Category Archives: google

Highlight NoFollow Links: Chrome "Plugin"

paid linksThe combination of Google Chrome’s speed and a fatal Firefox bug has converted me to Chrome full-time.  The biggest loss of such a switch is my treasure chest of great Firefox plugins.

Unfortunately Chrome doesn’t offer plugins yet (actually, they do for select parties found via this Chrome URL hack), but there is a close approximation for many needs: bookmarklets + javascript.  In fact, there’s a site offering various Chrome “Plugins” using this approach: ChromePlugins.org.  That was a really savvy domain/focus — thousands of Chrome plugins seem inevitable long-term and the site is well positioned for that future.
I’ve pulled multiple plugins from that site, but one was missing for exactly my needs.  I wanted a plugin that would highlight nofollow links, not just the text, but the background of the text — for easy viewing across sites with diverse text colors.  ChromePlugins had a plugin that changed text color to red, but sites like ReadWriteWeb (image above of pagerank passing paid links) already color their links red.  Therefore, I tweaked the code to highlight nofollow links with a yellow background (and red text).  The code is below:
javascript:var%20t=document.getElementsByTagName('a');for(i=0;i<t.length;i++){if((t[i].rel.toLowerCase()=='nofollow') | (t[i].rel.toLowerCase()=='external nofollow')){void(t[i].style.color='red');void(t[i].style.background='yellow');}}

To install it, you only need to drag this icon to your Chrome bookmarks bar: Highlight NoFollow
Let me know how it works for you…
UPDATE: I received a great suggestion in the comments, to also highlight ‘external nofollow’ links.  I’ve updated the javascript to do this.  If you grabbed the prior, just delete it and drag the current icon of my face to your bookmark bar.

Google Antitrust Violations

google monopolyA recent truemor about Google’s antitrust risk under the Obama administration raises what could become the most important technology topic of Obama’s administration.  That may sound melodramatic, but as all citizens and businesses grow more dependent upon the internet so too does Google’s power grow to impact the lives and livelihoods of the world. It doesn’t hurt that Obama’s pick to head antitrust, Christine Varney, considers Microsoft “so last century” and Google a monopoly.

Just today, B2B search engine TradeComet.com has filed suit against Google, accusing them of violating antitrust laws.  I’m not sure this is the suit that seals the deal, but TradeComet claims:

“With no notice, Google changed from cheerleader to tyrant when it realized we were a competitive threat,” said TradeComet founder and chief executive 

“For example, Google raised my prices by 10,000 percent, which strangled our business, virtually overnight,” he said. “As a result of Google flexing its monopolistic muscle, SourceTool.com currently averages about one percent of the traffic it previously had and is no longer a competitively viable business.”

Google responded with a now-familiar claim:

“the advertising market in which Google operates is highly competitive, and advertisers have a huge range of choice”

That response has worked before, but won’t for much longer.  You see, by pointing at the broad advertising market, Google tries to hide the fact that it also operates in the search and search advertising markets; both markets in which Google’s monopoly power grows daily.  That’s analogous to 1990s Microsoft claiming they operated in the highly competitive “software” market, to distract from their monopoly in the “operating system” market which they used to stifle competition in browsers and other related markets.
The real competition is for searchers and search advertisers — two areas where Google wields monopoly power.  Google has taken multiple actions against companies, webmasters and individuals trying to reach searchers and search advertisers that Google controls.  Often Google claims such actions are necessary to maintain “search quality”, just as 1990s Microsoft claimed that bundling software delivered a better quality end-user experience — the government didn’t buy it.  Those claims will also break down for Google — particularly because much of the targeted competition delivers exactly what searchers are looking for, relevant sites, undermining “search quality” as an excuse.  It also doesn’t help Google’s case that their actions are taken in such secrecy, with many competitors left wondering what happened and why and searchers often oblivious to their loss of choices.
I can’t predict when the antitrust charges will stick or what the remedy will be (breakup, new biz practices, mandated transparency), but they will.  I’m not a big fan of antitrust rules generally, but I do believe everyone should play by the same rules — even if they are major donors to Obama.  It’s only fitting that Google play by the same rules that allowed them to reach their dominance — if Microsoft had been allowed to dictate browsers and search destinations instead of fighting antitrust regulators, Google would just be another funny word today…

