By Yi-Wyn Yen

This week Google began rolling out its latest search feature, Google Suggest on its homepage. The new tool, which offers suggestions when you begin typing into the blank search box, was launched to help people who have difficulty defining their queries or are bad spellers.

Google Suggest is supposed to make searching more convenient. Say you’re looking for videos of Michael Phelps’s 100 meter butterfly race. The more keywords you type in, like “Michel Phelps 100,” the better Google gets at guessing what you’re looking for. Like other search engines, Google uses its own algorithms to anticipate what you’re looking for. Google already offers a similar feature, “Did you mean?” that corrects misspelled keywords after a search is performed on the homepage. The company has also promoted the suggestion function on YouTube, the Firefox browser Google search box and its Google Labs site.

In a blog post, Jennifer Liu, a Google product manager, explained that the latest feature was “like magic.”

Both Yahoo (YHOO) and Ask.com (IACI) have been providing “magic” for some time. But so far that hasn’t  helped attract much traffic from Google (GOOG).

Since Yahoo launched the Search Assist feature 13 months ago, its search market share has dropped 3%, according to comScore. Ask.com started the trend three years ago, but its percentage of search share has  remained in the single digits. Microsoft’s Live Search, the third-place search engine, does not currently offer the feature.

Enquiro, a search marketing firm that tracks the way your eyes scan search results, is skeptical that such features from really help. What matters most is the relevancy of results, notes Enquiro CEO Gord Hotchkiss.

“Yahoo Search Assist or Google Suggest are quick fixes,” he says. “All the search engines have this dilemma where they need to improve relevancy, but that requires a huge investment on the back end. The alternative is to have users do more work to define queries. But users don’t want to do more work, so the engines are using this stop-gap measure.”

Before using Google spreadsheets, Robert Khoo used a whiteboard to plan a major gaming expo. Image: Penny Arcade Expo

By Yi-Wyn Yen

While Google struggles to sell Google Apps, its web-based version of Microsoft Office and Outlook e-mail, to large corporations, it has found success with young entrepreneurs. Each day 6,000 businesses are signing up for Google Apps, and more than 10 million office workers are using the company’s office suite, according to Matthew Glotzbach, the product management director for Google Enterprise.

The adoption is driven by Generation Y entrepreneurs like Aida Mollenkamp and Noah Starr, two twentysomething cohosts who feature Gmail on the Food Network’s new interactive show “Ask Aida.” Then there’s young business owners like Robert Khoo, a 28-year-old from Seattle. Khoo is the president of operations for Penny Arcade Expo, a three-day confab in Seattle for 55,000 video game enthusiasts that is sponsored by big corporations like Microsoft (MSFT), Electronic Arts, and Activision Blizzard.

Khoo says Google Apps has helped the company scale the conference, which has doubled in size every year since 2004. Khoo and his coworkers used to use a large whiteboard to plan the gaming conference as they found it a better alternative than e-mailing a single Microsoft Excel back and forth.

But he says, “You couldn’t work on it when you were traveling. There was no real-time data.” Khoo switched to Google spreadsheets last June. “We needed something where everyone can collaborate at the same time and track changes. This has completely changed the way we do business.”

Though Google doesn’t track the demographics of Google Apps users, company executives say a Web 2.0 savvy generation is a major growth market. They insist that young trendsetters who grow up on Internet-based consumer products like Twitter, Facebook, and iChat, expect similar tools in the workplace. Gmail can turn an e-mail into a chat session when the other person is online and Google Docs allows multiple users to collaborate on files at the same time.

Google (GOOG) has barely made a dent in the office software market since launching Google Apps 18 months ago. The company earned $4 million from Google Apps compared to Microsoft Office’s $12.2 billion in 2007, according to research firm Gartner. But Google is banking that the Gen Y workforce who want more web-based solutions will help the company close the gap. “We’re not waiting 15 to 20 years. The generation of new [office apps] users is already here,” says Glotzbach.

Not everyone has faith that Gen Y office workers and business owners will dramatically shake Microsoft from its strong grip on the desktop software market.

“Google will get some bump from a younger generation coming into the workforce, but I don’t think that will switch things as broadly as Google thinks,” says Burton Group analyst Guy Creese. “Google is saying, cloud computing is the way of the future and software is dead. But it’s not like companies have been making stupid decisions for the past 20 years. That’s too binary of a view.”

Pushing further into Microsoft’s (MSFT) territory, Cisco (CSCO) announced Wednesday that it has signed a $215 million deal for business e-mail shop PostPath.

