OverMatter

Moving the Mississippi

"Then came the massive flood of 1927 -- to this day one of the greatest natural disasters in U.S. history. Heavy rains on the upper Mississippi unleashed a catastrophic flood from Tennessee and Arkansas down to the river's mouth south of New Orleans. The river flooded more than one million homes and caused about $1.5 billion in damage in 2005 dollars. In some spots the Mississippi, usually about a half mile across, was transformed into a lake 60 miles wide. Most of New Orleans was spared, partly because officials dynamited a levee to let the floodwaters pour on to nearby rural land and into the southeastern reaches of the city, home to many of the city's poor African-Americans. Some residents were killed and others were left homeless. It was an affront that became legend in New Orleans' poor neighborhoods.

The flood was a transforming event. The disaster drove thousands of black residents from the area around the Mississippi to big Northern cities, and propelled Herbert Hoover, who was in charge of flood relief, to the presidency.

Afterward, the federal government assumed near-total control of the river, and began pouring billions of dollars into shoring up its banks with tall, sturdy levees. Each year, millions of tons of sediment were dredged out of the river to make it navigable for ships and barges.

But civilizing the river also had unintended consequences. Instead of replenishing the protective wetlands south of the city with its mud, the Mississippi began blasting its sediment straight out the mouth of the river, over the continental shelf less than a hundred miles away and into the depths of the Gulf."

(WSJ.com, Moving the Mississippi, October 29, 2005; Page A1)

Africa's cellphone revolution

"Cellphones made up 74.6 percent of all African phone subscriptions last year, says the U.N.'s International Telecommunication Union. Cellphone subscriptions jumped 67 percent south of the Sahara in 2004, compared with 10 percent in cellphone-saturated Western Europe, according to Mo Ibrahim, the Sudanese who chairs Celtel, a leading African provider.

An industry that barely existed 10 years ago is now worth $25 billion, he says. Prepaid air minutes are the preferred means of usage and have created a $2 billion-a-year industry of small-time vendors, the Celtel chief says. Air minutes have become a form of currency, transactable from phone to phone by text message, he says.

This is particularly useful in Africa, where transferring small amounts of money through banks is costly.

"We are developing unique ways to use the phone, which has not been done anywhere else," said South African Michael Joseph, chief executive officer of Safaricom, one two service providers in Kenya. For an impoverished continent, low-cost phones make "a perfect fit..."

Saidi, the Zanzibar fisherman, can now check beforehand whether prices justify him sailing his catch to the Tanzanian mainland, while Wilson Kuria Macharia, head of the traders' association at the Nairobi market, says he no longer has to spend two to four weeks at a time roaming across Kenya and Tanzania in search of fresh produce.

"A few mobile-phone calls take care of what used to be the most grueling part of the business," said Macharia, 61."

(Africa's cellphone explosion changing economy, society)

Google Ad History

"This year, Google will sell $6.1 billion in ads, nearly double what it sold last year, according to Anthony Noto, an analyst at Goldman Sachs. That is more advertising than is sold by any newspaper chain, magazine publisher or television network. By next year, Noto said, he expects Google to have advertising revenue of $9.5 billion. That would place it fourth among American media companies in total ad sales after Viacom, the News Corp. and the Walt Disney Company, but ahead of giants including NBC Universal and Time Warner...

Hidden behind its simple white pages, Google has already created what it says is one of the most sophisticated artificial intelligence systems ever built. In a fraction of a second, it can evaluate millions of variables about its users and advertisers, correlate them with its potential database of billions of ads and deliver the message to which each user is most likely to respond.

Because of this technology, users click ads 50 percent to 100 percent more often on Google than they do on Yahoo, Noto estimates, and that is a powerful driver of Google's growth and profits. "Because the ads are more relevant," he said, "they create a better return for advertisers, which causes them to spend more money, which gives Google better margins..."

In 2000, Google started to sell ads on its own site, but they were only a few lines of text placed above the search results. There were no graphics and no banners. At first, these ads--and later, a second form of text advertisement that ran down the right side of the page--were sold at fixed prices. But such an approach would not last long.

