My Observer column on the Google IPO…

… is here.

Dissing the Blogosphere

There’s an interesting critical piece about Blogging on Mother Jones. Quote:

“The constellation of opinion called the blogosphere consists, like the stars themselves, partly of gases. This is what makes blogs addictive — that is, both pleasurable and destructive: They’re so easy to consume, and so endlessly available. Their second-by-second proliferation means that far more is written than needs to be said about any one thing. To change metaphors for a moment (and to deepen the shame), I gorge myself on these hundreds of pieces of commentary like so much candy into a bloated — yet nervous, sugar-jangled — stupor. Those hours of out-of-body drift leave me with few, if any, tangible thoughts. Blog prose is written in headline form to imitate informal speech, with short emphatic sentences and frequent use of boldface and italics. The entries, sometimes updated hourly, are little spasms of assertion, usually too brief for an argument ever to stand a chance of developing layers of meaning or ramifying into qualification and complication. There’s a constant sense that someone (almost always the blogger) is winning and someone else is losing. Everything that happens in the blogosphere — every point, rebuttal, gloat, jeer, or “fisk” (dismemberment of a piece of text with close analytical reading) — is a knockout punch. A curious thing about this rarefied world is that bloggers are almost unfailingly contemptuous toward everyone except one another. They are also nearly without exception men (this form of combat seems too naked for more than a very few women). I imagine them in neat blue shirts, the glow from the screen reflected in their glasses as they sit up at 3:48 a.m. triumphantly tapping out their third rejoinder to the WaPo’s press commentary on Tim Russert’s on-air recap of the Wisconsin primary.”

The vigour of this piece seems to be partly fuelled by self-loathing (see the confession about his addiction), but he’s right about the tendency of some blogging sub-cultures to function as echo chambers. My suspicion, though, is that this is more true of ‘political’ blogs. My own experience of blogs is completely different. I subscribe to the RSS feeds of many for a variety of reasons. Some are thoughtful and thought-provoking. Some are beautifully written. Some are just plain quirky. Some are a nice mix of news and personal info. Some give me up-to-date technical info I can’t easily get any other way. Some are by friends. Some provide terrific photography. And I write my Blog for myself and a few friends, mainly as a way of letting them know what’s on my mind. So I don’t experience the echo-chamber effect, though I recognise that it exists. For me, Blogs provide a flow of ideas and news that I couldn’t get any other way.

New York Times on Google IPO

“Unlike many companies that went public at the height of the Internet bubble, Google, the dominant Web search engine, is already profitable. And it appears to have strong competitive advantages.

But the company also has question marks. Its management is, for the most part, young and inexperienced, and the registration statement for its offering, filed with the Securities and Exchange Commission, is long on platitudes (one section begins “Don’t Be Evil”) and short on specifics.”

Actually, it’s a better piece than that excerpt would suggest.

“Investors will probably flock to Google”, it continues, “which has displayed astonishing growth and profitability during its six-year history, analysts say. Last year, the company had $962 million in sales and $106 million in profits.

But that significantly understates the company’s true profitability, because Google had unusually high tax and option expenses last year. In reality, it appears to have generated $570 million in pretax cash profits last year. That is still more than Yahoo, but Google is also spending more heavily than its chief Internet rival on new computers and equipment.

Martin Pyykkonen, an analyst at Janco Partners in Denver, said he thought Google and Yahoo ought to be valued comparably. Both companies have search engines, although Yahoo also provides a broad range of services like personal ads and an instant messenger. Yahoo’s sales were higher than Google’s last year, but Google is growing faster and has higher margins. ‘They look an awful lot alike, if you look at the numbers,’ Mr. Pyykkonen said.

Hmmm… Interesting that much of the financial comment compares Google to Yahoo! In practical terms, I’ve never thought about them in that way. In fact, I don’t see them inhabiting the same universe. And I’ve never used Yahoo! for anything. But then, I’m a user, not an investor.

