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Why Google is Worth More than AOL and Verizon

As I write this, Google has a market cap of about $148 billion, compared to Verizon at $124 billion and AOL parent Time Warner at $82 billion. Google might rule the Web search market, but Verizon's $88 billion and Time Warner's $44 billion in revenue last year dwarf Google's $10 billion. Why would a smaller company that makes less money be worth more to investors than larger competitors? Are they just being irrational? Maybe so, but I think there is at least one good reason why Google has been so successful: it has focused on providing services, rather than content or infrastructure. Why is this important? Think about it this way: whenever you do anything on the Internet, chances are you can break it down into three layers: 1) Infrastructure - your connection to the Internet, whether it's Cable, DSL, dial-up, FIOS, etc. 2) Service - the application you use to get what you want done, for example the search engine you use to find things or the mail client you use to read you email. 3) Content - the stuff you read, watch, listen to, or create yourself for others to see. This is of course not a strict hierarchy, but it is a way to look at just about any medium to get some useful insights. Small companies and new startups usually have to compete within one of the layers, just because you can only do so much with limited resources. So a magazine might put up a web site to provide content, and a VOIP company won't build it's own DSL lines, it will just provide VOIP service. Many larger companies eventually find it tempting to cover two of the categories or even all three. This seems like a good idea, and you will hear a lot about "synergies" and things like that. In the best case maybe the company will have some cost savings and be able to provide more value to customers because they no longer have to pay other companies for the other layers. Quite often, though, this can lead to "walled gardens" where companies try to steer users through their systems at each level. AOL, for example, used to keep a lot of premium content off of the Web available to their ISP subscribers. Verizon sells Internet access on it's cell network, but you'd better believe they want you to buy ring tones and MP3s through them rather than some random retailer. In the worst case this leads to illegal monopolistic behavior. Now Look at Google. They seem to have very little interest in providing or controlling the Infrastructure. To Google an Internet connection is an Internet connection. In addition, they have very little interest in being the content provider - Google wants to organize the world's information, leaving the creation of information up to the world. This gets them in trouble with companies that wish to control the content and the service, and use their control of content to force users into their service. Google makes it's play at the service level, with the search engine, Gmail, Google News, etc. YouTube is a good example of how Google can grow and compete in new areas while still keeping within the service layer. Verizon might see YouTube as competition for their IPTV service, but note that YouTube isn't building fiber to every house. Time Warner produces TV shows (content), runs networks (service), and operates the cable running out to your house - meanwhile YouTube lets users produce video themselves. So why is this an advantage for Google? Think about it this way - Google could try to extend their dominance of search into content, but would Google really make better content than everyone else? Google could try to buy up or build out infrastructure, and judging by their data centers they might be able to do a really good job of it. But could they build infrastructure to reach the whole world? Would owning the connection give them an excuse to make the services less flexible, and ultimately less useful? In more general terms, for some services these separations are so obvious that you probably haven't even thought about the alternative. Email is a good example - although in the ancient past the service was tied down to the infrastructure, I would have a hard time imagining a service provider trying to generate the content themselves. Would you use an email service where you couldn't email your mom, your professor, your boss, etc., but could correspond with professional emailers hired by your ISP? In the past ten years, would you have used an ISP that provided email service but blocked access to Hotmail or your college email account? Competition can and should exist at every level. Just like any market there are different approaches - you can try to fit a particular niche, you can try to outperform the competition, you can try to lock users in. Successful practitioners of the latter approach might be tempted to extend into other levels, but in the long run it might not be a good idea. The best case scenario, for both consumers and competitors, is a natural separation with lots of competition within each level. This is more or less the present case with the Internet, despite many attempts at vertical integration and a paucity of competition in the infrastructure level in most areas. Lots of competition means lots of opportunity for capitalism to do it's magic, providing a wide range of options and generating a lot of wealth. Informal, natural separation means everyone has to stay flexible and we get the benefits of specialization. Adam Smith would totally be on board. This best case scenario is also what a lot of people mean when they talk about Net Neutrality. I think that Google understands all of this. Now what about their partnership with Earthlink to offer WiFi? It's possible they are just following the "throw it up and see if it sticks" approach they are known for. My guess is that they see moves to extend lock-in by infrastructure companies into services as a threat and are demonstrating that they can do the opposite if needed. But I bet they would be perfectly happy with a vibrant WiFi market with lots of players providing the infrastructure so they can provide their services.

Pop vs. Soda vs. Coke

Scenario: you are in a restaurant in an unfamiliar town. You've been seated for just a minute when the waitress walks up. "What'll you have to drink?" It's too early for an alcoholic beverage and you're not in the mood for coffee or tea. Water is for cheapskates and juice is for hippies. But what do you call those sugary carbonated beverages that go perfectly with a burger and fries? Depending on where you are in the country, asking what kinds of "pop," "soda," or "coke" they have on tap has a 66 percent chance of earning you a dirty look. Don't call it pop in Massachusetts. Don't call it soda in Toledo. And now you can see what to call it no matter where you are in the nation: Soft drink dialect The graphic above, from the Pop vs. Soda Page, demonstrates an interesting phenomenon. The United States is permeated by a ubiquitous popular culture. We all watch the same TV, listen to the same radio, and see the same movies. Yet regional differences remain. Even the Web, which spans the globe and threatens to make English the international language, can't stamp out these sorts of things. The Web can make it easier to study them, as the chart above shows. For some verification of the map above, check out the results of Prof. Bert Vaux's Dialect Survey: pop, soda, coke, soft drink (soda is in red, pop in blue, coke in green, and soft drink in orange) People in the northeast and California generally say soda, with outposts surrounding St. Louis and Milwaukee. The rest of the Great Lakes and Midwest region say pop, and so do the Plains and the Pacific Northwest. The only people who say Coke when they point at root beer and Pepsi are Southerners. Coke is based in Atlanta, so maybe that has something to do with it. Or maybe it's related to these maps. The Dialect Survey also answers other questions such as whether you mow your lawn or cut your grass and how to pronounce thespian. I think the most important finding of all this research is clear: about 6 percent of Americans actually call pop "soft drinks," proving that 6% of Americans are annoying jerks.

