Google beat the analysts’ expectations again last week, releasing higher-than-expected earnings per share results.

This confirms once again that during a period of economic turmoil, people resort more to the online advertising medium because it provides more flexibility and more control over advertising programs. This is favorable to Google, with the majority of its business revenue coming from online advertisement.

And for credit crunch periods like the one we are in now, we have to note that this is especially favorable for companies with a large cash reserve, like the one in Google’s balance sheet. Google had $14.4 billion in cash at the end of September 2008.

But this acts not only in Google’s favor, but also in Microsoft’s. This is the time for these two companies to exercise their buying power to acquire companies with distressed cash flow.

I consider now to be an especially favorable time for Microsoft to raise again their proposal to acquire Yahoo! due to their distressed stock prices, and that a new offer no longer needs to be near to its original US$31 per share quoted at the beginning of this year. Just 10 months later, Microsoft could probably reach a deal for a much lower purchasing price. Although, many people believe that Microsoft is now interested primarily in the search technology of Yahoo! rather than the whole Yahoo! that includes many of its successful content sites. Perhaps Microsoft will only continue the discussion after the rumor regarding a merger between Yahoo! and AOL becomes reality.

Google cannot exercise the same tactic due to the anti-trust concerns of various governing bodies. The combined search market share could easily exceed 90% if Google merges with Yahoo. So this time Microsoft has an advantage over Google with the possibility of buying the whole or part of Yahoo!

Perhaps Yahoo! merging with AOL and selling its search technology to Microsoft is a better way out for Yahoo! shareholders. This frees them from the unfavorable market condition they have been enduring for the past few years. Considering their search technology is facing an uphill battle against Google, it is better for Yahoo! to remain focused on building content sites and leave the search business to the financially stronger Microsoft to continue developing (and hence battling with Google).

Do you any comments? Leave me message here.

Tags: Google’s quarter results, Microsoft’s acquisition of Yahoo!

I have been using the new Google browser for almost two weeks. You might have heard a lot of discussion about this new browser all over the world. People are looking to Google to deliver a new browser to combat Microsoft’s dominant Internet Explorer (IE), especially as IE Version 8 is on the way to official release soon.

I perceive this differently. What I have in my view is Google actually delivering its own OS (Operating Systems) to drive its applications – the applications that are now being delivered to its customers in the form of online applications like Google Apps.

Some people call this idea “cloud computing”. The concept is of future networked computer users having all their applications installed on networked servers, serving needs everywhere, so that users will never need to install the applications on their own computers and/or on their own office network.

There are two features that enforce my conclusion that Google is using to pave the way to use Chrome as a cloud computing OS.

The first feature is its own task manager. If you press the “Control” tab at the right hand corner of the Chrome Browser’s window, then select Developer → Task Manager, you can bring up Chrome’s own task manager to manage the opened tabs or windows of Chrome pages. This is an exciting feature. While it allows you to easily manage all opened pages under Chrome, I can also envision it as a real “task manager” to use Chrome to open and manage many online applications in the future using the Chrome windows.

The second feature is Chrome’s surprising capability to be installed on a computer by a user without administrative rights. Many Chrome users are not even aware of this. I can see this is a strategic tactic of Google, allowing you to install and use this browser on any public computer, even if you do not have administrative rights on that computer. This brings you a fast browser that has the possible future extensions of incorporating many of Google’s or its partners’ online applications with a single click of the button within the Chrome browser. With Chrome, you can use any of Google’s applications without hassle in any computer in the world, as long as it is connected to Internet.

Perhaps you can also see what I mean by looking at the actual design of the browser. The Chrome designers try very hard to get rid of the space consuming and cluttered tool bars that you commonly find in IE and Firefox. Chrome tries to give you as much space as possible for your “browsing” (or “application”) use. This also contributes to the feeling of using an OS instead of a browser window under Chrome.

These are the reasons why I think the release of Chrome is more strategic in nature. It is not merely a browser, but a future cloud computing platform. It is a platform that aims at attacking the lucrative application business of Microsoft, especially the Microsoft Office Package.