The move bolsters Cisco’s strategy to expand into the office software market by adding e-mail and calendar services to its existing roster of so-called enterprise networking features. PostPath, based in Mountain View, Calif., develops Linux-based software that gives corporate customers an alternative to Microsoft’s Exchange system. PostPath says its e-mail servers are compatible with a nearly all business systems, including Apple (AAPL) and its iPhone. 

Cisco, in announcing better-than-expected quarterly profits but a lower growth forecast, said earlier this month that it planned to make acquisitions in adjacent markets outside its core business selling Internet equipment.

With Google going door-to-door trying to sell its business software to Microsoft clients, this latest move by Cisco into e-mail isn’t necessarily a great comfort to the Redmond, Wash. giant. Given Cisco’s dominance in corporate IT gear, there is potential for Cisco to offer an alternative to Microsoft Exchange.

Cisco plans to add PostPath’s applications to its Web-based services, also known as “cloud computing.” Software providers have for years been looking for ways to let business users access their desktop computing tool wherever they happen to be. This way employees could collaborate on tasks using features like instant messaging, video conferencing or document-sharing services.

Microsoft’s quest to extend its desktop software dominance to the Web was a driver behind its failed bid for Yahoo earlier this year.

By Scott Moritz

A year after jumping ship, former Alcatel-Lucent president Mike Quigley may be returning to take the top job at the telecom gearmaker.

Quigley, who was an early architect of the Alcatel-Lucent (ALU) merger and later ousted under CEO Pat Russo’s term, has been picked by the company’s nomination committee to replace Russo, according to a Reuters report. The company declined to comment.

In July, after Alcatel-Lucent posted its sixth quarterly loss in two years, Russo and chairman Serge Tchuruk announced they were leaving later this year.

Under Russo and Tchuruk, the company struggled to integrate Lucent’s products and operations, based in New Jersey, with Alcatel’s Europe-based business, headquartered in Paris. In the nearly two years since the merger, sales have fallen 7.3% and the stock is down 55% as the company announced round after round of layoffs.

Heightened competition from outfits like Ericsson (ERIC) and China’s Huawei, along with networking equipment spending cuts by phone companies and a sluggish economy in the United States and Europe have squeezed Alcatel-Lucent’s performance. But some analysts see a big part of the company’s problem as a lack of focus and an inability to move in the same direction that its customers were headed.

“This is a great move,” said Telecom Pragmatics analyst Sam Greenholtz. He says Quigley had butted heads with Tchuruk and likely has a better feel for the products that telcos, the bulk of Alcatel-Lucent’s customers, are looking for.

As Alcatel-Lucent’s CEO, Quigley’s first job would be to finally integrate Lucent and Alcatel’s operations, says Greenholtz. “They have to get this merger done, and I think Mike will make some hard decisions that Serge and Russo couldn’t make,” Greenholtz said.

Alcatel-Lucent shares surged 5% Tuesday on word of Quigley’s possible appointment.

By Yi-Wyn Yen

Google has tussled with everyone from Microsoft to the telcos on Capitol Hill. Now it’s going after television broadcasters and cable companies.

The search king launched its first public advocacy campaign on Monday to encourage consumers to petition the Federal Communications Commission to “free the airwaves.” As the TV industry prepares to switch from analog to digital broadcasting in February, the FCC will decide what happens with the unused radio airwaves. Google wants to to open up the unlicensed airwaves, also known as “white spaces” left vacant by the switch to digital broadcasting.  Google has also lobbied for open-access airwaves for another band of wireless spectrum that the FCC recently auctioned off. The FCC could rule on what it plans to do with the “white spaces” as early as September.

Google (GOOG) is pushing for the FCC to open the unused airwaves to the public. Along with three public interest groups that support unlicensed broadband usage for rural areas and Native Americans, Google has a vested interest in fighting for free wireless spectrum because greater access to Wi-Fi and broadband Internet means more people surfing on Google from anywhere. “Google wants to promote any network that promotes high-speed Internet access,” said Richard Whitt, Google’s telecom and media legal counsel, on a conference call with reporters Monday.

That irks the National Association of Broadcasters, a powerful lobbying group that is backed by network TV companies, cable operators and national sports leagues. “This is a smoke and mirrors PR gimmick,” says Dennis Wharton, the NAB’s executive vice president. “Google wants you to think this about supporting broadband access in rural areas. But if they get what they want with handheld devices or whatever application devices, it could cause TV interference on a dramatic level in urban markets.”

