Google and Yahoo Ad Deal Set To Launch in October

SEM Advertisers Brace For Historic Rate Increases

PPC Rates Set to Explode ... Click Fraud Goes Unchecked.

Google CEO Eric Schmidt confirmed yesterday that despite pressure from the US Justice Department, the Google Yahoo advertising partnership will proceed with its scheduled launch of early October. “We are going to move forward,” Schmidt said. “We are in the process of talking to the government. They’ve not indicated one way or the other how they’re dealing with us. We always worry a little bit, but we think our arguments are pretty strong. Yahoo has made it very, very clear they’re going to take the best parts of their search network and combine them with ours.”

The advertising partnership between search competitors is designed to serve Google AdWords sponsored search ads in combination with Yahoo Search Marketing ads in the Yahoo Search results pages along with other forms of sponsored search contextual advertising throughout the Yahoo network. The new combined search advertising deal is expected to bring Yahoo a much needed $800 million in additional advertising revenue.

Under the join PPC advertising agreement, Google AdWords ads will be displayed in Yahoo Search results at higher cost per click values than Yahoo Search Marketing ads, as Google and Yahoo and will raise click fees once again and then split revenues. The deal means higher click fees for PPC advertisers in both Google and Yahoo. This brotherly love from Google could be pay back as Yahoo provided Google search technology free exposure and helped jumpstart AdWords eight years ago.

SEM advertisers can higher fees and more bogus click activity as no new click fraud protections will roll out in the new partnership.

As click fraud increases Google, Yahoo, and MSN continue to look the other way.

Google and Yahoo are both excited as they can drive rates higher and jointly profit more with little effort. Yahoo and Google revealed some exciting money earning details about their search advertising agreement in an SEC filing recently. No financial terms were disclosed and the filing is heavily redacted in an area that covers "other business opportunities."

Google and Yahoo released excerpts of their new search advertising partnership that keeps financial details secret. In a filing with the SEC the companies take the unusual step of disclosing the contract governing the partnership, but left out any financial terms, such as the revenue split on their new PPC deal.

Internet companies typically guard the terms of such contracts to protect their ability to negotiate pricing at variable terms with other customers.
Critics say the deal threatens competition for search advertising that runs alongside web searches. Congressional leaders have conducted hearings to investigate what impact the joint partnership could have on the Internet advertising market. The agreement covers the United States and Canada, but not other international markets.

Rivals such as Microsoft have protested that Google already controls more than 70 percent of the Web search ad market and that a Yahoo deal would give Google control over more than 90 percent of the market. Google and Yahoo executives have defended the pact, saying they will compete aggressively in other areas. No party has commented on Click Fraud.

Seeking to shore up its advertising business while warding off pressure to merge from Microsoft, Yahoo struck the agreement with Google, the dominant search engine in the United States and around the world.

Under the new deal, due to take effect in October of 2008 following regulatory approval, Google will supply Yahoo with Sponsored Search listings to run alongside Yahoo's Web search system. Yahoo after many stumbles and poor management decisions has fallen from the undisputed leader in keyword search with 70% of market share in 2000 to less than 20% today.

Google and Yahoo have sought to portray the partnership as a non-exclusive arrangement in which Yahoo is effectively contracting with Google to sell ads alongside a portion of its search results. This in turn can allow Yahoo to focus on other aspects of its business where it is more strongly positioned.

The contract reveals details of previously disclosed plans to make Yahoo Messenger and Google Talk, the companies' instant messaging (IM) systems, work together, it redacts four of the five other points in this "other business" section.

Yahoo has said it expects to generate an additional $250 million to $450 million in additional cash flow in the first 12 months after the agreement goes into effect.

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Google Will Offer Services for Bloggers at the Conventions

Google Inc. will help set up a two-story, 8,000 square-foot headquarters for hundreds of bloggers descending on the Democratic convention in Denver next week, and it will offer similar services at the Republican convention in September, as new media gain influence in politics.

Four years ago, Google wasn't a significant presence at the Democratic and Republican conventions. Its high-profile presence at both conventions this year mirrors the growth of new media, which will provide their takes on events and compete with established media companies via Google's YouTube video site and other social-media outlets.

With its financial support for the "Big Tent" blogger facility at the Democratic convention, Google stands to gain exposure and goodwill from 500 or so bloggers who paid $100 for access to the facility, run by a coalition of bloggers. Google's software and services will be featured, including a kiosk in the public area of the tent where anyone can post videos on YouTube.

With the potential for a blogger around almost every corner and delegates with cellphone cameras everywhere, including private parties that shut out journalists and bloggers, privacy will be hard to come by.

