Homo homini rodentius est

Google Cedes Enterprise to Microsoft

Google Vs. Office

Last week a number of fairly momentous events happened related to Google: 1) Their stock briefly dropped to $488.52 a share — a staggering 35% off its intra-day high of $747.24 set last November, 2) Microsoft announced a bid to takeover Yahoo in a move aimed straight at Google’s heart, and, 3) Google basically admitted defeat in its attempt to sell their online productivity application suite to enterprise customers.

The first two items have been covered to death by both the mainstream press and bloggers, but the third item sort of slipped by. The New York Times [reported] that Google has released a “Team” version of their Google Apps suite that allow individual’s to sign up for shared workspaces and access to online apps by providing their company email address. Once registered, they are automatically added to a group with all other people in their organization who have signed up and — presto! — they now have the benefit of using Google’s applications and collaboration tools for FREE, and without ever having to bother with those nasty nerds in their IT department. Nick Carr, who believes that IT departments are going the way of mastodons and saber-tooth tigers, [describes] Google’s apparent end-run around corporate channels to bring customers (well, they’re not really customers yet are they since they don’t pay…) into the “cloud” and grow their business virally. According to the conventional wisdom, this is wily Google doing what they do — upending traditional business sales models — by getting a cadre of users to pressure their companies to (eventually) shell out $50/seat to license the full enterprise suite. But Nick and others may be pulling too strenuously at the Kool-Aid spigot.

There’s another way to look at it — from someone who works in IT at a very large marketing firm: Google, lacking the ability to sell their products in to enterprise customers through traditional channels (their recent 8K filing indicates that fees from “Licensing and other revenues” — i.e., non-advertising related income — only amounts to $69MM and still makes up just 1% of their total revenue) have decided to risk poisoning those relationships for the foreseeable future by executing this “end run” to end users. The only companies that would not have a very big problem with what they have done are small shops, without large IT departments of their own and without a roster of clients who expect or demand strict control over the management of their proprietary materials.

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Bubble Wrap

Listen very closely… do you hear it? That hissing you hear is the sound of air escaping from The Great Web 2.0 Scam. The signs are accumulating that the faux-economy of venture capital and Google ads that underpin an infinite number of worthless internet startups may finally have run its course: last Friday, Google “The Mother of All Bubbles” closed at $600.25 — down 20% from it’s intra-day high of $747.24 set last November 6 and far outpacing the 13% decline in the S&P 500 over the same period. And that may not be the worst — last week, the [dour pronouncements] of a media macher about declining prices for online advertising combined with numbers from Nielsen showing a [decline in search market share] for Google suggest that when Google presents their 4Q earnings on January 31 there could be some very sober faces standing around the foosball tables of Silicon Valley.

But when the history of this strange period is written I have a feeling that the peak of “irrational exuberance” in this bizarre bubble may well be seen to have occurred last week when [Business Week], [TechCrunch] and others published news that a company called Slide, founded by the guy who created PayPal, was valued at 500 million dollars. Slide, in case you aren’t familiar, is an online application that allows people to upload photos into a customized “slideshow” and then share their work of art (which, from looking at their site, consists mostly of slideshows of half-naked babes). That’s it. In a normal world this thing would be called a blog plug-in and people would say, “Oh, cool… stupid” and move on. To put this valuation in some perspective, it took Microsoft 10 years to reach a valuation of $500 million and that was just after they went public in 1986. Their operating systems were already on hundreds of millions of computers, Windows had just been released, they were about to release Excel, the cornerstone of their Office suite and they were generating about $200 million a year in revenue. That was what a half-billion dollar company looked like, then. Twenty years later, this is what one looks like:

Cool… stupid.

Jaron Lanier, Digital Quixote

Jaron Lanier is one of the [venerable] not-so-old men of the digital age. I first learned of him during the fracas that arose over an essay entitled [Digital Maoism: The Hazards of the New Online Collectivism] that he published on a site for brainiacs called The Edge. In it, he dared to challenge the online status quo by raising questions about the social risks of the wisdom of crowds and the devaluation of meritocracy in favor of a techno-driven faux populism.

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Is Eric Schmidt leading Google over a cliff?

A bubble in search of a pin…

I’ll tell you, there’s a Pulitzer Prize waiting for the diligent reporter out there who writes the definitive exposé of the role of corporate public relations in driving tech journalism. Of course anyone with a half-functioning frontal lobe fully expects that what they read in tech blogs like Techcrunch and [Scoble] is often just lightly re-heated PR fodder fed to them by the flacks they live by. Occasionally even [wiser heads] succumb to the PR siren song. But it is another thing to see The New York Times publish a 3,600 word article entitled [Google Gets Ready to Rumble With Microsoft] that could have been (and was) pieced together from various bits of “news” seeded into the blogosphere by Google’s PR department over the past few months. The article, which slavishly adopts the David vs. Goliath storyline that has been the prevailing narrative associated with the release of Google’s online productivity application suite, ticks off every one of the “talking points” that the good folks in Mountain View have been pushing:

  • Google and Microsoft are engaged in an epic battle for enterprise users of productivity software
  • Google’s vision of “cloud computing” is the wave of the future
  • Google’s massive investment in distributed server farms gives them an early advantage
  • Google’s development model better matches the web 2.0 space where “velocity matters”
  • Google’s application offerings are being adopted at a fast rate

Contrary to what you might have come to expect from an august news source like the New York Times, these propositions are taken pretty much as they were received from Google with hardly any investigation. How many companies, and of what size, have adopted Google Apps? David Girouard of Google is quoted as saying that about 2,000 companies a day sign up for Google Apps. But most use the free version. And how many churn? Don’t know, the Times didn’t ask. What is Google’s revenue growth rate from these investments? Don’t know. How is Google going to manage Sarbanes-Oxley compliance issues for its enterprise customers and how well does their “perpetually beta” development model map against the need for corporate standards? Oops, doesn’t come up in an article about enterprise software use.

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Apple moves into the neighborhood

Apple’s new store at 14th Street and 9th Avenue.

Following up on the [rant] about hyper-development in the nabe… Apple unveiled their third Manhattan store in the Meatpacking district over the weekend. Granted, the long-term residents of the area would probably prefer to still have the [discount grocery store] that used to be at that location, but in the relentless reinvention of the neighborhood an Apple store is at least more useful than another silly fashion boutique. Pix after the jump…

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