It's All About Search by Jay Bhatti

07:31 pm | 1 recommendation | Be the first to comment

Why is Yahoo Not Buying Back Its Stock?

In a recent Fortune article, Yi-Wyn Yen suggested that Yahoo's management should announce a major buyback the way Microsoft and Hewlett-Packard did. Yi-Wyn Yen quoted Argues Canaccord Adams equity analyst Colin Gillis as saying "If Yahoo [executives] really thought the stock was worth $40, then send a signal of confidence and show us that you mean it.

When a company buys back shares of its own stock, several things happen:

1 – There are fewer shares in the open market, which makes current shareholders shares worth more.

2 – It increases the potential dividend ratio and earnings per share ratio for current investors.

3 – Most importantly, it sends a signal to the market that the company feels its stock is trading below market value and therefore is a good buy. This is often more important to people than any of the technical implications of a stock buy-back.

In the past two months, Microsoft announced a $40 billion buyback, HP made a commitment to buyback $8 billion, and just recently even Oracle announced an $8 billion buyback of its stock. If I was an active investor, I would normally interpret this as a signal that a company feels spending money on buying back shares is more valuable than spending it on something else within the company. If Microsoft were so bullish on their future outlook that they were willing to buy back $40 billion worth of stock, I’d most likely be buying the stock as well.

I find it surprising that Yahoo has not yet taken this move given the fact that they’ve recently been trading at five year low of $12. This after Microsoft offered Yahoo $33 per share just a few months ago. Yahoo’s current state of affairs has resulted in thousands of angry Yahoo investors looking for any signs of life from the company.

At $12 per share, the market value of Yahoo dips below $17 billion. In its current state Yahoo would be 15% the size of Google and only 8% the size of Microsoft. While it’s still a valuable entity, Yahoo was worth over $140 billion dollars in 2000.

Right now, investors need to see confidence from Yahoo’s management about the future. With the stock tanking, layoffs pending, and the Department of Justice looking deeply at Yahoo’s deal with Google, there are few things for Yahoo investors to get excited about.

Should Yahoo decided to do a major stock buyback, it will indicate to the investment community they firmly believe the value of the company is greater than the current price, and that management is confident enough in their strategy that they think it’s worth buying back shares at this low price.

Yahoo may also have something else in store, such as a new strategy that requires significant investment. But until they make their intentions clear and give some comfort to investors, I don’t see their stock rising anytime soon.

06:21 pm | 1 recommendation | 1 comment

Looking for a New Job? Be Prepared to Rely on the Web

With the current economic situation resulting in mass layoffs by some companies, there will be a large influx of qualified people entering the job market. For recruiters and HR personal alike, this comes as a blessing in disguise. With the job market set to become even more competitive, it will be more important than ever for people to not only re-examine their existing web presence, but also to make oneself more visible through self promotion.

In 2002 the PEW Internet Project reported that 52 million Americans used the Internet to search for a job, a 60% increase from 2000. By 2007, that number had nearly doubled with approximately 102 million or 51% of American adults using the Internet to look at job postings. Given a new resource to look at online resumes this behavioral trend has benefited HR Personal and Recruiters as well. With a viable new resource, the implications of online job hunting have meant more than just a decrease in newspaper ads and help wanted signs.

Among the many upsides of online recruitment are cost and reach. An SHRM study noted that the average cost per hire from an Internet recruiting strategy was $377 opposed to $3,295 from a major metro newspaper. With career and social networking sites such as Monster, Careerfinder, and LinkedIn supplying thousands of resumes in any number of occupations, recruiters now have access to a significantly larger pool of qualified candidates to pull from. In an interview with NPR,Maureen Crawford-Hentz of Osram Sylvania noted, "Social networking technology is absolutely the best thing to happen to recruiting -- ever."On Spock, 7% of our daily traffic is from recruiters or employment based searches. With occupation being one of the top tags that people list, it's no wonder that recruiters such as Monique Chin of iVedha have said, "I have to admit I use Spock everyday...for a recruiter competing with larger organizations, your site is an amazing equalizer".

