Entrepreneur Watch

Google TV: The Sequel

Reports are coming out that Google TV 2.0 is in the works. AllThingsD reports that Google is acknowledging the fact that TV producers are going to block it for now, and the new version will emphasize adding Internet programming to the TV stuff you're already getting. Just needs some inroads.

The system also needs design improvements. ZDNet says it should get rid of the keyboard.

Business Insider says it will have faster chips, a better user interface, and Android apps.

Someday the TV programming business is going to have to accept the fact that all programming will come through the Internet. Come on, everything digital is moving to the Internet. Legacy businesses just can't stand change.

Will this end up as another iPhone/Android competition between Apple and Google? We might have an idea next week when the new Google TV is announced at the Google/IO developer conference.

Why did it take so long to find Osama bin Laden?

It's tough to fingure out what intelligence is worth paying to I guess.

John Dvorak posted a video clip from a three-year-old Jon Stewart program in which Christiane Amanpour,  the anchor of ABC's Sunday morning political affairs program, said:

"I just talked to someone very knowledgeable ... she thinks he's in a villa ... a nice comfortable villa in Pakistan, not a cave."

Jon Stewart and the other guests didn't pay much attention -- kept talking over her.

http://www.dvorak.org/blog/2011/05/04/video-three-years-ago-christiane-amanpour-said-bin-laden-was-living-in-a-villa-in-pakistan/

 

I'll be attending the Privacy Identity Innovation conference in Silicon Valley May 19-20 this year. Great, thought-provoking conference I would recommend to anyone interested in the issues of privacy and identity in the Internet age. http://pii2011.com/#

Why the antitrust case against Google is nonsense

Nathan Newman has an article in the Huffington Post titled "The Case for Antitrust Action Against Google."

It's largely nonsense.

Here's the real reason why regulators are trying to build a case:

1. People love underdogs and fear dominant companies.

2. Competitors will attack companies in court when they can't compete in the market any other way.

3. Companies that can't game Google's ranking system to raise their results will try to hobble its power and get back the ability to cheat the search algorithms.

Here are the complaints Newman raises:

He quotes a release from the Senate Antitrust Subcommittee that says that some e-commerce sites that compete with Google CLAIM they're treated unfairly in their rankings.

Nonsense. See my point 3 above. Google got its start by refusing to bias search results. Every search engine used to rank paid advertisers higher in search results until Google came along. In a meeting with Google in 2001, an AOL executive meeting with Google said Google was "stupid" for not doing the same. Sergey Brin walked out of the meeting and said, loud enough for people in the meeting to hear, "Someone get me a can of gasoline. I have to set myself on fire to get rid of the scum of these people."

(My own ad: This tale is reported in my book, "Inside Larry & Sergey's Brain" which will be retitled "The Google Guys" for the paperback version.)

Larry and Sergey have always felt that they are trying to do something great for the world, something too important to cheat. My constant example: type a stock ticker symbol (GOOG or MSFT) into Google or Yahoo, and the search engines know you're looking for stock info, so they give links to Yahoo Finance and Google Finance. Both search engines list Yahoo Finance first, because more people link to it than to Google Finance.

The main point is that Google's honest search results work. They give better results, which makes Google more popular, which makes more people use Google. Why mess up a system that works?

Competitors also complain that they are treated unfairly in their ability to buy search ads.

Also nonsense. Google gives preference to advertisers who have relevant ads. If you pay $500 for an ad linked to a keyword that is not relevant, the ad will drop below someone who pays $10 for a more relevant ad. The ranking is based on how many people actually click on the ad. Google only gets paid when people click on an ad. So why accept irrelevant ads from companies willing to pay a lot of money, when nobody clicks on them? Google's entire revenue stream is from advertising, so eliminating relevant ads would be just plain stupid.

Newman also quotes Michael S. Lee, R-UT, who says Google's dominance "creates myriad opportunities for anticompetitive behavior."

