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Posts from the ‘Google’ Category

Google vs. The Teamsters

Yesterday, Google launched Chromecast, a streaming solution for integrating mobile devices with TV, part of another salvo against Apple.  Google vs. Apple has been the hot story now in Silicon Valley for a couple of years.  Before that, Google vs. Facebook.  Before that, Google vs. Microsoft.  Technology loves narrative, and setting up a battle of titans always gets the crowd worked up.

Lately, I’ve been thinking about the next fight Google might be inadvertently setting up, and wondering whether they are ready for it.

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Self-Driving Cars or Self-Driving Trucks

It turns out I’m not the only one who noticed that Google’s incredible push for self-driving cars actually has more likely applications around trucking.  Yesterday, the Wall Street Journal wrote an excellent piece about Catepillar’s experiments using self-driving mining trucks in remote areas of Australia.  It had the provocative headline:

Daddy, What Was a Truck Driver?

This is the first piece in the mainstream media that I’ve seen connecting the dots from self-driving cars to trucking, even with a lightweight reference to the Teamsters at the end.

Ubiquitous, autonomous trucks are “close to inevitable,” says Ted Scott, director of engineering and safety policy for the American Trucking Associations. “We are going to have a driverless truck because there will be money in it,” adds James Barrett, president of 105-rig Road Scholar Transport Inc. in Scranton, Pa.

The International Brotherhood of Teamsters haven’t noticed yet, or at least, all searches I performed on their site for keywords like “self driving”, “computer driving”, “automated driving”, or even just “Google” revealed nothing relevant about the topic.  But they will.

Massive Economic Value

The statistics are astonishing.  A few key insights:

  • Approximately 5.7 million Americans are licensed as professional drivers, driving everything from delivery vans to tractor-trailers.
  • Roughly speaking, a full-time driver with benefits will cost $65,000 to $100,000 or more a year.
  •  In 2011, the U.S. trucking industry hauled 67 percent of the total volume of freight transported in the United States. More than 26 million trucks of all classes, including 2.4 million typical Class 8 trucks operated by more than 1.2 million interstate motor carriers. (via American Trucking Association)
  • Currently, there is a shortage of qualified drivers. Estimated at 20,000+ now, growing to over 100,000 in the next few years. (via American Trucking Association)

Let’s see.  We have a staffing problem around an already fairly expensive role that is the backbone of a majority of freight transport in the United States.  That’s just about all the right ingredients for experimentation, development and eventual mass deployment of self-driving trucks.

Rise of the Machines

In 2011, Andy McAfee & Erik Brynjolfsson published the book “Race Against the Machine“, where they describe both the evidence and projection of how computers & artificial intelligence will rapidly displace roles and work previously assumed to be best done by humans.  (Andy’s excellent TED 2013 talk is now online.)

The fact is, self-driving long haul trucking addresses a lot of the issues with using human drivers.  Computers don’t need to sleep.  That alone might double their productivity.  They can remotely be audited and controlled in emergency situations.  They are predictable, and can execute high efficiency coordination (like road trains).  They will no doubt be more fuel efficient, and will likely end up having better safety records than human drivers.

Please don’t get me wrong – I am positive there will be a large number of situations where human drivers will be advantageous.  But it will certainly no longer be 100%, and the situations where self-driving trucks make sense will only expand with time.

Google & Unions

Google has made self-driving cars one of the hallmarks of their new brand, thinking about long term problems and futuristic technology.  This, unfortunately, is one of the risks that goes with brand association around a technology that may be massively disruptive both socially & politically.

Like most technology companies in Silicon Valley, Google is not a union shop.  It has advocated in the past on issues like education reform.  It wouldn’t be hard, politically, to paint Google as either ambivalent or even hostile to organized labor.

Challenges of the Next Decade

The next ten years are likely to look very different for technology than the past ten.  We’re going to start to see large number of jobs previously thought to be safe from computerization be displaced.  It’s at best naive to think that these developments won’t end up politically charged.

Large companies, in particular, are vulnerable to political action, as they are large targets.  Amazon actually may have been the first consumer tech company to stumble onto this issue, with the outcry around the loss of the independent bookstore.  (Interesting, Netflix did not invoke the same reaction to the loss of the video rental store.)  Google, however, has touched an issue that affects millions of jobs, and one that historically has been aggressively organized both socially & politically.  The Teamsters alone have 1.3 million members (as of 2011).

