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Archive for October 2005

Google ads

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Nice article in the NYTimes describing Google’s main revenue source: advertising. As a veteran of this era, I witnessed advertising as a revenue model go from very successful (circa 1999, mainly due to cost-per-view purchases by huge dotcoms willing to pay to aggregate eyeballs) to horrible (circa 2002, as supply outstripped demand and cost-per-view became cost-per-click, and then cost-per-action), and finally to success again, with auction models and a shortage(!) of prime ad space. It was one of the wildest swings in value of a commodity (Internet advertising) ever witnessed — probably a swing on the order of a factor of 100 within a few years. (For veterans, from CPM of $10 to complete inability to sell CPMs at all, and an implied CPM value using click-through or action rates of less than 5 cents or so…)

Very few people know that it wasn’t Google that pioneered the ultimately successful auction model (now used by Yahoo, Google and MSN). It was Bill Gross’, which became Overture, which was acquired for billions by Yahoo. The Times article does a good job of clarifying exactly how innovation proceeded. Note how young (and smart!) the people involved were (are). Gross is a Caltech grad, Brin and Page were Stanford PhD students, Schmidt is a Berkeley PhD and Kamangar is a Stanford grad. It’s yet another case of the non-linear value of brainpower in this century…

In early 2002, a Google employee, Salar Kamangar, now 28, convinced Mr. Schmidt and the founders to switch to an auction-based system like the one set up by Bill Gross, the head of IdeaLab. Mr. Gross had created, 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.)

Mr. 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.

Mr. Page and Mr. Brin were suspicious of any system that put high-bidding advertisers at the top, Mr. 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.

Mr. 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,’ ” Mr. 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,” Mr. 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,” Mr. 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.”

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October 30, 2005 at 6:04 am

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Babies arrived

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Sorry for the lack of posts. I’ve been a bit busy with some new additions to the family 🙂

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October 28, 2005 at 9:29 pm

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One year anniversary

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Wow! My blog is one year old now. The first post was 10/24/04, on revealed preferences and college rankings, and there have been 319 posts since then.

Some recurring topics?

globalization: China, India, US competitiveness, Bretton Woods II

finance: derivatives, volatility, equity risk premium, CDOs, bounded cognition, hedge funds, housing bubble

startups and Silicon Valley
my research in theoretical physics
science as a (bad) career choice
artificial intelligence
race and genetics
internet security

You can find posts on each topic using Google and the additional search term For example, here are all the places on my blog where the term singularity appears.

A list of pages that link to this blog.

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October 26, 2005 at 3:35 am

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Book of the month

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We already have a favorite prescient cartoon, now for our favorite prescient book. (See here for the latest developments. Has Fitz flipped Libby?)

Worse Than Watergate: The Secret Presidency of George W. Bush by John Dean.

For those who don’t recall the name, John Dean was Nixon’s White House counsel (not to be confused with Harriet Miers), who turned witness for the prosecution and pled guilty to obstruction of justice. It takes one to know one. You can’t con a con man. Don’t kid a kidder, etc., etc.

From the reviews:

John Dean goes further back, seeing in Bush all the secrecy and scandal of Dean’s former boss, the notorious Richard Nixon. The difference, as the title of Dean’s book indicates, is that Bush is a heck of a lot worse. While the book provides insightful snippets of the way Nixon used to do business, it offers them to shed light on the practices of Bush. In Dean’s estimation, the secrecy with which Bush and Dick Cheney govern is not merely a preferred system of management but an obsessive strategy meant to conceal a deeply troubling agenda of corporate favoritism and a dramatic growth in unchecked power for the executive branch that put at risk the lives of American citizens, civil liberties, and the Constitution.

…For a convicted felon, John Dean is an exceptional author. I remember reading his own recollections of the Watergate affair and his own association with the subsequent events that led both to his own denouement and the resignation of Richard Nixon in disgrace in “Blind Ambition” in the mid 1970s. Once again he weighs in impressively by building a very strong circumstantial case for the investigation and possible prosecution of President George W. Bush for criminal actions that Dean terms to be indeed, “worst than those of Watergate”. Culling from public records and the recollections of other eye-witnesses, Dean shows how Mr. Bush has systematically exaggerated, embellished, and engineered a series of preverifications and outright lies to the American public in an effort to convince us of the need for military intervention in Iraq.

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October 25, 2005 at 5:14 am

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Google print

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For anyone who hasn’t played with this new tool, I highly recommend it. It is a shame that publishers are suing to prevent the further scanning of books into Google’s database.

Try the following search:

“ellsberg plumbers”

Which brings up (third result) The Columbia Guide to America in the 1960s, edited by David R Farber, Beth L Bailey:

The first major episode in what came to be called the Watergate scandals occurred in July 1971. At Nixon’s orders, White House aides had formed a secret group called the Plumbers, to plug all leaks of secret information from the executive branch.

The Plumbers’ first target was Daniel Ellsberg. A former Pentagon consultant, Ellsberg had inspired Nixon’s wrath by leaking a secret government report on the Vietnam war, dubbed the “Pentagon Papers,” to the New York Times. These documents revealed that the U.S. government had continuously misled Congress and the American people about the course of the war… in hopes of destroying Ellsberg’s credibility, the Plumbers broke into his psychiatrist’s office, looking for embarassing personal records.

Next, I recommend the key words “perjury obstruction conspiracy watergate”.

