Texas Opens Inquiry into Google Search Rankings

Associated Press

 

Google Inc.'s methods for recommending websites are being reviewed by Texas' attorney general in an investigation spurred by complaints that the company has abused its power as the Internet's dominant search engine.

The antitrust inquiry disclosed by Google late Friday is just the latest sign of the intensifying scrutiny facing the company as it enters its adolescence. Since its inception in a Silicon Valley garage 12 years ago, Google has gone from a quirky startup to one of the world's most influential businesses with annual revenue approaching $30 billion.

A spokesman for Texas Attorney General Greg Abbott confirmed the investigation, but declined further comment.

The review appears to be focused on whether Google is manipulating its search results to stifle competition.

The pecking order of those results can make or break websites because Google's search engine processes about two-thirds of the search requests in the U.S. and handles even more volume in some parts of the world.

That dominance means a website ranking high on the first page of Google's results will likely attract more traffic and generate more revenue, either from ads or merchandise sales.

On the flip side, being buried in the back pages of the results, or even at the bottom of the first page, can be financially devastating and, in extreme cases, has been blamed for ruining some Internet companies.

European regulators already have been investigating complaints alleging that Google has been favoring its own services in its results instead of rival websites.

Several lawsuits filed in the U.S. also have alleged Google's search formula is biased. Google believes Abbott is the first state attorney general to open an antitrust review into the issue.

"We look forward to answering (Abbott's) questions because we're confident that Google operates in the best interests of our users," Don Harrison, Google's deputy general counsel, wrote in a Friday blog post.

Harrison said that Abbott has asked Google for information about several companies, including: Foundem, an online shopping comparison site in Britain; SourceTool, which runs an e-commerce site catering to businesses; and MyTriggers, another shopping comparison site.

All of those companies offer features that Google includes in its search engine or in other parts of its website. Foundem, SourceTool and MyTriggers have previously filed lawsuits or regulatory complaints against Google.

"Given that not every website can be at the top of the results, or even appear on the first page of our results, it's unsurprising that some less relevant, lower quality websites will be unhappy with their ranking," Harrison wrote.

Google says its closely guarded search formula for Google search engine optimization strives to recommend websites that are most likely to satisfy the needs of each user's request. If it didn't keep its users happy, Google argues that people would become disgruntled and switch to other search engines offered by Yahoo Inc., Microsoft Corp. and IAC/InterActiveCorp's Ask.com.

Regulators and lawmakers in the U.S. and Europe also have been looking into Google's privacy practices and its acquisitions as the company tries to fortify its power.

German court rules against YouTube over copyright‏

Associated Press

 

A German court ruled Friday that Google Inc.'s subsidiary YouTube LLC must pay compensation after users uploaded several videos of performances by singer Sarah Brightman in violation of copyright laws.

The Hamburg state court said the standardized question to users about whether they have the necessary rights to publish material is not enough to relieve YouTube of the legal responsibility for the content, especially because the platform can be used anonymously.

The wording of the court statement appears to be a major blow to YouTube's business model, but Google Germany spokesman Henning Dorstewitz told The Associated Press YouTube will appeal the decision detailed in the 60-page ruling.

YouTube must not publish those videos any more and provide information to settle the amount of compensation in at least three cases in which Brightman videos were uploaded, the court said.

Arnd Haller, director of legal affairs at Google Germany, said the court ruling disregards the current e-commerce directive of the European Union.

"This decision results in a substantial legal uncertainty for all providers of video platforms, opinion forums, social communities, blogs and many other Internet services in Germany," Haller said in a statement.

The plaintiff was not identified and a court spokesman could not be reached for comment. The court statement only said the plaintiff has claimed to be the copyright holder for several of Sarah Brightman's performances.

Google said in a statement that the plaintiff was Frank Peterson. He is a German composer and producer for Brightman and other artists, according to his website.

India Threatens Ban On Google, Skype

Information Week

Having given RIM a 60-day reprieve from a ban on Blackberry messaging traffic, Indian authorities have now set their sites on Google and Skype.

As they did with RIM, authorities in the country are demanding access to data that flows across Google's and Skype's servers.

"The notices to these entities will be issued beginning Tuesday and all of them will be asked to comply with the directive or else they will have to close down their networks," a senior government official said, according to The Times of India.

A new voice feature just added to Gmail is what put Google in the Indian government's crosshairs, the newspaper said.

Indian officials insist they need the ability to intercept mobile data in cases where they suspect the devices are being used to plot terror attacks or other crimes. The country has been the target of a number of high-profile attacks, including the 2008 assaults on the Oberoi and Taj Mahal hotels in Mumbai.