"There's no such thing as off the record anymore. There's no such thing as private moments anymore," says Simon Rosenberg, president and founder of NDN, formerly the New Democrat Network, and the New Politics Institute.

"We saw that with 'macaca,'" Mr. Rosenberg said, referring to an incident in 2006 when a videographer recorded then-Sen. George Allen using a term often considered derogatory to some ethnic groups. "This is the condition of life now in the new media age."

Four years ago, YouTube hadn't been founded yet. Now, it will have booths at each convention to help delegates and bloggers upload videos taken on the floor or at events around town.

"It's an amazing opportunity for us. You don't get all these people in one place but every four years," says Robert Boorstin, director of corporate and policy communications in Google's Washington office and a former Clinton administration official.

Not only will bloggers have Internet access, workspaces and couches for napping in the "Big Tent" headquarters, they will be provided food and beverages, Google-sponsored massages, smoothies and a candy buffet. On the final night of the convention, Google is co-sponsoring a bash with Vanity Fair magazine for convention-goers and journalists that has become one of the hottest party invites.

Google will offer similar amenities for bloggers and new-media reporters who attend the Republican convention in St. Paul, Minn., company officials say. It will demo a variety of new political tools next week, including a search function on YouTube that will offer almost real-time keyword searches of convention speech videos.

At the Republican convention, about 200 bloggers have been credentialed to attend and work from the press filing center. They will have the same access as reporters. That is up from about a dozen bloggers who were credentialed in 2004, according to Joanna Burgos, a convention spokeswoman.

"We recognize it's a whole new world out there with bloggers but we're really embracing it," she said. "It's so many more channels to get our message out."

At the Democratic convention, bloggers from each state were chosen to be embedded with their delegations on the convention floor. Several hundred other bloggers will report from the Big Tent and at events and protests around Denver.

"The paradox is that the events themselves are all news-free, and it's really mostly just atmospherics; there's no real news made after the VP picks are announced," says Micah Sifry, co-founder of TechPresident.com, an Internet site that tracks developments in Internet politics. "On the other hand, it's a target-rich environment for bloggers."

By: Amy Schatz
Wall Street Journal; August 19, 2008

Yahoo Nears Clearing Biondi And Chapple to Join Board

Yahoo Inc. is in the final stages of vetting former Viacom Inc. Chief Executive Frank Biondi and John Chapple, the former CEO of Nextel Partners, to join its board, according to a person familiar with the matter, as it moves toward completing its agreement with Carl Icahn, who backed down from his campaign to oust Yahoo's directors last month.

Yahoo -- which is expected to announce the appointments by Friday -- has yet to make a final decision, according to this person, but the informed individual characterized the two names as the board's preferred choices who were likely to be selected unless any unforeseen issues arose. One finalist, former Grey Global Group Inc. advertising agency head Edward Meyer, is no longer being considered, this person said. A Yahoo spokesman declined to comment. Messrs. Biondi and Chapple couldn't be reached for comment.

If finalized, Mr. Biondi and Mr. Chapple will be filling two new slots created in the pact with Mr. Icahn, who also won a seat as part of the agreement.

Under that pact -- sealed in the final days before Yahoo's annual holders' meeting -- Yahoo agreed to expand its board to accommodate Mr. Icahn and two new directors from a list of nine people Mr. Icahn recommended. All but one of those names -- including Mr. Biondi and Mr. Chapple -- were on Mr. Icahn's slate of nominees to replace the entire Yahoo board during the proxy campaign he dropped.

How closely their opinions about Yahoo match up to Mr. Icahn's remain unclear.

Both men are seasoned corporate CEOs with strong experience in the media and technology worlds, respectively. Mr. Biondi ran Viacom and also served as the chairman of Universal Studios. Mr. Chapple, ran Nextel Partners, a small wireless provider that was sold to Sprint Nextel, and is currently the president of private-equity firm Hawkeye Investments LLC.

Mr. Icahn and Mr. Biondi have teamed up on proxy battles before. As part of his campaign to take control the Time Warner Inc. board a few years ago, Mr. Icahn expressed his desire to install Mr. Biondi as CEO of Time Warner if the effort, which failed, succeeded.

The three new members join a board struggling to maintain the confidence of shareholders. At Yahoo's recent shareholder meeting, Yahoo Chairman Roy Bostock received support from only 60% of Yahoo shareholder votes cast. Board member Jerry Yang, who is also Yahoo's chief executive, received support from 66% of votes cast.