The NAB is lobbying the FCC to police the unused airwaves through spectrum auctions. It fears that any device – whether it’s a portable video game console, a smartphone, or your garage door opener – will interfere with the digital TV airwaves and wreak havoc on the TV viewing – and ad-watching – experience. The FCC has been conducting field tests for the past year to see if Wi-Fi-equipped devices that use the white space will interfere with broadcast signals.

Google isn’t the only one fighting for unlicensed airwaves. Last year it joined the Wireless Innovation Alliance and the White Space coalition with other tech heavy hitters like Microsoft (MSFT), Dell (DELL) and HP (HPQ)  to support wireless broadband initiatives. Microsoft spokeswoman Ginny Terzano said in a statement that the company is “pleased to see many grassroots efforts take shape like this one.”

Google’s “Free the Airwaves” campaign is the company’s first attempt to reach the masses. Google’s policy team admits it’s facing an uphill battle since the majority of consumers don’t spend a lot of time thinking about wireless policy. Google has put up 14 YouTube videos from white space advocates on its site in hopes that it will encourage Internet users to e-mail their congressional representative or petition the FCC.

“Google’s done public campaigns for net neutratity and the C-block auction, but they’re taking this to a whole new level,” says Stifel Nicolaus telecom analyst Blair Levin. “From the beginning, this has been a difficult campaign because it requires a lot of technical expertise. Google’s latest move suggests that they need more than technical expertise to win this. They need political support.”

By Scott Moritz

Google and its phone manufacturing partner HTC may have trouble breathing life into Android by the holiday shopping season.

The tech duo is working on the hotly anticipated mobile software for T-Mobile’s so-called Dream phone. But time is running out since the device will need clearance from the U.S. Federal Communications Commission, a process that typically takes three months.

Last year, Google (GOOG) made a big splash announcing it was setting its sights on the wireless market by the middle of this year. The search giant still hopes to make good on that promise, but all the pieces aren’t exactly falling in line.

T-Mobile the U.S. unit of Deutsche Telekom (DT) and No.4 wireless service says it is “working towards delivering an Android-based phone in the fourth quarter of 2008,” according to a statement provided to CNN. The phone would be the first to be powered by the Google-sponsored rival to the Apple (AAPL) iPhone, and if successful could land before the all-important holiday buying season.

But the Android project has met major challenges as Google leaves its comfort zone in an effort to push its software on to smartphones.

“To do it by Christmas is extremely tight,” says Roger Entner of market research shop Nielsen IAG. “They have to announce in the next two weeks with the FCC, and I’m not confident they will do it,” says Entner.

Google spokeswoman Erin Fors declined to comment on the timing of the first Android phone. “We are currently focused on delivering the next version of the [software developers kit] which should remove the remaining obstacles to broader developer adoption,” she said. “We look forward to continued dialogue with developers but have nothing to announce at this time.”

With 3 billion wireless phones in use, Google saw a big opportunity to extend its search and advertising success beyond the desktop to the mobile Internet community. Not willing to wait for telcos to adapt their phones to a Google-friendly setup, the company financed Android to develop a software system that would run cell phones and be open to all sorts of mobile applications.

The Android applications under development center largely on interaction between Google maps and a GPS-powered location based service. For example Social Monster combines an event coordination service like Evite with social network message blast like Twitter. Or WikiTude, an application that provides Wikipedia information about the area you happen to be traveling in.

All fun and useful, to be sure, but meaningless without a clear path to the consumer. A big disadvantage with Android is that its starting an operating system from scratch with brand new hardware that requires commitments from phone makers and a whole bunch of customizations to make the telco happy, say some observers.

Giving Android application developers reason to defect, Apple in March launched its own Android-type effort – the $100 million iFund with venture capital powerhouse Kleiner Perkins Caufield & Byers.

By Yi-Wyn Yen

Former Viacom CEO Frank Biondi and former Nextel CEO John Chappel will join Carl Icahn as the newest additions to Yahoo’s board.

All eyes are on Icahn and his gang. The three amigos will need to start making changes to placate shareholders soon because if they don’t, it’s likely that nobody on the board will. The three were part of Icahn’s original proxy slate that ran under a campaign to sell Yahoo (YHOO) to Microsoft (MSFT). Icahn dropped the fight in July in exchange for three seats on the company’s board.

Shareholders are still waiting for Yahoo to come up with a plan that will drive up the stock. Since mid-June, when Yahoo announced that talks with Microsoft were over, the stock has dropped roughly 20% in value and has hovered in the low $20s. Microsoft had originally offered to buy Yahoo at $31-a-share. Earlier this month investors re-elected Yahoo’s eight incumbents. But investors signaled their unhappiness with CEO Jerry Yang and chairman Roy Bostock. Yang received 66.3% of the votes while Bostock received the least, with 60.4% votes.

