallery at http://www.youtube.com/YTAwards. YouTube community members can vote on their favorites beginning Monday and concluding on Friday. The winners, as chosen by the community, will be announced March 25. Each will be prominently featured on YouTube and receive a trophy, the design of which will be revealed later.

On her Lawgarithms blog, Denise Howell picks up the thread that Google is not exactly averse to this Viacom suit, which may mean that it won't settle as quickly as some may think.

She cites Katie Hafner's October 06 look at Google's legal eagles:

Michael Kwun, a senior litigation counsel at Google, ... said that establishing a body of precedent was a priority for Google, especially as legal interpretations continued to evolve. “If we don’t at least litigate to the point where we get rulings on the issues that matter to us, we’re left with less clarity in the law,” he said.

And EFF's Fred von Lohmann, as interviewed by John Battelle:

I've thought for some time that the first lawsuits against YouTube (and other video hosting services) will be from small copyright owners (like LA News Service), not from major media companies. That's good news for YouTube (and Google). Small timers tend to lack the resources to bring top-drawer legal talent to bear in these fights. As a result, they often lose, creating useful precedents for the Google's of the world. In fact, Google has already been successful in securing good precedents against unsophisticated opponents who thought that they could squeeze a quick settlement out of Google (Field v. Google, Parker v. Google). What the small-timers don't appreciate is that Google would much rather spend money on setting a good precedent than on settling.

So I think the YouTube acquisition may well represent a legal opportunity for Google (and the Internet industry generally), rather than a vulnerability. After all, litigation to define the copyright rules for new online services is inevitable -- better to choose your battles and plan for them, rather than fleeing the fight and letting some other company create bad precedents that will haunt you later.

So the Viacom suit is different than a lot of the victories Google has lined up so far. Viacom will bring top legal talent to the battle and it won't be surprising to see them win at the District Court level in New York. Notes Siva Vaidhyanathan:

Look, when it comes to copyright, the Southern District of New York and the Second Circuit do not make good law. Learned Hand has been dead a long time. The chances of good law coming out of the home turf of Time Warner, Viacom, and the News Corporation at the behest of some punk-kid company from California are as slim as those of good wine coming from New York. I sure wish New York produced good wines. And I wish SDNY and the Second Circuit understood digital copyright better (see Universal v. Reimerdes). But we shall be waiting a long time for both these things.

Elinor Mills at News.com says a European Google executive let slip that a Google phone is in fact in the works.

The head of Google in Spain and Portugal has confirmed that Google is working on a mobile phone. "Some of the time the engineers are dedicated to developing a mobile phone," Isabel Aguilera is quoted as saying on the Spanish-news Web site Noticias.com.

A Google spokeswoman in the United States released this statement when asked for comment: "Mobile is an important area for Google and we remain focused on creating applications and establishing and growing partnerships with industry leaders to develop innovative services for users worldwide. However, we have nothing further to announce."

Google stateside has repeatedly declined to comment on rumors of a Google Phone, but the smoke has been rising lately. Earlier this month, Simeon Simeonov of Polaris Venture Partners wrote in his blog that an inside source told him the Google Phone will be a BlackBerry-like device running C++ at the core with an operating system bootstrap, or loading program, and optimized Java, and that it would offer voice over Internet Protocol.

So I finally read Viacom's complaint against Google and from a legal perspective I find it strange. The complaint is completely based on the Copyright Act and completely ignores the DMCA's Safe Harbor provisions.

This section of the DMCA essentially says that "service providers" will not be liable for user-submitted content if it's posted in an automated process. The other major part of the law provides that the content owner can provide a "take down" notice; if the service provider doesn't comply, then it becomes liable for the infringement.

While Viacom doesn't attack the Safe Harbor directly, it strongly suggests the law is unfair to content owners.

Even though Defendants are well aware of the rampant infringement on the YouTube website, and YouTube has the right and ability to control it, YouTube's intentional strategy has been to take no steps to curtail the infringement from which it profits unless notified of specific infringing videos by copyright owners, thereby shifting the entire burden - and high cost - of monitoring YouTube's infringement onto the victims of the infringement.

In other words, YouTube is accused of doing exactly what the DMCA says it should do - wait for a take-down notice.

Google will claim the Safe Harbor provisions in their defense and, as I see it, Viacom will need to show that Google was not in compliance with those provisions, that they in some way encouraged or selected or promoted copyright-infringing material. Thus, they should lose.

Which will suit them fine, because the appeal will go to the legitimacy of the Safe Harbors. On appeal, Viacom, with amici from the rest of the content industry, will argue that the sharing and embedding aspect of YouTube was unforeseeable by the drafters of the DMCA and that the current reality illegitimately impinges too far on copyright protection. That Safe Harbors are in fact unconstitutional.

To be sure, Viacom is alleging that Google did more than serving as a conduit for user-uploaded content. But the ways in which YouTube is alleged to have broken the rules are basically a description of Web 2.0:

YouTube returns a list of thumbnails of matching videos in its library ... YouTube also allows any person to "embed" any video available in the YouTube library into another website ... When a user clicks the play icon, the embedded video plays within the context of the host website ... YouTube also makes it possible for a user to share an embedded video by clicking the word "share" ... These embedded videos act as a draw to attract users to YouTube ...

The whole Internet industry is built on the Safe Harbors. Indeed, it was Congress' intent to support the growth of the Internet by freeing it from these very concerns.

"Google has basically been following the advice of the best lawyers in Silicon Valley," EFF's Fred Von Lohmann said. "If Viacom wins, that would call into doubt all of the business models that relied on the same kinds of legal advice."

Internet, online and on the air

Microsoft, Google, Dell, HP, Intel and Philips say they can deliver Internet over TV airwaves - and they're pushing the FCC to give them the green light, says the Washington Post.

The coalition has come up with a device that would make TV-spectrum Internet work in homes. After a few months of testing, they're hoping the agency will approve the device and that it could be sold in stores by 2009.

"These devices have the potential to take the success of the WiFi phenomenon to another level," said Jonathan S. Adelstein, an FCC commissioner.

That would mean a little competition for the cable companies and telcos, which of course also control massive amounts of content.

And really the greatest use of TV Internet would probably be in rural areas, where it's hard and expensive to get wired net and wireless solutions have proven too flaky. IMO, it should also work in urban areas where underprivileged can't afford to pay $60 a month for cable Internet. In any case, it could have a positive effect on municipal wireless networks.

In urban areas, a TV Internet system might somehow be combined with phone- or cable-provided Internet service to redirect signals through every wall of a house or office -- without replacing the phone or cable company as the provider, said a person affiliated with the coalition. He spoke on condition of anonymity because he was not authorized to speak on the record about such possible uses.

Google's the only company without a serious hardware business. What are they doing in the coalition? It's a new Internet platform, the article notes, and it gives them another option for alternative access to the Net. Recall that Google invests in Internet-over-power-line companies as well.

"It recognizes that the heart of the problem is a lack of competition on the broadband platform," said Rick Whitt, Google's telecom and media counsel in Washington. "We're very interested in finding ways to create platforms for other broadband connectivity."

Viacom is suing Google for $1 billion over the presence of its content on YouTube, Reuters reports.

Viacom says there are 160,000 copyright clips on YouTube, which have been viewed 1.5 billion times.

Here's Viacom's statement:

“YouTube is a significant, for-profit organization that has built a lucrative business out of exploiting the devotion of fans to others’ creative works in order to enrich itself and its corporate parent Google. Their business model, which is based on building traffic and selling advertising off of unlicensed content, is clearly illegal and is in obvious conflict with copyright laws. In fact, YouTube’s strategy has been to avoid taking proactive steps to curtail the infringement on its site, thus generating significant traffic and revenues for itself while shifting the entire burden – and high cost – of monitoring YouTube onto the victims of its infringement.

This behavior stands in stark contrast to the actions of other significant distributors, who have recognized the fair value of entertainment content and have concluded agreements to make content legally available to their customers around the world.

There is no question that YouTube and Google are continuing to take the fruit of our efforts without permission and destroying enormous value in the process. This is value that rightfully belongs to the writers, directors and talent who create it and companies like Viacom that have invested to make possible this innovation and creativity.

