Bill Gates Worries about Big Blue, not Google

“The biggest company in the computer industry by far is IBM. They have the four times the employees that I have, way more revenues than I have. IBM has always been our biggest competitor. The press just doesn’t like to write about IBM,” said Gates in an interview on Wednesday ahead of his keynote speech at the Consumer Electronics Show in Las Vegas…
Wait till the Google-Desktop takes over MS-Office.
What’s Google-Desktop? It’s how Google will take over your PC via the web. Fits in nicely with a $100 PC don’t you think?
What does a web-based desktop look like? Take a look at this.
OK, I admit it has a ways to go, but I know Google will do this right. They’re going to add an “open-office” component to the web-desktop. You’ll be able to do your word-processing, your spreadsheets, your presentations, your email, your calendar, your RSS subscriptions, your blog, your IM, your VOIP, your video-conferencing, your downloading, your podcasts, your news, your search, and your shopping all at That’s going to be the real Google Pack!
And that’s why AOL went with Google, not Microsoft.
Microsoft will become a B2B software company, and yes, IBM will be the biggest competitor in that space.

Getting Your IT Nerds to Innovate

Few studies have studied adoption of IS innovations by IS development (ISD) organizations. I just found a study that does.

Apparently researchers observed ten factors explaining radical innovation.
Seven factors were internal or organizational factors of which four characterize a configuration of capabilities that promote radical innovation within the firm. These four are: 1) Depth of Knowledge Resources; 2) Specialists; 3) Diversity of Knowledge; 4) Related Assets. The remaining three internal factors relate to features of processes where these capabilities are mobilized in ways that promote radical innovation. These three are: 5) Intra-firm Structural Linkages; 6) Experimentation; and 7) Technological Opportunism.
In addition to the seven organizational (internal) factors, three additional environmental (external) factors predict radical innovation within ISD organizations: 8) Environmental Dynamism; 9) Unit Autonomy; and 10) Adopters’ IT Strategic Congruence.
Read the report >>

Michael Porter: The Relationship between Innovation & Living Standards

During the 1990s, Americans found a way to do what seemed no longer possible — grow the economy, create jobs, and increase the standard of living, without driving up inflation. Much of the credit goes to the nation’s ability to develop and commercialize new technology. The result: one of the most robust periods of economic expansion and prosperity of the past century.
Today, the nation is experiencing an economic downturn. While fiscal and monetary policies pump dollars into the economy to boost the level of activity, innovation infuses the economy with growth-incubating new ideas, new products, services, and technologies. National policies and national investment choices have much to do with the growth and capacity of the American economy. For innovation, however, the real locus of innovation is at the regional level. The vitality of the U.S. economy then depends on creating innovation and competitiveness at the regional level.
In healthy regions, competitiveness and innovation are concentrated in clusters, or interrelated industries, in which the region specializes. The nation’s ability to produce high-value products and services that support high wage jobs depends on the creation and strengthening of these regional hubs of competitiveness and innovation.
Led by our buddy Michael Porter, the “Clusters of Innovation Initiative” examined five regions around the country: Atlanta, Pittsburgh, the Research Triangle, San Diego and Wichita.
One key point: “Growth is not the same as prosperity. Growth is only desirable if the standard of living of citizens rises. High growth per se often leads to a rising cost of living that erodes prosperity and degrades natural resources and physical infrastructure that support quality of life.”
My question: are there virtual innovation clusters out there as well? Clusters tied by purpose, but not geography? Is there a way to create and strengthen a virtual innovation cluster?
Read the report, and let’s talk >>

Googlespace Update: Video-On-Demand

Let’s see, what is Google’s innovation rate? One new service per month, per week?
Today we’ll see Google-Video and Google-Wallet. CBS is in on the deal with Google. So is the NBA.
Will Google go after the World Cup? If they do, it’s goodbye, Yahoo!
Another interesting day in Googlespace…

