Taken by Jason Blake, Standout on 15th December 2011

I of course sprang into action, camera in hand. The strange thing though, was the closer I tried to get to it the further it seemed to move away… optical illusion or perhaps it was just moving anyway? Unfortunately I couldn’t locate any gold either, still I got a few nice shots of it and it’s certainly better than snow!

The Internet has brought media to a global audience. The interactive nature of Internet marketing in terms of providing instant responses and eliciting responses are the unique qualities of the medium. Internet marketing is sometimes considered to be broad in scope because it not only refers to marketing on the Internet, but also includes marketing done via e-mail and wireless media. Management of digital customer data and electronic customer relationship management (ECRM) systems are also often grouped together under internet marketing.

Internet marketing ties together creative and technical aspects of the Internet, including: design, development, advertising, and sales.

Internet marketing also refers to the placement of media along many different stages of the customer engagement cycle through search engine marketing (SEM), search engine optimization (SEO), banner ads on specific websites, email marketing, and Web 2.0 strategies. In 2008, The New York Times – working with comScore – published an initial estimate to quantify the user data collected by large Internet-based companies. Counting four types of interactions with company websites in addition to the hits from advertisements served from advertising networks, the authors found the potential for collecting data upward of 2,500 times on average per user per month

Business models

Internet marketing is associated with several business models:

- E-commerce – In this model, goods are sold directly to consumers (B2C) or businesses (B2B) or consumer to consumer(c2c)
- Lead-based Websites – Strategy where an organization generates value by acquiring sales leads from its website
- Affiliate Marketing – The process in which a product or service developed by one entity (e-commerce business, single person, or a combination) is sold by other active sellers for a share of profits. The entity of the product may provide some marketing material (sales letter, affiliate link, tracking facility), however, the vast majority of affiliate marketing relationships come from e-commerce businesses that offer affiliate programs.
- Local Internet Marketing – Strategy through which a small company utilizes the Internet to find and nurture relationships that are to be used for real-world advantage. Local Internet marketing uses tools such as social media marketing, local directory listing ,  and targeted online sales promotions.

The Hat terminology comes from the old black and white westerns where the good guys wore white hats and the bad guys wore black hats.

- White hat Marketing – This form of Internet marketing follows all of the acceptable practices for the search engines.
- Gray hat Marketing – This is when the practices are not specifically deceptive or abusive but lie in an area not specifically defined blackhat but still not entirely white hat.
- Blackhat Marketing – This is a form of Internet marketing that employs deceptive, abusive, or less than truthful methods to drive web traffic to a website or affiliate marketing offer. This method sometimes includes spam, cloaking within search engine result pages, or routing users to pages they didn’t initially request.

One-to-one approach

The targeted user is typically browsing the Internet alone and therefore the marketing messages can reach them personally. This approach is used in search marketing, where the advertisements are based on search engine keywords entered by the users on the computer. This approach usually works under PPC (pay per click) method. With the advent of Web 2.0 tools, many users can interconnect as “peers.”

Appeal to specific interests

Internet marketing and geo marketing places an emphasis on marketing that appeals to a specific behavior or interest, rather than reaching out to a broadly defined demographic. “On- and Offline” marketers typically segment their markets according to age group, gender, geography, and other general factors. Marketers have the luxury of targeting by activity and geolocation. For example, a kayak company can post advertisements on kayaking and canoeing websites with the full knowledge that the audience has a related interest.

Internet marketing differs from magazine advertisements, where the goal is to appeal to the projected demographic of the periodical, but rather the advertiser has knowledge of the target audience — people who engage in certain activities (e.g., uploading pictures, contributing to blogs)…

Niche Marketing

Niche and hype-niche internet marketing put further emphasis on creating specialist destinations for web users and consumers on tightly targeted topics and products. Niche marketers differ from traditional Internet Marketers as they have a more specialized topic knowledge.  For example, whereas in traditional Internet marketing a website would be created and promoted on a high-level topic such as kitchen appliances, niche marketing would be something much more specific such as 4-slice toasters.

Niche marketing provides end users of such sites very targeted information, and allows the creators to establish themselves as authorities on the topic or product.

Geo-targeting

Geo targeting (in Internet marketing) and geo marketing are the methods of determining the geolocation (the physical location) of a website visitor with geolocation software, and delivering different content to that visitor based on his or her location, such as latitude/ longitude, country, region/state, city, metro code/zip code, organization, Internet Protocol (IP) address, ISP or other criteria.

Advantages

Internet marketing is relatively inexpensive when compared to the ratio of cost against the reach of the target audience. Companies can reach a wide audience for a small fraction of traditional advertising budgets. The nature of the medium allows consumers to research and purchase products and services at their own convenience. Therefore, businesses have the advantage of appealing to consumers in a medium that can bring results quickly. The strategy and overall effectiveness of marketing campaigns depend on business goals and cost-volume-profit (CVP) analysis.

Internet marketers also have the advantage of measuring statistics easily and inexpensively. Nearly all aspects of an Internet marketing campaign can be traced, measured, and tested. The advertisers can use a variety of methods: pay per impression, pay per click, pay per play, or pay per action. Therefore, marketers can determine which messages or offerings are more appealing to the audience. The results of campaigns can be measured and tracked immediately because online marketing initiatives usually require users to click on an advertisement, visit a website, and perform a targeted action. Such measurement cannot be achieved through billboard advertising, where an individual will at best be interested, then decide to obtain more information at a later time.

Because exposure, response, and overall efficiency of Internet media are easier to track than traditional off-line media—through the use of web analytics for instance—Internet marketing can offer a greater sense of accountability for advertisers. Marketers and their clients are becoming aware of the need to measure the collaborative effects of marketing (i.e., how the Internet affects in-store sales) rather than siloing each advertising medium. The effects of multichannel marketing can be difficult to determine, but are an important part of ascertaining the value of media campaigns. Internet marketing refers the online marketing methods that are related to email, social networks and wireless devices.

Limitations

From the buyer’s perspective, the inability of shoppers to touch, smell, taste or “try on” tangible goods before making an online purchase can be limiting. However, there is an industry standard for e-commerce vendors to reassure customers by having liberal return policies as well as providing in-store pick-up services.

The buyer can also be biased in case there is not sufficiently reliable product information available online.

Security concerns

Information security is important both to companies and consumers that participate in online business. Many consumers are hesitant to purchase items over the Internet because they do not trust that their personal information will remain private.

Some companies that purchase customer information offer the option for individuals to have their information removed from the database, also known as opting out. However, many customers are unaware if and when their information is being shared, and are unable to stop the transfer of their information between companies if such activity occurs.

Another major security concern that consumers have with e-commerce merchants is whether or not they will receive exactly what they purchase. Online merchants have attempted to address this concern by investing in and building strong consumer brands (e.g., Amazon.com, eBay, Overstock.com), and by leveraging merchant/feedback rating systems and e-commerce bonding solutions. All of these solutions attempt to assure consumers that their transactions will be free of problems because the merchants can be trusted to provide reliable products and services. Additionally, the major online payment mechanisms (credit cards, PayPal, Google Checkout, etc.) have also provided back-end buyer protection systems to address problems if they actually do occur.

