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Monday, March 31, 2008

Google looks to handhelds for revenue

On a chilly February morning Andy Rubin hustles past equation-filled whiteboards in a two-story building on Google's Silicon Valley campus.

Rubin, a computer scientist who builds robots for fun, has spent three years in this top-secret sanctum of the Googleplex.

He's putting the final touches on one of the most ambitious and potentially humbling projects the internet juggernaut has undertaken: an operating system for mobile phones that's designed to give Google the same grip on the mobile web that it commands in online search on personal computers.

"We've reached the point where anyone can build a cell phone," says Rubin, 44, dressed in blue jeans and a red T-shirt as he explains why Google is piling into wireless, the internet's new frontier.

"What's important now is software, having the next cool application."

After luring an audience that tops 588 million people who search in more than 200 languages, and winning 72 per cent of the $22.5 billion ($24.4 billion) in annual advertising linked to web queries, Google founders Sergey Brin and Larry Page are looking beyond the PC for growth.

Fewer Googlers are clicking on the text ads that run alongside Google's search results, threatening the area that generated most of the company's $US16.6 billion in 2007 sales.

Turning to telecoms won't make Google's life any easier, as Microsoft already holds 21 per cent of the US market for mobile operating systems.

Winning its bid for Yahoo would give the software giant the most popular site on the mobile internet, with 28 million combined subscribers, according to Seattle researcher M:Metrics. That compares with Google's 14.5 million.

Meanwhile, the phone companies that control the wireless networks aren't likely to bow to Google at the expense of Apple's iPhone and other hot products.

Ralph de la Vega, chief executive of AT&T's wireless division, says a so-called Google phone could probably become just one of the many offerings in AT&T shops.

originally posted by Australian IT

Friday, March 28, 2008

Yahoo Endorses Social Networks

Yahoo Inc. is joining an effort backed by Google Inc. and News Corp.'s MySpace to spur the creation of applications for social networks, a small but growing area of interest among software developers.

Yahoo said Tuesday it will endorse a technical specification called OpenSocial that was initiated by Google and supported by MySpace and other social- networking sites, a sign the initiative is gaining momentum after a slow start last fall. Yahoo, Google and MySpace also said they are planning an independent, nonprofit foundation to provide technology and intellectual-property guidelines for the evolving standard, while ensuring no one company has too much influence over its future.

Yahoo's move could pressure holdouts like Facebook Inc., which has stuck to its own software standards for developers, to join OpenSocial. Facebook, whose investors include Microsoft Corp., has indicated a willingness to license its platform to other sites. A Facebook representative said the company is evaluating OpenSocial. Microsoft, which has made a bid for Yahoo, hasn't joined OpenSocial, either. It declined to comment on if it would do so or to comment on Yahoo's move.

MySpace and Google's social network, Orkut, have both recently launched developer platforms compatible with OpenSocial. But Facebook, whose platform was announced in May 2007, has a head start and already offers some 20,000 applications to its users. MySpace owner News Corp. also owns Dow Jones & Co., publisher of The Wall Street Journal.

Internet companies are initiating the new guidelines to encourage software developers to build a range of entertainment and productivity services to keep users hooked on their sites. Developers, keen to reach the massive audiences, have done so eagerly, building tools like photo-sharing software or games that users can add to their profiles and share with their friends.

OpenSocial was designed to make it easier for developers to create these services across a range of Web sites. Developers can build their applications once and have them run across any site compatible with OpenSocial, with minimal modifications. But in the months after its launch, many developers were disappointed with the technology, which they said had holes and was not widely supported.

On a conference call with reporters, Joe Kraus, director of product management at Google, said developers will potentially be able to reach more than 200 million users through an OpenSocial-based application by next week. He added that the nonprofit will help to drive the effort by formalizing a range of guidelines critical to its success. For instance, the foundation will enable developers and sites to use the OpenSocial specification without fear of patent- infringement suits from contributors.

Wade Chambers, vice president of platforms for Yahoo, said on the call that Yahoo was not yet going to provide details about which Yahoo sites for which developers could build OpenSocial-compatible applications, but he said Yahoo wanted to sign on because it felt the standard was "rapidly maturing."

By Jessica E. Vascellaro
The Wall Street Journal; March 26, 2008

Open Source "Social App Server" Might Crack Garden Walls?

From right here in Philly's backyard, Ringside Networks came out of stealth mode yesterday to launch the first open source "social application server."

And what is that exactly?

It's the software guts of a social network that you can use behind your own firewall, old school style, to build social networking "stuff" into your own site.

Companies that want to build social applications (for runners sharing times at Runlicious) or socially aware marketing programs (like Jeep owners sharing pictures and videos) will be able to use social servers to develop the whole thing on their own websites. Their brand on their site instead of their brand on Facebook next to the "get help for your gambling problem" advertisement.

Developing a social network will be harder to do this way than it would be using a white label network like Ning, but it will be completely customizable, will integrate neatly into the rest of the site, and all the data will be right there for the application owner to mine.

That's the simple version anyway; use social servers to roll your own social apps and sites. But I also wonder how it might upset the balance of power inside the behemoth walled gardens of Facebook and Myspace.

OpenSocial took the first shot at the garden walls with a goal of empowering users to keep their social data portable (well, portable inside Google anyway). However, while OpenSocial promises developers social apps without servers, Ringside is saying that at least some developers are going to want their own stuff under their control. I think social app servers are going to take shots at the wall too, but with the social networking advertisers and application ecosystem as the core constituency.

By supporting Facebook's API (with other API's to follow), Ringside makes it a lot simpler to take a social application written for Facebook and move it to its own site, or visa versa as shown in this picture. This kind of write once deliver anywhere approach to social applications raises all kinds of interesting possibilities.

Like,... Don't want to have to enter your favorite beers into Beer! in both Facebook and Myspace? If Beer! builds their application on a social server that can tie your Facebook user name to your Myspace user name, you won't have to. Facebook and Myspace just become two points of presence for the application, and they'll be on equal terms with Beer!'s own web site. Wherever you log in, you see your beers and (most of) your beer friends.

Facebook opened up this possibility when they designed their platform to have the developer's servers do the heavy lifting. Doing it this way meant they didn't have to provide all of the servers and gear to run the applications, but it also means that it's easier to stick a social server outside the wall and treat it and other branded networks like distribution shelf space. Once an application can seamlessly span the networks, it can do more than map a user's identity across sites, it may also piece together a social graph that is bigger than any one site's. Sort of an application-specific super graph.

In one possible end state, users own all of "their" social graph and data in OpenSocial, and application providers own all of "their" social graph and data in their own social application servers. Meanwhile, the big branded social networks are still in the game with very large "lily pad graphs," but they no longer see the whole picture for any one user or any single application.

As this evolves we may see developers building first for Facebook and Myspace to get quick viral adoption in a huge audience. However, as soon as they can they may start to drive traffic over to their own sites where they can provide a better or different interface with a more carefully managed brand experience. Imagine if NBC let you show your first YouTube video from a planned series at 7pm on Thursday, for free.

Or, developers may use the write once deliver everywhere strategy to deliver their app as widely as possible. Where Facebook and Myspace were once king, in this scenario they may end up as two of many application points of presence with awareness of only a piece of the associated social graph. The successful application developer with a network-spanning super graph might then be free to monetize it however and wherever they can.

Well, at least until the API wars start in earnest. There is a good reason for the server to be open source, it will spread the load of keeping up with all those inevitable API changes.

By: Jim Stogdill
O’Reilly Radar; March 25, 2008

Testing Souped-Up Search Functions

Two Web Services Use Visual Cues; YouTube in 3-D

Search, by nature, doesn't need to be overly exciting stuff. It usually involves typing a word in a box, pressing enter and reading results to find the best one -- and this style works well for plenty of people, as is evidenced by Google's success. But many would like to see search become smarter, more intuitive or even visually stimulating.

This week, I tested two applications that turn searching into feasts for the eyes. Instead of showing search results in lines of text, these results are visually based. One, called SpaceTime, displays search results in three-dimensional views that make images look as if they are flying onto the screen. The other, an actual search engine called Searchme, spreads image results out in fan-like patterns. Both SpaceTime and Searchme encourage people to search by choosing what looks visually familiar or accurate, rather than trying to discern what the text in a link might mean.

The idea of improved search isn't a new one. Many have tried, ranging from Ask.com's media-rich result pages to Mahalo.com's human-powered search engine. But Google's simplicity and experience have made it hard to beat, and competitors know the importance of relevant and reliable results. Rather than comparing these sites with the big G, I looked at them as add-ons that could be especially useful for certain searches.

Searchme, a search engine built from the ground up, is technically in private beta -- meaning that it is still a work in progress and users must be invited to use it. The company gave me access to the site and created a link so that readers of this column could also use it: www.searchme.com/wsj. This Web-based tool works on Windows and Mac operating systems and in any major browser, and it tries to improve search by asking users to choose a category for their search terms.

