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Thursday, December 27, 2012

Qihoo Outapcing Baidu in China Internet Race

originally appeared in Bloomberg News:

Qihoo 360 Technology Co. (QIHU), the Chinese Internet company that started offering a search engine in August, is overtaking rival Baidu Inc. (BIDU) in the stock market on prospects the newcomer will boost its share in the industry.

American depositary receipts of Qihoo jumped 5.9 percent last week to trade at 35 times estimated earnings, double the valuation of Baidu, and reversing a discount of as much as 50 percent in January. Baidu, owner of China’s most-used search engine, rose 1.3 percent last week in New York, sending valuations to 17 times profits. Qihoo’s gain helped the Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in New York rise for a third week.

Qihoo’s site --, which means search in Chinese --has cornered more than 9 percent of the search market since its Aug. 16 debut, compared with Baidu’s stake of about 60 percent, according to October data from New York-based Internet-tracking firm Experian Hitwise. Qihoo will extend its rally on expectations the Beijing-based company will post faster sales growth than Baidu this year as well as in 2013, Oberweis Asset Management Inc. said.

If a small upstart takes a little bit of market share from the industry leader, it may not be a big deal for Baidu but it’s material for Qihoo, according to a fund manager who oversees $700 million, including shares of Qihoo and Baidu, at Oberweis said by phone from Lisle, Illinois, on Dec. 20. Qihoo probably has the more aggressive opportunity to hit much higher growth rates if they are successful in executing their strategies.

Sales Forecast

Qihoo, whose fourth-quarter sales projection given in November beat the median of six analysts’ estimates compiled by Bloomberg, has soared 69 percent this year. Beijing-based Baidu, down 15 percent in 2012, is forecasting the slowest revenue growth since 2009 this quarter. Analysts also forecast a 67 percent jump in Qihoo’s net income next year, compared with a 26 percent increase for Baidu, Bloomberg data show.

Qihoo develops anti-virus computer software and desktop applications that include its web browser, the most popular in China with 303 million users as of September. Searches derived from Qihoo browser’s personal start-up page have contributed 11 percent to its total query traffic last month, Hitwise data show, the most among Chinese companies with similar services.

Qihoo’s search engine ranks second after Baidu’s and its market share exceeds that of Tencent Holdings Ltd., China’s largest Internet company by market, and Inc.

Initial Growth

Qihoo is still gaining market share and, as a new entrant, initial growth should be strong, according to a senior analyst at Maxim Group LLC who recommends buying Qihu’s stock and selling Baidu, said by phone from New York on Dec. 21. Baidu is facing lower margins on a permanent basis. Qihoo is facing lower margins because it’s investing in the search markets, and that’s temporary.

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., declined 1.3 percent on Dec. 21 to $39.24 for a weekly loss of 0.3 percent. The ETF has risen 13 percent this year. The Bloomberg China-U.S. index retreated 1.3 percent on Dec. 21 to 96.42, paring the measure’s gain this year to 7 percent.

The Standard & Poor’s 500 Index dropped 0.9 percent to 1,430.15 after House Republican leaders canceled a vote on higher taxes for top earners, causing a standstill in the U.S. budget talks.

We’re seeing some good engines coming from emerging markets, but it all depends on what happens in the U.S., according to an analyst who helps oversee $426 billion at HSBC Global Asset Management, said by phone from New York on Dec. 21. If the U.S. went into recession in 2013, it’s likely to become a very big drag on exports from China.

E-House Plunges

E-House China Holdings Ltd., a real estate brokerage based in Shanghai, was the worst performer on the gauge last week, losing 15 percent. Its ADRs sank 13 percent to $3.64 on Dec. 21, the biggest one-day slump since 2009. SouFun Holdings Ltd., the Beijing-based owner of the largest real estate information website in China, dropped 2.2 percent on Dec. 21, trimming its gain last week to 6.1 percent.

China won’t rule out the possibility of introducing new housing curbs after the property market rebounded in November and some regions saw “irrational exuberance,” China Securities Journal reported on Dec. 21, citing an unidentified person in the industry.