Google TAC Deception and Marketplace Margins

wildcardwednesday

Google’s better-than-expected 3rd Quarter earnings last week was welcome news to a nervous market and a valley on the verge of panic. There was a lot of juicy data to dig into, but one Q&A that caught my eye was:

Q: A little more clarification to improvement in margins. Was that through better AdSense deals, or through expense controls?
A: Across all categories of expenses people have been very diligent…..I am not aware of a change on the ad partnership side that would result in a margin change.

This caught my eye because I’ve been researching marketplace margins for some time, including GOOG. While there may not have been a noteworthy AdSense partner margin change this quarter, the longer-term trend is eye-opening. In fact, if my calculations are right, Gross Margin for GOOG Network Revenues has dropped around 20-25% since Q3 2006. Given how slim those margins already are, that’s a shift worth watching. You wouldn’t see that if you focused on the deceptive Traffic Acquisition Cost (TAC: roughly the inverse of GOOG Network margins) chart GOOG shares each quarter:

That chart looks like TAC is dropping and, thus, margins are rising. However, TAC is largely driven by GOOG Network partner payouts — but the chart compares to all GOOG revenues, not just those from GOOG Network partners?!?

Given that my research has been focused on Google’s Network, rather than their proprietary properties, I charted GOOG’s Gross Network Revenue, Net Network Revenue and Gross Network Margin below. I didn’t include proprietary revenues and I only included TAC from AdSense Partner payouts — providing a better apples-to-apples comparison of revenues and margins.

The result, contrary to GOOG’s official TAC slide, this chart shows GOOG Network gross margins dropping over time — from 25% in Q3 2006 down to 20% in Q3 2008. Gross margins of 25% are already considered low in technology circles, shave off another 5% and I start wondering if something important is happening in GOOG’s Network (e.g. competition for publishers).

It also makes me question what the market is telling us about appropriate margins for online marketplaces — should they be 50%+, like many other technology businesses. Once you take GOOG proprietary properties out of the mix, AdSense is essentially a marketplace between advertisers and publishers — with GOOG providing an opaque venue. Publishers are getting 80% of each click and GOOG is getting 20% of each click. With over a billion a quarter flowing through the marketplace, that’s a strong datapoint for marketplace margins.

Are there other marketplaces that could provide a sanity check to GOOG’s numbers? The largest is probably eBay, although EBAY provides much more marketplace transparency for its participants. More transparency might suggest lower margins, because it’s harder for EBAY to hide their cut the way GOOG does. The following chart confirms that suspicion — EBAY’s Gross Marketplace Margin has grown by almost 50% (unlike GOOG’s dropping Network Margin), but overall magnitude is smaller at 9.3%.
Therefore sellers are getting 91% of each sale and EBAY is getting 9%. With over $60 billion of Gross Merchandise Sales projected for 2008, that’s another strong datapoint for marketplace margins. Note, although EBAY may use other terms for gross or net revenue, using Gross Merchandise Sales provides the best apples-to-apples comparison to Gross Network Revenues in an advertising marketplace like Google — one marketplace sells physical goods, the other sells advertising.

That gives us two substantial datapoints for online marketplace gross margins: 6-9% and 20-25%. Do you know others? Is my math wrong (probably)? Should they both jump their margins to the 50%+ expected of technology companies? All thoughts appreciated…

Google’s PageRank Patent in Jeopardy?

pagerank patentJohn Duffy has written an intriguing article over at PatentlyO about a set of recent cases/decisions putting all software patents running on general purpose computers in question; using Google’s PageRank patent to demonstrate what’s at stake. There’s been a running debate in IP circles whether software patents would hold long-term, and as more online innovation focuses on just collecting and combining data in new ways, the attacks on software patents are getting more precise.

