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Whether at the casino or the race track, the house always wins. That’s the way it has always been, too, with Internet advertising. Nearly all Internet ad dollars are spent in two ways: 1) buying ads from advertising networks whether that network is Google or Yahoo or even IDGTechNet, which sells space on this rag, or; 2) buying search terms — the right to have your ad shown every time someone searches on the word hermaphrodite, for example. Network profit in those transactions comes from arbitrage — buying low and selling high. But what if there was a more efficient way to buy and sell Internet ads? As of this morning it looks like there is a better way called Clickochet (for Click Richochet), the first ad trading network.

Clickochet is the baby of my old friend Paul Tyma and I have no financial or other interest in the product or the company. It’s just something cool to write about. I want you to know about it because it is different, probably a lot more efficient than competing solutions, and it might just change the world.

Paul is a great programmer who spent a number of years working as a senior developer at Google where his major achievement was a major rewrite of Gmail. He is also the author of Mailinator, one of the first and best anonymous e-mail services. But the idea for Clickochet sprang not from anything at Google, but from a Christmas gift Paul gave to his girlfriend Tanna, who runs a celebrity gossip blog called StarSnarks.com.

“She started it last fall and is pretty passionate about it,” Paul explained. “At some point she put up AdSense on the site and, no kidding, was making about five cents a day. She didn’t have a ton of traffic so it wasn’t terribly surprising. As a Christmas gift I bought her $100 worth of AdWords to help her get traffic. With no exaggeration this campaign lasted three days and yielded a total of 100 clicks. If you do the math, I successfully turned $100 into about 15 cents by converting to and from ad impressions.”

Ad networks work by selling ads, but if you close the loop between publishing and advertising there is an exchange rate between money and ad impressions. Existing ad networks create a market inefficiency in that exchange to make money. Using Tanna’s example, above, $100 bought $0.15 worth of ad impressions. That’s $99.85 in gross profit there, some of which goes to web sites participating in the program but most goes straight into the massive fuel tanks of Eric Schmidt’s G5 jet.

That is the way Google makes so much frigging money.

All web sites want traffic, yet I won’t buy ads for cringely.com. Why not? Because it is a non-economical transaction. The only revenue I get from this site is from ads, but as the example above shows it would be insane for me to buy ads to sell ads. That’s a perpetual motion machine and perpetual motion machines are always defeated by friction — in this case the friction of the ad network’s revenue cut. This is the market inefficiency that ad networks introduce. Ad networks provide value in other ways, but this closed-loop is not it.

It might make sense to buy ads for this site if I was offering more than just ideas. If I was selling diamonds or penis enlargement pills, okay, but buying ads just to sell ads is a fool’s game. As always, though, there are plenty of fools.

That’s when Paul came up with the idea of trading ad impressions. Tanna could show an ad for other small sites like hers and those other small sites could show her ad. It’s like a link exchange but way smarter because it isn’t just for Search Engine Optimization (SEO). It’s an ad trading network.

Clickochet is free, social, and tied to Facebook and Twitter. Clickochet is a social ad community for web site owners like me for whom buying ads doesn’t make economic sense.

“I realized right away that ad-for-ad didn’t exactly work,” Paul said. “First, when you show a normal text banner ad, you’re not just showing one ad — you are showing three. There are three text ads inside a 728×90 banner ad creative. I can pass that multiplier back to the Clickochet member. So to start, if Tanna shows 1000 banners in one day, I can show 3000 of her smaller ads across the network.”

Enter at this point the inevitable honking-big algorithm to make this all work, because there are many factors that come into play when doing transactions like this — factors like ad placement, ad quality, and even my reputation as a journalist — to determine the exchange rate for each ad. So instead of taking the traditional ad network route of converting clicks directly into dollars (CPM), Clickochet converts ad impressions into virtual currency.

Here’s where it gets very geeky and leaves traditional ad networks in the dust, because where a DoubleClick would take the money and run, Clickochet introduces a clever multiplicative effect.

On Tanna’s blog right now she’s showing a skyscraper containing five ad-equivalents. So showing one ad on Starsnarks could get up to five ads for her site showing on the network. She can get more out than she puts in.

