Jobs Attacks Flash as Unfit for iPhone

The Wall Street Journal

Steve Jobs escalates fight with Adobe

Apple Inc. Chief Executive Steve Jobs escalated his fight with Adobe Systems Inc. over the software known as Flash, a battle that could shape the evolution of video and gaming on mobile devices.

Mr. Jobs—after months of criticism from Adobe and software developers for his company's decision to ban Flash from iPhones, iPods and iPads— Thursday took the unusual step of posting a lengthy essay on Apple's Web site criticizing Adobe's software as a flawed throwback to a time before smartphones caught the fancy of consumers.

"Flash was created during the PC era—for PCs and mice," Mr. Jobs wrote in an essay totaling more than 1,600 words. "The mobile era is about low power devices, touch interfaces and open Web standards—all areas where Flash falls short."

Adobe CEO Shantanu Narayen fired back in an interview with The Wall Street Journal, disputing Mr. Jobs's assertions about shortcomings in Flash. That is a "smoke screen," he argued, for Apple's plan to keep its own lock over software development for its mobile devices. "It's clear that it has nothing to do with technology," he said.

The tough rhetoric underscores the huge stakes in setting key technical standards for the mobile Internet, a process that could affect the fortunes of device makers, programmers, media companies and advertisers.

Apple, a PC pioneer whose influence in that market waned, has won new power in the mobile world because of the success of the iPhone and the App Store created to supply software for it.



Analysts and industry executives don't expect Mr. Jobs to readily share that power with other standard-setters such as Adobe. "They are trying to control their ecosystem," said Jeffrey Hammond, an analyst at Forrester Research, of Apple. "It's all about control."

Mr. Jobs, through a spokeswoman, declined a request for an interview to elaborate on his essay and the reason for releasing it now.

Media companies and advertisers have privately expressed frustration about Apple's stance toward Flash because their online video and other Web content incorporates Flash. Adobe, meanwhile, has said it will try to work closely with Google Inc. to popularize Flash on phones using Google's Android system.

Flash is the most popular video format on the Web, and is also used for animation and advertising. It has been slower to take hold in cellphones, but Adobe has recently introduced new versions aimed at mobile devices.

Instead of Flash, Apple is supporting Web sites that use an emerging standard called HTML 5, which is being developed by a consortium that it is a part of alongside Google. But some Web developers say HTML 5 isn't yet ready to be used for anything besides trials.

Apple's anti-Flash policy is not new, but attained greater prominence after the iPad was first publicly demonstrated in January. With a small device like the iPhone, people expected a truncated version of the Web, but with the iPad, people had expected to be able to watch video on the device's big Web browser, said Ben Bajarin, an analyst at Creative Strategies, a research and consulting firm.

Another factor is a new version of Adobe's Creative Suite software, which includes tools for using Flash to build iPhone apps. Just before Adobe formally unveiled the software, Apple changed the terms of use for its App Store to forbid apps written with the new software.

Dave Wolf, vice president of strategy at Cynergy Systems Inc., a Washington, D.C., design firm, calls Apple's no-Flash policy "a pain." Mr. Wolf had planned to build apps for clients using the new Adobe software.

Developers are "caught in the middle," agreed David Clarke, founder of BGT Partners, a Web design firm in Miami.

The essay is a rare but not unprecedented move for Mr. Jobs. Three years ago he published a statement urging the music industry to let Apple sell music without anticopying software.

The debate has divided the media and technology industries. Adobe supporters created a Facebook page called "I'm with Adobe" that has nearly 11,000 members while others have sided with Apple.

Mr. Hammond of Forrester said many points raised by Mr. Jobs are just wrong. But other analysts disagreed. "I think Jobs summarized all the frustrations he's had," said Rick Doherty, an analyst with consulting firm Envisioneering Group. "I'd be really surprised if Adobe can challenge his arguments because they're predominantly true."

Mr. Jobs argues in his letter that Flash hasn't worked well on cellphones, shortens their battery life, adds security problems and doesn't support touch interfaces. He said Adobe's effort to use Flash to create apps for Apple's devices could cause problems if Adobe were slow to add support for Apple enhancements.

Adobe's Mr. Narayen said developers and consumers benefit from Adobe's multi-platform approach, which could ultimately make apps for iPhones work on other devices. "It doesn't benefit Apple and that's why you see this reaction," he said.

Apple to Charge a Premium to Put Ads in Mobile Apps
The Wall Street Journal

 

Setting a high bar for its debut in the advertising business, Apple Inc. aims to charge close to $1 million for ads on its mobile devices this year and perhaps even more to be among the first, ad executives say.

Apple is hitting the road to showcase its new mobile-device advertising capability, dubbed iAd, and has indicated it could charge as much as $10 million to be part of a handful of marketers at the launch, according to a person familiar with the matter.

Ad executives say they are used to paying between $100,000 and $200,000 for similar mobile deals.

Earlier this month, Apple unveiled iAd, a software system to offer ads in the applications available in its App Store. Ads are likely to start appearing in applications on its iPhone and iPod Touch devices in June, and its iPad later in the year, according to the person familiar with the matter.

Apple is making waves on Madison Avenue with its price tag, which comes with initial demands for greater control over advertisers' marketing campaigns.

"It's a hefty sum," says Phuc Truong, managing director at Mobext, a mobile marketing business owned by Havas SA whose clients include Sears, Choice Hotels, Amtrak and Volvo. "What Apple is trying to do is certainly above and beyond what's been done in the past."

An Apple spokeswoman said the company will sell and serve the ads and declined further comment, except to reiterate that app developers will receive 60% of the revenue. Apple gets the other 40%.

Apple on Wednesday said it has scheduled a developers' conference for June 7-11, where it is expected to unveil its next iPhone. It would be up to developers whether they want to include ads in their apps, although the financial incentive is there.

A handful of other companies sell ads that appear in Apple device applications, including AdMob Inc., which Google Inc. announced it would acquire last year for $750 million. AdMob says Apple's entry into ad selling is going to boost competition and development in the space, says Jason Spero, vice president of AdMob North America.

Zaw Thet, chief executive of mobile ad firm 4INFO Inc., said Apple's move is likely to spur other mobile ad startups to shift the focus of their developments away from the iPhone to other mobile systems, such as Google's Android.

Despite the high price, ad executives at agencies from Boston to New York and San Francisco to Los Angeles have crowded into conference rooms in recent weeks to listen to the tech company's pitch for iAd.

Discussions over possible deals are ongoing but several ad executives said they are beginning to prepare creative ideas for campaigns.

One example Apple has been showing advertisers is an ad for Nike's Air Jordan basketball shoe, says Baba Shetty, chief media officer at Boston-based ad agency Hill Holiday, owned by Interpublic Group. When a user is in an application, an animated banner ad appears on the border of the screen, along with an iAd logo. If the user taps on the ad, it expands across the screen, displaying a video, an interactive store locator and exclusive offers at local stores, among other features.

"It was very easy to think about the several minutes of interaction time consumers can spend with the ad. It's incredibly attractive," Mr. Shetty says.

Apple is planning to charge advertisers a penny each time a consumer sees a banner ad, ad executives say. When a user taps on the banner and the ad pops up, Apple will charge $2. Under large ad buys, such as the $1 million package, costs would rack up to reach $1 million with the various views and taps.

The audience is sizable: Apple has sold 85 million iPhone and iPod Touches so far and estimates that users spend about 30 minutes a day using applications.

Marketers will be able to target ads to groups of users based on consumers' download preferences from its iTunes store, according to ad executives. For instance, a marketer could choose to show its ads to people who have downloaded financial applications or reggaeton music, horror movies or comedy TV shows.