After a great deal of unproductive negotiation, and remedial efforts by ourselves and other copyright holders, YouTube continues in its unlawful business model. Therefore, we must turn to the courts to prevent Google and YouTube from continuing to steal value from artists and to obtain compensation for the significant damage they have caused.”

Here's some copyrighted content just for fun:

Venture Beat is reporting heavily on rumors that Google is working a cellphone, rumors that Eric Schmidt denied yesterday.

It all stems from a post from Polaris Venture Partners' Simeon Simeonov (a name right out of Tolstoy), who said a source described a phone stack that would run optimized Java on a C++-bootstrapped OS. Everyone's sure that means Google is doing a Steve Jobs-like number, where Google controls hardware and software and service providers dance to their tune.

That is sheer speculation, though. Consider what he told VB:

Why does he think Google will want to dictate the hardware too? Look at Apple, he says. Apple’s selling point for its iPhone is that it controls both the hardware and software completely, and if you’re a partner or user, you have the option of being on board or not, he explained. Microsoft, on the other end of the spectrum, says ‘We sort of control the software, but you can mess with it in other ways — for example, by taking out the IE browser, and putting in Opera.”

He said Google itself may not even be sure about where it is on the spectrum between Apple and Microsoft, because it is in a complex dance with multiple players, such as with carriers about ad revenue share and distribution. On the one hand, Google has a great brand, but it’s not like Apple, where its brand is associated with hardware. However, Simeonov says “it doesn’t feel Googlish” to forgo the hardware, and let its operating system be loaded on any device.

Doesn't feel googlish?

I won't pretend to have the insights into what's Googlish that Simeonov might, but unlike Apple Google is not a hardware company, doesn't have any experience in managing hardware and virtually no experience in consumer (even business consumer) marketing.

What does Google get out of having its own phone stack? Numbers. Total control of ad placements, geospatial data, user behavior. Why does it even want to build the software? Because there's a very big future in "real world" advertising. Being able to serve ads based on where people are in space and what else Google might know about them (search history, ad-click history, urban habitat), I mean that is very valuable stuff.

I think Schmidt is throwing a red herring when he says Google Apps is going to be a big chunk of Google revenue. Nothing fee-based will ever be a big chunk of Google. Google is about free, online software, leveraged for advertising potential, which they datamine the shit out of. If they know people are coming to Google Apps from inside the enterprise, there's value there. But Google Apps will not be the Microsoft Office of the future. Nothing will.

All of which is to say, sure, Google is going to do something meaningful in the mobile space, something that puts it, not Verizon, in the driver's seat. But it ain't hardware.

Andy Plesser over at Beet. TV interviewed Jim Kathman, head of AP's global broadcast strategy:

The Associated Press, the world's largest news organization, and Microsoft have developed an online video platform for thousands of U.S. newspapers, television and radio stations to upload, publish and monetize locally-created video.

The new system is in beta tests with some 30 newspaper publishers and broadcasters including The Miami Herald, the Houston Chronicle and the Rocky Mountain News.  The program will go live in about 30 days.

Link to Beet.TV: Exclusive: Microsoft and the Associated Press Teaming with Thousands of Newspapers and Broadcasters in New Online Video Network

MSFT's attack on Google's use and interpretation of copyright makes lots of sense considering the upcoming launch of this service.

But can MSFT get more revenues to the publishers than Google? Google's AdSense advertising network for publishers does not pay much, but can MSFT make sure publisher's get more revenue?

MSFT could offer 100 percent to publishers in order to lure them away from AdSense. We might even get into an advertising war in which MSFT or GOOG, or YHOO offer 125 percent or more... MSFT has a ton of cash--this would be a quick way to buy large market share.

Eric Schmidt told an investors' conference that Google is working closely with Apple, noting that the two companies have "similar goals and similar competitors," Reuters' Eric Auchard reports. The two companies are doing "more and more things together," he said. The answer came in response to a question about a rumored Google phone that would compete with Apple's iPhone.

Schmidt joined Apple's board in August '06.

Schmidt also said that it would be "highly unlikely" for Google cut any more billion-dollar deals like the one for YouTube. "It is not obvious to me where it would go," he said referring the pile of cash Google is accumulating - more than $11 billion.

Investors are anxious to see some diversification at Google. Virtually all of Google' revenue comes from advertising.

Schmidt said the newest meaningful contributor to revenue will be from the company selling subscriptions to business software delivered via the Web, its so-called "Google Apps" business.

"The next really big one is actually an extension of Google Apps," Schmidt said in speaking of major revenue contributors.

And finally, he dismissed rumors of a Yahoo-Microsoft merger.

"There are so many new areas ... where targeted advertising can be done. It does not strike me as the right time to be consolidating the whole market," he said, noting how the pace of innovation promises explosive change for years to come.

Can Google have its cake and eat it too? That's what Tom wonders in this follow-up post to my report on a federal decision that Google has the right to refuse advertising as it sees fit.

Tom wrote: "An ISP can argue that it is just a pipe, a bit carrier, and therefore has the protection of the [Communications Decency Act]."

But the CDA protection is much broader than this. In fact it's really aimed at user-created content, protecting "online services" from liability for what users post. In one case, a service was found not liable for some very clearly libelous things a user wrote about a starlet.

And just recently, as I reported two weeks ago, the CDA was found to protect MySpace against liability for an online predator's use of the service. In that case, the court said:

"To ensure that Web site operators and other interactive computer services would not be crippled by lawsuits arising out of third party communications, the Act provides interactive computer services with immunity."

Liability attaches for publisher-created content (for say, running "Why I Hate Blacks"), not for user-created content (thanks to CDA.) So long as Google doesn't create any original content, it seems to me they don't have liability concerns for such things as libel.

And this is not just District Court judges. The First Circuit just released a decision that Lycos and Terra Networks are immunized from lawsuits based on user postings (PDF).

So, if newspapers are at a disadvantage because they have liability, the answer is obvious. Publish stuff on other people's online services and turn the paper's site into a linkbucket. Hmm, no business model there. But I don't think liability is really the issue.

The issue of media competitiveness has to do with who delivers the best value for advertisers and how people want to take their journalism. I think they want journalism to be part of an intelligent conversation, that takes in new information and perspective and doesn't just adhere to an inverted pyramid or he-said, he-said formula. Papers are clearly losing the advertising front and they've made only modest gains on the second.

A federal judge has dismissed a case against Google that challenged the search engine's right to refuse advertising. In his ruling (PDF), the judge handed Google, Yahoo and Microsoft a big fat juicy win, saying that search engines can refuse advertising for any reason - and they don't have to say why.

The plaintiff, Christopher Langdon, was suing Google, Yahoo, Microsoft, Time Warner and AOL for refusal to run his ads. The complaint focused mainly on Google and its refusal to specify the reason for the rejection.

In essence, the judge answered the topic that's been tearing up these pages this week: Is Google a media company? Simply, yes. Search engines are constitutionally similar to newspapers, the decision says and they have the same limited First Amendment rights as newspapers to accept or reject advertising.

Eric Goldman has an excellent review of the decision. He highlights the main points.

• Search engines have a First Amendment right to reject ads as part of their protected right to speak or not (see Miami Herald v. Tornillo). This opinion is consistent with the uncited Search King ruling, although that case framed Google's Page Rank as protected opinion.

• Search engine decisions to reject ads is protected by [the Communications Decency Act] as a legitimate decision to filter "otherwise objectionable" content. The court concludes that "Section 230 provides Google, Yahoo, and Microsoft immunity for their editorial decisions regarding screening and deletion from their network." I'm expecting the KinderStart judge to protect Google's ranking choices under 230(c)(2) as well. (In case you're wondering, we're still waiting for the KinderStart ruling that was promised by the end of 2006.)

• Search engines aren't state actors and are not bound by the First Amendment, so they do not deprive advertisers (such as Langdon) of First Amendment rights by rejecting their advertising. This opinion is consistent with at least a dozen other cases holding that private IAPs and websites aren't state actors.
  