The Hang Seng China Enterprises Index slid 0.7 percent to 11,229.09 last week. The gauge has climbed 13 percent in 2012. The Shanghai Composite Index slipped 0.7 percent to 2,153.31 from the highest level in four months, bringing its loss this year to 2.1 percent.

Thursday, December 20, 2012

Child Web Privacy Law Gets Updated

originally appeared in The Wall Street Journal:

In a move to update rules governing children's privacy online to cover new areas like smartphones, U.S. regulators broadened decade-old policies, but amid pressure from the technology industry backed away from proposals that could have made companies like Facebook Inc. and Apple Inc. more responsible for violations.

The Federal Trade Commission said it would change how it implements the Children's Online Privacy Protection Act of 1998, or Coppa, to reflect the growth of social networks and smartphone apps among children.

The commission also expanded the types of information it considers personal under the law. Kids' apps and websites will now have to obtain parental consent before gathering photos, videos or geographic location, and before tracking kids' online behavior and passing along the data to other companies.

But in a departure from rule changes the government proposed in August, the FTC explicitly exempted app stores like those run by Apple and Google Inc. from responsibility for privacy violations by the games and other software that are sold there.

The updated rules, which go into effect July 1, also make clear that software such as Facebook's "Like" button and ads placed by advertising networks will only have to meet child online privacy regulations if companies have "actual knowledge" that they're collecting information through a website or app that targets kids.

The commission's move ended one chapter in the long-running Washington debate over how closely the government should regulate online privacy, but set the stage for new battles.

Consumer advocates said they would continue their push to make Apple and Google more responsible for the data-gathering practices of the apps they distribute, while several members of Congress are pushing legislation to further tighten limits on online tracking of children and teenagers.

Just last week, the FTC put a spotlight on gaps in kids' online privacy with a report that found hundreds of popular kids' apps were collecting data without parental consent.

Coppa governs how companies must proceed when collecting personal data from children under the age of 13. Enforcement falls to the FTC, which has been reviewing how it should approach the law in the age of smartphones and social media for two years. Kids' entertainment and Internet companies have lobbied heavily to blunt the impact of the update.

Apple, for example, met with FTC officials five times this fall, in particular contesting the possibility that the updated rules might hold it responsible for the data-collection practices of the third-party apps it distributes on the iPhone and iPad. Google made a similar point in a filing with the commission.

Google said it was evaluating the changes and would continue to work on effective ways to protect children's privacy and security. Facebook said it was pleased with the FTC's decision on so-called plug-ins, such as the "Like" button.

In several cases, the industry got what it wanted. Reversing a prior proposal, the commission agreed to continue to allow parental consent to be obtained by email as long as apps and websites only collect data for internal use.

The FTC's Chairman said the final rules strike the right balance between protecting innovation that will provide rich and engaging content for children, and ensuring that parents are informed and involved in their children's online activities.

While Apple, Google and Facebook scored partial victories, some smaller developers were disappointed. The president of the Application Developers Alliance, said that the new regulations could prove so burdensome that talented and responsible developers will abandon the children's app marketplace.

One FTC commissioner voted against the updated rules. She argued the commission went too far with the update by holding websites responsible when third parties like advertising networks gather personal data from children.

But some government officials made clear Wednesday they would like to place additional regulations on technology companies. Sen. John D. Rockefeller IV (D., W.Va.), a leading advocate on privacy issues, said he viewed the Coppa regulations as a step toward legislation that gives Americans more control of how they are tracked online.

The executive director of the Center for Digital Democracy and a consumer advocate who has been involved in the Coppa debate for years, said the FTC's decision was a step in the right direction but left loopholes for companies to mine kids' data inappropriately.

He said he would continue to push for more scrutiny of the role of the Internet giants that distribute kids' apps.

The FTC's chairman has made monitoring online privacy one of his priorities at the commission. At Wednesday's news conference announcing the revised rules, he repeatedly held up what he said was his 15-year-old daughter's white iPhone to illustrate how much technology has changed in the past decade.

It was enormously difficult for me to pry this away from my child today, he said.

