Google Worries About New Data-Handling Privacy Laws

First appeared in USA Today

They may be battling each other tooth-and-nail to win over online advertisers. But Google and Facebook are on the same side when it comes to opposing new data-handling privacy laws fast-gelling in Europe and the U.S.

On Wednesday, the European Union formally proposed strict rules that could restrict much of the systematic tracking and profiling Google and Facebook routinely do of Internet users, as part of delivering targeted ads to them.

If Europe's new rules are implemented as expected in 2013, the tech rivals could face hefty fines, up to 2% of annual revenue, for any violations. In Google's case that translates into a maximum penalty of $800 million.

On Tuesday, Facebook Chief Operating Officer Sheryl Sandberg delivered a statistics-filled speech at a tech conference in Munich outlining how Europe's proposed rules are very likely to stymie the global economy.

Sandberg called for a "regulatory environment that promotes innovation and economic growth."

Google spokesman Chris Gaither echoed Sandberg's argument. He says the search giant "supports simplifying privacy rules in Europe to both protect consumers online and stimulate economic growth."

Meanwhile, refinements announced this week by Google and Facebook, about how each tracks and profiles Internet users, added heat to the domestic debate over the need for new data privacy rules here in the U.S.

Google signaled that it will begin cross-referencing user data compiled from its most popular services, including search, Google Apps, Gmail and YouTube. The stickler: Users won't be permitted to "opt out" of having their Google activities correlated.

"Google is taking that option away," says P.J. McNealy, analyst at Digital World Research. Younger Internet users may not care much, he says. But Google patrons who are "more cautious or conservative with their personal data" may "cringe," McNealy says.

Meanwhile, the non-profit group SafeGov, which monitors security issues for federal, state and local government agencies, is alarmed that Google's new policy could put workers who use Google Applications for Government, a paid service, at heightened risk.

"Google should not be data-mining information in e-mails, text messages, searches and documents that workers are putting into Google services," says Jeff Gould, SafeGov security analyst. "It's a matter of not making government workers unnecessarily exposed to hackers and to inadvertent disclosures of information."

Google Vice President Amit Singh says Google's new privacy policy for consumer data is superceded by data privacy provisions in contracts with government agencies and other organization who use the paid version of Google Apps.

"As always, Google will maintain our enterprise customers' data in compliance with the confidentiality and security obligations provided to their domain," says Singh.

But Gould checked the city of Los Angeles' contract with Google and found that the data-privacy provision referred back to Google's policy for consumers. "They didn't think through the consequences for government users," Gould says.

Meanwhile, Google is busy fielding inquiries from a handful of politicians who've proposed legislation that would restrict online tracking and establish rules for data privacy.

"Amazingly, we still don't have a law that sets the rules of the road for fair information practices that everyone collecting, using, and distributing people's personal information must adhere to," says John Kerry, D- Mass.

Kerry and Sen John McCain, R-Ariz., continue to work for passage of the Commercial Privacy Bill of Rights. "Until Congress acts, Google and the rest of its competitors will continue to set that standard themselves. "

Rep. Ed Markey, D-Mass., notes that "Googling is like breathing for millions of kids and teens - they can't live without it." Markey, who has also been critical of Facebook's tracking practices, is calling on the Federal Trade Commison to review Google's new no-opt-out policy.

"Consumers - not corporations - should have control over their own personal information, especially for children and teens," says Markey.

Facebook is drawing more scrutiny too. It is making mandatory a new, glitzier user interface, called Timeline, that chronologically displays a member's preferences, contacts and online activities.

Facebook says Timeline does not present any new information nor alter any privacy settings.

Even so, SafeGov analyst Gould, for one, is concerned. "If you take the new Google policy and combine it with Facebook Timeline, the danger of hacking attacks for government users is multiplied by ten," he says.

More intensive tracking and profiling by the tech rivals puts richer data in cyberscammers' hands.

Gould worries about the all-too-common scenario where an intruder e-mails a government worker pretending to be an acquaintance. "They can put information in an e-mail which they can get from your Facebook Timeline, and trick you into downloading a piece of spyware," he says.

Heightened cross-referencing of an individual worker's Google Search Company, Gmail and YouTube activities poses similar risks, he says.

Twitter Can Censor Tweets

First appeared in USA Today

Twitter has refined its technology so it can censor messages on a country-by-country basis.

The additional flexibility announced Thursday is likely to raise fears that Twitter's commitment to free speech may be weakening as the short-messaging company expands into new countries in an attempt to broaden its audience and make more money.

But Twitter sees the censorship tool as a way to ensure individual messages, or "tweets," remain available to as many people as possible while it navigates a gauntlet of different laws around the world.

Before, when Twitter erased a tweet it disappeared throughout the world. Now, a tweet containing content breaking a law in one country can be taken down there and still be seen elsewhere.

Twitter will post a censorship notice whenever a tweet is removed. That's similar to what Internet search leader Google Inc. has been doing for years when a law in a country where its service operates requires a search result to be removed.

Like Google, Twitter also plans to the share the removal requests it receives from governments, companies and individuals at the chillingeffects.org website.

The similarity to Google's policy isn't coincidental. Twitter's general counsel is Alexander Macgillivray, who helped Google draw up its censorship policies while he was working at that company.

"One of our core values as a company is to defend and respect each user's voice," Twitter wrote in a blog post. "We try to keep content up wherever and whenever we can, and we will be transparent with users when we can't. The tweets must continue to flow."

Twitter, which is based in San Francisco, is tweaking its approach now that its nearly 6-year-old service has established itself as one of the world's most powerful megaphones. Daisy chains of tweets already have played instrumental roles in political protests throughout the world, most notably in the uprising that overthrew Egypt's government a year ago.

It's a role that Twitter has embraced, but the company came up with the new filtering technology in recognition that it will likely be forced to censor more tweets as it pursues an ambitious agenda. Among other things, Twitter wants to expand its audience from about 100 million active uses now, to more than 1 billion.

Reaching that goal will require expanding into more countries, which will mean Twitter will be more likely to have to submit to laws that run counter to the free-expression protections guaranteed under the First Amendment in the U.S.

If Twitter defies a law in a country where it has employees, those people could be arrested. That's one reason Twitter is unlikely to try to enter China, where its service is currently block. Google for several years agreed to censor its search results in China to gain better access to the country's vast population, but stopped that practice two years after engaging in a high-profile showdown with Chain's government. Google now routes its Chinese search results through Hong Kong, where the censorship rules are less restrictive.

In its Thursday blog post, Twitter said it hadn't yet used its ability to wipe out tweets in an individual country. All the tweets it has previously censored were wiped out throughout the world. Most of those included links to child pornography.

Financial Advisers Fear Hackers in Social Media

First appeared on Reuters

Financial advisers may be overlooking one potential threat in the rush to develop new client relationships through social media: hackers.

Social media websites like Facebook and Twitter can help financial advisers tap a rich source of potential business. But there are risks associated -- beyond the fear of someone posting false information about you -- that can compromise an adviser's reputation and computer network. Some so-called "friends" could actually be hackers working to take over profile pages or infect users' computer systems with malware, say technology professionals.

Hackers, for example, could post embarrassing comments using the adviser's name. They could also try to harvest tidbits of information, including names, birthdays and photographs, and use them to help create false identities which could be used to open credit or other accounts. What's more, an adviser's hacked account can automatically send messages that contain malware directly through social networking sites. Or an adviser could unknowingly infect his or her own business network by opening a malware-laced link sent via message.

The trouble is, most people do not realize these things have happened until after the fact. Advisers are no different.