In finding for Google, the court said that the First Amendment protects not only the right to speak but the right not to speak and cited three newspaper cases that protect a publisher's right to refuse advertising. Indeed, search engines are in an even stronger position than publications, because while newspapers face liability claims for what they publish (such as libel claims), "online service providers" to not. That's because of the Communications Decency Act, which explicitly "forbids the imposition of publisher liability on a service provider for the exercise of its editorial and self-regulatory functions." (Ben Ezra, Weinstein Inc. v AOL, 206 F.3d. 980.)

In the future, search engines need not worry about giving explanations to every advertiser it rejects. The ruling makes clear they can now reject without explanation.

This will save Google time and frustration--they can just invoke that standard sign over the cash register: We reserve the right to refuse service to anyone," says Dana Todd, president of the Search Engine Marketing Professional Organization and co-founder of SiteLab, a search engine marketing agency.

So the bottom line, says media and tech attorney Jon Hart, according to Forbes:

Next time, the defendant will pull up a copy of this opinion. Google is not the public square, it is a media company."

All Internet stocks took a beating along with the rest of the market yesterday, but the free-fall has stopped and several stocks are no worse off today than they were at yesterday's close. Standing out from the crowd, again, is GOOG, up 3.45 at midday to $452. MSFT was up a quarter percent and YHOO was running just about flat with yesterday's close. AMZN and EBAY were also up slightly. AAPL was up a full percentage point to just shy of $85.

Part of the bounce for GOOG must be the news from Nielsen/NetRatings that more searchers used Google last month than a year ago, up from 48.2% in Jan. 06 to 53% in Jan. 07. Yahoo searches fell an insignificant amount, from 22.7% to 22.2%. The real loser was MSN, which went from 11% to 8.9%.

Even better for GOOG: A federal judge ruled yesterday that the search company has a First Amendment right to refuse advertising for any reason, just like print publications. That might settle the question once and for all to whether they're a "media company." (More coverage to follow on the decision.)

Google recently fixed a very severe security risk in Google Desktop - which left users' PCs vulnerable to cross-site scripting attacks, in which hackers can place malicious software on users' computers, AP reports. The problem was reported by Watchfire Jan. 4 and reported as fixed by Google Feb. 1.

The attacker uses JavaScript code to control Google Desktop functionality, Watchfire said in a press release.

While evading current information protection systems, such as anti-virus software and firewalls allowing the attacker to covertly hijack sensitive local information. (For example: Office documents, Media files, emails, in many cases, even deleted emails, chat sessions and files could be accessed.)

Although this vulnerability has been patched, Google Desktop's integration between Web and desktop is a malicious attacker's dream application.

"Application security vulnerabilities need to be taken seriously. As the potential damage of a Cross Site Scripting attack against a desktop application with a Web interface is enormous, Web application security must be comprehensively evaluated and continually monitored," said Michael Weider, founder and CTO, Watchfire. "Industry leaders like Google continue to make strides in security but due to the dynamic nature of applications vulnerabilities can surface."

A Google spokesperson emailed the AP that Google has "taken many steps to protect our users and mitigate such attacks. We've added an additional layer of security checks to prevent the types of attacks pointed out by Watchfire and future possible attacks through this vector as well."

Red Herring reported last week that Google has bought in-game advertising company Adscape Media for $23 million. Red Herring said the deal is signed but not completely zipped up.

Adsense boasts two technology components, in addition to its experience and connections between gaming companies and Madison Avenue. AdverPlay allows for dynamic, customizable placement of ads in games. Real World/Virtual World Gateway enables two-way communication between advertisers and users via SMS, audio and video.

In-game insiders said the acquisition won't give Google much of a leg up in the sector.

“There is a whole world of difference between the form of advertising done by Google and Madison Avenue,” one source familiar with the in-game ad business said, comparing Google's familiar text-based ads to the rich media used in videogames. “While everyone appreciates the dollars Google can throw around, when it comes to [in-game ad] experience they just don’t have it.”

Adscape launched in 2006 with $3.2 million in VC funding but has yet to announce any customers.

WebProNews notes that the deal is an order of magnitude lower than Microsoft's acquisition of Massive last year. That deal was rumored at $200-$400 million.

Microsoft has Xbox Live, the online game network where they could integrate Massive's technology right away. Massive also had existing deals with game developers like Ubisoft and Konami, giving Microsoft an additional potential outlet for their adCenter and other advertising clients.

Naturally rumors have been abounding for some time that Google Earth would make a swell Second Life. Michael Arrington pointed out a few weeks back that with SketchUp, Google has a 3D tool for creating models for Google Earth. Assume that Google buys Adscape more for technology than for access to the gaming world (Google isn't interested in being an agency), so it has the advertising/economy machinery. That leaves avatars by Arrington's reckoning.

WebProNews' David Utter fantasizes:

If Google were to turn [Google Earth] into a Neal Stephenson-like virtual playground with the sensibilities of that author's Metaverse, maybe socializing at Google's take on the Black Sun is just around the corner. Near a virtual billboard, of course.

Caroline Andreolle points out that today's Valentine's day Google page is missing an "l."

After losing a copyright infringement case in Belgian court last September, Google lost again on its appeal. The earlier ruling prevented Google from copying newspaper headlines from 18 Belgian newspapers and threatened a 1 million euro per day fine.

One good bit of news for Google, though. The daily fine is cut to 25,000 euros and publishers have to allow Google to remove any items they give firm notice about.

On the corporate blog, Google said:

We believe search engines are of real benefit to publishers because they drive valuable traffic to their websites. If publishers do not want their websites to appear in search results, technical standards like robots.txt and metatags enable them automatically to prevent the indexation of their content. These Internet standards are nearly universally accepted and are honored by all reputable search engines. In addition, Google has a clear policy of respecting the wishes of content owners. If a newspaper does not want to be part of Google News, we remove their content from our index—all the newspaper has to do is ask. There is no need for legal action and all the associated costs.

I was recently chatting with a financial analyst from Norway about Iceland and the M&A wave that has been happening. Icelandic companies are on a tear acquiring large companies elsewhere. This is a nation of about 300k people.

He happened to mention that energy is virtually free in Iceland because of all the geothermal hotspots there. Very cheap electric power attracts aluminum smelters.

But where there are aluminum smelters GOOG is not far behind these days. GOOG also wants cheap electric power for its data centers, and that is why it is building a massive data center in Oregon, tapping into cheap(er) hydroelectric power.

How long before GOOG data centers spring up in Iceland?

And what is the next step in this approach? How about IP/data processing embedded in the electric power supply. You pay for the electricity but you get the communications/data processing for next to free...

Chad Hurley earned $345 million in Google shares as a result of selling YouTube - and co-founder Steve Chen $326 million, AP reports. The third cofounder, Jawed Karim, who dropped out of the company to attend Stanford (see Jawed Who? Meet YouTube's silent partner), received $64 million worth of stock. And Sequoia Capital, the sole VC backer of the company, got back a nice $442 million on their investment. (Did the pension funds invest in Sequoia?)

Google reported these details in SEC filings yesterday. In total, online search leader Google registered about 3.23 million Class A shares to issue to former YouTube stockholders, according to the filing.

Roughly two dozen of YouTube's 70 employees received Google shares, as well.

FAST Search and Transfer, the European based search giant, today announced software that allows online publishers to serve contextual ads to their readers.

The FAST AdMomentum software could increase ad revenues by more than 200 per cent for some publishers, compared with large advertising networks such as Google AdSense and Yahoo Publisher Network.

This is a software package installed in a publisher's data center. FAST says that it could also be used by a third party to offer a ready made online contextual advertising network that could be used to service many smaller online publishers such as blog networks. This means it could be used to compete with up and coming advertising networks such as FM Advertising, and AdBrite.

Publishers collect between 30 per cent to 70 per cent of the revenues that their advertising network partners receive--an amount that varies according to each deal. Google doesn't disclose the revenue split.

With AdMomentum, large publishers can establish their own advertising networks that support contextual ads, and also offer a wide variety of other types of advertising revenue such as impressions, pay per click, and also auctions.

Advertisers have a self-service interface and the software API is compatible with current advertisement tracking tools.

More than a dozen large publishers around the world have been beta testing the software.

Perry Solomon, VP of strategic market development at FAST, told SVW: "AdMomentum can be used to target ads to specific groups of people. One of our customers in Norway is using it to target ads to people on a street by street basis."

