Shocking: NYTimes Article On Virtual Goods Misses Huge Controversy

By Tom Foremski - November 7, 2009

The New York Times yesterday published a news story on the large profits being made in virtual goods without referring to the controversies that have rocked the sector this week.

In the article: Virtual Goods Start Bringing Real Paydays companies such as Playfish, Zynga, and games such as Farmville are mentioned. But there is no mention at all of the scandal that has rocked the virtual goods sector this week, and in one case resulted in a new CEO.

The closest the article gets to criticism is:

For outsiders, the selling of virtual goods -- items with no actual value in the real world -- might seem the very definition of a swindle.

Instead of reporting the accusation of scams in the virtual goods world, as kicked off by Michael Arrington in Techcrunch a week ago, it lamely reports:

"It's not about the good itself, it's about the underlying human emotion or desire," said Moshe Koyfman, a principal at Spark Capital, which has invested in two virtual-goods start-ups. "The recipient knows the person took time, picked something meaningful and spent money on it."

It's shocking that NYTimes editors would publish this article without any reference to the scams in online games which try to use "underlying human emotion or desire" to trick users into signing up for monthly charges for bogus services and using the allure of virtual goods.

The scams are spelled out in this article: Scamville: The Social Gaming Ecosystem Of Hell.

This publicity has led to virtual goods, online gaming companies and social networks to announce this week that they will be weeding out any scam advertisers and games. And in the case of Offerpal, one of the largest online gaming companies, the company announced a new CEO.

It's shocking that the NYTimes article would not mention the scams and the controversy since it is clearly relevant to the topic. Time magazine managed to notice what was going on: Facebook Game Scams Appear on Phone Bills - TIME. What's going on at the New York Times?

I expect more from the New York Times. I would also expect it to unleash its seasoned reporters and take this story further. After all, potentially millions of people have been harmed by these scams. Large companies such as the telcos are making tens of millions of dollars out of these scams by acting as the billing services. And the social networks are also making lots of money. Follow the money and you have a potentially great story.

Newspapers used to be "muckrakers" uncovering graft in City Hall, publicizing corruption, and looking out for the defenceless in society. I was hoping the New York Times might remember that tradition.

What's the point in running a bland article about virtual goods when there is a far larger story to be had? And why is there no mention of the scams in the article at all?!

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Please see:

Zynga CEO Mark Pincus: "I Did Every Horrible Thing In The Book Just To Get Revenues"

Offerpal Tries Out A New CEO. Shukla, Queen Of Scams, Is Out.

Facebook To Increase Enforcement Of Anti-Scam Rules

Analysis: The Business Opportunities From The Scam And Spam Epidemic

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November 7, 2009 | Permalink | Comments | Subscribe to SVW

Grant Thornton Study: Scary Numbers On The Decline Of US IPOs

By Tom Foremski - November 6, 2009

The lack of IPOs is harming the cycle of innovation in Silicon Valley but if you look beyond our region, it's effect is much larger.

Grant Thornton, a large accounting firm, has published a study that shows the connection between IPOs and the health of the US economy.

And it shows how new listings in Asia are helping to shift wealth and competitiveness outside of the US.

Here are some of the findings:

The scale of the decline in IPOs:
- Just 12 companies went public in the US in the first half of 2009 - 4 were non-US.
- 1997 was a peak year for IPOs, since then it has declined 39% (55% decline if adjusted for GDP growth.)

Asian IPOs:
- Asian growth in new listings is far higher than its GDP growth.
- Hong Kong new listings have doubled since 1997, tripled since 1991.

The US is losing the number of listed companies:
- Just to maintain US listings at the current level would require 360 new listings a year - a level not reached since 2000. There were only 54 in 2008 and an average of 166 a year since 2001.

- The US would require 520 new listings a year to keep pace with GDP growth of 3%.

The study claims the US has lost 22 million jobs because of the lack of new listings.

Pascal Levensohn, Board Member of the National Venture Capital Association (NVCA):

“The inability for emerging growth companies to access U.S. public equity capital by completing IPOs below $50 million inhibits job creation and hurts American entrepreneurs more than any other group. Starved for long-term risk capital in the U.S., the next generation of innovative private enterprises will continue to move to non-U.S. emerging innovation hotspots, where startups are nurtured through attractive capital incentives, if we can’t repair the bridge into public markets.”

The study offers a long list of possible solutions. Here are some:

- Create an alternative public market segment
A public market solution that provides an economic model that supports the “value components” (research, sales and capital commitment) in the marketplace. It requires a parallel market segment that leverages a fixed spread and commission structure.

- Make enhancements to the private market
A private market solution that enables the creation of a qualified investor marketplace – consisting of both institutional investors and large accredited investors.

- Free companies to market their securities more broadly
Eliminate SEC or statutory restrictions on “general solicitation” or “general advertising,” provided the ultimate purchasers are “qualified” investors. Permit companies and analysts to have media discussions of company performance and news...allow investment companies and ERISA accounts to invest a larger portion of their assets in unregistered securities.

- Overhaul verification of QIBs and accredited investors
Rather than requiring the company or private placement agent to verify, shift the burden to the investor to self-qualify (subject to liability for misstatements) for the new private placement market.

- Exempt companies from SEC registration
Permit holding of companies’ shares by an unlimited number of qualified shareholders (eliminating the 500-shareholder and the 100-accredited-investor limitations).

- Self-regulate trading spreads
To attract capital and promote liquidity, this new market must create and preserve economic incentive for its constituents. Allow the market to set minimum quoted spreads and commissions.

- Exempt market participants from holding period
Exempt new market participants from holding period restrictions, and remove the obstacle requiring market participants to purchase unregistered securities with “investment intent.” The “investment intent” requirement hinders the development of private markets, and is unclear and at odds with the very notion of what a market participant is supposed to do.

