My folks live not too far from Cisco’s headquarter in the Silicon Valley. When I visited my family this past Christmas, I had the opportunity to talk to a friend who has been working for Cisco for over a decade.

To my surprise, his morale was really low. He basically told me that he felt that the company had a lot of fat, and a layoff had to happen to get rid of some of the extra weight the company had put on. Also, his job had become so specialized in a huge corporation that he was just a tiny drop in the vast ocean. It is not the same Cisco he had known.

Cisco was one of the most successful high tech companies in the history of Silicon Valley. But, it has definitely lost a step or two (or several steps) in the past few years. It’s facing increasing competitions from multiple angles. It didn’t help that it had made several ill advised acquisitions that wasted a lot of money.

Reading through the memo, it sounds that John Chambers wanted to return Cisco to its core. I want to believe he is making the right moves, but he cannot make the changes without a major organizational shake-up.

It’s going to happen. I hope it happens soon and it will be done in the right way – a healthy Cisco will be good for the Silicon Valley.

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I’m not surprised.

I live in Seattle and I’m surrounded by people who work in Microsoft.

In the past 6 years, I knew only two people who told me they love working for Microsoft. I thought they’re either stupid or crazy.

I do have some very intelligent and capable friends who work there. But, they don’t work there because they love Microsoft. They have specific career goals or personal financial goals. Microsoft is stepping stones for them to achieve their goals.

I also met some Microsoft lifers – people who have been there forever. I notice several patterns:

1. they know very little about the world outside Microsoft
2. they think Microsoft is the center of technology universe
3. they know very little about non Microsoft technology
4. some of them are really arrogant for no reason
5. they’re afraid of leaving Microsoft. They’ve developed unhealthy dependency on Microsoft
6. they’re provincial
7. they feel really good about themselves

As a resident of the greater Seattle area and State of Washington, I want to see a stronger and more innovative Microsoft.

I also want to see a stronger Microsoft to put up a tough fight against Google.

Unfortunately, it’s just not happening unless Microsoft

• Cut much more fat
• Fire Steve Ballmer and bring in someone who is a world-class technologist and a world-class manager
• Take a chapter from Jack Welch’s playbook – focus on business lines that it can achieve the #1 position, and get rid of the unprofitable businesses such as Windows Mobile

These are sales guys who accounted for 20-40% of their employers’ annual revenue. They were not laid off. In fact, most of them just got promoted recently.

Why did they quit? If you ask them, they probably won’t tell you the real reason. After all, it’s hard to trust what came out of the mouths of ad sales people.

I have a few observations.

Good sales people instinctively smell where the money are. They’re moving to different niches (e.g. mobile advertising, social media such as Facebook and Twitter, gaming, etc.) because they think there are more money to be made there. On the other hand, they feel the upside for them in display ads is becoming increasingly limited.

Currently, there are several hundred of display advertising networks. It’s simply not sustainable. For the last couple of years, some of those companies have grown nicely because display ads were still fairly new to many traditional advertisers. Those advertisers want to give display ads a try.

So, in the past three years, just about every advertiser in the world have tried display ad once, which means they have worked with at least one ad network.

This is why you hear stories about a display ad start-up has grown its revenue by 50%, 100%, or even 200% in one year – they were able to talk to a lot of advertisers because almost every advertiser wants to give display ad a try.

But, what’s next? Those display ad companies have talked to every possible advertiser in the universe in the past years. They’ve run out of new advertisers to talk to. They must retain their existing customers, and get more money out of them.

It’s NOT easy. The problem is that it’s very hard to measure the performance for display ads. Unlike paid search, display ads is very much like a "black hole” in term of having visibility into campaign performance and ROI.

What’s going to happen? Here are my thoughts:

1. It’s unlikely the three big players (Google, Microsoft, Yahoo!) will make any major acquisition of large display ad networks. The big three have already had enough inventory and advertisers base. I don’t see much value for these companies to acquire another display ad network. However, strange things do happen. I wouldn’t be surprised if Steve Ballmer and Microsoft make another dumb move to acquire a display ad network. The same applies to AOL.
2. Small, niche networks with real technology could be acquired at a fairly good price. There are a few ad networks with solid optimization technology. They will be acquired by one of the big players.
3. There will be a lot of consolidations in the industry.
4. Most ad networks will become ad agencies. If you look at below the surface, most ad networks are ad agencies in disguise.
5. Depending on the economy and valuation, some large ad networks might be acquired by large ad agencies. It’s hard for ad agency to acquire technology companies because of valuation. Large, publicly traded ad agencies have low multiples. It’s very expensive for them to acquire technology companies with high multiples. However, if ad networks get desperate to sell, then large ad agencies will be able to buy them at lower valuation, which will make more sense for the ad agency’s shareholders. 

