Tag: Google

As Mayer Brings the Pizzazz, Yahoo Waits for the Magic

Posted on July 17, 2012

Yahoo’s hiring of Marissa Mayer — a high-profile executive and innovator ensnared from rival Google — as its new CEO has all the trappings of a coup. But Wharton experts say Mayer will have to move quickly to win the search engine new users and advertisers, and to jump-start product innovation.

“Will Mayer be the one to finally work some magic at Yahoo and restore its glamour in the industry?” asks Wharton management professor Lawrence Hrebiniak, adding that he his happy with the choice. “She brings experience with, and knowledge of, consumer websites gained at Google, a good place to work and learn.”

Mayer’s last post in her 13-year Google career was vice president of the search giant’s local, maps and location services, overseeing product management, engineering, design and strategy. Yahoo credits Mayer — who made Glamour magazine’s 2009 list of “Women of the Year” — with heading up some of Google’s most successful innovations and launching more than a hundred features and products, including Gmail, Google News, and the “look and feel” of the Google experience.

“Marissa Mayer is a great win for Yahoo,” says Wharton operations and information management professor Kartik Hosanagar. “She’s from a relevant domain and is a star exec. She will provide good, positive PR and will help in recruiting some good folks back to Yahoo.”

Prior to Mayer’s hiring, Hosanagar told Knowledge@Wharton Today that Yahoo needed a leader with an “entrepreneurial spark” as CEO. “Marissa is close, but not quite that,” he says now. “She joined Google very early … but she’s been at Google too long and it’s not clear to me she’s the person who comes up with new product ideas and gets them done. I’d have preferred someone who has started and grown a company. Even Jack Ma [founder of Chinese business-to-business trading platform Alibaba.com] would have been a great choice. That said, I think Marissa is overall not a bad choice.”

Mayer will have to hit the ground running at Yahoo, which has struggled to maintain stable leadership at the top and seen a steady decline in revenue over the past few years. “Her focus will be on Yahoo’s core advertising business,” says Hrebiniak. Adds Hosanagar: “The one thing Marissa needs to do is to focus on developing a new winning product at Yahoo instead of financial reengineering, restructuring the organization and the like. Some of the latter is needed, but what will get Yahoo out of this mess will be a new product, much like [the introduction of the] iPod for Apple. Given her background, I think her focus will indeed be on products.”

Hrebiniak suggests that the work done by Mayer’s predecessor, interim CEO Ross Levinsohn, including settling disputes with Google and Alibaba, will allow her to focus on the advertising business.

Closing the Revolving Door?

But Mayer could face other distractions, as well as formidable hurdles to overcome, Hrebiniak points out. “Levinsohn’s being passed over may generate resentment among key managers and employees, which could [lead to] defections and other problems,” he says. “Google and Facebook, which have steadily been stealing Yahoo’s users and advertising revenues, aren’t going away. A frontal attack by Mayer is certainly anticipated and the two formidable foes will assuredly be prepared for Yahoo’s new assaults.”

Mayer is Yahoo’s fifth CEO in as many years, and “a revolving door itself creates uncertainty and possible confusion,” Hrebiniak notes. “Levinsohn, for example, was reportedly in the process of formulating and executing his version of a new strategy. Mayer may upset the apple cart with something new and different, creating confusion and a feeling of ‘here we go again.’”

Wall Street seemed to cheer the choice of Mayer, notes Hrebiniak, but adds that “only time will tell if the trust in her capabilities in a competitive marketplace is warranted.” Mayer has a lot going for her — including a baby boy due Oct. 7 — and has been named in four consecutive years starting in 2008 to Fortune‘s list of the “50 Most Powerful Women in Business.” As one of only 20 female CEOs of Fortune 500 companies, and Google’s 20th-ever employee, “maybe 20 is the magic number,” for Yahoo, says Hrebiniak.

