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Wednesday, July 24, 2013

Alibaba Building China Delivery Net in Shift to Consumers

Story Originally Appeared in Bloomberg

In her apartment in Tibet, Lu Ping sits back and clicks an order for about 1,000 yuan ($161) of cosmetics. At the other end of China, online retailer Jian Weiqing receives the order in his office near a Shanghai airport and prepares Lu’s shipment, which will arrive in the distant province within four days.

Standing between the two is Alibaba Group Holding Ltd., the Chinese Internet juggernaut heading toward what analysts expect to be the biggest initial public offering since Facebook Inc. (FB)

After starting as a business-to-business marketplace where companies trade anything from shoelaces to steel, Alibaba has morphed into a far more consumer-focused operation. The company now gets the bulk of its sales and most of its growth selling to individuals across China, from villagers in places without supermarkets and malls to sophisticated consumers in Beijing and Shanghai seeking to avoid pollution and traffic.

“Foreign brands are just not that common here,” said Lu, who owns a hostel in Lhasa, the provincial capital of Tibet. “Online, I can get almost anything I want. And it’s so cheap” -- at least 20 percent less than department stores, she says.

Alibaba, which takes a cut of goods sold and charges retailers such as Jian to run ads on the site, says it generates about 70 percent of package deliveries in China. Consumers bought at least 1 trillion yuan in goods via Alibaba last year, a figure equivalent to almost 2 percent of China’s GDP.

Retail Engine

As Alibaba becomes a vital retail engine for China, founder Jack Ma understands he can’t keep growing without adequate distribution of the goods sold on his sites. So his next big initiative is the creation of a delivery network that can reach virtually any place in China within 24 hours.

To make that happen, Alibaba joined with five delivery companies and other partners to found Cainiao Internet Technology Ltd. Alibaba has said Cainiao will invest as much as 100 billion yuan within eight years to develop and manage a logistics network.

Though Cainiao has been vague about its plans, Cao Lei, a director at the China E-Business Research Center in Hangzhou, speculates that it will tap Alibaba’s data-crunching capabilities to help distribution companies optimize storage and delivery schedules and ensure their trucks take the cheapest and fastest routes.

“The smaller delivery companies have to join forces with Alibaba, because if they don’t they will be eliminated,” Cao said.

FedEx Rivals

Ma’s goal is to help Chinese delivery companies gain the kind of scale and efficiency enjoyed by United Parcel Service Inc. (UPS) and FedEx Corp. (FDX) in the U.S. In China, the American delivery giants are smaller than many domestic rivals because they mostly serve multinationals and charge higher prices.

“FedEx and UPS are very small players in China and cater to a different group of customers,” said Richard Tai, an analyst at consulting firm China Research & Intelligence in Shanghai.

Since Ma founded the company in his Hangzhou apartment in 1999 with only two dozen items for sale, he has expanded to 24,000 employees and marketplaces selling millions of products. The company said yesterday it was collaborating with Wasu Media Holding Co. on a set-top box connecting TVs to the Internet.

Alibaba’s earnings more than tripled to $669 million in the March quarter on sales that surged 71 percent to $1.4 billion. The company posted more revenue in the period than Yahoo! Inc. (YHOO), which owns a 24 percent stake in Alibaba, and its profit margin is wider than Apple Inc.’s.

$120 Billion IPO

Ma, whose fortune is estimated at $3.4 billion by the Bloomberg Billionaires Index, last year said he was considering an initial public offering. If it keeps its momentum, Alibaba’s operating profit could reach $4.3 billion this year, and $7.1 billion in 2014, according to Evercore Group LLC. An IPO could value Alibaba at $120 billion, Evercore predicts, which would make it the biggest tech IPO in history, eclipsing last year’s $104 billion pricetag for Facebook Inc.

Alibaba has no timetable for an IPO and hasn’t hired bankers, according to John Spelich, a spokesman for Alibaba in Hong Kong.

The company itself doesn’t sell merchandise; It provides a marketplace for online retailers that sell more than $3 billion in goods a day on its sites. The two most popular are Taobao Marketplace, which links individual buyers and sellers, and, which connects consumers to retail brands such as Microsoft Corp. (MSFT), Procter & Gamble Co. (PG), and Japanese clothing chain Uniqlo.

Millionaire E-Tailers

“Malls and department stores no longer attract me,” said Wang Lin, an English teacher in southwestern Sichuan province. “I just lie in bed comfortably, and I can shop around the country and even the world.”

