Earlier this year, I wrote about Frontier Communications hijacking Google searches (and documented the technical details).  I wrote Maggie Wilderotter, Frontier’s CEO.  I immediately heard back from her, and by May, her team asserted to me that they were no longer “proxying” queries.  I was disappointed Frontier was doing this in the first place, but impressed at how they followed up.

Yesterday, New Scientist published an excellent article by Jim Giles that outlines the hijacking business practice (and associated customer lawsuits) in much more detail.   His article includes a link to a tool developed at Berkeley that screens your Internet connection for a variety of ISP manipulations.  If you’re suspecting your ISP, you should try it out.

The more time I spend with Google+, the more I’m convinced XKCD got it exactly right:  it’s Facebook that’s not Facebook.

Many Google+ reviewers focus on “Circles” and “Hangouts”, which are great features.  I also think they’re relatively easy to copy:  Facebook has had friend lists for a long time, with the ability to limit visibility of status updates.  It’s not as cleanly presented as Circles, but that’s fixable with some UI work.  Hangouts should also be relatively easy enough to copy.

I think Google+’s rapid uptake is less about feature advantages, and is much more about being the “new bar in the neighborhood”.  Bars are defined somewhat by their decor and menus, but also by their “crowd” — the regular patrons and the way they behave.

Social networks are no different, and I’m guessing the initial burst of interest is coming from those seeking a new “crowd”.  I’ve seen a few Facebook-resisting friends jump on immediately.  Many of us joined Facebook initially for friend/personal reasons, then tried to figure out how to appropriately add in a professional layer (some are still struggling with this).  Google+ is a clean slate, a way to start over.

My hunch:  Facebook and Google+ will track similar features over time, but will diverge based on the “crowd”.  Facebook will be “fun, party, games, joking with friends”, while Google+ will be “drinks after work with colleagues”.

As I often tell my friends, it’s more fun to run other people’s businesses.  In that spirit, SEC filings are a great source of entrepreneurial case studies, and recently I’ve been reading about Demand Media.

Demand Media has a mix of businesses, including a domain name registrar.  The most visible property is eHow (acquired in 2006), which you’ve likely seen in search results. For eHow, Demand Media pays authors small amounts (~$15 and up) to write focused topic articles, then decorates those articles with ads.  As you’d expect for these price points, articles are relatively low quality (see how to roast a chicken).

Their risk for Google search algorithm changes has been well-reported.  Google has gone on record they are going after low-quality content, and recent algorithm updates appear to have hit eHow hard.  Demand Media has downplayed the impact, saying:

… the Company currently expects that its year-over-year page view growth across its owned and operated Content & Media properties in the second quarter of 2011 will be comparable to, or greater than, the year-over-year page view growth achieved in the second quarter of 2010.

This will likely be true, because they’ve added lots of new article content in the past year.

But it avoids the real question:  how do Google’s updates affect the per-article ROI?   Can Demand Media make a $20 article fee back in some reasonable period of time?

On this issue, what’s most interesting is Demand Media’s accounting treatment of the article fee. Instead of treating it as an expense (as a newspaper would do with journalist salaries), Demand Media argues their articles are a capital asset, with the creation cost depreciated over 5 years.  This method makes them look more profitable (or less unprofitable) than they would otherwise:  instead of a $20 article expense in the first year, they only expense $4.

Depreciation makes sense for assets that have a relatively predictable lifespan and value:  telephones, furniture, servers, tools, machinery, etc.   In this case, it’s a stretch application of the concept.  First, things change, and 5 years is forever in Internet time.  Second,  the content’s value-over-time is heavily influenced by external factors that they can’t control:  the search rankings (which are trending the wrong way), and the emergence of competitive content.

My bet:  their per-article ROI was already on the cusp, and Google’s updates are pushing it in the wrong direction.  Their content’s asset values will decline far faster than the depreciation model reflects, and they’ll be stuck holding the remaining depreciation expense.

What am I missing?