Yahoo has depicted its agreement with Mr. Icahn as a chance to move beyond the uncertainty it has faced since Microsoft Corp.'s Jan. 31 offer to acquire it with a new board ready to evaluate its options with fresh eyes.

How aggressively Mr. Icahn intends to keep pressuring for a sweeping strategic change -- such as a deal with AOL or Yahoo selling its search business to Microsoft -- remains unclear.

By: Joann Lublin and Jessica Vascellaro
Wall Street Journal; August 13, 2008

Yahoo Paid Big in Takeover Duel

Fending off Microsoft cost a little more than a quarter of firm's second-period net

Yahoo recently updated the amount it has paid for advice in fighting off the takeover advances of Microsoft. The new, higher total? $36 million.

Forget that the number is a little more than a quarter of Yahoo's second-quarter net income of $131.3 million, and up from the $22 million it disclosed in a filing in late July. The cost might have been worth it, because Yahoo appears to have succeeded in what many suspected was the goal of Chief Executive Jerry Yang and Chairman Roy Bostock since the end of January: fending off the takeover advances of rival Microsoft.

Of course, Yahoo never openly admitted it didn't want a deal with Microsoft; in fact, it bent over backward to tell investors and Microsoft that a takeover at $33 a share was practically one of its most cherished hopes.

Still, the body language -- the delays, the PowerPoint presentations, the coy responses -- signaled something very different to Yahoo investors, who suspected the Web-search-and-advertising concern wasn't as eager to be bought as its words indicated.

Several, including Gordon Crawford of Capital Research & Management and Carl Icahn, made their displeasure clear to Yahoo management.

For Yahoo's advisers at Goldman Sachs Group and Lehman Brothers Holdings, Microsoft's departure is bittersweet. As their client was dragged through the mud, criticized and disbelieved by investors, the battle against Microsoft hardly fit the profile of the ideal hostile-takeover defense.

And a portion of $36 million in fees, while generous, is only a fraction of what those advisers would have received if Microsoft had achieved its $44 billion-plus goal.

In his research report Monday, Morgan Stanley analyst William Greene predicted that if crude oil falls to $115 a barrel, the airline industry could be profitable. Well, oil was at $115.22 at midday Wednesday in New York, after settling at $113.01 Tuesday.

Providing this pricing point proves durable, will the industry take advantage?

Perhaps overlooked in the market's optimism Monday -- airline stocks were among the biggest gainers, though they were mixed Tuesday -- was a significant warning from Mr. Greene, namely that "falling oil prices introduce the risk of destructive competition as plans for capacity rationalization and revenue discipline fall victim to the seductive cost and market share benefits associated with capacity growth. Such actions would inevitably erode operating margins in an oil-driven up-cycle."

That is analyst-speak for fears that airlines might be lulled by those falling oil prices to forget that the real source of the industry's dysfunction is intense competition from too many domestic players.

Consider the issue of capacity. The agreement to combine Delta Air Lines and Northwest Airlines was motivated in part by the desire to achieve economies of scale. And indeed, analysts have pushed mergers as the best way to ensure steep cuts in the number of flights industrywide.

US Airways President Scott Kirby has said the industry is expected to cut capacity 9% by 2009. But will that be enough? Calyon analyst Ray Neidl, for instance, has put the needed figure at 20%.

The falling price of oil is good news. But for an industry that has been grounded by losses, it isn't a cure.

By: Heidi Moore
Wall Street Journal; August 14, 2008

As Its Holders Meet, Yahoo Taps New Ads

Having averted Carl Icahn's bid to replace its board, Yahoo Inc. will now seek to reassure angry investors it has plans to grow, starting at its shareholder meeting Friday.

The initiative that matters most is squeezing more money from Yahoo's bread-and-butter display-ad business. The goal: to raise the prices advertisers pay for display ads on its main sites and -- what's more of a challenge -- all the lesser-known pages that typically attract little interest from advertisers, such as individual users' Yahoo Mail "in" boxes and Yahoo user forum pages.

Yahoo last year purchased two technology companies to aid the effort. Yahoo has also struck deals to sell ads on sites operated by partners like Comcast Corp. and WebMD.

Mike Walrath, senior vice president for advertising marketplaces, says Yahoo wants advertisers to think less about buying an ad fixed to particular content, like the homepage of Yahoo Finance, and to instead seek to run ads where they will reach a particular type of user, such as someone interested in finance. The former is known as "guaranteed" advertising inventory, because it's pegged to a particular type of content at a particular time. The latter is called "nonguaranteed," because the ad could run wherever Yahoo thinks it can reach a particular audience.