Silicon Valley was late to lobbying and political influence, but this goes beyond influence.  We’re now getting to a level of social impact where companies need to proactively envision and advocate for the future that they are creating.  Google may think they are safe by focusing on the most unlikely first implementation of their vision (self-driving cars), but it is very likely they’ll be associated with the concept of self-driving vehicles.

I’m a huge fan of Google, so maybe I’m just worried we may see a future of news broadcasts with people taking bats to self-driving cars in the Google parking lot.  And I don’t think anyone is ready for that.

User Acquisition: Mobile Applications and the Mobile Web

This is the third post in a three post series on user acquisition.

In the first two posts in this series, we covered the basics of the five sources of traffic to a web-based product and the fundamentals of viral factors.  This final post covers applying these insights to the current edge of product innovation: mobile applications and the mobile web.

Bar Fight: Native Apps vs. Mobile Web

For the last few years, the debate between building native applications vs. mobile web sites has raged.  (In Silicon Valley, bar fights break out over things like this.) Developers love the web as a platform.  As a community, we have spent the last fifteen years on standards, technologies, environments and processes to produce great web-based software.  A vast majority of developers don’t want to go back to the days of desktop application development.

Makes you wonder why we have more than a million native applications out there across platforms.

Native Apps Work

If you are religious about the web as a platform, the most upsetting thing about native applications is that they work.  The fact is, in almost every case, the product manager who pushes to launch a native application is rewarded with metrics that go up and to the right.  As long as that fact is true, we’re going to continue to see a growing number of native applications.

But why do they work?

There are actually quite a few aspects to the native application ecoystem that make it explosively more effective than the desktop application ecosystem of the 1990s.  Covering them all would be a blog post in itself.  But in the context of user acquisition, I’ll posit a dominant, simple insight:

Native applications generate organic traffic, at scale.

Yes, I know this sounds like a contradiction.  In my first blog post on the five sources of traffic, I wrote:

The problem with organic traffic is that no one really knows how to generate more of it.  Put a product manager in charge of “moving organic traffic up” and you’ll see the fear in their eyes.

That was true… until recently.  On the web, no one knows how to grow organic traffic in an effective, measurable way.  However, launch a native application, and suddenly you start seeing a large number of organic visits.  Organic traffic is often the most engaged traffic.  Organic traffic has strong intent.  On the web, they typed in your domain for a reason.  They want you to give them something to do.  They are open to suggestions.  They care about your service enough to engage voluntarily.  It’s not completely apples-to-apples, but from a metrics standpoint, the usage you get when someone taps your application icon behaves like organic traffic.

Giving a great product designer organic traffic on tap is like giving a hamster a little pedal that delivers pure bliss.  And the metrics don’t lie.

Revenge of the Web: Viral Distribution

OK. So despite fifteen years of innovation, we as a greater web community failed to deliver a mechanism that reliably generates the most engaged and valuable source of traffic to an application.  No need to despair and pack up quite yet, because the web community has delivered on something equally (if not more) valuable.

Viral distribution favors the web.

Web pages can be optimized across all screens – desktop, tablet, phone.  When there are viral loops that include the television, you can bet the web will work there too.

We describe content using URLs, and universally, when you open a URL they go to the web.  We know how to carry metadata in links, allowing experiences to be optimized based on the content, the mechanism that it was shared, who shared it, and who received it.  We can multivariate test it in ways that border on the supernatural.

To be honest, after years of conversations with different mobile platform providers, I’m still somewhat shocked that in 2012 the user experience for designing a seamless way for URLs to appropriately resolve to either the web or a native application are as poor as they are.  (Ironically, Apple solved this issue in 2007 for Youtube and Google Maps, and yet for some reason has failed to open up that registry of domains to the developer community.)  Facebook is taking the best crack at solving this problem today, but it’s limited to their channel.

The simple truth is that the people out there that you need to grow do not have your application.  They have the web.  That’s how you’re going to reach them at scale.

Focus on Experience, Not Technology

In the last blog post on viral factors, I pointed out that growth is based on features that let a user of your product reach out and connect with a non-user.

