Is it just Yahoo or is there an ad glut?

This is a column I wrote that ran in the Technology section of the Globe on Thursday, and on globetechnology.com

The exclamation mark in their company’s name must really bug people at Yahoo! sometimes — like when the CEO announces that Yahoo’s profit fell almost 40 per cent in the most recent quarter, as he did Tuesday. That’s not exactly something to get excited about (unless you sold the stock short six months ago, of course, in which case you’d have every reason to celebrate).

Why is Yahoo doing so poorly? The company says on-line advertising growth is slowing, and that profit margins on those ads are also slipping. That isn’t just bad news for Yahoo and its shareholders, it’s potentially bad news for all sorts of people, including those who work at other on-line advertising-dependent companies (such as Google and MSN), and those who own shares in such companies.

Just a few years ago, people were debating whether on-line advertising would ever take off and become a real force in the market. Take off it did, thanks in large part to Google. Unfortunately, however, it became such a hot property that everyone jumped into it with both feet, counting on continued growth in on-line ad spending to provide them with a business model.

There are signs emerging — and Yahoo’s announcement is one of them — that this may have caused an on-line ad glut, exacerbated by a slowdown in spending on the part of financially strapped car makers and other prominent ad buyers. That in turn has had a fairly predictable effect on prices. All of which is great if you’re buying ads, but not so great if you’re selling them.

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Google bears emerge from the woods

It’s nice to see a couple of brave voices suggesting that Google, which has climbed by almost 400 per cent since it went public less than 18 months ago, might be a little overvalued — or at least “fully valued,” as analysts like to say when they’re trying to be cautious. Are they right? That remains to be seen. But it’s difficult to feel comfortable with a stock (particularly one with such a short track record) when almost every analyst that covers it has a “buy” or “hold” rating.

Small companies can grow as quickly as Google has and not hit any speed bumps or potholes, but a company that goes almost straight up from a market value of about $22-billion to one of almost $130-billion is doing the equivalent of driving an ocean freighter at the speed of sound. Bumps are inevitable. When analysts are uniformly bullish, many investors take it as a contrary indicator — and they are probably right to do so. Such an atmosphere suggests that whatever weaknesses or risks there might be (and they almost always exist) are being either ignored or glossed over.

Could Google be the Web equivalent of Wal-Mart, which went from being a small, regional retailer to the biggest company on the entire planet? Sure it could. But it’s unlikely to get there in two years when it took Wal-Mart two decades. The Internet is fast, but it’s not quite that fast. And that’s why it might be handy to know about some of the potential speed bumps in advance.

Please read the rest of this column in progress at globeandmail.com

Apple and the future of music

Here’s a column I’m working on for globeandmail.com:

Once an also-ran in the computer and personal electronics game, Apple Computer is now one of the superstars in that universe, thanks to the magic combination of a sexy and user-friendly music player — the iPod — and a profit-spinning online store called iTunes. The company’s handhelds have more than 80 per cent of the market for digital music players, and Apple’s financial performance has also been supernova-like: in the fourth quarter, the company’s profit more than quadrupled, and it had sales for the year of $14-billion (U.S.).

The market is looking for even better things in the future — all eyes are trained on Macworld this week, where Apple CEO Steve Jobs is expected to announce a number of new products. Among other things, the rumour mills have been churning out talk about an Apple Mini-style PVR, or personal video recorder, or even a kind of digital-media hub for the living room. Some have even speculated that Apple could launch a high-definition TV with a built-in computer.

Along more prosaic lines, the company is expected to announce Intel-powered laptops, an upgrade to the iPod Shuffle (perhaps adding a screen) and a new video player. Some or all of these products might — and no doubt will — find a ready market. But could Apple be sowing the seeds of its own failure, by pinning its success on a proprietary product, much as it did in the past with the Macintosh?

That’s the controversial argument being made by Clayton Christensen, the author of a well-received book called The Innovator’s Dilemma. Mr. Christensen told BusinessWeek magazine recently that he’s afraid Apple might be making some of the same mistakes it did with the Mac, by not opening up its products and software. Apple fans will no doubt scoff — after all, this isn’t the Mac we’re talking about, but a product with 80-per-cent market share. Still, it’s an argument worth considering.

Please read the rest of this column at globeandmail.com

Hey Sony — wake up

Here’s a column I posted at globeandmail.com about Sony’s DRM rootkit fiasco:

“For a company that has so much great technology behind it, including a number of firsts like the compact disc and the portable music player, Sony Corp. often seems to behave more like a dinosaur — and a slow-moving, club-footed dinosaur at that. A case in point is the company’s recent ham-handed attempt to protect some of its music CDs by installing anti-copying software on its customers’ computers. A simple thing, you might think. Plenty of other companies do it. Sony, however, has managed to turn what should have been a non-event into a public-relations disaster, one that has helped to cement its reputation as the technology giant with the best technology and the worst execution.

The company has said that it will stop using the “rootkit”-style copy-protection software — first discovered and publicized by Mark Russinovich on his blog — but the damage has already been done. Not only does Sony look stupid as well as sneaky, but a list of the artists whose CDs have been “protected” by the company’s technology has been published far and wide. Is anyone going to rush out and buy those particular discs, or are they going to stay as far away from them as possible? If I were an artist with Sony Music (such as Canada’s Our Lady Peace), I would consider asking the company to compensate me for the effects of its reverse PR.

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Column: Call it YahooVo?

Here’s a column I posted at globeandmail.com about rumours that Yahoo might acquire TiVo:

“In what was no doubt a welcome ray of sunshine for shareholders of TiVo, the maker of personal video recorders announced a deal with Internet portal and search engine company Yahoo, which will allow TiVo owners to click a TV listing on Yahoo’s pages and automatically record shows on their PVR. This gave a small boost to TiVo’s somewhat beleaguered shares, but unfortunately the warm glow of the deal didn’t last for very long — the shares lost ground on Tuesday, the day after the announcement, and are still down by more than 50 per cent from their peak early last year.

Not surprisingly, the deal with Yahoo renewed the speculation that TiVo might be an acquisition target — if not for Yahoo then for Google, or Microsoft, or AOL, or maybe your Aunt Phyllis (that last one is just a joke). It might be stretching things a little to say that behind every TiVo takeover rumour there stands a disgruntled shareholder, but at this point an acquisition of the company seems to be about the only thing that might breathe some life into the share price. Although it more or less invented the PVR market, TiVo hasn’t been able to capitalize on that “first-mover” advantage, and so has been forced to watch the world pass it by.

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