Recruiters aren't the only ones who benefit from this online revolution. For those looking at a career change, social networking and career sites have an open market effect where a potential candidate can explore multiple opportunities.

Along with increased access to resumes, people search tools such as Spock enable recruiters and HR personal to find out additional information about a person. Execunet.com conducted a survey of 100 executive recruiters, noting that 77% used applications such as Spock to learn more about a person and 35% of those had eliminated a candidate based on information uncovered. ExecuNet noted that it has not only become common practice to look up potential employees, but also to search for coworkers. With social networking sites such as Facebook and Myspace providing a popular platform for people to post pictures and information, there have been a number of reports advising people to limit their Web presence. Because of those warnings many people now feel an overwhelming need to censor and restrict their Web activity.

While monitoring your Web presence for certain behavior is advised, there is a competing school of thought that increasing your Web presence is not only a good idea but also a necessity. By being on sites such as LinkedIn and Spock, it not only enables you to promote your strengths and interests, but also connect and network with others. As Monster.com notes, promoting your Web presence can help distinguish you from other candidates and give hiring managers insight about your personality. Thus, while you may want to shy away from sharing racy photos of your Bachelorette Party, a blog about fixing antique cars, or old photos from Halloween will often increase your chances of being hired.

10:55 pm | 2 recommendations | 1 comment

How to Launch a Start-Up in Today’s Environment

With the financial meltdown yet to be resolved, a slowing economy and VCs backing away from Web 2.0 start-ups, many people assume that now is the worst time to launch a start-up. Yet, now is precisely the best time to launch a tech start-up. Historically some of the most successful companies have started during times of financial uncertainty. Given that IBM, Microsoft, Oracle, and Google were all started during economic downturn, we may see the next big thing emerge.

To begin a start-up the right way in today’s environment, one should go by the following three principles which have become standard issue in Silicon Valley:

1. Focus on Your Business Model and Technology – Investors and entrepreneurs are realizing that a big user base start-up such as a social network or a community powered media site is not necessarily the path to success. Social sites can be hard to monetize, and most social sites do not require the creation of any defensible IP. With no defensible IP or sustainable business model, many recent social and media start-ups are finding it harder to stay afloat.

If you were to begin a start-up today, make sure to start with a strong business model and comprehensive technology. Google is a great example of this. Early on in their development, they made focusing on their technology and business model a priority. With the tech boom busting in 2000, Sergey Brin and Larry Page knew it would be hard to survive without being self-sufficient. In the past, other search engines had made their business model secondary. Having deep pocketed VC’s backing them; it was assumed they’d have ample funding forever.

At Spock.com, we’ve focused on our technology since day one, and have emphasized our business model even more so over the past several months. I cannot tell you how much we have learned about our business and market potential after we focused equally on our technology and business model. I would recommend to every aspiring high-tech entrepreneur to make it a priority to concentrate on building companies with a strong business model and technology. Not only will you be able to survive the lean times, but you will also create something of value that other companies will pay serious money for when it comes time to think about an exit strategy.

Many newly formed start-ups in the Valley are beginning to see the value in this principle. Billshrink.com, a cell phone and credit card comparison site, is an example of a start-up that emphasizes their business model and has a strong focus on building a unique technology to solve a common problem.

2. Hire Great People – There are a lot of great engineers and business types in the marketplace today. During lean times, it is easier to hire great talent because there are not as many start-ups to compete with. If you have a compelling start-up during a downturn, you’ll be able to attract the cream of the crop. This was one of the primary reasons that Google was able to hire a great set of engineers in 2000 after the bubble burst. Since many saw it as one of the few start-ups left that had a chance to succeed, its openings were highly pursued. With such a deep and talented pool to pick from, Google ensured that its new hires met their criteria of engineering horsepower and team culture. In 2006, with Silicon Valley full of new start-ups, it was difficult for Spock to easily hire the top talent. Yet, we made sure to only hire the people who met our unique needs, from experienced engineers to young and motivated talent. To run our search, we picked up Hongche Liu, a seasoned expert in information mining from Yahoo. Our next great hire was Wayne Kao, a young and talented engineer from Microsoft, to run our front end. Both Hongche and Wayne are responsible for the development of Spock and its progress to date. If we had hired the wrong people in the beginning, we may have never gotten off the ground. I cannot stress enough how important hiring the right people is to any start-up. Spend the time necessary to find the right people for your business and never compromise.