Marketers also will be able to target ads to users in a general location like a city, although they cannot target ads to individual consumers or access personal details.

Apple is seeking high quality ads from big-name marketers for the launch, ad executives say. The ads will go through an approval process, and Apple will build the ads itself during the first couple of months to make sure they work well and attain a certain aesthetic and functionality, ad executives say. Eventually, Apple plans to create a developer kit so that agencies will be able to design and create the ads themselves.

The process is causing tension among some ad directors, who are hesitant to give up control.

"As a creative director, I can completely understand that they created this new baby and they want to make sure it gets born looking gorgeous. But as a creative director, I don't feel completely comfortable letting Apple do the creative," says Lars Bastholm, chief digital creative officer at WPP's Ogilvy.

Marketers have been much slower to buy mobile ads than expected, largely because consumers had yet to visit mobile Web sites in meaningful numbers and the process of creating mobile ad campaigns was a technical and logistical feat.

Apple isn't making that any easier, with requirements that advertisers use special technologies for its system, says Jordan Rohan, an Internet analyst with Thomas Weisel Partners.

But, ad executives say that if Apple nails its pitch, it could open up the gates for mobile advertising.

"I think the tipping point has come,'' says Mark Read, chief executive of WPP Digital. "The absolute revenues now are tiny, but you can see how these things are starting to fit together.''

Analyists: Facebook Seeks More Revenue, Not Control of the Web

Computer World

 

Moves could boost Facebook's marketing revenue if they don't lead to another user revolt

Contrary to a lot of online buzz, analysts say that Facebook's moves this week don't indicate that the company is looking to take over the Web.

Facebook on Wednesday unveiled a bevy of development tools aimed at enabling the social networking phenom to extend its reach across a greater expanse of the Web.

The new tools let operators of other Web sites share user data with Facebook, providing the social networking firm with new online advertising opportunities.

Industry analysts say the moves could affect the future breadth and pervasiveness of social networking, extending it to many new areas of the Internet, including news and e-commerce sites.

"Facebook isn't going to take over the Web, as much as they might try," said Dan Olds, an analyst with The Gabriel Consulting Group. "What this does signify is that social networking has reached the point where it's very big business and the stakes are high. Facebook sees the opportunity to make a power play and get into the online marketing game in a much bigger way. At this point, we don't know if Facebook has a gold mine here or not."

Rob Enderle, an analyst with the Enderle Group, agrees that Facebook is likely looking to position itself as a leader in the effort to create a more social Web so that it can better capitalize on its revenue potential.

"This is Facebook making strategic moves to own its customers and [get] the revenue these customers generate," said Enderle. "It is likely the first of a number of steps [toward] pushing [social networking] beyond what it is now. In fact, we may stop calling it social networking as it becomes an integral part of the Web experience."

Stuart Williams, an analyst with Technology Business Research, said Facebook is in a race to stake a position in the expanding business before other companies create alternatives tools aimed at attracting Facebook users and their marketing potential.

"Vendors -- Google, Microsoft, Salesforce.com, IBM -- are bringing social platforms to market all over the place for both business and personal environments," said Williams. "Users are getting more sophisticated about wanting more control over their online personas as well as their personal data, comments, photos, video and history. Facebook is monetizing the online personas of their users, by doing them the favor of integrating the Facebook environment with other social platforms and Web services. "

A key question, said Olds, is whether users will see the Facebook SEO moves as a favor or a flagrant misuse of personal information. Facebook users have a history of speaking up -- loudly -- about perceived threats to their privacy.

"It's not that this type of information - my likes, my dislikes, what I'm talking about now -- isn't already public in Facebook," Olds said. "It is, but it's primarily confined to my universe of friends and admirers. Facebook is going to give marketers a lot more information to pinpoint and direct advertising to me."

He predicted that "there's going to be a firestorm of criticism over this, Users are very touchy about privacy and being used against their will. This has the potential to mash those user hot buttons with a hammer."

Williams added that the new features could be a prime example of Facebook's tendency to simultaneously please and irritate its users.

"Users get more and easier access to other platforms but Facebook and its partners get more value from the aggregate usage and shared information," he said. "I see the clouds of a civil war on the horizon between users and the platform vendors as users want more discrete control over their history, privacy and data, and the platform vendors who drive advertising and data mining businesses."

Police Seize Gear from Gizmodo iPhone Blogger

 

SEATTLE (AP) - Authorities seized computers, digital cameras, a cell phone and other items from a technology blog editor who posted pictures and details of a lost iPhone prototype.

A computer-crime task force made up of multiple law enforcement agencies searched Gizmodo editor and blogger Jason Chen's house and car in Fremont, Calif., on Friday, according to a statement and search warrant documents provided by Gizmodo.

The warrant, issued by a Superior Court judge in San Mateo County, said the computers and other devices may have been used to commit a felony. Steve Wagstaffe, spokesman for the San Mateo County District Attorney's office, confirmed the warrant's authenticity.

Members of the Rapid Enforcement Allied Computer Team took several computers, hard drives, digital cameras, cell phones and other gadgets, plus Chen's American Express bill and copies of his checks.

Last week Gizmodo had one of the Web's hottest scoops when it posted photos of an Apple device that appeared to be a next-generation iPhone. It had been found in a bar in Redwood City, which is in San Mateo County, and sold for $5,000 by an unknown person to Gizmodo, a gadget blog owned by Gawker Media Inc.

After Chen, 29, posted photos and details about the phone, Apple acknowledged the device belonged to the company, and Gizmodo returned it.

Gawker Media said California law, which protects journalists from having to turn over anonymous sources or unpublished material to law enforcement during a search, should apply to Chen's property.

"Are bloggers journalists? I guess we'll find out," Nick Denton, who runs Gawker Media, wrote in an e-mail to The Associated Press.

Wagstaffe said the district attorney's office is examining that issue.

Apple spokesman Steve Dowling declined to comment.

Blippy Debit Card Numbers Still Appearing in Google

San Francisco Chronicle

Blippy, the social network for people who want to publicize their purchases, got in big trouble yesterday for publishing some of its users credit card numbers. But by mid-afternoon, Blippy had announced the problem was taken care of and that the situation was "a lot less bad than it looks."

Well, it still looks really bad.

With the help of an SAI reader, we found Blippy was still making at least one debit card number available to scamsters Google searching for the terms "site:blippy.com +outstanding." We've pasted a screenshot below.

A Blippy spokesperson agreed with us yesterday that these kinds of privacy mistakes are a "nightmare scenario" for Blippy.

Rationale people would assume that two days of publishing user's credit card and debit card numbers would be death blow for a social network designed for people who want to publish the purchasing history.

We're not so certain. The very fact that anybody uses Blippy, even before this week's cluster, suggests to us that there are lots of people with very little concern for their privacy. Some people would even suggest those types are just being realists, that any sense of privacy on the Internet is an illusion anyway.

The reader who spotted this info asked us not to use his name. We asked him if he was associated with Blippy or any of its competitors. He told us, "no connections whatsoever beside being a user."

"I just don't want problems with authorities because of the credit card numbers or anything. I don't think its a felony since it's google publishing this information but I wouldn't want to worry like the guy who sold the iphone 4g you know!"

Cybercriminals Increase Internet Advertising Click Fraud

USA Today

Click fraud is on the rise, as cybergangs step up the use of infected PCs to divert advertising dollars into their hands.

