Random Google Speculation

Google-mania may have subsided a bit with their recent earnings announcement, but Google Conquers the World talk is still alive and well.

Case in point, all the recent talk about Google creating a “private internet“. The rumors are based on, in part, Google job postings for “Strategic Negotiators” for dark fiber. (Actually, these ads are not new – they have advertised for these positions for a while. But they caught people’s attention again).

The word on the street, if I understand it correctly, is that this Google Internet would be more efficient, etc, etc, than the existing internet. People would be able to access it via a Google Cube. Content providers who are locked out of the system are in big trouble. Free speech is dead, Google is world government and censor, Peace reigns on… ok, take a deep breath.

I am going to go out on a limb here and suggest that all these reports are wrong. It doesn’t make much sense for Google to create a real parallel but closed universe.
However, there is one option that makes a lot of sense to me. Google is planning to create a monster Content Delivery Network (CDN). These are companies that route content more efficiently through internet. They set up data centers at different nodes, cache content at these centers (typically client content), and then deliver it when it is requested from a website. There are bandwidth savings, server load balancing benefits, and the overall speed and quality of the consumer experience is vastly improved. Akamai is the creator and leader in this space.

So, why do I think this is what Google plans to do? Several reasons:

1. CDN’s are all about math. Akamai was founded by an MIT math prof. The best routing algorithms go a long way. This is surely a good fit for the Googlers, who are similarly all about math.
2. CDN’s also rely on great server management skills – which Google has in abundance. In addition, CDN’s need content caching and delivery skill. Again, Google already caches and serves a ton of web content
3. Akamai has great Margins – i.e., this is unlikely to dilute the top line profitability of Google – in fact, it might add to it. Akamai’s Gross Margins are 87.4%. Very high. Google’s are 61.9%. Pre-Tax Margins are also high in both cases – 24% for Akamai, 35% for Google.
4. CDN’s are very very useful when delivering large files – such as media files (Google Video, Google Music?)
5. Adding a CDN service is a perfect cross-selling opportunity for Google’s contextual and branded advertising services (in both directions). It is the same customer base – large content providers. Google would have easy access to the content. It can greatly help localization (as you are serving content from a relatively local server). And both can use pay-per-click and value-based selling models.

Granted, I have no idea if this is what Google plans. But I think it makes more sense than most anything I have heard to date. It uses datacenters and fiber – giving the Strategic Negotiator something to do. It makes sense financially. It makes sense from a customer standpoint. And it is all about math. Frankly, the last part might be the most important. Before Google, the internet math whizzes lived at Akamai.

That said, I also thought that Google was raising the $4bn through their secondary offering in part to buy Akamai. That hasn’t happened yet. So I could be completely off my rocker

Customer relationships in a beta world

Random thought in process, would love outside perspective…

I may be late to the game here, but I’ve noticed recently an increase in applications processes for participation in beta programs. For example, to join AdSense for feeds, you have to apply. To join the Tivo ipod/PSP download beta, you have to apply. To become a beta tester for SlingBox, you had to apply (before they launched).

I understand the need to find qualified people to be your beta testers. And there is nothing new about the practice of beta testing: Consumer product companies regular launch products in test markets. Films often open in “limited release”. But the difference is that the restrictions in those cases are not personal – you are not turning down someone who is paying you $12.95 a month, for example.

It seems that with these programs, companies are taking their customer base for granted. It sounds like a great idea to build buzz by having a limited, hard to get into program – the “I wouldn’t want to be a member of a club that wanted me as a member” school of marketing. But, when you say no to a current or future customer, you inevitably, I think, hurt that customer relationship and risk an “if you don’t want me, I don’t want you” backlash. Maybe not a big one to start. But when customers are your biggest asset, it is worth asking if you want any damage at all.

A peek at VC returns

It is always tricky to really understand the world of VC and other Private Equity funds. Specifically, the funds typically go to extreme lengths to not disclose the returns on their portfolios. However, the Ohio Workers Comp fund has just published details of their returns. All in all, they made a total of 4.5% since 1998.

