Squeezing Websites Onto Cellphones

The Wall Street Journal

When a group of engineers at National Instruments Corp. modified a 1988 Oldsmobile so it could be controlled by an iPhone, the company was quick to share the project on its online forum for customers.

A spouse "might not care about it, but our community eats it up," said Deidre Walsh, community and social media manager for National Instruments, a supplier of automation and computer measurement tools.

The Austin, Texas, company has a fostered dedicated online group of 125,000 engineers and scientists with do-it-yourself projects. Its strategy illustrates how companies have increasingly turned to Web communities to build their brand, address customer service problems and unveil new products.

But as people spend more time on their cellphones, many companies are considering taking their message boards, user forums and blogs to mobile devices. National Instruments is considering ways to build a mobile site, Ms. Walsh says but has to resolve issues such as how users can share programming code, which are large files.

Other companies, including technology giant Hewlett-Packard Co., are discussing ways to build their first Web sites specifically for wireless users. "We definitely have work to do to get our Web site mobile friendly," said Lois Townsend, H-P's director of community. "We know our customers want it."

H-P has a financial incentive to expand its community strategy. The forums, which often address problems before a customer has to call the service line, have saved millions of dollars in deflected calls, Ms. Townsend said.

The move to mobile isn't without challenges. Companies have to decide whether to create a barebones site accessible by even the most basic handset, or opt for a flashier application accessible by select smart phones. Different phones, screen sizes and platforms create headaches for site designers.

Mike Hardy, community manager for Pitney Bowes Inc., says moving the company's online forums to mobile devices is a "no brainer" though the postage-meter maker is still evaluating technologies to do so.

H-P and Pitney Bowes aren't the only companies without a mobile-friendly site. Among others without a significant mobile presence are retailer Ikea International A/S, Samsung Electronics Co. and Apple Inc. Samsung says it is exploring the possibility of mobile site but declined to comment further. Ikea and Apple didn't respond to requests for comment.

There are some who believe that the idea of a site designed for phones is becoming less relevant as mobile browsers improve. Most smart phones, for instance, are able to load up sites built for the computer.

Some companies are hesitant to build a mobile site because they want more than just a simple page displaying wares, said Robert Chimsky, a consultant for inCode Telecom. While there are still many companies without a mobile site or application, "given the way things are moving, having a mobile-enabled capability is going to be increasingly important," Mr. Chimsky said.

Companies, however, have to avoid overloading customers with information. "You have to be very careful of what you're pushing and how you're pushing it," Mr. Chimsky said. "It's that relevancy angle that's so hard."

The cellphone affords the opportunity to be more interactive with customers. That's where companies such as Lithium Technologies Inc. come in. The Emeryville, Calif., company's software runs the social components of many traditional Web sites, including those of H-P, AT&T Inc., and Best Buy Co.

Lithium wants to take those forums, blogs and other social-networking elements to cellphones with a service it plans to roll out next year. Beyond its own social-networking tools, the platform will draw in related feeds from services such as Facebook and Twitter.

"A lot of these companies don't have a mobile site, and right away, they'll have a lot of content," said Philip Soffer, Lithium's vice president of product marketing. "Because the community is active and based on addictive behavior, it's the kind of thing that works well on mobile phones."

Lithium declined to provide the pricing for its upcoming service, which would work on any phone.

It's not the only company looking to bring large corporate sites to the mobile Web. Rival Jive Software Inc., which powers communities for companies like Nike Inc., SAP AG and National Instruments, has opted to go with a program specifically designed for the iPhone.

The Portland, Ore., company last month unveiled an iPhone app that gives corporate workers access to Jive-powered message boards and blogs. While the app is a free download, Jive charges a company $10,000 a year for up to 1,000 users.

For BlackBerry users, the company has a simpler Web interface and email alerts on community developments.

Unlike Lithium, Jive is focused on smart-phone users, noting that sites specifically designed for the devices can do more. "We think the magic happens really when you're able to go deep with functionality," said Ben Kiker, Jive's marketing chief.

Researcher: Google Wave, iPhone and Android will be Heavily Attacked in 2010
USA Today

 

From the crystal ball of  Roel Schouwenberg: Google Wave, the iPhone and Android mobile phones will come under heavy cyber attacks in 2010.

Schouwenberg, a senior malware researcher at Kaspersky Lab Americas, predicts Google Wave will grab headlines in coming months -- but not necessarily for emerging as the next killer online networking app. Instead, he says, Google Wave is likely to become a top target of cyber criminals.

"Attacks on this new Google service will no doubt follow the usual pattern," Schouwenberg soothsays. "First, the sending of spam, followed by phishing attacks, then the exploiting of vulnerabilities and the spreading of malware."

Schouwenberg also anticipates a sharp rise in attacks on the iPhone and Android mobile platforms, following the successful probe attacks of 2009. "The first malicious programs for these mobile platforms appeared in 2009, a sure sign that they have aroused the interest of cybercriminals," he says.

Android users, in particular, seem ripe for plundering. "The increasing popularity of mobile phones running the Android operating system, combined with a lack of effective checks to ensure third-party software applications are secure, will lead to a number of high-profile malware outbreaks," he says.

Schowenberg's prescient orb also tells him that  the overheated race between Google, Microsoft Bing, and Yahoo Search to incorporate Facebook and Twitter posts in search results -- in real time -- is destined to aid and abet cyber criminals' deployment of phishing scams, banking Trojans and cutting-edge intrusions. "Malware will continue to further its sophistication in 2010," he says.

Hacker Pleads Guilty To Credit Card Theft

USA Today

A computer hacker who helped orchestrate the theft of tens of millions of credit and debit card numbers from major retailers in one of the largest such thefts in U.S. history pleaded guilty Tuesday in the last of three cases brought by federal prosecutors.

Albert Gonzalez, a one-time federal informant from Miami, faces a prison sentence of up to 25 years under the terms of separate plea agreements. He is tentatively scheduled for sentencing in March.

"This is a young kid who did some reckless things and he's going to pay a price for it," said Gonzalez's attorney, Martin Weinberg, after his 28-year-old client calmly answered guilty to charges of conspiracy and wire fraud.

Weinberg said Gonzalez was remorseful and that he would ask two federal judges hearing the cases to sentence Gonzalez to the lower end of the 17- to 25-year sentencing range spelled out in the plea agreements.

Tuesday's plea stemmed from a case that was originally brought by federal prosecutors in New Jersey, but later transferred to Boston. It charged Gonzalez with conspiracy to gain unauthorized access to computer servers at Hannaford Brothers, a Maine-based supermarket chain; convenience store giant 7-Eleven.; Heartland Payment Systems, a New Jersey-based processor of credit and debit cards; and two unnamed companies.

Gonzalez pleaded guilty in September in two other cases that were combined in Boston. Those cases included charges that he hacked into the computers of prominent retailers such as TJX Cos., BJ's Wholesale Club, OfficeMax, BostonMarket, Barnes & Noble and Sports Authority.

Under questioning Tuesday by U.S. District Court Judge Douglas Woodlock, Gonzalez indicated that he had used alcohol and a number of drugs, including marijuana, cocaine and LSD, prior to his arrest in May 2008.

