Internet Explorer 7 Automatic Upgrade for Windows XP Users

Microsoft announced last week they will automatically push Internet Explorer 7.0 to Windows XP users when the browser is ready in Q4. It has been 5 years since Microsoft has released a major upgrade of Internet Explorer, and all I can do is breathe a sigh of relief. Not because I use or even particularly like Internet Explorer, but as anyone who publishes on the web can tell you, it is a pain in the rear to make your html compatible with the browser. I have many hacks I have to use to make sure my pages render correctly with Internet Explorer, and I'm hoping I can findly stop trying to support I.E. 6 (I already gave up on trying to support earlier versions). Thankfully, readers of my blog use Internet Explorer much less than the general population, which I take as a sign of their high I.Q. Below is a chart detailing the percentage of my blog visitors by browser type.




If you're using Internet Explorer right now, please do yourself and others a favor, switch to Firefox, Camino, or Opera. You'll have a much more enjoyable Internet experience, and after all, isn't that what life is really about?

The Upcoming Payment Wars

2007 will be the year that the payment wars begin, and it won't be limited to papal and Google. The groundwork is being layed for the upcoming payment battles, with many emerging companies entering the market, especially in the mobile payments space. Visa USA recently conducted a consumer survey, and 61% of participants between the ages of 25 and 34 said they were interested in using their cell phone to make purchases. Respondents also indicated they are twice as likely to carry their mobile phone than cash; this jumps to 4x for consumers in the 25 - 34 age range.

"These numbers indicate that mobile phones for U.S. consumers are becoming more a part of their everyday lives," said Michele Janes, Director of Product Innovation at Visa. "The new technology lets them do more with their phones. For banks, I think this means consumers will start demanding more applications designed for their phones."

The ecosystem of technology, financial systems, and consumer demand are now in synch, making the conditions ripe for a lucrative emerging market. "Over the past six to 12 months, we've seen a drastic increase in interest among [card] issuers in mobile payments," she relates. "Several of our issuers are asking about this."

There are several start-up companies well-positioned to take advantage of this emerging market, including Obopay, MobileLime, Get Scoot, and KushCash. These companies are raising significant amount of VC funding. Obopay received $10MM in March from Redpoint Ventures, Onset Ventures, and Richmond Capital and KushCash recently raised $12MM in private investment.

The competition is fierce and it is too early to tell who will emerge as winners or losers, but one company that I find particularly attractive is TextPayMe. This Redmond, WA based company was founded by two former Microsoft employees. The service is extremely easy to use: simply send a text message with amount and recipient's phone number and within minutes you receive an automated confirmation call confirming the funds were transferred.

Although I disagree, there are those who think mobile payments doesn't offer a strong value proposition compared to conventional payment methods.

“I think what needs to happen is that there needs to be a compelling reason for why I want this,” said Julie Ask, a wireless analyst at JupiterResearch. “What are the scenarios that I need to be traveling so lightly that I don’t need to take my wallet with me? It’s got to be more convenient than paying with cash, coins, or credit cards today.”

CNet Experts in Stock Backdating, Offers FAQ

I have no idea why I'm on this CNet kick, and I'm probably boring the few readers I do have, but I found it funny that CNet posted today an FAQ on stock backdating. The upshot: we're in good company (Apple does it too!), the tax laws incent the behavior, and at any rate, as long as you're up front with shareholders, it's not illegal. Well guess what CNet, shareholders won't care if the current SEC investigation finds your practices of backdating executive stock options illegal or not, they will still sue you. If it's such a benign practice, then why haven't you still announced your Q2 financial results? See you in court.

CNET Sales Rise, Delays Net Income Report

CNet Networks, Inc. reported revenue results today, but delayed earnings report until the previously announced investigation into the backdating of executive stock options is completed. Revenue jumped 14% YoY to $92 million, compared to 80.4 million in revenue for the same period of 2005. Revenue exceeded analysts expectations of $90.4 million, according to a survey tracked by Thomson First Call. CNet attributed the growth to their expanding overseas markets, which now account for 19% of their revenue, compared to 17% the year prior. In China, CNET acquired xcar.com.cn, an online automobile destinations that provides reviews and information for consumers considering car purchases. In Europe, the company launched localized versions of some of its popular U.S. sites.

"We are pleased with the growth of our business during the second quarter," said Shelby Bonnie, chairman and chief executive officer of CNET Networks. "We continued to expand our audience and customer base across the U.S., Europe and Asia by growing our core brands and adding new ones, enhancing our position as Internet ad spending continues to increase."

CNet forecasts revenue of $93 million to $96 million for Q3, and between $386 million and $403 million for the full year. Despite the lack of net earnings results and the potential damage from the on-going investigation, shares rose slightly in after-hours trading following the report.

