D-on-Net

Google Earth to the rescue...for Bird Flu virus

Reuters just released an interesting article that mentions U.S. poultry experts have been using Google Earth to aid in pinpointing the location of various chicken farms, feed mills etc. in the anticipated arival of the bird-flu virus in the U.S. expected at some point this year.  Google Earth first received a lot of press after rescue teams in Hurricane Katrina began using the mapping technology to identify neighborhoods etc.  Lucky for us, Google purchased Keyhole and gave it to the masses for FREE.  "Twenty years ago we had to drive around the countryside and find the chicken farm that reported a disease, but now everything is on a mapping system," Davison told Reuters in a recent interview.

Google does Dell and...Gateway

After messing with the http://www.google.com/ig/dell URL, T1R just discovered Google is also partnering on a homepage with gateway to do a branded bundled and personalizable homepage...ck it out...this may have legs http://www.google.com/ig/gateway.  We tried this for other PC manufacturers, sony, toshiba, apple, and HP, but no cigar...yet!!!

Google has not released details on pricing of the deal with Dell, but has been rumored at $1bn over 3 years. Excluding any expenses associated with this, the $1bn would equate to $0.43/share of EPS for Dell, or equivalent to $0.04/share per quarter. This is decent, but not huge for Dell considering other factors. However, for Gateway, even if their deal with Google is a mere $100mn over the same 3-years, this would equate to $0.33/share of EPS for Gateway, which is equivalent to nearly $0.03/share per quarter for a company that has negative EPS right now.

If the Department of Justice says Microsoft can, so can Google thanks to partnership with Dell

An alliance between Dell and Google is no longer speculation, but was confirmed by CEO Schmidt at Goldman’s Internet Conference.  CEO Schmidt acknowledged it is a multi-year deal and on a “worldwide basis”, but would not divulge any of the financial details.  The strategic partnership is much deeper than I previously anticipated.  Dell will pre-install Google’s toolbar, Desktop 4, and set the homepage of the PCs browser to a co-branded Google and Dell site.  However, the most interesting part of the agreement is also a direct shot to the response of the DOJs recent ruling that Microsoft is allowed to set MSN as the default search engine for IE7.  Since the DOJ said Microsoft was in the clear, Dell will be setting Google as the default search engine of choice for every Dell consumer, small, medium and large enterprise PC they sell amounting to tens of millions of computers a year.  CEO Schmidt also confirmed the two companies have been in a trial period for approximately six months and stated “we understand the value that it provides and we really understand the economics well.”  This is a big win strategically for Google in that it puts them directly on the PC out-of-the-box and will enable them to better position themselves against the upcoming release of Windows Vista and IE7.  Given the six month trial period of the arrangement, Google must clearly like the amount of search queries and ROI they are witnessing on the initial sample and is betting on this being a large opportunity on a global scale.  I am a believer that gaining presence on more PCs out-of-the-box will correlate to search query growth and thus incremental revenue for Google.  That said, there are many unanswered questions surrounding the economics of the deal.  Is Google really paying $1bn up-front for the agreement?  Nobody seems to know for sure.  Regardless, I can't help but believe given they were in a trial period for six months, Google would have continued with a formal alliance if the economics didn't make sense.  Sure there are arguments out there that this could be a negative for Google's near-term cash flow depending on the amount of the upfront payment etc., but I can't believe a company with the minds at Google would move forward if they didn't like what they have seen thus far. 

