Pete Cashmore, Paul Montgomery , and Mitch Ratcliff are having a real good conversation regarding the collective intelligence of “humanity” versus “algorithms.” A few random thoughts . . . as I dont have too much time for “coherentness”

1. Reminds me of the debate in the financial industry on quant hedge funds (program based trading) versus investing in broad indexes such as the S&P 500 (ie algorithms vs. collective intelligence). (BTW the third option, investing in human managed funds, would be considered the web 1.0 model . . . stupid, slow, dumb . . . I’m exagerating but you get my point.) The problem with algorithms (in both finance and editorial content) is that it is based on a priori model of the world which assumes that certain unknown variables (not in the model) remains constant. So as long as major shocks to the system do not appear (such as major earning disappointment, corporate fraud etc) , algorithms are much much faster than humans can at detecting market efficiencies, forming a view on market movements, and capturing value by exploiting such an inefficiencies. These models will make money slowly but consistantly until something goes wrong and the fund could potentially lose everything (read Long-Term Capital). As such, most quant hedge funds built into the system ways to for humans to intervene (such as turning off the trading program during earnings week or triple witching hour) as well as ways to add value into the model. The co-dependency implementation is not perfect but it beats losing your shirt. Perhaps thats where we are headed on the web in the not too distant future.

2. This is another key difference between Yahoo and Google. Many people have pointed this out before. Essentially Yahoo’s historic background in directories and Google’s in algorithms has pited the two company in two of major camps in their vision of the future. Yahoo has fully embraced the whole web 2.0 peer economy model. MyWeb is a historic attempt at “PeerRank” while many of its other products like Yahoo Local relies on the contribution of users. Google on the other hand is still taking an aggregated approach to web 2.0. Essentially it is gathering up reviews and content contributed by users of OTHER websites and presenting it to its users. Google believes that it has superior parsing and ranking algorithm to recognize valuable content and create “semantics” around unstructured data. Look at the relaunch of Froogle and its vendor and product reviews. . . all crawled from other content providers. Both model has its merits . . . Google has a much easier time building critical mass and generating value for its OWN users in the early phase of the product lifecycle. . . but eventually, it is at the whims of content providers (see craigslist and oodle). Yahoo, on the other hand will have a much harder time generating network effects, but once it does, its position in the industry is much more defensible because it “owns” much of the content on its own site. I wonder who will win out in the future . . .

For the first few days, everyone was focused on Google Base’s implication on the e-commerce industry (auction + classified). But there is something much bigger at work here as everyone started to noodle on the bigger implication around data, ownership, business model and access.

I alluded to these issues in my last post on the ping server acquisition (weblogs.com) by Versign that the current “crawl” model for information indexing is simply not sustainable in the long run.

Information on the web is generated at lightning speed which makes these search engine indexes almost obsolete the moment it’s done crawling the site. For example if a search engine only crawls John Battelle’s Searchblog once a day (which is a privilege reserved for the chosen few) the index is irrelevant the moment John puts up another post (man, the guy is prolific). As a result, “push” indexing will go the ways of the dinosaur if the lifecycle content of the web continues to increase. (Remember how old the Google image index was last year? I think something like 6 month old! imagine if a blog search engine has a 6 month old index). As a result blog search engines use the ping/subscribe/crawl architecture which is a lot more efficient with fresher indexes.

GoogleBase is an attempt to take that one step further. Couched in the terms of faster index inclusion and traffic generation, Google wants to take your data directly into their hosting infrastructure. Screw pinging, directly update your data on Google Base! If that doesn’t sound scary perhaps we need to remember the uproar we had over Microsoft Passport and Plaxo’s initial hosted data model. Just because Google claims to “do no evil” doesn’t mean it can replicate MSN’s product model and get away with it. In a world where data is becoming more federated and open, Google is taking a page from a book of a bygone era.

I have my faith that federated, open, and “ping” is the better model for the future of the search engine evolution. Yes, the GoogleBase model is technically superior; but I’m not too sure we all want to live in a world singly built ontop of SkyNet Google. We’ve done that for the last 20 years with Microsoft, I don’t want to switch one master for another just when I see an inkling of change.