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Internet Privacy Takes a Hit, Again

Posted on February 20, 2012

Google, according to a report in The Wall Street Journal last week, has not been playing fair when it comes to upholding its own privacy standards.

The company has been tracking “web-browsing habits of people using Safari browser software even if [users] intended for that kind of monitoring to be blocked,” the Journal article noted, adding that this behavior has led three U.S. congressmen to ask for a Federal Trade Commission investigation. The article also pointed out the company last year signed a privacy settlement with the FTC after the commission charged it with using “deceptive tactics and violating its own privacy promises to consumers” when it launched its Buzz social network.

As for the breach the Journal found last week, Google responded that it has deleted the tracking files in question and is addressing the congressmen’s concerns.

KnowledgeToday asked two Wharton faculty — Andrea Matwyshyn, professor of legal studies and business ethics, and Shawndra Hill, professor of operations and information management — to comment on this latest incident.

Given all the recent examples of Internet companies chipping away at people’s privacy, how serious is this latest breach?

Matwyshyn: According to press reports of commentary from a Google spokesperson, the company does not necessarily consider its actions to constitute impermissible conduct: Google is alleging that users authorized the company to interact with their data in certain ways and, by implication, that this consent authorized alteration of inconsistent settings on a device, which may have happened in an unanticipated manner. 

Hill: Firms like Google need to take [care] because legal cases regarding privacy breaches can and do go to court. With each breach, Google opens itself up to punishment and a degradation of consumer trust. In this [latest incident], millions of consumers might be affected, which could indeed prove problematic for Google because of the scale of the Safari problem.

What would have led Google to do this? An obvious answer is the increasing competition for ad dollars, but is there another explanation? 

Matwyshyn: This type of error is symptomatic of the broader privacy and security culture wars going on inside all companies, but technology companies in particular. Privacy and security champions and lawyers frequently butt heads internally with engineers over design and consumer protection. In engineering-focused cultures such as Google’s, shipping code usually wins, and privacy/security and consumer protection can be viewed by some internal decision makers as secondary things you “clean up” when they go awry, rather than things companies must design around.   

Hill: It’s possible that better advertising alone is driving the data collection when consumers use the Safari browser. However, it is also possible that Google was not aware of all the consequences of their actions. It is often the case with data collection that you have one intention but that there are other uses that are unforeseen when the data or process for data collection is established. Still, Google should do a better job identifying potential problems before launching new processes.

Is it conceivable that Google didn’t know this was happening?

Matwyshyn: Code is written by humans, for humans.  Yes, it’s entirely conceivable Google didn’t do their homework and anticipate this dynamic. It’s also conceivable that a company might anticipate a dynamic such as this, but would then decide that fixing it is a lower priority than shipping code out fast. A third scenario might be that a company decides this type of dynamic is a feature and not a bug, that their consumer EULA [end user license agreement] grants the right to tweak settings on user devices and that users are unlikely to notice the exact workings of the code.

Do you think Google’s reputation as a “do no evil” site has taken a substantial hit?

Matwyshyn: “Do no evil” was Google’s successful mantra from the 1990s and 2000s. Those days are gone from the standpoint of consumer perception. Although Google’s socially-beneficial pilot programs and philanthropic efforts are commendable, in the 2010s many consumers view Google as an aggressive data aggregator akin to Facebook. Microsoft is the new underdog.

Hill: Google is scheduled to change their privacy settings next month. In addition, they have come under scrutiny regarding other privacy breaches in the past year. While the firm may continue to claim to “do no evil,” their business strategy is certainly changing; no doubt consumer perceptions, and possibly trust, will change as a result. However, other large data driven companies are using behavioral, social network and demographic information to target ads. So, it’s not like there is an alternative (right now) where user data are not being used for advertising and business intelligence.

The main concern for consumers will come when/if Google tries to maximize their advertising dollars at the expense of giving users the most relevant information to answer their search queries.

