Entrepreneur Watch

Doing business in China: What's a Yahoo to do?

So it turns out that Yahoo apparently had more information about the Chinese government's investigation into journalist Shi Tao than it had let on.

It turns out the subpoena requested email account info from Yahoo because it was investigating "illegal provision of state secrets to foreign entities." Yahoo told Congress last year that the company "had no information about the nature of the investigation." Report from Wired News

Yahoo is now arguing with journalists over whether its testimony was accurate. Maybe, maybe not. But that's as irrelevant as the investigation by the U.S. Congress into whether Yahoo obeyed with the laws of a country in which it does business, leading to Shi's imprisonment.

We don't like what the Chinese government did. But Yahoo had no choice. If it is going to do business in China, it has to obey Chinese laws. A year ago, I talked with Google CEO Eric Schmidt about China. He said, "If we don't obey Chinese law, our employees there will be jailed and tortured. I have a problem with that."

Some people argue that U.S. search companies should not do business in China. How does that help the Chinese people? I don't like much of what the U.S. government does, either. But if this, the most secretive and dishonest Administration in U.S. history, subpoenas search and email companies for info about someone who gave away "secrets," they would have to comply.

What's the alternative? Not offering a search engine for the U.S.? That'd show them.

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psychopaths' brains, interesting small companies

I haven't been blogging lately. I've been working on some articles that actually earn money and neglecting my stuff here. I'll try to get back to it.

Here are some articles I've done recently:

Technology Review:

What Can Neuroscience Tell Us about Evil?

Advanced brain-imaging techniques have begun to point to specific brain patterns common among sociopaths.

SmallCapInvestor.com:

LivePerson: Turning online window shoppers into buyers

Visual Sciences: What's in a name?

Retalix: Do the numbers add up?

A Microsoft-Yahoo Merger Would Be a Boon For Google

Will Microsoft and Yahoo really merge one day? I've been thinking about that question since March.

There are a lot of advantages. Search Insider goes inside the Google annual 10K report to point out the dangers, as outlined by Google.

Either Microsoft or Yahoo could take share from Google if they "make their web search or advertiser services easier to access," according to the 10K. But that's a big if. A big part of the reason their products are hard to access is because they're confusing and bombed with too many ads.

Or, says Search Insider, their combined portals would be powerful traffic generators. Not likely. Portals are fading in importance to younger Web surfers. They're too annoying. Yahoo gets traffic mainly because people find it too hard to switch from Yahoo mail, and Microsoft gets most of its traffic by being the default home page on PCs.

But Google is making headway offering default services with PC makers such as Dell.

Also, Microsoft could make search an integrated part of Windows. That's exactly the kind of move that got Microsoft in trouble with the SEC and other governments. But it's possible now that Microsoft isn't the biggest bully on the block.

And let's not forget that Google is offering software services that compete with those from Microsoft and Yahoo. Still early, but that's the future of software.

What such a merger would really be after is a bigger advertising network. That could make them more competitive. But in a more balanced article, PC World points out the snag:  Merging the technologies of the two companies is harder than building a platypus from scratch.

Most mergers fail, and big mergers fare the worst. There would be enormous chaos if these two companies were to merge, and Google would gain ground while it happened.

And finally, volume is not everything in advertising. What you want is relevant ads. Yahoo and Microsoft don't yet seem to be able to wean themselves from the idea of pushing stupid and irrelevant ads on us because advertisers pay them a lot.

A merger would be a big upheaval, but I don't think it would be much of a threat. Only hard work and smart moves can beat Google.

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Google vs. Viacom -- huh?

The legal bickering between Google and Viacom over YouTube is a real mess.

Does Viacom really have a case? What confuses me is the arguing over the safe harbor provision of the Digital Millennium Copyright Act, which provides some protection for hosting sites.

Viacom says DMCA does not  apply to YouTube. “It is obvious that YouTube has knowledge of infringing material on their site, and they are profiting from it.”

