Google Rocks : Gearing To Rule The Internet World

Once again Google surprised the street with much higher than expected earnings. The stock price has jumped $20 today to more than $210 per share and the market cap is almost $58 billion. Paul Allen writes,"Google is on track to being the most valuable company on the planet". Earlier Paul wrote before,within 10-15 years Google will surpass Microsoft in market cap. He now writes, 7 reasons why it won't even take 10 years for this to happen:
- Google Philosophy : Google has the right philosophy for our time.By giving all access to extremely valuable data and tools, they are amassing the largest customer base in the world. After providing a service and attracting an audience, they figure out smart ways to monetize it.
- Efficiency of Advertising Model: Once they have eyeballs, the Google self-service model allows hundreds of thousands of businesses to manage their own accounts. New advertisers can set up an account and have traffic coming to a site in just a few minutes. Google pays almost nothing to get new customers and almost nothing to generate this revenue--the customers themselves do all the work. The profit margins here are breathtaking.
- Good Partner: Google is unbelievably generous with partners--content sites who accept Google ads in exchange for a percentage of the revenue. Because Google is not evil, and they want all sites to accept their ads, they share most of the revenue with their content partners.
- Employee Pet Projects : Long term, this is the #1 reason why Google will become the most valuable company in the world. Every employee at Google is allowed (or maybe even required) to spend 20% of their time each week working on a pet project. Most companies operate from the top-down. Managers tell employees what to do. Executives make all the resource allocation decisions. The most talented, creative, and entrepreneurial people leave companies like Microsoft in frustration in order to start their own enterprises, Google has created an environment where the most talented, creative, and entrepreneurial employees can play in their own sandbox, attract attention and support from top management, and have their pet projected funded within the company. There’s scope for more innovation here than from almost all the other top internet companies combined.
- Speed of Decision Making at the Top: Once all details are available.its maybe only a matter of days before they make a decision to invest in something or make an acquisition. Consider Google's acquisition of Blogger and Picasa. Google's founders' instincts are so good and they have the ability to make decisions so quickly--that the rest of the world--slow and beauracratized as most of it is--better watch out as Google makes big moves and does business at the speed of thought.
-Cash Flow Funds Pet Projects and Acquisitions. Google's cash flow is so amazing that anything the founders want to do in terms of funding employee pet projects or making acquisition, they will be able to do. While Microsoft is distributing tens of billions of dollars to its shareholders through dividends (signalling the end of their ability to generate high returns from investing the cash internally), Google will be investing more and more in its world changing strategies--like scanning millions of books from the major research libraries in the world and offering free voice over IP (free telecommunications) to people around the world. No doubt they will become a leader in instant messaging; they will launch a browser to steal market share away from Internet Explorer; they will be prominent in blogging, online photo sharing, and in online communities. Eventually they may even offer an operating system or network computer with application functionality that will compete head on with Microsoft Windows and Office.
- Open Source and Declining Hardware Costs: All the services Google rolls out are being launched on cheap hardware using open source software. The costs of providing services to the world are declining at an astonishing rate. And Google is there at the right time, investing like crazy. Google is on track to having a million or more cheap computers configured into one great network computer system that will store our personal data, host the knowledge of the world, and provide us with tools for communicating with each other. And the cost of deploying such a world-wide network is decreasing all the time. Which means profit margins at Google will be breath-taking for years to come and the street will continue to be surprised.Excellent analysis by Paul on Google - while he may be off the mark about other companies- particularly microsoft - who are moving on quite aggressively in other space like consumer electronics. No doubt Google has mastered the art of continual improvement in established areas and have shown phenomenal capacity to move into newer areas and gain leadership. Strategy, Execution are really top-of-the line- exisiting business have huge upside potential for growth. Google is well poised to go from strength to strength from here.