Usage trends

Online advertising techniques have dramatically been affected by technological advancements in the telecommunications industry. Many firms are embracing a paradigm that is shifting the focus of advertising methodology from traditional text and image advertisement creatives to rich multimedia experiences such as those containing more updated technology like HTML, JavaScript, and Adobe Flash. As a result, advertisers can more effectively engage and connect their audience with their campaigns which seek to shape consumer attitudes and feelings towards specific products and services. The paradigm shift from dialup to high speed internet has fueled these changes

Wonderfully British… LC has undergone a brand realignment which is friendly, approachable and versatile in its approach. I love the versatility of the new brand with contrasting typefaces, sizes and an array of colours. In fact it works in a similar way to the London 2012 Olympic brand in terms of colour and allows each restaurant to be personalised in a similar way to how (London 2012 themes events and venues by colour). My suggestion for the new strapline was Big Chef little taste, but by choosing “Good to Go” LC uses the same language as their target market whilst placing on emphasis on speed and efficiency.

Flexible Brand

LC should always be associated with good times and has 10million loyal fans, but the old brand had been showing its age for a long time. It had almost got to a stage where the original white of the seats had turned yellow…literally reflected in the decor of the building! Now the decor is playful with a tiled sky on the ceiling and the option of high rise or low rise dining…the option of self service food…what I like is that there is a modicum of flexibility which was never present in the old brand.
Owner of the brand Lawrence Wosskow says :

“We want to make the image softer, warmer and trendier.”

Now you simply have more options and good options at that. LC’s approach to rolling out the new stores is equally flexible. 4 new restaurants will be opened all with slightly different approaches. LC will then react to the feedback they get from these and continue the most popular approach across the rest of their restaurants, almost mimicking the approach of websites like thinkvitamin.com which reacted to users by changing it’s design straight after launch. This wasn’t a sign of weakness but instead a proactive / real world approach.
Scaled to perfection

I particually like the use of large typography in juxtaposition with the tiny little chef icon…this works perfectly, as does the use of red (in this case!) space. An iconic feature of little chef were the orange lollies you were given upon leaving…these have now been reinvented and kept beautifully in line with the current brand. The brand now filters across all mediums right down to the colours of the lollies themselves.

Big Chef takes on Little Chef

Heston Blumenthal really kick started The LC rebrand when he recorded “Big chef takes on Little Chef” and during this programme he began to put his stamp on the brand realignment by bringing in wonderfully British dishes (at reasonable prices) and also his own character (of a cool modern day chef) .

Roadside Consumer Habits

Roadside consumer habits really focused the approach of the realigned brand and the key considerations from this research were:

Speed / efficiency

Food needs to be served quickly and effortlessly to consumers who typically will have undertaken a long journey and will also be hungrier than they would normally be, as the wait for a meal when on the road is again typically longer. Wosskow says: “Most people want to spend 20 not 45 minutes when they stop.”

Reliabilty

In the form of recognised dishes which will satisfy hunger. You don’t want to be taking a risk with food when you are hungrier than normal; this is why the menu sticks to what we know.

Value for money

Roadside consumers will often want a quicker solution but not fast food as this is deemed lower in quality and not a ‘proper’ meal. So the price position of LC seems to be spot on.
The LC realignment has all the ingredients to be a success. The old Charlie chef never really grew up, but I’m looking forward to meeting his new age equivalent!

Packaging design is all about colour, shape, contours, size, sound, and feel. Many people buy products based not so much on what’s inside of the package, but the package itself. Consumers ask themselves questions as they grab the package. They wonder if the design will be appealing to their kids. They ask themselves if the package can fit inside their purse or briefcase, and they want to know what will happen if they accidentally drop the package. Will it break? The design of the package can make all the difference between whether people buy from you or not, and if people like your packaging, they’ll buy from you repeatedly. There’s no question about that. Some products have reputations based solely on the look of their packaging. It’s one of the best ways to creatively develop your brand and beat your competition.

There will always be a competitor, but the competitor may not know just how important branding is. When people are just starting out, they often try to cut corners when it comes to things like advertising, website design, and other areas of branding. However, little do they know that if you have spectacular designs in the beginning phases of a business, a product or service can suddenly become the thing consumers just have to have. Good and consistent branding helps people to get familiar with what you are offering, and it builds trust. That’s why people will buy from you over and over again.

To ensure you make an impact on the market, combine effective and creative package design with phenomenal branding. Invest in outstanding web design, and continue to build your brand by creating many websites. Once people see your high quality branding wherever they go, you’ll continue to bring in business for years to come. People will always appreciate good design, and it’s sure to leave your competition trembling.

Plus one will allow users to integrate a plus one button into their site next to whatever content they like. This will work in a similar way to FB like button and I reckon it could share a similar success to that of the FB like.

Plus one is digital shorthand for “really cool”, or “dench” and allows users to give their approval on specific content. I think this will be great for search because it is a step towards greater relevancy in our searches and will improve the overall quality of our search results by letting the people influence them.

Unlike goggle buzz though I actually reckon plus one could have legs and could prove a genuine rival to FB like.

J.C Penny has obviously realised the potential of Online Marketing and the money to be made. We don’t know how much they spent on SEO but they spent $2.46 million PER MONTH on Google search ads. J.C Penny phased out all of their Catalogues and placed them online generating $1.5 Billion in 2009. Ranking No1 for the word Dresses they received approx 3.8 million visits per month. Thttp://www.standoutuk.com/blog/j-c-penny-online-marketing-campaign-using-black-hat-seo/hese figures should convince any business to look at their online marketing campaign today!

Lessons Learnt : Quality SEO takes time and patience !

Original Article in NY Times

Someone types the word “dresses” and hits enter. What will be the very first result?

There are, of course, a lot of possibilities. Macy’s comes to mind. Maybe a specialty chain, like J. Crew or the Gap. Perhaps a Wikipedia entry on the history of hemlines. O.K., how about the word “bedding”? Bed Bath & Beyond seems a candidate. Or Wal-Mart, or perhaps the bedding section of Amazon.com. “Area rugs”? Crate & Barrel is a possibility. Home Depot, too, and Sears, Pier 1 or any of those Web sites with “area rug” in the name, like arearugs.com. You could imagine a dozen contenders for each of these searches. But in the last several months, one name turned up, with uncanny regularity, in the No. 1 spot for each and every term:

J. C. Penney.

The company bested millions of sites — and not just in searches for dresses, bedding and area rugs. For months, it was consistently at or near the top in searches for “skinny jeans,” “home decor,” “comforter sets,” “furniture” and dozens of other words and phrases, from the blandly generic (“tablecloths”) to the strangely specific (“grommet top curtains”). This striking performance lasted for months, most crucially through the holiday season, when there is a huge spike in online shopping. J. C. Penney even beat out the sites of manufacturers in searches for the products of those manufacturers. Type in “Samsonite carry on luggage,” for instance, and Penney for months was first on the list, ahead of Samsonite.com. With more than 1,100 stores and $17.8 billion in total revenue in 2010, Penney is certainly a major player in American retailing. But Google’s stated goal is to sift through every corner of the Internet and find the most important, relevant websites.

