April 20, 2007
Google Draws a Complaint to the FTC and a Little 1984 Thrown In
The concern that the Google purchase of DoubleClick will violate consumer privacy rights has generated a formal complaint to the FTC. The Electronic Privacy Information Center (EPIC), the Center for Digital Democracy (CCD), and the U.S. Public Interest Research Group have filed a document with the agency requesting that the merger be blocked. Google has said that it does not intend to merge databases from DoubleClick with its own, at least containing personally identifiable information.
Part of the concern is that anonymity is not enough. When AOL accidentally disclosed anonymous, raw search data, the New York Times was able to identify some consumers. One can ask, however, if someone types in personally identifiable information in a search engine - name, address, social security number - over a series of searches, what expectation of privacy can you have? In AOL's case there is some grievance because the company wasn't supposed to disclose the data at all. Their own researchers could conceivably have figured out who these people were without disclosing anything to the general public.
If the potential of Google knowing who you are for targeted ads scares pubic interest groups, then the Google Web History will scare all types of extraneous material out of them. The Google Tool Bar combined with a Google account will cheerfully track your every move on the web and just as cheerfully tell you where you've been. I've tried it and it goes way back. But before anyone gets scared about it, you have to be logged in to Google when searching or browsing, and if you use multiple computers, your history will only be available for that machine, not all of them. I'm basing that on the fact that the searches I've done at home do not show up when I logged into Google at work. You can also limit the tracking to page view or search history. For those who have a Google account and the toolbar, you can find out what Google has on you by clicking here. And as for the public interest groups, Google doesn't need DoubleClick to know where you go. Nor does Yahoo!, or Microsoft, or any other web service where you have a sustained login while on the web.
April 19, 2007
Google Up, Yahoo! and Microsoft Down - What Else is New?
Google reported net income this afternoon of $1 billion on revenues of 2.53 billion. This is a first quarter profit gain of 69%. Yahoo! in contrast fell 11% to $142 million in income on sales of $1.18 billion. Market share percentage of search puts Google at 48%, Yahoo! at 28%, and Microsoft at 11%. Yahoo! held at 28% but Microsoft fell 2% in the last quarter, so that Windows Live thing must really be (not) working out.
Yahoo! Sued Over China Disclosures
Yahoo! is being sued in federal district court in San Francisco by the wife of a Chinese dissident who was tried and convicted on the basis of evidence supplied to Chinese authorities by Yahoo. Wang Xiaoning used email accounts to post information to online forums and other public areas of the web that called for democratic reforms in the People's Republic. Yahoo!'s agreement with the Chinese government is to turn over information upon request in order to do business in that country.
Google and Microsoft have similar understandings with China as a condition of participating in the Internet market there. All three companies came under fire by congress for cooperating with the Chinese government rather than resisting in suppressing free speech. A hearing was held in the House on February 15th, 2006 entitled "The Internet in China: A Tool for Freedom or Suppression?" Links to the hearing transcripts, including a document from Yahoo! responding to specific questions by the committee are available on this page. Here is an excerpt that is relevant to the current lawsuit:
2. Describe the legal process by which Yahoo! receives a request to censor or provide electronic information. What documents does the government of China present and how specific are the documents?
• The procedure that Yahoo! China utilized when Yahoo! Inc. had operational control of the China business prior to October 2005, was that Yahoo! China responded only to officers authorized by their respective law enforcement agencies to submit a law enforcement demand. Yahoo! China required the information demand to be in writing on official law enforcement letterhead with official agency seal. Yahoo! China only provided information as legally required to comply with government demands and construed demands in the narrowest way possible to avoid revealing any unnecessary information about our users while still complying with the legal demand. A demand was always for specific information relating to an exact user ID.
3. Describe the established procedures for handling Chinese requests for censorship and Yahoo user personal information? Are there requests for clarification? Are there automatic referrals to U.S. headquarters/legal counsel? Are there legal appeals?
