Wednesday, December 21, 2011

Mozilla/Google, or Pooff Goes The Magic Dragon

When I was a child, I spoke as a child, I understood as a child, I thought as a child: but when I became a man, I put away childish things. - 1 Corinthians 13, verse 11

When Netscape, who first brought the Internet to the masses, found itself battling Microsoft, we rallied around a godzilla-looking mascot called Mozilla, and around the fact that an open Internet would be much better than the one Microsoft would have thrust upon users if they won the Internet platform battle. We had a great exit (who could complain about $4.2B), but despite Microsoft being convicted by the DOJ, there was no fixing the irreparable harm their illegal leveraging of the Windows monopoly did to the growth of Netscape and of choice in accessing the Internet.

After AOL killed what it had acquired, the fuzzy mascot became, which took the open source Netscape Navigator code and built upon it. The massive amount of work from hundreds of members resulted in Firefox, a browser that finally rivaled IE in sustained market share, and more importantly, introduced tons of valuable features that forced first Microsoft, and then Apple & Google to innovate in their own browsers.

Fast forward to today, though, and a different Internet monopoly now exists - Google Search - a toll booth advertisers must go through each and every day to get to over 80% of the world's Internet users. Mozilla, a non-profit whose core principles include consumer choice, transparent community-based processes and a balance between commercial interests and public benefit, has greatly facilitated Google acquiring monopoly status, first by making Google the default search in Firefox as Firefox grew share, and now by renewing that relationship for three more years even as Microsoft's monopolistic threat has been replaced by Google itself.

Were I to have faith in Mozilla's leadership, I would now launch into why Google, and not Microsoft, is the new bogey whose monopoly control we & they must work to limit. Dozens of my blog posts have already detailed how Google is very effectively turning the screws on the online advertising ecosystem now that it's a monopoly. But just as the boy stopped playing with his dragon when he grew up, so we Internet builders must stop believing Mozilla's leaders adhere to their stated principles.

The Chairperson of the Mozilla Foundation (an ex-Netscape lawyer) was quoted once saying "The average consumer does not know the difference between browser, Internet and search box." You're right, Mitchell Baker, yet Mozilla's own justification for renewing the deal despite Google's dominance ultimately rests on continued consumer choice, which effectively does not exist. Consumers are as non-technical as you say, and we in the industry know that 'default setting', practically speaking, means 'forever'.

The Mozilla Corporation is headed by a board comprised of a lawyer who's paid $500,000/year (~85% of which comes from Google) and three industry veterans who are primarily investors in Internet companies. It becomes clear to me now that Mozilla's board is very likely corrupted (knowingly or unknowingly) by the money Google gives them, and by the power being on the board of Mozilla gives them. Time, then, for members and Firefox users who do really care about the principles to make their voices heard and demand a change at the top. Unless, that is, you want a future in which one company sits between all humans, and all knowledge.

To my fellow ex-Netscaper Mitchell Baker, to former Efficient Frontier CEO Ellen Siminoff, to Greylock VCs John Lilly and Reid Hoffman, I say this: the browser wars continue, but the Nestcape/Microsoft war is over. Google is the new Microsoft if you care to look closely enough, and by your actions you are the new Vichy government helping them and yourselves consolidate power. You are riding the magic dragon into the ground, but I'm confident that ultimately a startup will come along that will disrupt, and probably one not foreseen or funded by you.

Monday, December 05, 2011

SEM Predictor Roll-Call: Google Will Crush Q4 2011 Consensus Revenue Estimates

This week I'll be in Park City for the Search Insider Summit, an SEM sausage fest where vendors pay shit-tons of money to hear each other speak, and big search advertisers feign interest in order to rationalize their free ski trip. I've never attended before, but decided to because I'm considering getting back into the space and have to meet people there. Since then, Efficient Frontier was acquired by Adobe, so thinly-veiled gloating over the largest SEM M&A exit of all time is an added bonus.

We'll have poker night in Geoff's suite (companies spending >$1M/mo on PPC only, or wealthy drunks), but because it's possible I'll lose at Pass The Trash, 5-card-draw-with-7s-wild or High/Low Anaconda, I've decided to invest in a sure thing = Google crushing consensus Q4 2011 revenue estimates.

How have I arrived at this conclusion? By looking at data five of the top SEM firms have put out in the past week and which show Google coming in way, way over the 30.3% consensus for year-over-year (YoY) revenue growth.

Rimm-Kaufman Group (RKG): +43% YoY
George Michie and team pore over and manipulate SEM data the way Columbo solves murders, and this time is no exception. RKG's Mark Ballard reports a 43% YoY increase in non-brand paid search spend for the first half of Q4, with higher click-thru-rates (CTRs) accounting for most of the increase. While 1-2 quarters of accurate quarterly forecasting to not an SEM oracle make, RKG's data is perfectly in line with our next datapoint.

Marin Software: +44% YoY
CEO Chris Lien has built Marin into a top five SEM platform, and his large & varied customer base means their aggregate data is likely to be a statistically valid indicator of Google's business. Their most recent Q4 data dive shows 44% YoY growth, with CTR increases leading the way.

Kenshoo: +48% YoY
My wife likes saying 'Kenshoo', and last time she liked a startup name I told her about, it was 'Google', where I turned down Omid's offer to be Google's first salesman. Sorry honey. Kenshoo's CMO - Aaron Goldman - once *wasn't* present for a car I gave away on behalf of Omniture at SES (d'oh!), so he's equally unlucky. I'll forgive him, though, as his take on Q4 (showing 48% YoY growth) allows the savvy investor to triangulate Q4 reality with Marin & RKG data.

IgnitionOne: +31.2% YoY
I've given up trying to keep track of the-firm-formerly-known-as-360i-or-SearchIgnite, but they're top SEM practitioners whose Q4 data shows *merely* 31.2% YoY growth. Theirs is the lowest Q4 estimate I've found, and yet it's still over consensus.

Performics +104% YoY
Of all the firms mentioned, no one's been at SEM longer than Performics, so it'd be unwise to overlook their point of view. In this case, I'm not sure what to make of their data, as it's so wildly positive that I'm inclined to think that their methodology involves illegal narcotics. That said, they're showing 104% YoY growth for Nov 21-25. Matt Miller & Dan Parks, if you read this, you have some explaining to do.

Wall Street readers to the SearchQuant blog: assuming you take my advice and make tens of millions of dollars in profits, do me a solid and send me one of these after you close out your position (5.2L preferably).

Google Analytics Alternative