What is web 2.0? It could be ajax, peer economy, etc . . etc. . . but really who cares . .. the numbers speaks for itself (the banker and engineer in me wakes up)

Google - 7.6B global searches (+74% Y/Y, 5/05); 384MM global unique visitors (+36%, 5/05) per comScore
Broadband 179MM global subscribers (+45% Y/Y, CQ2); 57MM in Asia; 45MM in N. America
Yahoo! 917MM streaming video (music…) sessions (+119% Y/Y, CQ4)
Digital Music 695MM cumulative iTunes as of 9/05; 6MM iPods sold in CQ2:05 (+295% Y/Y)
Personalization 40MM+ estimated My Yahoo! users
Tencent 16MM peak simultaneous Instant Message users, China, CQ2
Blogging 27% of US Internet users read blogs, 11/04
Ringtones $3B annualized ringtone sales (Informa 5/05) - vs. $495MM cumulative iTunes sales (7/05)
VoIP 54MM registered Skype users (9/05) - fastest product ramp ever?
Denmark VOIP minutes > landline voice minutes
MobileMessaging 1.1T SMSs sent with $50B in revenue in 2004 (Informa 5/05); more emails sent in Japan via mobile than PC (DoCoMo 2005)
PayPal 79MM accounts (+56% Y/Y, CQ2); 23MM users (+48% Y/Y)
Mobile Payments 4MM+ NTT DoCoMo wallet phone users (CQ1) in Japan
Global N. America = 23% of Internet users in 2005; was 66% in 1995
S. Korea Broadband penetration of 70%+ - No. 1 in world
China More Internet users < age of 30 than anywhere

No, I do not care whether there is too many startups and whether any or all of them will fail (not in the macro sense I dont). But do care that the world around me is changing, and it will never be the same again. 2 years ago, in the troughs of valley’s depression the numbers are very very different than what it is today. So its not just the hype (which they are plenty) but really , the world has changed since 2003.

BTW the #’s are quoted from Mary Meeker’s presentation here

215 years later, Adam Smith is having his last laugh again. Here we go again, arguing on the seemingly incompatibility of business and humanity. Is web 2.0 really so different from previous incarnations of business models, opportunities, and organizations that once again we hold our hand together and declare . . . “this time, the rules have changed!!!” Wasn’t it just a short 5 years ago we declared the same thing with the last new economy revolution.

Can the peer economy find a business model?

Does the peer economy deserve a business model?

Yes, Mr. Carr, web 2.0 is amoral . . . so is all businesses. . . and sometimes it can be immoral like some businesses. And its very amorality is what helps the aggregate “be moral.” No delusion of grandeur here.

Like Om said, the conundrum does exist and that many times eBay gets skewered for being the first web 2.0 (kinda of, close enough, web 1.5 atleast?) company to grow-up, make some money, and make some hard decisions. . . be it business or moral ones. (remember how eBay banned handguns on the site and got skewered? Freedom of speech or moral responsibility? Not an easy answer!)

Too many web 2.0 startups hide behind the mantra of openness as well as the lack financial downside (due to lack of scale and community critical mass) by simply spending VC’s money in search of a business model that might or might not exist. Even worse, they delay decision making on their “moral” responsibility on how best to manage and share value with their community and user contributed content until someone else figures it out.

Peter Rip & Alec Sauders is right, that web 2.0 needs a business model to be sustainable . . . whatever good these companies want to do for the world, it needs money to pay for the sky high mortgage payments in the Bay Area and kid’s college tuitions of the people that work there to be sustainable.

Here at eBay we walk the tight rope every day, sometime we argue endlessly amongst ourselves. We also know that if we don’t make some decisions, there is no one we can “copy” from. As the first “web 2.0” company (please forgive me for the audacity of the claim), I think eBay does have a lot to offer on striking the balance between morality and immorality – ie amorality.

Perhaps I’ve drank the cool-aide here at eBay for way too long, but I’ll let Pierre explain this one as he talked of his omyidar.net social investment fund at web 2.0:

Looking for businesses that can only be successful if they have a positive social good. We are building tools with new technology to bring people together. Adam Smith: given the right environment with people pursuing their self interest leads to an increase in the general welfare. In fact, look at the profit generated in an economic system, if the environment is right, then the existence of profit is evidence of general welfare. If the baker can sell bread to a shoemaker, he can feed his family, and also apply the profit to buy shoes. It’s more complex than that, but the principle holds true.

We look for three things: does it have a level playing field? does it foster interaction, connecting and communication around shared interests? do the participants have a sense of ownership for what is going on?