Wall Street isn’t convinced that Icahn and co. can do much to turnaround Yahoo. Says Thomas Weiser Partners analyst Christa Quarles, “Yahoo needs someone to help fix the business, and I don’t know if Icahn has the background to do that.”

Icahn has yet to reveal what his plans are to drive shareholder value for Yahoo beyond selling part or all of the company to Microsoft. The corporate raider has most recently pushed for management change at Blockbuster (BBI) and Motorola after securing board seats at those companies. Last year, Blockbuster CEO John Antioco agreed to step down after Icahn initiated a campaign to cut his salary. After Icahn won two seats on Motorola’s board in April, he persuaded the company to dump its cell phone division and was instrumental in pushing out former CEO Ed Zander.

Chappel, who is president of Seattle-based private equity firm Hawkeye Investments, was unavailable for comment. Biondi, a senior managing director of private equity firm WaterView Advisors, responded in an e-mail that he does not comment on boards that he serves. Biondi is currently a director of five other boards, including Seagate (STX) and Cablevision Systems (CVC).

By Michael V. Copeland

SAN FRANCISCO – Given all the drama surrounding Yahoo’s corporate activities, it’s easy to forget that there is a business still to be run and new products to launch. On Tuesday at Yahoo’s San Francisco-based skunk works – known as the Brickhouse – the embattled Internet company unveiled a new location services platform dubbed Fire Eagle. (Yes, it’s a silly name but say it 10 times fast and think of Firefox and it begins to sound OK.)

Location is one of those things that has huge potential for adding a layer of context to all kinds of services on the Web.  Geo-tagging – the practice of adding geographic information to Web sites, photos and videos – is gathering steam across all sorts of Internet-based properties, from restaurant review sites to social networks and house hunting services. What has been missing, however, is an easy way to insert yourself into that growing stream of geographic information.

In essence, that is what Fire Eagle does. You either tell Fire Eagle where you are, or give permission for some device to do it on your behalf – say your mobile phone -  and Fire Eagle broadcasts your location information to the services that you have approved.

So imagine that all your friends on Facebook now get feeds on your location, by city, neighborhood or even street address. If you are driving through a neighborhood house hunting, you could get updates on homes on the market, past sale prices and upcoming open houses. Hungry for Italian? The closest places for a decent plate of pasta come streaming to your phone. Note that you can do much of this today with individual services, but you have to tell each of them where you are. With Fire Eagle, you give your location once, and all kinds of services can access it (again, only with your permission).

Already about 50 applications have integrated Fire Eagle into their services, ranging from Six Apart’s blogging service Movable Type to messaging platform Pownce to neighborhood news site Outside.in.

Yahoo (YHOO) didn’t launch Fire Eagle with any of its own properties – photo service Flickr is an obvious one (automatic geo-tagging of photos) -  but you can expect to see Fire Eagle deployed in the world of Yahoo in the future.

“We really wanted this functionality for Yahoo services but we thought that if we just do it ourselves it is much less likely to get wide adoption,” said Yahoo co-founder David Filo, who was his usual low-key presence at Fire Eagle’s launch on Tuesday. “We’re still pretty early stages in this location stuff, but if we can get wide adoption of Fire Eagle across the Web we can become a leader.”

Yahoo will face competition from the likes of Apple (AAPL), which has made scores of location-based services available as downloads for the iPhone, and Google (GOOG), whose Android mobile phone platform is expected to do the same for a range of mobile devices. Yahoo isn’t competing head on with Apple or Google, but rather hopes to tie together all these devices and Web-based services through Fire Eagle. Whether Yahoo succeeds depends on Fire Eagle’s adoption by consumers, and whether it catches fire with the developers that it needs.

How Yahoo makes money from Fire Eagle is less clear, though there are several obvious options. One is to incorporate location into its online advertising services. If advertisers know where you are, they can entice you with deals/coupons/menus on the spot.  Yahoo could also help its partners, whether they are advertisers or application developers incorporate more location into their services with better software development tools that would take advantage of Fire Eagle. Presumably the partners would pay for those tools and expertise.

In every case, whether it’s a social network or an advertiser, a person’s location will only be made available to those services that individuals approve. And if you don’t want anyone to know where you are – illicit affair, job interview – you have the option of hiding your location for a period of time you determine, or even lying.

“We think it’s a good idea that users can lie about where they are,” says Tom Coates, head of product at Yahoo’s Brickhouse. “Like I don’t always tell my mother where I am.”

