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Posts Tagged ‘Search Deal’

Armstrong Hints AOL Will Renew Search Deal With Google: “Distribution Is Almost As Important To Us As Money”

During today’s AOL earnings call, which just finished, CEO Tim Armstrong dropped the strongest hint yet that Google is the front-runner in negotiations for who will power search across AOL properties. Google is AOL’s current partner, as it has been for nearly a decade, but the partnership is up for renewal. Needless to say, snatching the search partnership away would be a coup for Microsoft’s Bing search engine. Bing wants the search deal, which would help it increase its total volume of searches by a couple percentage points since AOL on its own has the fifth largest search share in the U.S.

But during the call, Armstrong emphasized that “distribution is almost as important to us as money, we will look for distribution as much as money in the deal.” AOL is a content company and it gets a lot of its traffic from Google. The sheer volume of referral traffic Google sends to AOL sites is something Bing cannot yet compete against, and to the extent that Google can find ways to send more traffic to AOL as part of its search deal, that makes it a more attractive partner than Bing.  Microsoft can throw all the money it wants at AOL on the search side, it probably won’t make a difference. Here is Armstrong’s relevant reply to an analyst’s question on the topic from my notes:

On search deal, we have had a great partnership with Google, we continue to be close to them. What we are expecting to get out of search deal is longer-term partnership where we are both aligned. We have a long partnership with Google. Marketplace is more competitive. First and foremost if you are looking for us to squeeze more dollars or pennies out every quarter, you are going to be disappointed. Looking for a deal that helps our strategy, a reasonable deal for us and the partner. We are a content focussed company, distribution is almost as important to us as money, we will look for distribution as much as money in the deal.

So he is not ruling out Bing entirely, but if you read between the lines it is clear that he values Google almost as much as a distribution partner as he does as a search partner. Add in the fact that he still seems to be on good terms with his former boss Eric Schmidt, and it is clear that he is leaning heavily towards sticking with Google.

Oh, by the way, this also means that he’s fine with Google being a huge news aggregator, because those links are extremely valuable and he understands that better than the CEOs of most other media companies. Google’s unique position as a source of traffic to Websites is one of its great strengths in any negotiation involving another Web company. I’ve heard this before from other Web CEOs who let Google get away with a better deal than they would otherwise because they fear reprisals in the form of lower search traffic. Google, of course, needs to keep up appearances that it delivers the best search results no matter what, but there are other ways Google can help juice a site’s traffic.

Update: As I was writing this post, Tim Armstrong called me. He emphasized that “Overall, we do feel distribution is important, we also like revenue. We will balance those things.” It all “comes down to what the actual distribution deal is.” In other words, he is still negotiating.

But he did shed some light on how a distribution deal could work. “You can’t really affect the index in partnership deals,” he explains, but there are lots of other things AOL and Google coudl do. On AOL’s end, it could change the way pages are set up and how much advertising is on each page to make them appear in results better. On Google’s end, there are opportunities to get more traffic “through Oneboxes and other types of integration like on the News property.” (The Onebox is Google’s unified results at the top of organic search which pulls from different sources). Another possibility is to include search advertising inventory into the deal. So Armstrong is definitely thinking creatively about how to get the most out of his next search deal.

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Rumor: Bing to be default search engine in iPhone OS 4.0?

Filed under: Rumors, iPhone

One of the most surprising things about the next iPhone OS could be the default search engine. BusinessWeek is reporting that Apple is in talks with Microsoft to have Bing replace Google as the default search engine.

It’s becoming increasingly clear that Apple’s main rival is not Microsoft, but Google. The Nexus One competes directly with the iPhone; Apple is allowing Google to use Lala, for now; and with Apple’s purchase of Quattro Wireless and Google’s acquisition of AdMob it seems each company is gearing to directly compete with the other in the mobile ad market. “Apple and Google know the other is their primary enemy. Microsoft is now a pawn in that battle,” says one of BusinessWeek’s sources who is familiar with the matter.

But this isn’t just about Apple and Google. As the BusinessWeek article points out, clinching the coveted default spot on the iPhone would also help Bing gain market share in the quickly growing area of mobile search. 86% of mobile searches belonged to Google in November, according to the Nielsen Co. Only 11% belonged to Bing.