Federal prosecutors have agreed to seek concurrent sentences in the cases, meaning that Gonzalez would serve no more than 25 years in prison. Weinberg, however, said he would argue for a lesser sentence based on factors including the prior drug abuse and a psychiatrist's report that Gonzalez exhibits behavior consistent with Asperger's syndrome, a form of autism.

The defense-commissioned report by Dr. Barry Roth described Gonzalez as an Internet addict with an "idiot-Savant-like genius for computers and information technology," but socially awkward.

"His personal life has been characterized most of all by awkwardness, impairment, troubles connecting to people, with an overarching preference and predilection to machines and technology," Roth wrote.

Authorities said Gonzalez, who said he had worked as a computer security consultant, was the ringleader of a group that targeted large retailers.

In 2003, Gonzalez was arrested for hacking but was not charged because he became an informant, helping the Secret Service find other hackers. But authorities said he continued to use his talents for illegal activities.

Over the next five years, he hacked into the computer systems of retailers even while providing assistance to the government.

He lived lavishly during that time. Authorities said he amassed $2.8 million and bought a Miami condo and a BMW. Under the plea deals, Gonzalez must forfeit more than $2.7 million, plus his condo, car, a Tiffany ring he gave to his girlfriend and Rolex watches he gave to his father and friends.

Before accepting the plea Tuesday, Woodlock heard Assistant U.S. Attorney Stephen Heymann outline the sophisticated hacking scheme, which also involved an individual identified only as "P.T." and two individuals identified in the indictment as Hacker 1 and Hacker 2. Heymann said they remain fugitives.

Gonzalez identified potential corporate victims by poring through lists of Fortune 500 companies and by going to retail stores to probe for potential vulnerabilities, Heymann said.

"It was foreseeable to defendant Gonzalez that the losses resulting from unauthorized access into the servers of the corporate victims identified in the indictment would exceed $20 million," Heymann said.

Google Sharpens Aim On Mobile Marketing With AdMob

AP

Four years ago, Omar Hamoui was just another ineffectual entrepreneur trying to spruce up his resume in graduate school.

Now, he's poised to become Google Inc.'s newest weapon as the company aims to extend its dominance of online advertising from computers to mobile devices.

Google is buying Hamoui's expertise in a $750 million acquisition of AdMob, a network for ads on iPhones and similar gadgets. He launched the business while struggling to support his wife and children as a student at the University of Pennsylvania's Wharton School.

Hamoui, 32, changed his life by setting up a system for advertising on mobile devices. Though that sounds simple, it was a breakthrough because Hamoui's network got around stifling controls that wireless carriers had imposed on the content their customers could see on their phones. The crack that AdMob opened in the carriers' "walled gardens" made it easier for independent programmers to profit from applications planted on mobile phones.

Users tend to click on mobile ads five to eight times more often than they do on PC ads

"It took a lot of guts because (the carriers) were the gatekeepers of the industry," says Rich Wong, an AdMob investor and board member who is with Accel Partners. "Back then, it was sort of like if you said no to the Godfather. Bad things could happen."

More than a year after Hamoui ignited the fuse, Apple Inc. blew up the status quo with the June 2007 introduction of the iPhone - which created a platform for applications chosen by users.

That has spawned more than 100,000 mobile "apps" for doing everything from bird watching to cooking poultry. The revenue from AdMob's ad network is one of the main reasons application developers can give the programs away or just charge a few bucks.

"Omar was absolutely the tip of the spear in this mobile media revolution," says Jason Spero, general manager of AdMob's North America operations.

If Google's proposed acquisition is approved by the U.S. Federal Trade Commission, Hamoui thinks he and AdMob's 150 employees will be in an even better position to turn mobile phones into moneymaking magnets.

Google is banking on it.

Drawing upon the more than $20 billion in revenue that it generates from Internet ads, Google has been investing aggressively in mobile technology. The Internet search leader has developed a free software system, Android, that runs mobile devices and is experimenting with its own phone, called Nexus One, that could be sold directly to consumers.

Google believes explosive growth in mobile advertising will justify its spending. For now, the market remains relatively small, with U.S. mobile advertising revenue expected to reach $416 million this year, according to the research firm eMarketer Inc.

AdMob has delivered nearly 140 billion ads on mobile Web sites and applications since its inception. That has helped AdMob double its revenue this year after tripling it last year. Hamoui won't be more specific, leaving it to analysts to estimate that AdMob's revenue this year will range between $45 million and $60 million.

That's less revenue than Google generates in a day. Nevertheless, AdMob's early lead in mobile advertising could trouble antitrust regulators already concerned about Google's growing power. The Federal Trade Commission has asked for more information about the deal - a sign that regulators want to take a closer look at how it will affect competition in the mobile ad market, which is expected to quadruple in size during the next four years.

Only two of Google's acquisitions have been bigger than the proposed AdMob deal. Regulators quickly approved Google's $1.76 billion acquisition of the Internet's top video channel, YouTube, in 2006 but took a year before signing off on the $3.2 billion purchase of another Internet ad service, DoubleClick Inc., in 2008. (By coincidence, AdMob is headquartered across the street from where YouTube started in San Mateo, Calif.)

Google contends its AdMob acquisition won't hurt competition. Among other things, Google points to other mobile ad networks from rivals such as Jumptap, Mojiva and AOL and argues that mobile ads still don't generate attract enough spending to be considered a distinct market.

Hamoui started AdMob out of frustration a few months after he enrolled in graduate school. He was building a phone-friendly Web site to make it easier for people to share photos with their family and friends, but he couldn't seem to attract much traffic.

To get the word out, Hamoui bought ads that would appear alongside certain search results at Google, Yahoo and other engines. That ended up costing him about $30 per referral, which he couldn't afford. So Hamoui decided to try advertising his site on other mobile Web sites, which are specially designed to work with the small screens and technological restraints of mobile phones.

Hamoui found a mobile Web site willing to run his ad for dramatically less money and wound up paying just 10 cents per referral. The experience resonated with Hamoui's studies on efficient markets, and inspired him to build a network that would make it easier to advertise on mobile devices.

If nothing else, he thought he might be able to turn the ad network into a project that would let him get out of having a conventional internship during his summer break in 2006. As it happened, AdMob created enough buzz that Hamoui dropped out of Wharton in the spring.

One key element of his system is that it lets programmers specify when and where ads can show up while their apps are running on a phone. Advertisers, which range from mass merchants to other app makers, can aim their messages widely - for instance, to everyone with an iPhone. Or ads can be aimed at a particular demographic. An ad for the movie "Fast and Furious" might show up on a mobile game such as "Tap Tap Revenge" that's popular among young men. The targeting frequently hits the mark: Users tend to click on mobile ads five to eight times more often than they do on PC ads, Hamoui says.

Jim Goetz, who joined AdMob's board after his firm, Sequoia Capital, put up the first $4 million of the $47 million in venture capital raised by AdMob, likens Hamoui to some of the other successful entrepreneurs that Sequoia has backed. That group includes Apple's Steve Jobs, Yahoo co-founders Jerry Yang and David Filo, and Google co-founders Sergey Brin and Larry Page.

