In 1990 the world's first web-page was created, and by 1992 there were all of 26. Today there are about 150 websites for everyone on the earth-- population (6.7 billion) and Google daily users number in the hundreds of millions. Google's chairman believes that Google (now $22 billion revenue firm) will someday reach $100 billion in revenues; revenues increased 31% last year. Googled: The End of the World As We Know It (Penguin Press/ Nov 2009) by Ken Auletta, is another in a line of books covering the history of Google's spectacular rise while also trying to explain it and project the future. The very good part of Auletta's work is that it makes readers think about Google's approach and potential in the future; the not so good parts are that many areas recently 'invaded' by Google are not well covered (fortunately, Wikipedia and Google itself can help fill in the gaps), and too many pages are filled with useless anecdotes and detail.
Google's search service underlies the company's success. It is based on a secret (to limit spammers' efforts to artificially boost ratings) algorithm (PageRank) developed by Google's founders, based primarily on the 'importance' of the pages (recursively determined by the other pages linking to them), and constantly under change (359 in 2008). About 200 factors are utilized in determining PageRank. Auletta contends that Google also uses cookies to refine search responses over time.
Google's advertising revenues account for more than 40% of all ad dollars spent online. Google also pumps additional ad dollars into tens of thousands of Web sites through its AdSense program in which Google serves as matchmaker, uniting advertisers with Web destinations. In effect, AdSense allowed Google to turn everyone's content into a potential place for Google ads. Google charges a fee of about 33%, and the Web destinations pocket about $5 billion/year as a result of visitors clicking on the ads. AdSense for search also allows website owners to place Google search boxes on their websites - Google shares any advertising revenue it makes from those searches with the website owner. 'Google AdSense' has been criticized by some as a large source of "invalid clicks," in which one company clicks on a rival's search engine advertisements to drive up the other's costs; auditing programs are available to help detect and correct for this.
Google AdWords, however, is the company's main source of revenue. AdWords allows potential advertisers to bid to place small text ads (95 character limit - less intrusive and bothersome than typical banner ads) next to the results for key search words. All auctions for ads are run online and automated. The highest bidder gets to place a small text ad to the right of the search results; up to ten lower bidders also win ad space below it. The order is set by a combination of comparative bid levels and the "quality score" of all ads shown. (The quality score is calculated by historical click-through rates, relevance of an advertiser's ad text and keywords, an advertiser's account history, and other determined by Google.)
Minimum bids per keyword are set by Google, also using the quality score - a commonly searched word or phrase like JetBlue might cost only a penny or two, while more esoteric phrases like helicopter parts might go for $50/click. Advertisers can choose to pay either according to the number of viewers or clicks. Google Analytics allows advertisers to track day by day, hour by hour, the number of clicks and sales, the traffic produced by the keywords used, the conversion rate from clicks to sales, where viewers came from (referrers, as well as physical location), etc. It helps advertisers target by age, sex, income, zip-code, personal preferences for leisure time activities, product preferences, news preferences. etc.
Google bought YouTube for $1.65 billion in 2006, the idea being to use it's free content as another platform for selling Google ads. YouTube, however, is losing money ($100 million expectation in 2009) so far. In 2008 Google also bought DoubleClick, a service that tracks users and records what commercial advertisements they view. It's main service is to automate the administration effort in the ad buying cycle for advertisers and the management of ad inventory for publishers to increase the purchasing efficiency of advertisers and to minimize unsold inventory for publishers - eg. allowing last-minute substitutions of higher-paying advertisers and filling unused ad space. Auletta reports DoubleClick as posting 17 billion display ads/day.
Ads constitute over 95% of Google's revenue, yet its tentacles are exploring numerous other areas. These include Google Earth, Google Maps, Google Scholar, Google Finance, Google Product Search, Google Calendar, Google Desktop (Docs, Spreadsheets, collaborative forms), Google Chrome (Google's browser), Google Sites (free and assisted way to create websites), Google Android (new mobile phone operating system, with over 1,000 released applications in 2008), Gmail, Google Reader, and Google Voice (provides people with a single phone number that can be used to reach them on their work, home, or cell phones, has 1.419 million users), as well as Google's efforts to digitize all books and to provide cloud computing (no installation). Part of this reflects Google's efforts to return more than just web sites in response to inquiries (eg. videos, books, photos, maps), and to respond to inquiries from more than PCs (about one-third of 2008 Google queries in Japan originated from mobile phones). Google's potential business model for all these is not clear - on the other hand, Google began without a business model, so it doesn't allow that to be an initial hindrance. (Google engineers are all allowed one-day/week to work on a project of their own choice, again without regard for profits; some of its non-engineers are also afforded that privilege.)
The cloud in Google's future - possible antitrust regulation, and lawsuits over copyright infringement (eg. Google Books). On the other hand, Fortune recently noted that Google and the Obama administration have generally good relations, with top company executives participating in a number of government projects.
Bottom Line: Readers need to read Googled slowly and carefully, thinking how this behemoth might affect their businesses. Newspapers, TV and cable stations are already undergoing dramatic changes as a result of Google. They also need to carefully read Wikipedia and Google sites for additional related information to fill in the holes Auletta left.