See point 1 above. Yes, any dominant company has ample opportunity to cheat. But it's a sad indictment of modern capitalism that people assume that the OPPORTUNITY to cheat means a company WILL do so. I have found Larry and Sergey to be two of the most honest and idealistic business executives I have met in my 30 years as a business reporter. I see no evidence that they cheat, or even want to.

Lee also thinks Google's dominant position reduces its incentive to provide the best privacy protection.

However, Google has always shown a stronger willingness to protect privacy than its competitors. People cits the "wi-spy scandal," as Newman calls it, when Google collected private info from wi-fi signals when it was taking pictures for Google Maps. The company said it was a mistake, stopped the practice, and never did anything with the data. It would like to delete the data, but all the anti-trust suits force it to keep it for evidence. I'm more skeptical of corporate claims than most, but I do not see what Google could possibly gain from something like this except losing the goodwill of its users. Nobody has ever shown any evidence of Google misusing private data. If you think Google does misuse your data, then go to Bing. I'm sure Microsoft is more reliable.

Newman says that when Microsoft was being investigated by anti-trusters, some people said it was just being attacked because it was a dominant company, implying that idiots like me must be just as stupid as the Microsoft apologists. I covered Microsoft for a decade, and used to have great respect for the company, but the evidence of manipulating the market became clear, and I said so. Google is not in the same category.

Newman then gives a lot of "what if?" scenarios without providing any evidence:

Newman says Google is "in the business of reselling aggregated data," so "if" it isillegally breeching privacy, that's an anti-trust violation. Huh? I'm just too stupid to follow his argument. Google is in the business of selling ads, not data. Why screw up the huge ad business to benefit some supposed minuscule business of selling data?

Newman says Google is "accused" of manipulating search results to punish competitors. See item 2 above. Newman cites the case of Foundem, a UK search site, which saw its site disappear from Google search rankings for three years. No evidence that Google unfairly manipulated its system to demote Foundem, just an accusation.  Google does manipulate search results in order to try and exclude sites that manage to game its system. Like when it demoted J.C. Penney for gaming the system so that it appeared first in search results for words like "dresses," "bedding," "area rugs," "furniture" and other items where JC Penney clearly does not lead. Punishing cheaters is not the same as punishing competitors. Any company that says Google is biased against it should provide some evidence that the company deserves to be higher in the results.

Google pulls up the sites that are most popular. That's why it wins. It's not a perfect system, because new sites that have not yet become popular are at a disadvantage. But that doesn't mean Google is cheating.

Newman says, without evidence, that it locks up the search syndication market with "exclusive" deals with PC makers, ISPs, software vendors and others. Really? That's one of Microsoft's own tactics. I can't say it doesn't happen, just that I've never seen the evidence. Show me the deals and I'll reconsider. My HP computer makes Internet Explorer and Bing the default programs. It even brings up a Bing search bar whenever I start up the computer, even though I've changed my default to Google. I have to close the Bing window every time. It makes me less likely to buy from HP again, because it's obviously making deals that are not in my best interest.

And finally, Newman says Google is accused of making it difficult for advertisers to port their data to competing ad platforms. I just wish he would show some evidence for this. His link on this topic just leads to another article that also makes the accusation without evidence. If the accusation is true, it should be possible to find someone who was not allowed to port their data, just as it was possible to find PC makers who said Microsoft charged them more if they didn't agree to use Windows exclusively.

So I don't get Newman's argument. He says the problems he listed means there should be anti-trust action against Google. "The question is why not force Google to act more competitively?" he writes.

I'm sorry, but without evidence that Google is unfair or uncompetitive, anti-trust suits are just pandering to companies that can't compete in the market. If competitors can force anti-trust investigations without evidence, it costs taxpayers and the accused company money, time and attention.

And that's what I would call unfair market hindrance.

 

Google Project Oxygen: Rules for good management

Forget all those managment books about business as war and chasms and zen. Google is analyzing what makes a good manager within its own company, and came up with a surprisingly simple list. The thing about surprisingly simple stuff is that so few people actually follow it.