"I don't think advisers have given much thought to protecting themselves from hacking on social media sites," said Korrine Kohm, vice president at Ascendant Compliance Management, a consultancy in Salisbury, Connecticut.

Companies typically have filters and firewalls in place to protect their internal computer networks. But those types of precautions usually do not extend to applications, or apps, advisers may run on portable devices, such as iPhones, to access social networking sites, according to Kohm.

Knowing the risks before jumping in can help advisers protect themselves from security breaches and possible regulatory trouble, compliance consultants said.

REGULATION AND RISK

The ramifications extend beyond annoying clients or an expensive tech clean-up.

Advisers must archive posts and messages they send through social networking for three years, according to recent regulatory guidance. But hackers could distort those archives by deleting or rewording prior posts, according to Conrad Jacoby, a senior attorney at Winston & Strawn LLP in Washington.

That could raise eyebrows among securities regulators, said Jacoby, who advises clients on managing information that is stored electronically. Altered posts could be embarrassing or violate securities industry advertising rules.

Social media monitoring and archiving software can help advisers keep track of their social media communications, including anything that is removed or altered. That could help eliminate concerns that regulators may have if a hacking problem crops up.

Facebook, Twitter and LinkedIn did not respond to emails from Reuters requesting comment. However, each include security information on their websites that advisers should review. A Facebook page, for example, explains threats, such as Koobface, a computer worm, and how to identify them. LinkedIn audits its system for possible "vulnerabilities and attacks," according to its site.

SAVING REPUTATIONS

Compliance programs that raise awareness of social media issues can help advisers manage hacking risks -- and potential regulatory trouble, said Glen Gilmore, a social media lawyer and principal at Gilmore Business Network, a consultancy in Hamilton, New Jersey.

The SEC, in recent guidance, signaled that advisers should consider social media training "to promote compliance and to prevent potential violations of the federal securities laws."

Training could include how to recognize sham messages that may contain viruses, or procedures to follow if a hacker takes over an adviser's profile page and spouts posts about, say, a new weight-loss supplement.

Advisers who diligently keep watch over their social networking profiles are also more likely to avoid problems. Recent guidance to advisers from Massachusetts Secretary of the Commonwealth William Galvin suggested reviewing social networking sites daily to ensure that their content complies with regulations.

Ongoing reviews of social media profiles can help advisers tackle problems early when they do occur. That could include telling clients -- quickly -- that an embarrassing message about legalizing marijuana really came from a hacker.

"Companies have to anticipate there will be problems," Gilmore said. "But how they handle it is what separates who masters social media and who doesn't."

Facebook and Google May Be Going Too Far

First appeared in USA Today

Google and Facebook might have finally gotten the average consumer riled up about privacy.

For the past two years, each company has experimented with different ways to divine more and more about how people live their lives on the Internet, without sparking a revolt.

But the plans the rivals announced on Tuesday, which critics say could dramatically rev up their respective abilities to gather intelligence on individual Internet users, seem to have struck a chord. An informal and unscientific survey of Web users by USA TODAY found a majority speaking out against the new business practices announced by Google and Facebook.

"It's dangerous for two companies to have so much personal data, regardless of whether the specific threats of that data consolidation are immediately clear," says Sarah Downey, a privacy analyst at software maker Abine.

Compelled to tap what many experts predict will be the next big Internet mother lode — online advertising — Google and Facebook laid down very big bets, during a week when European regulators are hashing out strict new rules that could prevent much of what the tech giants seek to do.

Google signaled its intent to begin correlating data about its users' activities across all of its most popular services and across multiple devices. The goal: to deliver those richer behavior profiles to advertisers.

Likewise, Facebook announced it will soon make Timeline the new, more glitzy user interface for its service, mandatory.

Timeline is designed to chronologically assemble, automatically display and make globally accessible the preferences, acquaintances and activities for most of Facebook's 800 million members.

Google and Facebook have repeatedly insisted that the changes are intended strictly to improve users' experiences.

"Facebook works the way it always has," says spokeswoman Meredith Chin. "There is no new information on Facebook as a result of Timeline, and no privacy settings have been changed with the introduction of it. It's simply an updated version of the profile."

But the changes have stirred anger from many consumers. Some, such as Joyce Norman, a writing consultant from Birmingham, Ala., are considering ways to limit their exposure to Google's and Facebook's new business practices. "Mine is not a lone voice crying in the wilderness," says Norman.

Benjammin Gaultney of Montague, Mich., sees it differently, looking forward to the possibility of more appropriate ads coming to his screen. "You have to deal with ads all over the Internet either way," he wrote on USA TODAY's Facebook page. "Advertisers could at least try to sell me something I'm actually interested in rather than life insurance."

Meanwhile, a high-stakes lobbying effort is unfolding in Washington aimed at shaping policies favorable to U.S. tech companies and blunting any potential move to follow Europe's more conservative proposals to limiting online tracking by companies.

The tech giants sharply increased their lobbying spending last year. Google spent $9.7 million in lobbying in 2011, up from $5.2 million in 2010, says the Center for Responsive Politics. Facebook spent $1.4 million in 2011 vs. $351,000 in 2010.

The driver: advertising revenue. The global online advertising market is expected to swell to $132 billion by 2015, up from $80 billion this year, according to eMarketer. Google and Facebook are putting their abilities to index individuals' online activity and behaviors into high gear to tap into this market, analysts say.

"If they can make the ads more relevant, the logic goes, they can increase the number of advertisers and the price they can charge per click (on each ad)," says Alex Daley, chief investment strategist at Casey Research. "Because the click will be from more qualified leads — customers who are more interested in the product — they can grow the revenue base."

But security analysts, privacy advocates and technologists say consumers probably should be very concerned. While making richer behavioral data more readily available to advertisers, Google's new data-correlating practices and Facebook's new Timeline and Open Graph, a more powerful way to express preferences on third-party websites, also tend to aid and abet more unsavory uses.

Beware of cybercrooks

Richer personal details are very beneficial to identity thieves and cyberspies, as well as to parties motivated to use such data unfairly against consumers, such as insurance companies, prospective employers, political campaigners and, lately, hacktivists, security analysts say.

"What these unilateral decisions by Google and Facebook demonstrate is a complete disregard for their users' interests and concerns," says John Simpson, spokesman for Consumer Watchdog. "It's an uncommonly arrogant approach not usually seen in business, where these companies believe they can do whatever they want with our data, whenever and however they want to do it."

Google has a long history of running into privacy problems.

Its Gmail raised hackles early on when the search giant decided to mingle advertising alongside users' e-mail. The move initially concerned people because the ads' relevancy was linked to e-mails inside users' accounts. For example, if a person was writing about buying a car, ads for cars could appear alongside that individual's e-mail. To many, that felt like a privacy intrusion.

The search giant maintains that such contextual ads, where advertisers can bid on keywords that relate to a users' content, don't reveal personal identities. Gmail users can turn some of the ads off, but adjusting the feature requires some work.

Much of this type of product development is the result of Google taking a very engineer-focused approach to mining data rather than serving consumer interests, say industry experts. Google engineers want to play with technology first, but they think about how the product plays with consumers and privacy second, says IDC analyst Karsten Weide.

When Google tried to build its Buzz social network in 2010 from Gmail contacts, it ran into privacy problems. It began publicizing users' contacts without asking. The Federal Trade Commission last year charged Google with "deceptive privacy practices" in the handling of Buzz.

Google "did not respect" consumers' expectations of privacy, says Helen Nissenbaum, a professor of media, culture and communication at New York University. "They (Google) seem to be doing the same thing here" with the privacy update.

