Microsoft Risks Margins as Office Unit Fights Google 

Bloomberg News

Microsoft Corp. President Stephen Elop is preparing for the biggest shakeup to the $19 billion Office business in a decade as the company races Google Inc. to sell Internet-based programs.

Two years into his career as head of Microsoft’s business software unit, Elop says cloud computing and social-networking sites have created a “constructive disruption” that could be more of an opportunity than a threat. Office 2010, due by June, will include a free Web-based version for the first time, matching similar software from Google. Future updates may add Twitter-like functions that allow users to post short messages.

The dilemma for Elop, 46, is how to embrace Web-based software while protecting his unit’s 64 percent profit margin. Under the cloud-computing model, Microsoft would store Office programs on its own servers and deliver them to customers online, which costs the company more than supplying software installed on computers. Elop says the shift will mean businesses actually end up spending more money with Microsoft.

“In that cloud environment, we are not only selling them software but we are also saying, ‘We’ll take care of your networking, your hardware your operations, your customer support,’” Elop said in an interview. “We’re doing much more work for the customer. What that does is increases revenue and allows us to participate in more profit.”

Elop’s Office unit is Microsoft’s biggest business, accounting for a third of the company’s $58.4 billion in sales last fiscal year. The shift to Internet-based versions of Office may cut margins by 5 to 10 percentage points, said Matt Rosoff, an analyst at Directions on Microsoft in Kirkland, Washington.

‘Have to Do Something’

“Elop’s challenge is to move carefully and not undercut the traditional software business,” Rosoff said. “You don’t want to give everybody free Office over the Web because that jeopardizes a highly profitable business, but you have to do something.”

Microsoft rose 24 cents to $28.59 at 4 p.m. New York time on the Nasdaq Stock Market. After gaining 57 percent last year, the shares have lost 6.2 percent in 2010.

Microsoft’s Office division, which dominates the word- processing, spreadsheet and presentation management software market, reported a 2.8 percent drop in revenue last quarter, with sales to businesses falling 6 percent. Consumer revenue rose 12 percent -- a slower pace than personal-computer sales, the Redmond, Washington-based company said.

Free Version

Microsoft is projecting that consumer and small-business sales will pick up with the release of Office 2010. The program will offer Web features, such as the ability to collaborate and share documents over the Internet. There also will be a free version included on some PCs and a student offer that’s two- thirds the price of the current product, which starts at $149.

That will attract consumers who might otherwise be reluctant to upgrade, Elop said. A record 4.5 million people have downloaded a test version of Office 2010, said Chris Capossela, a senior vice president who works for Elop.

The U.S. Olympic Committee used Office 2010’s SharePoint program to set up a Web site for reporters covering the Winter Games in Vancouver, allowing them to access the latest information on hometown athletes and follow their Twitter feeds.

Dell Inc. plans to install the new Office on at least 25,000 of its employees’ computers by year-end. It will rely on the software to help engineers and sales teams share notes and collaborate on projects over the Web, said Tom Piegat, a manager in Round Rock, Texas-based Dell’s information-technology department. Microsoft is taking the right steps to let employees work, save and share on the Internet, he said.

‘Jury Is Still Out’

“Whether that promise gets completely fulfilled with Office 2010, I’m not sure about that -- the jury is still out,” Piegat said. “But the building blocks are there.”

Office’s Web-based features are unlikely to generate significant additional revenue for the next few years and investors may not like the narrowing profit margins that result, said Heather Bellini, an analyst at ISI Group in New York.

“It’s a market they need to be involved in -- if that’s the way the industry is going, you don’t want customers to rip out Microsoft and go to a Google solution,” Bellini said. “But I question whether we’ll be able to have a company where the stock will go up even though margins are going down.”

Margins Shrink

Microsoft is selling more of its software as a service, which may hurt profit margins, said Bellini, who hasn’t yet calculated by how much. Besides the Web-based Office project, the company started charging this year for its Azure cloud- computing services, which store and run programs on behalf of customers.

Gross margin, the percentage of sales remaining after the cost of making the product, was 79 percent in the fiscal year that ended June 30. Ten years earlier, it was 86 percent, according to data compiled by Bloomberg.

Elop is playing catch-up in cloud software. Companies like Google and Salesforce.com Inc. have more experience with Web- based programs. Even so, Microsoft has an edge over Google in selling to large companies, Rosoff said.

Google, based in Mountain View, California, offers Internet-based word-processing and spreadsheet programs for free to consumers. It charges $50 a year per user for businesses.

“We welcome Microsoft’s movement to the cloud,” Google said in a statement. “Choice is good for users, and their direction further validates that the future of computing is in the cloud.”

In October, the Los Angeles City Council voted to have Google manage e-mail for city workers. Rexel SA, the world’s largest distributor of electrical equipment, also considered using Google -- until Microsoft cut the price of its e-mail software by 30 percent.

‘Pushing the Envelope’

“That’s going to be the challenge for Elop,” said David Smith, an analyst at Gartner Inc. in Stamford, Connecticut. “He is going to be competing more and more with things that are free or lower cost.”