Many Taobao store owners have become millionaires. Jian, who runs Chen Chen Cosmetic, the supplier of Lu Ping’s face creams, is one. The 38-year-old has expanded his online business from a one-man operation to a staff of nearly 50 in the past eight years. Last year, he sold more than 30 million yuan of beauty products.

“Jack Ma is really something,” said Jian. “Without him, my company wouldn’t exist.”

Ask Matt: Is Google a tech or ad company?

Story Originally Appeared in USA TODAY

USA TODAY markets reporter Matt Krantz answers a different reader question every weekday. To submit a question, e-mail Matt at

Q: Is Google an advertising company or a tech company?

A: It can be difficult sometimes to decide what label to put on a company. That's why investors need to follow the money.

While Google might get attention for some of its technology gadgets, including Google Glass, the company is by far an advertising company first and foremost. Google gets its money by tracking its users and using the data it collects to sell targeted ads to companies.

The numbers tell the story. Last year, Google hauled in total revenue of $50 billion. Of that, a majority, 60%, came from selling ads for the desktop search product, says researcher After Google's desktop search business, the next important was mobile search advertising, at 13%. That's not to mention the ad-driven YouTube business, at 8% of revenue.

The rest of Google's business drops off pretty quickly after the core advertising business. The next largest is Google's interest in Motorola cellular, which accounts for 11.8% of its business.

Analysts expect Google, which is an ad company today, to remain one. By 2015, Trefis estimates that 49% of the company's revenue will be from PC search ads, and 23% from mobile.

Monday, July 22, 2013

Yahoo nears Microsoft's '08 buyout bid price

Story Originally Appeared in USA TODAY

Microsoft's bid for Yahoo in 2008 isn't looking so crazy now.

Shares of Yahoo, the struggling Internet portal trying to regain relevance in an era of mobile communications and Internet search, have soared almost 50% this year to a stock price above $29. While the stock's runup looks impressive and is drawing praise for CEO Marissa Mayer's first year on the job, it is only getting Yahoo shares close to the $31 a share that Microsoft bid for the company in 2008 -- an offer that was rejected by Yahoo at the time as being too low.

So finally crossing that $31-a-share level will hardly be reason for Yahoo shareholders to celebrate.

"If there's this notion that somehow (the stock's recent rise) validates Yahoo's decision making over the past five to five-and-a-half years, emphatically say, it does not," says Scott Kessler, analyst at S&P Capital IQ.

Three reasons why:

• Yahoo's value is well below Microsoft's bid. Microsoft's $31 a share bid was actually worth $44.6 billion, which is nearly 40% higher than Yahoo's current $32.1 billion market value. Why the discrepancy? Yahoo has reduced its number of shares outstanding by selling part of its ownership of Chinese Web site Alibaba, says Martin Pyykkonen, analyst at Wedge Partners.

• Most of Yahoo's value has nothing to do with its business. Roughly 75% of Yahoo's market value is linked to the company's ownership stakes of Alibaba and Yahoo Japan, Pyykkonen says. The stock's moves are most closely linked to the fact Yahoo may be able to raise money from its stakes in those businesses, not because of its core business, he says.

• Investor pain in the meantime. Investors know money received now is worth more than dollars gained in the future. Even if Yahoo's market value were to soar 40% to match the $44.6 billion Microsoft bid, that would have been more than five years of painful waiting for investors, Kessler says. Meanwhile, Yahoo shares are essentially flat from the date of the buyout offer, while the Standard & Poor's 500 is up more than 25%.

"It's almost a different era for (Yahoo) versus 2008 so I don't think it can be said that the Board did the right thing by rejecting (Microsoft) at that time," Pyykkonen says. "Just because the stock is back up five (plus) years later doesn't vindicate that decision."

Friday, July 19, 2013

58 Analysis: Why investors still believe in Microsoft

Story Originally Appeared in USA TODAY

SEATTLE — With global PC sales in an accelerating slump, Microsoft on Thursday missed Wall Street's earning expectations for the software giant's fiscal fourth quarter.

Microsoft reported net income of $4.97 billion, or 59 cents per share, which contrasts a loss of $492 million in the same period a year ago, when the company wrote down $6 billion — roughly the entire value of its ill-fated 2007 purchase of digital advertising company aQuantive.

For the reporting period ending June 30, 2013, the company took a $900 million write-down for slashing the price of its Surface RT tablet.

Excluding the Surface charge, earnings were 66 cents per share, short of the 75 cents per share expected by analysts polled by FactSet. Revenue grew 10% to $19.9 billion, but that was also below the $20.7 million expected.