It will be interesting to keep our eyes on how Google will use this new OS platform in the coving future.

Tags: Google Chrome, Microsoft IE, IE 8, Chrome Task Manager, Google New OS

Cuil.com, a new search engine launched two days ago, is set to be another competitor for Google in the web search industry.

What makes this search engine different from others is the profile of its founders. Most of them are ex-employees of Google, Inc.  In particular, one of the main architects of this new search engine, Anna Patterson, was an important contributor of Google’s present search algorithm.

Attracting a lot of curious traffic, Cuil.com’s launch experienced such high traffic that the site was periodically out of service the first day.

According to some news sources, Patterson left Google because of its refusal to try innovative changes to their search algorithm. Anderson’s own search technology was acquired by Google in 2004, when her search algorithm was incorporated into Google’s search engine. She left Google for a new venture, creating another search engine with the debut of its self-proclaimed innovative search algorithm.

Unlike Powerset, the natural-language search engine recently acquired by Microsoft, Cuil focuses its full effort on improving the cost and speed of indexing web pages (with its search algorithms remaining a mystery to us), hoping to return more relevant and powerful search results to web surfers than Google.

Upon my first few attempts, the only thing that impresses me so far is the format of its output pages. The magazine-styled output page tries to provide pictures together with the search pages’ content to enrich the user’s search experience. Though from what I can tell, the pictures provided by its search result pages are mostly extractions from the returned web pages, and some of those (as you can probably imagine) are really silly extractions that hardly accurately represent the web sites recommended.

Most importantly, Cuil.com fails to return web pages that I know are important for a particular search term. I conducted an interesting test using this search engine to search its own name, “cuil”, but none of the returned web pages even show the web site’s own link, http://www.curl.com!

Interestingly, if I use Google to search for the same term, it returns the related news about curl.com, and indeed the first search result is the search engine’s own hyperlink http://www.curl.com (Quite ridiculous, eh?)

Whether this search engine can establish a foothold in the search engine industry remains unknown. But what can be sure is that the emergence of a new search engine provides us with more search choices in quality web surfing, and that is truly beneficial to all of us.

To Google, perhaps this is also another push to improve its search algorithm to handle the new competition. That could be good. In fact, this view is shared by Google itself. An official of Google said they welcome the new search engine to the competition, since it drives them to provide even more superior service to its customers.

I have set up a new Google Alert to track the term “cuil.com” for any updated news about this search engine. Have you?

Tags: Curl, curl.com, Google, Anna Patterson, Powerset

Last Thursday, Yahoo announced the halt of discussions of a possible strategic partnership with Microsoft. The fallout of a Yahoo/Microsoft deal might be a piece of good news for Google. Right after ending talks with Microsoft, Yahoo announced a strategic advertisement pact with Google.

What makes me worry is that this new partnership may signify a possible monopoly of these two giants in online advertising, with Google controlling almost 70% of US search market and Yahoo, who comes in second place, controlling 17.4%¹. I fear that online advertisers may suffer from higher prices because of this near monopolistic partnership.

As I have said in the other posts, the average online ad rate of Google AdWords has increased significantly in the past few years. Take my experience as an example: my AdWords budget to achieve the same number of impressions for my advertisement has risen more than 400% in the past three years. The reason I keep using Google AdWords is there is no better alternative, unless you negotiate ad placements with other webmasters individually. However, this would require a lot of time and effort, and I’m quite sure the results would not be as satisfactory as what you can do with AdWords.

But it seems that in the short run, we have no alternative to this problem.

Microsoft will certainly oppose to the deal by escalating their objection to governing bodies such as the Federal Trade Commission and the Directorate General for Competition of European Commission, asking them to deal with it on an anti-competitive behavior basis. But that process takes time and the results are uncertain.

The only one solution I can think of is buying Google stock (NASDAQ:GOOG) to “hedge” my financial pain of using Google AdWords.

