A New Start

FT: The man who put a local face on Google

The man who put a local face on Google

By Andrew Edgecliffe-Johnson

Published: May 18 2008 17:28 | Last updated: May 18 2008 17:28

The job of running Google’s largest overseas outpost may be the most sought-after position in European technology but, when Nikesh Arora was approached about the role, he was not impressed.

In 2004, Google’s European, Middle Eastern and African operations amounted to fewer than 400 people, 80 of them crammed into a small office in London’s Soho. Mr Arora sat in the conference room and told Omid Kordestani, Google’s worldwide sales boss: “It looks like a great company but, honestly, these offices do not reflect what I’d expect of it.”

Most discussions about Google come round sooner or later to the premises. Like the Googleplex in Mountain View, California, Google’s London workplace these days is all fresh fruit and Italian coffee machines. Soft furnishings in primary colours, bunting and the occasional inflatable tiger make it look more like a kindergarten pre-school than home to a group of high-powered engineers.

Handpicked crowd of powerful friends asked to tap into Zeitgeist

Nikesh Arora will today trade his stylish offices for a country house hotel in Watford as he plays host to one of the more unusual corporate networking events. Google’s Zeitgeist conferences, originally devised in the US, have evolved into something akin to a one-company Davos, which book up months in advance.

Over the next two days, a handpicked crowd of 350 advertisers, broadcasters and politicians from around Europe, the Middle East and Africa, will listen to 40 speakers ranging from Mohamed Ibrahim, the African mobile phone entrepreneur, to Queen Rania of Jordan.

The themes this year range from climate change to copyright battles. Tomorrow, the most popular users of YouTube, StarDoll and Metacafe will be on stage with the chief executives of the three websites to discuss how they might be improved.

The accomplished networker says he personally called 30 of the speakers to persuade them to come. They are not there to talk about Google, he insists. But, in a year in which Google has needed political support for its Doubleclick acquisition in Europe and has been rehearsing its arguments against a Microsoft-Yahoo combination, such powerful opinion formers are increasingly useful friends.

Sprawling in a red leather chair in one of the building’s more restrained offices overlooking Victoria station, Mr Arora describes his achievements largely in property and personnel terms. The nine EMEA offices he inherited are now 33, he says; he spends a third of his time recruiting – staff numbers have swelled to 3,400 – and thinking “how do we make our people happy”?

For Google, he says, this is no cliché. “The only way we can scale a business which has probably grown faster than any other business in the world is to make sure we have the right people and to trust them.”

Another third of his time is spent with partners and advertisers, discussing products with “local flavour” to work beyond California. Logic dictates which products are developed locally, he says, noting that Europe’s mobile telephony strengths have given it a lead over the US in mobile search and that the Dutch like their online maps to include bicycle routes.

Mr Arora spends the rest of his time pursuing longer-term ideas. Top of the list at the moment is the phenomenon of “video when you want it”, he says. As people have more freedom to watch programming at different times, he notes, assumptions about their demographic profile are also having to change. This opens the possibility of customising video advertising not just on websites such as Google’s YouTube platform but also over television set-top boxes.

Already, Mr Arora says, his 11-year-old daughter “doesn’t understand you have to wait in front of a television screen for something to happen at 8pm”.

Her approach of setting the family digital video recorder having researched programmes on YouTube is a far cry from Mr Arora’s own childhood. Growing up in India, he and his family would gather at the house of an aunt who had a TV set. They would arrive before broadcasts started to get a good seat, then, “from 6pm to 6.30pm, I got educated about how to be a better farmer” before the Bollywood music programme he was there to see came on. “That was it. That was entertainment.”

Mr Arora, who has just turned 40, left India 19 years ago, but he credits his upbringing with setting him on the path to Google. One of 100,000 students who sat the same examination in 1985 for 2,000 places in the six best engineering schools in the country, he still remembers his rank – 1,292. When he beat 200,000 people to get one of 250 scholarships the following year, “that’s when I figured out I might be a little smarter than I’d thought”.

Asked why so many of his generation of Indian engineers went on to make their careers in the US rather than at home, he points out that, when he left the Institute of Technology in Varanasi for his first job at Wipro in India, he was paid just £500 a year.

A year later, the 21-year-old Mr Arora moved to the US with two suitcases and $100. “The thing I feel most proud of is that I went to business school for two years in a culture I didn’t understand but I graduated first. That to me was a significant achievement because that tells me I can adapt to different environments,” he says.

An MBA at Northwestern University took him to jobs as an analyst at Fidelity and Putnam, covering the booming telecoms industry. By the end of the decade he was at T-Mobile, where he launched T-motion, a mobile media business, before becoming chief marketing officer.

Despite his ringside seat at the TMT boom, Mr Arora claims the only thing he knew about Google by 2004 was that it had used an unusual Dutch auction process for its initial public offering.

When interviewed by Google founders Larry Page and Sergei Brin at the British Museum, however, he clinched the job after a discussion about machine-based translation services spurred by five minutes in the gift shop reading about the Rosetta Stone.

Eric Schmidt, Google chief executive, told him later that his primary role would be to build a sales force. Mr Arora had no direct sales experience – “but that’s what Google’s about. We don’t believe everything we are going to do has been done, so it’s hard for us to hire somebody who’s done everything we want to do”, he says.

Mr Arora dismisses European handwringing about whether the continent has the talent to compete with Silicon Valley, adding that every one of his staff would give their US colleagues a run for their money. “Clearly you don’t have a Google [in Europe] but show me how many Googles exist in the world,” he says.

Europe may have been fertile recruiting ground but it has also been the place where Google has run into the most resistance over copyright and privacy issues. Mr Arora plays down its battles in Brussels as “discussions”, saying that Europe’s multiple states will rarely have as consistent a view on such issues as the US.

The debates are very different in other regions under his wing. The Arab world, eastern Europe and Africa will account for two-thirds of the world’s new internet users over the next decade, Mr Arora estimates, but they have little digital infrastructure at present.

Google’s efforts to build a culture of internet use in such markets has included its giving tailored, local-language versions of its Google Apps applications to education ministries in Egypt and Saudi Arabia. “You have access to the internet, you get access to information and it’s positive for economies, it’s positive for citizens,” he says.

Self-interest also plays a role, however. “We do it right and, in five, six or seven years, we’ll be working towards the same advertising benefits that we have in the developed world,” he says.

While analysts and bloggers hang on every word uttered by Google’s founders and chief executive, it is harder for outsiders to point to Google initiatives that have Mr Arora’s name on them. Asked about his achievements, though, he is clear: just above half of Google’s revenues now come from outside the US, he says, compared with one-third when he joined. Google does not break out regional sales but Europe is the largest of its international hubs.

