Forget RSS. Blow Up Atom. Here Comes....Webfeed?

The RSS renaming contest has a winner: Webfeed. I don't not like it.

Background...

• Posted by John Battelle at 2:39 PM
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The Google Easter Egg

Google plans to raise Google's choice to raise $2,718,281,828.

From Peter Kaminski's blog:

It turns out that 2.718281828... (...and an infinite number of digits after that) is 'e', the base of the natural logarithm. Because it can't be expressed as a ratio of two numbers, it's known mathematically as "irrational" -- something some bankers might say about the way Google is going public. However, 'e' also happens to be "transcendental," another fancy property of a number that means it can't be expressed by a finite number of algebraic operations. Maybe Google is making a little wordplay -- saying they expect to transcend expectations -- to overcome or notably exceed ordinary limits.

(Thanks, Ross)

• Posted by John Battelle at 1:31 PM
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Second Day Updates

The NYT has some insights on Google's true margins, which were depressed in the S1 due to stock option grants:

Google can behave with so little regard for shareholders' wishes because its business is so attractive that investors will be clamoring to buy stock no matter what conditions the company sets. The company's sales and profits are increasing at a spectacular rate, at least for now, and its profit margins appear to be among the highest in corporate America.

In 2003, Google reported an operating profit of $340 million on sales of $960 million. But the 2003 figure appears to understate the company's cash profit margin, since it includes very high expenses related to stock options that will probably decline in future years. On a cash basis, Google had an operating profit of $570 million in 2003, and an operating margin of 62 percent.

The WSJ, which I won't link to as it's sub required, had these tidbits:

The most prominent proponent of IPO auctions has been W.R. Hambrecht & Co., a boutique San Francisco investment bank founded by longtime technology financier William Hambrecht. Google's filing didn't mention W.R. Hambrecht, but people familiar with the matter say the firm is likely to be named an additional underwriter in coming weeks. A Hambrecht spokeswoman declined to comment....
...
Despite its size, Google continues to grow like the young company it is. Revenue more than doubled last year. Google said it generated $395 million in cash from operations last year and an additional $204 million in the first quarter of 2004.

The numbers are "stunning," says Mitchell Kertzman, a venture capitalist with Hummer Winblad Venture Partners in San Francisco. "The question is, how do you sustain that?"...

.. Page and Brin each now own roughly 15% of the company. CEO Eric Schmidt holds a roughly 6% stake. If Google were valued at $25 billion, the founders' stakes would be worth roughly $4 billion each, and Mr. Schmidt's stake would be worth about $1.5 billion. In an unusual declaration, Messrs. Page and Brin said in the prospectus that they planned to sell a portion of their holdings as part of the public offering.

Other than the founders, Google's two biggest shareholders are prominent Silicon Valley venture-capital firms Kleiner Perkins Caufield & Byers and Sequoia Capital, which invested roughly $13 million each in 1999. Each firm now owns slightly more than 10% of the company, meaning their stakes could be valued at $2.5 billion apiece....

• Posted by John Battelle at 8:37 AM
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By the Way...

PlanetOut filed today also. A founder - Megan Smith - is now at Google. It was a double big day for her!

• Posted by John Battelle at 10:59 PM
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Now That The Other Shoe Has Dropped

What does it all mean? Well, to be honest it was nice to be at the game, even if my team lost, while the first wave of coverage broke. I was with a great group of guys, all of whom care about the industry and who have opinions, some of them even informed, on the Google IPO. When I got home, I read through the S 1 . So herewith my first impressions, and they are only that, for I have not had time to really sit with the document, that will take days, if not weeks to really grok.

First the stuff you probably already know. Google filed for a prospective $2.7 billion (Wall St estimates) sale, valuing the company in the $20-25 billion range. Unusual aspects: There will be two classes of stock, one with supervoting rights (ten times those of regular shareholders), which keeps power squarely in the founders' hands. The symbol was not identified (ie, it's not "GOO", yet), nor was the market (NYSE or Nasdaq). There are only two banks, Morgan on the left in the power slot, and Credit Suisse on the right. Hambrecht did not make the cut, but their ideas did. Google will auction all of its shares.

Having seen how the quest for IPO glory can ruin a company, it's good to remember that an IPO is just the beginning of something, not an end in itself, though sometimes folks caught up in it can forget that. It certainly happened to us at Wired, for a while we thought we were reinventing the entire IPO process - we even redesigned the prospectus to look like our magazine. But high-minded claims of reinventing how the business world will work rarely come to pass, and it's never in anyone's interest to make such claims in the first place. I've seen it, trust me.

That thought came to mind as I read the five-page, Warren Buffet-inspired letter which opens Google's S1, entitled "An Owner's Manual" for Google Shareholders, which was written in the first person by Larry Page (full text in extended entry below). I can only imagine the eyes rolling at Kleiner Perkins, Morgan Stanley, and the rest of the veterans as the founders insisted on this, and I can imagine this letter is what broke the camel's back last week and engendered the "let's not get too cute" comment in the New York Times. The letter, which is unusual for an S1, borders on hubris. It's personal, discursive, and rather defensive in tone, and it attempts to address an investor's most pressing questions about the company. It claims, several times over, that Google is different, special, and remarkable. It also acts as something of a caveat, a pardon for future sins, claiming that going forward, Google will not act like public companies are supposed to act, because it is unique and long-term focused. "We're different, and better than others," is the tone. "Don't ask why we do things the way we do them. We know best." To be honest, the letter made me cringe a bit. "Yow," I said to myself (and now to you...). "Do they really want to set themselves up like this?"

Well, yes they do. The letter states, among other things, that 1. We don't need to do this for the money; 2. We have no plans to run our business to satisfy Wall Street's need for smooth earnings predictability; 3. We plan to give no earnings guidance, not at least as it's understood on Wall St.; 4. Don't ask us to do so, we'll simply decline the request; 5. We'll do odd things that you won' t understand; 6. We will make big bets on things that may not work out; 7. We run the company as a triumvirate, so there will not be clear leadership from one person like most other companies; 8. We bridge the media and tech industries (interesting), which are in flux, so we've chosen a two-class stock structure similar to the NYT, WashPost, and WSJ that helps us avoid being taken over by those forces; 9. We plan using an auction model, as it feels fairer and we understand auctions from AdWords; 10. Don't invest in us if this scares you at all, or the price feels too high; 11. Don't even think about asking us to cut expenses with regard to our employees; 12. We believe in the idea of Don't Be Evil; 13. It's evil to pay for placement or inclusion (a swipe at Yahoo); 14. We hope to bridge the digital divide through Gmail type free services and a foundation with at least 1% of profits and equity to help make the world a better place; 17. Betting on Google is a bet on Sergey and Larry (this was said multiple times, making me wonder if there wasn't some odd future blame being assigned here by the VCs or bankers); 18. This letter is our way of answering the questions we can't answer in the coming months due to the IPO quiet period.

While my summary of the letter may sound negative, it's my honest and initial response: to me, the letter comes off pretty strong, and likely will anger many on Wall Street. But I have to commend the founders for sticking to their beliefs, and using the IPO as something of a megaphone/soapbox. It is brave, unique, and rather commendable to very publicly state that the founders are controlling the company, and the founders will decide what is best for Google, not Wall Street. They've set themselves a very high long-term bar, claiming they will best the system, in essence. I think it will be very interesting to see how Wall Street responds. There is a chance, in the end, that the Street will feel slighted, and turn its back on the company.

However, as something of a present proof, the financials are quite impressive, though not as impressive as some had claimed. Profits are on track to break $250 million or so this year, they hit more than $100 million last year. The company has been profitable since 2001 (scroll down).

Three directors, all impressive, have been added to make the board looks robust and public facing: John Hennessy, President of Stanford, Paul Otellini, President of Intel, and Arthur Levinson, CEO of Genentech. More grist for the chip in brain conspiracy theorists, no doubt.

Also interesting: Google has an exclusive license to the PageRank patent from Stanford, but only through 2011. Then it becomes non-exclusive. And, as of March 31, Google had 1,907 employees. If you added in contractors, my guess is that'd go well past 2500. The articles of incorporation and bylaws have anti-takeover clauses, among other things. More on these details later.

As with all S1s, there is a very lengthy section on risks, with the first and foremost one labeled Microsoft and Yahoo. The risk sector reads like a response to all the criticisms of Google we've heard over the past year, from the Gmail privacy storm to index spamming.

There are tidbits throughout that will give all sorts of insights to competitors, the percent of revenues that are in the Google Network (ie not on the site itself, like AdSense), for example (18% last year, rising to past 20% this year). There are details on how they structure some deals with partners, on some accounting/regulation issues with stock options, on legal issues, and many other things. In reading through the entire thing, I realize it'd take me all night to report it all. I won't try. More as time goes by. For now, it's nice to know, the other damn shoe has dropped. Now, on with business.

 LETTER FROM THE FOUNDERS

“AN OWNER’S MANUAL” FOR GOOGLE’S SHAREHOLDERS1

INTRODUCTION

Google is not a conventional company. We do not intend to become one. Throughout Google’s evolution as a privately held company, we have managed Google differently. We have also emphasized an atmosphere of creativity and challenge, which has helped us provide unbiased, accurate and free access to information for those who rely on us around the world.

Now the time has come for the company to move to public ownership. This change will bring important benefits for our employees, for our present and future shareholders, for our customers, and most of all for Google users. But the standard structure of public ownership may jeopardize the independence and focused objectivity that have been most important in Google’s past success and that we consider most fundamental for its future. Therefore, we have designed a corporate structure that will protect Google’s ability to innovate and retain its most distinctive characteristics. We are confident that, in the long run, this will bring Google and its shareholders, old and new, the greatest economic returns. We want to clearly explain our plans and the reasoning and values behind them. We are delighted you are considering an investment in Google and are reading this letter.

Sergey and I intend to write you a letter like this one every year in our annual report. We’ll take turns writing the letter so you’ll hear directly from each of us. We ask that you read this letter in conjunction with the rest of this prospectus.

SERVING END USERS

Sergey and I founded Google because we believed we could provide a great service to the world—instantly delivering relevant information on any topic. Serving our end users is at the heart of what we do and remains our number one priority.

Our goal is to develop services that improve the lives of as many people as possible—to do things that matter. We make our services as widely available as we can by supporting over 97 languages and by providing most services for free. Advertising is our principal source of revenue, and the ads we provide are relevant and useful rather than intrusive and annoying. We strive to provide users with great commercial information.

We are proud of the products we have built, and we hope that those we create in the future will have an even greater positive impact on the world.

LONG TERM FOCUS

As a private company, we have concentrated on the long term, and this has served us well. As a public company, we will do the same. In our opinion, outside pressures too often tempt companies to sacrifice long-term opportunities to meet quarterly market expectations. Sometimes this pressure has caused companies to manipulate financial results in order to “make their quarter.” In Warren Buffett’s words, “We won’t ‘smooth’ quarterly or annual results: If earnings figures are lumpy when they reach headquarters, they will be lumpy when they reach you.”

If opportunities arise that might cause us to sacrifice short term results but are in the best long term interest of our shareholders, we will take those opportunities. We will have the fortitude to do this. We would request that our shareholders take the long term view.

Many companies are under pressure to keep their earnings in line with analysts’ forecasts. Therefore, they often accept smaller, but predictable, earnings rather than larger and more unpredictable returns. Sergey and I feel this is harmful, and we intend to steer in the opposite direction.

1 Much of this was inspired by Warren Buffett’s essays in his annual reports and his “An Owner’s Manual” to Berkshire Hathaway shareholders.

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Google has had adequate cash to fund our business and has generated additional cash through operations. This gives us the flexibility to weather costs, benefit from opportunities and optimize our long term earnings. For example, in our ads system we make many improvements that affect revenue in both directions. These are in areas like end user relevance and satisfaction, advertiser satisfaction, partner needs and targeting technology. We release improvements immediately rather than delaying them, even though delay might give “smoother” financial results. You have our commitment to execute quickly to achieve long term value rather than making the quarters more predictable.

We will make decisions on the business fundamentals, not accounting considerations, and always with the long term welfare of our company and shareholders in mind.

Although we may discuss long term trends in our business, we do not plan to give earnings guidance in the traditional sense. We are not able to predict our business within a narrow range for each quarter. We recognize that our duty is to advance our shareholders’ interests, and we believe that artificially creating short term target numbers serves our shareholders poorly. We would prefer not to be asked to make such predictions, and if asked we will respectfully decline. A management team distracted by a series of short term targets is as pointless as a dieter stepping on a scale every half hour.

RISK VS REWARD IN THE LONG RUN

Our business environment changes rapidly and needs long term investment. We will not hesitate to place major bets on promising new opportunities.

We will not shy away from high-risk, high-reward projects because of short term earnings pressure. Some of our past bets have gone extraordinarily well, and others have not. Because we recognize the pursuit of such projects as the key to our long term success, we will continue to seek them out. For example, we would fund projects that have a 10% chance of earning a billion dollars over the long term. Do not be surprised if we place smaller bets in areas that seem very speculative or even strange. As the ratio of reward to risk increases, we will accept projects further outside our normal areas, especially when the initial investment is small.

We encourage our employees, in addition to their regular projects, to spend 20% of their time working on what they think will most benefit Google. This empowers them to be more creative and innovative. Many of our significant advances have happened in this manner. For example, AdSense for content and Google News were both prototyped in “20% time.” Most risky projects fizzle, often teaching us something. Others succeed and become attractive businesses.

We may have quarter-to-quarter volatility as we realize losses on some new projects and gains on others. If we accept this, we can all maximize value in the long term. Even though we are excited about risky projects, we expect to devote the vast majority of our resources to our main businesses, especially since most people naturally gravitate toward incremental improvements.

EXECUTIVE ROLES

We run Google as a triumvirate. Sergey and I have worked closely together for the last eight years, five at Google. Eric, our CEO, joined Google three years ago. The three of us run the company collaboratively with Sergey and me as Presidents. The structure is unconventional, but we have worked successfully in this way.

To facilitate timely decisions, Eric, Sergey and I meet daily to update each other on the business and to focus our collaborative thinking on the most important and immediate issues. Decisions are often made by one of us, with the others being briefed later. This works because we have tremendous trust and respect for each other and we generally think alike. Because of our intense long term working relationship, we can often predict differences of opinion among the three of us. We know that when we disagree, the correct decision is far from obvious. For important decisions, we discuss the issue with the larger team. Eric, Sergey and I run the company without any significant internal conflict, but with healthy debate. As different topics come up, we often delegate decision-making responsibility to one of us.

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We hired Eric as a more experienced complement to Sergey and me to help us run the business. Eric was CTO of Sun Microsystems. He was also CEO of Novell and has a Ph.D. in computer science, a very unusual and important combination for Google given our scientific and technical culture. This partnership among the three of us has worked very well and we expect it to continue. The shared judgments and extra energy available from all three of us has significantly benefited Google.

Eric has the legal responsibilities of the CEO and focuses on management of our vice presidents and the sales organization. Sergey focuses on engineering and business deals. I focus on engineering and product management. All three of us devote considerable time to overall management of the company and other fluctuating needs. We are extremely fortunate to have talented management that has grown the company to where it is today—they operate the company and deserve the credit.

CORPORATE STRUCTURE

We are creating a corporate structure that is designed for stability over long time horizons. By investing in Google, you are placing an unusual long-term bet on the team, especially Sergey and me, and on our innovative approach.

We want Google to become an important and significant institution. That takes time, stability and independence. We bridge the media and technology industries, both of which have experienced considerable consolidation and attempted hostile takeovers.

In the transition to public ownership, we have set up a corporate structure that will make it harder for outside parties to take over or influence Google. This structure will also make it easier for our management team to follow the long term, innovative approach emphasized earlier. This structure, called a dual class voting structure, is described elsewhere in this prospectus.

The main effect of this structure is likely to leave our team, especially Sergey and me, with significant control over the company’s decisions and fate, as Google shares change hands. New investors will fully share in Google’s long term growth but will have less influence over its strategic decisions than they would at most public companies.

While this structure is unusual for technology companies, it is common in the media business and has had a profound importance there. The New York Times Company, the Washington Post Company and Dow Jones, the publisher of The Wall Street Journal, all have similar dual class ownership structures. Media observers frequently point out that dual class ownership has allowed these companies to concentrate on their core, long-term interest in serious news coverage, despite fluctuations in quarterly results. The Berkshire Hathaway company has applied the same structure, with similar beneficial effects. From the point of view of long-term success in advancing a company’s core values, the structure has clearly been an advantage.

Academic studies have shown that from a purely economic point of view, dual class structures have not harmed the share price of companies. The shares of each of our classes have identical economic rights and differ only as to voting rights.

Google has prospered as a private company. As a public company, we believe a dual class voting structure will enable us to retain many of the positive aspects of being private. We understand some investors do not favor dual class structures. We have considered this point of view carefully, and we have not made our decision lightly. We are convinced that everyone associated with Google—including new investors—will benefit from this structure.

To help us govern, we have recently expanded our Board of Directors to include three additional members. John Hennessy is the President of Stanford and has a Doctoral degree in computer science. Art Levinson is CEO of Genentech and has a Ph.D. in biochemistry. Paul Otellini is President and COO of Intel. We could not be more excited about the caliber and experience of these directors.

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We have a world class management team impassioned by Google’s mission and responsible for Google’s success. We believe the stability afforded by the dual-class structure will enable us to retain our unique culture and continue to attract and retain talented people who are Google’s life blood. Our colleagues will be able to trust that they themselves and their labors of hard work, love and creativity will be well cared for by a company focused on stability and the long term.

As an investor, you are placing a potentially risky long term bet on the team, especially Sergey and me. The two of us, Eric and the rest of the management team recognize that our individual and collective interests are deeply aligned with those of the new investors who choose to support Google. Sergey and I are committed to Google for the long term. The broader Google team has also demonstrated an extraordinary commitment to our long term success. With continued hard work and good fortune, this commitment will last and flourish.

When Sergey and I founded Google, we hoped, but did not expect, it would reach its current size and influence. Our intense and enduring interest was to objectively help people find information efficiently. We also believed that searching and organizing all the world’s information was an unusually important task that should be carried out by a company that is trustworthy and interested in the public good. We believe a well functioning society should have abundant, free and unbiased access to high quality information. Google therefore has a responsibility to the world. The dual-class structure helps ensure that this responsibility is met. We believe that fulfilling this responsibility will deliver increased value to our shareholders.

BECOMING A PUBLIC COMPANY

Google should go public soon.

We assumed when founding Google that if things went well, we would likely go public some day. But we were always open to staying private, and a number of developments reduced the pressure to change. We soon were generating cash, removing one important reason why many companies go public. Requirements for public companies became more significant in the wake of recent corporate scandals and the resulting passage of the Sarbanes-Oxley Act. We made business progress we were happy with. Our investors were patient and willing to stay with Google. We have been able to meet our business needs with our current level of cash.

A number of factors weighed on the other side of the debate. Our growth has reduced some of the advantages of private ownership. By law, certain private companies must report as if they were public companies. The deadline imposed by this requirement accelerated our decision. As a smaller private company, Google kept business information closely held, and we believe this helped us against competitors. But, as we grow larger, information becomes more widely known. As a public company, we will of course provide you with all information required by law, and we will also do our best to explain our actions. But we will not unnecessarily disclose all of our strengths, strategies and intentions. We have transferred significant ownership of Google to employees in return for their efforts in building the business. And, we benefited greatly by selling $26 million of stock to our early investors before we were profitable. Thus, employee and investor liquidity were significant factors.

We have demonstrated a proven business model and have designed a corporate structure that will make it easier to become a public company. A large, diverse, enthusiastic shareholder base will strengthen the company and benefit from our continued success. A larger cash balance will provide Google with flexibility and protection against adversity. All in all, going public now is the right decision.

IPO PRICING AND ALLOCATION

Informed investors willing to pay the IPO price should be able to buy as many shares as they want, within reason, in the IPO, as on the stock market.

It is important to us to have a fair process for our IPO that is inclusive of both small and large investors. It is also crucial that we achieve a good outcome for Google and its current shareholders. This has led us to pursue

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an auction-based IPO for our entire offering. Our goal is to have a share price that reflects a fair market valuation of Google and that moves rationally based on changes in our business and the stock market. (The auction process is discussed in more detail elsewhere in this prospectus.)

Many companies have suffered from unreasonable speculation, small initial share float, and boom-bust cycles that hurt them and their investors in the long run. We believe that an auction-based IPO will minimize these problems.