¹http://searchengineland.com/071228-164103.php

Tags: Yahoo!, anti-competitive behavior of Google

Google once again demonstrates its exceptionally innovative power, as we have discussed in other posts, by stunning analysts with its greater-than-expected 30% increase in its first quarter report. Google’s share price in after-hour trading jumped 17% to 525.96 last Thursday night. Again, this demonstrates how important people are, as assets of a company.

Before this news broke, analysts worried about the “paid clicks,” or the number of times users click on Google advertisements and its affiliated websites slowing down. Among these critics, the loudest warning voice came from Comscore (Nasdaq: SCOR) whose share price slipped 8% because of Google’s unexpected good news. People now question the accuracy of Comscore’s survey, on which it based its cause for worry.

Google’s explanation of its success rests on the fact that more than 50% of its business is conducted outside of the US, which it says attributes to its ability to withstand a slowdown in US economy. Google achieved more than 20% growth in clicks worldwide last quarter.

In my view, Comscore might not be wrong. The paid clicks rate has dropped overall. Google’s growth in paid clicks was 30% in Dec 2007 and 45% in the preceding quarter. Obviously, there is a trend of slowing down. But the paid-click rate represents only one factor of paid advertising. The other factor people often overlook is the price per paid click.

Google does not have a standard price list for its pay-per-click Google Adwords program. It uses an auction model to determine pricing, where advertisers bid for “keywords” they use their advertisements, that they would like to appear in Google’s search results and its affiliated websites. The more competitive a keyword is, the more expensive a click could be. With some popular keywords like “web hosting,” the charge per click could be as much as several dollars.

In my experience using Google Adwords, there is a solid growth trend in the average per-click price of keywords in the past few years. With some of the popular keywords that I use, I have noticed that the increase in price is as much as several hundred percent within a three-year time frame. It is increasingly difficult to find effective keywords that are “cheap” now.

This can be explained by the fact that more and more businesses are entering the market, using online advertising media to promote their products and services. In the past, small business owners were the major players in this market. But now more and more big guys are coming in. More competition for keywords drives up the per-click price, and that helps to compensate for the drop in growth rate of number of clicks.

And Google makes continuous efforts to combat click-frauds and click-arbitrage by some website affiliates, by refining its Google Adsense program. This effort pays off in improving the quality of leads brought to Google customers. Advertisers are more willingly to pay for the clicks if the customers are of good quality. This also explains the increase in Google’s average paid-click price.

In my view, the recent setbacks of Google’s share price are largely due to the general market sentiment. Google’s value is not totally reflected in its current share price.

To invest in a company, you need to consider the market, the industry, and the company’s management. As far as the industry goes, the online advertising industry is still budding and there is a lot of room to grow. As for the company, I always opt for Google’s exceptional management team that can attract and retain smart people to knock down its competitors (read my post about Microsoft Acquires Yahoo!). And with its ability to withstand the recession in the US economy (as proven by its first quarter results), it seems that Google is very likely to keep its momentum going in the coming years.

Tags: Google first quarter results

Microsoft sent out the warning message this Monday to Yahoo’s board of directors, reasserting its proposal to acquire Yahoo!, and citing a deadline of three weeks for Yahoo’s consideration of the proposal.

Many people regard this as a bold move on Microsoft’s part to escalate its head-on competition with the number-one player in the Internet advertising field, Google. But . . . is it a good move?

Google’s success in the lucrative online advertising market rests on one single word: innovation. Yahoo is losing its market share to this tough player due to its own failure to compete in terms of innovation. And so is Microsoft.

Innovation: A Key Consideration

Innovation has nothing to do with the size of the player, nor its predominant market share. Note that Microsoft’s primary motivation in acquiring Yahoo is the direct inception of its well-established market presence, including a number of successful services serving the Internet community, such as Yahoo! Mail and Yahoo! Answers, as well as portal services such as Yahoo! Finance and Yahoo! News. But this motivation does not hit the main point of this argument: There is no leverage of innovation in this acquisition.

Microsoft’s success in its predominant strategy for dealing with competitors has seldom hinged on innovation. Its usual strategy for outpacing its competitors is either by beating the competitors through its dominant market share in other related services/products, or simply acquiring them in order to kill the competition. And perhaps this is the reason Microsoft has faced so many anti-competitive legal proceedings both in the United States and Europe.