 

 

In the first three months of this year, 17% to 29% of clicks to online ads were fraudulent, according to separate estimates by Click Forensics and Anchor Intelligence, leading suppliers of click fraud detection technology. That's up from 15% to 25% in fourth-quarter 2009.

Advertisers pay website owners every time someone clicks on one of their online ads. Fraudulent clicks can occur manually, by an unscrupulous website owner, or by someone looking to waste a rival's ad budget.

Most often, click fraud is the work of cybercriminals who put up websites carrying online ads and no other content. The criminals then retain the services of cybergangs in control of sprawling networks of infected PCs, called botnets, which are directed to repeatedly click on the ads. This triggers payments to the crooks who put up the Web page.

A high percentage of bogus clicks get filtered by search companies and advertisers, says Kevin Lee, CEO of search consultancy Didit.com.

Still, the rising tide of faked clicks suggests click-fraud scammers are skimming off millions of dollars annually, Anchor Intelligence CEO Ken Miller says. "There are more dollars available for the taking now," Miller says.

Advertisers in 2009 paid a record $14.2 billion for clicks to online ads, research firm IDC says. Google took in 55% of that ad revenue, Yahoo, 9% and Microsoft, 6%.

With so much at stake, the big search companies take the click-fraud problem very seriously, Lee says, because "If they don't catch the fraud, it erodes advertiser confidence."

Google lets advertisers monitor for patterns of fraudulent clicks. Advertisers can dial up "the exact number of clicks we are filtering out on each ad campaign," Google spokeswoman Rachel Nearnberg says.

Yet, preventing click fraud is proving as difficult to stamp out as e-mail spam. "Spam generates a few cents per thousand e-mails sent, but a click-fraud criminal may make several dollars per thousand fraudulent clicks," says Gunter Ollmann, research director at security firm Damballa.

Botnet-driven campaigns "generating a huge volume of clicks and huge fees" are becoming more common, says Paul Pellman, CEO of Click Forensics.

Most often, advertisers eat the losses. "Advertisers are paying much more than they should," says Marissa Gluck, managing partner of Radar Research. "It's theft, plain and simple."

Yahoo’s Sales Forecast Misses Analysts’ Estimates
Bloomberg

Search Engine Loses Market Share

 

 

Yahoo! Inc., owner of the second- most popular U.S. Internet search engine, forecast sales that missed analysts’ estimates after the company lost market share.

Second-quarter revenue will be $1.6 billion to $1.68 billion, the company said today in a statement. Hamilton Faber, an analyst with Atlantic Equities LLP in London, had projected $1.69 billion.

In search, the company has lost ground to Google Inc., making its site less attractive to advertisers. Yahoo now must also compete for marketing dollars with social-networking sites, including market leader Facebook Inc. To win back share and trim expenses, Chief Executive Officer Carol Bartz is selling businesses and leaning on Microsoft Corp. to support its search service.

“Their search business is doing really poorly,” said Jason Helfstein, an analyst with Oppenheimer & Co. in New York. “They’re outsourcing the search business, so over time they’ll be able to help offset some of that search weakness with lower costs. In the interim, it still matters.”

Yahoo fell 66 cents, or 3.6 percent, to $17.72 in late trading after the report. The shares, up 9.5 percent this year, closed at $18.38 on the Nasdaq Stock Market.

Excluding revenue passed on to partner sites, sales totaled $1.13 billion last quarter. Analysts in a Bloomberg survey had projected $1.17 billion on average.

Profit Increase

While losing search market share hurt revenue, Yahoo increased the amount it makes per query compared with the previous quarter, said Tim Morse, chief financial officer. Revenue per search declined from the year-earlier period.

“Our underlying business performance is clearly improving,” he said in an interview. Yahoo’s search-engine market share also is stabilizing, Morse said.

First-quarter net income attributable to Yahoo more than doubled to $310.2 million, or 22 cents a share, from $117.6 million, or 8 cents, a year earlier. Sunnyvale, California-based Yahoo reported a 5 cent gain from the sale of its Zimbra unit, as well as 2 cents in payments from its Microsoft partnership.

Last July, Microsoft and Yahoo struck a 10-year agreement to team up against Google in the search market. Yahoo plans to use Microsoft’s Bing on its sites and sell ads next to the results.

Microsoft Payments

Yahoo should get about $75 million to $85 million in operational-cost reimbursement from the deal this quarter, Morse said during a call with analysts. The company received $35 million during the first quarter for operations costs. It also got $43 million in transition payments, Morse said.

The companies aim to complete the integration in the U.S. by the year-end holiday period, Bartz said on the call. Yahoo is seeing strong interest from advertisers and expects its search market share to climb this quarter.

“The economy continues to improve,” Bartz said. “We delivered what I call a solid quarter.”

Yahoo had 16.9 percent of the U.S. search market in March, down from 17.3 percent in December, according to Reston, Virginia-based ComScore Inc. That compares with 65.1 percent for Google. Microsoft’s Bing ranks third, with 11.7 percent.

Ad Recovery

Yahoo investors are counting on a rebounding ad market to lift the company’s fortunes. The U.S. online market will grow 13 percent this year, outpacing the 3 percent expected for total ad sales, according to Magna Global, a unit of Interpublic Group of Cos., the second-largest U.S. owner of ad agencies.

Bartz has pared back operations, eliminating some efforts to spur ad revenue via Yahoo SEO that didn’t work out. Last month, Yahoo said it would shut down its Publisher Network, a service that helps small businesses and bloggers display ads on their sites. The Publisher Network, which was still in a testing phase after almost five years, competed with Google’s AdSense.

In February, Yahoo agreed to sell its HotJobs employment site to Monster Worldwide Inc. for $225 million. The previous month, Yahoo approved the sale of its Zimbra e-mail and collaboration software to VMware Inc. for an undisclosed price. Last year, Yahoo closed the Web-hosting unit GeoCities and an online storage site called Briefcase.

Even as she offloads businesses, Bartz expects to make more acquisitions this year. Last month, the company agreed to buy Citizen Sports, adding mobile and social-networking features to its sports site. Citizen Sports lets customers check live scores on smartphones.

Google 1Q Growth Accelerates while Stock Reverses

 

SAN FRANCISCO (AP) - Coming off a stellar first quarter, Google Inc. seems to have regained the momentum that it lost shortly after the U.S. recession started in December 2007.

But it looks like it's going to take a lot longer for the Internet search leader's stock price to rebound to its pre-recession levels.

The shares fell $29.11, or 4.9 percent, to $566.19 in morning trading Friday, a day after the company released first-quarter results that exceeded analyst expectations.

Earnings rose 37 percent and revenue surged 23 percent. The latter figure represented Google's highest growth rate since the summer of 2008.

Google rattled investors, though, by adding nearly 800 workers in the quarter, the most in two years, and vowing to spend heavily to hire even more employees, snap up smaller companies and develop more products beyond the Internet search advertising market that generates most of the company's profits.

The loosening pursestrings could crimp earnings growth. The increased spending also raised worries that Google might be abandoning some of the financial discipline that it exerted in late 2008 and last year as the recession deepened.

Patrick Pichette, Google's chief financial officer and the driving force behind the cost cutting, said the company remains "generous but frugal." He scoffed at the notion that Google would become a spendthrift now that it's thriving again.

"Hiring more people does not mean we are wasteful," he said in a Thursday interview. "It just means we have a great agenda."

Another possible concern: The average price paid for Google ads in the first quarter was 4 percent lower than the fourth quarter, traditionally a period of heavy demand because of the holiday shopping season. The average price was 7 percent higher than a year ago.