India originally threatened to ban Blackberry messaging traffic as of August 31st, but on Monday authorities said they had given RIM a 60-day extension in which to come up with a solution that satisfies their concerns.

RIM has insisted that encryption is in its users' hands and that it does not have technology that would allow third-parties, including national governments, to monitor BlackBerry traffic.

RIM has previously offered to give Indian officials the IP addresses of its BlackBerry Enterprise Servers and PIN and IMEI (International Mobile Equipment Identity) numbers of BlackBerry handsets. But the offer failed to placate Indian security officials.

The dispute echoes a similar set-to that's transpiring between RIM and some countries in the Middle East. Saudi Arabian officials in Riyadh have threatened to cut off BlackBerry service in the kingdom unless RIM makes decryption technology available.

Also, UAE authorities have said they may impose a ban on BlackBerry e-mail and messaging starting Oct. 11.

Google Voice Problems Limited

Information Week

The meltdown scenario is a common one among Internet companies. The executive summary goes something like this: Launch a great new service or feature. See usage surge. See the service fail.

That's more or less what TechCrunch founder and editor Michael Arrington says happened with Google Voice following Google's integration of Google Voice with Gmail last week and the opening of Google Voice to the general public in June.

In a post published on Monday, Arrington reports that Google Voice's service in the past week has become "spotty at best, and unusable at times." He also says that based on conversations with multiple sources, Google hasn't invested enough in its core infrastructure to allow Google Voice to scale effectively.

Dozens of posts in the Google Voice help forum echo this view. A post by a Google employee acknowledges that the company has received a number of call quality complaints and asks users to report poor call quality.

The thread had 122 replies at the time this article was written, many of which present complaints similar to Arrington's.

"Things have definitely fallen off a cliff in the past 10 days when it comes to voice quality!" writes a user posting under the name "binxwalker." "This issue needs to fixed asap or [Google Voice] will be abandoned by most users. Most calls that I have made or received via [Google Voice] over the past 10 days have suffered from constant drop outs, garbled audio and one-way audio."

But the discontent is not universal. A significant number of people commenting on Arrington's post report having no trouble with Google Voice.

According to Google, the problem isn't as bad as critics suggest.

"Right now, there are no known widespread issues or outages with Google Voice," a company spokesperson said in an e-mailed statement. "We are looking into reports of people experiencing some trouble with the service, but these are isolated problems and not related to the increase in usage we've seen recently."

Texas AG Probing Google's Searches

The Wall Street Journal

 

The Texas attorney general's office is conducting an antitrust review of Google Inc.'s core search-engine business, a sign of widening government scrutiny of the Web giant.

Texas's top prosecutor has inquired about allegations by several small companies that Google unfairly demoted their rankings in search results or the placement of their advertisements on the search engine, Google said Friday.

The Internet giant disputed the allegations, which have been reported previously, tracing them to three companies with ties to rival Microsoft Corp.

A spokesman for Texas Attorney General Greg Abbott said an investigation of Google was ongoing but declined further comment. A Microsoft spokesman declined comment.

Don Harrison, a deputy general counsel at Google, said in a blog post that the company is sometimes asked about the fairness of the search engine and why some websites are ranked higher than others.

"Given that not every website can be at the top of the results, or even appear on the first page of our results, it's unsurprising that some less relevant, lower quality websites will be unhappy with their ranking," Mr. Harrison wrote.

Google said Texas officials asked for information about the cases of Foundem.co.uk, TradeComet.com LLC and myTriggers.com Inc., which have each claimed separately that Google unfairly demoted their search rankings to eliminate them as competitors.

TradeComet, a business search engine, has sued Google in federal court in New York, but the case was dismissed. It is appealing. MyTriggers, a price comparison site, sued Google in Franklin County, Ohio, common pleas court. Google has denied wrongdoing.

The European Commission is also conducting a preliminary inquiry into the complaint by Foundem, a British price comparison site. Google has denied violating European law.

In its blog post, Google said Foundem is backed by ICOMP, an organization funded largely by Microsoft and added that TradeComet and myTriggers are represented by the same antitrust attorneys Microsoft uses.

Microsoft, which competes with Google in multiple businesses, has acknowledged helping direct the complaints of small companies about Google to antitrust authorities. It has denied being behind their antitrust suits. The owners of Foundem, SourceTool and myTriggers have all denied they are acting on behalf of Microsoft.

TradeComet's chief executive, Dan Savage, said: "Obviously, Google is just trying to distract from its own problems by pointing to others and their lawyers."

