Michael Krigsman writes a post for ZDNet about Feedburner's recent 3 day outage.  For those who aren't bloggers Feedburner is a service operated by Google that allows you to track information about your RSS/Atom Feeds such as how many subscribers they have, what those subscribers are clicking on, etc...

In his post Mr. Krigsman says...

FeedBurner blog site statistics have been down for over two days with no word from Google despite numerous complaints from users. Does Google’s lack of response suggest something we don’t know?

...

In my view, Google’s cavalier attitude toward FeedBurner suggests that perhaps the service has been demoted to second-tier status despite the fact some FeedBurner services remain working. If so, that’s bad news for users. Google, any comment on this?

To be honest, I was surprised this issue didn't get more coverage in the blogosphere.  Such blatant mistreatment of customers, particularly vocal customers like bloggers, usually creates more of a storm than this. 

I don't know for a fact what is behind Google's lack of response.  But it reminds me of an issue that I don't think gets near enough attention and that's the fact that Web 2.0 companies, with their ad based revenue models, have no incentive to listen to their customers. 

Because unlike businesses in the past their money comes from a third party giving the consumer no pull.

Our lives are becoming more and more dependent on companies that don't answer to us in any way.  I actually posted on this a few months back.  At the time I said...

This is one of the biggest problems and least discussed consequences of Web 2.0's new "Advertisement Based Economy".  By being an intermediary between you and the service you are using the advertising company is preventing you from having any hold over the company that is actually providing you with a service.  Because of that you lose the ability to hold them accountable for providing that service poorly. 

It actually adds a lot of credence to the idea that nothing comes for free.

So the question is, what can be done?  People certainly don't want to start paying for something that is currently free and web sites have no reason to listen to users while the people with the ads are providing all the funding.  What needs to happen is the middle man (a.k.a. the advertiser) needs to start advocating for the user.

I still wish a system like this could be established but I'm less and less optimistic as time goes on.  Google's complete lack of not only contrition but response of any kind shows just how complacent people have become in regards to this. 

It makes me wonder though, with people relying more and more on these services and starting to put important data into them (Google Health for example) how long can this type of behavior be tolerated?  I have to think the consumer will stand up and complain at some point.

Interesting news about Google today.  Here's the quote from Clint Boulton of Google Watch...

Numerous media outlets are covering comScore's Monday report that clicks on Google's paid search links fell 7.5 percent from December 2007 to January. Reporters did the same when IDC two weeks ago reported Google's ad share dipped 0.5 percent.

Is it time to cry recession?

Google made $16.6 billion from online advertising in 2007, so I would agree that Google losing 7.5 percent of its primary financial cash cow would be a big hit to the company coffers if the figure averaged out or grew over 12 months.

It is not a sign that something is wrong with Google or its advertising business per se, not anymore than the search vendor's absurd soar to a $700+ stock share price this summer meant the company had found the fountain of youth. Finance is a fickle fancy.

I agree in that I don't think this says anything about Google.  I expect Google will have a few more flat-to-down quarters but I doubt it will matter.  Google will survive this bubble just as Microsoft, Yahoo and others survived the last.  They have a solid business model that will carry them through. 

The same is not true of a lot of "Web 2.0" companies out there who are counting on ads to get by.

It baffles me how people didn't see this "Web 2.0 bubble" following the same pattern as the "Web 1.0 bubble".  People start advertising on the web, a bunch of web startups popup funded by those ads, the bottom falls out of the ad market and those companies go out of business.  It isn't that difficult.

Yet I still see almost no acknowledgement of this in the blogs.  Worse yet, people are actually treating ad-based models as if they were the only business model.  Just one example was Steve Karp essentially claiming that in relation to the Wall Street Journal's decision to retain their paid content (I wrote a post on it)

Baffles me...

I'm not sure there's any saving the doomed Web 2.0 companies at this point.  If I have any advice it would be start cobbling together a secondary revenue source before things get bad.   Either that or combine with other like minded companies in order to create a compelling ad-network, ad-based revenue models are appropriate in some places.

My real hope here is that, when Web 3.0 rolls around, people will learn to put ad-based revenue into perspective.  Its certainly appropriate in some places but it is not and never has been the be-all-end-all.  Its just one tool in what should be an arsenal of ways to make money.

Erick Schonfeld of Techcrunch writes a good follow up to the initial news here.

Its a good article but I would make one point about the chart he publishes.  Comparing the combined revenue/expenses/etc... of Yahoo and Microsoft to that of Google is not a fair comparison.  Google is playing in a lot of Microsoft areas (office software for example) but they aren't really competing.  The bulk of their effort is still focused on a few key areas (all having to deal with Search and Adsense)

Microsoft on the other hand (and even Yahoo to an extent) is spreading their money much thinner because they are seriously competing in tons of different areas.  So to say that Microsoft and Yahoo would have Revenues of $65B vs Google's $16.6B is a little misleading when Google is probably spending twice as much on its cash cows (which also happen to be exactly what Microsoft is targeting with this acquisition)

For the record, Mr. Schonfeld makes a similar point in the post but it sort of gets lost in another point so I wanted to draw attention to it before linking to the post.

I almost feel stupid quoting this (like anyone hasn't heard)...

I am writing on behalf of the Board of Directors of Microsoft to make a proposal for a business combination of Microsoft and Yahoo!. Under our proposal, Microsoft would acquire all of the outstanding shares of Yahoo! common stock for per share consideration of $31 based on Microsoft's closing share price on January 31, 2008, payable in the form of $31 in cash or 0.9509 of a share of Microsoft common stock. Microsoft would provide each Yahoo! shareholder with the ability to choose whether to receive the consideration in cash or Microsoft common stock, subject to pro-ration so that in the aggregate one-half of the Yahoo! common shares will be exchanged for shares of Microsoft common stock and one-half of the Yahoo! common shares will be converted into the right to receive cash. Our proposal is not subject to any financing condition.

