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Friday, October 14, 2005

Federal Court Orders a Stay in Google vs. Microsoft Lawsuit

A federal judge ordered a tentative stay in Google Inc.'s suit against Microsoft Corp., according to a court Website, dealing a blow to Google's legal fight over its hiring of a former Microsoft executive.

The parties are scheduled to appear before Judge Ronald Whyte in U.S. District Court in San Jose, California, on Friday in connection with the suit. That suit is separate from a related action Microsoft brought in Washington state accusing Google and Kai-Fu Lee of violating a noncompete agreement that Lee had signed with Microsoft.

Google has argued that California, a state that generally does not recognize noncompete clauses, is the proper jurisdiction for the legal dispute.

A Washington state judge ruled last month that Lee can begin helping Google set up operations in China, but placed tough restrictions on him, pending a trial scheduled for January. Whyte's tentative order did not specify how long the suit would be stayed.

Meanwhile Lee sits idle and cannot take over as Google's new China office director. Does Google already have posession or knowledge of proprietary Microsoft code?

Monday, October 10, 2005

Newspaper Losses Mount as Search Engine Optimization Gains Continue

Amanda Bennett the lead editor of The Philadelphia Inquirer found out that she had to cut 75 jobs in her newsroom - 15 percent of her staff - she became sick to her stomach. But after some reflection, she said, she realized that the depth of the editorial cuts would force the newspaper to reinvent itself, and this would be to its advantage.

"This is a chance to hold everything up to the light and say, 'What value does this give to the readers?' " she said, adding that she would rethink everything from the concept of local coverage to the formats for delivering the news.

"If we miss this opportunity to change ourselves from a newspaper into a news organization," she said, "shame on us."

Such rethinking is sweeping newsrooms across the country as the industry faces a wave of job cuts, among them 700 announced since May at The New York Times Company, including its business operations and the various media properties it owns, and 14 at The Hartford Courant. Most recently cuts have been announced at The Boston Globe (a division of the Times Company), The San Jose Mercury News, The Philadelphia Daily News, The Baltimore Sun and Newsday, and over the last few years The Los Angeles Times, The Wall Street Journal and The Washington Post have also moved to eliminate jobs.

Industrywide, ad revenue is flat, costs are up and circulation is eroding. At The Inquirer, circulation has dropped 30 percent over the last two decades.

Beyond the industry's economic woes, the future is clouded by the rapid expansion of the Internet and the popularity of the seach engines, leaving newspapers in an identity crisis as they try to come to grips with fundamental changes in the industry and society that are significantly curbing their growth.

Pessimism about the industry's ability to overcome these obstacles continues to drive down the price of newspaper stocks. Wall Street has revised its third-quarter earnings estimates downward for most newspaper companies. The turmoil is largely confined to big metropolitan dailies, not small papers where the advertising base is more stable.

At big papers, ad revenue has stalled for several reasons: a decline in local auto ads; the consolidation of department stores, especially the merger of Federated and May, and a march to the Internet by travel advertisers, hotels and car rental agencies. That exodus from print includes Hertz, which has not advertised in The New York Times for six months, a Times spokeswoman said. Movie ads are in a trough as box-office sales slump.

Goldman Sachs predicted recently that ad revenue for the newspaper industry would grow a quite modest 1.7 percent in the third quarter this year over the period a year ago, the industry's weakest performance in two years.

"No one's crystal ball on this was good," said Lauren Rich Fine, a publishing industry analyst at Merrill Lynch. "No one anticipated that Federated/May would take a stance this year and say, 'We're less dependent on newspapers.' That has caused some of the panic at newspapers, where they are saying, 'We better get in front of this.' "

Several longer-term worries are also undermining growth. One is the migration to high-speed Internet connections, or broadband. Two-thirds of United States households are expected to have these connections by 2010, double the portion today, according to Forrester Research.

Advertisers like the Ford Motor Company are already seeing how this trend affects buying patterns. Ford says that 80 percent of its customers now shop online, doing everything from their initial research to setting up test drives and getting quotes from dealers.