Sales of cloud-computing services worldwide rose an estimated 21 percent to $56.3 billion last year, according to Gartner. By 2013, that number will hit $150.1 billion. The shift is of the same magnitude as the move to graphical computer software and the advent of the Internet, Elop said.

Elop, who was chief executive officer at Web-video pioneer Macromedia Inc., has experience building successful businesses out of Internet programs. At Macromedia, he helped make Dreamweaver the top Web-page authoring program, edging out Microsoft’s FrontPage. Macromedia also developed Flash, the Internet’s most popular video and animation software.

Elop said Microsoft CEO Steve Ballmer hired him in part because he had competed with the company for most of his life. Now that he’s at Microsoft, he’s championing the idea of making software that’s more compatible with rival products.

Rival Browsers

Elop wants to make sure that Office’s Web applications work on Mozilla Corp.’s Firefox and Apple Inc.’s Safari browsers, as well as Microsoft’s own Internet Explorer, Capossela said.

Elop’s interest in competing products impressed Capossela, who interviewed him for his current job without realizing he was screening his own boss. Elop walked into the Sunday morning interview at the Woodmark Hotel in Kirkland, Washington, with an iPhone, BlackBerry and Windows Mobile phone holstered to his belt, Capossela said. He pulled out each one to talk about them. Elop discussed his experience installing Microsoft’s Windows Vista on an Apple Macintosh computer.

He arrived as an outsider at the company, at a time when all the other product units were led by executives who had been at Microsoft more than a decade. Elop spent his initial few months listening to a team he inherited from 27-year Microsoft veteran Jeff Raikes, Capossela said. After about a year, Elop started talking about changing Microsoft’s approach to the market.

“He did a good job of articulating that we needed to be leaders in this disruption even though that can be scary,” Capossela said. “We can either worry about a disruption happening to us or we can do it in a way that’s constructive.”

Hackers Find New Paths Through Facebook And Social Media
Reuters

A new type of computer virus is known to have breached almost 75,000 computers in 2,500 organizations around the world, including user accounts of popular social network websites, according Internet security firm NetWitness.

The latest virus -- known as "Kneber botnet" -- gathers login credentials to online financial systems, social networking sites and email systems from infested computers and reports the information back to hackers, NetWitness said in a statement.

A botnet is an army of infected computers that hackers can control from a central machine."

The company said the attack was first discovered in January during a routine deployment of NetWitness software.

Further investigation by the Herndon, Virginia-based software security firm revealed that many commercial and government systems were compromised, including 68,000 corporate login credentials and access to email systems, online banking sites, Yahoo, Hotmail and social networks such as Facebook.

"Conventional malware protection and signature-based intrusion detection systems are, by definition, inadequate for addressing Kneber or most other advanced threats," Chief Executive Amit Yoran said in a statement.

Facebook and Social Media Hype Spinning Out Of Control

Don’t Believe The Hype on Social Media

A new article in the San Francisco Chronicle claims that Facebook is directing more web traffic than Google. 

We think this is sheer brazen hogwash. 

Social Media PR Machine

Hordes of PR pieces are being scattershot all over the web in an effort to convince us that if we have a website, then we MUST get involved in social media or we're missing the big boat. Don't bet on it! 

Headlines Like:  Facebook Driving More Web Traffic Than Google Are False
On its own merits, this claim is outrageous. And if you stop to consider the entire Google package: Google Search, Google News, Google Maps, YouTube, Blogger, and the brand new Google Buzz (Google's own social networking site), it should be mathematically evident that Facebook is not in the same league when it comes to driving traffic to websites.

Social Media Has Its Place in Promoting and Extending Brand Awareness 

By all means, if you have a website and a product or service to offer, you should make yourself a Facebook page, create a Twitter presence, maybe even try the new Buzz. But do not be fooled into emptying your wallet and investing a lot of your time on these sites. They're fun and addictive but, so far, the numbers do not necessarily add up to a good ROI.

Social Media Is Still Not the Primary Driver of Website Traffic
As of March 2009, Google was averaging nearly 300 Million direct searches per day. Currently, Facebook has only 100 Million total users!
 

Clearly, organic search is still the number one way users get connected to websites, and the way to get them to your site is through content development and content support through such mediums as video and blogging.

Here is the SF Chronicle article we mentioned at the top. Take it with a grain of salt:
 

Facebook directs more online users than Google
San Francisco Chronicle 

A big part of the Facebook experience is how friends and family share Web links to interesting news stories, photos, videos and Internet sites.

This "friend-casting" of information has helped propel Facebook into a major force in directing traffic around the Web.

According to Web measurement firm Compete Inc., Facebook has passed search-engine giant Google to become the top source for traffic to major portals like Yahoo and MSN, and is among the leaders for other types of sites.

This trend is shifting the way Web site operators approach online marketing, even as Google takes steps to move into the social-media world.

Some experts say social media could become the Internet's next search engine.

