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September 30, 2006
Internet's new wave threatens to wash the high street away
The Observer | Business | Internet's new wave threatens to wash the high street away
The fresh boom in online shopping and media has left traditional retailers in a quandary about how to sell - or where to advertise, says Heather Connon
Sunday October 1, 2006
The Observer
It has been dubbed 'Web 2.0', or the internet's second wave. It is the shorthand way of describing why we now go online. No longer are we simply logging in to the services of AOL or Yahoo; now we are harnessing the internet to interact with each other socially, download (and upload) our own entertainment - and buy products and services in ever greater amounts.
But for much of the business community, Web 2.0 could be shorthand for double the headache. Virtually every company now has an established web presence but, as internet culture sweeps on at a dizzying pace, figuring out how to make money from it becomes even harder.
Recent announcements from companies as diverse as Norwich Union (which is cutting jobs because more of its business is being done online) to HMV (which is slashing the prices of its back catalogue of music and films to compete with online retailers like Amazon and Play.com) illustrate how much the internet is affecting all areas of business.
Electrical retailer Currys is to join that list of competitors by adding films and music to its internet offering in the run-up to Christmas. And Waterstone's is relaunching its website, having ditched the services of Amazon, and will allow users to check stock in their local stores as well as order online and browse reviews.
But the key question is whether these initiatives will be enough to stem the decline in their traditional businesses. It will clearly be a struggle. Last week's trading statement from HMV, which also owns Waterstone's, showed that sales were down 3.7 per cent over the last 12 months. Others are suffering too: while Next could boast a 15.3 per cent rise in sales of its Directory mail order business - almost half of which now come via the internet - that was not enough to compensate for the 7.5 per cent decline in sales at its high street stores, some of which were doubtless disappearing online.
Doing business online is not just a matter of setting up a website. Mark Newton-Jones, chief executive of mail order group Littlewoods, points out that while retailers are expert at, say, distributing 3,000 items from a warehouse to one store in the middle of Nottingham, internet and mail order require parcelling up 3,000 items and delivering them to separate addresses.
Littlewoods is developing a business to help customers like Argos and Tesco - which has just expanded its online offering - do just that, and is also running the entire internet operation for Adidas in the UK (and, from the new year, Ben Sherman).
Newton-Jones reckons Littlewoods' mail order expertise and customer base means it is already the fourth biggest online retailer, and the largest in clothing and footwear. He is aiming to grow that presence further by revamping its websites to show the products better and investing £30m in marketing and customer acquisition, with initiatives like sponsoring the new television show from fashion experts Trinny and Susannah.
Seven years ago, when the dotcom boom was at its height, every business worth its salt was lavishing money on internet operations that, says Jaap Favier, an analyst with Forrester Research, were usually seen as a bit of a 'freak show', separate from the mainstream. 'Companies thought that, when these businesses made money, they would sell them,' he says. In fact, few of these hastily assembled businesses ever made money - indeed, many of them ended in painful write-offs and losses.
Things are a lot more focused now, says Favier. 'The internet has been pulled into the mainstream. Companies have started to see consumers going online one day, the next day seeing a salesman, and going into a branch the next. And they expect the same service regardless of the channel.'
That does not make life easy. Norwich Union may have cut 4,000 jobs - many from its call centres - partly because around half of its motor and home insurance policies are now bought online, but it cannot do away with its telephone service completely. Marketing director Shaun Meadows expects the number of online users to 'creep up'. 'But,' he says, 'if you look at all the people who drive and so need insurance, everyone from 17-year-olds to those who are long retired... there will always be a place for telephone or face-to-face contact.' And that, he says, means Norwich Union has seen both savings and additional costs from the growing use of the internet.
But perhaps the biggest impact of the internet's new phase of growth has been on the media.
This year's web phenomenon has been the explosive growth in blogging and social networking sites like MySpace - two phenomena at the heart of 'Web 2.0'. This has led to predictions of the demise of traditional media - such as the newspaper you are reading now - and advertising, as consumers turn to alternative services like these to select the news-media writing they are interested in.
That is forcing consumer goods companies to look at new ways of accessing their customers. Unilever brand Dove, for example, has set up online communities for its users. Adidas has a website allowing you to create your own training shoe, which it will then make for you. And a growing number of companies are reported to be using so-called 'viral marketing' techniques - for example, stealthy product placement on blogs and social networking sites - to promote their wares.
That, warns Paul Jackson at Forrester, could be the downfall of such sites: at the moment, people are happy to use Web 2.0 sites because they are seen as reliable and independent. 'Email marketing, the last great hope, was quickly discredited by spamming,' he says. 'It would be good news for newspapers if blogs were also knocked as untrue.'
September 30, 2006 at 09:14 PM in eCommerce | Permalink | Top of page | Blog Home
September 24, 2006
Word of web makes British writer US bestseller
Word of web makes British writer US bestseller - Sunday Times - Times Online
Richard Brooks, Arts Editor
AN unknown British author has topped America’s fiction bestseller lists after news of her debut novel spread over the internet.
Diane Setterfield, 42, a former university lecturer, took six years to write The Thirteenth Tale after she gave up her career teaching French.
The mystery, published just three weeks ago in America, has beaten established US authors such as James Patterson and Anna Quindlen as well as the latest Frederick Forsyth to top the bestseller lists of The New York Times, The Wall Street Journal and Publishers Weekly.
Setterfield, who lives in Harrogate, North Yorkshire, is the first debut British novelist to reach number one in America since Nicholas Evans in January 1996 with The Horse Whisperer. That book had already been bought in a film deal by Robert Redford before publication, giving it a significant headstart.
The Thirteenth Tale had few reviews in conventional media and seems to have taken off because bloggers recommended it. “I suppose it’s a new form of word of mouth,” said Setterfield, who tomorrow leaves for a book tour of America.
Despite the book’s success in America, where it has sold about 70,000 copies, it has had a less enthusiastic reception in Britain, selling 600 last week.
The development of Setterfield’s fan base on the internet is similar to that which gave a kick-start to musicians such as the Arctic Monkeys, Lily Allen and Sandi Thom. Setterfield has gone from a tiny income to deals worth nearly £1.5m.
She became a lecturer in the 1990s at the University of Central Lancashire in Preston. “In the end I hated it,” she said. “Not the students but the whole admin thing. So I moved with my husband to Yorkshire. I knew I had a book in me.”
After giving up teaching in 1999, she began The Thirteenth Tale, which tells the story of a novelist who employs a biographer to write her life story, resulting in the unearthing of family secrets.
September 24, 2006 at 09:48 AM in Business Models | Permalink | Top of page | Blog Home
Chaos by design: Google
Chaos by design - October 2, 2006
The inside story of disorder, disarray, and uncertainty at Google. And why it's all part of the plan. (They hope.)
FORTUNE Magazine
Adam Lashinsky , Fortune senior writer
September 20 2006: 9:29 AM EDT
(Fortune Magazine) -- Spend just a few minutes on Google's sprawling campus in Mountain View, Calif., and you'll feel it right away: This is a company thriving on the edge of chaos. Google (Charts), age 8, is pulling in $10 billion a year in revenue and is worth about $125 billion, but the vibe is far more freshman mixer than profit-seeking firm whose every utterance is scrutinized for deeper meaning.
The 1.3-million-square-foot headquarters is a mélange of two-story buildings full of festive cafeterias (yes, they're all free), crammed conference rooms, and hallway bull sessions, all of it surrounded by sandy volleyball courts, youngsters whizzing by on motorized scooters, and -- there's no better way to put this -- an anything-goes spirit. It's a place where failure coexists with triumph, and ideas bubble up from lightly supervised engineers, none of whom worry too much about their projects ever making money.
An edgy management style
Take the case of Sheryl Sandberg, a 37-year-old vice president whose fiefdom includes the company's automated advertising system. Sandberg recently committed an error that cost Google several million dollars -- "Bad decision, moved too quickly, no controls in place, wasted some money," is all she'll say about it -- and when she realized the magnitude of her mistake, she walked across the street to inform Larry Page, Google's co-founder and unofficial thought leader. "God, I feel really bad about this," Sandberg told Page, who accepted her apology. But as she turned to leave, Page said something that surprised her. "I'm so glad you made this mistake," he said. "Because I want to run a company where we are moving too quickly and doing too much, not being too cautious and doing too little. If we don't have any of these mistakes, we're just not taking enough risk."
When a million-dollar mistake earns a pat on the back, it's obvious this isn't your normal corporation. To figure the place out, I've repeatedly been told the person to see is Shona Brown, the 40-year-old ex-McKinsey consultant who is Google's senior vice president for business operations. That's what it says on her business card, anyway, but she might as well be Google's chief chaos officer. She literally wrote the book on the subject, a 1998 bestseller called "Competing on the Edge: Strategy as Structured Chaos." And fittingly, on the day I'm to see her at the Googleplex, my press escort and I get hopelessly lost. Finding anyone here requires precise navigation and the ability to read color-coded maps. We get so badly turned around -- entering the wrong building's lobby, backtracking through shrubbery to another -- that we arrive 17 minutes late. Even real estate at Google is chaotic.