John shares some cases/quotes of note including:

In re Bilski: “[USPTO] takes the position that process inventions generally are unpatentable unless they ‘result in a physical transformation of an article’ or are ‘tied to a particular machine’.”

Ex parte Langemyr
: “Any and all computing systems will suffice, indicating that the claim is not directed to the function of any particular machine. … Thus, the claimed method is not tied to ‘a particular machine,’ but rather is tied only to a general purpose computer.”

Ex parte Wasynczuk
: “the sole structural limitation recited is the ‘computer-implemented system’ of the preamble” and that limitation “is not any particular apparatus” because the computer could be “essentially any conventional apparatus that performs the claimed functions.”

If you’re in the software business, this is a topic worth watching…

SocialSpark Launches: Do You Smell What the Spark is Cooking?

So, today’s the day Sparky is let out of his private alpha chains…

IZEA’s latest innovation is being unleashed today at Ad:Tech, San Francisco, and the stars of advertising and blogging are already lining up to meet Sparky and the world’s first Social Marketing Network: SocialSpark.

I gave you a hint of what to expect when the site was being designed back in November, and as you can see, my tone has shifted from Ricky Bobby to The Rock. This is a seriously powerful platform for bloggers and advertisers, the likes of which hasn’t been seen before. In fact, before I even describe it, go signup and come back, I’ll wait…

OK, now that you’ve signed up and, possibly, reviewed the video above, what more can I share. There’s so much in SocialSpark, I’ll just focus on a few innovations that get me excited:

  • 1st advertiser/brand/agency social network with direct publisher friending, blogrolls, street teams and a dashboard to manage diverse social media marketing efforts. Imagine: advertisers proactively identifying relevant bloggers and organizing vertical advertising networks for their brands.
  • 1st face-based analytics: GOOG analytics plus MyBlogLog (faces for visitors, not just recent readers) plus visitor demographics in one end-to-end analytics, ranking, marketing and blog monetization platform. Imagine: understanding your visitors as people with faces and demographics, rather than pagevisits per unique, bounce-rates or IP addresses.
  • 1st 100% automated, in-post human disclosure, including audit tools to help publishers and advertisers verify compliance with key corporate or industry guidelines such as WOMMA’s Code of Ethics. Imagine: a marketplace that provides the tools to maximize visibility for readers and 100% Code of Ethics compliance.
  • 1st 100% automated, in-post machine disclosure via “nofollow”, including audit tools to help publishers and advertisers verify compliance with key search engine policies such as Google’s quality guidelines. Imagine: advertise and blog in the open with SocialSpark, without fear of GOOG penalties from SponsoredReviews, PayU2Blog, TLA or other paid-link companies that violate Google Quality Guidelines. Align yourself with SocialSpark sooner than later, I believe a fresh round of pagerank penalties are in process for those smaller networks and DIY link sellers.
  • 1st one-click blog sponsorship ad unit requiring no blog design/template editing to position the ad unit and provides 100% publisher approval to match brands to readers. Imagine: brands you trust ask to sponsor you and it’s done with one-click. Personally, I’m not a big fan of the Blog Welcome, but I believe that is being decoupled from the easy/valuable bottom sponsorship banner.
  • 1st clearinghouse for blog writer’s-block remedies called Sparks, providing organic post ideas such as inspiring charities, hot topics, etc. Imagine: more posts = more traffic, but without backstage passes and exclusive press releases like the elites get, how do you ramp your organic post inspirations? Sparks. I particularly like the potential for spreading your favorite posts or charities via free Sparks.

What else?

Well, I can share that advertiser appetite from the private alpha is already gobbling up sponsorship of the best tech, mommy and daddy blogs. If you are a tech blogger, a mommy blogger or a daddy blogger — the sooner you signup, the more likely you are to be added to relevant advertiser street teams. As the marketplace grows, competition will be tougher and getting noticed by your favorite brands could take more effort.

