Daily Pulse: Google's Innovation Dilemma, Ukrainian Hackers Net $100 Million

What is Google Doing? That was the headline of a column I wrote for Reuters two years ago. It’s a good question, again.

Investors cheered the changes at Alphabet, née Google, sending shares up 4.27% on a decidedly down day for the market. But it feels a bit like a first-day pop of the bygone dot-com era, since fundamentally nothing changed at the company between Monday and Tuesday. It may take years to assess whether the restructuring was an important milestone in the annals of innovation or just a way to mix things up the midst of a teenage identity crisis.

Berkshire Hathaway comparisons are nice, but that’s like putting together a band and saying you’d like to be The Beatles. Berkshire CEO Warren Buffett is a great investor to emulate. Many have. Nobody has come even close to matching his success in the execution of what is a very transparent application of the value, buy-only-what-you-understand school of investing. (It is only more delicious that Buffett eschews technology investments; he ignored the boom  boom 90s and had the last laugh when the irrational exuberance balloon burst.)

The New Yorker's John Cassidy is giving Alphabet co-founders Larry Page and Sergey Brin the benefit of the doubt. "Despite the criticisms they sometimes receive from Wall Street, Page and Brin, by taking the long view and following their hunches, have created a unique enterprise that is now valued at about four hundred and sixty billion dollars. Their record demands respect.

"At the very least, however, the two founders will come under pressure to show Wall Street that they have the financial discipline to operate as Buffet does, confining their investments to ventures that have a real chance of showing a decent financial return, and selling or shutting down ventures that don’t meet such a criterion." 

Google may be on the verge of many incredible things or may forever be on the verge of many incredible things while remaining the master of only one: Printing money with the most intuitive search engine the world has ever seen.

While past performance is seldom an indicator of future outcomes, Alphabet's prologue may be somewhat more relevant, especially since the management team is the same one that has run Google for years. They’ve done well with some crazy ideas and investments, not so much with others.

YouTube, Android, Chrome are all are market pace setters which make no money, essentially, but promote Internet use, which does make Google money in aggregate. Nest may or may not be a big deal in the Internet of Things, which isn’t even a thing yet. Wiring the world with Project Loon and Google Fiber — or is it Alphabet Fiber? — are wonderful, non-material initiatives.

Then there was Google Glass, an unmitigated disappointment which set back any ambitions to lead in wearables (Android Wear notwithstanding). And Motorola Mobility. Autonomous cars are a flavor of the month with no immediate market and, perhaps, suddenly, lots of competition. That reveal about getting into drone delivery made me think of Amazon’s marketing prowess, not taking the world by the tail.

Maybe clearing the decks will make it easier Alphabet’s management team to come up with a diversified portfolio that will reduce the risk of depending so heavily on a single revenue stream. That’s been a concern for a long time.

Hey — sometime moon shots actually do pay off. But they don't call them moon shots for nothing.

#Stat

89.5%

The percentage of Google’s 2014 revenues from online advertising

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Full Disclosure: Ukranian-based hackers allegedly netted more than $100 million by stealing press releases from three companies which distribute them for companies making financial disclosures.

The SEC said Ivan Turchynov and Oleksandr Ieremenko stole more than 100,000 press releases from PRNewswire, BusinessWire and Marketwired and shared the information with traders who paid them a fee or a percentage of the profits. Nine people were charged.

“This international scheme is unprecedented in terms of the scope of the hacking, the number of traders, the number of securities traded and profits generated," SEC Chair Mary Jo White in a statement.

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Home, SWEEEEET, Home: US home prices in Q2 rose in 163 of 176 metro areas, the National Association of Realtors reported. “Real-estate agents this year reported a hot spring selling season that bled into the summer with dwindling home supply, the return of bidding wars in some cities and trigger-happy buyers eager to get a home loan before a long-expected rise in mortgage rates,” reports Joe Light at The Wall Street Journal.

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Dear [Your Name Here]: If you are a virtual-assistant company, I guess it’s OK to fire more than 400 people with an email. On the other hand, if you are still accepting business 13 hours before you decide you are “pausing operations,” there’s more to the story.

Sadly, there is. Founder Maren Kate Donovan graced LinkedIn’s Studio L three months ago — to talk about how to raise money. Could there be any worse way to wind down? My colleague Maya Pope-Chappell — who interviewed Donovan back in April and heard from her today that Zirtual’s clients “will be the first to know on (sic) next steps,” isn’t so sure.

Donovan wasted little time specifying those next steps. In a post on LinkedIn, Donovan said "we have worked out a deal where Startups.co will purchase Zirtual, and all its assets, and restart the service — to offer our clients support and give us the opportunity to hire some of our people back."

Donovan said her company's burn rate became overwhelming when they converted workers from contractors to employees. "Simple math is add 20-30% on to whatever you pay an IC to know what it will cost to have them as an employee."

It's a familiar current dilemma at startups from Uber to Chariot. But whatever the reason(s), and "whether we’re in a bubble or not, we should expect to see more startups implode — that’s that nature of small businesses — and how to go out is going to be a major question,” Pope-Chappell writes, charitably. “Zirtual would appear to be a case study in how not to do it.”

#Quote

“I'm truly sorry the abrupt way we had to halt services + terminate employment over the weekend at Zirtual.com. This was the farthest thing from any of our hearts or minds just a few weeks ago, and we should have been more prepared to give proper notice.”

— Zirtual CEO Maren Kate Donovan, in an email to Pope-Chappell

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Cover Art: A boy takes part in the closing of the ten-day celebration of the Santo Domingo de Guzman festival in Managua, on August 10, 2015. (Inti Ocon/AFP/Getty Images)