For myself, I really like Bing. It took me a while to get used to it, but I think it has many advantages over Google, particularly the was it displays image search results. Microsoft also has a great Bing iPhone app [iTunes] that I find myself using more and more.

While the Bing discussions have been going on for weeks, the source notes that the search switch may never materialize. Interestingly, the article also states that Microsoft may also be lobbying to make Bing an alternative on Apple’s Safari browser for Mac users. Despite this, even if the Bing deal goes through, it may not last long. BusinessWeek’s source says Apple has a “skunk works” looking at a search offering of its own, and believes that “if Apple does do a search deal with Microsoft, it’s about buying itself time.” In other words, Apple sees search in its future.

TUAWRumor: Bing to be default search engine in iPhone OS 4.0? originally appeared on The Unofficial Apple Weblog (TUAW) on Wed, 20 Jan 2010 08:30:00 EST. Please see our terms for use of feeds.

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Yahoo BOSS To Survive Microsoft Deal In Some Form; Details Still Hazy

After months of silence, Yahoo’s BOSS team is opening up to frustrated third party developers about the future of the powerful search platform. A few hours ago, Yahoo’s Ashim Chhabra left a post on the BOSS group forum, offering an explanation for why it has taken so long for Yahoo to relay information to developers, and giving them some idea of BOSS’s fate. The good news? BOSS will continue to live on in some form, but it’s unclear exactly how things will be changing and which services will be powered by Microsoft technology — and there may be fees involved. That uncertainly will probably leave some developers on edge, but at least they know the project isn’t being scrapped entirely.

Chhabra’s post was clearly prompted by the actions of some frustrated BOSS developers, who grew tired of being left in the dark and approached the Department of Justice to talk about how BOSS will be impacted by the Yahoo/Microsoft search deal. The DOJ heard their complaints, scheduling a conference call with them for next week. Chhabra’s post may help placate them for the time being. We’ve included his full post below:

Folks,

Thank you for your feedback. We understand your frustration. This process has been long for all of us due to the complex nature of our agreement with Microsoft, and we appreciate your patience.

Under this agreement, Yahoo! is permitted to continue offering the BOSS web service, with search results that would integrate Yahoo! services and content with algorithmic results provided by Microsoft. As always, our intention is to provide a BOSS offering as long as it makes business and economic sense to do so. We are still examining what the BOSS offering will consist of, with some services powered by Microsoft, unique content that Yahoo! currently provides, and the potential for additional Yahoo! content in the future.

Prior to the announcement of the Yahoo!-Microsoft search agreement, we’d already shared our intention to explore a fee-based structure for BOSS. We continue to explore an appropriate fee structure or other revenue model as we work through the future of BOSS.

As you know, we must receive regulatory clearance before actual implementation of the search deal with Microsoft can occur. Only then can we finalize the future shape of BOSS. Of course, we will provide additional clarity and certainty when we can.

Thanks for your attention!

Yahoo! BOSS team

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Anxious Yahoo BOSS Developers To Speak With DOJ About Microsoft Deal

In July 2008, Yahoo announced a radical new product called BOSS, or “Build Your Own Search Service” that lets developers tap into Yahoo’s core search index with an unprecedented amount of flexibility. Now, in light of the Microsoft/Yahoo search deal that was announced last summer, the future of BOSS is uncertain. That’s bad news for the many developers who have built projects on the BOSS APIs, some of whom are building businesses off of the service. Now, after being met with months of silence and uncertainty, some BOSS developers are taking action: they’ve scheduled a conference call with the Department of Justice to discuss their concerns.

It’s understandable why the developers are agitated. Google and Bing both offer APIs, but they limit monetization options, limit the ways developers can change the way their search results are presented, and have myriad other restrictions that BOSS doesn’t. All of which means that developers can’t easily port their applications over to one of the alternatives.

A developer identifying himself as “Phil” on the BOSS Yahoo Group sent a letter to the DOJ outlining his concerns. The DOJ has apparently responded, saying that they will hold a conference call with any concerned developers (the group contains instructions for any BOSS developers who wish to join). We have a request in with the DOJ to verifiy that the call is scheduled, but it sounds legitimate.