- Encourage centralized information, control and custody systems Companies should seek out marketplaces that provide systems to support the management and delivery of appropriate disclosure information, and that facilitate the tracking and delivery of shares.

-Research permitted to work with banking
As a market for “qualified investors,” research analysts would be permitted to work with investment banking and be compensated on investment banking business, rather than be barred by FINRA Rule 2711 and the Global Research Settlement.

Foremski's Take:
There is no doubt that the lack of IPOs is harming the economy. However, this study appears to be an excuse to drive large changes in regulations governing the stock market and investments.

This will be difficult to do given the current lack of trust in Wall Street and its enthusiasm to exploit any arbitrage opportunity no matter the cost to society.

There would be plenty of new loopholes for Wall Street to discover with such a large number of new rules.

Also, there is nothing said about changing Sarbanes-Oxley. This is a huge burden on young companies and it is one of the largest obstacles to an IPO.

It would be far better to leave the stock market and investor regulations in place and to focus on reforming Sarbanes-Oxley.

This would be a much faster strategy in opening the door to new IPOs than persuading Congress to pass the many changes in stock market regulations that the study's sponsors have requested. There's little chance of that happening.

You can see the whole study here.

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November 6, 2009 | Permalink | Comments | Subscribe to SVW

AT&T Demos New Apps at SF Showcase

By Tom Foremski - November 5, 2009

I just got back from a demonstration of new AT&T technologies and apps at its annual technology showcase in San Francisco.

There were about a dozen demonstrations. However, there is no guarantee that any of these will reach a commercial stage. They are designed to show off the kind of research At&T is working on in its labs.

I asked John Donovan, chief technology officer at AT&T if Apple's success in attracting more than 100,000 apps had affected the research projects at AT&T and if any apps projects had been cancelled.

He said that there hadn't been any effect on research programs and that the company was working on platform technologies and specialized apps that require tight integration with networks.

He did say that AT&T would soon be releasing some apps of its own such as one that allows users to quickly report any dropped calls and other problems.

These are some of the things I saw:

- Air Graffiti, an application that allows you to use your phone to leave digital graffiti at any location. The graffiti can be anything, text, picture, a link. The core of the app is a geo-database platform.

- Medical monitoring technology in the form of a "telesole." This is an insert into a shoe that monitors the quality of each step. It can send an alert if it detects abnormal steps or a fall. Also, an electronic pill box that helps people to track and take the right number of pills.

- A compact laser projector. This uses a three color laser system connected to an iPhone to project very high resolution images onto any surface without the need for any focusing. Applications in medical institutions. Made possible by new green laser semiconductor generating devices.

- A second-life type simulation of home and work/lab environments where turning on a lamp, for example, turns on a real lamp in the home. It maps the virtual world directly into the physical and vice-versa.

- A geo-location technology that allows mobile phones to communicate with each other using their local Wi-Fi capabilities without the need for a network. Could be useful in emergency situations such as earthquakes where rescuers can communicate directly with each other. This relies on the establishment of a geo/comms standard that is accepted by phone makers and network providers. It can also be used for geo-games.

- AT&T speech recognition technology that can understand terms such as "find all Chinese restaurants around here." It shows map location and contact details. This works surprisingly well and is much more useful than AT&T's 411 service, which costs money, while this is a free app. The speech recognition technology is also used for a TV remote control that recognizes show titles and show times.

The apps were interesting but with with very little information on when, or even if, they will be released, it's difficult to assess if the work by AT&T's researchers is useful in anyway.

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November 5, 2009 | Permalink | Comments | Subscribe to SVW

Steve Jobs: Silicon Valley's Babe Ruth - Fortune's "CEO of the Decade"

By Tom Foremski - November 5, 2009

When I first met Steve Jobs in the mid-80s he was already hailed as a "visionary." I wasn't that impressed.

It wasn't until he had come back to Apple and reinvented the company time and again, and taken risks and failed at some things that I began to appreciate him.

While it is possible to get "lucky" in Silicon Valley, it is very rare to be able to continue being able to build new businesses and continue being successful. Steve Jobs has done that time and again. And he has built incredible shareholder value.

For example, the New York Post, Oct 21, 2009 reported:

shares of Apple soared to a new yearly high and helped Apple's market cap sail past search-engine giant Google for the first time, reaching $179.3 billion, vs. Google's market cap of $174.3 billion.

Money invested in Apple on the day of Google's IPO would have returned far more profit. And the company continues to beat Wall Street expectations nearly every quarter.

Do we have to mention Pixar? The studio hasn't had a single flop - what other movie studio can say that?

You might not like Apple's marketing or the legions of obnoxious fan boys, and you probably wouldn't enjoy working with Steve Jobs because of his notorious micro-management style but you have to give credit where credit is due. Steve Jobs is Silicon Valley's Babe Ruth - he continues to hit them out of the ball park.

Here is Chris Foresman at Ars Technica:

Not a bad list of accomplishments for a man that, despite a bout with cancer and a recent liver transplant, is still a decade away from retirement age.

Fortune Magazine:

Youthful founder gets booted from his company in the 1980s, returns in the 1990s, and in the following decade survives two brushes with death, one securities-law scandal, an also-ran product lineup, and his own often unpleasant demeanor to become the dominant personality in four distinct industries, a billionaire many times over, and CEO of the most valuable company in Silicon Valley.

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November 5, 2009 | Permalink | Comments | Subscribe to SVW

Gartner Prevails In Magic Quadrant Legal Challenge

By Tom Foremski - November 5, 2009

ZL Technologies has lost the first round in its legal challenge against Gartner Group's use of its "Magic Quadrant" classification of tech companies.