• When Yahoo! China had operational control of the China business prior to October 2005, Yahoo! China employed a rigorous process for responding to such demands. Yahoo! China responded only to officers authorized by their respective law enforcement agencies to submit a law enforcement demand. Yahoo! China required the information demand to be in writing on official law enforcement letterhead with official agency seal. Yahoo! China only provided information as legally required to comply with government demands and construed demands in the narrowest way possible to avoid revealing any unnecessary information about our users while still complying with the legal demand. Unfortunately, to our knowledge, there is no process for appealing such a demand in China. PRC law gives law enforcement authorities the right to demand and receive user information in the exercise of their investigative powers. These matters were dealt with by legal counsel in the Beijing office and were not referred to U.S. headquarters.
4. In what circumstances would you refuse a Chinese request?
• When Yahoo! China had operational control of the China business prior to October 2005, Yahoo! China’s process required that law enforcement provide such demands in writing from specific, authorized officers. Arbitrary and extra-legal demands were not complied with by Yahoo! China.
Yahoo! China has in October, 2005 merged its business in China with Alibaba.com, their original Chinese partner. Google, Microsoft, and other Internet services have similar partnership agreements with local providers per Chinese law.
The complaint was issued on behalf of Yu Ling, wife of Wang Xiaoning, by the World Organization for Human Rights USA. Claims are based on provisions of the Alien Tort Statute, the Torture Victim Protection Act, the Electronic Communications Privacy Act, and a number of California statutes. A PDF copy of the complaint is available from links on the main page of the organization.
The complaint reads as much as a diatribe on Chinese human rights practices as it does a legal document requesting relief and damages. Some of the language is conclusory, but there is probably enough there to keep it in court for a while, at least until the proofs are developed. The proofs will be the interesting part as much of the evidence for the alleged torture of Wang is in China and may not be available for presentation to a court in San Francisco. Yahoo! is certainly complicit in the prosecution of Wang according to the complaint. The complaint alleges that the turnover was voluntary rather than through a subpoena process as occurs here in the United States. Some of the alleged evidence comes from documents developed at Wang's trial identifying Yahoo! as the source of information tying Wang to the email address used to spread anti-government information.
When congress held hearings on U.S. Internet providers as working with the Chinese to suppress political speech, there was a lot of thunder about creating legislative solutions to how these businesses should operate. No legislation ever did come out of these hearings in the 109th congress nor is there anything of note in the current congress. The lawsuit may focus attention on the issue again, but unless Yu and the World Organization for Human Rights USA can get past the allegations, all the suit will be is more publicity for a problem with no foreseeable solution.
The Conundrum with China is that it is a huge developing market with a government that is not designed in the image of western democratic principles. We want access to the masses for the money, and look the other way relative to human rights practices in order to get that access. That alternative look gets uncomfortable sometimes, and Wang's case is a perfect example. It's too soon to expect the Bush administration to get involved, if it does at all. There are extensive western business activities in China that are jeopardized if human rights are pushed too far. That's the practical problem the administration faces: how to remake the bad parts of this relationship while keeping the good. An absolute stand on principle doesn't seem to be the obvious solution. Google, Microsoft, and other businesses will be watching how this develops.
April 18, 2007
More on Google's DoubleClick Deal
There's an interesting take on the Google/DoubleClick merger in the San Francisco Chronicle column by David Lazarus. He highlights the privacy concerns that some have about the merger, but quotes a consultant who claims that people care less and less about privacy or being tracked by advertisers. Google has indicted that it wouldn't necessarily combine the data from searches with DoubleClick advertising cookies as a response to privacy concerns. But as any situation where money is concerned, it comes down to whether government regulators impose conditions while allowing the purchase.
Web 2.0 Participation Low for Uploaders
Web 2.0 looked to democratize the web in some respects. The idea of participatory web sites where individuals would upload creative content is fueling another dot com boom. Now there are measures to how this is all proceeding. Hitwise studied traffic at the popular interactive sites and the results are somewhat surprising. Only 0.16 percent of visitors to YouTube actually upload content. One must ask, then, where does all that video come from. Maybe Viacom is on to something. A slightly higher percentage, 0.20 percent actually upload images to Flickr. Wikipedia has a better draw with 4.2 percent of visits for editing purposes.
This hasn't stopped visitors from flocking to so-called Web 2.0 sites. It just means that web visitors are just as passive about content as they are with other entertainment sources. Could this mean that when people get bored with video sharing and photo sites that they might move on to something else? What's hot doesn't always stay hot. We'll all know when that happens as the buzz will be about Web 3.0.