Open source ‘too costly’ for Irish e-gov

Register story:

“E-government in Ireland will be built using open standards technology, which may not be open source software such as Linux, Ireland’s e-minister Mary Hanafin has confirmed. Speaking at the Irish Software Association’s 16th annual conference, sponsored by Microsoft, O’Donnell Sweeney and ACT Venture Capital, minister Hanafin gave a brief overview of the state of Ireland’s e-government plans and said that an update to the government’s ICT strategy document “New Connections” would be published before May.

“The use of open standards is critical to the government’s plans,” she said. “But it is important to remember that open standards are not the same as open source.” Minister Hanafin indicated that Ireland’s e-government system, once fully constructed, needs to last for several decades and must therefore be upgradeable. “Using open standards gives us that option.”

She added that the government had looked into the long-term cost of various architectures and had determined that using only open source software could, in the long run, be more expensive. “The long-term cost of open source may outweigh the short term savings,” she said”.

Bet this is based on a report by one of the big consulting firms. It would be interesting to see it. Not that I don’t have faith in big consulting firms, of course. ;-) Must do some digging. Wonder if Karlin Lillington knows….

The New, New Thing — er, black and white photography

Saw this on a magazine rack today. Ironic to think that B&W is now exotic.

You know, come to think of it, it does look better in monochrome! But even that doesn’t conceal the fact that it’s technically a very poor digital image. Not sure why — maybe because it was snatched with the Dimage Xt, which is wonderfully unobtrusive but needs careful handling to produce the best results.

The meaning of life?

Got this from a friend. Wonder if she was trying to tell me something? Hmmm…

Wall Street affronted by Google: who do these kids think they are?

Hilarious responses already emerging from the corporate world to the perceived effrontery of the Google prospectus. The Wall Street Journal, still partly in shock, was driven to assemble a feebly-annotated version of the document. They wheeled out a hitherto unknown “associate analyst” from an outfit called Jupiter Research to observe that “This filing is Google at its defiant, headstrong best. They’re determined to not act like other companies, to manage to long-term goals and not short-term Wall Street demands. Whether or not they can actually hold to that strategy remains to be seen — but it’ll be a lot tougher than they think.” Wow! So this is what analysis lite looks like.

On the Google founders’ assertion that they propose to run the company their way, this associate cove comments:

“It’ll basically allow Sergey and Larry to become billionaires while ensuring that they’re left alone to run the company as they see fit. They’re throwing their weight around. They know they can get away with it, so they’re doing it.” But, he warns solemnly, “Wall Street can’t be thrilled with how they’re setting this up. With the dual voting structure, with refusing to provide guidance, they’re thumbing their nose at the Street.”

There’s more in this vein, but I won’t trouble you with it. It makes USA Today look like the collected works of Spinoza. Interesting, though, that even the WSJ couldn’t find a heavyweight commentator from the Street to go public at this stage.

Meanwhile, our own dear Financial Times has gathered its skirts and glared through its lorgnette like one of Bertie Wooster’s aunts. “Memo to Google: Don’t be arrogant” is the heading on its editorial comment. “Philip Larkin, the poet, once wrote that seeing the moon at night was ‘a reminder of the strength and pain of being young’. Youth’s strength of purpose can also be observed in the filing made by Google to the Securities and Exchange Commission on Thursday”. Goodness, these young people! Don’t they know that Life Is Serious? Tut, tut.

What makes this cant so comical, of course, is that it comes from a segment of society which (a) encouraged mugs to blow trillions of dollars during the last technology bubble, (b) took billions in fees from the IPOs of fatuous dot-coms, (c) employed ‘analysts’ like Merill Lynch’s Henry Blodget who hyped technology shares long after it was clear that they were doomed and (d) overlooked (and in some cases cheered on) Enron-style corruption and fraud for decades.

Wow! Was there ever a prospectus like Google’s?