I know that some of my former managers would have benefitted from these rules, as would have I when I was managing people. 

Interesting that Google went public with this just a few hours before it announced that Larry Page was taking over as CEO and Sergey Brin was going to take over strategic development. Google needs to get more products finished, and to better hit the mark when they release something. Did this experiment help them decide that they could do it with Larry and Sergey reasserting more control? 

The New York Times has an article about what Google found. The list of rules is below.

***

NOTE: Sorry I didn't notice the rules were cut off on the right. Thanks Allan for providing the link:

http://www.nytimes.com/imagepages/2011/03/11/business/20110313_sbn_GOOGLE-HIRES-graphic.html?ref=business

UPDATE:

I spent a lot of time at Google when I was writing my book (paperback version will be released in June as The Google Guys, with updates) and this study from Google has made me think a lot about the recent management changes at Google. The important thing is not that Larry Page is taking over as CEO, but that Sergey Brin is taking over as head of "strategic products, in particular working on new products." 

I have always found Schmidt to be one of the more straightforward executives in technology. He said that the goal was to simplify management structure and speed up decision making. I believe him. I don't know if he decided to semi-retire or if Larry and Sergey decided it was time to take more control again, but I believe him when he says the hope is that things will improve under the new management structure.

New products are where the most improvement is needed. Did Project Oxygen find that the managers heading new products like Chrome and Android were following those rules, while the people heading, say, Buzz, were giving bad direction? Whether or not that's true, I'll bet Sergey is interested in trying his hand at this management style.

Sergey is one of those people who is so brilliant he was in danger of never doing anything very important. This was expressed by James Watson, co-discoverer of the structure of DNA. Truly brilliant people, having succeded so easily at everything, never learn to strive to do something challenging. They're just never been challenged growing up. It's a good thing he met Page, who pulled him into Web search.

Sergey now has a challenge ahead: Getting Google to get products out the door, and in good shape. Can he learn to be sociable and support his team properly? He loves engineers, but is a tough critic and knows his own genius.

Learning how to do that is going to be the biggest challenge he's ever faced. Good luck to him.

Google's Rules, in order of importance (with my comments on Sergey's ability to follow them):

(Detailed list here.)

1. Be a good coach (Sergey was always a one-man show until he met Larry)

2. Empower your team and don't micromanage (Ditto)

3. Express interest in team members' success and personal well-being (He's not the most sociable guy in the world, although he has matured a lot in the last decade)

4. Don't be a sissy: Be productive and results-oriented (One of two things in the list he'll be good at)

5. Be a good communicator and listen to your team (See #1)

6. Help your employees with career development (Maybe. He cares about his engineers.)

7. Have a clear vision and strategy for the team (Not sure. Sergey has always been a seat-of-the-pants kind of guy.)

8. Have key technical skills so you can help advise the team. (The second rule that will come easily for Sergey.)

 

 

 

 

Coming soon: paying taxes on your Amazon orders

Forbes "Taxing Matters" columnist Janet Novack wrote a column asking the musical question: "Are Amazon.com's Days Of Tax Free Selling Numbered?"

Maybe. There's no loaded flintlock (governments are way behind the times compared to tech companies) that says tax-free Amazon days are numbered, but Novack gives a great summary of the constant pounding the company is taking from tax-strapped, club-wielding states trying to collect. The lack of a definitive action is why her headline is a question, not a statement. (When I was at Business Week, the magazine over-used the strategy of hedging through questioning headlines, leading one wag to parody the Radio Shack ads with the unofficial BW slogan: 'You have questions, we have questions.')

But I digress. I don't see how Amazon can avoid the tax man, or the grim reaper, forever. Although it could hold them off for a while.

The issues:

In 1992, the U.S. Supreme Court ruled that companies that have a physical presence in a state have to collect sales tax from residents of that state.

Amazon says that its distribution centers in states like Texas don't count. Bezos closed the distribution center in Texas when the state sent him a bill for $269 million in back taxes. Texas says Amazon still owes it the money.