The sequential slowdown fed the theory that Google may be facing more pricing pressure as both Microsoft Corp.'s Bing search engine and Facebook's popular online hangout attract more advertisers.

Google shares shed $29.10 in Thursday's extended trading after closing at $595.30, up 1.1 percent in the regular session. That fall leaves Google shares down by about 9 percent so far this year and well below their record high of $747.24 in November 2007, reached a month before the U.S. economy began its worst recession in more than 70 years.

Now, it looks like the online advertising and technology sectors are bouncing back much faster than most of the economy.

"The digital economy is running flat out with so much innovation," Pichette said. "(It's) going gangbusters."

Pichette, who joined Google in 2008, steered the conference call, filling Google CEO Eric Schmidt's usual role. It marked the first time that Schmidt hasn't been on Google's earnings conference call since the company went public in August 2004.

The decision to have Schmidt sit out the call was disclosed to The Associated Press several weeks ago. Pichette advised analysts not to read anything into the switch, which he said was aimed at focusing the discussion on Google's finances.

The company earned nearly $2 billion, or $6.06 per share in the first quarter, up from $1.42 billion, or $4.49 per share.

Revenue climbed 23 percent to $6.78 billion. That marked Google's greatest revenue growth since the third quarter of 2008.

If not for expenses covering employee stock compensation, Google said it would have earned $6.76 per share. That figure exceeded the average estimate of $6.60 per share among analysts surveyed by Thomson Reuters.

After subtracting commissions paid to advertising partners, Google's revenue stood at $5.06 billion. That was about $90 million above analyst estimates.

The most noticeable change in Google's spending patterns cropped up in the company's payroll. After the first-quarter hiring, Google employed 20,621 people - the most in its 11½-year history. Management had trimmed nearly 400 jobs from the payroll last year to boost its profit as revenue growth slowed.

Twitter Finished! Now with Ads!

National Enquirer

Networking phenom Twitter may see last Tweet as Jessica Simpson status updates to have ads embedded.

The celebrity micro-blogging net will soon be rolling out commercials with "all the tweets that are fit to Tweet."

"Promoted Tweets" will be transmitted via internal search engine on Twitter.com, The ENQUIRER has learned.

"Users will start to see Tweets promoted by our partner advertisers called out at the top of some Twitter.com search results pages,"  a Twitter spokesperson announced.

Initial advertisers include Best Buy, Virgin America and Starbucks.

Twitter admits on its website: "Our business model is in a research phase, we spend more money than we make."

So expect more pop-ups, roll-overs and full fledged celeb endorsements  when you need to alert the world The Situation is over.

Web Coupons Tell Stories About You

NY Times

For decades, shoppers have taken advantage of coupons. Now, the coupons are taking advantage of the shoppers.

A new breed of coupon,  printed from the Internet or sent to mobile phones, is packed with information about the customer who uses it. While the coupons look standard, their bar codes can be loaded with a startling amount of data, including identification about the customer, Internet address, Facebook page information and even the search terms the customer used to find the coupon in the first place.

And all that information follows that customer into the mall. For example, if a man walks into a Filene’s Basement to buy a suit for his wedding and shows a coupon he retrieved online, the company’s marketing agency can figure out whether he used the search terms “Hugo Boss suit” or “discount wedding clothes” to research his purchase (just don’t tell his fiancée).

Coupons from the Internet are the fastest-growing part of the coupon world — their redemption increased 263 percent to about 50 million coupons in 2009, according to the coupon-processing company Inmar. Using coupons to link Internet behavior with in-store shopping lets retailers figure out which ad slogans or online product promotions work best, how long someone waits between searching and shopping, even what offers a shopper will respond to or ignore.

The coupons can, in some cases, be tracked not just to an anonymous shopper but to an identifiable person: a retailer could know that Amy Smith printed a 15 percent-off coupon after searching for appliance discounts at Ebates.com on Friday at 1:30 p.m. and redeemed it later that afternoon at the store.

“You can really key into who they are,” said Don Batsford Jr., who works on online advertising for the tax preparation company Jackson Hewitt, whose coupons include search information. “It’s almost like being able to read their mind, because they’re confessing to the search engine what they’re looking for.”

While companies once had a slim dossier on each consumer, they now have databases packed with information. And every time a person goes shopping, visits a Web site or buys something, the database gets another entry.

“There is a feeling that anonymity in this space is kind of dead,” said Chris Jay Hoofnagle, director of the Berkeley Center for Law and Technology’s information privacy programs.

None of the tracking is visible to consumers. The coupons, for companies as diverse as Ruby Tuesday and Lord & Taylor, are handled by a company called RevTrax, which displays them on the retailers’ sites or on coupon Web sites, not its own site.

Even if consumers could figure out that RevTrax was creating the coupons, it does not have a privacy policy on its site — RevTrax says that is because it handles data for the retailers and does not directly interact with consumers. RevTrax can also include retailers’ own client identification numbers (Amy Smith might be client No. 2458230), then the retailer can connect that with the actual person if it wants to, for example, to send a follow-up offer or a thank-you note.

Using coupons also lets the retailers get around Google hurdles. Google allows its search advertisers to see reports on which keywords are working well as a whole but not on how each person is responding to each slogan.

“We’ve built privacy protections into all Google services and report Web site trends only in aggregate, without identifying individual users,” Sandra Heikkinen, a spokeswoman for Google, said in an e-mail message.

The retailers, however, can get to an individual level by sending different keyword searches to different Web addresses. The distinct Web addresses are invisible to the consumer, who usually sees just a Web page with a simple address at the top of it.

So clicking on an ad for Jackson Hewitt after searching for “new 2010 deductions” would send someone to a different behind-the-scenes URL than after searching for “Jackson Hewitt 2010,” though the Web pages and addresses might look identical. This data could be coded onto a coupon.

RevTrax works as closely with image-rich display ads, with coupons also signaling what ad a person saw and on what site.

“Wherever we provide a link, whether it’s on search or banner, that thing you click can include actual keywords,” said Rob O’Neil, director of online marketing at Tag New Media, which works with Filene’s. “There’s some trickery.”

The companies argue that the coupon strategy gives them direct feedback on how well their marketing is working.

Once the shopper prints an online coupon or sends it to his cellphone and then goes to a store, the clerk scans it. The bar code information is sent to RevTrax, which, with the ad agency, analyzes it.

“We break people up into teeny little cross sections of who we think they are, and we test that out against how they respond,” said Mr. Batsford, who is a partner at 31 Media, an online marketing company.
Readers' Comments

RevTrax can identify online shoppers when they are signed in to a coupon site like Ebates or FatWallet or the retailer’s own site. It says it avoids connecting that number with real people to steer clear of privacy issues, but clients can make that match.

The retailer can also make that connection when it is offering coupons to its Facebook fans, like Filene’s Basement is doing.

“When someone joins a fan club for Pigeon Forge attractions, the user’s Facebook ID becomes visible to the merchandiser,” Jonathan Treiber, RevTrax’s co-founder, said. “We take that and embed it in a bar code or promotion code.”

“When the consumer redeems the offer in store, we can track it back, in this case, not to the Google search term but to the actual Facebook user ID that was signing up,” he said. Although Facebook does not signal that Amy Smith responded to a given ad, Filene’s could look up the user ID connected to the coupon and “do some more manual-type research — you could easily see your sex, your location and what you’re interested in,” Mr. Treiber said. (Mr. O’Neil said Filene’s did not do this at the moment.)

The coupon efforts are nascent, but coupon companies say that when they get more data about how people are responding, they can make different offers to different consumers.

