GoogleGazer

Reportedly, Yahoo and Google are close to a deal. But it’s not the deal that everyone was imagining. Seems like they have found a very clever way to avoid potential antitrust trouble.

To recap the history first: It’s been assumed that in order to fend off Microsoft as an unwanted suitor, Yahoo decided to publicly get into bed with Google. The positive results of a limited test of living together (serving Google ads on the results of searches on Yahoo.com) reportedly showed a strong potential for revenue enhancement for Yahoo, because Google, with its much larger inventory of available ads can serve up more relevant ads, thereby increasing the “click-through” rate.

Microsoft and others hastened to raise the specter of anti-trust should this (more or less) one-night stand be continued as an ongoing living arrangement. If Google supposedly controls 80% of the market for search-related ads, the line of reasoning goes, and it’ would now serving up ads on Yahoo’s site in addition to its own, then there would be a prima facie case of restraint of trade, n’est-ce pas?

Not so fast.

The folks from Googleplex came up with an ingenious idea: a non-exclusive agreement, where others can play too. In effect, an auction of auctions. Remember how AdWords works? Each vendor indicates the maximum he or she will pay for a click-through when the user types the magic words into his search argument. The highest bidder’s ad gets top billing, etc. Google is running an open auction, where the highest bidder wins. What Yahoo is reportedly planning to do is to invite operators of all and sundry ad servers to place bids for the privilege of serving up individual ads. Thus, if everyone decides to play, and a user searches on “sell large diamonds,” then each ad server (Yahoo’s own, Google’s, Microsoft’s, AOL’s, whomever) would respond with the maximum price it can offer for the privilege of serving up the ad to this potential buyer of large diamonds. The Ad Server offering the highest price gets to serve up the ad. In effect, an auction of auctions.

Rather than restricting competition, Yahoo would be offering a “level playing field” and enhanced competition. How can anyone argue with that? Non-exclusive agreements are viewed positively in antitrust law.

Just one little thing, though. By having by far the largest inventory of ads, Google is likely to win the lion’s share of these auctions.

There’s a reason those guys in Mountain View make so much money. They are just smarter than the rest of us.

Comcast Corp (CMCSA.O: Quote, Profile, Research) is showing increasing signs of cuddling up to Google. It has jumped in to the social networking fray, where Facebook and MySpace are the leading players, by acquiring pioneer Plaxo for about $175 million, “plus or minus 5%,” while Microsoft last October paid $240 million for a 1.6 percent stake in Facebook, valuing newcomer Facebook at $10 billion, and proving once again that the pioneer is the fellow with the arrows in his back. At the time, Microsoft won a high-profile technology industry battle against Google and Yahoo for the privilege of making the investment.

Comcast stated that it will use Plaxo to offer social network links across Comcast-connected devices, from TVs to digital video recorders to, eventually, wireless devices, thanks to the new partnership with Sprint (S.N: Quote, Profile, Research), Clearwire (CLWR.O: Quote, Profile, Research) and Google (GOOG.O: Quote, Profile, Research) which we discussed in an earlier post. Plaxo’s own take on the transaction with Comcast is discussed in its blog and the sale was driven, in part, by Plaxo’s investors’ desire for liquidity.

Plaxo was founded in 2001 by two Stanford engineering students, Todd Masonis and Cameron Ring, as well as Napster co-founder Sean Parker, who was pushed out in 2004 by Plaxo’s financial backers, only to become the founding president of Facebook. In the last three years, Plaxo has been focusing on partnerships with big Internet companies to help synchronize address books and calendars with other Internet services rather than competing with Facebook and MySpace head-on.

I think it is significant that Plaxo announced a deal with Google to become “Social Graph Provider in Support of Google Friend Connect” just before the transaction with Comcast was announced. Plaxo has been working hard on a number of initiatives in support of its “all connected” vision including OpenID which eliminates the need for multiple usernames across different websites, microformats, a set of simple, open data formats built upon existing and widely adopted standards, OpenSocial, which defines a common API for social applications across multiple websites, Verisign’s consolidated online identity, a credentialing system for more secure online transactions, and the Social Graph API lead by Google. The Social Graph API now makes information about the public connections between people on the Web, expressed by XFN and FOAF markup and other publicly declared connections, easily available and useful for developers. Perhaps most importantly, Plaxo supports of Google’s just announced “Friend Connect initiative.” Plaxo’s announcement that it will become a “Social Graph Provider” in support of “this bold initiative to “socially-enable any webpage” was obviously in the works while Plaxo and Comcast were talking turkey.

What is a Social Graph Provider? As Plaxo says, it’s any social network that elects to let its users take their “friends list” with them to use all over the open Social Web. We agree with Plaxo’s assertion that “this is a critical missing piece at the center of a “services layer” for the emerging Social Web ecosystem.”