"Omar is a lot like them," Goetz says. "He has the ambition, the intelligence and that special sparkle."

By selling his startup to a larger company, Hamoui is doing something those other entrepreneurs didn't. His investors say he didn't do it for the money - AdMob still had plenty in the bank, and Hamoui doesn't seem to be driven by striking it rich. He still drives a lime-green Toyota Camry that elicits good-natured gibes around AdMob's offices. When he splurges, he does so frugally. AdMob's holiday party is being held next month when the prices are cheaper.

"It just seemed like we would be able to do the things we want a lot faster and a lot better with the resources we will have at Google," Hamoui says. "We already have achieved a big part of what we wanted to do - getting mobile seo advertising going and making it possible for people to start a mobile company without having to do a deal with a carrier first."

Antitrust Regulators Examining Google's Purchase Of AdMob

USA Today

Antitrust regulators are taking a closer look at Google's proposed $750 million purchase of mobile phone marketer AdMob, the latest sign of greater government vigilance as Google tries to expand its advertising empire.

The Federal Trade Commission sought more information about the deal this week, according to a Wednesday post on Google's blog.

This so-called "second request" doesn't mean regulators intend to block Google's AdMob deal. Most other acquisitions that go through this stage end up getting approved.

But the FTC's action shows regulators are watching Google (GOOG) more carefully as the company tries to build upon its dominance of the Internet's lucrative search advertising market. Google is expected to pull in more than $22 billion in revenue this year, mostly from ads shown alongside search results and other Web content.

"We know that closer scrutiny has been one consequence of Google's success," Paul Feng, a Google product manager, wrote in Wednesday's blog posting. Echoing previous management comments, Feng said the company remains confident its AdMob purchase, announced last month, will be approved.

Google's huge lead in Internet search triggered a 2008 government investigation that scuttled its plans to enter into an advertising partnership with rival Yahoo, which runs the second most-popular search engine. Yahoo plans to work with Microsoft instead, beginning next year if those two companies can gain regulatory approval.

Since its inception nearly four years ago, AdMob has built a thriving network that sells and delivers ads on applications and websites designed for the iPhone and other mobile devices. It's still relatively small with estimated annual revenue of $45 million to $60 million, but regulators apparently want to understand whether its technology and advertising contacts would give Google an unfair advantage in its quest to sell more mobile phone ads.

Google management has indicated that it believes mobile marketing eventually may become bigger than advertising on Internet-connected computers. That tipping point still appears to be many years away, with U.S. mobile advertising expected to total $416 million this year, about 2% of overall Internet ad spending in the country.

The FTC's decision to take more time digging into the AdMob deal means Google probably won't be able to take over the company for several more months, Stifel Nicolaus analyst Rebecca Arbogast wrote in a Wednesday research note. It took a year for the FTC to approve Google's $3.2 billion acquisition of Internet ad service DoubleClick, which was completed in March 2008.

Google's first big deal, a $1.76 billion acquisition of the video site YouTube, was cleared by regulators in a month in 2006.

Google, Bing Kick Yahoo To The Curb

CNN Money

Once the world's online search leader, Yahoo's share has sharply declined, putting it in danger of losing its relevance in a market increasingly dominated by Google.

Yahoo's search market share in November fell to 17.5% from 18% in October, according to a monthly comScore report released late Wednesday. It's the lowest share ever recorded for Yahoo.

Cannibalizing Yahoo's market share is Microsoft (MSFT, Fortune 500), whose new Bing search site gained 0.4 points of the search market to 10.3% in November. That was the first time Microsoft owned more than 10% of the market since September 2007.



Despite that good news, it's really a mixed blessing of sorts for Microsoft, which entered into a search deal with Yahoo that is expected to start in the next several months. When the deal was announced in July, analysts largely praised the marriage, since the companies held a combined 28% of the market -- close to the 30% that experts say is needed to convince advertisers that a company is a relevant competitor in a marketplace.

Since the July announcement, "Microhoo" has gone in the wrong direction. The companies' combined share has taken a 0.4-point hit, as Yahoo's share has fallen by 1.8 points, outpacing Bing's 1.4-point gain.

"They're still going to be a viable No. 2 behind Google, but less so than they expected," said Daniel Ruby, research director at search-advertising firm Chitika, Inc. "Everyone is surprised by the fact that Yahoo has lost such a significant amount of traffic. Thirty percent seems like a very long shot."

Google grew its share by 0.9 points since July to take 65.6% of the search market in November. That's the largest share Google has ever garnered.

Meanwhile, Yahoo has lost share for 10-straight months. As the closing date nears for the search rivals' deal, some say Yahoo is reaching a tipping point that could make or break the value of its partnership.


The devil is in the details

Under the 10-year agreement, Microsoft will power the searches that users make on Yahoo.com. In return, Microsoft will pay Yahoo 88% of the revenue it gains from searches on Yahoo's sites. Yahoo.com and Bing.com will maintain their own branding but search results on Yahoo.com will say "powered by Bing."

"There is no getting around the fact that the market share trend for Yahoo is absolutely awful," said Benjamin Schachter, analyst for Broadpoint AmTech. "The Microsoft deal does not guarantee any search revenue, only revenue-per-search levels; therefore, search share and volume are as critical as ever."

Still, another school of thought says not all is lost for Yahoo.

Both Yahoo and Microsoft have poured millions of dollars into advertising campaigns to get users to come to their Web sites. Yahoo's new "It's Y!ou" campaign has been plastered all over billboards and television spots. Microsoft just launched its new highly publicized Bing iPhone App on Tuesday.

As a result, some advertisers believe users who search on those sites are more likely to indulge a sales pitch and therefore are more likely to click on their ads than Google's users.

"Microsoft and Yahoo offer quality versus quantity," said Ruby. "The traffic they drive is more valuable than Google's in some advertisers' eyes, because their users are going to be delivering higher margins."

So even as Google SEO continues to gain share at "Microhoo's" expense, Yahoo and Microsoft live on to fight for high-quality searchers as a way to stay relevant.

Twitter Is Said to Be Profitable After Making Search Agreements
Bloomberg

Twitter Inc. will make about $25 million from Internet-search deals with Google Inc. and Microsoft Corp. announced in October, enough to push the site into profitability, people familiar with the matter said.

An agreement that made Twitter’s messages searchable on Google’s site will generate about $15 million, said the people, who asked to remain anonymous because the terms aren’t public. A similar deal with Microsoft’s Bing search engine will earn Twitter about $10 million.

The multiyear agreements will allow Twitter to make a small profit in 2009, said the people, who estimate that its operating costs are about $20 million to $25 million a year. The San Francisco-based company, which started in 2006, has about 105 employees, according to its Web site.

Until earlier this year, Twitter wasn’t even focused on revenue -- let alone profit. The company attracted millions of users with a free service that posts 140-character messages, known as tweets. Chief Executive Officer Evan Williams said two months ago that the company was spending almost all its time improving the product, rather than seeking ways to make money.