By Yi-Wyn Yen

Finally, some good news for Yahoo. Major tech advertisers are shifting a bit of the money they spend on Google (GOOG) to Yahoo (YHOO), according to a new report by marketing firm Covario.

Advertisers from 12 tech companies, including Research In Motion (RIMM), Hewlett-Packard (HPQ), Intel (INTC), and Lenovo, collectively moved 4% of their U.S. search advertising budget from Google to Yahoo in the second quarter. Covario notes this is the first quarter that spending for Yahoo’s paid search increased in two years.

However, the incremental shift should give little reason for Google to worry. These tech advertisers, whose online ad spending is tracked by Covario, are still spending the bulk of their money on Google. The search king received 81.2% of the paid search spending from these advertisers for the second quarter compared with just 14.3% for Yahoo. Microsoft (MSFT) came in a distant third with 4.3%.

Wall Street analysts say the small shift in ad dollars from Google to Yahoo is not surprising. Google has deliberately throttled back on paid search – those blue text ads that appear on the right side of a Google search results page - to give Internet users a better browsing experience. Direct marketers who still want to place their ads somewhere could be moving their spending to Yahoo.

Explains Thomas Weisel analyst Christa Quarles: “Say I type in ‘Harry Potter’ into Google. I don’t get any ads. But put those keywords into Yahoo and you get ads up the wazoo. The bigger question is, has Google gone too far with their initiative?”

Jonathan Rosenburg, Google’s top executive for product management, says the company is unlikely to change its game plan. During Google’s earning call last month, Rosenburg acknowledged that ads shown on the site were “at an all-time low relative to the last few quarters.” The company will continue to work on improving the quality of its ads. “Larry [Page] often says that we’d be best off if we just showed one ad, the perfect ad,” Rosenburg said.

If Google doesn’t reverse its less-is-more policy, Yahoo could continue to benefit from a shift in ad dollars for the current quarter.

By Yi-Wyn Yen

Last month Google’s chief economist Hal Varian discussed the durability of the search giant’s business model during the company’s quarterly earnings call. “During periods of slow economic growth, the last thing an advertiser wants to cut is its spending on search-based advertising,” Varian said.

In other words, display advertising (the flashy and creative side of the business) will take a bigger hit than paid search (the directly-targeted and accountable portion that Google excels at) as marketers tighten their purse strings.

Microsoft (MSFT), however, argues that search ads get too much credit for click-throughs while display ads don’t get enough. The company, which is struggling to build an online ad business to compete with Google (GOOG), is challenging that notion with a new tool that measures the effectiveness of display advertising in an online ad campaign.

Atlas Institute, which is part of Microsoft Advertising’s research division, has released a study that shows that people are more likely to click on ads or buy things online when they are exposed to display ads. In a study called “Illuminating the Alltel Wireless sales funnel,”  those who clicked on search ads for the cell phone maker were 56% more likely to buy a phone or wireless plan from the company when they saw Alltel’s display ads compared to those who only saw Alltel’s search ads.

Search ads typically get the most credit for contributing to a sale because they’re the last ad that is viewed. “When someone is ready to take action by clicking on an ad or buying something, they will go to a search engine and type in what they’re looking for,” explains Morris Martin, an analyst with Atlas Institute who led the study. “The very last ad is the one that gets 100% of the credit. We did this case study to get a better understanding of the synergies between search and display.”

Microsoft’s new measuring tool tracks branded ads that an Internet user comes across before making a purchase. The tracking system, which gathers the wealth of data through the Atlas ad server, then assigns a value for all the ads that contribute to a successful sale. Along with Alltel, Microsoft says 14 other advertisers, including Best Western, Citi Cards and Sprint (S), are testing the product

Google spokeswoman Lynn Tornabene says that its display ad server Doubleclick introduced a similar tracking tool a year ago but would not say how many clients are using the product. She declined to comment on the Microsoft study.

Fundamentally marketers know it’s not all about search ads. It’s just that Google knows how to be at the right place at the right moment. “Google is so close to the point of sale,”  says Jeffrey Lindsay, an Internet analyst with Bernstein. “When people type in those keywords, they are at an extreme point of sale. That’s well understood. Everyone knows Google gets a whole heck of a lot more credit for searches than what is attributable.”

Marketers say they welcome tools to get better gauge the impact of display ads.  “I don’t think media buyers are making decisions based on [these tracking systems] yet,” says David Cooperstein, the chief marketing officer for Burst Media, an online ad agency. “But they are asking about it a lot more than they were six months ago. As this media matures, brand advertisers will start to look for more response the way direct marketers do.”