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Facebook's IPO: More Yahoo than Google?

Facebook comes out at $100B valuation (27X revenue, 100x earnings!) with only $3.7B in revenue, 12% of that comes from Zynga (ie Farmville).  Google has a current valuation of $150B on $28B in revenue... not a bet I would take :)


Facebook's IPO: More Yahoo than Google?

By
Erik Sherman




 

(MoneyWatch)  

COMMENTARY There is so much hype around Facebook that it can be hard to put the numbers, and company, into perspective. But for all the new age talk of connecting people, it's still a business -- one that largely makes its revenue from advertising. Now Facebook filed for its IPO and there are some figures to look through.

But even then, to understand Facebook, you have to see how it compares to other companies as Google (GOOG), Yahoo (YHOO), and AOL that are in the same business of using the Internet to attract users and then sell ads. When you do, you see that Facebook is really more Yahoo than Google, at least for now. That's particularly true in that the company needs a different way to make money than it has used. Without a significant change in strategy, it will likely top out in the near future.

Facebook in a nutshell

There has been extensive speculation and leaks about how Facebook has been doing. But now it's time for guessing to move to the side. In 2011, the company had revenue of $3.71 billion. That compares with the previous few years as follows: 2010, $1.97 billion and $777 million in 2009. That was 154 percent growth between 2009 and 2010, with 88 percent growth between 2010 and 2011.

Of course, as such companies as Groupon (GRPN) and Pandora (P) have shown, revenue can mean little without at least a move toward profitability. Facebook actually made a profit in all three of its reported years. In 2008, net income was 29.5 percent of revenue. In 2009, it was 30.7 percent. It dropped to 26.9 percent last year. The company ran at a net loss in both 2007 and 2008. Clearly, though, this is a business model that works far better than Groupon, Pandora, and some other Internet companies that recently went public.

Another way to look at the company is revenue per user. If you take Facebook's own claims of 800 million active users and look at the last six months of revenue, to match up with more recent revenue, you get $1.7 billion for 800 million users over six months. Project that to a full year and it's $3.4 billion for 845 million users, or $4.02 per user per year -- and that includes both ads and other revenue, which, according to Facebook, really means the company's cut of what Zynga makes.

The competitive landscape

How does Facebook's financial performance compare with other companies that depend on online ads for revenue? Start with Google. Last year, the search giant came in with $37.9 billion in revenue. Of that, $36.5 billion was ad revenue. According to the company's quarterly earnings announcements, traffic acquisition costs (TAC), which is the amount of revenue that Google's partners get, ran around 24 percent. Take out all costs of revenue and you still have $24.7 billion, or 65 percent gross margins. Given Google's approximately 1 billion users, that Google's is $36.5 in ad revenue per user. The company's market cap is about $189 billion.

Yahoo had roughly $5 billion in revenue last year. Granted, that amount has been falling -- it was down about 21 percent from 2010. Revenue without TAC was $4.4 billion. Gross profit was about $3.5 billion for gross margins of 70 percent. Yahoo's market cap is $19.2 billion. It's the mid-tier player that is about a tenth the size of Google. Yahoo still quotes 2004 numbers that it has 274 million unique users. That would translate to $16.06 per user per year.

AOL had a total of $2.2 billion in revenue, of which $1.3 billion was advertising. Overall gross margin was just under 28.1 percent. AOL has a $1.6 billion market cap, making it a little under a tenth the size of Yahoo, or two orders of magnitude smaller than Google.

Another Yahoo?

Facebook is growing quickly. In that sense, it leaves Yahoo far behind. The company is also comfortably profitable, which will drive up the IPO price. But given the comparative sizes of their revenues, Facebook's growth is disappointing compared to the nearly 30 percent revenue growth -- virtually all ads -- that Google saw between 2010 and 2011.

Facebook may also be reaching the end of the growth it can expect from its current strategies. The company claims more than 800 million active users. Some evidence suggests that thenumber of users is flattening and that it is reaching a maximum of what it can expect.

In the middle of last year Facebook missed internal revenue projections by $500 million, or about 25 percent, and that was with its old growth in users. Even if the company does grow larger than Yahoo, unless things change significantly, it may only become a company that falls far short of what Google has obtained.