“Over time,” Mr. Treiber said, “we’ll be able to do much better profiling around certain I.P. addresses, to say, hey, this I.P. address is showing a proclivity for printing clothing apparel coupons and is really only responding to coupons greater than 20 percent off.”

That alarms some privacy advocates.

Companies can “offer you, perhaps, less desirable products than they offer me, or offer you the same product as they offer me but at a higher price,” said Ed Mierzwinski, consumer program director for the United States Public Interest Research Group, which has asked the Federal Trade Commission for tighter rules on online advertising. “There really have been no rules set up for this ecosystem.”

Study: Young Adults do Care about Online Privacy

 

NEW YORK (AP) - All the dirty laundry younger people seem to air on social networks these days might lead older Americans to conclude that today's tech-savvy generation doesn't care about privacy.

Such an assumption fits happily with declarations that privacy is dead, as online marketers and social sites such as Facebook try to persuade people to share even more about who they are, what they are thinking and where they are at any given time.

But it's not quite true, a new study finds. Despite mounds of anecdotes about college students sharing booze-chugging party photos, posting raunchy messages and badmouthing potential employers online, young adults generally care as much about privacy as older Americans.

The report, from researchers at the University of California, Berkeley and the University of Pennsylvania, is among the first quantitative studies looking at young people's attitudes toward privacy as government officials and corporate executives alike increasingly grapple with such issues.

"It is going to counter a lot of assumptions that have been made about young adults and their attitudes toward privacy," said Mary Madden, senior researcher at the Pew Internet and American Life Project. She was not part of the study but reviewed the report for The Associated Press ahead of Thursday's release.

Among the findings:

- Eighty-eight percent of people of all ages said they have refused to give out information to a business because they thought it was too personal or unnecessary. Among young adults, 82 percent have refused, compared with 85 percent of those over 65.

- Most people - 86 percent - believe that anyone who posts a photo or video of them on the Internet should get their permission first, even if that photo was taken in public. Among young adults 18 to 24, 84 percent agreed - not far from the 90 percent among those 45 to 54.

- Forty percent of adults ages 18 to 24 believe executives should face jail time if their company uses someone's personal information illegally - the same as the response among those 35 to 44 years old.

The survey, based on a 2009 telephone survey of 1,000 Americans 18 and older, did find some areas with generational differences in attitudes. For example, while 69 percent of all respondents said a company should be fined more than $2,500 for privacy violations, only 54 percent of those 18 to 24 years old thought the fine should be that steep.

Even so, the majority of young people generally agreed with their older counterparts in wanting more privacy, not less.

"Yes, there are some young people who are posting racy photographs and personal information. But those anecdotes might not represent what the average young person is doing online," said Chris Hoofnagle, co-author of the study and director of information privacy programs at the Berkeley Center for Law and Technology.

Although they grew up in the digital age, young people know surprisingly little about their rights to online privacy, the study found. They seem more confident than older adults that the government would protect them, even though U.S. privacy laws offer few such safeguards.

The lack of knowledge about the law, coupled with an online environment that encourages people to share personal information, may be one reason young people can seem careless about privacy, according to the study, which was conducted in July 2009 and has a margin of sampling error of plus or minus 3.6 percentage points.

There is also some evidence that, by virtue of their age, adolescents and young adults' brains are hard-wired toward risky behavior, the report said, citing past psychological studies.

The researchers suggest that lawmakers and educators should not assume that young adults do not care about privacy and therefore don't need protections.

Rather, they say, "policy discussions should acknowledge that the current business environment ... sometimes encourages young adults to release personal data in order to enjoy social inclusion even while in their most rational moments they may espouse more conservative norms."

Yet that doesn't mean you shouldn't believe all the stories about younger people prolifically posting photos of their beer-guzzling, scantily clad selves.

"But there is not enough research to find out (whether) older people do the same thing," said Joseph Turow, professor at Penn's Annenberg School for Communication. "Older adults, they may not show up naked, but they may be releasing other kinds of (personal) information."

Twitter Rolls out Ads

The Wall Street Journal

Twitter Inc. launched its long-awaited advertising system, marking the four-year-old company's first significant attempt to turn its so-called microblogging service into a profitable business.

 

The new service lets brands pay to have their tweets listed as the first result when a user conducts a search on Twitter. Over time, Twitter plans to show the promoted tweets in the stream of messages people see when they log into the site and to allow partners—from small developers to large Internet companies—to display the sponsored messages as well.

The start-up is balancing a mix of variables to determine when to show a promoted Tweet and, eventually, how to price it. Advertisers will bid to have their Tweet displayed when users search certain keywords. Then the company will determine a "resonance" score, based on factors like how many people clicked on or forwarded the promoted tweet.

Twitter's chief operating officer, Dick Costolo, said in an interview Tuesday that the company considered ad models that included charging brands for every new follower they attracted through a promoted tweet, but worried that it didn't capture the full value of what a tweet was worth to marketers.

Several months ago, an engineer approached him with the idea of blending lots of variables and it stuck, he said. Now, the company plans to start testing the formula. "The clock on the testing is just starting to tick," he said.

Twitter began showing users Promoted Tweets from a handful of brands Tuesday, including Starbucks, Virgin America and Best Buy. Marketers trying out Twitter's new ad product at launch aren't paying for the initial tests, according to two digital-ad executives, who said Twitter is still working on its bidding platform and on technology to help marketers track how the ads perform. Mr. Costolo declined to comment on the initial deals but said the company will initially charge marketers based on the number of times their ad is viewed, before moving to a resonance model.

He said that the company plans to discuss more details about opportunities for Twitter's partners, including how much revenue it would share from the ads, at its developer conference in San Francisco Wednesday.

Twitter's announcement received an enthusiastic reception from some marketers, who have been using the free service to blast out deals and messages.

Starbucks praised it as a more direct way for it to interact with consumers. "When people search for 'Starbucks' in Twitter they will be more likely to see our Tweets with this new product," Chris Bruzzo, vice president of brand, content and online, said in a statement.

Others expressed skepticism. "I am happy with the model right now and I am not sure what this does for the consumer," said Rudy Wilson, vice president of marketing for Frito-Lay North America. Frito is a unit of PepsiCo. "From a branding standpoint you can engage on Twitter without an ad model."

The service also sets up a major challenge for the young company: How to make good on a promise not to show its tens of millions of users irrelevant ads. Some users are skeptical. "My gut tells me that after they get a taste of the ad revenue, they'll open the floodgates and soon Twitter will become a constant stream of commercials," said Chris Dunn, 39, a Twitter user and chief executive of social-networking company Mobeze Inc.

Twitter has a lot riding on the ad service. The San Francisco company has raised around $150 million in venture capital, but is under pressure to show momentum as its user growth stagnates in the U.S. After growing nearly ten-fold in 2009, the company's unique U.S. Web visitors have hovered around 21 million in recent months, according to comScore Inc.

Having rebuffed acquisition and advertising partnership offers from Google Inc. and Microsoft Corp., Twitter also faces pressure to prove it can go it alone.

Sarah Hofstetter, a senior vice president at digital agency 360i, said Twitter's focus on monitoring how users are responding to the Promoted Tweets to determine their relevance is compelling and distinguishes it from Google's search-ad system, which looks at the quality of the Web site an ad links to and the rate at which users click on the advertiser's ads.

But she said the company will have to convince marketers of the value of Twitter SEO, many of whom are just dabbling in spending outside of major sites like Google and Yahoo Inc., to continue investing. "Its challenge is longevity," she said. "It gets exciting for a while and then you might move on the next shiny object."