Excellent resources:

• The Online Advertising Playbook: Proven Strategies and Tested Tactics from the Advertising Research Foundation
• Groundswell: Winning in a World Transformed by Social Technologies
• The New Rules of Marketing and PR: How to Use Social Media, Blogs, News Releases, Online Video, and Viral Marketing to Reach Buyers Directly, 2nd Edition

I’m not a car enthusiast. When I buy a car, all I need is a safe and reliable vehicle that can move me from point A to point B.

I’m not the most mechanical inclined person. I don’t like to do work on my car. All I want is to bring the car in for periodic maintenance. I want a worry-free, reliable car.

Toyota fits the bill. Eighteen months ago, when we needed a mini van, we got a Toyota Sienna. It is not sexy to drive a mini van around, but when it’s time to change diapers while we’re out or go on a long road trip with extended family, you cannot beat the space and convenience of a mini van.

For the past two weeks, I have been shopping for a commuter car. On January 20, 2010, after visiting several dealerships, I made up my mind to purchase another Toyota vehicle. I didn’t make the purchase because I wanted to wait until the end of month, which should put me in a better position to negotiate with the dealer.

I was lucky that I didn’t pull the trigger. On the next day, Thursday, January 21, 2010, Toyota announced the recall of 2.3 million Toyota vehicles.

The situation got even more serious and confusing this week as Toyota announced that it was temporarily suspending sales of selected vehicles and it was extending the recall to Europe and China.

I have decided that I will not buy a Toyota car this time around. I don’t know if my thinking is representative of a typical Toyota consumer psychology, but let me share with you my rationales for not buying Toyota.

First, Toyota lost my trust.

When Toyota announced its recall last year, I didn’t take it seriously. I thought it was blown out of proportion by the media. But, the most recent recall surprised me. It made me think that Toyota did not get into the bottom of the issue last year. Even now I still don’t feel that Toyota’s management has a good handle on the situation. Just looked at their announcements in the past week. They first announced the recall of vehicles in the U.S. They then suspended sales in the U.S. They then added vehicles in Europe and China to the recall list. I don’t feel that they have done all of the homework and come up with a thorough, well-prepared plan to address the issues. They were making up plans as they investigated the problem.

Toyota just announced today that they have a remedy. But, as a consumer, my question is: "Will the fix work?" Given the series of recent events, Toyota has to prove to the public that it has gotten into the bottom of the issue. It must re-establish trust with its customers. Only time will tell.

Second, there are plenty of alternative products in the market. Honda’s reputation is as good as Toyota’s. GM and Ford are making good commuter cars. Hyundai and Kia have done very well in the North America market. I don’t have to buy Toyota. The switching cost is very low — I’ll lose very little by switching to another brand.

Third, at least in my household, my wife calls the shot for big purchase. She has told me that we will not buy a Toyota. Women’s role is incredibly important in the auto purchase decision process. It was funny that I was chatting with a Toyota sales person a couple of weeks ago. He told me that he estimated over 75% of the cars he sold were decided or heavily influenced by women.

Toyota’s belling selling car is Camry, which is a family sedan. Who is the key influencer in purchasing family sedans? Women. That’s why I think Toyota has dug itself a deep hole in the marketplace.

I browsed a Toyota message board on Edmunds.com recently. One guy was talking about his dilemma after the recall. He recently bought his wife a brand new Toyota Avalon. But, his wife basically told him that there was no way that she would continue to drive the car. He had to get rid of it. This might be an extreme case, but it showed female auto consumers’ preference for safety, and aversion toward uncertainty.

Will you still buy a Toyota car?

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Excellent reading:

• Crisis Leadership Now: A Real-World Guide to Preparing for Threats, Disaster, Sabotage, and Scandal
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I figure you might be interested in what I wrote. So, I’ve re-produced my comments below to share with you:

The author of this article showed a lack of understanding of China and the dynamics of internet industry in China. Just finishing up the Three Kingdom book doesn’t make him understand the strategic thinking behind Chinese leaders.

Google is in the business of making money. It will not pull out of China. This is a PR stunt by Google. It’ll return back to the negotiation table and compromise.

One could even argue that Google is desperate at this point — it’s like a football team that is losing a game, and it has to start picking a fight to stop the momentum of its competitors.