Monday, December 17, 2012

Simple Tools Help Owners Sift Data for Eager Customers

originally appeared in The New York Times:

Velvet Palate sells artisanal wines that are made in small quantities around the world and typically not stocked in stores. Selling online, according to the co-founder, has allowed the company to zero in on a niche of geographically diverse customers.

Before helping to start Velvet Palate in New York in January, the owner worked for an online media company that analyzed how effectively subscription offers and other marketing tools attracted new customers.

We could see which Web sites people were coming from when they arrived on our Web pages, what they clicked, where they abandoned the process, she said. And that allowed us to constantly tweak and improve what we were offering and how we were communicating.

In her new venture, Velvet Palate's co-founder said her goal had been to use online data collection and Web analytics to cater to customers’ tastes.

There is nothing new, of course, about paying attention to customer needs and desires, but there is now far more data available — far less expensively — through Web analytics and customer-loyalty programs. Using basic e-commerce software along with free tools like Google Analytics and Bing Webmaster Tools, small businesses can perform sophisticated data collection and analysis that can help them compete with companies that have far greater resources.

Based on the experiences of business owners, this guide offers suggestions on how both Web-based businesses and traditional retailers can use data.

Velvet Palate offers highly rated wines along with information about how the wines are made and what foods they might best be paired with. Ms. Kooren asks customers who register with the site to fill out a questionnaire that helps her direct them to the right types of wines.

We can only offer a limited number of wines, she said. So we offer choices that are geared toward their preferences.

Velvet Palate’s e-commerce software, Magento Enterprise, tracks sales, but it also identifies tiers of customers, including those who have bought repeatedly, those who have bought once but not returned, and those who have visited the Web site but not made any purchases. This allows the co-founder to target each group in different ways.

To entice one-time buyers to come back, for example, she might offer free shipping for a limited time.  I try different ideas and see what kind of response I get, she said.

This kind of analysis can increase sales, according to a professor of marketing at the University of Pennsylvania’s Wharton School and author of “Customer Centricity,” because it allows companies to adjust their offerings and even to design products to meet the needs of their customers. Businesses can more accurately predict which customers will visit again, what products will interest them and which special offers will appeal to them.

The founder of SimplySoles in Washington, sells women’s shoes both online and through a catalog. Like many retailers, she has found that some customers routinely go through the steps of browsing her site and putting an item in a virtual shopping cart — but then leave before completing the purchase. They may have gotten distracted, or they weren’t sure about buying the shoes, she said.

Those shoppers, she said, are more likely to make a purchase than a visitor who spends time on the site without selecting a product. To try to encourage them to complete a purchase, she has set up a proprietary system — created for her by a Web development company, the Richard Group — that automatically asks the customers by e-mail if they would like to complete the purchases they started. About 15 percent of them do so.

The SimplySoles founder, who has an agreement to sell her business this week, also uses a Google Analytics dashboard that reports Web traffic information, like where her visitors come from. Even before the social networking site Pinterest became popular, she saw that many of her customers were coming from the pinboard site. That data told us we needed to have a presence on Pinterest and start to monitor it, she said.

There are other tools that help small businesses generate and manage customer data.

Using Bing Webmaster search engine optimization tools, the SimplySoles founder gets advice on how to improve her ranking in search results, such as adding a descriptive image tag to an untagged photo. She can also watch what is happening live on her site by using an app called Chartbeat. When she noticed visitors viewing a Web page that described a wine that had recently sold out, she bought more.

The founder of Blogilates, which includes the oGorgeous shopping site and the Blogilates blog, offers exercise videos, healthy menus and advice. She also designs and sells a line of workout clothes and accessories. When the founder e-mails a newsletter to her 70,000 subscribers, she tracks how many click on links to view new offerings and products on sale.

Because fashion moves quickly, she said, getting immediate feedback helps keep her site fresh. The dashboard of her e-commerce software, Highwire, shows how many purchases have been made of, say, a recently offered neon hoodie and how many she has left in inventory.

Colors are very important, she said, and if we see one is selling very quickly, we can adapt right away and put in an additional order with our supplier.

