Google Analyst Day: Live Coverage

We covered the Google Analyst Day festivities live.  Notes below.

SAI Spreadsheet: Google Key Financial Metrics
Key Points:

  • New era of technology: “Cloud computing”
  • This change as profound as shift from mainframes to PCs (and bigger opportunity)
  • Microsoft was winner in old wave, we are winner in new wave (SAI take)
  • Search still just at beginning
  • Ad targeting still at beginning
  • Apps at beginning.  Starting to see interest from lots of big players.  Not just because cheaper, but because users want them.
  • Eventually, we want to get paid for the sale of products, not for “advertising”
  • Big consumer products companies 1% penetrated.
  • Next wave of enterprise adoption will be driven by individual users
  • Google focused on generating major enterprise revenue.
  • Did not back away from goal of becoming $100 billion company.  17% of way there already.  Will not stop when we get there.

Full coverage after the jump.

Eric Schmidt, Sergey, George 4:55PM:

More Vint Cerf hero-worship.  Mercifully short.
Google is at BEGINNING, not end.
The new model is “cloud computing”

Ads now have value in and of themselves.
Well-targeted ad is more valuable ad, etc.
That model should work in every market where there is targeting.
We are not done innovating search, not done on ad targeting side either.
Not done innovating Apps:

sharing…seems trivial, but profound
New cloud computing paradigm…makes so much more functional

Google Docs:
We are NOT trying to solve the problem Excel solves
We are solving the collaboration problem.
We all edit the documents together.
[At SAI, we couldn’t agree more–and we no longer use Excel]
Very big organisations are now adopting:
Price and flexibility… and USERS PREFER.
So not done with Apps yet either.

Sergey, George, Eric Take Stage for Q&A

Irrelevant question about how Navteq deals will affect map pricing.  Sergey kind enough to answer: It’s irrelevant.

Apps: Will you partner?  What about competitors?
Schmidt: This new paradigm (cloud computing) has created whole new opportunity that is bigger than PC.  We are worried about speed, not particular competitors.  We don’t even know what the big apps will be yet.

How fast will penetrate small businesses?
Schmidt: Don’t want to speculate.  We will help them.

Apps: Our presence in market has affected pricing (Microsoft lower, presumably).

Social Networking strategy?
Sergey:  Orkut is very successful, just not in US.  More generally, we don’t have to own everything that works on Internet.  We partner with 20 leaders–Myspace, et al.

Paid click trends?
Sergey: We have long meetings about this.  Very complex.  Geographic mix matters.  New advertisers vs. old.  How people control budget limits.  User interfaces matter.  When we dig deep, takes a long time to go through the explanation for any change.  We view as a physics problem: Why did click occur?

Revenue per employee…do you still care about that?
Schmidt:  What we care about is profit growth.  All other metrics in service of that.

Set top boxes?
We don’t need to own them.

We’re in good shape, but we don’t control the timing.

Display Advertising plans?
We’re buying DoubleClick for this. Our customers tell us they want this.  This is why we want to get app approved.

$100 Billion Company?

If we get there, we won’t stop there.

What are the components of that?  Percentages?
Enterprise very large.  Lots of products.  We’re nowhere there right now, and we can get bigger.  TV, Display huge, too.  Opportunity is just way bigger than “online advertising.”  Current mobile platform hasn’t really gotten going. It will.

US wireless carriers…how problematic is locked policy?
Fundamental issue: Not enough innovation.  Lock up is a problem–tremendous friction.  Different deals all carriers, all have different platforms.  Slows down innovation.  Europe way ahead.  GSM interop. Not locked.  Japan, too.  We need to get that here.  We don’t need to build out our own network…many avenues open.

New ad models?
We want to get to where we’re paid for sale.  “CPA.”  We’re close, but not there yet. 
We want to offer advertisers flex to pay however they want.  We can then optimise ads, publishers can display.

Dependent on browser for apps.  Will it evolve fast enough?  Javascript?
We’re optimistic.  Didn’t use to be.  Last few years, tremendous improvements.  And we’re trying to help with Google Gears, etc.  More and more will be possible.

Schmidt: A couple reasons to be optimistic: Finally some competition in browsers again.  Second, sea-change from old model to new model very compelling.  Developers complain very loudly.  I think both will help drive.  Will always be a limit to browser-centric model, but nowhere near that limit.

Only solution that works…we have copy of right product, when copy comes over, we kill it.  This has to happen, because problem only going to get worse. Necessary to have good ecosystem with high quality content.