Some digital ad executives say they've been disappointed with the performance of ads sold through some of these new channels. But Yahoo's new push is showing some signs of success. President Sue Decker told analysts that the nonguaranteed business was a big factor in the 20% growth in overall display revenue in Yahoo's second quarter.

With investors breathing down Yahoo's neck, accelerating that growth could be the company's best hope for changing its trajectory, analysts say. Making matters more urgent, the majority of Yahoo's display revenue still comes from the slower-growing guaranteed advertising side. As Yahoo's users spend more time across a range of blogs, social networks and other fast-growing sites, advertisers are following them, pressuring Yahoo's premium rates. In addition, a tough economy has already caused some big brands to scale back their spending, and analysts are anticipating the trend will last through at least next year.

Hilary Schneider, executive vice president of Yahoo U.S., says nonguaranteed advertising becomes "mission-critical as you weather a tougher economy." But she says Yahoo will still work to improve results for its guaranteed ads. "It's not either or. It's both."

By: Jessica Vascellaro
Wall Street Journal; August 1, 2008

Shareholder Angst Fizzles

Criticism Is Sparse Over Microsoft Bid At Annual Meeting

Yahoo Inc. faced little criticism at its annual meeting over the issue that had been expected to be center stage: its rejection of multiple deal offers from Microsoft Corp.

Shareholders overwhelmingly endorsed the board, with Yahoo Chairman Roy Bostock receiving a 79.5% favorable vote, up from roughly two-thirds last year. Some 85.4% of votes were cast in support of Chief Executive Jerry Yang, down from more than 90% last year but still a strong endorsement for a leader who has faced calls for his resignation.

The results suggest that investors who have been harping about the company's handling of Microsoft negotiations are moving on -- or have decided to sell their stock. Yahoo shares have fallen roughly 30% from when Microsoft withdrew its $47.5 billion, $33-a-share offer, to acquire the company in May. Friday, the company's stock traded relatively flat and was at $19.80 in 4 p.m. composite trading on the Nasdaq Stock Market.

The meeting, in San Jose, Calif., was a tame follow to a bitter battle. Investor Carl Icahn, who settled his proxy fight for the company last month, didn't attend the two-hour meeting. Under the settlement, Mr. Icahn and two other directors will join Yahoo's board.

While Mr. Bostock addressed months of negotiations with Microsoft in detail, investors didn't dwell on the topic, besides a few brief or passing remarks. Shareholders instead pressed management on human-rights issues, executive compensation and its strategy against Google Inc.

Several investors interviewed at the meeting said they still are holding out for Microsoft to make another offer to buy Yahoo's search business, and they think a move is fairly likely in the coming months. That sentiment could be keeping up Yahoo shares to some degree.
Yahoo's board of directors faced tough questions from company shareholders at its annual meeting but there weren't many fireworks after its compromise deal with dissident shareholders Carl Icahn. MarketWatch's Benjamin Pimentel reports.

Eric Jackson, a small Yahoo shareholder representing a group of shareholders who own 3.2 million shares, has been critical of Yahoo's handling of the bid but raised the issue only briefly, saying to Mr. Bostock: "You overplayed your hand...and overstayed your welcome."

Mr. Bostock responded by saying that Mr. Jackson was mischaracterizing the facts. Mr. Bostock kicked off the meeting by reviewing the months of "twists and turns" between Microsoft's Jan. 31 bid and its truce with Mr. Icahn last month. At every step of the way, he said, Yahoo's board sought to increase shareholder value.

"There was never a compelling offer put on the table," he said, adding he still doesn't know why Microsoft withdrew its original offer.

In a statement, Microsoft said, "Yahoo is attempting to rewrite history yet again with statements that are not supported by the facts."

Mr. Bostock cracked several jokes about the long hours spent on the deal, noting he would be happy to share a time sheet of all the hours he logged on it. He said he has been working "26 hours in a 24-hour day."

Mr. Yang, who has been waging a battle to keep his job, walked through the company's plan to expand by building new products, including a new platform that makes it easier to buy advertising online. The company also has realigned its advertising business, he said, and has succeeded at implementing a more technologically savvy leadership team.

"This is a company we are very excited and determined to transform," he said. "There is no other company on the Internet that has this collection of assets."

The meeting didn't address who will join the board along with Mr. Icahn. The new members are to be selected by Aug. 15. While there had been some speculation that Yahoo was likely to select Jonathan Miller, the former chief executive of AOL, as one of the board members, Time Warner Inc., AOL's owner, said Friday that Mr. Miller had agreed not to work for Yahoo as part of his noncompete agreement with Time Warner.