Under terms of the FTC consent order, Google agreed to a 20-year independent review of its privacy practices.

But the changes announced Tuesday may again set it on a collision course with the FTC.

"We do believe the proposed changes — they have not yet been adopted — violate the FTC consent order," says Marc Rotenberg, executive director of the Washington, D.C.-based Electronic Privacy Information Center. Those changes could subject Google to monetary damages under Google's agreement with the FTC, says Rotenberg.

But Rachel Whetstone, Google's senior vice president for public policy and communications, says the company would not have proposed privacy updates that run afoul of the FTC settlement.

"We try to be transparent about the data we collect and give meaningful controls about how data is used," says Whetstone.

There are also concerns about Google's recent move to roll activities on its Google+ social network into users' search results. The opt-in integration of those two Google products mingles profiles, photos and posts of people a user follows on Google+ into the user's search results if they choose.

Whetstone says it doesn't raise privacy issues because the information is viewed only by the user.

Facebook's issues

Facebook has had its own issues, most recently in November when the FTC announced a broad settlement that requires the company to respect the privacy wishes of its users and subjects it to audits for the next 20 years.

The order, which claimed Facebook engaged in "unfair and deceptive" practices in December 2009, stems largely from the way Facebook handled information its users deemed to be private information.

On Tuesday it announced that Timeline will become the default user interface for all members over the next few weeks.

Combined with the addition last week of some 60 apps specifically written for Timeline, consumers can provide a detailed account, often in real time, of the music they listen to, what they eat, where they shop — even where they jog.

The deeper personal data of Timeline — which Facebook users willfully share — are potentially online advertising gold for marketers and advertisers. This is especially crucial, analysts say, as Facebook steamrolls toward an initial public stock offering this year.

The company is under pressure to increase sales and profits to meet the lofty expectations of shareholders, and online advertising is the most logical place to do that. Facebook gleaned 89% of its estimated $4.3 billion in revenue last year, or about $3.8 billion, from online ads, according to eMarketer.

"If Facebook has richer behavioral targeting data than Google, then it has an edge up in relevance," says Casey Research's Daley. "And an edge up in relevance is an edge up in revenue."

Some Wall Streeters believe the changes made by Google and Facebook will have only an "incremental" effect on the battle between the two giants in going after online advertising dollars.

Both companies continue to be dominant in their markets, which "tend to be winner-takes-all markets," says Ryan Jacob of the Jacob Internet fund. Google continues to hold strength in online search and is a strong player in online video with YouTube and in mobile with its Android operating system, he says.

But "Google has a long way to go before it can be considered a credible competitor to Facebook," he says.

Google's moves, if anything, are "somewhat defensive," he says. "For them (Google) to maintain their position in search, it's important for them to be players in other areas," he says.

Channing Smith of money management firm Capital Advisors, which owns shares of Google, is more optimistic. "If it continues to put up numbers for Google+, it can be a competitor to Facebook," he says.

Rep. Ed Markey, D-Mass., who has already been pressing Facebook to explain its tracking systems, said on Wednesday that he would ask the FTC to take a close look at Google's new privacy policies.

"Google's privacy policy changes mean consumers can't say no to sharing their personal information across Google's websites," Markey said. "Consumers, not Google, should be able to make these decisions."

Selling Drugs On Google

First appeared in Wall Street Journal
Wearing leg irons and guarded by federal agents, David Whitaker posed as an agent for online drug dealers in dozens of recorded phone calls and email exchanges with Google sales executives, spending $200,000 in government money for ads selling narcotics, steroids and other controlled substances.

Over four months in 2009, Mr. Whitaker, a federal prisoner and convicted con artist, was the lead actor in a government sting targeting Google Inc. that yielded one of the largest business forfeitures in U.S. history.

"There was a part of me that felt bad," Mr. Whitaker wrote in his account of the undercover operation viewed by The Wall Street Journal. "I had grown to like these people." But, he said, "I took ease in knowing they…knew it was wrong."

The government built its criminal case against Google using money, aliases and fake companies—tactics often used against drug cartels and other crime syndicates, according to interviews and court documents. Google agreed to pay a $500 million forfeiture last summer in a settlement to avoid prosecution for aiding illegal online pharmaceutical sales.

Google acknowledged in the settlement that it had improperly and knowingly assisted online pharmacy advertisers allegedly based in Canada to run advertisements for illicit pharmacy sales targeting U.S. customers.

"We banned the advertising of prescription drugs in the U.S. by Canadian pharmacies some time ago," the company said in its sole comment on the matter. "However, it's obvious with hindsight that we shouldn't have allowed these ads on Google in the first place."

The half-billion dollar forfeiture, although historically large, was small change for Google, which holds $45 billion in cash. But the company's acceptance of responsibility opened the door to potential liability for taking ads from other people involved in unlawful acts online, such as distributing pirate movies or perpetrating online fraud.

Google has long argued it wasn't responsible for the actions of its more than one million advertisers. But the forfeiture paid by Google represented not just the money it made from the ads, but also the revenue collected by illegal pharmacies through Google-related sales.

In an important shift, the settlement "signals that, where evidence can be developed that a search engine knowingly and actively assisted advertisers to promote improper conduct, the search engine can be held accountable as an accomplice," according to Peter Neronha, the lead prosecutor.

Unknown is whether the company will toss aside advertisers as a result. "If Google were to adopt a much more restrictive definition of problematic advertisements, everyone would immediately notice a drop in their revenue," said Eric Goldman, director of the High Tech Law Institute at Santa Clara University.

The government's case also contained potentially embarrassing allegations that top Google executives, including co-founder Larry Page, were told about legal problems with the drug ads.

Mr. Page, now Google's chief executive, knew about the illicit conduct, said Mr. Neronha, the U.S. attorney for Rhode Island who led the multiagency federal task force that conducted the sting. "We simply know from the documents we reviewed and witnesses we interviewed that Larry Page knew what was going on," he said in an interview after the August settlement.

Mr. Neronha declined to detail the evidence, which was presented in secret to a federal grand jury. Other people familiar with the case said internal emails showed Sheryl Sandberg, a former top Google executive who left in 2008 for Facebook Inc., had raised concerns about the ads.

Prosecutors could have used that evidence to argue Google deliberately turned a blind eye to lawbreaking to protect a profit stream estimated by the government in the hundreds of millions of dollars.

Ms. Sandberg declined to comment through a spokesman. Mr. Page also declined to comment.
Google says it has strict policies in place to prevent criminals from using its ad services and it bans advertisers who repeatedly violate its guidelines.

"We ban not just ads but also advertisers who abuse our platform, and we work closely with law enforcement and other government authorities to take action against bad actors," said Kent Walker, Google's general counsel.

Mr. Whitaker's story, told here for the first time, presents a different picture. Shuffling into federal court in handcuffs and beige overalls last month, the 37-year-old prisoner looked like he could pass for an employee of a Silicon Valley start-up.

The Tennessee native suffers from bipolar disorder, according to court submissions by his lawyers, and has a history of manic spending and fraud sprees. When he was 16 years old, Mr. Whitaker took his mother's credit card, rented a private jet and flew his girlfriend for a shopping spree in Knoxville, the documents said.

Mr. Whitaker's path to undercover operative began in 2005, when he took millions of dollars in orders for Apple iPods and other electronics at below market prices and skipped town without filling the orders, according to his account and court documents. He hopscotched around the U.S. in a private jet, evading arrest and protected by a private security detail. He briefly rented a Miami mansion for $200,000 a month.