There are 40 billion webpages in Google’s index, almost none of which make a profit by selling ads. Clickochet is, in some respects, an ad network for the long tail — the 39 billion web pages where participating in the present monetary ad system makes little sense. For those pages gaining traffic is important and forgoing nickel-a-day ad revenue is painless.

Clickochet removes the market inefficiency that ad networks create to make money. There are two facets to that inefficiency. One is money: the networks take their cut. But the other is time. If you took your AdSense money and paid into AdWords with it you’d be delayed 30 days because Google waits that long to pay and so do all the other networks. You finance Google. But Clickochet is an instant transaction. The moment you get an ad impression, you can configure the system to either bank the credits, or spend them immediately. Show an ad on your site, and 3 of your smaller ads show nearly instantly elsewhere on the network.

And unlike the $100 AdWords campaign Paul bought for Tanna, a Clickochet campaign runs indefinitely. You get out of the system only what you put in, but on a perpetual basis. If Tanna is only putting 1000 ad impressions a day into the system, she won’t get 1000 new users overnight, but will increase her traffic over time.

Because Clickochet converts ad impressions into virtual currency, you can save them instead of spending them right away. Say you are launching a new product or even a new company in six months. You can run ads on your knitting blog, bank the credits, then spend all your money in a big ad blast when the product or company is ready to go. Your friends and family investors can even pay you in ad impressions if they like.

Here’s another even more subtle effect. I have a link on this site for portraitquilts.com, which is run by my little sister. She wants the link mainly for Search Engine Optimization but doesn’t mind if you buy a quilt or a pillow with Grandma’s picture on it (or Elvis’s). I get a lot of traffic here, which is good for Sis to some extent, but my readership is also very stable. The same people keep coming back week after week after week. Eventually you’ll stop clicking on that quilt link and my good brother brownie points will cease to accumulate. The link will go stale as advertising, if it hasn’t already.

With Clickochet, however, I could distribute ads for my sister’s site elsewhere on the ad network — perhaps even on sites more relevant to photo quilts than this blog. I can directly convert my ad impressions into my sister’s. To be fair, Google would let me do this too — make money off cringely.com and buy ads for portraitquilts.com — but I’d never do that because it would be a losing proposition.

Clickochet is a great idea and since it is coming from a great developer I’m pretty sure it will work technically. But can Clickochet gain critical mass? That’s the problem faced by all new networks: they need lots of traffic to succeed but, absent some viral effect they don’t have any traffic to start. PayPal famously handled that simply by sending people money, but most networks can’t afford that gimmick so they die. What makes Clickochet any different?

The clever answer here is that Clickochet may well have all the mass it needs to start, courtesy of Paul’s other site — Mailinator.com.

“I’m doing a virtual economic stimulus,” Paul explained “I’m injecting Mailinator’s several hundred thousand ad impressions into the system every day, without taking any out. Active users could get a lot of free ad impressions.”

Mailinator’s ad inventory allows Clickochet on its first day (today) to start where it might otherwise be a week or a month into viral growth. Paul hopes that’s past the most likely failure point.

Yeah, but how does Clickochet expect to make money?

Initially it will be as a cheaper competitor to AdWords. Many sites will find this to be a new (and cheap) venue for advertising. They will simply buy ads on the network just as they would through Google. But where the term “mesothelioma” costs about $50 on AdWords, it could be much cheaper on Clickochet.

“We’ll level the cost of ads, ” says Paul. “This won’t help with cheap search terms but creates a new outlet for currently expensive ones. With the right ad sales team in place what percent of that market could we capture?”

We should all want Clickochet to succeed just the same way we want Southwest Airlines to start serving our local airport — because it will drive down the profit margins for all ad networks, increasing transparency and efficiency and saving money for us all.

The house will still win, but their profits won’t be so obscene at our expense.

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A few months ago I wrote a column giving advice to Larry Page when it was announced that he would be taking-over once again as CEO of Google. Not that Google is especially in trouble, but it is a big job getting 50,000 feet marching in the same direction. In order to make that happen I urged Larry to create startups within Google. And sure enough, as he took over the top job last week and started announcing changes, one of the most radical was something very similar to the “five guys in a rented apartment” scheme I had proposed. Who knows, maybe Larry reads this rag, but probably not.