"This is a way for publishers to capture the share of the revenues that have been going to the advertising networks," he added. "The publishers already have advertisers, and they have the content, they don't need the advertising networks. We can provide them with a revenue engine."

Nearly one-half of Google's revenues in the past, have come from its AdSense network, which serves advertising on sites owned by online publishers. Large publishers such as New York Times, Knight-Ridder, and Time-Warner use AdSense.

Foremski's Take: This is potentially a game changing product and it brings back the advertiser relationship to the publisher--where it belongs.

For example, I've always wondered why the New York Times would run AdSense on its online front page, and the AdSense ads carry a text link at the bottom "advertise on this site." That says to everyone "we have no clue how to monetise this space and have handed over the customer relationship to a third party." That is suicide in today's world.

The advertising networks take a huge cut considering that they establish self-service advertising interfaces and run a bunch of servers and some software. Well, now the publishers can now do the same and cut out the middleman.

I can also see AdMomentum being used by local newspapers to essentially become the "AdSense" for their regions. They could sign up smaller online publishers within their local towns and neighborhoods and provide a much better targeted service to businesses and residents.

Additional Info:

FAST is headquartered in Norway and is publicly traded under the ticker symbol 'FAST' on the Oslo Stock Exchange. The FAST Group operates globally with presence in Europe, the United States, Asia, Australia, the Americas, and the Middle East.  For further information about FAST, please visit www.fastsearch.com.

Will Google manage to work its magic on the oh-so-hard-to-crack China market? Internet biggies have floundered and faltered in China - not least over human rights and censorship but, more importantly to them, market share. But Google made two strategic investments in China last week, The Times notes, raising the question: Can Google do what Yahoo, eBay, and Amazon have so far failed to do?

In its latest move, announced Friday, Google struck a deal to invest about $5 million in one of the country’s fastest-growing Internet start-ups, Xunlei.com, according to people close to the deal.

That follows another hook-up this week, when Google said it would team with China Mobile, the country’s dominant, government-owned mobile telephone carrier, to offer mobile search services using the Internet.

One Jonathan T. Taplin, who once had a video on demand company called Intertainer - and before that served as Bob Dylan's road manage and produced Mean Streets and The Last Waltz - is claiming in a lawsuit that Apple, Google and Napster are infringing Intertainer's patents, The Times reports.

The company holds nine patents, including United States Patent No. 6,925,469, which was issued in 2005 and is intended to cover the management and distribution of digital media from various suppliers.

The suit is being filed in a federal district court in Texas that is friendly to patent claims, but a patent date of 2005 seems awfully late, reporters John Markoff and Miguel Helft note.

By that time, for example, Real Networks, the Seattle-based pioneer in streaming digital media, had begun a Internet subscription service for digital content.

The article quotes Eric Goldman, director of the High-Tech Law Institute at Santa Clara University, who seems a bit weary of all these patent infringement claims.

"There are so many of these lawsuits nowadays, it is hard to figure out which ones are a serious threat and which one are not."

"I have the same problem with this patent as so many of the patents of the dot-com boom days: I don't know what it means," Goldman said.

By Richard Koman for SiliconValleyWatcher

A new year will bring new search engines to the Internet - for the first time in a long while - but with Google so dominant in the space, will these new players find substantial niches, unseat the giant, or simply be able to crack Google's stranglehold? The New York Times profiles several up-and-comers in a space that in 2006 most people thought was owned by Larry and Sergey.

NYT: In Silicon Valley, the Race Is On to Trump Google

We first read about Powerset when VentureBeat reported the company was receiving gobs of VC funds. They've raised a total of $12.5 million from Foundation Capital, Founders Fund and several angels.

SVW: Powerset says it can knock off Google

As unlikely as it seems, many millions more are rushing in to compete with Google.

“There’s definitely a segment of the market that thinks we are crazy,” said Charles Moldow, a partner at Foundation Capital, a venture capital firm that is Powerset’s principal financial backer. “In 2000, some people thought Google was crazy.”

That mindset - more than any hardnosed evaluation of a startup's technology - may be what drives venture capitalists to keep playing in search. Google repeated the Silicon Valley mythology: Stanford, garage, modest start, groundswell of uptake, going public, the king is dead, long live the king. There may be big money to be made in niche search - but the dream is all about public search, about being a household name, about being the next Google. Short of that, getting bought up by Google sounds pretty darn good, too. For the right company (you know who), Google will pay big. That was one new revelation of 2006.

“We expect to be one of the top three search engines,” said Riza C. Berkan, the chief executive of hakia. It is a bold claim, given that hakia’s technology is not yet ready for prime time, and Mr. Berkan readily concedes it will take time to perfect it.

“It is hard for me to believe that anybody thinks they can take Google’s business from Google,” said Randy Komisar, a venture capitalist who was once known as Silicon Valley’s “virtual C.E.O.” for his role as a mentor to scores of technology firms. “But to call the game over because Google has been such a success would be to deny history.”

The Times notes that in the age of Microsoft's hegemony, companies did all they could do avoid competing with Redmond, but here we have a bevy of companies ready and willing to stake a claim to Google's.

In the Internet search industry, “you earn your right to be in business every day, page view after page view, click after click,” said Barney Pell, a founder and the chief executive of Powerset, whose search service is not yet available.

And, as Google - valued at $141 billion - marches on to compete with Microsoft, they may be taking their eye off the search engine, just as Excite and Lycos did back in the day. .

“The more Google starts to think about taking on Microsoft, the less it is a pure search play, and the more it opens the door for new innovations,” said Mr. Moldow, the Foundation Capital partner. “That’s great for us.”

Regardless, technologists continue to work on search and investors continue to pour millions into startups simply because search is not yet good enough and Silicon Valley will never trust that the dominant giant will be the one to perfect it. Unlike a Web 2.0 solution for bookmarks, search is crucial to all users and so complex it will never be "perfect." The basic human urge towards technological improvement and entrepreneurial endeavor are perfectly aligned in the the search startup. As Esther Dyson says:

“I love Google, but I love the march of history.”

Google's ambition is to have a searchbox in front of someone all the time. From that small rectangle of user interface, maybe it measures 1 square inch,  Google has built a massive business.

Microsoft owns far more user interface real estate than Google--you'd think it would be ahead of the game.

Microsoft's business model is very profitable and it is based on selling software rather than monetizing a square inch of space in front of someone. It's interesting that MSFT hasn't been able to capitalize on its far larger user interface real estate in the same way Google has, at least so far.

Is this a cultural block? Whatever the reason, it's interesting. Microsoft's position reminds me of my favorite American saying: "You can't get there from here."

New York Times:

In a move that will enable its employees to earn more money from stock options — and perhaps motivate them to settle for fewer of them in pay packages as a result — Google said yesterday that it would create a system allowing options to be sold as well as exercised.

Under the program, Google will grant employees a new type of option, called a transferable stock option. The company will work with Morgan Stanley to set up a market that will enable financial institutions and other investors to bid for those options.

Experts briefed on the plan were divided on whether it might provide a useful model for other companies. But the move appears likely to reinforce Google’s reputation for financial innovation. ...Google said the plan was aimed at showing employees the full value of their stock options.

By Tom Foremski for Silicon Valley Watcher

Yahoo's hastily engineered reorganization does away with key leaders within the company:

Chief Operating Officer Dan Rosensweig and Lloyd Braun, the head of Yahoo's media and entertainment group, are leaving the company, Yahoo spokeswoman Joanna Stevens said. John Marcom, senior vice president of International Operations, is also leaving the company "soon," she said.

Two top Yahoo execs to leave in reorg Tech News on ZDNet

Dan Rosensweig has earned a tremendous amount of respect in this industry. He is one of the few top executives that is able to garner so much positive sentiment from other senior execs. My ZDNet colleague Dan Farber at ZDNet worked with him and is one of his staunchest supporters:

Yahoo's Dan Rosensweig heading off for new adventures

My colleague Larry Dignan as well as many others (see TechMeme) have already covered the news about the management shake up and reorganization at Yahoo. I checked in with Dan Rosensweig, the Yahoo COO who resigned as part the reorg. Dan and I go back more than a decade. ...