I’ve been reading the “LETTER FROM THE FOUNDERS: AN ‘OWNER’S MANUAL’ FOR GOOGLE’S SHAREHOLDERS” in the Google SEC filing. It’s astonishing — no other word for it. Here are some excerpts:

“As a private company, we have concentrated on the long term, and this has served us well. As a public company, we will do the same. In our opinion, outside pressures too often tempt companies to sacrifice long-term opportunities to meet quarterly market expectations. Sometimes this pressure has caused companies to manipulate financial results in order to ‘make their quarter.’ In Warren Buffett’s words, ‘We won’t “smooth” quarterly or annual results: If earnings figures are lumpy when they reach headquarters, they will be lumpy when they reach you.’

If opportunities arise that might cause us to sacrifice short term results but are in the best long term interest of our shareholders, we will take those opportunities. We will have the fortitude to do this. We would request that our shareholders take the long term view.

Many companies are under pressure to keep their earnings in line with analysts’ forecasts. Therefore, they often accept smaller, but predictable, earnings rather than larger and more unpredictable returns. Sergey and I feel this is harmful, and we intend to steer in the opposite direction.”

[…]

“We will not shy away from high-risk, high-reward projects because of short term earnings pressure. Some of our past bets have gone extraordinarily well, and others have not. Because we recognize the pursuit of such projects as the key to our long term success, we will continue to seek them out. For example, we would fund projects that have a 10% chance of earning a billion dollars over the long term. Do not be surprised if we place smaller bets in areas that seem very speculative or even strange. As the ratio of reward to risk increases, we will accept projects further outside our normal areas, especially when the initial investment is small.

We encourage our employees, in addition to their regular projects, to spend 20% of their time working on what they think will most benefit Google. This empowers them to be more creative and innovative. Many of our significant advances have happened in this manner. For example, AdSense for content and Google News were both prototyped in ‘20% time.’ Most risky projects fizzle, often teaching us something. Others succeed and become attractive businesses.

We may have quarter-to-quarter volatility as we realize losses on some new projects and gains on others. If we accept this, we can all maximize value in the long term. Even though we are excited about risky projects, we expect to devote the vast majority of our resources to our main businesses, especially since most people naturally gravitate toward incremental improvements.”

[…]

“We want Google to become an important and significant institution. That takes time, stability and independence. We bridge the media and technology industries, both of which have experienced considerable consolidation and attempted hostile takeovers.

In the transition to public ownership, we have set up a corporate structure that will make it harder for outside parties to take over or influence Google. This structure will also make it easier for our management team to follow the long term, innovative approach emphasized earlier. This structure, called a dual class voting structure, is described elsewhere in this prospectus.

The main effect of this structure is likely to leave our team, especially Sergey and me, with significant control over the company’s decisions and fate, as Google shares change hands. New investors will fully share in Google’s long term growth but will have less influence over its strategic decisions than they would at most public companies.

While this structure is unusual for technology companies, it is common in the media business and has had a profound importance there. The New York Times Company, the Washington Post Company and Dow Jones, the publisher of The Wall Street Journal, all have similar dual class ownership structures. Media observers frequently point out that dual class ownership has allowed these companies to concentrate on their core, long-term interest in serious news coverage, despite fluctuations in quarterly results. The Berkshire Hathaway company has applied the same structure, with similar beneficial effects. From the point of view of long-term success in advancing a company’s core values, the structure has clearly been an advantage.”

[…]

“Informed investors willing to pay the IPO price should be able to buy as many shares as they want, within reason, in the IPO, as on the stock market.

It is important to us to have a fair process for our IPO that is inclusive of both small and large investors. It is also crucial that we achieve a good outcome for Google and its current shareholders. This has led us to pursue an auction-based IPO for our entire offering. Our goal is to have a share price that reflects a fair market valuation of Google and that moves rationally based on changes in our business and the stock market.”

And the bit I like most of all…

“Our employees, who have named themselves Googlers, are everything. Google is organized around the ability to attract and leverage the talent of exceptional technologists and business people. We have been lucky to recruit many creative, principled and hard working stars. We hope to recruit many more in the future. We will reward and treat them well.