In the mobile world of 2012, that may largely look like highly engaged organic users (app) pushing content out that leads to a mobile web experience (links).

As a product designer, you need to think carefully about the end-to-end experience across your native application and the mobile web.  Most likely, a potential user’s first experience with your product or service will be a transactional web page, delivered through a viral channel.  They may open that URL on a desktop computer, a tablet, or a phone.  That will be your opportunity not only to convert them over to an engaged user, in many cases by encouraging them to download your native application.

You need to design a delightful and optimized experience across that entire flow if you want to see maximized self-distribution of your product and service.

Think carefully about how Instagram exploded in such a short time period, and you can see the power of even just one optimized experience that cuts across a native application and a web-based vector.

Now go build a billion dollar company.

In Defense of Repricing Stock Options

This is actually news from last week, but Google announced that they are repricing their employee stock options.

John Batelle has fairly representative coverage on his blog.  His post cites coverage from Adam Lashinsky at Fortune (a personal favorite as a journalist) with a fairly typical dig on the issue.  Here’s the actual quote:

One last item of note. Google is offering employees the opportunity to exchange underwater stock options for newly priced options due to the stock price having been hammered. (The only catch in the exchange is that employees will have to wait an additional 12 months before selling re-priced options.) The stock price is  currently around $300, compared with $700 in late 2007. The number of shares eligible for exchange is about 3% of the shares outstanding, and the exchange will result in a charge to earnings of $460 million over a five-year period.

One must re-phrase this last bit in English: Google is transferring almost half a billion dollars in wealth from shareholders to employees, and for what ….? Motivation and retention, says Google. This a well known farce, as old as the Valley, which tells itself first that it offers generous stock options as a form of incentive and then, when share prices plummet, moves the ball so its employees, whose incentives apparently didn’t work (as if the stock price were under their control) can be re-incentivized. Retention? Would someone please tell me where the average Google employee is going to go right now?

To be clear, there have always been people who have a significant problem with employee stock option repricing, and with good reason.  Theoretically, options are supposed to align employee interests with shareholders.  In an ideal world, the employee wins if the shareholders win.   Repricing, therefore, breaks this model, because, after all, no one reprices the shares purchased by outside shareholders when the stock tanks.

Somewhere in the post-2000 bubble hangover, this criticism went from being a common argument to conventional wisdom.  Accounting standards were changed to require the expensing of employee stock options, and stock option repricing became largely verboten.

I rarely see anyone in the financial press explaining anymore why, in fact, there are very good arguments for stock option repricing.  So, I’m going to take a quick crack at it here.  Even if you disagree, it does a disservice to not reflect both sides of the argument fairly.

First, and foremost, it’s important to note that, while options are intended to help align employee interests with shareholders, stock options, in fact, do not do this in all situations.  The problem is the inflection point in the curve.

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This is a simple chart that shows the intrinsic value to an employee of a stock option with a strike price of 50 at different stock prices.  Notice the blue line, which is stock, actually reflects a 1:1 ratio of value.  If the stock is worth $10, the employee gets $10, etc.  For the stock option, however, there is a “break” in the line.  Below $50, the employee gets $0.  Above $50, the employee gets $1 for every $1 of stock price increase.

In general, employee stock options are granted at the strike price of the stock roughly on the date that they join.  So, the assumption is, this aligns the employee with gains after they join.  In theory, it’s even better than stock, because if the stock drops, they get no value for gains made before the date of their join.

This sounds good in theory, but we know that it has real problems, on both the upside and the downside.

On the upside, most stocks go up every year.  (Yes, I know.  In 2009, it’s hard to remember that.)  If the stock market itself goes up 7% every year, then an employee will see real returns on their stock options for just “matching the average”.  In fact, they can actually see real material gains over long periods even by underperforming their benchmark index.

However, since shareholders also enjoy that benefit, it tends to only get complaints when you see incredible gains by executives with huge option packages.   No one likes to see an outsized pay package for undersized performance.

On the downside, however, the problem is much more severe.  Let’s say our stock example from above drops to $25, a price that the company hasn’t been at for 3 years.  The good news is that shareholder alignment works, to a point, as advertised.  Not only are shareholder gains for the last 3 years wiped out, but so are the option grants for employees who joined in the last 3 years, and even any other employees who received grants in the past 3 years.