An auction is an unusual process for an IPO in the United States. Our experience with auction-based advertising systems has been surprisingly helpful in the auction design process for the IPO. As in the stock market, if people try to buy more stock than is available, the price will go up. And of course, the price will go down if there aren’t enough buyers. This is a simplification, but it captures the basic issues. Our goal is to have an efficient market price—a rational price set by informed buyers and sellers—for our shares at the IPO and afterward. Our goal is to achieve a relatively stable price in the days following the IPO and that buyers and sellers receive a fair price at the IPO.

We are working to create a sufficient supply of shares to meet investor demand at IPO time and after. We are encouraging current shareholders to consider selling some of their shares as part of the offering. These shares will supplement the shares the company sells to provide more supply for investors and hopefully provide a more stable fair price. Sergey and I, among others, are currently planning to sell a fraction of our shares in the IPO. The more shares current shareholders sell, the more likely it is that they believe the price is not unfairly low. The supply of shares available will likely have an effect on the clearing price of the auction. Since the number of shares being sold is likely to be larger at a high price and smaller at a lower price, investors will likely want to consider the scope of current shareholder participation in the IPO. We may communicate from time to time that we would be sellers rather than buyers.

We would like you to invest for the long term, and to do so only at or below what you determine to be a fair price. We encourage investors not to invest in Google at IPO or for some time after, if they believe the price is not sustainable over the long term.

We intend to take steps to help ensure shareholders are well informed. We encourage you to read this prospectus. We think that short term speculation without paying attention to price is likely to lose you money, especially with our auction structure.

GOOGLERS

Our employees, who have named themselves Googlers, are everything. Google is organized around the ability to attract and leverage the talent of exceptional technologists and business people. We have been lucky to recruit many creative, principled and hard working stars. We hope to recruit many more in the future. We will reward and treat them well.

We provide many unusual benefits for our employees, including meals free of charge, doctors and washing machines. We are careful to consider the long term advantages to the company of these benefits. Expect us to add benefits rather than pare them down over time. We believe it is easy to be penny wise and pound foolish with respect to benefits that can save employees considerable time and improve their health and productivity.

The significant employee ownership of Google has made us what we are today. Because of our employee talent, Google is doing exciting work in nearly every area of computer science. We are in a very competitive industry where the quality of our product is paramount. Talented people are attracted to Google because we empower them to change the world; Google has large computational resources and distribution that enables individuals to make a difference. Our main benefit is a workplace with important projects, where employees can contribute and grow. We are focused on providing an environment where talented, hard working people are rewarded for their contributions to Google and for making the world a better place.

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DON’T BE EVIL

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.

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. We also display advertising, which we work hard to make relevant, and we label it clearly. This is similar to a newspaper, where the advertisements are clear and the articles are not influenced by the advertisers’ payments. We believe it is important for everyone to have access to the best information and research, not only to the information people pay for you to see.

MAKING THE WORLD A BETTER PLACE

We aspire to make Google an institution that makes the world a better place. With our products, Google connects people and information all around the world for free. We are adding other powerful services such as Gmail that provides an efficient one gigabyte Gmail account for free. By releasing services for free, we hope to help bridge the digital divide. AdWords connects users and advertisers efficiently, helping both. AdSense helps fund a huge variety of online web sites and enables authors who could not otherwise publish. Last year we created Google Grants—a growing program in which hundreds of non-profits addressing issues, including the environment, poverty and human rights, receive free advertising. And now, we are in the process of establishing the Google Foundation. We intend to contribute significant resources to the foundation, including employee time and approximately 1% of Google’s equity and profits in some form. We hope someday this institution may eclipse Google itself in terms of overall world impact by ambitiously applying innovation and significant resources to the largest of the world’s problems.

SUMMARY AND CONCLUSION

Google is not a conventional company. Eric, Sergey and I intend to operate Google differently, applying the values it has developed as a private company to its future as a public company. Our mission and business description are available in the rest of the prospectus; we encourage you to carefully read this information. We will optimize for the long term rather than trying to produce smooth earnings for each quarter. We will support selected high-risk, high-reward projects and manage our portfolio of projects. We will run the company collaboratively with Eric, our CEO, as a team of three. We are conscious of our duty as fiduciaries for our shareholders, and we will fulfill those responsibilities. We will continue to attract creative, committed new employees, and we will welcome support from new shareholders. We will live up to our “don’t be evil” principle by keeping user trust and not accepting payment for search results. We have a dual-class structure that is biased toward stability and independence and that requires investors to bet on the team, especially Sergey and me.

In this letter we have explained our thinking on why Google is better off going public. We have talked about our IPO auction method and our desire for stability and access for all investors. We have discussed our goal to have investors who determine a rational price and invest for the long term only if they can buy at that price. Finally, we have discussed our desire to create an ideal working environment that will ultimately drive the success of Google by retaining and attracting talented Googlers.

We have tried hard to anticipate your questions. It will be difficult for us to respond to them given legal constraints during our offering process. We look forward to a long and hopefully prosperous relationship with you, our new investors. We wrote this letter to help you understand our company.

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We have a strong commitment to our users worldwide, their communities, the web sites in our network, our advertisers, our investors, and of course our employees. Sergey and I, and the team will do our best to make Google a long term success and the world a better place.

Larry Page
  
 
  

Sergey Brin

• Posted by John Battelle at 10:42 PM
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Time Out

Taking off the rest of the day for meetings and...a ball game. Posting to resume Friday. By then, perhaps, we'll have news on the IPO whose name I dare not speak.

• Posted by John Battelle at 8:20 AM
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Time to Rethink the Adwords Policy

Just a thought, but when Google starts shutting down a t-shirt company's right to advertise its politically charged wares, something feels rotten in the state of paid search. (The company is Y-Que, the controversy was first reported by boing boing).

This reminds me of the cruise line issue, but for some reason, it feels worse. This is no conspiracy, lord knows I'm not claiming Google is playing politics (I'd feel the same way if the t-shirts made fun of Democrats, and in fact they do have an "anti-Kerry" shirt), but I suggest that Google review their policy w/r/t "advocacy" and "anti-" sites, and drop the whole damn thing, leaving it up to the market and the FCC nannies to figure out what is and what is not appropriate. After all, Google essentially punted in trademarks. Why not here?

• Posted by John Battelle at 8:17 AM
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Privacy, Gmail, and Unintended Consequences

The email below comes to me via Dave Farber's IP list. I quote it in full with permission of the author, I think the story he tells is quite interesting as it relates to our communications and intentions moving from the ephemeral to the eternal (the title of a chapter in my book). This email was written by JA Terranson, who is on Dave's IP list, in response to this article by Declan McCullagh on issues of privacy and GMail.

Subject: Opposing view of Gmail issues (Cypherpunk tie in)

Good Afternoon Declan,

As with much of the online community, I have been discussing this
topic since it was announced by Google, and until recently, I was also of
the opinion that this was a simple contractual choice between the user of
Gmail and Google.

My opinion was altered by a gentleman in England, who used the
following story to illustrate his point:

When Google released their toolbar, he, like most of us, installed
it. What was different was that he installed it with all of the advanced
features (including the tracking options, which Google goes out of their
way to make crystal clear *is* tracking software). He reasoning was
similar to the thoughts you expressed below: he had nothing to hide, he
believed Google really was stripping identity data from their observations
of his browsing habits, and he did not mind having them "watch".

One day he had a firewall issue when trying to retrieve a file,
and the person who was hosting it offered to put it on a "private" (i.e.,
unlinked) page for him to grab over HTTP. He accepted, downloaded the
document, and promptly forgot about it - until this document, which had
extremely personal information on it (personal to the person *hosting* it,
not the person retrieving it) showed up on Google a short time later. You
see, the toolbar had seen him go to a web page that Google did not have,
and so they indexed it right away.

Without meaning to, the user of the toolbar had helped Google to
violate the privacy of the person who went out of his way to keep this
document private. This person knew nothing of the toolbar, and had no
agreement with Google, yet he became the unwilling participant in Google's
web cache.

The senders of email to users of Gmail are in the very same
position as our friend above: they know nothing of the agreement, they are
not participants in the Gmail program - they have never agreed to allow a
third party to access *their* private thoughts and utterances, yet they
too are caught in the middle.

As much as it goes against my gut reaction, I must admit that
Gmail has some very serious privacy implications, some of which almost
definitely fall under EU privacy laws.

The ultimate solution to the problem is close to what was
suggested in the essay below: encryption. But not by Google. Encryption
by the senders. The Cypherpunk cries of "Encryption Everywhere" lands
smack dab in the middle of the plate here - email stays private,
regardless of Google indexing, government snooping, or end user
negligence. Pity that people will spend thousands of hours, and millions
of dollars arguing over the best way to protect us from ourselves, but
that we won't spend five minutes learning to use a simple encryption
system that could completely erase these very issues.

Yours,

Alif Terranson

• Posted by John Battelle at 7:08 PM
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Why I Love Craigslist

I met with Craig Newmark , founder of craigslist, a while back, but I don't think I posted about it. But this crossed my desk recently, and I wanted to share it with you. Can't say how I got it, but damn, it's powerful stuff.

Top Web Entities (English-language traffic), with employee data

Rank # Employees Company

1. 3600 Yahoo
2. 55000 MSFT
3. 1500 Google
4. 91000 AOL/TW
5. 4000 eBay
6. 2650000 US Government
7. 7500 Amazon

Etc....(removed 8-23 so as not to bore you)

24. 5100 Earthlink
25. 14 craigslist

Of course the #s will change in the top 25 (everyone always argues about who's #1-10), but....to crack the top 25 with just 14 employees! The next smallest sized company is adultfriendfinder, #17, with 150.

Cool.

• Posted by John Battelle at 6:09 PM
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Lunch With Pierre

For some time I've been meaning to hook up with Pierre Omidyar, the founder and Chair of eBay. We finally got together at lunch earlier this week in Redwood City, where his foundation is based. I'd heard Pierre is just about the most down-to-earth, "normal" fellow one might want to meet, it in fact it turned out to be true. He kicked out of Valley life in 1999 and moved to the desert outside Las Vegas (he also spends a lot of time in France). He comes back every so often for eBay meetings and to meet with his foundation staff, and it's this foundation that really gets him up in the morning these days. He's made news recently by announcing a new strategy for the organization, one which blends a bent for social change with capitalism - in other words, he's expanding from philanthropy into the investment game, but he plans to focus on businesses that connect people to each other to create the kind of wholesale change that eBay did. Omidyar repeated to me a very repeatable observation: that eBay has been the vehicle for millions of strangers to establish relationships of trust with each other.

Hence his investment in Meetup, for example. It's the first business Omidyar has seen with the same ability to connect folks for social good. Good for Scott!

Pierre and I had a good lunch, talking over many issues for the book. But really, our conversation always came back to community, the core driver of value at eBay. We discussed Tim's concept of the "architecture of participation" and how critical it is in the Web 2.0 world, and how much of the media world has yet to grok it. You can't outsource participation to the ghettos of discussion threads, in other words. The online media world is still looking for its Pong, as Martin says, but I think we're getting close. Publications are essentially reflections of communities. And I believe the best blogs are publications, in a very classical sense.

In any case, those were the kind of tangents we took during lunch. We did talk search and SFO and such, but I've gotta save that for the book.

• Posted by John Battelle at 5:52 PM
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Lycos Up For Grabs, Will Diller Re-engage?

Cnet reports that Lycos has retained Lehman to advise the company on the sale of its US assets. Cnet claims a possible price of $200 million. That'd be a bargain, a far cry from the billions Barry was willing to offer back in the good old days...

Diller would not need the traffic, though it never hurts. What he does need is integrative search technology. And on that count, Lycos is not a strong player. Side note to Wired News folks: If you're looking to do something new, you know how to get in touch with me...

• Posted by John Battelle at 8:19 AM
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Tacoda To Form AudienceMatch

News broke today that Tacoda (previous post here) is creating a behavioral marketing network called AudienceMatch which will compete with other major ad networks like Google's AdWords or Overture's ContentMatch. Congrats to them, and to Fred, who invested in them.

• Posted by John Battelle at 2:43 PM
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Good God, Let's Get On WIth It Already

Is anyone else sick of all the Google IPO stuff? Until the S-1 or Form 10 drops, I promise I will no longer post on the IPO. I'm past the point of saturation, and I sense the rest of the world is too. As my friend John Heilemann pointed out to me yesterday, it's like the NFL draft. At the end of the day, what matters is the execution on the field. The draft is a sideshow.

• Posted by John Battelle at 2:30 PM
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Talk of the Nation

I'll be on "Talk of the Nation" shortly talking about - what else - the Google IPO. Streaming audio will be up in about four hours (6 pm EST) I'm told. Other guests include Steven Levy and Lauren Weinstein.

• Posted by John Battelle at 11:03 AM
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Enterprise Search (Yaawwwwnnn)

Oh, I know, I'm not big on enterprise search, it puts me to sleep. But to be honest, it was the enterprise that got me into this game, nearly 20 years ago, at a now defunct Macintosh weekly called MacWeek. We covered "MVBs" - Macintosh Volume Buyers, and my best sources were big corporate buyers at Anderson and the University of Texas. These guys saw all the cool shit early, and then blabbed about it to me. Our fearless executive editor was a fellow named Dan Farber, who now runs editorial at ZDNet. Anyway, Dan emailed me yesterday and asked what I thought of enterprise search, which is clearly one of the most overlooked stories in search. (His view on it is now up, here). It made me think, and I realized that in fact, enterprise search will probably rise again, and end up being one of the coolest things in search in the next few years. Why? Because it sucks so badly now, fixing it will be the kind of 10X revelation we had when we moved from Yahoo to Google in 1998-99.

Germane to that, here's an interview in the E-commerce Times with Google enterprise search chief Dave Girouard that's interesting.

The funny part is it's easier to find box scores from the 1957 World Series than it is to find last quarter's sales presentation in the enterprise. While Web search has gotten really good, enterprise search has stagnated, and that's why we really believe it's a problem that needs to be solved and that Google has a unique set of capabilities to solve it."

When Google goes public, and it seems that this is most certainly a when, rather than an if, it will have to grow. And once it's hit the plateau of consumer facing businesses, it will turn to the corporate IT market (it's already focused on the problem and is cranking up that focus). That market is still nascent, and there are buckets of money there (just ask Microsoft or FAST.) Mark my words, boring as it might seem, corporate search will be a big deal. And...there will be interesting implications w/r/t transparency and the like once all those corporate documents are discovered by the internal crawler.

• Posted by John Battelle at 9:30 AM
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Search Engines and the DMCA: Don't Be Evil

From time to time you might note, if you are really paying attention, that results on Google have been removed due to the DMCA, in particular a clause known as "Safe Harbor" - it has to do with supposed copyright infringement. If and when you run across such results, Google posts a notice at the bottom of the page informing you, and linking to the DMCA request that led to the result being pulled from Google's index. This is a very fine example of Google being a good corporate citizen, but Joe Hall has a good suggestion for refinement: show this disclaimer at the top of the page, not at the bottom, where many won't see it.

Also on this issue, the Virginia Journal of Law and Techweighs in with a paper entitled "Application of the DMCA Safe Harbor Provisions to Search Engines." Why do you care? Well, this paper concludes that "the burden of complying with the safe harbor procedures should not be placed on search engines. Given these concerns, a better alternative would be for Congress to grant search engines complete immunity from contributory liability for copyright infringing activities by third parties."

To reach its conclusion, the paper argues that "Internet service providers who receive notifications from copyright owners about allegedly infringing content must remove or disable access to that content in order to remain immune from claims for contributory liability. In response to such notifications, search engines have begun to remove links to allegedly infringing content from their search results. Unfortunately, application of the DMCA safe harbor provisions to search engines is problematic. Key portions of the statute refer to “subscribers” and “account holders,” making their application to search engines unclear because search engines typically do not have subscribers or account holders. Also, the lack of a subscription relationship between search engines and alleged infringers seems to make search engines more likely than other types of service providers to remove content overzealously in response to notifications."

If you're still with me, then you may realize what I'm about to say - yup, in the near future, most search engines *will* have subscribers and account holders. A9 already does, as does Yahoo, indirectly. Hate to say it, but this paper is already out of date, even if I agree with its conclusion.

(thanks, JD).

• Posted by John Battelle at 9:37 PM
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A Tale of Two Googles

Another (this is the third in two days) big NYT piece on Google, this one is from Saul Hansell, with great artwork (see left). Saul explores the debate between staying private and going public. And it had this tidbit, which I am embarassed to say I did not know:

Google has hardly been lazy working to manage the timing of an eventual offering. Early on, it split itself into two companies, Google Inc. and Google Technologies, so that each would have fewer than 500 employees, according to a person who had been close to Google. That was important because the S.E.C. requires companies with 500 shareholders and assets greater than $10 million to file financial statements and most of the other information they would have to disclose in a public share offering.

Early in 2003, the two companies were merged, in effect setting the date of April 29, 2004, as the deadline for Google to make the required disclosure. (The law requires a public filing 120 days after the close of a company's fiscal year, in this case April 29.)

I wondered how they got away with having so many shareholders for so long. Dooh!

• Posted by John Battelle at 9:15 AM
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Biz Mag Round Up

Read a bit over the weekend. First, the B'week cover package timed for the IPO is entirely reconstituted pablum. You've read this piece before, don't bother. However, there is an interview with Page online, here, worth reviewing if you're into that kind of stuff. Best quotes:

Q: Where is search today on an evolutionary scale?
A: People have consistently underestimated the size and importance of search. It's a very, very large space of technologies, usage, and information. We've gone from 30 million to over 3 billion documents in just a small number of years. There's going to be a lot of commercial activity in this space, a lot of companies doing things that are going to be very valuable.

Q: Competitors want to build search that simultaneously queries an individual's local computer, e-mail archives, as well as the Internet. Is that something Google aims to do?
A: Our mission is to organize the world's information. Clearly, the more information we have when we do a search, the better it's going to work. There are all sorts of details involved in different kinds of products, including privacy issues. I'd expect us over time to have access to more information.

Second, there was a big cover story on Diller and IAC last week, in the same issue of Fortune as the Moritz piece I blogged a few days ago (sub required past first page on both). The piece was written by Bethany McLean, who is credited with breaking the Enron story. And while I was particularly interested in how IAC - a non-centralized, non-consumer facing company built on a confederacy of otherwise unconnected brands - competes with centralized, software-and-analytics driven companies like Yahoo and Amazon, Bethany did not address those issues. There's a fine history of Diller and IAC, trademark analysis of IAC's numbers, almost reverential profiles of IAC execs, and classic Fortune hyping of a potential "gotcha" ("Cover tag: "What's real and what's fantasy?"!). But there's no gotcha.

The piece does have clues to what I think will drive IAC's future. In the last portion of the story, Diller talks about "eventual synergies" in his operating businesses. I think the company's long term fortunes will turn on the timeline of these "eventual" synergies. So... what drives synergies between lines of business online? Yup, search. Not to bang the search drum too loudly, but, the core asset IAC lacks most is search - a hole the Fortune piece missed, for the most part, though Diller does rue his loss of Lycos years ago. I certainly believe that regret is heartfelt. " Those dopes!" he says of the folks who fought him on the Lycos deal. "We were going to wire all out commerce to the No. 3 search engine at the time when habits were just changing. Our company would have been so far advanced!" Looking at what Yahoo, eBay, MSN, AOL, Amazon, and Google are trying to do now, I have to say I agree.

• Posted by John Battelle at 8:45 AM
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Google Sued in France: Trademarks

Good morning, Googlefolk: Your headache today (ain't it fun being big?) is that you're being sued by an *insurance company.* No, wait, that's not enough. A *French* insurance company, on trademark issues. Background here.

• Posted by John Battelle at 7:29 AM
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Markoff: Details on Google Filing; Rivlin: Who WIll Get Rich

Interesting: Markoff has a source (link is CC Times, not NYT, it's not reg required) who claims Google will not file an S-1 this week (the standard IPO prospectus) but rather will file ... well...on that the story is not clear. But something. I believe the only thing they could file other than an S-1 is a Form 10, which private companies file when they surpass 500 shareholders and 10 million in assets. Markoff's story does not say that will happen, but that's the implication. There's some good stuff in this short piece:

Google, the Web search company that has developed a huge popular following around the world, is expected to take a tentative first step next week toward a future public stock offering, a person close to the company said Friday. But it is likely to stop short of filing a formal registration to sell shares, he said......

At an employee meeting last month, the company's executives stated that Google had embarked on the path toward a public offering. They did not give any information, however, about the possible timing of the effort.