While I say Google isn’t in trouble, that doesn’t mean the company isn’t stuck. Google is very stuck. Like any successful and mature tech enterprise they are very adept at leveraging market advantages. PageRank, AdWords, AdSense are the big money-makers still. Everything else — everything else — is a page view generator and nothing else. Gmail, all the web apps, YouTube — all they are for is generating page views and displaying ads. There hasn’t been a successful new business at Google for more than a decade (no, Gmail is not a business, nor is Android). So Google is still a fabulously successful enterprise and great at making money, but it is a stuck very successful enterprise.

Google hasn’t shown it is very good at inventing new businesses internally and they aren’t good, either, at buying businesses externally. Name one business Google has purchased and taken to a new level of greatness. They tend to buy companies for the people and then throw away or forget the technology.  Name one CEO or CTO hired by Google with an acquisition who is punching out products today. It can’t be done. Graham Spencer, Rohit Khare, Max Levchin just to mention three: what happened to them?

They disappeared. I’m sure they are plenty busy with this and that, but they are also invisible.

So Larry Page has his work cut out for him and I commend him on his first week on the new job. Streamlining management, making Google’s social business a priority for everyone, coming up with new ways for Googlers to start their own businesses inside the company — that’s all great. But it isn’t enough.

Take that internal startup program, whatever it is being called. In principle it is a great idea, but the implementation is flawed. The internal startup founders, for example, are given two years to make their business work — two years before they have to deliver anything. That’s crazy.

Maybe it takes two years for Google to delivery anything, but Google is now a big stupid company with poor communication skills to boot — in many ways a worse Microsoft than Microsoft. A startup that hits its first deadline at 24 months is a startup that is over-capitalized and too lacking in fear.

Listen, these Google engineers with their startups will have already been thinking about their idea for months or years before they ever submit it to management. They need to deliver a prototype in two months, a solid beta product in six months, and have a full release in 9-12 months, tops. After all, they aren’t spending any time at all looking for money, and that’s what startup CEOs do probably half of their time.

Giving them two years is saying the engineers should take a year on the beach first, then get to work.

And if the startup idea fails then the Googlers working on it should fail, too. They should be fired.  Now there’s a proper incentive to succeed, not this fantasy startup thing.

Maybe Larry has forgotten all this, maybe he’s just slow, but he’s also wrong. This internal startup program may well keep people from leaving Google for awhile, but it won’t generate many new businesses, because it creates the wrong atmosphere — one that actually encourages failure.

But at least it is a step in the right direction.

Now what, Larry?

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My last column was about Eric Schmidt losing his CEO job at Google and how that company’s failed bid for GroupOn may have been a factor in Schmidt’s demise.  Weep not for Eric, who lasted in the CEO position for 10 years and earned $5.6 billion, which puts every other U.S. CEO to shame, even Steve Jobs. It’s interesting to consider Schmidt’s career arc and how he got where he is (isn’t?) today.

Eric Schmidt started his post-academic work life at Sun Microsystems where he loved all the smart people but was ultimately frustrated by management that he felt was simply not as smart as he.  Remember Scott McNealy was in charge of Sun when Schmidt left and McNealy rightly admitted that Sun’s 1990s server ascendancy with the Internet bubble was a happy accident as was Java.

Schmidt moved-on to Novell, another company filled with smart people but also a company in crisis or they never would have considered a non-Mormon for CEO.  There he slammed into a culture with completely different values, one where he was ineffectual because as an outsider he simply never got it.  Schmidt came away from Novell determined that the best way to find a suitable culture for his brilliance was by building it himself.

When Andy Bechtolscheim introduced Eric to Google co-founders Larry Page and Sergy Brin, Eric quickly saw this as his chance to create another Sun from scratch with himself as CEO while avoiding the entrenched cultural problems he had faced at Novell because almost everyone would be a new-hire.  That was 24,000 Google employees ago, so what we see in Google today is definitely a reflection of Schmidt — an intellectually curious but not especially passionate outfit.