He fled to Mexico in 2006 and started an Internet pharmacy, selling steroids and human growth hormone to U.S. consumers through Google ads, he said. The two substances—sold in the U.S. by prescription only—are sought by body builders to add muscle and by older consumers seeking to slow the signs of aging; they aren't approved in the U.S. for such uses. Google's policy prohibited advertising their sale online.

"It was very obvious to Google that my website was not a licensed pharmacy," Mr. Whitaker wrote to the Journal. "Understanding this, Google provided me with a very generous credit line and allowed me to set my target advertising directly to American consumers."

Mr. Whitaker was arrested in Mexico in March 2008 for entering that country illegally and returned to the U.S. to face charges of wire fraud, conspiracy and commercial bribery in the iPod case. Mr. Whitaker told U.S. authorities about the alleged role Google played in helping his Mexico-based pharmacy.

Federal prosecutors, seeking to test the allegation, set up a task force in early 2009 with Mr. Whitaker's help. On weekdays, he was escorted from the Wyatt Detention Facility in Central Falls, R.I., to a former school department building in North Providence, R.I. There, under the watch of federal agents, he set a snare for Google.

Posing as the fictitious Jason Corriente, an agent for advertisers with lots of money to spend, Mr. Whitaker bypassed Google's automated advertising system to reach flesh-and-blood ad executives. Federal agents created www.SportsDrugs.net, designed to look "as if a Mexican drug lord had built a website to sell HGH and steroids," Mr. Whitaker said in his account of the sting.

Google first rejected it, along with an anti-aging website called www.NotGrowingOldEasy.com. But the company's ad executives worked with Mr. Whitaker to find a way around Google rules, according to prosecutors and Mr. Whitaker's account.

The undercover team removed a link to buy the drugs directly—instead requiring customers to submit an online request form—and Google approved it. "The site generated a flood of email traffic from customers wanting to buy HGH and steroids," Mr. Whitaker said.

To pay Google's fees for the growing online traffic, undercover agents made payments every two or three days with a government-backed credit card.

Federal agents grew more brazen. They created a site selling weight-loss medications without a prescription, according to Mr. Whitaker and people familiar with the matter. They also added another site selling the abortion pill RU-486, which in the U.S. can only be taken in a doctor's office.

Google's ad team in Mexico approved the site, so U.S. consumers searching for "RU 486" would see an ad for the site. Google ad executives allowed the agents to add the phrase "no prescription needed."

Days later, federal agents added links to buy the drugs directly. Such sales broke U.S. laws prohibiting the sale of drugs from outside the country and without a prescription. "There were photos of the drugs, descriptions, labels that clearly printed out that we were shipping without a prescription and it was from Mexico," Mr. Whitaker said.

By the end of the operation in mid-2009, agents were buying Google ads for sites purportedly selling such prescription-only narcotics as oxycodone and hydrocodone. Agents also got Google's sales office in China to approve a site selling Prozac and Valium to U.S. customers without a prescription.

"Google's employees were instrumental in bypassing policy regarding pharmacy verification," Mr. Whitaker told the Journal. "The websites were blatantly illegal."

At the agents' direction, Mr. Whitaker said he signaled his illegal intent to Google ad executives, including Google's top manager in Mexico. As a tape recorder ran, he walked Google executives through the illegal parts of the websites. He said he told ad executives that U.S. Customs had seized shipments, for example, and that one client wanted to be "the biggest steroid dealer in the United States."

Agents at first ignored the flood of orders. But as the ersatz sites morphed into full-fledged Internet pharmacies, they worried that clients, some sick, would be expecting medication.

So customers were told they had to become members by filling out an online form and to receive a "membership kit." The kits never arrived, but it stopped users from placing orders, Mr. Whitaker said.

In the summer of 2009, U.S. agents visited Google's headquarters in Mountain View, Calif., to tell corporate executives about the evidence they had collected. Prosecutors served grand jury subpoenas and eventually collected four million pages of internal emails and documents, as well as witness testimony.

The federal task force, which also included the Food and Drug Administration's Office of Criminal Investigation, was preparing criminal charges against the company and its executives for aiding and abetting criminal activity online, prosecutors said.

Google hired attorney Jamie Gorelick, the former deputy U.S. Attorney General under President Bill Clinton. Two years later, the company reached a settlement with the government, a decision that stopped the likely introduction of emails to top Google executives had the case gone to trial.

"Suffice to say this was not two or three rogue employees at the customer service level doing this on their own," said Mr. Neronha, the U.S. attorney. "This was corporate decision to engage in this conduct."
Six private shareholder lawsuits have so far been filed against Google's executives and board members, alleging they damaged the company by not taking earlier action against the illegal pharmacy ads.

Google has other potential legal exposure. Record companies and movie studios say Google willfully profits from illegal Internet piracy—an issue raised last week, when Congress dropped antipiracy legislation after opposition from Internet companies, including Google.

A 2011 study commissioned by NBC Universal estimated that nearly a quarter of all Internet traffic relates to pirated movies, TV shows and games. "There's big business in being agnostic about what sites you place your ads on," said Jay Roth, national executive director of Directors Guild of America, which backed antipiracy legislation.

Online scams pose another potential legal threat. Searches relating to mortgage refinancing have been among the most popular on Google, Eric Schmidt said in 2009 when he was chief executive. An investigation by Consumer Watchdog, a consumer advocacy group, found that a large number of companies selling "mortgage modification" on Google bore the hallmarks of fraud.

The special inspector general's office for the Troubled Asset Relief Program in November said it had shut down 85 alleged online loan modification schemes that defrauded homeowners through Google ads.

"Google has a natural long-term financial incentive to make sure that the advertisements we serve are trustworthy so that users continue to use our services, and we aren't afraid to take aggressive action to achieve that goal," the company said.

To end the sting, federal agents killed off Mr. Whitaker's fictional character. They sent the Google employees a final email, allegedly from Jason Corriente's brother, saying the online entrepreneur died in a car crash.

Mr. Whitaker, who pleaded guilty and faced a maximum 65-year prison term, was sentenced in December to six years, following what federal prosecutors called "rather extraordinary" cooperation. He is due for release in two years.

"Lane-Keeping Technology"

First appeared in NY Times
A DRIVERLESS car is not yet ready for the market. But in the meantime, automakers are continuing to market some components of one. The Ford Motor Company announced last month that it would offer “lane-keeping technology” as an option for its 2013 Ford Fusion and Ford Explorer. The price has not yet been set.

When lane-keeping technology works, it can save lives. But it is suited only for certain road conditions, and there are reasons to doubt that it will activate as consistently as it should.

Ford’s technology relies on a camera mounted to the rear-view mirror. When the system is switched on and the vehicle is traveling more than 40 miles per hour, it will use the road’s lane markings to sense veering near one edge of the lane or the other. If the turn signal is off, the system will assume that the drift is unintentional and will send a vibration to the steering wheel as a warning.

If the driver doesn’t correct the drift, the software is then supposed to engage the power steering and turn the car back toward the center of the lane.

When all goes well, this will be flat-out wonderful. But the camera may have difficulty detecting the lane markings — when the sun is at a low angle, for example, or during heavy rainfall or on curves. If it fails to see the markings, it simply remains dormant.

The National Highway Traffic Safety Administration has declined to give lane-keeping technology its blessing. Ronald Medford, deputy administrator of the agency, says, “We believe additional evaluation and research about lane-keeping systems is needed before we can decide whether we should recommend it to the public.”