Ken Auletta is the author of ten books, including four national bestsellers. These include Three Blind Mice: How the TV Networks Lost Their Way, Greed and Glory on Wall Street: The Fall of the House of Lehman, and World War 3.0: Microsoft and Its Enemies. You'll find the author online at www.kenauletta.com
http://www.basilandspice.com/financial-well-being/google-to-reach-100-billion-in-revenue-increased-31-last-yea.html
We updated this post live, listening in on the Google Q2-09 Conference Call. Questions in italics.
Advertising
– Advertisers are not as uncertain anymore. Smaller advertisers have stayed consistent because of the benefits of return on investment on search. Bigger adverThe big advertisers stayed away for a bit but are back now.
– In Adsense for content, We saw solid results. Smaller partners performed well.
– We are seeing different means of monetization coming through: we’re beginning to see more branded advertising on YouTube and our display properties.
– The way to look at display for us is to look at multiple strangs. We’ve mand progress with the doubleclick ad exchange, having integrated that with Adsense. We’re going to see tremendous growth in the display space.
– On Google.com, Shopping and Computer Electronics verticals did well, but Finance was weak.
– Most of our advertisers are not maxing out their daily budget. We’ve spent time convincing them that search is an ROI medium, and we can’t create inventory - users create the inventory.
– CPCs have been impacted by increase in queries from low CPC countries like Brazil and China. International mix has an impact on our CPC - Germany vs India, then there are the currency issues. CPC was down year on year, and there was seasonality on top of it.
– There is a mix of display and performance side in advertising, and people are focusing on the performance side right now. Some advertisers are finding that display is a great complement to search. I think there’s a positive dynamic between the two. Advertisers who use search and haven’t utilized their budget entirely tend to spend on display.
– Google properties ahve driven most of the growth. AdSense properties have grown, but slower.
Focus On Power Users On Search
– Got more focused on active power users, who are typing longer queries and their expectations are greater than before. To serve power users, we launched options to allow users to slice and dice search results. We have a basic user principle that fast is better than slow. we’re looking to reduce latency, and launched improvements for Picasa
– We’ve had some success with local information, by determining where the user is. The search result innovations have been outpacing the innovations on the ad side. We’re going to push ahead with products that are good for the user on the search side.
YouTube
YouTube is now on a trajectory we’re very pleased with. Monetization views have triples in the last year. We’re monetizing billions of views now. We’re promoting feature partner videos. (Nikesh) YouTube homepage is of relevance and has established itself in the eyes of advertisers. Next move is towards long form video and pre-rolls. By bringing premium content to the home page, we drive views to premium content that increases inventory. Users are beginning to accept pre-rolls on premium content, and we dont see significant drop-off rates.
– It’s not our focus to monetize non-professional content. The non-professional content has relatively lower views. You can tell a professional quality video from a non-professional one. We don’t just mean large studios, but also smaller professional studios producing monetizable content.
– Pre-roll the key monetization method for YouTube? There are four main user activities on the site. They come to the home page, search for videos, watch videos and then interact with other users. Each activity will have a different monetization, form of advertising. The big inventory is in the watch pages. We’re trying to figure out if overlays will work. We’re still testing these things. We’ve been testing pre-rolls for quite a while.
Mobile, Mobile Search And HTML 5
– Users on high end phones are engaged. so display advertising there.
– We’re bullish on HTML 5. It’s especially important in mobile. This quarter we launched mobile versions of gmail and maps. One of the key things we’ve done is show desktop ads on mobile browsers of high quality. All of a sudden, we started seeing high searches and clickthrough rates. It makes sense over time, that search will perform better on mobile than PC, because we know more about the person. Mobile search tends to complement desktop volume, since people search from mobile when they’re away.
– 18-20 android phones will be out by the end of the year.
– 18-20 android phones will be out by the end of the year.
– Mobile search in the US has improved significantly, because of availability of phones with good browsers. Mobile search was pretty high in Indonesia and the Middle East, but we’re seeing it grow overall.
– The adoption of high end devices - the gphones, the iphone, they have a living on the web experience. there’s a fundamental trend that is happening there. there’s a whole ecosystem that is building right now.
– The adoption of high end devices - the gphones, the iphone, they have a living on the web experience. there’s a fundamental trend that is happening there. there’s a whole ecosystem that is building right now.
Bing
How worried are you about search competitors (read: Bing)?
We haven’t seen any shift in search today.
Your take on bing? You think you should blend vertical search with search?
There’s an opportunity to do a much better job with finance search, and other verticals like shopping.
Gmail
“We are pushing out one new feature a week, like automatic message translation. Try that, it’s a big deal. We took quite a few of our products out of beta last week. All of them are relatively stable.”
Chrome OS
The Chrome OS will be available to the PC community at the end of next year. Other aspects of our strategy still have to be worked oout. The primary focus will be speed, speed of computation and use, and focus on the web. It’s open source, so it’s possible for people to just take it and do whatever they want with it. There may be other ways of making money from it, but we don’t plan to charge for it.
Google Wave
We want to make the web better - what is good for the web, is good for Google. we asked the question -what if email was invented today, and the answer is wave. The product was conceived in Australia.
War of Attrition? Collapsing The Industry?
– Business Model for App Engine? Isn’t the competition with Microsoft is competition? looks like a war of attrition, where you’re just giving up for free. Instead of growing the industry, you’re collapsing the industry. Our data points say that Android hasn’t been successful.
With the App Engine, there are opportunities for licensing models, but we’re confident that with the functionality, where they are running search both on internal and external information, and the more people spend time on the web, the more they search. We’re confident that in the long run it is positive for us. We’re trying to make connectivity pervasive. The adroid has is successful, and we’re optimistic that it’s going to make for an exciting and richer web.
