Google Secrets

When Microsoft or Oracle barrel into a market, they serve up a grand strategy and a product road map to get you there. With Google, you might get a beta product that shows up on the Web, sometimes one that's less advanced than similar offerings in the market, and often with a narrowly defined goal, even if the potential for grand expansion seems obvious. CEO Eric Schmidt has said the company doesn't have a sweeping strategic vision, that "we delight in not having such strategy." Not no strategy, but one to innovate in many interesting areas and not to build just one thing.

What follows aren't the kind of secrets we dug through Google's trash to get. Google even talked a little about many of them. These are unknowns in the sense that the typically reticent Google hasn't told the world just how it intends to move down these roads. Here are some insights.

How big in the offline world?

Google is getting into something new all the time: Google Earth, a partnership with NASA, Google Pack software, voice over IP, scanning the world's books. But when it comes to revenue, the company's business can be understood on three lines: 56% from online ads running on its sites, 43% from other Web sites and magazines where Google places ads for a share of the revenue, and 1% other. Its dependence on online ads is one of the reasons Google paid $1 billion for 5% of America Online--to protect the ad revenue that partner AOL generates for Google and keep that from going to Microsoft.

Understandably, the company wants to diversify, and this month's acquisition of dMarc Broadcasting shows one way it intends to do so: by placing ads in conventional broadcast and print media. DMarc does business the way Google likes it--using software that helps automate the buying and placing of radio ads. Google plans to integrate that with its AdWords platform for placing Internet ads. How much does it like this business? It paid $102 million in cash, but the price tag could rise to $1.1 billion if the business hits all its targets the next three years. That's a lot of upside.

Google also is experimenting with print, placing ads for customers through a limited trial in PC Magazine, Maximum PC, Budget Living, and the Chicago Sun-Times. One advantage from such partnerships may be to access partners' local ad sales forces.

Google is now focused on the Internet, radio, and print media, says Patrick Keane, head of advertising sales strategy. But his description of the company's vision--delivering "accountability, efficiency, relevance, and scale to advertisers"--isn't so limited. With Google's recent decision to start selling video content such as CBS TV programs and pro basketball games, it's all but certain the company will move into enabling video advertising as well.

What about further afield, like telemarketing and direct mail? If Google goes there, it would have to do so more cautiously. The company's instant-messaging and Internet telephony application, Google Talk, is free and ad-free, but it's doubtful both of these conditions will continue indefinitely. Telemarketing over IP may not sound appealing, but marketers have yet to meet a medium they won't try.

The caveat here is that brokering the world's information presents as many pitfalls as opportunities. Given the wealth of information that Google collects about its users, figuring out what not to sell will be one of Google's most vexing challenges. --Thomas Claburn

If not a PC, then what?

Google co-founder Larry Page's speech at the Consumer Electronics Show in Las Vegas this month couldn't help but be a letdown. Page made significant announcements, detailing Google's plans to sell video online and distribute a consumer software bundle called Google Pack. But with the rumor mill speculating about a "Google PC" that would be sold in partnership with Wal-Mart (which Google denied all along), nothing short of a major hardware unveiling was going to be enough.

IBM and Yahoo Offer Free Enterprise Search Software

In a partnership reminiscent of Neil Simon's The Odd Couple, IBM and Yahoo have come together to offer free enterprise search software.

The two companies — one built for business, the other caught between geeks and glamour — on Wednesday plan to announce the availability of IBM OmniFind Yahoo Edition, entry-level search software for corporate Linux and Windows servers. The software is available at no cost from Yahoo.com.

"We think it's a very complementary relationship," says Marc Andrews, program director for information management strategies at IBM. "Yahoo brings that consumer view of the market and a view into small businesses, and also the awareness around Web search and easy search for the average user." IBM, he says, brings "an understanding of enterprise-oriented systems."

Those familiar with the installation of such systems — historically as pricey and painful as a multi-month root canal — may be surprised to find that IBM OmniFind Yahoo Edition has been designed to install in five minutes, in three clicks or less.