Does the collective wisdom of the Web really say that Penney has the most essential site when it comes to dresses? And bedding? And area rugs? And dozens of other words and phrases?

The New York Times asked an expert in online search, Doug Pierce of Blue Fountain Media in New York, to study this question, as well as Penney’s astoundingly strong search-term performance in recent months. What he found suggests that the digital age’s most mundane act, the Google search, often represents layer upon layer of intrigue. And the intrigue starts in the sprawling, subterranean world of “black hat” optimization, the dark art of raising the profile of a Web site with methods that Google considers tantamount to cheating.

Despite the cowboy outlaw connotations, black-hat services are not illegal, but trafficking in them risks the wrath of Google. The company draws a pretty thick line between techniques it considers deceptive and “white hat” approaches, which are offered by hundreds of consulting firms and are legitimate ways to increase a site’s visibility. Penney’s results were derived from methods on the wrong side of that line, says Mr. Pierce. He described the optimization as the most ambitious attempt to game Google’s search results that he has ever seen. “Actually, it’s the most ambitious attempt I’ve ever heard of,” he said. “This whole thing just blew me away. Especially for such a major brand. You’d think they would have people around them that would know better.”

To understand the strategy that kept J. C. Penney in the pole position for so many searches, you need to know how Web sites rise to the top of Google’s results. We’re talking, to be clear, about the “organic” results — in other words, the ones that are not paid advertisements. In deriving organic results, Google’s algorithm takes into account dozens of criteria, many of which the company will not discuss. But it has described one crucial factor in detail: links from one site to another. If you own a Web site, for instance, about Chinese cooking, your site’s Google ranking will improve as other sites link to it. The more links to your site, especially those from other Chinese cooking-related sites, the higher your ranking. In a way, what Google is measuring is your site’s popularity by polling the best-informed online fans of Chinese cooking and counting their links to your site as votes of approval.

But even links that have nothing to do with Chinese cooking can bolster your profile if your site is barnacled with enough of them. And here’s where the strategy that aided Penney comes in. Someone paid to have thousands of links placed on hundreds of sites scattered around the Web, all of which lead directly to J.C.Penney.com. Who is that someone? A spokeswoman for J. C. Penney, Darcie Brossart, says it was not Penney. “J. C. Penney did not authorize, and we were not involved with or aware of, the posting of the links that you sent to us, as it is against our natural search policies,” Ms. Brossart wrote in an e-mail. She added, “We are working to have the links taken down.”

The links do not bear any fingerprints, but nothing else about them was particularly subtle. Using an online tool called Open Site Explorer, Mr. Pierce found 2,015 pages with phrases like “casual dresses,” “evening dresses,” “little black dress” or “cocktail dress.” Click on any of these phrases on any of these 2,015 pages, and you are bounced directly to the main page for dresses on JCPenney.com. Some of the 2,015 pages are on sites related, at least nominally, to clothing. But most are not. The phrase “black dresses” and a Penney link were tacked to the bottom of a site called nuclear.engineeringaddict.com. “Evening dresses” appeared on a site called casino-focus.com. “Cocktail dresses” showed up on bulgariapropertyportal.com. ”Casual dresses” was on a site called elistofbanks.com. “Semi-formal dresses” was pasted, rather incongruously, on usclettermen.org. There are links to JCPenney.com’s dresses page on sites about diseases, cameras, cars, dogs, aluminum sheets, travel, snoring, diamond drills, bathroom tiles, hotel furniture, online games, commodities, fishing, Adobe Flash, glass shower doors, jokes and dentists — and the list goes on. Some of these sites seem all but abandoned, except for the links. The greeting at myflhomebuyer.com sounds like the saddest fortune cookie ever: “Sorry, but you are looking for something that isn’t here.”

When you read the enormous list of sites with Penney links, the landscape of the Internet acquires a whole new topography. It starts to seem like a city with a few familiar, well-kept buildings, surrounded by millions of hovels kept upright for no purpose other than the ads that are painted on their walls. Exploiting those hovels for links is a Google no-no. The company’s guidelines warn against using tricks to improve search engine rankings, including what it refers to as “link schemes.” The penalty for getting caught is a pair of virtual concrete shoes: the company sinks in Google’s results. Often drastically. In 2006, Google announced that it had caught BMW using a black-hat strategy to bolster the company’s German Web site, BMW.de. That site was temporarily given what the BBC at the time called “the death penalty,” stating that it was “removed from search results.” BMW acknowledged that it had set up “doorway pages,” which exist just to attract search engines and then redirect traffic to a different site. The company at the time said it had no intention of deceiving users, adding “if Google says all doorway pages are illegal, we have to take this into consideration.”

J. C. Penney, it seems, will not suffer the same fate. But starting Wednesday, it was the subject of what Google calls “corrective action.” Last week, The Times sent Google the evidence it had collected about the links to JCPenney.com. Google promptly set up an interview with Matt Cutts, the head of the Webspam team at Google, and a man whose every speech, blog post and Twitter update is parsed like papal encyclicals by players in the search engine world. “I can confirm that this violates our guidelines,” said Mr. Cutts during an hourlong interview on Wednesday, after looking at a list of paid links to JCPenney.com. He said Google had detected previous guidelines violations related to JCPenney.com on three occasions, most recently last November. Each time, steps were taken that reduced Penney’s search results — Mr. Cutts avoids the word “punished” — but Google did not later “circle back” to the company to see if it was still breaking the rules, he said.

He and his team had missed this recent campaign of paid links, which he said had been up and running for the last three to four months. “Do I wish our system had detected things sooner? I do,” he said. “But given the one billion queries that Google handles each day, I think we do an amazing job.” Mr. Cutts sounded remarkably upbeat and unperturbed during this conversation, which was a surprise given that we were discussing a large, sustained effort to snooker his employer. Asked about his zenlike calm, he said the company strives not to act out of anger. You get the sense that Mr. Cutts and his colleagues are acutely aware of the singular power they wield as judge, jury and appeals panel, and they’re eager to project an air of maturity and judiciousness.

That said, he added, “I don’t think I could do my job well if in some sense I was not offended by things that were bad for Google users.” “Am I happy this happened?” he later asked. “Absolutely not. Is Google going to take strong corrective action? We absolutely will.” And the company did. On Wednesday evening, Google began what it calls a “manual action” against Penney, essentially demotions specifically aimed at the company. At 7 p.m. Eastern time on Wednesday, J. C. Penney was still the No. 1 result for “Samsonite carry on luggage.”

Two hours later, it was at No. 71. At 7 p.m. on Wednesday, Penney was No. 1 in searches for “living room furniture.” By 9 p.m., it had sunk to No. 68. In other words, one moment Penney was the most visible online destination for living room furniture in the country. The next it was essentially buried.

PENNEY reacted to this instant reversal of fortune by, among other things, firing its search engine consulting firm, SearchDex. Executives there did not return e-mail or phone calls. Penney also issued a statement: “We are disappointed that Google has reduced our rankings due to this matter,” Ms. Brossart wrote, “but we will continue to work actively to retain our high natural search position.” She added that while the collection of links surely brought in additional revenue, it was hardly a bonanza. Just 7 percent of JCPenney.com’s traffic comes from clicks on organic search results, she wrote. A far bigger source of profits this holiday season, she stated, came from partnerships with companies like Yahoo and Time Warner, from new mobile applications and from in-store kiosks.