Other Comments
– Disciplined about costs, but looking to invest in our big long term opportunities including display and mobile.
– Android, Wave, Chrome and Chrome OS are all open source. the more power tools we put in developrs hands, the more development we will see on the web, which grows the pie for everyone.
– Paid storage is not a significant portion of our revenues
– Android, Wave, Chrome and Chrome OS are all open source. the more power tools we put in developrs hands, the more development we will see on the web, which grows the pie for everyone.
– Paid storage is not a significant portion of our revenues
Google (GOOG)
Q2 2009 Earnings Call
July 16, 2009 4:30 pm ET
Executives
Maria Shim - Investor Relations
Patrick Pichette - Chief Financial Officer, Senior Vice President
Eric E. Schmidt Ph.D. - Chairman of the Board, Chief Executive Officer
Jonathan J. Rosenberg - Senior Vice President - Product Management
Nikesh Arora - President - Global Sales Operations and Business Development
Analysts
Imran Khan - J.P. Morgan
Mark Mahaney - Citigroup
Justin Post - BOA Merrill Lynch
Christa Quarles - Thomas Weisel Partners
Benjamin Schachter - Broadpoint Amtech
James Mitchell - Goldman Sachs
Sandeep Aggarwal - Collins Stewart
Youssef Squali - Jefferies & Company
Doug Anmuth - Barclays Capital
Spencer Wang - Credit Suisse
Jeffrey Lindsay - Sanford Bernstein
Jeetil Patel - Deutsche Bank
Heath Terry - FBR Capital
Steve Weinstein - Pacific Crest
Jim Friedland - Cowen & Company
Presentation
Operator
Good day and welcome, everyone, to the Google Inc. conference call. This call is being recorded. At this time, I would like to turn the conference over to Ms. Maria Shim. Please go ahead, Madam.
Maria Shim
Good afternoon, everyone and welcome to today’s second quarter 2009 earnings conference call. With us are Eric Schmidt, Chief Executive Officer; Patrick Pichette, Chief Financial Officer; Jonathan Rosenberg, Senior Vice President of Product Management; and joining us for the first time, Nikesh Arora, President of Global Sales Operations and Business Development. Eric, Patrick, and Jonathan will provide us with their thoughts on the quarter and then Nikesh will join us for Q&A.
This call is being webcast from our investor relations website located at investor.google.com. Please refer to our website for important information, including our earnings press release, issued a few minutes ago, along with slides that accompany today’s prepared remarks.
A replay of this call will also be available on our website in a few hours.
Please note that we routinely post important information on our investor relations website, located at investor.google.com, and we encourage you to make use of that resource.
As a reminder, we are holding two calls today. On this call we will discuss our strategic overview and Q&A with the usual format, followed by a second call which is effectively an extended Q&A session with Jonathan and Patrick, giving the opportunity for participants to ask more detailed financial and product questions in an efficient and reg FD compliant manner.
The second call will begin at 3:00 P.M. Pacific Time and will also be webcast from our investor relations website.
Now let me quickly cover the Safe Harbor -- some of the statements we make today may be considered forward-looking, including statements regarding investments in our core business and innovation, expected performance of our business, and our expected level of capital expenditures.
These statements involved a number of risks and uncertainties that could cause actual results to differ materially. Please note that these forward-looking statements reflect our opinions only as of the date of this presentation and we undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events.
Please refer to our SEC filings, including our annual report on Form 10-K for the year ended December 31, 2008, as well as our earnings press release for a more detailed discussion of the risk factors that may affect our results. Copies may be obtained from the SEC or by visiting the investor relations section of our website.
Also, please note that certain financial measures we use on the call, such as operating profit and operating margin, are expressed on a non-GAAP basis and have been adjusted to exclude charges relating to stock-based compensation.
We have also adjusted our net cash provided by operating activities to remove capital expenditures, which we refer to as free cash flow.
Our GAAP results and GAAP to non-GAAP reconciliation can be found in our earnings press release.
With that, I will now turn the call over to Patrick.
Patrick Pichette
Thank you, Maria. Good afternoon or good evening, everybody. What we will do is we will have our regular schedule, so Eric will give us his comments first. I’ll cover the financial portion and then Jonathan will give us a product update. As Maria mentioned, we also have Nikesh with us and then we will turn it to Q&A. So without further ado, I’ll let Eric introduce.
Eric E. Schmidt Ph.D.
Thank you very much, Patrick. So Google, we’ve had a good quarter, one that demonstrates our resilience in what continues to be a very difficult environment, 3% year over year growth, as you have seen from the press release.
Google as a business appears to have stabilized despite the still weak economic environment. Advertisers and customers are obviously seeing the benefit of the performance-based advertising that we offer and consumers are clearly using search more and ever to find the best deals.
We’ve also implemented careful cost controls to help our performance. Making our business more efficient has been our goal for the last few quarters and it should put us in a good position to benefit from the eventual recovery whenever that occurs. And we are going to continue to invest in innovation. History shows that companies which invest in innovation during downturns emerge stronger than the cost-cutting competitors and it’s easy for big companies, Google is now a large company, to become conservative to take small steps when they need to take really big ones, so we are determined not to make that mistake.