We provide many unusual benefits for our employees, including meals free of charge, doctors and washing machines. We are careful to consider the long term advantages to the company of these benefits. Expect us to add benefits rather than pare them down over time. We believe it is easy to be penny wise and pound foolish with respect to benefits that can save employees considerable time and improve their health and productivity.”

I have a lovely image of the dour officials of the Securities and Exchange Commission having to lie down in darkened rooms at this point. I’ve never seen a prospectus like this — nor, for that matter, has Wall Street. Instead of the constipated legalese warning investors to expect nothing, there is plain English promising risks and adventure and an exhilarating ride. Instead of promises of penny-pinching, cost-squeezing management, there are undertakings to expand the range of employee benefits. Instead of the usual, corrupt IPO ‘placing’ of shares with investment bankers and their plutocratic clients, there is to be a public auction. There is an undertaking to set up a charitable foundation. And a commitment to values which are elsewhere honoured more in the breach than in the observance.

“We believe strongly”, Brin and Page write, “that in the long term, we will be better served — as shareholders and in all other ways — by a company that does good things for the world even if we forgo some short term gains. This is an important aspect of our culture and is broadly shared within the company…. We aspire to make Google an institution that makes the world a better place. With our products, Google connects people and information all around the world for free. We are adding other powerful services such as Gmail that provides an efficient one gigabyte Gmail account for free. By releasing services for free, we hope to help bridge the digital divide. AdWords connects users and advertisers efficiently, helping both. AdSense helps fund a huge variety of online web sites and enables authors who could not otherwise publish. Last year we created Google Grants — a growing program in which hundreds of non-profits addressing issues, including the environment, poverty and human rights, receive free advertising. And now, we are in the process of establishing the Google Foundation. We intend to contribute significant resources to the foundation, including employee time and approximately 1% of Google’s equity and profits in some form. We hope someday this institution may eclipse Google itself in terms of overall world impact by ambitiously applying innovation and significant resources to the largest of the world’s problems.”

Like I said, was there ever anything like this on Wall Street before?

Legal downloads start to make money

From Forbes: “Apple Computer observed the one-year anniversary of its iTunes Music Store today by adding new features to the service and releasing new numbers to demonstrate its success.

It’s almost funny looking back on the strange buzz that surrounded Apple a year ago. Days before the service was unveiled, weird rumors surfaced that Chief Executive Steve Jobs was also intent on going after Vivendi Universal’s music business. That deal never materialized.

Still Apple has rocked the music industry. Jobs said in a conference call today that Apple has sold 70 million songs since launch, and it has turned what he described as a “small profit.” Consumers are buying songs at a rate of 2.7 million songs per week, which works out to 140 million songs per year, Jobs said.

Real Networks said that as of April 15 it had 450,000 subscribers who were buying 1.8 million songs per day on its Rhapsody music download and subscription service. Apple doesn’t disclose the number of customers using its service.

The download library is also expanding. When it launched a year ago, iTunes boasted about 200,000 songs, but has since grown to 700,000. Jobs said one of Apple’s “next big challenges” with record companies is getting them to open up more of their catalogs for digital distribution. “

This squares with the latest findings from the Pew Internet Surveys:

“The Project’s national phone survey of 1,371 adult Internet users conducted between February 3 and March 1, 2004 shows that 14% of online Americans say that at one time in their online lives they downloaded music files, but now they no longer do any downloading. That represents more than 17 million people. However, the number of people who say they download music files increased from an estimated 18 million to 23 million since the Project’s November-December 2003 survey. This increase is likely due to the combined effects of many people adopting new, paid download services and, in some cases, switching to lower-profile peer-to-peer file sharing applications.”

The pleasures of gardening

I’m a hopeless gardener, but now have to do it. The wonderful thing about tulips is that they just appear. They were planted by Sue, many moons ago, but they still appear every year, as a lovely reminder of her.