Google Ad Revenue: What Happens When the One Trick Pony Gets Seedy Toe?
May 1, 2020
Seedy toe?
What’s that? If you live in Kentucky, home of the abandoned Derby you know. If not, your child’s pony is going to be in discomfort. And the costs? You don’t want to know what large animal vets in horse country charge, do you?
“CEO Sundar Pichai Spells Out Alphabet’s Positives, but COVID-19 Damage to Ad Revenues Is Only Going to Get Worse” presents a key point articulated by the chief Googler Sundar Pichai:
In March, we experienced a significant and sudden slowdown in ad revenues. The timing of the slowdown correlated to the locations and sectors impacted by the virus and related shutdown orders…Overall, recovery in ad spend will depend on a return to economic activity.
The article also quotes the Google chief financial officer as observing: The second quarter will be “a difficult one.” Google’s CFO did not elaborate on Google cost control measures. Yep, cost control. Important DarkCyber believes.
But back to seedy toe and a lame pony.
The bulk of Google revenues come from online advertising. Amazon is doing a good job of capturing product search and that means that Amazon product ad revenue is likely to track those clicks. That’s bad news for Google as the bad news from the virus disruption affects large swaths of the global economy. Facebook’s ad revenues may have taken a hit in the most recent quarter, but that outstanding, other-directed manager Mark Zuckerberg hungers for more ad revenue as well.
Google may be able to kick sand in the face of dead tree outfits, but the datasphere is a different sort of construct.
Limping ponies will not be invited to parade at birthday parties. Lame ponies can be expensive to make well again.
Here in Kentucky there are only so many places at the Old Friends Farm. Then what? A one way ticket to Fiji? Ponies are a treat of sorts in Oceania. Bula!
Google needs to avoid seedy toe. Amazon and Facebook are not ponies. These outfits are tigers with a hunger for easy prey; for example, a lame pony.
Stephen E Arnold, May 1, 2020
Amazon: Business Is Business
April 30, 2020
The truthy real news outfit published “Amazon turns to Chinese Firm on US Blacklist to Meet Thermal Camera Needs.” The write up points out that Zhejiang Dahua Technology Co Ltd is one of the outfits the US government does not buy from. Companies like Amazon are not constrained. But a deal is a deal.
A possibly afflicted employee possibly making a mobile phone call allegedly whilst working in an Amazon warehouse. Illustrative image source: https://bit.ly/35gD2vF
Thermal or multi spectral cameras are just less expensive when sourced from the Middle Kingdom. Plus the cameras are needed to make sure the happy, well paid, motivated Amazon warehouse workers are not ill. The idea is that a snap of a worker with a fever turns up as a bright blob. Amazon’s professional and sensitive managers can then rush to assist the afflicted professional. When employee health is concerned, Amazon leaves no low cost supplier in the dark. Business is business, even in matters of financial probity and health.
Stephen E Arnold, April 30, 2020
Sigma Gets $30 Million In Key Funding
April 30, 2020
Once the economic ramifications from the COVID-19 pandemic are underway and you are adjusting your investment portfolio, data analytics company stocks should not lose any value. Why? Data analytics platforms are in high demand and Sigma Computing recently nabbed: “Sigma Computing Raises $30 Million More For Cloud Data Analytics Tools” says Venture Beat.
Sigma Computing held a series B round of founding and added another $30 million to their fund. Investors in the second funding round include Sutter Hill Ventures and Altimeter Capital. CEO for Sigma Computing Rob Woollen said the money would be used for product development and product support.
Woollen stated that data is useless without making it comprehendible and capable of delivering actionable BI insights. Sigma makes data useable, but also keeping in mind the importance of governance, security issues, and compliance. Sigma uses a spreadsheet-like UI that transforms data from any source into useful insights, plus the search tool is powerful:
“Searches can be performed by natural language and by filter, the results of which can be compiled in an embeddable report and delivered via email. Where collaboration is concerned, Sigma’s link feature enables users to map data relationships and add linked data to documents. The platform’s workspaces are conducive to sharing — they can be circulated among teams, departments, or entire organizations — and spotlight important data blocks, worksheets, and interfaces with visual badges and a range of visualizations.”
Sigma Computing includes Zumper, Navis, LendUp, Clover, Volta, and Olivela among their clients. They sell software for data visualization and big data/business analytics, both markets combined are worth over $11 million. It sounds like a good investment.