And as an example, you don’t change the world incrementally. You do it through big innovation and the ability to execute on your ideas. So for example, we just announced Chrome OS for netbooks, our effort to rethink what an operating system should be, based on our lightning fast browser technology, Chrome, which people are already using. We need a faster operating system for the same reason we need faster browsers -- people are now doing everything on the web and this will be an operating system built around ubiquity and the power of the Internet.
http://seekingalpha.com/article/149349-google-q2-2009-earnings-call-transcript
In less than a week, Google announced an operating system to compete with Windows, while Microsoft announced that Office 10 will include free, online versions of its four most popular software programs — a shot at Google’s suite of web-based office applications.
And not more than a month and a half ago, Microsoft unveiled its new search engine Bing which it hopes will steal market share from Google and finally make it real money online.
From the news of it, it’s a full-blown tech battle, complete with behind-the-scenes machinations to sic government regulators on each other.
It is, however, not a death match — it’s more of an fight to see who will be the King of Technology, since both companies pull in their billions through completely different siphons and are unlikely to severely wound one another any time soon.
Google pulled in $22 billion in revenue in 2008, 97 percent of which came tiny text ads bought by the keyword and placed next to search results or on pages around the web. Google makes a negligible amount of money bundling its online apps for businesses, charging $50 a head annually — but mostly it just gives its online text editor, email and spreadsheet programs away.
By contrast, Microsoft sold $14.3 billion worth of Microsoft Word and PowerPoint and other business applications over the last nine months, making a profit of $9.3 billion. It made a further $16 billion in revenue in 2008 through sales of its operating systems, which range from XP installations on netbooks, to Vista, to Windows Mobile to its server software.
Google now plans its own range of operating systems, starting with Android, an open-source OS for small devices like smartphones, and Chrome OS, a browser-focused, open-source OS that will run on notebooks and desktops.
Clearly top executives at each company look over at the others’ pots of gold and dream of ways to steal them, or at least make it harder for the other guy to make money.
In fact, they even dislike each other enough to spend money to make the other one lose revenue — take for example, Microsoft’s behind-the-scenes campaign to scuttle last year’s proposed Google-Yahoo advertising deal or its ongoing attempts to derail the Google Book Search settlement.
But in reality, the competition is really about creating universes or ecosystems that it hopes consumers will want to live their technology lives inside. And it’s about ego — a fight to be recognized as the world’s most important technology company.
Microsoft would love for everyone in the world to be using its Internet Explorer browser to search through Bing to find a story from its MSN portal to email via Hotmail or Outlook to a friend. Add in a smartphone running Windows Mobile and an Xbox in the living room for the kids, and you have a Microsoft family. And though it is much joked about, Microsoft is the dominant platform for software developers of all types, whether they are making small business software, massive online role-playing games or photo-editing utilities.
Google’s ecosystem looks different. It starts with a Google Chrome browser (oddly running only on Windows) with a default homepage set to Google News or a customized Google homepage. From there you might go to Gmail and then click on a Word document sent to you as an attachment which Google will quickly — and safely — open for you in its online word processor.
But most importantly, Google wants you to search and travel around the web, hitting web pages that run Google-served ads and Google tracking cookies. You might think that Google is a really cool company to give away all this free technology, while never thinking about the persistent and silent data collection Google is undertaking to profile you in order to deliver you to advertisers for a premium.
So How Do The Two Stack Up in Four Key Areas of Competition?
Browser market share as of May, 2009. Source: Net ApplicationsBrowsers:
Internet Explorer in all its variations still retains close to 70 percent of the market (depending on who is counting and how). That dominance remains, even though Microsoft’s latest offering IE8 lags behind all the other major browsers in features and advanced web capabilities.
Firefox, Opera, and Apple’s Safari have all driven browser innovation over the last five years, but most people have not been convinced to leave IE behind, despite other alternatives being safer and more advanced. Why does it matter? Well, IE installations come with a default home page, don’t they?
Google’s Chrome browser, on the other hand, is a handsome, whiz-kid of a browser. It’s sleek and nimble, and it revolutionizes how tabs are handled. The address bar is the search box (Google as default, naturally). Each website opened runs as its own browser instance and has very low permissions to read and write to files. The sandboxing of tabs means that if a single website hangs or crashes, the rest are unaffected. Meanwhile, lower permissions make it harder for a hacker to bust into your computer through your browser.
Chrome also has less than 2 percent of the browser market share.
Online Search: Google’s name now means search to most users. Google’s search engine means money to Google. In June, it delivered 78.5 percent of search results pages delivered to U.S. web users. In the first three months of 2009, Google pulled in $5.2 billion in revenue, a majority of which came from AdWords, an auction-based service that triggers ads based on the keywords in a search query.
Microsoft recently debuted Bing, a new search engine it hoped would fare well in comparison to Google. It’s got some fine innovations, and shows the company is thinking very hard about better ways to present information to users by finding ways to synthesize data, rather than just retrieving links. Still, despite these improvements, a $100 million ad campaign, and generous press coverage that treats Bing like an underdog, Bing gained only a point in June to get Microsoft 8.2 percent of all searches.
Operating Systems: Microsoft has been making operating systems since 1979 and has spent 28 years perfecting MS-DOS and Windows NT, the frameworks that Windows have been built around. Microsoft is estimated to run on about 90 percent of all laptops and desktops in the world. By copying its competitors’ best features, leveraging questionable licensing arrangements and using its base of accustomed users to buy it time against innovators, Microsoft has held on to its lead in the OS market for almost 30 years. That’s despite challenges from Digital Research, Apple and IBM.