 

 

The Yin and the Yang of Corporate Innovation

 

NYT by 

 

In the hunt for innovation, that elusive path to economic growth and corporate prosperity, try a little jazz as an inspirational metaphor.

Enlarge This Image
Minh Uong/The New York Times

 

Enlarge This Image
Peter DaSilva for The New York Times

In business as in jazz, the tension between training and improvisation can result in great new works, says John Kao, the innovation adviser (and pianist).

That’s the message that John Kao, an innovation adviser to corporations and governments — who is also a jazz pianist — was to deliver in a performance and talk on Saturday at the World Economic Forum in Davos, Switzerland. Jazz, Mr. Kao says, demonstrates some of the tensions in innovation, between training and discipline on one side and improvised creativity on the other.

In business, as in jazz, the interaction of those two sides, the yin and the yang of innovation, fuels new ideas and products. The mixture varies by company.

Mr. Kao points to the very different models of innovation represented by Google and Apple, two powerhouses of Silicon Valley, the world’s epicenter of corporate creativity.

The Google model relies on rapid experimentation and data. The company constantly refines its search, advertising marketplace, e-mail and other services, depending on how people use its online offerings. It takes a bottom-up approach: customers are participants, essentially becoming partners in product design.

The Apple model is more edited, intuitive and top-down. When asked what market research went into the company’s elegant product designs, Steve Jobs had a standard answer: none. “It’s not the consumers’ job to know what they want,” he would add.

The Google-Apple comparison, Mr. Kao says, highlights the “archetypical tension in the creative process.”

Google speaks to the power of data-driven decision-making, and of online experimentation and networked communication. The same Internet-era tools enable crowd-sourced collaboration as well as the rapid testing of product ideas — the essence of the lean start-up method so popular in Silicon Valley and elsewhere.

“These are business and management innovations lubricated by technology,” says Thomas R. Eisenmann, a professor at the Harvard Business School.

The benefits, experts say, are most apparent in markets like Internet software, online commerce and mobile applications for smartphones and tablets. “The cost of creation, distribution and failure is low, so it takes relatively little time, money and effort to float trial balloons,” says Randy Komisar, a partner in Kleiner Perkins Caufield & Byers, the venture capital firm, and a lecturer on entrepreneurship at Stanford.

That style of innovation is being applied well beyond Google’s products and Internet start-ups. The National Science Foundation, for example, is embracing the formula to try to increase commercialization of the university research it finances. Last fall, the foundation announced the first of a series of grants for what it calls the N.S.F. Innovation Corps. The 21 three-member teams received a crash course at Stanford in lean start-up techniques, and have been given $50,000 each and six months to test whether their inventions are marketable.

The lean formula, with its emphasis on constantly testing ideas and products with customers, amounts to applying “the scientific method to market-opportunity identification,” says Errol B. Arkilic, program director at the foundation.

Yet while networked communications and marketplace experiments add useful information, breakthrough ideas still come from individuals, not committees. “There is nothing democratic about innovation,” says Paul Saffo, a veteran technology forecaster in Silicon Valley. “It is always an elite activity, whether by a recognized or unrecognized elite.”

Successful innovation, Mr. Saffo observes, requires “an odd blend of certainty and openness to new information.” In other words, it is a blend of top-down and bottom-up discovery.

OPEN innovation isn’t a new idea. It flourished, in its way, even in the late 19th and early 20th centuries, notes Tom Nicholas, a historian at the Harvard Business School. In fields like electricity, pharmaceuticals and communications, big corporations including General Electric and Dow Chemical routinely monitored the research beyond their walls, and bought or licensed promising work, especially the inventions of university scientists. The result, Mr. Nicholas says, was a thriving “ecosystem of private and corporate innovation.”

A century later, the corporate labs at G.E. are trying to quicken the pace of innovation — but this is long-cycle innovation, since G.E.’s power generators, jet engines and medical-imaging equipment last for decades. The company is opening a software center in Northern California to make its machines more intelligent with data-gathering sensors, wireless communications and predictive algorithms. The goal is to develop machines, such as jet engines or power turbines, that can alert their human minders when they need repairs, before equipment failures occur. Such smarter machines, the company says, are early arrivals in what it calls the Industrial Internet.