Brian Tarran at Research. reports:

District Court Judge Jeremy Fogel agreed with the IT analyst's argument that its Magic Quadrant reports and the positioning of ZL Technologies in the 'niche' quadrant constituted "non-actionable opinion". ZL had argued that its placement in the reports was derogatory "because they are understood by technology purchasers as a warning, by Gartner, that ZL and the ZL products are not good choices for enterprise email archive applications".

ZL has 30 days to file an amended complaint. It had asked for damages of $132m.

ZL had the backing of many tech companies who believe that to get a good placement in the "Magic Quadrant" they need to spend large sums to become a Gartner client.

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Please see: Gartner in the dock over Magic Quadrant | Irregular Enterprise | ZDNet.com

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November 5, 2009 | Permalink | Comments | Subscribe to SVW

PRWatch: Press Releases Must Be Labelled Says Google News

By Tom Foremski - November 5, 2009

Some PR people love Google News because it often distributes their press releases as if they are real news articles written by independent journalists.

"This gets past the gate-keepers!" has been their gleeful mantra. However, studies have shown that nearly one in five people can confuse press releases with real news stories.

That's all the better if you want a press release to pull the wool over people's eyes. But it's not ethical. And it is not a good thing for society because we need to be clear about what is paid-for-content, what is advertising, and what is not.

New rules about site maps published by Google news state that publishers should use the tag to label their content:

The tag takes one or more of the following values, separated by commas:
- PressRelease (visible): an official press release.
- Satire (visible): an article which ridicules its subject for didactic purposes.
- Blog (visible): any article published on a blog, or in a blog format.
- OpEd : an opinion-based article which comes specifically from the Op-Ed section of your site.
- Opinion : any other opinion-based article not appearing on an Op-Ed page, i.e., reviews, interviews, etc.
- UserGenerated : newsworthy user-generated content which has already gone through a formal editorial review process on your site.

This needs to be done "because these properties can directly affect the experience of a user, it is essential to accurately characterize your articles in Google News."

I've advocated the clear labeling of online PR content for several years so I'm glad that Google agrees.

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November 5, 2009 | Permalink | Comments | Subscribe to SVW

Schmidt: Don't Bet Against Silicon Valley - Or Its Weather

By Tom Foremski - November 4, 2009

"Anyone who bets against Silicon Valley is betting against a successful track record of 40 or 50 years," says Eric Schmidt, CEO of Google [GOOG] in an interview with the Wall Street Journal, when asked if Silicon Valley is losing its edge.

You've got the universities. You've also got a very, very effective venture-capital industry, which is very well honed and you have the creations of at least a biotech revolution and a high-tech revolution, and the possibilities of the green revolution being created here.

But despite these advantages, Mr Schmidt believes it all comes down to the weather(!)

When I'm asked about this, and I've been asked this for years, I answer this the same: It is the weather. There's a reason why generations of young people who are willing to challenge assumptions and so forth have ended up in the Bay Area, and the weather is not a small part.

It is a surprising statement. I think the weather is a nice cherry-on-a-cake thing to enjoy. I think people are here for the cake, the layer cake that Mr Schmidt describes. It's not the weather.

If it is about the weather then we should be concerned about innovation centers springing up in Hawaii or Florida.

Here are some additional observations by Mr Schmidt:

Q: A lot of workers in Silicon Valley have been laid off. Do you think they will end up back in the tech sector? Will Google hire them?

A: I don't know about Google.

Q: Many of the industries you have outlined, like biotech and energy, require sustained investment and lots of investment in capital-intensive infrastructure. Does Silicon Valley have the culture to wait for those sort of transformative initiatives to bear fruit?

A: I think it is a mistake to assume that the only interesting businesses are the ones which require no capital like Web-based businesses. I don't see any particular reason why high-cost capital business cannot also be built in the same cauldron as these low-cost ones.

Excellent question but I can see plenty of reasons why capital-intensive businesses won't be "built in the same cauldron as these low-cost ones."

If you take a look at VC funding, there are very few funds willing to invest in businesses that require large amounts of capital. If you add the higher risk of longer periods between exits for many clean-tech/green-tech, pharma, and biotech businesses, even during normal times, that's not going to attract the same type of VC funds that invest in IT software and Web 2.0.

As it is, we don't have enough funding going into Silicon Valley's traditional investments -- that funding certainly isn't going to shift into riskier, longer-term investments in biotech and energy. VC funding is currently very risk averse.

It's surprising that Mr Schmidt didn't mention Google's investments. It is funding several projects in biotech and energy. This includes investments in 23andMe, a biotech startup founded by Anne Wojcicki, the wife of Sergey Brin, co-founder of Google; and investments in solar and wind energy ventures.

Google's investments are expected to make money but they are strategic in nature designed to help seed important new industries -- they are not directly related to its core business.

Google can make such investments without much concern for any concerned shareholders because its founders, and other insiders, own the majority of the voting rights. They own preferred stock with ten times the voting rights of regular shareholders,

Intel Capital also makes a large number of strategic investments but they are all related to its business and are chosen because they will help drive sales of its technologies.

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November 4, 2009 | Permalink | Comments | Subscribe to SVW

Guest Post: Silicon Valley's Sputtering Engines of Innovation

By Guest Writer - November 4, 2009

Guest Post by Sue Lebeck, Program Director of the "Silicon Valley Letters to Washington" initiative from the Silicon Valley Innovation Society.

We are facing an interesting time here in Silicon Valley, and in the entrepreneurial community at large. Just as innovation has been re-confirmed as a critical element of our national success, our once potent "innovation engine" is sputtering and may soon stall.

Our nation, and the world at large, faces an unprecedented array of challenges today. These challenges come in all flavors -- economic, social and environmental. New solutions to old problems are needed now, more than ever. As President Obama recently declared and we believe, we must "innovate our way out of this recession."