Three congressmen have called on the FTC to investigate Google over this practice. Are we finally reaching a tipping point where the privacy issue has caused enough concern that the government will mete out serious sanctions/punishment?

Matwyshyn: One possible outcome may be another FTC consent decree expanding the existing mandatory periodic FTC audits…. The organizational impact of FTC audits may be underestimated internally: FTC audits are a disruptive and expensive experience, as Microsoft learned. If this underestimation is the case, and if the privacy lessons from Buzz have not been internalized by the corporate culture, it is unsurprising that another privacy problem has arisen.

Hill: It’s hard to say which case will end up [resulting in a] severe punishment. However, with each case, we get further along into the discussion about what is acceptable and what is not with respect to consumer privacy. The hope, at least from consumers, is that the conversation will evolve into a clear set of rules and regulations that govern how online firms and others can make use of personal data while offering useful, and free, services.

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How Google Is Trying to Grow Egypt’s Tech Industry

Posted on December 7, 2011

When bullets began flying in front of the State Television Building in downtown Cairo in October, Wael Fakharany had to run for cover. Fakharany, country manager for Google North Africa, was on his way to a TV studio interview when dozens of protestors outside the building were killed. “I was shot at,” he says. “The country is in chaos.”

And during the revolution that led to the unseating of Egyptian President Hosni Mubarak, Fakharany recalls dealing with state police visits on a daily basis. But the upheaval Egypt has seen since the Arab Spring began has not made him despondent. “To be honest, this gave me a lot of energy. Egyptians need help, and I’m a firm believer that technology can change Egypt — its economic landscape, the cultural landscape and the political landscape.”

That’s why Fakharany and his team are enthusiastic about sponsoring a start-up competition in Egypt called Ebda2 — Arabic for “start” — that seeks to support local innovators and entrepreneurs. It is the first time that Google has ever directly supported the development of a country’s tech industry.

“This is the way forward for us, to get more and more people involved and expand the technology market,” Fakharany notes. “This is an investment to us. There are thousands of kids who are starting their own technology ventures, a few of them become sustainable, a few of them become regional and a few of them become a great success for Google and for me as an Egyptian.”

Part of the goal behind this competition, Fakharany says, is to challenge the notion in the Middle East that failure must be avoided, and only certain jobs are acceptable. “It’s deeply rooted in the culture, so we cannot change some of that,” he says. “But we want to change the culture of graduating from college and waiting for a job.”

The competition will go on for seven months, during which entrants will receive advice and mentoring from Google employees and Egyptian tech entrepreneurs. The contest will be administered independently from Google, just to keep it fair and free for all participants.

Fakharany notes Google received 3,000 applications in 15 days. “It’s about taking the idea, having the skills, and basically sharpening the skills, and creating a working prototype,” he says. The competition is now down to 200 finalists. In May, one winner will receive $200,000 from Google, and finalists will get to pitch their ideas to Silicon Valley investors.

Ultimately, Fakharany says his scope for the start-up program goes beyond the year. He hopes the competition will not only discover would-be tech entrepreneurs, but also create a network of Egyptian investors. “The network of angel investors in Egypt simply does not exist,” Fakharany points out. “What I want to do is not create the funds, but the first angel investor network. This will let them keep their money, but allows them to access ideas in cloud computing, or engaging Arabic content.”

The start-up competition is one of a number of initiatives that Google is undertaking in the Arab world. The Middle East is also included in the YouTube Space Lab competition, which seeks student experiments that could be demonstrated by astronauts in space.

Google is also expanding its presence in the region. According to The National newspaper in Abu Dhabi, the search giant doubled its regional workforce in an effort to gain a larger stake of online advertisement spending there. Regional Google searches have grown 30%, the paper notes, while its online advertising market has grown 118% in 2011.

Fakharany says that the Arab Spring has played a part in developing that growth. “When I started at Google four years ago, there were four million people online in Egypt,” he notes. “Now there are 28 million people online. Everything has changed with the revolution. If you look at the number of YouTube playbacks per day, it’s grown from two million playbacks in January to 28 million right now.