To tap outsider ideas, G.E.’s research arm has made investments with venture capital funds in clean-energy technology and health care, and it works with corporations, government labs and universities on hundreds of collaborative projects. “We’re much more externally focused and connected to the outside world than we were several years ago,” says Michael Idelchik, G.E.’s vice president of advanced technologies.

Apple’s smartphones, tablets and computers typically have life spans measured in a few years instead of decades, with new models introduced regularly. But like G.E., Apple is in the hardware business, where innovation cycles are beholden to the limits of materials science and manufacturing.

Apple’s physical world is far different from Google’s realm of Internet software, where writing a few lines of new code can change a product instantly. The careful melding of hardware with software in Apple’s popular products is a challenge in multidisciplinary systems design that must be orchestrated by a guiding hand — though it will no longer be the hand of Mr. Jobs, who died last October.

Yet Apple has also repeatedly displayed its openness to new ideas and influences, as exemplified by the visit that Mr. Jobs made to the Palo Alto research center of Xerox in 1979. He saw an experimental computer with a point-and-click mouse and graphical on-screen icons, which he adopted at Apple. It later became the standard for the personal computer industry.

In 2010, Apple bought Siri, a personal assistant application for smartphones. At the time, it was a small start-up in Silicon Valley that originated as a program funded by theDefense Advanced Research Projects Agency of the Pentagon. Last year, Siri became the talking question-answering application on iPhones.

Apple product designs may not be determined by traditional market research, focus groups or online experiments. But its top leaders, recruited by Mr. Jobs, are tireless seekers in an information-gathering network on subjects ranging from microchip technology to popular culture. “It’s a lot of data crunched in a nonlinear way in the right brain,” saysErik Brynjolfsson, director of the M.I.T. Center for Digital Business.

Apple and Google pursue very different paths to innovation, but the gap between their two models may be closing a bit. In the months after Larry Page, the Google co-founder, took over as chief executive last April, the company eliminated a diverse collection of more than two dozen projects, a nudge toward top-down leadership. And Timothy D. Cook, Apple’s C.E.O., will almost surely be a more bottom-up leader than Mr. Jobs.

“What we’re likely to see,” Mr. Kao says, “is Google and Apple each borrowing from the playbook of the other.”

 

 

Game Changer: Everything You Need to Know About Google+

By Benjamin J. Garber

Seeking Alpha

Three weeks ago Google (GOOG) launched a new social networking product, Google+, on a limited invitation only basis. In this article I am going to discuss the implications Google+ will have for Google’s future business and provide some key insights into why it is important.

During Google’s earnings call last Thursday 14 July, Larry Page announced that in its first two weeks of limited release 10 million people have joined Google+ and have been sharing over 1 billion items per day. Incidentally Larry Page, who is enjoying a stupendous first quarter as the company’s new CEO, also posted a transcript of his announcement on Google+ which has subsequently been shared by Google+ users 1,000 times and +1’ed nearly 10,000 times (more on that in a minute). For the quarter Google’s revenue is up 32% year over year and has set a new record for quarterly revenue at over $9 billion. On the news Google shares shot up nearly 13%.

According to Page, “[Google’s] goal with Google+ is to make sharing on the web like sharing in real life, as well as to improve the overall Google experience.” While a lot of press has been devoted to Google+ as a challenger to Facebook and Twitter, Page had additional words that may indicate that the company hasn’t lost any competitive focus on Apple either. “Google+ is also a great example of another focus of mine--beautiful products that are simple and intuitive to use and was actually was one of the first products to contain our new visual redesign,” he said.

Preceding the launch of Google+, last quarter the company also launched the +1 button in search results and ads -- enabling users to recommend stuff they liked, and have those recommendations show up in the search results of people they know. The +1 button is often compared to the Facebook “Like” button however the message is intended to be slightly different. This quarter, the +1 button was launched to the entire web, and many sites like Huffington Post, the Washington Post (WPO), and Best Buy (BBY) have added +1 buttons. Today the +1 button is all over the web and is being served 2.3 billion times per day.

Adoption of Social Plugins by Top Websites
(Click to enlarge)

Soon enough I imagine the SeekingAlpha webmasters will add the +1 button right alongside the LinkedIn Share button at the top of each article. You can also follow me on Google+ to stay up-to-date on the latest market news and innovations.