That left many analysts and investors wondering how Twitter would convert its popularity into earnings. Twitter has more than 58 million global monthly users, according to ComScore Inc., a research firm in Reston, Virginia. The service is the third most popular social-networking site in the U.S., after Facebook Inc. and News Corp.’s MySpace.

No Comment

The company’s co-founder, Biz Stone, declined to comment on its finances, saying only that Twitter is proud of the work it accomplished in 2009.

“We’re thrilled about the partnerships we’ve formed this year and we’re looking forward to opening Twitter even more in the future,” Stone said in an e-mail.

Jane Penner, a spokeswoman for Mountain View, California- based Google, declined to comment, as did Pete Wootton, a spokesman for Redmond, Washington-based Microsoft. When the agreements were announced in October, none of the companies involved disclosed their value.

Twitter got help achieving profitability by reducing expenses, the people familiar with the situation said. The company used to pay more money to telecommunications companies for distributing its billions of tweets over wireless networks. Twitter’s popularity has given it bargaining power with phone companies, helping it renegotiate deals to bring down costs.

Workforce Costs

While telecommunication fees used to be the company’s single largest expense, employees are now the biggest line item, said one of the people. That means maintaining profitability will depend on whether Twitter keeps a lid on the size of its workforce.

The payments from Google and Microsoft underscore the growing value of the data coursing through Twitter’s network. Executives of both companies have said their search sites would be considered incomplete if they didn’t include the millions of messages that get posted on Twitter every minute.

“We believe that our search results and user experience will greatly benefit from the inclusion of this up-to-the-minute data,” Marissa Mayer, Google’s vice president in charge of search products, said in a blog posting after the deals with Twitter were announced. “The next time you search for something that can be aided by a real-time observation, say, snow conditions at your favorite ski resort, you’ll find tweets from other users who are there.”

Consumer Tweets

Tweets also are a source of product information, with shoppers using Twitter to share views on their purchases. Making that kind of information available on Google and Bing may help them sell more advertising, and provide more relevant search results to shoppers.

Twitter, which started in 2006, has raised about $155 million in venture capital. A round in September for $100 million valued the company at $1 billion, according to a person familiar with the deal. The size of the valuation, along with Twitter’s lack of a revenue plan, was reminiscent of the dot-com era, David Garrity, principal at GVA Research LLC in New York, said at the time.

Since then, Twitter has given more details about how it plans to make money. In addition to the search deals, it’s planning an advertising program for early next year. The company also will charge for commercial Twitter accounts, which would let businesses analyze tweet traffic.

Chief Operating Officer Dick Costolo, who joined Twitter in September, was key to getting the search-engine deals done, one person familiar with the matter said. Costolo helped found FeedBurner and worked at Google as an ad product manager after his company was acquired.

At FeedBurner, Costolo worked on selling ads on Web news feeds. The goal  for Twitter SEO now is to add advertising without disrupting the way Twitter works, Costolo said last month at a conference.

“We want to do something that’s organic and in the flow of the way people already use Twitter -- and not, ‘Here’s the tweets and here are the ads,’” he said.

Google Fined Per Day In France Over Copyright Issues

USA Today

PARIS — A Paris court ruled Friday that Google's expansion into digital books breaks France's copyright laws, and a judge slapped the Internet search leader with a $14,300-a-day fine until it stops showing literary snippets.

Besides being fined for each day in violation, Google was ordered to pay $430,000 in damages and interest to French publisher La Martiniere, which brought the case on behalf of a group of French publishers.

Google attorney Alexandra Neri said the company would appeal.

The decision erects another legal barrier that may prevent Google from realizing its 5-year-old goal of scanning all the world's books into a digital library accessible to anyone with an Internet connection.

A U.S. legal settlement that would give Google the digital rights to millions of books is in limbo because U.S. regulators have warned a federal judge in New York that the arrangement probably would thwart competition in the budding electronic book market and compromise copyrights, as well.

The top U.S. copyright official and the governments in Germany and France also have raised objections about that settlement overstepping its bounds. Google is trying to address the critics with a revised settlement that is still under court review.

The French case is relatively small in comparison. It didn't even seem to faze investors as Google shares gained $2.48 to $596.42.

Still, the ruling served as a reminder that Google's ambitious push into other markets beyond Internet search increasingly is clashing with fears the Mountain View, Calif., company is getting too powerful.

As part of the backlash, Google has been depicted as a copyright scofflaw that prospers off the content of others — a portrayal the company's management insists is totally off base.

The head of the French publisher's union applauded Friday's verdict.

"It shows Google that they are not the kings of the world and they can't do whatever they want," said Serge Eyrolles, president of France's Syndicat National de l'Edition. He said Google had scanned 100,000 French books into its database, 80% of which were under copyright.

Eyrolles said French publishers would still like to work with Google to digitize their books, "but only if they stop playing around with us and start respecting intellectual property rights."

Philippe Colombet, the head of Google's book-scanning project in France, said the company disagrees with the court's ruling.

"French readers now face the threat of losing access to a significant body of knowledge and falling behind the rest of Internet users," Colombet said in a conference call with reporters. "We believe that displaying a limited number of short extracts from books complies with copyright legislation both in France and the U.S. — and improves access to books."

Colombet declined to answer questions about whether Google would remove the books from its database or pay the fine. "We are going to study the judgment carefully over the coming days," he said.

The judgment will have little or no effect on Internet users outside of France. And French books that are in Google's database with publishers' consent will remain searchable, even in France. Colombet could not say how many French books Google has scanned overall, or how many French publishers allowing Google to show its works.

Google has scanned more than 10 million books worldwide since 2004, including 2 million with the consent of about 30,000 publishers, About 9,000 of those publishers are in Europe, Colombet said. Another 2 million books in Google's library no longer are in copyright. Google has been only showing snippets from the remaining books while it tries to iron out copyright disputes.

French President Nicolas Sarkozy has made catching up on France's digital delay one of the national priorities by earmarking euro750 million (about $1 billion) of a euro35 billion spending plan announced earlier this week for digitizing France's libraries, film and music archives and other repositories of the nation's recorded heritage.

Earlier this week a consortium of French technology companies announced a plan to create a book scanning project they said would be better than Google's, but only in three years time.

Facebook Can Wait For IPO After Large Russian Investment

Bloomberg

Facebook Inc., the most popular social-networking Web site, can take more time to decide on an initial public offering after Russia’s Digital Sky Technologies bought a stake, the head of the investment group said.

“Any IPO should be business driven and not liquidity driven as the latter can be done through the private market,” Chief Executive Officer Yuri Milner said in a Bloomberg Television interview in Moscow today. “That’s what we do, so founders and management can focus on business execution.”

Facebook CEO Mark Zuckerberg, who started Facebook as a Harvard University student in 2004, said in May he expects the company to have an IPO, though he wasn’t focused on it. Facebook is privately owned with a dual-class stock structure designed to allow current shareholders to hold on to voting control. Milner said today it’s up to Facebook’s board and management and not DST whether the social-networking Web site should hold an IPO.

Facebook SEO may attract the same level of attention as Google Inc.’s share sale in 2004, Adam Oliveri, managing director at New York-based SecondMarket, an exchange for private companies, said last month. Google sold 19.6 million shares for $1.67 billion in August 2004, giving the company a market value of $23 billion.