Click here to read more on Google's leadership
Brown has made a career of arguing that anarchy isn't such a bad thing -- which is why Page, co-founder Sergey Brin, and CEO Eric Schmidt hired her in 2003. A business theoretician in a company dominated by engineers, she considers Google the "ultimate petri dish" for her research, though her job is anything but theoretical. In addition to overseeing human resources (called "people operations"), Brown runs a SWAT team of 25 strategic consultants who are loaned out internally on ten or so projects at a time -- restructuring a regional sales force here, guesstimating a market size there.
The company's goal, says Brown, is to determine precisely the amount of management it needs -- and then use a little bit less. It's an almost laughably Goldilocksian approach that Brown also advocates in her book, co-written with a Stanford business professor. The way to succeed in "fast-paced, ambiguous situations," she tells me, is to avoid creating too much structure, but not to add too little either. In other words, just make it not too hot and not too cold, and you're done. "If I ever come into the office and I feel comfortable, if I don't feel a little nervous about some crazy stuff going on, then we've taken it too far," she says.
A "Googley" approach to business
Crazy definitely trumps comfy at Google. You have to keep your wits about you on campus just to avoid smashing into one of Google's 8,000-plus employees. Meetings typically start on the hour, and young Googlers tend to hover outside scarce conference rooms beforehand. They doodle on hallway whiteboards, contributing inside jokes, such as sinister new ways to expand the company's online advertising program. ("AdSense for Eyelids," reads one.) Celebrity sightings are ho-hum. A couple of years ago I was having lunch at Google's sunny outdoor courtyard when Page and Brin sat down at my table with their guest, comedian Chris Tucker. George Soros lectured at Google the day I met Brown. Google advisor Al Gore shows up often.
Nurturing such an off-the-wall culture is a luxury only a company that's performing stupendously well can afford, and Google is certainly doing that. Two years after going public, its stock is up more than fourfold, and it's so profitable that despite helter-skelter spending on everything from mammoth data centers to worldwide sales and engineering offices, Google is generating more than $800 million in cash each quarter. In the process, Google is thrashing the competition -- in market share, deals won, buzz -- notably Yahoo (Charts) and Microsoft (Charts). It's also cozying up to a growing list of heavyweights you'd think would be warier, including News Corp (Charts)., Viacom (Charts), and ad-agency giant WPP (Charts).
If Google's engine is running fast, then naturally it's also running hot. That sheds light on all kinds of blunders -- many of them dwarfing Sandberg's -- which Google likes to explain away as its Googley approach to business. (Googley being a cloying description these people actually say out loud. Frequently.) The company is figuring things out as it goes, and not quite as effectively as you'd expect from its stellar financial results. Its new products haven't made nearly the splash that its original search engine did. Critics have mocked its self-righteous "Don't be evil" motto when, for example, Google decided to scan copyrighted books for its book search index. Even Google's rocket-ship stock price has been grounded. After a run from $85 in August 2004 to $475 last January, it has puttered around $400 for most of the year. Says Benjamin Schachter, an analyst with UBS: "Investors are saying, 'Enough of what you're going to do. What does it do to the numbers?' "
What concerns investors is whether Google can come up with a second act. There's nothing to suggest that its growth engine -- ad-supported search -- is in trouble. But it's clear from Google's tentative lurches into new forms of advertising and its spaghetti method of product development (toss against wall, see if sticks) that the company is searching for ways to grow beyond that well-run core. It's the reason, for example, that Google requires all engineers to spend 20% of their time pursuing their own ideas. Successful second acts are exceedingly rare in the technology business -- or in any business, for that matter. Microsoft followed Windows with Office. Intel jettisoned its memory-chip line to rule microprocessors. Even Apple, which executed one of the most remarkable rebirths ever with the iPod, had to go through a painful decade to get there.
What emerges from months of interviews with employees ranging from fresh-out-of-college hires to the CEO is that Google firmly believes it has a framework for figuring out the future. It should come as no surprise that the plan is as irreverent, self-confident, and presumptuous as the company itself. Google's executives don't articulate it this way, but the framework can be found in the title of Shona Brown's book: structured chaos. Indeed, along with Googleyness, chaos is among the most important aspects of Google's self-image. Understanding how Google thinks about chaos -- like Page's teachable moment after Sandberg's million-dollar mistake -- is critical to divining where the company goes next. "Are lots of questions hanging out there in the market?" asks Sandberg. "Sure. Because we don't always have an answer. We're willing to tolerate that ambiguity and chaos because that's where the room is for innovation." Good strategy -- if it actually works.
In "Competing on the Edge", Brown describes a sizzling Silicon Valley software company from the 1990s that was confronting the joys and hardships of hypergrowth. She identifies it only with a pseudonym, Galaxy, and it bears a striking resemblance to Brown's current employer, which didn't exist yet. "Galaxy was populated by smart, hip twenty- and thirtysomethings who were chosen for their brains and their attitude," she wrote. "Tour Galaxy and you'll be struck by the college-like atmosphere. Landing a job at Galaxy is hard. The screening process is intense. Once hired, the Galaxy philosophy is to let people 'do their own thing.' " But Galaxy had one glaring weakness: "The firm was living off one set of unusually successful products, whereas the rest of the businesses were much more modest performers."
Finding a follow-up act
What vexed Galaxy is precisely Google's challenge today. For all its new products -- depending on how you count, Google has released at least 83 full-fledged and test-stage products -- none has altered the Web landscape the way Google.com did. Additions like the photo site Picasa, Google Finance, and Google Blog Search belie Google's ardent claim that it doesn't do me-too products. Often new services lack a stunningly obvious feature. Users of Google's new online spreadsheet program, for instance, initially couldn't print their documents. The calendar product doesn't allow for synchronization with Microsoft Outlook, a necessity for corporate users.
Other major initiatives like Gmail, instant-messaging, and online mapping, while nifty, haven't come close to dislodging the market leaders. Much-hyped projects like the comparison-shopping site Froogle (nearly four years in beta and counting) and Google's video-sharing site have been far less popular than the competition. One of Google's biggest misses is its social-networking site, Orkut, which is a hit only in Brazil and -- as Marissa Mayer, Google's 31-year-old vice president of search products and user experience, says with an impressively straight face -- is "very strong in Iran." Sometimes promising new products are buried so deep within Google's sites that users can't find them. "You can only keep so many things in your head," acknowledges CEO Schmidt. "Even if you're the No. 1 Google supporter, you cannot remember all the products we have."
This presents a conundrum: Impose order, and Google becomes just like everybody else; let chaos rule, and run the risk that Google's flailing about hurts its pristine brand and reputation for brilliance. Clarifying its intentions would be a start. "We need to do a better job of communicating which products we expect to be killer apps and which are experiments," Brin told a gathering of journalists in May. There's been progress. In June, Google released its online payment tool, Checkout, as a full-fledged product. Mayer, who has the final word (except for Page) on what appears on Google's home page, has established a war room to piece together a plan for better integrating Google's many products.
It's going to be a battle, though, simply because Googlers are adding features by the bushel -- and more are coming. Niniane Wang, a young engineer who worked on Gmail, is now assigned to a confidential project believed to involve social networking. Louis Monier, a Digital Equipment veteran who launched its AltaVista search engine, recently left eBay to join Google in a top-secret capacity. Katie Jacobs Stanton runs Google Finance, Google Blog Search, and two other projects. This summer she temporarily moved with her husband and three children to Bangalore to get closer to the engineers who built the finance site. Since Google Finance doesn't run ads or any other revenue-generating features, I ask Stanton how long the site can ignore making money. Her response: "Theoretically, forever."
In fact, Google is making money slyly, if slowly, on some of the very products that seem like mere whiz-bang. Consider Google Earth, the ubiquitous cable-news prop and workplace time waster that lets users view incredibly detailed geographic photos from around the world. It started as a satellite-imaging software company called Keyhole. "Sergey [Brin] was playing around with it and got enamored with Keyhole," says John Hanke, Keyhole's original CEO (and now a Google employee) before Google bought it in 2004. "At a staff meeting, he put Keyhole up on one of the projectors and started showing people their houses and flying around." The startup, whose images were confined to the U.S., had been bringing in modest revenue from real estate companies, but that's not what interested Brin. "When we got to Google, one of the first questions Sergey asked was, 'Why can't you look at the whole world at once?' " says Hanke. Two years later the company is integrating ads into Google Earth. Search for "pizza" while hovering above your neighborhood, and you'll get the idea.
Neat toys are about more than creating Web pages on which Google can slap ads. Google Earth has been downloaded more than 100 million times, and embedded in each download is a request from Google to place a toolbar, a Web gadget that includes a search box, permanently on a user's Web browser. That seemingly innocuous query is a gold mine for Google, because the ever present box increases the likelihood users will search on Google. The more people search on Google, the greater the chances someone will click on an advertiser's ads. "We know the lifetime value of a toolbar user," says Mayer, who offers the example to counter the notion that Google isn't trying to profit from its fancy doodads. "So we know how much value we're getting back out of somebody who downloads Google Earth and then subsequently downloads the toolbar."
