Google issued its Q2 08 earnings report today showing a 35% year-over-year jump in net income to $1.25 billion and a 39% spike in revenue to $5.37 billion -- all good news for an ordinary company. But Google is a vaunted growth juggernaut and investors had been expecting more out of the Mountain View search giant.
Why? Because Google's growth is slowing down and some evidence -- paid clicks declined sequentially from Q1 08 to Q2 08 -- is bubbling to the surface that Google could finally fall prey to the economic laws that affect ordinary companies.
As the chart above shows, Google's revenue growth from Q1 08 to Q2 08 was 3%, down from 6% from Q1 07 to Q2 07 and down from 9% the year before that.
Of course nothing expands forever and it was inevitable that Google would ultimately face this day. It doesn't help that a recession is underway and Internet advertising is under pressure. But still, as the chart indicates, Google was heading in this direction anyway.
Not that Google has anything to worry about. Even as revenue growth cools, the company gets richer by the day. Free cash flow, the monies left over after expenses and capital expenditures jumped 63% year-over-year and 14% sequentially to nearly $1.1 billion.
Updated Information At End of Post
A few days ago, I got wind of a big, big deal that was in the works between the U.S. cable industry and National Center for Missing and Exploited Children (NCMEC). I heard this agreement would allow for an industry-wide take-down of sites hosted by the operators' customers after NCMEC supplied to the companies a list of URLs suspected of transmitting child pornography.
I've been poking around, trying to get the details of the complex and extraordinary agreement, and along the way have probably prompted a rushed announcement of the deal - I had heard that the cable companies involved were planning a big press splash toward the end of July. As it stands now, the official memo of understanding that seals the deal has only been actually signed by one company -- Time Warner -- but the others plan to sign it within 30 days.
In any event, the memo of understanding between NCMEC and virtually every cable company in the country calls for NCMEC to provide to the companies a list of URLs in which it has confirmed the presence of content that "in NCMEC's good faith" appears to meet the Federal definition of child pornography. NCMEC will continually update "successive lists of newly confirmed URLs."
The operators will use the "list to reduce the proliferation of apparent child pornography" and can "remove or limit the availability of apparent child pornography images or other content based on the List, and in taking such action replaces the offending page with a notice, such notice shall contain no reference to NCMEC." The operators are required to keep the list in confidence, limiting dissemination of the suspected child pornographers to authorized personnel, except they can provide the list to law enforcement agencies.
If the operators are subpoenaed to produce the list to a third party during criminal or civil litigation, they must take steps to make the list of suspected child pornographers confidential by working to obtain a protective order. The list will be kept on a secure server in .csv file format for operators to download.
NCMEC maintains a CyberTipline for anonymous callers to report cases of child sexual exploitation and is capable of identifying IP addresses and suspected locations of suspicious URLs. According to a representative of Comcast, NCMEC will post that information and then each operator will cross-reference the data in their databases to see which company should be responsible for taking down the content.
But from that point on, it's very unclear how the NCMEC-cable pact will work. Will the operators be required to provide user information to police authorities when they take down a site? How will the list of suspects be kept subject to a protective order in a criminal investigation?
I've posed these and other questions to cable operators and will get back to you on the details.
Update: I've gained more detailed information on how this will work from cable operators. NCMEC staff will use their training and skills to identify sites that meet reportable thresholds -- NCMEC will rely on a variety of sources, not just the hotline, to get leads on which sites might be displaying child pornography. They will assemble the URLs and IP addresses in the database and cable operators will, as mentioned, cross-reference the data to their own databases. The identified URLs and content will be deleted and the operator will provide NCMEC the customer's name and address in those instances where that information is available. NCMEC will then work with law enforcement authorities.
I've asked about the specter of the list being overly inclusive -- i.e. NCMEC casts too wide a net and ends up snaring sites that arguably don't meet the definition of child pornography. Operators says that NCMEC is a skilled, congressionally-mandated private entity that knows a lot about the subject matter and isn't likely to make overly broad judgment decisions. Controverisal art that may feature children in adult-like poses, for example, is probably not going to "trip the wire," they say. One attorney charged with investigating these kinds of complaints today says that when he has really had to look at suspcious sites, "there's no question" about the dividing line.
In terms of keeping the list private during litigation, cable attorneys say that judges are likely to issue protective orders given the nature of the list and the importance of the problem.
Posted by Cynthia Brumfield at 11:44 AM | Print | Comments (0)
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