Shares fell more than 6% in after-hours trading to $33.03. They closed in regular trading at $35.44, down 30 cents.

Tech industry analysts say the jury is still out with respect to major moves triggered by CEO Steve Ballmer in recent months. In addition to discounting Surface, the company unveiled Xbox One and implemented a massive management restructuring.

Many of the big institutional investors who own large blocks of Microsoft shares are likely to stand pat, on the hopes that the release of Windows 8.1, the first major upgrade of Windows 8, will begin to undergird Ballmer's struggle to reposition Microsoft as a devices and services company.

"Microsoft is far from on death's door," says Gartner tech industry analyst David Cearley. "They are aggressively addressing a wide range of market challenges. Yes, they still have significant execution challenges, but, going forward, they remain a strong player in the market."

A top Microsoft European executive, Janet Gibbons, director of the company's U.K. and Ireland partner programs, told The Channel tech blog that Windows 8 hardware manufacturers are 18 months behind where Microsoft would like them to be.

Microsoft may be counting on a boost from the arrival of Intel's new Haswell chips.

"There could be a real difference as PCs and notebooks based on Intel's Haswell CPUs make their way further into the market," says Charles King, principal analyst at tech consultancy Pund-IT. "That silicon is made to support key features Windows 8 depends on, such as touch enablement and enhanced battery life, plus new voice and gesture-recognition capabilities."

Walls Street will keep a keen eye in the months ahead to gauge how well Windows 8.1 addresses concerns, and even outright resistance to the shift to a touch plus mouse-and-keyboard interface.

"If the redesign is successful, I expect we'll see a significant boost in new PC and
notebook sales," says King. "If it isn't, no amount of executive shuffling will be able
to save it."

Al Hilwa, application development software analyst at IDC, says Ballmer's reshuffling of the company's senior executives to make them more accountable for engineering decisions shows "the right priorities, but it will take time to translate organizational shift to products and services."

Hilwa is watching for tangible progress in the company's server and tools business, which continues to perform strongly. "The investments they are making in cloud data centers and the services they are rolling out today are very well targeted and extremely competitive," says Hilwa. "We have to wait and see how successful they are at blending these services in enterprise agreements for their large customers."

The biggest potential pitfall, moving forward? "Not moving fast enough to roll out new products," says Hilwa. "The biggest issue they have to tackle on the platform side is to what degree phone and tablet have to be converged for users and developers. Today this is a fragmented play."

Pund-IT's King says uninspired execution could yet trip up the company. "Microsoft's business and culture are so deeply wedded to a failing world-view that it is impossible for them to clearly perceive and execute a successful strategy," says King. "The innovations of Windows 8.1, which should have been incorporated in the original version, and the musical chairs-style reorg are both proof of that."

Google earnings clipped in mobile headwinds

Story Originally Appeared in USA TODAY

SAN FRANCISCO -- With Google's business under pressure from mobile advertising prices, CEO Larry Page talked up the potential for none other than the Internet giant's mobile businesses.

Google on Thursday missed Wall Street's expectations for both profit and revenue, sending shares 5% lower in after hours. Concerns continue about so-called cost-per-click prices that advertisers pay Google for Internet-search advertising.

That didn't stop the soft-spoken Page, who in May disclosed vocal chord paralysis issues, from touting the promise of Google's mobile strategy and teasing interest in a coming next-generation of mobile products.

"There's so much excitement around new devices today, and the potential for innovation is tremendous," Page said on a conference call with analysts, investors and members of the media. "I know you are all eagerly anticipating what Motorola is launching soon."

Google purchased Motorola Mobility in a $12.4 billion deal last year and has captured the attention of Silicon Valley watchers awaiting the debut of its Moto X phone. A rare U.S.-made device, Google's Moto X aims to compete with Apple's iPhone and Samsung's Galaxy lineup.

Google's average cost-per-click, which includes clicks related to ads served on Google sites and the sites of its network members, decreased about 6% in the quarter compared with a year ago. Analysts had predicted prices would drop about 3% in the period.

Enormous popularity for mobile computing devices has radically shifted the Internet business landscape in recent years. Companies such as Facebook, Microsoft and Zynga have sounded the alarm in shifting to a mobile focus to meet the rising demands from consumers. Microsoft has mostly missed the mobile bandwagon with low uptake for products running its operating system, while Zynga's CEO has stepped aside amid revenue declines.