Microsoft’s newest version, Windows 7, will be available in the fall. Early reviews say the OS boots quickly and sleeps fast, and avoids much of the confusing interface decisions that have made many dislike Vista, the successor to Windows XP. Microsoft also dominates in the business world, where nearly every medium to large company standardizes around Microsoft Office. Microsoft is also at work on version 6 of its operating system for handheld devices, which it first launched in 2000.
Its OS advantages are immense. It has millions of users who know nothing else and who like Windows. There are millions who are attached to games or the thousands of desktop apps that are only available on Windows. Thousands of devices just plug in and work on its hardware. And familiarity with Microsoft software is a requirement for a huge number of office jobs.
By contrast, Google first stepped into the OS game in 2007 when it announced its Android operating system for small devices. Google estimates that some 18 phone models will be running its system by the end of the year. Last week, Google announced, but did not show off, a new OS to compete with Windows, dubbing it Chrome OS.
That name signifies that Google’s OS will be for the web and browser-based. It hopes to convince developers to write software that runs inside a browser, instead of on top of the OS as developers for Windows and Apples’ OS X do. It will also let web developers extend the power of their websites by expanding the capabilities of the browser, allowing websites to lean on the browser for storage and processing help.
Advertising: Google is largely powered by its innovative auction-based text ads on its own site, but then expanded into serving ads on other people’s sites with the Adsense program. It bought the ad-serving and behavioral-profiling giant Doubleclick in 2007 for more than $3 billion, and has ventured into mobile, print, radio and television ads.
Microsoft has struggled to replicate Google’s online advertising success. Despite owning MSN.com — a portal that is second only to Yahoo as a destination — Microsoft has not made money on the internet. To turbocharge its ad delivery technology, it paid more than $6 billion in cash in 2007 for aQuantive, a full-service online advertising concern.
Instead, Microsoft’s online ad business lost $1.2 billion in 2008, double what it lost in 2007. The company expects 2009 revenues to be higher than the $3.2 billion it took in last year, but has not said it would make a profit.
Contrary to what some might have you believe, the benefits of the Google-Microsoft competition are immense.
Microsoft had largely grown complacent until Google came along to shake up categories. Gmail’s massive online storage capability and fancy programming made Microsoft hustle to upgrade its popular, though not user-friendly, web e-mail service. Google Maps led to Microsoft’s Live Maps, which now bests Google’s efforts in some ways.
Google has been winning the fight for the last few years, showing that it is still nimbler than the software giant from the Northwest. But the pendulum may be slowing, or even poised to swing the other way. With the innovations in Bing and the promise that Microsoft’s online Office offerings will be free and more fully featured than the Google equivalent, Microsoft is taking on Google where it matters for users: on the field of innovation.
And that will make for an interesting race, no matter which horse you prefer to ride.
Infographic: Wired.com/Dennis Crothers — Browser market share as of May 2009. Source: Net Applications
Update: This story was updated to correct the statement that recent Microsoft OSes were built around MS-DOS, when most versions of Windows have relied on Windows NT as their core.
http://www.wired.com/epicenter/2009/07/google-vs-microsoft-what-you-need-to-know/
And not more than a month and a half ago, Microsoft unveiled its new search engine Bing which it hopes will steal market share from Google and finally make it real money online.
From the news of it, it’s a full-blown tech battle, complete with behind-the-scenes machinations to sic government regulators on each other.
It is, however, not a death match — it’s more of an fight to see who will be the King of Technology, since both companies pull in their billions through completely different siphons and are unlikely to severely wound one another any time soon.
Google pulled in $22 billion in revenue in 2008, 97 percent of which came tiny text ads bought by the keyword and placed next to search results or on pages around the web. Google makes a negligible amount of money bundling its online apps for businesses, charging $50 a head annually — but mostly it just gives its online text editor, email and spreadsheet programs away.
By contrast, Microsoft sold $14.3 billion worth of Microsoft Word and PowerPoint and other business applications over the last nine months, making a profit of $9.3 billion. It made a further $16 billion in revenue in 2008 through sales of its operating systems, which range from XP installations on netbooks, to Vista, to Windows Mobile to its server software.
Google now plans its own range of operating systems, starting with Android, an open-source OS for small devices like smartphones, and Chrome OS, a browser-focused, open-source OS that will run on notebooks and desktops.
Clearly top executives at each company look over at the others’ pots of gold and dream of ways to steal them, or at least make it harder for the other guy to make money.
In fact, they even dislike each other enough to spend money to make the other one lose revenue — take for example, Microsoft’s behind-the-scenes campaign to scuttle last year’s proposed Google-Yahoo advertising deal or its ongoing attempts to derail the Google Book Search settlement.
But in reality, the competition is really about creating universes or ecosystems that it hopes consumers will want to live their technology lives inside. And it’s about ego — a fight to be recognized as the world’s most important technology company.
Microsoft would love for everyone in the world to be using its Internet Explorer browser to search through Bing to find a story from its MSN portal to email via Hotmail or Outlook to a friend. Add in a smartphone running Windows Mobile and an Xbox in the living room for the kids, and you have a Microsoft family. And though it is much joked about, Microsoft is the dominant platform for software developers of all types, whether they are making small business software, massive online role-playing games or photo-editing utilities.