Those close to the company say that Google's top executives are under pressure to move ahead soon because of fears that it may damage employee morale if they don't move ahead quickly to give them an opportunity to turn their shares and options into real wealth.

But from inside and outside the company, there have also been repeated rumblings that the founders of the company and its outside investors are still debating the value of an immediate public offering....

Google's founders, however, are leery, Silicon Valley insiders say, of giving up control of their firm as well as the operational and cultural changes that a public offering might bring about.

The company has considered the possibility of two classes of stock, they say, a route that would permit the founders to retain tight control, but would also reduce the value of a public offering substantially....

This has led to differences between the company's venture backers and founders, said a person at one of the venture firms that backs Google.

"I wouldn't call it tensions, but there are differences," he said. "I think our attitude is, 'Let's not be too cute.' "

Also, the Times runs a Page One rundown of who will get rich in the IPO. After reading it, I felt...a bit queasy, and I don't know why. (No, I don't own any shares!).

• Posted by John Battelle at 10:48 PM
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Why Subscribe to Re-Find?

Well, Re-Find (sign up at left) is the weekly summary of what was posted on Searchblog, which may or may not be interesting to you. But it's also a way for me to know who the hell you guys are. I am stunned, honored, and scared shitless to report that Searchblog has something like 35,000 readers now, and it's nice to grok a cross section of that readership, if only through the entrails of email addresses. Plus, those who proactively vote by signing up will more likely than not get an invitation to participate in whatever it is I might do next - read chapters of the book before publication, beta test a new site, or come to a conference I'm thinking about. So sign up, if any of that sounds interesting to you. You can always unsubscribe if I get too self serving, pedantic, or hopelessly boring.

• Posted by John Battelle at 10:21 PM
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Simson's Piece on Akamai and Google: Good Reading

I finally got around to reading Simson's piece in Tech Review. I knew it would be worth the wait, not another me-too package on the IPO but some original reporting and thinking. And I was right. The piece points out that Akamai is in a similar business to Google - the distributed computing business. Then he thinks through the implications. Very Web 2.0, web-as-platform kind of stuff here.

Fun excerpts:

“These numbers are all crazily low,” Farach-Colton continued. “Google always reports much, much lower numbers than are true." Whenever somebody from Google puts together a new presentation, he explained, the PR department vets the talk and hacks down the numbers. Originally, he said, the slide with the numbers said that 1,000 queries/sec was the “minimum” rate, not the peak. “We have 10,000-plus servers. That’s plus a lot.”...

...It’s (the) ability to build and operate incredibly dense clusters that is as much as anything else the secret of Google’s success....

....There is another company that has perfected the art of running massive numbers of computers with a comparatively tiny staff. That company is Akamai.

....Both companies have developed infrastructure for running massively parallel systems, but the applications that they are running on top of those systems are different. Google’s primary application is a search engine. Akamai, by contrast, has developed a system for delivering Web pages, streaming media, and a variety of other standard Internet protocols.

Another important difference, says Christy, “is that Akamai has had a very hard time creating a clear business model that works, whereas Google has been unbelievably successful.” Akamai has thus started looking for new ways that it can sell services that only a massive distributed network can deliver. Struggling for profitability, the company has been aggressively looking for new opportunities for its technology. This might be the reason that Akamai, unlike Google, was willing to be interviewed for this article...

...Now Akamai is developing techniques for letting customers run their applications directly on the company's distributed servers....

...Google’s infrastructure seems well-suited to the deployment of a service like Gmail. Last summer Google published a technical paper called The Google File System (GFS), which is apparently the underlying technology developed by Google for allowing high-speed replication and access of data throughout its clusters. With GFS, each user’s e-mail could be replicated between several different Google clusters; when users log into Gmail their Web browser could automatically be directed to the closest cluster that had a copy of their messages.

This is hard technology to get right—and exactly the kind of system that Akamai has been developing for the past six years. In fact, there’s no reason, in principle, why Akamai couldn't deploy a similar large-scale e-mail system fairly easily on its own servers. No reason, that is, except for the company’s philosophy.

Leighton doesn’t think that Akamai would move into any business that required the company to deal directly with end users.....

• Posted by John Battelle at 2:45 PM
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Good Profile of Moritz

Fortune's Adam Lashinsky has a well done profile of Michael Moritz, one of two VCs to invest in Google back in 1999. (The site is sub only, but I believe you can get the first page if you are not a Fortune subscriber. When, oh when, will Time Inc. realize that blogging is GOOD for them? Maybe when they spin out AOL...)

• Posted by John Battelle at 12:49 PM
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More Google News

It's a Google News Friday. Roundup:

- Cnet reports on Google's safe search, which it claims is too restrictive.

- Google rethinks its policy on hate sites (considering labels. I say, let the community label in aggregate..but what do I know).

- Google is apparently expanding its Gmail beta to users of Blogger. (Thanks, Andy)

- More on the grandstanding California Senator who is seeking to legislate Gmail...

• Posted by John Battelle at 8:40 AM
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Good Morning, Your Net IPO Today Is Not Yet Google...

But it will be shortly, the Wall Street Journal reports. The article is behind a subscription wall, excerpts:

...The announcement is linked to the fact that Google will soon be required to disclose publicly more information about its business, under a Securities and Exchange Commission rule triggered after closely held companies surpass a certain size. Google is expected to have to make such disclosures as early as next week. ...

..Based on early chatter among bankers, the offering could value Google at as much as $25 billion, and spread nearly $100 million in fees across Wall Street. Last fall, some of Google's prospective advisers estimated the valuation of the company could be in line with other Internet leaders. Those include Yahoo Inc., valued at $38 billion, Amazon.com Inc. at $20 billion and eBay Inc. at $54 billion....

• Posted by John Battelle at 8:24 AM
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Really..Must...Put...Google...On...Cover

Here we go again, this month's Google cover: Businessweek. Oh, they timed it for the IPO, yes they did, but those pesky engineers have yet to make those editors look like geniuses. Godammit!

Well, there's time. It might happen in the next few days, or next week.

Bizweek does the full package. I'll read it, and if there's anything new, I'll let you know. (The site requires registration.)

Thanks for the tip, Jim.

• Posted by John Battelle at 4:25 PM
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Feed Controversy!

Ev and Dave talk rss conspiracies...

• Posted by John Battelle at 4:06 PM
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MSN Earnings Are In...

And the are pretty solid, on first look. From their release (full text in extended entry)

MSN® reported another profitable quarter on robust revenue growth of 16% over last year driven by continued success in growing its advertising business. MSN advertising revenue increased 43% during the quarter, again showing strength in both traditional online and search-based advertising. Customers and advertisers continue to recognize MSN as a worldwide leader in online services with more than 350 million unique users to the MSN network, over 170 million active MSN Hotmail® unique users, and more than 120 million active MSN Messenger unique users worldwide on a monthly basis.

Q1 revenues are reported as $491 million, compared to $427 million last year, and $559 million last quarter. Recall, however, that last quarter is the holiday season. The company did not break out actual profits for MSN.

Microsoft_Investor_Relations_News_Release

Microsoft Reports Strong Third Quarter Revenue
Broad-based Demand Drives 17% Revenue Growth

Redmond, Wash. – April 22, 2004 – Microsoft Corp. today announced revenue of $9.18 billion for the quarter ended March 31, 2004, a 17% increase over $7.84 billion in the prior year. Operating income for the third quarter was $1.28 billion, compared to $2.74 billion in the prior year. Net income and diluted earnings per share for the third quarter were $1.32 billion and $0.12 per share. These results include stock-based compensation expense of $748 million (pre-tax) equating to $501 million (after-tax) or $0.05 per share, and legal charges of $2.53 billion (pre-tax) equating to $1.89 billion (after-tax) or $0.17 per share related to the settlement of the Sun Microsystems Inc. litigation and a fine imposed by the European Commission. For the previous year, net income and earnings per share for the third quarter were $2.14 billion and $0.20 per share, including stock-based compensation expense of $978 million (pre-tax) equating to $655 million (after-tax) or $0.06 per share.

“Broad-based demand and solid execution across all our businesses drove outstanding results for the quarter,” said John Connors, chief financial officer at Microsoft. “All of our businesses met or exceeded our expectations this quarter with the Client, Information Worker and Server and Tools businesses growing a combined 17%. Overall corporate IT spending continued to improve and we expect to see healthy demand through the end of our fiscal year.”

Information Worker revenue grew 18% over the prior year as Office experienced strong sales across all customer segments. Worldwide retail license sales of Office 2003 since its launch in October 2003 were double those of Office XP over its first five months. Office OEM sales grew 35% benefiting from increased adoption of Office 2003 including penetration of the Small Business and Professional editions. Customers acquiring Office during the quarter included Circuit City, Del Monte Foods, Perot Systems, The Thomson Corporation, and Unisys Corporation.

Server and Tools grew a solid 19% driven by healthy demand for Windows®, Exchange, SQL Server™, and Visual Studio® products. Rapid customer adoption of Windows Server™ 2003 continued with new licenses growing 31%. “Windows Server 2003 is our most successful server operating system product ever with customer license sales doubling any previous version over a comparable period since launch,” said Eric Rudder, senior vice president, Server and Tools business. “It is also rewarding to see customers and partners excited about the recently released Windows Small Business Server 2003 product, as is reflected by our early strong sales and already having 47,000 partners trained to deploy and service the platform.”

MSN® reported another profitable quarter on robust revenue growth of 16% over last year driven by continued success in growing its advertising business. MSN advertising revenue increased 43% during the quarter, again showing strength in both traditional online and search-based advertising. Customers and advertisers continue to recognize MSN as a worldwide leader in online services with more than 350 million unique users to the MSN network, over 170 million active MSN Hotmail® unique users, and more than 120 million active MSN Messenger unique users worldwide on a monthly basis.

Business Outlook

Management offers the following guidance for the quarter ending June 30, 2004, which includes stock-based compensation expenses in accordance with SFAS 123:

• Revenue is expected to be in the range of $8.9 billion and $9.0 billion.
• Operating income is expected to be in the range of $2.8 billion and $2.9 billion, including stock-based compensation expense of approximately $750 million.
• Diluted earnings per share are expected to be approximately $0.23, including stock-based compensation expense of approximately $0.05.

Management offers the following guidance for the full fiscal year ending June 30, 2005, which includes stock-based compensation expenses in accordance with SFAS 123:

• Revenue is expected to be in the range of $37.8 billion and $38.2 billion.
• Operating income is expected to be in the range of $15.9 billion and $16.3 billion, including stock-based compensation expense of approximately $2.5 billion.
• Diluted earnings per share are expected to be in the range of $1.16 and $1.18, including stock-based compensation expense of approximately $0.15.

Webcast Details
Microsoft will hold an audio webcast at 2:30 p.m. PDT (5:30 p.m. EDT) today with John Connors and Scott Di Valerio to discuss details regarding the company’s performance for the quarter and other forward-looking information. The session may be accessed at http://www.microsoft.com/msft. The webcast will be available for replay through the close of business on April 22, 2005.

Forward-Looking Statements
Statements in this release that are "forward-looking statements" are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors such as: entry into markets with vigorous competition, market acceptance of new products and services, continued acceptance of existing products and services, changes in licensing programs, product price discounts, delays in product development and related product release schedules, and reliance on sole source suppliers for key components of Xbox that could result in component shortages and delays in product delivery, any of which may cause revenues and income to fall short of anticipated levels; obsolete inventory or product returns by distributors, resellers and retailers; warranty and other claims on hardware products such as Xbox; changes in the rate of PC shipments; technological shifts; the support of third party software developers for new or existing platforms; the availability of competitive products or services such as the Linux operating system at prices below our prices or for no charge; the ability to have access to MSN service distribution channels that are controlled by third parties; the risk of unanticipated increased costs for network services; the continued ability to protect the company’s intellectual property rights; the ability to obtain on acceptable terms the right to incorporate in the company’s products and services technology patented by others; changes in product and service mix; maturing product life cycles; product sale terms and conditions; the risk that actual or perceived security vulnerabilities in our products could adversely affect our revenues; implementation of operating cost structures that align with revenue growth; the financial condition of our customers and vendors; variations in equity compensation expenses under FAS 123, which will fluctuate based on factors such as the actual number of stock awards issued and the market value of the awards on the dates of grant; unavailability of insurance; uninsured losses; adverse results in litigation; the effects of terrorist activity and armed conflict such as disruptions in general economic activity and changes in our operations and security arrangements; the level of corporate information technology spending and changes in general economic conditions that affect demand for computer hardware or software; currency fluctuations; trade sanctions or changes to U.S. tax law resulting from the World Trade Organization decision with respect to the extraterritorial income provisions of U.S. tax law; and financial market volatility or other changes affecting the value of our investments that may result in a reduction in carrying value and recognition of losses including impairment charges.

For further information regarding risks and uncertainties associated with Microsoft’s business, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Issues and Uncertainties” sections of Microsoft’s SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting Microsoft’s investor relations department at (800) 285-7772 or at Microsoft’s investor relations website at http://www.microsoft.com/msft.

All information in this release is as of April 22, 2004. The company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company’s expectations.

Founded in 1975, Microsoft (Nasdaq "MSFT") is the worldwide leader in software, services and solutions that help people and businesses realize their full potential.

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Microsoft, Windows, Visual Studio, Windows Server, MSN and Hotmail are either registered trademarks or trademarks of Microsoft Corp. in the United States and/or other countries. The names of actual companies and products mentioned herein may be the trademarks of their respective owners.

For more information, financial analysts only:
Curt Anderson, senior director, Investor Relations (425) 706-3703

For more information, press only:
Rapid Response Team, Waggener Edstrom, (503) 443-7070, rrt@wagged.com

Note to editors: If you are interested in viewing additional information on Microsoft, please visit the Microsoft Web page at http://www.microsoft.com/presspass/ on Microsoft’s corporate information pages. Shareholder and financial information, as well as today’s 2:30 p.m. PDT conference call with investors and analysts, is available at http://www.microsoft.com/msft.

Microsoft Corporation
Financial Highlights
Third Quarter 2004
(All growth percentages are comparisons
to the comparable quarter of fiscal year 2003)

This document contains statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors discussed in this document. We undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in our expectations.

Third Quarter Summary

Three Months Ended
March 31
(In millions, except percentages)
2003
2004Percentage Inc./(Dec.)Revenue$7,835$9,17517%Operating Income$2,744$1,278(53%)
The revenue growth resulted primarily from increased licensing of Windows operating systems through OEMs, Office 2003 and Server products, and MSN advertising revenue. Foreign exchange rates also contributed nearly 5% growth in total revenue for the quarter due to generally stronger foreign currency rates versus the U.S. dollar.

During the third quarter, continued strong PC and Server shipment growth and improved IT spending compared to fiscal 2003 contributed to our overall revenue growth. We estimate that total PC shipments grew approximately 14% from the third quarter of the prior year driven by strong business demand in both mature and emerging markets with consumer shipments growth of approximately 10% for the quarter. Total server hardware shipments have grown 17% in the third quarter of fiscal 2004 per our internal projections, with Windows Server shipments growing faster than the overall sector at 25% compared to the prior year’s third quarter. The net impact of foreign exchange rates on revenue was positive in the third quarter compared to a year ago, primarily due to a stronger Euro and Japanese yen versus the U.S. dollar. Had the rates from the prior year’s third quarter been in effect in the third quarter of fiscal 2004, translated international revenue earned in local currencies would have been approximately $350 million lower. Certain manufacturing, selling, distribution, and support costs are disbursed in local currencies, and a portion of international revenue is hedged, thus offsetting a portion of the translation exposure.

Unearned revenue as of March 31, 2004 decreased $326 million from December 31, 2003. Undelivered elements contributed $123 million of the net decrease in unearned revenue as deferral rates were lower, partially offset by lengthened product life cycles for the underlying products licensed, resulting in a higher proportion of revenue earned. The decline also reflects a net decrease of $248 million in unearned revenue from volume licensing programs as $261 million of revenue was earned from Upgrade Advantage programs.

For the full fiscal 2004, we expect PC shipments to grow at rates in the low teens, driven by both consumer and business demand for PCs. We believe the overall server hardware sector and IT spending outlook will continue to demonstrate improvement over fiscal 2003. Our enterprise server products revenue results should be positively affected by the continued shift to lower cost X86 server architecture. As a result, we expect overall server hardware shipment growth for fiscal 2004 to reach near mid-teens growth with Windows Server operating systems licenses growing faster than the overall sector. We believe foreign exchange rates will continue to stabilize during the last quarter of our fiscal year and we will continue to benefit from the U.S. dollar’s position relative to the Euro and Japanese yen.

The operating income decline for the third quarter of fiscal 2004 was due primarily to a $1.92 billion charge related to settlement of the Sun Microsystems litigation and a €497 million ($605 million) accrual for the European Commission fine. Sun Microsystems and Microsoft entered into a series of agreements that settled Sun’s suit against us and resolved other legal claims between the companies. The European Commission fine was imposed as part of its finding that Microsoft had infringed European competition law by refusing to supply work group server interoperability information and by including streaming media playback functioning in Windows desktop operating systems.  We intend to appeal the European Commission’s finding.

We adopted the fair value recognition provisions of SFAS 123, Accounting for Stock-Based Compensation, on July 1, 2003 and restated prior periods to reflect compensation cost under the recognition provisions of SFAS 123 for all awards granted to employees after July 1, 1995. Equity compensation is included in operating expenses as part of headcount-related costs. Total stock-based compensation costs included in operating expenses for the third quarter of fiscal 2004 were $748 million, compared to $978 million in the prior year’s comparable quarter.

SEGMENT PRODUCT REVENUE/OPERATING INCOME (LOSS)

Our seven segments are: Client; Server and Tools; Information Worker; Microsoft Business Solutions; MSN; Mobile and Embedded Devices; and Home and Entertainment.

The revenue and operating income/(loss) amounts in this section MD&A are presented in accordance with U.S. GAAP applied at the segment level. Certain corporate level expenses (primarily general and administrative expenses, including the accrual for the imposed fine from the European Commission, and corporate level sales and marketing costs) have been excluded.

Client

Three Months Ended
March 31
(In millions, except percentages)
2003
2004Percentage Inc./(Dec.)Revenue$2,527$2,92416%Operating Income$1,901$1,605(16%)
Client includes revenue from Windows XP Professional and Home, Windows 2000 Professional, and other standard Windows operating systems. In the third quarter of fiscal year 2004 Windows OEM license units grew 16%, driving an 18% growth in OEM revenue compared to the prior year. Revenue from commercial and retail licensing grew 6% compared to the prior year’s third quarter. The mix of Windows units shipped with the Professional version increased two percentage points to 58% of total Windows licenses compared to the prior year. Client operating income in the third quarter of fiscal 2004 declined primarily as a result of $700 million of legal expenses related to the settlement of the Sun Microsystems litigation, partially offset by growth in revenue.

We anticipate that total PC shipments will grow about 10% for the fourth quarter of fiscal 2004, continuing to influence our growth in Client revenue. Additionally, we do not expect significant future changes in the mix of Windows Home and the higher priced Windows Professional version.

Server and Tools

Three Months Ended
March 31
(In millions, except percentages)
2003
2004Percentage Inc./(Dec.)Revenue$1,827$2,17719%Operating Income/(Loss)$305($635)nm
Server and Tools consists of server software licenses and client access licenses (CALs) for Windows Server, SQL Server, Exchange Server, and other servers. It also includes developer tools, training, certification, Microsoft Press, Premier product support services, and Microsoft consulting services. In the third quarter of fiscal 2004, Server revenue, including CALs, grew $445 million or 36%. The revenue increase was driven primarily by an estimated 25% increase in Windows-based server shipments resulting in 31% growth in new Windows Server license sales as well as growth in SQL Server and Core CAL revenue. Consulting and Premier product support services increased $30 million or 11% compared to the prior year’s third quarter. Revenue from developer tools, training, certification, Microsoft Press and other services decreased $125 million or 38%, due to recognition of $128 million of previously deferred revenue in the prior year’s comparable quarter. The third quarter of fiscal 2004 operating income declined $940 million primarily due to $1.22 billion of legal expenses related to the settlement of the Sun Microsystems litigation, partially offset by the increase in revenue.