As I mentioned in my previous post on CNet, I think it is a good time for CNet to be aquired, and I can't think of a better company to benefit from such an acquisition than Yahoo!. Both Yahoo! and CNet have positioned themselves as media companies, and CNET has many assets that Yahoo! needs. Yahoo! already uses CNet for much of the product information in their shopping engine, and needs professional editorial support in other verticals as well. The timing is right with CNet's stock down nearly 45% this year, yet they have growing revenues with a solid balance sheet that includes a cash balance of $143.3 million. What can I say, the synergies and the price are right.

Internet Earnings Preview

Google, Yahoo! and eBay all report earnings this week, followed by Amazon next week. Competition among the Internet Titans has been heating up dramatically over the last year as they increasingly enter into each others core business (search, ecommerce, content & advertising) and fight for market share and global expansion. The fundamental drivers of growth in internet sector remain strong, as consumers increasingly use the web for communication, research, entertainment, and shopping. Investors will be closely watching the financial reports to see which companies are best able to take advantage of the increased time spent on the Web.

"Strong secular growth and fundamental trends remain intact for the Internet sector, despite some company-specific controversies," Goldman Sachs' Anthony Noto wrote in a recent note to clients.

According to comScore Networks, total U.S. Internet traffic rose 4% in June from a year earlier. Media and retail sites grew considerably faster, rising 15% and 8%, respectively, according to an analysis by Merrill Lynch. Web-page views on Google reached 10 billion in June, up 71% from the same month last year, while Yahoo's page views reached 40 billion, up 23% from last year, according to comScore. Traffic to e-commerce sites was healthy as well, with eBay's June user numbers rising 21% to 78 million and Amazon's up 22% to 49 million.

First up is Yahoo! who reports on Tuesday. Yahoo! is in the best position of all the Internet Titans to take advantage of the resurgent growth in brand & display advertising, and should report towards the top end of their revenue guidance of $1,080-$1,160 billion. Wall Street is looking for the company to report earnings of 11 cents a share, down from 13 cents a year earlier, on $1.14 billion in revenue.

During Q2, Yahoo! continued to focus on social media with offerings such as Yahoo! Answers and Yahoo 360! that rely heavily on user generated content. They also updated their homepage and formed a broad strategic partnership with eBay that includes advertising, online payments, Web searching and a co-branded toolbar. Yahoo! also announced that it will begin rolling out a completely redesigned search advertising platform (code name "Panama") in the third quarter to help businesses more easily connect to Yahoo!'s vast audience.

eBay reports on Wednesday and investors are looking for some good news from what has proven to be a very difficult year for the Internet auctioneer. Stock is down 30% this year and eBay recently experienced a series of executive departures, including PayPal President Jeff Jordan.

Analysts are expecting earnings of 24 cents a share, up from 21 cents last year, when the company wasn't expensing stock options. Revenue is expected to be $1.41 billion, at the high end of eBay's guidance of $1.37 billion to $1.42 billion.

Microsoft using Amazon for Storage

Amazon has hit a home run with their Simple Storage Service (Amazon S3). Amazon S3 enables companies and developers to store and retrieve any amounts of data from the web inexpensively. Amazon announced today that companies are storing 800 million data objects using S3, including Microsoft Corporation. The fact that a company with the resources Microsoft has at its disposal is using S3 for storage underscores the economic advantages S3 offers:

"We needed a storage and delivery solution that made it simple, fast, and dependable for students in hundreds of countries around the world to download our software at any time," said Joe Wilson, Director of Academic Initiatives in the Developer Marketing division at Microsoft Corp. Microsoft wanted to scale the program up without any upfront or increased ongoing expenses, which is why it chose Amazon S3. Microsoft expanded the program while managing to cut storage costs by more than 90 percent since switching to Amazon S3. "In addition to being easy for our users, Amazon S3 allows us to deploy and scale up in a very cost-efficient manner," said Wilson.

Amazon has invested over a billion dollars in their technlology platform, and is now leveraging the scalability of that platform to extend their business model beyond e-tailing. Although Amazon doesn't break-out the financials of their Web Services Group, over time these efforts should be a much needed boost to their slim operating margins.

CNET to Restate Earnings

CNET Networks, Inc. announced today that it will be restating financial results for 2003, 2004 and 2005 earnings because it back-dated stock options granted to executives. The first signs of trouble came on May 24th when they issued a press release that the SEC was conducting an informal inquiry into its stock option grants:

On May 16, 2006, the Center for Financial Research and Analysis issued an analysis of stock option exercise prices relative to stock price ranges for certain companies during the period 1997 to 2002. The report identified CNET Networks as having granted stock options on four occasions between 1998 and 2001 with exercise prices that matched or were close to a 40-day low for its stock price. On May 22, 2006, CNET Networks announced that its Board of Directors had appointed a special committee of independent directors to conduct an internal investigation relating to past option grants, the timing of such grants and related accounting matters. The Special Committee is being assisted by independent legal counsel.