Google’s ecosystem looks different. It starts with a Google Chrome browser (oddly running only on Windows) with a default homepage set to Google News or a customized Google homepage. From there you might go to Gmail and then click on a Word document sent to you as an attachment which Google will quickly — and safely — open for you in its online word processor.
But most importantly, Google wants you to search and travel around the web, hitting web pages that run Google-served ads and Google tracking cookies. You might think that Google is a really cool company to give away all this free technology, while never thinking about the persistent and silent data collection Google is undertaking to profile you in order to deliver you to advertisers for a premium.
So How Do The Two Stack Up in Four Key Areas of Competition?
Browser market share as of May, 2009. Source: Net ApplicationsBrowsers:
Internet Explorer in all its variations still retains close to 70 percent of the market (depending on who is counting and how). That dominance remains, even though Microsoft’s latest offering IE8 lags behind all the other major browsers in features and advanced web capabilities.
Firefox, Opera, and Apple’s Safari have all driven browser innovation over the last five years, but most people have not been convinced to leave IE behind, despite other alternatives being safer and more advanced. Why does it matter? Well, IE installations come with a default home page, don’t they?
Google’s Chrome browser, on the other hand, is a handsome, whiz-kid of a browser. It’s sleek and nimble, and it revolutionizes how tabs are handled. The address bar is the search box (Google as default, naturally). Each website opened runs as its own browser instance and has very low permissions to read and write to files. The sandboxing of tabs means that if a single website hangs or crashes, the rest are unaffected. Meanwhile, lower permissions make it harder for a hacker to bust into your computer through your browser.
Chrome also has less than 2 percent of the browser market share.
Online Search: Google’s name now means search to most users. Google’s search engine means money to Google. In June, it delivered 78.5 percent of search results pages delivered to U.S. web users. In the first three months of 2009, Google pulled in $5.2 billion in revenue, a majority of which came from AdWords, an auction-based service that triggers ads based on the keywords in a search query.
Microsoft recently debuted Bing, a new search engine it hoped would fare well in comparison to Google. It’s got some fine innovations, and shows the company is thinking very hard about better ways to present information to users by finding ways to synthesize data, rather than just retrieving links. Still, despite these improvements, a $100 million ad campaign, and generous press coverage that treats Bing like an underdog, Bing gained only a point in June to get Microsoft 8.2 percent of all searches.
Operating Systems: Microsoft has been making operating systems since 1979 and has spent 28 years perfecting MS-DOS and Windows NT, the frameworks that Windows have been built around. Microsoft is estimated to run on about 90 percent of all laptops and desktops in the world. By copying its competitors’ best features, leveraging questionable licensing arrangements and using its base of accustomed users to buy it time against innovators, Microsoft has held on to its lead in the OS market for almost 30 years. That’s despite challenges from Digital Research, Apple and IBM.
Microsoft’s newest version, Windows 7, will be available in the fall. Early reviews say the OS boots quickly and sleeps fast, and avoids much of the confusing interface decisions that have made many dislike Vista, the successor to Windows XP. Microsoft also dominates in the business world, where nearly every medium to large company standardizes around Microsoft Office. Microsoft is also at work on version 6 of its operating system for handheld devices, which it first launched in 2000.
Its OS advantages are immense. It has millions of users who know nothing else and who like Windows. There are millions who are attached to games or the thousands of desktop apps that are only available on Windows. Thousands of devices just plug in and work on its hardware. And familiarity with Microsoft software is a requirement for a huge number of office jobs.
By contrast, Google first stepped into the OS game in 2007 when it announced its Android operating system for small devices. Google estimates that some 18 phone models will be running its system by the end of the year. Last week, Google announced, but did not show off, a new OS to compete with Windows, dubbing it Chrome OS.
That name signifies that Google’s OS will be for the web and browser-based. It hopes to convince developers to write software that runs inside a browser, instead of on top of the OS as developers for Windows and Apples’ OS X do. It will also let web developers extend the power of their websites by expanding the capabilities of the browser, allowing websites to lean on the browser for storage and processing help.
Advertising: Google is largely powered by its innovative auction-based text ads on its own site, but then expanded into serving ads on other people’s sites with the Adsense program. It bought the ad-serving and behavioral-profiling giant Doubleclick in 2007 for more than $3 billion, and has ventured into mobile, print, radio and television ads.
Microsoft has struggled to replicate Google’s online advertising success. Despite owning MSN.com — a portal that is second only to Yahoo as a destination — Microsoft has not made money on the internet. To turbocharge its ad delivery technology, it paid more than $6 billion in cash in 2007 for aQuantive, a full-service online advertising concern.
Instead, Microsoft’s online ad business lost $1.2 billion in 2008, double what it lost in 2007. The company expects 2009 revenues to be higher than the $3.2 billion it took in last year, but has not said it would make a profit.
Contrary to what some might have you believe, the benefits of the Google-Microsoft competition are immense.
Microsoft had largely grown complacent until Google came along to shake up categories. Gmail’s massive online storage capability and fancy programming made Microsoft hustle to upgrade its popular, though not user-friendly, web e-mail service. Google Maps led to Microsoft’s Live Maps, which now bests Google’s efforts in some ways.
Google has been winning the fight for the last few years, showing that it is still nimbler than the software giant from the Northwest. But the pendulum may be slowing, or even poised to swing the other way. With the innovations in Bing and the promise that Microsoft’s online Office offerings will be free and more fully featured than the Google equivalent, Microsoft is taking on Google where it matters for users: on the field of innovation.