A spokesman for myTriggers said: "Though there are probably a lot of other victims too, MyTriggers' concern is just the harm to MyTriggers done by Google's anticompetitive conduct and bullying tactics. We have a strong antitrust claim and look forward to our day in court."

Foundem couldn't be reached for comment.

Under Mr. Abbott, who is facing re-election this fall, Texas has been active in antitrust cases. His office has been examining the electronic-book market, which saw price increases for some titles being sold by Apple Inc. for its iPad device, people familiar with the matter have said. In 2008 Mr. Abbott reached a $28 million civil settlement with Abbott Laboratories over alleged false reporting of drug prices.

In targeting Google's core business, Texas has moved ahead of the federal agencies charged with enforcing U.S. antitrust laws, the Justice Department and Federal Trade Commission. Both agencies have conducted antitrust reviews of Google's transactions.

The Justice Department, for example, moved to block Google's advertising deal with rival Yahoo Inc., forcing it to abandon the deal. This year, the FTC approved Google's $750 million purchase of mobile advertising company AdMob.

The Justice Department currently is reviewing Google's $700 million acquisition of ITA Software Inc., which powers the airfare search for numerous websites including Kayak.com and Microsoft's Bing search engine.

But neither the agency or the FTC is known to have conducted a monopolization inquiry that targets Google's core business of search advertising. Google accounts for more than 65% of all U.S. search queries, and an even larger portion of total search advertising revenue. Google handles about 90% of search queries in other countries such as France.

Google places text ads near search results, and it also ranks them based on the amount an advertiser bids, the popularity of the ad—how often users click on them—as well as the relevance and quality of the ad. Those ads now account for the majority of Google's $24 billion in annual revenue.

Separately, Google agreed Friday to pay $8.5 million to cover attorneys' fees and set up an education fund to settle a private class-action lawsuit that alleged its Buzz social-networking service violated users' privacy. The service, launched in February, at first created a network of contacts based from Google's email service, Gmail. Each user's network was visible to other users.

After an outcry, Google changed the settings so that contacts were kept private by default.

The proposed settlement of the case, filed on Friday in federal court in San Francisco, also requires Google to make further announcements about the privacy aspects of Buzz and fund Internet privacy efforts by public-interest groups.

YouTube Advertisements Turn Videos Into Revenue

CNBC

 

After shifting its focus to making money about 18 months ago, YouTube is expected to turn a profit this year, on revenue of about $450 million, with help from its onetime critics.  The New York Times reports.

Last month, a YouTube user, TomR35, uploaded a clip from the AMC series “Mad Men” in which Don Draper makes a heartfelt speech about the importance of nostalgia in advertising.

Viewers wouldn’t notice, but that clip also makes an important point about modern advertising — YouTube is an increasingly fruitful place for advertisers.

In the past, Lions Gate, which owns the rights to the “Mad Men” clip, might have requested that TomR35’s version be taken down. But it has decided to leave clips like this up, and in return, YouTube runs ads with the video and splits the revenue with Lions Gate.

Remarkably, more than one-third of the two billion views of YouTube videos with ads each week are like TomR35’s “Mad Men” clip — uploaded without the copyright owner’s permission but left up by the owner’s choice. They are automatically recognized by YouTube, using a system called Content ID that scans videos and compares them to material provided by copyright owners.

Those two billion views, a 50 percent increase over last year, according to the company, are just 14 percent of the videos viewed each week on the Google-owned site. But that’s enough to turn YouTube profitable this year, analysts say.

“YouTube is a big component of our display revenue, and display is our next big business,” Eric E. Schmidt, Google’s chief executive, said in an interview.

In the last year, the video site has become a significant contributor to the family business at a time when Google, which makes more than 90 percent of its revenue from text search ads, is seeking a second act. Though Google does not report YouTube’s earnings, it has hinted that it is hovering near profitability. Analysts say YouTube will bring in around $450 million in revenue this year and earn a profit. Revenue at YouTube has more than doubled each year for the last three years, according to the company.

YouTube’s new profitable relationship with content creators was not always so easy. For a long time, YouTube executives spent their time across conference tables with lawyers worried about copyright violations, said Chris Maxcy, YouTube’s director of content partnerships.

“It was 90 percent lawyers in a meeting and the marketing people faded into the background,” he said. “Now the partners we are working with get checks that get bigger every month. And now when you walk into a meeting there’s almost no lawyers, or there’s a couple of lawyers but they are deal lawyers there to help you get your contract done.”

The shift is also an important development for Google, which bought YouTube for $1.65 billion in 2006. The video site at first played the role of Google’s profligate son, throwing money at building out bandwidth and storage to handle all the videos but making little money of its own.