Moreover, we must innovate our way out of the constraints of our outmoded ways - whether in the fields of healthcare, finance, transportation, construction, manufacturing, energy, water, or the information systems that control them - the systems which drive our economy need to evolve. But first, the innovation-related structures which drive or impede that process need themselves to evolve.

"Innovation engine" is a potent metaphor for our innovation-driving structures. It reminds us of what is needed, and it underscores what is often missing in our innovation environment today. An engine needs fuel and air to run. The "fuel", if you will, is money: first, "seed" capital for an entrepreneur to investigate a solution; then "venture" capital to launch and grow a company; and finally a "liquidity event", such as an Initial Public Offering (IPO) of stock or an acquisition by another company, that frees the entrepreneur to repeat the cycle. All three types of funding have contracted significantly. Early-stage companies, more than ever, are choking. Many others are DOA.

Equally important to the operation of our engine is "air", the environment in which innovation operates. Laws and regulations, including tax policy, accounting rules and intellectual property rights are critical to support an innovation-friendly environment. Government policies have not kept up with the realities of innovating in a global economy; often they actively, if unintentionally, work against our ability to compete.

The Silicon Valley Innovation Leaders group, an informal collaborative convened through the Silicon Valley Innovation Institute (SVII)in late Spring of 2009, decided to launch an initiative to address the critical issues faced by the entrepreneurial innovation community. We've dubbed this initiative "Silicon Valley Letters to Washington".

This all-volunteer initiative was executed this autumn. Three working sessions over the space of two months produced a collaboratively written letter, viewable in detail at www.svletterstowashington.org. Its authors and contributors seek to share with our policy leaders the financial and environmental reality currently experienced by Silicon Valley entrepreneurs and, we imagine, entrepreneurs everywhere. We are outreaching to those in Washington who direct innovation policy, with a focus on the offices which manage Science and Technology and related policy.

Many additional issues are on our minds, but we wish to focus on these structural fundamentals. Our goal is not to speak just for ourselves, nor for any particular field of innovation, but for entrepreneurial innovators everywhere. Our hope: to engage in a dialogue that will inform and influence future innovation-related policy. For details on this letter, its recommendations, its authors and its audience, go to www.svletterstowashington.org. We hope you will review our point of view. Then, if you are an advocate of innovative entrepreneurship, we hope you will add your name to our cause.

Because, at the risk of being cliché, an innovation engine is a terrible thing to waste.

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November 4, 2009 | Permalink | Comments | Subscribe to SVW

Nvidia Could Be Prepping Intel Compatible Chips

By Tom Foremski - November 4, 2009

As Intel faces the challenge of new anti-trust charges in New York, it could also be facing a new challenge from its Silicon Valley neighbor Nvidia.

EETimes reports:

''We believe Nvidia could enter the x86 CPU business,'' said analyst Doug Freedman of Broadpoint AmTech. ''Nvidia could become a supplier of x86 CPUs by necessity to preserve both GPU and chipset revenue.'' Nvidia (Santa Clara, Calif.) has been quietly hiring former employees of Transmeta, a now-defunct, x86-based processor supplier. ''We believe internally developed x86 solutions are more likely than external acquisitions (i.e. Via Technologies),'' he said in a new report, referring to rumors that Nvidia would acquire Taiwan's Via. ''We believe that Nvidia has hired former Transmeta staff extensively, and that instruction code "morphing" requirements have declined as more x86 instructions have come off of patent coverage,'' he said.

Foremski's Take: Nvidia needs an X86 capability so that it can better compete against Intel in key markets such as netbooks -- a fast growing sector.

It used to be a big project to create an X86 compatible chip, it required establishing a "clean room" where engineers could reverse engineer the microprocessor instructions. But with patent restrictions expiring it could be a faster process.

In today's world graphics processing functions are very important because of the proliferation of graphics user interfaces across nearly all computing devices, and also a wide variety of web browsers available for different types of computers. And video also plays a big part in the user experience. These all rely on graphic processors rather than general purpose microprocessors.

While Nvidia has some of the best graphics processors it can't sell chipsets that also include X86 technology, essential for Windows operating systems and Windows applications. Chipsets with X86 processing capabilities reduce production costs which makes them popular with manufacturers. Nvidia is locked out of these large chipset markets unless it can add X86 compatibility.

Hiring former Transmeta engineers indicates that Nvidia might try the approach that Transmeta used in developing low-power X86 compatible chips. It created a very high performance processor using what is known as a RISC architecture and then ran the X86 code in a virtual environment.

Nvidia, armed with X86 technology, could become a formidable competitor to Intel, and also Advanced Micro Devices in several key markets. It would be a very smart move.

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November 4, 2009 | Permalink | Comments | Subscribe to SVW

Retreevo Study Discovers Vacuous iPhone Users

By Tom Foremski - November 3, 2009

Retreevo, the electronics retail store, has published the results of a study of iPhone users:

The highlights:

- iPhone users are more attracted by a partner's cool gadgets than their college degree.

- 20% of iPhone users watch adult material on their phones (seems very high to me.)

- One third think "old gadgets" are a "turn-off."

- one-third have broken up with their partners by text or email.

- one-quarter have broken up with their partner because they spent too much time on their mobile device (I'm not surprised they spent a lot of time on their mobiles if this is the kind of iPhone user typified by the above behavior.)

I use an iPhone but I don't identify with any of these iPhone users.

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November 3, 2009 | Permalink | Comments | Subscribe to SVW

ResearchGate: A Network For Sharing Scientific Research Results Both Good And Bad

By Tom Foremski - November 3, 2009

I recently met with Ijad Madisch, the founder and CEO of ResearchGate - an online community of more than 180,000 scientists sharing research results, helping each other with research problems, and networking within and beyond their fields of study.

Mr Madisch is a doctor specializing in virology. He grew up in Germany from Syrian parents. He lives in Boston.