Posted by Dan Farber in Between the Lines on: Dec 6, 2006 12:52 AM

I worked with John Marcom at the Financial Times and he was easily the most impressive executive in that organization. He had a keen understanding of what was achievable and realistic. When he left the Financial Times and joined Yahoo, that shook my confidence in the remaining management team.

I met with Mr Marcom late last year, he spoke about life at Yahoo, how the growth of the business was exhilarating, it felt like being on top of a galloping horse without a saddle. Clearly, that galloping horse somehow slowed lately and the reason seems to lay within Yahoo rather than in the broader market.

Yahoo's leadership crisis and reorganization is directly related to Google's fast paced growth. YHOO's performance would be considered very good against any other metric, but in comparison with GOOG it seems lackluster.

Google's business model is far more efficient because it has shown that using servers and software provides a far more scalable media business than that of Yahoo, which has pursued a hybrid approach relying on a human-plus-machine business model.

Several times, Yahoo has ventured into producing some of its own content, such as its Yahoo Finance video Internet channel several years ago. And more recently, with Patrick Houston, and other journalists brought in to create original content.

[Please see: Yahoo gets content . . .but can it make content?]

Google prefers to create content with machines. It sends out spiderbot armies to harvest content from the open Internet--content created by people but not by Google's people. Someone else is paying their salaries.

What is very troublesome about all of this is this: If Yahoo has trouble competing against Google then what hope have traditional media companies?

Remember, Google is a media company, it publishes pages of content and advertising.

It's that time of the year again when Google opens its doors to the media and offers wine and food and relaxed, off the record conversations with its top people.

I love this event because it is so family-like...it is a place full of familiar faces and I can't imagine the holiday season without it.  And I can report that I had some excellent conversations about some topics that are very dear to me: China and the behavior of Yahoo in regards to the jailing of a Chinese journalist; plus the monetisation of Google News. Unfortunately, I cannot report on what Google executives told me.

. . .

I was impressed with Elliot Schrage, chief of GOOG's PR/communications teams. The appointment of  Mr Schrage, about a year ago, was fascinating to me because his background is so different from what would be a typical hire by a large Silicon Valley company.  Here is someone that had been representing companies such as Nike, dealing with serious ethical and moral issues around child labor, and also dealing with foreign governments.

Clearly, his appointment showed that Google was looking into a future where it would need to navigate a landscape of similar ethical and moral challenges, and it would need experience in foreign government diplomacy.

I was glad to hear that the China issue is well recognized within Google and that the company is trying to understand how best  it can behave in an ethical way.

I would say that Google has a fabulous  opportunity to create a significant competitive advantage for itself because of the China issue. It can boost its ability to recruit the best and the brightest people. And people are the company, they create the value and the innovation.

Yahoo faces a significant disadvantage in its ability to compete against Google in attracting top talent because of management's disgraceful behavior in China. Who would want to work for a company that Reporters without Borders called a "police informant" for the Chinese government? If Yahoo fails to create an ethical position on this issue, the brain drain out of the company will accelerate.

. . .

I also met the very impressive Susan Wojcicki, VP of product management. She is in charge of monetising Google's products. I asked her to monetise Google News because that action would assign some value to a product that is currently free, but not produced for free.

By trying to monetise Google News GOOG would then be able to share revenues with the news producers--who are all hurting tremendously. San Jose Mercury, for example, this morning announced yet another round of layoffs. Google has the scale to help create badly needed revenue streams for news organizations.

Google News has a very large audience and some of that audience clicks through to the original site. However, driving traffic to a news site doesn't help much because news sites are terrible at monetising their online operations. Many news sites run Google Adsense ads and those pay very little per click, nowhere enough to support the costs of producing news.

How will news organizations survive when their advertising base is rushing into search engine marketing? The simple truth is that selling products or services next to a search engine box is far more effective than next to a news story.

Yet news is what gets people to return to the Internet. We desperately need a value recovery mechanism that rewards high quality news production. We don't have it yet but a company like Google has the brain power and the scale to create one, IMHO.

. . .

There were many familiar faces on the media side and also on the Google side. It was a pleasure running into my former boss at the Financial Times, Richard Waters.

David Krane, one of GOOG's senior comms guy has had another delivery from the crane, a second child. I'm impressed that David took a bunch of time off to bond with his child and that he recognized how such events impact women so much more than is sometimes recognized.

It was also good to connect again with Brian O'Shaughnessy, now heading comms for the entire product group at Google, recently recruited from running the show at Verisign.

Also good to see, John Furrier, co-founder of fast growing media company PodTech, who was wandering around packing various recording devices... Steve Gillmor, famed blogger, told me that he no longer has his Gillmor Gang podcast, but is working on a secret project...His brother, Dan Gillmor was there, I haven't seen him in a while, Dan said he has another book project.

. . .

Related info: 

Despicable behavior by Yahoo management - Shi Tao gets ten years

From the London-based The Independent: CHINA Published state secrets Shi Tao was sentenced to 10 years in prison after "illegally providing state secrets to foreign entities." His crime was to have emailed details...

Posted in Silicon Valley Watcher on October 30, 2006 03:06 AM

Yahoo and Google and China - it's time to Do Some Good

One of the most powerful images of the 20th Century is "Tank Man" the man that walked out in front of a column of tanks -- a day after the bloody suppression of...

Posted in Silicon Valley Watcher on November 6, 2006 04:05 AM

Congress's dilemma: When Yahoo in China's not Yahoo | csmonitor.com

A House panel will look into tech firms that cooperate with China to restrict access and reveal identities.
www.csmonitor.com/2006/0214/p01s04-usfp.html - 44k - Dec 4, 2006 -

Silicon Valley Watcher

It has taken about ten months, but Google has finally hired a PR boss, Elliot Schrage--as the new VP of global communications and public affairs. ...
www.siliconvalleywatcher.com/mt/archives/2005/11/google_hires_sq.php - 55k -

Google is one of several bridge investors in Meraki Networks, a wireless mesh provider that Google has shown interest in regarding the San Francisco WiFi Project, Katie Fehrenbacher writes on GigaOm.

co-founder Sanjit Biswas Biswas wouldn’t specify the amount but said the round was under a million dollars. “We’d bootstrapped the company so far, so this cash is really just for growth/acceleration . . .and for the development of some products we plan to launch next year,” says Biswas. The company currently sells a $49 wireless 802.11b/g router (beta price) that allows users to build a wireless mesh network or extend the range of a municipal network.

Microsoft officially released Vista and Office 2007 to business customers. But after so much delay and build-up, the official launch of Vista is fairly anti-climactic, especially since it's still not available to consumers. Infoworld:

This is a big launch for them but for everyone else it's ho-hum," said James McQuivey, a professor for Boston University's College of Communication who specializes in marketing research and business management. "It's the biggest wait-and-see event of the week. Customers are going to wait and see when they need [Vista] and if they need it."

Paul Kedrosky points to the transcript of oral arguments (PDF) before the Supreme Court in closely watched patent case. The case has big ramifications for software because the Court may reject the current "obviousness" standard for awarding patents.

This is important stuff, and changes -- which look inevitable, based on justice comments this morning -- could have a wide-ranging impact across a range of companies in all sectors, from consumer products, to life sciences, to information technology. We had justices calling the curent Federal Circuit standard vague, gobbledy-gook, and generally un-useful to everyone except the lawyers being paid to lawyer the thing. Here is Justice Scalia pointing out how absurd the current non-obviousness standard remains, despite its supposed universality: "It is misleading to say that the whole world is embraced within these three nouns, teaching, suggestion, or motivation, and then you define teaching, suggestion, or motivation to mean anything that renders it nonobvious. This is gobbledygook. It really is, it's irrational."

Google is facing more legal trouble in Europe. Italian prosecutors are suing Google over some videos showing a Down's Syndrome patient being abused, AP says.

Oddly, the suit seems to fly right in the fact of EU law, which excuses Internet providers for content uploaded by users.

"As far as I understand, the entire European Union has decided there is no responsibility for the Internet provider for content. You can't blame the Internet for being a means of diffusing something whose causes lay somewhere else," said Carlo Alberto Carnevale Maffe, president of Assodigitale, a think-tank on digital technology. "You can't blame the manufacturer of paper because someone prints an insult on it."

