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Monday, February 28, 2011

Web's Hot New Commodity: Privacy

The Wall Street Journal
February 28, 2011

As the surreptitious tracking of Internet users becomes more aggressive and widespread, tiny start-ups and technology giants alike are pushing a new product: privacy.

Companies including Microsoft Corp., McAfee Inc.—and even some online-tracking companies themselves—are rolling out new ways to protect users from having their movements monitored online. Some are going further and starting to pay people a commission every time their personal details are used by marketing companies.

"Data is a new form of currency," says Shane Green, chief executive of a Washington start-up, Personal Inc., which has raised $7.6 million for a business that aims to help people profit from providing their personal information to advertisers.

The Wall Street Journal's year-long What They Know investigation into online tracking has exposed a fast-growing network of hundreds of companies that collect highly personal details about Internet users—their online activities, political views, health worries, shopping habits, financial situations and even, in some cases, their real names—to feed the $26 billion U.S. online-advertising industry.

In the first nine months of last year, spending on Internet advertising rose nearly 14%, while the overall ad industry only grew about 6%, according to data from PriceWaterhouseCoopers LLP and WPP PLC's Kantar Media.

Testing the new privacy marketplace are people like Giles Sequeira, a London real-estate developer who recently began selling his own personal data. "I'm not paranoid about privacy," he says. But as he learned more, he says, he became concerned about how his data was getting used.

People "have no idea where it is going to end up," he says.

So in December, Mr. Sequeira became one of the first customers of London start-up Allow Ltd., which offers to sell people's personal information on their behalf, and give them 70% of the sale. Mr. Sequeira has already received one payment of £5.56 ($8.95) for letting Allow tell a credit-card company he is shopping for new plastic.

"I wouldn't give my car to a stranger" for free, Mr. Sequeira says, "So why do I do that with my personal data?"

As people are becoming more aware of the value of their data, some are seeking to protect it, and sometimes sell it. In January at the World Economic Forum in Davos, Switzerland, executives and academics gathered to discuss how to turn personal data into an "asset class" by giving people the right to manage and sell it on their own behalf.

"We are trying to shift the focus from purely privacy to what we call property rights," says Michele Luzi, a director at consulting firm Bain & Co. who led the Davos discussion.

Allow, the company that paid Mr. Sequeira, is just one of nearly a dozen start-ups hoping to profit from the nascent privacy market. Several promise to pay people a commission on the sale of their data. Others offer free products to block online tracking, in the hopes of later selling users other services—such as disposable phone numbers or email addresses that make personal tracking tougher. Still others sell paid services, such as removing people's names from marketing databases.

"Entrepreneurs smell opportunity," says Satya Patel, venture capitalist at Battery Ventures, which led a group of investors that poured $8 million in June into a start-up called SafetyWeb, which helps parents monitor their children's activities on social-networking sites and is rolling out a new privacy-protection service for adults,

For the lightly regulated tracking industry, a big test of the new privacy marketplace is whether it will quiet the growing chorus of critics calling for tougher government oversight. Lawmakers this month introduced two separate privacy bills in Congress, and in December the Obama administration called for an online-privacy "bill of rights." The Federal Trade Commission is pushing for a do-not-track system inspired by the do-not-call registry that blocks phone calls from telemarketers.

The industry is hustling on several fronts to respond to regulatory concerns. Last week, Microsoft endorsed a do-not-track system. Microsoft also plans to add a powerful anti-tracking tool to the next version of its Web-browsing software, Internet Explorer 9. That's a reversal: Microsoft's earlier decision to remove a similar privacy feature from Explorer was the subject of a Journal article last year.

The online-ad industry itself is also rolling out new privacy services in hopes of heading off regulation. Most let users opt out of seeing targeted ads, though they generally don't prevent tracking.

The privacy market has been tested before, during the dot-com boom around 2000, a time when online tracking was just being born. A flurry of online-privacy-related start-ups sprang up but only a few survived due to limited consumer appetite.

As recently as 2008, privacy was so hard to sell that entrepreneur Rob Shavell says he avoided even using the word when he pitched investors on his start-up, Abine Inc., which blocks online tracking. Today, he says, Abine uses the word "privacy" again, and has received more than 30 unsolicited approaches from investors in the past six months.

In June, another company, TRUSTe, raised $12 million from venture capitalists to expand its privacy services. At the same time, Inc. raised $15 million and tripled its investments in new privacy initiatives including a service that removes people's names from online databases and a tool to let people encrypt their Facebook posts.