Strategic Partnering
This virtuous cycle of more users conducting more searches benefiting more advertisers is precisely what makes Google so irresistible to business partners -- even those who feel threatened by it. Martin Sorrell, the chief executive of ad agency holding company WPP, has been outspoken in his fear that Google could obviate companies like his. (Automated ad auctions entail less overhead than armies of schmoozing ad executives, goes the argument.) He titled a section of his latest annual report "Google: Friend or Foe?" In an interview, he suggests the short answer: "The bigger and more successful you get, the more people want to bring you down." But it's not that simple. WPP, Sorrell notes, is Google's third-largest customer, measured by the amount of advertising it purchases on Google for its clients. Sorrell says Google wants to improve its access to WPP's clients, and he's inclined to allow that -- provided there's something in it for WPP. "We represent 20% of media revenue worldwide, and we're definitely not 20% of Google's revenue," he says. "We'll see how we can work together."
Working with Google and grumbling about it is quite in fashion. Viacom's MTV recently signed a deal for Google to distribute its videos to the Web publishers in Google's AdSense network, which lets the publishers run ads supplied by Google's advertisers. Comcast, which has been Google's ideological opponent in an acrimonious legislative battle over government regulation of Net access, is particularly pleased with the revenue it gets from having Google power the search results on its Comcast.net home page for broadband users. In both cases, the older companies profit from Google's superior Internet advertising network. Indeed, after initially scaring "old" media, Google has become the go-to partner for juicing Internet revenues.
Chumminess with the establishment is in the air in mid-August when I meet with Schmidt, two days after Google's announcement of a landmark deal to provide search over numerous News Corp. properties, notably MySpace. (Google guarantees News Corp. $900 million over 3½ years in exchange for an unspecified share of ad revenue.) In our 90-minute interview, I remind Schmidt that at a lunch for journalists in March, he repeatedly mentioned MySpace almost wistfully, seeing how Google had been a bust in social networking.
"We didn't know what to do about it," he says. "Now we know." He explains that Google's new social-networking effort has at least two prongs. The well-known part is the MySpace deal; the other is Google's technology to improve search on social-networking sites, which so far only MySpace has agreed to use. Schmidt's explanation is a bald attempt to declare victory after an obvious defeat, since MySpace trounced Google's Orkut (not including, of course, those triumphs in Brazil and Iran).
The MySpace deal reveals the Google leadership triumvirate's visceral style. The transaction might never have happened, says Schmidt, if Brin hadn't flown to meet with News Corp. executives in Pebble Beach, Calif., where Rupert Murdoch was hosting an A-list bull session on global issues. (Schmidt was vacationing in Europe; Page was in India.) "We sent Sergey because he's very intuitive," says Schmidt. "He goes down there and sort of hangs with them for a while and comes back and says, 'You know, I'm really sure we should do this.' And it's not a numbers argument. It's a feeling of commitment."
Winning MySpace kept the Web's gem of the moment out of the hands of Microsoft and Yahoo, which both privately claim that Google overpaid by several hundred million dollars. Whether that's true won't be known for years. Tim Armstrong, Google's New York-based head of North American sales and the company's point man in the MySpace negotiations, pooh-poohs the notion that Google got taken.
"What people aren't seeing is our ability to model deals," he says. "I would guess that Google was not offering to write the biggest check for this partnership." In any event, the deal created a fan in News Corp., which has steadfastly refused to place any of its Fox shows on Google's video site and yet is positively giddy about its budding advertising relationship. "I actually don't view them as overwhelmingly competitive with us," says Peter Chernin, News Corp.'s president and chief operating officer. "They are trying to sell advertising, and so are we. But at their core I view them as a technology company, and we are an entertainment company. It's a happy and convenient marriage."
Mapping the future
It's great for Google that Murdoch & Co. love it so, but that doesn't change the impression that Google is winging it -- after all, the deal only came together after Brin descended from the clouds to peer into News Corp.'s soul. When I ask Schmidt whether his company actually has a plan, he does what engineers tend to do in situations like this: He gets up and starts drawing on a whiteboard.
A billionaire at 51, Schmidt cuts the typical Silicon Valley figure of somebody's successful, but otherwise average, dad. His khakis-and-oxford uniform is standard, as are his wire-frame glasses and Supercuts-inspired hairdo. Schmidt's doodling, which he's also done recently for the Google board of directors, tells the story of where he sees Google's money coming from for years to come. He draws a series of connected clouds representing the history of the computing industry, from mainframes to minicomputers to PCs to today's mobile devices. The gist of the illustration is that there's practically no money left to be made in computers, not in hardware or software. The money, instead, is all in Web applications, a trend Schmidt had been predicting since his days as chief technology officer at Sun a decade ago. Users won't always be traveling to the Web on the PC, which is why he scribbles lines for cellphones, cable set-top boxes, Treos, BlackBerrys, and so on. Schmidt's most compelling point -- and the most visible glimmer of a method to Google's madness -- is the power behind the not-so-secret data centers Google is building, particularly a 30-acre facility in Oregon whose existence he references without provocation. "That massive investment should translate into the ability to build applications that are impossible for our competitors to offer, just because we can handle the scale," says Schmidt. (Microsoft, Yahoo, and IBM, each of which is spending heavily on similar big iron, would beg to differ.) He's talking about processing-power-sucking Google applications like Gmail and Google Earth -- and unannounced products on the drawing board.
Google has also begun to show how it plans to use that power for advertising services that go beyond search. Brokering video ads for MTV is new terrain, as are the graphical display ads Google plans to sell for MySpace. The company is engaged in an 18-month-old experiment to auction text and graphical ads for newspapers and magazines. It's also in the process of integrating its biggest acquisition to date, a radio-advertising company called dMarc Broadcasting, which Google bought in January for $102 million in cash plus a potential performance-based payout of more than $1 billion. dMarc automates the process for delivering radio ads to about 10% of the country's 10,000 stations. By merging dMarc into Google's AdWords, Google's online system for auctioning search terms, it will offer its advertisers -- who so far hawk their wares in 75 words or less of written text -- the ability to deploy radio ads as well.
It's a bold push. "We see very clear ways to improve advertising for all users," says Armstrong, the sales chief. It's the "all" in his aspirations that frightens anyone in Google's path. Or used to, anyway, before people started noticing that not everything Google does rocks the world. Nick Grouf, CEO of Spot Runner, a well-funded Los Angeles startup that does even more for television advertisers than dMarc does for radio, sees an Achilles' heel. "It's their incredible focus that got them this far," says Grouf. "But all these new initiatives suggest a dilution of that focus."
With so many moving parts, it's natural to wonder if Google is truly a company for the ages -- or whether it's the next Galaxy, that fast-moving, arrogant, one-hit wonder in Shona Brown's book. To believe that Google will find its second act, you have to accept the hubris and the chaos, and that the brainiacs who got lucky once will do so again. Google desperately wants to believe its nonlinear approach is all part of the plan. But as the company's big thinkers are the first to admit, most of the questions about Google aren't answerable. Try as they may, no one can truly control chaos. Top of page
From the October 2, 2006 issue
September 24, 2006 at 01:47 AM in Portals | Permalink | Top of page | Blog Home
September 16, 2006
iPod fans 'shunning iTunes store'
BBC NEWS | Technology | iPod fans 'shunning iTunes store'
Despite the success of Apple iTunes, few people stock their iPod with tracks from the online store, reports a study.
The Jupiter Research report reveals that, on average, only 20 of the tracks on a iPod will be from the iTunes shop.
Far more important to iPod owners, said the study, was free music ripped from CDs someone already owned or acquired from file-sharing sites.
The report's authors claimed their findings had profound implications for the future of the online music market.
Ripped disks
They estimate that during 2006 Europeans will spend more than 385m euros (£260m) on digital music - the majority of this spending will be on tracks from Apple's iTunes store.
However, the report into the habits of iPod users reveals that 83% of iPod owners do not buy digital music regularly. The minority, 17%, buy and download music, usually single tracks, at least once per month.
On average, the study reports, only 5% of the music on an iPod will be bought from online music stores. The rest will be from CDs the owner of an MP3 player already has or tracks they have downloaded from file-sharing sites.
The report warned against simple characterisations of the music-buying public that divide people into those that pay and those that pirate.
"It is not instructive to think of portable media player owners, nor iPod owners specifically, as homogenous groups," warned the report.
It said: "Digital music buyers do not necessarily stop file-sharing upon buying legally."
The importance of "free" to digital music fans should not be underestimated, warned the report, and should be a factor for newer digital music firms, such as Spiral Frog, which use an ad-supported model.
Perhaps the only salient characteristic shared by all owners of portable music players was that they were more likely to buy more music - especially CDs.
"Digital music purchasing has not yet fundamentally changed the way in which digital music customers buy music," read the report.
September 16, 2006 at 01:33 PM in Cluetrain | Permalink | Top of page | Blog Home
September 12, 2006
E-mail authentication: The choices
E-mail authentication: The choices
June 12, 2006 (Computerworld) -- Some observers criticize IT vendors for not agreeing on a single, standard way for dealing with evil e-mail. The key e-mail authentication protocols are Microsoft's Sender ID Framework (SIDF), with its Sender of Policy Framework (SPF) records, and the rival Yahoo/Cisco DomainKeys Identified Mail (DKIM).
But a good case can be made that e-mail senders, Internet service providers and e-mail recipients should use both SIDF and DKIM.
"Domain owners are well advised to publish information using both standards, and e-mail recipients can use both standards to help filter spam," says Richi Jennings, an e-mail security analyst at Ferris Research Inc. in San Francisco.
But, he adds, "DKIM is better because the methods used to verify that the sender was authorized to use that domain are stronger. SPF/Sender ID has issues with mail lists and other things that autoforward mail."