Lotus As A Web 2.0 Collaboration Platform? Not Quite Yet

IBM desperately wants a seat at the Web 2.0 table. Last week at its Lotusphere conference, IBM brought out new tools ranging from social networking software designed for businesses to a more user-friendly version of a Notes E-mail application that was once synonymous with "clunky."
All the Web 2.0 buzzwords are represented: wikis, syndicated feeds, video, presence awareness, click-to-call. Beyond the features, IBM's trying to make the Lotus brand something of a mashable collaboration platform, allowing plug-ins to products such as Cisco telephony, AOL instant messaging, Salesforce.com CRM, and Research In Motion BlackBerrys. "The collaboration market is not an E-mail-only market anymore," Lotus VP Ken Bisconti says.


Agreed. But IBM's everything-and-the-kitchen-sink approach could amount to a jumble of loosely coupled tools. Th.....

How To Protect Yourself In A Software Acquisition

Software users should protect themselves if an important vendor gets caught up in an acquisition. Here are a few simple rules.

Consider the possibility Gary Scholten, CIO at Principal Financial Group, considers the potential for acquisition during the due-diligence phase of choosing a software vendor, particularly if the company is in a fledgling area of technology. "Sometimes this leads us to say we're not going to take a chance on software in this space, where companies are being acquired and there's significant changes," Scholten says.

Hold fast to agreed-upon prices When a company's software vendor is acquired, it should require the acquiring company to honor the terms and conditions of its original contract for at least a few years, including maintenance prices, says Gartner analyst Alexa Bona, who specializes in software licensing. "We're seeing an increase in maintenance fees as a result of the acquisitions," she says. For example, Oracle's standard maintenance fee is about 22%, among the highest in the industry, says Bona, while Siebel's fees ranged between 15% and 17%, and PeopleSoft's were about 20%.

Beware architecture promises Be careful about the big four's plans for service-oriented architectures, such as Oracle's Fusion and SAP's NetWeaver. As a technological approach, SOA offers benefits, but it can give vendors an excuse to jack up prices. As SOA-based products emerge, Bona predicts, vendors will seek premiums of 30% or more over pre-SOA versions.

Go beyond the name Most customers license a product by name, Bona says, but in a contract, they don't define what's included in that name. That means an acquiring vendor can come back later and say, "We just rebundled this product, and it's not called a business suite anymore; it's called a specific process." Bona recommends customers include in contracts the basic functionality of the software that's been licensed, with a clause that says if it's renamed, rebundled or relicensed in any way, they're not going to pay anything extra for it.

Do your homework Principal Financial's Scholten is always wary of the acquiring vendor's integration claims. "We don't take their word for it." Scholten does an architectural assessment to try and determine how realistic such claims are, or whether in the end he'll have to do the integration work himself.

Microsoft is looking to supplant the ubiquitous JPEG with an image format of its own--and it's hoping the debut of Windows Vista will help do the job.

IBM's Sametime has gained interoperability with public instant messaging networks from AOL and Google, and will interoperate with the one from Yahoo in a matter of weeks.

IBM plans to make the announcement today, almost a year after disclosing its intention to provide this interoperability for Sametime 7.5, the newest version of the enterprise IM system.
Snubbing Microsoft?

Vista to give HD Photo format more exposure

Microsoft is looking to supplant the ubiquitous JPEG with an image format of its own--and it's hoping the debut of Windows Vista will help do the job.

In 2006, Microsoft began promoting its own image standard, formerly called Windows Media Photo but renamed HD Photo in November. The company makes no bones about its ambitions: "Our ultimate goal is that it does become the de facto standard people are using for digital photos," said Josh Weisberg, Microsoft's director of digital imaging evangelism.

"HD" doesn't actually stand for "high definition," but it's supposed to connote the better image quality that comes with HD TV. Rico Malvar, a Microsoft Research director who helped develop the format, said that compared with JPEG, HD Photo preserves more subtle details, offers richer colors and takes up half the storage space at the same image quality.......