Earlier research by the highway agency found performance problems in other systems then available. When asked about that, Michael Kane, a development engineer at Ford, acknowledges that certain conditions, such as when driving into direct sunlight, confound the system. “It’s not perfect,” he says.

But, he continues, “we’ve worked to enable the system to detect lane markings on a much higher percentage of situations, such as tree-lined curves with lots of shadows.”

When Toyota introduced similar technology in its 2010 Prius, it chose to call it “Lane Keep Assist.” Lexus and Mercedes also use similar language for their systems. That “assist” keeps expectations from getting out of hand. Ford is going instead with “Lane Keeping System,” without any namby-pamby qualifier.

Advanced automotive safety technologies, like lane-keeping systems, are most prevalent in Europe, says Eddy Llaneras, a staff member of the Virginia Tech Transportation Institute.

“In Europe, the driving population understands that ultimate responsibility remains with the driver,” he says. “Here in the U.S., we are inclined to believe the technology will do all the work for us. And if it doesn’t, we’ll sue.”

Mr. Llaneras expects that within five to 10 years we will see “lane centering,” in which the vehicle steers itself. “The technology exists today — it’s been tested on research vehicles,” he says. “But manufacturers hesitate to introduce it because the systems can never be 100 percent reliable and they introduce liability exposure.”

Mercedes makes its lane-keeping system active by default, but Ford, like Toyota and Lexus, insists that its system be turned on manually, every time; the driver doesn’t have the option to designate that it be activated by default, or when cruise control is used — a seemingly natural combination.

Ford’s new technology package also includes what it calls a “Driver Alert System,” which will provide warnings when the software detects a pattern of driving associated with drowsiness, such as weaving within the lane boundaries. For the first warning, Ford’s designers have chosen to sound a soft chime and to display this message on the dashboard: “Rest suggested.” If the problem persists, a louder chime and a new message — “Rest now” — follow.

Mr. Kane could not point to any test data, however, that suggests that a driver who is sleepy to the point of being dangerous is likely to find and heed display warnings. Notwithstanding the chimes, delivering the message with an insistent recorded voice would seem a better choice.

J. Christian Gerdes, director of the Center for Automotive Research at Stanford and an associate professor of mechanical engineering, has been testing driverless cars since the early 1990s. One such vehicle successfully climbed the twisty road to the top of Pikes Peak in Colorado — and did so multiple times. Its technology, however, isn’t coming soon to an auto showroom near you: its navigation relies on a base station in the area to transmit a Differential Global Positioning System signal.

Even if camera-based lane-keeping systems were to work well, we might not end up safer. Mr. Gerdes calls attention to the “risk accommodation” problem. “As vehicles are made safer, drivers may compensate by engaging in riskier behavior,” he explains.

As humans, we have one thing that works in our favor while driving: we are more likely to handle unexpected events successfully than the software in an autonomous car.

“Humans understand context,” Mr. Gerdes says. “If I’m driving along a row of parked cars and a ball rolls out into the street, I know to look for a child.”

Then again, we humans aren’t always exemplary in paying attention to the road. Ford’s system may lack perfect vision, but it will never be distracted because it’s checking its e-mail.

Picnik Is Retired

First appeared on Yahoo! News
Google has announced it will be retiring the online photo-editing service Picnik, together with a number of other products that the web giant feels “replicate other features, haven’t achieved the promise we had hoped for or can’t be properly integrated into the overall Google experience.”

Services that are affected besides Picnik include:

- Google Message Continuity (GMC): support to be ended. “Current GMC customers will be able to use GMC for the duration of their contract.”

- Google Sky Map: to be open-sourced. Google will be “collaborating with Carnegie Mellon University in a partnership that will see further development of Sky Map as a series of student projects.”

- Needlebase: to be retired on June 1, 2012.

- Social Graph API: “The API isn’t experiencing the kind of adoption we’d like, and is being deprecated as of today.” To be fully retired on April 20, 2012.

- Urchin: “New Urchin Software licenses will no longer be available after March 2012.”

“Changing products that people love is hard….But we’re excited to focus on creating a beautifully simple, intuitive user experience across Google—an experience that will change the lives of millions of people,” Google’s vice president of product management Dave Girouard wrote on the company’s official blog explaining the decision.

Picnik, which was bought by Google two years ago, will be retired on April 19, however, Picnik announced on its homepage that some of its photo editing tools will be moved to Google+, the new social networking site which this week claimed to have 90 million users.

Until Picnik’s closure, users will have the chance to try its premium services for free, and anyone that’s already paid for them will receive a full refund.

Picnik is undoubtedly a very popular product, with an interface that makes photo editing a breeze. Anything from a simple crop to advanced special effects are offered, and the online tools will no doubt be missed by many. Consider Google SEO.

It’s not clear yet how many of Picnik’s photo-editing tools will be pushed across to Google+, but what if you don’t want to open a Google+ account but would still like a quick and simple web-based solution when it comes to tweaking your pics?

Here are some suggestions that should help you out:

FotoFlexer – very similar to Picnik in look and feel; offers many effects, including distortions; ability to work with layers, too. One imagines this site is going to see a big increase in traffic once Picnik disappears from the scene.

Phixr – not such a clean interface; consider it as a simplified version of Picnik. Offers a few interesting options such as noise removal and ‘fun effects.’

befunky – another site which operates along the same lines as Picnik, though befunky feels a little clunkier to use. Still, it offers lots of editing options and may appeal to some, especially those who like to jazz up their images with stickers and such like.

iPiccy – nice, clean interface; lots of options for editing and adding effects. The site is currently in beta, but we can see this one becoming pretty popular with those who enjoy using Picnik.

pixlr – a more Photoshop-looking interface, with a comprehensive set of adjustment tools. Decent filter list. Much more powerful than Picnik, but may be daunting for some. Clean interface though and well worth a look.

blekko--A New Option In Search

A new kind of Search Engine?

Here are a few interesting additions to the search community:

blekko's mission: provide a differentiated editorial voice in search.

Search is the starting point for accessing information. A search engine is an editorial product. The algorithms that determine search results are created by humans and contain an editorial bias. Users deserve a choice in the editorial voice of their search engine.

blekko's Editorial Voice

Quality vs Quantity: blekko biases towards quality sites. We do not attempt to gather all of the world's information. We purposefully bias our index away from sites with low quality content.

Source based, not link based: blekko does NOT rely solely on link based authority.Too many people engage in efforts to game search by linking for purposes other than navigation. blekko relies on human beings and their judgement of the authority of sources to dictate search results.

Spam Free: blekko includes results from sites whose primary purpose is information, not monetization. Sites created solely to game search engines are not included in our results.

Human Curation: blekko believes that human beings should be involved in determining search results. Our community of users tag pages and sites for us every day to help insure the highest quality of search results.

Open and Transparent: blekko makes freely available to its users all of the data that provide the underpinning of our search results. This includes web data, ranking information and the curation efforts of our users.

There are more than 10 relevant results for every day queries such as "las vegas hotels" or "turducken recipes." We believe our results for these queries are better, but we leave that up to the user. The important point is that users have a choice.

Searching with blekko

blekko search results provide information and tools you can use to make decisions and improve your own search experience.

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Content Box

Some searches will have a content box that appears above the search results. This box gives a quick snippet of information depending on the slashtag used.

 Examples:

san jose, ca /weather | green lantern /movies | berkeley /map | verisimilitude /define

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Top Search Area

The Top bar includes the search box and the slashtag bar. The top bar is fixed in place by default but you can change this in prefs.

Search box – enter your query and slashtags and hit “search” to search blekko, e.g., alpha dog /movies.

