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In Online Privacy Fight, Google Blinks
Updated: Last night Google said it would cut the amount of time it saves its search engine inquiries from 18 months to nine months. Actually, what its doing is anonymizing the data after nine months rather than 18, which is has been compelled to do after EU and U.S. reglators turned greater attention to the lack of privacy on the web. The negative publicity and government scrutiny drawn by deep packet inspection firms NebuAd and Phorm working with ISPs to mine your web surfing habits for profit, was tarnishing Google and other search engines as well.
But Google isn’t exactly happy about this new prudishness on privacy and whines that losing such detailed information so quickly could be bad for business (and innovation!):
While we’re glad that this will bring some additional improvement in privacy, we’re also concerned about the potential loss of security, quality and innovation that may result from having less data. As the period prior to anonymization gets shorter, the added privacy benefits are less significant and the utility lost from the data grows. So, it’s difficult to find the perfect equilibrium between privacy on the one hand, and other factors, such as innovation and security, on the other.
Unfortunately for Google, there’s no rational equilibrium or cost/benefits analysis in this debate because people are different. Privacy is one of those things that people have a hard time putting a dollar value on, and everyone is different. Some people will take their clothes off for free, for money or never at all. Maybe the Google engineers can create an algorithm that respects that continuum and factors in the way heightened scrutiny affects where people lie on that continuum. Until then, we’re checking in with other search providers to see how Google’s decision will affect their own data retention policies.
Update: Through a spokeswoman, Yahoo has said it anonymizes data for 13 months and will still “continue to engage in a thoughtful dialogue with regulators and legislators in the EU and the U.S. about the best practices for protecting user privacy while improving our leading set of Internet services.”
Microsoft didn’t disclose any details, but sent a statement from Brendon Lynch, director of privacy strategy at Microsoft, that said, “The Article 29 Working Party has asked all major search companies to look into reducing their search data anonymization timeframes and how they anonymize search data, which we believe is equally as important as the timeframe. We will have more to share in the next few months.”
900 million PCs or 300 billion mobile handsets. Which is the bigger opportunity? Mobilize 08: GigaOM’s Next-Generation Mobile Conference
Newsflash: Congress Discovers that Web Firms Track Data
For any of us who recognize that personal privacy on the web is an illusion, the response to a Congressional inquiry asking how various ISPs and online portals target advertising and collect data will come as no surprise. Aside from the use of deep-packet inspection technology used by ISPs to insert advertising based on surfing habits, Congress discovered cookies and data retention policies. In a shocked tone, the Washington Post reported that Google is using DoubleClick’s tracking cookies to monitor where people go on the web in order to serve ads.
Is this really all that surprising? Wasn’t that one of the reasons Google paid $3.1 billion for DoubleClick? AOL also confessed to using tracking cookies and said relatively few (tens of thousands out of more than 100 million) users opted out of its targeted advertising program. Yahoo said it also uses behavioral ads but noted in its letter that it plans to announce the ability for consumers to opt out of such “customized ads.” It will still track users, though.
Looking beyond the major portals (excluding Microsoft, which hasn’t yet responded), the letters from the companies surveyed by the House Committee on Energy and Commerce turned up a few surprises such as Cable One, CenturyTel and Knowlogy using NebuAd’s deep-packet inspection technology in trials. I also noted that business providers such as Cbeyond, TW Telecom, and even large bandwidth providers Covad and XO Communications don’t use targeted advertising to their customers. Cablevision, Windstream, Comcast and Cox were the rare ISPs who aren’t using any real advertising efforts on their subscribers. Many providers did confess to typo squatting, however.
I’m not impressed by ISPs using invasive measures to track surfing habits to sell advertising, unless users are given some sort of price break and have a choice on whether they can opt-in. To me such tactics are undisclosed and give the consumer few outs if they don’t want to be tracked.