“When I came here four years ago, the biggest concern partners had was they felt they had to go to California to do anything,” he says. Today, as telecoms companies, advertisers or governments beat a path to the multicoloured offices in Victoria and beyond, “we have put a local face on Google”.

Copyright The Financial Times Limited 2008

FT: Google triumphant: Search wars look settled

Google triumphant: Search wars look settled

By Richard Waters in San Francisco

Published: May 12 2008 19:54 | Last updated: May 12 2008 19:54

Eric Schmidt was doing his level best late last week not to gloat. With Microsoft dropping its attempted takeover of Yahoo, the Google chief executive had just seen his arch-rival abandon its most direct attack yet on Google’s growing dominance of online search and advertising.

“I’m happy to be crowned winner,” Mr Schmidt said, before quickly adding: “But as we’ve learned in the election cycle, it goes back and forth.”

The political analogy may have been ill-judged. Like Hillary Clinton after last week’s primary results, Microsoft has never looked more on the defensive. For a company that has always scorned the idea of big mergers in the past, the pursuit of Yahoo was the clearest admission yet that the software company was running out of options as it tried to counter the rise of Google.

“The failure of the Microsoft/Yahoo merger eliminates the biggest short-term threat” to Google’s unrivalled position on the web, says David Yoffie, a professor at Harvard Business School. For now, its momentum “seems unstoppable”. Michael Cusumano, a management professor at Massachusetts Institute of Technology, describes Google’s now-unchallenged dominance even more bluntly: “They’re sitting on a goldmine.”

The scale of Google’s victory over Microsoft in online advertising, sealed by the failure of the Yahoo takeover approach, is hard to exaggerate. By next year, half of the world’s online advertising – set to reach $55bn (£28bn, €36bn) in total – is expected to flow through Google’s systems. Of that, slightly more than two-thirds will come from advertisements that run on Google’s own websites. The rest represents advertising that the internet company, acting as a broker, places on other companies’ sites in return for a small cut of the action.

It is a stunning victory that raises two overriding questions. Will Google be able to use the respite provided by the disarray at Microsoft and Yahoo to carry its dominance of search over into other areas of online – and broader digital – advertising? And should it now be a cause for alarm that one company is in a position to control so much of the lifeblood of the internet?

To some extent, the Microsoft/Yahoo debacle merely confirms something that had already become apparent: the internet search wars ended almost as soon as they began, and Google won. It accounted for around 70 per cent of the estimated $16bn of advertising placed on search engines last year, a share that continues to rise.

Microsoft and Yahoo were late to see the danger, beginning their own search initiatives four to five years ago. A merger would at least have created a second player with the scale to try to compete, says Sir Martin Sorrell, chief executive of WPP, the advertising group. Separately, the two now face continued erosion, he adds. Sir Martin also takes issue with a potential partnership with Yahoo, currently under discussion, that would give Google an even bigger share of the search advertising market.

The eventual limits of the fast-growing search market, which accounts for almost half of all online advertising, are still impossible to discern, but it is already a business that stands comparison with the technology industry’s most fabled success stories. On the current trajectory, Google’s revenue – almost all of it coming from search – will probably surpass the income that Microsoft generates from the Windows operating system some time next year.

There is no guarantee that the search company will alight on another idea as powerful as its advertising system, says Mark Anderson, a veteran technology commentator. Yet that may not matter for some time, he and most other industry insiders say. “I think it’s enough for the next 10 years,” says Mr Anderson. “When God gives you a golden goose, you have to hold it tight.”

Google has spent much of the money from this gilded fowl, and the time afforded it by the failure of its competitors to mount a tougher challenge, preparing for what comes next. Through the acquisitions of DoubleClick and YouTube, it has placed big bets on display advertising and online video. These deals have been the most visible part of its attempt to stake out a position in some of the most promising new areas of digital advertising, says Rishad Tobaccowala, a new media expert at Publicis, the advertising and marketing group.

This is most evident in the video and mobile worlds. Through YouTube and its test of a digital advertising system with EchoStar, the satellite television company, Google has put itself in a position to catch the wave of traditional television advertising as it moves to the web.

In mobile, meanwhile, Google has spent a frenetic year preparing the ground for what it claims will be a bigger business than even its current PC-based one. That has included fighting to open up part of the mobile spectrum in the US so that users get guaranteed access to its services, investing $500m in a high-speed WiMax network, grabbing a prime spot for its services on Apple’s iPhone and launching its own mobile technology platform, known as Android. “They have understood better, they have positioned themselves better, for where the world is going than anyone else,” says Mr Tobaccowala.

This does not mean that success is guaranteed. “The best technology doesn’t always win,” says Prof Yoffie. “History is littered with better technologies that have been left by the wayside.”

The biggest danger may well be that fear of Google’s growing power will prompt a backlash from the very companies it will need on its side as it tries to expand out of search. “The mobile carriers are very concerned about letting Google dominate advertising on mobiles the way it has on the PC,” says Prof Yoffie. That echoes the earlier struggles of another tech industry giant: Microsoft found it hard to break into the mobile industry for similar reasons, while the traditional media industry kept the software company at arm’s length for years after the arrival of the internet out of fear that it would become a gatekeeper with the power to intercede between media companies and their customers.

The parallels with Microsoft are compelling and help to explain why Google is becoming widely feared, says one person who has worked closely with Google for a number of years. Microsoft used its dominance of computer operating systems to build a second market in software applications, eventually dominating that market too.

“These days, the applications are newspapers and television and video games and communication devices,” this person says. According to this view, as these information services are digitised and move to the internet, Google’s advertising system will become the financial platform on which many of these businesses depend – in much the way that Microsoft’s operating system became the backbone for the technology ecosystem of the PC.

Despite the discomfort this causes, however, Google’s status as the internet’s most effective money-maker makes it hard to ignore. That helps to explain Yahoo’s plan to cast itself as a more trustworthy ally of other internet companies – and why many will be hoping it recovers to become a stronger competitor to Google.

So if Google is about to enter a golden age that rivals the heyday of Microsoft on the PC or IBM on the mainframe computer, should this be a cause for concern? Both of those technology companies were criticised in their industry for growing so powerful that they eventually squashed innovation, drawing the attention of antitrust regulators. Does a similar fate await the young idealists who have vowed “Don’t do evil” with their search engine?

The case against a dominant Google is summed up by Sir Martinof WPP. Without the prospect of a strong rival that would have been created by a combination of Microsoft and Yahoo, advertisers could be left with little choice, he warns.