April 17, 2007
Sony Does It Again
Sony has reached media marketing nirvana. It has managed to place DRM restrictions on some of its titles that won't let the movie play on one of its own DVD players. The consumer bought the movie, bought the player and can't play the movie. Why should Sony care? They have the money. Warranty of merchantability? Sony has the money. Now, if the labels can figure out how to sell you songs you can't play, that would be heaven to them.
Read the story in the Inquirer.
Internet Radio Takes a Substantial Financial Hit
Is Internet radio dead, killed by the finances of royalties. If it's not dead, it is certainly on life support after yesterday's decision by the Copyright Royalty Board. It effectively denied appeals from the broadcast industry over the rates set in March, which many broadcasters feel are prohibitively expensive. They now require a per song/per listener amount. Unless one is a big broadcaster such as Clear Channel, who can afford that? Certainly not the little guys. And who listens to Clear Channel anyway if looking for new and innovative artists? Even Clear Channel type broadcasters might have a little trouble with this as the rates they pay for over the air broadcasts are significantly less.
According to the folks at Savenetradio.org, about 7 million people listen to Internet radio per day and between 50 and 70 million listen per month. 20 million of those in the coveted 18-34 demographic range listen on a weekly basis. The higher rates are likely to shutter sites almost immediately as the rates are retroactive to 2006. Radio has been the traditional place listeners discover new artists. Internet radio is one of those places that is more adventurous in programming decisions. But more variety in listener tastes actually fractures the labels' ability to make money off of artists they don't control. Maybe that's the real enemy here.
Record labels applaud the new rates as fair compensation. But the effect may be to close off a market where the label product is no longer exposed to new listeners. A royalty can't be charged for a song that isn't played. Funny how that works out. And lack of Internet radio may just drive the audience to other means of discovering or acquiring music where no royalties are paid to labels or artists. Again, funny how that works out. Sirius and XM may also be a bit put off by the decision and the after affects. They argue that the audience has a variety of sources in which a combined company will compete against. The demise of Internet radio as a significant competitor just pokes a hole in that view.
There is one more possible appeal left to the federal courts. The Board was pretty definitive that there was no new evidence that would change their earlier decision. It may be difficult to persuade a court the third time around. Most expect congressional relief, especially from a democratic majority. We'll see.
The order is here.
April 16, 2007
Google to Buy DoubleClick
Steve Ballmer is probably grinding his teeth over this one, or throwing more chairs. The news came late Friday that Google is to acquire DoubleClick, the premier seller of banner ads to web sites that includes lofty sites such as AOL and News Corp. These are pretty hefty properties.
Microsoft issued a terse statement asking regulators to closely scrutinize the deal over the amount of control the deal would give Google over the online advertising market. Google can track searches by web site and with DoubleClick can combine that with click trails on web sites serving DoubleClick ads. Microsoft's concerns may come from their own negative experience with regulators, or it may come from sour grapes over the fact that Google beat it and Yahoo! out in making the successful bid. It's not as if the latter two do not track searches through their engines, and it's not as if they can't combine that with DoubleClick information to compromise user privacy. All of this, of course, assumes that Google intends to make the feared privacy combination.
Regulators will have to take a look at this because of the respective market shares. Google approaches almost half the online advertising market with Microsoft and Yahoo! not even that combined. News reports indicate that various national authorities will have to take a look at this as both Google and DoubleClick are global companies. See the article in The Age from Australia for a sample of foreign market issues.
Not exactly lost in the news was Google's announcement of a deal to sell advertising on Clear Channel Communications radio stations. Clear Channel is the largest owner of stations in the United States. Google will have access to approximately 5% of the radio giant's commercial air time. The deal is to run for several years.
Stockholders and analysts have long complained that Google is a one trick pony when it came to making money. No one is still sure how they plan to make money on their YouTube acquisition other than to sell ads with the videos. If the DoubleClick and Clear Channel deals are any indication, Google will grab as much market share as possible to make sure that pony generates as much cash as possible for as long as it can. That would be one very good trick. Google is reporting quarterly revenues on Thursday after the bell. We'll see if there are any surprises.