However, for free services, such as Google’s search engine or other web content providers, advertising is their lifeblood, and consumers (and Congress) should expect as much information tracking to take place as the portals can both devise and get away with. In the absence of regulatory protection and any other way of making money, it’s no surprise that advertising has become more invasive. Nothing in life is truly free.
For more on the topic check out these posts:
- Of Course the Government Cares About Your Privacy
- Bob Dykes CEO of NebuAd on DPI
- A Privacy Manifesto for the Web 2.0 Era
- How to Safeguard Your Privacy Online
image courtesy of Congressman Ed Markey
Google’s AOL Investment a Loss
In a SEC filing, Google acknowledged that it might come out on the losing side of its $1 billion investment in AOL.
Based on our review, we believe our investment in AOL may be impaired… We will continue to review this investment for impairment in the future. There can be no assurance that impairment charges will not be required in the future, and any such amounts may be material to our Consolidated Statements of Income.
Back in April, I had pointed out that Google’s investment in AOL was worth $500 million, mostly because there were rumors that AOL was being valued at $10 billion as it was being prepped for a sale. At the time Google made an investment in AOL, its estimated value (as per deal terms) was $20 billion. Some people believe that AOL is worth less than $10 billion these days.
Apparently buying Bebo for an outrageous sum hasn’t helped prop-up the company valuation, as Time Warner gets set to bust it up. Maybe they need to hire Brett Favre as a spokesperson to get people jazzed up! As for Google - too bad they have to take the lumps. Live by the sword, die by the sword.
No Takebacks: 5 Most Screwed-Up Tech Buys
As the tech world gets itself in a tizzy over Google saying its 5 percent stake in AOL might be impaired — basically it may now be worth less than they thought it was — we thought we’d revisit some of the most notable tech writedowns in history. Under U.S. accounting rules, once something’s impaired, it can’t be marked up again, which typically leads to a write-off. The write-offs on our list aren’t necessarily the largest, but we think they exemplify a certain point in time in the fizzy world of technology valuations that’s worth remembering, but not worth repeating.
So far this year we’ve seen one of the largest corporate writedowns ever, that of Sprint-Nextel shaving $29.7 billion in value off its $35 billion merger with Nextel Communications. The writedown led to Sprint-Nextel posting a fourth-quarter loss of $29.9 billion, and the company is still dealing with the aftermath of its push-to-talk love affair. At the time of the merger, cell phone deals were the thing to do, but mismatched networks and customer bases doomed this one from the start.
Another relatively recent write-off occurred when eBay woke up next to Skype two years after it offered up to $4.1 billion for the peer-to-peer voice provider and realized it paid waaaay too much for the privilege. It wrote off $900 million, which is small potatoes compared to some of the other writedowns listed here, but worth mentioning as a case of new technology feeding off an old-school web giant’s desperation.
AOL’s purchase of Time Warner back in 2000 was spectacular both for its $106.2 billion price tag and its almost instant failure once the deal closed. By that point, the tech bubble had burst and in 2002 the combined company wrote down $54 billion thanks to the evaporation of AOL’s value. Even the easy money economy of the previous few years has yet to see a deal of such awesome valuation, something for which we can all be thankful.
The dot-com crash was followed by another wave of writedowns related to the companies that had banked on the Internet infrastructure rush, such as Qwest Communications, which spent $36.5 billion on U.S. West in 1999, only to turn around and write down $24 billion of that in 2002.
I’ll put Google’s possible impairment on here simply because it’s amazing that AOL has managed to convince two companies to overpay for it, even as it does its own dubious buys. Since many financial experts are predicting a new wave of impairment charges, perhaps Google’s taking one of the first steps toward write-offs in the tech sector based on the Web 2.0 boom.
AOL’s Falco Gets Something Right
In a memo to employees aimed at addressing fears of an AOL/Yahoo tie-up, AOL chief Randy Falco today penned a truth for social networks:
But despite drawing large, engaged audiences, other social networks have not been able to make the experiences relevant to users and marketers alike.