Today's press release states the preliminary conclusion of the investigation indicates that the measurements dates of some stock options grants between 1998 and 2001 "differ from the recorded measurement dates." That is fairly vague, but my guess is that the measurement dates gave the executives a better strike price than the recorded date. As anyone who's been granted stock options can tell you, you make the difference between the strike price typically determined by the average stock price of the grant date, and the market price at which you sell. The dates indicated covered a few years during the internet boom, and modifying the grant day by as little as one day could be very significant depending upon the number of shares involved. At any rate, c|net explicitly states "these charges are material."

C|NET's stock is already down 45% this year, and this is not the type of news that will provide much comfort to shareholders. Nonetheless, I doubt that the restatements will have much impact on their current balance sheet, but the real risk for C|NET comes in the form of litigation from shareholders. Might be a good time for C|NET to be sold.

Slave to the Box

I took a fresh look at the variety of tools and services Google now offers: news, maps, email, IM, calendar, in addition to the 19 different flavors of search they offer, and it's not clear there is a grand master plan behind all of this, but they're smart folks, so lets give them the benefit of the doubt and assume there is. However, what is clear is that Google has yet to figure out how to integrate the puzzle pieces into a complete picture. What do I take as evidence of this? Their homepage.

Their homepage is beautiful in its simplicity, but in what they gain in simplicity, they lose in promotional opportunities. Their homepage is all about the box, as it should be: that's a multi-billion dollar box centered above the fold, and it's clear that nothing should distract from it. The opportunity costs are simply too high, and none of their complimentary services comes close to competing with the cash cow that is the box.

So among all the services and products Google now offers, how do they decide what to put on their homepage? As an outsider, I can only speculate, but I do so by considering 1) What they've actually put there, their mission statement, and their sources of revenue. In reviewing these three, I've come up with the following criteria:

1. High revenue and profit potential

2. Directly related to their mission statement to organize the world's information and make it universally accessible.

3. User demand.

If you look at the 5 text links (excluding "more") placed directly above their search box, they all fit neatly into two or more of the above.

1. Images: Google first launched image search in the summer of 2001, and is second only to web search in the number of queries submitted. Meets requirements 1 & 2.

2. Groups: The new Google groups leverages what they began in 2001 of integrating the huge volume of data in the Internet's largest Usenet archive into a searchable format. You can search and read more than 1 billion postings in the Usenet archive, and create your own groups, mailing lists, and email newsletters. Meets requirements 2 & 3.

3. News: Google news launched in beta in September 2002, and came out-of-beta on January 23, 2006. They currently do not monetize news with ads, but I expect this will come eventually. Meets requirements 2 & 3 above.

4. Froogle: Google currently monetizes Froogle with sponsored links, but with the recent launch of Google Checkout, this could get interesting. The internet company that can dominate online search, shopping, and advertising wins. Google already dominates search and search advertising, and with recent enhancements to Adwords (image & video), they have a chance at dominating display advertising as well. I doubt that Google can dominate e-commerce - that's Amazon's domain, and what Amazon does is just too difficult to do and requires an infrastructure that Google would never invest in. However, Google Checkout is a huge threat to eBay, as eBay is simply a venue for sellers and consumers to exchange goods, which is a much simpler space to enter. If Google enable buyers to directly buy from sellers on Froogle using their Check-out, you could see a mass exodus of sellers from eBay to Froogle. That's a big if, and Google needs to figure out how to make the economics better for sellers than it is for eBay. I'll be watching and reporting on this closely as it unfolds. Meets requirements 1, 2, and 3.

5. Google Maps: Google maps is just too cool and even if they never monetize it, it's a feature that deserves space on their homepage. Meets requirements 2 & 3 above.

Adding in G-mail and calendars, it's easy to imaging Google redesigning their home page by a robust integration of these features into a portal-esque page that is completely personalized. Google's homepage could become the ultimate gateway into the internet, and could unseed Yahoo! as the #1 internet destination. As it is, they remain a slave to the box, and there is too much real estate they are foregoing to maintain this simplicity. Perhaps they are still waiting to create all the pieces of the puzzle, and then one day like magic they'll put all of this together and offer us a homepage worthy and reflective of the products and services they offer.

What will that puzzle look like when it's complete?

Google Warns Broadband Service Providers

As much as it was expected, it's still sad that the net neutrality provision didn't make it out of committee last week. It's time for the Internet Titans to start playing hardball, and Google indicated it's ready to do just that. Internet Pioneer and Google VP Vint Cerf said in a news conference in Bulgaria, that if they lose the legislative battle - which is like the case - they will take any abuse by the Telcos and MSOs straight to the Justice Department anti-trust division. On this Independence Day, let's hope our legislators in D.C. have the foresight to keep the Internet free and independent.