New York passed a law saying you had to collect taxes if you have "affiliates" sellers in the state. Amazon is challenging it, but now collects taxes from New York residents.

Rhode Island and North Carolina passed laws similar to New York's, and Amazon ended its relationships with affiliates there (not enough of them to justify the taxes it would have to pay, I guess.) Illinois is awaiting the governor's signature on a similar law, and Amazon has warned that it will end its affiliations there as well.

A few strange things about Novack's blog:

First, it's surprising to see the libertarian rag take a stance for more taxes (the opinions of our blogger do not necessarily reflect...).

She says that Bezos set up shop in Seattle rather than in Silicon Valley so he wouldn't have to pay California sales tax. I've heard lots of reasons why Bezos went to Seattle, such as its proximity to a book distribution center and the growing high-tech community there, but never anything about avoiding taxes.

She thinks Amazon could lose the PR war and the support of the public if it keeps threatening to pull out of states that pass 'Amazon tax' laws. Really? People in those states want an extra tax in order to save about 100 jobs? That's about how many they would lose if Amazon pulls distribution centers.

But it may happen anyway. The thing is, just because Amazon isn't requred to collect sales tax in some states, it doesn't mean you the customer doesn't have to pay the sales tax in your own state. It's just that nobody pays it and states find it too difficult to try to collect.

That means that, at some point, the Supreme Court, or individual states, may force online retailers to start collecting taxes for their sales to all states. Amazon certainly has enough computing power to collect all the sales tax data and automatically add it to shipments to each state.

It's not actually Amazon that has to pay the tax. It's you. Amazon will just collect and pay it on your behalf. It wants to use its no-sales-tax status to keep prices down.

So the question is, do the states and the courts have the political will to make it happen? If enough states pass Amazon tax laws, Bezos will find it hard to keep ending relationships with affiliates and closing distribution centers. It will have to ship products farther, and that's an extra expense it will have to pay.

I don't know. Amazon probably should collect taxes.

But it'll probably still be a while before it happens.

 

 

Get your free Kindle: June 2012

The current buzz is about the coming of the free Kindle. 

Well, don't get too excited yet.This isn't new speculation. It just seems to be gaining momentum because some bloggers have recently discovered the idea.

Just so you know, though, I think it's a great idea and a real possibility. I'm just finishing up a book about Jeff Bezos and Amazon, and this seems like just the kind of bold move he might make. He's not afraid to take chances.

But the current web of speculation:

I write about it today because Myles Tanzer, a blogger at the Village Voice, wrote about it today because Amy Gahran, a blogger at CNN.com, wrote about it yesterday because blogger Kevin Kelly wrote about it in February because Michael Arrington wrote about it a year ago and because blogger John Walkenbach wrote about it in 2009.

Hasn't happened yet. But that doesn't mean it won't.

The buzz started when Walkenbach graphed the declining price of the Kindle, and noticed it was pretty much on a straight-line decline. Straight lines eventually hit the X-axis, which means the price hits zero.

So the price should hit zero in about three months.

Kevin Kelly adjusted the graph with a new data point.

So the price should hit zero in about eight months.

I thought I'd try my own chart, with all the data: The cheapest Kindles at any given time and the dates they were announced. Here it is. 

Oops. Not quite a straight line. It seems that John and Kevin neglected to put in all the data points. Like the original price in 2007. Plus, the last data point wasn't available yet. I added a best-fit straight line (linear regression) to my data.

So the price should hit zero in about 15 months. Wanna bet?

I should note the other info from the previous bloggers that led them to believe this would happen. 

In August 2010, Kevin Kelly asked Bezos about those unusually straight trendlines. Bezos smiled and said, “Oh, you noticed that.” And then smiled again. Yeah, well, Bezos might say that just to yank his chain.