We’ve reprinted Phil’s letter to the DOJ, which outlines the developers’ concerns, below:

Dear sir/madam,

I represent a group of people who are concerned about a certain aspect of an
antitrust issue which we understand is currently being examined by your office.
The matter at hand is the Microsoft-Yahoo deal. Our concern is the following:

In July 2008, Yahoo introduced a new program called Yahoo Boss. Boss is a
programming framework (called an API) which allows developers to create new
search engines which use the Yahoo database. In Yahoos own words:

“BOSS (Build your Own Search Service) is Yahoo!’s open search web services
platform. The goal of BOSS is simple: to foster innovation in the search
industry. Developers, start-ups, and large Internet companies can use BOSS to
build and launch web-scale search products that utilize the entire Yahoo! Search
index. BOSS gives you access to Yahoo!’s investments in crawling and indexing,
ranking and relevancy algorithms, and powerful infrastructure. By combining your
unique assets and ideas with our search technology assets, BOSS is a platform
for the next generation of search innovation, serving hundreds of millions of
users across the Web.”

(Quote from http://developer.yahoo.com/search/boss/)

The reason this program is so important is because before Boss, tens, if not
hundreds of millions of dollars would be required to start a new search engine.
Boss changed all that by making Yahoos own servers and search results available
to third parties. In the year and a half since, tens, if not hundreds of
companies and web developers have spent thousands of hours developing new
websites, web applications and search engines using Yahoo Boss. By May 2009,
Yahoo Boss was serving 30 million search queries a DAY through these websites
(http://www.ysearchblog.com/2009/05/19/key-milestones-for-searchmonkey-and-boss/
). Clearly, Yahoo Boss is a unique program which has been the biggest catalyst
in search engine innovation and competition in years.

Google and Microsoft do have their own similar APIS, but they are severely
limited. Googles API gives the user but a small number of search results, while
both Google and Microsofts apis disallow open monetization, thus rendering them
meaningless from a competitive point of view.

Over the many months since the Microsoft-Yahoo deal was announced, countless
developers have been asking Yahoo for information on the future of Yahoo Boss,
yet in vain. Yahoo refuses to tell us whether the framework will be shut down or
not. This is even after the two companies announced that all the details of
their deal had been fleshed out. This has given us the distinct feeling that the
decision to shut down Boss has already been made, but that they prefer to keep
that quiet in order to not “rock the boat”.

Obviously, this is of great concern to us. In addition to all the time and work
we have put in, Boss is the ONLY factor which has allowed broad and viable
competition in the search engine industry. Shutting down Boss would by default
mean shutting down all the websites using it, in addition to signifying the end
to the aforementioned competition.

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Aol’s New Model: Fighting The Downward Trend

AOL may be brushing up its brand image in preparation for its spin-off IPO in December, but brushing up its underlying business will take a little longer. Barclays analyst Douglas Anmuth released a report on AOL today complete with an earnings and revenue model going out to 2014 (see below). He projects absolutely no growth in revenues over the next five years, and only a one-time bump in profits in 2011, due to cutting one third of its current labor costs, before declines set in again.

In other words, investors who buy AOL stock will do so because it is a cost-cutting and turnaround story not a growth story, and that will determine what kinds of investors will buy the stock.  Anmuth outlines some of the key factors which investors should be paying attention to.

Key things to watch for:
1) Time Warner shareholder reaction following the spin;
2) significant cost-cutting to drive free cash flow;
3) a new search deal beginning in late 2010;
4) whether AOL’s display strategy can gain traction;
5) trends in key metrics like Unique Visitors and Page Views.

Since all existing Time Warner shareholders will become shareholders of AOL, if a lot of them decide to dump their shares that would create downward pressure on the stock. But Anmuth feels that a fair valuation is $35 to $39 a share, giving AOL a market capitalization between $3.8 billion and $4.2 billion. As AOL goes through its layoffs and other cost-cutting, those measures should help its free cash flow by eliminating about $300 million in annual expenses.

