Archive for February, 2008

Reading List: Web 2.0 Demographics; Amazon Goes Down; Google’s Power Blueprint

by Rich KarpinskiFebruary 19th, 2008

Today’s Telephony 2.0 Reading List:

Telco Take: The answer is Google, as Freakonomics “discovers” socio-economic self-selection in the Web 2.0 world. Google (and Facebook) are most popular among users defined as “Affluent Suburbia,” “Upscale America,” and “Small Town Contentment,” while Yahoo! is most popular among “Struggling Societies,” “Urban Essence,” and “Blue Collar Backbone.” Cross-tab that with typical telecom status levels including: “SmartPhone Business User,” “Unlimited Texter on Parent’s Family Plan” and “Buys Calling Card Minutes at Wal-Mart” and you might just have a *telephony 2.0* world-view.

Telco Take: Pure “five 9s” network guarantees are going to be difficult if not impossible to meet in the “cloud” computing world — data centers *will* go down, in both planned and unplanned outages. Here’s a good take on the “99.99%” myth when it comes to data center SLAs.

Telco Take: A look inside a soon-to-be-built Google data center, with the computer area measuring 68,680 square feet and attached cooling stations at 18,800 square feet. The Harper’s piece focuses on the power requirements of such a facility, with a brief but poetic look at the “arms race” occurring along Washington state’s Columbia River as company’s look for cheap fuel to power their “cloud computing” centers.

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Google As Rich Uncle With a Bankroll

by Rich KarpinskiFebruary 15th, 2008

One of my favorite bloggers in the mobile area is Russell Beattie, formerly of Yahoo’s mobile team among other endeavors and currently creator of Mowser, a mobile search engine/portal/transcoder.google-monopoly.jpg

Russell doesn’t suffer (particularly mobile) fools gladly, so he’s a good counterpoint to most conventional wisdom in the Web/mobile areas.

Today, his rant holds special import for service providers, as he lays out Google’s real path to success in the Web search market — and its plans to follow that blueprint in the mobile market.

Beattie seems at least in part inspired by Vic Gundotra, head of Google’s mobile operations, who at the Mobile World Congress this week implied service provider contracts are becoming less important, as mobile users increasingly wanted to browse beyond an operator’s own site:

“The world is changing. Users want an internet without fences. They know how to type in Google.com if they want to get to it. Two years ago the operators were still playing the role of gate­keepers but that is no longer the role for them.”

The idea that Google’s search growth happens serendipitously, either on the Web or on mobile phones, leads Beattie to lay it out plainly:

The greatest hoax ever played on the Internet is the idea that Google’s growth was somehow “natural” or “viral”, and that the strength of their search results alone is what propelled them to their insane 70% market share…. Google bought as much search space as they could from OEMs, portals, etc…the reason that Mozilla.org is a going concern and Opera is now free? Because of the search deals they made with Google.

For carriers, the other party in some of those search deals, this is nothing new. But Beattie follows the thread into the mobile area:

They’re doing it again in mobile, and no one seems to be noticing. The first thing I thought of when I read that Google is getting 50x more search traffic from the iPhone than any other phone is “Wow, that default iPhone search deal they made with Apple is really paying off.” Of course all the fanboys don’t bother noticing that and just assume somehow Google would be getting all that search traffic “naturally”. Google might still be seeing a huge percentage more iPhone traffic because of how nice the iPhone interface is than the rest (it is the best mobile browsing experience bar none) but that’s not the significant part. You don’t see Yahoo! or Microsoft or Ask making the same claims, do you? Google’s getting that huge increase in search traffic because they *paid* for it.

So while Google’s hard-ball 700 Mhz open access demands and its still-evolving Android strategy look like they’ll succeed in helping to “open” up the Web, don’t miss its deals that essentially “lock down” large portion of the search market — Web and now mobile — for itself.

Look no further than this week for more proof it its pay-for-play strategy in action as it managed to get the Google search engine embedded as part of Nokia’s search application.

For mobile operators, this means one thing (if it wasn’t already obvious). You have something Google — not to mention Microsoft and Yahoo, or Microsoft/Yahoo) — need, and need desperately.

Don’t get so distracted by the man screaming “OPEN!” behind the curtain that you give away the prize he is really looking for, prime mobile portal and search engine placement.

Be it large upfront fees or good terms on an ad share deal — make them pay.

UPDATED: Here’s some good additional info from Chris Sacca, who used to manage Google’s wireless business (ie–strategy and lobbying) but left recently to go the VC route. Sacca notes that browsing by searching on the iPhone is probably quicker than desktop-style URL entering given a) the hard-to-use iPhone keyboard interface and b) Google query box built into the iPhone “chrome.”