Beyond the extension of Google’s service offering, Page also announced that the company has 550,000 Android Devices activated each day. The Android platform has quickly caught pace with the Apple (AAPL) iOS platform on smartphones, although it still holds less than half the market share of iOS when you include tablet and iPod sales. These growth numbers are nothing to be scoffed at however, especially when you consider that Android’s market share has risen from around 5% in January 2009 to 20% in May 2010 while iOS has drop from 75% to 59% in the same time period. Additionally, Google’s Chrome browser is also the fastest growing browser on the market now with over 160 million users.

Source: BrightEdge Research, "Social Share Report," July 2011.

What this means for Google and Google users is:

  • Growth – Google’s reach of influence is rapidly expanding and becoming increasingly integral to a greater scope of even more people’s lives. Their user base is increasing and Google has a proven track record of monetizing their users.
  • Personalization – as users and those in their network use Google+ and the +1 button search will become increasingly personalized. This means that my search results will not always match your search results eventually creating a significant product advantage that is not easily replicated by competitors. This is already happening.
  • Integration – the ties that connect the user experience between Google search, Gmail, Google+, and Android as well as Google’s other products will become more seamlessly bound. This is already apparent for users of the Android OS. Integration creates brand loyalty and stickiness which drastically increases switching costs.

Revenue per active user of service
(Click to enlarge)

Footnotes: 1.) The figure for Google users refers to the number of unique monthly search users, which doesn't reflect all the people that see its ads and use its services. 2.) The figure for Groupon users refers to reported "cumulative customers" in 2010. 3.) The figure for active Zynga users refers to "monthly unique users" from October through December 2010. 4.) The figure for active Twitter users refers to a recent report from Business Insider that found that only 21 million Twitter users follow 32 or more accounts. Twitter considers an "active" user to be someone who is following 30 accounts, with a third of those accounts following back. 5.) Revenue figures for Facebook and Twitter are based on estimates from eMarketer, a research firm. 6.) Revenue figures for Zynga and Groupon come from their IPO filings with the Securities and Exchange Commission.

Source: “How much is a user worth?” Technology Review India, MIT, 12 July 2011.

Furthermore, as Google stampedes down the road of expansion their M&A activity is going to increase. Earlier this month at the Sun Valley conference in Idaho, Google Executive Chairman Eric Schmidt explainedhis expectation for an explosion of startups built around the Google+ platform:

“You could image the scenario where the social platform is so successful that you’ve got startups that are building on top of Google + that are so incredibly sexy and exciting that we would pay top dollar very fast … That’s a great scenario because then you know you’re winning.”

According to Schmidt, Google M&A made the decision last year to accelerate the acquisitions of companies below the Hart-Scott-Rodino Act threshold, or the amount that is subject to FTC notification requirements and a waiting period (currently $66 million and 30 days). Google is targeting companies such as Punchd that they are acquiring for around $10 million, versus AdMeld for $400 million, in order to fill gaps in their broader development strategy. Schmidt emphasized that M&A at Google is driven from the bottom up, “A product manager that has a problem and [needs to] solve that problem” is the impetus for many potential acquisitions.

All signs point to an increased rate of growth. As Google continues to propagate a progressively more dedicated, integrated, and subsequently monetized customer base, Google+ is going to provide the fuel for rapid acceleration. To anyone standing in their way: look out.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

 

Yahoo's Search Revenue Is A "Disaster" via @alleyinsider

OK who didn't see this coming (I mean besides Carol)?  Search is not important to Yahoo, they proved that when the passed it over to Microsoft.  

Bing and the MS team are doing a good job with traffic quality, a good job with organic and a good job with monetization.  The problem they face is that Bing still doesn't have the traffic to challenge Google.  I'm not saying they never will, they are off to a good start.  The infrastructure is in place and I like what I have seen so far.  As for Yahoo, you better hope display continues to grow...


 

Yahoo's Search Revenue Is A "Disaster" via @alleyinsider

Yahoo's tanking search revenue (down 19%) ruined what would have been an otherwise strong earnings report last night.  Carol Bartz blamed sliding search revenue on Microsoft's adCenter not delivering high enough revenue per search -- her implication is that the ads aren't as relevant as they were under Yahoo's system, so users aren't clicking on them as much. 