I believe it is this lack of passion that ultimately came to hurt Schmidt at Google.

Is this likely to change with Larry Page as CEO? I think it will a bit. Page is more passionate than Schmidt. His view is less stratospheric and he allows himself to be a little more vulnerable.  But this very vulnerability will be his downfall because most of what he does isn’t likely to succeed and that will tell on Page very quickly.

How long again did Jerry Yang last as CEO of Yahoo?

Now to GroupOn, which recently spurned a reported $6 billion buy-out bid from Google. I posed the idea in my last column that $6 billion was too much for GroupOn as a company that seems to have no proprietary (and therefore protectable) technology and a lot of emerging direct competitors.

Then I read this week an excellent paper by the very clever Ahmadali Arabshahi that analyzes the GroupOn business model showing why be believes it is such a perfect fit for Google.  Remember my point wasn’t that the merger was a bad fit, just that it was too expensive and Google should instead build it’s own GroupOn-type service I called GoogleOn, which they now appear to be in the very process of doing.
Ahmadali sees synergy for Google with GroupOn’s Chicago-based sales force.  But he sees even greater potential in what Ahmadali calls “price discovery” — Google’s ability to use what it knows about our consumer behavior right down to MAC addresses and gmail content to individually price each daily offer so the optimal number of us accept its terms.  Remember that’s the basis of a GroupOn — a substantial discount on some local good or service offered for only one day and to be paid for up-front.

The weak spot in GroupOn’s business model, as Ahmadali notes, is that it is hard to scale a single offer per market if you aren’t selling exactly what that market wants at exactly the price it is willing to pay. He thinks the algorithm jockeys of Google could optimize GroupOn and make it even more of a commercial juggernaut.

Against this my friend Ed Kohler from Minnesota raises some very well-informed concerns. The GroupOn sales force may be over-rated, Ed thinks, but more importantly the GroupOn deals aren’t even as good as can be found on sites like restaurants.com.

I didn’t know that, did you?

Add to this the fact that a small percentage of GroupOns are paid-for but never redeemed (the company and its partners surely count on this for substantial extra profit) that GroupOn risks alienating we normally docile consumers.  We may be stupid but eventually we catch-on and GroupOn, having turned-down Google’s $6 billion, might shortly fade as just another Internet fad.

I come down somewhere in the middle of this argument, less concerned about either Google or GroupOn and more concerned about, frankly, me.  This is an old story.  I wrote a column years ago at pbs.org arguing that pages like this could be easily paid for not by advertising but by readers throwing coins in an electronic tip jar. The very next week PayPal invented PayPal Donate to solve this problem (I still have the e-mail from PayPal thanking me for the idea) but PBS would never let me use it.  Time to start thinking again.

I believe there’s a logical extension of the GroupOn business model to almost any affinity group, an example of which could be the readers of this rag.  What if I eliminated ads entirely and replaced them with a quarterly chance to buy something at a huge volume discount?  It would have to be something most of us would like to have and the discount would have to be very real (you tell me what that would be).

If a few thousand of us were captivated by the offer this space could be easily sustained ad-free.  It’s an idea I have toyed with in many forms for the last couple years. Not long ago I came up with the idea for a new form-factor PC I thought could serve as the first offer. I’d sell them under the CringeCo label, I thought, though they’d be made, like everything else, somewhere in Asia.

Alas what I thought I’d invented was essentially an iPad. I had a couple advantages but not enough to really compete, so the offer never happened.  Yet the business model I think could still be a success for mid-size web pages like mine.

Let a thousand GroupOns grow.

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No, Eric Schmidt didn’t step down from being CEO of Google to take Steve Jobs’s position at Apple. I’m fairly certain Schmidt was demoted. Or if he wasn’t, then he should have been.

From a strict business perspective I suppose it’s ridiculous to criticize Schmidt’s performance at Google, but that won’t stop me. The guy has done a fabulous job of optimizing search and web advertising but nearly everything else he and Google have done has been a failure. What else does Google make money from other than search and ads?

Nothing.

Yeah, but YouTube is almost profitable, right?

Hardly. While YouTube may be operating at near break-even that completely ignores the minimum $5 billion sunk and lost in the video sharing venture over the last several years. YouTube is still years from breaking-even on a net-net basis.