For their part, Google executives make a number of claims for why their particular corner of the advertising business is not susceptible to monopolisation – and why bringing even more advertising into their system should actually help customers.

“What we’ve seen in the past when we’ve done substantial expansions of our network, advertisers have really benefited, they’ve been really happy to be able to get increased reach for their targeted ads,” says Sergey Brin, one of Google’s founders. “For them it just means more sales with clear and accountable profit margins,”

Larry Page, his co-founder, adds that since Google merely runs an auction in which advertisers bid against each other, rather than actually setting the prices for advertising placed on its sites, it cannot affect pricing. “In general having more inventory available to advertisers is very positive for them – they have one powerful interface where they can bid on one type of advertising and have that against as wide a range of inventory as possible,” he says.

Yet this heavy focus on the financial efficiency of Google’s brand of online advertising ignores the fact that many customers want more choice in the types of advertising they use and more ability to negotiate unique ways to present their message, says Prof Yoffie. “Google doesn’t have the reputation for being the easiest company to deal with, and with less competition it will be even less easy,” he adds.

That will not matter as long as advertisers are able to switch their business to other online advertising networks, counters Mr Schmidt. “Advertisers always have multiple choices so it always makes sense for them to use more than one,” he says. “It is incorrect to assert that there’s lock-in or an opportunity for dominance in the advertising space.”

Switching between advertising suppliers in a market as concentrated as internet search may not be as simple as this suggests, though. Big advertisers that want to buy a large volume of “clicks” a week may find that other search engines cannot guarantee them the volume they need, says Sandeep Aggarwal, an analyst at Collins Stewart in San Francisco.

Also, the cost of building the technology to connect with Google and learning how to get the best out of its search system means that many of its customers have made a big investment, says Prof Yoffie. “There are real switching costs,” he adds.

Even some of Google’s admirers agree that the limited choice in search – and, potentially, other areas of digital advertising – does not sit well with customers. “Generally, advertisers like to have four or five suppliers in a market,” says Mr Tobaccowala.

The argument for overlooking this, he adds, is that most big advertisers direct only a very small percentage of their budgets to search – and besides, the upheaval under way on the internet is so great that any lopsidedness in a particular part of the industry may well prove insignificant in the long run. “With all that change, I’m less concerned about one company climbing on the others,” Mr Tobaccowala says.

That is certainly how Google’s leaders see it. The search company and its rivals are racing to invent the future of advertising, says Mr Page, and this rapid innovation is by far the dominant force in shaping the competitive landscape.

If Google tries to rub salt into Microsoft’s wounds by pressing ahead with an alliance of its own with Yahoo, it will get a chance to find out whether regulators agree with this sanguine view.

Copyright The Financial Times Limited 2008

FT: Hitch a ride on a search engine

Hitch a ride on a search engine

By Richard Waters

Published: April 4 2007 17:27 | Last updated: April 4 2007 17:27

Off Santa Monica’s touristy Third Street Promenade, up a narrow flight of stairs, there is an unmistakable hustle in the air.

The ceiling of Richard Rosenblatt’s office has not yet been finished, and a clutch of investment bankers is waiting in the hallway for a meeting (probably a common occurrence, given that he raised $220m last year to build his latest internet start-up.)

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This district of Los Angeles has become a centre for the new digital media industry, a place where technology from Silicon Valley, 350 miles to the north, mingles with the creative impulses of nearby Hollywood. It is no coincidence that Yahoo! moved its media arm here, or that Electronic Arts has built a games studio nearby.

The fast-talking Mr Rosenblatt, 37, is already a veteran of this world. The last company he headed, Intermix, was sold to Rupert Murdoch’s News Corp in 2005 for $650m, thanks to the success of one of its online subsidiaries that at the time was only just gaining wider attention: the social networking site MySpace.

He claims to have no regrets now about giving up an internet property that has since become a household word. Yet Mr Rosenblatt is itching to go one better than he did before.

For a would-be entrepreneur, there is a paradox to the digital revolution under way in the media business. On the one hand, the barriers to entry have collapsed. It has never been this easy for anyone with a good idea to find an instant audience. Given the sizeable fixed costs involved in setting up a large-scale operation, however, this is an industry where big money is starting to count.

Mr Rosenblatt’s company, Demand Media, exhibits both sides of this conundrum. Starting with a clean sheet of paper, he and his business partner Shawn Colo, a veteran of private equity, have set out to build a new media company that is tailor-made for the era of Google and MySpace.

Any media business, says Mr Rosenblatt, needs three things: content, an audience, and a way to cash in on that audience. The trick is to find a free – or at least extremely low-cost – way to do each of these things.

Take the way Demand sets out to attract an audience. Some of its cash has been spent on acquiring digital assets that have a good chance of attracting the casual web surfer. That includes buying generic domain names – such as Gardening.com – that internet users are likely to type directly into the address bar of their Web browser.

A second approach relies on “natural” search – the free listings that Google and other search engines return in response to a query. Demand has bought up sites that stand a good chance of figuring high in the results. They include eHow, a collection of tips written by professionals that is targeted at search engine users.

To make money from this audience, Demand relies entirely on plugging into Google’s AdSense system. This places contextually relevant advertisements on other companies’ websites in return for a cut of any money earned, relieving companies such as Demand of the need to employ their own salesforce.

Content, the third element, is a work in progress. On some of Demand’s sites, the adverts from Google are the only content. Flashgames.com, for instance, is a website that exists purely to draw users to Google ads. Users who go to the site find a collection of links to other games sites: a click on any of these earns the company a fee.

“That little domain makes $200,000 a year profit and does nothing,” says Mr Rosenblatt. “It just sits there.”

That is the starting point. Adding other types of content to keep users on the site longer, or recommend it to their friends, could eventually increase the audience and advertising yield. From his experience with MySpace, as well as earlier internet ventures, Mr Rosenblatt is clear about the cheapest way to do this: give people the tools to create the content themselves.

It all sounds like a highly opportunistic and low-risk recipe for turning a profit. Yet perfecting this system takes big money. Partly that is because it relies on the sort of leverage that comes only from being able to aggregate a large amount of internet traffic.

“The bigger you are, the more attention you get from the search engines. They want to do big deals,” says Mr Rosenblatt. The little guy simply can’t bargain for the same sort of revenue share when it comes to negotiating an advertising deal. Also, size helps to justify the large fixed investments in infrastructure, expertise and technology needed to run an internet company like this.

“We think, right now, scale is important,” says Mr Rosenblatt. That is one of the lessons from MySpace: without the backing of a big parent like News Corp, he says, MySpace could never have afforded the investment needed to grow so quickly.

