Yahoo, How Do You Make Money?

Since Jerry Yang announced he is stepping down as Yahoo CEO, pundits have been pouring out advice for his yet-to-be-named successor. Most center around strategy, as in "it would be good to have one, articulate it clearly, and rally your troops around it." Some I have read even claim Yahoo has a strategy, opening its myriad services to developers in order to spread their use hither and yon.

Sadly, even if this is and will be the strategy, it is woefully incomplete.

Some years ago, I was working on a presentation for a company that was being acquired. We wanted to tell our story as clearly and succinctly as possible to the board of the acquiring company. After much debate,we included a slide simply titled "How We Make Money." In a few bullet points, it made clear how our great strategy was monetized. The acquiring board paid much attention to that portion of the presentation.

When you are as big and well established as Yahoo, this is essential, else you have no credibility. You cannot get away with keeping score by eyeballs. Income and earnings matter. So here is my advice to the next Yahoo CEO. State your strategy clearly and succinctly, and explain exactly how you'll make money executing it. Rallying the internal and external folks around it will be lots easier that way.

Republicans Win Land, Democrats Win People

Take a look at Newsmax.com. Newsmax displays a great map that shows the 2008 presidential vote county-by-county. There is an awful lot more red than blue. That's because John McCain mainly won sparsely populated, primarily rural counties all over the country. Barack Obama, on the other hand, mainly won in cities and their suburbs. Obama won where the people are; McCain won where people are scarce.

This was not because of a huge youth vote or black vote. These two demographic groups of voters were actually up very slightly as a percent of the electorate as compared to 2004. (The Washington Post reports that, based on exit polls, black voters made up 11% of the electorate in 2004, 13% in 2008; for young voters the figures are 17% in 2004 and 18% percent in 2008). If you take out the rural vote, the Obama victory cut across virtually all demographic groups.

In our democracy, people count in elections. Land doesn't vote. And, since the trend is towards increasing urbanization, the Republican challenge should be clear.

Microsoft Adopts Web 22

Two years ago, in a post entitled Web 22 - Where Everybody Has A Share, I imagined a future in which we'd get beyond merely giving things away to attract online eyeballs. Instead, I proposed Web 22, where we pay people to come to our sites and click on stuff. 

This business model was actually perfected in World War II and documented by Joseph Heller in his novel Catch-22. Milo Minderbinder, whose Nobel Prize in Economics is long overdue, is the genius behind this business model. He explains it to Yossarian, who is puzzled about why Milo buys eggs in Malta for seven cents and sells them to the mess hall for five cents, that he actually makes a profit because "everybody has a share."

Well, it seems that Steve Balmer, who almost "missed the internet" and has been playing catchup ever since through the Web 1.0 and Web 2.0 eras, has decided not to be late to Web  22. The Softies recently announced two programs that pay you to use their search engine, Live Search. The Live Search Cashback program pays you to search for products using Live Search. Live Search Perks awards you virtual tickets for each Live Search, that you can redeem  for prizes.

This is, of course, another desperate attempt to yank search share away from market leader Google. It is another in a long line of flailing actions taken be a company that ought to forget about web search, online advertising and its Yahoo-like collection of disparate web properties. Microsoft needs to focus on what Ray Ozzie is working on, cloud infrastructure (the recently announced Azure) and applications seamlessly linked to a wide range of computing devices. That is what the internet means to Microsoft, the means of delivering operating system services and applications analogous to Windows and Office to masses of users and developers. 

Microsoft should focus on monetizing these new offerings in innovative ways. Sure, some of that may be via ads, which they should cheerfully place through Google. But I did say "innovative" and the ability to truly innovate seems to be in short supply in Redmond.

Pick-Me-Ups and Tide-Me-Overs

As our family knows, my wife and I make a sharp distinction between a pick-me-up and a tide-me-over. It struck me that this would be a useful analogy for what is happening with the federal economy bailout, oops, I mean rescue.

A pick-me-up is a snack you have when your energy is low and you want to give yourself a boost. My wife and I have a pick-me-up most evenings, as we find ourselves fading sometime between dinner and bedtime.

A tide-me-over is a snack you have when you expect that a meal will be delayed and you want to have some extra fuel to span the gap. I'm particularly sensitive to eating on schedule, so I use tide-me-overs to prevent grouchiness when I know a meal will be significantly delayed. My wife, who is particularly sensitive to my grouchiness, is vigilant in advising me when she thinks a tide-me-over is called for. 