For this reason, the combination of these two players, Microsoft and Yahoo!, could never increase Microsoft’s competing power against Google.

Google’s Use of Innovation

If you take a look at Google’s history, Google’s success can be attributed to the clever deployment of innovative services. Consider the following examples:

1) Google’s first success was the ranking algorithm of its indexed web pages based on inbound links from other websites. This algorithm is based on the PhD thesis written by Google’s two founders: Larry Page and Sergey Brin. The search results of this algorithm are excellent. Many users switched to using Google as their primary search engine instead of Yahoo because of its superior relevant search results. Google now commands more than 57% of the US search engine market share.

2) Google moved to use contextual text advertisements as opposed to traditional graphical based advertisements, successfully raising the click-through rate of the advertisements it holds for its clients. This is a vital move in Google’s history as contextual based advertising creates strong revenue streams for Google. And it literally proved that text-based online advertisement is indeed more effective than graphical ones such as banner advertisements.

3) Google further increases contextual advertisement exposure by introducing a well-accepted program for most website owners: Google’s Adsense program. This program allows a website owner to post Google’s contextual advertisements on his or her website. Google then charges its client for successful clicks on those contextual advertisements, and shares the commission with the owner of the website on which the ads were posted. Google makes this “pay-per-click” form of advertisement the defacto standard online advertising program. While Google is not the first company who promoted this form of advertising (Overture, now part of Yahoo, used this technique before Google), Google is the most successful at administering it.

4) Google stunned the industry back in 2004 when it offered its Gmail service with a user’s mailbox size of 1GB, capturing a large share of online email users. In this strategic service, Google is able to further expand its exposure of online advertisement to email users. The offering was so successful that it forced Yahoo! Mail and Microsoft’s Hotmail to offer comparable services in order to keep their customers.

5) Google offers other excellent services such as: Google Earths, Picasa, Google Docs, Google Analytics, Google Desktops, Google Videos (which is about to merge with Youtube). These services work to encourage various types of Internet users to use Google’s services. Some, such as Google Docs, are even targeting corporate customers, which promises to convert to excellent revenue sources in the future.

6) Google moved into the battlefield of mobile platforms earlier than any of its rivals except Microsoft. But Google’s eye is not on the license fee of the operating system, but on mobile advertisements. Google started the Open Source operating system Android for mobile phone manufacturers, offered for free in exchange for mobile advertisement exposures. Google takes a serious look at the growing trend of users’ online activities on mobile platforms and makes its move into this market aggressively.

To further illustrate Google’s commitment to innovation, take a look at http://labs.google.com. Here you can see they have a pile line of many products and services for online users. Each is targeting the specific needs of online customers in an innovative way.

Can the Microsoft / Yahoo! Combination Compare?

When you look back at Yahoo and Microsoft, there is no way they can compare with Google’s excellent work and work-to-be in innovative services. Google wins over Microsoft and Yahoo! through its people and clever strategies, not simply by a dominating presence in the market (though Google is already the market leader in many online services).

From that perspective, there is absolutely no leverage in Microsoft’s acquisition of Yahoo!. Google’s heavy objection to the acquisition is perhaps an over-reaction. Maybe the merger of these two Internet giants is good for Google. The uncertainties involved in a huge merger—such as the difficulties of merging two companies of totally different corporate cultures, the possibility of “brain drain” for those involved in the merger, and the significant cost of the integration process—could help Google defeat these two rivals altogether. Isn’t this a good piece of news for Google?

Tags: Overture, Google Labs, Microsoft acquires Yahoo!

When people talk about keyword density in SEO (Search Engine Optimization), they usually limit themselves to saying, “use the exact the same keyword throughout your web copy to stress the related keywords”. And the general rule is: the more repetitive the keyword is, the more it looks relevant to your site from the standpoint of search engines.

However, search engines have become even cleverer now. They do not simply index your page by keywords in your site. They also use applied semantics technology to aid the work.