3. Create a Prototype First – The days of taking a PowerPoint to a VC and getting a term sheet are extinct. Investors want to see that you can actually build a product and have market feedback. It’s in your best interest to get as far as you can without investors. You’ll be forced to focus on building a quality product and being scrappy. Startups such as GoPlanit.com are examples of companies bypassing initial VC funding while they prove their model works. Ultimately, if your product receives a positive response from the market, you’ll be in a much stronger negotiating position for more favorable term sheets with VCs. From a financial and sustainability perspective I think this is the best approach.

While doing any start-up or business is a daunting task, the better job you do in fine tuning your business model, hiring the right people, and creating the right product upfront, the greater your chances of outlasting the competition and achieving success.

01:01 pm | 2 recommendations | Be the first to comment

Microsoft and Yahoo Losing Search in a BIG Way

The latest search numbers were recently released and it appears that for the month of August once again Microsoft and Yahoo lost market share to Google. What’s worse is that not only are they losing market share in a growing market, but they are actually losing the number of raw searches done on their properties.

It’s one thing for Yahoo and Microsoft to claim that although Google is growing at a faster rate, the overall search market is growing and their search volume has actually been increasing (which has been a case in the past). It is a whole other issue to have to proclaim that not only are they losing market share in an expanding market, but the number of searches being done on their sites is decreasing as well.

Looking at the latest data from Compete, which aggregates all of Microsoft’s search properties (Live, MSN, etc); the picture looks bad for both Microsoft and Yahoo.

At the end of the day, the numbers and results do not lie. With Microsoft and Yahoo putting a lot of spin on their search stories of late, the bottom line remains that neither has a compelling enough product to stop Google.

For Yahoo, they’ve been talking up their new ad platform called APEX, which focuses on content and display ads. While APEX actually has very little to do with search, this may be the right direction for Yahoo. They are still the leading content site on the web and display ads are something they can compete and win in. Google has traditionally had a hard time winning with display ads, and the DoubleClick deal has yet to pay off. Google does not allow display ads on Google.com and publishers have consistently found display ads from Yahoo and other ad networks to be better and more profitable than similar offerings by Google Adsense.

If Yahoo’s recent actions are any indication, then they are slowly giving up on Cost Per Click (CPC) ads and going to let Google monetize text ads on Yahoo search properties. If the Department of Justice were not in the way, I could imagine Yahoo letting Google power all of its search technology as well as search ads. That would enable Yahoo’s Jerry Yang to instantly remove the huge overhead of a search organization, and make more money via Google powering its search ads. In addition, it would give Yahoo the time, capital, and manpower needed to maintain its lead as the number one content portal and content ad network on the web. Furthermore, it would give Yahoo the resources needed to take its portal to the next level by integrating all of Yahoo’s various web properties into a cohesive and unified consumer experience. Realistically, Yahoo can remain successful without search. There is enough demand for content and content ads in the world that Yahoo could thrive by just focusing on its portal and letting Google take care of the rest. Jerry Yang could do shareholders well by saying that Yahoo will rule the world of content, media and display ads and let Google tackle search technology and text ads.

For Microsoft, its focus of late has been touting their Cash Back program and natural language processing via the PowerSet acquisition. Neither focus has resulted in any significant change, as Microsoft search properties actually did 40 million less searches in the month of August than in July (Google had nearly 100 million more searches over the same period). If I were Steve Ballmer, this would make me flip and throw a chair at my search team. Unlike Yahoo, Microsoft does not have the luxury of handing over their search to Google. Maybe Ballmer should stop saying “I am a PC” and start saying “I am going to learn the Internet and I love Search.”