Kommersant Report

Paul Bard, an analyst at Renaissance Capital LLC, which has specialized in IPO research since 1991, also said last month that Facebook may sell stock through an IPO within 12 to 18 months. Zuckerberg said in May that an IPO is “something we’ll do when we’re ready for it” and “it’s something we don’t see on the immediate horizon.”

DST, which has offices in Moscow and London, in May paid $200 million for less than 2 percent of Palo Alto, California- based Facebook. The Russian investment company has since raised its stake to 5 percent and spent at least $400 million on its Facebook investment, Kommersant reported yesterday, citing an unidentified person at an investment fund close to Facebook.

Milner today declined to comment on the report, adding that DST doesn’t need to disclose details on its holdings as it is a private company.

Google In Talks To Purchase Yelp

NY Times

SAN FRANCISCO — In a sign that Google is interested in broadening its reach among local businesses, the search giant is in acquisition talks with Yelp, the review site for local businesses, according to three people with knowledge of the deal.

The two companies have had conversations for several years, but a more serious round of acquisition talks began two months ago, one of the people said late Thursday. The companies have discussed a price and are negotiating the details, but have not yet signed an agreement.

Both Google and Yelp declined to comment on Friday.

The people with knowledge of the deal would not disclose the acquisition price, but one said that it was more than $500 million, the figure cited by TechCrunch, the industry blog that first reported the news Thursday evening.

Yelp, which has raised $31 million in venture capital, is on track to bring in about $30 million in revenue this year, one person said.

Yelp, which was founded in 2004 by two PayPal veterans, Jeremy Stoppelman and Russel Simmons, dominates the market for local business listings and ads in big American cities, and has listings in Canada and Britain. It gets more visitors than its closest rival, Citysearch, and many of them review local businesses prolifically.

Yelp makes money selling sponsorships to these businesses. For $300 to $1,000 a month, their ads appear on top of search results and on the profile pages of competitors, and businesses can post slide shows of photographs and prevent competitors from advertising on their page.

Google has been showing greater interest in the local business market in the United States. It has expanded its profile pages for local businesses, which include location and hours, maps and reviews from other Web sites. In June, Google gave local businesses the ability to manage what people see on their profile pages, similar to what Yelp does.

Google has been reaching out to local businesses with simpler ways to advertise on the search engine and achieve better Google SEO results. It is also distributing stickers that businesses post in their windows and passers-by can scan with cellphones to get coupons or information about the business.

The deal between Google and Yelp could still unravel, one person said, particularly if another acquirer comes forward now that details have leaked.

Google Labs Creates 'Living Stories'

LA Times

Google today said it has developed an experimental news site that it calls "Living Stories."

The idea, jointly developed with the New York Times and the Washington Post, is to pool together the many disparate stories a newspaper writes on a single topic, such as healthcare reform, into a single Web page.

Readers can customize pages based on the topics they wish to read. Each page automatically updates to include new stories on the topic, and remembers what the reader has already viewed to serve up newer or related stories and photos.

Living Stories was launched today in Google Labs, an area reserved for products that are not yet ready for prime time. The page currently has stories only from the Post and the Times, which worked with Google to develop the prototype.

"This project is a pilot," said Josh Cohen, senior business product manager for Google News, in an interview. "The idea is to make improvements based on the feedback we receive, then make those tools more widely available."

The concept of grouping articles by topic isn't new. Yahoo came up with its version, called Yahoo News Topics, two years ago. Here's Yahoo's page on "Google," for example. What's different is that Google sees publishers using Living Stories on their own websites, not just on Google. Here's an example from the Times of what a page about the war in Afghanistan looks like.

Publishers have no lack of options when it comes to digital distribution models as they cast about for a way to make up for the losses in print circulation and advertising. Just today, a group of five major publishers announced they would jointly build an online storefront for readers to buy magazines and newspapers. You can read more about that announcement here. Many see the effort as a response to Amazon.com's Kindle model, which pays publishers 30% of the revenue generated from the sale of periodicals.

So what's the benefit to publishers of going with Google?

Cohen said it's a happy union of developing a reader-friendly experience while maximizing a website's rank with search engines that can drive traffic to a publisher's website.

A page containing links to many stories on the same topic tends to rank higher with search engines than a page with a single story. This explains why Wikipedia is often at the top of a search results page on any given query.

"On the search side, there’s a single page to point to," Cohen said. "Instead of thousands of links, there is a single point of reference. And that’s helpful for users as well."

Google Accused Of Predatory Monopolistic Practices

USA Today

Google has come under fire for allegedly using predatory monopolistic business practices. In this debate , sponsored by the Federalist Society in Washington D.C. this week,  Precursor tech industry analyst Scott Cleland accused the search giant of engaging in "pervasive predatory anti-competitive behavior that is seriously harming competition."

Cleland supplied a long list of alleged Google sins, ranging from "price-fixing and auction-manipulation" stemming from its bread-and-butter search advertising business, to "proactively thwarting" the proposed Microsoft-Yahoo merger last year.

He also outlined  a case for how Google steers  online advertising spending towards  search ads, which it dominates, and away from display ads, which big media companies are scrambling to tap.

Google anti-trust attorney Susan Creighton, acknowledged the copyright lawsuit brought by authors and publishers  miffed at Google's campaign to digitize library books.  Beyond that, she argued that there are no anti-trust allegations of merit that she knows of. Creighton, who served as the Federal Trade Commission's competition director under President George W. Bush,  reiterated Google's long-espoused assertion that Google SEO is always  just one click away from losing a customer.

Can Tim Armstrong Save AOL?
Armstrong may have the toughest job in media—trying to teach an old digital dog new tricks that would make it relevant to users and advertisers 

Business Week

Tim Armstrong needs a new hip. Two decades ago the AOL chief executive absorbed a crushing hit on a high school football field. Over the years his discomfort worsened, and a few months ago his doctor told him that he should seriously consider a replacement. Armstrong, who is just 38, wasn't having any of it. He's too busy saving AOL, which on Dec. 10 will finally separate from Time Warner (TWX), bringing to a merciful end a dysfunctional marriage that lasted nine long years.

Armstrong may well have the most difficult job in media. Mention AOL, and people think: The Worst Deal of All Time! Ask them what AOL does nowadays, and most will say: I have no idea. "Tim needs to articulate the value of AOL," says Robert W. Pittman, a former AOL Time Warner chief operating officer. "He needs a strong selling proposition." Since leaving Google (GOOG) eight months ago to run AOL, Armstrong has busied himself coming up with one. It goes something like this: AOL is not some dot-com has-been selling Web access and e-mail. It's a digital media colossus with 80 Web sites churning out everything from personal finance advice to bedroom tips for women. With 100 million unique monthly viewers, Armstrong asserts, AOL has what it takes to lure blue-chip companies eager to reach multiple audiences with one ad buy.