DKIM is stronger, Jennings says, because it generates cryptographic hashes of content using keys owned by the e-mail sender's domain, while SIDF is simply based on which IP address the message comes from. "This means that DKIM is harder to set up and a little more expensive in terms of computing horsepower," he says.
John Scarrow, Microsoft's general manager of antispam and antiphishing strategy, agrees that the approaches are complementary. "By utilizing both, e-mail senders receive optimal protection and functionality across the board," he says. He acknowledges that DKIM is better for automatic forwarding by servers, such as when a user configures his Hotmail account to automatically forward messages to his Microsoft account.
But Scarrow argues that DKIM requires users to upgrade to both outbound and inbound message-transfer agents (MTA), such as Microsoft's Exchange Server, and affects "about 10% to 15% of computing cycles, while SIDF has no outbound impact to the MTA and negligible impact to any computing resources."
September 12, 2006 at 02:17 AM in email | Permalink | Top of page | Blog Home
The Future of E-mail
une 12, 2006 (Computerworld) -- Your company scans incoming e-mail for viruses and outgoing messages for confidential information. Your spam filter snags most of the garbage, and it gets better as it learns the latest spamming and phishing spoofs. You're encrypting sensitive e-mail now, and you recently completed a project that keeps your messages safely archived in case federal regulators come knocking.
Indeed, with the right technology, the right policies and a little slice of your budget, you can pretty much manage the messaging madness. And new technology likely to emerge from the labs in the next year or two will help bring a little more civilization to the world of e-mail, ensuring its continued place among the most popular and important of all corporate applications.
However, e-mail's problems will accompany it into its second act, especially as users deploy a growing variety of mobile devices and discover new ways of communicating -- such as instant messaging, blogs, wikis and virtual reality spaces you've never even dreamed of. These will offer green pastures for hackers, spammers and phishers, and will require a whole new round of defensive tools, techniques and policies.
While today's efforts to improve e-mail are aimed mostly at curing its ills, research in vendor and university labs points to brave new uses for the humble e-mail message, from knowledge mining to workflow enhancement. Interviews with researchers, futurists and IT managers yielded the following conclusions about the future of e-mail.
1. New technologies, plus economic and political pressures, will eventually tame the malware.
Ray Tomlinson, a principal engineer at BBN Technologies in Cambridge, Mass., calls the struggle against spam, phishing and malware "pretty much a draw" at present. He has a good deal of perspective on these issues, having sent the world's first network e-mail message in 1971.
Tomlinson points with hope, but some exasperation, to alternate -- some would say competing -- proposals for stemming the tide of offensive, malicious and deceptive e-mail.
"It's not so much a hard technical problem; it's a hard business and political problem," Tomlinson says. "The players have vested interests in the various approaches, and they are fighting tooth and nail to get their approaches adopted. It's not the end users who are the bottleneck here."
Microsoft Corp. is pushing its Sender ID Framework, which verifies that a message was actually sent from a server authorized to send mail for the domain owner. John Scarrow, Microsoft's general manager of antispam and antiphishing strategy, says Sender ID has been adopted by 73% of Fortune 100 companies and is used for 31% of all e-mail messages.
An experimental system at HP Labs shows actual e-mail paths (the gray lines) overlaid on the lab's formal organizational structure (the black lines).
An experimental system at HP Labs shows actual e-mail paths (the gray lines) overlaid on the lab's formal organizational structure (the black lines).
"We are seeing the amount of spam now starting to plateau," he says. "It's a good indication the industry is starting to take a good bite out of the economics of the business."
More good news, Scarrow says, is that while IM and other modes of electronic communication also need to be protected, the technology for doing so is similar to that for e-mail.
Meanwhile, Yahoo Inc. and Cisco Systems Inc. last year submitted to the Internet Engineering Task Force a proposed standard called DomainKeys Identified Mail (DKIM), which, like Sender ID, is designed to guard against spoofing and phishing by authenticating an e-mail sender. DKIM verifies the domain of the sender and also cryptographically verifies the integrity of the message.
In addition to Sender ID, Microsoft has the SmartScreen filter, which uses statistical techniques to learn what's spam and what isn't, and the Phishing Filter add-in for the MSN Search Toolbar. But those tools are not enough, say the folks at Microsoft Research, where some 40 people work on new e-mail technology.
For example, researcher Joshua Goodman says the ultimate solution could be a four-pronged defense against spam called SmartProof. Here's how an experimental version of it works:
* First, a machine-learning filter, similar to SmartScreen, snags the obvious spam and quarantines it or throws it away. The filter passes on to the user's in-box any message that is from someone on the user's "whitelist."
* Messages suspected of being spam trigger replies to the senders, challenging them to prove they're not spammers.
* Senders may respond to the challenge by solving some kind of a puzzle -- one that's easy for a human but hard for an automatic spam generator.
* Alternately, senders can ensure the delivery of their messages by making credit card-based "micropayments." The payments may go to the recipient, the Internet service provider or a charity, or they can be refunded to the sender if the message turns out not to be spam.
"We thought if we could put all that together, we'd have a great long-term solution," Goodman says. "Obviously, it's a very ambitious plan, and I don't think we ever thought it would happen quickly."
Elsewhere at Microsoft, researchers are working on a prototype called MailScope that monitors e-mail routes and alerts users when significant delays are expected. If MailScope sees persistent delays between, say, Microsoft.com and Berkeley.edu, it warns users on those servers that delays are likely, much as a traffic report notifies drivers of congested routes.
In a related Microsoft project called SureMail, when a message is sent, a system posts a tamperproof notification to a table somewhere on the Internet. E-mail recipients periodically query the table and match notifications with messages received. If they find a notification for which there is no message, they know the message has been lost. Microsoft calls these "silent" losses because they so often go undetected. In controlled experiments over two months, using a variety of e-mail systems and carriers, Microsoft found that one in 140 e-mail messages disappeared without a trace. Delays averaged four minutes but lasted as long as 27 hours.
Despite the extensive research and development, some observers say technology can never completely cure e-mail's ills. Economic and regulatory tools will be needed as well, they say.
"Ultimately, I believe there will be a pay-per-message type of service that charges to ensure that e-mail is spam-free," says CIO Matthew Lynch at ShopKo Stores Inc. in Green Bay, Wis. E-mail carriers will charge companies a penny or two per message and will in exchange certify those messages as legitimate, he says. Lynch also predicts "stronger legislation around this topic."
A combination of technology, policy and market measures will keep e-mail among the top of all corporate applications, most users say. "E-mail will continue to be an integral form of communication," says Matthew Marks, head of integrated user services at Aetna Inc. "The capability to quickly and easily distribute a message with an attachment -- documents, links, objects, etc. -- to a large, dispersed audience with tracking and audit cannot be matched by IM, fax or snail mail."
2. E-mail -- just one of the many communications streams in the workplace -- will become part of a "puddle," or "activity thread."
Although e-mail seems unlikely to be supplanted by alternatives, the job of the IT manager is nevertheless complicated by the emergence of other options.
E-mail is in its "pimply adolescence," says futurist Paul Saffo at the Institute for the Future in Palo Alto, Calif. The problems of spam, phishing and e-mail-borne malware will be conquered, he predicts. In the meantime, he cautions, "you can't treat e-mail in isolation. All of our communications forms are melting away, and we are creating new things out of the puddle of old stuff."
Richard Golden, vice president for IT infrastructure at Circuit City Stores Inc. in Richmond, Va., says these threats will cause corporations to augment their technology defenses with strong policy defenses. He says it's relatively easy to protect e-mail systems with spam filters, virus scanners and the like because the systems are well defined, with discrete messages going from Point A to Point B through corporate IT assets.
"But things are converging into a world that is not as clearly definable as a corporate e-mail system," he says. "I think you'll see more policies about things like blogging, for instance. As the lines blur on the means for communications, it's going to require more focus on the information conveyed, regardless of the means used to convey it."
IBM Research is looking for ways to combine e-mail with other functions and integrate it seamlessly into users' daily activities. "It's not enough to help people manage their e-mail; it's important to help them manage their work," says Dan Gruen, a research scientist at the company's facility in Cambridge, Mass. That involves "connecting all the communications and information feeds around a topic or activity," he says.
For example, an IBM Research proto-type called Activity Explorer is a collaboration tool that pulls together e-mail messages, synchronous communication such as instant messages, screen images, files, folders and to-do lists. A project team can establish "activity threads" containing these feeds and can switch easily between asynchronous and real-time collaboration. An activity thread might include the messages, chats and files exchanged among members of a team that's writing a contract bid, for instance.
A more advanced experimental tool from IBM called Unified Activity Manager does all that and more, linking into other corporate applications such as workflow systems. It not only combines the elements of a current activity but also pulls in those elements from past similar activities. These notions of "activity-centric collaboration" will show up in the next release of Lotus Notes, dubbed Hannover, which is expected to ship next year, Gruen says.
Meanwhile, Microsoft Research has developed a way to combine e-mail, files, Web pages, calendar entries, to-do lists and other materials into one searchable archive. Called "Stuff I've Seen," the prototype uses MS Search to index a user's important content and then offers it through a unified interface with sorting, filtering, previews and thumbnail views.