Information Worker

Three Months Ended
March 31
(In millions, except percentages)
2003
2004Percentage Inc./(Dec.)Revenue$2,327$2,73918%Operating Income$1,696$1,92614%
Information Worker includes revenue from Microsoft Office, Microsoft Project, Microsoft Visio, SharePoint Portal Server CALs, other information worker products including Microsoft LiveMeeting and OneNote, and professional product support services. Revenue for the third quarter of fiscal 2004 reflected continued momentum from the Office 2003 launch. Benefiting from increased adoption of Office 2003 including penetration of the premium Small Business and Professional editions, OEM licensing revenue grew 35% compared to the prior year’s third quarter. Revenue from volume licensing, retail packaged product and pre- installed versions of Office in Japan also grew 15% in aggregate as Office 2003 sales strength continued post launch. Contributing to the increase in revenue was previously deferred multi-year licensing arrangements revenue, including Upgrade Advantage, and a lower deferral rate for undelivered elements, partially offset by lengthened product lives. Information Worker operating income for the third quarter of fiscal year 2004 increased due to the growth in revenue, partially offset by an increase in operating expenses, primarily headcount-related costs and marketing expenses in the Small and Mid-Market Solutions and Partners group.

Microsoft Business Solutions

Three Months Ended
March 31
(In millions, except percentages)
2003
2004Percentage Inc./(Dec.)Revenue$147$1534%Operating Loss($92)($65)(29%)
Microsoft Business Solutions includes Microsoft Great Plains, Microsoft Navision, Microsoft Axapta, Microsoft Solomon, Microsoft CRM, bCentral and other business applications and services. The revenue increase in the third quarter of fiscal 2004 was primarily attributable to continued growth in licensing of Navision and Axapta products outside of the United States as well as the timing of licensing agreements. Microsoft Business Solutions operating loss for the third quarter of fiscal year 2004 declined due to growth in revenue and lower stock-based compensation expense partially offset by increased sales and marketing costs.

MSN

Three Months Ended
March 31
(In millions, except percentages)
2003
2004Percentage Inc./(Dec.)Revenue$508$59116%Operating Income/(Loss)($139)$107nm
MSN includes MSN subscriptions and the MSN network of Internet products and services. In the third quarter of fiscal 2004, MSN Network services revenue grew $100 million or 43% as a result of growth in paid search and growth in the overall Internet advertising market. MSN subscription revenue declined $17 million or 6% as the number of narrowband subscribers continued to migrate to competitively priced broadband or other ISPs. The number of total MSN subscriptions at the end of March 2004 was 8.2 million, slightly higher than at the end of December 2003, as the loss of narrowband subscribers was offset by the gain of other premium service subscriptions. Subscription revenue may decline in the fourth quarter of the fiscal year as the narrowband subscriber base is expected to continue to decline. The improvement in operating income/(loss) in the third quarter was due to strong advertising revenue and paid search, while operation costs remained flat and customer acquisition expenditures declined.

Mobile and Embedded Devices

Three Months Ended
March 31
(In millions, except percentages)
2003
2004Percentage Inc./(Dec.)Revenue$46$6133%Operating Loss($72)($38)(47%)
Mobile and Embedded Devices includes Windows Mobile software, Windows Embedded device operating systems, MapPoint, and Windows Automotive. The increase in revenue in the third quarter of fiscal 2004 was driven by growth in all businesses. The revenue growth realized by MapPoint has slowed and is expected to grow at a continued slower pace in future quarters, as the first two quarters of fiscal 2004 growth rates reflected the acquisition of Vicinity Corporation toward the end of the second quarter of the prior fiscal year. Mobile and Embedded Devices operating loss was lower in the third quarter of fiscal 2004 compared to the prior year’s third quarter, due to lower operating expenses and growth in revenue.

Home and Entertainment

Three Months Ended
March 31
(In millions, except percentages)
2003
2004Percentage Inc./(Dec.)Revenue$453$53017%Operating Loss($277)($209)(25%)
Home and Entertainment includes the Xbox video game system, PC games, consumer software and hardware, and TV platform. Xbox revenue increased $81 million or 35% from the prior year’s third quarter, with $78 million related to higher volumes of Xbox software and $39 million due to higher Xbox console volumes, partially offset by a $36 million decline related to past price reductions of Xbox consoles and software. At the end of the third quarter of fiscal 2004, we announced a price reduction for the Xbox console in the United States. Overall, Xbox console volumes increased 30% in the third quarter compared to the prior year’s comparable quarter. This increase was partially attributed to low inventory levels of competitive consoles. Xbox’s life to date U.S. games attach rate according to NPD data was 6.8 games per console. Revenue from consumer hardware and software, PC games and TV Platforms declined $4 million or 2% compared to the third quarter of fiscal 2003 due to lower PC games software and PC gaming devices sales.

Home and Entertainment operating loss for the third quarter of fiscal year 2004 improved from the third quarter of fiscal year 2003 driven by revenue growth and improved Xbox console and third party software margins as well as lower marketing costs.

Operating Expenses

Cost of revenue

Three Months Ended
March 31
(In millions, except percentages)
2003
2004Percentage Inc./(Dec.)Cost of revenue$1,274$1,41111%As a percentage of revenue16.3%15.4%(0.9)pp
Cost of revenue includes manufacturing and distribution costs for products and programs sold, operation costs related to product support service centers and product distribution centers, costs incurred to support and maintain Internet-based products and services, and costs associated with the delivery of consulting services. The increase in absolute dollars in the third quarter of fiscal 2004 resulted from an increase in product support and consulting services costs and Home & Entertainment costs related to increased Xbox console units sold, partially offset by lower costs of producing the Xbox console.
 
Research and development

Three Months Ended
March 31
(In millions, except percentages)
2003
2004Percentage Inc./(Dec.)Research and development$1,692$1,538(9%)As a percentage of revenue21.6%16.8%(4.8)pp
Research and development expenses include payroll, employee benefits, equity compensation and other headcount-related costs associated with product development. Research and development expenses also include third-party development and programming costs, localization costs incurred to translate software for international markets, and the amortization of purchased software code and services content. The decrease in the third quarter of fiscal 2004 was primarily due to lower headcount-related costs driven by reductions in stock-based compensation expense, partially offset by increased product development costs.
 
Sales and marketing

Three Months Ended
March 31
(In millions, except percentages)
2003
2004Percentage Inc./(Dec.)Sales and marketing$1,700$1,92813%As a percentage of revenue21.7%21.0%(0.7)pp
Sales and marketing expenses include payroll, employee benefits, equity compensation and other headcount-related costs associated with sales and marketing personnel and advertising, promotions, tradeshows, seminars, and other marketing-related programs. Sales and marketing costs increased in absolute dollars in the third quarter of fiscal 2004 due to marketing programs targeted toward the Small and Mid-Market Solutions and Partners group and $117 million or 13% growth in headcount-related costs.
 
General and administrative

Three Months Ended
March 31
(In millions, except percentages)
2003
2004Percentage Inc./(Dec.)General and administrative$425$3,020611%As a percentage of revenue5.4%32.9%27.5pp
General and administrative costs include payroll, employee benefits, equity compensation and other headcount-related costs associated with the finance, legal, facilities, certain human resources, and other administrative headcount, and legal costs and other administrative fees. General and administrative in the third quarter included $1.92 billion of charges related to the settlement of the Sun Microsystems litigation as described in the segment information and a $605 million accrual for the European Commission fine.

INVESTMENT INCOME

The components of investment income are as follows:
 
Three Months Ended
March 31(In millions)20032004Dividends and interest$ 455$ 500Net gains (losses) on investments2419Net gains (losses) on derivative instruments1593 Investment income$ 472$ 1,012 
Dividends and interest income was relatively consistent for the comparable quarter. Net gains (losses) on investments include other-than-temporary impairments of $5 million in the third quarter of fiscal 2004 compared to $234 million in the third quarter of the prior year. The decline in impairments was due to improved market conditions. Realized gains from investments increased to $424 million compared to $236 million in the third quarter of the prior year.
 
INCOME TAXES

The effective tax rate for the third quarter of fiscal 2004 is approximately 42%.  The increase in the effective tax rate for the third quarter reflects the impact of the accrual for the European Commission fine, which is not tax deductible.   The effective tax rate for fiscal 2003 was 32%, reflecting a benefit in the second quarter of $126 million from the reversal of previously accrued taxes.

STOCK-BASED COMPENSATION

Three Months Ended
March 31(In millions, except earnings per share)20032004Stock-based employee compensation expense$ 978$ 748After-tax stock-based employee compensation expense$ 655$ 501Stock-based employee compensation expense per diluted share$ 0.06 $ 0.05
Effective July 1, 2003, we adopted the fair value recognition provisions of SFAS 123, Accounting for Stock-Based Compensation, using the retroactive restatement method described in SFAS 148, Accounting for Stock-Based Compensation—Transition and Disclosure. Under the fair value recognition provisions of SFAS 123, stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the vesting period. The June 30, 2003 balance sheet has been restated for the retroactive adoption of the fair value recognition provisions of SFAS 123 which resulted in a $13.89 billion increase in common stock and paid-in capital, a $10.00 billion decrease in retained earnings, and a $3.89 billion increase in deferred income taxes.

FINANCIAL CONDITION
 
On our balance sheet, cash and short-term investments totaled $56.41 billion, equity and other investments were $15.16 billion and we have no debt as of March 31, 2004.

Unearned Revenue

Unearned revenue from volume licensing programs represents customer billings, paid either upfront or annually at the beginning of each billing coverage period, which are accounted for as subscriptions with revenue recognized ratably over the billing coverage period. For certain other licensing arrangements revenue attributable to undelivered elements, including free post-delivery telephone support and the right to receive unspecified upgrades/enhancements of Microsoft Internet Explorer on a when-and-if-available basis, is based on the sales price of those elements when sold separately and is recognized ratably on a straight-line basis over the related product’s life cycle. The percentage of revenue recorded as unearned due to undelivered elements ranges from approximately 15% to 25% of the sales price for Windows XP Home, approximately 5% to 15% of the sales price for Windows XP Professional, and approximately 1% to 15% of the sales price for desktop applications, depending on the terms and conditions of the license and prices of the elements. Product life cycles are currently estimated at three and a half years for Windows operating systems and two years for desktop applications. Unearned revenue also includes payments for online advertising for which the advertisement has yet to be displayed and payments for post-delivery support services to be performed in the future.

The components of unearned revenue were as follows:

Dec. 31Mar. 31(In millions)20032004Volume licensing programs$4,579$4,331Undelivered elements2,6242,501Other649694Unearned revenue$7,852$7,526
Unearned revenue by segment was as follows:

Dec. 31Mar. 31(In millions)20032004Client$2,954$2,829Server and Tools1,9452,019Information Worker2,6352,341Other segments318337Unearned revenue$7,852$7,526
Unearned revenue as of March 31, 2004 decreased $326 million from December 31, 2003. The sequential decrease reflected a $123 million net decrease in unearned revenue related to undelivered elements as deferral rates were lower, partially offset by lengthened product life cycles for the underlying products licensed, resulting in a higher proportion of revenue earned. The sequential decline also reflects a net decrease of $248 million in unearned revenue from volume licensing programs as $261 million of revenue was earned from previously deferred revenue from Upgrade Advantage programs.

Of the $7.53 billion of unearned revenue at March 31, 2004, the following table outlines the expected recognition of this balance:

Recognition (In millions)of Unearned RevenueThree months ended: June 30, 2004$2,598 September 30, 20041,660 December 31, 20041,085 March 31, 2005606 June 30, 2005 and thereafter1,577Unearned revenue$7,526
The revenue earned from the Upgrade Advantage programs for fiscal years 2003 and 2004 was as follows:

(In millions)Revenue EarnedThree months ended: September 30, 2002$464 December 31, 2002$480 March 31, 2003$450 June 30, 2003$421 September 30, 2003$379 December 31, 2003$296 March 31, 2004$261

Cash Flow

Cash flow from operations for the third quarter of fiscal 2004 was $4.97 billion, compared to $4.17 billion in the comparable quarter of the prior year. The increase reflects higher net income before non-cash items including stock-based compensation expense and legal charges, and other changes in working capital. Cash used for financing was $1.04 billion in the third quarter of fiscal 2004, compared to $1.21 billion in the comparable quarter of the prior year. Cash used in the prior year’s comparable quarter included a cash dividend payment of $857 million. We also repurchased 49.9 million shares of common stock under our share repurchase program in the third quarter of fiscal 2004, compared to 30.7 million shares repurchased in the prior year’s third quarter. Cash used for investing was $738 million in the third quarter of fiscal 2004, compared to $4.21 billion in the prior year’s third quarter. The decrease reflects the decline in purchases of investments partially offset by impact of other investing activities.

Cash flow from operations in the fourth quarter of fiscal 2004 will be affected by the cash payment of certain legal charges accrued in the third quarter of fiscal 2004.

For More Information:
Curt Anderson, Senior Director, Investor Relations, (425) 706-3703

• Posted by John Battelle at 3:58 PM
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Tickle Searches People

Tickle, the matchmaking/social networking site, announced today a new "people search" feature that lets you find people based on keyword search. The site uses the plethora of data it has on its 18 million registered users to correlate people to search terms. I spoke to CEO James Currier yesterday, and tried out the service a bit to boot. It's a neat idea, but a bit ... odd to see people matched to terms. Take a gander at a search result for "mortgage" for example. And here's what "lawyer" looks like with "everything" chosen - web, people, and sponsored results.

The search works much better if you are a member, Currier said. The engine will then search for folks based on your search term, then correlate stuff like number of degrees away, similar interests, and even scores on the hundreds of tests Tickle makes available to its members. I can imagine this to be a pretty cool way to find, say, a mechanic or a lawyer, if you're a member and have a pretty robust social network.

I think this points in interesting directions.

Full release in extended entry....

Media Contacts:
Amy Bessette/Diane Schreiber Jennifer Hwang
Spark PR Tickle Inc.
415.962-8200 x233/231 415.946.5042
amy@sparkpr.com/diane@sparkpr.com jhwang@tickleinc.com


Tickle Introduces People Search
Adds human aspect to make Internet search more personalized and valuable

SAN FRANCISCO, Calif. - Apr. 22, 2004 - Tickle Inc. (www.tickle.com ) today announced the launch of Tickle People Search, the first Internet search service that not only gives you relevant web results but also links you to people who are experts or interested in what you're searching for. By taking into account who you are and what you're interested in Tickle's innovative People Search technology brings back people results ranked by relevance to you.

"Before the Internet, people would research most topics by asking others for advice and information," said James Currier, CEO of Tickle Inc. "The advent of Web search in the 1990's taught us to query text data pages instead of talking with each other. Tickle People Search brings online search full circle, back to letting us find the right people to talk to."

In a survey of 2500 individuals, the Tickle Research Group found that 70 percent of people still rely on both independent research as well as personal referrals from someone they trust before making most purchasing decisions. By bringing people into the search results, Tickle is enhancing the overall online search experience, adding a human touch to an otherwise impersonal process. For example, if your friend Samantha wants to refinance her house and searches for "mortgage" on Tickle People Search, she will get web links for mortgage information, plus a list of people she knows - or people who know people she knows - who have expertise in mortgages. She can then contact them directly for advice, making it much easier and more personal for her to find the information she needs.

Be found when you want to be found
Tickle's People Search results are pulled from over 2 million profiles in the Tickle Social Network. Growing virally at an average rate of 15,000 members per day, the Tickle Social Network is the world's second largest social networking service, in part because it features the deepest, most comprehensive user profiles available on the web. Anyone can create a profile within the Tickle social networking system simply by signing up for a free Tickle membership.

Tickle members who have a knowledge base they want to share with others can simply add relevant information into their profiles so they can be found by individuals looking for their specific capabilities. For example, a mortgage broker's profile might include details about her background, her experience, her employer and more - making it easier for people who need mortgage information to find and contact her. Tickle People Search results will only display details that individuals want to share with others - information people want to keep private will not be included.

Tickle People Search - find the people who can help you
Led by PhDs and experts in social science and psychology, the Tickle Research Group has conducted years of research in human interaction and behavior. By incorporating this research, Tickle has pioneered a proprietary people search algorithm to sort and rank people results by relevance to the person doing the search. Tickle's ranking algorithm evaluates factors such as relationship proximity, background and interests to produce personalized people search results that are meaningful and useful to the individual searcher. Tickle People Search also incorporates web results from the Teoma search engine and Ask Jeeves' sponsored links.

"Tickle has always believed that the Internet is fundamentally about people, not just data," added Currier. "Over the last five years, we have built our science and expertise in optimizing the structure and content of a person's profile as well as in developing algorithms that allows us to rank and match individuals in terms of relevance to each other."

Anyone can start using Tickle People Search today at http://search.tickle.com . If someone doing a search is not a Tickle member or not logged into Tickle's social network, he or she will only receive people results of individuals who have included the search word within a completely public area of their profile.

For convenient access to Tickle People Search and all of Tickle's popular online services, download the Tickle browser bar from the bottom of the Tickle homepage.

About Tickle
Tickle Inc. is a leading diversified digital media company, focused on delivering interpersonal content and services (self-discovery, matchmaking, career and social networking) to more than 18 million active members worldwide. Founded in 1999 as Emode, Tickle is a place where people can use science to make deep, meaningful connections, understand themselves and others, and manage their personal and professional relationships in a way that is fun and enjoyable. More than 50 million people have answered over 6 billion questions at Tickle.com, making the company the online leader in self-assessment testing. Ranked as one of the top 50 most visited web sites by comScore Media Metrix, Tickle is distinguished by a strong foundation in scientific research, a proven commitment to member privacy, and many years of customer satisfaction and financial stability. Tickle is headquartered in San Francisco, Calif. and can be found at http://www.tickle.com .



Julie Keslik
Director, Sparkpr
87 McLea Court
San Francisco, CA 94013
Phone: 415-321-1877
Cell: 612-802-8629
Email: julie@sparkpr.com

• Posted by John Battelle at 3:48 PM
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Another Reason I Like Search...

...19 year olds can put up an engine with some nifty features. Check out FyberSearch.

Gary says:
This engine allows the user to tweak the keyword density portion of its
relevancy algorithm. I haven't seen this option from a general web engine,
I like it! You often find this feature from databases like LexisNexis and
Factiva where the searcher can specify how many times a word or phrase
must be mentioned in a document to be considered relevant. Often, the
syntax atleast(x) is used. An advanced interface and image searching are
available. You'll also notice a link (on search results pages) to
immediately reindex each page. Finally, options to limit your search to
terms in the title, meta tags, and url by simply pointing and clicking.
The default search finds your terms in page titles only. You'll need to
select "content keywords" to search terms on the page.

• Posted by John Battelle at 1:37 PM
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Microsoft: Built From Scratch, The Interface Migrates to the Web

Three things struck me as I reflect back on my trip to Microsoft Tuesday. One, it's not wise to dismiss the company as being "at the first grade level" or "behind" the rest of the pack. Second, the fact that Microsoft came late to the search game just might be an advantage. And third, I need to get some face time with the Windows team, because I went into the day wondering if MSN isn't becoming MSFT's future interface/platform play, with Windows relegated to a supporting role (as DOS was to Windows) and, well, nothing I heard convinced me otherwise. And that certainly can't be right. Or can it?

I met first with David Cole, who runs MSN and has a long history at the company, in particular with Windows and web technology. Much of what we discussed I need to save for my column, but suffice to say we covered a broad range of topics, including Longhorn integration (yes, MSN and search are being built with an eye toward that eventuality), the Web OS meme (while not dismissive of the idea, Cole thought it was just one of many approaches to solving computing and information service problems), and of course, competition with Google and the rest of the field. Cole began by outlining how MSN has shifted to its current strategy, based on building scaled software services that break into two major buckets: communications services (MSN Messenger, Hotmail, etc) and information services (search, content, etc.). Yusuf Mehdi, who I met with next, runs information services, and we had a pretty detailed chat about the present and future of search. That conversation was for the book alone, due to timing issues. I can report, however, that Yusuf was pretty charged up about what they are building.

So why did I leave thinking that MSFT's late start in search could be an advantage? Well, think about it. The company has massive resources, and the folks in charge are pretty smart. So they get to tackle the search problem with no legacy issues and no presumptions with regard to approach. There are any number of hurdles in search - starting with how to scale your infrastructure and moving into how to integrate results with personalized data - and many of these might best be tackled by starting fresh. Plus, on the talent side, MSFT is really the only viable player that can offer engineers unlimited resources and the chance to start from scratch. I know, the Valley mill says MSFT is having a hell of a time hiring, but when I asked that question up in Redmond, I got quite the opposite answer.