Scale also brings something else: a deeper knowledge of user behaviour, and the value of internet content, that can be used to perfect an online business model. With what Mr Rosenblatt claims are 9m domain names and 15m-20m unique monthly visitors, his company is in a position to analyse usage patterns and financial returns across many different websites.

“You can predict the ROI [return on investment] on a piece of content,” he says, and make smarter decisions about when to invest in extra content to attract an audience.

The model, however, is not without risk. Relying on natural search to generate an audience leaves a company dependent on the methods that popular search engines use to rank their results. These can change abruptly as search engines act to prevent websites “gaming” their systems, creating unpredictable changes in the search rankings.

Also, without their own sales forces, Demand’s reliance on the advertising networks of Google and others gives it less control over their revenue-generating capability. And because it amasses a large audience by drawing together many specialised ones – what is known on the internet as the “long tail” – it probably has no other option.

“For most of the ‘long tail’, you need to give up your advertising to a Google or a Yahoo,” says Mr Rosenblatt.

When personal gets vertical

It all sounds so 1999. In the first dotcom boom, there was much talk of “vortals” – short for “vertical portals”, or specialised gateways to the internet that would draw an audience of people who shared a common passion. The language of the Web 2.0 boom may be different, but it appears that some ideas don’t change.

“I think social networks and communities will become more personal and more vertical,” says Richard Rosenblatt, chief executive of Demand Media.

In other words, sites such as MySpace have benefited from the new passion for social networking, but this audience will fragment as internet users congregate around online services that reflect their particular interests, whether that is gardening or kayaking.

Mr Rosenblatt has licensed back some of the social networking technology that, as chairman of Intermix, he sold to News Corp, and is now working to graft that on to the specialised websites that Demand has assembled. If all goes to plan, for instance, users of eHow will later this month be able to post their own advice on the site and find related tips written by friends or others who share their interests.

The next step, says Mr Rosenblatt, will be personal portals that are even more closely tuned to each user’s interests. To that end, Demand has licensed the “.tv” domain and is building a service to let internet users run their own personal video portals.

“People will want their own vertical, and their own personal space,” says Mr Rosenblatt.

Copyright The Financial Times Limited 2007

FT: Entrepreneurs change the rules to cash in on clips

Some types of media and entertainment content are likely to be better suited to this world than others. In general, according to entrepreneurs such as Mr Reese, it suits short-form, highly targeted pieces of information that can easily be indexed by search engines or matched to specialised websites (readers of a site such as Free-beauty-tips.com, for instance, may have more of an interest in pimple solutions than most).

The second part of this new online media model relies on distribution to as wide an audience as possible. This means tapping into mainstream "destination" sites that attract large audiences of their own (for ExpertVillage, that includes submitting its content to Google Video's servers); making it easy for people to discover the material through search engines; and tapping into the various new online syndication services that have been set up to make it easy to reach a wide range of potential online outlets.

Not all the mechanisms required for this distributed media world to operate efficiently have yet fallen into place, however. Controlling content as it passes around the web and collecting money each time it is "consumed", often in very small increments, requires a level of technology infrastructure and standardisation that has yet to be achieved.

==

Entrepreneurs change the rules to cash in on clips

By Richard Waters and Aline van Duyn

Published: February 16 2007 02:00 | Last updated: February 16 2007 02:00

Byron Reese is typical of the new wave of internet entrepreneurs out to turn the economics of the media industry on its head. While traditional publishers and broadcasters struggle to adapt to a disruptive new medium, often by trying to limit access to their content and retain their premium pricing, newcomers such as him start with a different idea.

The approach is based on ultra-low cost, purpose-built content and the ability to tap into a rapidly expanding and highly diverse ecosystem of independent online distributors to build a wider audience. Many of these new distributors, however, are at an early stage of development and some important technological underpinnings have yet to be put in place.

ExpertVillage.com, the US website that Mr Reese heads, does not produce the sort of videos that you are likely to want to watch every day. Its short instructional videos, each two to three minutes long, include items such as "How to get rid of pimples" and (recommended for would-be automotive mechanics only) "Replacing the serpentine belt with jacking screw".

In a world exploding with amateur video and other "user-generated content", such sites represent a small but fast-growing area of professionally produced but cheap material. ExpertVillage, which has rivals including VideoJug in the UK, pays filmmakers just $20 (£10, €15) for each video they submit (which must feature advice from an "expert"). Each video costs a further $10 to publish online.

By finding an average of 15 viewers a month to watch each segment, and by generating 10 cents in advertising revenue for each viewing, ExpertVillage hopes to recoup its investment in each video within two years, says Mr Reese. To do that, it looks not just to traffic on its own site but to a range of other distributors to reach out and find a global audience: among others, the company is negotiating with a website in India to promote its how-to videos there.

Ideas such as this turn the economics of media on its head. The old way of doing business was built around the idea that distribution was scarce. With few outlets available (whether that meant television channels or newspapers), the trick for each producer/distributor was to attract as big a share of the audience as possible, usually with expensively produced content. The large audiences that TV stations or newspapers have traditionally been able to attract have justified high charges to advertisers, which bought audiences in bulk.

The new approach to media that is purpose-built for the internet is the opposite. First, cut costs to the bone, then spread distribution across as many sites and online services as possible, pushing the content out far beyond the original publisher's domain.

Some types of media and entertainment content are likely to be better suited to this world than others. In general, according to entrepreneurs such as Mr Reese, it suits short-form, highly targeted pieces of information that can easily be indexed by search engines or matched to specialised websites (readers of a site such as Free-beauty-tips.com, for instance, may have more of an interest in pimple solutions than most).

Some big media groups are attempting a similar approach to content creation themselves. The Warner Brothers Television Group, the biggest maker of television shows with hits such as Friends and The West Wing, last year created Studio 2.0 to produce short-form programming for the internet. Instead of tapping only the group's impressive but expensive roster of television writers, the division is signing up newcomers. Many of the people working on the emerging digital ventures are not a part of any union and they often work on short-term contracts.

Other production costs can also be cut. Content made for web viewing can be of a lower resolution and fewer frames per second than that made for television; quality can be reduced further for video viewed on a very small screen such as a mobile phone. In addition, the absence of marketing, packaging and physical distribution costs leads to budgets in the thousands rather than the millions of dollars.

The second part of this new online media model relies on distribution to as wide an audience as possible. This means tapping into mainstream "destination" sites that attract large audiences of their own (for ExpertVillage, that includes submitting its content to Google Video's servers); making it easy for people to discover the material through search engines; and tapping into the various new online syndication services that have been set up to make it easy to reach a wide range of potential online outlets.