Twitter's service comes as other services that were once "shiny objects" among online marketers have started to become good businesses. Google's YouTube and social-networking site Facebook Inc. were for years viewed skeptically by marketers leery of advertising against user-generated content. Now both are generating hundreds of millions of dollars in annual revenue as advertisers follow their surging users.

Twitter isn't betting its business on ads alone. The company earns some revenue from sharing its stream of tweets with search engines like Google and Microsoft's Bing and is planning to offer paid commercial accounts for businesses. Mr. Costolo said the company is testing what will eventually be paid commercial accounts for businesses. The accounts will allow brands to access data about their tweets and any promotional tweets the advertiser had through the account. Such accounts will also give brands more ways to interact with users on their Twitter profile page he said, citing the ability to display Tweets geographically near their business as a possible example. He declined to comment on the timing, beyond saying that it will depend on the pace of its ad roll-out.

Google CEO Says Newspapers Can Make Money Online

WASHINGTON (AP) - Google Inc. Chief Executive Eric Schmidt told a group of editors Sunday that he is confident that newspapers will find new ways to make money online by harnessing the vast reach of the Internet.

Media executives have accused Google of draining readers and advertising from newspapers' Web sites. But in a speech to open the annual conference of the American Society of News Editors, Schmidt said Google recognizes that newspapers are vital to democracy and provide a critical source of online content.

"We understand how fundamental your mission is," he said.

Schmidt predicted that the news business will find a new model, based on a combination of advertising and subscription revenue. He said Google hopes to facilitate that, but he offered no specifics.

"We have a business model problem. We don't have a news problem," Schmidt said. He added: "We're all in this together."

Schmidt encouraged his audience to experiment with everything from social media to personalized content to engage readers.

"Technology allows you to talk directly to your users," he said.

He also said the news business needs to reach out to readers using mobile technology, delivering content through wireless devices such as Amazon.com Inc.'s Kindle, Apple Inc.'s iPad and Google's own Android smart phones.

Reaction to Schmidt's speech was mixed.

Anders Gyllenhaal, executive editor of The Miami Herald, said that even though Google drives a lot of traffic to his newspaper's site, he remains unconvinced that Google sees newspapers as true partners. "We really are going in different directions," he said.

Still, Jonathan Wolman, editor and publisher of The Detroit News, said he was "heartened to hear the Internet geniuses talk about newspaper content as an essential ingredient."

Google Adds a Touch of Microsoft to Applications

MOUNTAIN VIEW, Calif. (AP) - Google has upgraded its online package of word processing and spreadsheet programs so they work even more like the Microsoft applications with which they're competing.

The changes introduced Monday include several editing tools for word processing and quicker ways to fill cells in spreadsheets. The new features have long been staples in Microsoft's widely used Office suite of software.

Google Inc. has been trying to lure users away from Microsoft Corp.'s products for several years in an effort to siphon revenue from one of its biggest rivals. At the same time, Google hopes to diversify its own business, lessening its financial dependence on Internet advertising powered primarily by its search engine.

Winning converts has taken time because Google requires people to reach its programs over the Internet - a concept that has become known as "cloud computing." Microsoft's competing applications typically are installed on individual computers.

Google believes it has developed a superior, less expensive search engine placement alternative because hosting the applications in a Web browser makes them accessible on any computer with an Internet connection. But many companies remain reluctant to entrust their technology to an outside service that could be hacked or suffer lengthy outages.

To promote cloud computing's advantages, Google hosted the technology decision makers from about 400 companies at its Mountain View headquarters Monday.

In a question-and-answer session at the end of the event, Google CEO Eric Schmidt said the company's online suite is aiming to provide about 80 percent of all the tools available in more established programs such as Office.

"Our applications aren't full replacements for the incumbents," Schmidt said.

FCC Chief Julius Genachowski faces Broadband Dilemma
USA Today

Federal Communications Commission Chairman Julius Genachowski will soon have to make a wonky but controversial decision that could have a profound impact on how much consumers pay for broadband, how fast their services will be — and possibly whether millions of people will be able to get it at all.

He can ensure that the FCC has the power to set rules for high-speed Internet service if he asks his fellow regulators to define it, in legal terms, as a highly regulated common carrier service like telephones. Or he can let cable and phone companies call the shots by allowing it to remain a lightly regulated information service.

There's no deadline for a decision. But if Genachowski waits too long, he may have to abandon dozens of policy changes that he has proposed to close the digital divide and protect broadband subscribers.

That would mean Genachowski "will have no legacy," says Josh Silver, executive director of Free Press, an activist group that favors more broadband oversight.

But if he does act, cable and phone companies likely would "launch an all-out attack" on the FCC leading into this year's congressional elections, "with charges of lost jobs, lost investment, lost (broadband) deployment and more Democratic meddling in industry," says analyst Rebecca Arbogast of Stifel Nicolaus, a financial services firm.



Genachowski ran into this dilemma last week when the U.S. Court of Appeals for the District of Columbia overturned a commission decision from 2008 that involved Comcast's management of Internet traffic. Justices said the FCC lacked an explicit mandate to regulate broadband. The agency tied its own hands in 2005 when it defined phone DSL broadband as an information service, similar to a decision it made in 2002 about cable modems.

The court tossed aside the FCC's view that it could infer some power over Internet services from its authority to set rules for cable TV and phone services. The ruling hit just weeks after the FCC unveiled a sweeping proposal, called the National Broadband Plan, designed to make high-speed Internet a staple of everyday life.

Separately, Genachowski and President Obama have said that they want to require Internet providers to treat all Web services equally, a policy known as net neutrality.

Without a change in the law that defines broadband, many of these proposals would have to be scuttled or might end up being "litigated before a skeptical court," Arbogast says.

The FCC won't say whether Genachowski is inclined to reassert regulatory power over broadband by reclassifying it as a common carrier service. But whatever decision he makes will create shock waves.

Rules are 'badly out of date'

If the FCC changes the way it treats high-speed Internet, then "everybody in the industry would sue," says Scott Cleland, chairman of NetCompetition.org, an Internet forum supported by cable and phone companies.

"It would be like an 8.0 earthquake under the sector," he adds. "Hundreds of billions of dollars have been invested (in broadband) in the belief that there'd be a market rate of return, not a regulated rate."

The FCC's two Republican commissioners have said they'd fight a move to reclassify broadband.

Verizon and AT&T have said that they'd prefer to see Congress clarify the FCC's role and what rules should apply to new players including Google. Laws are "badly out of date," Verizon Executive Vice President Tom Tauke said in a recent speech.

But consumer advocates and others say that Genachowski can't afford to wait. "It would surely take a year or two" to get a major law through Congress, says Andrew Schwartzman of the Media Access Project, a public interest law firm.

And if an FCC decision to reclassify broadband draws a lawsuit, it makes more sense to have "one big court case instead of a dozen small cases," Schwartzman says.

Genachowski's fellow Democrats on the commission also are eager to act. Michael Copps called reclassification the "only way the commission can make lemonade out of (the Appeals Court's) lemon of a decision."

If Genachowski wants to defuse the issue, he could try to engineer a compromise. For example, he could agree to take broadband reclassification off the table as long as providers make legally binding promises to offer consumer protections called for in the National Broadband Plan and to agree to treat all Web services equally. But it will be hard to please everybody as advocates gear up for a fight.

While reclassification isn't a sexy issue, as the Internet becomes the main pipeline for media and communications and phone DSL broadband, the FCC's rules "will shape everything that people use to interact with the world," Silver says.