It’s obvious that Comcast’s acquisition of Plaxo on top of its recent deal with Clearwire (in which Google also invested) indicates clearly that Comcast and Google are becoming increasingly cuddly. One also has to wonder why Google itself did not acquire Plaxo, as money is obviously no object here. I think that there is more to this story than meets the eye, and that additional announcements will be forthcoming.

We reported earlier that either Google or MySpace was rumored to be dickering with Blinkx to acquire its video-indexing technology. On its own website, Blinkx brings a Times article that says that Blinkx’ chief executive is adamant it doesn’t need a deal with Google to be successful in video search.

This reminds me of the famous George Bernard Shaw story. “Madam,” he asked a dinner companion, “for a million pounds, would you sleep with me?” “For a million pounds, ” the woman answered, “I might.” “how about for five?” Shaw persisted. “What to you think I am?” the woman angrily replied, “a whore?” “We have already established that,” replied Shaw calmly. Now, we are only hagging about the price.

I think that Blinkx CEO Suranga Chandratillake is agreeable to a transaction, but right now, the parties are still haggling over the price.

Demonstrating Google’s commitment to invest in solar thermal energy generation as one of the key emerging industries addressing “the changing global climate,” Google announced that it had made a $10 equity investment by taking a stake in BrightSource Energy’s $115 Venture round through its Google.org arm. The investment is part of Google’s RE<C (Renewable Energy Cheaper Than Coal) initiative . Google has already been working with eSolar Inc. (PDF) which specializes in solar thermal power and Makani Power Inc. (PDF) which is developing high-altitude wind energy extraction technologies aimed at harnessing the world’s most powerful wind resources.

Bright Source designs and builds large scale solar plants that deliver low-cost solar energy in the form of steam and/or electricity, at prices competitive with fossil fuels, to industrial and utility customers worldwide.

Chris Busselle, Investments Manager and Kevin Chen, Green Energy Strategy were named in the announcement on Google’s blog. To demonstrate its commitment to this sector, Google announced that it was seeking a also looking for a Head of Renewable Energy to run their internal R&D effort, which is focused initially on solar thermal power, advanced wind technologies, and enhanced geothermal systems.

Google.org is the “do good” arm of Google that is run for long-term profitability and “aspires to use the power of information and technology to address the global challenges of our age: climate change, poverty and emerging disease.” You can visit it’s blog and website .

Given the cash that Google throws off every day, it’s still just dipping its little toe in these waters, but one can’t but applaud the initiative.

Kevin Maney, Portfolio.com had an astute analysis in Wired about why Hewlett Packard (HP) decided to lay out $12 billion to buy Electronic Data Systems - it’s in recognition, he says, of the shift to “cloud computing” a red-hot area going forward for IBM, Amazon and Google, also known as hardware as a service.

Google and Amazon both mastered the art of cheap, massively parallel, fail-safe computing. Increasingly, they are offering their hosting services to others. HP, it seems, is at least as interested in cloud computing as consulting.

Kevin quotes Jeff Bezos of Amazon: “We’ve been working on our Infrastructure Web Services for four years,” Bezos said. “We launched our first one two years ago, the Simple Storage Service, and I am astonished — I rarely meet a startup company these days who isn’t using our web services and now we’re starting to get, you know, deployment inside Enterprise level data centers as well. So it’s a very exciting.”

Asked about Google’s plans to get into a similar business, Bezos said: “Well … we really do have a practice of not talking about other companies. But this, like our retail business, (there) is not going to be one winner. I think there are going to be multiple winners pursuing different flavors or strategies, different kinds of products…. I think our web services business is going to be part of what becomes an important industry. And … important industries are rarely made by single companies.”

He continues, “Asked about Google’s plans to get into a similar business, Bezos said: ‘Well … we really do have a practice of not talking about other companies. But this, like our retail business, (there) is not going to be one winner. I think there are going to be multiple winners pursuing different flavors or strategies, different kinds of products…. I think our web services business is going to be part of what becomes an important industry. And … important industries are rarely made by single companies.’ “

While Google and Amazon may both be building “infrastructure businesses,” in my humble opinion, this misses the point. What Amazon, and even more so Google have learned to do is to build enormous and profitable web-based businesses offering services, either totally free or very cheaply. They are really doing “software as services” while others are just talking about it. In future posts, we will look more closely at some of Google’s emerging businesses, like Google Apps, which seriously threaten the desktop-centric order of things.

HP’s CEO, Mark Hurd, is one smart fellow, and I’m sure he sees far more in EDS than merely the provision of consulting services in order to keep up with IBM. Perhaps, EDS has strengths in “cloud computing” that we don’t know about, or maybe, just maybe, another shoe is yet to drop that will fill in the missing piece of the puzzle.