"It's just night and day out there," says Abine's Mr. Shavell.

Online advertising companies—many of which use online tracking to target ads—are also jumping into the privacy-protection business. AOL, one of largest online trackers, recently ramped up promotion of privacy services that it sells.

And in December, enCircle Media, an ad agency that works with tracking companies, invested in the creation of a privacy start-up, IntelliProtect. Last month IntelliProtect launched a $8.95-a-month privacy service that will, among other things, prevent people from seeing some online ads based on tracking data.

In its marketing material, IntelliProtect doesn't disclose its affiliation with the ad company, enCircle Media, that invested in it. When contacted by the Journal, IntelliProtect said it would never give or sell customer data to other entities, including its parent companies.

A cofounder of Allow, Justin Basini, also traces his roots to the ad industry. Mr. Basini came up with the idea for his new business when working as head of brand marketing for Capital One Europe. He says he was amazed at the "huge amounts" of data the credit-card companies had amassed about individuals.

But the data didn't produce great results, he says. The response rate to Capital One's targeted mailings was 1-in-100, he says—vastly better than untargeted mailings, but still "massively inefficient." Mr. Basini says. "So I thought, 'Why not try to incentivize the customer to become part of the process?"

People feel targeted ads online are "spooky," he says, because people aren't aware of how much personal data is being traded. His proposed solution: Ask people permission before showing them ads targeted at their personal interests, and base the ads only on information people agree to provide.

In 2009, Mr. Basini left Capital One and teamed up with cofounder Howard Huntley, a technologist. He raised £440,000 ($708,400) from family, friends and a few investors, and launched Allow in December. The company has attracted 4,000 customers, he says.

Mr. Basini says his strategy is to first make individuals' data scarce, so it can become more valuable when he sells it later. To do that, Allow removes its customers from the top 12 marketing databases in the U.K., which Mr. Basini says account for 90% of the market. Allow also lists its customers in the official U.K. registries for people who don't want to receive telemarketing or postal solicitations.

Currently, Allow operates only in the U.K., which (unlike the U.S.) has a law that requires companies to honor individuals' requests to be removed from marketing databases.

Then, Mr. Basini asks his customers to create a profile that can contain their name, address, employment, number of kids, hobbies and shopping intent—in other words, lists of things they're thinking about buying. Customers can choose to grant certain marketers permission to send them offers, in return for a 70% cut of the price marketers pay to reach them. Allow says it has finalized a deal with one marketer and has five more deals it hopes to close soon.

Mr. Basini says Allow tries to prevent people from "gaming" the system by watching for people who state an intention to buy lots of things, but don't follow through.

Because Allow's data comes from people who have explicitly stated their interest in being contacted about specific products, it can command a higher price than data gathered by stealthier online-tracking technologies. For instance, online-tracking companies routinely sell pieces of information about people's Web-browsing habits for less than a penny per person. By comparison, Allow says it sells access to Mr. Sequeira for £5 to £10 per marketer.

Mr. Sequeira, the London real-estate executive, says that after he filled out an "intention" to get a new credit card, he received a £15.56 credit in his Allow account: a £10 signing fee plus a £5.56 payment from the sale of his data to a credit-card marketer. So far, he says, he hasn't received a card offer from the company.

"I don't think it's going to make a life-changing amount of money," says Mr. Sequeira. But, he says he enjoyed the little windfall enough that he is now letting Allow offer his data to other advertisers. "I can see this becoming somewhat addictive."

China's state news agency launches search engine

Associated Press
February 22, 2011

BEIJING (AP) - China's main government news agency launched an Internet search site Tuesday, giving its own sanitized view of the Web following Google's closure of its China-based search engine last year over censorship.

The Xinhua News Agency is operating in partnership with state-owned China Mobile Ltd., the world's biggest phone carrier by subscribers.

The venture gives the ruling Communist Party a new tool to try to control what China's public sees online. Industry analysts say it might be commercially viable, drawing on Xinhua's news report and China Mobile's vast subscriber base, but is unlikely to challenge local industry leader Baidu Inc., which has more than 75 percent of China's search market.

Xinhua and China Mobile announced the venture in August after Google Inc. closed its China-based search engine, saying it no longer wanted to comply with Chinese censorship and complaining its e-mail service was hacked from China.

Xinhua said it hopes to make Panguso one of China's leading search engines.

