The Week in Geek – Oct. 16, 2006
Smart Move or Silly Move 2.0?
It’s all a big guess – should Google have paid $1.65 billion for YouTube? If it’s a mistake, Google can afford it, but the bet just might measure up. Since January the # of YouTube videos served each day has grown 10 fold to 100 million. And copyright issues look less troubling now that CBS, Universal, Sony, and Warner have all signed deals to offer programming to YouTube in exchange for a revenue cut. From a profits perspective Google’s still a one-trick pony, with the overwhelming majority of income coming from pay-per-click advertising. So YouTube not only gives Google a traffic boost and a vital growth-maintaining opportunity to sell more ads, it may also be a great platform to increase revenue outside of text-advertising. YouTube users are far more tolerant of banner & video ads than Google’s impatient search users. And few firms other than Google have expertise in running resource-hogging systems on the massive scale that YouTube requires (if ad revenue doesn’t eclipse infrastructure costs, the deal’s a bust). Of note in the bidding wars for YouTube, BusinessWeek comments on the challenges faced by new Viacom CEO Philippe Dauman. His predecessor got the boot in part because he was slow to do net deals, but Google swooped in faster than most had expected. With Fox snapping up MySpace last year (now considered by many to be a bargain at $580 million) and Google taking YouTube, Facebook is next. Must be great to be Facebook founder Mark Zuckerberg. Yahoo & Viacom are desperate to deal – expect it to go in the coming weeks for an obscene price. Clear winners in the YouTube deal – venture firm Sequoia, which in 19 months turned a $11.5 million YouTube investment into $495 million. Also on fast-track is Apple. With Google’s CEO on Apple’s board, expect the media-rich YouTube to be a compelling content source for Apple’s Q1’07 iTV device.
Google Docs & Spreadsheets Launches
It’s not a deeply integrated project, and you won’t want to throw out Office yet, but Google’s beta launch of its online ‘Docs’ word processor (the acquired app formerly known as Writely) and Spreadsheets (a home grown number cruncher) show the firm continues to explore markets that overlap with Microsoft. It’s really VERY difficult to imagine significant numbers of users deploying these apps as Office replacements. Even as a collaborative tool, Microsoft holds share by building collaboration into its existing apps. But the tools may eventually morph into a hard drive or mobile device tool and find their niche. And there’s always the market blasted open by Negroponte’s $100 laptop.
Building eBay 2.0
Meg Whitman dropped from #1 to #3 on Fortune’s 2006 list of the Most Powerful Women in Business, but she still runs a champ. eBay is a miraculous firm with a stranglehold on key auction markets worldwide. Margins are blowout and growth should come in at 27% this year. But the stock, which has been priced for perfection, has been cut in half since Dec. 2004 as domestic growth inevitably slows, and moves by Google and international competitors scare investors. Skype and PayPal are seen as growth drivers and eBay is lashing together three businesses that have network effects. PayPal now accounts for an astonishing 10% of eCommerce payments in the US and 5% worldwide.
Jack Ma Aims to Unlock Middle Kingdom
eBay is a colossus, but Jack Ma is giving the firm fits in China. Ma’s Alibaba Taoboa has grown its consumer auction share to eclipse eBay China. Beating a leader is a rarity in the auction space where a few months head start can cement an insurmountably strong network effect (remember Yahoo nabbed the $5 billion+ Japanese market by beating eBay by only 5 months). The free Alibaba service has succeeded in part because China’s net population is still in growth mode, with new users coming online daily. Yahoo tried a free auction approach in the US but failed in part because eBay sellers wouldn’t leave for Yahoo when doing so meant abandoning their feedback scores. But Alibaba has managed to get first-time auctioneers as China’s net use surges – these are users that don’t have the ratings ‘glue’ to keep them on another service. Alibaba powers money-losing consumer auctions with lucrative business-to-business sales in the firm’s Taobao subsidiary. Last year Yahoo turned over China operations to Ma along with $1 billion in exchange for a 40% stake in the firm. Alibaba Taobao isn’t in China business hotspots of Shanghai, Beijing, or Guangzhou – it’s in Hangzhou, a second-tier China city. Net power players emerge everywhere! Jack Ma hadn’t even touched a keyboard before 1995, but he saw opportunities when he in an early experiment he typed ‘China’ and ‘Beer’ into a net search engine but got no results.
Singapore Plans Free Broadband Wireless Access
In more evidence that the US is falling behind in basic infrastructure, Singapore announced that most of the nation will have free high-speed wireless access next year.
Nintendo Wii On Its Way
Nintendo’s Wii console will hit the shelves on Nov. 19, two days after the PS3, and will sell for just $250, well under the $399 and $599 prices for the full versions of the rival machines. Wii games will sell for $10 less than Xbox, and unlike Microsoft & Sony, Nintendo actually expects to sell its consoles at a profit (the other firms make money on game & service sales). The Wii will sport a built-in Opera Web browser and a unique, one-handed, motion-sensitive controller that allows players to swing an arm to realistically control game moves such as a tennis serve, golf swing, or fly fishing cast. The Wii news comes at a time when Sony is scaling back the PS3 launch, and passing on Europe ’til the end of the holidays because of problems with the Blu-ray DVD player included in its units. Sony expects only 400,000 consoles to be available in the US for holiday purchase. And in more news on the next-gen video game front, Microsoft will release an HD-DVD capable Xbox 360 in Japan, meant to match the HD capabilities of Sony at a still lower price.
Cheap, Portable MRI
Those who enjoyed Andy Kessler’s The End of Medicine should consider this: a new MRI technology is being developed that relies on low-power magnets and costs only a few thousand dollars. Researchers hope to minimize the current setup and thereby create a handheld, battery-powered device that can be used anywhere. The impact on early detection could be staggering, with office scans becoming routine.
How to Burn a Three Terabyte CD
Researchers have fabricated a nano antenna–built directly onto an inexpensive, off-the-shelf laser–that focuses light to a much smaller spot size than is possible with even the best traditional lenses. The upshot according to researchers? A technology that will “be able to pack more than three terabytes [about 3,000 gigabytes] worth of data onto something the size of a CD”. That’s enough to hold more than 300 feature-length movies. That’d be a massive improvement over both dual-layer HD-DVD and Blu-ray disc, which hold ‘just’ 30 gigabytes or 50 gigabytes, respectively.