But knowledge of the infringing material is not enough as long as the stuff is removed when informed by the copyright owners.

Google does that, and has said it will soon be offering more tools for copyright owners, called "Claim Your Content."

Regarding the financial benefit part, the web site ktlaw has a good summary of DMCA and notes this exception: "if the service provider ... receives a financial benefit directly attributable to the infringing activity, the service provider will not be protected"

But when this suit was filed, YouTube had no revenues! So how is it profiting?

Maybe Viacom just figures that there will be profits by the time the suit makes it to court. YouTube is supposed to be adding ads soon.

Lawrence Lessig, a brilliant opponent of overly-zealous copyright laws says Viacom is trying to avoid DMCA, a law passed by Congress, and instead get the courts to rule against Google on the basis of "the common law of copyright" established by a Supreme Court ruling against Grokster.

"Why burden Congress with the hassle of law making when you’ve got a Supreme Court eager to jump in and legislate?" says Lessig.

Then again, maybe this is just Viacom's way of striking a lucrative deal with Google to get a lot of money for the rights to use Viacom material.

According to the Financial Times: 'CEO Eric Schmidt has called Viacom's suit a "negotiating tactic." “The kinds of comments you’re referring to [criticising Google] are in the context of a business negotiation,” Mr Schmidt told investors at a Bear Stearns conference.

At least that makes sense.

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The Wisdom of Clouds: How Google will build the Semantic Web

Everyone wants to build a semantic Web. Most people have the wrong idea of how to do it.

You can't build a software program that adequately mimics and understands the rules of human grammar. Not even Google can do that. Look at its problems in translating one language to another.

But you don't have to. We talk about the "cloud" of the internet, an amorphous virtual computer that sits on the fringe of our local networks, waiting to do our work for us. The great thing about the cloud is that it's smart. It's smarter than any one individual.

The internet is not just a string of connected computers. It is also people. People create links, travel to some sites more than others, refer interesting things to friends, comment on things they've seen, chat with each other. By tapping into the patterns of human activity on the internet, we tap into human intelligence.

Google first did this with the PageRank algorithm. By studying links people made to web sites, it was able to make a good evaluation of the relevance of those sites. It tapped into the human intelligence lying within the internet.

Google does not reveal what new algorithms it has created to determine relevancy. But you can be certain it has gone beyond PagRank. It can track our own traffic patterns to tell what's relevant to us. When we click on certain search results, Google gathers data about what's relevant to us. We leave a trail behind every time we surf the internet, and there are many trails Google can follow to determine what's relevant.

Amazon watches purchase patterns to determine what other products might be of interest to us. If we buy one thing, it can tell us what others buying that product have also bought. It taps into the human intelligence of the buying patterns.

I did some consulting last year for a startup called Pluggd, which helps people find videos of interest to them. Aside from watching people's patterns of viewing videos, it also gathers data by crawling the text-based internet. That reveals what people are talking about at any given time, helping the Pluggd search engine figure out exactly what it is you intend to search on.

It's called "associative rule mining," and happens to be an area Sergey Brin experimented with for a while at Stanford.

The company told me that the associations made can surprise them. When people were searching on "injury" at one point last year, the search results started coming up heavily weighted toward the terms "strained rotator cuff," "torn ligament," "sprained knee," and "stress fracture." It was the height of NFL season and fantasy football was a hot topic in the internet.

You don't have to create a computer algorithm that tries to mimic the human brain's ability to understand grammar. By analyzing the human traffic in the cloud, you can make associations that tell you what people are trying to say.

The brain is a mysterious computer, impossible to mimic by any computer today. But human wisdom is already captured in the cloud. You simply have to come up with the right ways to tap into it.

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Microsoft attacks Google

ZDNet reports from a Gartner conference that Google isn't going after Microsoft, Microsoft is going after Google.

The assertion is half right.