Applied semantics is a technology that teaches search engines to group variations of your targeted keywords into meaningful clusters. What this means is that synonyms and other related, relevant words are counted into the calculations of the keyword density of a particular keyword.

It is not an easy job to apply the semantic technology to different articles using the exact words. Let’s look at an example to illustrate what I’m talking about. Search engines have to distinguish the word “Apple” in a website discussing Apple, Inc – the manufacturer of iPod and iMac – from that of the site that discussing farming technology or agriculture.

Here’s another example of what could be a headache for you. Search engines have to understand more than a dozen variations of the same word, “design”. According to Thesaurus.com, design could also refer to:

• Architecture
• Arrangement
• Blueprint
• Chart
• Composition
• Conception
• Constitution
• Construction
• Diagram
• Draft
• Drawing
• Idea
• Layout
• Makeup
• Method
• Model
• Outline
• Paste-up
• Pattern
• Perspective
• Picture
• Plan
• Rough draft

And that’s just 23 variations. There could be many, many more! So do you see why I say that it could be a headache?

In 2003, Google acquired Applied Semantics, giving it a new platform for its contextual pay-per-click Google Adwords and Adsense Program. However, what I have been watching closely since then, is that its adoption of the semantic technology can effectively be put to use in their search engine technology.

Many SEO forums are discussing the changes in the past few years in Google’s ranking algorithm. However, few of them are able to attribute it to this acquisition of Applied Semantics

What I conclude is that the tactic of using a carefully planned list of identical keywords in a single passage is no longer a good strategy. You now need to use a variety of synonyms of the specific theme in your website copy.

So is this good new or bad? The good news is you are no longer tied in your copy to using the identical keywords just because you want to build keyword density in your article.

However, the bad news is that you don’t have a simple formula to calculate the keyword density of your website copy any more.

Perhaps there is one conclusion can be drawn: Search engines are getting smarter. The SEO game is becoming more difficult to play.
Related Topics: SEO, Search Engine Optimization, Search Engine Optimization, Applied Semantics, contextual advertising, pay-per-click advertising, keyword density, Google Adwords, Google Adsense

Google has just acquired YouTube for $1.6 billion US, one of the largest acquisitions in Google’s history. It is creating the same exciting feeling as we used to experience in the dot.com era in the ’90′s. However, the move is not really well understood.

If we take a look at the background of YouTube, it lacks the very successful elements of previous successful dot.com companies. It does not have proprietary technology nor does it possess customer lock-in capability – a very important element for a market leader to keep on dominating market.

In study of successful dot.com companies like eBay, we have to go back to a special network utility phenomenon called Network Externality Effect. Its basic argument is a network’s utility increases exponentially with the number of users in the network, making it more valuable in due course. For explanation of this phenomenon, refer to another post here:Â Metcalfe’s Law and Network Effect.

Theoretically if you run a similar auction network service like what eBay started to do more than 10 years ago, it’s unlikely you can knock down eBay because it has already had so many buyers and sellers entrenched in its network. Its network utility is so high that you have no way to attract new users to your service, no matter how hard you try. When a new user (irrespective of whether he/she is a buyer or seller) is looking for an online auction service to join, their most likely choice will be eBay.

The network effect keeps boosting the increasing network dominance power of eBay, making it virtually invincible. Sometimes we call this phenomenon “The Law of Increasing Returns”.

But we don’t see this in YouTube. It has no customer lock-in capability. Theoretically, let’s say that if you have sufficient capital to start with a server farm facility as big as YouTube, you can start offering services to public like they do, allowing users to upload their videos and share them with others. A new user can select your service or YouTube. YouTube has no immediate advantage over your new service to this new prospect.

YouTube model actually works on the viral marketing effect – the marketing effect that takes place to boost its exposure by people’s word-of-mouth. For a further discussion on viral marketing, refer to this post – Viral Marketing: A Powerful But Free Marketing Tactic. The new service can definitely take this viral marketing approach. It doesn’t matter if it’s a late comer.

