Google Aims At Microsoft – Google Apps In the Enterprise – Google Sets Up Channel Partners

In an big move Google is taking the classic enterprise sales move – set up a channel.  Indirect channel marketing is great leverage and if pulled off is very disruptive. I’ve spend many years in the channel business with Hewlett-Packard and the channel model is based upon a simple formula – get thousands of people selling your product everywhere.  However, the key to success is money which Google has plenty of.  If Google can incent channel partners with good products and great margin, they will put a dent in the Microsoft dominance.

Here is more detail. Web search leader Google Inc took another step on Wednesday toward direct competition with Microsoft Corp by recruiting IT resellers to market its Web-based applications to business clients.

From the end of March, authorized resellers will be able to sell, customize and support premium versions of Google Apps, which includes word processing, spreadsheets, calendars and email.

Google Apps is broadly similar to Microsoft‘s top-selling Office package except that Apps is completely Web-based and is part of Google‘s push into so called ‘cloud computing‘ or software-as-a-service. Microsoft said in October it is also looking at adding Web-based features for its Office applications.

Since it launched Google Apps in February 2007, Google has only sold directly to business users over the Web. Analysts said the move to work with third parties is necessary if Google hopes to compete seriously with Microsoft or IBM.

Microsoft, which is the world’s largest software company, sells more than 95 percent of its software through more than 440,000 third party resellers, according to Gartner Research, and intends to spend around $3 billion on managing those sales channels in 2009.

Google’s Catch and Release Developer Ecosystem – Google Analytics Has Flash Tracking – It’s About Time

Google is announcing today Google Analytics supporting Flash content. This is a very big deal. Widgets and flash based content is everywhere and soon it will be the preferred navigation method for most content.

Catch and Release Strategy to Ecosystem Development
I am very impressed lately by Google’s commitment to open source. Specifically, I love their strategy of what I call the ‘Catch and Release’ strategy for developing their ecosystem of developers and partners.

They are certainly doing a lot of land grabbing, but they are releasing their innovations and improvements as open source. This strategy for ecosystem development is much different than Microsoft’s old model (closed ecosystem embrace and extend). Google is earning credibility in a new way by enabling key technology and then by releasing code for open collaboration and development – Catch and Release.

They are betting on the Internet Operating System. If more people use the web then Google wins. Here again with Flash (like Andriod, Chrome, and dozens of other projects inside the Googleplex) Google’s innovation is the ‘catch’ and their ecosystem developer strategy is the ‘release’.


Tracking Flash – The Next User Interface That Needs Search and Navigation

Google is announcing a simplified solution for tracking Flash content for everyone, called Google Analytics Tracking For Adobe Flash. This feature is a translation of the current Google Analytics tracking code into the ActionScript 3 programming language that dramatically simplifies the ability to track Flash, Flex and AS3 content. This new Flash tracking code provides all the rich features of the current JavaScript-based version, including campaign, pageview and event tracking and can be used to track Flash content such as embedded videos, branded microsites and distributed widgets, such as online games.

Now it’s simple for Flash content developers to answer questions like:

* How many people have watched my video?
* Are we developing the right creative that attracts new users?
* How effective is my content at getting people to take action?

Google is providing tracking libraries for both Flash and Flex which can be downloaded as a ZIP file here. The libraries include:

* Flash visual component
* Flash AS3 library
* Flex MXML component
* Flex AS3 library

And you can learn more about how to use them through this developer documentation.

Open source is the way! Google is delivering on innovation and code for developers. Google is providing the entire AS3 code base under the Apache 2 License as Open Source, available here.

If you are a developer and want to improve the code’s functionality, you can contribute to the code base. Or, if you are a company that is running a content platform, you can seamlessly integrate the Flash tracking codebase into your existing architecture.

Google Memo To Publishers – They Are Saying Don’t Panic We Are Innovating

Google is sending letters to their AdSense publishers saying don’t panic we’ll be fine. Google has to be worried that the economic times will hurt publisher. What’s worse for Google is the AdBlocking technologies coming out.

Here is the Google “Don’t Panic” memo

Dear Publisher,

We understand that the recent economic turmoil has created a lot of uncertainty in the lives of AdSense publishers. During these difficult times, we’re continuing to invest in innovations that improve publisher monetization and advertiser value in the content network.

