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<< [ Acts of Omission ]   |  Meeting Over a Cup of Java  |   [ Seeing Is Believing ] >>

Weekly Column

Meeting Over a Cup of Java: Some Thoughts on What's Behind This Week's Sun/Google Announcement, Plus a Promised AdWords Update

Status: [CLOSED]
By Robert X. Cringely
bob@cringely.com

Sun and Google stood together in front of the press this week and said, well, not much at all beyond Sun bundling Google's toolbar with Java. Can this all be just to keep me from writing about AdWords? No, but it represents the quiet beginnings of a battle for the hearts and minds of computer users everywhere. The key players are Google and Microsoft and the stakes are high -- leadership of a $1 trillion industry. What's not clear to me is why this week?

Let's look at the players, their ambitions and expectations. Microsoft and Google are at polar extremes while Sun is in the middle -- at least on paper the ally of both. Microsoft paid for Sun's friendship with a $1.95 billion settlement of Sun's anti-trust lawsuit. In addition to getting Scott McNealy off his back, what Bill Gates was buying with all that cash was an interoperability agreement with Sun. In this case, Sun was viewed by Microsoft as a proxy for the broad range of Internet technical standards. Sun is Microsoft's Rosetta Stone with the idea that even the Open Source guys can't afford to be non-interoperable with Sun, so committing Sun to Microsoft interoperability is, in effect, a "get out of jail free" card, protecting Microsoft from future technical zigs and zags at the IETF.

For its part, Sun likes the money, Sun COO Jonathan Schwartz is a believer in staying close to your friends and closer-still to your enemies, and there's still a glimmer of hope at Sun that the Microsoft agreement could backfire and actually make Microsoft more vulnerable.

That's where Google comes in.

It's no surprise that Google and Sun would be friendly. After all, Google CEO Eric Schmidt spent most of his career at Sun. When I interviewed him as CEO of Novell all he could talk about was Java, which is hardly a Novell strength and may explain why he's no longer jetting to Provo. So Sun and Google speak some of the same language, though Google definitely has the mojo, which is to say Google is perceived by Microsoft as its clearest competitor. To make any inroads against Microsoft, Sun NEEDS Google.

What's funny about all this is that it all comes down to Sun's old mid-80s corporate slogan: "The network is the computer." For all three parties, the network -- in this case the Internet -- is at the heart of any and every future product.

It is popular for pundits in the general press to see this coming conflict as one of Microsoft (representing traditional desktop computing) versus the Internet (embodied by Google). This is simply not the case. It is all about the Internet.

Microsoft doesn't want to lose the desktop, true, but the way they see to maintaining monopoly power is by dominating the Internet. The desktop will only follow.

I got a hint of the future this week when a techie came up to talk with me after listening to a speech I gave in Florida. At issue was how much longer Microsoft Word's dominance of the word processing application market would last. By adopting XML as the Word file standard with that product's next release, the guy maintained, Microsoft was throwing away its leadership role. They couldn't truly own the file format anymore, so their stranglehold over the market would naturally go away.

Well, Mrs. Gates didn't raise no stupid children, so all I can wonder is what's really at work here? On that very same day Microsoft further embraced Adobe's PDF file format for Office documents, which would seem to be yet another uncharacteristic bonehead move. Only it isn't.

At Microsoft, the key is keeping your eye on the target, and the target is ALWAYS the same -- profitability and earnings growth. Technical standards are nice and can be very useful to control, but not if it is costing you money to do so. Microsoft has beaten that old .doc horse as far as it can go, so it is perfectly logical to give it up in favor of a new, fresher mount.

Microsoft's corporate goal so far this decade has been a move to deterministic income: They want to RENT us our next copy of Office and probably Windows, too. And why not? The Longhorn release debacle shows that big releases and forced upgrade cycles have become simply too complex and difficult to continue as corporate policy. Microsoft needs to find another way to get regular piles of our money.

Windows Vista, nee Longhorn, will arrive on schedule next year and with it, I'm guessing, will be a new version of Office, only this time it will be Office.net -- a much lighter application reliant on back-end Internet services. Turn off those services for more than a few hours and you'll cripple Office. Same too for the new security structure promised in Vista: Stop staying current and IN-security will rapidly follow. The new products will look cheaper, but the area under the Microsoft revenue curve will continue to increase. We haven't for years actually OWNED any Microsoft products. We just own a license to use them. Well soon we'll LEASE a license to use them.

And this may not be bad. Certainly, it will feel more comfortable, at least until Microsoft shows itself to be unworthy of the trust they'll be asking us to give.

At its heart this is a plan to completely circumvent Open Source, to take it completely out of the desktop game while giving Microsoft additional advantages on the server side. This lofty goal deserves a column all to itself and I'll get to that in a couple weeks.