In early 2002, a Google employee, Salar Kamangar, now 28, convinced Schmidt and the founders to switch to an auction-based system like the one set up by Bill Gross, the head of IdeaLab. Gross had created Goto.com, a search engine made up entirely of ads, where advertisers paid only if their ad was clicked on, and the advertiser who bid the most per click was listed first. (Goto was later renamed Overture Services and then bought by Yahoo, an early Google backer that has become its fiercest rival.)

Kamangar, though, had an important improvement on the model. Rather than giving priority to the advertisers that bid the most per click, as Goto did, he realized that it was better to save the front of the line for ads that brought in the most money--a combination of the bid and the number of clicks on the ad. This was not only more profitable, but it also linked readers to ads that were more relevant to them. He also figured out that the system should use what is called a Vickrey auction--that is, to charge the winner only one cent more than the second-highest bidder. That gives advertisers an incentive to bid high, knowing that they will not be penalized if they are far higher than the rest of the market.

Page and Brin were suspicious of any system that put high-bidding advertisers at the top, Kamangar said. "They thought if someone was willing to pay more it was a negative," he recalled. But he was able to convince them that the site could be improved by incorporating how often users clicked on an ad.

Schmidt, who was still new as chief executive, was worried more that moving to an entirely auction-based system--amid a recession in online advertising--could be financially disastrous. "I said to Salar, 'Promise me the revenue won't go down,' " Schmidt said. "I was afraid people would realize these ads were worthless." In fact, revenue quickly increased tenfold.

As Google's audience took off, advertisers came running--many thousands of smaller ones at first, but soon large companies as well. Among Google's largest advertisers is eBay, which has long bought keywords for nearly every sort of merchandise it sells.

"The smartest thing that Google did was getting smaller advertisers to buy in," said Ellen Siminoff, the chief executive of Efficient Frontier, an agency that helps advertisers manage their campaigns on search engines. She estimates that Google has two to three times as many advertisers as Yahoo does, largely because Yahoo has a 10-cent minimum bid. This lets Google earn money on more obscure search terms for which rivals have no ads.

This growing advertising business gave Google the confidence to expand its audience. Most significantly, in 2002, America Online brought in Google to replace Overture, which provided both search and search ads; that deal enshrined Google as the premier search engine and ad network. Google won the deal by guaranteeing AOL a substantial sum, which it would not disclose. Google was willing to make that bid only because of its confidence in its advertising sales prowess. "If we were wrong," Kordestani said, "there were some scenarios that would bankrupt the company."

But by that point, Google had figured out that the same sort of computing and engineering skill that it used to find Web pages could also be used to improve the quality and, ultimately, the profitability of advertising. "Initially, we didn't understand how fundamental the computer science was in advertising," Schmidt said. "We didn't have enough staffing or focus on this area. I managed to fix that."

Google introduced its current system for determining which ad to show on which page late last year. It is a wonder of technology that rivals its search engine in complexity. For every page that Google shows, more than 100 computers evaluate more than a million variables to choose the advertisements in its database to display--and they do it in milliseconds. The computers look at the amount bid and the budget of the advertiser, but they also consider the user--such as his or her location, which they try to infer by analyzing the user's Internet connections--as well as the time of day and myriad other factors Google has tracked and analyzed from its experience with advertisements.

"If someone is coming from a particular location, a certain ad may be more popular there," explained Jeff Huber, Google's vice president for engineering. "The system can use all the signals available, and the system itself learns the correlations between them..."

In addition to selling ads on its own site and on other sites that use its search technology, Google also places text ads on all manner of sites published both by professional media companies and by amateurs. Brin created this program in early 2003 after he became worried that the Internet crash would keep people from creating interesting Web pages for Google to index. This technology, called AdSense for Content, has made advertising on Google more attractive and provided the economic foundation for the rise of blogs.

"God bless Google," said Jarvis, the BuzzMachine blogger. "They took the cooties off citizen media." Until Google's program came along, advertisers shied away from placing ads on individual user's pages. But AdSense analyzed each page and tried--not always successfully--to find ads related to the page's content."