Search experts, however, say Penney likely reaped substantial rewards from the paid links. If you think of Google as the entrance to the planet’s largest shopping center, the links helped Penney appear as though it was the first and most inviting spot in the mall, to millions and millions of online shoppers.

How valuable was that? A study last May by Daniel Ruby of Chitika, an online advertising network of 100,000 sites, found that, on average, 34 percent of Google’s traffic went to the No. 1 result, about twice the percentage that went to No. 2. The Keyword Estimator at Google puts the number of searches for “dresses” in the United States at 11.1 million a month, an average based on 12 months of data. So for “dresses” alone, Penney may have been attracting roughly 3.8 million visits every month it showed up as No.1. Exactly how many of those visits translate into sales, and the size of each sale, only Penney would know.

But in January, the company was crowing about its online holiday sales. Kate Coultas, a company spokeswoman, wrote to a reporter in January, “Internet sales through jcp.com posted strong growth in December, with significant increases in traffic and orders for the key holiday shopping periods of the week after Thanksgiving and the week before Christmas.” There was considerable pressure from investors for Penney to deliver strong holiday results. It has been struggling through one of the more trying times of its century of retailing. The $17.8 billion in revenue it reported last year is the exact same figure it reported in 2001. It announced in January that it would close a handful of underperforming stores, as well as two of its five call centers and 19 outlets that sell excess catalog merchandise.

Adding to the company’s woes is the demise of its catalog business. Penney has phased out what it called its Big Book and poured money into its Web site. But so far, the loss of the catalog has not been offset by the expansion of the Web site. At its peak, the catalog brought in about $4 billion in revenue. In 2009, the site brought in $1.5 billion. “For the last 35 years, Penney has tried to be accepted as a department store, and during unusually good times, it does very well,” said Bernard Sosnick, an analyst at Gilford Securities. “But in bad times, it gets punished by shoppers who pull back after having spent aspirationally.”

MANY owners of Web sites with Penney links seem to relish their unreachability. But there were exceptions, and they included cocaman.ch. (“Geekness — closer to the world” is the cryptic header atop the site.) It turned out to be owned and run by Corsin Camichel, a chatty 25-year-old I.T. security analyst in Switzerland. The word “dresses” appears in a small collection of links in the middle of a largely blank Cocaman page. Asked about that link, Mr. Camichel said his records show that it turned up on his site last April, though he said it might have been earlier than that.

The link came through a Web site, TNX.net, which pays Mr. Camichel with TNX points, which he then trades for links that drive traffic to his other sites, like cookingutensils.net. He earns money when people visit that site and click on the ads. He could also, he said, get cash from TNX. Currently, Cocaman is home to 403 links, all of them placed there by TNX on behalf of clients.
“You do pretty well,” he wrote, referring to income from his links trading. “The thing is, the more you invest (time and money) the better results you get. Right now I get enough to buy myself new test devices for my Android apps (like $150/month) with zero effort. I have to do nothing. Ads just sit there and if people click, I make money.”

Efforts to reach TNX itself last week via e-mail were not successful.

Interviewing a purveyor of black-hat services face-to-face was a considerable undertaking. They are a low-profile bunch. But a link-selling specialist named Mark Stevens — who says he had nothing to do with the Penney link effort — agreed to chat. He did so on the condition that his company not be named, a precaution he justified by recounting what happened when the company apparently angered Google a few months ago.

“It was my fault,” Mr. Stevens said. “I posted a job opening on a Stanford Engineering alumni mailing list, and mentioned the name of our company and a brief description of what we do. I think some Google employees saw it.”
In a matter of days, the company could not be found in a Google search. “Literally, you typed the name of the company into the search box and we did not turn up. Anywhere. You’d find us if you knew our Web address. But in terms of search, we just disappeared.” The company now operates under a new name and with a profile that is low even in the building where it claims to have an office. The landlord at the building, a gleaming, glassy midrise next to Route 101 in Redwood City, Calif., said she had never heard of the company.

Mr. Stevens agreed to meet in mid-January for a dinner paid for by The Times. Asked to pick a “fine restaurant” in his neighborhood, he rather cheekily selected a modern French bistro in Palo Alto offering an eight-course prix fixe meal for $118. Liquid nitrogen and “fairy tale pumpkin” were two of the featured ingredients.

Mr. Stevens turned out to be a boyish-looking 31-year-old native of Singapore. (Stevens is the name he uses for work; he says he has a Chinese last name, which he did not share.) He speaks with a slight accent and in an animated hush, like a man worried about eavesdroppers. He describes his works with the delighted, mischievous grin of a sophomore who just hid a stink bomb.
“The key is to roll the campaign out slowly,” he said as he nibbled at seared duck foie gras. “A lot of companies are in a rush. They want as many links as we can get them as fast as possible. But Google will spot that. It will flag a Web site that goes from zero links to a few hundred in a week.”

The hardest part about the link-selling business, he explained, is signing up deep-pocketed mainstream clients. Lots of them, it seems, are afraid they’ll get caught. Another difficulty is finding quality sites to post links. Whoever set up the JCPenney.com campaign, he said, relied on some really low-rent, spammy sites — the kind with low PageRanks, as Google calls its patented measure of a site’s quality. The higher the PageRank, the more “Google juice” a site offers others to which it is linked.
“The sites that TNX uses mostly have low PageRanks,” Mr. Stevens said.

Mr. Stevens said that Web site owners, or publishers, as he calls them, get a small fee for each link, and the transaction is handled entirely over the Web. Publishers can reject certain keywords and links — Mr. Stevens said some balked at a lingerie link — but for the most part the system is on a kind of autopilot. A client pays Mr. Stevens and his colleagues for links, which are then farmed out to Web sites. Payment to publishers is handled via PayPal.

You might expect Mr. Stevens to have a certain amount of contempt for Google, given that he spends his professional life finding ways to subvert it. But through the evening he mentioned a few times that he’s in awe of the company, and the quality of its search engine.

So how does he justify all his efforts to undermine that engine?

“I think we need to make a distinction between two different kinds of searches — informational and commercial,” he said. “If you search ‘cancer,’ that’s an informational search and on those, Google is amazing. But in commercial searches, Google’s results are really polluted. My own personal experience says that the guy with the biggest S.E.O. budget always ranks the highest.”

To Mr. Stevens, S.E.O. is a game, and if you’re not paying black hats, you are losing to rivals with fewer compunctions.

WHY did Google fail to catch a campaign that had been under way for months? One, no less, that benefited a company that Google had already taken action against three times? And one that relied on a collection of Web sites that were not exactly hiding their spamminess? Mr. Cutts emphasized that there are 200 million domain names and a mere 24,000 employees at Google. “Spammers never stop,” he said. Battling those spammers is a never-ending job, and one that he believes Google keeps getting better and better at.