Without search, Microsoft does not have a platform from which to win the web. It’s ad network, which is still smaller in comparison to Google and Yahoo, cannot afford to keep losing search share, as fewer and fewer advertisers will consider going to Microsoft AdCenter. A Microsoft executive once told me how worried he was at Live Search share going below 10%. If it dropped to that point, he figured a drove of advertisers would leave and not waste their ad spend on a network with such low traffic. For Microsoft this is not a good sign, as Live search share is now at 7%.

Many tech writers like Garett Rogers of ZDNET say that Microsoft should forget about search and focus on its core products like Windows and Office and sign a deal with Google. I believe this to be a recipe for disaster. Many people do not understand just how core search and the web are to Microsoft’s future. In order to remain relevant, Microsoft has to compete in search, it has to compete in online advertising, and it has to compete in enabling online utilities like e-mail, spreadsheet, word, and PowerPoint. They cannot afford to allow Google to obtain 90% of the search engine market share, and become THE operating system of the web. Should that happen, every developer and site will be designed to rank on Google and nothing else (as they are starting to do anyways). The amount of commerce that would flow through Google via ads, SEO, and organic clicks would rival that of most countries. If the leading way people get to your site is through Google.com and Google Chrome, you can bet everyone will design their site and spend their dollars on Google. Ultimately Google has similar opportunity to do what Microsoft did in the 80s and 90s when every developer and application went through Windows.

The reality is that Microsoft cannot be left out of online advertising. The market is too big and growing too fast for Microsoft to just stand by and watch others make billions on the Internet. With consumers less willing to spend money on software online, and becoming used to “free” software on the web, online advertising may become the primary way for companies like Microsoft to make money on the web. Even more important, Microsoft cannot let Google Apps replace Microsoft Office. There are already stories of small businesses using Google Apps to power their email and collaboration and canceling their licenses to Microsoft Exchange and Microsoft Office. If you’re wondering why Microsoft is so concerned about Google, and Ballmer so determined to win the search battle, it is exactly because Google threatens Microsoft’s future and its historic cash cow in more ways than one. At this point, Google is by far Microsoft’s toughest competitor. They have the market share, brains, and capital to give Microsoft a run for its money.

Ultimately Microsoft has to be competitive with Google in search, online advertising, and web utilities offered. It doesn’t need to be the leader in this space, but must remain relevant. Similar to how Pepsi is a good counter to Coke, Microsoft’s future depends on it being strong presence in the search industry and an alternative to Google.

07:01 pm | 1 recommendation | Be the first to comment

How the financial meltdown affects high tech

Having worked in the financial sector before moving out west to start-up land, I have been asked several times over the past few days about the impact the financial meltdown will have on high tech.

At first, people may think the sectors are so far removed from each other that the impact would be minimal. I mean, come on. What in the world does Merrill Lynch, Lehman Brothers, AIG, and Bear Sterns have to do with the fate of start-ups in Silicon Valley and established giants like Oracle and Microsoft. Plenty when you take a closer look.

The big players like Oracle, Sun, Microsoft, and SAP – These guys will feel an immediate impact. Financial Service firms are some of the biggest spenders of IT budgets around. I can imagine memo’s coming from the top to CIOs at banks telling them to cut costs ASAP. Naturally, they will start to push back on upgrades to new software (sorry Vista), ask for greater concessions on license pricing, and in some cases, abandon plans for new technology deployments such as new hardware or new ERP applications. This will impact the bottom line of many established high tech firms. Given all the layoffs at these banks, you will see a lower number of Microsoft Office seats, Oracle seats, Laptops purchased, and less server side hardware and software bought over the next 18 months.

Still, companies such as Microsoft are large and diverse enough to absorb the storm without too much turmoil. Yet, I would not be surprised if I heard Sun report: “We did not meet our numbers this quarter due to decreased spending and turmoil in the financial sector….”

Why Green Technology may be in for a scare - I can see the biggest impact happening on Green Tech Investments. Green Technology requires a LOT of capital (wind energy is not cheap, have you seen how big those turbines are?). Most software start-ups can be funded in under $20 million and get to profitability or an exit with that investment. However, in Green Tech, the amount of investment needed in many cases go well past the billion dollar mark. With congress taking a close look at wasteful spending on green technology (remember corn), many VCs and Green Tech CEO’s were looking to the private markets for later stage capital. However, with hedge funds imploding, private equity shops dwindling, and banks going out of business, who will be left to write those billion dollar checks for a high-risk high-reward technology in Green? Not Uncle Sam!