However, AOL cannot cut its way to prosperity. The cuts will buy CEO Tim Armstrong some time to put his new content strategy into place and boost display ad revenues.

Even here, though, AOL is fighting against a downward trend (see chart above). Display ads are driven by pageviews, which are down 22 percent year-over-year across AOL’s sites to 14.3 billion. Unique U.S. visitors to AOL sites are down 11.5 percent from a year ago to 98.5 million people.

AOL also runs display ads across other sites, of course, but is able to charge a premium for its own audience. The core of that audience still comes from its 5.4 million access subscribers, who are declining but still account for about 60 percent of AOL’s EBITDA (earnings before income taxes, depreciation, and amortization). They are also AOL’s most valuable audience in terms of advertising, which explains why Armstrong felt it was necessary to hold onto the access business as long as possible.

The other big source of earnings comes from AOL’s very lucrative search deal with Google, Armstrong’s former employer. Anmuth estimates that AOL gets 92 percent of the search revenue generated by search ads on its site through its deal with Google, and that search ads account for 36 percent of its EBITDA.

Armstrong needs to renegotiate that deal and play Google off of Bing, which might end up with the business and pay AOL a higher revenue-share than the 88 percent it will be paying Yahoo through it search deal still awaiting approval. The problem for AOL is that its overall share of searches, while still a significant 3 percent in the U.S., is less than half what it was three years ago, and keeps going down.

That leaves Armstrong with getting display ad revenues back on track. Anmuth forecasts that AOL’s display ad revenue growth will lag the industry’s recovery until 2012, remaining essentially flat next year and then growing a tepid 3 to 5 percent annually after that. Fortunately, selling ads is what Armstrong does best, so he might surprise investors on the upside there. But as these numbers make clear, it is going to be a tough slog.

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Bing Tries To Buy The News

Rupert Murdoch is pointing a gun to Google’s head, and Microsoft is helping him pull back the trigger. For the past few weeks, Murdoch and his officers at News Corp. have been very vocal about their distaste for Google and their desire to lead other media companies in a boycott of sorts.

Murdoch keeps threatening to stop letting Google index the WSJ.com and his other media sites, and wants other news sites to join him in this self-imposed silence. The folks at Microsoft’s Bing think this is a great idea. Not only that, but the FT reports that Microsoft is in fact in discussions with News Corp. and other publishers about the possibility of paying them to remove their sites from Google’s search index. This report comes on the heels of a meeting in Europe where Bing dangled the prospect of premium spots in search results to publishers and outright money for search R&D.

Microsoft is not afraid to buy search market share, which is what it’s doing with the Yahoo search deal and even its Cashback program. But with these latest talks, it is literally trying to buy the news, or at least exclusive access to the news.

Bing can’t buy all the news, it can only buy certain brands. If Bing can somehow become the only place you can find news results and working links to the Wall Street Journal and other top papers such as the New York Times, the Washington Post, and the LA Times, for instance, that would be a big reason to switch for a lot of folks. But it’s not clear how much Bing would have to pay the news companies of the world for them to give up all the traffic Google sends them in return for a fraction of that traffic and some cash.

Even Google couldn’t afford to strike such deals. Says Murdoch, of Google, “If they were to pay everybody for everything they took from every newspaper in the world, and every magazine, they wouldn’t have any profits left.”

In order to actually make a dent in Google’s market share, Bing would have to pay such exorbitant sums to so many different news companies that it would be difficult to recoup its investment. Bing certainly get some marketing buzz out of any such move, but that’s about it.

The big problem with a search engine trying to buy market share by buying parts of the news is that information spreads so quickly these days, exclusives last about 30 seconds. That information will end up on a site that is indexed by Google. Or the same news will be broken by someone else on the Web before the WSJ.com even gets to it.

Exclusive indexing goes against the Web’s inherent openness. Companies that try to curtail that openness don’t last long on the Web.

Image via PhotoXpress.

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You Can Go Home Again, Even If It Means Back To Yahoo While Rejecting Google (And Maybe Facebook And Twitter)

This past summer, Daniel Raffel was desired. Google was pushing hard to hire the product manager, we hear from a source. And there are whispers that Twitter and Facebook were also in pursuit of his services. Basically, it seems like he had his choice of the companies in Silicon Valley that everyone wants to work for. So where did he end up? Yahoo.