Here’s another hypothesis, this one for the conspiracy-minded. Last year, Advertising Age obtained a Google document that listed some of its largest advertisers, including AT&T, eBay and yes, J. C. Penney. The company, this document said, spent $2.46 million a month on paid Google search ads — the kind you see next to organic results.

Is it possible that Google was willing to countenance an extensive black-hat campaign because it helped one of its larger advertisers? It’s the sort of question that European Union officials are now studying in an investigation of possible antitrust abuses by Google.

Investigators have been asking advertisers in Europe questions like this: “Please explain whether and, if yes, to what extent your advertising spending with Google has ever had an influence on your ranking in Google’s natural search.” And: “Has Google ever mentioned to you that increasing your advertising spending could improve your ranking in Google’s natural search?”
Asked if Penney received any breaks because of the money it has spent on ads, Mr. Cutts said, “I’ll give a categorical denial.” He then made an impassioned case for Google’s commitment to separating the money side of the business from the search side. The former has zero influence on the latter, he said.

“If you asked me for the names of five people in advertising engineering, I don’t think I could give you the names,” he said. “There is a very long history at Google of saying ‘We are not going to worry about short-term revenue.’ ” He added: “We rely on the trust of our users. We realize the responsibility that we have to our users.”

He noted, too, that before The Times presented evidence of the paid links to JCPenney.com, Google had just begun to roll out an algorithm change that had a negative effect on Penney’s search results. (The tweak affected “how we trust links,” Mr. Cutts said, declining to elaborate.)

True, JCPenney.com’s showing in Google searches had declined slightly by Feb. 8, as the algorithm change began to take effect. In “comforter sets,” Penney went from No. 1 to No. 7. In “sweater dresses,” from No. 1 to No. 10.

But the real damage to Penney’s results began when Google started that “manual action.” The decline can be charted: On Feb. 1, the average Penney position for 59 search terms was 1.3.

On Feb. 8, when the algorithm was changing, it was 4.

By Feb. 10, it was 52.

MR. CUTTS said he did not plan to write about Penney’s situation, as he did with BMW in 2006. Rarely, he explained, does he single out a company publicly, because Google’s goal is to preserve the integrity of results, not to embarrass people.

“But just because we don’t talk about it,” he said, “doesn’t mean we won’t take strong action.”

The campaign works on a couple levels. Firstly it proves that social media can be used to engage with customers in a fun, personal and tangible way and also you cannot deny the positive way people will talk about KLM after this as these satisfied customers will almost definitely go on to tweet about their experience. Word of mouth is a powerful tool and KLM seem to truly appreciate its value judging by this experiment.

The more cynical among us could construe this campaign as verging on stalking however I personally wouldn’t say no to a free gift and see this as a truly compelling way to engage with customers via social media.

The Internet has brought media to a global audience. The interactive nature of Internet marketing in terms of providing instant responses and eliciting responses are the unique qualities of the medium. Internet marketing is sometimes considered to be broad in scope because it not only refers to marketing on the Internet, but also includes marketing done via e-mail and wireless media. Management of digital customer data and electronic customer relationship management (ECRM) systems are also often grouped together under internet marketing.

Internet marketing ties together creative and technical aspects of the Internet, including: design, development, advertising, and sales.

Internet marketing also refers to the placement of media along many different stages of the customer engagement cycle through search engine marketing (SEM), search engine optimization (SEO), banner ads on specific websites, email marketing, and Web 2.0 strategies. In 2008, The New York Times – working with comScore – published an initial estimate to quantify the user data collected by large Internet-based companies. Counting four types of interactions with company websites in addition to the hits from advertisements served from advertising networks, the authors found the potential for collecting data upward of 2,500 times on average per user per month

Business models

Internet marketing is associated with several business models:

- E-commerce – In this model, goods are sold directly to consumers (B2C) or businesses (B2B) or consumer to consumer(c2c)
- Lead-based Websites – Strategy where an organization generates value by acquiring sales leads from its website
- Affiliate Marketing – The process in which a product or service developed by one entity (e-commerce business, single person, or a combination) is sold by other active sellers for a share of profits. The entity of the product may provide some marketing material (sales letter, affiliate link, tracking facility), however, the vast majority of affiliate marketing relationships come from e-commerce businesses that offer affiliate programs.
- Local Internet Marketing – Strategy through which a small company utilizes the Internet to find and nurture relationships that are to be used for real-world advantage. Local Internet marketing uses tools such as social media marketing, local directory listing ,  and targeted online sales promotions.

The Hat terminology comes from the old black and white westerns where the good guys wore white hats and the bad guys wore black hats.

- White hat Marketing – This form of Internet marketing follows all of the acceptable practices for the search engines.
- Gray hat Marketing – This is when the practices are not specifically deceptive or abusive but lie in an area not specifically defined blackhat but still not entirely white hat.
- Blackhat Marketing – This is a form of Internet marketing that employs deceptive, abusive, or less than truthful methods to drive web traffic to a website or affiliate marketing offer. This method sometimes includes spam, cloaking within search engine result pages, or routing users to pages they didn’t initially request.

One-to-one approach

The targeted user is typically browsing the Internet alone and therefore the marketing messages can reach them personally. This approach is used in search marketing, where the advertisements are based on search engine keywords entered by the users on the computer. This approach usually works under PPC (pay per click) method. With the advent of Web 2.0 tools, many users can interconnect as “peers.”

Appeal to specific interests

Internet marketing and geo marketing places an emphasis on marketing that appeals to a specific behavior or interest, rather than reaching out to a broadly defined demographic. “On- and Offline” marketers typically segment their markets according to age group, gender, geography, and other general factors. Marketers have the luxury of targeting by activity and geolocation. For example, a kayak company can post advertisements on kayaking and canoeing websites with the full knowledge that the audience has a related interest.

Internet marketing differs from magazine advertisements, where the goal is to appeal to the projected demographic of the periodical, but rather the advertiser has knowledge of the target audience — people who engage in certain activities (e.g., uploading pictures, contributing to blogs)…

Niche Marketing

Niche and hype-niche internet marketing put further emphasis on creating specialist destinations for web users and consumers on tightly targeted topics and products. Niche marketers differ from traditional Internet Marketers as they have a more specialized topic knowledge.  For example, whereas in traditional Internet marketing a website would be created and promoted on a high-level topic such as kitchen appliances, niche marketing would be something much more specific such as 4-slice toasters.

Niche marketing provides end users of such sites very targeted information, and allows the creators to establish themselves as authorities on the topic or product.

Geo-targeting

Geo targeting (in Internet marketing) and geo marketing are the methods of determining the geolocation (the physical location) of a website visitor with geolocation software, and delivering different content to that visitor based on his or her location, such as latitude/ longitude, country, region/state, city, metro code/zip code, organization, Internet Protocol (IP) address, ISP or other criteria.

Advantages

Internet marketing is relatively inexpensive when compared to the ratio of cost against the reach of the target audience. Companies can reach a wide audience for a small fraction of traditional advertising budgets. The nature of the medium allows consumers to research and purchase products and services at their own convenience. Therefore, businesses have the advantage of appealing to consumers in a medium that can bring results quickly. The strategy and overall effectiveness of marketing campaigns depend on business goals and cost-volume-profit (CVP) analysis.