"People are spending less time navigating the Internet on their own and are now navigating the Internet based on their friends' recommendations or their friends' activities," said Dave Yovanno, chief executive of Gigya Inc., a Palo Alto firm that offers social-media services. "That's one of the big trends we started picking up on probably four or five months ago."

For years, Web content creators had to worry whether they had the proper level of search-engine optimization to make sure search engines listed them among the top results. Now, they have to consider what companies like Gigya offer - social-media optimization.

"Marketers must focus on social marketing in addition to traditional search, as customers have a multi-pronged way of finding information," said Jeremiah Owyang, a Web strategist for the Altimeter Group, a San Mateo consulting firm with clients like Gigya. "The clear-cut channels of yesteryear are now an intricate set of connections."

Using a snapshot of Web traffic from December, Compete's director of online media and search, Jessica Ong, found that 15 percent of traffic to major Web portals like Yahoo, MSN and AOL came from Facebook and MySpace. The lion's share of that traffic, 13 percent came from Facebook.

Google, which has profited handsomely from directing Web surfers to their destinations during the past decade, was third with 7 percent, just behind e-commerce site eBay, which had 7.61 percent. MySpace was fourth with just under 2 percent.
 

Surprise gain

The numbers proved eye-opening because Google used to dominate most Web-referral categories. "I was surprised to see Facebook has become No. 1," Ong said.

In other categories, Compete's data showed Mountain View's Google still on top, but Palo Alto's Facebook was not far behind. For example, Google accounted for 21.3 percent of referrals to sites catering to movie fans, but Facebook was second with 12.4 percent. And in a video category, Google - which owns YouTube - was first with 22.9 percent, but Facebook was next at 12.7 percent.

Facebook's meteoric growth as a Web destination was a factor. Facebook says it has 400 million active members, including about 225 million added in just the past 12 months. Its size now rivals that of major Web portals and its demographics mirror those of the Internet in general, Ong said.

"Putting all this information together, we can say that Facebook has become an integral part of the consumer Web experience, similar to how portals like Yahoo and MSN are part of most consumers' online sessions," Ong said. "So the message for the advertising industry is that more serious attention needs to be paid to social-networking sites like Facebook, and advertisers need to figure out how to leverage this traffic."
 

TurboTax gamble

One of Gigya's clients is financial software maker Intuit Inc. Seth Greenberg, Intuit's director of national media and digital marketing, said the company is betting on social media to draw customers to its TurboTax Web site this year. The tax preparation program generates about $1 billion in revenue in the 10 t0 15 weeks leading to April 15.

Half of TurboTax's 20 million users are on Facebook and each has an average of 150 friends. Intuit is using social media to generate more buzz about the program through the sharing of product reviews and answers to tax preparation questions.

Greenberg coined the phrase "friend-casting" to describe how Intuit is using social media.

"We actually want our customers to be our best sales force, not us," Greenberg said. "Enabling our 20 million-customer base to be a word-of-mouth army for us is much more interesting."
Strong influence

Although methods such as paid search, Web display ads and TV commercials still reach a larger audience, the "influence" tapped in social media "is a heck of a lot stronger than it is with traditional advertising," he said.

David Berkowitz, director of emerging media and client strategy for the digital marketing firm 360i of New York, said the importance of search engines isn't going away.

"But there's always been one downside to search," he said. "Consumers only spend about 5 percent of their time online searching and the other 95 percent of the time at the destination. Social media is quickly accounting for a large percentage of that 95 percent. Google's biggest acquisitions, DoubleClick and YouTube, have been all about playing a big role in the rest of consumers' Web usage."

He noted that last week Google purchased San Francisco's Aardvark, a social-media search engine for questions and answers, and then unveiled Google Buzz, which allows Gmail users to post updates, videos, photos and links, Facebook-style.

"Mobile will be another new source for search, and some of that will be incremental rather than cannibalistic," he said.

"But social media's just finding its feet and the business models are just starting to emerge. And they're evolving quickly."

Google Admits Buzz Testing Sucked and They are 'Very Very Sorry'

Gizmodo

Are Larry and Sergey Buzzed?

Google has admitted that their Buzz testing process was equivalent to mine: Click enable, then disable it ninety seconds later. They said to the BBC that their testing sucked donkey balls, which is why many people hate it. The excuse:

    We're very early in this space. This was one of our first big attempts. We've been testing Buzz internally at Google for a while. Of course, getting feedback from 20,000 Googlers isn't quite the same as letting Gmail users play with Buzz in the wild. If it becomes clear that people don't think we've done enough, we'll make more changes.

That's what Todd Jackson, Buzz product manager, told BBC News. Google only tested this thing internally, and didn't put the service through the Google Trusted Tester program, like they have done with other services in the past. He also admitted that tens of millions of Buzz users were "rightfully upset" and that Google was "very, very sorry." Todd's right, but I don't think all those "tens of millions of Buzz" ex-users would care about the too late apologies. They do care about the privacy problems and the inbox spamming.