We’re focusing on further developing our product offerings and boosting ad performance for publishers. We recently announced advancements in AdSense for search and experiments to make ads more effective. We’re bringing DoubleClick technologies to AdSense publishers, and we’ll continue to launch new products and features. We’re also continuing to improve our offerings for AdWords advertisers, making it easier for them to target the Google content network. Features for advertisers, such as the new display ad builder, are designed to improve ad performance on AdSense publisher sites.

We’ll keep driving technological progress, but our best asset will always be our publisher partners. The strength of AdSense lies in the value of the content you bring to users and the quality of the sites you bring to advertisers. Our success is tied to yours. We look forward to partnering with you for the long term, and remain dedicated to helping you succeed.

Sincerely,

xxxx xxxx {name removed}
Director AdSense Online Sales & Operations

Google and Intel – Weaving the Web Of Relationships

Interesting article on Intel. This brings up some interesting data points. The relationship between these companies is compelling.  The Intel CEO sits on the board of Google and the CEO of Google sits on the board of Apple.

Within five years, they estimate that Google will purchase one-third of all microprocessors

Google already exerts significant monopoly power in the market, since when they construct a new standard build, the chips have to come either exclusively from AMD or Intel. AMD’s last few profitable quarters a couple years back can be traced to their holding of the Google contract.

The best business development has always been with the CEO.

Google 3rd Quarter Finanical Results

Google Inc. (NASDAQ: GOOG) today announced financial results for the quarter ended September 30, 2008.

“We had a good third quarter with strong traffic and revenue growth across all of our major geographies thanks to the underlying strength of our core search and ads business. The measurability and ROI of search-based advertising remain key assets for Google,” said Eric Schmidt, CEO of Google. “While we are realistic about the poor state of the global economy, we will continue to manage Google for the long term, driving improvements to search and ads, while also investing in future growth areas such as enterprise, mobile, and display.”

Q3 Financial Summary

Google reported revenues of $5.54 billion for the quarter ended September 30, 2008, an increase of 31% compared to the third quarter of 2007 and an increase of 3% compared to the second quarter of 2008. Google reports its revenues, consistent with GAAP, on a gross basis without deducting traffic acquisition costs (TAC). In the third quarter of 2008, TAC totaled $1.50 billion, or 28% of advertising revenues.

Google reports operating income, net income, and earnings per share (EPS) on a GAAP and non-GAAP basis. The non-GAAP measures, as well as free cash flow, an alternative non-GAAP measure of liquidity, are described below and are reconciled to the corresponding GAAP measures in the accompanying financial tables.

  • GAAP operating income for the third quarter of 2008 was $1.74 billion, or 31% of revenues. This compares to GAAP operating income of $1.58 billion, or 29% of revenues, in the second quarter of 2008. Non-GAAP operating income in the third quarter of 2008 was $2.02 billion, or 37% of revenues. This compares to non-GAAP operating income of $1.85 billion, or 34% of revenues, in the second quarter of 2008.
  • GAAP net income for the third quarter of 2008 was $1.35 billion as compared to $1.25 billion in the second quarter of 2008. Non-GAAP net income in the third quarter of 2008 was $1.56 billion, compared to $1.47 billion in the second quarter of 2008.
  • GAAP EPS for the third quarter of 2008 was $4.24 on 318 million diluted shares outstanding, compared to $3.92 for the second quarter of 2008 on 318 million diluted shares outstanding. Non-GAAP EPS in the third quarter of 2008 was $4.92, compared to $4.63 in the second quarter of 2008.
  • Non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, and non-GAAP EPS are computed net of stock-based compensation (SBC). In the third quarter of 2008, the charge related to SBC was $280 million as compared to $273 million in the second quarter of 2008. Tax benefits related to SBC have also been excluded from non-GAAP net income and non-GAAP EPS. The tax benefit related to SBC was $63 million in the third quarter of 2008 and $48 million in the second quarter of 2008. Reconciliations of non-GAAP measures to GAAP operating income, operating margin, net income, and EPS are included at the end of this release.

Q3 Financial Highlights

Revenues – Google reported revenues of $5.54 billion for the quarter ended September 30, 2008, representing a 31% increase over third quarter 2007 revenues of $4.23 billion and a 3% increase over second quarter 2008 revenues of $5.37 billion. Google reports its revenues, consistent with GAAP, on a gross basis without deducting TAC.