The New Dotcoms Of The New Rules Economy

Tom Foremski writes,There is a new kind of dotcom company that will emerge during Internet 2.0 this current and very distinct emerging phase of the Internet. New-rules companies will decimate established companies in many/most sectors. And it will happen very quickly when it happens.
The characteristics of a new rules enterprise: Excerpts with edits:
- The first rule of the newrules enterprise is that it is new, brand spanking new.
- The second rule is it is staffed by a small group of executives that know the most efficient business processes for what the venture will produce.
- The third rule is to stick as much open source/industry platform software and hardware onto the business processes as you can, creating a highly automated highly-efficient business venture with virtually free IT.
- The fourth rule is to use as much web services IT as possible.
- The fifth rule is work free for six-months to create the nucleus of the venture. It’s an atomic ventures world. It’s the $40k startup. When IT, and other infrastructure costs are so cheap and available to everyone then knowledge capital becomes the competitive differentiator—who is on your team.
- The sixth rule is don’t put anybody on the payroll unless you absolutely have to.
- The seventh rule is the venture does not go public, it stays private. It will have private investors/owners and those investors would be paid in dividends. By staying private newrules enterprises are a blackbox corporation. Competitors cannot peek inside because it is private and thus cannot benchmark their business model against it.
- The eighth rule of the newrules enterprise is that there will be a lot of intellectual property that is not patented but is kept secret.
- The ninth rule, and the most important, is that the newrules enterprise uses blogging techniques and technologies to market research/help produce and sell products and services that near-perfectly match the needs of their customer communities.
I get two messages out of this:
A. All trendy things are in this list
B. There is definitely an upturn in the valley - so much so people have once again began to glamorise the activities in the valley. Thats good news for everyone.

New Technologies, New Opportunties, New Offerings - View Through A New Prism

Techbeat writes, "Be afraid of new technologies" trying to disrupt existing technologies and moving in a different trajectory.
Views like Voice Over Internet Protocol will take a long time to make much of a dent in plain old telephone service. Once in a while, you receive views like "You're not going to get a mass migration to VOIP until such time as the service becomes the equivalent of what you have today," and that "You have to offer people more than they can do today."
The big mistake many people make with new technologies, from personal computers to the World Wide Web and, most likely, VOIP, is to compare them with existing ways of doing things, and then-big surprise!-they don't measure up. Yet already, more than 22 million people, plus 70,000 more every day, think Skype is more than good enough, and no doubt it will get better. What's more, it offers much more than POTS-such as the ability to know if someone's available before you call and set up conference calls with a click. Let the so-called experts argue over how many years away the tipping point is. I and 22 million other people already know it's here.
Disruptive Technologies need to be looked in with a different perspective – obviously at the initial stages, disruptive technologies do not look all that promising to all – except a few trendspotters and regulars would like to compare with the current competitor and focus on shortcoming when time pushes the new technology into a different forward trajectory. For example, today in the world - the number of mobile phones exceed the number of landline phones available- all this has happened in less than 15years..

The Global Internet Shift?

Om Malik writes Growth is slowing for US centric Internet business models. After years of high double digit growth, the "US" sales of many large Internet companies are showing a gradual plateau.The Internet is morphing from a mostly US-centric phenomenon to a truly global phenomenon. EBay and Amazon’s examples show that there is a momentum shift happening – the power of the Internet is moving away from US to the new comers – China, South Korea and soon India. In case of Amazon, international segment sales accounted for 44% of worldwide net sales in 2004, up from 38% in 2003.

Om Points to Erik Schonfeld's article
EBay for instance has realized that and has moved quickly to snap up overseas auction sites and that the world according to EBay points out that soon global sales will outpace US sales. EBay spent $1.6 billion and bought its way into large and fast growing markets. The company has 31 sites straddling the globe, from Brazil to Germany to China. They generated an estimated $1.1 billion in 2004 sales — 46 percent of eBay’s overall trading revenues — and are growing twice as fast as the company’s domestic operations. International trading revenues are likely to surpass US revenue in 2005 . Om cautions, analysts need to figure out the outer threshold of growth and need to start questioning the valuations being put on Internet companies. Among other issues one has to worry about is if the US centric models translate into opportunities worldwide. Om also adds that there is going to be a new resurgence in the local entrepreneurship in those high-Internet growth countries.

My Take: Om Malik is undoubtedly the authority on spotting trends and his power of inference is indeed amazing.Asia represent 250M Internet Users or 32% of the internet population with huge room for growth with 60% of the world population.Asia also have some highest Broadband pentration countries in the world. Broadband is one of the basic requirement for applied services like ebusiness,IP Telephony service etc to boom and so this represents an immediate market for one willing to explore. However, a few things to get the complete perspective correctly:

A. Whats Europe's share in the international business outside of US. Om had earlier pointed out Asia - US internet traffic exceeding that of Europe -US internet traffic , but we may be better off knowing the volume of business transacted by international online firms.In the software field - both products and services, which I am intimately involved with - generally the share of european business exceeds tat of Asia - I must however say that few enteprises are beginning to say - Asian share of business has nearly matched or about to catch up with european level of business.