Online publishers will eventually find that their content is "watched, listened to and read more off their sites than on them," says Dick Costolo, chief executive of FeedBurner, one of the new syndication companies. Among the material it distributes, FeedBurner puts out nearly 100,000 independent podcasts as "feeds": consumers can subscribe to any of these directly and other websites can pick up the material, provided they pay a share of any advertising revenue they generate.

Not all the mechanisms required for this distributed media world to operate efficiently have yet fallen into place, however. Controlling content as it passes around the web and collecting money each time it is "consumed", often in very small increments, requires a level of technology infrastructure and standardisation that has yet to be achieved.

For instance, while there is a convention about what defines a web page "impression" and therefore when an advertiser must pay an online publisher, there is no similar agreement when it comes to video and audio, says Mr Costolo: what happens when the material is only partially listened to or watched?

Systems to identify and track the use of copyrighted material as it moves around the web, enabling the owners either to limit or charge for its use, are also in rudimentary form. Digital "fingerprinting" systems, which identify content based on their unique audio or video patterns, have been put in place on a number of websites to combat piracy: MySpace, for instance, announced a video identification system this week.

However, tracking video automatically in this way remains difficult to do reliably. Also, fingerprinting systems have yet to be set free to crawl the web at large to track down copyrighted material.

Richard Waters

and Aline van Duyn

Copyright The Financial Times Limited 2007

IFTF: The reality of biotech

http://future.iftf.org/2007/02/the_reality_of_.html

February 13, 2007

The reality of biotech

New York Times reviews Gary Pisano's new book, Science Business: The Promise, the Reality, and the Future of Biotech. The big claim of Science Business is that contrary to popular perceptions (or perceptions within the biotech world), biotech is actually

no more efficient at drug development than traditional big pharmaceutical companies. That conclusion runs contrary to popular belief that scrappy, driven biotechnology entrepreneurs can run rings around the bureaucratic drones of Big Pharma.

Biotechnology has been “one of the biggest money-losing industries in the history of mankind,” Arthur D. Levinson, chief executive of Genentech, told analysts in New York last year. He estimated that the biotech industry as a whole has lost nearly $100 billion since Genentech, the industry pioneer and one of its most successful companies, opened its doors in 1976. Only 54 of 342 publicly traded American biotech companies were profitable in 2006, according to Ernst & Young.

Most biotech enterprises face a host of daunting challenges. While they can work much more nimbly than their brethren in Big Pharma, they also lack some of the hard-won experience that large corporations bring to the drug pipeline. Moreover, biotech companies often aim at harder-to-conquer diseases and use more experimental technologies, further complicating their quests.

Technorati Tags: biotech, books, innovation, pharma

 

   

Posted by Alex Soojung-Kim Pang at 10:19 AM in Biotech, Innovation | Permalink

New York Times reviews Gary Pisano's new book, Science Business: The Promise, the Reality, and the Future of Biotech. The big claim of Science Business is that contrary to popular perceptions (or perceptions within the biotech world), biotech is actually

no more efficient at drug development than traditional big pharmaceutical companies. That conclusion runs contrary to popular belief that scrappy, driven biotechnology entrepreneurs can run rings around the bureaucratic drones of Big Pharma.

Biotechnology has been “one of the biggest money-losing industries in the history of mankind,” Arthur D. Levinson, chief executive of Genentech, told analysts in New York last year. He estimated that the biotech industry as a whole has lost nearly $100 billion since Genentech, the industry pioneer and one of its most successful companies, opened its doors in 1976. Only 54 of 342 publicly traded American biotech companies were profitable in 2006, according to Ernst & Young.

Most biotech enterprises face a host of daunting challenges. While they can work much more nimbly than their brethren in Big Pharma, they also lack some of the hard-won experience that large corporations bring to the drug pipeline. Moreover, biotech companies often aim at harder-to-conquer diseases and use more experimental technologies, further complicating their quests.

Technorati Tags: biotech, books, innovation, pharma

 

The reality of biotech

New York Times reviews Gary Pisano's new book, Science Business: The Promise, the Reality, and the Future of Biotech. The big claim of Science Business is that contrary to popular perceptions (or perceptions within the biotech world), biotech is actually

no more efficient at drug development than traditional big pharmaceutical companies. That conclusion runs contrary to popular belief that scrappy, driven biotechnology entrepreneurs can run rings around the bureaucratic drones of Big Pharma.

Biotechnology has been “one of the biggest money-losing industries in the history of mankind,” Arthur D. Levinson, chief executive of Genentech, told analysts in New York last year. He estimated that the biotech industry as a whole has lost nearly $100 billion since Genentech, the industry pioneer and one of its most successful companies, opened its doors in 1976. Only 54 of 342 publicly traded American biotech companies were profitable in 2006, according to Ernst & Young.

Most biotech enterprises face a host of daunting challenges. While they can work much more nimbly than their brethren in Big Pharma, they also lack some of the hard-won experience that large corporations bring to the drug pipeline. Moreover, biotech companies often aim at harder-to-conquer diseases and use more experimental technologies, further complicating their quests.

Technorati Tags: biotech, books, innovation, pharma

 

FT: Treasures in the company attic

Measuring the links between online and offline advertising is difficult, but increasingly search usage is being used as a proxy to gauge the effectiveness of traditional advertising.

“Search provides a perfect bridge between offline and online,” says Peter Hershberg, managing partner at Reprise Media. “We know people do not randomly end up in a search box, and by measuring search after a commercial we can measure how much brands are resonating with consumers.”

Seven ways to bring the corporate website to life

■Print publications. Companies spend millions of dollars producing in-house publications, reports and catalogues or magazines for their clients. Once checked for topicality, accuracy and copyright, articles and pictures can be re-used on websites, perhaps grouped together in themes or with other relevant content.

■Conferences. The specialised conferences that companies organise for internal purposes or for clients often produce expert material that can be used as a theme within a website. When speaking at conferences, check whether you will be able to reproduce video or audio of your company’s contributions on its website.

■Sponsorship. Any corporate sponsorship of arts, sports, music and other events should be used to the full. Ensure the right to re-use content is part of the deal. Photographs can be used on the web, for example through the creation of slide shows, and music and video can help liven up a website.

■Corporate art. Investments in arts and antiques can be good for more than just decorating conference rooms. Photographs, combined with history, can create an interesting slide show or be used to illustrate other parts of the website.

■Archives. Sometimes corporate archives can be a source of interesting content – all owned by the company. Examples include a timeline of patents or a selection of photos of important moments in the company’s history.

■Old advertisements. Just as people like watching television programmes based on old advertising campaigns, or specials about the 1970s, 1980s or 1990s, old publicity material can provide interest by tracing the path of a company’s branding or product development.