Finally, search using “ecclesiastes new sun” to find that there is nothing new under the sun 🙂

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October 24, 2005 at 4:48 am

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The fire this time

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I’m sure current defenders of Bushco would have been just as quick to defend Ehrlichman and co-conspirators back in 1973, until admitting belatedly, 10 years later, that they were indeed criminals whose activities threatened to undermine our Republic. Let’s see what current Bush supporters will have to say 10 years from now.

Note the parallels between Nixon’s cronies trying to silence or discredit Daniel Ellsberg’s criticism of the Vietnam war, and Bushco’s attack on Joe and Valerie Wilson.

From the discussion of this blog post, analyzing how Judith Miller was caught in a perjury trap by Fitzgerald (resolving the mystery of how she “found” her lost notebook and why she had to testify twice). Apparently, Secret Service records showed her meeting Libby at the White House on June 23.

While I cannot know which of the convicted felons involved in the Watergate crimes was Buchanan’s “good friend,” it is certainly true that some people went to prison for telling a grand jury, “I can’t recall” when that was false.

For example, White House domestic policy assistant John Erlichman was indicted on September 4, 1973. Count 4 of the indictments issued by the a grand jury against John Erlichman and others (CR 74-116, United States District Court for the District of Columbia) charged that Erlichman violated Title 18, United States Code, Section 1623, which makes “False declarations before grand jury or court” . His crime occurred in this exchange:

Q. Just so that the Grand Jury and we are clear on this, prior to receiving information about the break-in, you had no information, direct or indirect, that a psychological profile of Dr. Ellsberg was being drawn up?
A. I can’t recall hearing of a psychological profile until after I had heard or the break-in.

5. The underscored [boldfaced] portions of the material Declarations quoted in paragraph 4, made by JOHN D. EHRLICHMAN, the DEFENDANT, were material to the said investigation and, as he then
and there well knew, were false. (Title 18, United States Code, Section 1623.)…ciary/ APPII.PDF at pages 19-21 (indictment starts at page 12).

Erlichman was found guilty of this count and 2 other counts. judici…ciary/ APPII.PDF at page 9. He was sentenced to serve a prison term of 20 months to 5 years for conviction on 3 counts.

Egil Krogh avoided conviction on a similar count of falsely declaring when he said that he was not aware of certain travel. He avoided that conviction because instead he entered a guilty plea on another matter in a plea agreement with the prosecution. Pages 29-31 of same.

Krogh made a statement to the court upon entering his guilty plea, to the effect that the actions of retaliation against a critique of the war in Vietnam were an invasion of the rights of Dr. Ellsberg. He stated:

“But however national security is defined, I now see that none of the potential uses of the sought information could justify the invasion of the rights of the individuals that the break-in necessitated. The understanding I have come to is that these rights are the definition of our nation. To invade them unlawfully in the name of national security is to work a destructive force upon the nation, not to take a protective measure.” ( at page 61)

Of course, it’s not only Judith Miller who “could not recall” some things, but some of the principals in the White House. Those supposed lapses in memory could be the basis for indictments if Fitzgerald has evidence that a claim of lapsed memory is bogus.

From that well-known liberal newspaper, the WSJ:

Yesterday, one former administration official said Karl Rove, the deputy White House chief of staff, had discussed former diplomat Joseph Wilson and the role of his wife, Ms. Plame, with White House staffers in 2003. That buttresses the possibility that Mr. Fitzgerald is investigating charges related to leaking classified information.

The former official said Mr. Rove had these discussions after Mr. Wilson went public with claims that the Bush administration had twisted intelligence to build support for the Iraq war. Mr. Rove discussed discrediting Mr. Wilson, the former official said, adding that Mr. Rove didn’t necessarily name Ms. Plame or make her a key talking point in conversations with other White House officials.

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October 21, 2005 at 6:47 am

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Hard rain’s gonna fall

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In an unguarded moment during the last campaign, John Kerry said (not knowing a microphone was on): “These guys are the biggest bunch of crooks you’ve ever seen.”

Chris Matthews:

If there are indictments, they’re going to be probably in the vice president’s office, they’re probably going to come next week and they are going to blow this White House apart.

It’s going to be unbelievable.

I think the people watching right now who are voters better start paying attention to this issue. It’s not just about whether somebody’s name was leaked, it’s about whether we went to war under false pretenses or not, whether people knew about that or not, and what they did when they were charged against that kind of offense against the United States.

It’s serious business.

and from Pat Buchanan:

During Watergate, a good friend went to prison for saying twice before a grand jury, “I can’t recall.” That was about a picayune matter compared to Judy Miller’s “I can’t recall” to the question, “Who gave you this name, ‘Valerie Flame’?”

So, my guess is that there are multiple indictments coming, for lying to investigators, perjury, obstruction of justice, and disclosure of national security secrets for political purposes. And maybe conspiracy….

Though this case may be narrowly about whether Libby or Rove lied to investigators or the grand jury, it could also become about whether we were lied into a war General Odom calls the “greatest strategic disaster in the history of the United States.”

There is simply no good news here for Bush & Co., unless Patrick Fitzgerald declines to indict anyone. If, however, Fitzgerald comes down with no indictments, some journalists will have to be put on suicide watch, so heavy is their psychological and emotional investment in this case.

From DailyKos. Also, see our favorite prescient cartoon.

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October 20, 2005 at 8:51 pm

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