Internet marketers also have the advantage of measuring statistics easily and inexpensively. Nearly all aspects of an Internet marketing campaign can be traced, measured, and tested. The advertisers can use a variety of methods: pay per impression, pay per click, pay per play, or pay per action. Therefore, marketers can determine which messages or offerings are more appealing to the audience. The results of campaigns can be measured and tracked immediately because online marketing initiatives usually require users to click on an advertisement, visit a website, and perform a targeted action. Such measurement cannot be achieved through billboard advertising, where an individual will at best be interested, then decide to obtain more information at a later time.

Because exposure, response, and overall efficiency of Internet media are easier to track than traditional off-line media—through the use of web analytics for instance—Internet marketing can offer a greater sense of accountability for advertisers. Marketers and their clients are becoming aware of the need to measure the collaborative effects of marketing (i.e., how the Internet affects in-store sales) rather than siloing each advertising medium. The effects of multichannel marketing can be difficult to determine, but are an important part of ascertaining the value of media campaigns. Internet marketing refers the online marketing methods that are related to email, social networks and wireless devices.

Limitations

From the buyer’s perspective, the inability of shoppers to touch, smell, taste or “try on” tangible goods before making an online purchase can be limiting. However, there is an industry standard for e-commerce vendors to reassure customers by having liberal return policies as well as providing in-store pick-up services.

The buyer can also be biased in case there is not sufficiently reliable product information available online.

Security concerns

Information security is important both to companies and consumers that participate in online business. Many consumers are hesitant to purchase items over the Internet because they do not trust that their personal information will remain private.

Some companies that purchase customer information offer the option for individuals to have their information removed from the database, also known as opting out. However, many customers are unaware if and when their information is being shared, and are unable to stop the transfer of their information between companies if such activity occurs.

Another major security concern that consumers have with e-commerce merchants is whether or not they will receive exactly what they purchase. Online merchants have attempted to address this concern by investing in and building strong consumer brands (e.g., Amazon.com, eBay, Overstock.com), and by leveraging merchant/feedback rating systems and e-commerce bonding solutions. All of these solutions attempt to assure consumers that their transactions will be free of problems because the merchants can be trusted to provide reliable products and services. Additionally, the major online payment mechanisms (credit cards, PayPal, Google Checkout, etc.) have also provided back-end buyer protection systems to address problems if they actually do occur.

Usage trends

Online advertising techniques have dramatically been affected by technological advancements in the telecommunications industry. Many firms are embracing a paradigm that is shifting the focus of advertising methodology from traditional text and image advertisement creatives to rich multimedia experiences such as those containing more updated technology like HTML, JavaScript, and Adobe Flash. As a result, advertisers can more effectively engage and connect their audience with their campaigns which seek to shape consumer attitudes and feelings towards specific products and services. The paradigm shift from dialup to high speed internet has fueled these changes

Schmidt will assume the role of Executive Chairman, focusing externally on deals, partnerships, customers and broader business relationships, government outreach and technology thought leadership–all of which are increasingly important given Google’s global reach. Internally, he will continue to act as an advisor to Larry and Sergey.

Scmidt writes on the official blog:

When I joined Google in 2001 I never imagined—even in my wildest dreams—that we would get as far, as fast as we have today. Search has quite literally changed people’s lives—increasing the collective sum of the world’s knowledge and revolutionizing advertising in the process. And our emerging businesses—display, Android, YouTube and Chrome—are on fire. Of course, like any successful organization we’ve had our fair share of good luck, but the entire team—now over 24,000 Googlers globally—deserves most of the credit.

And as our results today show, the outlook is bright. But as Google has grown, managing the business has become more complicated. So Larry, Sergey and I have been talking for a long time about how best to simplify our management structure and speed up decision making—and over the holidays we decided now was the right moment to make some changes to the way we are structured.

For the last 10 years, we have all been equally involved in making decisions. This triumvirate approach has real benefits in terms of shared wisdom, and we will continue to discuss the big decisions among the three of us. But we have also agreed to clarify our individual roles so there’s clear responsibility and accountability at the top of the company.

Larry will now lead product development and technology strategy, his greatest strengths, and starting from April 4 he will take charge of our day-to-day operations as Google’s Chief Executive Officer. In this new role I know he will merge Google’s technology and business vision brilliantly. I am enormously proud of my last decade as CEO, and I am certain that the next 10 years under Larry will be even better! Larry, in my clear opinion, is ready to lead.

Sergey has decided to devote his time and energy to strategic projects, in particular working on new products. His title will be Co-Founder. He’s an innovator and entrepreneur to the core, and this role suits him perfectly.

As Executive Chairman, I will focus wherever I can add the greatest value: externally, on the deals, partnerships, customers and broader business relationships, government outreach and technology thought leadership that are increasingly important given Google’s global reach; and internally as an advisor to Larry and Sergey.

We are confident that this focus will serve Google and our users well in the future. Larry, Sergey and I have worked exceptionally closely together for over a decade—and we anticipate working together for a long time to come. As friends, co-workers and computer scientists we have a lot in common, most important of all a profound belief in the potential for technology to make the world a better place. We love Google—our people, our products and most of all the opportunity we have to improve the lives of millions of people around the world.

Earlier Schmidt wrote an ineresting post at Harvard Business Review today indicating that Google’s strategic initiatives for the year are all about mobile. He wrote:

First, we must focus on developing the under¬lying fast networks (generally called LTE). These will be 8-to-10- mega¬bit networks, roughly 10 times what we have today, which will usher in new and creative applications, mostly entertainment and social, for these phone platforms.

Second, we must attend to the development of mobile money. Phones, as we know, are used as banks in many poorer parts of the world—and modern technology means that their use as financial tools can go much further than that.

Third, we want to increase the availability of inexpensive smart phones in the poorest parts of the world. We envision literally a billion people getting inexpensive, browser-based touch screen phones over the next few years. Can you imagine how this will change their awareness of local and global information and their notion of education? And that will be just the start.

The Official Release:

MOUNTAIN VIEW, Calif. – January 20, 2011 – Google Inc. (NASDAQ: GOOG) today announced financial results for the quarter and the fiscal year ended December 31, 2010.
“Q4 marked a terrific end to a stellar year,” said Eric Schmidt, CEO of Google. “Our strong performance has been driven by a rapidly growing digital economy, continuous product innovation that benefits both users and advertisers, and by the extraordinary momentum of our newer businesses, such as display and mobile. These results give us the optimism and confidence to invest heavily in future growth — investments that will benefit our users, Google and the wider web.”

In addition, Google has also announced plans to streamline decision making and create clearer lines of responsibility and accountability at the top of the company.
• Starting from April 4, Larry Page, Google Co-Founder, will take charge of Google’s day-to-day operations as Chief Executive Officer.
• Sergey Brin, Google Co-Founder, will devote his energy to strategic projects, in particular working on new products.
• Eric Schmidt will assume the role of Executive Chairman, focusing externally on deals, partnerships, customers and broader business relationships, government outreach and technology thought leadership–all of which are increasingly important given Google’s global reach. Internally, he will continue to act as an advisor to Larry and Sergey.