Piper Jaffray on Google: Target Price = $600

We believe the stock will hold its multiple a year from now for the following reasons:
• Given the company’s performance, market share gain, and the pipeline of new
products, we believe outperformance is still very likely;
• We expect the global search market to grow by 41% in 2006 and maintain a
CAGR of 37% over the next five years;
• We expect Google to continue to gain market share in 2006. In 2005, the
company gained an additional 5% market share in the U.S. alone;
• Google’s brand continued to gain strength as the release of new innovative
products such as Google Maps and Gmail enhanced the consumer’s Internet
• Google’s innovations are fueling an impressive pipeline of new initiatives
particularly Google’s Ad Network and Google Base, which should become
notable revenue generators by the end of 2006;
• Expectations for Google most likely remain conservative – we note that we have
raised our forward estimates every quarter of 2005 from our 2006 net revenue
estimate of $4.7B before Google’s Q1 reporting to our current estimate of $8.8B,
an increase of more than 87% since April;
• Despite being the most talked about stock of 2005, GOOG remains significantly
less widely owned than other key technology names and has yet to be added to
the S&P 500.
While the stock may have its ups and downs throughout the year, we believe it will
reach $600 by the end of 2006 and we prefer to have one 12-month price target
rather than raise it every quarter.
The above factors are leading us to raise our one-year price target to $600, sharply higher than our previous $445 target, but based on fundamentally the same reasoning taken one year further out. Our previous target of $445, which GOOG exceeded briefly in intra-day trading in mid-December, was based on 50x our proforma 2006 EPS estimate. Our new price target, which we feel is attainable by GOOG 12 months from now, is based on 50x our 2007 proforma EPS estimate. Although such a high multiple may seem aggressive, we believe that given Google’s dominant position in an already large yet still rapidly growing market, its phenomenal brand power, and its status as a technology leader justifies such a valuation. Also, importantly, it’s likely 2007 estimates will come up throughout the year, as we have seen this pattern for 2006 estimates play out in 2005. As such, we believe the ending multiple will be well below 50x.
We believe Google is an iconic company that, like Microsoft and eBay before it, has defined a new and vital industry. Such market leading technology companies have traditionally traded with peak valuations in the 50x-60x range. EBAY, for example, has traded between 38x and 158x its one-year forward earnings estimate since 2000 with an average forward multiple of 70x. Even excluding the bubble years of pre-2001, eBay had maintained a multiple generally above 55x. Currently the other leading Internet companies, Yahoo, eBay, and Amazon trade at an average of 45x 2006 proforma EPS estimates, with Google only slightly higher than average at 47x (and notably below Amazon’s multiple of 52x). We believe that over the next year as Google’s lead in search and online advertising becomes even more apparent and its growth far exceeds its closest comparables (we predict GOOG will grow revenue by 52% in 2006 while YHOO, EBAY, and AMZN will only grow by 27%, 34%, and 19%, respectively), investors, who may be inclined to take some profit now given GOOG’s gains in 2005, will increase their holdings of Google.
Read the full report on Battelle’s site >>

Goldman Sachs’ Environmental Policy Framework

Do you believe this:
Goldman Sachs believes that a healthy environment is necessary for the well-being of
society, our people and our business, and is the foundation for a sustainable and strong
Goldman Sachs recognizes that diverse, healthy natural resources – fresh water, oceans,
air, forests, grasslands, and agro-systems – are a critical component of social and
sustainable economic development. Forests are particularly important for the
environment and biodiversity. They are vital to water and air quality, and help regulate
climates. Forests are home to thousands of wildlife species, and, at the same time,
represent a natural source of timber. The key challenge for society is to manage the
competing human demands on land, soil and vegetation without undermining crucial
ecosystem functions.
We take seriously our responsibility for environmental stewardship and believe that as a
leading global financial institution we should play a constructive role in helping to
address the challenges facing the environment. To that end, we will work to ensure that
our people, capital and ideas are used to help find effective market-based solutions to
address climate change, ecosystem degradation and other critical environmental issues,
and we will seek to create new business opportunities that benefit the environment. We
will work to identify policy measures that are creative, meaningful and provide real
solutions to environmental problems while recognizing the importance of economic
growth in contributing to the alleviation of poverty. In pursuing these objectives we will
not stray from our central business objective of creating long-term value for our
shareholders and serving the long-term interests of our clients.

Go GS! Make sure you practice what you preach…
Read the full text here >>

Clicks and Conversion Rates in 2005

I just read a Brian Eisenberg article in which he says:
“Depending on whom you ask, average conversion rates are between 2 and 4 percent. By today’s standards, you get bragging rights and the full dose of hero treatment if you can maintain a conversion rate of 5 percent or above. You have deity-like status if your conversion rate approaches double digits. the world’s finest players sport double-digit conversion rates of somewhere around 12-14 percent.
“Of course, I’m referencing top-line conversion: Tthe number of visitors who take the macro action you want them to divided by the total number of site visitors.Aa double-digit conversion rate seems unimaginable to some, but experience demonstrates it’s certainly possible. We’ve seen it happen time and again.”
The funny thing is I have a client, who for some reason, is unimpressed by a 44% conversion rate I’ve gotten for them over the past year. Some months it went down to 39%, in other months it was up as high as 53%. I’m not kidding. And the client still doesn’t understand how amazing this is.
What’s amazing about Double Loop Marketing is just how effective it can be. For instance, my record-breaking conversion rate was 98% for an offer on a landing page from John Hagel and JSB. Now granted, JH3 and JSB are smart people, and when they give away something for free, it’s not difficult to see that they’d have a great conversion rate. That said, 98%?!! I’m still in shock over that one.
This year I’ve resolved to publish a book on the power of Double Loop Marketing, with a few, real-life case studies comparing traditional online marketing approaches with Double Loop Marketing tactics. God and the devil are both in the details, as they say. John Hagel’s has committed to writing the foreword for the book, so I think that itself will make the book worth reading 🙂