Microsoft hurt by poor Live branding, analysts say

Bungled branding of the new Windows Live Internet services has hurt Microsoft and could affect its chance to play catch-up with Google, analysts said on Friday.

On Thursday, Microsoft lowered its sales forecast for its Internet services business for the full year from 11 percent to between 3 percent and 8 percent. It also acknowledged that its search market share has dropped. Windows Live Search saw its searches drop nearly 10 percent from a year ago, while Google's rose more than 22 percent, according to figures released this week from Nielsen/NetRatings. Google has 50.8 percent market share, followed by Yahoo at 23.6 percent and Microsoft with only 8.4 percent.
While it's too early to write the obituary for Windows Live, things aren't looking good in its first year, analysts said.

"There are concerns that there has been some slippage or (Microsoft) has moved backwards" with regard to its push to better compete against Google in the market for consumer software that is supported by ads, said Michael Cherry, lead Windows analyst at Directions on Microsoft. "This is a long-term thing, so I'm not sure how to measure it on a quarter-by-quarter basis."
While Microsoft doesn't break out the financial figures for its new Live services from its established MSN content services, both of which make up its Internet services business, it's likely the newer brand is what is weighing things down.

"Microsoft's Live branding has been tremendously confusing and has hurt the company, and it is very likely contributing to the situation they are in right now," said David Smith, an analyst at Gartner. "They've created another brand and have not differentiated it."

It's too early to pass "final judgment" on the strategy, Smith said. But now is the time for Microsoft to clearly explain its strategy, he said.

Microsoft has invested billions of dollars in creating the Windows Live brand, separating the free, online consumer Internet services like e-mail and instant messaging from its MSN brand and building its own search engine and paid search platform from scratch.

Microsoft launched its paid search program, AdCenter, last May and is still working to gain traction and compete against market leader Google. In the meantime, No. 2 search provider Yahoo has launched its next-generation paid search platform, albeit a quarter late.

But the advertising program will only succeed if there are eyeballs to view the ads. How many people think to type in "www.live.com" to search the Web? Users at a Web 2.0 panel in November said they didn't even know Microsoft had a search engine.

Adam Sohn, a director in Microsoft's online services group, acknowledged that the growth in search queries and search advertisers hasn't been as good as the company had hoped.

"We feel good about the transition, but we continue to see some challenges with search query growth," he said. "There is some room for improvement there and we are going to work to increase the speed of that growth and increase market share.

"We will see more advertisers in the system--which, frankly, will drive prices up because it's an auction system," Sohn said. "More folks in there bidding will mean prices will go up."

Number of users, page views growing
Microsoft still has a tremendous number of users of its Windows Live Mail and Live Messenger services and readers of its MSN content, he said. The number of users grew as much as 40 percent from a year ago, while the number of page views was up at least 30 percent, he said. And ad revenue rose 20 percent from a year ago.

"The pieces are falling into place," he said. "Would we like the numbers to be more positive more quickly? Of course we would."

It's not just that Microsoft wants to expand its business beyond software. The company also sees the potential that more and more software, particularly consumer software, will be delivered online and, in many cases, backed by ads. Some inside the company have been pushing for the company to offer some of its titles for free.

The company even has said it is exploring whether it makes sense to have versions of its low-end Works software that are either online, ad-supported, or both.
Cherry complained that some Live services do not work on browsers from rivals. "For example, Microsoft Windows and Office Live services really are not browser independent. They really only work with Microsoft's browser and only the latest versions," he said. "So I have to question whether they even understand the marketplace."

Consumers can use any browser with Live Search and most of the Live services, except for a few, such as Virtual Earth and some MSN services, Sohn said. "We're working on this."

Despite the hurdles, don't expect Microsoft to throw in the towel any time soon.

"This is a long-term bet," said Sohn. "The big challenges are worth fighting for and worth succeeding at, and we're absolutely willing to commit the resources."