Commenting on these changes, Eric said: “We’ve been talking about how best to simplify our management structure and speed up decision making for a long time. By clarifying our individual roles we’ll create clearer responsibility and accountability at the top of the company. In my clear opinion, Larry is ready to lead and I’m excited about working with both him and Sergey for a long time to come.”

Larry said: “Eric has clearly done an outstanding job leading Google for the last decade. The results speak for themselves. There is no other CEO in the world that could have kept such headstrong founders so deeply involved and still run the business so brilliantly. Eric is a tremendous leader and I have learned innumerable lessons from him. His advice and efforts will be invaluable to me as I start in this new role. Google still has such incredible opportunity–we are only at the beginning and I can’t wait to get started.”
Q4 Financial Summary

Google reported revenues of $8.44 billion for the quarter ended December 31, 2010, an increase of 26% compared to the fourth quarter of 2009. Google reports its revenues, consistent with GAAP, on a gross basis without deducting traffic acquisition costs (TAC). In the fourth quarter of 2010, TAC totaled $2.07 billion, or 25% of advertising revenues.
Google reports operating income, operating margin, net income, and earnings per share (EPS) on a GAAP and non-GAAP basis. The non-GAAP measures, as well as free cash flow, an alternative non-GAAP measure of liquidity, are described below and are reconciled to the corresponding GAAP measures in the accompanying financial tables.

• GAAP operating income in the fourth quarter of 2010 was $2.98 billion, or 35% of revenues. This compares to GAAP operating income of $2.48 billion, or 37% of revenues, in the fourth quarter of 2009. Non-GAAP operating income in the fourth quarter of 2010 was $3.38 billion, or 40% of revenues. This compares to non-GAAP operating income of $2.76 billion, or 41% of revenues, in the fourth quarter of 2009.

• GAAP net income in the fourth quarter of 2010 was $2.54 billion, compared to $1.97 billion in the fourth quarter of 2009. Non-GAAP net income in the fourth quarter of 2010 was $2.85 billion, compared to $2.19 billion in the fourth quarter of 2009.

• GAAP EPS in the fourth quarter of 2010 was $7.81 on 326 million diluted shares outstanding, compared to $6.13 in the fourth quarter of 2009 on 322 million diluted shares outstanding. Non-GAAP EPS in the fourth quarter of 2010 was $8.75, compared to $6.79 in the fourth quarter of 2009.

• Non-GAAP operating income and non-GAAP operating margin exclude the expenses related to stock-based compensation (SBC). Non-GAAP net income and non-GAAP EPS exclude the expenses related to SBC and the related tax benefits. In the fourth quarter of 2010, the charge related to SBC was $396 million, compared to $276 million in the fourth quarter of 2009. The tax benefit related to SBC was $89 million in the fourth quarter of 2010 and $62 million in the fourth quarter of 2009.

Q4 Financial Highlights

Revenues – Google reported revenues of $8.44 billion in the fourth quarter of 2010, representing a 26% increase over fourth quarter 2009 revenues of $6.67 billion. Google reports its revenues, consistent with GAAP, on a gross basis without deducting TAC.

Google Sites Revenues – Google-owned sites generated revenues of $5.67 billion, or 67% of total revenues, in the fourth quarter of 2010. This represents a 28% increase over fourth quarter 2009 revenues of $4.42 billion.

Google Network Revenues – Google’s partner sites generated revenues, through AdSense programs, of $2.50 billion, or 30% of total revenues, in the fourth quarter of 2010. This represents a 22% increase from fourth quarter 2009 network revenues of $2.04 billion.

International Revenues – Revenues from outside of the United States totaled $4.38 billion, representing 52% of total revenues in the fourth quarter of 2010, compared to 52% in the third quarter of 2010 and 53% in the fourth quarter of 2009. Excluding gains related to our foreign exchange risk management program, had foreign exchange rates remained constant from the third quarter of 2010 through the fourth quarter of 2010, our revenues in the fourth quarter of 2010 would have been $201 million lower. Excluding gains related to our foreign exchange risk management program, had foreign exchange rates remained constant from the fourth quarter of 2009 through the fourth quarter of 2010, our revenues in the fourth quarter of 2010 would have been $132 million higher.

• Revenues from the United Kingdom totaled $878 million, representing 10% of revenues in the fourth quarter of 2010, compared to 12% in the fourth quarter of 2009.

• In the fourth quarter of 2010, we recognized a benefit of $25 million to revenues through our foreign exchange risk management program, compared to $8 million in the fourth quarter of 2009.

Paid Clicks – Aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of our AdSense partners, increased approximately 18% over the fourth quarter of 2009 and increased approximately 11% over the third quarter of 2010.

Cost-Per-Click – Average cost-per-click, which includes clicks related to ads served on Google sites and the sites of our AdSense partners, increased approximately 5% over the fourth quarter of 2009 and increased approximately 4% over the third quarter of 2010.

TAC – Traffic Acquisition Costs, the portion of revenues shared with Google’s partners, increased to $2.07 billion in the fourth quarter of 2010, compared to TAC of $1.72 billion in the fourth quarter of 2009. TAC as a percentage of advertising revenues was 25% in the fourth quarter of 2010, compared to 27% in the fourth quarter of 2009.

The majority of TAC is related to amounts ultimately paid to our AdSense partners, which totaled $1.74 billion in the fourth quarter of 2010. TAC also includes amounts ultimately paid to certain distribution partners and others who direct traffic to our website, which totaled $333 million in the fourth quarter of 2010.

Other Cost of Revenues – Other cost of revenues, which is comprised primarily of data center operational expenses, amortization of intangible assets, content acquisition costs as well as credit card processing charges, increased to $877 million, or 10% of revenues, in the fourth quarter of 2010, compared to $688 million, or 10% of revenues, in the fourth quarter of 2009.

Operating Expenses – Operating expenses, other than cost of revenues, were $2.51 billion in the fourth quarter of 2010, or 30% of revenues, compared to $1.78 billion in the fourth quarter of 2009, or 27% of revenues.

Stock-Based Compensation (SBC) – In the fourth quarter of 2010, the total charge related to SBC was $396 million, compared to $276 million in the fourth quarter of 2009.We currently estimate SBC charges for grants to employees prior to January 1, 2011 to be approximately $1.6 billion for 2011. This estimate does not include expenses to be recognized related to employee stock awards that are granted after December 31, 2010 or non-employee stock awards that have been or may be granted.

Operating Income – GAAP operating income in the fourth quarter of 2010 was $2.98 billion, or 35% of revenues. This compares to GAAP operating income of $2.48 billion, or 37% of revenues, in the fourth quarter of 2009. Non-GAAP operating income in the fourth quarter of 2010 was $3.38 billion, or 40% of revenues. This compares to non-GAAP operating income of $2.76 billion, or 41% of revenues, in the fourth quarter of 2009.

Interest and Other Income, Net – Interest and other income, net increased to $160 million in the fourth quarter of 2010, compared to $88 million in the fourth quarter of 2009.
Income Taxes – Our effective tax rate was 19% for the fourth quarter of 2010.