That right there is the reason I’m hostile to most social networking and social networking-related startups that plan to rely on advertising: They’re depending on marketers to foot the bill while at the same tailoring their content to users that are generally hostile to or uninterested in marketing.
Falco believes that AOL’s future combination of Bebo and Platform A will solve this problem. He’s wrong. Buying more companies with cooler widgets or more users isn’t the direction the Internet is heading. We no longer need portals because we now can navigate the web for ourselves. The real opportunity for a startup in social media is making social networks relevant for advertisers — and making advertisers see social networks as an essential forum for their messages.
It might start with a technological solution, such as the one from startup ScanScount, which is trying to isolate relevant content so advertisers feel comfortable placing their brand on social and user-generated media sites, but it won’t end there. These sites, no matter how useful, need to make money. The company that figures out how to do that will be the Google of Web 2.0.
Google’s AOL Stake Down By Half?
Back in December 2005, Google paid $1 billion to buy 5 percent of AOL from Time Warner, valuing AOL at a whopping $20 billion. Fast-forward to April 2008. According to The Wall Street Journal, AOL and Yahoo are in talks to combine the two companies. AOL is being valued at $10 billion for the sake of this new proposed deal.
Under the terms being discussed between Yahoo and Time Warner, the latter would fold its AOL unit into Yahoo and make a cash investment in return for about 20% of the combined entity, people familiar with the situation said. The deal, which wouldn’t include AOL’s dial-up access business, would value AOL at about $10 billion.
What that tells us:
- No way AOL’s loser dial-up business is worth $10 billion.
- In the last 25 months, AOL lost half its value.
- And Google took a bath. Their $1 billion investment (5 percent) is now worth exactly half: $500 million.
Of course, AOL has been selling off its parts for the past few years and has raised close to around $3 billion, including the $1 billion it got from Google.
March 6, 2008: Lotta Ads and Mobile Fads
- NYTimes: Social Networking Moves to the Cell Phone
- ArsTechnica: AOL’s OpenAIM SDK Requires Apps to Include Ads
- DataCenterKnowledge: Crunch Time: Wall Street May Buy Not Build
- Reuters: EU Set to Clear DoubleClick/Google Merger: Sources
- AdWeek: Make Room for Paid Search
- Multichannel News: Cox to Launch TiVo in New England
- Reuters: Intel Memory Prices Drop Double Projection: CEO
Feb. 21 Headlines: Google Launches Video AdSense
Boopsie Gives Mobile Search a Speed Boost
Mobile search, despite the presence of giants such as Google (GOOG), Yahoo (YHOO), Microsoft (MSFT) and AOL (TWX), is wide open. Any startup has as good a chance as any of the the big boys, just as long as they have cutting-edge technology and enough business acumen to capitalize on it. One such startup that is getting a lot of buzz is Boopsie -– yes, you read that right — Boopsie.
The company quietly launched at the recent Mobile 2.0 conference, but went largely unnoticed. And that’s a shame, for I ended up downloading Boopsie’s mobile search application to my Nokia N95, and I was impressed. The app supports all platforms, including the iPhone. After talking to the company — I am typing this while sitting in the airport in Las Vegas, waiting to get home — I like their approach. (It is not clear where the company is based, and their website offers no information.) They’ve basically created channels of content that might be useful.
The search query on Boopsie gets rolling with a “smart prefix” — which means that instead of typing out the whole word, you only need to type the word’s first few letters. Start typing “Caltrain,” for example, and you get a list of options to choose from, including the Caltrain schedule. I will get more details about Boopsie when I get back, but I am told that their technology has impressed many — Yahoo wanted to buy them, apparently — but right now the company is looking to raise Series A funding.
If the team is smart, they should try and position it as a solution for the wireless carriers, who I am sure aren’t too thrilled about Google’s mobile plans.
Folks if you try it out, please let me know what you think about this little mobile app.
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