Whitney Grace, April 30, 2020
Documentation: Possibly Too Expensive to Produce?
April 29, 2020
The cost of documentation is not a hot topic. The good old days of getting a fat manual, produced by the pre-Adobe Framemaker, has gone the way of the dodo. We noted that a possibly accurate factoid surfaced about the cost of the documentation for the US government’s Air Force One aircraft. According to Defense One, the documentation for the new Air Force One costs $84 million. You can get the details in the news story at this link.
The number is an interesting one. The cost for software documentation can be kicked under the sofa. When a “true” or allegedly “true” cost surfaces, the number may surprise.
Stephen E Arnold, April 29, 2020
Do Big Clouds Pay Forward?
April 26, 2020
This spring’s sudden increase in work- and school-from-home arrangements has been a huge boon for cloud providers. Many of their business clients, however, have suffered revenue losses of as much as 50 or 60 percent this season. You would be wrong if you thought the biggest providers would have mercy on their small-business customers. Taipei Times reports, “Amazon, Microsoft Offer Little Relief to Cloud Clients.” We’re told Google joins those two in their lack of compassion.
A hallmark of the cloud business model has been flexibility, where companies pay for what they use. However, big providers have been pushing long term contracts with minimum spending thresholds. Companies who could once cover these minimums with ease are now stretched thin, and many feel betrayed. While countless landlords and regulated utilities have offered relief programs, cloud providers are doing little to nothing of the sort. Perhaps they are too busy counting their growing piles of coin. Journalists Mark Bergen and Matthew Day report:
“By the middle of last month, John Lyotier’s travel software business Left Technologies Inc was cratering with the spread of the COVID-19 pandemic. Seeking to cut costs, he reached out to his office landlord, who offered rent relief. Then he contacted Amazon.com Inc, asking to ‘explore creative financing opportunities’ for his monthly cloud-computing bill. The response was succinct: ‘Nope, that’s the way it is.’ … With the economic devastation of COVID-19, entrepreneurs such as Lyotier feel that the fate of their businesses rests on the benevolence of their cloud provider. While Amazon Web Services (AWS) is restructuring some large contracts on a case-by-case basis, according to a person familiar with the decisions, smaller companies are not receiving the same flexibility. Half a dozen start-up executives said that recent appeals to these cloud companies have gone unanswered. While older technology providers, such as Cisco Systems Inc, are offering credits to customers, the major cloud companies have not made any public announcements about deferring or cutting bills for clients.”
As this pandemic and its economic repercussions continue, perhaps big tech will decide to extend some grace to its clientele. After all, one cannot make money off of customers who have gone out of business.
Cynthia Murrell, April 26, 2020
IBM: Respond to a Hungry Tiger with Deflection and Delay
April 24, 2020
I stumbled across an essay by a former IBM Watson professional writing in his new role at a real estate company. The career choice struck me as interesting, and I decided to read “How to Manage During A Crisis: Sort Everything Into “Now, Next, or Later“. The advice and opinion article appeared in Entrepreneur Magazine. I rarely associated IBM Watson, real estate, and entrepreneurial spirit. Time to learn I decided.
The write up states:
In normal times, every business should have a plan. But you can’t plan for contingencies when the business climate might change, when new laws and regulations are imminent, or, as in our current crisis, public health threats are in flux. At that point, planning is simply a waste of time. What to do instead? React fast.
Management with minimal thought strikes me as a fight or flight approach. The idea of figuring out how to avoid a hungry tiger is one thing, dealing with business challenges seem slightly different.
The desire to react fast may be why this individual abandoned the relative safety and security of IBM for the thrilling world of property management. As those renting properties close their offices, I imagine that property management is becoming slightly more thrilling than it was a few years ago.
This management advice strikes me as the type of thinking that does not match up with IBM. The essay notes:
The U.S. Air Force has a conceptual model for fighter pilots called OODA—or, “observe, orient, decide and act”—that might help you think about crisis management.
This is an updated version of the hungry tiger situation. Humans may be hard wired to get an adrenaline boost from OODA situations — if the enemy’s air to air missile is picked up by the aircraft’s defensive systems AND the systems react in the time available to neutralize the attack. Modern air warfare, if I understand the upside of the F 35 platform, is to never get into this surprise situation.