I’ve shared plenty here, but I probably also prompted some questions — let me have ’em…

Oh, and given my post title, I’ll leave you with a video montage of Method Man’s tribute to The Rock — “Do you Smell What the Rock is Cooking?” He reminds me of Ted Murphy, but with muscles, good looks and personality 😉

Sponsored by SocialSpark

Where is Jason Calacanis’s Disclosure, to People AND Machines?

It’s a good thing February 29th doesn’t come around that often. It’s a day Jason Calacanis may want to sweep under a rug.

After yet another episode of Jason jumping up and down for the world to notice him and his company (this time with some affiliate marketer rants and techmeme coverage), a Feb 29 post by Allen Stern over at Center Networks focused on Jason’s conflicted, undisclosed PageRank-passing link practices and his promotion of such practices to the rest of his employees. Jason’s practices were particularly ironic given he just highlighted the FTC quote: “We wanted to make clear . . . if you’re being paid, you should disclose that.”

You can read Allen’s direct affiliate, employee, paid link comparisons. My post just provides a bit more detail to Allen’s dead-on observation. My post isn’t about affiliate links. My post isn’t about buzz marketing. My post isn’t about Mahalo’s business model (human scraping is worthy of a whole other post). It’s simply about applying Google’s standard for machine-readable disclosure to Jason’s PageRank-passing links. In fact, it’s even more narrow than all of Jason’s violations (Andy Beard covers some others) — I’ll just focus on his deliberate PageRank juicing of Mahalo already alluded to by Allen. No rocket science here.

Google’s standard:
1) Google’s position on disclosure, via Matt Cutts, is that adequate disclosure on the web must be understood by people AND understood by machines. [next 3 images are directly from Cutts presentation]
2) Google has suggested a few ways to meet their standard of machine-readable disclosure; the most straightforward being the use of rel=”nofollow”.
3) Google has exacted severe penalties against sites failing to provide machine-readable disclosure.
Jason’s PageRank-passing:
4) Jason Calacanis gets paid direct cash compensation from Mahalo, and significant equity compensation from Mahalo as a shareholder. [next 3 images are directly from calacanis.com posts]
5) More Mahalo pages in Google SERPs equals more money in Jason’s pocket and equity — orders of magnitude more than the typical affiliate or sponsored blogger that Jason has railed against in the past.
6) To get more Mahalo pages in Google SERPs, and higher in Google SERPs, Jason repeatedly creates PageRank-passing links to Mahalo, with SEO keywords stuffed into anchor text. One or more links are a daily occurrence, with many linkfarm-in-a-post posts.
7) None of Jason’s PageRank-passing links provide machine-readable disclosure as required by Google (or human-readable for that matter) — even though using nofollow would still retain any traffic/branding goals of linking.
The result:
8) Jason’s undisclosed PageRank-passing links are working. Pages that no one has found interesting enough to link, reach Google #1 SERPs because of Jason’s single PR6 keyword-stuffed link. See this Google SERP and this backlink check as just one example of many.
9) Neither the linker (Calacanis.com, PR6) nor his sponsor (Mahalo.com, PR6), have received any penalties as a result of these clear Google Guideline violations. There are times when I’ve heard Google say they focus on the most egregious examples, but I can’t think of a blogger with more compensation at stake, doing more blatant, conflicted PageRank-passing without machine-readable disclosure.

Google, what are Allen and I missing?

GOOG Will Die an Open Death

I’ve been digging into open search, playing around with Hadoop, Nutch, Wikia Search and other efforts. I don’t think it’s close to supplanting GOOG, but it will eventually. It will start with better results and/or better display of results — particularly to niche/long-tail needs. The key will be when someone applies a sustainable revenue model to Open Search in a manner that allows distribution channels to get off the GOOG candy.