B. Asia's adoption of leading edge service offerings - for example - Amazaon AWS users, Flickr users - I guess may be pretty low than what we see in the US. Its always competition between the fast and the slow ( even in the digital world)

c.Very specific net centered initiatives first coming out of Asia is few and far beween - A.K.A ohmynews.org in citizen journalism.

D. What if we take the case of 10% retail sale happening through online in Korea and expect to see this threshold happening in the US.

E. Asian ability to innovate new service offerings extendable across the region leaves a few things to be desired - see my article "Where's the asian equivalent of Vonage?"for instance.

Dell - Don't Give Way For The Niche Players

In his article for business week,Nicholas Carr writes, "Dell shouldn't dismiss Apple's design driven success" .Markets historically evolve past commoditization to value style and special features. Excerpts with edits and my comments added:

Until now, Dell has been able to use pretty much the same strategy in selling computers to consumers as to business buyers: Offer functional, standard machines at cutthroat prices. Focus relentlessly on cutting supply-chain costs – like the classic Model T strategy. Like Dell with PCs, Ford Motor came to dominate the car market a century ago by turning the automobile into a cheap, mass-market product.and beating competition by operational efficiency. By the early '20s, sales of Ford's drab but well-built Model T surpassed those of all other U.S. auto makers combined. As consumers began to take cars' basic functions for granted, they started seeking a little pizzazz in their vehicles. An unadorned black roadster was no longer enough - everyone suddenly wanted a stylish set of wheels. Niches proliferated. Fashion mattered. General Motors President Alfred P. Sloan saw the change coming. Popular consumer products, he understood, tend to evolve through three phases:
Phase I: They start out as luxury goods, expensive to produce and pitched to a small, elite market.
Phase II : As maturing technologies and economies of scale drive down manufacturing costs, they become mass-market commodities.
Phase III : Once they're established as affordable necessities, consumers start looking beyond the price tag for distinctive designs and features. Form begins to trump function.

While Ford continued to churn out one-size-fits-all Model Ts, GM introduced a string of attention-grabbing Chevrolet models with smart new features. It also began tweaking its models every year, following the lead of clothes designers. By 1926, Chevrolet was stealing market share from Ford. By 1927, Chevys were actually outselling Model Ts. The market had gone, to use Sloan's terms, from "mass" to "mass class." A similar shift is looming in the home computer market. Now that basic computing functions are mature and well-established, consumers can be expected to start demanding a higher fashion quotient in their digital devices - just as they do for other commonplace appliances like refrigerators, TVs, coffee makers, and speakers. Buying just another colorless box will become steadily less appealing. The market is already showing early signs of such a transformation. After years of erosion, Apple's market share is beginning to grow again, thanks to distinctive products like the iMac, iBook, and, yes, Mac mini. As computers keep moving from home offices into living rooms, the demand for sleek, striking designs will only grow.
Finally in 1927 ford announced it was discontinuing the Model T and would close down its main factory in order to revamp it for a new line of more attractive models. But the carmaker's glory days were over. It would never again come close to dominating the market the way it had just a few years before. Ford's fall stands as a cautionary tale for all companies that have thrived by riding the commoditization wave of a new consumer product. If Dell wants to continue to rule in the home as well as the workplace, it may need to class up its act. Rather than dismissing fads, Dell should try starting a few.
My Take :I think that this is all the more important in the technology industry when three more additional factors come into interplay:

A. Fast advancing technology
B. Dropping prices
C. High level of innovation and newer products getting developed due to
intersection and convergence
D. Truly global industry
E. Very high market potential for penetration and replacement
F. Relentless efforts to bring low cost PC like negroponte's low cost PC

Where Do Your Great Ideas Come from?

In his blog, Dave comes with an approach to create your Personal Creativity Profile.

The Profile will tell you:
- When and where you get your best ideas
- How your sources of great ideas differ from others, and why
- How you can make more time and space for creative activities

In this post, Dave helps with
A. Survey creation process for yourseld
B. Copy the questions, normalized average rankings (which he provides) and your
answers into a spreadsheet, and
C. Publishing results, visual interpretation and proving inference and graded scores

Dave concludes, we can finalise based on the results, - What works for you, and why? Are there times and places and techniques that aren't on this list at all that seem to surface great ideas for you? In what ways does your ideal environment for idea generation differ from mine, and from the other survey respondents'? And are there ways you could be spending your time a little differently to allow your right brain to get some more exercise?