Danny Sullivan, one of the smartest journalists watching the search business, took a long look at Bartz's claim and Yahoo's search business, and he thinks Bartz is too quick the place the blame at Microsoft's feet. 

He found that Yahoo's search business was declining before the Microsoft deal. It has continued that decline at a steady rate -- even if you subtract out the 12% that Yahoo pays Microsoft now that Bing is powering its search results. 

Sullivan offers an alternate reason why revenue per search has continued to drop after the Microsoft deal: Bing offers better organic results than Yahoo did, so users are clicking on the actual search results and not relying as much on the ads. 

Whatever the reason for the drop in Yahoo's search, Sullivan calls it a "disaster," and warns, "The search revenues need to reverse themselves, and quickly, for Yahoo to be convincing that the deal it hawked is really paying off. Otherwise, when 2012 rolls around, and those headwinds have finally slacked off, Yahoo might find it has slowed down to earning Blekko money." Read »

Google making app that would identify people's faces
By Mark Milian, CNN

Google's Hartmut Neven, pictured here, says the company is working on a facial-recognition app.

Google is working on a mobile application that would allow users to snap pictures of people's faces in order to access their personal information, a director for the project said this week.

In order to be identified by the software, people would have to check a box agreeing to give Google permission to access their pictures and profile information, said Hartmut Neven, the Google engineering director for image-recognition development.

Google's Profiles product includes a user's name, phone number and e-mail address. Google has not said what personal data might be displayed once a person is identified by its facial-recognition system.

"We recognize that Google has to be extra careful when it comes to these [privacy] issues," Neven told CNN in an exclusive interview. "Face recognition we will bring out once we have acceptable privacy models in place."

While Google has begun to establish how the privacy features would work, Neven did not say when the company intends to release the product, and a Google spokesman said there is not a release timeline.

The technology wouldn't necessarily be rolled out in a separate app, a Google spokesman said. Instead, facial recognition could be issued as an update to an existing Google tool, such as its image search engine.

Google has had the technical capabilities to implement this type of search engine for years.

Just as Google has crawled trillions of Web pages to deliver results for traditional search queries, the system could be programmed to associate pictures publicly available on Facebook, Flickr and other photo-sharing sites with a person's name, Neven said. "That we could do today," he said.

But those efforts had frequently stalled internally because of concerns within Google about how privacy advocates might receive the product, he said.

"People are asking for it all the time, but as an established company like Google, you have to be way more conservative than a little startup that has nothing to lose," said Neven, whose company Neven Vision was acquired by Google in 2006. "Technically, we can pretty much do all of these things."

Neven Vision specialized in object and facial recognition development. The object-related programs are reflected in an image search engine, called Goggles. The face-recognition technology was incorporated into Picasa, Google's photo-sharing service, helping the software recognize friends and family members in your computer's photo library.

In 2009, Google acquired a company called Like.com, which specialized in searching product images but also did work in interpreting pictures of people. Google has also filed for patents in the area of facial recognition.

Privacy concerns

As Google's size and clout grow, so does the chorus of critics who say the company frequently encroaches on people's privacy. Over the years, Google has made various missteps.

Read full article >>>>>>

Apple, Google & the War To Replace Your Wallet via @mashable

by Ben Parr

Amazon, Google, Apple, Microsoft and others have their eyes on the NFC mobile payment market, setting the stage for a potentially brutal battle over the future of payments.

NFC, or near-field communication, allows for wireless transfer of data over short distances between two devices. This makes it an ideal technology for financial transactions between a phone and a device at a brick-and-mortar store.

While NFC is still in its infancy in the U.S., it is prevalent in Japan, where you can pay for almost anything by simply swiping your phone.

There’s no need for credit cards, cash or even ID. Your smartphone is your wallet.