For instance, when I typed "US Open" in the Searchme box, categories appeared to the right, including Tennis, Squash, Gambling & Casinos and Golf. Since I was looking for the tennis-related grand slam, I chose the Tennis category and saved myself some typing. The more I used Searchme, the more I came to rely on these categories for faster, more-refined results.

Searchme's visual search works by displaying snapshots of Web sites, each of which has the search term highlighted on its page. These pages fan out from the center to look like Cover Flow in Apple Inc.'s iTunes, visually sorting images like album covers in a jukebox so they can be flipped through until the best Web page is found.

By moving a cursor along a horizontal scroll bar below these pages, I skimmed through 10 to 15 Web sites in a matter of seconds, quickly weeding out unwanted sites. But these pages don't allow interaction like scrolling down or playing of embedded videos. A button below these images reveals a list-view where text and links relating to the images are listed, but I kept this option hidden more often than not.

Though Searchme's categories are helpful and I liked using visual searching, I did notice many more results, overall, while performing searches through Google and Yahoo. A Google search for the Regency Hotel in New York City returned accurate links to the hotel's Web site -- and a map. Searchme's first result was a defunct Web page for the Regency, and the younger search engine doesn't yet have maps, news or stock quotes like Google.

Settings can be adjusted for Searchme, including one option to filter out adult content and another to open up new windows whenever a Web page is selected, so as not to lose the current page.

SpaceTime (www.spacetime.com) differs from Searchme in that it doesn't try to be its own search engine. Instead, it is a browser that works with established search engines and Web sites. It isn't Web-based, like Searchme, and must be downloaded to a Windows PC (it doesn't yet work on Macs). The intense 3-D graphics of this program work best on a computer with at least one gigabyte of system memory and 256 megabytes of dedicated video memory.

At first glance, SpaceTime appears to be a normal browser. It has the usual URL line where specific Web sites can be entered and a search box at the top right that can be set to search Google, Google Images, Yahoo, Yahoo Images, eBay, Flickr, YouTube, RSS feeds or Amazon.

But using this search box starts the fun of the product. Search results appear as images lined up on the screen, floating through space and descending into the distance in a 3-D visualization akin to that of Windows Vista's Flip 3D. SpaceTime's dark background gives it a dramatic edge, and each object is reflected in an artistic, glass-like surface. Results can be tweaked, turned, magnified and moved within this 3-D space.

When I performed normal Google or Yahoo searches, the returned results appeared as images of each Web site on which the searched term appeared. When I searched for images on Google, Yahoo or Flickr, the results came back in image-only fashion -- not images embedded in Web sites -- that looked stunning lined up in 3-D. Searches of eBay are especially useful on SpaceTime because each item up for bid zooms onto the screen as its own object along with its current price, number of bids and remaining auction time. YouTube searches return videos lined up in SpaceTime's 3-D environment.

With all of these images flying in and out of the screen, things can get a little overwhelming. One pile of search results is called a stack, and each stack is automatically saved in a dock at the bottom of the screen, labeled with a thumbnail image of where you last left off. Searches can be saved and snapshots of screens can be captured and saved in the dock.

To return results as fast as possible, SearchTime says it will pull up just 10 at a time for image, product and video searches, or five pages at once for content-heavy sites. But in my tests, using two different Vista computers with 2GB of RAM each, I usually never saw more than five results at a time. The next five or 10 images can be retrieved by choosing a "Next Set" button at the bottom of the screen.

On-screen Web sites and objects are interactive, meaning that I could scroll down within a Web page or play a YouTube video within the SpaceTime screen. A clever magnifying glass pops up on the screen to pinpoint the original search term on each page.

SpaceTime allowed me to rapidly flip through tens or even hundreds of images and Web sites in a very short time, but it wasn't perfect. Some search results took a while to load, only displaying the first object while the other lined-up objects appeared as empty frames because they were still loading. YouTube seemed sluggish and wasn't as easy to navigate as some other searches, and Flickr was especially slow to load in a few of my tests.

SpaceTime is working on a Web-based version that won't rely so heavily on each user's PC specs, and Searchme is still in its testing phase, working to return more relevant results. But for now, these two sites turn search into a different, much more visually stimulating experience. After using these programs for a little while, I started to search differently -- moving through results faster and clicking on fewer links that returned unwanted results. Though I'll still rely on Google for basic searches, visual search can save time and turn searching into a fun process.

By: Katherine Boehret
Wall Street Journal; March 26, 2008

AOL Ad Project, 'Platform A,' Plots Plan B

Digital Effort Aiming To Unite Multiple Fronts Faces Various Obstacles

Over the past two years, Lynda Clarizio has helped build Advertising.com, AOL's ad network, into one of the hottest properties in online advertising. Her reward: She gets to try to clean up one of the Internet company's messiest divisions.

Time Warner's AOL unit is aiming to transform itself from an Internet service provider into a full-service digital-advertising business. To that end, it has spent about $1 billion to buy seven ad-technology firms with different areas of expertise, from behavioral targeting to video ads. The next step is to knit them together with Advertising.com -- an entity AOL has dubbed Platform A, but has yet to take to market.

AOL's future largely hinges on the success of that transformation, which involves aggressively slashing costs, forsaking billions of dollars in overall subscription revenue, and laying off thousands of employees. Time Warner Chief Executive Jeff Bewkes has said that mission is key to plotting a new course for a company whose stock price has stagnated in recent years.

But Platform A is off to a rocky start. In its first six months, it has been marked by failed sales targets, tensions among its different business groups, and, most recently, the dismissal of its president, Curt Viebranz. A number of marketers say they are ready to spend their ad dollars with Platform A, but can't because the disparate units still operate independently.

The idea behind Platform A is that AOL can be a one-stop shop for placing ads both on AOL's own Web sites and on the broader Web, through its ad networks like Advertising.com, which sell ads on thousands of Web sites. So far, though, the company is a long way from that reality. AOL is fourth among the major Web portals -- behind Google, Microsoft's MSN and Yahoo -- in ad revenue, and the pace of its ad-revenue growth has also dropped off. AOL's ad revenue grew 12% in 2007, compared with 37% in 2006 and 38% in 2005, according to research firm eMarketer.

Even Advertising.com, a rare bright spot in AOL's business recently, is facing new pressures. A major part of a two-year deal with its biggest advertiser, Apollo Group's University of Phoenix, ended in January. Advertising.com was University of Phoenix's exclusive online marketing partner, managing its ad buys both on its network of sites and on other ad networks. The deal generated $215 million for AOL in 2007, up $58 million from $157 million in 2006, and accounted for 17% of AOL's ad-revenue growth last year. (University of Phoenix will continue to buy ads on the Advertising.com network, but decided to take its ad buying in-house.)

AOL's biggest competitors are developing their own ad networks, which will make life tougher for Advertising.com. "If I get the inkling they are not innovating, I'm going to look elsewhere and talk to Yahoo or any of the other Web giants," says Tom Hespos, president of Underscore Marketing, a closely held digital agency in New York.

AOL executives have picked Ms. Clarizio, 47 years old, to rescue Platform A, which has the widest reach of any ad network in the country -- reaching 90% of the U.S. online audience, according to comScore -- but isn't able to effectively sell across that spectrum yet. A nine-year veteran of AOL, Ms. Clarizio led the deal team that acquired Advertising.com in 2004 for $435 million. That unit has accounted for nearly a quarter of AOL's revenue and is one of the fastest-growing parts of the company.

Trained as a lawyer, Ms. Clarizio is known internally for an analytical mind and an ability to delegate. A graduate of Princeton University and Harvard Law School, she came to AOL from Washington law firm Arnold & Porter, where she was a partner for seven years and also worked as an AOL outside counsel.

While AOL is known as a relatively slow-moving, bureaucratic company, Advertising.com has developed a different reputation. "AOL has reinvented itself so many times. It is hard to keep track," says Adam Schlachter, senior partner and group director at Mediaedge:cia, a media-planning firm that is a part of WPP Group's Group M. "(Advertising.com) has been able to grow steadily, consistently and innovate."

Ad.com grew from a cramped townhouse on the outskirts of Baltimore, where brothers Scott and John Ferber opened a digital advertising company called TeknoSurf in 1998. Their idea was to piece together a network of Web sites where they would buy ad space, then resell it to advertisers at a premium. It changed its name to Advertising.com in 2000.

Ms. Clarizio tried to embrace Ad.com's start-up spirit. The company remained at its Baltimore headquarters, instead of relocating to AOL's Dulles, Va., base, 60 miles away. She dressed up for Halloween and competed in relay races.

She also has tried to get the company's various sales teams and engineers working on common goals. During daily 9 a.m. meetings in Ad.com's "War Room," midlevel executives discuss the previous day's results and chart the next day's goals.

Ms. Clarizio wants to replicate that culture at Platform A, which suffers from duplication among its sales, tech and other groups. Different ad units, for instance, call on the same clients -- in essence competing for the business. One of Ms. Clarizio's first moves in her new post was to announce a "leadership team" for Platform A. The new structure puts in place one sales team, one technology team, one product and operations team, one marketing team and one publisher-services team to cut across all the company's different ad units.