Gartner vice president David Smith apparently says, according to ZDNet, that Google is developing Web-based productivity applications "to distract Microsoft from focusing on its own core search advertising business."

If that's true, Google is in big trouble.

This has been the classic strategy of every company that has watched Microsoft invade their turf, from Sun Microsystems to Netscape to now barely-remembered Borland. It failed every time.

The strategy distracts the defending company from improving its own products, allowing Microsoft to catch up.

But I don't believe Google is that stupid.

Google has a vision of the future of computing. It's marked by social computing, taking advantage of the interconnected power of the internet. Applications operate in the cloud, documents are freely shared. People communicate for free, share music and videos for free, and collaborate online.

Google isn't just trying to mimic Microsoft's products, it's trying to create new types of products. There's a classic opening. The internet allows you to create social applications, opening up a new market. And existing applications are too expensive, giving an opening to a company that knows how to make money off free applications.

No, Microsoft is trying to take on Google in advertising, in search, and in the new breed of social applications. It's Microsoft playing catch-up all the way. In that respect, Gartner is right.

The behavior of both companies is telling. While neither company admits they are trying to compete directly with the other, Microsoft acts like it is. Its PR department takes every opportunity to bad-mouth Google to the press, off the record. It offers tips on how Google is evil and how it is doing things wrong.

Google doesn't do that to Microsoft. Just as, in the past, Microsoft never bad-mouthed the companies whose turf it was infiltrating. Those companies used to do it to Microsoft.

You can tell a lot about the competitive landscape by paying attention to who uses the most desperate tactics.

Time to prosecute Steve Jobs

It's called "plausible deniability."

US Attorney General Alberto Gonzales did "nothing wrong'' in firing Federal prosecutors who go after too many Republicans, and Steve Jobs "didn't know the accounting implications of backdating."

Excuse me, but I know a crock or two when I see them. At Least Gonzales didn't do anything illegal. Just unethical.

Why people seem to think Jobs is innocent because he didn't know the implications of options backdating is so far behind my comprehension it rates up there with String Theory.

I learned the mantra in grade school: "ignorantia legis non excusat." OK, I learned it in English. Stated by Wickipedia, "...no one can justify his conduct on the grounds that he was not aware of the law."

Sure, there are exceptions, in the case of certain obscure laws. But for Jobs to deny he knew this was illegal is to exorbitantly underestimate Jobs. Come on, folks, he knows stock options. He's been an entrepreneur and executive and board member for decades.

And now Apple's scapegoats have fired guns at him that are still smoking.  Former CFO Fred Anderson said that he told Jobs that backdating options would require an accounting change.

Not quite as good as the emails that proved Gonzales wasn't as innocent as he claimed, but good enough to take to court.

The fact that Jobs was informed of accounting implications means he knew that Apple would have to restate its earnings. It should have announced that earnings in the quarter in which the options were granted were actually lower than the company had claimed.

Ouch. That would have upset Wall Street and hit the company's stock, so they didn't do it.

Steve Jobs knows that is both illegal and unethical. I know that's illegal and unethical, and I've never been on a company's board. I just don't see the plausible part of this denial.

Jobs is known in the Valley as a ruthless competitor. Allowing his former execs to take the fall is ruthlessly unethical, an attack on people who did not compete with him, but worked with him. This really stinks.

Now the only question is whether securities regulators will pursue Jobs with the same vigor they pursued, say, former CFO Anderson, who has to pay $3.5 million in fines and penalties.

Backdating was a common, illegal activity in Silicon Valley, and it hurt untold shareholders while enriching the people taking the options.

It needs to be prosecuted in order to let executives know they can't get away with these kinds of tactics.

The SEC needs to prosecute Jobs, or it will have as little credibility as Alberto Gonzales. Just do it.   

Why everyone hates the telcos and cable companies: they deserve it.

Let's stop hating Google for a moment to hate some companies that really deserve it.