The investigation is sought by Vividown, a Downs advocacy group.

Vividown President Edoardo Cenzi said that although Google removed the content within 12 hours after they reported its existence to authorities, the group took further action because "we don't believe these videos should be circulated without controls."

But Google says they don't want to "hide behind laws," said Stefano Hesse, a spokesman for Google Italia.

"We have clear policies about content and we always remove what we think is illegal content and what our users flag as illegal content," Hesse said. But he acknowledged that sometimes what is deemed offensive varies by culture.

"It could be religious. It could be pornography. It depends on the culture or the way of thinking of the people looking at the video, since it is a worldwide platform," Hesse said.

From the London-based The Independent:

CHINA

Published state secrets

Shi Tao was sentenced to 10 years in prison after "illegally providing state secrets to foreign entities."

His crime was to have emailed details of the Chinese government's plans to handle news coverage of the 15th anniversary of the Tiananmen Square massacre in 2004. Yahoo! provided crucial information in the case, linking the message and email account with Shi 's computer. Reporters Without Borders accused Yahoo! of acting as a "police informant."

This kind of behavior will not fly. Yahoo management made a serious error in judgement and so has that of Google, which also hands over such information to Chinese and other government authorities. Both companies could "launder" their data before they receive it, and thus have nothing to turn over.

Both companies always assure us that any data collected is not identifiable and that they are only interested in aggregated behavioral data. It's time to prove it.

The revolt will come from within Yahoo's and Google's own ranks. How does it feel to work for a "police informant" for the Chinese government?

The revolt from the rank and file is already happening. Watch this space for more details.

And how long before users of Yahoo or Google services switch to more ethical service providers? On the Internet, other services are just a click away...

Social causes are becoming extremely important in recruiting and retaining people. As competition for key staff rises, the determining factor will not be money or stock options, it will be ethics.

What use is money and stock options if you work for a company that does not act in a socially responsible way? Yahoo and Google can have their cake and eat it. They can comply with police authorities in other countries and make sure that they do not enable repression, oppression, or supression of political dissent.

They have the technology and the means to collect user data without identifiable data. It's as simple as that.

The conventional wisdom, as proposed by Google et al, is that placing advertising on a web page in its context gets the best results. Mortgage ads on mortgage pages, etc. In fact, Google recommends to its AdSense partners that Google ads should blend into the page, same colors etc.

BlueLithium, the online ad network, says that this isn't true when it comes to serving ads based on users' behavior. Its BL Labs research division found that out-of-context ads perform better: (BlueLithiumClick here for BlueLithium press release)

BL Labs analyzed over 400 million impressions across numerous sites, evaluating click-through rates (CTR) and conversion, or action-through rates (ATR), across several pre-determined behavioral and contextual categories. It also analyzed nine behavioral categories containing over 10 million impressions for patterns across various contextual categories. Analysts discovered that ads shown in the same context as behavior had a higher CTR in seven of the nine categories while ads shown in a different context had a higher ATR in five of the categories.

The "shoppers" category showed the highest CTR from ads on career sites and the highest ATR on female-oriented sites. "Travelers" had the highest CTR on food sites and highest ATR on career sites.

These types of findings will help to support online publishers because online advertising will be more effective and better able to support a greater diversity of content. Otherwise the subject matter of content will be designed for the ads, which you can see this happening already.

I've been saying Google is a media company for a couple of years now. I put it this way: Google is a media business because it publishes pages of content with advertising around it.  Now, more of the media is figuring it out.

Over at the excellent Poynter.org journalism site, there are an increasing number of articles and discussions about Google. And that's because more of the media is noticing that that Google is indeed a media company, or as I like to put it, "a technology-enabled media company."

For example, Vincent J. Maher over at Poynter, wrote this short article: We're Facing a Monster: Will Someone Please Step Up and Say It?

Maher notes that Rupert Murdoch's NewsCorp is considering banning YouTube videos from MySpace. And he says that every media company should place Google on its hitlist.

As a veritable superpower in information gathering and publishing, we should remember that Google has used its power to censor the Internet in China, and to help itself win court cases through exclusive access to its Gmail spam filter data. And in Belgium, Google scoffed at legitimate copyright claims.

The cultural impact of such power is to stifle competition and innovation -- the very things Google says it stands for.

Can someone please step up and say we're facing a monster?

Link to Poynter Online - E-Media Tidbits

I'll step up and say it, I'll even shout it: WE ARE FACING A MOSTER.

GOOG is a monster media company that seeks to collect and distribute every digital bit and byte worth publishing--over a global distribution network that is unmatched in its efficiency and scale.

The monster is fed by massive amounts of free content harvested from the web, and then redistributed within an advertising wrapper. All automated. (Including the laughing-all-the-way-to-the-bank... :-)

- - -

I predict Google Free Zones on the Internet will arise and I humbly offer this designation:

</GOOG>

(

For those who don't speak Geek, it's a play on </DIV> - the closing tag for applying CSS style sheets, which is used to control the look and feel of nearly everything published  on the web.

Google's acquisition of YouTube for $1.65bn stunned many in Silicon Valley.

Some thought it was way too much to pay for a startup with hardly anything in revenues and it indicates a bubble mentality.

While others took it as good news because it would boost the valuation of other startups in the same or related markets.

Those opinions would be true if this was 1999, but it's not.  In 1999 we didn't have these massive computing platforms, such as Google, Yahoo, AOL, EBay, Amazon,  etc.

One way to look at this deal is to say that YouTube acquired the most efficient and powerful computing platform on the planet. GOOG can offer YouTube instant economies of scale that would have taken it years to build.

In addition, Google has a business model that can monetize YouTube much better, and more quickly than anybody else. If YouTube had an IPO today, it would take it a long time to become a large thriving business, fighting off many similar competitors along the way.

GOOG can monetize YouTube far better and far more quickly than anybody else. Therefore YouTube's valuation is likely on the low side considering the revenues Google can make from this acquisition.

This also means that the valuations of similar businesses are not boosted by this deal, because suddenly, there is an 8,000 lb guerilla in the room. And it is taking all the oxygen out of the room.

In 1999, the Internet was still a level playing field, all the big Internet players were still relatively small, you could build competing businesses and take on the leaders and win. In 2006 this is not the case.

So what if you have a better search technology today? Google can monetize it better than you can, you would partner with it or sell out to it.

What the Google/YouTube deal represents is the bet that scale on the Internet will win every time. That if you can aggregate the largest number of users, the largest number of applications, the largest number of advertisers, you will win each time.

And today, there really is no "rule of three" in the market, the notion that the "big three" as in car mackers, and in other industries, become the dominant monetizers and everyone else grabs the scraps.

The Internet is all about scale, where scale is rewarded. There is no reason for anyone but the largest, most efficient Internet company to dominate Internet markets.

Google is essentially building a proprietary Internet with efficiencies that the current Internet cannot hope to match. The Internet is a patchwork quilt of old and new systems and networks.

The "GooGnet" is a modern network made from the most cost efficient and effective systems and networks ever built.

Google's engineers are already influencing and changing the architecture of computer systems at Sun Microsystems and Hewlett-Packard, of microprocessor designs at Intel, and influencing similar developments at hundreds of other companies.

Google is spending hundreds of millions of dollars per quarter and it will soon become the world's largest computer systems buyer as it builds out its platform.

And the more the GooGnet is loaded with massive applications such as YouTube, the faster Google can scale and dominate.

Over time, there will not be a number two, or a number three competitor in Google's markets. There will be many small companies living off the margins, in niche markets - making decent livings but nothing blockbuster.

That's why Google has its motto - "Do no evil" because with such scale it could do tremendous harm.

But will it be doing good? It doesn't need to "do"  anything, it will be essentially neutral, just as the Internet itself is a neutral entity in any ethical and moral sense.

- - -

So what about things like copyright problems on YouTube? It's not a problem because Google will sort it out in the same way its news aggregator Google News sorts it out: if you don't want to be in Google News, tell the company and it will remove you. And it will also remove any traffic that Google is sending to you.

