Clear Indexes Ideas

Speed of the Web

I have lifted most of this from the Gomez press release. I have not formatted it in the traditional indented and italics format because I have edited out their self promotion and added some additional thoughts from an investor’s perspective.

According to data from the Gomez Last Mile press release, reported by Internet retailer in April, shoppers with a high broadband connection could access a Top 50 retail site, on average, in 5.92 seconds, compared with 15.25 seconds for a low broadband connection and 54.65 seconds for dial-up.

The last mile is defined as the connection between a Web browser user; business or residential; and the ISP providing that user with access to the Internet.

Network applications, particularly real-time, Web-based transactional applications (securities trading, travel reservation, or auction bid) would hit the “wall” when it comes to the last mile. This is where the largest amount of configuration variations, equipment permutations, and user variance occurs. Depending on geography and demographics, users can access the same Web application over ISP connections ranging from static-prone, 24Kbps dial-up connections to dedicated, super-clean, 1.5Mbps T-1 links, and Wi-Fi users connection speed vary, from time to time, depending on the strength of the signal.

The last mile puzzle also includes firewalls, routers, switches and LANs. Then there are all those workstation related variants ranging from processor speed and memory, to the type of operating system and the Web browser version being used.

Web application response times experienced are contingent on all of these factors.

The stats:

Dell provided the fastest response time, at 2.84 seconds, for customers accessing the site using a high broadband connection. Dell was followed by

• Zappos (3.49 seconds)
• OfficeMax (3.63 seconds)
• J.C. Penney (4 seconds)

Using a dial-up connection, Office Depot provided the fastest site response time at 37.82 seconds.

Top 50 Web Site Response Performance: (Response Time in seconds April 01 , 2007 - April 30 , 2007)
Rank	Retailer	Dial Up	Low Broadband	High Broadband
1	Office Depot	37.32	11.92	5.01
2	Eddie Bauer	40.34	11.14	4.16
3	J. C. Penney	40.46	9.86	4.00
4	Office Max	40.67	10.30	3.63
5	Zappos	41.12	9.01	3.49
6	Dell	42.25	8.70	2.84
7	Quixtar	42.38	14.55	5.76
8	Avon Shopping	43.82	11.89	4.71
9	Gateway	44.00	12.39	5.70
10	Neiman Marcus	44.29	13.39	6.16
11	Sears	44.67	14.29	5.74
12	PC Connection	44.85	13.97	7.07
13	Staples	46.28	12.47	4.84
14	Peapod	46.28	18.07	9.02
15	Macys Store	46.80	12.20	4.53
16	Footlocker	48.13	10.88	3.78
17	Nordstrom	49.35	13.86	5.91
18	Williams-Sonoma	49.79	14.11	6.01
19	L. L. Bean	51.02	13.15	5.13
20	Cabelas	51.75	11.01	4.12
21	Chadwicks	51.79	10.74	3.54
22	Netflix	51.86	16.48	7.15
23	CompUSA	52.47	14.81	7.39
24	HSN	53.94	12.96	4.87
25	CDW	54.05	18.57	7.92
26	Barnes and Noble	54.09	15.16	5.60
27	Scholastic	54.17	11.35	4.17
Benchmark Average		54.65	15.25	5.92
28	Circuit City Home	55.55	13.58	4.92
29	Musicians Friend	57.28	13.29	4.55
30	Drugstore	57.31	14.60	5.75
31	HP Shopping	57.58	15.06	6.20
32	Newegg	58.14	14.63	5.61
33	Overstock	58.35	17.82	7.45
34	Victoria Secret	58.76	12.75	4.53
35	Amazon	60.59	14.94	5.61
36	Costco	61.20	17.98	7.43
37	Buy.com	61.73	15.89	5.94
38	QVC	61.78	14.64	4.55
39	FTD	62.06	16.29	6.37
40	1-800 Flowers	62.07	15.70	5.85
41	Tiger Direct	65.83	17.50	5.63
42	Apple Store	66.34	17.52	6.24
43	Toys R Us	66.70	21.09	7.47
44	Oriental Trading	67.23	19.98	7.72
45	The Home Depot	67.58	20.82	7.71
46	Sony Style	67.63	25.81	7.80
47	Wal-Mart	68.54	20.13	6.79
48	Best Buy	70.01	23.14	8.47
49	Target	71.43	23.37	9.22
50	Gap	81.08	28.87	11.81
Source: Gomez Last Mile network, May 2007

All data was collected 30 times an hour from Dial Up, Low and High Broadband users across the United States, 24 hours a day except between 3AM to 6AM EDT. Response Time is the average of each test measurement to download the web site content divided by the total number of tests, according to Gomez.

The Web Now Influences China

Given the interesting market activity in China over the past week, we thought it would be of interest to our readers to devote this weekly review to commentary on the Chinese economy and our take on it. Many believe that the 4% drop in the Shanghai Composite index on Thursday helped spark a selloff here in the U.S. The near 4% rise in the China stock market today may have helped drive buying in the U.S., so we can see that the link between our stock market and the Chinese market appears to be gaining importance.

After reading excerpts from a report from 1st Quarter 2007 edition of the China Quarterly Survey by BIGresearch, the numbers tell an interesting story. Chinese consumers are impacting the growth of their own economy. In other words, it is not all exports.

Exports are still the main story as Keith Bradsher reported 4/18 in the NY Times.