Would these users give Google another chance? I doubt it would be soon. And, personally, I doubt there's enough interest for yet another Facebookish Tumblred Twitting clusterfuckassered online service.

Microsoft to pull Facebook, MySpace into Outlook

Office Productivity Meet Outlook "Time Suck"

SEATTLE (AP) - Microsoft Corp. is taking another step toward turning Outlook, its desktop e-mail program, into a hub for information from popular social networking sites such as Facebook and MySpace.

On Wednesday, Microsoft is releasing a "beta" test version of the Outlook Social Connector. The add-on software, which was first discussed last November, adds a new pane to the main e-mail reading screen on Outlook. When a user clicks to read an e-mail message, the new pane fills up with the sender's most recent social-networking activities. Those could include the addition of a professional contact on LinkedIn or a "what I'm doing now" status update from Facebook.

Microsoft has a mixed record when it comes to Web trends. The company's free Hotmail and Windows Live Messenger programs are widely used, but its Windows Live blog/social network didn't pick up much steam in the face of competition from Facebook. In this case, a small startup called Xobni has already built an Outlook add-on that combines inbox search with content from Facebook, LinkedIn and others.

Microsoft's new software also treats Outlook itself as a social network. If the e-mail sender and recipient are jointly working on a document stored on a company's Sharepoint server, both will see updates if one logs on to make edits.

For now, the new software doesn't let people use Outlook to push information back up to LinkedIn, Facebook or other sites.

People using Office 2003, 2007 and beta versions of Office 2010 can download the updated Outlook Social Connector beta Wednesday. LinkedIn, which is primarily used for business networking online, is the first company to make its add-in software available. It can be downloaded from LinkedIn.com.

Microsoft said the Facebook and MySpace plug-ins will be ready for download by the time Office 2010 goes on sale in June.

Will Kennedy, a corporate vice president for the Office group, said some of Microsoft's business customers have expressed concern that employees will become less productive if they have all this extra information at their fingertips.

But Kennedy sees business-friendly uses for the Social Connector. He thinks it could speed up processes that require a string of people to sign off, because each person in that chain could see when it's time for him or her to weigh in.

"We don't want this to sort of be the next great time waster in the workplace," he said.

Privacy Group Files FTC Complaint Against Google Buzz
AP

A privacy watchdog group complained to federal regulators on Tuesday about Google's new Buzz social networking service, saying it violates federal consumer protection law.

The Electronic Privacy Information Center filed its complaint with the Federal Trade Commission just days after Google Inc. altered the service to address mounting privacy concerns.

Since launching Google Buzz as part of Gmail a week ago, the search company has come under fire for automatically creating public circles of friends for users based on their most frequent Gmail contacts. Over the weekend, Google altered the service to merely suggest contacts for its users' social networks.

Despite the changes, EPIC argues that privacy violations remain because Google automatically signs up Gmail users for Buzz, rather than waiting for them to do so themselves, or "opt in" for the service. EPIC wants the FTC to require Google to make Buzz a "fully opt-in" service. It also wants the company barred from using Gmail address book contacts to compile social networking lists.

"This is a significant breach of consumers' expectations of privacy," EPIC Executive Director Marc Rotenberg said in a statement. "Google should not be allowed to push users' personal information into a social network they never requested."

But Google insists that it gives users control because, even though it adds a "Buzz" link to all Gmail accounts, users must click on the link and agree to activate the service. Google also gives users the option to disable Buzz.

In response to the EPIC complaint, Google said it has already made some changes to Buzz based on user feedback and has "more improvements in the works."

"We look forward to hearing more suggestions and will continue to improve the Buzz experience with user transparency and control top of mind," the company said.

Aiming for a Comeback: Microsoft Plays Show and Tell With Phone Software

USA Today

NEW YORK — Microsoft is expected to announce a major revamp of its phone software Monday, in an attempt to regain momentum in a crucial market where it has been overshadowed.

CEO Steve Ballmer will be speaking at Mobile World Congress in Barcelona, Spain, the world's largest cellphone trade show, and analysts expect him to reveal Windows Mobile 7. The software could be in phones by late this year.

The new software comes as Microsoft, dominant when smart phones were young, has taken a back seat to Research in Motion's BlackBerrys among corporate users and Apple.'s iPhone among consumers.

"They seem to have lost the world's attention in smart phones," said Dan Hays, who specializes in telecommunications at management consulting firm PRTM.

The new software is expected to be more consumer-focused than previous versions, with a simplified user interface, which could be borrowed in part from Microsoft's well-reviewed — but low-selling — Zune HD media player.

"If that thing had a phone in it ... that would be a pretty darn good device," said Charles Golvin, analyst with Forrester Research.

"But my own judgment is that this is kind of their last chance," Golvin said. "If Windows Mobile doesn't get it right this time around, they're probably toast."

Microsoft is famous, Golvin said, for sticking to its projects, version after version. But developments in smart phones are coming so fast that tenacity alone won't help. RIM and Apple are already squeezing Microsoft out, and in the last year, Google Inc. has emerged as a major player with its Android software.