Google has done very poorly in China. About five years ago, Baidu’s CEO predicted that Google would become irrelevant in China in five years. Everyone thought he was crazy. Now, looking back, his prediction might very well be correct. Google’s execution in China has been very poor — the main reason of Google’s failure is not because of lack of intellectual property protection or human right or government censorship in China.

If you ask any Chinese internet users, they will tell you that they use Baidu because it’s a better search engine to find Chinese content.

Finally, Google’s threat is going to back fire — in fact, it’s already happening. Google’s Chinese employees were not notified of the threat in advance, and suddenly found out that they couldn’t access Google’s internal databases. There are a lot of frustrations among Google China employees. They are caught off guard.

Furthermore, there is a huge outcry among the Chinese internet users — there is strong nationalistic sentiment among Chinese youth who were born after 1980. They’re angry about Google’s threat.

I’m afraid that Google needs another PR campaign to improve its image among Chinese internet users.
So, in contrary to what’s being reported in American media, Google’s threat is not that smart a strategic move after all.

This news caught my attention because I have been thinking lately that more US based technology companies will be acquired by Chinese companies.

As Chinese companies grow, they must figure out a way to enter the U.S. market – they need to acquire existing customers, sales force, channels, and technologies to expand to the US market.

I’m looking forward to see more acquisitions by Chinese companies in North America. Is Alibaba the next one to make an acquisition? I’ve always felt that Alibaba should acquire a company in the SMB segment to promote Alibaba’s among SMB owners in the United States.

By the way, it was pretty interesting to read the nasty fight between Mochi Media founders and VC when Mochi Media was close to be acquired a while ago.

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Recommended reading:

• The PayPal Wars: Battles With Ebay, the Media, the Mafia, And the Rest of Planet Earth
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Nike chairman Phil Knight stands by Tiger Wood: "When his career is over, you’ll look back on these indiscretions as a minor blip, but the media is making a big deal out of it right now."

On the other hand, consulting firm Accenture has dropped Tiger Wood as spokesman. According to Accenture Sponsorship Update on Accenture corporate web site, "Given the circumstances of the last two weeks, after careful consideration and analysis, the company has determined that he is no longer the right representative for its advertising. Accenture said that it wishes only the best for Tiger Woods and his family."

Then, there is the indecisive Tag Heuer who "will spend the next few weeks assessing its endorsement relationship with golfer Tiger Woods".

I think the Tiger Wood saga is going to become a classic case study in PR crisis management.

I tend to like Nike’s approach. I think American public and the world are forgiving. From Kobe Bryant to Michael Vick, plenty of super star athletes were given a second chance. Tiger Wood is still the best golfer in the world. As long as he continues to play at the highest level, and show genuine remorse to the public, he will be OK.

I also understand Accenture’s stance. Accenture is a professional service firm. It has a more traditional and conservative corporate culture. It needs to stay away from controversies. Given its line of business and corporate culture, I think Accenture also did the right thing.

I didn’t like the way Tag Heuer reacted. I think they’re not sure how to react, so they want to buy some time to wait and see how the scandal will evolve in the next two weeks. It’s perfectly reasonable for them to wait for a couple more weeks, but I don’t understand why they’re making a public statement about their wait-and-see strategy. It shows that they’re confused and indecisive.

Put yourself into the shoes of an advertising executive, what would you do if your firm has a sponsorship with Tiger Wood?

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But, Amazon Fresh has really impressed me. Amazon Fresh started to deliver grocery in limited number of zip codes in the Seattle area. It then expanded to more zip codes. Recently it started to deliver to my neighborhood. By the end of 2009, it’ll deliver to the entire Seattle area.

I can now order meat, vegetables, fruits, diapers, detergents, diary products, etc. It’ll save me at least 3 hours a week. That’s 156 hours a year. We’ll have more time to read, exercise, play with the kids, enjoy family time.

We have two little ones at home. There are times that after a full day of work and several hours of playing, bathing and putting kids to bed, I had to drive to grocery store because we run out of milk or diapers or whatever although I was exhausted.

If there is one thing we need more, that’s TIME. Plus, grocery shopping is not exactly my favorite activity.

Amazon Fresh works beautifully.

• If I order before mid-night and choose the “pre dawn” delivery option, the grocery will be left at my door stop by 6AM in a temperature controlled box.
• During the day, as long as I order 7 hours in advance, I’ll get same day delivery.
• I can set up automatic delivery for items that runs out periodically (e.g. milk, diaper, etc.). I’ll get 10-15% discount for automatic delivered items.
• There is a requirement for $30 minimum purchase. The delivery cost is $5 for purchase under $75. But, if I made enough purchase, I’ll be qualified for free delivery in the following month.