Some digital-advertising executives question whether combining sales teams is the right strategy. They fear Ad.com's emphasis on data-driven results will come to dominate Platform A, frustrating bigger-brand marketers used to the tailored campaigns they have gotten from some of AOL's ad-sales teams.

But Ms. Clarizio is moving full speed ahead with the integration. AOL also announced last week that it has integrated two of the companies that provided separate search-engine-marketing services -- Advertising.com and Quigo, a contextual targeting ad firm AOL acquired last fall. "It's an example of what we need to do across the board. It's definitely an iterative process and takes a lot of work to do that," Ms. Clarizio says.

By Emily Steel
Wall Street Journal; March 26, 2008

Comcast, Time Warner Cable in Wireless Talks

The two biggest U.S. cable providers, Comcast Corp. and Time Warner Cable Inc., are discussing a plan to provide funding for a new wireless company that would be operated by Sprint Nextel Corp. and Clearwire Corp., people familiar with the talks say.

The partnership would create a nationwide wireless network using WiMax technology, which is designed to provide high-speed Web access from laptops, cellphones and other mobile devices, as well as high-quality mobile video. Sprint and Clearwire have been working for months to cooperate on a WiMax rollout and are now trying to raise at least $3 billion for a joint venture.

Under the plan the parties are reviewing, Comcast -- the largest cable operator with 24 million subscribers -- would put as much as $1 billion into the venture, with No. 2 operator Time Warner Cable adding $500 million. The sixth- biggest cable operator, Bright House Networks, is also involved in the talks and would contribute between $100 million and $200 million, people familiar with the matter said. Comcast Chief Executive Brian Roberts has played a prominent role in the talks.

Sprint, of Overland Park, Kan., and Clearwire, a Kirkland, Wash., start-up founded by wireless pioneer Craig McCaw, are trying to line up other funding too. Intel Corp. has signaled a willingness to put in about $1 billion or more, depending on the terms, people familiar with the discussion say. And Google Inc. could provide hundreds of millions of dollars, the people say. The exact amount each would contribute could change, and people involved in the discussions said it is still possible the entire deal could fall through. Google and Intel both declined to comment.

Entering the wireless business is becoming a bigger priority for cable companies as they compete fiercely for customers with telecom giants AT&T Inc. and Verizon Communications Inc. Those phone companies have encroached on cable's turf by entering the pay-TV business and are positioning themselves to offer a " quadruple play" of services that includes landline phone, high-speed Web access, cellphone, and video. "That's obviously a concern, if Verizon can put together a converged service offering that starts to peel people away from cable operators, " said Mark Rowland, head of the wireless practice at IBB Consulting.

Cable companies' push into wireless would mark the next chapter in that escalating rivalry. It isn't clear precisely what wireless services the cable operators intend to offer via the WiMax venture. Executives at some of the operators feel the U.S. wireless market is already crowded, with 80% of U.S. consumers already owning a cellphone.

The companies are likely to try to distinguish themselves with advanced mobile data and video services that take advantage of the stockpiles of content they are already adept at licensing. People familiar with the discussions said some cable companies are looking at options to develop their own mobile devices in partnerships with manufacturers.

Sprint CEO Dan Hesse is pressing all parties to wrap up discussions in time for the wireless industry's trade show next week in Las Vegas, so Sprint can have something to present to investors. In addition to the $3 billion Sprint and Clearwire are trying to raise now to start rolling out WiMax, they will likely need more to complete a nationwide network. Sprint previously had told Wall Street the venture would cost $5 billion by 2010.

Mr. Hesse wants Sprint to begin building the WiMax network quickly so it can get a head-start over competitors AT&T and Verizon Wireless on advanced wireless broadband services. WiMax promises faster speeds than current technologies and a wider range of video and other services.

In exchange for funding the WiMax joint venture, the cable companies would get equity in the business and would be able to purchase wholesale access to the network to offer their own high-speed wireless data and voice services to customers, the people familiar with the discussions said.

The cable industry has been flirting with the idea of getting into wireless for years, but hasn't had a clear strategy. Investors have also discouraged cable companies from embarking on any big spending projects. A consortium of cable operators including Comcast, Time Warner Cable, Bright House Networks and Cox Communications Inc. bought more than $2 billion in radio spectrum in a 2006 government auction but never put it to use.

The same companies created a separate joint venture with Sprint in 2005, dubbed Pivot, that offered cellphone service in about 30 markets by the time it stopped marketing late last year amid low demand. One key problem was that cable providers didn't have significant control over pricing and marketing. They are asking for that control in the new WiMax venture. Comcast and other cable operators have also mulled acquiring a major wireless carrier.

Cox, the third-biggest cable operator, appears to be pursuing a separate wireless push. It acquired 22 radio spectrum licenses for $305 million last week, which would allow Cox to offer wireless service in its markets, predominantly in the south and southwest.

If cable operators dive into wireless, that will put more pressure on satellite TV providers, their other major competitors, to do the same. Satellite providers on their own can't offer high-speed Web access or voice services. Dish Network Corp. took a step into the wireless business through the FCC auction, winning 168 licenses throughout the country for $712 million. DirecTV Group Inc. hasn't announced any plans in wireless.

"This is like a game of three dimensional chess because the cable operators aren't just thinking about how this helps them compete with Verizon and AT&T, but how this helps them block potential threats from DirecTV and Dish," says Bernstein analyst Craig Moffett.

By Amol Sharma and Vishesh Kumar
The Wall Street JournalMarch 26, 2008

Does the Web Deserve The Power It Gained To Influence Politics?

Considering how Barack Obama is one of YouTube's biggest stars -- the video of his Philadelphia speech on race is just the latest involving the senator that, by Web metrics, went platinum -- you'd think he would be one of the site's most unalloyed fans. The other day, though, he was vigorously ambivalent.

Those enlessly played clips showing Rev. Jeremiah Wright making controversial racial statements, Sen. Obama told an interviewer, aren't representative of the man. "I don't want to suggest that somehow, the loops you have been seeing typifies the services all the time," Sen. Obama said. "That is the danger of the YouTube era. It doesn't excuse what he said. But it gives it some perspective."

As with Nixon going to China, it might take an Obama, with solid youth-tech cred, to suggest any downside to the online world. Considering the rapidly growing number of Americans who rely on the Web to follow the election and judge its players -- even if mostly via mainstream-media sites -- it's a good time to look at all the Web does very well with politics, and at what it messes up.

Web videos, especially on YouTube, are a good place to start. They have been called the death of the TV sound bite, for the way voters can experience lengthy realities without the filters of a news show constrained by time limits and commercials. The 37 minutes of Sen. Obama's race speech quickly became one of the most widely downloaded.

Less clear is whether YouTube will be just as bad, or worse, at blurring the line between a fair point and a cheap shot than newspapers or TV ever were.

Elected officials, especially those in small communities, have complained since the invention of the camera that one sure way to get their picture into the paper is to fall asleep at some legislative event, even one that has lasted all night. But if a dozing politician thinks being in the day's newspaper or the night's newscast was a problem, wait until the clip gets viewed eternally online.

Montana Republican Sen. Conrad Burns had plenty of other problems when he ran for re-election in 2006, but the campaign wasn't helped when he was caught shutting his eyes for a few seconds at a Senate hearing on a farm bill.

Videos like these may enjoy the popularity they do because they confirm ideas already held about the politicians involved, in which case blaming YouTube confuses cause and effect. But there is a danger that our politics might be shaped by insignificant events that assume an importance merely by having been caught on tape.

It's not just video that is being refashioned in the Internet age, but words, too, through blogs and other widely democratized forms of expression. Blogs are enormously useful, if only because of the way they allow communities with similar politics to follow the ups and down of a campaign as a group.

When Hillary Clinton or John McCain give major policy speeches, commentators feel compelled to have their thoughts online within a few hours -- even those who work for weekly newsmagazines. And, in keeping with the conventions of blog posts, which rarely go on for more than a screenload of type, they were often expressed in just a few hundred words.

Blogs then, make possible an amazing diversity of lucid ideas, but those ideas tend to be quickly considered and briefly expressed before everyone moves on to the next topic du jour.

Discussion such as this one about the Web and politics usually involve the newest and most glamorous parts of the Internet: the participatory, Web 2.0 neighborhoods, like blogs and YouTube.

One of the biggest electoral impacts of the Web involves one of its earliest applications: email. It's an easy and effective way for people to share ideas with friends about what might be going on with the candidates. By operating person-to-person and under the radar, email can have an enormous and injurious influence before anyone even notices.

The Obama camp learned this earlier this year when emails making false statements about the candidate's religion started showing up in millions of in-boxes. Old-fashioned whispering campaigns usually work only in relatively small, cohesive communities. With email, though, they can be national and nearly instantaneous.

Suggesting that there is both good and bad with the Web and politics isn't to say they exist in equal amounts. Say what one will about the shortcomings of blogs, I can't imagine going back in time to a world where a relatively small number of newspapers and magazines -- even though by and large they were very good ones -- had an effective monopoly on what did and didn't get printed about a campaign.

