November 2007 Archives
An update on the Google bid for the prime 700 MHz auction is that they intend to go it alone. With cash and short term investment of over $13 billion, there's no reason to upset their partner circle by choosing one over another. They can buy the spectrum and spend the additional $3 billion to build the network, of course they would need to find someone who knows how to do it. Google has been operating a network using a test license from the FCC and is currently running Android devices over it. It is thought that they are experimenting with pricing models that include a one-time licensing fee with no monthly access charges. The handsets would be subsidized by advertising. A single 700 MHz tower can cover 20 miles so expect to see an explosion in rural mobile Internet no matter who wins. Google has indicated they are using game theorist to help with their auction strategy. There is some good information on Google's public policy website.
If you read and study the way the auction works, Google has to bid but they don't have to win to give consumers a 2/3 chance to win. By not bidding however, they cannot get the auction to include open devices & applications, which is what they've been pushing for. If they back out, the FCC would put up a new auction at the $4.6 billion reserve with no open requirements. The FCC could also raise the reserve to $4.7 billion and see how green Google's money is. If they squawk and pull out, then a 3rd auction can be made with no restrictions at the $4.6B reserve. This is why they need game theory specialists. My prediction is they will bid but will not be extorted to overpay. If the requirement gets in, they can still influence the wireless business and continue to cause disruption, that's a good thing. I've speculated on other activities of Google possibly working with Apple. They could also wait for additional shakeout in the space and make a run for Sprint. The big telcos, AT&T and Verizon, want that spectrum for mobile TV. The traditional carriers know how to play this game, Google is the newbie. A Google spokesperson said "Our goal is to make sure that American consumers have more choices in an open and competitive wireless world." Next thing we'll see is Eric Schmidt kissing a few babies. They are only doing all this for us.
Not to be outdone by Microsoft, Google is also facing scrutiny from the European Union for its proposed acquisition of DoubleClick for $3.1 billion. EU officials claim that the combination of the two companies puts Google in too much control of the online advertising market. The EU probe has a deadline of April 2nd to determine if they will limit competition by buying DoubleClick. Google is of course crying foul because the bulk of the complaints come from Microsoft and Yahoo. Microsoft recently came out of a very expensive and long EU investigation. It's all part of being one of the "big" players ... big oil, big tobacco, big blue, big search. I don't see this to materially affect Google in the long term as they can probably show that there are other advertising serving engines out there. As discussed here before, I believe the whole advertising model is changing from "search" to "find me" anyway. At least we can still go 220 clicks on the E40 from Frankfurt to Berlin ... so much for the information superhighway.
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The Wall Street Journal reported today that Sprint-Nextel and Clearwire are abandoning their plans for a nationwide WiMax network that would have reached 100 million people by the end of 2008. The departure of Sprint's CEO, Gary Forsee presumably complicated the closing of the transaction. This is a real blow to the burgeoning ecosystem being created around WiMax. There were great expectations from the recent WiMax Forum with regards to Sprint's Xohm service that was expected to be available in mid-2008. Perhaps Sprint's investors want to see them improve their overall revenue picture before launching down a $3 billion+ CAPEX road. This is a major setback to Craig McCaw's Clearwire. One option under consideration was a spinoff of Sprint's WiMax business and merging it with Clearwire. I'm not sure Clearwire can make it on its own because estimates of infrastructure build out costs continue to increase (from $600M to over $1 billion). Sprint also has been working to get things going with Google, although nothing has been launched. Sprint is without a leader and clearly that affects their ability to get strategic deals completed. Don't be surprised if other companies in the supply chain come with investment money to help Clearwire survive - Intel, Motorola and Samsung to name a few. The shakeup of the weak WiMax players is well underway.
Facebook announced today a brilliant new advertising system designed to unlock the trust factor of friendly recommendations to promote products and services. This is the new model discussed here before where we move from an Internet of Search to an Internet of "Me." Facebook CEO Zuckerberg gave a speech to about 200 advertising industry executives today in New York. He said you have to get your message out to the conversations, not just push them to people. This makes sense because every marketer knows the more targeted the audience, the more likely they will respond to your offer. There is another dimension to this model that makes it extremely powerful - the ability to tap into the dynamic nature of the social network itself. This is accomplished by attaching an advertising message to viral alerts generated by users doing everyday "facebooking." This includes writing reviews, shopping online, selling with auctions and the like. We have more than just a game of Web 1.0 "eyeballs." Facebook (and Microsoft) want "qualified" eyeballs with the pocketbooks ready to buy what their social graph says they should be buying. Nothing sells better than the recommendation of a friend. Nick O'Neill has some good information on what Facebook Ads offer to advertisers. The "Landmark" partners include an impressive list of top tier consumer companies. Facebook will try to beat Google at its own game. But don't count Google out yet, there's much more on the way. Oh, and I've finally added the word Facebook to my dictionary so the spell-checker will stop flagging it. We're in for long haul now.