I’ll make fewer trips to Costco, Trader Joe’s, and Fred Meyer’s. I think Amazon Fresh is going to steal market share from these grocery stores.

I’m also very impressed by amazon’s execution. They worked hard to avoid Webvan’s mistakes. Amazon hired a former Webvan executive to run their grocery business. They have a very limited marketing budget to limit cost. It rolls out its service in only one geographic area (i.e. Seattle) to limit the infrastructure cost and test the concept. I also notice that Amazon Fresh’s price is a little bit higher than traditional grocery stores. But, for the convenience and time saving, I think many people are willing to pay.

I also think that amazon’s ability to deliver on the same day is going to be huge. Once they build up the infrastructure in all major cities in the United States, they’ll be able to control the “last mile” of delivery.

Amazon Fresh is “Costco meets FedEx”. I don’t know Amazon Fresh’s revenue and profit. But, if amazon can make it economically viable,  it could be a game changer that fundamentally disrupts many traditional businesses.

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Excellent reading:

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I’m a fan of the PBS “Great American Scenic Railroads ” series. I have been to the official web site (www.gsrj.com) before, but I forgot to bookmark it.

Last night, I searched “Great American Scenic Railroads” on Google. I couldn’t find the official site on the first 3 pages of the search results. In fact, I stopped browsing through the search result pages since most of the search results are online shops who sell the Great American Scenic Railroads DVDs.

For the first time in a long time, I gave up on Google. I went to Bing.com, entered the exact search keywords “Great American Scenic Railroads”.

The official web site was returned as #1 search result. That’s exactly what I was looking for.

Why is Google not showing the official site? Is it because of search engine optimization (SEO) done by all of the online sellers who’re gaming for the top spots on the search result pages?

Google CEO Eric Schmidt commented on Bing recently: “"It’s not the first entry for Microsoft. They do this about once a year.” I think Google needs to take Bing and Microsoft more seriously. Microsoft had a lot of problems over the past few years and failed many times. But, Microsoft is a very resilient company. It seems to be at its best when its back is against the wall. Remember the browser war between Netscape and Microsoft? Microsoft kept trying, and eventually got it right.

Don’t count Microsoft out yet in the search war.

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Excellent resources:

• Competing On Internet Time: Lessons From Netscape And Its Battle With Microsoft
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A few interesting things I learned about John Sperling and his founding of University of Phoenix from the book:

• he didn’t find his calling until his late 30’s
• he founded University of Phoenix when he was 53 years old. That’s pretty late for an entrepreneur
• he was born into a poor, dysfunctional sharecropper family. In fact, he said in the book that the day his abusive father died was one of the happiest day in his life
• John Sperling had to fight one regulatory battle after another to keep his company alive. It was absolutely brutal.
• University of Phoenix survived and prospered despite the regulatory battles because there was a strong demand for its programs.
• feisty, aggressive, outspoken, controversial – John Sperling is a tough guy and quite a character.
• Until very recently, recruiters at University of Phoenix got paid more than senior managers.

Over past decade, several for-profit education companies have been very successful – Apollo Group (parent company of University of Phoenix – NASDAQ: APOL), Career Education Corporation (NASDAQ: CECO), Corinthian Colleges (NASDAQ: COCO), New Oriental Education (NASDAQ: EDU), Grand Canyon University (NASDAQ: LOPE) – these are all publically traded companies. Most of their stocks have been holding pretty well – education is a relatively recession-proof business.

I’m very passionate about education.  But, I have always been quite skeptical about for-profit colleges – aren’t they degree mills? Who would spend money to earn those useless degrees?

I have to say that I think differently now after reading the book and doing some research on my own.

I, and most of my friends have been through the “traditional/conventional education path” – high school to college to graduate school. However, there are a lot of people who left out of the conventional system:

• high school graduates who start working after graduation. They later realize that they need more education, but family/job obligation preclude them from attending a conventional college program
• teenage mothers who dropped out of high school or college
• military personnel who want to get a degree while they’re enlisted
• stay-home moms who want to learn a new skills and enter the workforce when their kids get older
• mid-career professionals who want to change careers or acquire new skills. But, they have family and kids. Traditional college program isn’t an option.
• etc.

For-profit universities fill the void. There are a lot of controversies about for-profit schools, but given its explosive growth, clearly there is a market demand.

Given layoffs and a down economy, I predict that for-profit education sector will continue to grow, and start to gain main-stream acceptance.