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Telco Take: What MS+Yahoo Means For Service Providers

by Rich KarpinskiFebruary 1st, 2008

ms-plus-y.jpgIf the telecom and Web worlds are merging, then a mega-merger on one side — Microsoft’s proposed $44.6 billion acquisition of Yahoo — surely affects the other.

But how?

1. The Ad Angle

The combination of Microsoft and Yahoo is, above all, about online advertising. Google is the paid search leader (with more than 75 percent market share in 2007, according to eMarketer), with Yahoo and Microsoft chasing from behind. This week, Google reported fourth quarter revenue of $4.83 billion, mostly on ad revenues, up 51 percent from a year ago. Too bad its stock is taking a hit, down from a high of 750 to a shade north of 500 in a few months. The cause: part law of big numbers, part recession worries, part challenges in selling off its ad inventory, particularly social ad inventory (including a deal with MySpace), which nonetheless remains a priority for both Google *and* Microsoft (which is partnered with Facebook). Even as Web/search/social network advertising shakes out, the next big market — mobile ads — is beginning to emerge as well, with all the same players targeting the riches and just as much uncertainty.

The telco take here is obvious: service providers need to figure out how to add advertising their revenue mix, but mastering this volatile market is not going to be easy. For more on the carrier advertising challenge, read our cover package from our current issue, which includes a big-picture overview of the telco ad opportunity plus examinations of IPTV advertising and mobile ad developments.

2. Portal Partnerships

Google, Microsoft and especially Yahoo have been key content and ad partners for carrier broadband and mobile portals. So combinations and shake-ups in the Web search/portal market absolutely affect those deals.

It’s probably no coincidence then, given Yahoo’s sliding share price, that days before the unsolicited Microsoft offer Yahoo announced a renegotiated portal deal with AT&T. The deal essentially removes broadband “bounty” fees paid to Yahoo by AT&T, replacing those with an ad revenue-sharing arrangement on AT&T Web and mobile sites. The deal means less guaranteed money for Yahoo but could result in greater revenue for the company if Web and in particular mobile advertising takes off on AT&T properties. AT&T will relaunch the att.net portal soon, powered by My Yahoo content and the Yahoo Mail platform, the companies said. Yahoo recently renegotiated a portal deal with Rogers Communications with similar terms.

The AT&T/Yahoo deal demonstrates a shift in the Web/telco power positions, with service providers now in a position able to cut better deals with their portal partners. Yahoo — which has stated a goal of becoming the “start” page for as many users as it can — clearly remains interested in service provider partnerships. Google, on the other hand, is being viewed more warily by carriers due to its wide-ranging mobile device and wireless services ambitions.

3. Partner/Competitor Matrix

While Google’s moves are beginning to position it as both a potential partner and competitor, Microsoft may be even more so in that position. Microsoft today provides a variety of software and services to fuel service providers’ core businesses, from plain old server software to IPTV middleware and set-top software and more. At the same time, Microsoft’s telecom ambitions, particularly in the area of unified communications and software-as-a-service, place it potentially in competition with the service provider market. “Coopetition” isn’t a new concept in the telecom world, but for service providers a potential Microsoft/Yahoo deal adds yet another dimension of complexity to the partner/competitor matrix.

4. Web-Telephony Route-Arounds

Yahoo has been fairly silent on the Web-telephony/unified communications front. Microsoft, on the other hand, has broad ambitions there with the release late last year of Office Communications Server and its unified communications strategies. And Google is clearly eying the telephony market as well with its spectrum bids, Grand Central acquisition, VoIP-enabled Google Talk software. While no Web-based telephony company or startup has taken a leadership position yet that would cast fear into the hearts of service providers, a strong move by a larger player like Microsoft/Yahoo or Google will likely have a much bigger impact. It’s an area carriers must continue to watch closely.

5. A Grand Duopoly

We’ll take a bit of a U.S.-centric view here, but clearly a Microsoft/Yahoo combination will compete with Google as the two big dogs in the online/mobile search and advertising markets. Will the major U.S service providers, notably AT&T and Verizon, pair up and partner along those lines as well? So far, AT&T seems to be playing both sides of the fence, dealing with Yahoo on portal content and ads and working closely with Apple on the iPhone (noteworthy because Apple and Google seem linked on a number of fronts including Google CEO Eric Schmidt serving on Apple’s board). On the social network front, Microsoft has aligned with Facebook while Google is linked with MySpace. Will we seem the same sort of choosing up sides on the Web/telco side? One would think so.

What Do You Think? Let us know what you think in the comments section below. What will the Microsoft/Yahoo potential combination mean for the carrier market and the intersection of Web and telephony?

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