# of results – the number of results are shown. If a slashtag was used, there will be a link to that slashtag.

Sort options – /relevance is the usual default option, but you can change the sort order to /date or /likes. /date will order the results by date while /likes will only show results from you and your friends’ Facebook likes.

Slashtags – suggested based on your query. You can also access your own slashtags by clicking on the arrow next to your username.

Share – click the drop down to share the search result page on either Facebook or Twitter.

What is a slashtag?

A slashtag is an easy-to-create custom search engine. It is a tool used to filter search results and helps you to search only high quality sites, without spam or content farms.

 

Example: /health

Search keyword /health and trusted sites like will come up and more appear high in your results with content farms and spam sites banished entirely.

There are 3 types of slashtags:

topical – Created by blekko and curated by experts, topical slashtags are built to search only top sites for specific topics like health, tech, recipes, etc.

user – User slashtags are created by you or other members of the blekko community. You can personalize your own slashtags with sites you trust.

built-in – Built-in slashtags are programmed in the back-end by blekko and perform specific search functions, such as /date or /blogs.

Legislation to Tax Internet Purchases?

First appeared in Up North Live

Governor Rick Snyder is set to deliver his state of the state address -- and many retailers hope that this year he takes action on a bill that would close a tax loophole on online sales.

If you shop online, chances are you're probably breaking the law. That's because internet retailers like Amazon.com don't collect Michigan's 6% sales tax. They don't have to, but you are legally obligated to pay it.

The loophole is something many local businesses want changed.

Horizon Book Sales Manager, Amy Reynolds says it puts them at a competitive disadvantage.

By forcing internet retailers to charge the sales tax it could also bring millions of much needed revenue to Michigan.

The legislation would require online businesses to offer a link to another website where the buyer would make purchases and the internet store could then collect the taxes.

Yahoo Loses Jerry Yang

First appeared in the Wall Street Journal

Jerry Yang rode Yahoo Inc.'s swift rise and subsequent decline over 17 years. Now the co-founder of the onetime dominant Internet company has decided to stop hanging on.

Mr. Yang, 43 years old, said Tuesday he was resigning from Yahoo's board, severing ties to the company he co-founded with David Filo in 1995 while both were Stanford University graduate students. Mr. Yang also said he would leave the boards of Yahoo Japan Corp. and Alibaba Group Holding Ltd., in which Yahoo owns significant stakes.

Mr. Yang has been under pressure for weeks, grappling with criticism over his multiple roles at the Sunnyvale, Calif., company—including co-founder, director, former chief executive and large shareholder. Some investors questioned whether Mr. Yang had conflicts of interest as Yahoo in recent months explored its strategic options, including whether to sell all or part of the company.

Mr. Yang is leaving after Yahoo this month hired a new chief executive, Scott Thompson, the former president of eBay Inc.'s PayPal unit. He fills a void created four months earlier when the board fired Carol Bartz. Yahoo is also closing in on a deal to shed its Yahoo Japan and Alibaba stakes without creating a hefty tax bill.

Activist investor Dan Loeb's Third Point LLC in recent months has threatened a proxy fight against Yahoo and called for the resignation of Mr. Yang and several other directors. In a reflection of investor sentiment toward Mr. Yang, Yahoo's stock gained 3% to $15.90 in after-hours trading after the co-founder announced his departure from the company's board.

Mr. Yang himself made the decision to exit Yahoo's board, said two people familiar with the situation. Mr. Yang didn't immediately inform all of his fellow directors that he would step down, these people added.

In making his decision, Mr. Yang also didn't discuss potential external pressures facing the board, said one of the people. "Mr. Yang just decided that now was the time," this person said. "Anything else is speculation."

But another person familiar with the situation said Mr. Yang may have wanted to avoid being a target if a proxy fight were to occur. "He's rich. He doesn't need all this [fuss],'' this person said. "He has a great reputation and he doesn't need it sullied.''

Mr. Yang's departure comes several weeks before shareholders can nominate rival directors to Yahoo's board, beginning Feb. 24, though the company could postpone the schedule. All nine Yahoo directors are up for re-election this year. Yahoo hasn't yet announced the date for this year's annual shareholder meeting.

Earlier this month, The Wall Street Journal reported the company was searching for several new board candidates to replace possible outgoing directors, including Chairman Roy Bostock, according to people familiar with the matter.

In a statement, Mr. Yang said "the time has come for me to pursue other interests outside of Yahoo." He didn't respond to requests for further comment.

A spokeswoman for Yahoo said she had no information about whether Mr. Yang would be replaced and who would take his posts on the boards of Alibaba and Yahoo Japan.

Mr. Yang's exit is the latest chapter for Yahoo and underlines the widening gap between old Internet companies and newer ones. Yahoo was part of an earlier crop of Web companies from the 1990s that helped spark the dot-com boom and came of age as users world-wide began going online.

But after riding that wave, new companies such as Google Inc. and Facebook Inc.—often with younger leaders like 27-year-old Mark Zuckerberg at Facebook—came to prominence with Web technologies such as search and social networking, leaving older firms like Yahoo struggling to catch up.

The resignation of Mr. Yang—who as of November still owned a 3.8% stake in Yahoo, compared with a 5.9% stake held by co-founder Mr. Filo—is a far cry from the glory days of Yahoo. The company began as a hobby for Messrs. Filo and Yang, who created "David's and Jerry's Guide to the World Wide Web," a list of their favorite websites.

In 1995, the duo dropped out of Stanford, took a $2 million investment and incorporated Yahoo. The founders chose the name Yahoo largely for its dictionary definition: "rude, unsophisticated, uncouth," according to an official company history.

When consumers started surfing the Web in the mid-1990s, Yahoo became their trusted guide, a kind of Yellow Pages for the new age. Yahoo went public in 1996 in an IPO that instantly made Messrs. Filo and Yang multi-millionaires. The company adopted an anti-corporate image, with executives who wore jeans and put their feet on their desks.

Mr. Yang, the more visible of the two co-founders, quickly became a poster child of the dot-com boom. At its peak in 1999, Yahoo was worth more than $120 billion—bigger than companies such as Cisco Systems Inc. and Hewlett-Packard Co. today.

But even then, the seeds of Yahoo's decline were being planted. The company failed to realize a crop of "algorithmic" Web-search engines such as Google were a potential threat to its business. More recently, Yahoo grappled with the rise of Facebook while failing to establish a big footprint in mobile devices and new methods of selling online ads.

"The near-term Wall Street reaction is that he [Mr. Yang] wasn't doing a good job, but the longer-term perspective is that he will go down as one of the top 10 Internet entrepreneurs," said Mark Mahaney, an analyst at Citigroup Inc. who has been covering the Internet industry since 1998.

During the dot-com bust last decade, Mr. Yang used his star power to help Yahoo draw in badly needed advertisers by meeting with them personally. "For big clients, Jerry was the man," said Greg Coleman, a former top Yahoo executive. "He was the iconic rock star…and he knew how to work that magic."

In the mid-2000s, Mr. Yang fostered a friendship with Jack Ma, CEO of Alibaba Group. In 2005, Yahoo opted to hand its Chinese operations over to Alibaba, while buying a 40% stake in the Chinese firm for $1 billion. That stake was recently estimated at $14 billion, making it one of Yahoo's most valuable assets.

On Tuesday, Mr. Ma said his relationship with Mr. Yang "has withstood some ups and downs over the past few years, and I have great respect for what he has built and I wish him well."

Mr. Yang was Yahoo CEO between mid-2007 and early 2009, during which time he grappled with an offer from Microsoft Corp. in 2008 to buy Yahoo for more than $45 billion. Mr. Yang and fellow directors turned down the offer, igniting a barrage of criticism.