By: Jessica Vascellaro
Wall Street Journal; August 2, 2008

U.S. Web Sites Draw Traffic From Abroad But Few Ads

U.S. Web sites are waking up to a sobering reality: A huge share of their traffic now comes from overseas, but they are struggling to make money from it. Now, Internet companies big and small are scrambling their business models to try to cash in on foreign markets they have largely ignored.

The internationalization of online traffic in the U.S. has accelerated at a pace that has surprised even some people in the Internet business. Many U.S. sites now draw more than half of their audiences from international visitors but generate only about 5% of their revenue from that traffic, according to recently compiled figures by Internet tracking firm comScore Inc. and industry analysts.

For example, Web sites published by Condé Nast, such as GQ.com and Style.com, derive 55% of their traffic from overseas, while Facebook's international audience accounts for 73% of its 124 million monthly visitors.

Most of these sites started drawing foreign visitors without any effort on their part. The changing demographics of their users owed in part to the rapid increase in broadband Internet penetration in countries such as Russia, Brazil, India and China in recent years.

U.S. Web content is proving popular with those new Web users, just as American TV and movies have been in those and other countries. Also, technology investments by U.S. Web sites have helped them appear prominently in search results for Web surfers world-wide.

This trend has huge financial implications for big U.S. publishers. Many sites have paid little attention to foreign traffic because it was so small and because, in some cases, marketers in those countries weren't yet buying online ads. As a result, international visitors to U.S. sites still often see ads that are completely irrelevant to them.

A recent visit to CNET.com from Australia, for example, showed an ad for Verizon Communications Inc.'s FiOS TV service, which is available only in select U.S. cities. U.S. marketers know they aren't reaching their intended audience with those ads, so they normally don't pay Web publishers for them.

"Web sites are neglecting a massive opportunity," comScore analyst Andrew Lipsman said.

Now, some sites are moving aggressively to build their international sales operations. Closely held Glam Media, whose properties include fashion and celebrity gossip site Glam.com, recently acquired London digital marketing firm Monetise Ltd., jump-starting its strategy to add several dozen salespeople in countries that include Germany, Japan, India and China. Half of Glam's 77.4 million visitors come from abroad, but only 5% of its revenue is from non-U.S. advertisers.

"We really have a global media company, but we were running it locally," said Samir Arora, chairman and chief executive of Glam, which by visitors is the largest U.S. Web property aimed at women.

Other Web sites are outsourcing ad sales to companies with on-the-ground sales teams. This includes Adconion Media Group, a London firm that sells ads for sites such as the Drudge Report and Sony Corp.'s video site Crackle from 12 international offices. Meanwhile, niche players are cropping up to focus on individual countries, such as Komli Media, a start-up based in Mumbai, India, that sells ads for 250 U.S. Web sites, including CNET Networks Inc.

But selling Internet ads to local advertisers in overseas markets can be a tough feat. While most sites are technologically capable of targeting ads to visitors from different countries, online marketing is still a nascent phenomenon in many places. Amar Goel, who left Microsoft Corp.'s online ad sales group to start Komli, said many Indian brands still view the Internet as an afterthought, partly because there is still such fast growth in traditional media such as newspapers and television.

Mr. Goel said he had tried to pitch the chief executive officer of a large consumer packaged-goods company at a recent conference. "When he heard I was with an Internet marketing company, his eyes just glazed over," Mr. Goel said. "He doesn't yet believe the Internet can significantly impact his brand." Mr. Goel said he has made some headway with companies such as Naukri.com, India's largest job-search site, and MakeMyTrip, a large travel site, as well as multinational banks and software companies with operations in India.

Traditional U.S. media companies such as ESPN, Forbes and CNN have a head start because they already publish and broadcast overseas and have sales teams in place. But even those companies still have to coach local marketers to spur more online ad buying. ESPN, for instance, says it has been showing marketers in Latin America how sports fans are using the Web.

While overall non-U.S. Internet ad spending jumped to $25.1 billion in 2007 from $4.5 billion in 2003, according to Publicis Groupe's ZenithOptimedia, developing markets still aren't providing a huge share. In India, for example, online ad spending will only be about $111 million this year. In Brazil, it will be $453 million, ZenithOptimedia predicts. In comparison, U.S. online ad spending is expected to reach $19.8 billion this year, up 23% from $16.1 billion in 2007.

"It's taken the U.S. Internet 13 years to get to where it is now, these other places are still in years zero through two," said Ross Sandler, an Internet analyst at RBC Capital Markets.