The essential point about a tide-me-over is that it is preventive. You don't wait until you run out of gas; if you do, then you need a pick-me-up. But you can rarely be certain you will actually need a a tide-me-over. You may not find your energy flagging even if a meal is late. Or the meal may arrive earlier than expected. So you could save the cost (however you measure it: time, money, calories, whatever) of the tide-me-over, and instead count on having a pick-me-up only if and when the need actually arises. Note that this does not factor in the potential loss of the pleasure from the missed tide-me-over, which may be yummy.

My experience is that pick-me-ups are usually more costly than tide-me-overs. I'm quite hungry when I find myself needing a pick-me-up, but not nearly as hungry when I indulge in a preventive tide-me-over. And when the meal arrives, I often enjoy it less after a crash pick-me-up than after a well-timed, modest tide-me-over.

So where is our economy? It is in desperate need of pick-me-ups. Companies (and many families) are running out of money and now are desperately hungry for cash. Worse, many cannot figure out when the next meal, that is, a recovery, will occur, especially as the financial news gets worse and worse. 

Now, some companies (and families) that use a tide-me-over strategy are better positioned to withstand the downturn than those who eschew preventive action as a disdainful, wasteful practice of the faint-at-heart. Now the latter folks are begging for massive pick-me-ups.

I'm not optimistic about lessons being learned here. Human nature is more tuned to pick-me-ups than tide-me-overs.

Maybe we should just put my wife in charge. She has an uncanny knack for knowing when a tide-me-over is due.

Curling Up With Bookman's Kindle

Sometime last century (I just love writing that), I was part of a group of tech company leaders assembled by a market research firm to explain the internet to them. This was in the early days of the Netscape-Microsoft browser wars. My big contribution to the discussion was in answer to the moderator's question: "Will people read books online?" I said, "It's hard to curl up with a good computer." It got a good laugh, and the marketers loved it because it was short and sweet and they understood it.

A bit later, the same firm asked me to give them my opinion of a device that was not yet on the market. It was a gadget with the sole purpose of reading electronic books. Though the identity of the manufacturer was kept secret, I was told that the thing would be called The Bookman. This time, my big contribution was to tell the very serious Japanese interviewer that it was a bit ironic that the device and I had the same name. He expressionlessly ignored that comment. When Sony later released The Bookman, it proved to be a device ahead of its time.

Which brings me to the Amazon Kindle. When my son gave me one as a gift nearly a year ago, I was a bit skeptical. I recalled how clunky the Sony Bookman and other equally unsuccessful clones were. But I was willing to give it a try, and now I'm sold.

The first generation Kindle is almost great. It is the right size (that of a large paperback), light, and has great battery life. The screen is incredibly crisp and readable in varying light conditions. It can store more books than I'll ever need to carry around at one time. The Amazon Kindle store makes it a cinch to order and instantly (I mean in a few seconds) download books without hooking up to a PC or doing anything to connect to a network except turning on the network switch (which you otherwise keep off to save battery life). This is truly like magic. You can also order Kindle books on a PC if you wish and then flip on the Kindle to download them. And you can upload other documents, though I have never done so.

I now prefer reading an e-book on my Kindle to a physical book. But there are some limitations. You really cannot give an e-book to someone else to read. The controls for turning pages are too big, which means it takes some practice to learn how to hold a Kindle without accidentally turning pages (this, I am led to believe, will be fixed in the next generation Kindle). And I'd love a button to press to get the time (I don't want the time displayed all the time, that would be distracting, but when I read I get absorbed and it'd be great to be able to do an instant time check).

But these are minor gripes. On the other hand, it's great to have instant, automatic bookmarking. And to be able to search in a book. And to have all the books I might read on a long international vacation in one light device.

So, yes, this Bookman now curls up with his Kindle. And loves it.

Netbook Versus Notebook

Buried in the buzz about Windows 7, the recently announced successor to (well, actually, refinement of) Windows Vista, were the low end requirements for this next Microsoft OS. The specs make it clear that Win7, unlike Vista, will run on the new class of ultra-portable computers, the Netbook.

Netbooks have been around for awhile, but there is a lot of confusion about what a Netbook is, and how it differs from a Notebook. Evidence for this confusion is the higher rate of returns for Netbooks as compared to that of Notebooks. So let's look at what distinguishes one from the other.

The first thing most of us have to get over is that most people call Notebook computers laptops. The term Notebook is pretty much used by the tech industry and usually refers to a set of specifications that are now industry standard. So for all intents and purposes, Notebook is the technically correct term for a laptop.

Notebook computers are full-fledged PCs that are portable. They can do everything a desktop PC can do, and in a few years may well replace most desktop PCs.