“The revolution has just helped us — everyone knows about the Internet now, and it is becoming a mainstream source of news,” he adds. “If you look at our search index, before the revolution, it was 15% celebrity news and gossip. Now 24% of our index is news [related to] the revolution.”

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Yahoo: Let’s Make a Deal

Posted on October 24, 2011

As Google, Microsoft and other potential suitors continue to explore the idea of buying Yahoo, the question remains: Who would benefit most from such a purchase, and why? 

According to Wharton marketing professor Eric T. Bradlow, co-director of the Wharton Customer Analytics Initiative (WCAI), Google, with its prior acquisition of DoubleClick, “would have a unique opportunity to utilize its in-house technology to monetize Yahoo’s installed base. Revenue on the Internet is still driven by traffic, which is a function of having unique and important content.” DoubleClick, purchased in March 2008, provides ad management and related services for buyers and sellers of digital media advertising.

Google could also bring its recently launched social networking Google+ to Yahoo’s audience of nearly 700 million unique visitors, according to a report in the Wall Street Journal. In addition, Google would benefit from Yahoo’s relationships with content publishers like ABC News.

Kevin Werbach, Wharton professor of legal studies and business ethics, states that while Yahoo’s massive user base makes it valuable as a whole to acquirers, “the user benefits really come from the individual Yahoo offerings that are differentiated or have well-developed communities.”

Google is in talks with private equity investors to buy Yahoo’s core business, while Microsoft plans to invest “several billions of dollars” in loans to potential bid partners and preferred equity in Yahoo, the Journal report says. Yahoo and Microsoft already have a 10-year search partnership signed in 2009, a year after U.S. antitrust regulators frowned on a proposed Google-Yahoo partnership for web search advertising. Chinese Internet firm Alibaba Group Holdings, in which Yahoo has a 40% equity stake, has also shown interest in buying Yahoo, but has not yet made a formal offer.

If Microsoft’s strategy is successful, it may also push to integrate Skype, the Internet communications service it recently bought, into Yahoo, says a New York Times report. Already, Microsoft’s Bing search engine allows Yahoo to sell ads against responses to user queries.

The “basic question,” says Werbach, is whether Yahoo today is more valuable as a whole or in parts. “Any new owner of Yahoo must choose whether to extract as much revenue as it can from the existing platform, or to re-energize Yahoo as a distinct competitor. The second option would be better for Yahoo’s users, but it’s riskier for potential investors.”

Bradlow notes that while Yahoo has struggled in some ways, it has continued to provide content that attracts millions of unique visitors on a daily basis, especially “a very monetizable set of customers.” Yahoo’s visitors “tend to be heavier-than-average buyers of products and services, and provide a valuable audience for targeted advertiser content,” he adds. Yahoo’s news arm reported 81.2 million unique visitors in August, making it the biggest online news site, the Times report said.

Yahoo reportedly sought out potential investors after firing its chief executive, Carol Bartz, in September. Bartz made way for Yahoo CFO Tim Morse to become interim CEO after a study of Yahoo’s assets and performance by independent directors concluded that the company was not performing as well as it could. Yahoo is “still basically playing out the Internet portal model that it pioneered in the 1990s,” Werbach told Knowledge@Wharton Today at the time, adding then that “Morse, or whoever takes over as the permanent CEO, needs to make a major strategic decision: Sell the company or bet big on a big idea.”

Price could be a major sticking point as Yahoo’s suitors cobble together a deal, according to the Times. “Private equity firms have indicated they are unwilling to pay much more than Yahoo’s current market value of $20 billion, arguing that the stock price already includes the expectation of a sale,” the article says.