That part seems fine… at first.

Where does the company go from here?  Now we need to talk about the principle of sunk cost.  Sunk costs are costs that cannot be recovered, and therefore should be ignored when making future investment decisions.  (More rigorous explanation on Wikipedia).  For stocks, it’s important to remember the stock market does not care what you paid for a stock.  It has no memory.  The question for a shareholder (barring external effects like taxes, etc) is purely where you think the stock will go from here.

But now we see that the employee is no longer aligned with the shareholder!  From $25, most shareholders would love to see a gain of 20%, which would take the stock to $30.  But for employees, a $30 share price and a $25 share price mean the same thing:  $0.

Worse, if employees leave the company, and get a job at a new company, they will get option prices at today’s stock price.  In fact, if the employee quits the company, and then is rehired back, they would actually get their options priced at today’s stock price.

In a world of at-will employment, this is a big problem.  True, as Adam Lashinsky pokes at, most employees won’t be able to find a new job so fast.  But many of the good ones can.  And they will.  Because your competitor can actually come in with in a simple, fair market offer for the employee, and beat your implicit offer of zero.  Even if they don’t do it today, these problems tend to persist for long periods of time, and employees have long memories.  You may find that your best talent starts leaving, and then you get snowball effects because great talent is hyper-aware when other talent leaves.

So what is a company to do?

In a perfect world, the company would have a very tight and accurate evaluation of their best talent, and would target “retention compensation” proportionally to their people based on their value.  This would both minimize the risk of flight, and would also help “re-align incentives” for the gains going forward.

Unfortunately, the mechanics and accounting of repricing makes this fairly prohibitive.   As a result, it tends to be an all-or-nothing option.

The truth is, repricing stock options can be one of the best things to realign employee incentives going forward.  It resets the vesting period, basically treating employees like new employees.  The employees do not get to go back in time and recover their equity compensation for the past three years.  The new vesting period basically wipes out the history.  They literally no longer own the rights to the shares – they have to re-earn them.  In fact, if the employee quits the next day, they will take no stock with them, even if they worked for the company for three years.

As a result, stock option repricing actually re-aligns employees more closely with shareholders than nay-sayers give credit for.

Last thoughts

While I am explaining the reasons why repricing stock options makes sense, there is still the significant problem of “repeat abuse”.  If employees believe all options will be repriced for all drops, then you end up with a moral hazard, where you might actually want to drive down the price, get your options repriced, and then recover easy gains.  True, the market is fairly hostile to repricing due to the accounting charge, so it’s unlikely this would happen, but it’s still a real concern.

As a result, my recommendation would actually be that companies faced with this situation actually use the opportunity to not reprice stock options, but move to actual stock-based compensation.  Both have an accounting charge, but actual stock-based compensation serves three purposes:

  • The new stock grants can be better targeted to employees based on performance and value
  • The new stock grants have immediate value, serving as a kind of retention bonus
  • The new stock grants align the employee with shareholders going forward in both up and down markets

So while I do believe that repricing stock options gets a “bum wrap” in the financial media, I also believe that there may be potentially better compensation alternatives, particularly for public companies.

Google Superstar Joins LinkedIn

Can’t get much better press than that, right?  The title is copied verbatim from a blog post on the announcement.

From Finance Geek:

A Google (GOOG) rock star defects: Dipchand “Deep” Nishar, who helped kickstart Google’s mobile business, is moving to LinkedIn.

WSJ: Mr. Nishar, 40, in January will become vice president of product strategy for the social-network that is focused on professionals. He will lead LinkedIn’s efforts to develop new products and services on top of its social-networking site. LinkedIn chairman Reid Hoffman, who had previously filled the senior product role, will remain at the company and shift his focus on broader strategy issues…

Mr. Nishar held a range of jobs at Google, including building the back-end infrastructure for Google’s monetization systems, starting its mobile initiatives and, more recently, overseeing product development for the Asia-Pacific region. He worked closely with Jonathan Rosenberg, Google’s senior vice president of product management, and was the recipient of a rare and lucrative accolade given to employees who have made extraordinary contributions to the company, known as the Google Founders Award.