The Web isn't going away, and so its boosters should no longer feel defensive when its inanities are pointed out. The YouTube political debates where voters submitted video questions, from January, for example, were described as a singular chance for citizens to question candidates directly, which sounded good until one of the questioners presented himself as a snowman.

Because it's such a vastly powerful network, the Internet has the ability either to elevate or to debase the political discussion. Both will be occurring between now and November, though with a little luck, not in equal amounts.

By Lee Gomes
Wall Street Journal; March 26, 2008

Thursday, March 27, 2008

Students Get Tough Lesson In Borrowing

Many Lenders Exiting The Market as Profit Becomes More Difficult

The credit crisis is worsening in the student-loan arena just as students are receiving acceptance letters from colleges. A number of lenders are backing out of the federal student-loan program. They say it's the result of the credit crunch and also government subsidy cuts that have made the business of lending to students increasingly unprofitable.

Big banks, such as Citigroup Inc. and Wells Fargo & Co., might be reluctant to pick up the slack as other lenders exit, because they're already stretched by the credit crisis. The government, already a big student lender, could step in to shore up the system, although that would be complicated.

An estimated eight million students and parents will seek $109 billion from the Federal Family Education Loans program, or FFEL, for the coming fiscal year, according to Education Department data. If lending continues to tighten, it could push up their costs.

"We've seen a dramatic reduction in borrowers' opportunities," says Deborah Fox, founder of Fox College Funding LLC, a San Diego company that advises families on paying for college.

Monday, Brazos Higher Education Service Corp. became the latest lender to suspend new loans to students through FFEL for the 2008-2009 academic year. Brazos, a 33-year-old company based in Waco, Texas, is one of the nation's largest student lenders, with a portfolio of $15 billion in education loans. It joins a list of at least 26 other lenders that have stopped providing such loans, according to FinAid.org, a student-financial-aid publication.

The void they leave already accounts for almost 10% of the total estimated loans needed this year, according to one industry estimate.

"I think you will see a larger number lenders exiting this market," said Sameer k Gokhale, an analyst with Keefe, Bruyette o & Woods. "They are not making money on these loans."

Samara Yudof, a spokeswoman for the Education Department, wrote in a release that U.S. officials "are concerned about the uncertainty in the current market and are weighting all option available" to ensure federal student aid continues to be available.

Department officials maintain that with nearly 2,000 lenders taking part the FFEL program, others, particularly banks, will pick up the volume from institutions that stop lending. The vast majority of those lenders are relatively small players in the student-loan arena. The top 50 FFEL lenders account for more than 83% of all loans made under the program, according to FInAid.org. The banks that rank in the top 50 exited FFEL lask week.

Sallie Mae is the biggest lender in the industry. Banks comprise more than 40% of student-loan orginations.

Little Incentive for Lenders
For Wells Fargo, "student loans are not a profit-making business," said Michael DeVito, executive vice president of education financial services for Wells Fargo, which ranks fourth in annual origination. "We are here to meet the demand and the need of our customers," he added, but "in terms of trying to use this as an opportunity to take market share, that's not pur strategy."

Citigroup, which is the nation's second-largest student lender, also has no plans to aggressively expand its current FFEL lending operations, said a person familiar with the sutation, noting the weak securitizations markets. KeyCorp, a Cleveland-base top-50 lender, says it isn't looking to grow into "new places we've never been before," says Richard Vonk, president of Key Education Resources.

J.P. Morgan Chase & Co., the nation's J.P. Morgan Chase & Co., the nation's seventh-largest originator of student loans, has said it plans to increase its share of the student-loan market, but spokesman Tom Kelly declined to specify if the expansion will concentrate on FFEL loans or the more-lucrative private variety.

Students in the 2006-2007 government fiscal year are estimated to have borrowed $114.8 billion through federal loan programs. That includes new loans and loans used to consolidate or refinance existing loans. Of the total, about 85% were FFEL loans, according to government data. The rest are direct government loans.

In addition, students borrowed an estimated $18.5 billion in private and state sponsored loans. Private loans are not controlled by the government and often carry higher interest rates.

Three Strikes; They're Out
A storm has hit Brazos and its competitors in the past six months.

First, the auction-rate-securities market, an important source of financing for many lenders, collapsed. That doubled some lenders' costs overnight.

Meantime, the cost of borrowing in the longer-term asset-backed securitization market, where more than half of all loans were securitized, has risen. For instance, Citigroup's Student Lending Corp. securitized $1.9 billion in student loans at Libor plus 1.4%, compared with deals at Libor plus 0.10% last June.

The market turmoil combined toxically with last fall's College Cost Reduction Act, in which the government slashed lenders' subsidies by more than $20 billion, or roughly in half.

In July of last year, the average FFEL loan provided the lender a 1.28% return on its investment, according to an estimate by one investment bank that asked to remain anonymous. Now, thatloanregisters a 0.6% loss.

If private lenders don't fill a void that develops at FFEL, the government could be left to come up with another solution. The Department of Education and industry participants are reviewing contingency plans for a program called Lender of Last Resort, which is untested.

The government also has a direct-lending program, which could take up some of the FFEL market share. This would require schools to switch their current systems and relationships quickly. Boston's Northeastern University and Pennsylvania State University recently have taken that step.

By Liz Rappaport & Robert Tomsho; David Enrich contributed to this article.
Wall Street Journal; March 25, 2008

Drug Updates Via Email: Just What Doctor Ordered

At a time of heightened safety concerns about prescription drugs, notices from pharmaceutical companies about warnings and label changes still typically come to doctors via an antiquated method: the U.S. mail.

Besides taking too long to arrive, doctors say the notices often get buried in stacks of drug-company marketing materials or thrown out with junk mail. "They get stuck in the mailbox," says Kenneth Renney, a family physician in Houston. "Do I go to my mailbox every day? No."

Now, a nonprofit group called the iHealth Alliance is launching an online network that will email alerts to doctors who sign up. It is being operated by Medem Inc., a for-profit company founded in 1999 by the American Medical Association and six other medical societies.

To keep doctors from becoming overwhelmed by a barrage of emails, the alerts will be focused by specialty -- notices about dermatologic drugs would go to dermatologists only, for instance -- and will be limited almost exclusively to alerts that drug makers send out in what are often known as "Dear Doctor" letters: significant drug-label changes, warnings and recalls.

Until recently, drug companies felt bound by federal regulations, dating back to the pre-Internet era, that described how to send these types of communications through a paper-based system. In 2006, the FDA issued guidance saying the rules were outdated and that it was acceptable for the messages to go out by email. But many drug makers have stuck to the regular mail because it has seemed like the surest way to reach doctors.

"Physicians are now inundated with mailings and paperwork, and the concern has always been that many of these reach the circular file immediately," says Janet Woodcock, director of the FDA's Center for Drug Evaluation and Research, referring to the trash can.

The iHealth Alliance is a nonprofit group whose board includes doctors and medical-society leaders. Drug makers will pay to use the new system, which will be free for doctors and won't include any drug-company marketing materials. Doctors who don't sign up for it will continue to receive the notifications through the mail.

After receiving email notifications, doctors will get updates by going to a Web site called the Health Care Notification Network, which will archive alerts for a year, and will record that the doctors have gone to the site to see the notices. The network will provide suggested language that doctors can forward to their patients, explaining the alerts in lay terms. And doctors will be able to hit buttons that will let them send feedback to the FDA or the manufacturers about patients' reactions to drugs. The network may also be used to send doctors information on major public-health emergencies or bioterrorism alerts.

Johnson & Johnson, based in New Brunswick, N.J., is among drug makers that plan to start using the email system. Currently, the process for mailing out letters involves multiple steps that can take a few days or longer, says Christine Cote, a vice president in a J&J office involved with new technologies and ventures. "We're talking about the Dark Ages here, doing pigeon posts," Ms. Cote says.

Alan Metz, North American medical director at GlaxoSmithKline PLC, says the company, based in Britain, is also inclined to use the new system, though it hasn't made a final decision.

Medem says five major drug makers have requested contracts to start using the system, though none are official yet. Doctors can sign up at www.hcnn.net. Drug-safety alerts are expected to begin flowing through it in about two months.

For patients who want to stay on top of FDA and drug-company alerts affecting drugs they are taking, one option is to establish an online personal-health record at www.ihealthrecord.org, which is also operated by Medem. Notifications are sent about drugs that patients record they are taking.

The National Library of Medicine runs a Web site, largely oriented to doctors, called DailyMed that includes updated label information. Another option is the government site MedlinePlus, which is more oriented to consumers and includes information about drugs. Groups such as the American Diabetes Association also collect relevant health news and offer electronic news feeds to patients with those conditions.

The FDA offers an email-alert system called MedWatch that sends out notices about a variety of health-safety issues, but the iHealth Alliance hopes its system will distribute alerts that are more targeted to the individual recipients' needs.

