Silicon Valley Watcher - reporting on the business of technology and media

VeriSign (NASDAQ: VRSN) recently won an important deal with Microsoft (NASDAQ: MSFT) choosing its secure OpenID log-in technology for users of HealthVault to safeguard their medical information.

[Microsoft Selects VeriSign to Provide Secure Log-In for HealthVault Users from VeriSign]

This was a feather in the cap for VeriSign which has been working hard to establish its credentials as a provider of a growing number of secure computing services.

I spoke with Gary Krall, technical director of VeriSign's OpenID platform. "Microsoft chose our solution because we offer strong authentication services along with OpenID, this offers extra security." This extra security is part of the VeriSign Identity Protection system which offers "end-to-end identity protection."

Here is how it works:

When a user logs into their HealthVault record using VeriSign OpenID secured with a VIP credential, they will be prompted for their OpenID user name and password, and then asked for a one-time-password (OTP) generated by their VIP credential. The process makes it extremely difficult for fraudsters to access accounts illegally because it combines something users know (user name/password), with something they have (a VIP credential). Moreover, as the same credential can be used by other members of the VIP network, users have the convenience of utilizing these credentials to secure their identities across multiple Web sites.

Extra security is exactly what users need to safeguard medical data. Mr Krall said that the authentication is carried out on very secure servers situated in data centers around the world with high reliability. "It is probably a better use of Microsoft's resources to have someone else run the secure systems for them."

Microsoft has run into security problems in the past but it is rebuilding its reputation, its probably better to outsource that function to a company such as VeriSign, which already has a good brand in security. Also, VeriSign is one of many providers of OpenIDs, others include Google, Yahoo, AOL etc. Those other companies are more direct competitors to Microsoft in key Internet markets, again, making VeriSign a better choice.

VeriSign Labs . . .

I also spoke with Fran Rosch, vice president, Identity and Authentication Services. "The identity service is developed in VeriSign Labs and we don't yet have a business model for it. We are looking to launch additional services around OpenID that could give users greater control over their information."

This makes perfect sense for VeriSign to distinguish its OpenID by offering additional services. And it is something other companies offering OpenIDs will need to do if they want to build a business around these "community" IDs.

OpenIDs need DNS services . . .

Potentially, VeriSign could extend its services way beyond the means of anybody else because it helps run the core of the Internet with its Domain Name System (DNS) servers. Every time your web browser pulls up a website it consults a DNS server to find its location. It's a huge number of queries. [ The Domain Name Primer]

During the 1st quarter, VeriSign processed loads of more than 50 billion Domain Name System (DNS) queries per day, with each query representing an instance of an Internet user accessing a Web site or through sending email. The VeriSign DNS continued to maintain 100% operational accuracy and stability throughout 2007 - just as it has for the past decade.

The VeriSign Domain Report – June 2008 >>

Interestingly, every OpenID is also a URL that means the use of OpenID naturally requires the services of VeriSign's DNS.

Potentially, VeriSign could track OpenID users across the Internet. This could be seen as a positive thing because it would be a way to authenticate users according to their activities and make it difficult for others to engage in illegal activities around OpenID.

There is also a possible negative privacy issue since Americans are extremely sensitive to any type of tracking IDs even though normal Internet use already provides a plethora of tracking technologies through cookies and other means.

A privacy issue . . .

I asked Mr Rosch if VeriSign's DNS business could be combined in some ways with its OpenID services. He agreed that this could be an issue if VeriSign did that but he assured me that the company's very strong privacy regulations would not allow such a business combination.

Still, it seems that the two could be combined for positive purposes, after all, VeriSign's OpenID services already require the use of VeriSign's DNS system.

Could there be a potential privacy issue here? Or could a close interface between secure OpenID services and the Internet's core directory produce a more secure system of protection and authentication for OpenID and encourage its use?

Let me know what you think.

Vuze, a develper of peer-to-peer video distribution technology, today released a report suggesting widespread blocking of "legal Web traffic" by major phone and cable companies around the US.