And that will make for an interesting race, no matter which horse you prefer to ride.
Infographic: Wired.com/Dennis Crothers — Browser market share as of May 2009. Source: Net Applications
Update: This story was updated to correct the statement that recent Microsoft OSes were built around MS-DOS, when most versions of Windows have relied on Windows NT as their core.
http://www.wired.com/epicenter/2009/07/google-vs-microsoft-what-you-need-to-know/
Rosetta Stone, a highly popular software program for learning foreign languages, has filed suit against Google for trademark infringement. The lawsuit claims that since 2004, Google has allowed companies to run Adsense advertisements on Google using keywords allegedly trademarked to Rosetta Stone. The result is that when a person runs a search on Google for Rosetta Stone, numerous paid advertisements for competitors of Rosetta Stone will appear on the page as “sponsored links.” The company asserts that Google even allows companies to use trademarked terms in the headlines of the ads.
Attorney Terence Ross, a partner at the law firm of Gibson, Dunn & Crutcher, filed the lawsuit in the U.S. District Court for the Eastern District of Virginia. The lawsuit on behalf of Rosetta Stone is just the latest in a series of similar complaints against Google for their advertising practices. A copy of Rosetta Stone's lawsuit can be found here.
While the infringement claims of Rosetta Stone for the use of certain terms may carry some weight, it seems difficult for them to prevail on their claim to hold a trademark on some other common phrases. For example, their complaint over other advertisers using the words “Rosetta Stone” in their ads is more compelling than their claim to control the use of phrases such as “Global Traveler” or “Language Library.” Also, considering that the Rosetta Stone company took their name from an ancient Egyptian artifact called the Rosetta Stone, their trademark infringement claim may run into some problems.
Attorney Terence Ross, a partner at the law firm of Gibson, Dunn & Crutcher, filed the lawsuit in the U.S. District Court for the Eastern District of Virginia. The lawsuit on behalf of Rosetta Stone is just the latest in a series of similar complaints against Google for their advertising practices. A copy of Rosetta Stone's lawsuit can be found here.
While the infringement claims of Rosetta Stone for the use of certain terms may carry some weight, it seems difficult for them to prevail on their claim to hold a trademark on some other common phrases. For example, their complaint over other advertisers using the words “Rosetta Stone” in their ads is more compelling than their claim to control the use of phrases such as “Global Traveler” or “Language Library.” Also, considering that the Rosetta Stone company took their name from an ancient Egyptian artifact called the Rosetta Stone, their trademark infringement claim may run into some problems.
High Paying AdSense Words
For a typical blogger or website owner, we make money when someone clicks on one of the Google Ads on our site, or per 1000 impressions of the AdSense links. For most of us, we already know how hard it is to get people to click on these links and even if they do, sometimes the chosen ads are low paying ones because of the keywords used on our page.
So to help maximize profits, here is a list of 101 high paying Google AdSense words you can try and use to target the keywords in your content to. It is assuming that as the website owner, you will receive roughly 50% of the total cost per click that Google charges its advertisers, but you should check this with Google to find out the actual value (if they’ll tell you).
1. AdWords - $9.41
2. available domain name - $12.97
3. addwords - $10.92
4. AdWords campaign - $14.63
5. AdSense - $12.43
6. buy domains - $8.84
7. buy domain name - $17.10
8. bachelor degree on line - $14.36
9. best webhost - $8.68
10. bulk email marketing - $11.77
11. bankruptcy - $5.72
12. cheap domain name - $9.16
13. car insurance - $22.89
14. credit cards - $10.93
15. crm software - $15.96
16. car loans - $11.79
17. construction estimating software - $5.80
18. domain names - $17.57
19. debt - $13.18
20. degree education on line - $12.44
21. dell computer - $5.79
22. degree - $6.37
23. debt management - $7.15
24. database software - $3.13
25. email marketing - $13.24
26. ecommerce hosting - $11.81
27. education degree online - $14.69
28. earn money online - $3.04
29. free domain name registration - $5.81
30. free credit report - $9.57
31. flowers - $4.83
32. financing - $4.50
33. gas prices compare - $6.19
34. google news - $2.07
35. graphic design degree - $12.58
36. graduate degree program - $7.93
37. hosting providers - $14.25
38. how to get a web site - $5.83
39. hp computer - $7.52
40. interest credit - $15.53
41. insurances - $17.67
42. interior design degree - $14.17
43. java software - $1.69
44. keyword tracking - $4.37
45. knee support - $1.57
46. life experience degree - $8.36
47. lung cancer treatment - $6.10
48. loans - $9.86
49. merchant account - $10.55
50. microsoft certification - $4.88
51. mba degree online - $15.78
52. master degree on line - $11.51
53. marketing software - $8.28
54. network monitoring software - $11.45
55. nursing degree - $8.81
56. norton anti virus software - $4.01
57. Norton virus protection - $3.85
58. online accounting degree - $27.50
59. online paralegal degree - $19.45
60. online degree - $13.74
61. online psychology degree - $20.78
62. online college degree - $14.10
63. payroll software - $7.95
64. pay per click - $8.18
65. personal domain name - $10.26
66. project management software - $10.80
67. quicken - $3.46
68. quick money - $3.32
69. register domain - $9.03
70. register domain name - $8.31
71. register a website - $10.47
72. register url - $8.69
73. student credit card - $10.54
74. survey software - $9.51
75. scheduling software - $7.60
76. shopping cart software - $5.23
77. travel insurance - $6.76
78. tax software - $6.89
79. teaching degree - $12.72
80. turbo tax - $5.47
81. University Degrees Online - $10.98
82. unlimited web hosting - $8.31
83. university degrees - $5.68
84. undergraduate degree - $4.71
85. voip phone system - $9.57
86. visa credit card - $11.83
87. voip billing software - $8.21
88. virus protection - $5.58
89. website domain names - $12.65
90. web domain name - $10.62
91. web host rating - $9.75
92. web site register - $13.04
93. web hosting - $13.03
94. web design software - $2.57
95. web space provider - $6.62
96. yahoo domain - $7.70
97. yellow page advertising - $6.56
98. yahoo domain name - $9.00
99. your site - $2.57
100. zire pda - $2.16
101. zenith television - $1.55
NB: The dollar values were correct at time of publication; please recheck keywords using Google’s Keyword Tool for the most up to date values.