Let’s go back to the discussion of eBay. The only way you can knock down eBay is to start a new service that rests on a new technology that eBay does not have. And that technology must truly benefit the new and current users of eBay in a way that can pull them away to try your service. This is the only way you have chance to succeed.

To put it another way, the way to win and keep your market position is to possess new technology, if you do not have the network externality effect that helps like companies like eBay.

We cannot see this in YouTube either. The video broadcast technology is neither new nor exclusive to YouTube. Although we know that they claim to have proprietary technology to identify copyright protected material, but that is not the main theme of this deal.

Google spent $1.8 billion US to acquire this company. The same amount of money (perhaps much less) can definitely be used to build broadcast facilities that resemble the power of YouTube. This is addition to the fact that Google already started its own video service years ago.

The only advantage we can see for this deal is its immediate access to its vast number of broadcasting page views, and that it can put to use for its famous and profitable Adwords’ service customers.

Even though it represents only a tiny portion of its vast market capitalization of $131 Billion US (as of stock closing at Oct 10, 2006), is it really worth the $1.6 billion US expenditure?

Related Topics: Google , YouTube, Google Acquires YouTube, YouTube is acquired by Google, Google Acquired YouTube, Network Externality Effect, Law of Increasing Returns, Network Effect, Market Capitalization of Google, Market Capitalisation of Google, Viral Marketing, The Law of Increasing Returns, network utility, customer lock-in capability, Google Adwords

Submit your website’s updated information to Google using Google Sitemap Tool

Google unveil a very innovative tool to allow webmaster submit their site’s changes (new links, new content, etc) to Google’s search database using their Google Sitemap service

This service allows a webmaster to manage and submit all the sites he/she operates under a single Google account.

I am not a big fan of search engine submission. However, Google seems to have put in a lot of valuable statistic and management features into this new service – Google Webmaster Tools. And Google Sitemap is among one of them.

So it is worth to take a look.

Particularly, you can use a XML formatted Google Sitemap File to notify and update Google any changes of your site’s content.

If you are using WordPress like this Blog, you can use the plugin here to generate the Sitemap file:

If you are using Joomla (my favorite Content Management Script), you can use Joomap as a new component to aid the auto-generation of the sitemap xml file.

If you use OSCommerce, you cannot miss this one

http://www.oscommerce.com/community/contributions,3226

There are quite a lot of available third party solutions of sitemap generation available at this link
http://code.google.com/sm_thirdparty.html

I have just started to test and verify the effectiveness of this service. I’ll be using Joomap and WordPress Sitemap generator for the trials. Stay tuned with me for my update on this service.

Over Optimization – SEO guys – Be Careful!

Webmasters who have been doing Search Engine Optimization (SEO) should know about the importance of inbound links to their websites. People come to build inbound links by participating in link exchange programme or buying inbound links from websites of high page rank.

It helps boosting your page rank if you plan and carry out diligently the tedious tasks of link building for your website. But one thing you have to be careful not to ruin your good work. It is: you have to be careful about choosing the anchor text (or called link text) that the sites have put in to describe the link to your site.

Why? It is because search engines start to analyze those link texts and decide if those links are naturally built or artificially built.

How? Naturally build link text should vary in its description for every link that points to your site. Artificially built link text is not. A web master could easily negotiate and work with a dozen web masters requesting them to place a link to his/her website with exactly the same description in their link text.

Search Engine works in picking up this clue now. If it notices that there are exact wordings or descriptions in most of the links to your website, it could trigger its link discount algorithm to reduce the metric of page rank contribution of those links. The worst of all, if it concludes you are undergoing some search engine spamming tactics, your site could be de-listed from its listing forever.

So be careful when you setup your website link exchange page. When you invite other webmasters to exchange link with your site, you’d better advise each of them to use different link text in the links that point to your site.

Actually the mutually two-way link exchange tactic is losing its value as more and more webmasters are doing the similar thing. Search Engines are discounting the values of those mutually linked websites’ inbound links. Think about other tactics like buying inbound links and article submission with resource box of your websites.

Try this service to learn about the inbound links’ anchor text to your website.