Are IBM’s problems a surprise like this tiger ruining a nice walk in the bush? Perhaps IBM embraces the hungry tiger as a way to buy time and create a plausible explanation for its revenue decrease and disappointing financial outlook?
What about IBM?
The author just mentions IBM Watson, so I think he is either proud of having worked on that outstanding collection of smart technology, he wants to bask in Watson’s halo effect, or he is making a distinction between the real estate way and the IBM way.
IBM has had its share of minor troubles: Litigation related to RIFFing workers, management turnover at the top, and financial disruptions.
“IBM Q1 2020 Earnings Call Highlights: Withdraws 2020 Outlook Amid Covid-19 Crisis” suggests that IBM is shifting into the adrenaline charged world of facing one or more hungry tigers.
The write up reports:
As the impact of COVID-19 intensified in March, [IBM] clients began to deprioritize some of their projects. In this environment, the company deployed its resources to engage customers virtually, modernize and migrate the applications to the cloud, empowering a remote workforce with cybersecurity and IT resiliency. The company expects its Global Business Services customers to continue to delay and replan some of their projects in the near term.
Okay, Covid was a surprise to almost everyone except the Chinese and BlueDot in Canada. Yes, the virus has created some economic pressure. But IBM’s issues began long before Covid became the alleged surprise.
IBM has bought back about $140 billion in its stock to put some shine on the Big Blue operation. The write up points out:
IBM withdrew its earlier profit outlook for the full-year 2020 given the uncertain environment in the wake of the COVID-19 crisis. The company said that with better clarity on the economic recovery it will reassess the situation and will give an update at the end of the second quarter of 2020. When IBM announced fourth-quarter 2019 results in January, it had projected GAAP EPS to be at least $10.57 and non-GAAP EPS to be at least $13.35 for fiscal 2020. The company expects the second quarter to be more challenging if the customers continue their same buying pattern.
The translation in my lexicon means, “We are losing revenue and costs remain a problem. Circle the wagons. Blame the virus.”
DarkCyber believes that IBM’s entrepreneurial behavior will mean more staff cutbacks, more wild and crazy marketing, and acquisitions which deliver a RedHat type of boost. Yep, fast, decisive action.
What does the former IBM Watson professional advise:
But when an extreme or unprecedented event takes place, those plans almost always come up short—because they’re geared toward maintaining business as usual, instead of coping with the kind of massive disruption that nobody could prepare for… Right now it’s better to ditch those five-year plans… and get ready for curve balls we know we can’t predict.
Whoa, Nellie. I thought that IBM Watson made it possible to make sense of disparate information. Watson can process data and generate “answers.” What this former IBMer recommends and what IBM itslef is doing is rationalizing fear, uncertainty, and dread.
One would think that anyone injected with the Big Blue antiviral would do more than dodge reality. The problme is not a particular hungry tiger; the problem is the IBM systems and methods.
The IBM way has not worked well for years, and it is unlikely that the duck-and-delay approach will deliver what stakeholders expect: Growth, sustainable revenue, and a healthy bottom line.
Never fear, gentle IBM workers, there are opportunities in real estate or as management consultants.
Stephen E Arnold, April 24, 2020
Intelware/Policeware Vendors Face Tough Choices and More Sales Pressure
April 20, 2020
The wild and crazy reports about the size of the lawful intercept market, the policeware market, and the intelware market may have to do some recalculations. Research and Markets’ is offering a for fee report which explains the $8.8 billion lawful interception market. The problem is that the report was issued in March 2020, and it does not address changes in the financing of intelware and policeware companies nor the impact of the coronavirus matter. You can get more information about the report from this link.
As you know, it is 2020. Global investments have trended down. Estimates range from a few percent to double digits. Now there is news from Israel that the funding structures for high technology companies are not just sagging. The investors are seeking different paths and payoffs.
“Post Covid-19, Exits May Seem Like a Distant Dream But Exercising Options May Become Easier” states:
With Israeli tech companies having to cut employees’ salaries by up to 40%, many have turned to repricing stock options as a means of maintaining their talent.
Repricing means that valuations go down.
Gidi Shalom Bendor, founder and CEO of IBI Capital subsidiary S-Cube Financial Consulting, allegedly said:
You can see the valuations of public companies decreasing and can assume private companies are headed the same way,” Shalom Bendor said. Companies that are considering repricing have been around for several years and have a few dozen employees, so even though an exit is not around the corner for them it is still in sight, he explained. “In some cases, these companies have even had acquisition offers made, so options are a substantial issue.