A lot of companies are betting that 2011 is the year NFC takes off in the U.S., and are working on their own NFC payment solutions. This list includes some very big players:

  • Google: The search giant may be the farthest along of the big companies. Android already includes NFC support, but most Android phones don’t yet carry NFC chips. This hasn’t deterred Google from running in-store mobile payment tests. More recently, Google reportedly partnered with Mastercard, VeriFone and Citigroup to create an NFC payment system that could launch later this year. It also acquired NFC startup Zetawire last year.
  • Apple: The iPhone maker is reportedly considering adding NFC to the iPhone 5, though rumors that it would be added to the iPad 2 turned out to be false. From what we’ve heard, Apple has been testing NFC payments on its Cupertino campus for months, but is unsure about whether it should be made available in the next edition of the iPhone.
  • AT&T, Verizon & T-Mobile: Three of the four major networks teamed up last year to announce Isis, a joint venture between the networks to facilitate the addition of NFC technology into their phones.
  • Amazon: The ecommerce giant is reportedly exploring the idea of its own mobile payment service to compete with Apple and Google. Amazon already has Amazon Payments, and has popular apps on both iOS and Android, but it doesn’t have an NFC product.
  • Microsoft: The software giant is also reportedly getting into the mobile payments game. It hopes to get NFC into its OS this year, which would be a huge boost to its Nokia partnership. Nokia is already committed to NFC, and its reach could instantly make Microsoft a major player.
  • Others: When talking about payments, you can’t forget PayPal, which has partnered with startup Bling Nation to add NFC-enabled stickers to people’s phones. Boku is another company to watch.

 

JC Penney Fires Back at Google and New York Times Over SEO Controversy via @PCMag


By Sara YinSEO abstract

Over the weekend the New York Times published a damning expose of how JC Penney allegedly gamed Google's page-ranking algorithm, which artificially made the retailer a top search result. On Monday, JC Penney fired back at both theNew York Times and Google for misrepresenting the company.

 

"The characterization of JC Penney in the New York Times article is misleading and unwarranted," wrote Darcie Brossart, vice-president of corporate communcations at JC Penney, in an e-mail.

Responding to Google's reaction of burying links to JCPenney.com in its search results, she added, "We have no record of ever having received a violation notification from Google before last week when the unauthorized links came to our attention. If we had, we would have worked quickly to remedy the situation, as we are doing now. Obviously, we are disappointed that Google has reduced our rankings."

The original story, "The Dirty Little Secrets of Search" by David Segal, details how JC Penney allegedly manipulated unpaid, organic search results to make itself the top listing for numerous generic terms like "dresses" and "area rugs." The New York Times hired a search engine optimization firm, Blue Fountain Media in New York, to show how this was done.

Using a well-known trick called "black hat" optimization, JC Penney's now-fired SEO firm SearchDex apparently created artificial websites that linked to JC Penney's site. The links helped push JC Penney pages to the top of Google search results; one known aspect behind Google's top-secret page-ranking algorithm is that the more times your website is linked, the higher up you rank in a search result.

Google told PCMag that even before Times reporter Segal contacted the search giant with the results of his investigation, it had already discovered the issue and changed its page-ranking algorithm after spotting suspicious activity from JC Penney and other companies. Google has an entire team, the Web Spam Team, devoted to detecting search-result spam and amending its page rank algorithm.

However, after looking at Segal's findings, Google concluded that JC Penney had also violated Google's Webmaster Guidelines. The company reacted by burying JC Penney's search results, and as the NYT notes, now when you search for something like "Samsonite carry on luggage" JC Penney is the 71st search result instead of the first.

"When someone is looking for information on Google, we want them to find the most relevant answers possible. Our search algorithm relies on more than 200 signals to help people find the answers they're looking for, and when websites violate our published webmaster guidelines to try and game the system, that's bad for users and we are willing to take manual corrective action," a Google spokesman said.

JC Penney denies involvement with the black hatting techniques of SearchDex.

"JC Penney was in no way involved in the posting of the links discussed in the article. We did not authorize them and we were not aware that they had been posted. To be clear, we do not tolerate violations of our policies regarding natural search, which reflect Google's guidelines," Brossart wrote.

"The Dirty Little Secrets of Search" via @ nytimes

One of the most well written and comprehensive looks inside search advertising I have read...

Photo illustration by The New York Times
By DAVID SEGAL
Published: February 12, 2011

PRETEND for a moment that you are Google’s search engine.  Someone types the word “dresses” and hits enter. What will be the very first result?

There are, of course, a lot of possibilities. Macy’s comes to mind. Maybe a specialty chain, like J. Crew or the Gap. Perhaps a Wikipedia entry on the history of hemlines.