■Employees. Chances are that among your employees there are plenty of amateur video enthusiasts, musicians and photographers. Ask them for ideas on content and presentation. If you want to test their ideas before going public, try it out first on the corporate intranet.

==

Treasures in the company attic

By Aline van Duyn

Published: January 29 2007 17:36 | Last updated: January 29 2007 17:36

Not long ago, one of the biggest software companies in the US decided it wanted to take the plunge into the digital world and spend a much larger part of its budget on online advertising.

The process quickly ran into a problem. Once people clicked on the search results or the online banner ads, they were directed to a website. The snag was that there was no money to create new content for this site; most of the software company’s budget had been spent on a snazzy, 30-second television advertisement which would not hold the interest of web users for long.

In desperation, the advertising executive in charge of the account walked around the company’s US headquarters in a hunt for content. He found a room full of tapes of footage of every speech ever given at a conference by senior executives; he also found a store of magazines that were being published for company employees and its clients.

“These parts of the company never had to talk to each other before,” says the advertising executive, who did not want to identify his client. “Finding this was just what we needed, though. After getting rid of content that was out of date and after finding out what we did and didn’t have the rights to use, there was enough there to create a very interesting website. Companies sometimes have more content than they realise.”

This story is being repeated across the globe as companies increasingly put the web at the centre of their advertising strategy yet struggle to find content to put on their sites.

It is already clear that media consumption is changing. The widespread use of high-speed internet connections allows people to watch video on the web and exchange video, pictures and text with others online. PwC, the consultancy, estimates that 187m households around the world have broadband internet access, up from 30m in 2001. Within three years, the figure is expected to reach 433m worldwide.

Advertising and marketing campaigns therefore have to adapt. “What was once a one-way, static dialogue with the consumer is now a network of dynamic conversations,” a recent report on advertising by PwC concluded. “Campaigns built entirely around broad messages, faceless audiences and mass distribution are becoming a thing of the past.”

In addition, the lines between traditional advertising and online advertising are blurring. Traditional ads, which lack the interactivity of the internet, are increasingly being used to encourage people to visit websites, where they can get more information or be urged to buy something.

A good example is an online initiative by advertisers such as Doritos, Alka Seltzer and Chevy cars ahead of next weekend’s SuperBowl, the American football final, which have one of the world’s biggest live audiences with an estimated 90m viewers.

These companies are attempting to generate excitement with websites seeking entries for amateur ads that will then be aired on TV (plopplopfizzfizz.com and chevycollegead.com). The advertisers are hoping that people will return to the web to look for the ads after seeing them broadcast.

Measuring the links between online and offline advertising is difficult, but increasingly search usage is being used as a proxy to gauge the effectiveness of traditional advertising.

“Search provides a perfect bridge between offline and online,” says Peter Hershberg, managing partner at Reprise Media. “We know people do not randomly end up in a search box, and by measuring search after a commercial we can measure how much brands are resonating with consumers.”

So how should a compelling company site be built? The most effective include different kinds of content, including video, audio and interactive features.

Cisco, the US maker of network switches and routers, says it has recently “significantly increased” its spending on the web, and it has begun posting more video and audio content on technology subjects.

“We are embracing the web as our basic platform for all our communications,” says Kelly Hemmingway, senior broadcast producer at Cisco. “Two years ago, webcasts were a combination of PowerPoint presentations and audio. We have changed the model . . . and introduced a [video] news-style format last September.”

As well as news-based video reports, Cisco is putting up regular podcasts. These audio recordings, which can be downloaded on to iPods or other portable music devices, are available on Apple’s iTunes website for free, meaning that Cisco can reach an audience previously beyond its reach.

“We have set up our own broadcast network for customers, which aims to demystify technology . . . It is extending our reach with a new engaging type of content,” says Maureen Hands, new media broadcast producer at Cisco.

The video services also showcase one of Cisco’s products, which it calls “a YouTube for enterprise”. Last year, its audience for news@cisco exceeded 1m, and the company reports a good response to the podcasts, which started in September.

One of the features of the Cisco initiative is to get staff involved, and executives have been surprised how many of the company’s programmers enjoy doubling up as reporters and editors.

At Intercontinental Hotels, the staff are already part of its advertising. But now, concierges in 134 countries are going to be the stars of the company’s web-based videos. Currently in production and due to roll out in a few months, the hotel group hired an outside company to make videos, which will cost $5,000 to $7,000 each.

“We have noticed a big focus [among our customers] on digital media because of the emergence of broadband,” says Jenifer Zeigler, senior vice-president of global brand management at Intercontinental Hotels, which spent $10m on training concierges for their new role.

“We had to strengthen our website because people have much higher expectations, and making these videos is a really cost-efficient way of doing that.”

Other sources of content are Intercontinental Hotels’ sponsorship of the Aston Martin racing team, which generates photos and video material, as well as its sponsorship of National Geographic photoshoots, which allows the hotel group to use the photographs on its website.

Even for companies that cannot take on such ambitious plans, there might be more available than they realise. For example, many banks and larger companies decorate their headquarters with impressive corporate art collections. These can be used to create a prominent visual feature online.

“Especially when companies join efforts with someone who has experience in presenting content, like a media company, they can do a lot with the information or knowledge they already have,” says Eric Bader, director of digital at MediaVest Worldwide, a media services agency.

Some inevitably get it wrong. Earthlink, the internet service provider, last year decided to re-use material from its radio advertising campaigns as content for podcasts. The initiative created such a storm of protest that the company decided to make fun of itself and start a competition for the worst possible podcast.

But there are ways to avoid looking out of touch. Cisco, for example, uses professional journalists to ensure its programmes do not contain too much jargon which often seeps into company-specific conversations, and to make subjects intelligible to new audiences.

“It is very costly [to create content] . . . but professional talent helps to raise the bar,” says Ms Hands.

Seven ways to bring the corporate website to life

■Print publications. Companies spend millions of dollars producing in-house publications, reports and catalogues or magazines for their clients. Once checked for topicality, accuracy and copyright, articles and pictures can be re-used on websites, perhaps grouped together in themes or with other relevant content.

■Conferences. The specialised conferences that companies organise for internal purposes or for clients often produce expert material that can be used as a theme within a website. When speaking at conferences, check whether you will be able to reproduce video or audio of your company’s contributions on its website.

■Sponsorship. Any corporate sponsorship of arts, sports, music and other events should be used to the full. Ensure the right to re-use content is part of the deal. Photographs can be used on the web, for example through the creation of slide shows, and music and video can help liven up a website.

■Corporate art. Investments in arts and antiques can be good for more than just decorating conference rooms. Photographs, combined with history, can create an interesting slide show or be used to illustrate other parts of the website.

