Da Breakfast NY
As brigas facebook vs google e microsoft vs google passaram para outro nível!
O Made By Many fez uma apresentação foda no QG do Google em londres sobre agências e o conceito de Lean Startup:
O que falar desse slide?
Hoje foi um daqueles dias que eu conheci um blog deveras foda – Above the Crowd – e desde então me culpo por não ter conhecido antes. As análises de Bil Gurley são tão técnicas quanto simples. Segue um baita exemplo:
Over the past 30-40 years of tech investing, public investors have come to expect the market leaders in each sector to trade at valuation premiums. On average, these market leaders have had respectful PE multiples of over 30X forward 12-month earnings, and price/revenue multiples in the 6-10X range. As examples, Microsoft and Cisco held 30X+ PEs for many, many years. With this as a backdrop, many are surprised that Google, which is relatively young at only 12 years old, is burdened with a PE multiple that is typically associated with the senior-citizens of tech leadership. Google’s forward current PE multiple isn’t remarkably higher than Microsoft (12.75) or Cisco (15).
While there is no exact science for what leads to higher PEs, there are many theories. Some argue that PE’s relate to growth. That said, Google’s growth is much higher than Microsoft and Cisco, and yet it doesn’t have that much higher a multiple. My good friend, Mike Mauboussin of Legg Mason, suggests that higher PEs reflect more concrete competitive advantages. I have always been a huge fan of this theory he calls CAP (which stands for Competitive Advantage Period). It also dovetails nicely with Warren Buffet’s competitive moat theory. However, when I look at Google, I see a company that is well positioned strategically. All attempts at dislodging their leadership have been unsuccessful to date. As such, I don’t think they suffer in this area. One other area typically cited is the more amorphous category of “execution.” I also have a hard time seeing this as the culprit, as Google’s recent execution on Android is pure genius. Moreover, the Google Apps progress is extremely impressive.
So if its not growth, competitive position, or execution, what is the shortcoming that hurts Google’s valuation? Believe it or not, the problem is that their initial business model was “too good.” Before I explain take a look at the included chart. Microsoft was founded in 1975, it went public in 1986, reached $10B in sales in 1997, and fell below 20% growth in year 2000. Google was founded in 1998, went public in 2004, hit $10B in sales in 2006, and fell below 20% growth in 2009. So it took Microsoft 22 years to hit $10B in sales. Google did it in 8 years. Resultantly, Microsoft had growth of greater than 20% for 26 years; Google for only 11.
I would argue the reason for the noted disparity is pricing optimization and pricing power. When Microsoft first established DOS as a market standard, they reaped about $10/PC in royalties. By the heyday of Windows NT, Microsoft was receiving well over $120/PC in the enterprise. Additionally, they layered in Microsoft Office on top of the OS, which took revenue/PC well north of $200. That’s a 20X increase from where they started. Google’s brilliant bid/market based ad product optimized pricing remarkably quickly. As such, Google reached $10B in revenue in about 3X more quickly than Microsoft. Unfortunately, this coin has two sides.
With its ad optimization engine so amazingly efficient, Google has no obvious pricing power against its current installed base. There is simply no way to “double” the amount of spend from each customer, much less a way to take it up 20X. Additionally, they have not yet identified a product that would represent the Google’s version of Microsoft Office in terms of revenue leverage. The Enterprise Apps offering is phenomenal, but the numbers are simply too small relative to search. More importantly, the Entprise App product does not “sit right on top of” the search franchise (as Office was to Windows), limiting the ability to leverage the success of one product into the other.
Of course, there is little reason to weep for Google. As mentioned earlier, they appear to be rocking in many areas. Google mail and calendar are now used by over 2 million unique organizations. Also, the execution of the Andoid team will be talked about for decades to come. And even though they may be limited in their price leverage on core search advertising, they still have that blank wide open home page, that I suspect is at least $1 billion in forgone annual ad revenue.
Nesse post aqui, Bill cita Warren Buffett e compara o sistema de busca do Google a um castelo, enquanto Android e Mapas (dentre outros produtos do Google) seriam o poço que circunda e protege o castelo:
AdWords is an highly respectable castle, and Google would clearly want to put a “unbreachable moat” around it. Warren himself is on record suggesting that Google’s moat is pretty good already. But where could you extend the moat? What are the potential threats to Google’s castle? Basically, any product that stands between the user and Google and has the potential to distract the choice of search destination is a threat. A great example is Firefox. Like many browsers, Firefox has a search bar built into the upper right corner. This leads to a substantial number of Google searches for which Google pays Firefox a handsome fee. From time to time, this fee must be negotiated, and as a result there are constant rumors that Firefox might chose another search engine, like Bing. Other examples include smart-phones and choices made by carriers and/or handset makers. As an example, a few years back, Verizon set the default search box on Blackberry’s to Bing instead of Google. Despite Warren’s faith in Google’s moat, there are ways to move the needle on search share, or at least hurt the economics by demanding more profit share for distribution.
So here is the kicker. Android, as well as Chrome and Chrome OS for that matter, are not “products” in the classic business sense. They have no plan to become their own “economic castles.” Rather they are very expensive and very aggressive “moats,” funded by the height and magnitude of Google’s castle. Google’s aim is defensive not offensive. They are not trying to make a profit on Android or Chrome. They want to take any layer that lives between themselves and the consumer and make it free (or even less than free). Because these layers are basically software products with no variable costs, this is a very viable defensive strategy. In essence, they are not just building a moat; Google is also scorching the earth for 250 miles around the outside of the castle to ensure no one can approach it. And best I can tell, they are doing a damn good job of it.