Customer opinions that used to require formal market research to discern are now readily available through feedback forms and discussion forums. When a frequent customer posted a note to other Velvet Palate members that Spanish Rose was a great summer wine for entertaining, SimplySoles' founder used that idea in a marketing message.

Services like Sentiment Metrics or Radian6 can help a company track how it is being discussed online. SimplySoles' founder uses Sentiment Metrics and is alerted when Velvet Palate or any of her specified search terms are mentioned. She can view totals or drill down to individual mentions to see how influential a poster might be, as judged, for example, by how many Twitter followers the person has.

Even brick-and-mortar stores can use new data collection technology. The retailer who opened the Ben Franklin craft store 37 years ago in Monroe, Wash., added a customer-loyalty program to his point-of-sale software last year after an employee suggested that it was in keeping with the spirit of a country store that wanted to get to know its customers.

Store employees have signed up more than 20,000 customers since the BLoyal tracking and rewards system was installed. At first, the store owner used it to see which products and hobbies were popular, so he could adjust his orders. Then he started to reward frequent customers by e-mailing them sneak peeks at new merchandise, sales events and free classes. His tracking and rewards system identifies the store’s most valuable shoppers.

All types of businesses can benefit from utilizing a Google Analytics Consultant who can provide actionable information to help improve their online presence.

We used to have an idea who our best customers were because we’d see them often in the store, he said. But using BLoyal, we can identify people we may not have noticed and can make sure someone recognizes them when they visit to say thank you and point out new items they might be interested in.

In the past, combing through sales records and categorizing customers would have taken too much time, according to the owner, but now he cannot imagine doing business without that information.

Friday, December 14, 2012

Netflix, CEO Hastings get SEC warning for Facebook Post

originally appeared in USA Today:

The Securities and Exchange Commission issued a "Wells Notice" to online video streaming business Netflix and its CEO, the company said Thursday.

The move arises from regulators' determination that Netflix's CEO violated Regulation Fair Disclosure, a rule that requires companies to share material and non-public information with all investors. Netflix disclosed the receipt of the Wells Notice in a regulatory filing.

The Securities and Exchange Commission declined comment.

Netflix' CEO wrote in an regulatory filing the SEC's allegation stems from a posting he made on Facebook in early July. In that post, he told the 200,000 people who subscribe to his posts that Netflix members have viewed more than 1 billion hours of programming on the service in June. The company did not file an official regulatory filing disclosing that information.

He disputes the allegation, saying that having 200,000 followings on Facebook made the Facebook disclosure public. He says the fact regarding the 1 billion hours of viewing not only wasn't material, but had already been disclosed on a public blog.

He also says that while Netflix' stock rose the day he posted on Facebook, the stock's rise started before the mid-morning post as made and likely driven by a positive Citigroup research report.

Netflix' CEO wrote that he remains optimistic this can be cleared up quickly through the SEC's review process.

Tuesday, December 04, 2012

South Korea Taking Efforts to Stop Youth Digital Addiction

story first appeared in

An 11-year-old South Korean, sleeps with her Android smartphone instead of a teddy bear. When the screen beams with a morning alarm, she wakes up, picks up her glasses and scrolls through tens of unread messages from friends, shaking off drowsiness.

Throughout the day, the gadget is in her hands whether she is in school, in the restroom or in the street as she constantly types messages to her friends. Every hour or so, she taps open an application in her phone to feed her digital hamster.

Fiddling with the palm-sized gadget, she says he gets nervous when the battery is low and finds it stressful when out of a wi-fi hotspot.

In South Korea, where the government provides counseling programs and psychological treatment for an estimated 2 million people who cannot wean themselves from playing online computer games, youngsters such as Park have previously not been considered as potential addicts.

Here and in other parts of Asia, online addiction has long been associated with hardcore gamers who play online games for days on end, isolated from their school, work or family life and blurring the line between the real and fantasy online worlds. In a shocking 2010 case in South Korea, a 3-month-old girl died after being fed just once a day by her parents who were consumed with marathon online game sessions.

She does not play computer games and in class, she confidently raises her hand to answer a question. She also gets along well with her friends and likes to cook as a hobby. And yet, she set off more than eight red flags on an addiction test, enough to be considered unhealthily dependent on her smartphone. Park is not unique and the government is concerned enough to make it mandatory for children as young as 3 to be schooled in controlling their device and Internet use.