Here are some notes from our meeting.

- ResearchGate was inspired by FaceBook. Mr Madisch noticed that one of his friends listed his research in his profile and that eventually led to another scientist being able to offer helpful information for his research project.

- The goal is to help scientists help each other with research and to prevent duplication of research projects. This can speed up the overall process.

- The site is growing at more than 1,000 new members every day.

- Members are rated on the quality of their comments and contributions.

- ResearchGate wants to encourage scientists to write up their research even if it failed. There is a lot of valuable information in creating a large database of scientific research even if it didn't fulfill expectations. 90% of research is not published. A searchable journal of failed research would be very valuable for designing future research projects.

- ResearchGate offers access to seven databases of scientific research. It also publishes the research papers of scientists. Research periodicals are very expensive but scientists are allowed to publish their research results on their personal sites -- ResearchGate profiles act as the personal sites for scientists. Otherwise you have to pay $35 per research paper.

- Some universities are using ResearchGate for private networks. This is a potential revenue source.

- Other revenue sources are an "Amazon" for lab equipment with user ratings and reviews. And job postings. It will never sell user data.

- ResearchGate plans to offer collaboration tools for scientists.

- The largest research sector is biomedical. Next is computer science.

- Future plans include online scientific conferences; a peer reviewed online journal; and more that cannot be discussed just yet.

- The company is angel funded. It has a development team in Boston and in Berlin.

- Mr Madisch's visit to Silicon Valley was to meet with potential partners such as a video streaming company, and others.

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November 3, 2009 | Permalink | Comments | Subscribe to SVW

Analysis: The Business Opportunities From The Scam And Spam Epidemic

By Tom Foremski - November 3, 2009

There is an excellent article by Mike Arrington from Techcrunch on the subject of the duplicity of social gaming networks and social networks as fronts for advertisers that trick people into signing up for monthly "services." [Scamville: The Social Gaming Ecosystem Of Hell]

This is an issue that has been going on for some time. And it's not limited to the social gaming companies or the social networks.

I raised the problem earlier this year when I interviewed Brett Brewer, president of Adknowledge, the largest virtual goods/cash company. [Will Virtual Cash Reinvent Online Ads?]

Mr Brewer said that Adknowledge was aware of the problem and was taking steps to weed out the problem advertisers.

Mike Arrington describes how some of these scams operate:

...users are offered in game currency in exchange for filling out an IQ survey. Four simple questions are asked. The answers are irrelevant. When the user gets to the last question they are told their results will be text messaged to them. They are asked to enter in their mobile phone number, and are texted a pin code to enter on the quiz. Once they've done that, they've just subscribed to a $9.99/month subscription.

There are plenty more variations.

Here is a description of the money that can be made from a self-confessed Facebook spammer: [How To Spam Facebook Like A Pro: An Insider's Confession]

When the Facebook platform first launched, developers used Google AdSense, which was paying 10-15 cent eCPMs, meaning that developers were earning 10 to 15 cents for every 1,000 ads they shown. But soon, ad networks, such as the one I operated, stepped in to show that by using social data and some clever ad copy, we could raise this to well over $6--that's 60 times better than AdSense.

It's not just gaming and social networks where you can find these types of scams. They are everywhere on the Internet. They are distributed by large ad networks.

And there are plenty of grey areas. For example, Experian, the credit reporting firm that owns freecreditreport.com. The New York Times reports:

[The Federal Trade Commission] has long believed that the company that owns freecreditreport.com is deliberately diverting people from a government-mandated site where consumers can get free credit reports by law, and using the reports as a lure for a $14.95 monthly service that alerts subscribers to important changes in their credit status.

Foremski's Take: This deluge of scam and spam is a serious issue because it threatens the future of Internet commerce. The more people ensnared by these types of scams, the less likely they are to buy much of anything over the Internet.

Media companies, for example, are already struggling to make money from online advertising. This will make matters much worse.

The gaming companies, the social networks, the ad networks all seem to turn a blind eye to what is going on because they reap large rewards from these scams. But it is a short sighted strategy because they are selling out their users, their members.

They should be looking out for them not selling them out.

By turning a blind eye these companies are missing a unique business opportunity to offer a safe place for Internet users, to guarantee that there is no scam advertiser on their network, and to insist that their advertisers clearly spell out billing terms.

But this will take courage and it means saying no to large amounts of money. And it will also raise their costs of business because it will require monitoring of ads, and this can't easily done by machines, it requires people.

Silicon Valley media companies such as Google, Facebook, etc, like to do everything by server and software. This is potentially an Achilles' heel that other media companies could exploit.

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November 3, 2009 | Permalink | Comments | Subscribe to SVW

Analysis: Impressive Ribbit Mobile Launch - BT Steps Beyond The Network

By Tom Foremski - November 3, 2009

Ribbit, the SIlicon Valley based subsidiary of BT, the UK telecom giant, this morning launched its Ribbit Mobile service which offers a suite of products ranging from control over phone lines to transcription of voice mail--all managed from a web browser.

Users can make free phone calls over the Ribbit network; they can switch calls to other numbers in mid-call; they can create a "clone" of their phone through a web browser; they can have voicemail messages transcribed, and many other services.

The cost for the premium service is $30 per month. Although Ribbit calls this a "consumer" service it is really designed for the mobile business person, a "road warrior." There is a free, and a $10 a month version with certain limitations.

Ribbit is a platform...

Last week I met with Ribbit CEO Ted Griggs, Don Thorson CMO, and Crick Waters EVP Strategy and Business Development.

It might seem that Ribbit is a developer of telephony applications such as Ribbit Mobile but that's not the case. Ribbit enables applications like Ribbit Mobile.

It has built a technology platform that merges voice and data telecommunications networks over the Internet using a software switch approach. Developers use its APIs to create a wide diversity of telephony services and to integrate them into other applications.