Michael Arrington quoted “a reliable source” that says Bezos wants to give a free Kindle to every Amazon Prime subscriber (Amazon customers who pay $79 a year to get unlimited free two-day shipping and one-day shipping for $3.99 per item.) Although, as a former real journalist, I have to say that no real journalist would report something like this with only one anonymous source.

Amy Gahran pointed out that the economics of e-book sales might justify a free Kindle. Market researcher Forrester estimates that people bought $1 billion worth of e-books in 2010, and that by 2015, it will grow to $3 billion annually. I bet it'll hit $3 billion by June 2012. Hey, I can guess as well as the next market researcher.

For now, the Kindle still leads the market for e-book readers at its current price. Research company ChangeWave estimates that the Kindle had the largest share of the market in early 2011, at 47 percent. Apple's iPad (which does much more than just read books and is more expensive) had a 32 percent share. The Sony Reader and the Barnes & Noble Nook were laggards, with just five percent and four percent of the market, respectively. However, Amazon had the market almost to itself until the iPad was intoduced, so it looks like it could use more price cuts.

E-books are clearly a huge part of Amazon's future. The question is whether the Kindle itself will be a part of that future. After all, Amazon also provides free applications that allow people to turn their computers and cell phones into e-readers in order to buy and download e-books from Amazon.

If Bezos wants to keep his share of the e-book market, maybe discounting the Kindle to $0 makes more sense than trying to discount the e-books themselves. He's been fighting the publishers to cut the prices, and losing. It's a delicate balance.

But I'm sure Bezos has a flow chart to figure out if it could work.

If it does, go for June 2012. At least I used real data.

 

Will Steve Jobs make a cheap iPhone?

Sources told Peter Burrows at Bloomberg BusinessWeek that Apple is working on a small, cheap (and out of control?) version of the iPhone to slow the infiltration of the Android from Google. 

Really, really interesting, and a major strategy shift rom Steve Jobs if true.

Since his comeback, Jobs has seemed content to stick to his pre-firing strategy of capturing the high end of markets and letting the "clones" take the bulk of the business. That happened in PCs, where imitations of the Mac OS (a product from Microsoft called "Windows") took over the PC business, leaving the Mac as a niche player. An important, cutting-edge, Mercedes-type niche, but still a niche.

Jobs has seemed willing to continue that strategy in smart phones and now tablets, letting Google play the old Microsoft role: Imitate Apple's software and license it to all hardware makers. That means Micros- er, Google, sells more units and attracts more apps from the independent market over the long-term.

It's been working for Google. Canalys says Android phones have started taking over current sales of the smart phone market.

At the end of 2009, Android captured 9% of smart phones sales, while iPhone got 16%.

One year later, Android took 33%, iPhone 16.0%.

(Raw numbers from Canalys here)

I figured Jobs was happy with this approach. After all, Apple's profits and stock price are outstanding. But I've had a bad habit of underestimating him. I admit it. He's a genius. (Well, I've always admitted that.) He's smarter than I. He's the greatest pioneer since Thomas Edison said "Let there be light bulbs." He will continue to surprise everyone, no matter how used we've become at being surprised by him.

Perhaps Jobs is entering a new phase: Undisputed market leader. Bad for Google if he decides to do that.

Maybe he's still just thinking about this mass-market iPhone. Now that the iPhone is coming out on the Verizon network, we'll have to see if Android will continue its momentum. If not, Jobs may not have to make this change. Or maybe he'll do it anyway.

Hell, what do I know?

 

 

Nokia + Microsoft vs. iPhone vs. Android

Ed Burnette at ZDNET has a funny interpretation of the announcement that Microsoft and Nokia are teaming up to create a "new ecosystem" in smart phones.

Right.

I'm always wary of underestimating Microsoft. It tends to create good products after the third try. It created a nice search engine with Bing. And it's gaining. Hitwise reports that Google's market share is stalled at only 71% of the market, while Bing has risen a point or so in the last sixth months, powering up to about a 9% market share. Comscore says Bing is up to 11.5% while Google is only at 65.5%.