I can see a lot of VCs taking less of a gamble on technologies that will require significant later stage capital. Instead, they will probably make investments in Green Tech companies that have lower capital requirements. No VC wants to pour $20 million into a company, and when it comes time for that company to raise $500 million for wind turbines, they will find it harder to come by people willing to foot the bill. It’s sad, but the financial meltdown may also cause an ozone meltdown.

More traditional start-ups in the valley are also being impacted. When hedge funds were popping up all over the place, they needed a new place to invest their money. One of the investments they started looking into was high tech startups. Entrepreneurs welcomed this with joy. It gave them another outlet to get funding outside of traditional VCs (just look at the private investments made in Facebook less than a year ago). However, with hedge funds now reverting back to their traditional channels and many closing shop, a lot of funding that entrepreneurs were expecting may never surface. This is a shame in my opinion. There are more great ideas in the Valley than ever before and a lack of funding will prevent many would be great companies from getting off the ground.

12:28 pm | 2 recommendations | 2 comments

Protecting Your Online Identity

Your personal information is online and getting more accessible every day. So how can you manage your online reputation and privacy in this cyber world where walls don't exist? Here are five ways in which Internet users can ensure that their online identity is correctly positioned and that their personal information is protected: 1. Take Responsibility for Your Online Actions Most people believe that what they post on a blog or upload will stay hidden behind a wall and never be seen anywhere else on the web – This is false. Always make sure to read the terms of service on websites and social networks and assess their privacy control options. With over 500,000 people joining a social network every day, the number of people who post content about themselves on the web is increasing rapidly and so is the need for them to understand how the web works. If you post a picture of yourself on a public website, it's as if you posted that picture on a billboard in Time Square. It becomes public content for anyone to see and copy. You really don't want that recruiter to see your online party photos. So be careful of what you post and do online. 2. Track Your Online Profile Search for your name - If you find something you do not like, then you can reach out to search engines like Spock, Google, Yahoo and MSN to remove that content from their index. But bear in mind that even if these search engines remove the content in question, it is most likely that that information was crawled by other services that might not have the same respect for personal privacy. Go to the source of the content itself and either remove it yourself (your public social network pages, blog posts) or ask the website administrators to assist you. 3. What Do You Do When Your Personal Information is Out There Background checking is a billion dollar industry. There are dozens of companies out there that buy your personal data from phone companies, banks, even from your local county records office and sell it online to anyone willing to pay for the data. Once I did a search for myself on Google and to my surprise my former home address was indexed – This had been taken from a third party site. Not cool! At Spock we have a clear policy for people search to only display data that exists on the public web - We never show personally identifiable information (address, phone number, email, and so on) even if it is on public sites. These are steps I would recommend if you find yourself in the same predicament:

1. Contact your bank, phone service provider, and your county records office – Be very clear to them that you do not want your private information sold to a third-party.
2. Contact the site where you found your information and ask them to remove it immediately. Most of these companies do not want to deal with legal action and thus are fairly responsive in removing such data.
3. Make it very clear to these sites that you do not want them to display your private information ever again.

1. Don't use a password that contains any combination of your birthday, social security number, or phone number. There are too many websites out there with poor security protocols which can easily be hacked.
2. Never use the same password twice. A common trick of hackers is to fool people into giving them their password - Ever get one of those phishing emails asking you to reset your password for Paypal? The best way to protect yourself against identity theft is to use different passwords for different services.
3. Change your passwords every six months.

03:27 pm | 2 recommendations | Be the first to comment

Top Vertical Search Engines

Reporters and venture capitalists often ask me to name some of the top vertical search engines. Because I believe strongly that search will become a dynamic industry of very search specific sites and concepts, I decided to compile a listing of what I think will be the search engines that take market share away from Google, Yahoo and Microsoft over the next 3 years.