In an on-stage interview at a conference in San Francisco that year, Mr. Yang deflected suggestions he had let his feelings for Yahoo cloud his decision making. "I know I will be labeled with that forever," he said.

After Ms. Bartz became Yahoo CEO in 2009, Mr. Yang receded from the spotlight. Following her firing last September, Yahoo began entertaining potential investments by private-equity firms to take a controlling or minority stake in the company.

Some Yahoo investors expressed concerns because one of the proposals discussed by Yahoo's bankers involved Mr. Yang aligning himself with a private-equity firm or other buyers and becoming part of a new Yahoo ownership group, people familiar with the matter have said. The activist hedge fund Third Point said Mr. Yang must "declare whether he is a buyer or a seller—he cannot be both."

Yahoo denied there was any conflict and people close to Yahoo said Mr. Yang was acting with the board's blessing and that he had retained his own lawyer to advise him on potential conflicts. Another person close to Yahoo said company directors hadn't expressed any concern about Mr. Yang's motivations.

Within Yahoo, Mr. Yang stepped up his presence after the firing of Ms. Bartz, people familiar with the matter have said. He has attended high-level company meetings and been involved in engineering and corporate development strategy, including Yahoo's $270 million acquisition of ad-technology firm Interclick Inc., announced in November, these people said.

CEO Letter to Yahoo

First appeared on Business Gear Live

So, Jerry Yang has left Yahoo!. Of course, we're interested in knowing how new Yahoo! CEO Scott Thompson would handle addressing the news to his crew, and we've got the full email below to show what he had to say. Spoiler: he has nothing but good things to say about Yang, and Yahoo! as a whole:

Dear Fellow Yahoos,

By now, I think everyone has heard that Jerry has decided that it is time for him to pursue other interests outside of Yahoo! and has resigned all of his positions with Yahoo!.

Obviously, I’ve only been here a short time, but Jerry has had a strong influence on me.  I know that when the Board appointed me as CEO, it was one major step in their plan to help restore Yahoo! to a path of robust growth and industry-leading innovation.  When I came on board, Jerry shared with me his confidence that the company had the foundation and resources necessary to achieve those objectives.  The more I dig in, the more I'm convinced that Jerry is right to have that confidence that Yahoo! can realize its still enormous potential, and I share it.

So it was very encouraging that even as he leaves the company, Jerry expressed his enthusiasm for our ability to create “an exciting and successful future” together – a powerful endorsement from one of the two people who know this company best.  Personally, I am grateful for the support and warm welcome Jerry provided me in my early days here.  His insights and perspective were invaluable, helping me to dig deeper – more quickly than I could have on my own – into some of the key elements of the company and how it operates.

Jerry will clearly be missed, but he has left an indelible imprint on this company he co-founded and built and an internet industry he helped pioneer.  The high standards he set for engineering excellence and a constant push for innovation will remain among the guideposts for our path forward.  Please join me in wishing him all the very best in this new phase of his life.  I assure you, we will make him proud.

Scott

Wikipedia Might Make People Mad

First appeared on MarketWatch

Wikipedia’s 24-hour blackout, to attempt to stop Internet piracy legislation under consideration by the U.S. Congress, is a terrible idea.

Wikipedia is only going to infuriate many of its users.

New-media entities like Wikipedia pride themselves on offering services for free, unlike those evil capitalist, old-media fossils, who would do anything for a lousy buck. This kind of attitude has helped burnish Wikipedia’s public-spirited image.

Today, Wikpedia wants you and me to carry its water in its bid against Washington. It’s hoping it has amassed so much good will that we’ll blindly follow its lead. Hmmm.

Problem is, Wikipedia, ultimately, will hurt itself by this act. For 24 hours, we citizens are being locked out. We’re being told, You can’t use our service because we want to make a point. We want to show people, by virtue of this move, exactly how important we are. You can’t do without us, even for only one day.

That may well be 100% true, too.

But think about it from a completely different angle for a moment: Who is Wikipedia helping by making this show of foolishness? Is it enabling its users to live productive lives? Uh-uh. Is it making a contribution to the world? Not exactly.

And will the decision to shut down actually make an impression on the members of Congress? We’ll have to wait and see.

If Wikipedia really wanted to make a fuss, it would get its users to stop making campaign contributions to the hostile Congress folks.

There is a move that would make an impression in Washington.

Zappos Was Hacked, 24 Million Customers Affected

First appeared in Forbes

Twenty-four million Zappos customers are getting an unpleasant Sunday-evening surprise

The Amazon-owned e-commerce firm has revealed that it was the target of a cyber-attack that gained access to its internal network, including the accounts of 24 million of its users. Though the company says that no complete credit card numbers were revealed in the breach, the intruders may have accessed customers’ names, e-mail addresses, phone numbers, addresses, the last four digits of their credit card numbers, and encrypted passwords. Zappos says it’s taken the precaution of resetting the passwords of all its customers and directing them to set a new password upon visiting the site.

“We were recently the victim of a cyber-attack by a criminal who gained access to parts of our internal network and systems through one of our servers in Kentucky,” the chief executive wrote to Zappos employees in an email posted to the site, declining to offer more information about the breach. ”We are cooperating with law enforcement to undergo an exhaustive investigation.”

Even after choosing a new Zappos password, users should be careful to also change their passwords on any site where they’ve used a similar or identical password, in case Zappos’ intruders are able to decrypt the scrambled passwords they’ve stolen. Zappos is also warning affected customers to watch out for phishing emails that will use their stolen email addresses to spoof official Zappos emails and ask for account credentials or financial details.

The chief executive wrote in his all-hands email that every employee at Zappos’ Henderson, Nevada headquarters will be assisting in the customer response to the breach, and that the company will only be responding to emails rather than phone calls in its effort to answer the massive number of queries that it expects to receive.  ”We’ve spent over 12 years building our reputation, brand, and trust with our customers. It’s painful to see us take so many steps back due to a single incident,” he wrote in the email. “I suppose the one saving grace is that the database that stores our customers’ critical credit card and other payment data was not affected or accessed.”

Zappos customers can change their passwords.

Google Ecosystem

First appeared on CNN Money

Technology innovations are often blended into buzzword trends like "curation" and "social graph." This is shaping up to be the year of "ecosystem."

What does that mean? Depends on who you ask. Google (GOOG, Fortune 500) chairman Eric Schmidt offered up his view during a panel discussion at the Consumer Electronics Show in Las Vegas on Tuesday.

Schmidt started with a canned answer about how he defines ecosystem -- "scalable network platforms that deliver the best customer value" -- but he warmed up when the talk turned to Google's Android operating system.

"We even have Android in refrigerators now," Schmidt said. "By open-source we mean, 'take it and have fun.' And people have."

The panel moderator, CNET's Molly Wood, pointed out the pitfall of that strategy: hundreds of devices are running dozens of various versions of Android. But as soon as she said the word "fragmentation," Schmidt cut her off.

"You have to be careful with that word, fragmentation," he said.

"So what would you say?" Wood asked.

"I would say differentiation," Schmidt replied. "Differentiation is positive, fragmentation is negative."

Whatever you call it, the approach is working: Google activated 3.7 million Android phones on Christmas Eve and Christmas Day, Schmidt revealed.

But Wood pressed the fragmentation issue, asking Schmidt whether the new Android operating system -- 4.0, codenamed Ice Cream Sandwich -- is a chance to "give [Google] a little more control."