Rafe Needleman, editor of Webware, a site dedicated to Web 2.0 applications, and a part of the CNet empire, has an interesting and timely post about the mess currently being made that’s known as data portability, especially as it relates to social networks. The need is certainly there. None of us likes belonging to many of them, and inevitably, entering the same information multiple times.

Needleman hit the nail on the head. He reports:

Within a matter of days, some of the biggest names on the Web announced new projects that all have a roughly similar aim of making it possible for Web users to have a single social-media identity across the Internet–”data portability,” as the general term has come to be known. MySpace.com was first out of the gate with the announcement of Data Availability, a way for members of the News Corp.-owned social network to share their profile data with partner sites including eBay, Yahoo, and Twitter. The next day, Facebook launched Facebook Connect, an extension of its developer API so that third-party sites can incorporate Facebook authentication and user identities.

The Google-created Friend Connect, announced Monday, is a little bit different. With its goal of bringing the connectivity of the social Web to its less social online brethren, the project takes a cue from two much lower-profile social-networking strategies: MyBlogLog, a Yahoo-acquired widget manufacturer that lets readers of popular blogs socialize with one another; and Flux, launched by Viacom to provide interoperable social features to its own Web sites but open to other participants as well”.

The Data Portability Workgroup, a consortium of techies working toward the common goal of translating identities from one social site to another, says this about data portability and the group’s mission:

Mission: To Consult, Design, Educate and Advocate Interoperable Data Portability to Users, Developers and Vendors.
Definition: Data Portability is the option to use your personal data between trusted applications and vendors.

This is a worthy mission and a clear definition. Here’s the rub: Any time you propose to set standards, all the big boys line up to say that they are in favor. Standards are good, like motherhood and apple pie. In fact, generous souls that they are, they’ll take their internal standard, and “donate” it to the group, so everyone can adopt it. Of course, when MySpace, Facebook, and Google all want to have a unified standard [theirs],

Rafe says it well: “

One thing to keep in mind is that there’s still time for all three of these projects to change and evolve before any Web users actually see them in action. Facebook is not yet at the point of releasing the technicalities of Facebook Connect other than the fact that it’s an evolution of its existing API; MySpace’s Data Availability is rolling out slowly with only a few launch partners. A general launch of Friend Connect, Google director of engineering David Glazer said, will take ‘months.’

In the meantime, expect plenty of speculation, plenty of criticism of ‘walled gardens,’and at least one claim that data portability is dead in the water before it’s even taken off. This is tech blogging we’re talking about–would you expect anything less?”

As I dinosaur who has seen nearly 40 years of arguments over standards, I would hold your breath for an immediate resolution to this problem, but hey, at least they are talking.

CNN quotes Fortune Magazine which raises a concern that Google, voted one of the top employers in the country, is steadily losing staff. Sean Knapp, together with Belsasar Lepe and Bismarck Lepe left  successful careers at Google and a bucketful of unvested options to found Ooyala, which focuses on building video syndication and monetization solutions for the distribution of high quality video content. They have already attracted $10 million in funding. ( Ooyala means cradle in Telugu, a Southern Indian language, in case you were wondering).

They are not the only ones who headed for the exit doors.

Paul Buchheit, an early Google engineer who coined the oft-repeated  “Don’t be evil!” battle cry, is a founder, with three ex-Google colleagues, of a social-networking company called FriendFeed, which enables you to keep up-to-date on the web pages, photos, videos and music that your friends and family are sharing. and to to discover and discuss information among friends. Yanda Erlich, once a popular Google product manager, started an instant-messaging company called Mogad, which lets you chat with all your Facebook friends from one IM client. Nathan Stoll, who managed Google News, is hard at work on his new company, Mechanical Zoo. (It’s in “stealth mode”- so few details are known.) Former business-development guys Salman Ullah and Sean Dempsey have a new venture capital firm, Merus Capital, that aims in part to fund startups founded by ex-Googler employees. The departures have grown so numerous that the exiles have formed an informal alumni club of ex-Googlers turned entrepreneurs. David Friedberg, another former biz-dev executive, started a company called WeatherBill, which sells insurance pegged to climate risks (nicely profiled in TechCrunch). He recently attended the club’s first meeting at a conference center in Palo Alto. “I was surprised by the number of things that were being done that could have been done at Google,” he says.

There’s been an exodus of executive talent too: Its chief information officer, Douglas Merrill, just left. Several top people have gone to Facebook, most notably Sheryl Sandberg, who ran Google’s automated ad sales, and Elliot Schrage, who ran PR. George Reyes, Google’s CFO, announced his retirement last summer and has yet to be replaced.