Amazon launches POD for publishers

Amazon's [AMZN] announcement of its print-on-deman program for book publishers bears the question if this is a retaliation towards Google's Book Search efforts or if these programs could potentially compliment one another. Amazon's POD efforts enable authors to sell less popular titles by enabling them to be printed as they are ordered, which is a compelling value proposition to any author.  The press release states "For a limited time, BookSurge will provide discounted book scanning services with no upfront investment to the publisher and free setup for titles with POD-ready digital files.  Publishers participating in POD will also be provided the option to enroll these titles into Amazon's Search Inside the Book and Amazon Upgrade programs at no additional cost."  I believe Google's Book Search program is actually complimentary to Amazon's POD program and is likely to aid in driving sales to Amazon.  Google's Book Search program is really a marketing opportunity for authors enabling them to expose the topics of the book to a larger user base.  Authors have the opportunity to provide paragraph teasers, full sample pages, or the entire book through Google Book Search.  The value proposition Google provides is a larger audience base intent on searching for information relevant to their query and more importantly "links them to places where [searchers] can buy them immediately."  This is where Amazaon and its POD program can come into play.  Authors who don't have the financial ability to print large quantities of their books and perhaps are not gaining much traffic on their own website now have a two-headed monster they can set in motion in hopes of driving sales.  By authorizing portions of your book to be searchable on Google Book Search and entering Amazon's POD program, an author can market its work to a larger user audience and point them in the right direction to purchase the book without risking additional upfront capital in mass production. 

Amazon's POD efforts also resembles the wildly successful business model of Digital River [DRIV].  Digital Rive helps companies who sell through CD-Roms, but don't want to invest in large CD-ROM inventories.  DRIV creates this efficiency for companies by running a CD-ROM creation studio that makes copies as they are ordered. 

Google + China Mobile = huge opportunity

Several publications have reported Google and China Mobile are in talks.  The talks are reportedly around Google getting its search engin on China Mobile's phones, which could be a huge opportunity for GOOG.  Google has said over and over they believe the mobile opportunity is large and all internet players continue to point to the fact there are 2x the amount of cell phones than pcs in the world.  Google is already serving mobile ads in Japan and is using the country as a kind of test market.  A potential partnership with China Mobile could be significant for GOOG considering they are China's largest cell phone provider with approximately 260M subs.  While Baidu [BIDU] is currently the leader in search in China, they have yet to make any strides in the mobile arena.  A partnership wtih China Mobile would immediately provide GOOG access to a large audience and catapault GOOG's brand awareness in the country.  Given the popularity of mobile phones in China, I believe a strategy focused on developing as many partnerships in the mobile arena is the right one and expect many mobile partnerships in ASIA PAC to be announced in the coming months.

Google also announced a mobile partnership with KDDI in Japan today who will integrate Google's search engine into its mobile offerings. 

Alibaba, who now owns Yahoo!'s search engine, stated they are not currently focused on the mobile opportunity in China, which could be a mistake for the company.  They are currently focused on taking share from Baidu, but I believe given the massive amount of cell phones in China relative to PCs, this strategy is the wrong one to take.  Although Alibaba has three very popular brands in China with Alipay, Taobao and Alibaba, all of which can be used to promote Yahoo! Search on PCs, I still firmly believe given the 2-1 cell to pc ratio globally and actually larger in china, both Baidu and Alibaba are setting themselves up for failure over the long-term if they continue to ignore the mobile search opportunity.  I believe China is a market that in many ways is the opposite of the U.S. in the sense that what we use on our PCs we also prefer to have access to on our cell phones.  However, given the dynamice in China, I believe it makes more sense that users will likely use the products and services they have access to via their cell phones on their pcs.  This is a dynamic I will continue to follow and report on in the future.

Takeaways from Yahoo! Analyst Day

We are over an hour into Yahoo!'s Analyst Day and have yet to hear anything new.  Company focused on leveraging existing platforms, social media, user generated content, enhancing Search (new Social search), mobile initiatives etc.  Shares are reacting negatively, down 1.39% to $30.58, due to the lack of compelling information or a new twist to their story.  If shares break $30 today, I would expect shares to fall to $27/$28 before seeing support.  The company remains affixiated on using its properties to serve graphical advertisements and keep users within its portal.  They are clearly the leader in display advertising, but the market wants to know about Search.  Jeff Weiner, SVP of Search and Marketplace is on deck to present. 

Jeff Weiner gave an in-depth overview of Yahoo's plans for Social Search, which is tied to the announcemnt of their Yahoo! Answers announcement earlier this week.  The stock is holding in the low $30s, but Tim Cadogan, VP of Search is up next to talk about the company's monetization efforts, which is what the market is waiting for.