Microsoft has said it would not comment in advance of Monday's event.

Windows phones accounted for 9% of smart phones sold worldwide last year, according to research firm In-Stat. That was down from 13.2% in 2008.

Much is at stake in the battle for smart phone dominance. Phones steer their users to potentially lucrative Web services and ads. Software developers write their applications first for the largest base of phones, making those phones even more attractive.

As it's trying to regain its footing, Microsoft also finds itself in the odd position of charging for something that others give away. Both Android and Symbian, used on Nokia's smart phones, are free for any manufacturer to use and modify as they see fit. Both Google and Nokia hope this will spur adoption and steer phone users to their services.

Having to compete against a free product hasn't hurt Microsoft on PCs, where free Linux software has made few inroads against Windows. But phones are a different game, because they're less dependent on being compatible with other Microsoft products such as Office software, or with peripherals like printers that may connect only with Windows.

However, the cost of the software makes up a relatively small part of the cost of a phone, said In-Stat analyst Allen Nogee, and manufacturers are likely willing to swallow the cost if the benefits are worth it.

Ballmer went to Barcelona a year ago to show off the previous software update, Windows Mobile 6.5. The first phones landed in October, to little acclaim.

"Microsoft always tries to make a big splash at Mobile World Congress," Hays said, "and they never do."

Yet Again, Google Revises Buzz Privacy Settings

USA Today

Google on Saturday again revised privacy settings of Buzz, the new social network it has piggy- backed onto tens of millions of existing Gmail accounts.

It was the second major revision in 72 hours. The search giant has been scrambling all week to quell backlash from Gmail users upset about how Google has introduced the new service and how Buzz taps into their Gmail contacts list.

Buzz lets Gmail subscribers create profiles, like Facebook, and send Internet-wide blog postings, like Twitter. One issue of concern is a feature called "auto follow" that automatically sets up people you e-mail and chat with the most as followers of your Buzz postings.

Google launched Buzz on Tuesday with auto follow enabled by default. Disabling it required several steps. On Thursday, Google announced it would revise that feature by displaying a pre-checked box, followed by two lines of text describing the auto follow function and allowing first time users to disable it by unchecking the box.

On Saturday afternoon, Google announced another revision. It said first time users will be presented with a series of pre-checked boxes, each showing a photo and name of a specific person Google suggests the user follows, chosen from those they e-mail and chat with "the most," says company spokeswoman Victoria Katsarou.

Users will not be able to use Buzz unless they make some choices at that point: affirm the full list, disable the entire list, or select specific individuals from the list to follow. "We're prompting you to make the decision to say 'Yes, we want to follow these people,'" says Katsarou.

She said the new revision, dubbed "auto-suggest," will go live "in the next couple of days."

Some critics have been calling for Google to go a step further and assume Gmail users do not want Buzz's auto follow feature enabled unless they specifically request it. Nicholas Carlson, senior editor at Silicon Alley Insider, says this could easily be done by leaving the boxes unchecked. Users would retain the privilege to "opt in" by checking boxes.

Beyond the auto follow feature, Buzz's tight integration with Gmail and other free Google online services has raised a storm of complaints on blogs and social networks. Some users have complained about their lists of contacts being spread too widely without their permission, introducing the potential to disrupt business and personal confidences.

In its blog post Saturday, Google acknowledged the problems.

"We quickly realized that we didn't get everything quite right," wrote Todd Jackson, Google's product manager for Gmail and Buzz. "We're very sorry for the concern we've caused and have been working hard ever since to improve things based on your feedback. We'll continue to do so."

Computer Hacker to Repay $27.5M, Sentenced to Prison for Credit ScamUSA Today

PITTSBURGH — A San Francisco man who had more than 1.8 million stolen bank and credit card numbers on his home computers was sentenced Friday to 13 years in federal prison and ordered to repay $27.5 million to the banks and credit card companies he victimized.

Max Ray Vision, who legally changed his last name from Butler, had pleaded guilty in June to his role in an online clearinghouse where identity thieves shared stolen information.

A self-taught computer whiz who fell in love with the devices as an 8-year-old boy in his father's computer store, Vision told Senior U.S. District Judge Maurice B. Cohill Jr. that he was mesmerized by "the thrill of hacking, being addicted to it."

Bespectacled, soft-spoken and articulate, the 37-year-old Vision told the judge he had changed and realizes what he did was wrong.

"You probably hear that a lot, but it's absolutely true," he said.

Cohill's sentence was based on a joint recommendation by federal prosecutors and Vision's public defender, Michael Novara. Federal sentencing guidelines suggested a sentence of 30 years to life, which Novara called "ludicrous."

Still, Assistant U.S. Attorney Luke Dembosky said serious punishment was merited because of the scale of Vision's crimes. Dembosky agreed to the lesser sentence because Vision has continued to work with the government under terms that remain sealed.

All Dembosky would say is, "It could relate to a whole range of things."