By Sarah Rubenstein
Wall Street Journal; March 25, 2008

Colleges Turn Away From Private Lenders

As Cuts in Subsidies to Banks Eat Into Benefits for Students, Schools Start to Migrate to Federal Direct Loan Program

Schools like Augustana College, in Rock Island, Ill., are taking another look at the federal government's direct student-loan program.

For years, the small liberal-arts school relied on private lenders to make federal loans to its 2,500 students. Guaranteed by the government under the Federal Family Education Loan, or FFEL, program, such private loans routinely came with benefits like discounted loan-origination fees and lower interest rates for graduates who made automatic payments.

But recently, many lenders told Augustana they could no longer promise to provide such benefits, citing cuts in the federal subsidies they receive and troubles raising capital in the securities markets. Coming on top of last year's ethics probes of the student-loan industry, it "really changed our whole outlook," says W. Kent Barnds, Augustana's vice president of admissions and enrollment.

Problems are mounting in the student loan business, as many lenders have stopped providing loans through the Federal Family Education Loan program and other institutions may not be able to step in with support. WSJ's Liz Rappaport reports.

This fall, Augustana will stop doing business with FFEL lenders and join the federal direct-lending program. Under it, students borrow from the federal government through their colleges, and private lenders are eliminated from the picture.

So far this year, nearly 60 other institutions have moved to direct lending or applied to do so -- including the mammoth Pennsylvania State University system, with its 85,000 students; Boston's Northeastern University; Ohio's Mount Vernon Nazarene University; and Northern Illinois University. "I think we are going to start seeing a lot of schools switch over," says a congressional staffer who has worked on the financial-aid issue.

The federal government sets the interest rates and benefits for direct student loans. It sets maximum interest rates for FFEL loans, although lenders are free to offer discounts and benefits of their choosing. Because the two programs involve different processing systems, few institutions actively participate in both and students rarely get to choose between them.

Private lenders still dominate the federal student-loan market, estimated at $114.8 billion in fiscal 2007, which includes Stafford loans for students, PLUS loans for parents and graduate students, and consolidation loans for borrowers seeking to combine previous student loans under a single lender. About 4,500 colleges and other institutions actively take part in the FFEL program, compared with just over a thousand for direct lending. In fiscal 2007, private lenders provided about 82% of all federal student loans.

But for the many students whose schools don't participate in direct lending, borrowing stands to be more expensive for the 2008-09 academic year, as private-lender rebates disappear. Additional disruption could erupt if lenders now accepting FFEL loan applications withdraw from the program before the school year starts.

Financial-aid administrators say it is more important than ever to shop around for a lender and not to wait until summer to do so, as many students and parents traditionally do. On the political front, Democratic presidential contenders Hillary Clinton and Barack Obama have both indicated that, if elected, they would eliminate the FFEL program in favor of direct lending.

Many college administrators say the FFEL program still offers advantages. Sarah Bauder, financial-aid director of the University of Maryland, says private lenders and loan-guarantee agencies spend time educating students about personal finance and debt. "They work with the students from the moment they get their money," she says, adding that such efforts have helped Maryland maintain a 1.4% loan-default rate, compared with 4.6% nationwide.

But big lenders such as College Loan Corp. and the Pennsylvania Higher Education Assistance Agency, or PHEAA, have said they will stop making FFEL loans for the fall term. Monday, Brazos Higher Education Service Corp., in Waco, Texas, announced it too would suspend making new loans. And with investors shunning securities backed by student loans -- a key source of capital for lenders -- a continuing exodus of lenders could prompt more colleges to consider direct lending.

No Crisis Foreseen
For the moment, most observers don't foresee the sort of crisis in FFEL loan availability that could spark a wholesale rush to direct lending. Although students won't begin borrowing in earnest for the 2008-09 academic year until late spring, Department of Education officials have yet to spot any problems with loan availability, and lending volume for both federal programs has been typical for this time of year.

Financial-aid professionals say nearly 2,000 lenders are still making FFEL loans, including big banks that aren't solely dependent on securities markets for funding sources.

Penn State, for one, isn't waiting to see what happens. About 40,000 of its 85,000 students have federal loans through PHEAA, which in recent years provided about 90% of all federal loans at the school. Faced with calls from worried families and the challenge of quickly finding new lenders for thousands of students, Penn State earlier this month opted to switch to direct lending.

Congressional leaders want the Bush administration to make sure the direct-lending system is ready to take on additional loan volume on short notice if many other schools follow Penn State's lead. Although the direct-lending program was occasionally plagued by processing delays in the late 1990s, Mark Kantrowitz, publisher of FinAid.org, a financial-aid Web site, says those problems appear to be resolved.

Department of Education officials believe they could readily handle double the $13 billion in direct loans they processed in fiscal 2007, although a bigger increase is likely to require more planning.

The Clinton administration rolled out the direct-lending program in 1993, aiming to eventually make it the only source of federal student loans. But congressional supporters of the private lenders blocked those plans and, since 1996, the number of active direct-lending schools has declined 20% to 1,051 as private lenders lured colleges away by promising speedier loan processing and better lending terms.

But along the way, some were also offering colleges and their administrators the sort of travel junkets, financial perks and alleged kickbacks that sparked last year's conflict-of-interest investigations by Congress and New York Attorney General Andrew Cuomo. As a result, dozens of schools adopted tighter ethics codes and Congress last year passed the College Cost Reduction and Access Act. It sliced more than $20 billion of the federal subsidies that have given private lenders a competitive edge by allowing them to offer better loan terms, roughly halving them.

"The scandal contributed to the political environment that made the deep cuts possible," says Kevin Bruns, executive director of America's Student Loan Providers, a trade group representing private lenders. He maintains, however, that compared with direct lending, there are still bargains to be found on the FFEL side.

Narrowing Differences
Yet the competitive differences between the two programs are narrowing. The federal government is phasing out its loan-origination fees, which private lenders used to pay on borrowers' behalf, and is offering rebates to borrowers in the meantime. A 2005 federal law set the interest rate for direct PLUS loans for parents and graduate students at 7.9%, compared with a maximum of 8.5% for FFEL loans. And the direct-loan program is offering a new perk for borrowers who take public-service jobs, such as teaching: If graduates work in public service for at least 10 years, they get their loans forgiven.

On the FFEL side, interest-rate discounts are harder to find and benefits have been trimmed. MyRichUncle, the lending concern owned by MRU Holdings Inc., is offering undergraduate Stafford loans with a 5.8% interest rate -- a full percentage point below direct Stafford loans -- but the lender will no longer discount interest rates on federal PLUS loans.

Meanwhile, Cleveland-based KeyCorp has eliminated most of its benefits to borrowers, Wachovia Corp. has reduced the maximum rebate that Stafford borrowers can get for on-time repayments, and Wells Fargo & Co. has eliminated some so-called back-end benefits, such as immediate interest-rate reductions at repayment.

By Robert Tomsho
Wall Street Journal; March 25, 2008

Wednesday, March 26, 2008

In Real Estate, Think Global, Not Local

The mantra that all real estate is local looks more suspect than ever, now that a national home-price bubble has burst. In today's interconnected marketplace, real-estate trends might follow a global pattern, with overseas housing markets following the lead set by the U.S.

In Europe, slack lending policies and low interest rates helped drive up property values just as they had in the U.S. In 2006, home prices rose at a double-digit pace in Ireland, Spain, France and Norway, according to Moody's Economy.com. They shot up in the United Kingdom, too, after briefly flattening out in 2005.

The air now looks like it is leaking out of Europe's housing balloon. Prices in Ireland fell 6% in the fourth quarter of 2007, after gaining 13% a year ago. In the U.K., prices gained 4.8%, compared with a gain of 10.5% a year earlier. Spain's 4.8% gain compares with an increase of 9.1% the previous year.

The International Monetary Fund said in a recent report that a slowdown in credit growth in Europe is emerging as "several countries face housing markets considered overvalued." It expects gross domestic product in the euro zone to grow by 1.6% in 2007, down from 2.6% in 2007.

Consumers are feeling it. In the fourth quarter, real European consumer spending fell at an annual rate of 0.3%, compared with a 1.9% annualized increase in the U.S., according to Citigroup.

It's not just Europe. In Thailand, prices for detached homes were down slightly in the third quarter from a year earlier, according to Thailand's central bank. Townhouse prices have flattened.

The upshot: The housing engine that helped drive the global economy is running out of gas, more evidence that a recovery could take longer than many expect.

Wall Street Journal; March 25, 2008

Do You Need to Work Faster? Get A Bigger Computer Monitor

Working late? Blame your computer screen. A new study finds that bigger monitors make people more productive.

Researchers at the University of Utah tested how quickly people performed tasks such as editing a document and copying numbers between spreadsheets while using different computer configurations: one with an 18- inch monitor, one with a 24-inch monitor and one with two 20-inch monitors. Their finding: People using the 24-inch screen completed the tasks 52% faster than people who used the I8-inch monitor; people who used the two 20-inch monitors were 44% faster than those with the I8-inch screens.