Google Sees Web Attack on Vietnam

The Wall Street Journal

 

Security engineers at Google Inc. and computer security company McAfee Inc. said malicious software was used to spy on government critics in Vietnam in what analysts suspect is the second major example in recent months of an Asian country trying to quash dissent on the Internet.

A posting on Google's online security blog Tuesday said the software has targeted "potentially tens of thousands" of people who downloaded software enabling them to type in Vietnamese, and that the software was used by unknown persons to attack blogs criticizing the government's policies. "Specifically, these attacks have tried to squelch opposition to bauxite mining efforts in Vietnam, an important and emotionally charged issue in the country," wrote Neel Mehta, a Google engineer.

McAfee went further, saying on its security blog that the software is an example of a politically motivated cyber attack. McAfee Chief Technology Officer George Kurtz wrote on the blog Tuesday that the perpetrators "may have some allegiance to the government of the Socialist Republic of Vietnam."

Vietnamese government officials didn't respond to requests to comment, and it was unclear who was behind the attacks. A Google spokesman declined to comment beyond the blog post. McAfee officials couldn't be reached.

Still, the attacks mirror a recent series of similar incidents in China, leading some analysts to suggest that Vietnam—which has launched its own crackdown on dissidents in recent months—was copying China's tactics in neutralizing the Internet as a tool for antigovernment activists.

"Vietnam is very keen to learn what China is doing to suppress dissent, and there is a close link between the public security ministries in both countries," said Carlyle Thayer, a Vietnam expert and professor at the University of New South Wales in Canberra.

Google in January publicized what it said was a series of attacks on accounts on its Gmail email service belonging to journalists and human-rights activists in China, as well as a hacking attack on it and other companies. Combined with growing concerns about censorship, Google last week decided to move its Chinese-language search operations to Hong Kong.

While the Vietnam attacks weren't as sophisticated as those in China, Google's Mr. Mehta wrote, they represent another example of how political expression is vulnerable to the deployment of malicious software and other hacking techniques.

Internet use in Vietnam has mushroomed in recent years. Vietnam's communications ministry says around a quarter of the country's 86 million people regularly surf the Web. While initially welcoming this rush of online activity, Vietnam's authorities have shown concern about how it can be used to spread criticism of government policies and agitate in favor of democracy and other reforms.

"The regime has discovered there is a whole flank they can be outmaneuvered on so they have come in hard. Their policy is to seize the initiative in the cyber domain and crush all opposition," Mr. Thayer said.

Last year, government officials instructed Internet service providers to block access to the social-network site Facebook, according to people familiar with the situation, and that Web site remains difficult to access in Vietnam.

Other sites that officials consider a threat to national security are also blocked. Separately, the government has jailed around a dozen human-rights activists recently in a coordinated crackdown on dissidents, analysts and diplomats say.

Vietnam's plans to develop a bauxite mine in the country's environmentally sensitive Central Highlands region has proved to be a magnet for dissent, both online and otherwise.

Police last year detained several bloggers for criticizing the government's plans to develop the mine in conjunction with Chalco, a unit of China's state-run Aluminum Corp. of China. Critics are concerned about environmental damage resulting from surface mining for bauxite, an ore used in making aluminum.

They are also worried about an influx of Chinese workers and growing Chinese influence in Vietnam. The two countries fought a border war in 1979 and continue to wrangle over control of islands in the South China Sea.

In December, an activist Web site called bauxitevietnaminfo.com was hacked, and McAfee said the attacks began around the same time. Mr. Kurtz said somebody broke into a Web site run by a California-based organization called the Vietnamese Professionals Society that was founded to promote better awareness of social and political issues in Vietnam. The hacker switched a Vietnamese-language keyboard program that can be downloaded from the site with a malware program.

Google's Mr. Mehta said computers attempting to download the keyboard software were infected with the malware. "These infected machines have been used both to spy on their owners" as well as render inaccessible blogs and Web sites containing antigovernment content, he wrote. The group couldn't be reached Wednesday.

Some of the country's largest trading partners already have expressed their concern about Vietnam's increasingly conservative tendencies as it struggles to deal with rising inflation and a widening trade deficit. Vietnam's finance ministry is considering proposals to introduce price controls on foreign and private companies selling goods such as gasoline, milk and building materials to help cap rising costs.

U.S. Ambassador Michael Michalak in December told a donor conference that the Internet curbs were hindering the expansion of commerce in the country.

U.S. Tech Coalition Calls for New Online Privacy Law

BBC News

US technology firms and privacy groups have called for an overhaul of privacy laws, saying the government has too much access to private online data.

Google, eBay and others have launched the Digital Due Process coalition, seeking to update the 1986 privacy act, passed before internet usage exploded.

It calls for warrants to be issued before e-mails and texts are handed over to law enforcement agencies.

It seeks more protection of data stored online and mobile tracking information.

Outdated law

The coalition is looking to re-write the Electronic Communications Privacy Act (ECPA) of 1986 that governs what kinds of private digital information the government has access to and how they may obtain it.

"It is not surprising that a law written in 1986 didn't foresee the privacy protections we need some 25 years later," Richard Salgado, Google's senior counsel for law enforcement and information security told BBC News.

The coalition - which includes over 30 members drawn from the worlds of industry, privacy and academia - said the ECPA is "a patchwork of confusing standards that have been interpreted inconsistently by the courts".

For example, law enforcement agencies can get access to some email information, instant messages, and other data stored online through simple subpoenas, not court-ordered warrants.

The coalition has recommended that a warrant be required before internet providers must hand over the online information - just as a warrant is required for a physical search of a suspect's computer or filing cabinets.

It wants similar protection before mobile carriers turn over tracking information about customers.

It also want courts to ensure any real-time information like texts and instant messages are relevant to an investigation.

"The law needs to be clear that the same standard applies to email and documents stored with a service provider, while at the same time be flexible enough to meet law enforcement needs," said Jim Dempsey of the Center for Democracy and Technology.

Dialogue

Members of the coalition said that had had discussions with the White House, the FBI and the justice and commerce departments.

They acknowledged that law enforcement agencies were likely to resist any change and a long debate was almost certain before Congress would act.

"We are not expecting that these will be enacted this year, but it's time to begin the dialogue," the CDT's Mr Dempsey told reporters.

Senator Patrick Leahy, chairman of the Senate Judiciary Committee, said he planned to hold hearings on "much-needed updates" to the US privacy act.

NY Suit vs. Google Seeks Damages for Pictures, Art

 

NEW YORK (AP) - Groups representing photographers and artists on Wednesday accused Internet search leader Google of copyright infringement in a lawsuit that mirrors complaints book publishers and authors have made for years about the company's attempt to create the world's largest digital library.

The lawsuit, filed in U.S. District Court in Manhattan, seeks up to $150,000 in damages for each of tens of thousands of photographs, illustrations and graphic works that it said were copied, stored and electronically displayed without permission from copyright holders.

"Google is engaging in massive copyright infringement," claimed the lawsuit, which said Google "will continue its brazen acts of willful copyright infringement" unless stopped by the court.

Lawyers for Google Inc., based in Mountain View, Calif., didn't immediately respond to telephone messages and e-mails sent Wednesday.

The lawsuit adds a new wrinkle to the dispute over whether Google should be allowed to preside over and profit from the world's largest digital library.

A judge in Manhattan has not ruled whether to accept a $125 million settlement of a 5-year-old lawsuit groups representing authors and publishers brought against the company.

The deal would let Google include in its library so-called orphan works - out-of-print books whose writers' could not be located - and the works of other authors who decline to opt-out of the agreement after learning about it.

