Ecommerce Blog

Ever since Google’s stock-withering earnings report, I’ve had the Flaming Lips’ “Waiting for a Superman” stuck in my head. Things are indeed getting heavy, and everyone was waiting for Google to lift the sun into the sky. That didn’t happen, and Google’s stock was quickly shoved down 9.5 percent in after-market trading.

Just as it was unrealistic to expect Google to save the tech sector, sentiment is now likely to become unrealistically gloomy. Eric Schmidt swore that Google isn’t hurting from the weak economy, and he’s probably right (for now). That discussion misses the bigger point in Google’s recent numbers: The last of the Internet giants founded in the 90s is finally maturing into slower growth, and signs are the transition could be painful.

We may have seen the last quarter when Google can boast of revenue growth rates above 50 percent. (Five years ago, it was nearly 500 percent). That was inevitable, but it’s come sooner than you might like to think. Revenue growth had been gracefully decelerating until the most recent quarter, when it stumbled.

In particular, paid clicks — clicks on ads on Google’s or its AdSense partners’ sites — grew 30 percent in the latest three-month period. They grew 61 percent a year ago and held between 45 percent and 52 percent in 2007.

Also, traffic acquisition costs took a nasty and unexpected rise, to 30.3 percent of revenue from 29.1 percent a year earlier. Google chalked that up to ads on social networking sites — presumably including MySpace — not monetizing as they should.

Analysts will be parsing for days the few tea leaves Google allows in its teacup. In the end, I suspect we’ll end up with an image of Google as an older, less limber player in a game whose rules are changing as fast as ever.

Investors may have to learn to live without Google lifting the markets. Google hasn’t forgotten them or anything. They’re just too heavy for Google to lift anymore.

Paul McGuinness, longtime manager of rock band U2, gave a speech earlier this week that made me sit up and shake my head in disbelief. McGuinness called on ISPs to institute user disconnection policies that would be enforceable by governments. I am a huge fan of ͔ — I even once flew to Ireland for the sole purpose of seeing one of their shows — but their manager needs to go back to managing the band and not speak on issues of which he has no understanding or credibility.

During the speech, delivered Monday at the MIDEM music conference in Cannes, France, McGuinness employed several analogies in an effort to place blame on ISPs and Internet technology for recording artists losing royalties via illegal downloads. His proposed solution is to implement an ill-conceived policy that is nearly impossible to enforce, similar to the one introduced late last year by the conference’s host country.

I acknowledge that there are global trends changing the face of the music industry, among them the way in which artists are paid royalties. Further, I absolutely agree with McGuinness’ main point: Money needs to flow to artists for their creations in a legal manner. Yet while I am clearly not an expert on the music industry and its associated royalty structures (perhaps I understand this even less than McGuinness understands the Internet), blaming the Internet and its related technologies for the disruption of royalty payments seems patently ludicrous.

The Internet is infrastructure and technology used for a multitude of global purposes, not something devised to take royalty money away from recording artists. To use an analogy that McGuinness may understand, if the Internet is to blame for people performing illegal music downloads and stealing royalties from artists, then the civil engineers and construction workers that design and build roads are responsible for all global car thefts. After all, the roads transport the thieves, right?

Which brings me to another reason as to why the policy that McGuinness presents is ill-conceived. Are the civil engineers and construction workers that design and build roads also destined to police them? I assume the architects and builders have the police in mind when they build the roads and in many instances consciously add features to help law enforcement (shoulders, turnouts, turnarounds, etc.), but they are not the ones handing out traffic violations and confiscating cars. Likewise, many ISPs design and build their infrastructures and make technology choices that to allow them to monitor their users and even aid law enforcement when required. So why should ISPs be forced to be police officers?

Next, let us imagine that ISPs do implement a government-supported disconnection policy based on McGuinness’ suggestion. Enforcement of this policy would be difficult if not impossible. In many locations around the globe there are multiple companies offering Internet connectivity to individuals via connectivity options that include DSL, cable, cellular, wireless and so forth. Even in locations where a local PTT or government dominates the Internet infrastructure there is competition -– with the notable exception of regions where civil liberties do not exist. Thus, in many regions of the world the only way I can conceive of McGuinness’ policy being enforced is via a global “No-Bits List.” It would be akin to the FAA “No-Fly List,” would be adopted by ISPs around the world and would ban users that download music illegally from all Internet connectivity. Needless to say, there are lots of technical, political and social issues with this concept that need to be explored and considered.

I wholeheartedly agree that the illegal downloading of music is hurting the music industry and that the artists deserve payment for their work. But a governmental policy that forces ISPs to police their own infrastructure is a horribly bad idea that places blame in the wrong place and is next to impossible to implement. Next time I am at a U2 concert (assuming I am still allowed to attend), I hope to see McGuinness dancing in the wings while working his magic managing the band and their music. I won’t even mind if he’s wirelessly surfing the Internet at the same time.