Putting the right price tag on Yahoo may be a tough call, but the space it operates in offers advertisers a value they cannot ignore. “What social media has allowed companies to do is listen to customers in real time,” said Bradlow in a recent Knowledge@Wharton interview. “You think about the biggest problem companies have: What is it? It’s customer defection and churn. You know why? Because you spend a huge amount of money on acquisition costs, [but] many customers don’t stay around long enough” to justify that expense.

 

 

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How Will Google Digest Zagat?

Posted on September 12, 2011

Last week, Google bought Zagat, the restaurant-review company started in 1979 by Tim and Nina Zagat, in an attempt to expand its ability to offer consumers more information about local businesses.

Complicating this deal are two issues: One, Google is already being investigated for possible antitrust violations regarding allegations that the company stifles competition by undermining other online review sites. Two, Zagat currently partners with online service OpenTable to help diners make reservations at restaurants — a relationship whose future is now unclear.

KnowledgeToday asked three Wharton experts for their opinions on the acquisition.

Strategically, says Wharton operations and information management professor Eric Clemons, “It is a great move for Google and will [significantly] increase Google’s power in mobile commerce and in restaurant advertising as well as in restaurant bookings. It probably is not a great move for consumers, for restaurants or for Google’s competitors in search and in online commerce generally.” The deal, he added, will definitely bring greater antitrust scrutiny. “It looks like a small irrelevant move, but it will be followed by larger and more dangerous moves.”

Clemons predicts that Google will almost certainly change the way Zagat operates. “That was the point of the acquisition,” he states. “If Zagat does not become a booking site, and a way to influence both consumers’ bookings and restaurants’ advertising, then there was no point in the acquisition. I suspect that the Zagats will be quite happy to lose their jobs and their influence.  They were paid a good price. If they had refused to sell, Google would simply have opened its own site, bootstrapped it by copying content from Zagat as they did with Yelp’s content, and put them out of business anyway. This way they at least got some money before being forced out.”

Meanwhile, the Zagat partnership with OpenTable will end, Clemons states. “The deal is intended to allow Google to replace OpenTable, not just to acquire Zagat. I call the move ‘the creation of GopenTable.’” The only way this acquisition could backfire on Google, he adds, would be “if the destruction of OpenTable could convince regulators and consumers that search engines should not be allowed to engage in vertical integration into their own content and into direct sale of goods and services. It is more likely that this …. [acquisition] will be approved, and that a wide range of other acquisitions will follow.”

When it comes to Google’s strategy, Kartik Hosanagar, Wharton professor of operations and information management, points out that the search firm “typically doesn’t buy companies that publish their own content. But the chance to land more local business ads may trump any concerns over this purchase…. Local search and local advertising is a big and consistently growing market. So it’s an important area of focus for Google. Within this space, reviews of local businesses and restaurants are among the most useful content. Such content will help Google retain users a little longer on its own website. This ultimately means more ad dollars.”

Google has been interested in this content for quite some time, Hosanagar adds. “It even explored an acquisition of Yelp a few years back, although those talks fell through.”

As for possible antitrust scrutiny, Hosanagar suggests that Google’s purchase of Zagat is “partly a response to ongoing [federal] investigations. One of the issues raised by Google critics is that the company scrapes local content, like Yelp reviews, from other sites and displays the content in its properties, like Google Places. This eliminates a consumer’s need to go to sites like Yelp and hurts those firms who invested in creating the content. So far, Google’s response has been that it does so to ensure that consumers get the information in as few clicks as possible, but critics have described such attempts as anti-competitive. Google can now show its own content without having to worry about this scraping criticism. In the end, I believe Yelp is the loser in this deal.”

Wharton management professor Tyler Wry says that with this acquisition, “Google is clearly aiming to be the dominant player in every high growth area of the net. Even though the halcyon days of the dot-com boom are a distant memory, the web is still a bit of an open frontier with a diverse cast of players charging into new spaces…. I’m not sure if the appropriate metaphor is ‘Lewis and Clark’ or ‘the Blob’, but the bottom line is that Google is going to take a mom and pop shop supernova through this deal by integrating it with the local services it already has. On the surface, it seems a bit crazy to think about Zagat being a big threat to Yelp, TripAdvisor and Groupon, but I would be nervous if I was helming any of those companies today.” From a strategic perspective, he adds, Google’s purchase of Zagat is a “good acquisition.”