Before his arrest in 2007, Vision had developed software to prevent hacking and had even worked as a volunteer who helped the FBI understand and prevent cyber crimes.

Dembosky agreed that Vision wasn't mean-spirited, but was more "wide-eyed" and "curious" about what he could accomplish behind a keyboard.

"Unfortunately, that curiosity took a dark turn and that's why we're here today," Dembosky said. "The amount of damage a person can cause with a keyboard in this day and age is astronomical."

Visa, MasterCard, American Express and Discover tracked more than $86 million in fraudulent purchases to the account numbers found on Vision's computers. In all, 10,000 financial institutions were victimized, Dembosky said.

Vision was charged in Pittsburgh because he sold more than 100 credit card numbers and related information to a western Pennsylvania resident who cooperated with the investigation of a website called cardersmarket.com. About 4,500 people worldwide could trade or access stolen credit information on the website from 2005 until it was shut down in 2007.

Vision has been in custody since authorities raided his apartment in September 2007.

Although authorities found 1.8 million stolen credit card numbers on his computers, they said they were confident that Vision had obtained 1.1 million directly, Dembosky said. The others might have come from other sources.

Vision's $27.5 million restitution was calculated by multiplying the 1.1 million by the roughly $25 it costs banks and credit card companies to replace each stolen credit card number, Dembosky said.

"No one should think that's the amount of money Max gained as a result of this misadventure," said Novara, who claims Vision likely netted less than $1 million from selling the numbers.

"I think we're all trying to figure out, how did we get here?" Novara said.

Summary: Google Continues Book Battle with DOJ

AP

WHO'S SMARTER?: Google Inc. believes it can convince a federal judge that it has a better grasp on antitrust and copyright law than the U.S. Department of Justice.

WHAT'S AT STAKE: The Internet search leader is seeking the digital rights to millions of hard-to-find books to make them more accessible. It has reached a settlement with publishers, but the Justice Department and others object.

THE DECISION MAKER: U.S. District Judge Denny Chin in New York.

WHAT'S NEXT: Chin is scheduled to hear arguments Feb. 18.

Yahoo Talks Tough About the Search Business

BBC News

Web giant Yahoo said it is still in the search game despite falling market share in a business it helped create.

The company held a press event to address what it called misconceptions that exist about its search efforts.

Yahoo said a deal to let Microsoft's Bing power searches on its sites might have led many to think Yahoo had abandoned one of its core businesses.

"Yahoo has been in search, is in search and will continue to be in search," said Yahoo's search boss Shashi Seth.

"That is the stake we have put in the ground. We will continue to show innovation and drive lots of great features and products into the marketplace and wow our users," said Mr Seth who took up his post just three weeks ago.

The partnership with Microsoft is still going through the regulatory process but is expected to be finalised in the next few months.

Many bloggers said at the time that the deal signalled Yahoo's departure from search.

Mr Seth admitted to the BBC the view of Yahoo changed as a result.

"I wouldn't say it killed us but it did make a dent. It is going to be a really tough job going forward but I think we are well equipped to do well in that space."

'Web of things'

During the SearchSpeak presentation at its California headquarters, a series of Yahoo executives defended the company's commitment to search, and unveiled a number of products it said will solidify its position in the market.

The features under development were all aimed at producing what Yahoo described as "the next generation of search".

These included a way to look for restaurants on a smartphone using a finger to draw a circle on a map.

Another example included shortcuts to organise related content and a variety of information without having to type in the search bar. Images of albums, audio clips and videos were shown alongside results for the rock band U2.

For nearly a year the company has been categorising information and pulling it together so that queries for things get more than just a list of blue links as the return.

Yahoo called it the "web of things".

"It includes everything in your everyday life," said Larry Cornett, Yahoo's vice-president of search consumer products.

"We are talking about people like celebrities and athletes, but also your friends and the people you are connected to. We are talking about restaurants, stores, places you go, things you are thinking about buying and connecting them in a way you don't have to think about when using search."

'A fighting chance'

Can Yahoo succeed in a market where it is losing ground to both Microsoft's Bing and industry leader Google?

Research group comScore revealed this week that Yahoo's share of US search queries has dropped more than three percentage points to 17% in the past year.

Google has solidified its hold on first place with around 65% of all queries made while Microsoft's Bing has gained share at Yahoo's expense rising to 11% in January.

"I think the market wants a competitive Yahoo," Greg Sterling, of blog SearchEngineLand, told BBC News.

"It doesn't want to see just two players dominate this space. It wants more diversity and innovation and that comes from competition. I give them a fighting chance."

AT&T, Verizon May Have to Share Internet Lines Under FCC Plan
Bloomberg

AT&T Inc. and Verizon Communications Inc. would be forced to lease fast Internet lines to rivals providing Web services to small businesses under a proposal being weighed by U.S. regulators.

The biggest U.S. phone companies have told the Federal Communications Commission that opening access to lines they laid would curb their incentive to continue spending billions of dollars expanding high-speed service. The FCC’s decision “will significantly affect investment in fiber-based networks,” line- maker Corning Inc. said in a filing with the agency.