I think they need a new investment strategy.

The article also shows the vast difference between funds:

“Some funds, nonetheless, have already generated high returns. The bureau’s $8.2 million investment in a fund run by Quad-C Partners of Virginia in 2001 produced a $1.9 million profit check and a March 31 balance of $13.7 million – a return of 89 percent. Its 2000 investment of $14.3 million in the Carlyle Partners III fund of Washington, D.C., was up 49 percent as of March 31.

None of the five Cincinnati funds managing bureau money showed a positive return as of March 31.

Its $13.6 million stake in the Blue Chip Ventures IV fund in 2000 was down 16.8 percent. Its $11.1 million stake in the Fort Washington Private Investors Equity III fund was down 4.2 percent.

Meanwhile, the bureau’s $2.4 million investment in River Cities III declined 9.2 percent. Its $900,000 stake in Triathlon Medical was down 47.1 percent. Its $350,000 investment in Charter Life Sciences declined 42.9 percent.”

TiVo

Slightly off topic (ok, I have posted a total of three things to date, so who can say what is on and off topic…), I am going to rant about Tivo.

I love my Tivo. It has completely changed the way that I watch TV. And made me watch a lot more of it than I used to.

But really, I have to ask at this point if Tivo has any idea what it is doing.

For one thing, it has the worst UI I have ever used. Sure, it is pretty. But searching for a TV program to record is painful; setting a Season Pass schedule is painful. Deciding how long I want to keep a show is painful. Even seeing what shows I have recorded is somewhat painful. And don’t get me started on Tivo suggestions! Picking TV shows at random would yield better recommendations!

Now Tivo has a remarkable idea – let people buy movie tickets and check the weather!

Huh? Everyone I know who has a Tivo also has a PC with a broadband connection. Sure, this may not be everyone, but I bet there is a huge overlap. Why on earth would I look at Tivo, using their incredibly hard to use interaction model, when I could just go to my PC and look it up on Yahoo? For goodness sake, weather? Isn’t that what the Weather Channel is for?

This is not why I bought a Tivo. One of these days, they maybe should do some classic marketing work – hire some people to ask customers what they want. I can’t imagine the first thing they said was “Weather” or “Movie Tickets”.

What people want is control and quality. Look at iTunes. It is successful because Apple knows how people will use their service. What do I want from tivo? To be able to watch my TV shows on my PC or PSP (without the eternal download times and clunky Tivo Desktop software). To watch the Daily Show that I Tivoed while in my hotel room (why don’t hotels carry Comedy Central?). To watch a show I tivo in my bedroom in my living room. To actually get good recommendations of other shows I might like! To record HD! To get rid of my cable box but still record HBO.

At some other point I will write about their new ad search offering. Interesting concept, but I want to wait to see how they actually do it.

The Four Seasons

Picking up on my last post, my wife and I just stayed at the Four Seasons Scottsdale to celebrate our first anniversary. This was my first experience staying at a Four Seasons for anything but a quick business trip, and it was wonderful. One of the things that struck me the most was how personalized the experience was. From the moment I made the reservation (on the phone), they started discretely asking questions – was this my first time staying, were we there for business or pleasure, special occasion, etc. Conversational, to the point that I almost didn’t notice that I was being questioned.

When we got there, we were greeted with a Happy Anniversary. At the restaurant that evening, the Maitre D, waiters, staff all knew it was our anniversary. At the end of dinner, brought us out a complementary Happy Anniversary desert. This happened throughout the stay, always discrete in the Four Seasons way.
I can see some ways in which a technology-only solution could have figured this all out (although Hilton, with all their CRM technology, didn’t on our wedding night, despite the fact we had also blocked a dozen or rooms rooms for our wedding guests, and that I am Diamond in their HHonors program).

But the “Just Ask Them” approach the Four Seasons uses guaranteed a highly personalized, and enjoyable, stay.