MySpace is trying ramp up its sales teams outside the U.S. and hopes to eventually generate 50% of its revenue from abroad. The company recently announced a campaign by Cartier for its "Love by Cartier" collection, in which the French luxury jeweler is launching MySpace profile pages targeted at users in eight European and Asian countries.

By: Emily Steel and Amol Sharma
Wall Street Journal; July 10, 2008

Dell Tests Player to Renew iPod Battle

Music Device Is Key To Broader Strategy

Dell Inc. failed once to move into Apple Inc.'s digital-music turf. Now, it is plotting another foray.

In recent months, Dell has been testing a digital music player that could go on sale as early as September, said several Dell officials. Launching the player -- along with an online download service and related software -- would be part of a strategy that Dell Chief Executive Michael Dell hopes will move the company into a broader range of consumer markets than it has served before.

Dell first entered the music market in 2003 with a line of MP3 players that let users buy music from a variety of Web sites. But sales were disappointing. When Dell stopped making music players in 2006, its U.S. market share remained below 3%, estimated analyst Rick Doherty of Envisioneering Group, who follows the MP3 player market.

This time, if the company goes ahead with the music player, the strategy is different, said Michael Tatelman, Dell's vice president of consumer sales. Instead of simply selling a piece of hardware tied to someone else's music service, as it did in 2003, Dell is working on software for a range of portable PCs that will let users download and organize music and movies from various online sources.

The music player Dell has been testing -- the product's name couldn't be learned -- features a small navigation screen and basic button controls to scroll through music play lists. It would connect to online music services via a Wi-Fi Internet connection, and Dell executives said they would likely price the model currently being tested at less than $100.

The executives said the device has gotten a favorable reception from testers. Software would connect the device to an online subscription service that Dell expects to launch later this year. Through licensing agreements with online music providers, Dell's new service will let consumers download songs and move them between devices like PCs and cellphones.

While the device Dell is testing is focused on playing music, Dell's new service also would allow movies to be downloaded and displayed on PCs, for example. Pricing for the new service hasn't been determined.

Mr. Tatelman declined to detail how Dell expects the strategy to generate profit.

Rob Enderle, an industry analyst whom Dell hired to consult on the new entertainment strategy, said he is still discussing with Dell whether profits would come mainly from the subscription service or from devices tied to it. Mr. Tatelman said he will decide "in a few weeks" how to proceed with the music player, and that he may decide not to sell it at all. Other people familiar with the matter said they expect the product to be on the market by fall.

Dell would face stiff odds. Its new foray would put it into an Apple-led market that has defied assaults. Companies like Microsoft Corp. and Sony Corp. have tried -- and failed -- to make a dent in the market dominated by Apple's iPod players and iTunes store. Apple had 71% of the U.S. MP3 player market in the first quarter of 2008, according to industry analyst NPD Group. Apple's closest rival was SanDisk Corp., with 11%. Microsoft, which introduced its Zune music player in 2006, had just 4% of the market.

And Dell's track record isn't strong in expanding into other markets beyond PCs. In 2003, it started selling Dell-branded televisions; it abandoned its big-screen TV business last year after disappointing sales. Dell last year also discontinued its hand-held mobile device, called the Axim, which was introduced in 2002; again, sales were disappointing.

Mr. Tatelman said past efforts tried to make money by selling devices cheaper than competitors. The new entertainment strategy, he said, is different. Dell isn't trying to compete head-on with Apple's iPod, he said.

"This isn't about a new MP3 player," he said. Now, rather than simply trying to sell cheaper hardware than competitors, Dell is trying to integrate its products with software and services.

Dell has been working on a new consumer strategy since early last year, when Mr. Dell returned as CEO after a three-year hiatus. During that time, Dell lost PC market share as industry growth shifted away from Dell's base of commercial sales and toward consumer purchases of notebook PCs. To boost sales in that market, Dell last year started selling computers in retail stores, and has been trying to make its products more appealing to consumers by improving their external design and making them more entertainment-focused.

The new plan could strengthen Dell's consumer brand, said Mr. Enderle, the consultant to Dell. But it "carries a lot of risk, because one, this is an area where Dell didn't do well in the past; and two, there's a lot of companies out there that aren't doing well in it," said Mr. Enderle. To succeed, he said, Dell will have to invest in something it isn't accustomed to paying for: "an Apple level of marketing."