With Google News, the news sites have become dependent on nearly half of their traffic coming from Google. It has become a distribution platform for them and they could not survive without it.

That's what will happen with "YouTube powered by Google," it becomes the distribution platform for the emerging world of IP TV.

I had an interesting chat recently with William Jolitz, a Silicon Valley veteran about this topic. He notes that it costs about $1 per minute to deliver TV content to a viewer as compared with 5 cents per minute via a service such as YouTube.

Those are powerful numbers, a 20 to 1 cost advantage is huge. It's a huge competitive advantage. And Mr Jolitz knows the value of a broadband driven business model, see: "The Google Test" on VentureBeat.

Last night I thought it odd that Writely was prominently displaying a planned outage notice. This morning, I found that www.writely.com redirects to Google's new Docs and Spreadsheets page. What gives?

Basically, just a sensible, if modest, integration of two online office services - Writely's word processing and Google's homegrown spreadsheet app - just in time for the Office 2.0 conference. (Where are the branding people at Google, though? Docs and Spreadsheets? And when Google adds the next piece of Office, what will they call it? Docs, spreadsheets and slideshows? Please.)

Michael Arrington notes:

Google is straightforward in its goal to excel in collaboration and sharing of documents, while agreeing that desktop office applications will continue to offer superior editing features for the foreseeable future. Still, the ability to import and collaborate on a document, and then publish it to the web or take it back to the desktop, is a powerful feature not available to Microsoft Office users outside of Office Live or Microsoft Sharepoint Portal Server. And use of Google’s online office applications is free.

Google is officially the proud new owner of YouTube. It's a $1.65 billon, stock-for-stock deal. According to the Google press release, "When the acquisition is complete, YouTube will retain its distinct brand identity, strengthening and complementing Google’s own fast-growing video business. " The deal has been approved by both corporations and is expected to close in Q4.

I just got off of the conference call on this deal, so here the notes I was able to take. You can listen to the full call at 888-203-1112, confirmation code 2260624.

Eric Schmidt: The music deals of this morning show the growing value copyright holders place on video. YT is one of many investments Google will be making in video. YT is a social phenomenon that I've never seen before. The thing that tipped us over was their vision. YT/Google will create a new and very interesting platform.

Chad: We're in the midst of a shift in control of entertainment. We'll sharpen our focus on this vision and Google's revolutionary ad platform has inspired us to create a revolutionary new video platform.

Sergey: Video is a very important part of the world's information. When you think about search, oftentimes when you want a true explanation of something what better way to get it then to see a video of it. Video is a great medium for advertising. I expect YT will be a great channel for advertising. It's hard for me to imagine a better fit - technically and culturally. YT reminds me of Google just a few short years ago.

Q: Why did Google need to buy YT? Why stock, not cash? YT cost structures?

Eric: When we looked at our mission, Video Google was doing very well. There were lots of interesting content and partnerships. The marketplace showed a clear winner in social networking in video.

David Drummond (Google's corporate development VP): We did a stock deal it order to make it tax-free for the YT shareholders. It's a good deal for them and it made it cheaper for us, as well. We're pleased YT shareholders wanted to be Google shareholders.

Q: YT's new ID architecture?

Steve (YT's chief of engineering): We've been hard at work at identifying users and partners can ID their content such as fingerprinting, audio fingerprinting, keyword searches. We're on track to launch within the month.

Schmidt: In the short time the engineering teams have had to work together, they're come up with 20-30 ways that the two companies can extend each other's technologies. We don't lack for a set of ideas. Most people believe this is just the beginning of a video revolution.

Drummond: The price was modeled on a synergistic model. "We arrived at a price that's very fair and reflects great value that YouTube has created."

Sergey: "We care very much about search and to increase the comprehensiveness of search. We're also working on the advertising side of video - but there's more experimentation to be done there."

Schmidt: Google Video will not go away. "It's a very important part of the Google user experience and it's going to be more even more integrated with Google overall."

Sergey: "The general sense we've taken from MySpace, there's a new class of site that have dev very quickly are very successful and are very attractive to users - it's a next generation of sites and companies. We're excited to work with them in all sorts of ways."

What was Chad Hurley doing over the weekend? Unlike Facebook's Mark Zuckerberg, it seems that Hurley is willing to spend a beautiful couple of days talking to lawyers. The Wall Street Journal reports today that a deal to buy the company for $1.65 billion could be announced today.

The deal would allow YouTube to keep its name, office and staff - a "smart move by Google," notes Cynthia Brumfield at IP Democracy .

At Hitwise, LeeAnn Prescott takes a look at the numbers and sees just how lamely Google Video has performed, compared to YouTube: Last month YT received four times as many visits as Google Video. And until the August placement of Video on the Google homepage, Google was sending more traffic to YT than to GV.

Oddly, she concludes that Google needn't spend this money on YouTube, since their brilliant engineers could replicate any and all features that YT offers. It's not a question of engineering, though; it's question of "mindshare." YouTube has it - and it's enabling them to cut the big deals with Hollywood. If Google can't make those deals - and Schmidt has never delivered a big Hollywood deal; indeed copyright owners (in the form of publishers and European news agencies) hate Google - it will have to buy into them. (More on YT's deals shortly.)

Finally, the deal is so obsessing the Valley that strange rumors are flying about, as Michael Arrington, who broke the rumor, notes:

Whether its happening or not, this seems to be THE topic of conversation in Silicon Valley right now.

We don’t have any additional verified information, other than a bizarre story Marshall Kirkpatrick was tracking and that developed on Friday and Saturday. We got word that a lawyer representing Google may have told at least one person that the “deal has officially gone through.” The person who was supposedly told this then sent an email out to a number of people summarizing the conversation, which we got wind of. I spoke to the attorney, who denied having “any knowledge of the deal” or making that statement. I also spoke to the person who wrote the email, who backtracked and stated that he exaggerated the lawyer’s statements, and that, in short, the email he wrote wasn’t true. At that point Marshall and I decided to drop it. But I will say this - the fact that the lawyer repeately told me that he had no knowledge of a deal instead of “no comment” means he was either lying (unlikely), that a deal is happening and he doesn’t know about it (unlikely), or that there is no deal. We’ll see.

Google is in the final stages of talks to buy YouTube for about $1.6 billion, according to inside sources. The deal was first reported by Michael Arrington on TechCrunch as "completely unsubstantiated rumor" but moments ago The Wall Street Journal confirmed that the talks are real.

The Journal's Kevin Delaney reports:

Google Inc. is in talks to acquire popular video-sharing site YouTube Inc. for roughly $1.6 billion, according to a person familiar with the matter. The discussions are still at a sensitive stage and could well break off, this person says.

Arrington said early this morning that:

A quick phone call to a VC confirmed that the rumor is circulating (he also confirmed the price), but that is far from confirmation that this deal is happening. I’m digging for more but the source on this one is very good.

We know that YouTube has had informal talks with a number of companies about acquisition in the $1.5 - $2 billion range. And I suspect Google won’t be daunted by the prospect of dealing with a ton of pissed off copyright holders.

Based on experience with these sort of rumors, I’d put this at 40% likely to be at least partially true.

Such a deal would be "damn cheap," Trip Chowdhry, an analyst with Global Equities Research, told the Journal. "YouTube's brand identity is no less than Google's and is no less than Coke's.''

While YouTube is the brand name in user-created video services, Google Video is one of dozens of also-rans. As the conventional wisdom is that video will be very, very big very soon - and Google has of course the content-based advertising market wrapped up, such a move sounds sensible. But it's definitely a sea change for Google, which is in the habit of buying lots of very small, beneath-the-radar companies, not brand-name companies.

For YouTube's founders, who have been moving to monetize their golden goose as quickly as possible - unfortunately with deals to promote Paris Hilton and reality TV - the big pay-off must look a lot more attractive than negotiating the copyright abuse waters and the long road to profits.