To be sure, China’s exports to the United States are huge and growing, as is the trade imbalance, which is significantly larger than the European Union’s deficit with China.

China is still nearly 25 times as dependent on exports to the United States as a percentage of its total economic output as the United States is on exports to China. Given that the Chinese economy is less than a quarter the size of the American economy, it is all the more striking that Chinese exports to the United States are worth more than six times American exports to China.

China sent more than 31 percent of its exports to the United States in 2000, but that dropped below 24 percent in November and reached 22.7 percent in February, according to a Goldman Sachs tabulation that included Chinese goods trans-shipped through Hong Kong. Exports to the rest of Asia have leveled off, while those to European Union countries rose slightly. Exports to the rest of the world, notably India, Brazil and Russia, have doubled in the last seven years, to 32 percent this winter. 

As the Chinese economy continues to overheat as many more mature countries are leveling, discovering the sources of sustainable growth are key to the investment process.

The statistics are proving to be ever increasingly important as the rest of the global economy is planning and scheming to sell to the largest population in the world. Most of the industrialized world from Asian neighbors to the United States has drooled at the opportunity to tap the mother lode of all populations. A key issue selling into the billions of citizens has been the basics of their earning power and savings rates, which are not comparable to the more mature economies of Japan, Western Europe or the US.

The BIGresearch survey highlights some interesting statistics. There are 380 million young (18-34) people, 191 million of which are men that are consumers of luxury brands and other key consumables. Imagine exporting to China, and gaining some of our currency and balance of trade back.

Key findings of the survey* include such things as:

• European brands continue to be preferred above U.S. brands in key categories such as Clothing, Cosmetics, Furniture and Jewelry
• Consumer confidence remains very high
• Planned expenditures on electronics are much higher in China than in the U.S.
• Chinese men and women say surfing the net is their #1 leisure activity
• Word of mouth is even more influential to Chinese consumers than U.S. for Electronics, Clothing, Autos and Pharmaceuticals

Though Word of Mouth ranks as the number one influence for electronics purchases for men ages 18-34 at 52.6% in the U.S., only 38.6% of Chinese men ages 18-34 say the same.

Acting globally and thinking locally has different meaning in different parts of the planet.

Top 5 Media Influences for Electronics* (Men Ages 18-34)
China	United States
Read article on product	Word of Mouth TV/Broadcast
Magazines	Read article on the Internet
Read article on product Magazines	TV/Broadcast
Word of Mouth	Internet Advertising
Source: BIGresearch, April 2007

The newest ETF for China may ultimately be global exporters to China. We haven’t put an analyst on it quite yet, but its day may come sooner than you think.

*The China Quarterly by BIGresearch, primarily tracking 18 to 34 year olds' positions on purchase behaviors, brand preferences, purchase intentions, product usage, health topics and future spending in key product categories, as well as media consumption, simultaneous media usage and media influence on purchases.

A Four Horse Race. Or More data to ponder or crunch.

According to data aggregator eMarketer US ad revenues at Google (GOOG), Yahoo (YHOO), AOL (TWX) and MSN (MSFT) represented 57.4% of all US Internet ad spending  in 2006. Further they estimate that the big will only get bigger reaching 66.6% in 2007. Below is eMarket’s chart in percent and then a second chart represented in dollars?

US Online Advertising Revenues* at Top Four Portals As a Percent of Total Online Advertising Spending, 2004-2007
	2004	2005	2006	2007
Google	13.1%	19.2%	25.0%	32.1%
Yahoo!	18.4%	19.4%	18.3%	18.7%
AOL	6.8%	7.2%	7.5%	9.1%
MSN	9.4%	7.8%	6.7%	6.8%
Total for top four portals	47.8%	53.7%	57.4%	66.6%
Note: Numbers may not add up to total due to rounding; *net of traffic acquisition costs (TAC) Source: company reports, 2004-2007; eMarketer calculations, February 2007
081313	www.eMarketer.com

"As traditional marketers move more money online, they look for safety in established, mass-market brands, and portals are that," says David Hallerman, eMarketer senior analyst and the author of the new Portal Marketing: The Big Four report. "Other than Google, the large portals are at least 10 years old, and all four average 100 million or more unique visitors monthly."

US Online Advertising Revenues* at Top Four Portals As a Percent of Total Four Portals, 2004-2007 (Millions)
	2004	2005	2006	2007
Google	$1,264	$2,410	$4,095	$6,265
Yahoo!	$1,776	$2,439	$2,996	$3,641
AOL	$655	$905	$1,235	$1,772
MSN	$906	$979	$1,092	$1,318
Total for top four portals	$4,601	$6,733	$9,418	$12,996
Note: *net of traffic acquisition costs (TAC) Source: company reports, 2004-2007; eMarketer calculations, February 2007
081311	www.eMarketer.com

All four firms have spectacular growth especially when compared to traditional media which is considered mature or deflating. Google’s year over year growth is decelerating. As investors in Google, we are not concerned. When examining the data in terms of total dollars the growth rate is still increasing. Further much of the “this company must plateau” is well priced into the stock.

My disclosure and continued conclusion: Long Google (GOOG)

Disclosure: Google Inc. (GOOG) is held in the Clear Large Cap Growth portfolio which is managed on a separate account platform. Mr. Corn is the founder and CEO of Clear Asset Management LLC and owns (GOOG) directly through his investment in the Clear Large Cap Growth portfolio.