Will Bing boom or be a big bust?
Bing is the latest incarnation of Microsoft's search engine
Microsoft's latest search engine could shake things up, says regular columnist Bill Thompson.
While sales of hardware may be suffering greatly it seems that the general economic gloom has not yet diminished the ambitions of the larger technology companies to give us new products and services online.
In the last few weeks we have had Wolfram Alpha offering a way to search structured data and provide results in a form suitable for further computation. We have had Google Squared promising a simple way of pulling organised data from websites into a spreadsheet style format.
Finally, a new controller-free interface for the Xbox 360 games console from Microsoft that - the company hopes - will open up gaming to the millions who are intimidated by the complexity of current controllers.
And now, after years of effort, billions of dollars worth of investment and several failed attempts, Microsoft has launched Bing, a search engine that it thinks has a chance of unseating Google and which it would like us to think of as a "decision engine".
Site seeing
The name feels a bit strange, but I suspect it will quickly become as acceptable as other odd names for network services like Spotify, Paypal or eBay.
 |   Microsoft is going to have to work very hard to penetrate the dense forest of thorns that Google has assiduously constructed over the years to protect the Sleeping Beauty of search in her fairytale castle.  Bill Thompson  |
Discussing Bing at the All Things Digital conference Microsoft's boss Steve Ballmer said the company wanted a name that was short, inoffensive and capable of being "verbed-up" like Xerox and Google, and it may have found one.
The Bing identity is already being rolled out across Microsoft's online properties. Live Search Maps are now Bing Maps, the search box at the top of the Windows Live homepage is now a "Bing box", and the comparison site ciao! is now "ciao! from bing".
Microsoft is also working hard to reach the technical community, and the Bing team are twittering away merrily, though on Facebook the most prominent results for a search for "bing" are Chandler from Friends and a cool ice-cream shop in Shanghai.
However, Google doesn't make much effort here either and the official google.com page has not been updated since last November, perhaps because Facebook is a closed community with its own internal search function.
The Bing home page is quite nice, with an uncluttered feel that clearly owes a lot to the Google approach to stripped down design containing a large inviting search box laid over an image of a rugged landscape.
It even advertises itself as a "beta", just so we know they are a serious Web 2.0 production.
It seems to do a decent job, and the general results were certainly not surprising compared to what Google delivers for the same query, while cool features such as having the thumbnails of results for video search play the linked content show what can be done with modern browsers and fast networks.
It also integrates data from other Microsoft offerings like the ciao! shopping community, maps from Multimap and prices from the airfare prediction site Farecast.
 Google still dominates when it comes to searching online |
One of the problems facing Microsoft or anyone else who wants to challenge Google is that search is now much more integrated into the general online experience than it was 10 or 20 years ago.
In the early days of the web a search engine was a website, and your choice of search engine was made every time you decided to look for something, so when Google itself launched it was easy for people like me to decide to go to google.com instead of altavista.com or yahoo.com in order to look for something.
Embed and extend
The argument that changing search engine is as easy as clicking on a new URL no longer holds, because search is embedded in many different places and often users will neither be aware of which search engine is the default nor have any real idea how to change it. Search is embedded in your browser, or accessed through a widget on a website or an app on a mobile phone.
 Search is now embedded in many different programs |
Google search is embedded in millions of websites around the internet, including the w4mp.org site for MPs staff that I manage, because it was easy, simple and free, while millions of mobile phone users are happy to default to Google search if it is provided by their handset.
This sort of integration is not limited to the web. One of the nice features of Apple's mail program, for example, is that it tries to recognise addresses in mail messages and offers a menu that lets you add a new address to your contacts list or look it up on a map. Follow the link and Google Maps opens in your browser, with no obvious way to change the default.
Microsoft is going to have to work very hard to penetrate the dense forest of thorns that Google has assiduously constructed over the years to protect the Sleeping Beauty of search in her fairytale castle.
Bing could of course succeed not by offering a better search than Google but by making money for more people. Google's targeted advertising programmes, Adwords and Adsense, are the key to the company's success and have fuelled its growth, and if Microsoft can find ways to generate advertising income for others then it may raise Bing's profile enough to take some of Google's mindshare.
As long as Microsoft has income from software sales to subsidise its search technology then it can afford to offer advertisers better deals than Google, which needs the money they provide. The success of Windows 7 and the Azure cloud computing platform could end up mattering as much to Google as it does to Microsoft.
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