The study concluded that someone using a larger monitor could save 2.5 hours a day. But James Anderson, the professor in charge of the study, said to take that result with a grain of salt: It assumes that someone will work nonstop for eight hours, which no one will, and that the tasks they perform will benefit from a larger screen, which isn't always the case. Still, tasks such as moving data between files are ideally suited to bigger or multiple screens. Mr. Anderson, who uses a computer with two 20- inch screens and one 24- inch screen, recommends that businesses take the time to match employees with the proper screen size based on job requirements.

A caveat: The study was funded by NEC Corp., which makes computer monitors. Mr. Anderson said it was vetted by his university's research board.

by Ben Worthen
Wall Street Journal; March 25, 2008

New Routers Catch the Eyes of IT Departments

Multifunctional Boxes Keep Business Networks Humming, Curbs Sprawl

Information-technology professionals like Jeff Young want to cut down on the sprawl of networking equipment in their company's computer rooms. In the process, they are being drawn to a new type of product coming out of the technology-networking industry.

Mr. Young, chief technology officer at financial data company FactSet Inc., used to buy a different piece of networking equipment to handle each different technology task. That meant he purchased one piece of gear to deal with email spam, another piece for Internet-traffic filtering, and yet other equipment for firewalls. Overall, his Norwalk, Conn., company had more than 300 "routers," the back-office networking gear that helps to direct and shape Internet traffic.

Having so many routers was expensive and took up space. So late last year, Mr. Young began testing a new type of router from networking company Cisco Systems Inc. Called the ASR 1000, the router crams multiple functions -- including speeding data through computer networks and filtering out unwanted Internet traffic -- into one box. Cisco officially launched the product this month.

"The consolidation component of this gear is compelling," says Mr. Young. He adds that for every five of FactSet's old routers, he plans to replace them with one of Cisco's new routers. Mr. Young expects the rollout to be finished in a year, but declines to comment on how much the deployment will cost.

As IT pros like Mr. Young clamor to deal with "box sprawl," networking companies from Cisco to Juniper Networks Inc. to Telefon AB L.M. Ericsson's Redback Networks are introducing new routers that can stuff more services into their boxes. Apart from its new ASR router, Cisco unveiled a multifunction router known as the ISR in 2004. In 2005, Redback Networks introduced a multifunction router called the SmartEdge, which can facilitate Internet telephone calls and filter Internet traffic. That same year, Juniper launched new routers dubbed the M-series, which boast Internet-telephone features and can block unwanted Internet traffic.

These new multifunction routers are intended to appeal to IT departments that want to minimize the space devoted to networking equipment, replacing older gear with more efficient products that consume less energy. Unlike typical routers, which may perform just one function, the new gear can be customized to carry out a variety of tasks, such as securing a network and ensuring important files have the proper bandwidth to reach their destinations. Prices of the new routers vary according to the different mix of services that companies add to them.

For companies that adopt these multifunction routers, there are cost savings to be had. Most of the savings will come in a company's data center, the huge back-office computer warehouses where Internet and communications companies and businesses link to each other's computer networks. Companies typically lease space in data-center facilities based on the amount of square feet that their equipment occupies. A spokesman for Cisco, San Jose, Calif., says its ASR router uses between two to four feet less in a datacenter than a bundle of networking gear delivering the same features, saving customers $4,000 to $20,000 in data-center-setup fees.

Some data centers also lease space based on the amount of power that computer equipment consumes. A Redback spokesman says its SmartEdge router consumes 61% less energy than a competitor's single-function box that is used to deliver Internet-telephone and data services. That translates into savings of about $3,000 a year in energy bills, says the spokesman.

Companies need to weigh such potential cost savings against the front-end expense of these new routers, however. Because the multifunction gear packs in more services than typical routers, they can be four times as expensive at the outset as typical routers that cost about $20,000 apiece. Cisco has said its new ASR router costs between $35,000 and $400,000, depending on what functions a customer decides to add to the box.

Still, "while clearly the equipment is more expensive, in some cases the cost savings and reduction in energy can offset the pricing," says Ray Mota, an analyst with Synergy Research Group Inc., a Reno, Nev., market research firm.

Some corporate customers may not like the multifunction routers for other reasons. Mr. Mota says some IT managers feel safer having a dedicated router performing a single task, thereby ensuring service for that one task is optimal.

Manoj Leelanivas, a senior vice president at Juniper who oversees the unit that mainly produces routers for cable and telephone companies, adds that some corporate customers may avoid the new routers because of the way their companies' IT is structured. He notes, for instance, that some corporate IT departments have separate groups managing communications, networking and security and don't want to introduce equipment that would overlap.

This isn't the first time networking companies have offered multifunction routers. Early this decade, networking concerns such as Crescent Networks Inc. and CoSine Communications Inc. introduced routers that could perform several tasks, but those boxes were often faulty. Equipment manufacturers have since developed specialized processors and software to improve the performance of such routers. Redback Networks, for instance, has spent about $250 million since 2005 on developing special processors. Cisco says it spent $100 million and obtained 42 patents for the semiconductor it is now using in its new ASR router.

Mark D. Krupinski, who oversees networking for WesBanco Bank Inc., turned to multifunction routers to control the box sprawl at his Wheeling, W.Va., bank. In 2006, after several acquisitions, WesBanco had 80 different phone systems spread across 82 bank locations. The extensive network included dozens of specialized call-routing boxes and other equipment.

So Mr. Krupinski decided to consolidate all the confusing systems into a single network. By early last year, the massive array of routers serving the different phone systems had been replaced with a single server and an ISR multi-function router from Cisco. Mr. Krupinski declines to say what the bank spent on the conversion, but says the move saves it $1 million a year in maintenance and telecommunication costs.

"It's a headache to have to worry about maintenance and power consumption for loads of equipment if you don't have to," he says. "The costs savings we saw more than justified our consolidating."

By Bobby White
Wall Street Journal; March 25, 2008

China Cracks Down On Online Video

Chinese authorities have shuttered 25 online video websites and publicly warned 32 others about their content, including one of China's most popular sites, Tudou.com

The notice, issued Thursday by the State Administration of Radio, Film and Television, said an investigation of Chinese online audio-visual service providers conducted between December 20 and February 20 found five companies that were streaming video without content licenses, and that dozens of others had hosted illegal content.

Separately, references to the violent protests going on around China in the wake of the recent violence in Tibet have been noticeably absent from Chinese websites, including China's three leading online video sites.

Although it has been covered by China's national state-run broadcaster China Central Television and state-run Xinhua News Agency, discussions about the unrest in Tibet on China's popular internet forums have been removed as quickly as within minutes of being posted by internet companies.

This latest development in the government's effort to regulate online video reasserts Beijing's desire to control the internet. It also confirmed recent speculation about an imminent clampdown on the online video industry - which has collectively raised tens of millions of dollars of venture capital and drawn hundreds of millions of viewers.

In the past few months, regulators issued new requirements that all video-streaming websites be owned or controlled by the government, except for existing privately owned video sites that could prove their content was in compliance with government regulations.

The closely held start-ups, meanwhile, have been scrambling to prove themselves. "We received a warning, and we're always working to upgrade our filtering system, to catch things that need to be caught," said Dan Brody, Tudou's vice president of business development, who wouldn't disclose the specific reason for the warning. The clampdown "creates a more stable regulatory environment for the industry including advertisers, copyright holders, investors, everyone."

Tudou's chief competitors, Youku.com and 56.com, were not mentioned in Thursday's notice, though their fates are also uncertain until official licenses for private online video sites are given.

Increasing numbers of China's population of internet users - which by some estimates is now the world's largest - are watching online video. According to government researcher China internet Network Information Center, 76.9 per cent of internet users in China watched online video in 2007. But with low rates of advertising spending on online video, compared with other forms of online advertising, and the high cost of operating such a website, many local online video companies have yet to break even.

China's government controls internet content by periodically blocking and unblocking foreign websites, including Google's YouTube and Wikimedia Foundation's Wikipedia, though these blocks are largely unnoticed by China's internet users, which may have exceeded 225 million this month.

Local internet companies, including web portals, search engines and online video websites, employ entire teams to filter content for pornography and other banned subject matter, including the Falun Gong spiritual group, so they may keep the internet content licenses required to operate in China. Companies say that usually, the vast majority of illegal content caught by site monitors is pornographic.

Chinese companies have said their content filtering systems aren't very different than those used by companies outside China. YouTube, for example, removes videos that aren't in compliance with their user agreement, which prohibits videos of drug abuse and gratuitous violence, among other things.

But in China, the consequences of letting the wrong content slip through filters could cost internet companies the legal right to run their businesses, especially now that there is tighter regulation. According to Beijing-based technology research firm BDA China, eight online video sites alone have raised $US190 million in venture capital since 2005.

Still, Victor Koo, chief executive of Youku, says the clampdown by regulators has given positive direction to the already-consolidating industry. "In a way, it (the latest notice from regulators) has created more transparency in terms of the development of the business," Mr Koo said. The State Administration of Radio, Film and Television "is trying to show a very clear direction about what is right and what is wrong. They are paving the road for web sites to get approval."