Our proposal represents a 62% premium above the closing price of Yahoo! common stock of $19.18 on January 31, 2008. The implied premium for the operating assets of the company clearly is considerably greater when adjusted for the minority, non-controlled assets and cash. By whatever financial measure you use - EBITDA, free cash flow, operating cash flow, net income, or analyst target prices - this proposal represents a compelling value realization event for your shareholders.

What's interesting here isn't that Microsoft wants to acquire Yahoo, that's been rumored for years.  What's interesting is how much they are willing to pay.  Yahoo's shares closed at 19.18 yesterday while Microsoft offered a staggering 31 per share as an acquisition offer. 

To me this is Microsoft making an offer that Yahoo can't refuse.  I mean no offense towards the people at Yahoo but they are in a mess and there aren't many investors who think they can dig themselves out of it.  Even if they can it will take a massive effort to get Wall Street's faith back.  Microsoft is handing them everything they'd have to work for on a silver platter.  I'm sure there are employees who will resist this but I can't imagine there's a yahoo investor out there who isn't jumping for joy right now.

Anyway, the implications here are pretty vast and I certainly can't list them all in one post even if I were prepared to do so.  But here's a list of quick reactions...

Ads: This is what everyone is focusing on and Microsoft is clearly trying to build a massive advertisement business based on acquisitions.  Technology companies are essentially the sum of their employed talent so acquisition has never been a big thing in the tech sector but my understanding is that its a huge thing for Ad agencies.  Customer loyalty is a big deal in that market and changing your ad agency is rarely done (in the grand scheme of things).  So if Microsoft can buy up the ad market around Google and use large properties as enticements they might be able to beat Google without beating Google's technology.  People forget how many small blog ads it takes for Google to compete with Microsoft getting all the big fish.

Search: Microsoft's search stinks and has only risen slightly in share because of money spent on marketing.  I don't want to portray this blog as being of great importance but it's publicly on the Internet and both Google and Yahoo indexed it over a month ago.  Live.com still hasn't even found it.   As for relevance, that situation is just as bad.  To test I put in a few political candidates and ran into a perfect example with John McCain.  See the Live results here and the Yahoo results here.  The Microsoft site lists all the individual subdirectories of Mr. McCain's site as if they were different sites.  So california.johnmccain.com is 3, lousiana.johnmccain.com is 4, michigan.johnmccain.com is 5 and so on.  The Yahoo results on the other hand list his myspace page, his wikipedia page, etc...  Bottom line, Microsoft Search stinks and could really use Yahoo's help (and maybe together they could at least get within striking distance of Google).

Economies of Scale: Lets be honest here, Yahoo and Microsoft are doing a lot of the same things.  It only makes sense to collaborate on those things and save some money doing it.  Even if they aren't going to merge they should be looking at collaboration on things like data centers because it allows them to compete against Google far more effectively. 

Just Plain Scale: Both Microsoft and Yahoo have become media companies at this point and both fund (in one way or another) a surprising amount of content for their individual networks (MSN and Yahoo respectively).  I think it would be foolish to kill either one of those networks off but allowing that information to co-mingle will double the amount of content they have to offer and hopefully make both sites more appealing. 

Web 2.0: Remember this is an area that Steve Balmer has specifically mentioned as a goal for Microsoft in the next few years.   Yahoo has been very successful at acquiring companies that fit the description and I'm sure Microsoft has at least noticed that (though their obsessive need to brand will probably screw this up as Flickr becomes MSN Photos and fans go elsewhere)

That's all I have for right now.  I really do think this merger is pretty much inevitable.  I'm honestly not sure if I think its the best thing to do for either company yet.  But I also haven't gotten to read much of the coverage yet so its possible some of it will open my eyes to something I didn't consider. 

Whatever the case this is certainly big news. 

"A lot of things are free in Vegas but most of them aren't all that good"

I had a lot of reason to think about the above quote while vacationing in Las Vegas over the New Years Holiday.  But more than Vegas it got me to thinking about the "Web 2.0" world and how much of our lives are now dependent on companies that don't answer to us directly.

What I mean is that, in the old days, if your local Newspaper printed something about you that wasn't true you could call someone up and complain.  Now, if someone writes something false about you in Wikipedia and Google is indexing it for the world to see there's not a whole heck of a lot you can do about it.

This is one of the biggest problems and least discussed consequences of Web 2.0's new "Advertisement Based Economy".  By being an intermediary between you and the service you are using the advertising company is preventing you from having any hold over the company that is actually providing you with a service.  Because of that you lose the ability to hold them accountable for providing that service poorly. 

It actually adds a lot of credence to the idea that nothing comes for free.

So the question is, what can be done?  People certainly don't want to start paying for something that is currently free and web sites have no reason to listen to users while the people with the ads are providing all the funding.  What needs to happen is the middle man (a.k.a. the advertiser) needs to start advocating for the user.

This isn't unheard of believe it or not.  For all the hate that gets slung Wal-Marts' way they are actually famous for being a middle man who advocates for their customers.  If you'll recall, items you had to assemble didn't come with little mini screw drivers until a few years ago when Wal-Mart insisted that manufacturers wanting to sell through them include mini tools for the consumer. 

The Advertisers could do that too.  It would take very little effort for them to set up a web site allowing their customers to lodge complaints about sites they advertise on and then advocating for their customers against the various web properties that have no reason to listen to the users otherwise. 

The truth is, if the advertisers were smart they'd band together and form services in which you'd register with them and they could advocate for you.  In doing so they'd be getting user information that they could use to promote themselves while providing a valuable service to the user.