The idea, proposed to the FCC by computer-services company Cbeyond Inc., has support from the Small Business Administration, which said it could spur job creation. The plan would add to competition for business clients, who are also being courted by cable providers led by Comcast Corp. and Time Warner Cable Inc.

Requiring phone companies to lease their lines would “erode their market position,” said Donna Jaegers, a Denver- based analyst for D.A. Davidson & Co., in an interview.

Atlanta-based Cbeyond sells packages of Internet-based services, such as e-mail, voicemail and data backup, to businesses with fewer than 250 workers. It now uses slower lines than those it wants to lease from AT&T and Verizon.

Cbeyond could benefit “longer term” as the market for advanced services develops, Jaegers said. She recommends buying Cbeyond shares and doesn’t own any.

Atlanta, Chicago

The company, with about 1,100 employees, serves markets such as Atlanta, Chicago, Los Angeles, Miami and Seattle. It reported $350 million in revenue in 2008, a 25 percent increase from the previous year. The company is scheduled to report fourth-quarter earnings on March 3.

Cbeyond fell 4 cents to $12.50 at 4 p.m. yesterday in Nasdaq Stock Market trading, and declined 21 percent in the 12 months ended yesterday.

Verizon, AT&T and Qwest Communications International Inc. refuse to offer rivals long-term contracts on connections to businesses, said Cbeyond Chief Executive Officer Jim Geiger.

“We expand the market” for business services “because we’re educating these small companies” about online resources, Geiger said in an interview.

Letting competitors lease lines into businesses may boost Internet adoption, help small businesses grow and aid job creation, said Colin Crowell, an aide to Democratic FCC Chairman Julius Genachowski, in an interview.

‘Lot of Appeal’

“That is certainly something that we’ll look very closely at, and has a lot of appeal as part of a national strategy,” said Crowell. The change may be proposed as part of the FCC’s national plan for increasing the use of high-speed Internet, or broadband, that is to be delivered to Congress in March, Crowell said.

Cbeyond’s proposal could help deliver services such as video conferencing and cloud computing to small businesses, which would “increase their efficiency, and ultimately, spur job creation,” the Small Business Administration’s Susan Walthall, acting chief counsel for advocacy, told the FCC in a filing.

The FCC decided in 2003, under Republican leadership, that phone companies don’t need to sell competitors access to the fiber lines they added. The decision didn’t affect cable companies, which are subject to different regulations and don’t have to lease lines.

The 2003 decision encouraged broadband deployment by assuring phone companies they could invest without having to share lines at regulated rates, said Paul Gallant, a Washington- based analyst with Concept Capital’s Washington Research Group, in an interview.

‘Robust’ Investment

The result was “robust private investment in broadband networks,” Verizon said in a filing. Companies “are less likely to invest” in networks “if they must share the fruits of that investment with their rivals.”

Verizon committed $23 billion to its all-fiber FiOS network, which carries video, telephone and Internet services, as part of the investment “boom” that followed the FCC’s earlier decision, the company said in its filing.

Cbeyond “ignores the reality of the marketplace” where there is “tremendous competition” for business-services contracts, said Glenn Reynolds, a vice president at US Telecom, a Washington-based trade association with members including New York-based Verizon and Denver-based Qwest, in an interview. Both companies referred requests for comment to the trade association.

Cbeyond’s proposal “will undermine” FCC efforts to promote investment in broadband, said Michael Balmoris, a Washington spokesman for Dallas-based AT&T, in an e-mailed statement.

Genachowski Meeting

Cbeyond proposed the rule change in November. Geiger, the company’s founder, met with Genachowski Oct. 5, and appeared as a panelist at the agency’s Dec. 21 public hearing on how broadband can help small businesses.

Cbeyond’s typical customer is a business with 12 employees that buys seven Internet-based products, and spends $748 monthly on its services, according to a company document presented to the FCC.

“All we need to do is tweak certain regulations and we know we can unleash innovation and job creation,” Geiger said in the interview.

Cbeyond wants to pay retail rates for its access, Geiger said. AT&T said in its comments that there is no relevant retail rate, and Cbeyond’s idea “appears to involve the creation of a new regulated rate, derived from the retail prices of lower- priced services, such as AT&T’s U-Verse.”

Google Buzz Privacy Concerns Similiar to Facebook Issues
eWeek

Google's entry into the social networking space will face similar privacy challenges as Facebook and other social networking sites. Here are some facts about Buzz privacy for users to keep in mind.

Social networking brings with it its own set of privacy and security challenges. With Google making its own foray into the space with the launch of Google Buzz, security experts say users will have to find the right balance between privacy and openness.

Like Facebook, Buzz allows users to post updates, videos and photos. Buzz will automatically push updates to Gmail users from fellow users with whom they exchange e-mail and engage in chat sessions. In addition, Picasa Web public albums, Google Chat status messages and items shared via Google Reader will appear as posts in Buzz.