Schmidt replied: "Well, control ... I mean, we want to get everybody under Ice Cream Sandwich, but we absolutely allow our developers to add or change anything, as long as they're not breaking anything."

He added: "The great thing is if you don't like one phone, you can choose another. You're not bound to certain hardware."

That potshot was aimed at Apple, whose iOS appears only on its own devices.

Schmidt's digs at competitors continued when Wood brought up Internet-connected TV and the success of Microsoft's (MSFT, Fortune 500) gesture-controlled Kinect system.

"How big a barrier is it that Microsoft seems to have all the pieces in place, with the Kinect and the Xbox and all, but hasn't really gotten it together yet?" Wood asked.

"Microsoft is trapped in an architectural problem it might not get through," Schmidt replied.

The blunt comment drew a few laughs from the audience. Schmidt shrugged them off saying, "My sense is that they're going to get there. It's a problem of user interface design. It's a matter of getting people with great taste into the company, designing."

Next on Schmidt's slam list: Amazon (AMZN, Fortune 500), whose Kindle Fire tablet runs on a highly altered version of Android. Schmidt said Google welcomed the customization, but that the tablet "has some limitations, [which] have been well documented."

Wood tried to close the discussion with a question based on the panel's theme: "Which is most important for the ecosystem: Hardware, content, services or software?"

Schmidt went the politician's route. He tossed that query out and swapped in his own.

"They work together," he said. "I'll answer a different question: What was the most surprising thing in 2011?" Schmidt asked himself, as attendees laughed.

"It's always surprising to people when they realize how significant these ecosystems are," he continued. "I saw this with respect to Apple, Amazon and even Facebook."

The open ecosystem allows multiple types of players to work together, Schmidt said. That means "everyone can be a winner" in a financial sense.

"All of these people can operate without your knowledge or control," he said. "It's about making it open enough so that the creative people, the app developers, the consumers -- you build something tremendously valuable for everyone."

Apple’s Siri Changes Voice Technology

First appeared in Fox Business

Apple Inc. will again dominate conversations at CES, the world's biggest technology showcase. Only this time, the talk is extending beyond iPad and iPhone chatter to include "Siri," the voice app that is capturing consumers' imagination.

Apple's dulcet-voiced, speech-controlled personal assistant, a key factor in making the iPhone 4S a blockbuster, has breathed new life into the once-obscure and oft-maligned world of speech-recognition technology.

Siri, which can do everything from taking dictation for text messages and entering calendar appointments to answering general-knowledge questions, has intrigued users. Experts say it demonstrated emphatically that voice recognition has moved beyond the days of misheard commands, narrowly defined keywords and anguishingly slow speeds.

The smartphone industry is now scrambling to match and better Apple's offering. Google Inc and Microsoft Corp will likely want to cash in on an explosion of interest in an area they have invested in for years, without getting anything like the attention Siri is attracting.

"All the mobile phone manufacturers are investing in speech, expanding investments in speech, creating more elegant designs and integrating it more deeply into phones," said Michael Thompson, senior vice president for mobile at voice-recognition specialist Nuance.

Thompson was coy about his company's future plans but said he expects voice to be a central topic at the Consumer Electronics Show in Las Vegas as device makers jostle for attention from investors, media and consumers.

While voice is expected to be used in many areas of consumer electronics, the technology is particularly pertinent to cellphones because it simplifies functions from Web surfing to typing.

Internet merchants like eBay are also jumping on the bandwagon. And reports have emerged about a voice-control for TVS from South Korea's LG Electronics just before CES, which will open its doors in Las Vegas this week.

Many companies at CES are not yet ready to showcase products that can match or outdo Siri, Forrester Research analyst Charles Golvin said. But he said he expects the current flurry of activity to result in big voice product advancements in coming years as the technology is perfected.

Apple's rivals are planning to ship phones with improved speech technology in the fall, in time for the 2012 year-end holiday season, said Thompson at Nuance, which supplies and licenses technology to Apple but has its own voice app.

Even traditional PC makers will jump on the bandwagon: Intel announced at CES on Monday it will adopt Nuance's "Dragon NaturallySpeaking" voice-command technology on ultra-thin laptops -- dubbed UltraBooks -- coming out this year from the likes of Dell and Hewlett Packard.

"Voice as an input mechanism is going to be more and more useful and more and more prevalent," Golvin said. "Consumers have a lot of bad historical experience with it. They are going to encounter good voice interfaces more and more."

BANDWAGON ROLLS ON

Experts say the technology will evolve as more consumers get acclimated to it.

The interest in voice is already sparking acquisitions, with Nuance setting its sights on phones based on Google's Android operating system. Last month, it bought Vlingo, a developer of voice-control apps for a phones based on Android.

Android phone manufacturers -- all major rivals of Apple -- include Samsung Electronics Co Ltd, HTC Corp and Motorola Mobility, which Google is buying.

In the meantime, some developers are helping phone makers bridge the gap. A new app called "Ask Ziggy," launched a few weeks ago on Microsoft Windows-based smartphones, is generating buzz among users as it allows them to update Facebook, Twitter, answer texts and questions -- all through speech.

The free app helps a Windows phone mimic Siri's features and is already one of the top downloaded apps in its category.

"There's been a lot of interest globally," said Ask Ziggy developer Shai Leib, who told Reuters his inbox has been flooded with feedback from users, some even from Microsoft employees.

Leib plans to incorporate speech technology further in the app, to make phones completely hands-free. Microsoft's gesture-based Xbox Kinect gaming system has also raised the possibility of using hand gestures to manipulate screens and execute commands -- the so-called "Minority Report" interface named after the Tom Cruise sci-fi vehicle.

"With the success of the Microsoft Kinect and Apple's Siri, new ways to interface with CE devices have suddenly become top of mind," Ben Arnold, NPD's director of industry analysis, wrote in a blogpost last week. "I expect several companies to exhibit products using some of these new interface methods in an effort to differentiate themselves."

Leib argues there's nothing to stop smartphones also adopting gesture-recognition.

"The next level is to improve the speech, grammar and make the answers a little bit more conversational," he said. "The possibilities are amazing, especially with Kinect."

"I am looking forward to see what's going to happen with Windows 8 and if there are going to be future updates on the Windows phone that can recognize gestures."

HISTORY OF SPEECH

Apple was not the first to incorporate speech on phones. Google has had speech-recognition applications for Android smartphones for more than two years, and is now possibly trying to beef up its capabilities through the recent acquisition of a company called Alfred.

Alfred uses artificial-intelligence technology to sift through the Web's vast trove of data and recommend restaurants, bars and other real-world places users might like. Some experts say the technology could provide an important building-block that Google could pair with existing voice-recognition technology to create its own answer to Siri.

E-commerce companies are also playing catch-up, not wanting to be caught flat-footed should consumers become more comfortable using voice to search the Web and shop online.

EBay is planning a voice and image-based search function for its online market and "Red Laser" price-checking mobile software.

EBay Chief Executive John Donahoe has said he believes Siri is just the beginning, and sees a future where users can speak their preferences into phones to narrow down shopping choices.

Dan Miller of San Francisco-based Opus Research agrees. He was particularly intrigued by reports last November of an acquistion by Amazon.com of Yap, whose software coverts voice to text.

"The clock is ticking. In the next year or year and half expect a talking Kindle that supports commerce," Miller said.

Miller, who has studied voice technology for about 25 years, said he is gratified by the sudden spotlight on voice as he recalls years of consumer frustration over automated customer serivce systems.

"We're really happy to see this much positive attention," he said, "As opposed to "Oh the machine doesn't understand me."