So the company has decided to move 30 percent of its estimated ad budget of $1 billion a year to nontraditional media, with 15 percent going to online. "With the explosion of broadband, it makes more sense for us to continue to increase our spend where we can find our customers," said Linda Perry-Lube, Ford car communications manager.

These trends are likely to accelerate. Over the next three years, advertisers are expected to devote 15 to 20 percent of their budgets to the Internet, up from 5 to 8 percent, according to David Verklin, chief executive of Carat Americas, a major media services firm. At the same time, newspapers are losing classified ads to Craigslist and eBay. And they are losing information-seekers to Google and Yahoo, which recycle news from media outlets and increasingly offer content of their own. As readers turn to these cyberbehemoths, advertisers follow.

While newspaper websites are attracting an increasing number of online ads, those ads are cheap and bring in only a fraction of the revenue that print ads do. And while some newspapers now have more readers on their Web sites than they have in print, most are reluctant to charge for their content online, depriving themselves of revenue from their most popular product. The New York Times recently started charging $50 a year for nonsubscribers to read its columnists online, but it has declined to discuss the early results.

Those are just some of the factors crimping the outlook for newspapers even as their costs are climbing.

"The basic newspaper, when you take out the Internet and all the other targeted publications that people are starting, is just not growing," said P. Anthony Ridder, chairman and chief executive of Knight Ridder, which owns The Philadelphia Inquirer. "Newsprint costs are up significantly. Wages and health benefits are up. So you have the cost pressure on the one hand and the lack of revenue growth on the other. That's really the problem, and everyone is having essentially the same do we battle the search engines?"

Nonetheless, many top news executives say they are adapting to these new realities and positioning the industry for a promising future. Gannett newspaper corporation is beginning to address organic search engine optimization by outsourcing organic seo and drive exposure of their daily classified listings.
Google Opens Washington Office - Begins To Lobby for Changes to Trademark Laws

Google Goes Inside the Beltway
Business Week Article
With major Net and privacy issues looming, the search giant has hired its first full-time lobbyist. Some say it's about time

Call it a rite of passage: Google (GOOG ), the once-upstart search outfit with the sparse homepage and a motto championing "Democracy on the Web," has hired its first full-time lobbyist in Washington and plans to staff up more. Google has picked technology-law expert and Washington veteran Alan Davidson to help win friends and influence people on Capitol Hill.

"Our mission in Washington boils down to this: Defend the Internet as a free and open platform for information, communication, and innovation," Andrew McLaughlin, Google's senior policy counsel, wrote in an Oct. 6 company blog.

The move to beef up lobbying coincides with forays by the online giant Google into a host of new markets and services beyond basic Web search (see BW Online, 09/05/05, "Google's Grand Ambitions"). While many of its new ventures have wowed consumers, they've brought Google into conflict with old-media stalwarts and telecom behemoths alike. Print for Libraries, a plan to scan and index millions of the world's library books, has publishers fuming and prompted a group of authors and the Authors Guild to sue Google for alleged copyright infringement (see BW Online, 09/22/05, "For Google, Another Stormy Chapter").

"A GROWN-UP COMPANY." Google's push into other communications, including Internet-calling service Google Talk and a plan to provide Wi-Fi for San Francisco, threatens to tread on turf dominated by the biggest phone carriers, including Verizon Communications (VZ ) and SBC Communications (SBC ). Meanwhile, privacy advocates have raised concerns about how Google tracks and stores search data.

With an overhaul of landmark telecom legislation pending and legal battles brewing, Google needs to widen its influence in Washington while its developers dream up pie-in-the-sky projects in Silicon Valley. "The company is bleeding into so many new sectors and businesses that there are any number of government policies the company should be involved in," says Blair Levin, a managing director at Legg Mason and a former chief of staff at the Federal Communications Commission.

"It really shows they are becoming a grown-up company," says Fred von Lohmann, senior intellectual-property attorney at the Electronic Frontier Foundation. "The Internet companies are belatedly realizing that they can't ignore Washington."

