Monday, November 28, 2005



The retail industry calls the Monday after the Thanksgiving “Cyber Monday” because it is the first big day of the online holiday sales season.

The Friday after Thanksgiving is the traditional start to the holiday shopping season. It is often called “Black Friday” because in the holiday shopping Bacchanalian that is the American Christmas run up, it is the period of the year in which many retailers first show a profit.

Cyber Monday refers to the spike in online sales when holiday shoppers return to work on Monday and use their employers’ high-speed Internet connections to shop on-line during working hours. (1) About five percent of holiday sales occur on-line. With the Author, however, about 95% of holiday gifts are bought on-line. But not at work.

It is likely that online sales will increase over time as more people become Internet acclimated and retailers lavish more attention on their online purchasing portals. Which leads, interestingly enough, into the main topic of this post, Google, Inc.


The Author has written about Google in two earlier posts. This post will be the last Google post for a while. This post will focus on a Google strategy that should increase its Internet dominance.

Robert Cringely is a technology and Internet writer. In an article for PBS, “Google-Mart”, Cringely writes that Google seeks to effectively “take over the Internet”. (2) They will do it neither through the anti-competitive tactics that Microsoft employs, nor by bribing government officials in the mode of Halliburton and Bechtel. What Google will do is build and operate its own “Internet” alongside much of the existing Internet. They will, in effect, build their own “railroad” on the unused track.

Google is purchasing “dark fiber”, unused optical fiber circuits that can transmit huge amounts of Internet traffic. The nation has a large amount of unused high-speed fiber optic cable. By purchasing access to unused fiber, Google will have the ability to send more data and send it faster. Using the railroad analogy, this dark fiber is the unused segments of track that metaphorically sit alongside the main railroad. The tracks (fiber circuits) are already there. Google only has to rent them; it does not have to build them from scratch. And the rent is cheap.


Google has also developed prototype data centers that fit in shipping containers. According the Cringely article, these data centers contain the most storage, memory, and processing power that can be stuffed into a shipping container. (3).

These data centers will be dropped into place, located in secure Internet Hosting facilities, racked up, and attached to the Google dark fiber. So Google will then have a way for trains to run on the less congested tracks that sit next to the regular railroads. And it has a way to switch the trains to and from the regular railroad. So while the trains on the regular tracks travel 30 miles an hour, the trains on the Google track alongside move at 60 mph. But there is still a problem. How do the trains get on and off the Google “track” so they can drop off their freight? This can be done by locating the Google data centers at Network Access Points (NAPs).

Network Access Points are places on the Internet where Internet Service Providers (MSN, AOL, Zianet, Ligtel), the companies that provide users access to the Internet, connect with each other in peering arrangements. Peering arrangements exist between Internet Service providers to provide access directly to their web sites or to other ISPs without going across the Internet. Think of them as shortcuts that reduce congestion and increase speed of transmissions. And staying with the railroad analogy, imagine that these network access points are the railroad yards where trains get off and on to the main tracks to deliver or pickup their freight.

By combining these new Google data centers with the dark fiber, Google can build its own Internet alongside the existing Internet. It will be faster than the existing Internet and will have mammoth amounts of storage next to each NAP. It could host video and become a competitor to cable television. Or sell VoIP (Voice-over Internet Protocol, an equivalent of telephone) services for less than the phone company. Or lots of other services. Or few services. It could just rent its Internet to companies that wanted faster service.


The Author does not generally recommend individual stocks. He sometimes suggests ETFs (exchange-traded funds) in sectors that show strong relative strength or inverse funds as alternatives to short positions. The Author does not recommend individual stocks because his style is momentum investing and his stocks often require quick movements in and out. A 12% gain or a 7% loss in a day or two is not uncommon. Because the newsletter is monthly and the posts do not track a recommended portfolio, he cannot get the information out quickly enough to provide real-time guidance. That may change in the future, however.

Additionally, the Author does not buy stocks with the intention of holding them for a long period of time. He buys stocks and holds them until their momentum or other technical attributes change. He is not concerned with whether a company has a great new product coming to market or whether analysts predict strong long-term earnings growth. He buys stocks that are moving up or poised to move-up. He does not concern himself with owning a “piece” of a good company.

But Google may be an exception. Although the Author is primarily a technical analyst, he has done a lot of fundamental stock analysis and may work up Google from that perspective. If he decides to purchase Google for a long-term holding, he will advise his readers and explain his reasons.

As Always,


(1). So much for workplace productivity. But this Cyber Monday phenomenon also demonstrates the lagging rates of high-speed interconnectivity in the US. Europe has a much higher rater of home Internet broadband connectivity. Compared to Europe, more Americans are still using slow-speed dial-up modems for Internet use. According to an article on CNN from June 17, 2005, “Broadband lag could hurt the U.S”, America ranked 4th in the world in broadband access in 2001. But by December 2004, it had dropped to 12th, behind South Korea, Japan, and nine European countries:
(3). See Footnote 2, above.


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