"We would like to fully exploit the advantage of Xinhua as an official agency having a large collection of news and information, and that of China Mobile in terms of technology, advanced operation principles and strong infrastructure," said Xinhua president Li Congjun in a statement released by the agency.

China has the world's biggest population of Internet users with 457 million people online as of Dec. 31, and 303 million people searched the Web by mobile phone last year, according to a state-sanctioned industry group, the China Internet Network Information Center. China Mobile says it has more than 589 million accounts.

Beijing promotes Web use for business and education but its extensive filters bar access to material deemed pornographic or subversive. Search engines in China are required to exclude results of banned sites abroad.

Panguso, available on both Web and mobile phone, appears to filter even more stringently than other Chinese sites.

A search on Panguso for Liu Xiaobo, the jailed activist and Nobel Peace Laureate, returned no results. A search on Baidu turned up Chinese-language commentaries criticizing Liu.

Searches on Panguso for the Dalai Lama turned up tourism information for Tibet, followed by commentaries from Chinese state media criticizing the exiled Tibetan leader.

And Panguso has politically embarrassing gaps. It returned no result in a search for the website of People's University in Beijing, the first university founded after the 1949 communist revolution and one of China's most prominent institutions.

Baidu claimed a 75.5 percent share of China's online search market in the final quarter of last year, according to Analysys International, a Beijing research firm. Google was second but its market share fell to 19.6 percent, down from 30.9 percent before the closure of its China search engine.

China's mobile phone-based search market is more fragmented. Baidu leads with 34.3 percent but local rivals such as also have double-digit market shares.

Top Alibaba executives resign after fraud probe

Associated Press
February 21, 2011

SHANGHAI (AP) - Chinese e-commerce giant Alibaba says two of its top executives are resigning to take responsibility after a probe discovered more than 2,000 suppliers had defrauded customers, sometimes with the alleged collusion of its sales staff.

Alibaba said in a notice Monday to the Hong Kong Stock Exchange that its chief executive and chief operating officers, who were not implicated by the investigation, were resigning to take responsibility for the company's "breakdown in integrity."

The company said 100 sales representatives, out of a total workforce of 14,000, allegedly involved in defrauding customers were fired. Some supervisors and sales managers had either intentionally or negligently allowed the creation of fraudulent "storefronts" by letting some 2,326 suppliers evade authentication and verification measures, it said.

Most purchases involved offerings of popular consumer electronics at bargain prices with low required minimum orders. "The methods of the perpetrators suggest that they have engineered an organized and systemic attack on the integrity of the platform for illegal gains," the company said.

"The investigation concluded that the pursuit of short-term financial gain at all cost had tainted parts of our sales organization, risking serious damage to our company's core values," it said.

Jack Ma, the entrepreneurial whiz and former English teacher who founded Alibaba in 1999, said he was sending a strong message meant to reinforce trust in his company, which has thrived in this age of online commerce and outsourcing.

"One of our most important values is integrity. That means the integrity of our employees and the integrity of our online marketplaces as trusted and safe places for our small business customers," Ma said in a statement.

Jonathan Lu Zhaoxi, CEO of affiliated Chinese e-commerce company Taobao, will replace David Wei Zhe as Alibaba's CEO, the notice said. It did not say who would replace resigning COO Elvis Lee Shi-Huei.

Alibaba, based in the eastern Chinese city of Hangzhou, claims more than 56 million registered users in more than 240 countries and regions.

The company says it investigated after noticing an increase in complaints of fraud by buyers using its websites in late 2009. The probe found that 1,219 of its "Gold Supplier" customers who joined in 2009 and 1,107 that joined in 2010 had engaged in fraud against buyers.

Alibaba terminated the "storefronts" of those allegedly fraudulent customers and will collaborate with authorities to seek redress, said company spokeswoman Linda Kozlowski.

But such efforts would depend partly on buyers deciding to take legal action, she said.

The average amount of fraud involved in the cases was less than $1,200, the company said. It gave no total amount involved. But Kozlowski said the company has paid out $1.7 million since 2009 from a fund set up to redistribute to buyers any revenues from companies found to be engaged in fraud.

"We decided we did not want to take revenue from fraud," she said.

Alibaba, whose shares are traded in Hong Kong, says the cases would not have an impact on its overall finances.

Facebook's Web of Frenemies

The Wall Street Journal
February 15, 2011

Facebook Inc.'s growing ambitions are redrawing battle lines in Silicon Valley.

As the seven-year-old company ramps up its hiring and adds new features to its social network, it is disrupting the businesses of established companies like Yahoo Inc. and Google Inc. and putting even more Internet firms on notice.