"Ribbit Mobile is a complex service, but yes, a third-party developer could have created it," said Crick Waters, EVP Strategy and Business Development.

A Silicon Valley phone company...

Ribbit likes to call itself "Silicon Valley's first phone company." I have written about the company several times and recognized its potential to disrupt the larger Telco companies.

When it was acquired by BT last year, I was disappointed. I wrote:

It is disheartening if we, as journalists, pick up interesting companies to write about only to see them being acquired by the very companies they are supposed to be disrupting.

Ted Griggs, CEO, said: "The BT acquisition enables us to scale our technology across a large telecoms network. And BT's international business connections become very beneficial in helping us to enter new markets -- it would have taken us much longer if we were to try and do this ourselves."

The acquisition of Ribbit was masterminded by BT's JP Rangaswami, managing director of innovation and strategy.

I met with Mr Rangaswami in July, during a visit to London, and I was impressed with his understanding of how Ribbit's technology could be used to move BT into new markets. I was also impressed by his strategy of moving BT into many types of innovative services, recognizing the business potential in becoming a platform for thousands of third-party developers rather than trying to own the applications.

Google Voice and other competitors...

While there are competing services to Ribbit Mobile such as Google Voice, there isn't any competition in terms of the combined telecoms platform that Ribbit and BT can provide.

This is something that Google will have to address, not just for Google Voice but also for other services. Google will have to partner or acquire a large telecoms platform otherwise it can be blocked in its future ambitions.

Showing developers the money

The key test for Ribbit will come from its ability to attract developers.

Don Thorson, CMO, has come up with an unique way to reward developers. "We will offer the applications for free and then split the revenues with developers based on how much usage they get per month per user."

This is a much better model than for iPhone or Android developers. Apple likes to point to the more than 85,000 iPhone apps but this is not a sustainable business model if just a tiny fraction of developers are making money. The winning platform will be the one on which developers can make money.

Plus, Ribbit developers get access to BT's billing systems and BT's existing relationship with millions of households and businesses.

Clone your phone...

There is another aspect to Ribbit that is very interesting, it allows you to "clone" your phone. A web based version of your phone is available from any computer device. If you were to lose your phone you would still be able to access it from any web browser.

This potentially provides an end-run around all the phone wars and takes BT beyond the phone and beyond the confines of its own network. Android or iPhone, it doesn't matter in Ribbit's world.

Ribbit becomes the point of the spear for BT's new business ambitions while at the same time allowing third-party developers to share in the action.

It's a potent business strategy and one that I don't see at any other telco. It'll be interesting to see how competitors will react. In the meantime, Ribbit and BT have a head start.

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Please see additional coverage:

Ribbit challenges Google Voice with Ribbit Mobile | VentureBeat

Ribbit Mobile’s Launch Shows BT’s Strategy Isn’t Just All Talk

Ribbit Mobile Launches to Challenge Google Voice, VoxOx

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November 3, 2009 | Permalink | Comments | Subscribe to SVW

MediaWatch: More About Embargoes...

By Tom Foremski - November 2, 2009

Last Thursday I was on a panel discussing embargoes. (There will eventually be video of the event.) The moderator was Sam Whitmore, and I was sitting next to Dylan Tweeney from Wired, on my right was Damon Darlin from the New York Times, and Mark Glaser from MediaShift on my far right.

Unfortunately Mike Arrington from TechCrunch couldn't make it, which is a shame because plenty of PR people have told me TechCrunch regularly breaks embargoes and it would have been good to have heard his side of the story.

Dave Needle from InternetNews.com wrote a very good reound-up of what was said: This tech news is not embargoed - InternetNews:The Blog - David Needle

Here is an extract:

While Tweney continues to selectively agree to embargoes (as does InternetNews.com), he said he recently "punished" a PR firm by refusing to communicate with them for six weeks after a competitor was allowed to publish an embargoed story ahead of everyone else. He said the PR firm's excuse was that the vendor, a handset manufacturer, had leaked the news to a blog directly without the PR firm knowing.

The New York Times Darlin said embargoes are generally used as a tool by PR firms to co-opt the media. That said, Darlin said the Times often accept embargoes because they ensure reporters don't miss a story and they have more time to do a thorough job.

That thoroughness is limited. Once you've agreed to an embargo, you can't share that news ahead of time with the analysts and competitors you might otherwise call for comment. Vendors will sometimes provide a list of analysts that have been pre-briefed on their news.

While many took shots at the embargo process and the games PR folk sometimes play, Chris Preimesberger, an editor at eWeek, said embargoes help him get his job done.

"They give me the background information and the time to do the piece right," said Preimesberger, during a follow up Q&A session. He estimates 75 to 80 percent of the stories eWeek does are facilitated by the embargo process, the rest are breaking news.

"I have no problem with the process and don't feel like I'm being manipulated," said Preimesberger.

My proposal that holding a press conference, real or virtual, so that everyone gets the news at the same time seemed to have a fair amount of support as an alternative to embargoes. But overall, I didn't think that we made much progress in creating any new rules around embargoes.

However, I was surprised that there is such a lot of interest in this subject. Embargoes have been around since year dot and we all have our way of working with them, selectively of course. They are not going away, that's certain.

But I think it could and should lead to media outlets rethinking their editorial policy. Do we have to be first with with news? If a dozen other publications also have the news what is our value-add?

There is more to be gained from developing an unique editorial stance than there is from pressing the publish button a few minutes earlier than anyone else..

The panel discussion sparked a few blog posts. Mike Yamamoto, the founding editor of CNET's News.com wrote an interesting post. The absurdity of embargoes

What was especially interesting was his stories about the use of embargoes when he worked in the Washington D.C. bureau of the Los Angeles Times. Government agencies routinely placed embargo notices on their news releases. It's a practice that companies and PR firms have attempted to use too.