There has to be competition for the pursuit of self interest to work. No externalities that are not priced into the product that you are selling. Market failures. Commercial sector has the ability make the world a better place, but governmental regulation is responsible for fostering the right environment. As an investor, we want government to help understand it’s responsibility, while being a good citizen in the private sector and not distort markets.
An organization that only focuses on their social good has difficulty scaling compared to those that focus on profits. With both, you get great people and you set them loose. That’s what we did at eBay. With the full confidence that as they were pursuing returns they are making the world a better place.

Peter and Alec’s post is directly related to what happened with Oodle and Craigslist (and Om’s question on whether the community deserves to profit from their contribution). Be it webservice API’s, crawling, or scraping. . . the underlying technology does not matter. . . the question is how do you share value and make money when the atomization of value contribution is distributed and hidden behind the end user experience – be it another website, web service, or an another user.

eBay does have a model. . . not THE model or even a model that applies to anyone but eBay . . . but it does have one. . . For making a platform/marketplace (check out the # of employees eBay have in the 10K, its not such a hands off business as many might think) eBay take a portion of the value. Sellers make their margin as well (if they don’t, they wont come back and eBay will slowly die). Buyer gets a better deal than they would have from another site (so they would come back too).

Finally, direct to Peter’s point, on the API side of eBay. Furthermore, in some cases the API calls are free other times not. And in many cases, eBay actually PAY our partners who drive traffic (and transactions) to the site using the API’s. In short, based on the value creation equation and use case, money (and value) flows all different ways not just towards eBay. eBay have TRIED to strike a balance between openness and monetization. It works for now, and it can work better. As mashups become more popular, I’m sure more issues will arise. But eBay will be sticking our neck out trying to make it work.

BTW, the usual disclaimers apply. Everything in this blog is my own opinion. I do not represent eBay nor does it represent me. I am not directly involved in the many decisions made mentioned above nor work at the business divisions mentioned above. None of the data/information is proprietary. Think of me simply as a biased observer.

Blog networks are hot. . . ever since weblogsinc got bought by AOL the idea of blog networks have spread beyond the “professionals” into the casual bloggers segement. Sure there had always been BoingBoing, Gawker, Corante, even the9; but today everyone and their mom are either starting their own blog network, joining one, or being invited to one. (I won’t name names here)

This was certainly inevitable ever since main stream media started publishing top xxx blog lists. A few people realized what was happening like, Fred Wilson, and asked to be taken off those lists. Other’s however, saw an opportunity to get famous or make some money. Many on those lists are leveraging their notoriety as “anchor” blogs and starting their own networks. Those left off, are joining together hoping to gain critical mass in numbers. (BTW Google’s PageRank is one of the implicit drivers of the trend).

The emergence of a blog hierarchy, be it single destinations or networks is not a good thing. It feeds the ego of bloggers and destroys the democratic nature and voice of the blogosphere. Perhaps I’m being naïve as there was never such a thing (see blog mobs). But I don’t see a good ending for the scene in general.

A long long time ago, as a teenager, I was involved (peripherally) in another “scene.” An underground PC hacking counter culture sometimes called the “scene” or “elite.” The scene first started out as bunch of kids distributing and cracking games where copy protection had been removed. The community (the better word for it) at the time was pretty haphazard (like the blogosphere was 12 month ago) and certainly amateurish. There were “groups” of hackers with their BBS’ but no one dominated the scene. That all changed when “The Humble Guys” arrived. No longer a community of teenagers looking for a free copy of Leisure Suit Larry, these guys were adults (almost ) who had risen/grown up with the scene and taken a elitist and professional attitude to what was before a hobby and passion. There were money to be made in the ecosystems of cracking and distributing illegal software. All of which fed off the ego of the community to be cooler and better than others. The software remained free, but you can now pay to join a group, pay to be a distribution BBS for a crack group, pay to run your BBS on the latest version of Vision or LSD, etc, etc.

Pretty soon, seeing the power and money making ability of The Humble Guys, other imitators popped up like Razor 1911, iNC, Fairlight, USA, and others. A hierarchy was quickly established and the scene bifurcated significantly. You are either a “consumer” or part of the “management.” More specifically, people are either involved in the publication of software (analogous to blog creators) or people who downloaded (readers). There was no middle ground. You were either “elite” or “lame.”

There was almost no point starting your own BBS (think blogs) because there is no support system for you to get started unless you belong to a major group or have a network of BBS to drive you traffic (dialers). But of course, you can’t join one unless you run your own BBS and build up a good reputation and user base. The catch-22 eventually drove the downsizing of the community. The resulting apathy, the rise of the internet, movement away from copy protection, secret service crack down, and p2p file trading all helped reduce what was once a very vibrant community.