Net Income – GAAP net income in the fourth quarter of 2010 was $2.54 billion, compared to $1.97 billion in the fourth quarter of 2009. Non-GAAP net income was $2.85 billion in the fourth quarter of 2010, compared to $2.19 billion in the fourth quarter of 2009. GAAP EPS in the fourth quarter of 2010 was $7.81 on 326 million diluted shares outstanding, compared to $6.13 in the fourth quarter of 2009 on 322 million diluted shares outstanding. Non-GAAP EPS in the fourth quarter of 2010 was $8.75, compared to $6.79 in the fourth quarter of 2009.

Cash Flow and Capital Expenditures – Net cash provided by operating activities in the fourth quarter of 2010 totaled $3.53 billion, compared to $2.73 billion in the fourth quarter of 2009. In the fourth quarter of 2010, capital expenditures were $2.55 billion, which was primarily related to the purchase of our office building in New York City, as well as IT infrastructure investments, including data centers, servers, and networking equipment. Free cash flow, an alternative non-GAAP measure of liquidity, is defined as net cash provided by operating activities less capital expenditures. In the fourth quarter of 2010, free cash flow was $981 million.
We expect to continue to make significant capital expenditures.

A reconciliation of free cash flow to net cash provided by operating activities, the GAAP measure of liquidity, is included at the end of this release.

Cash – As of December 31, 2010, cash, cash equivalents, and marketable securities were $35.0 billion.

Headcount – On a worldwide basis, Google employed 24,400 full-time employees as of December 31, 2010, up from 23,331 full-time employees as of September 30, 2010.

Webcast and Conference Call Information

A live audio webcast of Google’s fourth quarter and fiscal year 2010 earnings release call will be available at http://investor.google.com/webcast.html. The call begins today at 1:30 PM (PT) / 4:30 PM (ET). This press release, the financial tables, as well as other supplemental information including the reconciliations of certain non-GAAP measures to their nearest comparable GAAP measures, are also available on that site.

Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties. These statements include statements regarding our continued investments in our core areas of strategic focus, our expected stock-based compensation charges, and our plans to make significant capital expenditures. Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance. The potential risks and uncertainties that could cause actual results to differ from the results predicted include, among others, unforeseen changes in our hiring patterns and our need to expend capital to accommodate the growth of the business, as well as those risks and uncertainties included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2009, and our most recent Quarterly Report on Form 10-Q for the quarter ended September 30, 2010, which are on file with the SEC, and are available on our investor relations website at investor.google.com and on the SEC website at www.sec.gov. Additional information will also be set forth in our Annual Report on Form 10-K for the year ended December 31, 2010, which we expect to file with the SEC in February 2011. All information provided in this release and in the attachments is as of January 20, 2011, and Google undertakes no duty to update this information.

About Non-GAAP Financial Measures

To supplement our consolidated financial statements, which statements are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, non-GAAP EPS, and free cash flow. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the tables captioned “Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures” and “Reconciliation from net cash provided by operating activities to free cash flow” included at the end of this release.

We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures that may not be indicative of our “recurring core business operating results,” meaning our operating performance excluding not only non-cash charges, such as stock-based compensation, but also discrete cash charges that are infrequent in nature.

We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to our historical performance and liquidity as well as comparisons to our competitors’ operating results. We believe these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business.

Non-GAAP operating income and operating margin. We define non-GAAP operating income as operating income plus stock-based compensation. Non-GAAP operating margin is defined as non-GAAP operating income divided by revenues. Google considers these non-GAAP financial measures to be useful metrics for management and investors because they exclude the effect of stock-based compensation so that Google’s management and investors can compare Google’s recurring core business operating results over multiple periods. Because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use under ASC Topic 718, Google’s management believes that providing a non-GAAP financial measure that excludes stock-based compensation allows investors to make meaningful comparisons between Google’s recurring core business operating results and those of other companies, as well as providing Google’s management with an important tool for financial and operational decision making and for evaluating Google’s own recurring core business operating results over different periods of time.

There are a number of limitations related to the use of non-GAAP operating income versus operating income calculated in accordance with GAAP. First, non-GAAP operating income excludes some costs, namely, stock-based compensation, that are recurring. Stock-based compensation has been and will continue to be for the foreseeable future a significant recurring expense in Google’s business. Second, stock-based compensation is an important part of our employees’ compensation and impacts their performance. Third, the components of the costs that we exclude in our calculation of non-GAAP operating income may differ from the components that our peer companies exclude when they report their results of operations. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP operating income and evaluating non-GAAP operating income together with operating income calculated in accordance with GAAP.

Non-GAAP net income and EPS. We define non-GAAP net income as net income plus stock-based compensation less the related tax effects. We define non-GAAP EPS as non-GAAP net income divided by the weighted average outstanding shares, on a fully-diluted basis. We consider these non-GAAP financial measures to be a useful metric for management and investors for the same reasons that Google uses non-GAAP operating income and non-GAAP operating margin.

However, in order to provide a complete picture of our recurring core business operating results, we exclude from non-GAAP net income and non-GAAP EPS the tax effects associated with stock-based compensation. Without excluding these tax effects, investors would only see the gross effect that excluding these expenses had on our operating results. The same limitations described above regarding Google’s use of non-GAAP operating income and non-GAAP operating margin apply to our use of non-GAAP net income and non-GAAP EPS. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP net income and non-GAAP EPS and evaluating non-GAAP net income and non-GAAP EPS together with net income and EPS calculated in accordance with GAAP.

Free cash flow. We define free cash flow as net cash provided by operating activities minus capital expenditures. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that, after the acquisition of property and equipment, including information technology infrastructure and land and buildings, can be used for strategic opportunities, including investing in our business, making strategic acquisitions, and strengthening the balance sheet. Analysis of free cash flow also facilitates management’s comparisons of our operating results to competitors’ operating results.

A limitation of using free cash flow versus the GAAP measure of net cash provided by operating activities as a means for evaluating Google is that free cash flow does not represent the total increase or decrease in the cash balance from operations for the period because it excludes cash used for capital expenditures during the period. Our management compensates for this limitation by providing information about our capital expenditures on the face of the cash flow statement and under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10-Q and Annual Report on Form 10-K. Google has computed free cash flow using the same consistent method from quarter to quarter and year to year.

The accompanying tables have more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures.

Since then, I have purchased the next three in the series of GTA games, each of which I have found more compelling and engaging than the last. I have always liked the finer details in games, and Rockstar seem to pay a lot of attention to this, with seemingly simple tasks such as a character’s movements and engagements with objects around the city. Even components such as giving extras in the game world personalities is something that as a game I can really appreciate and increases the level of gameplay.

However, the motion capture technology employed in their newest game, LA Noire is something which is undoubtedly going to push the boundaries of future game releases. With the main characters having facial technology employed on them, characters can now really portray emotion more than ever before, by using real actors and capturing their motion. In La Noire, everything on the characters faces moves from the mouth and tongue right through to the finer details of the eyes. Seeing that it is Rockstar that has come out with this facial engine technology is something which really excites me, as you would expect the storyline and interactivity to match up to the astounding advancements.

It really bodes well for the future of gaming, imagining if the level of realism in humans can be mapped onto something non-human, making fictional creatures in games such as Final Fantasy even more lifelike.

Click here to view the video clip