To that end, Dell is tapping ex-Apple expertise to make its foray. Its device is based on software developed at Zing, a company Dell acquired last year and which is headed by an Apple veteran. Mr. Tatelman said Zing software can be used to retrieve and organize online music, movies and photos, and will come pre-installed on a series of new Dell notebook computers and other devices. The Zing service will let users access their content from locations other than their own computer.

Zing, he said, will be used as a basis for an entire line of new consumer PCs and other products. That lineup, Mr. Tatelman said, will give customers access to whatever source of music or movie content they want, "rather than being dictated by a device and a single service."

The hope among Dell executives is that by integrating their PCs with entertainment software -- and streamlining the external design of their computers -- they will attract the type of consumer who would typically buy an Apple computer, but might be put off by restrictions that often apply to sharing music purchased from Apple the iTunes store.

Whereas Apple sells music itself, Dell is aiming to provide products that offer easier access to a variety of sources. Mr. Tatelman said Dell's Web site will factor into the strategy. Earlier this month, the company set up a feature called "Best of Web" that links to music services Pandora Media Inc. and Rhapsody, which is jointly owned by RealNetworks Inc. and Viacom Inc.'s MTV. Dell plans to sign licensing deals with online music services so that Zing subscribers can access their content, said two Dell executives.

Mr. Doherty, the industry analyst, said Dell's strategy may work because consumers are looking for ways to organize music from disparate sources in a way that Apple's digital-music strategy doesn't always allow. There's room for "incredible growth," he said, if companies can develop "something that makes the finding and sharing of music easier."


By: Justin Scheck
Wall Street Journal; July 30, 2008

Google Trumps Wikipedia
Launches Knol

New Google Wiki Alters Approach and Offers Single Author Expertise and More Accuracy

Google Knol tries to out-wiki Wikipedia. Just as you settled on Wikipedia as your de facto source for all information, Google Knol jumps onto the scene. Google Knol is Google's latest attempt to gain yet another foothold on your everyday life by providing users with a new source for their daily zeitgeist of knowledge -- the wiki. How long can Wikipedia survive until Google "does no harm" them to oblivion?

Welcome to the newest player in the sea of Web sites trying to answer your questions: Google Knol. Seen by many as the Wikipedia killer, Google Knol mixes the topical breadth of Wikipedia with the implied expertise in categories of About.com to create a limitless, write-for-pay cyclopedia endeavor.

It has the potential to add value to information-hungry end users. It has the potential to consolidate a dangerous amount of Web traffic, production and revenue in the hands of a single entity, a scary thought, even if the entity’s mantra is “Don’t Be Evil.”

According to Google, the key difference between its encyclopedia and the primary competition is that it is the reverse of Wikipedia's anonymous mass of editors. In Knol, a single professional steeped in the academia of a topic serves as the topic editor. In theory, this is a great addition to the online encyclopedia concept. Readers will probably be more likely to trust the article on salmonella if it is written by the head of a medical facility compared with one written by, say, my auto mechanic sitting in front of his computer after work ranting about the recent tomato-induced illness.

Knol stands for "unit of knowledge," and Google expects the units to add up quickly. Its initial beta launch includes approximately 300 knol entries ranging from "Type 1 diabetes" to "Things to do in Singapore." As the topic areas expand, the gaps between entries and relevant content will surely be filled. But with just a smattering of entries, Google is already receiving copious traffic from organic search engine results.

Despite promises to the contrary of Google not using its domain-name power to increase the relevancy of its search results to promote the Google Knol system, it's hard to believe Knol results won't creep into the top 10 search results for every arena on which its experts decide to write. Search engine results, or SERPs, are the lifeblood of both small and large Web presences. A dip in results from the second place on a keyword search to sixth place results in a geometric traffic decrease on a Web site. Search Engine Land's Danny Sullivan showed in a brief test that nearly one-third of the keywords he tested ranked in the top search engine results from these newly created Knol entries.

Google’s Conflict of Interest

The can of worms in this online encyclopedia project falls at the feet of Google's namesake search engine. If Google Knol entries begin to outrank other normally organic entries, it gets to keep a lion's share of traffic to an unlimited number of topics in its own stable. Specifically, Sullivan calls it a potential conflict of interest. "I remain concerned that by hosting this content, it plays too much in the content owner space when its core business is supposed to be driving traffic outbound to others," Sullivan writes.

The other twist with Google Knol is that, unlike the established informational sites, these esteemed authors are able to earn money from the Google AdSense program. This means that authors are no longer working on a labor-of-love concept. They’re gaining notoriety in their field and getting rich doing it, a reward for the hours they spend removing the additions from my aforementioned mechanic.