The organization Free Press, has petitioned the Federal Communications Commission (FCC) to ensure equal access for all types of Web traffic. The FCC has launched an investigation into the problem.

Marvin Ammori, general counsel of Free Press, said:"Vuze's report suggests what many have feared all along: In addition to Comcast, other phone and cable companies may be censoring legal Web traffic over their networks. Many industry practices remain unknown and are increasingly difficult to detect.

Consumers and innovators cannot be expected to police for abuse, nor should they have to accept interference until their network provider is exposed. Until the FCC makes it clear that it will not tolerate Internet blocking, phone and cable companies will continue to engage in this harmful practice."

Vuze has released a plugin for PC users that can collect data on how ISPs are blocking traffic. The report is based on data collected from 8,000 users and over 1 million hours of Internet use.

See the Vuze report: http://www.vuze.com/internet_future

Please see:

Readers and Cox speak out on Craigslist block by Cox Interactive

Craigslist founder responds on Cox/Craigslist block

The long tail is a concept popularized in an essay by Chris Anderson, editor of Wired magazine, that points out a characteristic of Internet commerce--the ability to profit from business markets as small as just a handful of potential customers.

Usually the larger the market, the larger the potential reward. Tiny markets reap small rewards. But if you can aggregate huge numbers of small markets there are big rewards to be had. Mr Anderson argues that there is a pot of gold in the long tail of micro-markets that exist within many industry sectors, especially in the media industry.

Silicon Valley startups love the long tail term and often try to work it into a part of their business plans in a bid to impress investors and themselves, that they are forging new business models.

Yet the business of monetizing massive numbers of small markets has been going on for far more than a decade, long before Mr Anderson christened it with a term.

The Internet's largest businesses such as Google, Yahoo, Ebay and Amazon, have all executed very profitable long tail business models. This was called small and medium business (SMB) markets. These days it is the business of small (BS) markets, this is the long tail.

If you look around, many of today's competitive battles can be seen as fighting for the spoils of ever smaller markets. MySpace and Facebook for example, are living off of the market opportunities around groups of friends. Most of these groups are made up of just a few dozen people and represent tiny markets.

To monetize tiny markets companies have to figure out how to attract customers. Marketing expenses are traditionally a very large cost of doing business. A traditional approach would wipe out any potential profits in small markets.

One solution to attracting potential customers is to have compelling content and services. But to make money the content has to be free, or as close to free as possible. For example, Google scrapes its content for free, it is harvested by machines from any web site it comes across. It serves up that content as part of its search service, which costs little per search--an index is very scalable and easily leveraged against billions of search queries.

The current generation of Internet giants has figured out an even easier way to gain free content, and also much better content--content that is of huge interest to individual users, and is individual to those users, which means lots more repeat visits. That's what is called user generated content and that's what every Internet company wants.

Facebook, YouTube, MySpace, and many other sites, are competing to attract as much user generated content as they can, because that generates massive traffic flows to their sites, with very low customer acquisition costs.

Free content is a great business model and it seems also to be the best way to monetize long tail markets.

The accepted notion these days is that the long tail represents an untapped bonanza of business opportunities. But I'm not so sure following a discussion I had this week with David Scott, the CEO of 3PAR, a top supplier of data storage systems for massive data centers.

Here is part of that interview . . . (more) And there is more to come on this topic.

It is a sunny, crisp mid-afternoon, and Gurbaksh Chahal, the CEO of BlueLithium advertising network,  is wearing a stunning blue striped suit by a French designer as we walk along a dowdy part of Divisadero Street, in San Francisco. I am meeting with him and top brand management executives from Anheuser Busch, who are dressed more conservatively,  to discuss plans to use online social networks to sell beer.

The research group of BlueLithium, the second largest US online advertising network, last year came up with an idea for MingleNow. It is an online social network organized around the offline world.  

Since friends gather around the same bars, restuarants and clubs, there is a potential opportunity to create social networks built around these common points of community. (SVW: MingleNow - social networking that mingles online and offline.)