3. New e-mail applications will emerge, including tools that mine message archives for corporate intelligence.
Even as e-mail yields turf to upstarts like IM, especially among younger users, new uses for e-mail are on the horizon. As companies and individuals begin to systematically archive messages, the e-mail becomes available for data mining, and researchers at a number of companies and universities are developing ways to make these archives more accessible.
For example, Hewlett-Packard Co. researcher Bernardo Huberman is devising ways to "harvest organizational knowledge" by mining the e-mail messages and PowerPoint presentations of employees. His techniques go way beyond the searching and categorization of messages that products do pretty well now. Huberman looks at the strengths of communication bonds among employees and patterns of communication that can reveal both hidden problems and opportunities.
"You can look at an organizational chart and make all sorts of inferences about how people work, but when you look at e-mail patterns, you see how they work in a different way," he says. "You discover leadership roles, such as who's the hub through which most of the e-mails go, that you wouldn't identify from the organizational chart."
The result of such pattern or network analysis might be to reorganize departments, projects or activities around those hubs, Huberman says.
HP Labs is now prototyping a tool called Knowledge Navigator that's based on those principles. It applies text mining, clustering algorithms and statistical analyses to employee e-mails and presentations stored on HP's servers. It could handle a query such as, "Who are the top five experts on topic x?" Huberman says, even when such expertise is not explicitly noted in org charts or personnel records.
Huberman says this kind of knowledge harvesting will be used by companies internally on their employees and externally on customers, resulting in the ability to generate messages and pitches aimed at both groups. "What we will see in the next few years is a very targeted way of placing information in the hands of relevant people," Huberman says. "Sure, it can be annoying, but it's better than getting spam on things you don't care about."
Despite the benefits, he acknowledges that mining messages raises ethical and potential legal issues. "In the next few years, we will see a blurring of the boundaries between what is considered private and public," Huberman says.
Mining employee e-mails is "something the company has an interest in, and we are starting to see that interest grow," says Carl Jones, director of collaboration services at The Boeing Co. in Chicago. He says the company has a knowledge management pilot project that, among other things, examines e-mail messages.
"If you have a business problem, you may be able to mine across the e-mail spectrum and find out, hey, there are people out in the field who are subject- matter experts that can help you," says Jones. But, he adds, "we'll have to be very careful about policies on privacy and so on."
Jon Kleinberg, a professor of computer science at Cornell University , says much can be learned from the networks created by people's activities on the Internet.
"How can you infer that someone is influential?" he says. "Is it the obvious things, like they send and receive the most messages, or is it more subtle things, like they operate at the periphery [of a group] but pull together groups that are otherwise weakly connected?"
Kleinberg says answers to such questions may have profound importance for companies that sell online and rely on word-of-mouth recommendations via customers' e-mail. He's looking into two competing theories as to why that kind of e-mail sometimes leads to snowballing sales and other times fizzles.
"Is it the attractiveness of the product, or is it something about the community of people who are into those kinds of products?" Kleinberg wonders.
He says e-mail pattern analysis could help a company answer questions such as, "Who are the key people to influence?" and "For which products is it worth it, and for which is it not?"
"Social network analysis is one of the great tools for productivity going forward, and very few people understand it," says Thornton A. May, a Computerworld columnist and dean at the IT Leadership Academy at Florida Community College at Jacksonville. "People tend to think of social network analysis as a list of people -- an address book. But it should tell you not just who knows who, but who knows what as well."
Users should see social network analysis as more than a way to find dates or customers. It can "solve problems, create teams or recombine organizations," May says.
IBM's Unified Activity Manager
IBM's Unified Activity Manager combines e-mails, files and schedules associated with a multiperson effort to respond to a request for proposals. This kind of capability will ship in IBM's next version of Notes, dubbed Hannover.
(Click image to see larger view)
September 12, 2006 at 02:15 AM in email | Permalink | Top of page | Blog Home
September 11, 2006
Internet use growth 2000 - 2005 - Middle East
September 11, 2006 at 08:46 PM in | Permalink | Top of page | Blog Home
Internet use growth 2000 - 2005 - Middle East
September 11, 2006 at 08:44 PM in Internet evolution | Permalink | Top of page | Blog Home
September 10, 2006
Suspicions and Spies in Silicon Valley
Scandal at HP: The Boss Who Spied on Her Board - Newsweek Business - MSNBC.com
In a business saga, how Pattie Dunn's obsession with trying to root out the source of press reports ended with the covert tracking of directors' phone records.
By David A. Kaplan
Newsweek
Sept. 18, 2006 issue - It was supposed to be an easygoing celebration of a coronation. In early 2005, after Mark Hurd had been chosen to be Hewlett-Packard's new chief executive officer, he and his wife joined chairman of the board Patricia Dunn and her husband at the Marin County home of director Tom Perkins. Sitting on a lush hilltop overlooking the Golden Gate, they dined and wined in honor of what they hoped would be a new era for HP, an icon of Silicon Valley that had been through much recent turmoil, including the ouster of high-profile CEO Carly Fiorina. After dinner, they moved to the huge living room. Before a blazing hearth, looking out at the stunning view of San Francisco Bay, Dunn wanted to talk shop with Hurd. As Perkins tells the story—Dunn declined to comment—the spouses were bored silly. So was Perkins. He went off to his study to get his prized radio-controlled helicopter, and proceeded to buzz Dunn's head. The spouses were in stitches. Perkins circled the toy helicopter for another mischievous pass. Dunn just kept on talking about regulatory issues and other arcana of management. "Pattie!" Perkins asked: "Didn't you just hear something zooming over your head?" Her answer: "I just thought it was the dishwasher running."
The funny little vignette suggested to Perkins that he and the chairman had entirely different MOs. Little did he realize that about a year later their styles and priorities would collide to create a boardroom scandal that would shake the company that was once lionized in the Valley. At the same time, it would mezmerize corporate America, as other business leaders wondered how HP could have been involved in activity the California attorney general calls "colossally stupid," no matter how well intentioned, and may well result in criminal charges.
HP has now admitted to spying on its own directors' personal phone records in order to root out a leaker. It did so by using private investigators who engaged in "pretexting"—calling up phone companies and impersonating directors seeking their own records. HP late last week additionally admitted to spying on the phone records of nine journalists, including at The New York Times and Wall Street Journal, some of which date to 2005. HP's Dunn stands accused of orchestrating the investigation. Perkins quit in a rage over the surveillance and wants Dunn out as chairman; HP is painting him as an angry traitor with a vendetta against Dunn. Lying, spying, name-calling, finger-pointing—all of it is a tragicomedy that Shakespeare might've penned had he gotten an M.B.A.
Perkins and Dunn surely are contrasting archetypes in the rich backstory of Silicon Valley. At 74, he's the nonpareil behind-the-scenes venture capitalist with a larger-than-life array of extracurriculars. His Kleiner Perkins Caufield & Byers firm is the Medici of the Valley, bankrolling such home runs as Genentech, Google, Netscape and Amazon. He performs the financial alchemy of converting millions to billions when start-ups go public, in the process making VCs like himself centimillionaires. Out and about, he was the fifth husband of romance novelist Danielle Steel. He's just launched the 287-foot Maltese Falcon, the largest and most expensive private sailboat ever built; last year he wrote his own bawdy novel, "Sex and the Single Zillionaire"; in 1996 he was convicted of involuntary manslaughter for his involvement in a sailing collision off the coast of France that resulted in the death of another regatta participant (he paid a $10,000 fine and individuals on the other boats were convicted as well).
Dunn, 53, is less prominent in the Valley's Zeitgeist, yet is a success story in her own right, as well as a profile in courage for her fight against cancer. She was raised in Las Vegas, where her father did bookings for casinos. Her mother was a showgirl at the Copacabana. While Dunn met the rich and famous, her family didn't have a lot of money. Her father died when she was 12, her mother had emotional problems, and Dunn and her sister basically raised their younger brother after they moved to the Bay Area. Dunn majored in economics and journalism at Berkeley, and—your punch line here—hoped to become an investigative reporter, her sister Debbie Lammers says. Dunn eventually wound up as a temp typist at an investing firm that was later acquired by Barclays, at which Dunn began her career climb.
In recent years, as vice chairman of a division of Barclays, she has become wealthy enough to own property in the East Bay and Hawaii, as well as a Shiraz vineyard in Australia. But in the midst of her Barclays and HP duties, she has faced repeated health crises. She was diagnosed with breast cancer in 2000 and melanoma two years later. Those struggles have been widely reported, but Dunn confirms that she was diagnosed with Stage IV ovarian cancer in 2004. Last month, after doctors discovered a malignant tumor in her liver, she underwent extensive surgery. Dunn says she has kept the HP board apprised of her health, and her sister says she marvels at Pattie's "willpower" and ability to "survive beyond doctors' expectations." Six weeks after her 2004 surgery, Dunn kept a promise to her family to hike across the Sydney Harbor Bridge in Australia. Before her most recent surgery, she stopped at her vacation home in Kona and played 27 holes of golf.