Of course the pc hacking scene is not even a close analogy to the blogosphere today . . . but there are lessons to be learned. Once any community has a huge peer asymmetry between producers and consumers, its network value decreases and a vicious rather than virtuous cycle emerges driving down the incentive of joining such a community. I hope this I not the beginning of the end. I once got apathetic and left the “scene 1.0” (plus chasing skirts became more fun ), I hope this is not the case for the “scene 2.0.”

I always wondered what happened to those guys, and where they are today (those that did not get arrested!). Did Paul Allen become Fabulous Furlough after leaving MSFT? (not likely ) Did any of them become hugely successful entrepreneurs? Are they running around the valley today knee deep in the tech industry? The blogosphere even? Better yet, are there any BBS’s left? Would love to fire up my modem and Procomm, dial around and re-live the wild wild west again. I could even load up theDraw and pull out some ANSI artskills I’ve hidden away for over 10 years. . .

Barry Diller once said at a conference that I attended (shop.org) that he doesn’t place too much value in “reviews and ratings.” To him, they are just imperfect replications and proxy for a more powerful concept called “brand.” I certainly do not agree with him completely but I do understand where he is coming from and the importance of the statement.

Answer this simple question, if Coca-Cola was to launch today, how many “positive ratings and reviews” does Coca-Cola need to have in order to build its “brand” to what it is today? Probably infinite. . . ie it will never get there if “reviews” was all it focused on . . . Positive reviews are certainly neccessary . . . much like word of mouth . . . but Coke will never be able to create powerful and emotional connections between the company and its customers without focusing on the intangibles of building brand equity . Pepsi always had better reviews (think of its taste test challenges) but somehow consumer preference for Coke never waivered. (BTW, read about David Aaker’s concept of brand equity and other brand measurement techniques here)

Today, in a world dominated by search engine marketing, many online companies have foresaked the concept of brand for immediate ROI . . . certainly for most, its a right decision because

1. its a lot easier to measure return . . . (revenue - COGS)/Click - cost per click = $ made
2. many brand building strategies requires significant scale in distribution and marketing expenditure to be effective. If I am running a $500K a year shoe web store, there is really no point for me to do anything but search engine marketing.

But for the many online companies out there, the time has come for them to think hard about moving a portion of their budget beyond search. It is not that search does not build brands. . . it does to certain extent . . . but that in the end, you do not want to be in the business of competing with your competitors purely on each other’s ability to pay more for a click. Its simply not strategic because your ability to pay is only dependent on your cost structure. Search marketing can not be ignored. . . but for the many startups that have “grown up” by perfecting the search engine marketing game, its time to think about owning that customer relationship directly and realize that Google no longer deserves to make money by dis-intermediating you and your best customers.

If you watch TV tonight (sunday), you will see the launch of one company’s exercise in building and extending its brand . . .

What Is It?

Glad Tom, fixed his myYahoo feed problems, I had thought he took a little hiatus from blogging. If he didnt fix the issue I would have missed this exceedingly interesting post on a new service on Pong. (here is their blog)

By decentralizing the ping process to a user’s desktop, the messages are sent immediately to all tracking services that the user selects. Weblog authors no longer need to deal with delays in their posts as blog authoring software or hosting services attempt to forward pings. They no longer need to open a browser and navigate to multi-service ping relaying sites in order to send these notifications.

And most importantly, control over when and where these pings are sent is placed in the hands of weblog and feed authors, not a centralized service that makes this determination based upon business partnerships and financial incentives (this is happening, see these BusinessWeek and WSJ articles).

There are a couple reviews from Jeff Bar and Buzzword Compliant.

This is not much of an issue for Wordpress users who can add/delete their own ping tracking servers. I’m not sure how blogger or typepad works, but I suspect this product/service is targeted at their users. I dont really think Pong can solve the commercialization issue of ping servers as Matt (of wordpress) mentioned because it still relies on ping aggregators to relay to less well known RSS readers and search engines. Pinging directly to search engines and RSS readers is something I can configure myself in wordpress.

In the end though, I think its a usefull service for a segment of users who do not have access to a configurable blogging platform. As such here are couple suggestions. . .

1. Build a tool bar version would be cool as most peole write their blogs via their browser
2. Even better, build a greasemonkey script that add “Ping” button to blogger/typepad/livejournal etc on the blog writing page. And include an option to link the “publish” button to automatically enable the Pong “ping.”