Mr. Schmidt said that YouTube’s role began to change about a year and a half ago, when he asked the unit to start focusing on revenue.

The strategy had been to amass “an audience first, then figure out the tools that will create the revenue, then you go to the content partners and say, ‘Hey, look guys,’ ” Mr. Schmidt said. “And I think we’re at that point now.”

Salar Kamangar, YouTube’s co-head, who also co-founded Google’s AdWords search advertising program, started spending his time figuring out how to make money on the video business.

YouTube gives Google the chance to get a piece of the television ad market, Mr. Kamangar said, by bringing videos straight to the television over an Internet connection, or Internet protocol, as the industry calls it. “Ads can be a lot more effective when they’re delivered over I.P. instead of cable or broadcast, because they’re delivered personalized to you.”

YouTube now offers several types of ads, including display ads on its home page and on the video pages, ads that promote videos and ads that run in the video stream or pop up on the bottom of a video.

When someone uploaded a recording of the Eminem song “Not Afraid,” for instance, instead of taking down the recording, YouTube ran pop-up ads that let people buy the song or the ring tone and shared the revenue with the copyright owner.

“Google smartly realized that consumers consume different types of media throughout the day,” said Dave Marsey, senior vice president of media at Digitas, the online advertising agency. “Search is a huge component of that, but there are times when you want some entertainment or you want to solve a problem and going to YouTube makes sense.”

YouTube shares advertising revenue with content partners, who may be big entertainment companies like Lions Gate or amateur videographers who have developed a following. Hundreds of these partners make more than $100,000 a year. Some, like Sal Khan, a former hedge fund manager who now makes math and science education videos, have quit their day jobs.

YouTube’s next challenge is to attract more advertisers by offering more professional, long-form content to supplement the videos of cooing babies and surprised kittens. YouTube is testing a pay-per-view film rental service and broadcasting live events like concerts, and it just signed a deal to show on-demand Major League Baseball games in Japan.

Hulu, the site started by TV networks that streams movies and shows, makes considerably more revenue per stream than YouTube because it has more professionally produced content, said Jordan Rohan, an Internet and digital media research analyst at Stifel Nicolaus. “YouTube is certainly the market leader in terms of streams. They’re certainly the market leader in terms of revenues,” Mr. Rohan said. But only a small percentage of its revenue streams would justify a high ad rate, he said.

YouTube must also follow its viewers as they increasingly watch videos away from their computers, on small mobile phone screens and big TV screens. YouTube now has 160 million mobile views a day, almost triple last year’s number. When Google introduces Google TV later this year, people will be able to watch YouTube videos on Internet-connected televisions.

A New Digital Battlefield

The Wall Street Journal

Amazon, Apple Rivalry Moves Beyond Music and E-Books Into TV Shows

TV shows are emerging as a new front in the war over digital media between Amazon.com Inc. and Apple Inc., amid their ongoing battles over electronic books and online music.

Hours after Apple said Wednesday that it would begin renting some shows for 99 cents per episode, Amazon cut its price on a similar set of shows to 99 cents from $2.99. And unlike Apple, which rents the videos, Amazon lets its customers buy the shows.

"When we see a competitive product available elsewhere, we make sure to match or beat that price," said Bill Carr, Amazon's vice president of music and video, in a Thursday interview. "Things are evolving rapidly."

Apple declined to comment on Amazon's pricing.

A price battle between the tech titans could help drive consumer interest in the nascent market for paid on-demand video over the Internet. But it could also drive away the media giants that Apple and Amazon are counting on to feed them with TV content. Some media executives worry low prices could eventually undermine the existing TV business.


For the past several years, Amazon and Apple have both offered services that let consumers buy or rent films over the Internet on a one-by-one basis and watch them on TVs, game consoles or portable devices. It's part of a wider race among cable-TV and satellite-TV providers and tech companies, including Netflix Inc. and Google Inc., to dominate the digital delivery of TV and movies.

That race heated up on Wednesday when Apple introduced an updated Apple TV set-top box for $99 and said it reached deals to offer rentals for a selection of TV shows from News Corp.'s Fox and Walt Disney Co.'s ABC, ABC Family and Disney Channel, as well as BBC America.

TV networks haven't presented a united front when faced with Apple, Amazon and other tech companies that want to license their content. Already, some, such as Time Warner Inc., are aligning with cable and satellite TV operators to offer some shows on the Web only for their paying subscribers, while others such as General Electric Co.'s NBC Universal put episodes from a large number of their shows online for free viewing with ads. But even those positions are changing, with some media companies pulling back how much they offer free or working on paid subscription offerings of their own.