Meanwhile, a week after the violence erupted in Lhasa, the Chinese government stepped up its manhunt for protesters, as thousands of troops converged on foot, trucks and helicopters to Tibetan areas of western China, according to the Associated Press. The violence is the biggest challenge to Chinese rule of Tibet in more than two decades.

The violence in Lhasa has sparked unrest in neighbouring provinces and warnings from Beijing for tourists and foreign journalists to stay away.

by Loretta Chao; Sue Feng and Kersten Zhang contributed to this report.
Wall Street Journal; March 24, 2008

The Wall Street Journal

Tuesday, March 25, 2008

Pleasing Google's Tech-Savvy Staff

Information Officer Finds Security in Gadget Freedom of Choice

How do you run the information-technology department at a company whose employees are considered among the world's most tech-savvy?

Douglas Merrill, Google Inc.'s chief information officer, is charged with answering that question. His job is to give Google workers the technology they need, and to keep them safe -- without imposing too many restrictions on how they do their job. So the 37-year-old has taken an unorthodox approach.

Unlike many IT departments that try to control the technology their workers use, Mr. Merrill's group lets Google employees download software on their own, choose between several types of computers and operating systems, and use internal software built by the company's engineers. Lately, he has also spent time evangelizing to outside clients about Google's own enterprise-software products -- such as Google Apps, an enterprise version of Google's Web-based services including email, word processing and a calendar.

Mr. Merrill, who has surfer-length hair and follows a T-shirt dress code, studied social and political organization at the University of Tulsa in Tulsa, Okla., and then went on to earn master's and doctorate degrees in psychology from Princeton University. His education in IT came largely from jobs as an information scientist at RAND Corp., senior manager at Price Waterhouse and senior vice president at Charles Schwab & Co. He joined Google in late 2003.

We sat down with Mr. Merrill to talk about Google's approach to IT. Excerpts:

The Wall Street Journal: What's the structure of the IT organization at Google?

Mr. Merrill: We're a decentralized technology organization, in that almost everyone at Google is some type of technologist. At most organizations, technology is done by one organization, and is very locked-down and very standardized. You don't have the freedom to do anything. Google's model is choice. We let employees choose from a bunch of different machines and different operating systems, and [my support group] supports all of them. It's a little bit less cost-efficient -- but on the other hand, I get slightly more productivity from my [Google's] employees.

WSJ: How do you support all of those different options effectively?

Mr. Merrill: We offer a lot more self-service. For example, let's say you want a new application to do something. You could take your laptop to a tech stop [areas in Google offices where workers can get technical support], but you can also go to an internal Web site where you download it and install the software. We allow all users to download software for themselves.

WSJ: Isn't that a security risk?

Mr. Merrill: The traditional security model is to try to tightly lock down endpoints [like computers and smartphones themselves], and it makes people sleep better at night, but it doesn't actually give them security. We put security into the infrastructure. We have antivirus and antispyware running on people's machines, but we also have those things on our mail server. We have programs in our infrastructure to watch for strange behavior. This means I don't have to worry about the endpoint as much. The traditional security model didn't really work. We had to find a new one.

WSJ: You depend in large part on open-source software or software that's built internally. What are some examples? What are the benefits?

Mr. Merrill: We do buy software where it makes sense to -- for example, we have a general ledger [accounting software] from Oracle; Oracle did a good job. Where it makes more sense to buy, we'll buy; where it makes more sense to build our own, we'll build. An example: Our [customer-relationship management] software is tightly integrated with our ad system, so we had to build our own.

We also believe there should be competition -- for instance, in operating systems, because different operating systems do different things well. We run search off of Linux. We run the Summer of Code where we pay college students to work on open-source projects that they think are useful.

WSJ: What's driving the "consumerization" of tech in the enterprise, where companies are borrowing tech ideas from the consumer Internet?

Mr. Merrill: Fifteen years ago, enterprise technology was higher-quality than consumer technology. That's not true anymore. It used to be that you used enterprise technology because you wanted uptime, security and speed. None of those things are as good in enterprise software anymore [as they are in some consumer software]. The biggest thing to ask is, "When consumer software is useful, how can I use it to get costs out of my environment?"

Google Apps is hosted on my infrastructure, and [the Premier Edition] costs roughly $50 a seat. You can go from an average of 50 megabytes of [email] storage to 10 gigabytes and more. There's better response time, you can reach email from anywhere in the world, and it's more financially effective.

WSJ: When you make that pitch to other CIOs, what are they most skeptical about?

Mr. Merrill: When I talk to Fortune 100 CIOs, they want to understand, "What is your security model? Is it really as reliable? What's the catch?"

The answer is, I had to build this massive infrastructure to run Google, so adding all the enterprise data isn't a big deal. I already had to build security standards because search logs are really private. Very few [Google employees] have access to consumer data, [and those who do] have to go through background checks. We have a rich relationship with the security community -- so when people find problems, they tell us. We have more than 150 security engineers who do nothing but security. We don't have a security priesthood: Every engineer is trained. We use automated tools that check every engineer's code.

We're able to invest in information security in a way that most people aren't. We did it because of search. In some sense, Google Apps is just a byproduct.

By Vauhini Vara
Wall Street Journal; March 18, 2008

Forbes Is Planning Web Ad Network

Traditional media companies trying to stem the flow of advertising dollars to Google and other large Internet companies increasingly are building ad networks of their own, anchored by their brands. The latest, Forbes Inc. was set to announce Monday that it will start selling ads this spring for about 400 financial blogs. In recent months, Conde Nast, Viacom Inc., CBS Corp., and other major media companies have unveiled topic-specifi ad networks. But these media networks - some linking fewer than a dozen handpicked Web sites - may have a tough time competing with the networks of thousands assembled by Google, Yahoo Inc., Microsoft Corp., and Time Warners Inc.'s AOL.

-Associated Press

Microsoft Denied Bid To Stop Suit

The U.S. Supreme Court rejected Microsoft Corp.’s bit to stop an antitrust lawsuit brought by Novell Inc. Novell sued Microsoft in 2004 over 1990s practices by the software giant in the word-processing and spreadsheet software markets. The Supreme Court rejected Microsoft’s appeal, allowing the case to proceed in a federal court. Microsoft has already paid almost $5 billion relating to the government’s antitrust case.

CBS TV Stations Start Up An Online Ad Network

Television stations owned by CBS Corp. are launching an online advertising initiative with local bloggers and social media sites, the company announced. The ad network will involve CBS-owned TV stations generating online modules called “widgets” which individuals can easily add to their Web sites. The widgets will contain local news as well as advertising, which the CBS stations will sell. The online partners will receive a share of the revenue, but specific financial details weren’t disclosed.

- Associated Press

Monday, March 24, 2008

Selling Home Requires Savvy

If you're selling a car or house in today's sluggish economy, make sure the price is right.

Americans are constantly buying stuff. But most of us don't do a whole lot of selling - which means we don't have much experience at setting prices.

Want to improve your odds of finding a buyer? As you try to unload your car or home, consider these four pricing tricks.

Looking slim. We know $1.99 is barely less than $2. Yet retailers continue to use this trick because there's ample evidence it works.

"When we look at prices, we make judgments in a fraction of a second," says Manoj Thomas, a marketing professor at Cornell University's Johnson Graduate School of Management. "We read from left to right. We anchor our judgment on the first thing we see."

For instance, if you're trying to sell a car that you think is worth $8,000, you might set the price at $7,999. Potential buyers will read the seven first - and have a sense the car is cheaper than it really is.

Alternatively, you might start at $8,222 and then quickly drop the price to $8,111. One study of price comparisons found that, if the left digits are the same, buyers will focus on the right-hand numbers.

At that point, buyers perceive the discount to be larger if those right numbers are declining from, say, two to one rather than from nine to eight. Even though the decline is the same in dollar terms, "people think they're getting a better deal," says one of the study's co-authors, Robin Coulter, a marketing professor at the University of Connecticut.

Stacking up. As buyers check out your car or house, they'll have in mind a price they are willing to pay. The good news: You can influence that price.

"You should list higher than you're willing to accept," says Alan Cooke, a marketing professor at the University of Florida's Warrington College of Business. "If you ask a high price, people use that as information in setting their reference price. But there's also evidence that, if you set a price that is implausibly high, the impact will be less than if you set a price that's more reasonable."

You can also affect the reference price of buyers by, for instance, telling them your car's book value or sharing the price of competing properties in the neighborhood. The caveat: Only pass along this information if the comparisons are in your favor.

Sending messages. Imagine you're selling your house, which you figure might fetch a little less than $600,000. A round number, such as $595,000, will convey quality while a precise number, such as $595,385, will indicate a bargain.

The reason? We associate precise numbers with lower-priced goods. A precise number may also signal that you have given a heap of thought to the price and aren't inclined to negotiate.