This time, its different . . . but the outcome will be the same for entrepreneurs . . .

After 6 months of seeing my friends go off and start their own companies I wondered like everyone else if this time, its really different or is it just a bubble . . . knowing that its almost impossible to predict the future especially with regards to market adoption, I wont sit on my ass and pretend to know better than people who are more qualified than I am . . . (Fred Wilson, Brad Feld, Tom, Alarm Clock, BubbleGeneration, Genuine VC, David Gibbons, Blodget?!)

I know that the weakness of “web 2.0” companies are the very “superiority” of their business models. In exchange for long-term scalabilities, these companies sacrificed short-term applicability. Put it another way, while “virtualness” is great once critical mass is achieved, the lack of value proposition until scale will cause many of these companies to fail . . . the value proposition of buying a book online is quite transparent . . . but the value proposition of writing a book, publishing a book, and reading a book .. all online is much harder to articulate and market to joe schmo.

On the other hand, to balance the increase in market risk, the execution risk for these ventures are significantly lower. As small as my sample size is, the people that are leaving to pursue their entrepreneurial are experienced builder of Internet applications. . . Back in 1998 no one really knew how to build web apps. . . we cobbled together software development paradigms and adjusted it as we went hoping to come up with the right recipe. 7 years later, companies like eBay, Yahoo, MSFT, who have went through countless iterations of the web product development cycle have produced a generation of developers and product managers that have no problem articulating a vision and execute to produce a user friendly product.

What this means is a potential gold mine for VC’s. Instead of funding execution and market risk, many VC’s have either invested minimal amount at the concept stage or waited until beta is produced to invest.

In the end, the ratio of successful companies to failed companies will be the same as another other boom . . .be it railroads, minicomputers, pc’s, the internet, web 1.0, 2.0 . . . (Hsu’s Law . . .not! ) But this time, VC’s would have put in less money and taken less risk to get the same amount of return. Unfortunately, entrepreneurs would have taken the same risk (quit their job, lived off savings) . . . to get the same success probability. Unless they bootstrapped the company (and thus acted as the financier themselves), someone else would have captured the shift in the value creation in web 2.0 world.

Nothing in the blogosphere is really considered “little known” these days especially given the # of trackbacks on Versign’s blog . . . but comparatively, the purchase of weblogs.com by Verisgn got very little attention given the implications. . . (maybe cause people were confusing it with AOL-weblogsinc.com deal or that the web 2.0 conference was more interesting) . . . (here are some other posts on the topic . . . Ochman, Kottke, Paid Content, and Winer’s own account, and lastly John Furrier)

The purchase is a watershed moment because the way current search engines are architected is wholly inadequate given the increasingly real time nature of the web. Limited by the # of crawler they can sent out to the web, (computing cost + just bogging down the web in general), search engine indexes are usually out of date the moment they are refreshed. The next time any webpage might be re-indexed could be hours if not days. The web has changed significantly in the last 3 years as blogs became one of the major sources of “pages” and information on the web. Because people instead of corporations are now creators and distributions channels for content and information, the web is “changing” and “updating” itself much faster than it was when corporations controlled the creation and distribution of information.

Good analogy is eBay. Because pricing information updates in real time for auctions, a traditional “search engine” implementation is useless to index the tens of million plus items that are live on the site at any time. Instead, the index must be updated to the second in order to give searchers on eBay relevant information regarding products.

The web is becoming more and more like eBay . . . timeliness is as important as static relevancy.

Yahoo received a lot of crap for the paid inclusion service when first launched, but there was a token of a good idea beyond making money that made a lot of sense. I.E., instead of “pulling” for content, Yahoo wanted web sites themselves to “push” content to the search engine. This not only saves Yahoo’s crawlers from crawling non-updated sites, but also help Yahoo keep informed of the latest changes on the web. Not surprisingly, all the major search engines are doing this today. . . ie asking major contributor of content/information to push or ping them with new content as they are updated. (although its not highly publicized for PR reasons)

As the # of search engines proliferate, it will no longer make sense for ONE website to push content to MULTIPLE search engines. . . it is both inefficient and expansive. The centralized ping and crawl RSS model makes a lot more sense. Only when there are changes to the website does the website ping the centralized server ONCE, which in turn lets ALL the search engines (or RSS readers) know that its time to send a crawler/reader out to read the RSS feed of the website to gather new content.