The U.S. Department of Justice has said the settlement might violate antitrust laws. The deal is opposed by some Google rivals, consumer watchdogs, academic experts, literary agents and even foreign governments.

A lawyer for Google has said fewer than 10 million books of 174 million books in the world would be affected by the settlement; about half the 10 million books were out of print.

The new lawsuit said Google has scanned more than 12 million books and may eventually scan the rest of the 174 million books, along with periodicals. It said Google's plans will diminish the value of pictures and art in the books, causing the photographers and artists to lose profits and opportunities and have their reputations damaged.

The lawsuit's plaintiffs include the American Society of Media Photographers Inc., with more than 7,000 members; the Graphic Artists Guild; the Picture Archive Council of America Inc.; the North American Nature Photography Association and the Professional Photographers of America, which has more than 20,000 members in 54 countries.

AOL Looks to Sell or Shut Down Bebo

SAN FRANCISCO (AP) - The struggling Internet company AOL Inc. plans to sell or shut down the online community Bebo nearly two years after buying it for $850 million in an expansion of its social-networking ambitions.

In an e-mail to employees Tuesday, Jon Brod, who runs AOL's startup acquisition and investment unit, AOL Ventures, said Bebo would need a "significant investment" to remain competitive.

Although Bebo has been in the shadow of rivals such as Facebook, it has been strong in foreign markets, including Britain. AOL wanted to tap that strength abroad to drive traffic to AOL's other free, ad-supported Web sites, especially internationally, while leveraging AOL's instant-messaging communities, AIM and ICQ, to try to grow Bebo in the United States.

But Bebo's audience has instead been slipping in the U.S. According to comScore Inc., Bebo had 5.1 million U.S. users in February, down from 5.8 million a year earlier and a sliver of the 210 million that Facebook has.

Brod said AOL will look for potential buyers and plans to finish a strategic evaluation by the end of May.

The $850 million in cash that AOL paid for San Francisco-based Bebo in May 2008 made it AOL's largest deal since it bought MapQuest for $1 billion in 2000 (not counting AOL's $106 billion purchase of Time Warner in 2001). At the time, AOL was still joined with Time Warner Inc., but it separated from the media conglomerate late last year.

Since spinning off from Time Warner, AOL has sold one property: affiliate marketing business Buy.at, which it sold in March to Digital Window Ltd. for an undisclosed price. Digital Window runs a network of affiliate marketing sites, which steer customers to e-commerce sites in exchange for a cut of sales.

AOL, a pioneer in the dial-up Internet business during the '90s, has been trying to streamline and concentrate on rebuilding itself as a content and advertising business. It runs dozens of Web sites, including popular tech blog Engadget and personal finance site WalletPop.

Clayton Moran, an analyst at The Benchmark Co., said the price AOL paid for Bebo was questioned from the start.

"It made a lot of industry watchers scratch their heads," Moran said. "At this point they probably would admit they overpaid for it and now they're just cleaning it up."

He said that if AOL does sell Bebo, it would likely fetch a fraction of its original purchase price.

Shares of New York-based AOL rose 25 cents, or 1 percent, to close Tuesday at $26.39.

FCC Loses Key Ruling on Internet 'Neutrality'

WASHINGTON (AP) - A federal court threw the future of Internet regulations into doubt Tuesday with a far-reaching decision that went against the Federal Communications Commission and could even hamper the government's plans to expand broadband access in the United States.

The U.S. Court of Appeals for the District of Columbia ruled that the FCC lacks authority to require broadband providers to give equal treatment to all Internet traffic flowing over their networks. That was a big victory for Comcast Corp., the nation's largest cable company, which had challenged the FCC's authority to impose such "network neutrality" obligations on broadband providers.

Supporters of network neutrality, including the FCC chairman, have argued that the policy is necessary to prevent broadband providers from favoring or discriminating against certain Web sites and online services, such as Internet phone programs or software that runs in a Web browser. Advocates contend there is precedent: Nondiscrimination rules have traditionally applied to so-called "common carrier" networks that serve the public, from roads and highways to electrical grids and telephone lines.

But broadband providers such as Comcast, AT&T Inc. and Verizon Communications Inc. argue that after spending billions of dollars on their networks, they should be able to sell premium services and manage their systems to prevent certain applications from hogging capacity.

Tuesday's unanimous ruling by the three-judge panel was a setback for the FCC because it questioned the agency's authority to regulate broadband. That could cause problems beyond the FCC's effort to adopt official net neutrality regulations. It also has serious implications for the ambitious national broadband-expansion plan released by the FCC last month. The FCC needs the authority to regulate broadband so that it can push ahead with some of the plan's key recommendations. Among other things, the FCC proposes to expand broadband by tapping the federal fund that subsidizes telephone service in poor and rural communities.

In a statement, the FCC said it remains "firmly committed to promoting an open Internet and to policies that will bring the enormous benefits of broadband to all Americans" and "will rest these policies ... on a solid legal foundation."

Comcast welcomed the decision, saying "our primary goal was always to clear our name and reputation."

The case centers on Comcast's actions in 2007 when it interfered with an online file-sharing service called BitTorrent, which lets people swap movies and other big files over the Internet. The next year the FCC banned Comcast from blocking subscribers from using BitTorrent. The commission, at the time headed by Republican Kevin Martin, based its order on a set of net neutrality principles it had adopted in 2005.

But Comcast argued that the FCC order was illegal because the agency was seeking to enforce mere policy principles, which don't have the force of regulations or law. That's one reason that Martin's successor, Democratic FCC Chairman Julius Genachowski, is trying to formalize those rules.

The cable company had also argued the FCC lacks authority to mandate net neutrality because it had deregulated broadband under the Bush administration, a decision upheld by the Supreme Court in 2005.

The FCC now defines broadband as a lightly regulated information service. That means it is not subject to the "common carrier" obligations that make traditional telecommunications services share their networks with competitors and treat all traffic equally. But the FCC maintains that existing law gives it authority to set rules for information services.

Tuesday's court decision rejected that reasoning, concluding that Congress has not given the FCC "untrammeled freedom" to regulate without explicit legal authority.

With so much at stake, the FCC now has several options. It could ask Congress to give it explicit authority to regulate broadband. Or it could appeal Tuesday's decision.

But both of those steps could take too long because the agency "has too many important things they have to do right away," said Ben Scott, policy director for the public interest group Free Press. Free Press was among the groups that alerted the FCC after The Associated Press ran tests and reported that Comcast was interfering with attempts by some subscribers to share files online.

Scott believes that the likeliest step by the FCC is that it will simply reclassify broadband as a more heavily regulated telecommunications service. That, ironically, could be the worst-case outcome from the perspective of the phone and cable companies.

"Comcast swung an ax at the FCC to protest the BitTorrent order," Scott said. "And they sliced right through the FCC's arm and plunged the ax into their own back."

The battle over the FCC's legal jurisdiction comes amid a larger policy dispute over the merits of net neutrality. Backed by Internet companies such as Google Inc. and the online calling service Skype, the FCC says rules are needed to prevent phone and cable companies from prioritizing some traffic or degrading or services that compete with their core businesses. Indeed, BitTorrent can be used to transfer large files such as online video, which could threaten Comcast's cable TV business.

But broadband providers point to the fact that applications such as BitTorrent use an outsized amount of network capacity.

For its part, the FCC offered no details on its next step, but stressed that it remains committed to the principle of net neutrality.

"Today's court decision invalidated the prior commission's approach to preserving an open Internet," the agency's statement said. "But the court in no way disagreed with the importance of preserving a free and open Internet; nor did it close the door to other methods for achieving this important end."