Sounds great, right? And it might just work. But consider the challenges. Armstrong faces a landscape populated by giants, such as Yahoo! (YHOO), Microsoft (MSFT), and Barry Diller's IAC (IACI), and a slew of startups—all pushing their own content. Plus, Yahoo and Microsoft attract more eyeballs than AOL. And while Armstrong says content is at the heart of his strategy, AOL already tried that and failed. What's more, right now, advertising-supported content, according to one estimate, generates only 30% of AOL profits. Meanwhile, AOL employees, having endured multiple layoffs and strategies over the past decade, are demoralized and weary of yet another makeover. So, yes, the hip operation can wait. "This is a challenge, I know that," says Armstrong, a first-time CEO. "We have to create a company that doesn't settle for mediocrity."

Armstrong's arrival at AOL marks the latest chapter for a company that over the past 25 years has gone through multiple permutations. When it was founded in 1985, it provided software for Commodore computers; a decade later it had morphed into America Online. AOL introduced millions of Americans to the Web, and the slogan, "You've got mail," embedded itself in the popular culture. As AOL's stock took off, hubris set in, and the boyish CEO, Steve Case, developed a burning ambition to acquire Time Warner, one of the world's most powerful media companies. The deal closed on Jan. 11, 2001, amid much talk of synergies. We all know what happened next: AOL Time Warner shareholders watched helplessly as $100 billion-plus in value evaporated.

STANDING OVATION

After that, AOL stumbled along, adopting one strategy only to jettison it for another. Meanwhile, the likes of Yahoo, Google, MySpace (NWS), and Facebook came to define the Web. Finally, earlier this year, Time Warner CEO Jeffrey L. Bewkes had had enough. And Bewkes, who had criticized the merger back when he was running Time Warner's HBO, set in motion the long-anticipated divorce. He hired Armstrong as CEO. The choice was widely applauded because during nine years at Google, most of them as head of U.S. ad sales, Armstrong had made peace with Madison Avenue, then deeply suspicious of Google's motives.

By doing so, he helped turn the search giant into a $20 billion advertising juggernaut.

On Mar. 17, a rainy St. Patrick's Day, Armstrong made his AOL debut before 1,000 staffers packed into a large tent outside the original Dulles (Va.) headquarters. Case and former AOL Vice-Chairman Ted Leonsis spoke first. They took pains not to dwell on what might have been but on how Armstrong would transform AOL. Then Armstrong, an imposing six-foot-four, took the podium. The crowd, some wiping away tears, gave him a standing ovation. A few days later he reported for duty on the fourth floor of the Wanamaker Building in downtown Manhattan and got busy figuring out how to turn AOL into a 21st century media company.

AOL faces a classic business conundrum: The original enterprise (selling Web access) is dying, but the new operation (selling ads) isn't big enough to replace it. AOL still has about 5 million subscribers but is losing several hundred thousand a year. Recently, the company has made up for the loss in subscriber revenue by cutting costs. Then came this year's advertising drought. For the first nine months of 2009, AOL's revenues dropped 24%, to $2.4 billion, while operating profits shrank 34%, to $765 million. The picture doesn't get any rosier. Over the next three years, according to estimates from equity research outfit Sanford C. Bernstein, operating profits will continue to decline, by 10%, to $880 million. You can see why Armstrong is under enormous pressure to rev up advertising.

When Armstrong took over the corner office, he was shocked to discover that AOL had stopped doing the most basic things. Nearly three years had passed since it did any market research. In fact, AOL had been without a chief marketing officer for 12 months. "We were dark for a very long time," says a senior executive who is helping find a new CMO. In those first days on the job, Armstrong relied on his gut. He came to believe he needed to reach three kinds of people. There are old-timers who still use AOL e-mail and regularly visit AOL news, music, and entertainment sites. There are younger people who hang out at pop-culture sites like FanHouse, Stylelist, Spinner, or PopEater but have no clue that AOL owns and operates them. The last group are folks who simply gave up on AOL.

To find out how people perceive AOL, Armstrong hired ad giant Leo Burnett to conduct surveys among 5,000 people aged 18 to 65. Burnett found that most people are aware of AOL but lack strong feelings about it. About half said they didn't know what AOL did anymore. "AOL has the awareness," says Pittman. "It just has to drive out the fuzziness."

Armstrong went looking for answers. In his first 100 days, he visited 16 cities around the world. By his count, he has spoken with 10,000 people—employees, advertisers, investors, even people he meets at conferences. He has reached out to fellow executives. David J. Stern, a friend and commissioner of the National Basketball Assn., told him not to be afraid of experimenting. Mickey Drexler, the CEO of J.Crew (JCG), also headquartered in the Wanamaker building, regularly drops by. He told Armstrong to listen to customers and workers.

Armstrong has become a student of corporate turnarounds. A favorite case study: Apple's (AAPL) resurrection. He asks employees to read a 1996 BusinessWeek cover story about Apple headlined "The Fall of an American Idol," a dour view of the company before Steve Jobs' return. Armstrong has taken much of his road map from the Apple turnaround, which he sums up as: "New products and services that people find necessary."

What he means by that is content—news, politics, sports, music. But isn't the world awash in content? Yahoo, arguably AOL's closest rival, has many similar sites. Yahoo and its ilk, however, are mainly aggregators, taking others' stuff and selling ads against it. Armstrong aims to stand out from the crowd by creating original content.

A year ago, AOL licensed up to 80% of its content; today, the company says, it generates 80%. Bill Wilson, AOL's content chief, has exploited traditional media's implosion to hire seasoned journalists. Their expertise and voices, Armstrong believes, will enhance AOL's sites—and the brand. Each week some 30 AOL editors appear on TV and radio to talk about their areas of specialization. Of course, AOL once had access to Time Warner's original programming and journalism, and that didn't get it very far.

As local newspapers wither away, AOL is positioning itself as the go-to source for local communities. Its main vehicle is Patch.com, a collection of sites with a hyperlocal focus that AOL acquired in June. (Armstrong was an investor but agreed not to take a profit on the sale.) The sites, each operating under a single editor, offer local news and sports, restaurant offerings, and events. AOL operates 25 Patch sites in towns with populations of 15,000 to 50,000. It plans to have hundreds more up and running in the next year. The idea is to lure national advertisers keen to reach local consumers. So far, though, advertisers are mostly local—colleges, arts centers, florists, and so forth. And a lot of other players, including Topix, a venture by McClatchy (MNI), Gannett (GCI), and Tribune, are vying for the hyperlocal market.

E-mail may seem a sideshow these days, but AOL says it drives people to its sites, particularly since visitors see a page of headlines hawking AOL content whenever they sign on. While instant messaging remains popular, regular AOL e-mail lost 15% of its U.S. market share in the last year to the likes of Yahoo and Google. To help reverse those trends, Armstrong recruited Brad Garlinghouse, a former Yahoo executive who helped the portal go from No. 3 to No. 1 in e-mail. One of the first things he did was reduce the advertising on AOL e-mail by 60% to eliminate the annoying clutter. He is also ditching a bunch of obnoxious rules that had chased away many AOL e-mail users. When somebody canceled an account, for example, AOL didn't allow anyone else to use that name. Now they will. Also, AOL e-mail users could never put a period or an underscore in their addresses. Now users will be able to.