This is the future of search engines if they ever want to become real-time repositories of “human knowledge.” Blog Search is not only a nice-to-have vertical search engine for Yahoo and Google, it’s a mandatory upgrade if they ever want to remain competitive and true to their mission.

Today, Versign in one swoop has become the gatekeeper of a major source of internet content . . . while it will certainly keep the service “open” . . . in the near future a premium service will allow paid customers to receive priority “service” and the ability to skip the queue . . . in effect those who pay will have newer and more recent indexes . . . as more of the web subscribe to the RSS model of search inclusion . . . Versign will be well poised to profit from this acquisition. . . If I was Google or Yahoo (Yahoo does not have blogger and Google does not have blo.gs ), I would have ponied up the low single digit millions for weblog.com . . . in 5 years weblogs’s assets will be worth more than Flikr . . . mark my word. . .

I’ve been trying to digest Umair’s latest presentation on “edge competencies” especially because Umair’s distinction on Metcalfe & Reed’s law (+ his own Hague law) is an in interesting framework for segmenting as well as evaluating network effects driven business models. I’ve spend better part of my career at companies that tried to leverage network effects so it’s a important field of study that interests me highly. Furthermore, the framework has also garnered a lot of buzz, as it should, around the web from the likes of Fred Wilson (1,2) and the Stalwart blog.

The first thing I learned is that Umair has to be atleast 3x smarter than me , but more importantly, network effects can be really segmented into 3 parts

1. The re-usability of the “trading” unit. For example, since content is produced once but consumed multiple times (zero or close to zero marginal cost per “sell”!), its increasing return economies of scale is much higher than that of companies which use network effects for trading non re-usable or non re-consumable “units” such as physical goods. (but of course physical goods is “valued” more per unit usually so content centric businesses needs to realize higher scale to achieve the same network value)

2. Peer production symmetry. The more “flat” the distinction between producer and consumer (or client and server) the more value is created. In eBay’s case, ideally, you want all your buyers to be sellers as well – thus increasing participation, transaction per user, as well as loyalty. Bill Burnham called it “input-output asymmetry” more than a year ago on his blog.

3. Network efficiency and size. The is probably the best understood part of the network effects business model. How big is the network? how many users? How easy is it to participate in the network (acquisition+activation)? And finally, how efficient, fast, easy, is it to trade on the platform.

(BTW, I hope I’m paraphrasing Umair correctly)

One thing, however, that I do have a few questions with is whether Google, as Umair asserts, has exponential (Reed’s) network economies of scale. Obviously the regression graph of revenue on users makes it seem so. But on a technical level I question the “number of Google users” is an apple to apple comparison to other companies’ user numbers. The # of adwords/adsense accounts is only a small % of the real user number of Google. Searchers do not need accounts and thus are not counted. Furthermore, gmail, gtalk, orkut, etc users are only a subset of ad clickers (consuming participants). The unique vistors / month metric is also a vastly deflated # as total registered user base is used for other companies. I’m not sure which one Umair used (or Google used). As a result, as keyword prices increased significantly over the last year, the user # held steady (there are only so many buyer of keywords, they are just buying more) it seems as if Google revenue/user is growing exponentially.

Using the framework I outlined, I also question Google is truly a Reed’s law business.

1. The major trading unit for Google is “information” (which arguably is re-usable) but the most monetizable segment is really “purchasing information.” Ad buyers are trying to sell something and thus only search traffic that have commerce intention are really monetized by Google (i.e. clicked on). As a result, Google can only monetize their traffic as fast as their ad buyers are selling and ad clickers consuming physical goods or services. Thus Google’s scale economies are limited by the offline inefficiency of production and consumption (like everyone else).

2. There is significant asymmetry between ad buyers and ad clickers – as most searchers do not buy ads from Google.

3. The last part regarding Google’s network size and efficiency is where Google really kicks ass. It is obviously a popular/great service with a lot of traffic. Furthermore, its dynamic pricing mechanism is the enviable model of value pricing. So on this part, Google gets a full score.

I do believe Google has as good an opportunity as anyone to become a “Reed’s” law business as it expands beyond search to other business lines that are more amenable to achieve Reed’s economies (Gtalk, etc). But for now, it’s simply enjoying a hypergrowth phase like many previous internet darlings. Of course, I could be very wrong as I have to admit I did not fully comprehend the intricacies of the framework as presented by Umair.