The fight hasn’t been about search quality for some time. It’s been about buying distribution. However, there have only been a few players with search quality high enough to test distribution models. When Open Search allows anyone to match search quality/display, then creative monetization models will emerge — unlocking distribution in the process.

Yahoo’s recent “An Open Approach to Search” post was nice to see, but it’s just the tip of the iceberg…

Related images: yahoo, google, hadoop, nutch, wikia search, open search

RankSpank Makes Me Laugh…What’s Your RealRank?

As a VC you get to live vicariously through your portfolio companies. Sometimes that is exhilarating, other times it is frustrating, and quite often it’s just plain funny. This morning, I’m laughing.

Given some of GOOGopoly’s moves in late 2007, more and more bloggers and advertisers are realizing that PageRank has no direct correlation to traffic and pageviews. A link-savvy PR5 site can have ~100 visitors and plenty of PR0 sites have thousands of visitors. Alexa tries to improve on this with sampling estimates for traffic, but it’s common knowledge that sampling errors and gaming drive a wedge between Alexa stats and reality.

Being in the social media marketing business, IZEA saw this as a problem and an opportunity. The result was RealRank, an open ranking system based upon real visitors, pageviews and active links (e.g. links that actually refer people rather than hidden on footers etc.). IZEARanks.com was launched with RealRank tools and reporting. So, how do you let the world know when you’ve got a better mousetrap? Well, one way is the town crier of our time: funny videos.

Kudos to Veronique, Ashley, Travis, Scott, and even champagne bubbles Ted, for a very professional music video. Keep them coming and keep having fun

Why GOOGopoly Cannot Buy Yahoo!, Even if They Try to Annoy Microsoft Anyway

Microsoft announced today a bid to buy Yahoo! for $44.6 billion. First, let me say “wow, that’s a big number and this deal, if completed, will have big consequences.” Steve Ballmer extended the offer by phone to CEO Yang and sent the following letter to the YHOO board:

January 31, 2008

Board of Directors
Yahoo! Inc.
701 First Avenue
Sunnyvale, CA 94089
Attention: Roy Bostock, Chairman
Attention: Jerry Yang, Chief Executive Officer

Dear Members of the Board:

I am writing on behalf of the Board of Directors of Microsoft to make a proposal for a business combination of Microsoft and Yahoo!. Under our proposal, Microsoft would acquire all of the outstanding shares of Yahoo! common stock for per share consideration of $31 based on Microsoft’s closing share price on January 31, 2008, payable in the form of $31 in cash or 0.9509 of a share of Microsoft common stock. Microsoft would provide each Yahoo! shareholder with the ability to choose whether to receive the consideration in cash or Microsoft common stock, subject to pro-ration so that in the aggregate one-half of the Yahoo! common shares will be exchanged for shares of Microsoft common stock and one-half of the Yahoo! common shares will be converted into the right to receive cash. Our proposal is not subject to any financing condition.

Our proposal represents a 62% premium above the closing price of Yahoo! common stock of $19.18 on January 31, 2008. The implied premium for the operating assets of the company clearly is considerably greater when adjusted for the minority, non-controlled assets and cash. By whatever financial measure you use – EBITDA, free cash flow, operating cash flow, net income, or analyst target prices – this proposal represents a compelling value realization event for your shareholders.

We believe that Microsoft common stock represents a very attractive investment opportunity for Yahoo!’s shareholders. Microsoft has generated revenue growth of 15%, earnings growth of 26%, and a return on equity of 35% on average for the last three years. Microsoft’s share price has generated shareholder returns of 8% during the last one year period and 28% during the last three year period, significantly outperforming the S&P 500. It is our view that Microsoft has significant potential upside given the continued solid growth in our core businesses, the recent launch of Windows Vista, and other strategic initiatives.