Dunn is demonstrably tough. Whether she was wise is a different question. "If I did anything stupid, it's not because I have cancer or was receiving chemotherapy," she tells NEWSWEEK. Perkins himself calls her "nobody's fool"—deft at running annual meetings and a tough questioner. Early in their time together on the HP board, Perkins and Dunn got along and were actually allies: they were part of the team that lured Hurd to HP from NCR. But their different outlooks as directors could not help but emerge. Perkins, the venture capitalist, thought in broad strategic strokes, preferring to leave the details to others. Dunn thought the core of her job was to dot the I's and cross the T's—to keep her board process-driven rather than personality-driven. It drove Perkins nuts. It kept making him think of that helicopter. He recalls a meeting in his office with her in which he wanted to discuss how to compete better with Dell, IBM and others. According to Perkins, she was fixated instead on her discovery that there were inconsistencies between HP's bylaws and the Corporate Directors Handbook. Those inconsistencies then occupied hours of discussion at subsequent board meetings. "Intel might be kicking the crap out of us," Perkins says, "but that didn't seem to matter."
That's an overstatement. In the new world of corporate governance after Enron and other business implosions, good corporate governance isn't just a swell idea, but a legal requirement. And corporate watchdogs give the HP board high marks for independence. The chairman deserves credit for the high marks. Meanwhile, the company's profits have risen, and its stock price has soared. The supreme irony now, of course, is that being a stickler for proper procedures doesn't seem to have worked out so well for Pattie Dunn. An obsession with leaks to reporters could have happened at any company, especially at one with all the intrigue HP had faced during Carly Fiorina's tenure. It's not a function of Silicon Valley and it's got nothing to do with the details of corporate minutiae. The Dunn-Perkins mess is about what drives most conflict: human emotions.
The HP board of directors has long been a leaky ship. During the embattled reign of Fiorina—HP's flashy CEO who was forced out nearly two years ago—a blow-by-blow account of a board retreat, held off-site to discuss the company's most sensitive problems, appeared in The Wall Street Journal. Furious, Fiorina laid down the law to board members: the leaks had to stop. For a time it appeared that the leakers, whoever they were, had gotten the message.
But then, in January 2006, the online technology site CNET published an article about HP's long-term strategy. While the piece was upbeat and innocuous, it quoted an anonymous HP source and contained information that could've come only from a director. It was the last straw for Dunn, who by then had been elected non-executive chairman of the board. Dunn was incensed that the drip-drip-drip of information out of the boardroom continued. She wanted to know the leaker's identity, but she would not supervise an investigation herself.
Dunn referred the matter to HP's general counsel. In turn, that office contracted out the investigation to security experts who recruited private investigators who then took the extraordinary step of spying on the phone records of all the directors (including Dunn), as well as journalists (including the CNET reporter). These were not the records of calls from HP offices, but the records of calls made from personal accounts—like Perkins's home in Marin County. It was classic data mining: HP's consultants weren't actually listening in on calls—all they had to do was look for a pattern of contacts.
It is not uncommon for companies to monitor the phones and computers of their employees. Indeed, in the wired age, most employees don't realize how much privacy they sacrifice. But pretexting goes a step beyond. The investigators use your ID—typically, the last four digits of your Social Security number—to obtain your phone records from unwitting phone companies. Last week California Attorney General Bill Lockyer said he has decided a crime was committed, though he hasn't concluded by whom.
In an interview with NEWSWEEK, Dunn says she was aware HP was obtaining the phone records of suspected leakers as long ago as 2005. But she says she didn't know about the pretexting until late June, when she saw an e-mail to Perkins from HP's outside counsel, Larry Sonsini. "I was told it was all legal," she says. She now acknowledges that HP's tactics were "appalling" and "embarrassing," but says the current "brouhaha" grew out of a personal dispute between her and Perkins.
Dunn insists Perkins was just as eager to learn the identity of the leaker as she was. "Tom was the most hawkish member of the board for plugging the leaks, which he thought were coming from management. He advocated the use of lie-detector tests." Perkins disagrees. He tells NEWSWEEK that Dunn brought up the idea of lie-detector tests and that he volunteered to take one. "I thought it would be a kick—great for my next novel," he says. But he pointed out that if word leaked out an HP director had to take a lie-detector test, it would be a "catastrophe."
It remains unclear exactly what Dunn knew and when she knew it. The California attorney general will want to know if Dunn intentionally avoided knowing about the details, like a head of state who wants "plausible deniability" while ordering an assassination plot. (An ancient model, cited by old CIA hands, is Henry II. When he wanted to get rid of the Archbishop of Canterbury, he simply muttered in front of his knights, "Will no one rid me of this troublesome priest?")
In any case, Dunn sprang the identity of the leaker at a meeting of her fellow directors on May 18, at HP headquarters in Palo Alto, Calif. Meeting in the nondescript first-floor boardroom, Dunn laid out the surveillance and pointed out the offending director, who acknowledged being the CNET leaker. He was 66-year-old George (Jay) Keyworth, a science adviser to President Reagan and the longest-serving HP director. Thunderstruck, Keyworth apologized but said to the board, "I would have told you all about this. Why didn't you just ask?" Keyworth was asked to leave the room and did so. Close to 90 minutes of discussion followed. Hurd, the CEO, reportedly was asked by one director how he would handle a leak by an employee. "I would have no choice but to fire him," Hurd replied.
Other directors were noncommittal, according to Perkins. They included Larry Babbio, the president of Verizon—the phone company that has aggressively sought to protect the privacy of its customers' records. (Babbio, through a spokesman, declined to comment.) Perkins says he was the only director who rose to take Dunn on directly. Perkins told the directors he was enraged at the surveillance, which he called illegal, unethical and a misplaced corporate priority. "Pattie, you betrayed me," he says he railed at Dunn. "You and I had an agreement that if we found out who did this, we would handle it offline without disclosing the name of the leaker."
Dunn now charges that Perkins was just trying to protect his friend Keyworth. "He's angry that I stood in his way to cover up the results of our investigation and the identity of the leaker." Perkins dismisses the charge as a red herring—corporate spin to obscure larger issues. There may indeed be deeper issues at work. Dunn tells NEWSWEEK that Perkins has been agitating to vote her out as chairman for a while. At times, he had been. Inevitably their styles just clashed. Perkins is used to being king of the hill, even though he's never been a CEO. Venture capitalists routinely call the shots from behind the scenes in Silicon Valley, and Perkins is the most powerful VC of them all.
Whatever Perkins's motivations, he acted as if he were onstage in a melodrama. After a divided board, by secret written vote, passed a motion demanding that Keyworth resign, Perkins picked up his papers, grabbed his briefcase, walked out and zoomed off in his Porsche Carrera GT. "I quit!" he said as he stalked out. "I'll not be party to this. I'm resigning." Keyworth re-entered the room and learned he was being told to leave. He refused, saying it was up to shareholders to make such a decision. "We can ask him, but we can't make him," Ann Baskins, HP's general counsel, told the board. (Keyworth remains on the board even now, though HP announced last week it would not recommend him for re-election by shareholders come March; he declined to comment for this article.) After Perkins left the room, the rest of the board's agenda was scrapped and the meeting was thrown into chaos.
When Perkins returned to his office, he soon got a call from Sonsini, the best-known, most powerful lawyer in Silicon Valley. Baskins had called Sonsini at his nearby office and asked him to rush over. As Perkins tells it, Sonsini asked him, "How can I characterize this, Tom? May I say you're resigning for personal reasons?"
"No, Larry, you cannot."
"May I say it's a disagreement with Pattie?"
"Sure, but don't you dare say I resigned to spend more time with my children."
In media mentions a few days after the May 18 meeting, Perkins's resignation was noted, but without explanation or any indication that his exit was a form of protest. This began nearly four months of warfare between HP and Perkins about whether the surveillance would ever come to public light. Any time a director resigns from a public corporation, federal law requires the company to disclose it in an SEC filing. If the director quits because of a major "disagreement" with the company, the reason has to be disclosed as well. HP reported Perkins's resignation but not the reason for it. It was the Perkins-Sonsini phone call, according to HP, that allowed the company to give the SEC no explanation. "I gave them the opening not to disclose," Perkins now says. "I'm no SEC lawyer." Sonsini did not return calls from NEWSWEEK.
A few days later, Perkins was off to south Florida to promote his bawdy novel. His publisher had set up a contest with Romantic Times magazine, with the lucky winners getting a chance to have dinner with bachelor Tom. From Daytona Beach he was off to Istanbul, where he was preparing his superyacht for its sail trials in the Mediterranean. He fumed that the reason for his resignation had not yet come out, and he felt constrained from going public himself. Over time, in e-mails with Sonsini and communications with the board, he escalated his attempts to force SEC disclosure, as well as to get federal and state officials to investigate HP's spying on personal phone records; the FTC, FCC and federal prosecutors have now begun investigations. Perkins hired his own lawyer, Viet Dinh, a former Bush administration lawyer who had helped draft the Patriot Act.
Perkins had concluded that Dunn had to go. He even e-mailed her so. According to Perkins, she told him no. (Dunn recalls only that "Tom wrote to disinvite me from the launch party of his boat" on the Italian Riviera in mid-July.) But Perkins was hardly all-consumed with the battle. The day before his $100 million sailboat departed for its maiden voyage, the government of Turkey threw him a reception at the Imperial Palace. Perkins decked out the Falcon with signal flags adorning the deck from bow to stern, across the tops of the three 190-foot masts. The playful message spelled out in nautical-speak: "Rarely does one have the privilege to witness vulgar ostentation displayed on such a scale."