"It's hard to fault them (Google), because everyone is still searching for their mobile business model. I think we've figured out that merely transplanting the desktop model to the mobile business is not working," said independent analyst Jonathan Yarmis.

Google reported second-quarter net income of $3.23 billion compared with $2.79 billion a year ago. Revenue in the quarter rose 19% to $14.1 billion.

Analysts were expecting Google to report net income of $3.6 billion on $14.41 billion in revenue for the quarter, according to the survey of estimates from Thomson Reuters.

Tuesday, July 16, 2013

Yahoo’s Mayer Impresses Investors More Than Advertisers

Originally Appeared in Bloomberg News

Yahoo! CEO Marissa Mayer speaks about the company's acquisition of Tumblr at a press conference in Times Square, New York, on May 20, 2013. Photographer: Mario Tama/Getty Images

Marissa Mayer, the Google Inc. (GOOG) executive brought in a year ago to restore Yahoo! Inc. (YHOO)’s lost luster, has revamped products, shaken up management and presided over a 75 percent rally in the stock.

Even so, Yahoo’s fifth chief executive officer in four years has struggled where it matters most: luring advertisers whose spending will put revenue back on a growth path.

While Yahoo’s shares have soared in the past year on optimism over Mayer’s turnaround plan and the value of its Asian assets, analysts are bracing for another quarter of stagnant sales when the company reports earnings today.

That’s because Mayer so far hasn’t convinced advertisers to spend more money to reach users of the largest U.S. Web portal. Marketers, who continue to shift online-ad budgets to rivals Google and Facebook Inc. (FB), say Mayer’s strategy of buying startups and lavishing perks on employees has ignored the needs of advertisers contributing the bulk of Yahoo’s sales.

“As they continue to acquire more products, how are they going to bring it together?” said Marla Kaplowitz, CEO of MEC North America, a media agency that has worked with Yahoo advertisers such as Visa Inc. (V) and Viacom Inc. (VIAB)’s Paramount Pictures. “Everyone is trying to figure out, how does it all come together and what do they truly stand for?”

Yahoo is projected to report sales, minus revenue passed on to partner sites, of $1.08 billion, in line with results from a year ago, according to the average of analysts’ estimates compiled by Bloomberg. First-quarter revenue was also little changed from a year earlier.
Share Rally

Sara Gorman, a spokeswoman for Sunnyvale, California-based Yahoo, declined to comment on advertiser spending.

Since Mayer’s first day as CEO on July 17, 2012, Yahoo has surged 75 percent, a better run than 93 percent of companies in the Standard & Poor’s 500 Index.

Yahoo’s stock has rallied more than it had during any of Mayer’s recent predecessors in their inaugural years. Carol Bartz presided over a 38 percent rise in 2009, her first year; shares fell 27 percent in Terry Semel’s first year, 2001; and co-founder Jerry Yang’s 2007 debut as CEO saw the stock slide 18 percent.

Still, most of Yahoo’s gains in the past year were driven by the appreciation of its stakes in Alibaba Group Holding Ltd. and Yahoo Japan Corp. (4689), according to Mark Mahaney, an analyst at RBC Capital Markets in San Francisco.

“The vast majority of the move in the stock is due to improved perception of the value of Yahoo’s stakes in Asia,” said Mahaney, who rates the shares outperform, the equivalent of a buy. Mayer “has been a small part of the rise,” he said.
Shopping Spree

After selling half its stake in Alibaba last year, Yahoo currently owns 23 percent of the Hangzhou, China-based online marketplace, which could hold an IPO in Hong Kong this year. Alibaba’s value probably doubled in the past year to about $80 billion, according to Brian Weiser, an analyst at Pivotal Research Group LLC.

Emboldened by proceeds of the Alibaba sale, Mayer embarked on a shopping spree that comprised at least 17 companies, including her $1.1 billion purchase of blogging platform Tumblr Inc., as well as mobile-application makers Stamped Inc. and Jybe Inc. and Summly Ltd., the news-reading application created by teenager Nick D’Aloisio. Earlier this month, Yahoo paid about $70 million for Xobni Corp., a maker of contact-management software, two people said at the time.

The acquisitions have created confusion for some marketers, who are still unclear about whether to shift their spending to ads on Tumblr and Yahoo’s other new properties, said Rob Norman, chief digital officer of media agency GroupM, which works with Yahoo advertisers including Volkswagen AG. GroupM is the media planning and buying division of WPP Plc, which also owns MEC.
Ad Strategy

“The acquisition strategy is either not especially clever or too clever for me,” Norman wrote in an e-mail. “I am negative on Tumblr, as I don’t believe it’s truly social.”