For some reason, many companies and government agencies seem to think that simply receiving so-called embargoed material automatically means you have agreed to it--even if you never knew the information existed, let alone had consented to any restrictions, before it landed in your inbox or mailroom unsolicited.

It would be the equivalent of my mass-emailing a contract to sell my house for $10 million, then holding its recipients to the provisions of the "agreement." When they rightly tell me to go pound salt, I would cry foul and claim that they broke the rules.

Mr Yamamoto rightly points out:

Because News.com did not agree to embargoes, therefore, their restrictions did not apply to us. It's impossible to "break" a contract you never agreed to.

Lastly, I feel it is up to the PR industry to police this issue. If they are working with a journalist or organization that routinely breaks their word, then they should not disclose embargoed information the next time.

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November 2, 2009 | Permalink | Comments | Subscribe to SVW

MediaWatch: Mashable Is On A Tear - Continues To Widen Its Lead Over TechCrunch And Others

By Tom Foremski - October 30, 2009

Compete.com provides a rough guide to the traffic of various sites, it's usually on the low side because of the way it collects its metrics but it does provide a good indication of trends.

Over the past year Mashable has been doing very well especially compared to the tech news sector leader TechCrunch.

A year ago TechCrunch had 660,000 more monthly visitors than Mashable (1.63m versus 0.96m). The most recent figures for 09/2009 show Mashable has grown 171% and overtook TechCrunch in May.

Mashable now has 43% more monthly visitors (2.62m versus 1.83m). According to Compete, TechCrunch traffic has been declining since June, and is down by about 10%.

TechCrunch is likely making more money than Mashable, at least for now. Mashable is using the Federated Media (FM) ad network. FM takes a large cut from advertising revenues plus it is selling ads based on prior lower Mashable traffic counts.

TechCrunch dropped FM about six months ago and thus can collect a higher ad revenue. (BTW GigaOm also dropped FM and now uses IDG ad network.)

Here is a graph of Techcrunch and Mashable's performance over the past year plus a look at ReadWriteWeb, VentureBeat, and GigaOm.

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October 30, 2009 | Permalink | Comments | Subscribe to SVW

Are There New Rules For Embargoes?

By Tom Foremski - October 29, 2009

This evening I'm on a panel moderated by Sam Whitmore and organized by Waggener Edstrom:

The topic is:

"Love them or hate them, embargoes are a familiar and much-discussed element of the rules of engagement with media and influentials. Clearly the old rules are not working. Is 2010 the time to re-write that rulebook?"

I'll be discussing this with Damon Darlin, New York Times, Dylan Tweney, WIRED, and Sam Whitmore from Media Survey. Mike Arrington from TechCrunch was going to join us but dropped out.

Mike Arrington has gotten a reputation for breaking embargoes and I know plenty of PR people that won't work with TechCrunch because it harms their relationships with other journalists who do agree to hold the embargo. So it's a shame that we won't be hearing Mr Arrington's side of the story.

Continues >>

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October 29, 2009 | Permalink | Comments | Subscribe to SVW

Happy Birthday Dear Internet . . . The Internet Devalues Everything It Touches

By Tom Foremski - October 28, 2009

Forty years ago today, October 29, 1969 marks the birth of the Internet.

The first command typed in was "lo" which crashed the entire Internet - all two machines. Internet Reaches 40th Birthday Milestone

Undergraduate Charley Kline was given the simple job of logging on remotely from UCLA to the SRI machine; his one command was "login".
The first attempt, however, proved too much for the "interface message processor" or IMP for short - the system crashed as young Charley reached the letter "g".

... 12 years on, only 213 computers being linked up to the network.

The Guardian is collecting stories for its "A people's history of the internet."

To mark the 40th anniversary of the first stirrings of the internet we asked you to tell us your experiences of life online. Hundreds of you responded, and here we present an interactive documentary of your stories and videos, alongside our own research and interviews with key figures (About this project)

Foremski's Take: The Internet is the most significant collection of communications technologies ever created. It enables huge numbers of new types of businesses and services, many of them replacing pre-Internet businesses.

Anything, any service, business, that can be digitized is open to disruption because of the Internet. The Internet devalues everything it touches.

I define "devalues" in a monetary sense, dollars and cents because clearly it creates tremendous amounts of value. But that value often cannot be quantified or measured, or recovered, in a financial sense. For example, look at the transition to online journalism -- it creates tremendous amounts of value because huge numbers of people read online journalism but we don't have (yet?) a good way to recover the value of that work in dollars.

Journalism is not the only sector being disrupted in this way because of the Internet.

The challenge for Internet based businesses is to figure out how they can transform the value that they create into dollars and cents and then hang onto it.

The challenge is that competitors can continually undercut each other because the costs of providing Internet based services are relatively low and it is difficult to lock up customers. Switching costs are very small for customers.

It helps if you are government regulated. The Telcos, for example are able to make use of VOIP and other advances in communications technologies to reduce their costs of doing business yet they are still able to raise the price of their services. Being a government regulated industry helps them keep competition away.

But if you are in the music industry, movie industry, journalism, software services, cloud computing, if you are a software engineer, if you are a web designer, if you design logos -- if you do any kind of digital work you are exposed to a huge amount of competition, you are exposed to the lowest cost provider in your sector -- thanks to the Internet.

It's interesting that countries spend billions of dollars to protect their living standards by limiting immigration because they know that low-cost labor hurts the living standards of their citizens. Yet there are no controls on exporting jobs via the Internet.

That will change or at least there will be efforts made to change this and other aspects of Internet use, because of the disruptive effects that it enables.

I believe the Internet will eventually enable a new golden age but getting there will be very messy.

These are interesting times. Happy birthday Internet.