But the real killer for Eric Schmidt — the bonehead move that would have gotten him fired had I been on the board — was that $6 billion offer for GroupOn.

Here’s what Google could have done — should have done. First, take four top engineers and set them up like a startup in a rented apartment, denying them any access to the Googleplex. No free massages and definitely no unlimited Froot Loops. Google has grown to the point where it is virtually impossible to get anything done. So just like IBM did with the PC, a GroupOn clone would have to be done as a completely separate renegade operation. Four engineers, two months, and GoogleOn would be ready to go.

Then simply pay every adult in America $10 to join.

That’s about 100 million members or $1 billion. See, I saved Google five billion dollars.

It’s actually even better than that since GroupOn has only 50 million members.

Buying companies yields far more instant advantage than building them, I know. In Groupon’s case Google would get effectively irrelevant, copyable technology along with their entire user base. But $6 billion? Really?

My plan is way better.

Trying stuff that “doesn’t work” until “something does” is awesome. But seriously, when will the “something does” part begin for Google? The company is so financially successful because of its one trick, but at some point even at Google there is ultimately someone to blame. In this case that’s Eric, not so much for offering GroupOn $6 billion, but for getting turned down. The offer stinks of desperation and impotence. And to be rejected makes it even worse.

We can definitely say Eric did not screw-up search, but can we say anything else? Remember when Microsoft “missed” the internet? Well Google “missed” the Facebook.

Now understand that for all my complaints Google is going nowhere but up, with the economy slowly recovering and with that Internet advertising. But I’d say Eric had his shot. Unfortunately Larry Page probably isn’t the hammer Google needs, either. Google has super people but a lot of them seem to be in a rut. If Larry could have changed that, wouldn’t he have already done so?

I don’t know who should be the next CEO of Google, but I know who I’d hire to be the next head of Google HR.

Yahoo’s Carol Bartz.

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Google Labs has this new lexical research tool you may have read about called a Book Ngram Viewer, which allows you to peek inside five million books published between the 15th century and 2008 to see how many discussed antigravity and when:

Semiconductors:

Michael Jackson:

And good old-fashioned fornicating:

But most important of all, since this is simply a new form of Googling we’re talking about, we can look up ourselves:

Obviously, as my young and lovely wife frequently says, my best days are behind me, while fornicating seems to be more popular than ever.

But wait, there’s more!  Since these are books we’re talking about and books take time to publish, or used to, my literary popularity probably peaked earlier, in say 2001.

And if you look really closely at the numbers on the y-axis you’ll see something truly amazing.  Fornicating is not only on the rise, it is eight times as popular as I am.  Antigravity is 1.2 times as popular as fornicating, which is either senseless or a really amazing bit of news.  Michael Jackson is four times more popular than fornicating (38 times more popular than me).  And semiconductors — semiconductors — while they have been in decline since 1990 (fully 12 years before my career hit the skids) were at their peak 7.5 times as popular as Michael Jackson, 30 times more popular than fornicating, and 240 times as popular as me.  There’s simply something wrong about that one.

Now talk among yourselves.

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There’s a dispute going on right now between Comcast and Level3 Communications concerning the peering agreement between those two companies. Comcast says the dispute has nothing to do with the fact that Level3 just got the Netflix video streaming contract while most observers think that’s all it has to do with.

I think so, too.

Peering is at heart nothing but restraint of trade. Peering came about when various Internet backbone providers noticed they were all connected to the same big data centers and points of interconnection, normally inside telco central offices. Simply pulling an Ethernet cable from one rack to another could interconnect millions of users from two different backbone providers, saving time, distance, router hops and total bits in the process. Peering agreements typically involve no exchange of money since they are intended to be between peers — very similar companies of roughly comparable size that would be sharing equal numbers of bits back and forth. Peering agreements were for big companies, especially backbone providers interconnecting with the fundamental idea that they’d be giving as many bits and they got and therefore no direct compensation would be required. It also kept smaller companies out of the backbone business because they were made to pay, and dearly.