I found both Cole and Mehdi personable and open, and willing to listen as much as hold forth. I did ask them any number of questions suggested by Searchblog readers, and I got a chance to talk to Scoble before I went in as well. I asked Scoble what I should ask the MSN execs, and he said he wanted to know when MSFT would launch blogging on MSN, what their RSS strategy was, how they plan to kick Google's ass, and what they were going to buy. I asked those questions and more, and while some of the answers are under embargo for the book, here are a few of the highlights I can report:

- MSN Premium, a new subscription product, already has a rudimentary blogging tool, Cole told me, and blogging will be improved and incorporated in some way across the system.
- 3 degrees, a social networking application that is in testing in the Sandbox, has taught MSN a lot and we can expect to see some version of it attached to MSN Messenger. In particular, watch the music application.
- RSS: Well, Cole was not hip to RSS, but he said he would get hip pronto. (He also was not aware of Scoble, but that's changed now!)
- Google: Very diplomatic on this front as you might expect. Respectful of how the company changed search and the internet for good. It's not often that Gates admits defeat.
- What might they buy? We didn't really get into this one - ran out of time. But I sense that MSFT is pretty into rolling its own right now. When the search platform is stable, I'd wager they might go looking for neat things to plug into it.

On the platform idea (point three), my general thesis is this: Over time, more and more of a typical user's desktop real estate is devoted to web-enabled apps. I am an extreme example of this trend (and I'd wager the same is true of most of Searchblog's readers): at any give moment, I've got ecto (a blogging tool), NetNewsWire (RSS reader), Firefox and/or Safari (browser), mail, and Office open. All these applications are web-enabled (Office is the lamest of the bunch, but not for long). Even OSX makes web calls - if only for software updates for now. So if you look at my screen, at least 80 percent of it is web applications. Compare that with five years ago, where it was just email and the browser, or ten, where it was just email.

Now, all these applications are migrating to the portals, and the portals are migrating to the model Cole described: software-based platforms replete with tools and applications - mail, calendar, blogging, rss readers, the works. At some point (and this certainly is not a new idea) the very idea of the "desktop" will become pretty old school. We're building an entirely new architecture on top of our OSes. So...what does that mean for the traditional OS? In essence, it loses the glory role, in the eyes of the consumer. The OS does the hard stuff - files systems, security, connectivity, etc., but the interface, the stuff the user sees, is migrating to the web. And MSFT's play there isn't Windows. It's MSN. At least, I think it is....

This, it seems to me, is why the company held its nose and lost untold billions through MSN'a rough patches (the service is now on a path to sustained annual profitability). And it also seems to me that this trend has something to do with Longhorn's delays and missteps: how do you build a new operating system when its interface will live on the web, instead of on the desktop? I'm looking forward to learning more.

• Posted by John Battelle at 11:15 PM
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Time Warner: Get Over AOL Already

As I watch the internet business really gain traction, I am reminded of a key player which, to my mind, remains unacceptably hobbled. Yup, it's my AOL hobbyhorse, and I'm in a mood to saddle up. Maybe it was the MSN trip, I dunno. But I've written this before, and I will say it again. The people running Time Warner, who lost their company to AOL in 2001, then won it back in bitter street fighting during 2002, need to stop punishing AOL for the damage the deal did to their net worth (don't think business is personal? Talk to Time Warner folks. Trust me, it's personal. And it ain't just the execs. It's the whole Time Warner establishment...). My prescription? Cut AOL loose to be the mammoth success it could be, if only its management didn't have to cowtow to Time Warner's rear view mirror approach to the world. I mean, could you imagine Google, Yahoo, or even IAC run by Dick Parsons?

Here's the lead to a recent Washington Post piece on AOL:

When AOL Chief Executive Jonathan Miller strides into the 10th floor boardroom at the Time Warner Center in New York tomorrow, he will face a difficult challenge: persuading board members that America Online can return to growth, even as its core dial-up subscription business continues to rapidly shrink.

Why on earth would someone who has 25 million paying users and a top five web property have to convince anyone that he has a growth story? I mean, really, think about that. Ads alone, he's in the pink....unless, of course, his strategic goal is to assuage the Time Warner execs whose egos were bruised when they sold their own company short to Steve Case four years ago. Let's get real here. And get over it.

This is a company with the largest installed paying base of internet users in the world! Hello? Time Warner execs, get over the fact that you sold yourselves short in the AOL deal, and let this company do what it must. And what must it do? Well, frankly, it must become a software-based information services company, as Google, MSN, and Yahoo already are. It needs its own R&D labs, its own world class engineers and product managers. It needs to stop forcing good people to work in New York and Dulles. In other words, it needs to be the kind of company Time Warner has no idea how to run or manage. My opinion? The AOL deal was smart, but you lost faith almost immediately. You decided the internet economy was just so much hooey, then you damaged both the AOL and the TW brands as you backpedaled and blamed those sneaky new economy folks at AOL for selling you a false promise. Well, it's 2004 now. As they say here in California, let it go. Go buy more cable networks, lick your wounds, and prepare for the next time you do something massively dumb. Or, alternatively, get behind AOL in a major public way, and play the game along with Barry Diller, Terry Semel, the Google Guys, and Bill Gates. Because trust me, these are the folks who will own the equivalent of network television for the next decade.

But, I don't think you buy that idea - you bought it once, and it didn't pan out. So you want to get the most out of AOL? Clean it up and spin it out. Enough said. Move on, Time Warner. The AOL mess is no longer Case or Pittman's problem. It's yours. And if you don't want to run this company, let someone else do it.

• Posted by John Battelle at 10:04 PM
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DIY Search

Well, OK, if you're Matt Wells, you can do it yourself. Gigablast is amazing, in that it really is just Matt. Here's an interview that I read on the plane on the way to MSFT yesterday. Talk about dissonance. Matt Wells, one guy in New Mexico. MSFT, well, MSFT. My report on MSFT by the way is held up a bit as I clear some PR issues as to what I can and cannot report right now....stay tuned.

• Posted by John Battelle at 4:33 PM
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Nutch Update

The recent announcement of Mozdex, which is leveraging the Nutch open source engine, reminded me to ping Doug Cutting and see how things were going with the Nutch project. He replied that while Mozdez only crawls a few million pages, it's a start, and he was pleased to see folks starting to use Nutch. He also pointed to ObjectsSearch, another site which uses Nutch.

But Doug said that his focus these days with Nutch is not to try to get a major, open source alternative to Google or Yahoo out there, though that remains a long term goal. Instead, he reports:

I'm opting for organic growth: get some users and developers
will follow.

In this vein, I put together a demonstration a few weeks ago for Oregon
State University. They love it. It's at:

http://devjr.cws.oregonstate.edu:8080/en/search.html

Compare this to their Google appliance at:

http://search.oregonstate.edu/web/

The quality is pretty close, and the price a lot less. It took me about
20 steps to build that demo, I want to reduce that to just a couple, to
put it within the grasp of any campus webmaster. Then I'll turn it over
to them to operate themselves.

I'm also contracting to build a Nutch-based search engine for the
Creative Commons, searching everything which uses one of their licenses.

Meanwhile, folks at a few universities are starting to use Nutch as a
platform for larger-scale search experiments.

Combined, these efforts should continue to push Nutch's scalablility at
the same time as build an installed base, all without having to first
find a sugar daddy.

• Posted by John Battelle at 2:50 PM
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Good Evening. More IPOs For You...Including a Mapping Giant...

Salesforce seems to be finally going ahead, an amended filing is here. They apparently had to deal with a bunch of SEC stuff, but it's on again. Lead banker: Morgan. Revs in 2003: Close to $100 million. Profits around $3.5mm.

And Navteq filed while I was at MSFT, the docs are here. Navteq, you say? Who the f*** are they? Well, the provide the mapping info for Yahoo, auto nav systems, et al. The CDDB of maps! OK, revs in 2003...ready? $237 million. HOLY SHITE! But wait, they have operating income of nearly $65 million. And some odd tax stuff (any CPAs out there?) which put their net income at ... $235 millon! Oh my goodness....Bankers Credit Suisse and Merrill.

• Posted by John Battelle at 9:34 PM
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Good Morning, Your Net IPO Today Is....

Lindows. Go, Linux, Go.

PS - Astute readers point out, Lindows is a WRHambrecht deal...Open IPO...Way to go, Hambrecht!

• Posted by John Battelle at 7:32 AM
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Taking the Day Off, Headed to MSFT

Going to MSFT today (well, early on the 20th) to meet with David Cole, who runs .net and MSN, and Yusuf Mehdi, who runs search and most of MSN for David. Should be darn interesting. Scoble, you around? If so, email me jbat at batellemedia.com.

Anyone care to suggest questions for these two gentlemen? Post away on comments or email me....thanks!

• Posted by John Battelle at 10:07 PM
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Double Your Money In Two Months

Well, if you had bought Ask Jeeves in early March, and sold it today, you'd be twice as rich as when you started. It helped that Piper upgraded its stock today in advance of earnings...the stock has gone from 20 to 40 in less than 60 days. Sign of the times.

• Posted by John Battelle at 9:20 PM
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Want to Grok The Google File System?

Then start here, with the paper describing it. And here, with a blog entry that describes the virtues of having a product platform.

Excerpt:

We have designed and implemented the Google File Sys-
tem, a scalable distributed file system for large distributed
data-intensive applications. It provides fault tolerance while
running on inexpensive commodity hardware, and it delivers
high aggregate performance to a large number of clients.
While sharing many of the same goals as previous dis-
tributed file systems, our design has been driven by obser-
vations of our application workloads and technological envi-
ronment, both current and anticipated, that reflect a marked
departure from some earlier file system assumptions. This
has led us to reexamine traditional choices and explore rad-
ically different design points.
The file system has successfully met our storage needs.
It is widely deployed within Google as the storage platform
for the generation and processing of data used by our ser-
vice as well as research and development efforts that require
large data sets.

(Thanks Ross!)

• Posted by John Battelle at 9:04 PM
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Good Day, Your Net IPO Today Is...

Blue Nile. Bankers Merrill, Weisel, Bear Sterns. 2003: $128 million revenues, $11.3 million profits (not including an odd $15 million tax credit, which takes profit to $27 million). They sell jewelry online.

Prospectus here and here.

• Posted by John Battelle at 7:41 PM
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Grokking Furl: Storage, Search, and the PersonalWeb

Today I finally got to talk with Mike Giles, the fellow behind Furl. He's based near Amherst, Mass, but used to work out in California, most recently at Vitria, a businessprocessenterpriseapplicationsoftware (ie, BigBoringButImportant) company. He started there when it had 20 employees, rode it out as it went to 1200 and went public, then bailed (it's now at about 300 or so). Before Vitria he founded a startup, then, closed it. In other words, he's one of us - he's been through the roller coaster, and he's wiser for it.

Something tells me he's pretty happy in his current gig. He's the only full time employee, but works with a small cadre of contractors and friends. He's got between 5-10K users since announcing the beta in January.

Mike started Furl about a year ago to solve a problem he - and a lot of us - had with bookmarks. Namely, bookmarking is a lame, half-assed, unsearchable, flat, linkrotten approach to recalling that which you've seen and care to recall on the web. Now, a lot of folks have made stabs at solving this particular problem, but Mike's got a lot of very cool features built into his beta, and more on the way.

And from my conversation with him, he's got one more thing that others might be missing: a clear sense of what Furl could do if it were part of a massively scaled platform like AOL, Yahoo, Google, or MSN. If I'm reading him right, he's smart enough to realize that what he's built will probably be a feature set on everyone of those platforms before the end of 2005, and he's also smart enough to know that by launching Furl, he's forced all of them to consider him as the person to watch in the space.

So what is it about Furl that made me write that past paragraph? After all, it's just a web page-saving application. Right? Well, yes and no. Furl does a good job of helping you manage your web browsing. It adds several features that others don' t have - full text search on your saved pages, for example. But Furl saves the entire web page you've "furled", not just the URL, which prevents link rot, on the one hand, and creates what I'll call a "PersonalWeb," on the other.

Now, having your own PersonalWeb is a very cool thing. Every page you care about is now saved forever, and is searchable. How I wish I had Furl while I was researching my book for the past year. This application was inconceivable before the cost of storage and bandwidth began to fall toward zero.

But wait...there's more. You can share your PersonalWeb with others. And Mike just added a recommendation engine, so you can see links the service thinks will be interesting to you, based on what you've already Furl'd. Now, let's play this out. Imagine Furl on, oh, Yahoo, for example. Or Google. You now have a massively scaled application where millions of people are creating their own personal versions of the web, and then sharing them with each other, driving massively statistically significant recommendations, and...some pretty damn useful metadata that can be fed into search engine algorithms, resulting in...yup, far better search (and...far better SFO (Search Find Obtain) opportunities).

Speaking of SFO, imagine the business model. (Mike has, trust me.) If you have a system that has stored millions of people's PersonalWebs, webs they have literally voted for by *taking action* and *saving* or even *annotating*, then it's not such a trick to apply some contextual advertising mojo to the whole lot. After all, Web 2.0 is built on the premise that taking action - voting, in effect - can create scaled value (the best known expression of a scaled "voting system" is Page Rank- a link is a vote.) With Furl, saving a page is a vote. Apply a bit of Gmail-like ad play to the PersonalWeb, add in a bit of A9 SFO juju, and presto, it's Really Contextual Advertising and a Really Useful Shopping Service to boot. BTW, Amazon groks this, of course, it's why the A9 Toolbar has so many Furl-like features in it. (I'm not claiming Udi and his team stole from Furl, the ideas are out there for anyone to leverage.)

I have to run to a meeting, or I'd rhapsodize a bit more (personal Database of Intentions, anyone?). Suffice to say, there are probably scores of biz dev folk banging away on Furl build/buy spreadsheets in Seattle, Palo Alto, and Dulles. Bravo Mike. Keep up the good work.

• Posted by John Battelle at 11:44 AM
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Broadband: More than Half Have It...

...at either home or work. This is important. Pew study here. (hat tip to Gary).

• Posted by John Battelle at 10:00 AM
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MSFT's Sandbox

A sort of consumerized version of MS Research, MSN Sandbox is where they roll out social software and search-related betas for test runs.

(thanks Tara)

• Posted by John Battelle at 8:57 AM
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Hey, Napster's back, why not Netscape?

AOL might have some play left after all. According to this Infoworld piece (hey, didn't there used to be a NetscapeWorld?), AOL is planning to release a new version of the browser, based on Mozilla, and, to quote the piece:

In addition to a browser suite update, AOL has quietly started beta testing a new product called the Netscape Desktop Navigator that offers access to localized Web content -- based on the user's zip code -- through a round user interface that resembles a coaster. The beta version of the Netscape Desktop Navigator is available for download at: http://navigator-stage.netscape.com/.

The content in question will be from AOL and partners. Mozilla is pretty good stuff, especially the browser. I wonder....will this be the start of AOL having a true play in the browsing/search/local ad space?

• Posted by John Battelle at 8:26 AM
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Google Filing Watch: Many Say April 30 Is Deadline

Last year Barron's reported that it appeared that Google would have to file statements with the SEC by April 30th of this year, because it had more than 500 shareholders. SEC rules require that private companies with 500 or more shareholders (including option holders) have to file within 120 days of the year after the 500 mark is reached. The deadline is approaching, and the curtain raising has begun. The Merc has the first one I've seen.

Google may not want to undergo the cultural shift that takes place in companies when they have to meet analyst and shareholder expectations every quarter. Google may turn out to be the rare company that willingly files public financial reports but doesn't publicly trade its stock.

Levi Strauss is one company that does this. Its stock is privately held -- mostly by descendants of the Strauss family -- but the company files quarterly reports with the SEC.

Another option is for Google to dodge the public reporting requirement. In 2001, the SEC detailed how companies can do so: by disclosing their financial information only to shareholders

If Google chooses this latter option, it will be interesting to see how long it takes for an employee to leak his or her statements. I'd wager about a day.

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O'Reilly on Gmail and the Net

Amen to this, brother.

• Posted by John Battelle at 3:06 PM
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Loads O' News

Getting caught up, in case you missed it:

MSN Newsbot has new personalization features, including search history (hmmm!). (CNET) (Gary has details...)

Lycos' HotBot has a new toolbar that incorporates desktop search. Cool! But...will it gain traction? (SEW)

University researchers are hacking up 3-D image search. (CBS)

Tim Berners Lee gets a cool million .... (Guardian)

• Posted by John Battelle at 10:01 AM
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Search Engine Loyalty, A9 Prognostications...

Mediapost reports fresh search engine loyalty numbers, concluding that "Google gets the gold again" - 65 percent of Google users use only Google, as opposed to just 55 percent of Yahoo users. I'm not sure I buy the whole search engine loyalty thing. I think folks aren't loyal, they're lazy. As Yoda might say, not until a compelling choice they have, switch will they.

Which brings me to A9. Over at his blog, Rex points out I missed the most compelling potential A9 feature, that of collaborative filtering.

To me, A9 is not designed as an Internet search engine, but as a knowledge-searching tool to end all knowledge searching tools.....As you look for information, Amazon will provide you the results that "people like you" have found most helpful when searching for the same information, product, place, answer, etc

He's right, of course, and I should have made a bigger point of this, but I sort of presumed that was the sex in A9 to begin with - it's Amazon, after all. A knowledge-searching tool is exactly what a search engine should evolve towards. But I disagree with this:

I don't think Amazon wants to compete with Google. Google admitted recently that it was a content business. Amazon has no such designs. Amazon, rather, wants to connect you with something you can purchase.

While I agree that Amazon wants to connect you to a purchase, I disagree with the implication that Google does not. The advertising business = the marketing business. and the marketing business = the ecommerce business. This loop, somewhat blurry in the physical world, is nearly seamless online. As I said in my posts, it's two ends (search, commerce) to the middle here. That's what makes it so interesting. And I am pretty sure that Google spiffed Froogle up and put it on the home page last month for a reason...and that the announcement of GMail, which will offer a compelling user lock-in, was not a coincidence. Rex points out, and I second wholeheartedly:

If A9 incorporates the collaborative filtering algorithms that power Amazon's predictive recommendations to customers, it will (and I know this from very, very expensive first-hand experience) produce search results that will astound the user. Just think about it: Your search results will be filtered first by Google algorithms and then through Amazon's collaborative filtering algorithms. In the simplistic metaphor we used at smallbusiness.com, "Your search results will be based on those results found most helpful by people like you. It will be cool. Promise."

Damn straight. That sounds like one hell of a search engine, and if I were Google, I'd be most attentive.

• Posted by John Battelle at 9:47 AM
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Super, Man

It's been a while since I've beaten one of my favorite dead horses, network television advertising. But this ClickZ story (thanks Pam) had the grist for my mill: I've been wondering what the stats look like for the Seinfeld/Superman film, I figured if they were low, we'd hear very little about it (no reason to trumpet it), but if they're high...

According to the story, which quotes Comscore data, the site is drawing upwards of 30,000 visits a day, which is about what a major blog pulls in. The traffic trend is building, the story notes, and Amex claims it's had more than a million viewers so far.

These are not huge numbers, by any measure. In fact, I expected them to be far higher. Amex is hyping the site in any number of ways using more traditional marketing. What I wonder is what the numbers are that makes this a success. If traffic keeps building, and as they release the next installment it will, the site will certainly cross 2, 3, and probably 5 million viewers. WIll it be a success then? From a traditional ad buy perspective, most likely the answer is yes. You have 5 million viewers who all *opted into* watching your message. You'd need to buy Superbowl ads to get such a devoted audience. Your message is five minutes long (ten times longer than the 30-second spot) - buying that kind of time on network TV is prohibitive. The branding experience is far better. Etc. etc.

But what I really like about this play is how it points the rest of the moribund mass marketers to the next frontier of advertising. "Hey guys!," Amex is saying, "come on in! The water's fine...."

• Posted by John Battelle at 9:19 AM
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At Yahoo, A Sense of Humor Emerges...

Try searching for "what is my destiny"...this is a nod to the Onion spoof, posted here...

• Posted by John Battelle at 8:20 PM
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China Internet Conference At Berkeley

The Graduate School of Journalism at UC Berkeley, where I have taught for the past few years, is sponsoring a conference April 30 and May 1 on "China’s Digital Future: Advancing The Understanding of China’s Information Revolution." More information on the conference is in the extended entry below, but I wanted to let this audience know about it, as I helped the school create China Digital News, a blog covering these issues, and will be moderating a panel. Admission is free.