Attracting eyeballs is just half the challenge. Armstrong needs to get advertisers to follow—and fast. To help sell the new AOL to Madison Avenue, Armstrong poached a Google colleague named Jeff Levick, calling him during a family vacation in St. Bart's to make his final and ultimately successful pitch. A former mergers-and-acquisitions lawyer, Levick brought with him valuable contacts, a clear sense of Armstrong's thinking, and a commitment to do for brand advertising at AOL what he had done for search advertising at Google.

Shortly after he started in April, Levick concluded AOL had too much advertising inventory—industry lingo for places to put ads. He and Armstrong agreed the oversupply was hurting the rates AOL could charge advertisers. So Levick did something unusual: He cut the number of ads on the home page from 10 to one. "You raise the quality," Levick says, "and charge a premium." Is it working? He isn't saying.

These days companies expect data proving that their ads are reaching the right people. Armstrong wants to go a step further by giving advertisers real-time information so they can tweak their messages on the fly. Once again AOL looked to a Google alum, this time Shashi Seth, whose job had been to wring as much money out of ads as possible. Seth gathered 55 computer scientists and ordered them to design algorithms that can do things like predict when demand for specific products and services peak. Intrigued by the technology, ad buyer Interpublic (IPG) Mediabrands struck a strategic partnership with AOL in October. Interpublic will share resources and research, as well as take advantage of AOL technologies. "

What we're seeing here is a very novel approach to advertising," says Quentin George, Interpublic Mediabrands' chief digital officer. "We're excited about how they are looking at consumer demand when it comes to content."

As his team works feverishly, burnishing old strategies and creating new ones, Armstrong's big push in the coming months will be selling the world on AOL, the brand. He doesn't believe it will happen with a flashy TV ad campaign. "We don't want to put lipstick on a pig," says one of his aides. Instead, Armstrong believes AOL needs to approach consumers with humility: Yes, the company lost its way, but now it has plenty to offer. How will he get the message out? "Listen," says Armstrong, "we have 100 million unique visitors every month, so that is a huge opportunity to spread the word."

CONVINCING INVESTORS

Unlike some of his predecessors, Armstrong seems unafraid to hitch sites to the AOL brand. "In the past, [our] services were like little speedboats racing away from the AOL name," he says. So does AOL's popular sports site FanHouse become AOL FanHouse? Still to be determined. "You may or may not see the AOL name on the title of our sites, but you will begin to see a more consistent effort to promote the AOL brand on the sites themselves," says Wilson. While some people wouldn't be turned off by having AOL attached to sites, it could hurt others. For example, consumers said if the Politics Daily site added the AOL name they might think the site is biased.

Armstrong is stressing all of this as he embarks on a 10-city U.S. road show. If consumers are apathetic about AOL, investors are bitter. Having been burned by the AOL Time Warner merger, money managers may require the hardest sell of all. Armstrong believes that simply being separated from Time Warner will put a lot of the ill will behind AOL. "Why would I buy AOL?" asks a large media investor. "It would largely be a bet on Tim, given what he was able to do at Google." AOL may never again be a $70 stock. And by some estimates, its market cap will be about $3 billion. That's not enough to make it into the Standard & Poor's 500, meaning AOL won't be able to tap the investors who buy that index. Still, Armstrong says AOL will have a chance to show Wall Street that it is the media model of the future. Needless to say, skeptics abound.

Armstrong knows he doesn't have much time to prove his case before AOL is written off as a legacy brand. That's why for now, as much as his old injury hobbles him on his worst days, the occasional acupuncture treatment will have to do.

Yahoo Using FaceBook Connect For 'Project Rushmore'

Media Memo

A few weeks ago, several sources at Yahoo begin telling BoomTown about a mysterious “Project Rushmore,” which was described as a massive integration of major social networking sites across the giant Internet portal.

Now, the first unveiling of Project Rushmore comes with this morning’s announcement that Yahoo (YHOO) will be integrating Facebook Connect with its many properties–from its powerful media sites to its Flickr photo service to its email.

Once deployed–in the first half of next year, said Yahoo–Yahoo users can monitor their full Facebook feed on the site and Facebook users will have their Yahoo activity displayed on their news feed, if they choose to.

The companies said no money will be exchanged in the five-year deal; nor will there be any other financial or advertising element.

This is a major step for Yahoo, which has long touted its openness, and a significant upgrade to the company’s relationship with Facebook.

It’s also more than ironic, as Yahoo had been very close to acquiring Facebook for just over $1 billion several years ago, in a should-have deal that went south.

Currently, Facebook users can update their status and access their stream via an app on the Yahoo homepage. They can also share to Facebook using buttons on Yahoo, and Facebook can access contacts on Yahoo.

But the relationship between the pair–which have some of the largest audiences on the Web between them–has been relatively thin until now.

This has been a glaring problem for Yahoo, which has also promised a lot of socialization throughout the service, but has not really provided it for users. The company hopes this tight link with the fast-growing Facebook will send users back to Yahoo.

Facebook–via Facebook Connect, which allows users to log on to participating sites with their identity on the service–is perhaps the bigger winner here.

The huge amount of data from the activities from one of the most trafficked sites on the Web–with upward of 500 million users–will further solidify its growing role as a central hub of a user’s Web life.

Another irony: This was the role Yahoo held for many years and has been losing to, yes, Facebook.

Yahoo is still aiming to be the central hub for a lot of people too, said Jim Stoneham, Yahoo’s VP of Communities, who noted that slightly more than half of Yahoo users also have Facebook accounts.

“That’s highly relevant that a lot of people use both,” said Stoneham. “So, there should be a strong bond across both sites.”

Added Stoneham: “This will be a done on a deep level into Yahoo.”

Stoneheam declined to comment on whether and when the service would be striking similar deals with other networking sites.

But sources told me that Twitter and LinkedIn are likely candidates, as well as MySpace.

That would, of course, account for the four presidential stone faces on Mount Rushmore–George Washington, Teddy Roosevelt, Thomas Jefferson and Abraham Lincoln.

Other big Internet companies are getting into the social act. Separately, both Microsoft (MSFT) and Google (GOOG) recently struck a data-mining deal with Twitter and Microsoft also did so with Facebook.

So, such an overall move by Yahoo is an important and necessary one–and also very late in coming–since it completely missed the social networking train and needs to figure out how to be part of it in a way that is useful to users and open.

“This relationship pushes us really far forward [toward openness],” said Cody Simms, senior director of product management for Yahoo’s open strategy. “And it helps our users be more social, which they want to be wherever they are.”

And presumably, Yahoo hopes these moves will keep users on Yahoo a little longer while doing that.

Here is the full blog post from Yahoo’s Yodel Anecdotal by Stoneham:

    Update once to share with many on Yahoo! and Facebook

    Posted December 2nd, 2009 at 6:29 am by Lucas Mast, Blog Editor

    We have good news to share with everyone who uses Yahoo! and Facebook–in the first half of 2010 we will open the door between two of the Internet’s largest online communities. You will be able to see your Facebook friends’ activities on Yahoo! and share Yahoo! content–ratings, photos, article comments, and more–directly on your Facebook stream. We’re doing this by deeply integrating a service called Facebook Connect across Yahoo! properties worldwide, which we announced today.