Mayer discussed a restructuring of the sales staff on a conference call with analysts in January. The initiative, led by Chief Operating Officer Henrique de Castro, will create sales teams that serve all clients in a particular industry, such as consumer-packaged goods, Mayer said.

“Customers felt it was sometimes confusing and cumbersome to do business with us,” Mayer said in January. “Looking at our sales organization through the eyes of our clients, we aligned into a solutions focused team that offers a single point of contact for each customer.”
Investor Doubt

While Mayer takes time to hone her pitch to advertisers, Google and Facebook are winning Yahoo’s business. Yahoo’s share of the $17.5 billion market for display ads, its core business, will slip to 7.9 percent in 2013 from 9.2 percent last year, estimates researcher EMarketer Inc. Google will climb almost three percentage points to 18 percent, while Facebook will increase about two points to 17 percent, EMarketer said.

Part of the advantage those two rivals have accumulated is in mobile ads, where Yahoo has yet to create a compelling offering to marketers, said Clark Fredricksen, vice president at New York-based EMarketer.

“Yahoo appears to have a ways to go before it can stand side by side with Google and Facebook in the mobile space,” Fredricksen said in an interview.

Skepticism of Mayer’s strategy is also reflected in the options market, where investors are betting that Yahoo shares are more likely to decline in the coming months. Puts protecting against a 10 percent drop in Yahoo shares cost 3.67 points more than calls betting on a 10 percent gain, according to one-month data compiled by Bloomberg.

“Increasingly, investors are going to want to see some top-line growth,” said Kevin Stadtler, president of Fort Worth, Texas-based Stadtler Capital Management LLC, who manages $16.3 million in assets, including Yahoo shares. “You’ve acquired a number of properties -- let’s see some revenue growth.”

Ask Matt: Is Google stock unstoppable?

Originally Appeared in USA TODAY

USA TODAY markets reporter Matt Krantz answers a different reader question every weekday. To submit a question, e-mail Matt at

Q: Is Google and its stock unstoppable?

A: Apple stock is dead money. Yahoo is trying to get its mojo back. And Facebook is struggling with investors.

While the other titans of mobile communication and the Internet labor, investors can't get enough of Google. The company has effectively leveraged its dominance in online search to push into the faster-growing and emerging area of mobile access.

Google provides the Android operating system to smartphone makers for free, creating a vehicle that allows Google to bundle its search engine and get a leg up in mobile search.

Google's move into mobility isn't being lost on investors. Google's stock is rising almost as quickly as Apple's is falling. But even with Google's 31% rise this year to $924.69 a share, the stock is still rated "outperform" by the average Wall Street analyst. Analysts are calling for the company's earnings to grow by nearly 16% this year.

But it's often when companies seem unstoppable — as Google does now — that something unforeseen can hit. At a valuation of 28 times its trailing earnings, Google is not only more pricey than the market but pricier than some of its top rivals: Microsoft at 18 and Apple at 10.

Meanwhile, the company faces regulatory risk as governments step up investigations into the company's business practices.

Tuesday, July 09, 2013

A New Tool Aims to Help Facebook Users Dig Deep

Originally Appeared in The New York Times

MENLO PARK, Calif. — Facebook is an excellent tool for certain kinds of social interaction. With a couple of clicks, you can share a cute photo of your newborn baby. You can pop over to the page of a college buddy and find out where he lives now and whether he is a fan of “Mad Men.”

 But just try finding that photo of Mom and Dad in front of the Eiffel Tower during their 2008 trip to Paris, or the name of that lovely bistro nearby that they mentioned in a status update. Odds are, you would have to plow through a lot of old posts and photos to dig out that information, if you could find it at all.

Now, Facebook is trying to make it easier to find that lost photo or restaurant recommendation and unearth other information buried within your social network with a tool it calls Graph Search.

On Monday, the company will roll out the feature to its several hundred million users in the United States and to others who use the American English version of the site. Other languages will follow.

Developing a sophisticated search feature is vital to Facebook’s long-term success, both to deepen users’ engagement and to make it more appealing to advertisers.

Experts say that Facebook’s technical achievement so far is impressive. Privacy could still be an issue, however, as more user data becomes easily accessible. Also, the feature is dependent on Facebook users volunteering more information about their likes and dislikes.