Yahoo hasn’t exactly seemed like the ideal place to work over the past couple of years. Besides just the Microsoft acquisition offer distraction (and subsequent search deal), and the CEO shuffle, the company has lost much of its sterling polish that it once had during the dot-com era. But what’s even more odd is that Raffel has worked at Yahoo before. It’s where he made a name for himself by helping to create Yahoo Pipes, the popular content mashup tool. But a few years ago, Raffel took off to work at Pioneers of the Inevitable, where he helped make Songbird, the open source desktop music player.

So why’d he come back to Yahoo at a time when others were pursuing him? It’s hard to say for sure, but one source believes Yahoo paid a significant amount of money to lure him back. Another source believes he was promised more resources and an easier time rising up the ladder than if he went to Google. Still, Yahoo over Google is not a choice that a lot of people seem to make these days. And one source is sure that Bradley Horowitz, a former Yahoo exec that is now at Google, would have obviously wanted to bring Raffel on board, and was likely pushing for it.

There’s another reason he may have went with Yahoo. Since returning in late August, Raffel has been serving as a senior product manager under Cody Simms, the senior director of product management for Yahoo Open Source (Y!OS), we hear. He’s apparently working on mainly off-network projects such as making the Yahoo authentication platform more seamless. That might not sound sexy, but the bigger picture may be involve Yahoo building out its own platform product to better connect Yahoo with the rest of the web. Yes, think Facebook Connect, Google Friend Connect, and the like. The chance to get into this hot space and play a critical role in building a “Yahoo Connect,” may have also enticed Raffel to come back, but that’s pure speculation at this point.

“He’s one of those rare product guys who is technical and can actually build stuff,” says one our sources. We’ll be watching what he’s building for Yahoo the second time around.

We’ve reached out to Raffel for comment, but have yet to hear back. We’ll update if we do.

[photo: flickr/sektordua]

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Google Social Search: Twitter And FriendFeed Highlighted. What About Facebook?

Last week at the Web 2.0 Summit in San Francisco, Google’s Marissa Mayer took the stage for two reasons. The first was to formally announce the Google/Twitter search deal, but the second was the show off a new product: Google Social Search. The on-stage demonstration was interesting, but left a lot of questions unanswered. Today, the Google Labs experiment goes live, and we’ll get those answers.

Social Search essentially pulls in information from social networks to augment Google search results. But a major question is: What social networks get pulled it? While the experiment isn’t quite live yet, it would seem that from the video below made by Google’s Matt Cutts, Social Search, at least at first, will be able to include results from Twitter, FriendFeed, Picasa, Blogger, and Google Reader.

The last three are obvious since Google owns all of those. Twitter seems obvious too because of the new Google/Twitter search deal. FriendFeed is an interesting one though since Facebook bought that service in August. As expected, it doesn’t appear that Facebook data will play a big role in Social Search (if any), as Google and Facebook continue their social profile stand-off. Cutts makes it clear that public data is the key to all of this, and Facebook doesn’t exactly have the most public information. That’s too bad since Facebook is, after all, the largest social network.

Cutts explains that the idea behind all of this is to utilize your “social circle.” The key to populating this social circle is your Google Public Profile. On this profile, the different social networking profiles you list yourself as being a member of will be a signal to Google to scour those networks for social data to serve up in its new results.

Interestingly, in the second video below, explaining how Google Social Search works, a Facebook profile appears in the lists of profiles. But again, in all the experiments, no data from Facebook seems to show up.

For its social circle, Google is going deeper as well. For example, if you follow 100 people on Twitter, Google will look at their public updates when you search for things, but it will also look at the friends or your friends for even more data. This is similar to what FriendFeed has done in the past to help surface other information that may be relevant to you. Google calls this your “extended social circle.”

Google also uses your Gmail chat buddies to build out your social circle.

When it’s live, you’ll be able to find Social Search here on Google’s Experimental search page.

Update: And now it’s live.

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