Following a private beta last year, BlueLithium is making a big push with MingleNow this year. Its goal is to have 2m active users by the end of 2007. And Mr Chahal has landed Anheuser Busch as a key launch partner for the venture.

Tom Shipley, director of Global Industry Development at Anheuser Busch explains the reasons for the alliance. He shows me charts of beer consumption over the last 35 years.

He points to the problem: beer's high point was in 1995 when it reached a  61 per cent share,  compared with hard liquor and wine. By the end of 2005 it had declined to 57 per cent.

"For the last 18 months we have been running a campaign called "Here's to beer" which we have funded and which promotes the entire beer industry not just our brands. It highlights the positive, social aspects of beer drinking, and we hope it will reverse the trend," he says.

With the rise of social networks such as MySpace, Friendster, etc, there is an opportunity to see if there might be a mutually beneficial relationship between the two "social" products/services.

For the next stage of the "Here's to beer" campaign, Mr Shipley says Anheuser Busch wanted to team up with known experts in online social networks, people that know what they are doing, people that know how to build communities.

I pointed out that BlueLithium is not yet an expert in this area, and it doesn't have a proven track record in building social networks.

"We were attracted to MingleNow's goal to have 2m users and its vision.  It is also focused on the 21 to 25 year old demographic that is also our target. And we know that that demographic doesn't like direct marketing so we are trying a different approach with MingleNow."

There is a promotion called "Clink" that encourages people to upload photos of themselves clinking beer glasses with others. Those with the most photos win prizes and trips.

Mr Chahal says that the Clink promotion plays well with MingleNow's viral expansion strategy.

"We are not spending much money to market MingleNow, we believe it should grow virally so that it becomes a key part of people's communities. We have been to venues and have taken pictures of people and uploaded their photos to MingleNow. That's a great way to get people to come to the site, to register, and to start using it."

The contrast between Mr Chahal's designer blue suit, and his more conventionally dressed clients, perfectly illustrates the sharp contrast between the older worlds of marketing and promotion, and the new emerging forms of online promotion. And that is precisely why BlueLithium is building MingleNow, to discover those new forms advertising.

"MingleNow is not about traditional online advertising, using banner ads, etc. It is about mining the data to feed back into our advertising network," says Mr Chahal. "We believe that when we get to at least 2m active users, that will create a data stream that will be very useful in improving our business."

It's an ambitious goal for this very young (2004) privately held company, that has already reached $100m in revenues.

What is the metric for success I ask  Mr Shipley? He points to his charts and the year 2005, "When this number goes up," he says.

It could potentially be a perfect partnership. After all, beer has helped build social relationships for centuries--maybe online social networks can now help build sales of beer. 

. . .

Additional Info:

MingleNow - social networking that mingles online and offline

I just got an early briefing on an interesting idea for social networking coming out of BlueLithium, the online advertising agency headquartered in San Jose, CA. It's an idea developed in Blue Lithium Labs, the R&D component of the...

Posted by Tom Foremski on June 12, 2006 3:30 PM

MediaPost Publications - 5 Questions for BlueLithium's Gurbaksh

The Web 2.0 conference is happening this week in San Francisco. And these days, lots of startups characterize themselves as Web 2.0 companies because their products offer collaborative tools, sharing of virtually anything, and their products use AJAX.

Most of the Web 2.0 companies offer products that are very, very similar to each other. They all enable communities to share or not share their content or applications, and to do it in many different ways, from  using 3D Avatars,  to sending out their content to mobile phones - it all melds into a blur.

It is difficult mustering any interest in Web 2.0 companies unless they have a community of users. And I don't mean "registered users." I've registered for at least 100 sites and never went back.

If a Web 2.0 company can show it has a large enough and growing community of users, then I'll take notice. Just because a Web 2.0 company offers a Swiss-army knife array of collaborative functions, and/or it uses AJAX, means nothing.

Show me your users and that's when I'll take notice. 

Is YouTube a Web 2.0 company? Yes. Is that why it achieved a value of $1.6bn? No. It is the huge community that YouTube managed to coral into one place - that's the $1.6bn of value created.