Level3 is mainly a backbone company that is lately delivering a lot of streaming video, too. Comcast points to the disparity between the number of Netflix video bits served (a lot) to the number received (almost none for Netflix other than some Quality of Service data and of course the movie orders). That’s not the deal, says Comcast, which wants Level3 to pay the difference in cash.

On the other hand, Comcast for the most part isn’t an Internet backbone provider. They have some backbone assets, sure, but mainly they are America’s largest broadband ISP. So while Comcast can fault Level3 for taking advantage of their peering agreement terms, Level3 could as easily drop peering with Comcast altogether, still getting to Comcast viewers through other peers, though with the addition of some latency from the extra hops required.

Note that Netflix formerly did its streaming through Akamai’s Content Distribution Network (CDN) which shares revenue with participating ISPs.  Level3 probably got the Netflix gig by beating Akamai on price and they beat Akamai on price because they are relying on that darned peering agreement to make it possible.

As an ISP, Comcast could afford to drop one backbone, but not all of them, so Level3 has some power here — more than many commentators have noticed.

There is a lot of posturing here, so let’s try to figure out the real issue, which I think is Google.

Google has long wanted to drop a rack or a container or at least its own fiber connection two hops from every broadband user in Ameica and eventually the world. They’d like to do that through peering agreements like Level3 and certainly have as much of an argument as Level3 has for doing so, given Google’s own fiber assets, which are certainly more than Comcast’s. But Google will pay for access if it must, because global domination is worth the price.  The search giant is willing to pay if it must for guaranteed access.

Comcast knows this. As America’s largest broadband ISP, Comcast stands to gain more than any other company from allowing Google to run fiber into every head-end data center the company has. But Google won’t pay if they don’t have to. So to make sure Google pays, Comcast has to make sure Level3 pays.

That’s all it is. Both sides are distorting the peering agreement like crazy to make their points, which aren’t about equity, net neutrality, user rights, legal theory, who is actually paying for the bandwidth (customers), or anything else — just Google’s money.

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If you think AOL actually intends to buy Yahoo, you are wrong. That story hit the press this week but it’s a ruse to motivate Google exactly as I explained a few days ago. AOL has neither the money nor the motivation to buy Yahoo, which is analogous to a bus company buying a poorly-managed airline.  AOL just wants to make Google jealous.

Here’s what I think happened. This is pure speculation on my part, of course, but I know most of the players and am even correct from time to time. I think one or more private equity firms brought the deal to AOL: they’ll put up the capital if AOL’s Tim Armstrong will manage the combined company, putting Carol Bartz out of her misery at Yahoo. This is not a bad idea, per se, except it conflicts with AOL’s current strategy in that Google could probably get government approval to buy AOL because their businesses are so different, but that difference largely goes away if AOL buys search-heavy Yahoo.

If AOL abandons its Google-centric strategy (selling itself to Google), then buying Yahoo is fine. But they can’t have it both ways.

Why, then, is AOL apparently considering a play for Yahoo? I’m not sure they are, but if the talk continues my guess is it is to force Google’s hand.

This sort of thing happens all the time. Here’s an example of what I mean. A privately held U. S. company is in talks to be acquired, wants to be acquired, but the negotiation is taking too long or the numbers aren’t high enough. What’s to be done? They can give-in and accept the lower offer. They can walk away from the deal hoping the acquirer will come back with a higher offer to get talks going again. Or they can take what’s behind Door Number Three, which is registering for an IPO on the Hong Kong Stock Exchange.

Door Number Three is the smart move because, if successfully completed, that IPO will instantly double the eventual cost of acquiring that company at a later date. Acquirers that might have waited or deliberately slowed negotiations suddenly have to decide what the company is really worth to them and pay it, quickly.

I think that’s what’s happening here with AOL and Yahoo. There are some synergies, sure, but the potential deal has some real complications, too. Google doesn’t want Yahoo. Google might want AOL. AOL is certainly a lot cheaper for Google than buying Yahoo on almost any measure. So AOL is rushing the net, hoping to force the play on Google.

It should be interesting.