Microsoft’s consistent belief has been that the combination of Microsoft and Yahoo! clearly represents the best way to deliver maximum value to our respective shareholders, as well as create a more efficient and competitive company that would provide greater value and service to our customers. In late 2006 and early 2007, we jointly explored a broad range of ways in which our two companies might work together. These discussions were based on a vision that the online businesses of Microsoft and Yahoo! should be aligned in some way to create a more effective competitor in the online marketplace. We discussed a number of alternatives ranging from commercial partnerships to a merger proposal, which you rejected. While a commercial partnership may have made sense at one time, Microsoft believes that the only alternative now is the combination of Microsoft and Yahoo! that we are proposing.

In February 2007, I received a letter from your Chairman indicating the view of the Yahoo! Board that “now is not the right time from the perspective of our shareholders to enter into discussions regarding an acquisition transaction.” According to that letter, the principal reason for this view was the Yahoo! Board’s confidence in the “potential upside” if management successfully executed on a reformulated strategy based on certain operational initiatives, such as Project Panama, and a significant organizational realignment. A year has gone by, and the competitive situation has not improved.

While online advertising growth continues, there are significant benefits of scale in advertising platform economics, in capital costs for search index build-out, and in research and development, making this a time of industry consolidation and convergence. Today, the market is increasingly dominated by one player who is consolidating its dominance through acquisition. Together, Microsoft and Yahoo! can offer a credible alternative for consumers, advertisers, and publishers. Synergies of this combination fall into four areas:

Scale economics: This combination enables synergies related to scale economics of the advertising platform where today there is only one competitor at scale. This includes synergies across both search and non-search related advertising that will strengthen the value proposition to both advertisers and publishers. Additionally, the combination allows us to consolidate capital spending.

Expanded R&D capacity: The combined talent of our engineering resources can be focused on R&D priorities such as a single search index and single advertising platform. Together we can unleash new levels of innovation, delivering enhanced user experiences, breakthroughs in search, and new advertising platform capabilities. Many of these breakthroughs are a function of an engineering scale that today neither of our companies has on its own.

Operational efficiencies: Eliminating redundant infrastructure and duplicative operating costs will improve the financial performance of the combined entity.

Emerging user experiences: Our combined ability to focus engineering resources that drive innovation in emerging scenarios such as video, mobile services, online commerce, social media, and social platforms is greatly enhanced.

We would value the opportunity to further discuss with you how to optimize the integration of our respective businesses to create a leading global technology company with exceptional display and search advertising capabilities. You should also be aware that we intend to offer significant retention packages to your engineers, key leaders and employees across all disciplines.

We have dedicated considerable time and resources to an analysis of a potential transaction and are confident that the combination will receive all necessary regulatory approvals. We look forward to discussing this with you, and both our internal legal team and outside counsel are available to meet with your counsel at their earliest convenience.

Our proposal is subject to the negotiation of a definitive merger agreement and our having the opportunity to conduct certain limited and confirmatory due diligence. In addition, because a portion of the aggregate merger consideration would consist of Microsoft common stock, we would provide Yahoo! the opportunity to conduct appropriate limited due diligence with respect to Microsoft. We are prepared to deliver a draft merger agreement to you and begin discussions immediately.

In light of the significance of this proposal to your shareholders and ours, as well as the potential for selective disclosures, our intention is to publicly release the text of this letter tomorrow morning.

Due to the importance of these discussions and the value represented by our proposal, we expect the Yahoo! Board to engage in a full review of our proposal. My leadership team and I would be happy to make ourselves available to meet with you and your Board at your earliest convenience. Depending on the nature of your response, Microsoft reserves the right to pursue all necessary steps to ensure that Yahoo!’s shareholders are provided with the opportunity to realize the value inherent in our proposal.

We believe this proposal represents a unique opportunity to create significant value for Yahoo!’s shareholders and employees, and the combined company will be better positioned to provide an enhanced value proposition to users and advertisers. We hope that you and your Board share our enthusiasm, and we look forward to a prompt and favorable reply.