Travel

Kayak- If you’re like me, and hate searching dozens of sites for the best travel deals then Kayak is what you’ve been looking for. With everyone being affected by high gas prices, searching for the best travel deals can go a long way in saving you money. Whenever I plan to travel, I first go to kayak.com to find the best deals. Kayak’s UI is clean, easy to understand, gives me the right level of filtering, and most importantly is comprehensive. It searches over 200 travel sites to give me the best deals on airfare, hotel, cars, and vacations. Only a few years old, Kayak is the clear leader in this vertical. It even bought out its main rival sidestep.com for $200 million a few weeks ago.

Farecast.com- With a UI very similar to Kayak, Farecast was bought by Microsoft a few months ago. It’ll be interesting to see how it develops over the next few months and if Microsoft will be able to eat away at the travel search market. With Kayak’s success, I think that Microsoft should have never let Expedia go. Ideally, they should have kept Expedia in-house and placed its bets on making it the comprehensive travel search engine that Farecast aims to be.

Events

Zvents - When I met Zvents CEO Ethan Stock a few years back, I never thought I would end up using his service almost every weekend in the not so action packed Redwood City. Finding something to do in a small town is hard enough as is, and a search engine like Zvents goes a long way to solving that problem. Having tried out a number of other local event sites, Zvents by far has the best listings and UI.

Eventful - I haven’t used this site as much as Zvents, but a number of my friends swear by it. Eventful relies on the community contributions which enables you to take advantage of some of the more random functions. While this may help you find a unique happening once in a while, I personally prefer a comprehensive and automated approach like Zvents.

Products

Amazon - Not many people realize this, but Amazon is steadily developing into a search engine for almost any product you’d want to buy. Today, when I shop on Amazon, half the products I get delivered are not even sold by Amazon, but by one of their trusted merchants. Hmmm…sounds like they are nicely going from just a commerce site to a complete search engine for products. Not a bad direction on their part. They already have the brand, they understand the unique UI needed for product search, and users trust them.

theFind.com- Siva Kumr, CEO of the thefind.com thinks that a pure focus on crawling commerce related products across the web and a great UI can make a big difference in product search. I tend to agree. His search engine is one that could give Amazon some heartburn in a few years.

Shopping.com- Owned by eBay, this is a big ad network as well as a money machine when it comes to the volume of transactions that happen on the site. My only concern is that eBay tends to be slow in innovating their properties and care too much about near term results (something all public companies have to do at some time or another). We’ll see if they can keep pace with companies like thefind.com and Amazon asI see a lot of competition in this space. Fortunately this can only be a good thing for consumers.

People

Spock- Yup. Not surprising that I would pick spock.com as the best people search engine, as I may or may not function as the co-founder.. But I REALLY REALLY do believe that we have the best people search engine out there. Spock is the only people search site that seriously tries to index the web and create a real search engine. Compare results on Spock to any other site and let me know if you think someone else is better. I would love some competition in this space.

Music

Seeqpod- A few of my engineers love to use this music search engine while coding away at Spock. It helps them not only find music they are looking for, but also has a discovery feature that lets you discover music that you may be into. It can be difficult enough to search or know what you are searching for, and a discovery UI is pretty helpful. However, don’t get too cozy with Seeqpod just yet. They are being sued by Warner Music for you guessed it (copyright). We’ll have to wait and see how this pans out.

Grooveshark- Similar to Seeqpod, they index web pages that contain user uploaded music files and have been catching up quickly to some established players in this space. We’ll have to wait and see what happens here as well with regard to some of the legal loopholes they may need to navigate through.

Video

Truveo- It’s surprising to me how many people think that YouTube is the be all and end all of video. Sure Youtube may have 90% of the market share now, but so what! Netscape and Yahoo had that type of share at one point, and now look at what happened. In the world of the Internet, nothing is certain. That’s why I think video search is an attractive market on the cusp of something big. They do a really good job of indexing videos across the web. I was surprised at how well they indexed videos of me on the web.

Blinkx- It’s like watching 50 TV channels at once. A really unique UI and interesting take on video display. They are now even offering local video search - not bad. This site is definitely worth a peak.