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IN THE AUGUST ISSUE...
GOOGLE'S MYSPACE DEAL SEEN AS BIG PLUS
Associated Press, 08/08/2006
Monday's news that Google Inc. will provide search and advertising for News Corp.'s MySpace and other sites prompted analysts to weigh in Tuesday about the deal's benefits for the search engine.
Under the agreement, Google will install its search boxes and keyword-driven ads on MySpace and other Fox Interactive sites. The search company will pay at least $900 million in advertising revenue to News Corp., provided traffic on the sites reaches an undisclosed threshold. Analysts estimated the deal could bring Google net revenue anywhere from $50 million to $200 million.
"In our view, MySpace is like Alaska, which Russia sold to the U.S. in 1867 for $7.2 million," quipped RBC analyst Jordan Rohan in a note to investors Tuesday. "At the time, the climate of Alaska was a bit hard to tame, and the land and waters were relatively underexploited. But Alaska, like MySpace today, was rich with natural resources and potential."
The deal gives Google a presence in the social networking arena, an area
in which analysts said the company was weak. Search competitor Yahoo Inc.,
which provided limited search and advertising support to MySpace before
the Google announcement, has conducted its own experiments in the area
and acquired companies with social networking savvy, such as online photo-sharing
site Flickr.
So while the deal may be a financial win for News Corp., it's a strategic one for Google, according to Rohan. "Google needed to win this deal to lock up the last remaining large and fast growing piece of traffic on the Web today," he wrote. "One thing is certain: Yahoo and MSN would have loved to sign News Corp., but could not make sense of a $900 million guarantee."
Google also gets the right to sell directly any display ads not sold by Fox. Google's search advertising business leads the sector, but so far analysts have seen its display ad business as weaker than the field.
"While we have highlighted the potential opportunity for Google on the display side for some time, we feel that Google has made limited progress on this front," wrote UBS analyst Benjamin A. Schachter in a Tuesday note to investors. "We applaud this deal as an example of how Google can leverage its relationships and technology to grow an additional revenue stream and monetization models."
The MySpace deal follows on the heels of a Google partnership with Viacom Inc. to distribute MTV programming. Schachter added that he sees the two deals as "strategically quite significant, and positive. The company seems to be convincing traditional media companies to view it as a technology partner...instead of competitor."
YAHOO! DISAPPOINTS ON SEARCH PLATFORM DELAY
Mary Crane, Forbes, 07/19/2006
Shares of web giant Yahoo! plunged in pre-market trading Wednesday after the company reported mixed results for its second quarter.
On Tuesday, Yahoo! reported net earnings that were mostly in-line with consensus estimates with a 28% year-over-year increase in net revenue to $1.12 billion and normalized earnings of 16 cents per share.
But management disappointed investors when it pushed back promised improvements to its search-monetization platform, meant to boost Yahoo!'s advertising revenue, until at least the fourth quarter. Dubbed "Project Panama," the search-model project is similar to Google's system of ranking search-engine advertisements by the amount advertisers pay for keywords and the relevance of the ad.
Yahoo! had previously hoped to roll out Project Panama in the third quarter and investors saw the new model as a way to close the search-monetization gap with Google, the research analyst said.
RBC Capital Markets analyst Jordan Rohan, writing in a note to investors Wednesday, said that after only two months of third-party review, Project Panama's delay hurts management's credibility. "The problem that exists with Yahoo! today is that, in its zealous pursuit of secrecy related to Project Panama, which, in our opinion, is a bit of a misguided pursuit, the company caught investors off guard—poor investor communications around a reasonably explainable slip in product release schedule," he said.
Rohan maintained an "outperform" rating on Yahoo! shares, but as a result of management's missteps, decided to take "a more conservative stance" after the earnings call, lowering the price target to $33 from $40.
Credit Suisse analyst Heath Terry also maintained an "outperform" rating, along with his $45 price target on Yahoo! shares. He was slightly more upbeat on Project Panama's delay, saying the extra few months it will take to launch Project Panama should pay off.
"We believe that the potential upside is considerable as the growth acceleration from Panama begins to show through," said Terry.
AOL CALLS RELEASE OF [SEARCH] DATA A 'SCREW-UP'
Aline van Duyn, Financial Times, 08/07/2006
AOL found itself at the centre of an internet firestorm after its employees published details of the search histories of 658,000 of the group’s US users.
The information, the release of which AOL itself on Monday called “a screw-up”, was published on an AOL site aimed at academics and discovered by technology blogs on Sunday, some of which used the data to analyse search trends.
Although the individuals whose search histories were detailed were not identified by name, they each had a unique user number.
Bloggers, picking up on the data, noted the search history for one user showed that the individual conducted a number of searches for “how to kill your wife” and was also keen to find images of “dead people”, “car crashes” and decapitation.
By the time AOL, the internet group owned by Time Warner, became aware of the breach and took the information down, the data was widely copied and is still easily available on the web.
“This was a screw-up and we’re angry and upset about it,” AOL said in an e-mailed statement. “It was an innocent enough attempt to reach out to the academic community with new research tools but it was obviously not appropriately vetted and if it had been, it would have been stopped in an instant.”
The revelations come at a sensitive time for AOL. The internet access pioneer took over Time Warner at the height of the dotcom boom in 2001, but since then the collapse in its value has meant there have been constant questions about its future.
Last week AOL and Time Warner announced a plan aimed at finally turning the group into a valuable business that could lift Time Warner’s share price.
From September, AOL’s remaining 18m paying customers will receive their AOL e-mail addresses and software for free. The resultant loss of billions of dollars of subscription income is expected to be offset by sharp cost cuts, including 5,000 job losses, and a bigger share of the online advertising market.
Analysts said the biggest risk was that AOL would not be able to execute the new plan – a view that could be reinforced by the release of the data, which suggests a lack of controls. AOL said the data were only a very small sample of its customer base.
The AOL search network had 42.7m unique visitors in May, according to comScore Media Metrix, meaning that the results reflected less than 1.5 per cent of the company’s users.
The move will raise fresh concerns about the safety of the information stored about individuals and concerns about US government requests for records of telephone and internet use.
WEATHER REPORT - THE NEW YAHOO! SEARCH CRAWLER (SLURP) IS HERE
Yahoo Search Blog, 07/28/2006
We launched a new Yahoo! Search Crawler, Yahoo! Slurp earlier this week. In addition to crawling the Internet faster, our new crawler is more efficient at visiting websites. As a result, site owners will notice as much as a 25% reduction in the number of requests and bandwidth consumed by the crawler.
While transitioning to the new crawler over the past few weeks, we had been running both crawlers in tandem. In some cases, this increased the frequency of Yahoo Search requests to websites. Now, with the new crawler in full production, we have turned off the old crawler and site owners should see a much lower crawl load without a loss in content coverage.
With this change of behavior in the crawler, you may see some shuffling of the pages that are included in the index and some changes in ranking as well.
Let us know what you observe through our feedback form, or if you have any technical issues with Slurp please contact support.
Thank you to everyone who helped us with this update!
David Simpson
Yahoo! Slurp Team
Priyank Garg
Yahoo! Search