The telcos and cable companies, otherwise known as Evil Incarnate and The Devil Himself.

It's not their fault, really. They're victims of their childhoods. Any company raised as a monopoly just can't stop robbing the people who who paid for its nurturing through public assistance programs.

Now that the telcos are rebuilding monopolies, they figure they can gouge us a little more. The cable companies have hated their customers all along.

They already killed off most of the independent ISPs, by bundling that service with their phone and cable  services, which were really monopolies in their geographic markets. You get a discount only if you subscribe to all their services, like the only hotel in the county charging you a higher room rate if you don't pay its fee for the exercise room and eat all your meals in its restaurant.

When Microsoft tried to bundle services with its monopoly product, governments the world over tried to do a little monopoly-busting head-butting with Bill Gates, who has more wealth and power than most nations.

Now the telcos figure they can screw us a little deeper. They want to start making us sign contracts and charge penalties for early withdrawal. It showed up in a Consumers Union survey of practices among broadband suppliers.

I guess they have bigger butts than even Bill Gates, because no governments are trying to stop them.

They're already trying to sue VoIP companies out of existence by claiming patents on the technology. Never mind that they were last to the market.

No matter, here's what's going to happen: Companies like Google and Metro-fi will increasingly wire cities for free wi-fi, despite the resistance of city governments who either don't know their ISPs from a manhhole cover or are beholden to the local telcos. The existing ISPs will find their business models collapsing under their feet like Wile E. Coyote standing on an overhanging bluff.

Then companies like Google and Apple will create direct-to-internet cell phones as wi-fi spreads, and drop a boulder on the phone companies's heads with free or exorbitantly cheap international calling.

And companies like Google, Apple, AOL, Blinkx, etc., will put folks in touch with free video, no matter how much Hollywood tries to stop it. There goes that boulder on the cable coyotes' heads.

Ten years, max, the telcos and cable monopolies will be dying or desperately seeking other ways to make money. We'll have free telephony, free internet access, and free video and music on demand. And there won't be any early cancellation fees.

It's inevitable. It's the internet, dammit.

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Google is buying its way out of lawsuits

Google has decided to throw a few bones to  media companies. Instead of getting sued for sending traffic to news sites, Google will pay media companies for sending traffic to their sites.

Such a deal!

Google has settled the lawsuit by Agence France-Presse, which was irate that Google posted headlines, news summaries and photos, plus links to the sites so you can read the whole story. Google already agreed to pay AP for the privilege last August.

Now I know that Donna Bogatin thinks Google is just stealing news from others and making money off that news through some mysterious, unspecified means (Google does NOT run ads on Google News. It seems to think this is just a good service for people interested in news. Go figure.)

But I'm dumb. I just don't understand the complaint. I like reading news, and I use Google to find it. Google's snippets tell me where to find news I'm interested and then--surprise!--I go to the sites where the news originated and put up with their ads.

That's how I found the Fox News article I linked to above.

It also seems to me that I've seen lots of TV commercials advertising  newspapers and news programs, and in each of them, they show headlines, snippets and photos.

I hope the broadcasters are paying those news services for the privilege of running those ads.

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How do you say "Bad Google, bad, bad!" in Mandarin?

Google was caught cheating. This ought to make the Google-haters happy.

Apparently, Google's Pinyin Input Method Editor (IME), which enables you to use a standard English keyboard to enter Chinese characters for searches, uses data from competitor Sohu. Sohu complained, Google apologized and removed the offending data.

Information Week gives a great translation of Google's announcement of its apology, courtesy of Google's translation program: "We are willing to face up to their problems, such as Sohu said it apologized to customers."

Still a few bugs to work out.

I think it means Google is willing to admit its mistakes and apologize, as Sohu demanded.

I'll bet this was something that was done by Google's folks in China. The home team is too wary of lawsuits to do anything that blatantly illegal.

I wonder if Sohu will sue anyway.

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