Google has organized this defensive play with precision. Carriers and handset makers that use Android are given economics to do so. The Android version of the “AppStore” shares the majority of its economics with the carrier and handset makers. Once again, they are not building a business, they are building a moat (sorry for the repetitiveness, it’s intentional). Because they are “giving away” money to use their product, this creates a rather substantial conundrum for someone trying to extract economic rent for a competitive product in the same market.
Ele fecha o post com a seguinte pedrada:
John Doerr, once said “The Internet is the greatest legal creation of wealth in history.” Android may be the opposite of that, the greatest legal destruction of wealth in history.
Coisa fina, não?
For Varian, everything – including his culinary choices – can relate to data. Last year, while looking to buy a pepper shaker online, he hit upon the idea of a Google Price Index (GPI). It uses Google’s web shopping database to create a daily measure of inflation. It could, one day, be a complement – or competitor – to the official, yet less frequent, Consumer Price Index (CPI).
There’s a systemic gap, Varian points out, between the low-frequency data employed by governments and the high-frequency data of business. Government is working on it, though. “It’s now using supermarket scanner data to predict inflation rates,” notes Varian. How did it predict them before? “They used to send people out with notebooks to write it down.”
More communication between government and business clearly benefits both, says Varian. Business can provide more real-time data. “If you look at most businesses now, pretty much everyone – think of UPS, FedEx, MasterCard – has a real-time database. And that’s powerful.” Government can, in turn, aggregate information, giving businesses insight into their industry and the economy as a whole.
Se você não conhece Hal Varian, envergonhe-se.
Via Think Quartely, uma puta publicação do Google feita na Inglaterra.
Não é de hoje que ando lendo algumas coisas interessantes sobre fissuras na excelência do algoritmo de busca do Google. Por isso que fiquei feliz quando dei de cara com uma matéria da The Atlantic compilando as principais críticas ao gigante da busca. Assunto deveras interessante.
Google Is Like Bananas, says Felix Salmon at Reuters, expanding on the monoculture idea. He cites a recent New Yorker article explaining how the banana industry is at risk because the same species of banana (the Cavendish) is grown and eaten across the world. He continues: “Maybe if Google wasn’t a monoculture, there wouldn’t be quite as many SEO sites all trying to hit the jackpot of, however briefly, landing atop the Google search results. In general, monoculture is a bad and brittle thing–and that goes for search as much as it goes for bananas.”
Google Needs Sex, declares Paul Krugman at The New York Times. Krugman takes stock of the Google search debate, only to respond, “This makes me think of sex.” Why? Evolutionary theory, he explains, suggests that sexual reproduction is in part a defense against parasites: If each generation of an organism looks exactly like the last, parasites can steadily evolve to bypass the organism’s defenses … So the trouble with Google is that it’s a huge target, to which human parasites–scammers and spammers–are adapting.
Google Is a ‘Monoculture,’ argues Alan Patrick, “and thus parasites have a major impact once they have adapted to it.” In other words, he borrows the agricultural terminology to explain how Google’s market dominance translates into spammers wielding considerable influence–they can lavish so much attention on one search engine. “Half a decade after so many people began unquestioningly modifying their sites to serve Google’s needs better,” adds Anil Dash in response “there may start to be enough critical mass for the pendulum to swing back to earlier days, when Google modified its workings to suit the web’s existing behaviors.”
Google Is a Jungle, states Vivek Wadhwa at TechCrunch. Google, Wadhwa contends, has become “a tropical paradise for spammers and marketers. Almost every search takes you to websites that want you to click on links that make them money, or to sponsored sites that make Google money.”
É bizarro ver como a empresa que há dois anos atrás era absoluta hoje tropeça em suas prórpias pernas, enquanto assiste ao crescimento vertiginoso do facebook.
450 Page Google Docs Presentation contou com 3 animadores, 3 dias e 450 frames produzidos. Esses são os números dessa impressionante animação feita utilizando somente com o google docs como suporte. Fuckingawesome.
But Google’s a huge success in a landscape of failure. Online ads sell for pathetic rates relative to broadcast or print. This is because by all accounts online advertising doesn’t work very well. You can measure whether someone clicks on an ad, and often whether they buy something after that click. But it turns out they rarely do those things. So businesses aren’t willing to pay very much for ad space on websites.
Is it really a coincidence that the advertising medium with the best instrumentation also appears to be the least effective? I suspect it’s not. It may be that ads never worked as well as the industry had told us; or it may be that the eyeballs/clicks/conversions funnel is a naive conceptualization of how the system works. Either way, Google has succeeded by giving advertisers what they think they want, which is analytic tools that seem to reveal that the whole enterprise is horribly ineffective.
I think the push for better tools and more efficient ads is basically a race to the bottom. In fact, less perfect instrumentation might allow the ad industry to capture a bit more revenue from business thanks to decreased efficiency.
Trecho de um puta post do Manifest Density.
January 17, 2010: “If you have something that you don’t want anyone to know, maybe you shouldn’t be doing it in the first place.” -Eric Schmidt
November 10, 2010: “Google CEO Eric Schmidt announced the salary hike in a memo late Tuesday, a copy of which was obtained by Fortune. The memo was also leaked to Business Insider, which broke the news. Within hours, Google notified its staff that it had terminated the leaker, several sources told CNNMoney. A Google spokesman declined to comment on the issue, or on the memo.”
Do Nick Carr