Wednesday, March 16, 2005


Google adds new tool amid local search war CNET

The Yellow Pages are slowly dying. This is not news but the prices paid to own Yellow Pages services show that there is money to be made offering online "Yellow Page" services.

Yahoo and Google have been building online "business directories" for some time. Yahoo has partnered with the big phone companies to sell complementary online and traditional Yellow Pages. The Google approach as described in the CNET article is different. Google is building its directory by searching the net, but then each business can add to or update the listing. This free listing gives Google the opportunity to offer to drive traffic through advertising. If there are two pizza restaurants in a town and one is on the Google map connected to links to the business, folks will find the one and not the other. The number of businesses who can use the scalable and highly relevant advertising is a very large number.

The ramifications are endless. A few weeks ago Google registered as a domain name sales company. It appears that Google will offer every business, charity, enterprise or person in the world free web hosting. It will be up to each domain "owner" to determine if the pages offer contextual advertisements. In other words, some businesses may advertise their own products and others might decide to earn advertising fees by offering space for Google to offer relevant ads. When an international economist attacked Google as being over-priced, I asked him to describe the supply and demand curves for a product that is offered free of charge but then earns the giver and the receiver revenue. He refused to even try.


The 75% pop in TIVO shares today was a joy to several of my portfolio owners. The excitement will be if TIVO can earn more from its advertising features than it can from the subscription fees. One of the features is that one can fast forward through a commercial but must see a click-able banner for at least a few seconds. Those who are interested in a product can click to view extensive product promotions. TIVO will learn the interest of each household and viewers will be offered advertisements that are relevant to their interest. TIVO finally has a path to the 21 million Comcast customers. This market is competitive but the TIVO patents may have been the driving force that opened the Comcast market. DVRs are everywhere but look for TimeWarner and others to offer TIVO as an option. EchoStar has sold or leased a lot of DVRs which makes the out-come of the TIVO-EchoStar lawsuit interesting.

The reason for mentioning TIVO is to reiterate the power of the Google model. Google does not need to charge for services because advertising feeds are pervasive and non-obstructive. Many of us despise pop-up adds but do not mind relevant ads on every screen. It is like reading a focused newspaper. The travel section is full of articles and ads about travel. You will rarely respond to any particular travel deal but you may read the ads with just as much interest as the articles. To make a decent return, the newspaper must charge for the distribution of the paper and for the ads. The internet allows Google to offer free distribution and low priced, focused and relevant ads. The advertiser only pays when a potential customer seeks more information.

MSFT has an ad server in beta testing in France. Google will likely lose market share as MSFT and Yahoo move forward with contextual programs similar to Google's. Other articles continue to speculate that GOOG, YAHOO and MSFT will soon offer VOIP. Google employees have recently attended VOIP conferences and asked a lot of questions. The total number of opportunities for advertisements is growing into a very large number; so far, Google is getting a 35% share! GOOG is likely to be one of the participants in the coming BULL BOOM BUBBLE!