But in the meantime there's Google, which is perceived by Microsoft as its only worthy opponent. It is Microsoft's expectation that Google will launch an Office suite of its own based on Open Office and just as heavily-dependent on Google-labeled back-end services. Maybe, but I think that's underestimating Google.

Google most likely WILL launch a variety of Office-like services that can be accessed through a browser. There will probably be official links to Open Office and Star Office for those who have those products, but the truest form of the art would be to eliminate the traditional Office front-end entirely.

The goal is making the desktop operating system a non-factor. Windows? Linux? Mac? Symbian (remember that one)? What's behind Door Number Three? It won't matter.

At its heart this is a battle between quite similar standards with Google taking Javascript to its limits through a constant interaction of light processes that ought to bring the browser to life in whole new ways versus Microsoft's reliance on the heavy-lifting of XML. I've written before about what I perceive to be XML overkill (it's in this week's links), but the key difference here is between a light app (Office.net) and a NON-app (Google Office).

"MSFT is hobbling on one leg and AJAX is going to kick out the other," a Google programmer once told me.

What's in this for Sun is infrastructure. At the least they'll sell some hardware to Google and probably even make their $1 per processor-per-hour server farms available for Google Office overflow.

There are no losers. Competition is good for everyone. Nor is there an obvious winner. Microsoft is entrenched in corporate America and that won't change for years, which I'm sure Google is counting on, because if we all shifted overnight, they wouldn't be able to handle the load. But the greatest limitation on my ability to call a winner comes down to my own lack of imagination in forseeing future web services, because that's where the action will be. The rest of this decade should be very exciting.

Now back to Google AdWords, which I wrote about two weeks ago (it's in the links) and promised an update today. To review, a friend of mine conducted some AdWords tests in an effort to fine-tune his yield as an already successful advertiser. He set up a parallel account using the same ads that had worked well before and found that raising his bid-per-word helped sales to a certain extent, but then reducing that bid led to a precipitous decline BELOW the level of clicks-through that he was getting all along with his original site at a significantly lower bid. What gives? I asked. Was Google punishing him for lowering his bid in this controlled experiment?

Readers weighed-in, generally cautioning that the experiment wasn't at all controlled because the new site was new. If it and the original site were exactly the same age then it might, indeed, control for time effects, but as it was presented the experiment was probably just showing that the AdWords algorithm somehow gives preference to sites with longevity.

Other readers took exception to the idea that a single experiment could show any reliable results. Give then 100 or more experiments, they said.

For his part, Google VP of Engineering Jeff Huber offered to help:

If you or your friend would be interested, we'd be happy to take a closer look at the behavior experienced and help understand what might be going on. I can vouch that we do take our company motto of "don't be evil" very seriously, and we work very hard to ensure that our advertisers get great return-on-investment for the money they spend with AdWords.

So, on further thought and without specific data on the account(s) involved, here are some potential non-evil explanations of what might be happening:

1. ad position does have non-linear behavior -- higher position ads tend to get a multiple of clicks of lower position ads,

2. auction dynamics can change if any additional entrants/competitors began in the period (it is very dynamic -- think of a marketplace that does many multiples of daily transactions of the NYSE or NASDAQ),

3. end-user perceived quality, as measured by ad click-through-rates, substantially affects ad ranking (more than bid price, in fact; we hope & believe that our emphasis on end-user quality & relevance is fairly non-evil :-)

4. in some areas there can also be a "brand effect" to end-user perceived quality, where users will choose brands they recognize & trust more; if your friend's established business has established brand effect in his/her segment, it could be getting higher click through rates, and therefore getting higher/better placement and more traffic, with lower keyword bids,

5. we also strive to provide diversity of high quality ads for better end-user quality; if the ads in question were pure duplicates (e.g., in destination URL) attempting to show on the same end-user queries, they may get a lot less traffic than the original account/campaign (which has an established history & track record of high quality)

And there may be others. With more data from the accounts in question, we should be able to tell a lot more. If you'd like to connect me with your friend, we'll take it from there -- all we'll need is account ids/e-mail addresses from the experiment.

Thanks, Jeff. This is Bob again. I wanted to include his complete response out of fairness to Google.

My friend preferred not to have Google help him with his experiment, which by the way was one of 17 experiments based on well-established research methodology. What was so peculiar about his results was that the market in question has very little competition so both of his ads (and those of his single real competitor) were nearly always on the first page no matter what the bid price. Odder still was the fact that shortly after my AdWords column appeared, THE EFFECT SUDDENLY STOPPED.

Go figure.

Finally a word about Apple's big announcement next week. I'm told that if you try to access a page on the Apple web site that doesn't exist, something like http://www.apple.com/cringely you get a "page not found" redirect. But if you try http://www.apple.com/movies you get a "forbidden" message.

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