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TechCrunch, a company made up of tech blogs somewhat like this one as well as classified advertising and some events, announced its sale last week to the new-old AOL for a price widely, broadly, and deeply rumored to be $30 million. Nobody will officially confirm this price but I have no reason to believe $30 million is wrong. It is way too high, but it probably isn’t wrong. The better question is why would AOL pay TechCrunch four times what it is actually worth?

I think I know why.

Since I am not known as an equity analyst, you might wonder what makes me believe that TechCrunch is worth only a quarter of the rumored sale price? Well last year, in a moment of personal financial angst, I nearly sold a minority interest in this rag to Mark Cuban. And part of that experience involved valuing my product, which if you squint hard looks kind of like a little TechCrunch. That company was one of my comps. And based on the price Cuban was willing to pay and the relative traffic stats of our two enterprises, I’d say TechCrunch in the current market is worth about $7.5 million.

Getting the other obvious question out of the way: Cuban let the four (4!) contracts we’d negotiated with his legal team sit on his desk unread for two months until I finally walked away in disgust. The guy was trying to buy the Chicago Cubs then, which I understand was a complex (and ultimately unfruitful) venture, but it left me with nothing but a $15,000 legal bill. My only joy in this is, I suppose, that one of the contracts said I couldn’t blog about Cuban and I’m glad not to be bound by that.

Back to TechCrunch, AOL paid so much because they had to. TechCrunch is cool and AOL is not. AOL wanted to be cool so they had to pay more for the honor. And thinking of it that way a convergence number of $30 million actually feels about right.

That explains why TechCrunch would require at least $30 million from AOL, but doesn’t come close to answering the question of why AOL would need $30 million worth of TechCrunch? What is driving this economically-unsound acquisition?

Simple: AOL is making itself into the very media machine it expects Google will eventually want to buy and that media machine would have to include a lot more authoritative technology coverage than AOL currently provides.

Keep this idea in mind. Every move AOL makes from here on is done solely with Google in mind.

AOL CEO Tim Armstrong came from Google and knows that company as well as anyone. I am told he is convinced that Google will eventually have to give up its idea of not paying for content and will buy a big journalistic organization with some of the $30 billion in Google cash that’s lying around Mountain View.

In Armstrong’s view Google could buy Time-Warner, repeating the whole AOL Time-Warner debacle; it could buy Yahoo; or it could buy AOL. No other content providers are big enough to satisfy Google’s expected hunger. I’m told that Armstrong quite rightly sees a stigma on Time-Warner, that Yahoo isn’t a pure enough play and risks anti-trust problems in the search space, while AOL is just right.

All of this is hearsay of course, but it makes sense to me. And if it is true we should then expect AOL to go on a crazy acquisition spree making sub-$100 million buys of online firms in the tech and financial markets that command high ad rates.

I happen to believe that Armstrong is right about Google’s eventual intentions, even if Google doesn’t yet know it themselves. But that belief combined with the fact that I have pretty good idea what I, Cringely is worth in the current market does not mean any transactions are looming here.

We are no longer seeking investors, thanks.

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We all know Google’s corporate philosophy is “don’t be evil, ” but what does that really mean? Is it okay, for example, to be just a little evil, rather than bad to the bone? Or is it okay to enable evil in others? The latter case certainly represents the minimum coefficient of evil I see operating at the Googleplex now that I know the search giant is involved with the Online Lenders Alliance. You know, payday loans.

Payday loans are cash advances provided to consumers until their next pay cycle secured by post-dated checks with most advances not exceeding $500. These loans are for people who can’t find money any other way to buy milk for their kids. Very few get payday loans to buy Springsteen tickets. And with interest rates that often exceed 400 percent annually, you can see why I might think payday lenders are evil.

Get behind on a payday loan and most borrowers never catch-up.

The Online Lenders Alliance is a trade group comprised mainly of payday lenders, though it also involves call centers, collection agencies (natch), lead-generation companies, credit rating agencies (though not the ones you have heard of)… and Google, which had a booth last month at the OLA convention in Chicago.

The idea of Google having a trade show booth at all surprises me. Remember this is no-touch, algorithmically-driven Google, which generally doesn’t like to get involved in public events involving, well, people.