Ayal Shenhav, head of the tech department at Israel-based firm GKH Law Offices, allegedly said:
Pay cuts and the repricing of options go hand in hand.
Let’s step back. What are the implications of repricing, if indeed it becomes a trend that reaches from Israel to Silicon Valley?
First, the long sales cycles for certain specialized software puts more financial pressure on the vendors. Providing access to software is not burdensome. What is expensive is providing the professional support required for proof of concept, training, and system tuning. Larger companies like BAE Systems and Verint will have an advantage over smaller, possibly more flexible alternatives.
Second, the change in compensation is likely to hamper hiring and retaining employees. The work harder, work longer approach in some startups means that the payoffs have to be juicy. Without the tasty cash at the end of a 70 hour work week, the best and brightest may leave the startup and join a more established firm. Thus, innovation can be slowed.
Third, specialized service providers can flourish in regions/countries which operate with a different approach to funding. Stated simply, Chinese intelware and policeware vendors may be able to capture more customers in markets coveted by some Israeli and US companies.
These are major possibilities. Evidence of change can be discerned. In my DarkCyber video for April 14, 2020, I pointed out that Geospark Analytics was doing a podcast. That’s a marketing move of note as was the firm’s publicity about hiring a new female CEO, who was a US Army major, a former SAIC senior manager, and a familiar figure in some government agencies. LookingGlass issues a steady stream of publicity about its webinars. Recorded Future, since its purchase by Insight, has become more vocal in its marketing to the enterprise. The claims of cyber threat vendors about malware, hacks, and stolen data are flowing from companies once content with a zero profile approach to publicity.
Why?
Sales are being made, but according to the DarkCyber research team the deals are taking longer, have less generous terms, and require proofs of concept. Some police departments are particularly artful with proofs of concepts and are able to tap some high value systems for their analysts with repeated proofs of concept.
To sum up, projections about the size of the lawful intercept, intelware, and policeware market will continue to be generated. But insiders know that the market is finite. Governments have to allocate funds, work with planning windows open for months if not a year or more, and then deal with unexpected demands. Example? The spike in coronavirus related fraud, misdirection of relief checks, and growing citizen unrest in some sectors.
Net net: The change in Israel’s financing, the uptick in marketing from what were once invisible firms, and the environment of the pandemic are disruptive factors. No quick resolution is in sight.
Stephen E Arnold, April 21, 2020
Google Cloud: Thinner and Wispier?
April 20, 2020
The Murdoch paywall notwithstanding, DarkCyber was able to read “Google May Let Some Air Out of Its Cloud.” (My dog Tibby subscribes to the dead tree edition. DarkCyber is running an on going experiment to find out if the dead tree and the online units of the WSJ coordinate. So far the answer is “No.” How long has the experiment been running? More than 10 years.
The write up reveals that the Google will spend less on data centers. Why?
Fallout from coronavirus
The real news article points out that if Google slows down its spending, the impact on outfits lower down the food chain will be negative.
Okay, but let’s consider another angle.
Advertising is slowing down. The costs for indexing for the Google search engine are going up. Google has been struggling with cost control even with the hard eyed CFO the company has counting beans.
What’s this mean?
Google will automate more, index less, and hunt for money by providing “We’ll do the ad allocation for you” type services. Imitating Zoom’s interface signals that me-too is more important than applying the Google magic wand to products and services.
Net net: The company’s showing that it has feet of clay-based silicon. After 20 years, these feet should be resistant to perturbations in the humanoid aspect of the firm’s business.
Stephen E Arnold, April 20, 2020
Pricing Exposed: Delightful and Dark Tactics
April 16, 2020
Pricing has been a core competency of blue chip consulting firms. The methods were passed from old timer to young sprout once the senior consulting believed the jejune MBA would not be forced out of the firm for failing to hit a sales quota.
Now some of these pricing secrets have been revealed in “The Definitive Guide to Pricing Plans.” If you have to figure out what to charge, you may want to download this story and tuck it into your “Useful Research” folder.
Here are two of the methods. The remainder appear in the source document.
- The decoy effect. Two options, and the customer is induced automatically to choose one.
- Fewer choices. Put the cattle in the kill lane.