Wry agrees with others that the antitrust implications of the deal are “certainly a concern. Google may have done a bit of an end around on the issue, though. While the exact terms of the deal haven’t been disclosed — at least I haven’t seen them — it appears that they paid less than $66 million for Zagat, because the deal didn’t trigger a formal antitrust review. The issue would be a whole lot more interesting if Google [had bought] Yelp a few years ago for a billion dollars.” Google can accomplish much of what it wanted to do with Yelp through the Zagat purchase, Wry adds. “If it was also a strategic move to skirt government scrutiny — and it works — the whole thing looks pretty savvy.” 

As for the future of Zagat’s partnership with OpenTable, Wry suggests that OpenTable would be unwise to make any demands if Google wants to keep them on as the reservation provider for Zagat. “It’s like your best friend getting invited to play in the major leagues and inviting you to come along…. If I’m Jeffrey Jordan [the founder of OpenTable], I’m sitting by my phone praying that I’m not the one without a chair when the music stops on this deal.”

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Google’s Motorola Bid: Big Patent Portfolio — but Potentially Big Headaches, Too

Posted on August 16, 2011

On Monday, Google announced plans to buy Motorola Mobility in a surprise $12.5 billion deal that gives the creator of the Android mobile operating system access to 17,000 patents and 7,500 patents in progress. Google was recently outbid by an industry consortium led by Apple and Microsoft in an auction for Nortel’s 6,000 patents. The wireless consortium won Nortel’s patents with a bid of $4.5 billion.

In a blog post, Google said the effort to outflank the company for Nortel’s patents amounted to an attack on Android. When Google announced the acquisition of Motorola Mobility, CEO Larry Page said the acquisition “will increase competition by strengthening Google’s patent portfolio, which will enable us to better protect Android from anti-competitive threats from Microsoft, Apple and other companies.”

Indeed, Google is facing a lawsuit from Oracle over Android, and partners such as HTC and Samsung are being sued by Apple over intellectual property.

With that backdrop, Wharton management professor David Hsu says that Google had little choice but to buy Motorola Mobility to beef up its patent portfolio — if only to fend off lawsuits. “It’s no surprise that people are talking about the intellectual property portfolio when it comes to Google and Motorola Mobility,” Hsu notes. “It seems that Google weighed the time and effort of dealing with the legal system — and paying royalties on each Android activation — with [the cost of] buying Motorola Mobility.”

Kevin Werbach, a legal studies and business ethics professor at Wharton, points out that by purchasing Motorola, Google is acquiring a series of “foundational” phone patents, given that Motorola created the first cell phone. “Motorola has been at this for a long time, and Google was looking for patents that others don’t control and would be scared of,” he says.

However, Werbach adds that there is more to Motorola Mobility than patents for Google. For instance, Google gets TV assets that can boost its television software efforts, as well as engineers who are well versed in the wireless market.

What’s unclear is how many complications Google will inherit just to acquire Motorola’s patent portfolio. Hsu says that because Motorola uses the Android platform, Google will likely end up in competition with its other Android partners, notably HTC and Samsung. Publicly, HTC and Samsung supported Google’s plans to buy Motorola. On a conference call, Page said that “many hardware partners have contributed to Android’s success, and we look forward to continuing our work with all of them on an equal basis.” He added that Android will remain open source, and key partners “share our enthusiasm for this combination.”

In the smartphone industry, competitors are fighting to win over software developers, create app markets and create platforms that are hits with consumers, Hsu notes. He questions how Google can keep Motorola Mobility on equal footing with other partners and manage perceptions. “Will there really be a Chinese wall inside the organization [between Google and Motorola]? There are clearly bundling opportunities [there] for Google.”