To this old fart, it all seems very normal. Many Microsoft instant millionaires did the same thing in Microsoft’s heyday, and so did Cisco engineers. However, for what it’s worth, Fortune professes to be worried. “Google has to prove that its quirks - its odd hiring practices (e.g., asking 45-year-olds their GPAs), refusal to play the guidance game with Wall Street, the free food, etc. - will stand the test of time. It has to show that its success is because of its Googleyness (more Googlespeak), not despite it. Even its friends harbor doubts. ‘I’m not convinced they’re in the ranks of GE or P&G or even Microsoft, for that matter,’ says Peter Chernin, president of News Corp., whose MySpace unit is a key Google partner. ‘Not yet.’ “

Even folks much younger than I can remember all the learned analysts who opined that Google was “overpriced” at $100 per share and was a great short. A recent quote had it around $582.

Still, Fortune does allow for the possibility that all is well, covering all bases: “Then there’s the possibility that Google truly is inventing an entirely new way of doing business. ‘People are labeling them as just about search,’ says Bruce Jaffe, a former M&A executive at Microsoft who came to admire Google the hard way- by competing against it. “‘but I’m not sure that’s accurate. They’ve introduced a new model for software. Think of it this way. If they are a household brand on products like Google Maps and Gmail, that may be more than just search.’ In other words, getting customers to use Google all the time would make it ubiquitous on the web, as Windows is on PCs. ‘It may be that they’re in a whole other world from everyone else,’ says Jaffe. ‘They could be such pioneers that no one will know for years.’ “

Something for everyone in this article.

Ashkan Karbasfrooshan poses an interesting question at Seeking Alpha:

Will Rupert Murdoch, who runs News Corp. (NWS), the parent of MySpace buy Blinkx for its media search capabilities, giving MySpace’s 75million unique users better search tools to find its burgeoning video content? If not, will Google (GOOG) buy it for YouTube?

It seems as though Blinkx is already “in play.” The Financial Times noted that Blinkx , the video search group that was spun out of software specialist Autonomy, was the standout small cap stock Friday on the AIM. Its shares jumped 38.9 per cent but then fell back a bit in after-hours trading, as rumours circulated that Blinkx, which just launched its new online video indexing technology, might seek a Nasdaq listing for its shares. Adding to the positive mix for the stock was talk that the company might attract a 60p-a- share bid.

The acquisition would make sense for both potential suitors, and it will be interesting to see if Ash is right!

See Reuters for more information about Blinkx, founded in 2004 by Sri Lanka-descended Briton Suranga Chandratillake, became public on London’s junior AIM stock market in May 2007 following a merger with another UK search engine firm, Autonomy.

The speculation may have come in anticipation of a May 24 expiry of a clause which stipulates that $50 million should be paid to Autonomy in the event of a buyout within a year of its initial share sale, IPO filings show.

Blinkx may also be a target because of its technology and its strong consumer focus, said Piper Jaffray analyst Rajeev Bahl.

On May 9, Yahoo! announced that it had acquired Inquisitor, a Safari browser plug-in to strengthen its Search Assist capabilities, announced last year, to make them available to Apple users. Inquisitor 3, a search technology that auto-completes queries and delivers results right in Safari Web browser, is similar to Yahoo!’s existing Search Assist technology. Simply type in your query and websites will appear immediately, as well as suggestions for refining your search. Just as with Search Assist, the goal with Inquisitor is to help users find exactly the site they’re looking for as quickly as possible.

While it’s not likely to put Google search out of business, and it may be too little too late, it’s a useful step in the right direction. It’s a free download.

Felix Gillette, in an article in The New York Observer tells an interesting tale of Google’s efforts to have the Internet, rather than just television, play a significant role in the upcoming presidential debates, making an end-run around the Commission on Presidential Debates, which has held tightly on to its monopoly power over the presidential debates up until now.

It seems that Google has hired Bob Boorstin, a former speechwriter in the Clinton White House, as a communications executive (whatever that means), and Boorstin, who knows his way around Washington, hasarranged for Google to team up with the New Orleans Consortium, which was dissed by the Commission as one of four sites for the presidential debates after being considered a “sure thing,” in an end-run around the Commission. While the Commission seems grudgingly committed to some recognition of the Internet (with a tentative commitment to include some “webby” feature in one of the four debates), it made no mention of Google in any of its announcements, apparently prompting Google to take matters into its own hands.

It will be interesting to watch and see if the two presidential candidates will agree to participate in the forum in New Orleans, and if so, whether Google goes it alone or teams up with one of the major networks. One unnamed source identified only as a TV News executive said that any network, including his own, would “jump at the opportunity to co-host the debate with ‘Google & Co.’ “.