Perkins came to learn more about HP's use of pretexting. He discovered that he himself was hacked. In an Aug. 11 letter to Perkins that he demanded, an AT&T attorney explained that Perkins was a victim of pretexting in January 2006, just at the time Dunn decided to find the leaker. The AT&T letter explains that the unnamed pretexter who got details about Perkins's home-telephone usage was able to provide the last four digits of Perkins's Social Security number, and that was sufficient identification for AT&T. The impersonator then persuaded a customer-service rep to send the records electronically to an e-mail account, mike@yahoo.com, that on its face had nothing to do with Perkins. Records for Perkins's long-distance AT&T account were similarly obtained, but it was by redsox9855@yahoo.com. Both e-mail accounts are registered to the same Internet Protocol address, but AT&T says it doesn't know the identity of the user.
In mid-June, according to a letter Perkins sent to the full HP board, Perkins contacted Sonsini and asked him to look into the Dunn investigation. In an e-mail to Perkins obtained by NEWSWEEK, Sonsini acknowledged that Dunn's security consultants "did obtain information regarding phone calls made and received by the cell or home numbers of directors" and that it was "done through a third party that made pretext calls to phone-service providers." That was the first time Perkins had heard the word "pretexting."
Sonsini's e-mail emphasized that the consultants engaged in "no electronic surveillance," "no phone recording or eavesdropping" and "no recording, review or monitoring of director e-mail." His initial legal defense of pretexting was that it is "apparently a common investigatory method" and that "there was no 'secret spying,' i.e., no electronic gear, listening devices, etc." In its SEC filing last week, HP stated that the outside counsel had concluded that the use of pretexting "was not generally unlawful," but that counsel "could not confirm that the techniques" used by pretexters in the HP investigation "complied in all respects with applicable law."
Sonsini's legal tiptoeing intrigued Perkins for two reasons: it seemed to raise so many non-issues in Perkins's mind, and Perkins had also never heard of the pretexting that Sonsini admitted to. But it was only after he says HP then refused his repeated requests to take action that he eventually decided to approach a host of government agencies, as well as prosecutors in California and New York. By early September, HP scrambled to go on the offensive, and made a filing last week to the SEC, laying out the pretexting story for public consumption. The story exploded in the press (first in a piece on NEWSWEEK.com). Dunn called an emergency board meeting, which—by the time this story appears—may have called for her resignation. Dunn, interviewed by NEWSWEEK on Saturday, was philosophical. "My goal in this job was to help the board overcome its conflicts. I was unsuccessful. I wanted to show that two people at opposite ends of the spectrum could work together. That was naive."
Next week Dunn is scheduled to be inducted into the Bay Area Business Hall of Fame. Perkins is already a member. Maybe the two adversaries can reconnect at the induction ceremony—and exchange phone numbers.
With Karen Breslau, Brad Stone, Nadine Joseph, Daniel McGinn and Dana Gordon
Update: A source close to Hewlett-Packard tells Newsweek that HP's emergency board meeting was adjourned late in the afternoon on Sunday (ET) without any decision being reached on the possible resignation of Patricia Dunn as chairman. The source, who requested anonymity because of the confidentiality of internal board proceedings, said the HP board would reconvene late Monday afternoon.
Editor's Note: David A. Kaplan is writing a book for HarperCollins about Perkins's superyacht.
URL: http://msnbc.msn.com/id/14736379/site/newsweek/
September 10, 2006 at 10:56 PM in Online crime | Permalink | Top of page | Blog Home
September 06, 2006
Toronto turns on municipal Wi-Fi service
After technical delays and concerns from authorities, the city begins reinventing itself as a giant hot spot. Find out what the pricing plans and potential public sector applications are
Wi-Fi in Toronto: Should it stay free?
Why more Canadian cities aren't wireless
9/6/2006 4:50:00 PM
by Neil Sutton
TORONTO – Toronto Hydro Telecom Wednesday launched its downtown Wi-Fi service with pricing it claims is 35 per cent below the average for high-speed Internet service in the city.
The first area to go live is Toronto’s financial district. Four other areas will be switched on before the end of this year, culminating in a New Year’s Eve launch for the final phase in Toronto’s entertainment district. The service, which is being called “One Zone” will be free for its first six months of operation (until March 6, 2007). After that, three pricing packages will be available: a pre-paid monthly subscription rate of $29; a 24-hour rate of $10; and an hourly fee of $10.
The pricing plan is based on the usage patterns of its potential audience: permanent users, occasional users and visitors to the city. Toronto Hydro Telecom president David Dobbin said, “we have a wide pool of users available to us,” but admitted the key to the service’s financial success will be the number of business customers it can win.
Dobbin said the pricing is competitive with existing rates for DSL and cable-based high-speed Internet service. Wi-Fi is also mobile – a selling point Dobbin hopes will draw users.
“You don’t have to pay an additional charge. The service follows you wherever you go,” he said during a press conference held at the Toronto Stock Exchange.
Gartner Canada telecommunications analyst Elroy Jopling called the rates “(not) bad but they’re not great. I think that’s the thing that jumps out.”
Jopling said he was surprised that Toronto Hydro Telecom didn’t take the opportunity to set its rates significantly below that of its competition.
“If you’re a new kid on the block, or you’re late coming onto the block, I think you have to bring something more,” he said.
He pointed out that the voice-over IP wars are being waged over price. Montreal-based Videotron, for example, undercut the market by 30 per cent, garnering the company immediate customer acceptance.
The Toronto wireless hot zone has come across a number of obstacles since the project was first announced in March. Originally, the service was to have gone live in June, but there were problems with the street light poles that were used to attach wireless antennas. There were also concerns from police services that the wireless service could be used for drug trafficking communications and other illegal purposes.
Despite the delays, Dobbin said Toronto is the first major North American city to get its Wi-Fi service off the ground. Similar initiatives in San Francisco and Philadelphia are still in planning or implementation stages.
Toronto Hydro Telecom is also in talks with the City of Toronto to use the network for municipal services. Possible uses include Wi-Fi parking meters, vehicle management systems and surveillance for law enforcement. “Those will unfold over time,” said Toronto mayor David Miller, who also attended the press conference.
Dobbin said Toronto Hydro Telecom did not have any estimates of the service’s eventual audience, but said the outlook was positive. The service was quietly turned on last week to allow for last-minute tests and had 200 users online the morning of the launch. “Our take rate is going to be stronger than we thought,” he said.
The next move may be up to Hydro’s competitors, said Jopling. If they choose to lower their Internet rates in response, Toronto Hydro could have a price war on its hands.
“This probably one where the winner will be the consumer,” he said.
September 6, 2006 at 08:44 PM in Wireless | Permalink | Top of page | Blog Home
September 04, 2006
Marketers muse about MySpace
TheStar.com - Marketers muse about MySpace
Sep. 4, 2006. 09:35 AM
TARA PERKINS
BUSINESS REPORTER
"You're a square, and you have more than 81,000 friends, WHAT'S HAPPENING TO THE WORLD"?
—Posting on MySpace.com,
Aug. 26, 7:15 a.m.
Who is this popular square?
According to his profile, his name is Smart, he lives in New York and he's 28. Smart is single, but wants to have kids one day. He also wants to meet Angelina Jolie. And his hero is Dave Thomas.
Smart is a square-shaped mascot, created by Wendy's International Inc., the U.S. hamburger chain that is spinning off its ownership stake in Tim Hortons and that shook up its marketing department this summer to focus on innovation.
Wendy's created a profile page for Smart — who is shaped like the chain's square burger patties — on MySpace, the popular networking site bought by media firm News Corp. for more than $500 million (U.S.) last year.
As of Friday, Smart had 81,015 "friends," other MySpace users who can connect their profile to Smart's and leave comments on his page.
Companies can post profiles on MySpace for free or, like Wendy's, work with Fox Interactive Media to develop a site with a price tag ranging from about $100,000 to more than $1 million.
"Whether through a customized profile or a marketing campaign, brands and advertisers such as Disney, Toyota, Gillette, Pepsi, even the U.S. Marine Corps, have the opportunity to engage users, ultimately allowing the community to become brand ambassadors to their network of friends," says a fact sheet handed out by Fox Interactive, which runs MySpace.
Canadian companies have recently been experimenting with MySpace and similar social networking sites, but experts warn that caution is required. Pitfalls include negative comments posted to the profile page, criticism from those who feel that posting a profile on MySpace to advertise is deceptive, and posting a profile that just isn't embraced by the company's target demographic.
Last week Hitwise, an online researcher, said that MySpace.com accounted for 2.53 per cent of all U.S. upstream visits to shopping and classified sites for the week ending Aug. 26, nearly double its percentage from six months earlier.
By comparison, Google.com was responsible for 14.93 per cent of U.S. upstream visits to shopping and classified sites, followed by Yahoo at 4.69 per cent.
"With the growth of MySpace and others, online retailers should expand their focus beyond search to consider social networking sites as a source of additional traffic," stated Bill Tancer, general manager of global research at Hitwise.
MySpace ranked as the sixth most popular site on the Web in July, according to Fox Interactive which cites comScore Media Metrix.
Windsor's Motor City Community Credit Union is among the Canadian organizations with a profile on MySpace.
Mike Quinlan, the marketing director of the credit union, said he was aware of the dangers, but the experience has been more successful than he hoped.