Ever since Facebook released an early version of the tool in January, the development team has been observing and listening to millions of testers and making improvements. “We launched it early, when it still was in a pretty raw state,” Lars Rasmussen, the engineering director of the project, acknowledged in a recent interview.

Early on, Mr. Rasmussen said, users had trouble even finding the search box, which was blue and melded into the border at the top of every Facebook page. The team eventually made the box white and used words to explicitly describe its purpose.

The tool also has struggled to understand how people actually use language.

For example, typing in “surfers who live in Santa Cruz” confounded the search engine, which was tuned to recognize the phrase “people who like to surf” but not synonyms like surfers or “people who like surfing,” said Loren Cheng, who leads the team of linguists who are working to refine the tool’s natural language capabilities.

The engineers also had to adapt the algorithms to consider the many ways that people express interest in a topic.

For example, Mr. Rasmussen, a ballet fan, said that when he looked for “friends who like ballet,” only two popped up. But many more friends had liked the pages of individual ballet companies. So the search engine now takes into account related pages when assessing whether users like a topic.

Facebook’s Graph Search is still a work in progress, as company officials are quick to acknowledge. Its recognition of synonyms and related topics is spotty. It cannot yet find information in status updates, a top request from users. It does not yet incorporate information from third-party apps like Yelp or Instagram, which is owned by Facebook. And the new search tool is not available on Facebook’s mobile apps, which are increasingly the way that people use the service.

But Facebook believes it is now good enough for wide release. And despite the tool’s limitations, technologists praised the company’s work.

“There is a near infinite variety of ways to say anything in English or in any other language,” said Nick Cassimatis, an associate professor at Rensselaer Polytechnic Institute and a co-founder of SkyPhrase, a start-up working on similar natural-language search technology. “They are trying to memorize all the ways of saying something.”

Unlike Google’s familiar search engine, which typically takes the keywords entered into a search box and matches them to the most relevant Web pages that contain them, Facebook’s search looks primarily at structured data.

That means the company analyzes the virtual check boxes that people fill out on the site, like movie pages they have liked, restaurants they have checked into, the city they live in and their relationship status.

 That creates particular challenges.

“We don’t go through and ‘like’ all the things that we really like,” said Danny Sullivan, founding editor of Search Engine Land and a longtime observer of the industry. “And if you don’t do that, the database is minimal.”

Privacy is another complication.

The company promises that Graph Search will show only information that the searcher would normally be allowed to see under the privacy settings defined by the person who posted the data. So a search for Christians in San Francisco who like to knit won’t pull up everyone who fits that profile, only those who have decided to publicly disclose their religion, love of knitting and location.

As Graph Search becomes widely available, Facebook users might be surprised at what information about themselves shows up in searches that others do, especially if old items were posted with looser privacy restrictions.

Finally, the company must deal with the flood of new data coming in. It said its 1.1 billion global users posted 3.3 million new items every minute in May.

If the company does make it easy for users to sift through all of that information, it could open a new era in search.

Google and specialized search sites present users with information from strangers, Mr. Sullivan said. Facebook “is potentially promising us the ability to search the knowledge of our friends.”

Mr. Cheng from the linguistics team said that based on Facebook’s current tests with about 20 million people, the most frequent queries are people searches, as users seek friends of friends that they might have met, potential dates and people who live in a particular city. Photo searches came in second, followed by recommendations for restaurants and bars, hotels, stores and gyms.

This year, Facebook intends to expand the search tool to include results based on scans of the actual words in status updates as well as data from third-party applications. Graph Search will also be added to Facebook’s mobile apps. The company is even experimenting with predictions, suggesting movies and books a person might like based on what else they like and what their friends like.

Facebook hopes that an ever-improving search tool will prompt users to spend more time on the service and share more information about themselves by, say, checking in to restaurants and liking more pages.

That would have myriad benefits for Facebook’s business. More detailed dossiers of its users would allow the company to better target advertising to people receptive to a marketer’s message. And since people tend to trust recommendations from their friends, the companies that pop up in search results could find it more appealing to advertise to searchers.

For Facebook’s users, a powerful search tool makes the service a better place to get information and connect with others.

“Finding people, finding activities, finding recommendations is part of what makes Facebook useful,” said Colin Sebastian, an analyst at R.W. Baird & Company. The problem, he said, “is that there hasn’t been a way for users to access that data.”

Monday, July 01, 2013

Secret court lifts veil, slightly, on Google, Microsoft lawsuits

Originally Appeared on CNET

A Foreign Intelligence Surveillance Court judge breaks with tradition by taking a tiny step toward more openness in lawsuits brought by Google and Microsoft. They're trying to clear their names.