(Google wants to dominate Madison Avenue, too | CNET News.com)

Apple Honors Rosa Parks

"A key figure in the US civil rights movement died on October 24th…her name was Rosa Parks... Apple showed that they really do 'think different' by turning their home page into a memorial. The image is one that they used before in their ‘Think Different’ campaign." (Writers Block Live - Apple - Thinking Different Again)

One Man Stonehenge?

"The power of simplicity: how Stonehenge could have been built by *one man*" (Fungod.com via Good Experience)

iBelieve

"Rejoice!... a repacement cap and lanyard for your iPod Shuffle." (devoted1.com)

Netflix Customer Service

"We have a great customer support group. The miraculous thing about it is it's smaller now than in 2000 when we had only 100,000 customers instead of today's 3.2 million. It's not because people are on hold longer -- we still have great response times. It's because we've learned how to avoid so many problems. That's the big leverage. You read a lot about outsourcing of customer support -- send it to India, save $3, all this stuff. That's totally uninteresting to us. We're focused on much higher leverage and avoiding issues and fixing them at their root cause...

An interesting exercise is when we run short of titles. We try to always be in stock, but sometimes we're not. Say we've got 1,000 copies and there's 5,000 people who want a movie. So maybe somebody's already gotten a lot of value for their $20 or $18 or $9 because they've watched a lot of movies while other people have hardly watched that many movies this month, so they haven't gotten enough value yet. Our sense of fairness is that if we run short, it goes first to the people who haven't gotten the most value yet in order to create a fair and balanced experience for our customers..

Then, for a while we started doing bonus shipments. When we had excess inventory of something, and it's in your queue, but not in the first position, wouldn't it be cool if we sent it to you a week in advance? It's not going to cost us more. But it overwhelmed customer support. As soon as customers got their bonus DVD, no one understood it. They were afraid it was going to cost them. It confused them. It was a catastrophe. Our consumers as a whole want simple and reliable things they understand and not fancy extras."

(Fast Company Magazine)

Political Virus

"When one pharmaceutical company offered to sell a new pneumococcal vaccine to the government for $58 a dose, the Centers for Disease Control demanded a $10-a-dose discount. Politicians want companies to take all the risk of developing new vaccines, but they don't want the companies to make any money from taking those risks. Then the politicians profess surprise and dismay that there's a vaccine shortage." (WSJ.com - Political Virus, October 22, 2005; Page A6)

Is quest for safety unsafe?

"As Nascar tightens rules to protect drivers, their view of the race around them is increasingly obscured by safety equipment. As a result, races are getting tighter and crashes are up, according to spotters and drivers." (WSJ.com - Nascar's Unofficial Traffic Cops, October 22, 2005; Page P8)

China Rising

"China today is simultaneously the world's largest start-up and the world's largest turnaround. It draws on a 2,000-year tradition, yet it is inhaling Western business know-how and technology, doing everything at the same time and for the first time.

That explains why China has been able to progress so quickly. Think about the past decade in China's economic and social development in terms of comparable changes in U.S. history. China is undergoing, simultaneously, the raw capitalism of the robber barons of the late 1800s; the speculative financial mania of the 1920s; the rural-to-urban migration of the 1930s; the emergence of the first-car, first-home, first-college-education, first-family-vacation, middle-class consumer of the 1950s; and even aspects of social upheaval similar to the 1960s.

The start-up side of the equation is China's desperate need for foreign capital, technology, expertise and overseas markets for its products. Like all start-ups, the Chinese have progressed through frantic trial and error, making it up every day, copying and modifying practices and products of others, always sprinting to capture the market first, always aiming at the next pile of quick profits.

The turnaround side is the Communist Party's decision 26 years ago to unleash the entrepreneurial power of the people, so long smothered and entrapped in the cruel inefficiency of dogma. When economic reforms were launched, there was only one place in the world with a significant population of poor Chinese people: China. The tens of millions of ethnic Chinese who lived abroad were among the world's most ambitious and successful scientists, inventors, engineers, merchants and business tycoons."

(WSJ.com - How Rupert Murdoch met his match in China, October 17, 2005; Page B1)