Quality of applicants improves as we get bigger.  In June quarter, we had a bonus accrual issue (that drove overspending).  We are watching hiring carefully.

Europe: Why share so high of advertising dollars?  Current trends?
No current commentary.  We enjoy good marketshare in Europe.  We localised fast and produced high quality product.  We have spent lots of time getting to the 99% of languages used online.  Combination of lots of things.

Thank you!

[Comical Moviefone-like voice encourages everyone to check out the product demos in the lobby.  Samba music cranking…]

Internet Trends Session, 4PM-4:30PM

Internet emeritus Vint Cerf takes the podium:

1.2 billion internet users.
Asia 460 million users, biggest portion of world pie.  And only 12% penetrated
Europe next, 340 million, 42% penetrated
North America, 235 million, 70% penetrated.
Latam: 116 million, 21% penetrated.
Mid-East: 34 million, 17%
Oceania: 19 million, 55%    [Oceania?]
Africa: 44 million, 5%

Point: Growth is not in US. Google is global: 40 offices.  Engineering everywhere.  Our organisation looks like this chart.

Next 10 minutes of presentation largely a Lifetime Service Award for Vint Cerf.  Deserved, but irrelevant.  Philosophy of social networking.  Wow, games are big now.  Etc.  YAWN.  “People now advertise in Second Life!”  [Vint apparently asleep for last few years.]  In 1979 a terabyte of storage would have cost $100 million, today $600.  Storage costs going down!  New business models!  [Vint DEFINITELY asleep last few years].  OMG: “Change happening faster now”.  Analysts flew thousands of miles for this?

This is absolutely astoundingly boring, so we break for a newsflash:

MICROSOFT “WINS” FACEBOOK INVESTMENT: $240 Million at $15 Billion Valuation.  Google’s Tim Armstrong is apparently not streaking across Valley to make last-minute counter-offer.  Personally, we think Facebook blew it here, if only because Google actually could one day become a competitor (which they probably wouldn’t have if they’d had a piece of deal).  But maybe Google was just in there to make sure that Microsoft paid an astronomical sum for a crumb of the equity.

Back to the gee-whiz-this-Internet-thing-is-cool presentation:  Internet-enabled surfboards. “Billions of devices will be on Internet.”  First time we heard that–back when Vint apparently went to sleep: 1995.
Interplanetary Internet backbone.  Analysts collectively fuming.  Can they expense plane tix back to Google?

Q&A (thank God):

Q: What will Google do with wireless spectrum?
A: We don’t know.  Something cool, we hope.

Q: Comcast blocking BitTorrent…what think?
A:  Think very profound.   Never happened before.  Very important what regulators do.

Q:  Can Google replace Akamai?  What think of P2P?
A:  We’ve already replicated lots of info in lots of data-centres.  [we basically already have replaced Akamai]. 

Presentation over, thank goodness.

Jonathan Rosenberg, SVP Product Management, 1:15-2:15

1:17:     Promising to open kimono on google product development.  We’ll see.
1:19:    When engineers pitch internal ideas, have to “show demos”
1:20:   Give major responsibility immediately to rookies.  They tend to be ambitious because don’t know any better.  Try things we would never think of.  Leave “social networking” to young people who date.  JR doesn’t date.  Introduces product managers

1:21:    Jack Menzel, Brown grad, product manager Universal Search
Typical Google employee: brilliant, articulate, entertaining, polished, 12 years old
Introduces product with poem
Gives demo using Hillary Clinton: ranking, relevance, etc.  Not just “dumping it on you”.
Shares “existential crisis.”  Gives another boring demo.
[problem: demos are dull]
Will see greater improvements in relevancy, types of content, etc.
APPLAUSE FOR JACK!  Entertaining, but no useful news.

1:28:  Jessica Ewing, iGoogle
Recent grad from somewhereorother.  Pretty brunette, hooded sweatshirt, brilliant, articulate, etc.
[Typical crappy Real Networks player freezes webcast]
iGoogle demo.  Yawn.
New feature: Google Finance widget (sorry, “gadget”)
Inter-gadget communication: can sync with each other.
“Really interesting and powerful.” 
About “getting your content out there.”  Componentized web.  Mashups, personalisation.
Your content, the way you want it.

1:35  Albert Cheng, Google Trends
Recent Penn grad.  Red t-shirt.  Stern.  Serious.   “Demo, please”
disarming story about pregnant wife searching for baby name.
Couldn’t find good spelling of “Connor”.  So…went to Google Trends (poor kid)
Comparing hot-ness of product searches. 
Digital picture frames vs. American Girl dolls
If retailer checked, would have known hot trends.  Now updated daily.
Nissan/Honda example: Nissan can track searches stimulated by marketing campaign (very cool)
Bought co. called Trendalizer…now does macro econ trend search.