By mixing the content delivery and search worlds, Google holds the ability to unseat as many topic leaders in search engine results as it wishes. For those of you keeping score, Google now keeps hold of the advertising network, the content, the search engine relevancy and the payment to authors. In essence, if Google creates a wireless bandwidth network and starts selling computers, it will own everything from the top to bottom on content delivery except the end user. That, according to my mechanic's recent Wikipedia entry, is becoming more of a commodity anyway.

By: Jack Margo
eweek.com; July 28, 2008

Google Engineers Launch New Search Engine

Search Industry Abuzz With Optimism About CUILL

Anna Patterson's last Internet search engine was so impressive that industry leader Google Inc. bought the technology in 2004 to upgrade its own system.

She believes her latest invention is even more valuable -- only this time it's not for sale.

Patterson instead intends to upstage Google, which she quit in 2006 to develop a more comprehensive and efficient way to scour the Internet.

The end result is Cuill, pronounced "cool." Backed by $33 million in venture capital, the search engine plans to begin processing requests for the first time Monday.

Cuill had kept a low profile while Patterson, her husband, Tom Costello, and two other former Google engineers -- Russell Power and Louis Monier -- searched for better ways to search.

Now, it's boasting time.

For starters, Cuill's search index spans 120 billion Web pages.

Patterson believes that's at least three times the size of Google's index, although there is no way to know for certain. Google stopped publicly quantifying its index's breadth nearly three years ago when the catalog spanned 8.2 billion Web pages.

Cuill won't divulge the formula it has developed to cover a wider swath of the Web with far fewer computers than Google. And Google isn't ceding the point: Spokeswoman Katie Watson said her company still believes its index is the largest.

After getting inquiries about Cuill, Google asserted on its blog Friday that it regularly scans through 1 trillion unique Web links. But Google said it doesn't index them all because they either point to similar content or would diminish the quality of its search results in some other way. The posting didn't quantify the size of Google's index.

A search index's scope is important because information, pictures and content can't be found unless they're stored in a database. But Cuill believes it will outshine Google in several other ways, including its method for identifying and displaying pertinent results.

Rather than trying to mimic Google's method of ranking the quantity and quality of links to Web sites, Patterson says Cuill's technology drills into the actual content of a page. And Cuill's results will be presented in a more magazine-like format instead of just a vertical stack of Web links. Cuill's results are displayed with more photos spread horizontally across the page and include sidebars that can be clicked on to learn more about topics related to the original search request.

Finally, Cuill is hoping to attract traffic by promising not to retain information about its users' search histories or surfing patterns -- something that Google does, much to the consternation of privacy watchdogs.

Cuill is just the latest in a long line of Google challengers.

The list includes swaggering startups like Teoma (whose technology became the backbone of Ask.com), Vivisimo, Snap, Mahalo and, most recently, Powerset, which was acquired by Microsoft Corp. this month.

Even after investing hundreds of millions of dollars on search, both Microsoft and Yahoo Inc. have been losing ground to Google. Through May, Google held a 62 percent share of the U.S. search market followed by Yahoo at 21 percent and Microsoft at 8.5 percent, according to comScore Inc.

Google has become so synonymous with Internet search that it may no longer matter how good Cuill or any other challenger is, said Gartner Inc. analyst Allen Weiner.

"Search has become as much about branding as anything else," Weiner said. "I doubt (Cuill) will be keeping anyone at Google awake at night."

Google welcomed Cuill to the fray with its usual mantra about its rivals. "Having great competitors is a huge benefit to us and everyone in the search space," Watson said. "It makes us all work harder, and at the end of the day our users benefit from that."

But this will be the first time that Google has battled a general-purpose search engine created by its own alumni. It probably won't be the last time, given that Google now has nearly 20,000 employees.

Patterson joined Google in 2004 after she built and sold Recall, a search index that probed old Web sites for the Internet Archive. She and Power worked on the same team at Google.

Although he also worked for Google for a short time, Monier is best known as the former chief technology officer of AltaVista, which was considered the best search engine before Google came along in 1998. Monier also helped build the search engine on eBay's online auction site.

The trio of former Googlers are teaming up with Patterson's husband, Costello, who built a once-promising search engine called Xift in the late 1990s. He later joined IBM Corp., where he worked on an "analytic engine" called WebFountain.

Costello's Irish heritage inspired Cuill's odd name. It was derived from a character named Finn McCuilll in Celtic folklore.

Patterson enjoyed her time at Google, but became disenchanted with the company's approach to search. "Google has looked pretty much the same for 10 years now," she said, "and I can guarantee it will look the same a year from now."