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Drama 2.0's The Web Week in the Review focuses in on big companies (and big money) this week.

Google earnings miss expectations

The analysts were confident but Google didn't deliver quite what they hoped for.

The Mountain View search king's revenues were in line with analyst expectations but the company fell short on profits, delivering $4.63 per share instead of the $4.72 per share Wall Street expected.

The shortfall has been attributed to "lower interest income and higher expenses for foreign currency hedges" and Google executives claim the earnings are not reflective of vulnerability to a weaker economy.

That didn't stop investors from sending shares falling more than 7% after hours.

As one analyst observed:

"There's the initial shock of this being the best company in the space and it just fell short."

While I don't think there's any doubt that Google is not completely immune to the economy at large, Collins Stewart analyst Sandeep Aggarwal may have pointed out the company's biggest problem:

"Competition is getting more intense, and Google is still a one-trick pony with nearly 94 percent of revenue coming from search."

As the New York Times observes:

"The earnings report also suggests that Google continues to hunt for a meaningful second act. Other parts of its business, like YouTube and the display advertising company DoubleClick, which it acquired in March, contributed only incrementally to Google’s bottom line."

Of course, having multiple acts doesn't necessarily guarantee that Wall Street is going to love you either.

Microsoft, which has done quite well with some of its products (such as XBox), saw its shares drop more than 6% in after hours trading on Thursday as it missed its profit expectations.

One observer feels that Microsoft's high operating costs are to blame and that some of these have been due to the company's focus on competing with Google.

Peter Misek, the global technology strategist for Canaccord Adams, called Microsoft's results "really pretty solid" but noted that in Microsoft's pursuit of Google, "the only people that lose are the shareholders."

So as it stands, whether you're in love with Google, Microsoft or Yahoo - you're losing.

Yahoo rejects a new Microsoft deal

Yahoo and Microsoft are the biggest stars in what has become the technology industry's metaphorical telenovela.

Last Saturday, Yahoo rejected a "take it or leave it" deal that Microsoft made reportedly at the behest of Carl Icahn.

Yahoo called the deal "ludicrous."

And later in the week, Yahoo went on the offensive to defend against Ichan's proxy battle following his formal nomination of replacements for Yahoo's board of directors.

In a letter to shareholders, Yahoo reiterated that it was now willing to sell to Microsoft for $33 per share and lambasted the "Icahn-Microsoft agenda":

"Your Board of Directors believes strongly that the Icahn-Microsoft agenda - as presented to us jointly last week - will destroy stockholder value at Yahoo, serving only their very narrow special interests, clearly not your interests."

Part of Yahoo's defense is the argument that its recent capitulation to Google is going to help it add hundreds of millions of dollars in revenue every year.

But its deal with Google has drawn scrutiny from lawmakers.

And some groups are claiming that instead of creating a more competitive search advertising market, the deal will boost costs for advertisers. This is one of the factors regulators will consider when decided whether or not to let the deal happen so it appears that Yahoo should not consider anything final yet.

So when will this all end? As with any good telenovela, you can expect that the drama will be extended as long as possible.

YouTube and Viacom reach data deal

Some copyright infringers may sleep a little bit sounder tonight. Google and YouTube have reached an agreement to anonymize the YouTube user data that Google has been ordered to hand over to Viacom as part of Viacom's $1bn copyright infringement lawsuit.

But that's not the end of the story.

Google and Viacom are now reportedly arguing over YouTube usage records for YouTube employees.

As News.com's Greg Sandoval details, the revelation that YouTube employees uploaded and/or viewed infringing content could put a dent in Google's argument that it is protected by the Safe Harbor provisions of the Digital Millenium Copyright Act.

Under the Safe Harbor provisions, a "service provider" is not liable if it "does not have actual knowledge that the material or an activity using the material on the system or network is infringing," "in the absence of such actual knowledge, is not aware of facts or circumstances from which infringing activity is apparent," or "upon obtaining such knowledge or awareness, acts expeditiously to remove, or disable access to, the material."

Given the relevance of YouTube employee data to Viacom's case, I would be surprised if Viacom doesn't end up with it and I would be equally surprised if it is completely "clean."

Once again, I believe Google is facing a serious problem in the Viacom lawsuit and I certainly wouldn't want to be in the position of having to defend it.

Intel Is Charged With New Antitrust Violations by EU

Intel reported a 25% increase in net income in Q2 2008 based on strong global demand.

Which means what? It's the perfect time for the EU to rachet up its shakedown of the company.

European Union regulators have added three more charges to their antitrust claims against the chipmaker:

"It says the company has given a major personal computer retailer substantial rebates in return for it selling only Intel-based computers, paid a manufacturer to delay an AMD range of computer processing units and given rebates to the same company in return for buying all its laptop CPUs from Intel."

As much as I love Europe (my father's family is from Europe), the EU's antitrust behavior is, in my opinion, quite disturbing.

So disturbing that I am forced to agree with TechCrunch's Michael Arrington, who once wrote:

"EU’s chief Microsoft-taxer, errr, antitrust chief, Neelie Kroes, seems determined to make a name for herself by filling the EUs coffers. But perhaps it’s time for Europe to stop looking for the Microsoft handouts, and start promoting actual capitalism within their borders. Google, Apple and Mozilla, among others (including Germany’s SAP), seem perfectly able to compete against Microsoft without crying for help every time users decline to use their products."

"Those who can, do. Those who can’t apparently live in Brussels and engage in a legalized shakedown of Microsoft every couple of years."

"Watch out, Google. You’re next."

Looks like Intel was higher on the list.

Americans Watched 12 Billion Videos Online in May

The day when Americans sit their children down in front of the computer monitor instead of the TV may not be as far off as one might expect.

According to comScore, Americans watched 12 billion online videos in May 2008. The average American internet user watched 85 videos.

In total, the average online video viewer consumed 228 minutes of video and the average video was 2.7 minutes in length.

Of course, the average American watches more than 4 hours of television each day according to Nielsen Media Research so relatively speaking, YouTube et. al. are nowhere close to dethroning the television as the king of entertainment.

But the trend is quite clear - online video is fast becoming a viable option for those who want to "turn on, tune in, drop out."

Drama 2.0

Published 18 July, 2008 by Drama 2.0

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