Google Sites Revenues Google-owned sites generated revenues of $3.67 billion, or 67% of total revenues, in the third quarter of 2008. This represents a 34% increase over third quarter 2007 revenues of $2.73 billion and a 4% increase over second quarter 2008 revenues of $3.53 billion.

Google Network Revenues – Google’s partner sites generated revenues, through AdSense programs, of $1.68 billion, or 30% of total revenues, in the third quarter of 2008. This represents a 15% increase over network revenues of $1.45 billion generated in the third quarter of 2007 and a 1% increase over second quarter 2008 revenues of $1.66 billion.International Revenues – Revenues from outside of the United States totaled $2.85 billion, representing 51% of total revenues in the third quarter of 2008, compared to 48% in the third quarter of 2007 and 52% in the second quarter of 2008. Had foreign exchange rates remained constant from the second quarter of 2008 through the third quarter of 2008, our revenues in the third quarter of 2008 would have been $59 million higher. Had foreign exchange rates remained constant from the third quarter of 2007 through the third quarter of 2008, our revenues in the third quarter of 2008 would have been $168 million lower.

In the third quarter, we recognized a benefit of $34 million to revenue through our foreign exchange risk management program.

Revenues from the United Kingdom totaled $776 million, representing 14% of revenue in the third quarter of 2008, compared to 16% in the third quarter of 2007 and 14% in the second quarter of 2008.

Paid Clicks – Aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of our AdSense partners, increased approximately 18% over the third quarter of 2007 and increased approximately 4% over the second quarter of 2008.

TAC – Traffic Acquisition Costs, the portion of revenues shared with Google’s partners, increased to $1.50 billion in the third quarter of 2008. This compares to TAC of $1.47 billion in the second quarter of 2008. TAC as a percentage of advertising revenues was 28% in the third quarter, compared to 28% in the second quarter of 2008.

The majority of TAC expense is related to amounts ultimately paid to our AdSense partners, which totaled $1.33 billion in the third quarter of 2008. TAC is also related to amounts ultimately paid to certain distribution partners and others who direct traffic to our website, which totaled $167 million in the third quarter of 2008.

Other Cost of Revenues – Other cost of revenues, which is comprised primarily of data center operational expenses, amortization of intangible assets, content acquisition costs as well as credit card processing charges, increased to $678 million, or 12% of revenues, in the third quarter of 2008, compared to $674 million, or 13% of revenues, in the second quarter of 2008.

Operating Expenses – Operating expenses, other than cost of revenues, were $1.63 billion in the third quarter of 2008, or 29% of revenues, compared to $1.64 billion in the second quarter of 2008, or 31% of revenues. The operating expenses in the third quarter of 2008 included $859 million in payroll-related and facilities expenses, compared to $810 million in the second quarter of 2008.

Stock-Based Compensation (SBC) – In the third quarter of 2008, the total charge related to SBC was $280 million as compared to $273 million in the second quarter of 2008.

We currently estimate stock-based compensation charges for grants to employees prior to October 1, 2008 to be approximately $1.1 billion for 2008. This does not include expenses to be recognized related to employee stock awards that are granted after October 1, 2008 or non-employee stock awards that have been or may be granted.

Operating Income – GAAP operating income in the third quarter of 2008 was $1.74 billion, or 31% of revenues. This compares to GAAP operating income of $1.58 billion, or 29% of revenues, in the second quarter of 2008. Non-GAAP operating income in the third quarter of 2008 was $2.02 billion, or 37% of revenues. This compares to non-GAAP operating income of $1.85 billion, or 34% of revenues, in the second quarter of 2008.

Interest Income and Other, Net – Interest income and other was $21 million in the third quarter of 2008, compared with $58 million in the second quarter of 2008. The decrease was primarily related to an increase in expenses substantially due to more activity under our foreign exchange risk management program. The cost of the options used to manage our foreign exchange risk is amortized on a mark-to-market basis. As a result, the amount of amortization expense we recognize in any particular quarter is impacted by how much the option moves into or out of the money, as well as the underlying currency’s volatility.