The Berkeley China Internet Project and the New Media Program at the
UC Berkeley Graduate School of Journalism present:
China’s Digital Future
Advancing The Understanding of China’s Information Revolution
Friday, April 30, and Saturday, May 1, 2004
 
North Gate Hall and Sibley Auditorium in Bechtel Hall
UC Berkeley campus
Welcome and Opening Remarks: Orville Schell, Dean of the UC Berkeley Graduate School of Journalism; AnnaLee Saxenian, Dean of the UC Berkeley School of Information Management and Systems; and Gong Wen Xiang, Dean of Peking University’s School of Journalism and Communication
Keynote Speaker: Lawrence Lessig, Stanford University Law School. Introduced by Xiao Qiang, Director, UC Berkeley China Internet Project
This conference is free and open to the public. For details, including registration, visit: http://journalism.berkeley.edu/conf/chinadf

Co-sponsors: UC Berkeley’s Western Knight Center for Specialized Journalism, School of Information Management and Systems, Institute of East Asian Studies, Center for New Media; Center for Information Technology Research in the Interest of Society (CITRIS); and The Office of the Chancellor; and the Annenberg School for Communication at the University of Southern California; Intellectual Property & Communications Law Program, DCL College of Law at Michigan State University; School of Communication & Information, Nanyang Technological University; and the School of Journalism & Communication, Peking University.

Conference Program
Friday, April 30, 2004 Sibley Auditorium

Welcome and Opening Remarks 1-2:00 p.m.

Internet Development in China 2:15 p.m. - 3:30 p.m. 
Panelists:
Jack Linchuan Qiu, USC Annenberg School for Communication
Duncan Clark, BDA China Ltd., China
Mao Xianghui, Yifang Inc., China
Stella Xi Jin, IDG Ventures, San Francisco
Hal Varian, UC Berkeley School of Information Management and Systems (moderator)

Regulation and Control of the Internet 3:45-5:00 p.m.

Panelists:
Cindy Cohn, Electronic Frontier Foundation
Bill Xia, Dynamic Internet Technology Inc.
Jonathan Zittrain, Harvard Law School
Cheng Jie, Tsing Hua Law School, China
John Battelle (moderator), UC Berkeley Graduate School of Journalism

Reception 5:15 p.m. UC Berkeley Graduate School of Journalism, North Gate Hall Courtyard and Library, Euclid & Hearst

************************************

Saturday, May 1, 2004
Continental Breakfast 8:30-9:30 a.m. Courtyard and Library, North Gate Hall. (Conference moves to Sibley Auditorium, Bechtel Hall)

Welcoming Remarks 9:30-10:00 a.m.

Keynote Address: Lawrence Lessig, Stanford University Law School professor 10:00-11:00 a.m.

Standards, Infrastructures, and Designs 11:15-12:30 p.m.
Panelists:
John Gage, Sun Microsystems Inc.
Andrew McLaughlin, Google Inc.
Izumi Aizu, International University of Japan
Alex Zixiang Tan, Syracuse University School of Communication Studies
Peter K. Yu (moderator), Michigan State University

Lunch 12:30-1:30 p.m. Courtyard and Library, North Gate Hall

Keynote Discussion: Public Opinion in Chinese Cyberspace 1:30- 2:30 p.m.
Haibo Lu, Sohu.com, China and Chunyuan Liang, Sina.com, China.
Moderated by: Xiao Qiang, UC Berkeley Graduate School of Journalism

The Social Impact of the Internet 2:45-4:00 p.m.
Panelists:
Benjamin L. Liebman, Columbia Law School
Bu Wei, Chinese Academy of Social Sciences, China
Ashley Esarey, Columbia University
Susan Shirk, UC San Diego
Randy Kluver (moderator), Nanyang Technological University, Singapore

The Challenges of the New Media in China 4:15-5:30 p.m.
Panelists:
Liang Lu, BlogDriver Inc., China
Fons Tuinstra, Chinabiz Ltd., China
Andrew Lih, University of Hong Kong
Richard Baum, UCLA Center for Chinese Studies
Paul Grabowicz (moderator), UC Berkeley Graduate School of Journalism

Closing Remarks 5:45 p.m.

• Posted by John Battelle at 12:22 PM
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Google Innovates for Advertisers

Obscured a bit in the A9 vortex is this announcement that Google is providing a much more granular tool for local advertisers interested in limiting their AdWord buys to specific locales or cities. I find this interesting as it points to Google's willingness to be responsive not only to users, but to advertisers as well. Of course, offering users more relevant, localized ads can also be considered a service.... MediaPost, CNET, and the NYT report. I'm quoted in the NYT piece, seemingly beating on Google, but it's not quite in context - I was saying that Google Local (not the local ad product) is still beta, and that Yahoo has been more aggressive in commercial search than Google to date.

Apparently Google's move to aid local advertisers will really help merchants in Europe, who previously could only target at the country level. Now they can literally target by distance - say within 20 miles of a place of business. This kind of lat/longitude-driven metadata will open up a $12 billion local advertising market (US alone). And it soon will be integrated into the aforementioned Google Local, which was rolled out (as a beta) last month.

• Posted by John Battelle at 11:02 AM
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Good Morning, Your New Net IPO For The Day Is...

Alibris. Here are their S1 and other SEC docs. Alibris is a sort of high-end Amazon with the spin of hard-to-find and used titles....they filed their original registration statement more than a month ago...it's an WRHambrecht Open IPO deal....

• Posted by John Battelle at 9:34 AM
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Interview with A9's Manber up on B2.0

No need to repost it here, as my interview with Udi is up on Business2.com without subscription walls (thanks 2.0!). Includes an intro which gives an overview of the service and the implications. Good for those of you who don't want to wade through my last two posts on the subject...and gives a bit of insight into how Udi's mind works.

UPDATE: The link apparently is now behind reg, so the column is posted in extended entry. (6/21/04)

WEB EXCLUSIVE
Can Amazon Unplug Google?
The online retailer is planning to change the way we navigate the Web. An exclusive interview with Udi Manber, whose newly unveiled A9 engine just may drain the juice from the brightest light in search.

By John Battelle, Business2.com, April 15, 2004

Is Amazon (AMZN) taking on Google? Last fall the giant online retailer announced that it was launching a company focused exclusively on search. Lest anyone miss the implications, Amazon promptly rented an office far from its Seattle headquarters -- in the epicenter of Silicon Valley, near Stanford University. That's where both Google and Yahoo (YHOO) were born.

Tapped to lead the startup was Udi Manber, Amazon's chief algorithms officer and Yahoo's former chief scientist. Widely respected for his elegant approaches to intractable software problems, Manber was a magnet for Silicon Valley talent. (Either in jest or retaliation, Google responded by buying advertisements on its own search engine for the phrase "Udi Manber"; type his name into the search form and the top ad link offers job opportunities at Google.)

Amazon recently took the wraps off its initial public beta version of A9, and we got the first sneak peek. It's easy to see why the new engine might set Google and other search-driven companies on edge: A9 is a credible step toward making a search engine that knows you and acts as your agent online.

By overlaying what you're looking for onto what you've already found -- and, ultimately, what you've consumed -- A9 aims for the holy grail of search and e-commerce. While others have tried to create personalized interfaces, none has worked so far. Users don't like to answer questionnaires about what they like and what they don't; often they lie. But Amazon already knows who you are -- or at least, what you buy. With A9, the company can factor in what you browse and search for as well.

And the best part, from Amazon's perspective, is that the more things you buy at Amazon, and the more you browse with A9, the better the company will know you. Ideally, it's win-win -- you get better results, Amazon gets more sales.

Manber is the first to tell you he's nowhere near his goal of creating the perfect search engine. But A9 -- the name stands for the nine letters in the word "algorithm" -- is a significant evolution. Blending powerful personalization features with clever interface tweaks and a truly useful toolbar, A9 could well do Google one better. Interestingly, it uses Google's search results -- Amazon and Google have a longstanding search deal -- but builds on them with an elegant set of features that, taken together, make A9 seem like a new way to search.

In truth, Amazon and Google are speeding from two ends toward a very fertile middle ground where commerce and search meet. When they get there, they'll have formidable company -- AOL, eBay (EBAY), Microsoft (MSFT), and Yahoo, to name a few. All of these companies have millions of loyal users and business models built on connecting those who seek with those who sell.

And there's an obvious question: Does Amazon honestly think Google will stand by while Manber creates a better way to search?

It's clear he's just getting started. A native of Israel, Manber has an almost elfish grin and the merry intensity born of someone who clearly knows more than he's allowed to tell. John Battelle asked him a lot of questions anyway.

Walk me through what's different about A9 as a search site.

When people come to A9.com, they have the option to install a browser toolbar and register through Amazon's regular registration process. If you're already an Amazon customer, the site automatically recognizes you. If not, you don't have to register, but if you do, you get the personalized features, and if you install the toolbar, you get even better services.

As to what is new, the most obvious feature is your personal search history -- which is integrated into your entire search experience. So your entire search history is available to you, and with the toolbar, that includes all your searches across any search site, as well as all your browsing on the Web. Also, all the interface columns on the site -- personal history, or related books, or the Web search column itself -- are adjustable and the site remembers the settings the next time you come (the default is that Web search only is opened). I'm very proud of our toolbar's diary feature that allows you to annotate each site you visit. And we have integrated Amazon's "search inside the book" feature into the engine, so now all your results include excerpts from related books.

I understand much of the personalization is made possible by what you call a "history server." What exactly is that?

The history server stores -- on our servers -- your history of interaction with us for the purpose of bringing that back to you in a very convenient way. Whenever you come to the site, we can show you what you searched for in the past in a very easy-to-organize fashion. If you want to hide some of that, you can opt out at any time. If you install the toolbar, then all your Web browsing, as well as all your searching, is stored as well. And we are working on many different ways to improve that.

So there is a massive repository of data, held on an Amazon server, that tracks where I've been on the Web. Isn't that something of a privacy nightmare?

Our privacy policy is very clear on this subject -- we will never share this data with third parties. Also, having the data of what users search for or where they go is not a new concept. Any site that requires registration -- AOL or MSN, for example -- already has this information. What is new is that we're taking this information and giving it back to the users to make their search experience better and more useful. It gives them more power.

Will A9 ever integrate all the information Amazon already knows about its customers -- what they buy, browse, or search -- into creating better search results? If I happen to buy a lot of books on jungle cats, will my A9 search results know to serve me the cat-related search results for the query "jaguar" ahead of the car or the football team results?

We have no plans to do this at the moment. It is very hard to do well. If we do this, we want to make sure to do it in a way that makes the search experience work better for users. But again, I can't predict the future. The whole goal here is to get better customer experience. Whatever I can find to get better customer experience, I'll do it.

How can we square the perception that A9 was going to be a commerce engine with the reality of the site as it debuted, which feels much more like the evolution of a pure search site like Google? Will a shopping comparison engine be added soon?

I can't answer that. As an engineer I don't like to talk about things that I haven't yet built. A9 is a way to experiment with several features that help our users. It's a way to bring more users in, and it's a way to see the feedback they give us using those features. We will later use that feedback to improve search both at Amazon and other sites we partner with. It is clear that search is an integral part of any e-commerce site. It's also clear that search is not a solved problem for e-commerce, or beyond e-commerce.

What happens if A9 starts to steal market share from Google?

We don't talk about other companies, and to be honest, we don't even think too much about competitors. We try to concentrate completely on the users. I don't look at it as who we compete with but rather how much something helps the users.

You've said search is not solved. What are the problems that need to be addressed?

In general, the main problem of search is very simple: Too often people do not get the results they need. Solving that is hard. We cannot read people's minds, but we can do much better anticipating their needs and making the process much easier for them.

What might we expect from A9 in the future?

A9 is going to roll out features over time. This is our first beta test -- the result of a small team working over a short amount of time. We are growing the group as fast as we can. We have a large queue of very good ideas with the purpose of making search better. Our long-term goal is to improve search. We hope to invent new search technologies and use them on Amazon.com and other partner sites.

John Battelle is a visiting professor at the University of California at Berkeley and author of "The Search" (Portfolio, late 2004).

Find this article at http://www.business2.com/b2/subscribers/articles/1,17863,611251,00.html

�2004 Business 2.0 Media Inc. All rights reserved.
Reproduction in whole or in part without permission is prohibited.

• Posted by John Battelle at 9:17 AM
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Searching Is Getting More Complicated

A few weeks ago I spent the morning with Gary Flake, who heads up Yahoo's R&D efforts (Yahoo Labs). He's got some pretty cool stuff in the works over there, though most of it is still in the "I could tell you but then my publisher would kill me" category. One thing he did say which stuck with me had to do with search interface issues - how to solve that intractable problem of figuring out what the user wants, without forcing that user to jump through UI hoops all day. "We just need one more datapoint," Flake said, referring to the original query as the first datapoint. "Just one more interface element to make search better." The problem, of course, is depending on a million factors, that second input might be any number of things, from a "Did you mean...?" clustering question to flicking on a personalization tool that filters results through your zip code, Amazon purchase patterns, search history, social network...etc.

Anyway, this all came up when I saw this eMarketer report today, proving at least the trends are heading - a bit - toward complication. It shows, as has been the case for the past year or so, that searches are getting more complicated - the percentage of searches that have just one word in them is declining, and the percentage of multi-word searches is ever-so-slowly increasing. The graf at the bottom of this post is last year, at the top, this year.

• Posted by John Battelle at 7:48 AM
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More on A9

The blogosphere continues to chew away on A9, and I think it will take some time for the new service to fully reveal its more interesting features. Gary, for example, gives it a less-than-rave response here, and summarizes many of its features in the process.

I wrote about the implications of A9 w/r/t business models in my last post, but I wanted to say a short bit about why I'm so interested in its approach.

To me, the core feature that makes A9 interesting is what Udi Manber calls a "history server" - the technologies behind A9's search history and personalization features. Having your entire search and click history, and if you use the Toolbar, your entire browsing history as well, available on a server side application opens up all sorts of new approaches to solving search, research, and recall problems. Combining that history with what Amazon already knows about you (no, A9 does not do that...yet) creates even more powerful possibilities. Yes, it brings up massive privacy issues, but then, we've seen this movie a few times. Those who don't want to watch can opt out.

(As an aside, I have to say the idea of a complete, lifetime record of a person's searches and browsing history - which by the way that person can edit - is an extraordinary concept. It's taking the idea of the database of intentions to the utmost granular level of history - the individual. What, I wonder, happens to a person's search history when they die? Do they have a right to own it? Does it get passed down as a keepsake to his or her children?)

What gets me thinking is that for those who commit to A9 as a search solution, new and continuous improvements in search are likely to be hacked up, based on the fact that the personalized history can be analyzed and leveraged. For example, Gary and others have noted that the service does not allow you to keyword search within your searches, and display, for example, just those pages you've browsed in the past. I'd wager Giants tickets that will be in the feature set by the end of the year.

A minor example of the power of the history server: when you repeat a search, A9 will show you what links have changed and what links you've clicked on before. This might seem like a minor deal, but it's a pretty effortless feature for A9 to serve up. Imagine what else might be done with the history server. If you can imagine it, you can probably do it - again, I'll wager that Amazon will figure out a way to make the A9 interface API friendly, so that its platform developers can cook up even greater feats.

On the interface side, I am a fan of the collapsable columns for search history, web results, and books (which you can imagine will be all things sold on Amazon and its affiliates before too long). But I do agree that the color scheme is a bit...dull. It lulls me toward sleep. Or maybe that's just my lack of sleep talking.

Manber is quite insistent that A9 is a very early piece of work, the result of 30 folks banging away for 90 days, but that it's quite robust, and will evolve very quickly in the next year. From what I've heard about him from others in the field, and what I can see so far, I am sure it will worth watching very closely.

• Posted by John Battelle at 10:40 PM
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NEWS: A9, Amazon's Search Portal, Goes Live: Reverberations Felt in Valley

A9, Amazon's much discussed skunk works search project goes live today, so I can finally write about it. I saw it last month (caveat: unbeknownst to me until recently, Amazon targeted me as their conduit to break this news - I think they wanted it to move from the blogosphere out, as opposed the WSJ in) and had to keep the damn thing to myself, it was hard, and here's why: On first blush it's a very, very good service, and an intriguing move by Amazon. It raises a clear question: How will Google - and more broadly, the entire search-driven world - react?

My gut tells me the public face will be one of partnership: After all, A9 uses Google' search results and displays at least two paid AdWord listings per result (I've requested comment from Google, you can imagine I'm not the only one...). But I have to wonder: What business is Google in, after all? Is it still in the business of just search - as it was back when it was cutting search provisioning deals right and left, with Yahoo (already ended), AOL (arguable imperiled due to Gmail and other trends), Ask, and Amazon? Is it really still in the business of being an OEM to others, a strategy which allowed it to steal those portals' customers? Or...has it evolved, to a business where it owns a large customer base, one it must now position itself to defend?

It seems to me, Google's position in Amazon's A9 implementation is at best a step backwards. If A9 is as good as it seems to be, every customer that uses and/or switches to A9 becomes an A9 search customer, and, more likely than not, a deeper and far more loyal Amazon customer. (The service incorporates a personal search history and many other really neat tweaks, including a wicked good Toolbar.) In essence, Amazon seems to be making a play for Google's customers. Or it seems that way to me, anyway. Sure, Amazon isn't in the AdWords business. It's happy to outsource that to Google and focus on the entire US retail GDP instead...

Udi Manber, the head of A9 and one of the leading lights of the search community, is understandably evasive when asked about this subject. Google and Amazon have always been friends and partners (despite the fact that "Work at Google" is the top paid link when you search on his name on Google). But as I point out in the introduction to my Business 2.0 interview, to be posted any moment now, one-time partners can quickly become serious competitors in the Search Find Obtain market. And judging from the look of it, A9 is a very direct statement from Amazon: We are now officially in the search business, so get used to it.

One could argue that A9 is a pure commerce play, not a search portal. After all, that's what the folks at Amazon insisted when they founded the company and located it in the heart of Google/YahooLand (ie, Palo Alto). But that argument is disingenuous. First off, take a look at the A9 interface. Where's the commerce? (Answer, it's there, but it's hidden, more on that later when I post on the service itself). And second, I'd argue that you can't really be in the commerce business without having at least a strategy for owning search. The reverse also holds true. It's two ends toward the middle, and by the way, that middle ground is getting damn crowded - AOL, Yahoo, MSN, eBay, IAC, Amazon, Google...

Of course anyone who’s been in this game for a while will tell you that the internet industry is rife with cat and mouse games of cooperation turned to competition. Netscape’s outsourced its early search traffic to Yahoo, thereby ensuring Yahoo’s success. Yahoo paid the favor forward by outsourcing its search to Google, a practice it ended only last quarter. Microsoft built Overture, and crushed Looksmart. And AOL’s advertising business is on the rise again, due in large part to a deal with Google, which just announced a stunning new email service that pretty much decapitates one of AOL’s core differentiators (oh, Yahoo and MSN as well...).

What makes this particularly noteworthy is that A9 is built quite literally on top of Google. In short, Amazon has taken the best of Google, and made it, to my mind, a lot better. Sound familiar? Yup, it's what Google did to Yahoo, Yahoo to Netscape...you get the picture.

It all reminds me of a quote in a recent AP story from Google employee #1:

(The ongoing threat of competition) has helped keep Google from becoming complacent, said Craig Silverstein, the company's director of technology. "If someone should come along and do a better job than us, we know people will switch in a heartbeat."

Something tells me the hearts are beating a bit faster at Yahoo and Google HQs today. Will Google renew its deal with Amazon? Will Bezos and Schmidt put a good face on it and call this a partnership? I have no idea, but man, things are certainly getting interesting in this neck of the woods. More after I talk with folks and get a second order view of the landscape.

(I'll also have a much more complete posting on A9, including a tour of its features and a discussion of its strategic implications later tonight.)

PS- for a tour of what's cool in A9: Click here.

• Posted by John Battelle at 11:24 AM
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F*cking Spam

Spam. F*cking spam. Last night I got hit with about 150 or so comment spams from "http://www.emmss.com", some Chinese site I can't even read. I'm on it, but I don't have the time to hand-delete all these spams, and my mail is down to boot, meaning my Blacklist ain't functional. Even if it were, that's hundreds of clicks. Anyone know a way to batch delete comments in the MT backend?

• Posted by John Battelle at 7:55 AM
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The Web Time Axis

One of my largest gripes about the web is that it has no memory. But I think this will soon change - at some point in the not too distant future we'll have live and continuous historical copies of the web that will be searchable - creating, if you will, a time axis for the web, a real-time Wayback Machine (only there'll be no broken links). In other words, in our lifetimes we'll see our cultural digital memory - as we understand it through the web and engines like Google - become contiguous, available, always there. And barring a revival of the Luddites or total nuclear war, this chain will most likely be unbroken, forever, into the future. Historians looking back to this era will mark it as a watershed. At some definable point in the early 21st century, the web will gain a memory of itself, one that will never be lost again. Most likely, this will start as a feature of a massively scaled company like Yahoo or Google, much like Gmail or search itself is now. But it's coming, and the implications are rather expansive.