Netbooks are designed for ultra-portability with a focus on web-based computing. These are not the NCs (Network Computers) Larry Ellison and Scott McNealy dreamed about a decade ago. Instead, they are full-fledged computers running full-blown operating systems (usually Windows XP or Ubuntu Linux). Here is how a Netbook differs from a Notebook:

• Much smaller-easy to carry in one hand
• Much lighter
• Much smaller screen
• Much smaller keyboard
• Less storage-means less room for music, videos, photos, applications and games
• Less processing power-means they do not run many desktop applications and games well
• No DVD or other external drive-cannot pop in a movie, cannot easily install a lot of software
• Longer battery life-at least four hours, often as much as twelve, as compared to two to four hours for Notebooks
• Low price-$300 to $500

Notebooks are designed for web-based computing. They are great for browsing the web and running online (cloud-based) applications and games. While they are full-fledged PCs and can run desktop applications, they often do the latter quite slooooowly. They are more limited in what the can run, store and hook up to.

That Windows 7 will run on Netbooks further puts the nail in the PDA coffin, as cell phones take over their functions from one side and Netbooks do so from the other.

I think most returns of Netbooks are by those thinking they could do everything a Laptop could do, and just as well. Not so.

Some footnotes:

• Apple has not yet entered the Netbook market. The expectation is that they will do so with a game-changing design, much like the iPhone changed the cellphone game.
• Returns of Netbooks seem to be skewed to those running Linux, which may be because of buyers expecting Windows capability.

Will Yahoo Ask Obama For A Bailout?

First, Yahoo CEO Jerry Yang turned up his nose at a buyout offer from Microsoft that was stunningly generous.

Then he turned to Google for a cockamamie advertising deal.

Then Google, not a company known for turning away from a legal challenge, got cold feet in the face of federal antitrust concerns (conspiracy theorists who claim Google made the offer knowing they'd have a later excuse to withdraw, just to further distract and decimate rival Yahoo, please go back to political blogging).

Then he turned back to Microsoft, with the epiphany that the Yahoo brand would be real valuable to the Softies and, gee, he'd love to sell out to them. (Yang described the Yahoo brand as a "consumer brand that allows people to get what they want on the Internet." He did not use the P (portal) word, but that's what he meant. See my 10/29/2008 post "Portal, Schmortal" or my 11/22/2006 post "Peanut Butter Portals." )

Then Steve Balmer said, gee, thanks but no thanks.

So here we are. Yang has told the world, and his demoralized employees, that Yahoo is hopelessly lost wandering in the internet desert if left on its own. Will Yang next try to convince the feds that Yahoo is too big to fail and seek a federal bailout? Wait, I got it! Jerry, quick, buy struggling Tesla and then join GM, Ford and Chrysler at the federal money trough.

Save! Spend!

We all need to spend to get the economy going again.

We all need to save to give America a sound capital base.

Spend more and save more. How, you may ask, do I do both?

There is only one answer. Make more.

Let me expand on each of the above. The first is easy. As I said in my October 24 post, businesses and individuals are all responding to the economic crash by cutting spending. That makes the slowdown worse, so governments around the world are using the Keynesian formula for shortening the depth and breadth of the downturn: deficit government spending. But that effort cannot last and ultimately we all have to start spending again. The theory, to which I subscribe, is that targeted government spending can pump enough money into our pockets to kick-start economic activity. So, okay, when you have more cash (and confidence), you'll likely spend more.

But there is also a structural problem here in the USA. We have pretty much stopped saving. Not only has the federal government been piling up trillions of dollars of debt, companies and consumers have been doing likewise. This debt has been financed by Japan, China and OPEC. This too is unsustainable. If our savings rate rose to just 5%, which is low by historical (though not recent) and worldwide standards, we'd be able to fund much of our own annual national debt and stop borrowing trillions abroad. That means we lend the money to each other and interest is earned here at home, thus it is spent and saved at home.

History shows us how to make more so we can both spend more and save more. It is not through inflation. That route only makes it seem like we are making more, but we then find our spending buys less, so, oops, there goes the ability to save. Instead, we need to increase productivity. When we are more productive, we make more in terms of real spending power and thus can generate personal surpluses, otherwise known as savings.

Now, sure, we need to change our bad habits. We need to restore the virtues of thrift and sound personal financial management. But we don't need to get all tied up in a new culture of austerity. We do need to get focused on a new culture of productivity.

Productivity is about better education for all. It is about healthier workers (i.e. good health insurance for all of us). It is about availability of capital to businesses and consumers, with a proper balance of cost and risk. It is about government policies that encourage the development of new technologies, the true driver of high-paying jobs in the 21st century. It is about tax policies that reward both labor and capital investment. It is about balanced regulation evenly enforced.

Let's get back to growth by focusing on productivity. For the long haul.