Apple has already discovered those divisions: While both News Corp. and Disney signed on to test its 99-cent TV-show rentals, other major media companies rejected the plan. Several executives said those rentals could be a step toward a world where people see less advertising or stop paying for cable subscriptions—two principal sources of revenue. (News Corp. owns The Wall Street Journal.)

The price war could lead at least some media companies to pull existing episodes sold at $1.99 from Apple, one media executive said.

"We're happy to sit back and see how it goes," said another media executive, who also suggested that competition between the two tech giants could be a boon. That executive said a major danger media companies face is allowing one player—like Apple—to gain too much power over the distribution of content, as it did with music. Amazon could provide a welcome challenge, the executive added.

Securing affordable video content is crucial in Apple's strategy to tout the iPad, iPhone and iPod Touch as go-to multimedia devices.

The existing price of content—which can cost $2.99 apiece for a high definition TV show or $4.99 for a movie—is still a high barrier of entry when consumers can access many of the same shows free on websites such as Hulu, or as part of their Netflix subscription.

Amazon, the Web's largest retailer, has used aggressive price cuts on a variety of products to draw attention to its offerings and maintain its position as a low-price leader. The company today offers 75,000 movies and TV shows, which customers can watch on a variety of systems, from computers to TVs.

Mr. Carr declined to say what impact a price cut might have on adoption of digital video, and said it "remains to be seen" what an ideal price might be for video.

"The lower that they bring the cost, the more they will expand adoption," said David Krall, the chief operating officer of Roku Inc., a company that makes set-top boxes that play Amazon and other online content on TVs. "People compare the price to going to the DVD store to rent, and convenience of having to get in the car."

It remains to be seen whether the pricing rivalry will hurt Apple's dominate position in the space. According to Screen Digest, Apple accounts for 57% of transactions in Internet video-on-demand movies, on a number-of-sales basis, and 53% of the TV shows market, excluding sports. In contrast, Amazon is only 5% and 6% respectively.

Both Microsoft Corp. and Sony Corp., through their videogame consoles, sell more online video than Amazon, according to Screen Digest. (The estimates exclude Netflix because it doesn't offer a-la-carte sales and rentals of movies and TV shows over the Internet.)

One advantage that Apple has in these early days is that it has many products through which consumers can view the content. By contrast, on the digital book front, the competition between Apple and the online retailer is more intense in part because Amazon had Kindle, an e-book reader that it had been selling long before the iPad. Mr. Carr declined to comment on whether Amazon was interested in making its own devices for watching digital video.

"We don't believe Amazon's price cutting on TV shows will materially affect Apple's overall market share," said Arash Amel, Screen Digest's digital media research director. "ITunes rarely gets sucked into a price-war, given their position as the market-leader."

Amazon has had mixed success with its past digital media efforts. Its digital music business, in which it also uses aggressive pricing, has what analysts estimate is about 12% of the digital music market.

Moreover, the TV discounting costs Amazon because the company will continue to pay the companies the same wholesale price per episode that it paid before the retail-price cut, said media executives.

In the short run, a price cut could help Disney and News Corp., if Amazon sells more episodes while paying them each the same wholesale price. But some media executives and analysts believe the proliferation of lower prices could start to devalue electronic TV shows more broadly.

"It further ingrains in the consumers' mind the idea that a TV show is only worth 99 cents," said Evercore media and entertainment analyst Alan Gould.

Amazon is also interested in challenging players such as Netflix with a subscription service that would deliver TV shows and movies over the Internet. In recent weeks, Amazon has pitched a Web-based subscription service to several major media companies.

Mr. Carr declined to comment on the idea of a subscription service.

The entire business of selling episodes of TV shows through services like Apple's and Amazon's is expected to generate only $407 million in 2010, according to Screen Digest. Meanwhile, U.S. consumers and advertisers will spend about $143 billion on traditional TV advertising and subscriptions in 2010, according to PricewaterhouseCoopers.

Google Sued Over Nexus One Troubles

Information Week

A Nexus One owner claims Google made misleading claims about the phone's 3G capabilities and failed to provide adequate support.

 

 

Apple and AT&T have long been the targets of litigants who believe that the two companies have exaggerated the iPhone's capabilities in their marketing. Now it's Google's turn.

Google introduced its Nexus One mobile phone in January, hoping to change the way mobile phones are sold by offering it to customers directly through its Web site without a carrier service plan. It also offered a subsidized version with a T-Mobile service plan. By the middle of July, Google gave up and discontinued the Nexus One, citing disappointing sales.

But during its brief time on the market, the Nexus One managed to disappoint some customers. Following the launch of the Nexus One, many users complained about poor 3G network performance.