The original Wall Street Journal article is here.  My favorite quote from Deep:

His departure comes as the recession has made a move from a mature company to a start-up more risky. But LinkedIn, which has 32 million registered users, is better positioned than many… “I don’t view LinkedIn as risky by any means,” said Mr. Nishar.

Very excited to have Deep join the team in 2009.  His LinkedIn profile is here for more detail on his professional achievements.

Adam Nash: The Fight for the Google Top 10

Owning your own personal brand is harder than you might think.

It’s neck-and-neck for the domination of the “Adam Nash” top 10 search results on Google.  It used to be just a two-way battle between me, and some child born in Colorado for the express purpose of donating stem cells to his sibling.  Now, there are a three contenders, and it’s getting tight.

Right now, the score is:

  • Yours truly, with links 1, 2, 5, and 6.
  • Adam Nash (aka Adam Ramona) from Melbourne, Australia has links 3 & 4 & 7  He’s using Blogspot and Ning for pagerank.  Has his own domain, YamanakaNash.net.
  • Adam Nash, the baby born from Lisa & Jack Nash in Colorado, rounds out the bottom 10 with 8, 9, 10.  Old news links.

Part of this is my fault.  I left adamnash.blogspot.com open, and Adam Ramona took it.  I’m usually quite good about locking up the name space.  He also took nashadam at Ning, but he couldn’t get adamnash because I had that locked up.

In any case, I’m lucky right now because I have the holy trinity of personal page rank working for me:

Plus, for whatever reason, Stanford continues to have amazing page rank for my old Computer Science department page which has been pointing to adamnash.com for the last 10 years.

Still, I’m worried I’m going to lose the top spot if the pace of news coverage on my doppelganger in Australia is any indication.  One thing he’s doing, which is smart, is creating a web page that indexes every article about him, tied to his domain.  Maybe I should do the same thing with the heavy news coverage of LinkedIn product launches with my name in it.

Hmmmm.

Using Google Spreadsheets as a Lightweight Database

Yes, I have nostalgic feelings for good, old Filemaker.  There, I said it.

I caught this post on the Google Docs blog last week, and thought I’d comment here about it, since it’s such a useful feature enhancement.

The enhancement?  The ability to create short web-forms that you can email out to people, without requiring login.  As users enter the data, it auto-populates the spreadsheet on the back-end.   Check out this explanation from the blog post:

We’re really excited to bring you forms! Create a form in a Google Docs spreadsheet and send it out to anyone with an email address. They won’t need to sign in, and they can respond directly from the email message or from an automatically generated web page. Creating the form is easy: start with a spreadsheet to get the form, or start by creating the form and you’ll get the spreadsheet automatically.

Responses are automatically added to your spreadsheet. You can even keep a closer eye on them by adding the Google Docs forms gadget to your iGoogle homepage, created by software engineers Valerie Blechar and Sarah Beth Eisinger (in her first month at Google!).

I’m not a big iGoogle user, but I could easily see embedding this type of gadget on my LinkedIn homepage.  There are so many simple workplace applications that still come down to the need for a very simple database (not even relational!) and a form-based front-end for users.  In the 1990s, Filemaker Pro was my weapon of choice for that type of problem.  I’ve looked into Quickbase a bit, but the pay-per-seat model through me off a bit.

Check it out, and let me know what you think.

Also, if you know of a good “Filemaker Pro meets Web 2.0″ free web service that you like,  let me know.  I’ve got to believe there are dozens of them, since every other great desktop application class has made it to the web.

Campfire One Video is Live (Open Social Launch)

The video from Campfire One, the launch event for Open Social last night at the Google campus is now live.

The demo that Elliot & I give for LinkedIn is about 38:30 into the video (or 18:55 from the end, if you have the timer set up to run backwards). It’s a good thing there was a rehearsal – I’m pretty sure my demos are always better the second time. :)

The event was fun to do – it was really a campfire set up in the middle of Google campus. Yes, there were real fires. In fact, the smoke was a real hazard to the speakers – if the wind went the wrong way, all of sudden you’d be blinded and unable to speak. I think Marc Andreessen got the worst of it in rehearsal.

The Google site for the OpenSocial APIs is live now. The LinkedIn blog post on the topic is here.

My previous blog post on Open Social is here.

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