If Google really wanted to allay concerns with its Android partners, it could end Motorola Mobility’s manufacturing altogether, Hsu suggests. “Google could shut down Motorola manufacturing to prove it will be an even landscape. That would be a bold, but crazy, move.”

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Will Google+ Help the Search Giant Succeed at Social Networking?

Posted on July 1, 2011

With this week’s “invitation-only” launch of Google+, the search giant unleashed its latest attempt to stake a claim in the social networking space. But can Google successfully take on Facebook?

Critics point to Google’s underwhelming experiences with previous social networking applications, including Buzz and Orkut, as examples of the company’s inability to accurately assess market needs and respond effectively. But others point to Google’s deep pockets, previous successes in search and strengthening Android mobile platform as reason to believe the company can make an impact in the social media sector as well. Google+ also has the advantage of learning from Facebook’s shortcomings — for example, the new service allows users to be selective about which information is shared with different groups of followers.

“Just because it is Google doesn’t mean that [Google+] will have instantaneous success,” says Wharton marketing professor David Reibstein. He points to some of Google’s previous failures, including Google Wave, which was intended to take on Microsoft Outlook and instant messaging services by offering a mix between chat and email. Then there was Google Buzz, which was seen as an attempt to go after Twitter and Facebook. Reibstein says those misses came because Google did not fully understand “what all is involved in those businesses … basically, not understanding the customer well enough.”

Kartik Hosanagar, a Wharton professor of operations and information management feels differently. ”Google’s advantage is that it has a lot of cash and it can afford to build, learn, fail and restart,” he notes. “Clearly, Orkut and Buzz have not worked out as well as planned. But Google can afford to restart. More importantly, as a late entrant, Google+ has the advantage of learning from Facebook’s mistakes and delivering a product without those deficiencies.” Hosanagar says that the biggest user frustrations with Facebook have revolved around privacy concerns and contacts management. “Google+ is specifically focused on fixing these issues.”

Features of Google+ include the ability to create groups or “circles” of contacts, such as circles for friends, family and acquaintances; users can choose what  information and updates they share with each circle. In addition, Google+ offers video chat and group-texting applications, and allows users to instantly upload photos and videos from Android smartphones. The service also has a “+1” button that is similar to Facebook’s “Like” feature. (For more, CBS has compiled a roundup of Google+ reviews from across the web.)

But Google is moving forward cautiously with its latest effort. Vic Gundotra, a Google senior vice president, told the Wall Street Journal that “fundamentally we believe online sharing is broken.” He continued, “We’re not going to nail it on our first attempt, but we’ll work as long as it takes.”

Google, of course, seems to have a penchant for launching beta products. Soon after opening the invitational rollout for Google+, it temporarily discontinued new registrations, citing “insane demand.”

According to Reibstein, Facebook “ought to be able to very easily respond” to the Google+ “circle” feature, if not others. “The question is how sustainable is any advantage coming out of Google+, which means something not easily replicable.” He adds that with its video chat capabilities, Google+ may deliver a strong challenge to Internet phone service Skype, a possibility also noted by Om Malik, founder and senior writer for technology trends site GigaOm.

“Google has to play to its strengths — that is, tap into its DNA of being an engineering-driven culture that can leverage its immense infrastructure,” Malik wrote. “It needs to look at Android and see if it can build a layer of services that get to the very essence of social experience: communication.” He predicts that Facebook is safe for now, arguing that “the only way to beat Facebook is through a thousand cuts.”

During a discussion on social media at last week’s Wharton Global Alumni Forum in San Francisco, panelists were asked why Google has had such difficulty in developing a social networking application with staying power. Panelist Ethan Beard, Facebook’s director of platform partnerships and former director of social media and head of new business development at Google, noted that the companies have two distinct cultures.