"It came about because of listening to my eldest daughter, who was 24. (She) lived in Ireland for a year and had her own blog, which was kind of new for me as a communication channel," Quinlan said.
"So then, I was trying to come up with ideas to penetrate the youth market, I did some research, and I found MySpace."
The credit union hired "a couple of twenty-somethings" to help, for their "familiarity with talking the talk," he said.
The profile site is intended to give young people a forum to learn about and discuss financial issues, he said. "It's a great channel, it's very cost-efficient.
"It's too early to say it's a raving success, but we are really encouraged," he said. "We thought that if we could get 100 friends within the first two or three months we'd be really happy, and we're already over 200."
Quinlan did have some concerns before the credit union, which has about 17,000 members, set up its profile.
"MySpace has, obviously, all types of users with all types of subjects," he said. "Our concern was that if the MySpace aura itself was getting bad publicity, we would be wrapped in. Like, if they were saying it's nothing more than a pornographic channel," he said.
While the Wendy's profile page for Smart is filled with comments like, "Your {sic} the man square, I know if you run for Prime minister I'll vote you in :)," it also has complaints about service at the restaurant and lines of profanities.
And some critics are calling commercial profiles on MySpace "deceptive." An article by CNET News.com titled "MySpace blurs line between friends and flacks" quoted experts who say that younger teens who thrive on social networks may not be skeptical enough of this "new, seductive form of advertising."
MySpace attracts profiles from individuals, music and entertainment artists, non-profit organizations and corporations around the world. "Why these diverse groups join is not that different — it's all in the name of shameless self-promotion," said an industry newsletter put out by Canadian youth marketing firm Youthography earlier this year.
The music industry began using the site early, and other companies are now following suit.
Youthography warns, "There are definitely risks that come along with creating a branded corporate MySpace page. First off, there's no control over the comments users leave on your page, aside from deleting the comment entirely.
"Corporations that join should expect to see profanity, nudity and all around vulgarity. If your brand is sensitive to this and isn't comfortable with these associations, then MySpace might not be for you."
A second caution is the need to raise "the creative bar," Youthography says.
A Tim Hortons profile on MySpace has a dark background featuring coffee mugs that makes it very difficult to read the overlying font. Tim Hortons is described as a 42-year-old male from Hamilton, and the site features ads for iced cappuccinos and strawberry tarts.
The company was unable to confirm whether it posted the profile.
September 4, 2006 at 12:26 PM in Online Marketing | Permalink | Top of page | Blog Home
September 02, 2006
Livedoor Trial Reflects Changes in Japan
ABC News: Livedoor Trial Reflects Changes in Japan
Trial for Former Internet Star Reflects Japan Grappling With Changing Corporate Culture
By YURI KAGEYAMA
The Associated Press
TOKYO - When the trial of Japan's most famous dot-com entrepreneur opens Monday, a much wider issue will also be before the court: this nation's tenuous shift to a more freewheeling market economy.
Takafumi Horie, 33, founder and former president of Internet startup Livedoor Co., faces charges of securities laws violations in falsifying earnings data to inflate the company's stock price. He has repeatedly said he is innocent.
But in many ways, the Livedoor scandal is more than a story of one cocky tech-savvy man. It has brought far deeper repercussions to Japan's financial world.
Donning T-shirts instead of dark suits, Horie, a dropout of the prestigious University of Tokyo, defied old guard Japan Inc., long dominated by a web of cross-shareholdings in which companies hold stocks in each other to bar outsiders.
Starting about two years ago, Horie tried unsuccessfully to buy a professional baseball team and take over a radio broadcaster that is a key part of a powerful media conglomerate led by Fuji Television Network Inc.
Horie was praised by some as a courageous innovator but scoffed at by others as a brash novice. He appeared on TV talks shows and used his visibility to draw individual investors to Livedoor's stock, raking in millions as the Net portal that Livedoor operated grew increasingly popular.
At one point, Horie seemed destined to celebrity status.
He dated actresses. The Roppongi Hills complex where he lived and worked became synonymous with the beautiful life. He ran for parliament last year and won high-profile backing from the ruling party, although he lost the election. He appeared in TV commercials. He announced he was investing in space travel as a business.
But that's as good as the ride got.
In January, rows of prosecutors marched into Roppongi Hills in a raid that was televised live on nationwide TV. Horie was arrested a week later.
The sell-off of Livedoor's stock that followed triggered a plunge in Tokyo shares dubbed "Livedoor shock" and even shut down trading because the exchange couldn't handle that many trades.
Individual Livedoor investors, estimated to number some 220,000 people at one point, were outraged.
Prosecutors say Horie and other Livedoor executives used dubious methods to buy up other companies, set up "dummy" companies to hide losses and jack up the capital value of their group companies.
Livedoor is suspected of pretending to have an affiliate acquire a company that was already under its control and selling stock in that company to doctor its books, prosecutors say.
Key to the trial is how much Horie knew about such antics and whether he was aware of wrongdoing or if he had conspired with the other executives to fabricate results, as prosecutors contend.
If convicted, he faces a maximum penalty of five years in prison or 5 million yen ($42,000) in fines, or both.
The whole affair stirred up loud criticism of the government for failing to adequately monitor securities transactions and other financial practices because Livedoor's repeated stock splits and aggressive takeovers had been widely known.
Parliament passed a bill in June to tighten oversight of investment funds amid calls for stricter and clearer rules governing the securities market, partly in response to the Livedoor scandal.
But so far, there has been no move to create an independent body that would be equivalent to the U.S. Securities and Exchange Commission. Japan only has a smaller team of bureaucrats with lesser punitive authority to do the job, and mostly relies on prosecutors to crack down on such wrongdoing.
Robin Greenwood, assistant professor of finance at Harvard Business School, said that Horie used a loophole in regulations about stock splits to edge up Livedoor shares.
In the U.S., stock splits don't change the value of a company. In Japan, stock splits made shares momentarily unavailable for trade, jacking up the price as supply failed to keep up with demand, he said.
Settlements in Japan were still done with paper shares, while in the U.S., the paper system has long been replaced by electronic trading. That allowed Horie to carry out totally legal stock manipulation, Greenwood said.
"It is somewhat surprising how long it took them to figure out what was going on," he said in an e-mail.
Greenwood and others worry that the Livedoor debacle will keep individual investors away from the market. Some of the efforts Horie represented were positive, such as openly bidding for companies and appealing to investors. But stodgy old-style management could exploit Horie's fall from grace to block sorely needed change.
"It is convenient for Japan's old guard," Greenwood said. "They can claim that Horie was bad news for shareholders, and therefore that this justifies any steps that management might take to entrench themselves."
There's no doubt that Horie symbolizes an emerging new generation of daring Japanese who look remarkably different from the docile "salaryman" who clung to jobs backed by a lifetime employment system, which is gradually unraveling amid global competition.
Horie, released on bail in April, has stuck to his assertion of innocence. The Japanese police and incarceration system are infamous for coaxing confessions out of those in custody.
"I have not admitted to any of the charges, and I did not order or approve illegal acts," Horie said in a statement to the media in May.
Copyright 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Copyright © 2006 ABC News Internet Ventures
September 2, 2006 at 04:28 PM in Japan | Permalink | Top of page | Blog Home
September 01, 2006
Net browser promises secure surf
BBC NEWS | Technology | Net browser promises secure surf
A web browser has been released that promises total privacy for its users.
Browzar, as it is known, automatically deletes all traces of the pages a person has visited, and the terms that they have searched for on the web.
Most web browsers, including Microsoft's Internet Explorer, allow users to do this manually.
The developers of the browser say that it will be useful for people who want to protect their privacy on work PCs or when using shared PCs in net cafes.
Unwritten history
Browzar is similar to Internet Explorer but has had much of its software code rewritten.
It works by automatically deleting all private information about your surfing habits
Unlike other browsers it does not record the web address for any website you visit. So next time you logon, the names of sites such as http://news.bbc.co.uk are not stored in the drop-down address bar at the top of the browser.
This also means that there is no web history folder on a user's hard drive, that records visited sites.
So called cached webpages are also not stored. Normally these webpages are kept on a computer's hardrive to speed up the download times of frequently visited websites.
Computer users crowd round a screen
The browser prevents other people looking at private information
Using a cached page means a computer only has to download those elements of a site that has changed.
The browser also deletes "cookies" at the end of each browsing session.
A cookie is a small program that sits on your computer and identifies you to the website.
Cookies may hold personal preferences about the site and details of how you reached the page.
The browser also does not use an auto-complete function, that works like predictive text on a mobile phone, and can give away terms previously used on search engines.
Currently, web users can delete all of these files manually, but it is often fiddly and would need to be done after every browsing session.
Stiff competition
Browzar is entering a market dominated by Internet Explorer.
Earlier this year, web analysis firm One Stat released figures that showed it had an 83.5% market share. In 2004, that share stood at 95%.
Rival browsers such as Firefox and Opera have been gaining significant inroads into the browser market.
But the developers of Browzar do not see their product as a rival. Instead they say their software is a complement to existing applications and is "designed to be run at those times when we want privacy."
At present the free download is available for PCs running the Microsoft Window's operating system. It is currently offered as a "beta", or test version.
New versions for Apple Macs and Linux machines are expected soon.
September 1, 2006 at 09:31 AM in Browsers | Permalink | Top of page | Blog Home