Besides, Bing is the new Yahoo! That oughta help.

So what's this new ecosystem stuff? A powerful new Smart Phone system based on Nokia hardware and Microsoft software! 

Microsoft has done it before. I mean, Windows for the PC became a great ecosystem. Sure, it got a little head start by becoming the OS for the IBM PC back in the Lower Cretaceous Period of the PC. And Bill Gates was smart enough to keep the right to license it to others and take over the PC world like the marsupials that took over the dead dinosaur niche and eventually evolved into Bill Gates.

But, hey, now it's got Nokia to give it a ... well, a fourth place head start. I'm sure the same strategy will work as other smart phone makers jump on the "Nokia Windows Phone Smart Phone" (NWPSP) standard!

OK, it doesnt have the pizazz of the "IBM PC" standard. They're working on that, I'm sure.

Ballmer points out that there must be millions of apps companies who already know how to build Windows apps -- you know, those folks that build apps for PCs, like Word, Excel, PowerPoint, etc. -- and are anxious to leverage their Windows skills for the smart phone market. Or, at least, the apps developers hope they will find themselves in the pole position once the NWPSP ecosystem takes off the way Bing has.

Already, Ballmer says there are over 8,000 apps for Windows Phone. The iPhone apps market, by contrast, is stalled at about 300,000 apps.

He also notes that by combining Nokia's power in phone hardware and Microsoft's huge advertising budget, the two of them will create "a shared roadmap so that we can really align and drive the future evolution of the mobile phone."

God knows that's needed. Steve Jobs and Sergey Brin don't seem to have much of a road map.

Nokia and Microsot are now the underdogs in this fight, so they're going to fight harder. And they've both been there before. About 30 years ago.

I'm sure they still remember how it's done.

Google management changes -- focusing on the wrong thing

A couple days ago, Google CEO Eric Schmidt announced that he was handing the company's reins back to Larry and Sergey.

Commentators have been focused on the wrong things. There has been a lot of discussion of Larry's new role as CEO. I think the important issue is Sergey's new role in all this.

Bill Saporito, blogging on Time.com, sees trouble. He thinks Google has become too big to be run as a "geek commune" any more. He thinks it may be a bad time to get rid of Schmidt's "adult supervision." Given the fact that the company is having trouble in social networking and its Chrome operating system, he writes, "It's possible that Google doesn't need a guy who can invent the whip -- it needs a guy who can crack the whip."

By contrast, Claire Cain Miller and Miguel Helft at the New York Times write that this is an attempt to revive its "start-up spark."

The Times is closer to the truth, but not because Schmidt is out and Page is in. The important change is Sergey Brin's new job.

According to Schmidt's blog, "Sergey has decided to devote his time and energy to strategic projects, in particular working on new products. His title will be Co-Founder."

Aren't the Chrome OS (which will run any iPad competitor Google will push,) social networking and Google TV (which has been struggling to gain momentum) just the kind of strategic products that Sergey will now head?

It used to be that Sergey focused on new technology, Larry headed new products and Schmidt ran the company's financial operations. But those roles were all somewhat fuzzy when the company was run by a triumvirate. All three had to make strategic decisions together. Now it's clear who is doing what.

Larry has the job of running the basic business of the company. He still has Schmidt as an advisor, and there are plenty of financial folks to help as well. And don't forget: financially, Google is doing fine. Larry just believes he's mature enough to run a company now, and Eric agrees.

But new product development has been spotty and disorganized. So the most important product and technology development is now focused under Sergey. By dedicating all his attention on important new products, he may be able to get them out the door faster, with smaller teams and better coordination.

Why the change with Schmidt? Who knows? But he has nothing to prove any more. He's wealthy and successful. Maybe he wanted to back off, or maybe Larry wanted the top job now that the VCs can't make him have adult supervision.

But I think what Schmidt says in the blog is, in fact, the main reason. "Larry, Sergey and I have been talking for a long time about how best to simplify our management structure and speed up decision making." This change looks like it may do just that.