The Electro-Kinetic Road Ramp, Environmentally Friendly Engineering

Lately we have been uber-enviro-nerds with the talk of wind turbines, deep lake cooling and environmentally friendly roller coasters. I just felt the need to put up another nifty energy saving device that was invented by a Bloke from the UK named Peter Hughes. He has created a ramp that absorbs kinetic energy from breaking or slowing down while driving your car over regular roadways. The idea is simple, use the cars wasted kinetic energy to power the streetlights and stoplights. There are a series of plates installed under the road which the cars will drive over, more than likely around stop lights or other areas where the traffic will be slowed. The weight of the car slightly shifts the plates, causing kinetic energy to be created. The energy is stored and then used to power whatever. It is better described on the official site, so I will just do you a favor and quote it here.
The ramp is unobtrusive, silent in operation, causes no discomfort to the vehicles occupants and is entirely safe in operation. The Ramp is designed to require the minimum of maintenance and may be used for generating electricity to power street lighting, traffic lights, road signs, with the surplus being fed into the national grid. It also has the capability to store electricity within a storage battery facility.
I also found a video that you can watch that shows this in action. [youtube]uA0aiKFMSac[/youtube] I have high hopes for this technology; it is a very smart design and easily implemented for almost any roadway. The amount of energy spent operating the lights for roadways may not be much in comparison to other utilities we expect in our daily lives but this simple innovation will hopefully lead the way in other inventions to lessen our dependence on fossil fuels and ultimately reduce the amount of pollution because of this. I think this technology is only currently being implemented in the UK but hopefully American cities will become aware of this power creating device and take advantage of it's obvious benefits. Also, since America is the largest contributor to pollution world wide, it couldn't hurt to try to change the image for the better by fully embracing any new technology that could possibly make a worthwhile difference.

Deep Lake Water Cooling: Saving the Earth, one Skyscraper at a Time

In the past we've talked about some things that you can do to make your house more energy efficient. Some things are easy, like putting in Compact Florescent light bulbs, while others are on their way in the near future, like your own personal wind turbine. There's only so much you can do at home, though, and many of us live in large, air-conditioned office buildings. How could a glass-covered skyscraper possibly use less power for cooling in the summer? If you live in Toronto, it's easy - just tie into the Deep Lake Water Cooling System. Deep lake water cooling system in Toronto The system, by Enwave, draws water from Lake Ontario, deep below the surface where it's always a chilly 4 degrees Celsius. The water runs through huge heat exchangers before making its way into the city's normal water supply. A separate cooling loop transports water chilled by the incoming lake water to various buildings in the financial district where it is used in the air conditioning system. Here's a diagram of the system at work. The city is seeing substantial benefits since it tied into the cooling system:
Metro Hall went online with Enwave's Deep Lake Water Cooling system in June 2006. With the addition of this building, energy consumption will be reduced by 1.7 million kilowatt-hours per year and reduce CO2 emissions by 1,915 tonnes annually - equivalent to taking 383 cars off the road.
According to Enwave, the system uses 90% less energy than a traditional air conditioning system and is price-competitive. This is one of those cases where you don't even have to pay a premium to reduce CO2 production. Here's a picture of the gigantic heat exchangers: Deep water cooling heat exchanger Other large Great Lakes cities like Chicago, Cleveland, and Buffalo could take advantage of a system like this as well. Add in a few off-shore wind farms and the Rust Belt could take a real lead in green technology that makes use of the local geography. So what do you say, Cleveland?

Sick of PowerPoint Slides? Here’s a Better way to Present Data

If you design web sites, write reports, or do presentations, you should probably take a look at the work of Edward Tufte. One of his best-known essays tells how your typical PowerPoint presentation can obscure information more than it helps illustrate. So what do you do if you have a ton of numerical data and just two and a half minutes to present it? Well, if it's data about the pron industry on the Internet, you could do something like this: (Might be NSFW) [youtube]QOFTQpNhsWE[/youtube] Thanks to TechCrunch for digging up the video. The video might seem like just a punchline, but seriously, this is the perfect way to present this data and I think it could be translated to other subjects as well. Obviously it would take a bit of creativity, I don't mean to say that your quarterly sales data should be sharpied across your significant other's backside. A simple example: if I had data about food, I might capture my audience's attention with pie charts made out of, well, actual pie. Tufte is not really a fan of pie charts, and I admit this example is more about capturing attention than effectively conveying complex data. Can you think of any novel, but amazingly appropriate, ways to present facts and figures? And in case you need the executive summary (read: no data) of the above presentation, here it is: [youtube]QtiGd58J0bY[/youtube]