O.K., how about the word “bedding”? Bed Bath & Beyond seems a candidate. Or Wal-Mart, or perhaps the bedding section of Amazon.com.

“Area rugs”? Crate & Barrel is a possibility. Home Depot, too, and Sears, Pier 1 or any of those Web sites with “area rug” in the name, like arearugs.com.

You could imagine a dozen contenders for each of these searches. But in the last several months, one name turned up, with uncanny regularity, in the No. 1 spot for each and every term:  J. C. Penney.

The company bested millions of sites — and not just in searches for dresses, bedding and area rugs. For months, it was consistently at or near the top in searches for “skinny jeans,” “home decor,” “comforter sets,” “furniture” and dozens of other words and phrases, from the blandly generic (“tablecloths”) to the strangely specific (“grommet top curtains”).

This striking performance lasted for months, most crucially through the holiday season, when there is a huge spike in online shopping. J. C. Penney even beat out the sites of manufacturers in searches for the products of those manufacturers. Type in “Samsonite carry on luggage,” for instance, and Penney for months was first on the list, ahead of Samsonite.com.

With more than 1,100 stores and $17.8 billion in total revenue in 2010, Penney is certainly a major player in American retailing. But Google’s stated goal is to sift through every corner of the Internet and find the most important, relevant Web sites.

Does the collective wisdom of the Web really say that Penney has the most essential site when it comes to dresses? And bedding? And area rugs? And dozens of other words and phrases?

The New York Times asked an expert in online search, Doug Pierce of Blue Fountain Media in New York, to study this question, as well as Penney’s astoundingly strong search-term performance in recent months. What he found suggests that the digital age’s most mundane act, the Google search, often represents layer upon layer of intrigue. And the intrigue starts in the sprawling, subterranean world of “black hat” optimization, the dark art of raising the profile of a Web site with methods that Google considers tantamount to cheating.

Despite the cowboy outlaw connotations, black-hat services are not illegal, but trafficking in them risks the wrath of Google. The company draws a pretty thick line between techniques it considers deceptive and “white hat” approaches, which are offered by hundreds of consulting firms and are legitimate ways to increase a site’s visibility. Penney’s results were derived from methods on the wrong side of that line, says Mr. Pierce. He described the optimization as the most ambitious attempt to game Google’s search results that he has ever seen.

“Actually, it’s the most ambitious attempt I’ve ever heard of,” he said. “This whole thing just blew me away. Especially for such a major brand. You’d think they would have people around them that would know better.”

To understand the strategy that kept J. C. Penney in the pole position for so many searches, you need to know how Web sites rise to the top of Google’s results.  Read full article here >>>

Google Quietly Kills Their Creepy Latitude Location Alerts Feature


via TechCrunch

Back in February, we noted a sort of creepy feature of Google Latitude that was annoying some users: Location Alerts. The beta feature actually launched alongside the Location History feature the previous November, but it didn’t get a lot of attention at the time. Then people started getting emails notifying them where their friends were — without asking for such emails. Yeah, a little creepy. So it shouldn’t be too surprising to hear that Google has quietly killed the feature.

The only place Google noted this is on this page on their support site. As they write:

The experimental Location Alerts (beta) app was retired in December, 2010. Retiring features is always a tough decision, but part of building experimental features is picking the best ones on which to focus. Rest assured, we’re continuing to develop apps such as Location History as well as the Latitude API to enable the developer community to create even more ways for you to use Latitude.

While it may have sounded like a good idea on paper, the execution of the feature was bizarre. You would get emails notifying you where your friends were if they opted to use the feature. That lead to users getting weird emails like this:

Subject: Location Alert: Peter XXXX was nearby!

Google Location Alert

Peter XXXXX (XXXXXX@gmail.com) was within 800 meters of you in San Francisco, CA at 7:15 PM. Check Google Latitude to see where Peter is now.

It’s not quite: “Peter is looking in your window RIGHT NOW”, but it’s not that far off either. There was a way to stop getting these alerts, but it was a really weird feature to make opt-out.

It was also a bit weird because they would only send the alerts when your friend was somewhere they’re not normally at. There are at least a dozen scenarios where that could be troublesome.

Google recently released a Latitude iPhone app, and says the service now has 9 million active users — which we find a little suspect, but the service is deeply integrated into Android.