    As the place where over 500 million people visit every month, Yahoo!’s goal is to bring together social experiences from across the web, and provide one place for people to access information and stay in touch with the people they care about most.

    Yahoo!’s integration of Facebook Connect will provide you with richer experiences across the Yahoo! products you use every day, such as Yahoo! Mail, Yahoo! News, Yahoo! Answers and Yahoo! Sports. In the future, you’ll be able to choose where you want to update your status message–from destinations across Yahoo!–or directly on Facebook.

    We are doing this as part of our commitment to deliver more personally relevant Internet experiences, so watch for more details in the New Year!

    Jim Stoneham, VP of Communities for Yahoo!

Microsoft Not Bailing Out Newspaper Publishers

Media Memo

Just in case newspaper publishers are still fantasizing about cashing big Bill Gates checks in exchange for bailing on Google, Microsoft wants to be clear: Don’t count on us.

Yes, there could be some kind of deal between Microsoft (MSFT) and some publishers. And yes, that might involve some kind of payment. But the company is signaling, loud and clear, that it’s not going to pay the huge sums necessary to fund a real Google (GOOG) boycott.

That’s what All Things Digital reported last week. And that’s what the Associated Press echoed in a subsequent story this week. And that’s what Microsoft said today, more or less. Except this time it was on the record.

Here’s Satya Nadella, who heads up R&D for Microsoft’s Online Services Division–i.e., Bing–at a San Francisco press conference, per Kara Swisher’s account:

    Then comes a question about premium, or “non-Google,” content. Nadella avoids the question, and instead focuses on “scaffolding” the data.

    “We’re not as focused on getting exclusive content,” he says flatly. Uh-oh, publishers! As I reported, Microsoft is not forking over the dough.

    …Nadella gets another question about paying to de-index Google.

    “There is no real intent here that is focused on getting a whole bunch of content that is de-indexed from Google,” he said.

Nadella went on to say that Microsoft is happy to feature different kinds of content, as a way of differentiating itself from Google. Like the work it already does with the Mayo Clinic on health searches: Plug in “swine flu” and you’ll see information from the clinic prominently featured, via a licensing deal.

But that’s a far cry from handing over a sack of cash in exchange for abandoning Google altogether.

Obligatory “to be sure” graf: Say Microsoft was interested in handing over sacks of cash to publishers like News Corp. (NWS), which owns The Wall Street Journal (as well as this site). You wouldn’t hear Redmond bellowing that out loud, anyway.

That’s certainly what the News Corp. folks hope. Or alternately, they’re hoping that all this talk of a Microsoft-publisher alliance spooks Google. But, as the tough guys like to say, hope is not a plan.

Racist Obama Image Shines Light On Web Searching

CNN

When a racist image of first lady Michelle Obama surfaced from the ugliest corners of the Internet last week to top Google's image search results, the episode shined a spotlight on the mysterious workings of search engines.

Google placed an ad near the image, apologizing for its offensive nature. But the company resisted calls to scrub the image from its database, saying its role as a neutral tool for searching the Web means having to live with the results, whether it likes them or not.

"We have a bias toward free expression," Google spokesman Scott Rubin told CNN. "That means that some ugly things will show up."

Google handled almost two-thirds of all Internet searches in the United States in October, according to comScore, making the company the dominant player in the field. Like other search engines, Google relies on a complicated and largely secretive algorithm to decide which Web pages should pop up first based on a user's search terms.

The popularity of a Web site, the number of times a certain page has been viewed, the number of people who have linked to a page from their own pages -- all weigh heavily in the automated decision-making process triggered each time a user clicks "search."

"They [Google] have these 200 different factors that they analyze," said Danny Sullivan, who writes about online search issues at his site, Search Engine Land. "They put them all together and kind of cut it loose and see what it comes up with. It can surprise them as well."

In the case of the crudely doctored Obama image, which replaced her face with that of an ape, Google eventually removed the page on which it first appeared -- but, according to Google, because the page potentially contained malicious software that could harm the computer of anyone who visited it.

As of Tuesday, the image did not appear within the first several hundred results for a Google Images search for "Michelle Obama," although it remained the first result produced by an image search for the words "Michelle Obama ape."

"When the image was coming up on the term 'Michelle Obama,' it was coming up that way against an innocuous query," Rubin said. "If the term you're using is 'Michelle Obama ape,' one could argue that's a relevant result, however offensive it may be."

Sullivan believes Google may have tweaked its search algorithm after finding a bug in its system that caused the Obama image to climb on its results pages.

"When it doesn't do what they want it to do, they go back and start tweaking things," he said. "Long term, you look at how they got there. When you search for Michelle Obama, do you really think that kind of image is one of the most popular things about her on the Internet? I don't think so."

Rubin would not comment on whether any changes were made in the wake of the Michelle Obama incident. But Google and other engines are constantly tinkering with their processes.

Google says it has added an automated feature to prevent "Google bombing," an orchestrated effort by search-engine users to force a specific result.

In 2003, critics of former President George W. Bush gamed the system by repeatedly linking the words "miserable failure" to his official White House biography. Supporters of the Republican president apparently responded, pushing former Democratic President Jimmy Carter's autobiography to No. 2 on the search results for the phrase.

In 2007, comedian and talk-show host Stephen Colbert's fans pushed to link him to the phrase, "greatest living American" -- an effort that worked briefly before Google reversed it.

"We're always working to improve our algorithm to provide more relevant search results," Rubin said. "We do not make editorial decisions based on our politics or anyone else's."

Sullivan and other observers say the Michelle Obama photo did not appear to be a case of "bombing." Instead, they say, it appears to have slowly crept up Google's image search results until it was noticed, and written about, by bloggers and other media whose attention propelled it to the top.

When negative search results arise on the Web, they recede quicker for some people than for others.

Rhea Drysdale, who handles online image issues for Internet marketing company Outspoken Media, said that the offensive picture of Michelle Obama will fade quickly for a simple reason -- there are so many other images of her on the Internet.

"That's not something that's going to stick with her for long," she said.

As examples, she cited two people who got negative press in 2009: rapper Kanye West and convicted Wall Street swindler Bernie Madoff.

A Google search for Madoff's name delivers page after page of news stories about the multi-billion dollar Ponzi scheme the former investment banker pleaded guilty to earlier this year.

West grabbed headlines, and much criticism online, by barging onstage to interrupt an acceptance speech by country singer Taylor Swift at the MTV Music Video Awards in September.

But search Google for "Kanye West" and the first news account of the incident comes after about half a dozen other items, including West's official Web page, personal blog and Wikipedia entry.

"It's just a matter of news coverage," she said. "Kanye has a blog. Kanye has a MySpace page. He has a record label that writes all these other things about him. If you have any of those other properties that are yours out there, they can fill the search results."

In recent years, a cottage industry has developed among online consultants who help clients manage how they look in Web searches. These hired guns work to push positive news to the top of search results while burying, as best as possible, negative information.

Meanwhile, Google says it will work to try to keep its search results pure.

"A result that you're not looking for is not a good search result," said Rubin, the Google spokesman. "It's not a good search experience."