Her obsession with being online is a byproduct of being reared in one of the world's most digitally connected societies where 98 percent of households have broadband Internet and nearly two thirds of people have a smartphone. Being wired is an icon of South Korea's pride in its state-directed transformation from economic backwater to one of Asia's most advanced and wealthy nations. Always seeking an edge, the government plans to digitize all textbooks from 2015 and base all schooling around tablet computers.

But some now fret about the effects that South Korea's digital utopia is having on its children, part of the first generation to play online games on smartphones, tablets and other devices even before they can read and write.

New mobile devices that instantly respond to a touch of a finger seem to make children more restless than before and lack empathy, said Kim Jun-hee, a kindergarten teacher who conducted an eight-month study on Internet safety and addiction education for pre-school children.

In Suwon city south of Seoul, students in teacher Han Jeoung-hee's classroom now turn in their smartphones when they arrive at school in the morning. After that, he said kids forgot to eat lunch, completely absorbed with smartphones and some stayed in the classroom during a PE class.

Han who teaches sixth grade students at Chilbo elementary school. Smartphones are put in a plastic basket and returned when kids leave for home after classes.

The National Information Society Agency, or NIA, estimates 160,000 South Korean children between age 5 and 9 are addicted to the Internet either through smartphones, tablet computers or personal computers. Such children appear animated when using gadgets but distracted and nervous when they are cut off from the devices and will forgo eating or going to the toilet so they can continue playing online, according to the agency.

Across the entire population, South Korea's government estimated 2.55 million people are addicted to smartphones, using the devices for 8 hours a day or more, in its first survey of smartphone addiction released earlier this year. Smartphone addicts find it difficult to live without their handsets and their constant use disrupts work and social life, according to NIA. Most of their personal interaction is carried out on the mobile handset. Overuse of smartphones may be accompanied by physical symptoms such as turtle neck syndrome caused by having the head in a constant forward position and a pain or numbness in fingers or wrists.

Though Internet addiction is not recognized as a mental illness, there is a growing call from medical practitioners and health officials worldwide to treat it as an illness rather than a social problem.

The American Psychiatric Association's Diagnostic and Statistical Manual of Mental Disorders lists Internet Use Disorder as meriting further study. It is unclear whether it will be recognized as a mental illness in a major revision of the standard-setting manual due out next year. But as the Internet becomes more pervasive and mobile, more societies are grappling with its downside. In Asia, countries that have experienced explosive growth in the Internet such as Taiwan, China and South Korea are most active in carrying out research into whether Internet addiction should be recognized as a mental illness, according to Lee Hae-kook, a psychiatry professor at Catholic University of Korea, College of Medicine.

South Korea already provides taxpayer-funded counselors for those who cannot control their online gaming or other Internet use. But the emergence of the smartphone as a mainstream, must-have device even for children is changing the government's focus to proactive measures from reactive.

South Korea's government is widening efforts to prevent Web and digital addiction in school-age children and preschoolers. Starting next year, South Korean children from the age 3 to 5 will be taught to protect themselves from overusing digital gadgets and the Internet.

Nearly 90 percent children from that age group will learn at kindergartens how to control their exposure to digital devices and the danger of staying online for long hours. The Ministry of Public Administration and Security is revising laws so that teaching the danger of Internet addiction becomes mandatory from pre-school institutions to high schools.

Kim, the kindergarten teacher, said educating children against digital and web addiction should start early because smartphones are their new toys.

From next year, her program for 3-year-olds will focus on introducing them to the positive activities they can do with the computers, such listening to music. Children aged 4 and 5, will learn the dangers of overuse and how to control their desire to use computers.

Programs also include making and learning the moves for "computer exercises" and singing songs with lyrics that instruct kids to close their eyes and stretch their bodies after playing computer games. They read fairy tales where a character falls prey to Internet addiction and learn alternative games they can play without computers or the Internet.

Kim said parents have to be involved in the education. Some of the children are even calling out parents to change lifestyles along with them.