Trying to settle on a price for your home? "If it's a new development and you're trying to give the impression of prestige, you would want to go for the round number," says Vicki Morwitz, a marketing professor at New York University's Stern School of Business. "But if you're going for the quick sale and you want to give the impression of a bargain ... go for the precise number."

Cutting prices. In today's housing market, many homeowners are struggling to find a buyer.

Thinking of dropping your asking price? Suppose that, as in the above example, you initially asked $595,385. If you lower the price to, say, $578,495, potential buyers may perceive the price drop as relatively modest.

"You want to make the computation as easy as possible," Thomas says. "If you use digits that make computation difficult, it will lead to a perception of a small difference."

What to do? You might specify the dollar discount or, alternatively, lower the price from $595,385 to maybe $580,385 or $575,385.

By Jonathan Clements
The Wall Street Journal; March 2, 2008

Thousands stuck with fake art prints

CHICAGO (Reuters) - Take a second look at that signed Picasso print you bought on eBay.

A ring of art counterfeiters has sold thousands of prints since 1999 bearing the forged signatures of Picasso, Miro, Dali and other famous artists to buyers around the world.

"Thousands of people will learn they ... bought a fake," said Chicago-based U.S. Attorney Patrick Fitzgerald, who announced indictments on Wednesday charging two Americans, a Spaniard from Barcelona, and two Italians from Milan and Monsummano with multiple counts of fraud.

U.S. authorities will seek to extradite the Europeans.

Sale prices ranged up to $50,000 for counterfeit prints that came with forged artists' signatures and fake certificates of authenticity that were sold in galleries, at art shows and through Internet auction site eBay, Fitzgerald said.

The counterfeits were produced in Spain and Italy, with the volume of fakes such that two of the alleged conspirators warned another one not to flood the market.

While buyers are stuck with the bogus works, prosecutors offered a Web site where they can provide details of how they were scammed: www.usdoj.gov/usao/iln.

Story published on Yahoo! News, March 21, 2008.

Shipping Slump Slows Boats From China

Drop in Pacific Passage Hits Global Sea Carriers; Are FedEx, UPS Next?

A sharp drop in freight shipped across the Pacific during the past two months suggests the shipping-industry slump is about to get worse.

At the major ports of Los Angeles and Long Beach, Calif., which bring in nearly two-thirds of West coast containerized goods, import volume fell 8.8% in both January and February compared with a year earlier, as the weakening economy, tough housing market and high gasoline prices eroded U.S. demand.

In response to slowing. traffic, three of the largest global carriers Danish shipping-giant A.P. MollerMaersk AS's Maersk Line, French carrier CMA CGM Group and Swiss company Mediterranean Shipping Co.are sharing space on the same ships instead of operating their own weekly trans-Pacific shipping services, in hopes of slashing transportation costs by as much as 30%.

"These people are trying to compensate for the lack of growth by getting some of the economies into the system by moving traffic in a cheaper way," says Mark Page, director for liner shipping at Drewry Shipping Consultants Ltd., a London maritime-advisory firm.

The ocean-freight slowdown bodes ill for railroads, delivery companies and others that bring imported goods to U.S. businesses and consumers in the coming weeks and months.

Volumes of Asian-made goods crossing the Pacific Ocean peak in the summer and early fall for back-to-school and holiday shopping. Railroads then move the bulk of the items across the continent from ports on the West Coast. Package-delivery companies such as United Parcel Service Inc. and FedEx Corp., which together handle about 22 million packages a day, close the final gap with stores and consumers.

FedEx Corp.'s earnings report today could shed further light on the health of the industry. The Memphis, Tenn., company is expected to report that earnings for the quarter that ended in February hit the low end of its profit target. The company has said its performance depends on the economy showing no further sign of weakening. Moreover, the company is expected to report flat delivery volumes, particularly in the U.S. air market.

United Parcel Service Inc. told investors last week that, after a strong January, momentum vanished over the following six weeks.

Union Pacific Corp., the nation's largest railroad company in terms of revenue, says its volume dropped 4% from the beginning of the year to March 8 .

Import volume from Asia into the U.S. is expected to grow by less than 2% this year-no better than the tepid growth seen in 2007, says Mr. Page. Average growth for many years prior to 2007 was about 10% annually, he said.

Nationwide, research firm Global Insight expects import volumes to fall 2.1% year, compared with a drop of 0.5% last year. "We feel the market to keep on shrinking," says Rodolphe Saade, chief executive vice It of CMA CGM.

The slowdown comes amid skyrock~l costs, which make up more than 50% of the operating costs for shipping companies. As a result, shipping companies are seeking rates and surcharges despite traffic.

The Transpacific Stabilization Agreement, which covers 15 major container-shipping lines that carry cargo from Asia to U.S. ports, calls for an increase of $400 per 40 feet of cargo space to West Coast ports and an increase of $600 per 40 feet to East Coast ports, beginning May 1.

Mr. Saade says CMA CGM's fuel cost was $240 per ton in January 2007, but the company was paying $450 per ton by December.

China Ocean Shipping Group Co., a major Pacific shipper, and "K" Line America Inc., a unit of Kawasaki Kisen Kaisha Ltd. of Tokyo, plan to extend fuel surcharges to all contracts by the end of this year.

Container ships stack secure, metal boxes that are generally stoked with clothing, shoes and consumer electronics from southern China and furniture, apparel and auto parts from northern China. The Pacific crossing typically takes between 12 to 16 days.

Today companies operate more than 125 weekly container routes to the U.S., an increase of more than 60% since 1999, according to the World Shipping Council, a Washingtonbased trade association.

But in recent years, the U.S. service has generated less profit than other trade routes, shipping experts say. That is leading major shipping companies to shift ships out of the Pacific to routes serving Europe, where growth remains stronger.

By Stephanie Chen, with contributions from Corey Dade
Wall Street Journal March 20, 2008

Morgan Stanley Profit, Offers Relief for CEO

John Mack passed the test. The chief executive of Morgan Stanley saw his company post sharply lower first-quarter results, but like Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. the day before, its earnings were better than some analysts had feared.

The net earnings, down 42% from year-earlier levels, are no doubt a relief for Mr. Mack, who came under fire late last year when the company released fourth-quarter results that included a $9.4 billion write-down, a $3.6 billion loss and the sale of almost 10% of the company to China Investment Corp. for a $5 billion capital infusion.

It was a blow to the company and raised questions about the amount of risk Morgan Stanley was taking, especially as mortgage-related losses were mounting across Wall Street.

The fourth-quarter loss was largely the result of a bad bet with the company's own money on securities' backed by mortgages. Morgan Stanley recorded a $1.2 billion mortgage-trading loss in the recent quarter, including some damage from that trade and $600 million in losses on Alt-A mortgages, which are given to prime borrowers who didn't fully document their income.

Despite that, the news this quarter was decidedly more positive and is sure to ease concerns that were raised late last year about the direction Mr. Mack had chosen for the company.

Morgan Stanley's net income fell to $1.55 billion, or $1.45 a share, from $2.67 billion, or $2.51 a share, a year earlier. Results included $1.1 billion in losses from marking down loans and loan commitments, ,as well as the $1.2 billion loss on mortgage bets in which Morgan Stanley risked its own cash. Net revenue fell 17% to $8.32 billion. Analysts polled by Thomson Financial had expected earnings of $1.03 a share.

"I don't want to be Pollyannaish and I did give a cautious outlook today, but I do think there are signs [of] recovery we can point to," said Morgan Stanley Chief Financial' Officer Colm Kelleher.
Mr. Kelleher said that he is comfortable with the company's liquidity and that Morgan Stanley, like other. brokerages, welcomed the Federal Reserve's decision to make
discount window-style loans, previously only available to banks, available to brokerages. This week, a host of brokerages, including Morgan Stanley, have taken advantage.

Morgan Stanley's stock, down 18% so far this year, was up 59 cents, or 1.4%, at $43.45 in New York Stock Exchange trading.

Rival brokerage house Bear Stearns was scheduled to report earnings this week, but last weekend the investment bank announced it had agreed to be bought by J.P. Morgan Chase & Co. for $2 a share.

In other areas, revenue in institutional securities, which includes trading results as well as investment banking, fell 13% to $6.21 billion. Still, it was the divi. sion's third-best showing ever. The company said its trading performance was fueled by a record showing of $3.3 billion for stock trading-which benefited from bigger volumes of customer activity, including in prime brokerage, which serves hedge funds.

by Susanne Craig
Wall Street Journal

Friday, March 21, 2008

Almost $442 Million in Fees Makes for a Costly Bankruptcy

Calpine Corp.'s army of lawyers, restructuring consultants and accountants racked up nearly $442 million in fees and expenses during the company's two year Chapter 11 reorganization, making for one of the most expensive bankruptcy cases in recent year. The San Jose, California energy company says the cost was justified by its transformation into a profitable power generator that is poised to benefit from recent laws limiting greenhouse-gas emissions. Calpine, which exited bankruptcy last month, posted $2.7 billion profit for 2007, compared with $1.77 billion loss in 2006.