If the web had a time axis, you could search constrained by webdate. You could ask questions like "show me all results for my query from this time period..." or "Tell me what was the most popular results for XYZ during the 3rd of May in 20XX." How about "show me every reference to my great grandfather, born in 2050," asked by a great grandson in 2150? Impossible? Yeah, seems that way, but...so did a free gig of mail and the concept of the entire Internet in RAM. Thanks to the dramatic decrease in the cost of storage, 64-bit computing, abundant memory (jesus, there's an entendre), and the scalable business model of paid search, I think this day is not far off. The web is just ten years old, for the most part, but think what it might be like when it's 100 years old. That's a lot of data to search.

I was reminded of this idea (I had written it down a while back while musing for the book) when Gary sent word that Daypop is archiving its Top 40 back to 2002. It's fascinating to see what was the buzz, say, two years ago today.

• Posted by John Battelle at 10:01 PM
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Gmail update: CA Legislation, Timeline, et al

Hard to keep up with all the Gmail news, CNet rounds it up here. Upshot: CA legislator is threatening to introduce legislation outlawing the product, Google announced it was in a 3-6 month test phase and might make changes to the product based on response (opening the door to possible changes to protect or enhance or at least address privacy issues).

• Posted by John Battelle at 9:07 PM
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The Politics of SERPs

NYT today has an overview of the ongoing JewWatch.com case. The case reveals the bind Google faces when asked to remove offensive search results, in this case, the first result for the word "Jew" is an anti-semitic site. I am sure that does not leave many "feeling lucky."

The company, which is based in Mountain View, Calif., said it had no plans to remove the site from the search results list because it trusts its automated program to rank Web sites accurately. The search engine has been listing "Jewwatch.com" as the first-ranked site for three years.

"We find this result offensive, but the objectivity of our ranking function prevents us from making any changes," said David Krane, a spokesman for Google, adding that an exception is made only in cases where a site is illegal. Mr. Krane said the company has, for example, removed sites from its rankings that promote pedophilia, which is illegal.

The issue here, it seems to me, is the fact that Google is taken as the first and last word on what our culture believes to be important w/r/t any given term. That jewwatch.org is the first result for "jew" seems counterintuitive to nearly everyone, and clearly offensive. But somehow it has gained the highest ranking - it is a directory, with hundreds of links. Perhaps that is one reason why...and this controversy is only giving it more links...an interesting phenomenon. (I've not linked to it in this post for this reason).

Links into Jewwatch.com, according to Google.

According to Technorati.

Apparently, some folks are organizing a counter Google bomb, by linking to the wikipedia entry, which currently ranks at #2. There you go, I just added my pagerank to the cause...

Update: Google has posted an explanation of why this occurs here...that they responded so quickly is cool, I think.

• Posted by John Battelle at 11:30 AM
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What Does Google Know Trademark Lawyers Don't?

They must know something, because late last week they notified their advertisers that it was open season on trademark keyword buys (CNET story here). Yes, this is the long simmering issue that is still in the courts - trademark owners don't want third parties bidding on their trademarked terms (the most well-known case is Playboy).

In any case, this is a bold move, akin to "waving a red flag at the bull" as one source told CNET. But is it? At the end of the day, the law favors clarity and consistency, if it can. Seems to me this move forces clarity: It's all or nothing. Google is, by its action, declaring what it thinks is the appropriate approach - let the market decide. LImiting *some* keywords forces the courts into a never ending cycle of litigation around where the boundaries w/r/t fair trademark use are.In the current political climate, such an approach will probably prove futile in the long run. Google is playing this move against what they believe is the end game, and they may not be far off in their estimation of the courts.

• Posted by John Battelle at 8:53 AM
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More Open Source Search: Mozdex

Mozdex launched recently, it's an open source search engine that uses DMOZ as its seed corn.

Cool: Every result has an "explain" button that shows the ranking code. Now that's interesting.

It's a tad slow, and new so it's incomplete, but I hope takes off...and I hope Nutch will as well. (My 2.0 column on Nutch here...)

UPDATE: Gary, ever alert, notices this:

A quick check shows that the owner of GetHitsfromUS.com owns the
Mozdex.com domain.
http://www.whois.sc/mozdex.com

This may be a pure ad play, in other words. More when I know for sure.

• Posted by John Battelle at 4:30 PM
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Cramer: Google IPO Proves System Is Corrupt

A great Cramerian rant on why the Google IPO could be a "train wreck."

Excerpts:

And Google could be worth every penny, at least the pennies that the investment bankers are pitching it for, although it may not be worth what it ultimately ends up trading for. That’s because the disparity between where the bankers price the IPO and where it opens could be the largest gulf in the history of IPOs, in part because neither the government nor the industry has done a thing to fix a system that broke down and descended into corruption and stupidity during the dot-com heyday. Put simply, Google could end up being the biggest IPO, and the biggest IPO train wreck, in history....

When you combine the fervid nature of the Google fans with the fact that all Google fans own personal computers attached to the Web and therefore can access their broker with a keystroke, you get the potentially toxic combination of tons of uninformed buyers clamoring for any piece of Google stock that can be had, either on the deal—unlikely, given that the process favors the big boys—or after it starts trading on the open market. That means Google could have one of those bizarre trading patterns we saw at the height of the bubble in 1998 and 1999, when the bankers brought the deal at $25 and the stock opened for trading at three or four times higher than that.....

Google, the company, may be the real deal, but Google the stock may just show us a return to the bubble days that we all thought had mercifully been put behind us. Or, to put it another way, Google, now synonymous with “to search,” could, the moment it opens for trading, become synonymous with “to fleece.”

• Posted by John Battelle at 4:15 PM
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Findory Featured...

Newsearch engine Findory is profiled in this Seattle Times article. Like Topix, this engine creates personalized news pages based on your interests. Findory watches what your read and presents related stories. The founder, Greg Linden, cut his teeth in Amazon's personalization foundry...

• Posted by John Battelle at 4:04 PM
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Search Radio

Many have pointed me to this NPR series on search...I was interviewed for it but have no idea if my ramblings made the cut...

• Posted by John Battelle at 4:00 PM
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Microsoft: Fat around the Middle?

This BusinessWeek article, which I missed but an alert reader pointed me to, takes the thesis that MSFT is facing middle age with uncertainty.

The piece runs down the threats: Linux, slow growth, bloated core product that hasn't had an update in years, anti-trust suits....then runs down how they are reacting.

So check this out: They keep a list.

While Ballmer drives day-to-day operations, the 48-year-old founder is taking personal control of the technology charge. He has put together what is now called "The List" around Microsoft's Redmond (Wash.) campus. It's a priority ranking of 50 or so initiatives that cut across product lines and are critical to making the next generation of products successful -- everything from security software and the user interface to Web search and telephony. The List is so important that each item has been assigned to one top executive, who is responsible for driving it throughout the company. "We're using a lot of IQ to go after these things," says Gates.

Sound familiar? Yup, that's how Google has been doing it for years.

Also interesting, BizWeek seems to have a scoop on what's going on with Longhorn and the integrated search/file system:

The most important change (to Longhorn) is to the file system -- the way information is stored on the PC. Microsoft is creating a new design not just for Windows but for all of its products that makes it easier to retrieve photos, documents, songs, and e-mail. That's important as users stash more and more files on their computers. If Microsoft gets it right, it will be simple, for example, for users to zip through thousands of pictures and sort them by date or by the people in them.

But Longhorn won't do everything Gates first envisioned. BusinessWeek has obtained copies of two internal e-mails showing that Microsoft is cutting some of the most ambitious technologies to get the product out the door. For example, Longhorn will now ship with a scaled-back version of the file system. The current plan, in practical terms, means people will be able to search their PCs for documents and information related to each other, but they won't be able to reach into corporate servers for similar files.

I wonder, does this mean web-wide search integrated into Longhorn will be delayed?

And on the mid life crisis meme - Google may not be worried, but beware a company in midlife crisis - it might just try to buy the equivalent of a $100,000 sports car. And MSFT can afford some very nice cars....

(Thanks, Rohit)

• Posted by John Battelle at 3:51 PM
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Good Morning, Your New Net IPO Today Is....

Greenfield Online. They filed before, have filed again. They do online surveys.

• Posted by John Battelle at 8:24 AM
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The Font of Tragedy

Our culture often counters success with the rebuke of pridefulness, the font of tragedy. News.com reports from a Stanford MBA panel, where a Google exec (Salar Kamangar) gave the reporter, search beat veteran Stefanie Olsen, the sense that he was "downplaying the looming threat of search competition from Microsoft, saying his company doesn't expect to see a credible product from the software giant for years."

I dunno if this was a misinterpretation, but...this reminds me of what Marc Andreesseen said lo so many years ago (the famous quote where Windows was dismissed as buggy device drivers...). Also, new Google recruit Anna Patterson dismissed MSFT's search in this story a month ago. A trend? Probably not. But it's not beyond many to call it so.

• Posted by John Battelle at 9:15 PM
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I'll Take Mesothelioma for $100

Lawyers lick their chops at the chance to prosecute a mesothelioma case. That's why the rare form of cancer caused by asbestos is a high-value keyword. Apparently the term has hit $100 a click, according to this UPI report.

• Posted by John Battelle at 7:42 AM
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The Web As Platform

I've decided to add a new category to Searchblog, and with it a new facet of coverage, which I'm calling The Web As Platform. For reasons I hope to make clear over time, I think search represents critical binding for this particular erector set. This meme has been around for a very long time, in various flavors, but any number of circumstances are gathering which have given it significant traction and I find it important and fascinating. I've been doing a fair amount of work in this space, work I'll be announcing later in the year, but for now, I hope you agree this is a space worth watching.

• Posted by John Battelle at 1:03 PM
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IntelliTXT: Your Advertising Peanut Butter Is In My Editorial Chocolate....

Back in 1998, February to be exact, I shared a stage at the TED conference with Bill Gross, founder of IdeaLab. Richard Saul Wurman, TED's founder and impressario, introduced us both. I went first. I gave a short overview of my new magazine to a polite and curious reception. Gross then got up and in ritalin-starved fashion began a manic pitch. Imagine, he told the incredulous audience of tech and entertainment influencers, an entirely new search engine model, one driven not by editorial results, but by the raw metrics of the market itself - a pay-for-placement search engine, where the highest bidder wins top spot.

Afterwards a number of folks gathered around to congratulate me, and at the same time to ridicule Gross's vision. After all, I was starting a magazine predicated on principles pretty much diametrically opposed to Gross: objective and high-integrity journalism. Pay for placement? Bah! It will never work. Keep up the good work, Battelle.

Well, what Gross presented six years ago was GoTo, nee Overture, nee AdWords. What I was pitching was The Standard. Enough said.

This was on my mind earlier this week as I chatted with Doug Stevenson, CEO of Vibrant Media, the company behind IntelliTXT. This is the service that has been much maligned by journalists for its inline advertising solution, ads which pop up from inside editorial content when you click on a word or phrase which is double underlined in green. (An example of the ads in action is here (doesn't work on OSX).)

While the knee-jerk reaction of the press to this invasion of their hallowed editorial space is understandable, it's hardly nuanced. And some nuance is required to grok this particular beast.

That the IntelliTXT approach violates one of journalism's most sacred conventions cannot be denied. The ASME guidelines covering new media, in which I played a minor role as an ASME judge, do not specifically prohibit an IntelliTXT scenario. But that very fact belies how deep the nerve IntelliTXT has touched truly is: No one ever imagined that advertisers and publishers would have the temerity to turn a journalist's very words into an advertising opportunity. The section covering this territory reads as follows:

Hypertext links that appear within the editorial content of a site, including those within graphics, should be at the discretion of the editors. If links are paid for by advertisers, that should be disclosed to users.

It's almost as if we knew that IntelliTXT was coming, but in fact, we did not. What we meant by "hypertext links" were the ad units already extant at the time - in particular, paid text links at the bottom of the page or to the right, which were proliferating when these guidelines were created (circa 2001). We presumed they'd be discrete, we did not imagine they'd be the actual content itself.

The guidelines also state:

All online pages should clearly distinguish between editorial and advertising or sponsored content. If any content comes from a source other than the editors, it should be clearly labeled.

A case could be made that the green double-underline format is sufficiently distinguishing, and one could argue back that the opposite is also true. I'd like to move past that. If this approach can in fact make money for publishers, some version of it will be adopted. So now what?

Stevenson, the Vibrant CEO, was quite flummoxed by the negative press IntelliTXT has garnered. He said that Vibrant has been around quite a long time, had built a strong online advertising business with tens of millions in revenues, and was very deliberate in its approach to rolling out IntelliTXT - he had solicited the input of publishers and journalists, and built the product in a way that he thought was both appropriate and cutting edge. He argued that the system was created to be unobtrusive - the only way the ads show is if the user actively rolls the cursor over the keyword, then clicks. In a sense, he argues, he's giving control back to the user, they can ignore the ad if they'd like; the double green underline is far less intrusive than pop ups, and far more relevant than contextual paid links. If you're reading a travel story on Paris, for example, and the words "Paris hotel" are underlined, you just might choose to click on that link, and be offered an advertisement for a Paris hotel booking service. (Note I did not choose the Paris Hilton....) If you do choose that link, the ad is a service, not an intrusion, Stevenson points out.

Stevenson's other point is even more direct: It's the publishers who decide which keywords are linked to, and when. The entire system is controlled by the publishers, so if anyone should take the heat, it's the publishers, and not the IntelliTXT system. While this argument ranks up there with insoluble polemics such as "Guns Don't Kill People, People Kill People," Stevenson does have a point. So why might a publisher want to employ such a system?

I can think of many reasons. One, the publisher has no ostensible editorial boundaries. Cargo - one of a raft of new magazines that are essentially cataglog magazines ("magalogs"), or most of the Seven Sisters (Glamour, Vogue, etc) come to mind. These magazines pretty much exist to move product, and they don't pretend otherwise. A system like this would work quite well for the online kin to these kind of publications.

Second, there are an entire classes of content-driven sites which claim absolutely no pretense of editorial objectivity. Whether they are fan sites, directories, blogs, corporate advertorials, for-profit domain-specific portals, you name it, the tradition of sites which carry their biases proudly or are baldly commercial in nature is rich and growing, and IntelliTXT may well give these kind of sites a new monetization model.

When it comes to true editorial sites, I think IntelliTXT portends an important opportunity for publishers to control and manage relevance, service, and context for their readers. But I think both readers and journalists are not ready for the context-jarring concept of ads directly in editorial text. It crosses a line that should be respected. But what if it were possible to break out keywords for a given article in a separate box, for example, and run that box at the end or to the side of the article? This addresses the Reese's Peanut Butter Cup problem (your advertising peanut butter is in my editorial chocolate....) but retains the power and reader service of the system. Stevenson replied that in fact such a hack would be possible. Should IntelliTXT prove a viable advertising medium, I'd expect publishers to try this approach almost immediately.

Now, I won't get into other issues this service raises - that editors might start writing to high-value keyphrases, for example - but they exist, as they do for anyone working with AdSense or even standard print advertising, for that matter.

To conclude, I think journalists jumped all over IntelliTXT because it was easy to leap, just like we did with GoTo back in 1998. But we'd be wise to not dismiss so quickly ideas which might portend new approaches to monetizing our work. In this marketplace, a few minor tweaks can yield historic shifts. Witness Overture: Gross and his team ended up adopting an OEM model and outsourcing their pay for placement engine to others, who put the ads on the right of editorial results, clearly marked for readers (well, in most cases). The rest is history.

IntelliTXT backgrounder is here.

• Posted by John Battelle at 11:44 AM
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Re-Find

A reminder to sign up for Re-Find, the email summary of the week that was on Searchblog, in the upper left hand corner. If you're into that kind of thing, that is.

• Posted by John Battelle at 9:01 AM
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Claria Clarified

Perhaps I was being a bit too off the cuff in my last post on Claria. Full disclosure: A good friend went to work for them recently. This person admitted the company's past, but said that in fact it was mending its ways. New management has come in, folks with a good track record at Excite, pre-bust. I'm looking forward to learning more soon. On that note, look for my post on IntelliTXT shortly.

• Posted by John Battelle at 9:00 AM
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Claria Files For IPO

Change your name from Gator, get the books in order, put happy smiling people on your website, and file. OK, Marchex, Advertising.com, BrightMail, Shopping.com, Salesforce, Claria. Do we have a trend yet? Do we have a problem yet?

Bankers: Deutsche Bank Securities, Piper Jaffray, and Thomas Weisel Partners.

The S-1 is here.

• Posted by John Battelle at 8:10 PM
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Google and Online Currency?

Not sure entirely what they're on about in this eMarketer report, as it's an excerpt, but the suggestion is made, after lengthy throat clearing, that Google create its own online currency so as to compete in the SFO (Search Find Obtain) space. The article correctly points out that Google lacks muscle in the Obtain part of the equation, compared to Amazon and EBay. But then it says Google should get its own currency. I don't think so. But, what do you think?

• Posted by John Battelle at 9:03 AM
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Yahoo Earnings Jump, Stock Does the Splits

Yahoo announced earnings (PDF) just now, and the numbers were stronger than expected. The company earned $132 million on revenues of $758 million ($550 excluding TAC), up from $55 million on $283 million a year ago. EPS came in at .14, the street was expecting .11. The stock is up more than 10% in after hours trading. If you want to download their presentation on their earnings, click this link. The company posted strong gains across nearly all the core metrics - uniques, active users, cash flow, international revenue ...etc.

To add to the euphoria, Yahoo announced a 2 for 1 stock split, and boosted guidance. The conference call is slated for a half hour from now.

(Thanks for SEC nod, Gary)

• Posted by John Battelle at 2:30 PM
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Privacy Advocates: Suspend Plans For Gmail

In a letter released yesterday twenty eight privacy experts and civil liberty organizations urged Google to suspend Gmail. This is quickly becoming a significant test of not only Google's ability to communicate its intent to the world, but of what it means to live in a web centric world where your data is out there, with all the consequences, good and bad. One company cannot solve this problem.

PS - Gmail also has some trademark issues...

• Posted by John Battelle at 10:28 AM
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The Google Platform Meme Grows

...with this post from Kottke. The concept is further pushed by Danny Sullivan in a post here and in an AP piece in which yours truly is quoted.

Excerpts from Kottke:

They have this huge map of the Web and are aware of how people move around in the virtual space it represents. They have the perfect place to store this map (one of the world's largest computers that's all but incapable of crashing). And they are clever at reading this map. Google knows what people write about, what they search for, what they shop for, they know who wants to advertise and how effective those advertisements are, and they're about to know how we communicate with friends and loved ones. What can they do with all that? Just about anything that collection of Ph.Ds can dream up.

Tim O'Reilly has talked about various bits from the Web morphing into "the emergent Internet operating system"; the small pieces loosely joining, if you will. Google seems to be heading there already, all by themselves. By building and then joining a bunch of the small pieces by themselves, Google can take full advantage of the economies of scale and avoid the difficulties of interop.

Google isn't worried about Yahoo! or Microsoft's search efforts...although the media's focus on that is probably to their advantage. Their real target is Windows. ....

From Danny:
After all, even if you do have a great way to search through desktop-based e-mail, you might like the idea that all your mail is backed up, stored offsite, and easily searchable from anywhere.

Now, take things a step further. Imagine next year Google provides users with 5, 10, or more gigabytes storage space for personal files.

Got a ton of text documents, spreadsheets, and other material? Push it to us, Google would say. We'll store it, index it, and make it easy to retrieve what you want. Google already indexes this type of material across the Web and has done so for ages.

As broadband expands, such an idea becomes increasingly more feasible. With it, the notion that Microsoft might trump Google with desktop lock-in becomes less of an issue.

As I've muttered privately more than a few times, and have begun to shout to anyone who will listen now that I'm writing in Word - if Google could do to Word what it intends to do to Entourage, well, that would sell me. F*cking Word.....

• Posted by John Battelle at 10:12 AM
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The Trademark Lawsuit That Won't Go Away...

A lawsuit at the heart of the trademark/paid search issue will not be tossed out lightly, a judge ruled yesterday. CNET reports.

• Posted by John Battelle at 8:26 AM
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Yahoo Launches Soul Search

Funny Onion spoof (is there any other kind?):

"A soul search often required backpacking trips across Europe, disastrous long-term relationships with incompatible lovers, and years of expensive therapy," Semel said. "Worse, the search process often included depression, lowered self-worth, and intense doubt."