 The most secretive court in the nation, which has been criticized for authorizing domestic surveillance by the National Security Agency, has taken a tiny step toward openness in lawsuits brought by Google and Microsoft.

CNET has learned that Reggie Walton, the presiding judge of the Foreign Intelligence Surveillance Court, told the Obama administration last week that -- barring any objections from the government -- he would take the unusual step of disclosing procedural information about the Internet companies' litigation.

The Department of Justice responded yesterday by saying it had no objections. Neither Google nor Microsoft's legal briefs "contain information that is now classified, nor information that should be held under seal," the department said in a response submitted by John Carlin, the acting assistant attorney general for national security.

Edward Snowden, the former NSA contractor now staying in the transit area of Moscow's Sheremetyevo Airpot, has leaked a series of classified documents that outlined how the spy agency vacuums up Americans' confidential communications. The disclosures have roiled Washington officialdom and prompted a high-level diplomatic tussle over whether or not Russia will deport Snowden to face criminal charges under the Espionage Act.

Google, Apple, Yahoo, Microsoft, Facebook, and other Internet companies were left reeling after a pair of articles earlier this month, based on one of Snowden's disclosures, alleged that they provided the NSA with "direct access" to their servers through a so-called PRISM program.

 By the next day, however, CNET reported that was incorrect, and the Washington Post backtracked from its original story on PRISM, eventually concluding there is no evidence that "the privacy of any American was illegally or improperly invaded." Google's filing before the surveillance court said the initial news coverage was "misleading," and Microsoft's lawyers called it "inaccurate."

The two companies, which have flatly denied providing any government agency with direct access to their servers, filed the lawsuits to try to clear their names. They say they respond to government requests for individual account data only when they're legally compelled to do so -- in cases ranging from kidnapping to missing persons to terrorist investigations -- and want permission to divulge more information publicly.

Microsoft says it received a combined total of "between 6,000 and 7,000" orders from federal, state, and local government agencies for "between 31,000 and 32,000 consumer accounts" during the six months that ended in December 2012. Facebook's total: up to 10,000 requests for up to 19,000 accounts. Apple's total: up to 5,000 requests for up to 10,000 accounts or devices. Yahoo disclosed receiving up to 13,000 requests, but did not say how many user accounts were swept in. Google has asked for permission to be far more specific.

Walton, the FISC's presiding judge, gave the Justice Department until July 9 to respond to the requests from Google and Microsoft to disclose summary statistics about orders received under Section 702 of the FISA Amendments Act, which became look in 2008. The pair of companies have until July 16 to submit their replies.

Section 702 requires that the government obtain the secret Foreign Intelligence Surveillance Court's approval of "targeting" and "minimization" procedures, and that the court review the agencies' certification describing how proposed surveillance techniques will comply with the law. Judges must consider whether the targeting procedures are "reasonably designed" to exclude Americans and purely domestic surveillance.

The Justice Department had the option of objecting to allowing this phase of the litigation to take place publicly by claiming either of the company's requests "contains classified information" or "information that is or should be sealed."

Walton defended the court last week against charges it allowed bulk surveillance by the NSA with limited oversight. In a statement to Reuters, he said: "The perception that the court is a rubber stamp is absolutely false. There is a rigorous review process of applications submitted by the executive branch, spearheaded initially by five judicial branch lawyers who are national security experts, and then by the judges, to ensure that the court's authorizations comport with what the applicable statutes authorize."

RIP Google Reader

Originally Appeared on CNET

Today, Google's RSS reader is kaput. Maybe most don't notice, maybe some are relieved not to have another box with 396,955,428 unread items. But the loss casts a shadow over a stalwart contingent.

Google Reader is no more.

The reason for that is directly correlated to the fact its passing will go unnoticed by most people who ever set up the service to funnel RSS feeds from Web sites, news blogs, and other publishers. For them, if there is any reaction, it may be the heart-lightening realization that another box cluttered with neglected items is neatly wiped away.

But still, this sunset leaves an impassioned cohort of Google Reader fans in the dark, nearly eight years after the service's dawn.

"This is a sad day," CNET reader trhoads82 wrote in March when Google announced the coming demise for Reader. "I won't switch to anything else. It just means I won't take the time to go to each site to read my content each day."

Here's how Google had heralded the birth of the service in 2005.