Davidson, who joined Google on May 31, is well-suited to wave the company flag in the nation's capital. A Massachusetts Institute of Technology-trained computer scientist and graduate of Yale Law School, Davidson served for eight years as associate director of the Center for Democracy & Technology, a nonprofit think tank and initiative group that opposes government and industry control of the Internet, while advocating user privacy.

DANGEROUS FAULT LINES. Associates say Davidson is best known for his work on intellectual-property and Internet-privacy policy issues. He has argued against the mandatory inclusion of special content locks in digital-recording devices and testified before Congress for increased measures to protect personal privacy online.

A background in privacy is of particular importance, notes Levin. After all, Google's method for tracking and archiving user data fundamentally affects search, its core business. "When I think of what could go wrong with them, a privacy issue could be much more damaging than losing out on some universal service issue," says Levin. "It's important both from a consumer perspective and a policy perspective...that Google stay out in front of concerns of privacy."

Google's top priority will be "to create a free and open Internet," according to Davidson. "I've been very focused in my previous work on advocating for consumers and Internet users, and I find myself doing very much the same work for Google," Davidson says. He declined, however, to delve into specifics. But within this broad goal, Google says it will focus on three major categories: Copyrights and fair-use policy, intermediary liability, and "Net neutrality."

LIABILITY FOR BLOGGERS? Each is directly intertwined with one of Google's nascent businesses. With the Print for Libraries and Google Video projects, the company has said it plans to digitize both copyrighted books from libraries and video from television networks -- and make it all searchable. These efforts have come under fire from both the publishing and entertainment industries.

Intermediary liability has to do with ensuring that the government treats the company as a neutral provider of tools rather than holding it liable for all of the content held in its search results, or on the blogs created on the Google-owned Web-log-publishing tool "Blogger." "With Blogger, Google is becoming a pretty prominent Web publisher...presenting a whole new set of issues" says von Lohmann.

One of the most contentious regulatory battles may fall in the realm of telecommunications, and specifically "Net neutrality," the idea that an Internet service provider should cease efforts to hobble the performance of other sites and services in favor of their own.

BABY-BELL BATTLES. Moreover, while Google hasn't completely tipped its hand, recent activity points to a strong move toward providing consumers with data and voice service. Along with the bid for Wi-Fi in San Francisco, the company has helped fund Current Communications, a technology company that provides broadband Internet service over power lines. Also, Google last summer launched Google Talk, its free voice over Internet protocol (VOIP) service.

These moves could have Google running headlong into huge telecom players that would just as soon keep cities out of the business of providing city-wide Wi-Fi. Google's challenge: Continue to push back the Baby Bells on this issue. Also, Google has said it would oppose efforts by network operators to block their customers from reaching competing Web sites and services.

"Should they be able to speed up their own sites and services, while degrading those offered by competitors?" McLaughlin asks in the blog. "What's better: [a] Centralized control by network operators, or [b] free user choice on the decentralized, open, and astoundingly successful end-to-end Internet? (Hint: It's not [a].)"

"THEY'VE ARRIVED." Davidson and his associates will be able to outline such views when they weigh in on any overhaul of the Telecom Act, just now getting under way. The House Energy & Commerce Committee says it wants to introduce a bill later this month -- and is working on a second draft after having circulated a first one and received comments back.

The first version of the law contains language hinting the committee is on board with Google's view of the world. The Senate Commerce Committee is not as far along, though it's expected to start drafting a proposal soon.

Google's lobbying effort will only grow from here, says company spokesman Steve Langdon, as it plans to add more staff in Washington. Just a little over a year after its IPO, analysts hardly find this surprising. "It signals that Google's part of the mainstream now," says Scott Cleland, CEO of the Precursor Group. "It's a milestone that they've arrived in mainstream corporate America."

While Google may still like to cultivate the image of a light-on-its-feet, devil-may-care startup, it's beginning to act like the $80 billion industry heavyweight it really is.