Google characterized the issues at the time as affecting a small number of users.

Nonetheless, one Nexus One user is suing, in the hope of finding enough other aggrieved Nexus One users to allow his claim to be certified as a class action.

Attorneys representing Nathan Nabors, a resident of Orlando, Florida, filed a lawsuit against Google on Tuesday alleging violations of the Communications Act and of trade laws related to warranties. The lawsuit claims that the Nexus One phone suffered connectivity problems on T-Mobile's network and that Google provided inadequate customer support to deal with these problems.

"Google either knew, reasonably should have known, or was obligated to understand that the [Nexus One] could not consistently perform at a 3G level, contrary to Google's representations," the complaint says.

A Google spokesperson was not immediately available for comment.

Logitech To Create First Google TV Set-Top Box In Fall 2010

HotHardWare

 

Google managed to score quite a few big partners with their Google TV launch, with Intel and Sony being two key partners in moving the technology forward into the mainstream. But for those who don't want to purchase any entirely new television this fall with a CE4100 processor and the Google TV app onboard, they'll need a set-top box to connect to their existing setup. For that, there's Logitech.

This whole situation feels a little bit like when Microsoft first launched "Extenders for Windows Media Center" at CEDIA a few years ago, but those boxes eventually failed and are pretty much relics today. Google's hoping to have a lot more success with their own STB, with Logitech selected to be the first out of the gate. The details on the box have yet to be fully revealed, but it's pretty clear what it will do. You'll connect the box to your existing HDTV, and then the Google TV platform will come to life via the internal hardware within the sleek, small black shell.

No price points were discussed either, but consumers were told that it will be compatible with existing Logitech Harmony remotes and it will ship with a few accessories, too. A compact keyboard, remote control and touch pad, to be specific. Logitech will also be responsible for a few more Google TV-related accessories, including an "an HDTV camera for video conferencing, and specialized apps that allow you to turn your smartphone into a Google TV controller." Expect the box to launch alongside the service this Fall.

Microsoft sees Opportunities in China after Google's Exit

International Business Times

 

By launching Adcenter advertising platform on Tuesday Microsoft could improve the prospects of its Bing search engine after Google pulled out of China’s mainland in March this year, said a China Daily report.

Microsoft’s Adcenter facilitates pay per click advertising like Google’s AdWords.

The launch is aimed at grabbing the online advertising market share in China where companies have become cautious over going with Google, as the internet giant started redirecting all its mainland traffic to Hong Kong site.

"It's the time to join the market and let Chinese advertisers have more choices," said the report quoting Anderson Liu, general manager, MSN China.

With 32.8 percent market share by the end of 2009, Google saw a continued decline in market share to 27.3 percent in the second quarter.

Feeling the impact from its woes in China, Google snapped commercial ties with two of its 25 advertising agents in the country in July.

To cash in on the Google’s woes, Microsoft mainly aims to grab the overseas advertising from Chinese exporters by the launch of new Adcenter services, the report said. It expects revenues from these new services to contribute to half of MSN China’s business.

Advertising activity from Chinese exporters forms a major part of China's online search engine market and occupied 40 percent share in Google’s revenues, said the report quoting Analysys International.

Currently Microsoft is partnering with Baidu to sell search engine advertising and the company clarifies that the new services will not hurt their tie-up. In the second quarter, Baidu held a search engine market share of more than 70 percent in China.

"Actually I think it's a very good opportunity for MSN China," said the report quoting Edward Yu, president of Analysys International.

UK Regulator to Expand Supervision Over Online Ads

PC World

The U.K.'s advertising regulator will increase its oversight of online marketing, scrutinizing how companies advertise on their own Web sites as well as social sites such as Facebook and Twitter.

The Advertising Standards Authority (ASA) said on Wednesday that the new code, which will take effect starting next March, is in response to nearly 3,000 complaints in the last year over advertisements that were not within its purview to act on.

The ASA already oversees paid-for online advertisements and sales promotions, investigating complaints over misleading advertisements and other issues, such as social responsibility and child protection. In some cases, advertisements have been withdrawn or removed by search engines, said Matt Wilson, ASA press officer.

For advertisements that are not withdrawn, the ASA has worked with search engines to publish a notification next to the ad that there is a problem with it, Wilson said.

The new rules will cover companies or organizations running promotions in unpaid space, including their own Web sites and social-networking sites. Companies are increasingly using platforms such as Facebook and Twitter to draw people to their brands or causes.

The ASA said that assessing whether material constitutes advertising or marketing communication will require a "careful assessment."