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Please see:

A Saturday Post: The Internet Devalues Everything It Touches, Anything That Can Be Digitized - SiliconValleyWatcher

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October 28, 2009 | Permalink | Comments | Subscribe to SVW

Our Local Schools Should Be Showcases Not Basket Cases - GOOG Ups Its Schools Focus

By Tom Foremski - October 28, 2009

The promise of distance learning through the Internet has yet to be realized and I'm puzzled why this is the case since it should be possible to collaborate on creating a great online curriculum. Once it is created it can be easily accessed by anyone.

Why don't we use the social networking and collaborative tools we already have to put together an open-sourced curriculum consisting of text, images, videos, lectures, online volunteers acting as tutors, etc. We have all the technology we need to do all of this today.

I've always been amazed that San Francisco/Silicon Valley region public schools are so bad. We are inventing the future here, yet we can't use our ingenuity, our technologies to improve our local schools? Our public schools should be showcases, not basket cases, we should be ashamed to allow this to happen.

So it's good to see Google becoming more interested in schools because there is a lot it could do to help, especially in terms of projects like its Google Books. Maybe it could help to provide text books. It's incredible how expensive textbooks are.

For the past two days Google has hosted a conference on its campus: Breakthrough Learning in a Digital Age. The goal was to "create and act upon a breakthrough strategy for scaling up effective models of teaching and learning for children." It's not clear what breakthrough strategy has emerged but at least it's a start,

Dan Fost writing at Los Angeles Times has a report on the conference:

[Sergey Brin] advocated putting all textbooks on computers, to make for easier access, and for putting high school students to work -- writing Wikipedia articles, and teaching technology to senior citizens and middle school students. In teaching, they will learn.

...he did see a downside.

"When I was growing up, I always knew I'd be in the top of my class in math, and that gave me a lot of self-confidence," he said. But now that students can see beyond their own school or hometown, they see that "there are always going to be a million people better than you at times, or someone will always be far better than you. I feel there's an existential angst among young people. I didn't have that. They see enormous mountains, where I only saw one little hill to climb."

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October 28, 2009 | Permalink | Comments | Subscribe to SVW

Preparing For Spotify - Google Partners To Launch Music Service - Denies Competing With iTunes

By Tom Foremski - October 28, 2009

Google launched it's much anticipated music service today, partnering with Lala, Pandora, Rhapsody, imeem and MySpace, to provide music streaming services on Google search pages.

Searchers will be able to hear songs for free for the first play but must pay a fee for subsequent plays. LaLa charges ten cents per song for a lifetime streaming license.

The Los Angeles Times reports:

Google itself isn't paying record companies for the rights to play millions of songs on its search page; its partners are. Those include Lala, Pandora,imeem, MySpace Music and Rhapsody, a subscription service from Real Networks. All have licensing agreements with record labels to stream or sample millions of songs online.

..."We're not in the music business per se," said R.J. Pittman, Google's director of product for the music search project. "We don't license the music nor sell the music directly on Google. We are merely a music search feature."

Experian Hitwise, which tracks Internet traffic, says that music is a popular search term. Hitwise analyst Heather Dougherty writes:

- Out of the top 1000 search terms that took place on Google last week, 6% were music-related (includes bands, music services and content).
- Last week, Google sent 1.48% of their total visits to the Music category and of those visits, 95% of the downstream traffic to Music websites were returning visitors (that had visited Google in the past 30 days).
- Google was the top referral website to the Music category accounting for nearly 30% of the total traffic to the category last week, 5x more than 2nd ranked Yahoo! Search and 6.3x more than MySpace.
- Last week, 15% of the clicks from the search term portfolio of Music that includes the names of over 900 band & artist names resulted in a visit to a Google property, especially YouTube.

US music sites are bracing for the US introduction of Spotify, a very popular European based streaming music service. Spotify could launch before Christmas.

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October 28, 2009 | Permalink | Comments | Subscribe to SVW

MediaWatch: An Example Of Data Journalism

By Tom Foremski - October 28, 2009

For several years I've been writing about the need for "media engineers" part software engineer and part journalist. And others have also started to write about teaching journalism to programmers.

MediaShift . Can Programmers, Journalists Get Along in One Newsroom? | PBS

There is a lot of journalism that can be done by mining data in public databases. Some newspapers now have interactive maps, for example, Oakland Tribune has an interactive map of homicides.

A much better example of data journalism is EveryBlock, which provides a news feed for neighborhoods in all large US cities. Type in your zip code and EveryBlock will email a newsfeed that contains police reports, restaurant openings and reviews, building permits, coverage in the media, and other local data culled from public databases and other sources.

EveryBlock is run by Adrian Holovaty, based in Chicago. It was recently acquired by MSNBC.

EveryBlock was started by a grant from the Knight Foundation and part of its condition was that the EveryBlock publishing software be released under an open source license. It's available to anyone, anyone can replicate what EveryBlock has done.

Adrian Holovalty is a true media engineer, he is also one of the driving forces behind the Django project, an open-source framework for quickly developing web applications for newsroom projects.

Data journalism has had its fair share of critics. But I think it has a bright future as long it it is wrapped within the right context. The temptation is to just publish the raw data without much else and allow the readers to make sense of it depending on how the data affects them.

Data journalism combined with a fair amount of human journalism could be a potent mix, providing context to the content. It'll be interesting to see how newsrooms combine the two.

But most newsrooms lack the software engineering skills to use Django and similar technologies. And with newsroom cuts and the pressure on media business models continuing unabated, we may be running out of time to experiment with data journalism.

That would be a shame because today's media technologies make it possible to create many novel types of media formats. There's a tremendous amount of innovation that can be done with media formats. I've got a few ideas myself that I'd love to try out but unfortunately I, too, lack the resources.

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October 28, 2009 | Permalink | Comments | Subscribe to SVW