Net Income – GAAP net income for the third quarter of 2008 was $1.35 billion as compared to $1.25 billion in the second quarter of 2008. Non-GAAP net income was $1.56 billion in the third quarter of 2008, compared to $1.47 billion in the second quarter of 2008. GAAP EPS for the third quarter of 2008 was $4.24 on 318 million diluted shares outstanding, compared to $3.92 for the second quarter of 2008, on 318 million diluted shares outstanding. Non-GAAP EPS for the third quarter of 2008 was $4.92, compared to $4.63 in the second quarter of 2008.

Income Taxes – Our effective tax rate was 24% for the third quarter of 2008.

Cash Flow and Capital Expenditures – Net cash provided by operating activities for the third quarter of 2008 totaled $2.18 billion as compared to $1.77 billion for the second quarter of 2008. In the third quarter of 2008, capital expenditures were $452 million, the majority of which was related to IT infrastructure investments, including data centers, servers, and networking equipment. Free cash flow, an alternative non-GAAP measure of liquidity, is defined as net cash provided by operating activities less capital expenditures. In the third quarter of 2008, free cash flow was $1.73 billion.

We expect to continue to make significant capital expenditures.

A reconciliation of free cash flow to net cash provided by operating activities, the GAAP measure of liquidity, is included at the end of this release.

Cash – As of September 30, 2008, cash, cash equivalents, and marketable securities were $14.4 billion.

On a worldwide basis, Google employed 20,123 full-time employees as of September 30, 2008, up from 19,604 full-time employees as of June 30, 2008.

Chrome and OS? Yes Google Chrome is an OS

I posted on the day leading up to the Google Chrome announcement that it was an Operating System. Now a guy named Ted Dziuba (programming who worked at Google) says that people don’t know shit about this being an Operating System.

First of all a message to Ted. Nice try ( I have to differ having a degree in Computer Science in what oh Operating System Design) and Chrome is in fact and operating system or operating environment. By the classic definition maybe I can buy your argument but this is not about the classic definition. It’s about the future. The future operating environment where traditional elements are commodities.

I think that you need to look back at other environments to find some similarities. Outside of the common sense that Chrome is a platform for an operating environment of “new apps” I think that the networking stacks of the 80s is similar. I’m old enough to remember the ‘networking protocol’ wars (SNA, Decnet, TCP) and TCP replaced them all in the end. I would argue that this Chrome debated isn’t just about the classic definition of the Windows paradigm.

Chrome is an modern view of an Operating System.

For any environment if it quacks like an OS then it is an OS- Chrome at its core is a OS with a browser front end.

Browser Judo – Google Chrome’s Secret Move

I like Chrome. Chrome is impressive. Chrome is about the future. However, it lacks the innovation on the video side, but that wasn’t expected in this first version. Bottom line: Chrome doesn’t suck. It’s good. I have been using Chrome since it launched and it hasn’t crashed once.

As I reflect on Chrome and what it means, I’m struck by two things: The immediate hit on Firefox and the strategic blow to Microsoft – I’m calling this Browser Judo. The inventor of the browser hints to some of the same things here.

The big tech story isn’t that Google in essence copied Firefox. It’s browser judo. The judo being put on Microsoft. The move is little old Javascript. On the surface Javascript is Javascript, but Google’s Judo move takes this little (major) element of the web and uses it against Microsoft. Why? Because Microsoft Internet Explorer is weak when it comes to Javascript. In talking to tech geeks over the past few days Chrome is 40x faster then Internet Explorer.

Little Javascript is the Judo move on Microsoft. Microsoft COM is actually very good but Internet Explorer treat Javascript as a separate silo even in how they develop the broswer – it’s a separate coding team. So this makes the hidden classes piece of V8 huge – especially against the big turtle now known as Internet Explorer.

Because of the relationship between COM and Javascript, Microsoft incurs a huge “overhead” penalty in managing pages and interactions – In the geek developer world this is called “taking out the trash” or garbage collecting. IE 8 doesn’t really solve this problem of overhead.

Google is taking a small but important element in Javascript and using to throw down IE in performance. As an end user I see immediate benefits on page loads especially if I use the web a lot – hello that’s what the browser is for. Google has it right in this version.

With Chrome Firefox in the short term is impacted, but the real loser will be Internet Explorer. Dean and his team better get busy and fast. I’m a big fan of Internet Explorer since it’s inception, but it’s time for Internet Explorer to compete and put out a faster product.

Better Microsoft better counter the Browser Judo with a move of their own.