User-generated content, for example, is created by private individuals, the ASA said in its guidance notes. But if a website owner solicited the content and used it in marketing material, it would be subject to the code. Even if a private individual provided unsolicited content that is incorporated into marketing material, that would also be subject.

The code will apply to companies and organizations that have a U.K. presence or a U.K. registered website, Wilson said.

Advertisements targeting the U.K but placed outside the country "are subject to the jurisdiction of the relevant authority in the country from which they originate if that authority operates a suitable cross-border complaint system," the ASA said.

The initiative will be funded by a 0.1 percent levy on paid-for advertisements appearing on Internet search engines through media and search agencies. The ASA, which has a £7 million (US$11 million) annual budget, will have to add 9 or 10 staffers to enforce compliance, Wilson said.

Police Bust Russian Hacker Gang who made $30M in one Month

Russia Times

Russian police have detained ten people who managed to get one billion roubles, approximately $30 million, through a clever scheme involving a computer virus, blackmail and SMS billing.

Website Lifenews.ru reported on Tuesday that ten members of the criminal group had been detained in Moscow. Operatives of the city police directorate for fighting economic crimes have told journalists that the suspects created a computer virus that blocked all programs on the users’ computers and put a pornographic picture on the screen together with a demand to send an SMS to a certain number to receive a code that would supposedly unblock the computer. For the SMS the victims were billed about 300 roubles or $10. However, sending the SMS never led to any results and some users have sent it repeatedly.

According to the police, the suspects made about one billion roubles from the scam, or $33 million in just one month.

Although the virus extortion scheme is widespread in the world (it even has the special title of “ransomware”), Russians were probably first to invent the virus that blocks the Windows operating system completely.

Paul Allen Launches Patent War

The Wall Street Journal

They're the everyday fixtures of the Internet experience: pop-up stock quotes on a website, suggestions for related reading near a news article, videos along the side of your screen.

Now, Microsoft Corp. co-founder Paul Allen says he owns the technology behind all these ideas, and he's demanding that some of the world's top Web companies pay up to use them.

The 57-year-old software guru on Friday sued much of Silicon Valley, claiming Internet giants such as Google Inc., Facebook Inc. and eBay Inc. have built their businesses around what he says is his technology.

Mr. Allen's suit, filed in federal court in Seattle, asserts those three companies and eight others are using technology developed a decade ago at the billionaire's now-defunct Silicon Valley laboratory. Mr. Allen, a pioneer of computer software, didn't develop any of the technology himself but owns the patents.

His targets vowed to fight. "This lawsuit against some of America's most innovative companies reflects an unfortunate trend of people trying to compete in the courtroom instead of the marketplace," a Google spokesman said. Other companies named in the suit said they planned to defend themselves or weren't available to comment.

Patent litigation in general is on the rise, in what is becoming a lucrative endeavor. Ocean Tomo, a Chicago-based merchant bank that tracks the intellectual-property market, values the licensing market at as much as $500 billion.

Mr. Allen's lawsuit comes amid high-profile successes of firms such as NTP Inc., which enforce patents without making products and have been called "patent trolls" by critics. Courts have tried to rein in patent litigation, with mixed results, and Congress has yet to act on legislation that would do the same.

For Mr. Allen, the lawsuit marks new terrain. The four patents named in the suit were developed at Interval Research Corp., a Palo Alto, Calif., lab and technology incubator Mr. Allen financed with about $100 million during the Internet bubble, but which closed down about a decade ago.

Mr. Allen wasn't available for comment, according to a spokesman, who said Mr. Allen's lab created the technology that he wants to mark as his own. "We recognize that innovation has a value, and patents are the way to protect that," said the spokesman, David Postman.

Mr. Postman said the timing of the suit wasn't related to Mr. Allen's health or personal finances. Mr. Allen recently pledged to give away the majority of his fortune. He was diagnosed last year with non-Hodgkin's lymphoma, but has completed treatments and has no outstanding issues.

"It sounds like the classic patent-troll case," said Mark Lemley, a Stanford Law School professor who specializes in intellectual property and has represented Google and Netflix Inc. in other cases. He said suits filed by holders of years-old patents over technology that's in widespread use can be difficult for a plaintiff to win.

Mr. Allen's lawyers said a team has been reviewing his patent portfolio for years, seeing what's relevant to the current marketplace and parsing the technicalities necessary to complete the lengthy patent process. During that time, some patents were sold or licensed.

Ron Laurie, a former intellectual property lawyer who now advises companies on patent licensing strategy, said Mr. Allen and his companies have generally avoided aggressive litigation. "He's not been thought of as being in the troll community at all," said Mr. Laurie, who in past years advised another concern tied to Mr. Allen.

