Commentaries

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Google’s golden one-trick pony

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Google chief executive Eric Schmidt declared “the worst of the recession is over” while unveiling third quarter results. Certainly Google’s recession doesn’t look like anyone else’s.

Revenues of $5.945 billion were up 7 percent from a year ago  and up 8 percent over the previous quarter, after  two flat quarters. Earnings of $5.89 per share were comfortably ahead of the consensus estimate of $5.32. Cost per click, the average amount advertisers pay, was up 5 percent from the second quarter, although still down on the previous year. And Google gushes money — the third quarter had $2.5 billion in free cash flow.

There are, however, factors that give pause. Part of Google’s strong recovery came from discipline. Capital expenditure was way down ($186 million compared with $452 million year on year), contractors in the workforce were largely eliminated, staff numbers were cut, and even the famed free food at the Googleplex was trimmed. Schmidt suggested that some of those constraints will be loosened. Capital expenditure will rise – the third quarter was already ahead of the second – and Google is hiring again.

Schmidt also talked about making strategic acquisitions, although these are likely to be small. When Google was growing by double figures each quarter, discipline was an afterthought. The company has shown it can clamp down, but there is some risk that it will return to previous profligacy.

Cashing in on the data you create

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– Eric Auchard is a Reuters columnist. The opinions expressed are his own. – 

By Eric Auchard

Eric_Auchard_columnist_shot_2009_June_5x7_589x824.jpgSAN FRANCISCO, Sept 17 (Reuters) – You created it. They make money off it.
  
That’s the business strategy of popular Web sites, led by Facebook, which is just beginning to tap the value of its 300 million members, triple its base a year ago.
  
The paradox of so-called “user-generated content” is that big companies such as Facebook and Twitter look to grow rich on information users share with one another.
  
But some users are beginning to grow savvy to — and protective of — the value of the data they share about themselves. This has prompted Web players to make democratic noises about users owning their own information.
  
The companies face a dilemma: they must find ways to sell advertising to support the cost of hosting their customers’ creative content without scaring off the users who make it all possible.
  
Facebook photosLast week, Twitter, the Web-based short-messaging phenomenon, revised its terms of service to reassure members that they retain the rights to any messages they post on the site. The key change Twitter made is that now it has laid the groundwork to sell relevant advertising based on users’  messages, known as “tweets.” 
  
Such moves are putting the legal conditions in place to offer targeted advertising based on user behaviors and intentions as they can be deduced from the content they create or watch. Individual activities can be used by advertisers to identify potential audiences, which in aggregate, are served up specific marketing advertising.
  
But it’s hard to see how existing forms of online advertising can be crammed alongside the rapid fire bursts of 140-character messages that Twitter users produce. Advertising experts say the company’s best hope lies in making corporate marketers pay to deliver marketing messages over Twitter. Some recent rule changes seem designed to enable such ads. 
   
Facebook got into hot water with its members earlier this year for adding two sentences to its terms of service that asserted ownership of messages, photos and other user content.

Why Paddy powers past the field

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Here’s why Paddy Power makes the other bookies look flat-footed. Microsoft’s politically-incorrect move to turn a black model’s face white for an ad featuring three smiley happy people that ran in Poland has produced the predictable grovelling apology from the company.

Now Paddy (is that racist? – ed) is offering odds on the racial mix when the campaign for MS Office 2010 is launched. Here they are: 12/1 against white and Asian, 4/1 white only, and a reassuring 11/10 for the original mix of white, Afro-American and Asian. Bet on the favourite, I’d say.

Has Europe’s hottest site got what it takes?

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LONDON, Aug 5 (Reuters) – Spotify is enjoying a fairy-tale success as Europe’s hottest Internet start-up this year, thanks to music industry support and rapid adoption by avid listeners. The trouble is that the young company appears to have no special technology or business model that will help it compete in an online market where many consumers expect music to be free.   The company, founded by two Swedes, combines some of the best features of other music discovery sites with the aim of taking on no less a rival than Apple Inc and its iTunes media store. It has certainly caught on — despite being on the market for only 10 months, the advertising-supported service has attracted 2 million users in the UK, Sweden and other European countries.

Unlike iTunes, which sells songs or videos by the download, Spotify is one of the many services that offer consumers streaming access over the Web to a more or less unlimited library of songs. In Britain, Spotify has rocketed to become the 10th most visited music site, up from 27th a few weeks ago, according to Web measurement firm Hitwise.

It still ranks behind sites like BBC Radio 1, Last.fm, the pioneering music discovery site, and a newer rival, the ad-supported site We7.com, which is backed by musician Peter Gabriel. Spotify also has competition from social network sites like MySpace and Nokia’s Comes with Music service on phones, among many others.

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