"The amount of information on the Web is rapidly increasing," Google said on the day of the site's launch. "Google Reader helps you keep up with it all by organizing and managing all the content you're interested in. Instead of continuously checking your favorite sites for updates, you can let Google Reader do it for you."

 It embodied Google's stated mission of organizing the world's information, and it matured into one of the most popular ways of tracking a swath of sites. It was also an early experiment for Google in social networking.

But Google Reader's relevance to the Web-going public eroded with the rising tide of Facebook and Twitter. That tidal shift to other social-networking sites hurt Google Reader, but not as much as Google's own reaction to the networking competition.

When Google instilled changes to Google Reader sharing in 2011 to encourage more Google+ usage, an incensed cohort of ardent Reader fans protested. As Google+ became the golden child doted upon by the parent, that fervent Google Reader usership recognized the beginning of the end.

Today that end becomes reality, and with echoes across the tech firmament. Yahoo is shutting down its RSS Alerts today too, according to a post of its official Tumblr Friday, replacing that service with e-mail alerts.

Meanwhile, a couple one-time titans are eager to pick up what Google is casting aside. Digg has pushed through a revamp to cater to Google Reader users in a couple months. Feedly has been refreshing its site, now compatible with all major browsers, with a new interface that doesn't require plug-ins or browser extensions, though first it had to wean itself off Google's servers. And AOL last month launched its own offering.

And plenty of other alternatives are available.

It's the opposite phenomenon of a behemoth like Google entering a space and sucking all the oxygen out of the room. Google leaving means the fires of competitors can burn brighter, at least for those who are left looking for somewhere to warm up.

N.J.'s largest newspaper says closure looms

Originally Appeared in USA TODAY

NEWARK, N.J. (AP) — The owners of The Star-Ledger plan to close New Jersey's largest newspaper by year's end if its production unions don't make concessions in contract negotiations, the publisher said Wednesday.

In a letter to staff, publisher Richard Vezza said the company felt "pushed into a corner" by the unions, whose contracts expire in July. Vezza said the unions have until Sept. 27 to make compromises or else the paper will shut down.

"This is not a threat. This is reality," Vezza said in an interview with The Associated Press.

The paper's website,, is owned by a separate company and will continue to publish "no matter what happens with the Ledger," Vezza said.

The unions issued a joint statement saying their studies of the paper's ad revenues came up with different figures than the company's, and accusing the Ledger of trying to force the press workers, drivers and other production employees to accept a steep wage cut.

"Vezza's announcement that he will cease publication unless a settlement is reached with all the unions is another sad and pathetic attempt to pound all of our union brothers and sisters into a state of submission," said Ed Shown, president of the Council of Star-Ledger Unions and one of the Teamsters locals.

Vezza said the unions had shown little interest in "meaningful negotiations." Shown said the Ledger demanded a 55% cut in the entire wage package, which he said showed a lack of meaningful negotiation on the part of the company.

He said the unions are willing to "do whatever we have to so that the Star-Ledger may remain a thriving newspaper in these challenging economic times."

In his letter, Vezza said the paper lost $19.8 million last year, and is on track to do the same in 2013. The Star-Ledger lost $12 million in 2011.

In January, the paper laid off 34 employees from its newsroom, which is not unionized. In recent years, wages and benefits have been cut and staff members have been forced to take unpaid furlough days.

Vezza said the paper asked the unions to negotiate in December over the possibility of outsourcing production, a move he said could save $9 million a year. He said outsourcing without a union agreement would likely lead to a protracted court fight.

Shown said the unions do not believe the company was ever serious about outsourcing production but still wants the $9 million the company says it would save by doing so.

"This is a very serious and painful situation," Vezza told the AP. "It is certainly something we wouldn't have done unless we felt that we really sort of had our backs to the wall on this."

This is not the first time the Star-Ledger has threatened to shut down. In 2008, the then-publisher said the paper would cease to print if union concessions weren't met. The two sides reached an agreement a few months later.

"I am optimistic that we're going to be able to strike a deal with the union," Vezza said.

Shown said the unions "look forward to settling their differences with the company so the Star-Ledger will remain a vital resource providing valuable news coverage to our state."

The Star-Ledger is part of Advance Publications, a privately held company owned by the Newhouse family.

Unlike some of its sister papers, the Star-Ledger has no plans to reduce its print edition to three days a week, Vezza said. The company has said the market is too competitive to make that a cost-cutting option.

The Star-Ledger has 771 employees, 240 on the production staff and 170 in the newsroom.