■Archives. Sometimes corporate archives can be a source of interesting content – all owned by the company. Examples include a timeline of patents or a selection of photos of important moments in the company’s history.

■Old advertisements. Just as people like watching television programmes based on old advertising campaigns, or specials about the 1970s, 1980s or 1990s, old publicity material can provide interest by tracing the path of a company’s branding or product development.

■Employees. Chances are that among your employees there are plenty of amateur video enthusiasts, musicians and photographers. Ask them for ideas on content and presentation. If you want to test their ideas before going public, try it out first on the corporate intranet.

Copyright The Financial Times Limited 2007

FT: New horizons for ancient cures

New horizons for ancient cures

By Geoff Dyer

Published: November 8 2006 02:00 | Last updated: November 8 2006 02:00

In the past couple of decades, the pharmaceuticals industry has often looked for inspiration to the thousands of natural products used in traditional Chinese medicine.

The best current malaria medicine is based on an ancient Chinese treatment for fevers that comes from star anise fruit. Two recent cancer drugs are derived from camptotheca acuminata, a tree found in China.

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In spite of these successes, there is still much scepticism within the industry about the scientific potential of natural products. Yet one Shanghai-based company is trying to show that there is more to traditional Chinese medicine than a few flukes.

Hutchison China Medi-Tech is one of the first Chinese companies to attempt to bring the modern bio-technology model - a start-up drug discovery operation using state-of-the art screening tools - to the treasure chest of traditional Chinese medicine (TCM).

"Our aim is to modernise and globalise traditional Chinese medicine," says Christian Hogg, chief executive of the group, otherwise know as Chi-Med.

The company is in many ways a hybrid. Based in Shanghai, it is controlled by the Hong Kong conglomerate Hutchison Whampoa and listed in London, raising £40m ($76.2m) on the Alternative Investment Market in April.

It also has three very different legs. As well as the research arm, the group has a business selling existing TCM products in China and another in the UK.

The Chinese TCM business is the current revenue driver, with turnover of $31.1m in the first half of the year. It has 40 per cent of the market for Ban Lan Gen, a cold and flu medicine made from a root, which was particularly sought after at the time of the Sars outbreak.

Sales of TCM medicines are about $11bn a year - 30 per cent of all drug sales in China - but, like many consumer products in China, the market is fragmented. Mr Hogg says there are 1,200 manufacturers across the country.

As a result, the industry is ripe for consolidation. The company will consider acquisitions but is mainly looking to add to its three joint ventures, where the Chinese partner provides the assets and Chi-Med adds the marketing expertise. "The Hutchison name is a great calling card," says Mr Hogg, who spent five years of his 10-year career at Procter & Gamble managing joint ventures in China.

The market may be growing 20 per cent a year but there can be problems. The group warned in July that a rule change would affect one of its joint ventures. Executives said this was part of the normal business of a rapidly evolving market. However, the company's shareholders took fright and the shares are now trading at 162p, well below their float price of 275p, marking an inauspicious debut on the London market.

The overseas retail business, which hopes to tap growing demand for alternative therapies, is less well established and is loss-making. The company has six London shops under the Sen brand name in places such as Harvey Nichols - clean, colourful spaces that sell teas and tonics as well as acupuncture and reflexology. The concept is something like Chinese mysticism meets Absolutely Fabulous.

The main reason for Hutchison to get involved, however, is the scientific opportunity. The company has a library of 10,000 natural substances, many of which have been used for centuries, which it is scanning for medical potential.

Chi-Med now has two products in four clinical trials: a drug to enhance radiotherapy for cancer patients and an oral treatment traditionally used for respiratory infections and modified to treat Crohn's disease and ulcerative colitis.

On top of the library, there are two other attractions to pursuing drug discovery in Shanghai. One is the potential to bring back skilled Chinese scientists who trained in the US or Europe but now want to take part in the mainland's economic boom.

The research division is run by Samantha Du, a former Pfizer executive, who has brought back a number of colleagues, including Su Weiguo, a top Chinese chemistry student who went on to become a leading researcher at Pfizer. "I wanted to contribute something to my country," he says.

Chi-Med also believes there is a big cost advantage in China. The scientists themselves do not come cheap if they are returnees but it is both quicker and cheaper to do clinical trials. "If it costs $1bn to develop a new drug, then a 10 per cent cut is tremendous," Ms Du says.

Apart from the scientific obstacles in turning botanicals into drugs, one of the biggest problems facing Chi-Med is intellectual property. As its medicines are based on substances in use for thousands of years, it can be hard to establish the patents that justify heavy development costs.

Mr Hogg says any drugs the company develops will be hard to copy. But as its scientists dig deeper into the library, he says they will start to understand how the substances work on a molecular level and how they react with the human body. As a result, they will begin to isolate specific chemicals that could be the basis for potential new drugs, which would be much easier to patent.

The flotation has given Chi-Med the money to fund at least three years of research and it will receive further revenues from a deal signed this week with P&G to screen its plants against skincare targets.

In the long term, having scientists in Shanghai and shops in Harrods could be unwieldy. Mr Hogg says the drugs research business could be spun off in the future. But before then, Chi-Med's researchers will have to show that their library is full of more than just scientific curiosities.

Copyright The Financial Times Limited 2006

NYT: Marketers Trace Paths Users Leave on Internet

Marketers Trace Paths Users Leave on Internet

Ads displayed by Tacoda Systems. One, top, is shown to those who searched for mortgage data; the other to those who have checked want ads.

 

By SAUL HANSELL

New York Times:
Published: August 15, 2006

 

If you use  Yahoo’s Web search engine to learn about hybrid cars, the site will quietly note that you fit into a group of users it calls “Consciously Cruising.”

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A Face Is Exposed for AOL Searcher No. 4417749 (August 9, 2006)

   

If you click on ads for moving van companies, you will join the “Home Hopping” group. Shop for wedding cakes and reception halls and you might be tagged as a future bride or groom.

Earlier this year, Yahoo introduced a computer system that uses complex models to analyze records of what each of its 500 million users do on its site: what they search for, what pages they read, what ads they click on. It then tries to show them advertisements that speak directly to their interests and the events in their lives.

Yahoo and the many other companies building similar systems say the systems are benign because they typically do not collect personal information like names and addresses.

“We are much more conservative than we need to be” in using information about site visitors, said Usama Fayyad, chief data officer at Yahoo.

Still, just how personal even “anonymous” information can be was shown vividly last week as a list of three months of search queries from 657,000 AOL customers began circulating online. Collectively, a person’s Web searches, it turns out, can create an eerily intimate portrait — one that some privacy advocates say should never be assembled and stored in the first place.