Do these make sense to you? If so, you could apply for a job at McKinsey or implement one of these methods.
Remember: The objective is money no matter what the Economist says as it criticizes capitalists. Delightful.
Stephen E Arnold, April 15, 2020
Online Pricing: Analysis Misses the Door to the Bank
April 13, 2020
I spotted a discussion about online pricing written in 2018. The focus was Google. “Would Google Search Make More Money If They Charged 1 Cent per Search?” contains some interesting information. In fact, the write up underscores how those wearing blindfolds outside the online sector wake up in the dark only to discover they have been swallowed by a whale. (How did that work out for Jonah?)
The write up contains an analysis by Jasper who does “a little back of the napkin calculation.” The results are that Google could charge for each search and possibly generate more than it generates from online advertising.
Rop-ke, another participant in the discussion, points out:
But to tell you the truth, people would search a lot less if they were charged money per search.
In fact, Rop-ke pointed out that “Google will die.”
Alenda made clear that the free Craigslist killed newspapers. (Well, not quite, but Craigslist added to the hurt.)
The most recent comment about this article appeared on April 12, 2020. I quote:
They would until someone replaced them with a free service.
Several observations may be warranted:
- There are times when people will pay for online information. The most common is a “must have” situation. What would you pay for an online search for an antidote to save your child from death by poisoning? What would a person like Harvey Weinstein pay for an online LexisNexis search as part of his effort to avoid further prosecution in Los Angeles? The idea is that “must have” information will cause people to pay.
- Asking people to pay for online information splits the user base into two groups: Those who will pay to use the service and to have access if the service is needed. In general, only a small number of online information services can stay generate enough revenue to make the online service into a sustainable business.
- The modes of online access have shifted dramatically in the last 30 years. In 1980, one needed a separate device like a Texas Instruments Silent 700; today one can do a search talking to a smart television set. Most of those searching are not aware that their actions are an online search. The lack of awareness creates a clueless mass which can be converted to revenue.
How do online companies make money today? Let me highlight a few of the more popular approaches:
- Selling data either directly or indirectly. The user’s actions are the bits that matter. Even cash strapped enforcement agencies will pay for data when the investigation warrants.
- Online is a stepping stone to other businesses. Example? Online sales. The Amazon model is built upon search. Want a cloud service? Do a free search of the AWS documentation. The motivation is gratification like buying an eBook or shifting to the cloud so pesky information technology staff can be riffed.
- Online search facilitates a new type of revenue stream. If you want to make a fortune in digital currency, you need to find a digital wallet. Then you need to find a “how to.” For those providing that information, the payoff comes from getting their hands around money churn.
The problem with selling online information is that it is difficult to generate sustainable revenue, cover the infrastructure and other costs, and spin a profit. But when online provides options for other streams of revenue, the digital bits can be like gold dust.
Will Google charge for search? Maybe, but the company is charging to use its search infrastructure. The company offers a Microsoft Office killer for a fee. Google sells phones, mostly not so good, but like the Loon balloons, the company is trying. One can also rent the Google plumbing for cloud computing.
I am fond of pointing out that Google has one business model, a model it obtained in a moment of inspiration from Yahoo. Google was more clever than Yahoo’s management. Google has been more clever than many companies.
Will that cleverness come to an end when a better search engine comes along? Not likely. For now, online search seems easy to do and monetize. Every human construct winds down. But with Google’s seemingly free services rolling along, the firm has momentum. Its tie up with Apple suggests that no quick changes will occur.
What does persist? Some misunderstandings about the costs of offering online information in either free or for fee mode. I remarked decades ago that online is a fairly tricky business to make pay even for criminals selling contraband on the Dark Web.
Imagine how difficult it is for LexisNexis to pay for the technological debt it has strapped to its back. Most online companies are in the same slog. The New York Times talks about its rapidly growing online business. What the NYT doesn’t say is that the cost of its missteps in online which began when Jeff Pemberton’s in house online system was terminated with extreme prejudice. Yeah, I know the current crop of NYT managers will ask, “Technical debt. Who’s Jeff Pemberton?”
The cloud of unknowing about online continues to swell just like the ad revenues from search at Amazon, Facebook, and Google. These are not habits; they are addiction. There’s money in serving addicts: Perceived must havism.
Stephen E Arnold, April 13, 2020
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