Legal experts said increasingly large settlements for patent holders in recent years have created an incentive for patent owners to file infringement suits, rather than sell intellectual property, even when patents are years old.

NTP in July sued Apple Inc., Microsoft and four other companies over patents related to the wireless delivery of email to cellphones. BlackBerry maker Research In Motion Ltd. paid NTP $612.5 million in 2006 to settle similar patent charges.

Another Microsoft veteran, former chief technology officer Nathan Myhrvold, has amassed thousands of patents and secured hundreds of millions of dollars in patent-licensing deals from telecommunications companies and others. Mr. Myhrvold's Seattle-based firm Intellectual Ventures patents some of its inventions but also acquires patents to license.

Named in Mr. Allen's suit are Google, Facebook, eBay, Apple, Yahoo Inc., AOL Inc., Netflix, Office Depot Inc., OfficeMax Inc., Staples Inc. and Google's YouTube subsidiary.

Notably missing from the defendants' list are Microsoft, in which Mr. Allen remains a major investor, and Amazon.com Inc., which is based in Mr. Allen's hometown of Seattle. Mr. Postman declined to comment on the selection of defendants.

EBay said it was reviewing the complaint and planning a vigorous defense. A Facebook spokesman said, "We believe this suit is completely without merit and we will fight it vigorously."

Representatives from Apple, AOL, Netflix, Yahoo, OfficeMax and Office Depot declined to comment. Staples didn't return requests for comment.

The suit, filed by Mr. Allen's Interval Licensing LLC, lists violations of four patents for technology that appear to be key components of the operations of the companies—and that of e-commerce and Internet search companies in general. The suit seeks damages but doesn't specify an amount.

The technology behind one patent allows a site to offer suggestions to consumers for items related to what they're currently viewing, or related to online activities of others in the case of social-networking sites.

A second, among other things, allows readers of a news story to quickly locate stories related to a particular subject. Two others enable ads, stock quotes, news updates or video images to flash on a computer screen, peripherally to a user's main activity.

Mr. Allen bankrolled Interval Research. During its heyday, the lab employed more than 110 scientists, physicists, engineers, "and was at the forefront in designing next-generation science and technology," the suit says. The lab's co-founder David Liddle, a former Xerox Corp. researcher, couldn't be reached for comment.

The lab worked on numerous projects, with goals to create technology to use in Mr. Allen's ventures in cable-TV and telecommunications. In later days it also focused on developing technology to license to others. Over a decade, Interval was issued about 300 patents.

According to Friday's suit, Interval Research was listed in Google's "credits" site in 1998 as an outside collaborator and one of a handful of sources of research funding for Sergey Brin and Lawrence Page's research that resulted in Google seo. Google declined to comment on any ties to Interval.

Interval Research's developments included cellular voice-processing technology and motion-detection technology used in games that allows a computer to "see" commands. It also created a "smart" toy called "Red Beard's Pirate Quest" and later sold the technology behind it to Lego Group.

Work at Interval Research was phased out after plans for commercializing its technology didn't pan out as expected.

Verizon’s Pact With Google Would Keep Internet Open, Tauke Says

Bloomberg / Business Week

 

Verizon Communications Inc.’s proposal with Google Inc. for Internet-traffic rules will meet demand for an open Internet, said Thomas Tauke, Verizon executive vice president for public affairs.

“We need to get this right” to promote investment, Tauke said in a speech at an Aspen, Colorado, conference.

U.S. regulators and lawmakers are considering what rules are needed to keep companies from throttling rivals’ Web traffic. Verizon and Google announced a proposal on Aug. 9 that would bar providers from selectively slowing content traveling over their wires while exempting Web use on mobile devices from government regulation.

The Google-Verizon accord may lead to discrimination against some wireless Internet traffic, and a provision allowing special services might “create a tiered ‘private Internet’ reserved for a few big corporations,” the Washington-based advocacy group Free Press said in a statement.

Tauke, at the Aspen Forum organized by the Washington-based Technology Policy Institute that studies innovation, said consumers would benefit from added services.

“We want to protect the Internet but we also want to offer consumers more services,” such as remote monitoring of blood pressure, Tauke said. “The broadband platform, in addition to the open Internet, is the platform for innovation and growth in the years ahead.”

A U.S. court rules in April that the Federal Communications Commission didn’t have authority to regulate Comcast Corp.’s Web practices. FCC Chairman Julius Genachowski has proposed to reclaim power by applying rules written for telephone service.

Verizon, AT&T Inc. and the National Cable & Telecommunications Association representing Comcast and Time Warner Cable Inc. oppose the idea, which is backed by Free Press and Consumer Federation of America.