Facebook, which has more than 600 million users and was valued at $50 billion in a recent funding round, is grabbing online-advertising from Yahoo, Myspace and others. The social network is a potential rival in electronic payments to eBay Inc.'s PayPal, while partnerships Facebook is cementing with smartphone makers set the stage for competition with Apple Inc. and Google in mobile services.

Meanwhile, Facebook is tussling with Google and Microsoft Corp. for top engineers.

As a result, many Silicon Valley companies increasingly have to decide whether to treat Facebook like a friend whose reach and user data can help propel their own growth, or a foe that can become a destructive force.

"Facebook is both a great competitor and a benefactor here in Silicon Valley," said David Cowan, a venture capitalist at Bessemer Venture Partners in Menlo Park, Calif. "Anyone who's trying to get the attention of the young Internet user now has to compete with the dominant position that Facebook has there. On the other hand, they have opened up a lot of opportunities."

Facebook executives aren't shy about their aspirations. "We think every industry is going to be rebuilt around social engagement," Chief Operating Officer Sheryl Sandberg said.

Facebook already helped spur a new crop of videogame companies designed around interacting with friends, Ms. Sandberg said, adding, "News, health, finance, shopping and commerce—we think similarly, all of these things will be rebuilt by companies that work with us to put social at the core."

So far, Facebook's key battleground has been in online marketing.

In just two years, Facebook's share of online display ads has surged to 13.6% from 2.9% of the U.S. market, which reached $8.88 billion in 2010, according to research firm eMarketer.

Facebook's growth comes at the expense of companies such as Yahoo and AOL Inc., and the site is also likely taking ad money away from traditional media like newspapers and TV.

Yahoo has stopped trying to compete directly with the social network and instead integrated Facebook features into its sites, hoping to halt a slide in the time its users spend on Yahoo each month.

Myspace, which like Yahoo has struck some partnerships with Facebook, declined to comment. Myspace and The Wall Street Journal are owned by News Corp.

Jeff Levick, the president of AOL advertising, said he viewed the rise of Facebook as "complementary" because the companies are "running two very very different businesses."

AOL, he said, focuses on monetizing the content that Facebook users share. "The more high quality content we produce and is shared, the traffic comes back to us," Mr. Levick said. The top advertisers who are working with both companies are spending more with AOL each quarter, he said.

Facebook likely had revenue of $1.9 billion to $2 billion last year, mostly in advertising, one person familiar with the company has said.

Facebook has recently introduced ad formats that incorporate users' networks of friends—even their names, photos and postings—into the ads.

And Facebook has also turned its attention to the local advertising market, launching its own location check-in and deals services that bring together elements of sites such as coupon site Groupon Inc. and business reviews service Yelp Inc.

Groupon and Yelp declined to comment.

Facebook is likely to tread on more toes as it builds out what's known as a platform for the Internet, which other websites, cellphones and now even cars can use to build their own offerings to allow people to take their friends and preferences with them.

Some 2.5 million websites have so far tapped the platform, which lets them populate blog posts, news articles, product listings and other pages with Facebook's "Like" button.

With its platform play, Facebook is positioning itself as a partner to other tech companies—even Google, which allows YouTube users to share videos with their Facebook friends.

"The foundation of a platform is one where people want to build on top because there is equal value exchange," said Dan Rose, Facebook's vice president of partnerships and platform marketing.

Still, Mr. Rose said Facebook intends to participate in new businesses that emerge from the use of its platform.

One case in point: Game developers such as Zynga Game Network Inc., among the first to find massive growth on Facebook's platform, now have to pay a kind of tax.

Last month, Facebook said it would require all game developers on its platform to use its in-house Credits, a virtual currency for buying things in games. Facebook takes a 30% cut from all Credit sales. Zynga declined to comment.

Facebook could later extend its Credits system to other areas of commerce, including physical goods, potentially making it a competitor to PayPal and Inc.

Mr. Rose didn't rule that out, but said the company had no current plans to do so and was focused on virtual goods for now.

PayPal President Scott Thompson plays down any rivalry with Facebook.

He said his company partners with Facebook, which lets people pay for Facebook Credits with PayPal. Even if Facebook gets deeper into payments, he said PayPal will be well-protected. "Payments is really, really hard to do," he said.

Yet many Silicon Valley firms are wary of Facebook's control over its platform and have turned elsewhere.