Update:

From Andrew Lipsman, senior analyst at comScore Networks

TRAFFIC DATA

Total U.S. - Home/Work/University Locations
Source: comScore Media Metrix
Total Unique Visitors (000)

Select Sites            Aug-06
----------------                ------
Yahoo! Video               21,141
MySpace Videos          19,406
YouTube                      19,089
MSN Video                   15,414
Google Video Search    11,891

STREAMING VIDEO DATA
Select Video Properties
July 2006
Total U.S. - Home/Work/University Locations
Source: comScore Video Metrix

Select                  Unique U.S.     Streams Initiated
Properties            Streamers (000) by U.S. Users (MM)
----------                      --------------- ------------------
Total Internet (U.S.)   106,534         7,182
Yahoo! Sites                   37,934          812
MySpace                         37,422          1,459
YouTube                         30,538          649
Microsoft Sites               16,227          156
Google Sites                     7,520           60

Select                  Share of
Properties           Streams Initiated
----------                      -----------------
Total Internet (U.S.)   100.0%

Yahoo! Sites               11.3%
MySpace                     20.3%
YouTube                     9.0%
Microsoft Sites           2.2%
Google Sites               0.8%

Tom Foremski: Interestingly, CNET's News.com still has nothing on this story more than 8 hours after the news broke.

The wire services gave Google due credit for launching The Literacy Project - an effort with LitCam and UNESCO to promote literacy around the world - at the Frankfurt Book Fair. The press release version is represented in this BBC article:

The Literacy Project enables teachers, organisations, and those interested in literacy to use the internet to search for and share literacy information. .... Users can search for information in digitised books and academic articles, and share information through blogs, videos and groups.

Cool. But take a look at the so-called portal and you realize that the so-called development is little more than a landing page and some predefined searches. The portal features links to Google Books, Video, Blogger, etc. You might as well bookmark it for whatever you want to search on Google, because there's absolutely nothing specific to literacy about it.

The portal doesn't feature a subset of books available on Google, such that every search is going to come up with on-target hits of interest to literacy advocates. Indeed, searching from the Literacy Project simply queries the entire Books index. Search Books for "africa literacy" and you get a hodge-podge of titles with those words; the top hit is from an encyclopedia of library science referencing South Africa.

This is a job for the AOLs of the world, which are going to put an army of actual people on the task to preselect the best, most relevant materials. Google's effort is development via press release, essentially a half-day school project for a web design student.

By Richard Koman for SiliconValleyWatcher

Google will turn over to Brazil information that could identify users engaging in online racism, pedophilia and homophobia, The Washington Post reports. But when the US Dept. of Justice asked to see Google data, the company responded with a lawsuit.

What's the difference?

What they're asking for is not billions of pages," said Nicole Wong, Google associate general counsel. "In most cases, it's relatively discrete -- small and narrow."

Google released a statement yesterday saying it was complying with the Brazilian court orders following a ruling Thursday by a Brazilian judge that threatened Google with a fine of $23,000 a day for noncompliance.

The Brazilian court orders focus on Orkut, which Google bought a few years ago. Orkut is hardly on the radar of American social networking sites but it is the dominant player in Brazil. And some of the social connections being made on Orkut are of the depraved and hateful variety.

Google has complied with 26 court order and has stored information on 70 other users whose information is ripe for subpoena.

Civil liberties groups like the Electronic Frontier Foundation and the Electronic Privacy Information Center say Google has no choice but that the fact that internet companies store so much information is the source of the problem.

"It's almost a defining moment for the industry," Rotenberg said. "They need to decide if they want to become a one-stop shop for government prosecutors."

UPDATE: A reader points out that it looks like the Irish Medical Times newspaper was hacked and then picked up by Google. I had posted this hack from Google News with an anti-Israeli message and I asked how GOOG could stop other such incidents and guarantee the integrity of the content.

Google News is one of the world's most popular web sites and a trusted brand. This means it has a responsibility to its community if it is to retain the trusted brand relationship--which Google has managed to maintain despite its super-star status.

http://72.14.203.104/search?q=cache:rX8_ZjbMpf4J:www.imt.ie/displayinterview.asp%3FWID%3D250%26CAT%3D19

Since Google does not employ any human editors, (it is all harvested by machines) the hack hasn't been filtered from Google News.

This calls for a Digg-type credibility system. GOOG can still use machines to harvest content, (more scalable than humans) and the readers can flag potential news hacks. The entire community benefits.

But that's if the community can detect false or doctored stories. A slight doctoring of a company earnings announcement could translate into market advantages for some, and could be difficult to spot in a timely manner by even the most vigilante citizen press corp.

Citizen journalists will be very important unless we figure out viable business models for the profession of journalism; they will be the public's prime media sources, but with the potential for misinformation too.

Private groups will increasingly finance professional journalists and collect and share the information in select groups to gain competitive advantages. Ted Shelton points out that this is the way the Venetian princes won at overseas trade.

Information about ships and prices of goods was valuable to those that had it. It was so valuable, that the Venetians managed to beat out competing trade centers--and also fund the Renaissance.

This transformed the entire known world. The Renaissance was a cultural and scientific revelation, it was the rediscovery of rationalism. This propelled humanity out of a millennium of Dark Ages and into the Age of Enlightenment, and led to our modern world. Not too shabby.

I know that there will be a new generation of Venetian princes from this next phase of the Internet. If it also brings a cultural revolution on a Renaissance scale, that would be interesting. I would certainly welcome a rediscovery of rationalism and the secular society.

My red arrow points to it... Hat tip to Sheri Starko-Jones...

If Google news can be hacked then spoof press reports could be inserted which could affect stock markets and other decisons... How can GOOG guarantee the integrity of Google News?

If it is in beta, does that mean it doesn't have to secure it from outsiders?

UPDATE: Irish paper hacked and distributed by Google

By Richard Koman for SiliconValleyWatcher

The fun game yesterday was speculating on the meaning of Google CEO Eric Schmidt's joining Apple's board. After all, Google and Apple are two great tastes that go great together.

First, corporate speak: Steve Jobs (from Apple press release): "Like Apple, Google is very focused on innovation and we think Eric’s insights and experience will be very valuable in helping to guide Apple in the years ahead.”

Om Malik looks forward to integration between Google's advertising network and Apple's iTunes juggernaut. "Even though Google is being overtly aggressive about online video market, it is trying to leverage its advertising network more than download sales. Is it too hard to imagine - watch the video on Google Video, and download it on iTunes store? Both parties win? iTunes being included as part of Google software pack, or part of Google Toolbar? Google driving music-related searchers to iTunes store?"

Any of these scenarios is possible, even likely, but none of them require a seat on the board.

My initial take - especially after having posted about speculation that Jobs may have stock options problems at Pixar - was that Apple needed someone of Schmidt's stature as a potential CEO successor to Jobs. If you care to revisit the 1980s, you will recall that Apple simply doesn't run on MBAs. Apple requires vision, obsession and near-insane devotion to execution at the top. And ValleyWag points out that Schmidt has experience dealing with demanding personalities. But somehow, none of this really holds much water either.

Enter John Dvorak with the kicker: Schmidt is the set-up pitcher for a Sun-Apple merger.

Schmidt would quietly be Sun's inside man on the negotiations although technically he's be a neutral party since he doesn't actually work for Sun.

The way Dvorak sees it, Sun's server genius, Andreas von Bechtolsheim, a good friend of Schmidt's, may actually be behind the move. He's put Sun back on the map with AMD-centric servers that are fast, cheap and reliable. But Sun no longer has the marketing muscle of the glorious old days. Sun would get Apple's ad budget and Apple would get ... serious servers.

But does Apple still seriously care about the server market? This Sun-Apple business has been bouncing around for 20 years but since Jobs' return, Apple has substantially moved from a desktop manufacturer to a consumer company. When you look at long-term movements and you look at Apple, do you see a Microsoft-style company that wants to be dominant in every area?

Or do you see a design-centric appliance company that builds consumer lifestyle devices running robust software all tied together with proprietary lock-in and e-commerce opportunities? I see the latter, and while such a company might be an excellent company for Sun's servers, I don't see that they need to be Sun.

Last word to John Battelle: "I don't know what it means.

Tom Foremski here: What to expect from Eric Schmidt, Google's CEO joining the board of Apple Computer? Not much.

It certainly doesn't mean that Mr Schmidt will help bring about a Sun Microsystems and Apple merger, as John Dvorak speculates on MarketWatch. And it doesn't signify an Apple-Google alliance against Microsoft as