1:42   Keith Coleman, Gmail
Stanford grad, 3 yrs ago  (Stock was $300ish then, so he’s loaded).
Collared sweatshirt thing.  T-shirt.  Carrying stop-watch, using as prop.
New version of Gmail: “All about speed.”  Javascript.  Etc.
pre-loads, so super-fast.  Demos…
“Free imap!”  “Blackberry experience on any device”

1:49:  Rajen Sheth,  Apps
Stanford, 3 yrs ago.  Baseball hat.  Est net worth: $25 million
Going on about Gmail epiphany.
Innovation in consumer space, more than enterprise.
Demoing Google Spreadsheets (which we love–click link above to see example).
[another annoying screen freeze brought to you by Real Networks]
[Assume just more cool Google App demos.  They are good.  Microsoft is going to be disrupted]
Next: Calendar Gadgets
Rajen “schedules” going to movie (Uh oh)
Lastly, community.  Northwestern Video
These products NEVER FINISHED

1:57:  Paul McDonald,  Developer Program
Worked at Google for 4 years while going to college.  [Where do they find these people?]  Est. net worth: $30 mill.
Tries to engage audience with some sort of Pledge of Allegiance.  Bombs.  Moves hastily along.
Demo-ing API crap (I think).  Yawn.  This is FINANCIAL ANALYST DAY, people!

2:03:   Rami Bitar,  YouTube
Double masters degrees, graduated college age 9, etc.  17th birthday next week?
“Serendipitous discovery experience.”
Demoing “Related Videos”
“Social discovery”

[SAI’s Dan Frommer taking over coverage for next session…]

2:21: Aman Govil
Google Maps – Street view, API, “Maplets”
Most popular maplet: click and find distance between two places
Orbitz maplet: overlay hotel data on a Google map
Geosearch: find stuff on Google maps/earth — “Sightseeing in Madrid”
Bottom line: More searches = more monetization opportunities money!

Ads and Enterprise Overview – Panel
Moderator: Omit Kordestani, SVP Global Sales and Biz Dev
Nick Fox, Director Product Management
David Fischer – VP Online Sales and Ops
Tim Armstrong – President Advertising & Commerce, North America
Brian Axe – Director Product Management
Dave Girouard, VP/GM Enterprise

  • Nick Fox: Goal is to show best quality ads to users. Why do we care? Best ads = best clicks = money.
  • Some ads are so bad we don’t show them at all!
  • Running dozens of ad-system-tweak experiments at all times.
  • David Fischer: Next billion dollar opportunity is core search product. Lots of growth left.
  • [So far light on content, heavy on back scratching.]
  • Tim Armstrong looks distracted. Something on his mind?
  • Brian Axe: Social networking lower monetization than content sites. Segmenting audience is key.
  • Dave Girouard: Big trends: Consumers now have access to same tech as enterprise. Tech at work not nearly as inspiring at work anymore. Chinese wall between consumer/workplace tech. Doesn’t make sense. How can channel consumer innovation to enterprise?
  • Nick Fox: Ads quality has gotten a lot better in the last 2-3 years. Long tail! 10x more ad system changes/improvements over span of time than a few years ago.
  • Fischer: When launched AdWords, every ad submitted manually reviewed by a human. Today, 80%+ automated.
  • Demo: Gadget ads. Live traffic map in background of Nissan ad. Mini-mashup!
  • Girouard: Google apps popularity growing among large businesses. Huge numbers of universities. ‘Thousands’ piloting, hundreds rolled out. Hook ’em at school, keep ’em when they’re CIOs! 20-30 pilots with huge companies.
  • Q&A: How aware are you about revenue, Street estimates? Nick Fox: Huge amount of knowledge about how changes will impact revenue, user happiness, etc. Completely insulated from external expectations. We don’t adjust how we serve ads to please the Street.
  • What inning of baseball game are we in for search ad monetizing? Fox: Stay away from predicting innings — never know if you’re going to go into extra innings. (Giggles from the audience.) Probably in earlier inning internationally than in U.S. Lots of upside for additional gains in CTR, CPC.
  • Armstrong: Wife looking online for how to get chocolate milk off Oriental rugs. Not enough ads! Room to grow in search, brand ads, offline.
  • [Stepped away for a few. Google breaking for lunch. Sessions resume at 4 p.m. EDT.]

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