Online-dating service Zoosk Inc. launched in 2007 as an application on Facebook, where it experienced fast user growth. But in mid-2008, co-founder Shayan Zadeh decided Zoosk needed to expand to other platforms such as Myspace and its own website. It began to ask its Facebook users for their real email addresses, instead of just relying on Facebook as a means of communication.

Mr. Zadeh said he was concerned that some shift in Facebook's business model or platform strategy could destabilize Zoosk. "If you want to be a long-term established business, you have to establish a direct communication line," he said. Today, Zoosk has about 15 million to 20 million active monthly users; only about 20% of new users come through Facebook.

Facebook executives also have their sights set on smartphones, where they hope to become more integrated in the software on the handsets. Last week, INQ Mobile, owned by Hutchison Whampoa Ltd., unveiled a handset for the U.K. that prominently features contacts, photos and other data from users' Facebook accounts. More such arrangements are expected soon.

Such activity increasingly puts Facebook on a collision course with Google, Apple and others in mobile advertising. Mr. Rose said Facebook could eventually make money off its mobile efforts through ads and Credits, but doesn't have any plans for it at the moment.

Google declined to comment on Facebook, but in an interview last, year Chief Executive Eric Schmidt said the two companies compete for talent but not for ad dollars and that Facebook users use more Google services than any other users. He also said that "you're assuming that if they do well we do poorly," but "winners tend to all do well.

Tuesday, February 08, 2011

AOL Makes an Expensive Bet With Huffington Post Deal

The Wall Street Journal
February 8, 2011

AOL Inc.'s acquisition of the Huffington Post is the latest step in its uphill quest to eke profits from free content on the Internet and to make the company relevant to users and advertisers again.

AOL is paying $315 million to buy the nearly six-year-old Huffington Post, a rich price to hitch itself to a news and opinion website and its outspoken celebrity co-founder and editor-in-chief, Arianna Huffington. While the site was launched as a counterweight to conservative sites like the Drudge Report, in recent years it has expanded into topics like sports, entertainment, sex and self-help.

The deal installs the 60-year-old Ms. Huffington as president and editor-in-chief of a new group inside AOL, overseeing the roughly 700 editorial employees across both the Huffington Post and AOL, including AOL's tech blogs Engadget and TechCrunch.

A columnist turned talk-show staple who has become an influential voice for the political left, Ms. Huffington signed a multi-year contract with AOL. She said she wants to apply the Huffington Post model—a combination of aggregated content and original reporting—to AOL.

She plans to move to New York and deploy a similar editorial management structure that she has pursued at the Huffington Post: selecting editors from established publications and pairing them with newly minted reporters and freelancers.

The site has taken heat from traditional news companies for aggregating other publications' content without paying for it.

Ms. Huffington has said news aggregation is "part of the Web's DNA."

And Huffington Post spokesman Mario Ruiz said, "The majority of our content is original, including our vast number of blog posts." The company has 148 editorial staffers.

Addressing the site's liberal political stance, AOL's chief executive, Tim Armstrong, said AOL will "build more and more properties that are beyond left and right and tackle larger issues in society that are not political based."

Some investors are dubious that AOL has the advertising prowess to make money off the content it is distributing and Wall Street had some doubts about the deal and the price. AOL stock fell 75 cents, or 3.4%, to $21.19 in Monday trading on the New York Stock Exchange.

Analysts said that the major risks are the integration and political controversy. "Arianna Huffington's political views could challenge AOL's perception as an unbiased source of news, potentially impacting traffic growth," UBS analyst Brian Pitz said.

"We think this is an aggressive move, but complicates the story." Ben Schachter, an Internet analyst with Macquarie Securities, said in an analyst note. "AOL remains a company in transition. In many ways, it is a binary equation: either its content business becomes profitable or it doesn't."

One person close to the situation said people in AOL's sales department are excited to have a fresh, high-profile, buzzy ad space to sell.

The cost to buy an ad on AOL's home page— the most expensive ad slot —is about $200,000 per day, and the cost to buy an ad on Huffington Post's home page ranges from $90,000 to $125,000, according to an ad buyer. AOL generally is the cheapest of the three major portals, MSN and Yahoo, the buyer said. These rates are estimates and depend on several factors, including the size of the total ad buy and time of year. Ad rates on other sections range widely.

The deal underscores how companies like AOL and Yahoo Inc. are racing to develop inexpensive content to bundle for advertisers and to keep consumers' on their sites longer.