Well, Tim Cadogan gave an in-depth overview of Yahoo's new ad platform, but failed to divulge much in the way of new meaningful and insightful information.  Again, the market is looking for more color around the upside the company expects to see with the improvements in its platform and how this is going to impact RPS and overall monetization, which is color YHOO failed to deliver.  During the Q&A session afterwards, CEO Decker told the audience the company isn't expecting any meaningful financial contribution from the new ad platform in 2006, but is looking more towards 2007.  However, I interpret this as a conservative response and standing firm by its guidance.  Said differently, upside in the remainder of 2006 from the new adplatform is by no means out of the question. 

One interesting bit of context was provided for the graphic and display advertising market in Europe.  Greg Coleman, EVP Global Adv. Sales stated Europe is essentially where the U.S. was in 2003 in terms of accepting grpahical and display advertising and Yahoo! is investing heavily to build out its international infrastructure in order to accomodate for the growth they are anticipating, which they are expecting to outpace growth in the U.S.

Founder and CEO of Alibaba.com, Jack Ma presented and clearly had everyone on Yahoo!'s management team nervous...this is a man that is not afraid to say anything.  Alibaba is taking share from eBay in China.  Alipay is the leading online payment system and the most popular form of payment on eBay.

Shares fell below $30 in AH trading to $29.81 and shares of eBay were beaten down today, below $30 in anticipation of information regarding Alibaba's lead in c2c and b2b e-commerce in China.  That said, I continue to believe shares of both companies are attractive at these levels.   

AOL announces AIM Phoneline

AOL has finally announced the highly anticipated FREE AIM Phoneline offering providing AIM users with a local phone number and voice-mail.  AIM pages is also expected to be launched in the coming days and already been dubbed the "myspace" killer considering AIM is the dominant IM client app with a reported 80M registered usrers.  Although, a 3rd party market analytics company reported only 46M used AIM in March 2006.  I bring this point to the forefront because AIM Phoneline and AIM Pages is specifically geared to junior high and high school students, but the release states only users 18 and up are eligible to receive a free local number...somehow I think it is the lawyers that made them put that in there. 

AIM Phoneline has excellent functionality built into its initial release, which is refreshing to see especially considering it doesn't carry the "beta" tag Google adores.  Users can be notified of voice-mails with messages sent to their cellphones and users don't have to be signed onto to AIM in order to receive or retrieve voice-mails.  The client even comes equipped with caller ID, which is a differentiator to-date.  I also like the fact they are offering a flat fee rate of $14.95/month enabling users to call other landlines, and cellphones (U.S., Canada and 30 International countries) and even enables 911 phone calls.  This announcement makes Skype's decision to offer SkypeOut functionality in the U.S. and Canada free through the end of 2006 even more clear as their last ditch effort to gain traction in the U.S. where they only have 6M registered users.  Expect Yahoo to answer the shots sent over its bow by Skype and AIM Phoneline in the coming months.  As for Google Talk and MSN Messanger...they have a lot of catching up to do in terms of VoIP functionality and may need binoculars to see what AOL, Skype and YHOO are doing if they don't get it in gear. 

Yahoo! redesigns its homepage...finally!

Yahoo! announced the launch of its redesigned homepage with a big new search box front and center.  Yahoo! even included a new demo video from the founder on what is new.  The clean up of their homepage was long overdue! 

Shares of YHOO are down over 30% since the beginnning of 2006 and are trading at 16x '06 EV/EBITDA, which is a significant discount relative to its peers.  Yahoo! has been making announcements left and right before the company's analyst day tomorrow.  The company is in dire need of rejuvinating its name on the Street.  Yahoo!'s comments will likely focus on Search and its upgraded version of its Search Marketing platform.  Additional topics I am expecting to be covered are CAPEX plans, MSFT's role as a partner going forward, Mobile (partnerships, new offerings, and Search) initiatives, China (Alibaba update), Japan, Europe and its VoIP efforts as a result of Skype's announcemnt it will be offering free SkypeOut calls in the U.S. and Canada through the end of '06.