“There’s a fundamental difference [between Google and Facebook] in how the products are designed and in how the design process takes place,” Beard said. “Google is very academic…. Some of the greatest thinkers in computer science now work at Google. The design process … is focused on building a really cool back end that sifts through the data and pops out the result.”

On the other hand, Beard described Facebook as having more of a “hacker culture,” in the sense that “instead of working on the back end and throwing up any front end, we start with the designers and say, ‘What if a user saw this [on the front end]?’ and then ‘OK, that’s good, now go build the back end as fast as you can so we can start to play with it.’”

Cultural challenges aside, Hosanagar is optimistic about the prospects of Google+. “There’s nothing in Google’s DNA that prevents it from building a good social product,” says Hosanagar. “Given how big the social space is, and how much bigger it will be, Google is doing the right thing by trying for a third time.”

In the end, much depends on how many “+1s” Google+ gets from users. “Whether Google+ will stick will depend to some extent on the whims and fancies of unpredictable consumers,” Hosanagar notes. But Reibstein says the imponderables lie elsewhere: “I am not at all confident [Google] has a real feel for understanding what the marketplace needs.”

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For Apple’s iCloud, the Sky’s the Limit

Posted on June 8, 2011

Apple’s iCloud begins a new era of cloud wars, in which companies like Amazon and Google vie for what may be a one-time, land-rush opportunity to attract new customers and cement their loyalty. Once a consumer stores their music, photos and other files with a service, it can create a high level of “stickiness.”

More directly, Apple’s move offers a compelling new level of convenience for gadget users. For those using strictly Apple products, at least, there will be no more relentless synchronizing of gadgets – smartphones, tablets, laptops – to keep music, photos, files and applications up to date on each. Since everything will simply sync wirelessly to a central server warehouse, updating one device becomes an instant update of every other device upon connection.

“It’s about time,” says Wharton marketing professor Peter Fader. Imagine if when you went to pick up your car at the repair shop the mechanic handed you a wrench and asked if you wouldn’t mind cranking on those last few bolts yourself. It’s almost as if we’ve been “brainwashed” into doing the tedious upkeep in synchronizing our electronic devices ourselves. Or, as Apple’s Steve Jobs put it in making the iCloud announcement: “Keeping these devices in sync is driving us crazy.”

For Fader, “This signals a whole new ballgame for everyone with a vested interest in music, ranging from Apple’s direct competitors — most notably Google and Amazon — to up-and-comers such as Pandora and Spotify.”

Apple’s announcement Monday came a few weeks after Amazon announced its new Cloud Drive and Cloud Player, which allow customers to store music and other content remotely on Amazon’s servers. In early May, Google launched its own cloud music-management service called Music Beta. Like Amazon and Apple, Google wants to manage music libraries and deliver them through the cloud. Many observers expect Facebook to jump into the market, too.

There is one big difference with Apple’s service, however: Consumers can “match” their entire music collection via the Internet with Apple’s catalogue of more than 18 million songs. iTunes Match will scan every song in users’ libraries and match them with an Apple duplicate copy already stored on Apple’s servers (in the cloud). That eliminates the need to tediously upload a whole music collection, often song by song. Apple alone can do this because of existing agreements with four major record labels. Apple will charge users $24.99 per year for the service, and the record companies earn 70% of that fee.

Some analysts point out that by distributing those revenues to recording companies, Apple in effect will allow them to recoup some fees for songs that had been copied or shared illegally among users.

“It will be fascinating to see how all of these firms will start changing their strategies and tactics to compete in the cloud, but the clear winner is the consumer – who will have a far better music consumption experience than ever before,” Fader says.

The move by Apple comes at a time when increasing attention is being devoted to the cloud by corporations that also want to simplify the process of endlessly updating applications that reside on computers and other devices. One of the biggest challenges in that effort involves security.

For more information on the future of remote music storage and players, including insight into the Amazon and Google strategies, see this Knowledge@Wharton story: With Its New Music Storage and Player, Can Amazon Deliver in the Cloud?

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