But Google was involved with the OLA and I have to wonder why? Were they there just to sell advertising? Certainly payday lenders have migrated en masse to the Internet and do a ton of business through Google ads. But that wouldn’t necessarily lead inevitably to a trade show booth. Auto parts vendors sell tons through Google, too, but I don’t see Google on the exhibitor list at the big Specialty Equipment Manufacturers Show (SEMA) in Las Vegas.

Maybe Google was there as an aggregator and seller (or even buyer) of consumer data. This type of Internet lead is an underwriter’s dream because once consumers develop an “I no longer care” attitude they supply more private data (including Social Security numbers) as well as more general data — up to 80 fields worth! Google might want to buy that sort of information to add to what they already know about our searching and other online habits.

Whatever Google’s motivation, it is pretty clear the company views payday loans as a special case. When I did a Google web search on the term “payday loans” for example, the search results placed the uniformly negative news items near the bottom of the results, below the fold as we used to say in the newspaper business. Similar web searches on the terms “mortgage loan” and “auto loan” put the news in each case near the top of the results, significantly above the fold where it was more likely to be seen.

Why would Google do that? Payday loans are despised by consumer advocacy groups, governments, and my Mom, alike. Nobody likes payday loans, except of course the companies that make billions providing and servicing them.

There are lots of big companies that benefit from payday loans. If you wonder where payday lenders get their money, for example, it is from the same banks where we have our checking accounts. The biggest backer of payday lenders is reportedly Wells Fargo.

But enough of this speculation! The best way to find out why Google was exhibiting at the OLA show would be to simply ask them, which one of my readers did as favor to all of us. And the answer he got from folks manning the Google booth was surprising — or at least it surprised me. He was told “the (payday loan) industry is ripe with inefficiencies, shady practices, and shady people. Coupled with overwhelming consumer demand, Google believes it can right these inefficiencies, provide better transparency, and ally with consumer protection agencies. ”

If I heard correctly, that means Google is thinking of entering the payday loan business.

I can’t tell, is that evil or not?

Like a lot of big tech companies, Google is sitting on a ton of cash — $30 billion — that is just dragging-down earnings because interest rates for non-payday-type investments are close to zero. That’s 10 times the total float of the entire payday loan industry! If Google took even half that money and started lending it online, it would drive payday interest rates sharply down to, say, 20 percent — still an order of magnitude better than an Apple earns on its stash of cash.

Earning 20 percent interest on $15 billion would increase Google’s profit by $3 billion per year for an increase of almost 30 percent.

The impact of Google entering the payday loan business would reverberate through the sub-prime lending industry, affecting many other types of loans and credit cards ruthlessly aimed at the the most vulnerable.

Maybe it is not so evil after all, but I’d say the jury is still out on that one.

I have long expected that we’d all be metaphorically signing-over our paychecks to Google. I just didn’t expect we’d be doing it literally, too.

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Microsoft co-founder Paul Allen filed suit this week against a litany of Internet companies claiming they had violated patents awarded years ago to Allen’s now-defunct Interval Research. Many writers, including one passing himself off as me, claimed this made Allen a so-called “patent troll. ”

I don’t think that is the case.

Patent trolls are individuals or companies that habitually sue others over obscure patents. While the Interval patents generally are obscure, that doesn’t make them invalid. And the fact that Allen and then-partner Dave Liddle paid $100 million for the basic research behind those patents, well that hardly sounds like troll behavior.

If Paul Allen actually were a patent troll. he would have sued in South Texas, where all the whopping patent judgements are handed-down, not in Seattle.

Suing in Seattle is bad trollmanship.

What we have here is a guy who may be the 37th richest person in the world, but he used to be the second-richest. He’s pledged to give away his fortune and maybe wants more to give. In short, I don’t see a problem with these legal actions.

That doesn’t mean, however, that Allen will prevail. The odds are against him. While Interval developed upwards of 300 patents, that isn’t like the thousands of patents now controlled by Nathan Myrhvold’s company, Intellectual Ventures. Myrvold has acquired baskets of patents creating a strategic mass of IP and an associated legal team he can use to bludgeon almost any company into cross-licensing. Allen has no such depth (or power).

He’s just trying to turn lemons from lemonade.