Still, Web companies continue refining their techniques. Advertising on search engines is already a $14-billion-a-year business because the ads can be so closely tied to what people are looking for. Yahoo’s system is meant to use search queries and other actions to select ads people see while checking their e-mail and reading other pages.

AOL is working on a similar system to display ads for products related to a person’s Web search history. MSN from  Microsoft just introduced technology to do the same. Other companies use systems that bring together information about users from across many sites. Internet companies call this behavioral targeting, and it is based on the insight that knowing what people do online can be more valuable to a marketer than knowing how old they are or what they do for a living.

“Search behavior is the closest thing we have to a window onto people’s intent,” said Jeff Marshall, a senior vice president of Starcom IP, an advertising agency. “When people are gathering information to make a choice, that means they are often going to spend money.”

Many Internet users have no idea that records of their actions are being collected and used. They might find out about these practices only if they read the fine print of Web site privacy policies.

But AOL’s release of search data has already led some privacy advocates and legislators to call for new limits on how Web sites and advertisers keep and use information about online behavior.

AOL has apologized for the release, saying that its research unit had not been authorized to publish the records. It removed the data from its site, but copies are still available online.

Not all of the behavioral marketing involves search engines. Technology from companies like DoubleClick and AOL’s Advertising.com unit allows marketing messages to follow people around the Web.

Starwood Hotels, for example, alerts members of its frequent-guest program to new promotions by placing ads that will be shown only to people who have previously visited its Web site. These ads can find customers in unlikely places, like the vast social networking site MySpace.

While most MySpace users are more likely to spend money on soda and sneakers, some of the site’s 100 million members do stay in Starwood’s Westin or Sheraton hotels and will see the ads.

Cingular Wireless uses a similar approach to advertise to people who have started shopping for a phone.

“You are no longer targeting people you think will be interested in your product,” said Les Kruger, a senior marketing manager at Cingular. “We know based on your behavior that you are in the market, and we can target you as you bounce around the Internet.”

Most of these marketing systems use cookies, unique numbers that a Web site can place on a computer to spot return visitors. Cookies are also used by companies like Advertising.com that place ads and track visitors across many sites.

Shopping sites like  Amazon.com use cookies to greet returning customers by name. But many of the targeting systems try to avoid recording personally identifiable information, like a person’s name and address.

In the late 1990’s, an outcry about an earlier wave of marketing schemes led to some restrictions on how data is shared among sites and to rules that allow users to specify that they do not want to have some data collected about themselves. These options are rarely used.

Yahoo and most of the major Internet companies do not sell profile information to others, as magazine publishers and credit card companies often do. They want to profit directly from the information they gather.

But Web publishers do sometimes trade information among themselves — often simply what sites a particular computer has visited. For example, Seevast, an Internet advertising company, pays Web sites to place its cookies on the computers of users that visit them. That way, Seevast will know more about those users when it chooses which advertisements to display on sites in its network.

Mr. Fayyad  of Yahoo said Internet companies were walking a fine line.

“If you get bombarded by ads for minivans on Yahoo, even if you are interested in minivans, it becomes creepy,” he said. “If you want to do this responsibly, you have to restrain yourself.”

For example, he said, Yahoo’s new system is based on monitoring for 300 types of behavior — some as detailed as having shopped for flowers in the last two days — but it does not keep records on more sensitive topics, like specific medical conditions.

Still, Mr. Fayyad argues that some level of targeting is necessary for Internet companies to avoid the fate of television networks.

“Every time I serve the wrong ad to the wrong person, I am training that person to tune out,” he said.

More immediately, Yahoo and many other sites see this sort of targeting as a way to increase advertising rates for material that otherwise would have little appeal to advertisers.

“We sell people, not pages,” said David Morgan, the chairman of Tacoda Systems, which sells technology for behavioral targeting to publishers including The New York Times Company. “The L.A. Times can target car buyers when they are surfing the local news.”

At first, Tacoda offered a service to allow companies to track behavior on their own sites. Now it runs a network across 3,500 sites, so Weather.com, for example, can show lucrative auto ads to its users who recently visited Car.com.

These systems can turn up some surprising results. Alamo Rent a Car, for example, found strong responses to its advertisements among people who had recently read obituaries on newspaper sites. That may have been because they were more likely to be taking a last-minute trip to a funeral, Mr. Morgan said.

Google, which runs both the largest search engine and largest advertising network, picks its targets more narrowly. When Google sells advertisements that appear on other Web sites, it selects the ad by analyzing the subject matter of the page the ads appear on. Those sites can send Google additional hints for use in ad targeting, like ZIP codes.

Google outbid its rivals last week when the  News Corporation accepted its offer of $900 million for the right to sell advertising on MySpace and other sites; it helped that Google has sophisticated technology that can make inferences about what ads are best for a particular page.

So far, however, Google has not used information about the past behavior of searchers to target advertisements, even though the company keeps logs of all searches and its privacy policy allows it to use these for advertising. Google does not collect the names of most searchers, but it is doing so increasingly as it offers more personal services like e-mail.

“We have considered every potential targeting option, and we come back every time to the idea that the trust of the user is paramount,” said Tim Armstrong, Google’s vice president for advertising. After the initial outcry over Google’s Gmail service, which displays ads based on the content of individual e-mail messages, the company has been wary of taking actions that would raise privacy concerns.

Mr. Armstrong also challenged the idea that it was effective to show people advertisements based on what they searched for hours or days earlier: “Does a user want to see an ad on cars when they are planning their weekend vacation, or do they want to see an ad related to what they are looking at?”

Indeed, some argue that behavioral targeting may be more trouble than it is worth. Web publishers worry that it will lead clients to buy fewer ads. And advertisers question whether the higher prices the Web sites charge are worth it.

One believer is Panasonic, which has found that users do respond to such advertisements. It ran a series of ads for plasma televisions on entertainment and electronics Web sites. Then it used technology from Tacoda to show ads to people who had once visited those sites while they surfed elsewhere. The response to the ads increased when they were on a site unrelated to televisions.

“The ad is less expected and is playing to your subconscious,” said Lydia Snape, the director of online marketing at Renegade Marketing, Panasonic’s Internet advertising agency.

LendingTree, an online loan broker, has experimented with aiming ads at some of the 300 categories of users in Yahoo’s new system, like newlyweds and people who have just moved. It had by far the best results advertising to people who had searched for and read information about borrowing money.

“People aren’t in the market for loans all the time,” said Darren Beck, LendingTree’s vice president for online advertising. “These behavioral targeting models seem like the holy grail. We can find people exactly when they want a loan.”