Semel called the old way of seeking clarity "a logistical nightmare."...

"There are bound to be some bugs, but we're not too worried," Semel said. "We at Yahoo have a lot of experience in helping people navigate an environment full of falsehoods, random useless information, and truly horrifying pornography. I don't think the human soul will hold any real surprises for us."

Early reviews from consumers have been overwhelmingly positive.

"I was skeptical, I'll admit," said former Boston-area investment banker Royce Creighton. "But after two minutes on Yahoo Soul Search, I found that being born into a family of bankers didn't mean I had to be a banker. Half an hour of advanced soul-searching helped me find a buyer for my house, an alpaca farm for sale in Wyoming, and a highly recommended acupuncturist in Cheyenne. I've never been happier... and I found all this inside myself through Yahoo!"

• Posted by John Battelle at 4:36 PM
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Referrals and the Yahoo Switchover

Yesterday's SEW (yes, I'm behind, was on deadline on a story that is so damn good, but...damn, it's under embargo) has a good story comparing Yahoo and Google referrals, using WebSideStory data. This chart shows that Google still has the lion's share, and in fact grew a bit year to year, but that Yahoo has not slipped during the changeover from using Google to using its own search. The chart is for March, 2004.

• Posted by John Battelle at 10:57 AM
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The Future of Search

Computerworld does the honors this time and has some interesting new stuff, including a crawler that is domain (ie, subject) specific. This could help build the Specific Web, which I sort of outlined in this post on GlobalSpec. Thanks to Gary for the tip, and a good summary of the article here.

• Posted by John Battelle at 10:41 AM
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Phillip Blogs Blow by Blow on Gmail Testing

Interesting and funny. Some tidbits on Google exces "personal question" for password recall purposes.

• Posted by John Battelle at 8:35 AM
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Spymac?

Tiny Mac-related hosting site is giving away gig of free email. No idea how. Stefanie Olsen reports...

• Posted by John Battelle at 12:15 AM
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IntelliTXT Debuts, Journalists Not Pleased

Journalists have a problem with IntelliTXT. Not only is its name rather difficult to spell, its technology takes words within editorial stories and turns them into sponsorship opportunities. This is not going over well with the ink stained classes. I'm talking to the company later this week, stay tuned.

• Posted by John Battelle at 4:04 PM
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Safa Says: Strong Earnings Ho...

Safa Rashtchy predicts strong earnings this past quarter, starting with with a good quarter from Yahoo this Weds.

Driven by continued strong fundamentals, the first quarter of 2004 will bring mostly upsides to the estimates and only a few in-line performances. In fact, we believe the Q1 earning season will be characterized as a strong quarter with two trends: On the one hand, companies like Ask Jeeves, Netflix, and LookSmart have already pre-announced a much better-than-expected quarter. On another category, companies like eBay and Yahoo will have strong upsides to guidance - much of it already known and reflected in at least some of the Street estimates, including ours. We do believe, however, there will still be upside even to our raised estimates for Yahoo or eBay. The upside to guidance is likely to be the trend even for the smaller companies such as DoubleClick and Cnet - in general, all ad-based models should report a solid upside since the growth trend in advertising noticeably accelerated in Q1. Similarly, search not only stayed strong but showed very solid pricing for a seasonally weak Q1.

• Posted by John Battelle at 2:06 PM
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Revenue Science

New model in an emerging market. Big name investors. Strong management. Product launched today. Big name customer, too (WSJ...) On my To Grok list.

Update: Fred points out that Tacoda was in this space first and, to my mind, sports Big Name Investors as well, namely, Fred and Jerry...

(thanks, Gary)

• Posted by John Battelle at 11:37 AM
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boing boing and the bills

My friends at boing boing are asking their readers to help them figure a way to pay the bills yet stay true to their roots. They've asked me to help them, and I'd love your input too. Many of Searchblog's readers are well down the path of figuring out how to support blogs with advertising or sponsorship revenue. You can chime in via the comments below, or at bb's comments page, here.

• Posted by John Battelle at 10:43 AM
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The IPOs Are Back, Advertising.com...

...has filed. That makes yet another net advertising-based filing - Marchex clearly helped. Story here, S-1 here(re req'd). Goldman will lead with Deutsche and Piper holding the wedding train.

• Posted by John Battelle at 9:40 AM
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Yahoo: New Brand Image ("Life Engine"), Distribution Wins

Yahoo will launch a new brand marketing campaign this week, according to a lengthy report in Media Daily News. It's the first major effort by the new CMO, Cammie Dunaway. The theme is "Yahoo is the life engine" and it features a number of "minor celebrities" like former CA governor Gray Davis.

Perhaps the most charming of the initial group is a spot featuring former California Gov. Gray Davis paired with a junior high school student who uses Yahoo! mail to convince her schoolmates to elect her as eighth-grade treasurer. With "Hail to the Chief" playing in the background, Davis introduces himself and says he's using Yahoo! to look for an agent, suggesting that if a former actor can be governor, maybe a "former governor can be an actor," although he doesn't think "action/adventure" would be his genre. The spot closes with Yahoo! as a "Job engine, mail engine, life engine." The creative strategy presents the audience with two different demographics, each using Yahoo! to achieve a task or to enrich a passion.

In other news, Yahoo and its Overture subsidiary won some new business last week, including stealing CNN's search biz from Google, and adding a deal with the WSJ and renewing and extending its deal with ESPN. Release in extended entry.

Overture Extends and Expands Search Agreements with CNN.com and ESPN.com, Signs New Deal with The Wall Street Journal Online
 

Company Adds Three New Content Match⎪ Agreements and Provides Yahoo! Search Results to CNN.com

PASADENA, Calif., April 5, 2004 - Overture Services, a wholly-owned subsidiary of Yahoo Inc. (NASDAQ: YHOO) and provider of essential online marketing services, today announced that it has extended its existing agreement with CNN.com and has expanded it to include additional Overture and Yahoo! products.  In addition, the company announced that it has signed a new distribution agreement with the Wall Street Journal Online (WSJ.com) and that it has extended and enhanced its existing agreement with ESPN.com. All three deals are multi-year agreements.

"Today, CNN.com, ESPN.com and The Wall Street Journal Online - three of the world's leading online brands - are confirming their commitment to search through their relationship with Overture," said Bill Demas, senior vice president and general manager, Overture’s Partner Business and Solutions Group. "Our comprehensive suite of sponsored search, Content Match and Yahoo! Search products enables us to offer partners the customized search solutions that meet their individual needs.”

As part of its enhanced agreement with CNN.com, Overture will replace CNN.com’s existing Web search listings with results generated by Yahoo!’s Search Technology. In addition, Overture will begin to provide Content Match, its contextual advertising product, to multiple CNN sites and has extended its term of service as CNN.com’s exclusive sponsored search provider.

"We're delighted to expand our relationship with Overture. CNN.com has consistently been the number one online news publishing site. Overture’s strategy for creating a premium marketplace for contextual links fits perfectly with our goal of aggregating and serving a highly desirable audience,” said David Payne, senior vice president and general manager, CNN.com. “In creating this new marketplace and in providing search result functionality, Overture and CNN.com are able to jointly leverage and monetize our valuable audience and tremendous traffic numbers."
Under the terms of its new distribution agreement with WSJ.com, Overture will deliver Content Match results to WSJ.com’s more than 689,000 online subscribers worldwide.  In addition, Overture will provide sponsored search results to users of the WSJ.com’s site search.

“We are very pleased to partner with Overture to add their sponsored search and Content Match capabilities to our site,” said Randy Kilgore, vice president of advertising, The Wall Street Journal Online.  “We selected Overture because of its flexibility, support and integrated solutions, and look forward to working with them to provide our subscribers the most up-to-date, relevant information possible.”

With ESPN.com, Overture has renewed and extended its existing sponsored search agreement to include Content Match. The enhanced relationship offers users a more robust keyword search, ESPN.com site search and comprehensive Web search experience.

“We are excited to extend our relationship with Overture to add its contextual listings to ESPN.com, which will provide even more relevant information across our site," said John Kosner, senior vice president and general manager, ESPN.com. "Having multiple search products with our content allows us to offer far more customized information to our users.”

“These partnerships will greatly benefit advertisers and users alike. By establishing and deepening relationships with leading publishers like CNN.com, ESPN.com and WSJ.com, Overture can now provide advertisers even more ways to connect with customers,” said Demas. 

About Overture
Overture Services, Inc., a wholly-owned subsidiary of Yahoo! Inc., offers essential marketing services for companies doing business online. The company's search-based products and tools help businesses connect with highly motivated customers. Overture is based in Pasadena, Calif. with U.S. offices in New York, Chicago and San Mateo, CA. The headquarters for Overture's non-U.S. business is in Ireland, with offices across Europe, Asia, and Australia. For more information about Overture, visit www.overture.com. Overture is a service mark of Overture Services, Inc.

• Posted by John Battelle at 9:16 AM
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How To Stop Gambling Online? We'll Never Know, Exactly...

Yahoo and Google have agreed to stop take online gambling advertising. Lycos already has.

I'm not sure I like this, for the precedent it sets. I don't like the lack of clarity by the companies about why they made this decision, and I don't like the perception that the threat of government action was behind it all. In essence, it feels this was done behind closed doors, without a clear signal as to why the action was taken. Again, I don't like the precedent. First this, then? Don't Be Evil can cut both ways.

• Posted by John Battelle at 12:51 AM
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TuneCircle

Buddy just invited me into this new social networking app: share your music library (info only) and see how FOAF plays with tunes. Plan to sign up and see how it goes.

• Posted by John Battelle at 11:56 PM
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Skrenta Groks The Google Platform OS

Some very smart thinking in here about how Google is a massively distributed platform with its own OS, and how that has given Google the competitive edge to roll out cool stuff like Gmail. Very Web 2.0 stuff here - the Platform Web.

Google is a company that has built a single very large, custom computer. It's running their own cluster operating system. They make their big computer even bigger and faster each month, while lowering the cost of CPU cycles. It's looking more like a general purpose platform than a cluster optimized for a single application.

While competitors are targeting the individual applications Google has deployed, Google is building a massive, general purpose computing platform for web-scale programming.

This computer is running the world's top search engine, a social networking service, a shopping price comparison engine, a new email service, and a local search/yellow pages engine. What will they do next with the world's biggest computer and most advanced operating system?

PS - read the comments in my Gmail post. Seems some Gmail beta testers are hanging out there...

PPS - Gmail is reviewed here by a beta tester...thanks Eric...

• Posted by John Battelle at 11:51 PM
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Is the Google IPO Meme Slipping?

Methinks.

The Guardian:

As it is, Google's plans to embrace the public market and all that entails seem to have slipped. Too late for the pre-summer flotation window, there are also no jungle drums beating for an autumn offering. It is as if the search engine's owners have tested market receptivity, found it to be OK in principle but now have to make the hard decisions about the merits of a listing before they even get to the issue of its timing.

• Posted by John Battelle at 9:03 PM
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Newsletter reminder

Hey Folks -

Reminder, if you want to get a week's worth of Searchblog in your in box each Friday, toss your email into the box at left. Will send the next one - version 1.04, shortly.

• Posted by John Battelle at 8:58 PM
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I'll Scrape Your Back, But Don't You Scrape Mine...

Google is blocking a small web developer from scraping Google News, which itself is a scrape of a bunch of other sites. The developer admits his scrape breaks Google's TOS. Rich, how do you feel about this over at Topix? Will you let him scrape you?

Developer's lament here...

(Thanks, Beal.)

• Posted by John Battelle at 11:14 AM
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Google Changes AdSense Pricing Strategy

AdSense is Google's contextual ad product for publishers - the one folks can sign up for and have up and running on their own site in minutes. Google's advertisers have long complained that AdSense ads are far less valuable to them than AdWords ads (the ones that run on Google's site), as folks who are reading content on any given site have far less intent to buy than folks who are actively searching for something on Google's site. Google steadfastly mixed the two and would not offer variable pricing, until now. But their plan is not to split the purchase, but rather "monitor performance" and offer a better rate if conversions are low. Cnet reports. Overture already offers a split pricing service.

This move is widely seen as "Google giving in to advertiser demands." Interesting. Jarvis sees it another way: He says publishers - in particular bloggers - are getting shafted by an ever more powerful Google. He's hoping to drive interest in alternatives via his session at Bloggercon.

• Posted by John Battelle at 11:07 AM
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GMail Roundup: "The Creeps"

The meme most media outlets have given to their second day coverage of Gmail is that it gives folks "the creeps." In essence, the idea that machines will be reading folks' email freaks a lot of observers out. Privacy advocates are connecting the dots on mailing lists like Farber's IP, and Cnet, the LA Times, and Wired News have written stories turning on this angle.

I think the jury is out on this issue. If people willingly give up their privacy to get a gig of storage and the ability to search their email (email search is one of the biggest search hairballs out there, IMHO), who's to say that's wrong? On the other hand, this does create a lot of potential for trouble, given how much information can now be connected. If you get on the wrong side of the government, for example, and use GMail and Google search (and Orkut...), you had better hope the Patriot Act has been repealed. But this is true if you're using Yahoo, AOL, or MSFT as well. All these companies would have to give up your personal information to a government demand. It's just that with Google, the power of that information working together is so obvious, and is, in a way, made available to you via a business model which - thanks to contextual advertising - makes it economical for you to have a gig of storage and a whole new interface to mail (search). Is that a bad thing? I don't think so. But I do think it'd be very wise for Google to lay out a white paper explaining all of this in intricate detail, a link to which is prominently displayed to all Gmail users.

Trust me, Google may be the first company to show the general public the power of personal information leveraged against search, but they won't be the last. Think about Amazon for a microsecond...

Of note:

Phillip points to a GMail screenshot. He also rebuts the privacy issues in this post.

• Posted by John Battelle at 9:16 AM
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Yahoo Responds to GMail (unconfirmed)

Now that we know Google's Gmail is for real (though my God, what a joke it was...) and - blush - I went out on a limb and called it a hoax - I have unconfirmed news that Yahoo has already responded to some users with an upgrade to 100MB of storage. Here's what a Yahoo mail user claims was sent to him, no idea if this is confirmed. Will attempt to find out for you all...

UPDATE: Yahoo PR sez: This test was in the works well before Gmail rolled out, and was sent out prior to the GMail announcement...

-----

Yahoo! Mail
Service Notice

Dear Yahoo! Mail User,

We've made changes to your Yahoo! Mail account -- we've upgraded your email
storage quota to 100MB, at no cost to you. As a loyal Yahoo! Mail user, you've
been randomly selected to receive this free benefit effective March 31, 2004.
You'll also be able to attach up to 10 files to an outgoing email message
(increased from 3); and your outgoing message size can be up to 10MB
(increased from 3MB). It's just our way of saying thanks!
You can keep these benefits as long as this Yahoo! Mail account remains
active. For your email account to stay active, you must sign in to your Yahoo!
Mail account at least once every four months and comply with all applicable
Yahoo! Terms of Service and guidelines. If your email account becomes inactive
at any time, you will no longer have the increased storage capacity.

If you purchase a Yahoo! premium service in the future that includes
additional email storage*, you will be charged the then-current price for that
service. After the purchase, your storage quota will be the level that
accompanies the purchased service or the level granted to you as part of this
offer, whichever is greater. Storage will not be additive. For example, if you
purchase a Yahoo! Mail Plus account with 100MB of storage, your total Mail
Plus storage quota will be 100MB. You will not receive any refunds or future
credits with your service upgrade.

Thanks again for using Yahoo! Mail. If you prefer not to receive this free
benefit for any reason, simply reply to this email and let us know.

Sincerely,

Yahoo! Mail

*These include SBC Yahoo! Dial or DSL, Yahoo! Plus, Yahoo! Mail Plus, or
Yahoo! Mail Extra Storage.

-------------------------------

• Posted by John Battelle at 9:22 PM
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Ask BVDs...

Ask has sense of humor too....

(thanks Gary...)

• Posted by John Battelle at 8:40 AM
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Kinja Launches (No Fooling, I think....)

Meg and Nick's creation launched today. It's a "blog of blogs." A "blog portal." AN "RSS reader (of sorts) for people who don't know what RSS is..."
The Times has a piece here.
Nick blogs the background here.
Congrats to them both!

• Posted by John Battelle at 7:47 AM
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Gmail: Elaborate Fraud, Or...

Google announced GMail late yesterday, and the media, Wired News and CNet and the New York Times, bought it. So did The Register, which said that the company is using April Fools to launch the service for real. The Times' John Markoff - no slouch he - wrote up the story totally straight citing unnamed sources "familiar with the service." AP and Reuters moved wire stories....

But one can seriously debate whether this is a joke, folks (this is, of course, as is this Google job posting). Sure, there may be seeds of truth, like the patent application the company filed to serve email ads, or the fact that such a service makes a lot of sense for Google, and has been widely rumored. Or even the one gigabyte storage approach - never have to delete an email again - (sounds like Mirror Worlds...).Slashdotters are having a field day debating this one...turning up the fact that Gmail.com is registered to Google, for example...(this has been known for a while...)

But this has got to be an April Fool's Joke. A very believable one, one that in the long run may come true, but a joke. Note an employee's posting on his blog, under the subject "haha" and noting "I love this time of year." And the release itself is simply too sophomoric to be anything but a joke. If indeed this is an elaborate ruse (including fake quotes and interviews from Wayne Rosing) I imagine the press will be most unhappy with the folks at the Googleplex. Journalists these days tend to have no sense of humor when it comes to their own gullibility. Unless, of course, they were all in on it...which has its own set of issues. Fun, no matter how you slice it...

UDPATE: OK, maybe this *is* for real, because Danny Sullivan of SEW is playing it straight. If it *is*, then...what's with all the hat tips toward April Fools? Ahhhh, who knows.

• Posted by John Battelle at 3:28 AM
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The Other Shoe Finally Drops: Google Files S-1

If Google published its S-1 in book form, it'd be #1 on Amazon for weeks. But you can read it for free here, because today, Google filed for the IPO of the decade. The details:

- Big News: Larry Page, Sergey Brin, and VCs Sequoia and KPCB together own 95% of the company. The remaining 5% is split between early angels and a lava lamp wholesaler who "management admits got a pretty good barter deal back in 1998."

- The employee stock option plan, long believed to be the impetus to a public filing, has been dumped in favor of a private shadow equity plan modeled after the Economist magazine. "It's the only magazine we read that hasn't put us on the cover," Page explained. "We kind of hoped this hat tip might change that."

- Google will be taken public by Morgan Stanley (no surprise there) but with a twist: To win the Google business (and estimated fees of $300 million), Morgan has agreed to purchase Dutch auction innovator WR Hambrecht for an undisclosed sum (wags estimate it at nearly $150 million), to be paid in pre-IPO shares (apparently the ability to "sell on the pop" was a deal clincher). Morgan and WR Hambrect, in a joint release, have promised to "incorporate WRH's innovative approach to fair market valuation" in the secondary market at some point in the "near future."

- Eric Schmidt, while participating in the Economist-style plan, also has options to buy up to 20% of the company directly from the founders at a strike price 20% above the opening trade "should certain conditions occur." A close reading of these conditions include: 1. Upon a tender offer for the company by Microsoft which values Google at no less than $100 billion (such a transaction would net Schmidt $15 billion, conservatively) 2. Upon a "reasonable" tender offer for the company by AOL (literally, AOL, the offer is void if tendered by Time Warner) 3. Whenever a quorum of Google VPs stipulate under oath that Larry and Sergey have become distracted and are no longer interested in the business 4. The day Google accepts paid inclusion or 5. The moment Sales has input into Product Management. One can only imagine that a sixth condition may as well be: Should hell freeze over, an option to exercise his shares forty five days thereafter, assuming that, in fact, hell remains frozen on the forty-sixth day. One senses this portion of Eric's compensation is some kind of elaborate joke between the three famously tight-knit leaders.

- Google lists as its main market competitors Microsoft, Yahoo, AOL, that pesky butler in Emeryville, neighborhood garage sales, and, interestingly, Udi Manber.

- The S-1 lists an extraordinary cavalcade of "material pending legal matters." Of note: An ongoing dispute with Stanfurd University, holder of the PageRank patent, on the exact definition of "in perpetuity" and a slow burning lawsuit brought by Overture Inc., the gist of which seems to be "Material and Adverse Damages Related to Generally Getting Credit For Our Idea, Goddammit."

More as the press wakes up to this extraordinary news...

Light posting today, as I am out in meetings...Happy April Fools!

• Posted by John Battelle at 2:57 AM
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