Sincerely yours,

/s/ Steven A. Ballmer

Steven A. Ballmer

Chief Executive Officer

Microsoft Corporation

There is plenty of speculation about how GOOG might react. I think the bigger question is whether YHOO will take the offer, but GOOG could still be an annoyance. MSFT and GOOG have been here before, on small deals and on big ones like DoubleClick. However, this one is different.

You see, GOOG currently dominates the market of Search Advertising (direct & indirect) — already confirmed by the FTC during their DoubleClick review, when they found:

“Google, through its AdWords business, is the dominant provider of sponsored search advertising”

DoubleClick got through because the FTC’s review largely focused on Privacy and because DoubleClick didn’t add to GOOG’s monopoly in Search Advertising. YHOO, on the other hand, would be an acquisition of their largest competitor for Search Advertising (direct); on the heels of manual, targeted anticompetitive actions against Search Advertising (indirect) competitors like TextLinkAds (how, again, is a search for “text-link-ads” more relevant with www.text-link-ads.com removed from the top spot and replaced with TLA competitors?)

GOOG may throw some head-fakes internally or externally to complicate the deal, but they cannot buy YHOO. In fact, their time would be better spent educating their entire organization about the risks created and opportunities foreclosed by anticompetitive behavior. Even if the YHOO shareholders take the 60% premium being offered for their shares, GOOGopoly will still be the dominant provider of Search Advertising. That means power, and consequences — just ask Microsoft…

Related posts:
http://searchengineland.com/
http://www.lockergnome.com/
http://bhandler.spaces.live.com/
http://blogs.zdnet.com/
http://www.techboggle.com/
http://avc.blogs.com/
http://www.floozyspeak.com/
http://www.techcrunch.com/

IZEARanks.com Alpha Now Live: Open Analytics Arrives

It was announced earlier today that IZEARanks.com has been released in alpha. Ted’s post at the IZEA blog provides plenty of context, including details on the open analytics, smooth graphs, and API. In short, social media deserves a transparent ranking system that measures true traffic and influence, based upon primary data (via on-site analytics) rather than audience inferences (via in-browser) or mysterious backlink algorithms. RealRank is that ranking system and more IZEARanks will be coming (like ROIRank: measuring true ROI for social media marketing). Go register your blog now, or checkout others…and help make the open analytics even better…

I think a tease of eye-candy is in order:Congrats team on the alpha release…and good luck with the alpha bug reports and feature requests 😉

GuessNow: Can Predictive Markets Be Fun?

I’ve always been intrigued by the potential of predictive markets: speculative markets created for the purpose of making predictions. That’s why I was excited when Delray Beach, FL-based GuessNow contacted me about sponsoring an FVB review via PPP Direct. It was also timely because I’m following up my completion of Chris Anderson’s The Long Tail, with James Surowiecki’s The Wisdom of Crowds.

The broad idea behind predictive markets is that large populations of people, who stand to benefit from accurate predictions, can become an engine for predicting future events. If you read the wikipedia article I linked above, you’ll find that there is some controversy around the accuracy of results and various approaches to received optimal results.

GuessNow.com has an interesting management team, with John Ferber leading the charge as CEO. John, with his brother Scott, previously founded Advertising.com before selling it to AOL in 2004. I like serial entrepreneurs. I like the connection of advertising minds to predictive markets, because I’ve seen too many companies pursue “cool ideas” like artificial intelligence, behavioral modelling or predictive markets with business models as a secondary concern. I also like that the site feels a bit more engaging/fun than you might expect from a predictive market.

Turning to the site itself, I thought John’s incentive system was interesting. Instead of a pure stock market type of system with various prices for different outcomes, GN implemented a point system. Specifically, users can earn points for answering questions correctly (more points for correct, fewer points for incorrect), answering questions early (more points for early, fewer points for later), and avoiding group think (more points for correct answers going against the crowd). They also have a bonus point system for site participation and advertiser offers, but I don’t entirely understand the “bonus” section of the site — that section feels more like rewarding site behavior and CPA advertising than predictive.