 “We designed Buzz to make it easy to connect with other people and have conversations about the things that interest you,” a Google spokesperson said. “That said, we understand some users may not want to share their posts with others, so we've made it easy for users to change and control their personal settings.”

Gmail users can follow people whose Buzz posts they choose to see, and Buzz recommends posts from others as well that the user can choose to ignore. Users can opt out of displaying the full list of people following them and who they are following.

However, the default setting is "public", meaning Buzz users will find themselves initially in the same condition as Facebook users did when the social networking site updated its privacy settings two months ago. In the public setting, posts will be available to all users of Google Buzz as well as the poster’s searchable Google profile. The user’s activity on connected sites such as Picasa Web Albums or Twitter can be shared in Google Buzz as well.

 “That’s always the key point on any social networking site—people have available to them the means to protect their privacy but often don’t,” said Augie Ray, an analyst with Forrester Research.

 “Another area of concern may be the way Google’s mobile app allows people to give permission to automatically report their location,” he said. “That’s the sort of “set it once than then forget it” setting that can catch the casual use unaware.”

If a user chooses to view "nearby" posts, the person’s location will be collected by Google. Location information will also be collected if a user creates a post that shares his or her location. However, users can also choose to exclude their location from all mobile posts or on a post-by-post basis.

 Just how users will react to Google’s approach to privacy remains to be seen.

 “I think it will find its niche and those that enjoy Google's services will be receptive to its controls,” said Sean Sullivan, security advisor for North American Labs at F-Secure. “I use Google Reader and currently "share" items with colleagues. It works very well for this. I don't think it will generate a backlash, I'll just turn it off like I do many of the other features included in Gmail, and I'm sure many others will as well.”

Google to Offer Super-Fast Net Service on Trial Basis

LA Times

SAN FRANCISCO — Google on Wednesday introduced a plan to offer ultra-high-speed Internet access to consumers in a test intended to showcase the potential new uses of broadband networks once such speeds become commonplace.

The test could also help advance Google’s policy goals of open, unfettered Internet access, challenging the business model of established telecommunications companies.

In a post on its corporate blog, the company said it planned to build and test a high-speed fiber optic broadband network capable of allowing people to surf the Web at a gigabit a second, or about 100 times the speed of many broadband connections. The trial could be offered in several communities and extend to as many as 500,000 people.

In an interview, Richard S. Whitt, Google’s Washington telecommunications and media counsel, said Google did not see the test as a new business venture as an Internet service provider, but rather as an effort to push the industry into offering faster Internet access at lower cost.

“We are not getting into the I.S.P. or broadband business,” said Mr. Whitt, using the industry shorthand for Internet service provider. “This is a business model nudge and an innovation nudge.”

[Google] said it planned to build and test a high-speed fiber optic broadband network capable of allowing people to surf the Web at a gigabit a second, or about 100 times the speed of many broadband connections

Mr. Whitt said that if the project was successful, Google would benefit because more people would use the Internet, and in turn, the company’s own services.

“All companies who live on the Web ultimately benefit if consumers have more access to the Net than they have today,” Mr. Whitt said.

Google said that over the next six weeks, it would solicit proposals from communities interested in the service, and then announce trial communities later this year. Mr. Whitt said he hoped that the service could be deployed by the end of the year in some areas, though he acknowledged it might take longer.

Mr. Whitt said that Google had urged to Federal Communications Commission earlier this year to encourage similar kinds of test projects. “After we did that, we talked about it and said we could leave this to the government or do it on our own,” Mr. Whitt said. Google decided to put its own money behind the idea, though he declined to say how much Google would invest in the project.

In a statement, Julius Genachowski, the chairman of the F.C.C., welcomed Google’s announcement. “This significant trial will provide an American test bed for the next generation of innovative, high-speed Internet apps, devices and services,” Mr. Genachowski said. “The F.C.C.’s National Broadband Plan will build upon such private-sector initiatives and will include recommendations for facilitating and accelerating greater investment in broadband, creating jobs and increasing America’s global competitiveness.”

Mr. Whitt said that while Google would build the network, it might not offer the Internet service to consumers. Instead, he said the company planned to open its network to other service providers, emulating a business model that was common during the days of dial-up Internet access. That model all but disappeared in the United States with advent of broadband, but remains common in other countries.

“It may be that Google is the I.S.P., but it could be AOL or EarthLink or dozens of companies you could choose from,” Mr. Whitt said. “We are more interested in learning what happens to the network itself.”

Google has a long history of pushing against what it sees as barriers to fast and unfettered Internet access. Since 2006, the company has operated its own wireless network in Mountain View, Calif., where it is based. It later supported a plan to offer similar service in San Francisco, which was derailed because of opposition from some city officials.

In 2008, Google bid more than $4 billion in a government auction for wireless spectrum. Google said it had no desire to win the auction, but wanted to ensure that the airwaves would be subject to so-called openness requirements — meaning that Google services like Web search, Gmail and maps could not be excluded from phones using those frequencies.