Since becoming chief executive of AOL in 2009, Mr. Armstrong has been on the hunt for content companies, purchasing TechCrunch and online video company 5min Inc. in September, among others. Still, AOL's ad revenue fell 29% in the fourth quarter even as the broader industry enjoyed growth.

AOL is seeking to produce more content cheaply and it has struck partnerships with celebrities and producers to create more original video content. Last week, AOL said it was teaming up with reality-show producer Mark Burnett and an independent movie company to make comedic videos based on CliffsNotes, which students often read for quick summaries of school books.

AOL says that its content strategy will start to pay off in the second half of this year.

For the Huffington Post, the match-up connects it to a wider audience. In December, AOL had about 112 million unique visitors to all of its sites. The Huffington Post had about 25 million. Despite its rapid visitor growth in recent years, the Huffington Post still lacked the resources to expand aggressively and it remained too small for a public stock offering, Ms. Huffington said.

"There was no way we could do all these things on our own with our current resources," Ms. Huffington said in an interview.

Huffington Post is on track to generate more than $50 million in revenues this year, AOL said. The company started turning a profit in the third quarter of 2010, rounding out the full year in the black, according to a person familiar with the matter.

The company declined to comment on the size of Ms. Huffington's stake in her site. Softbank Capital, Oak Investment Partners, chairman and co-founder Kenneth Lerer and Ms. Huffington together own a little more than 50% of the company, according to a person familiar with the matter. Other investors hold the remainder.

On Monday, the Huffington Post said that several top officials would be stepping down, including Mr. Lerer, CEO Eric Hippeau and Chief Revenue Officer Greg Coleman. Mr. Coleman had worked at AOL until Mr. Armstrong came in.

Ms. Huffington and Mr. Armstrong crossed paths in November at a conference in New York. At the end of a panel discussion in which Mr. Armstrong participated, Ms. Huffington approached him from the audience and told him she thought they had similar views on content. The next day, the two met at Mr. Armstrong's New York office to continue their discussion and they met several more times throughout November and December.

The week after Christmas, Mr. Armstrong and Mr. Minson, the CFO, flew to California to have lunch at Ms. Huffington's house. "At the end of that lunch, we said, 'I think we're interested,"' Mr. Armstrong said.

The lunch kicked off a month of talks that culminated in a deal reached on Sunday night.

Monday, February 07, 2011

Microsoft: Google's Bing Probe is Click Fraud, Honeypot Attack

PCMag Mobile
By Chloe Albanesius
February 3rd

Microsoft hit back at Google Wednesday over accusations that it stole Google search results for its Bing search engine, accusing Google of engaging in a honeypot attack and going after Bing because it was worried about its growth.

"In simple terms, Google's 'experiment' was rigged to manipulate Bing search results through a type of attack also known as 'click fraud,'" Yusuf Mehdi, senior vice president of Microsoft's Online Services Division, wrote in a blog post. "That's right, the same type of attack employed by spammers on the Web to trick consumers and produce bogus search results."

"We do not copy results from any of our competitors. Period. Full stop," he continued.

Mehdi insisted that Google's investigation did not uncover anything that the industry didn't already know. "We use click stream optionally provided by consumers in an anonymous fashion as one of 1,000 signals to try and determine whether a site might make sense to be in our index," he wrote.

On Tuesday, Search Engine Land published a story that said Bing was copying search results from Google. Google later confirmed this , and said it had conducted a test to prove its suspicions. Specifically, Google took a phrase that the average Google user was unlikely to search - like "mbzrxpgjys" - and manually paired it with an unlikely search result, like the homepage for Research in Motion. These dummy search results were added to Google on December 17 and by December 31, about 9 of the 100 tests added to Google were showing up on Bing, which Google said proved its point.

Google said Microsoft was collecting data via Suggested Sites, which suggests similar Web sites you might want to visit, and the Bing toolbar, which has a default setting to collects information.

At a Bing-sponsored search event that day, Harry Shum, corporate vice president of search product development at Microsoft, said that "it's not like we actually copy anything; it's really that we learn from the customers, who opt-in to share the data with us."

Mehdi suggested that Google was getting worried about Bing's progress.

"In October 2010 we released a series of big, noticeable improvements to Bing's relevance. So big and noticeable that we are told Google took notice and began to worry," he wrote. "Then a short time later, here come the honeypot attacks. Is the timing purely coincidence?"

In a Tuesday blog post, Amit Singhal, a Google Fellow, said "we look forward to competing with genuinely new search algorithms out there—algorithms built on core innovation, and not on recycled search results from a competitor."