Points are then redeemed for cash, according to a “point value” decided by the total Prize Pool for a month divided by the total number of points awarded in that month. For example, if 500,000 points are awarded in a month with a $5,000 Prize Pool, then each point is worth $.01. If you earned 1,000 points that month, then your points are worth $10.00. I believe a similar calculation happens for the Bonus Prize Pool and bonus points.

They have a good set of questions, including topic areas such as:

Some of the questions I’ve answered include:

The model is pretty flexible. In addition to predictive questions, I also noticed trivia-type questions (e.g. “name the state that…”) and survey-type questions (see hybrid car question above). It’s not clear these are necessary to keep people engaged for predictions, but I can see them opening monetization options.

A few of my suggestions include:
1) I loved some of the higher level data concepts such as accuracy ratios, friction and confidence levels — find ways to share that data and reward publicly on these;
2) I know the “Shocking New Video” ads are probably prompted/related to your Miss Internet Pageant 2007, but they could be a tad risque for the diverse demographic good predictions will require; and
3) I may have missed it, but I couldn’t find where to compare past group predictions with past actual results — that is the question everyone has about such markets and there has to be some data you can share, probably great linkbait.

And, lastly, I’d be remiss if I didn’t mention GN’s points-based affiliate program and blog. I don’t know GN’s funding status, but this review has prompted me to dig a little deeper. Thanks for reaching out to me guys!

(sponsored post)

Search Engines: It’s the Economics, Stupid

I’ve been meaning to play around with Google’s custom search for awhile and a recent prod to try Lijit Search was enough to push me over the top. I’ve also been using Swicki at FVB for some time. Each of the services have their pros and cons, and none of them have everything I want, yet.

Instead of a full rundown of pros and cons for each, I’ll just summarize what type of person might be best served by each.

Swicki: Best if you treasure customization of look and feel, including pre-populated tag clouds, open-ended color options and voting on search results.

Lijit: Best if you like the focus of social media search, across your various properties and social networks.

Google Custom Search: Best if you like standardizing with a player most likely to include all bells and whistles over time, including the best site-based results prioritization and labelling.

Google ties in AdSense from the start — sharing revenue produced from sponsored results alongside your search results. Swicki hints about future sponsored search potential. I haven’t seen a direct sponsored search claim from Lijit, but any business in the search space will ultimately have to offer sponsor revshares.

I think this last part is the most important for any new search entrants. The reason Google is so powerful in web search is not because they have the best technology. It’s because they have the best distribution and the economics that distribution partners cannot walk away from for a “better” search engine. As such, Google only has to be “good enough” in search to keep their distribution.

However, blogs offer a growing distribution channel that isn’t already addicted to Google rev shares. The new entrant that gets blogs addicted to a revenue stream stands the greatest chance of challenging Google in web search.

Is that crazy talk? What are your experiences? What new search engines should I be watching?

What is the Meaning of Life? Ask Yahoo!

When Yahoo and Google each launched their Answers platforms I was cautiously optimistic. I mean, where better to ask “What is the meaning of Life?” in hopes of distilling insight from a world of perspectives.

Since those launches, Yahoo has done better than I expected, while Google has done worse (AKA, dead). This post isn’t about comparing the two services, but I will note that Yahoo Answers benefited from a more social atmosphere (helping instead of consulting) and recently launched even more social aspects.

Although I’ve watched, I never actually asked or answered a Yahoo Answers question until today. In learning more about the service, I provided answers to a couple softball questions:
1) What is Venture Capital?
2) What advice would you give a start-up company?

In exchange for doing so I received 2 “points” for each answer, with the potential for more points if my answers are chosen as the best. I haven’t used the service enough to know why I should be excited about these points, but the potential for focused knowledge sharing is exciting enough.

If you haven’t tried Yahoo Answers you might want to, particularly if you can share some insights on the Meaning of Life, only 3 days left!