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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.

What Wouldn’t Jesus Do? The Five Funniest Videos of the Son of God

In honor of the passing of Jerry Falwell, who made a mockery of Christ's teachings, we present the best mockeries of Jesus himself. Actually, that's a bit harsh - these aren't really mockeries, more like satire. 1. First off, in Passion of the Christ 2, Judgment Day, we see Hollywood logic extended to Mel Gibson's blockbuster. A box-office hit deserves a sequel, and any self-respecting sequel needs twice as many explosions. [youtube]EWuji6TADXM[/youtube] 2. Family Guy pairs Jesus with Chris Tucker. Finally, some recognition that Jackie Chan is equal to one-third of the holy trinity. [youtube]NqH2dGettBw[/youtube] 3. Monty Python's Life of Brian is, of course, the classic elseworlds version of Christ. Brian is almost, but not quite, Jesus. In this scene, Brian tells us that we're all different: [youtube]qANMjwLmo6Y[/youtube] 4. A modern-day Jesus feels strongly that he will survive. [youtube]fN1dPtEph2U[/youtube] 5. Finally, UltraChrist gives us the most probable scenario. Jesus, returned after nearly 2000 years, finds today's youth just don't relate to him. So he casts away his robes for spandex and becomes UltraChrist! This may also be the only movie depicting Jesus vs. Hitler, Jesus vs. Richard Nixon, and Jesus vs. Jim Morrison. [youtube]uWAkNr_gGh8[/youtube] Did I miss any? put a link to any other great Jesus-based comedies in the comments below. By the way, I disqualified at least one video for cheating - Yakety Sax makes anything funny.

Was the Violence in 300 Excessive?

We can agree to disagree about the political messages in the movie 300, whether it was propaganda or gay-bashing.  But I think everyone who saw the movie will agree it was quite violent. But was the violence excessive or gratuitous?  The only empirical way I can think of to find out is to remove the violence from the epic: [youtube]gNqiSkd1M6k[/youtube]

Two Reasons Why the Viacom-YouTube Debate is Important

Just last year I wrote a little bit about why YouTube works. Since then, two major things have happened: YouTube was bought by Google, and large copyright-holding corporations finally noticed it. The almost inevitable result? Billion-dollar lawsuits. I'll let The Daily Show explain the situation better than I can: [youtube]w9CRD1COCAY[/youtube] But really, who cares?  Two multi-billion dollar companies duking it out in court surely doesn't effect you or I.  But there are at least two reasons why it does matter. 1.  It's not about stealing TV shows, and it's not really about YouTube in particular.  It's about control and availability of information. Let me explain:  Viacom doesn't offer all of it's material online, but Comedy Central at least has it's "motherload" interface.  The clip I posted above - and apologies if it has already been deleted - is available there.  They even have a little "embed" link, to help you post the clip in your blog. Notice I didn't use that embed link, and instead have the same clip from YouTube.  No, I'm not trying to be ironic.  I tried using the Comedy Central clip but noticed something sort of odd.  It says "This video expires 04/22/2007." One of the main reasons the Web is so powerful, and so important, is that it makes publishing, storing, and retrieving information cheap, fast, and easy.  Not a little cheaper, a little faster, a little easier - we are talking orders of magnitude. In the past, there were reasons why information might disappear, or be difficult to find.  Books went out of print because someone had to actually print books.  But now, there is no longer any real excuse.  Videos don't naturally expire on a certain date, like bologna.  Keeping the video around for a while doesn't really cost Viacom that much, and bandwidth and storage prices are always going down. I'm sure lots of people use YouTube just to watch TV shows without paying for them, but that's not why YouTube is important - it is important because it makes video available for comment, by anyone, basically forever.  So when a senate candidate uses an delightfully unfamiliar racial slur, but no major news networks are around, the video still gets out. So why should we care that clips from a network that has puppets making crank phone calls are available too?  There's no way to cordon off the important video from the unimportant, because it's too subjective.  In fact, Comedy Central is the perfect example - it has actually been the source for some very, very important video over the past few years. Steven Colbert's explanation of the concept of truthiness was the most insightful commentary on the current administration and it's backers to be seen on any channel.  But I can't find it on Comedy Central's web site.  And any video site hosting it, even in the fair use context of commentary and scholarship, is likely to get a DMCA letter to take it down. If the Viacoms of the world get their way, we will lose something new and amazing - the democratization of commentary and reference in the world of video. 2.  If Viacom wins, in the long term Viacom loses.  Again, video clips are not bologna.  This Daily Show video expires because Viacom doesn't understand the Internet.  The Colbert truthiness video is not immediately available for commentary because Viacom doesn't understand the Internet.  Some stuffy old guy in a well-appointed office made this decision, and the thinking went something like this: "Hmm, this video clip thing is hot according to CEO Fad Magazine, but I don't fully understand how to monetize it."  I suppose he understands enough to put a billion-dollar price tag on the copyright infringement, but not enough to actually make a billion dollars by putting video clips online.  Will this cannibalize DVD sales?  Will people stop subscribing to cable altogether?  So many scary questions! Meanwhile, people like YouTube founders Chad Hurley and Steve Chen, sitting where ever they used to sit, were thinking more like this:  "Wow, we've done the math and the Internet has made an amazing thing possible that has never been possible before.  Let's do it." Now think back to all of the biographies you've read about inventors, founders of major companies, scientists and engineers.  Which mentality, do you think, has driven the American economy to create such amazing amounts of wealth?  How many companies stay successful by avoiding change, becoming confused and disoriented by new possibilities, and trying to fight new technologies with lawsuits? Viacom needs to get a clue and embrace the fact that video distribution and storage has suddenly become easier, faster and cheaper.  They don't have to do so by letting YouTube host videos, but ignoring the lessons that YouTube is teaching the rest of the world is not a good long-term strategy. This is important because there is a lot of money, and there are a lot of entrenched interests, on the clueless side.  These companies are sitting on top of a gold mine but more worried about putting up fences than actually digging up the gold. I don't really care if YouTube or Google Video or iFilm or whoever has clips of this show or that.  I'm not interested in whether they paid for them, if so how much, whatever.  If this was all just fighting over whether or not college kids can watch blurry little South Park clips for free in their dorms, we could all safely ignore it. But this is important, and hopefully you are paying attention.

For Presidents Day: What if Abraham Lincoln had Lived?

One of greatest tragedies of American history is the untimely death of Abraham Lincoln. Having done a great service to us all by ending slavery and preserving the Union, Lincoln had a plan for southern reconstruction that was more moderate than the measures taken after his death. Although I sympathize with the radical Republicans of the time and their desire to quickly end slavery, give voting rights to freedmen, and crush the power of slavery as an institution, their methods lead to the "redemption" where conservative whites dominated southern politics for decades. This left a legacy of racial segregation and distrust that lingers to this day. What if Abraham Lincoln had lived? Countless historians and authors have pondered this, but I think the video below gives the most insightful analysis. [youtube]xIU6GZA6L78[/youtube] (If you are viewing this post from your feed reader, please click through to this Abraham Lincoln article to see the embedded video).