Author: Niraj Chokshi

If at first you don’t succeed, let Google try.

The search company announced its plans to merge the Web and TV yesterday with its new Google TV service. In short, they’re bringing their Chrome Web browser, their mobile phone applications and search to TV. But nearly every major tech company has failed at uniting TV and the Web, so why is Google trying and what do they hope will set them apart?

Answering why is easy: the amount of ad money spent online last year, $22.7 billion, was one-third the size of that spent on TV. It stands to reason that the Web’s largest ad company would want to cash in on the much-larger $68.9 billion TV ad market. But Google doesn’t just want a piece of the TV
ad market, it wants to wring even more money from it: “we can do even more relevant television advertising, which
should be worth a lot of money,” Google CEO Eric Schmidt said.

But as paidContent’s Staci Kramer reminds us, Google is entering a minefield:

Anyone remember Intel Viiv? Web TV? Joost? Yahoo (NSDQ: YHOO) Connected Life? Paul Allen’s Wired World? The myriad set-top boxes and streaming devices? Apple (NSDQ: AAPL)
TV? Digeo? Insert your own examples here. They were either ahead of
their time, not ready for prime time, or in some cases, not worth the
time.

And CNet counts nineteen mostly defunct or never truly popular Web gadgets.

Google hopes to find success by delivering what it already does well online: simplicity and search. The heart of Google TV is a simple search box and the service will deliver targeted content and most likely ads, too. A new feature called YouTube Lean Back will deliver a simple, personalized feed of videos your friends or Google’s algorithm’s recommend.

But how Google implements its PageRank search algorithm is most important, billionaire entrepreneur Mark Cuban argues. If a search fails to promote the right content, then broadcasters, media companies and customers won’t get on board. “It will be a mess. That would kill the product because if it doesn’t work with the TV shows you want to watch, why buy it?”

Given the many failed attempts at uniting TV and the net, opinions vary on how Google TV will fare. But if the service proves popular, Google will have successfully entered an ad market three times the size of the one that made them a household name.

Google – Apple – Eric Schmidt – Yahoo – Google Chrome

If online media is supposed to be journalism’s white knight, it is taking its sweet time getting here.

AOL is hiring hundreds of journalists and so, on a somewhat smaller scale, is Yahoo. But despite the hype at a few big online outlets, the slowly thawing journalism job market is still dominated by legacy organizations like newspapers and magazines. Journalism schools and students know that newer companies will play a role in redefining journalism, and they’re trying to prepare for it with additional technical training, but the old guard still reigns.

“We still are doing a lot of business with all the people we were doing business with 30 years ago,” said Nicholas Lemann, the dean of Columbia’s Graduate School of Journalism. The new companies matter, he added, but “they don’t come across to
me as sort of the key variable in our life right now.”

The old guard has shrunk dramatically in recent years, as a once-lucrative business model has fallen prey to Internet economics. Daily papers shed 5,200 jobs last year, according to The American
Society of Newspaper Editors, which has conducted an
annual survey since 1978. The last three years were the worst in
the survey’s history, with 5,900 and 2,400 jobs lost in 2008 and 2007,
respectively. In 2009, the size of the workforce reached an all-time
low.

In just five years, a Russian venture capital firm has amassed quite a portfolio of the Internet’s hottest companies.

Digital Sky Technologies said this week it is taking the ICQ instant messaging service off of AOL’s hands for $187.5 million, but it isn’t the first time the small, four-partner firm has made social media headlines. Last May, DST bought a $300 million stake in Facebook. The company was also the key investor when social game maker Zynga raised $180 million in December and social coupon site Groupon raised $135 million this month.

So who’s behind DST? The New York Times offered a partial answer in December:

Alisher Usmanov, a Russian industrialist billionaire who spent six
years in an Uzbek jail for fraud and embezzlement in the 1980s (he was
later cleared by a Soviet court), owns 35 percent of D.S.T. Mr. Usmanov
has said he was jailed for political reasons.

Tencent, China’s largest Internet company, also said it would buy a 10 percent share of DST earlier this month and Goldman Sachs, where two of DST’s four partners worked, is a minority shareholder. A South African media firm, Naspers, also owns stakes both in Tencent and one of DST’s websites, The Economist reported, though what all the ties mean isn’t exactly clear.

Another nagging question is how a small Russian firm landed such major deals. The answer is that DST just isn’t as demanding as its peers, writes VentureBeat’s Kim-Mai Cutler, who asked around and last week offered up a seven-point list of reasons behind DST’s success. That list includes forgoing getting seats on a company’s board of directors, demanding fewer rights, turning deals around quickly and paying departing founders and early employees generously.

Those payouts are key to the company’s model, writes Silicon Alley Insider editor Nicholas Carlson, who credits DST’s billionaire-CEO with developing a “clever strategy that’s changing the way tech companies grow up.” Some startup managers try to delay initial public offerings to get more experience before subjecting themselves to quarterly analysis, Carlson writes, but employees and investors are not so patient. That’s where DST swoops in:

DST solves this problem for entrepreneurs by coming in and buying stock from these early investors and employees at very high valuations. DST also buys some new stock from in the startups themselves.

Whatever the business model is, it seems to be serving the company well. According to Bloomberg, DST plans to spend over “$1 billion on social media over the next five years and is monitoring 50 global companies for investment opportunities.”

India, Yahoo, Google, and the U.S. government finally have something in common: Chinese cyberattacks.

Hackers in China have been siphoning Indian national security information for eight months now. In recent weeks, there have been China-based attacks on Yahoo! and Google users, and computer spies launched an attack from China and stole terabytes of data on the Air Force’s Joint Strike Fighter program.

The attacks underscore just how difficult it has been for countries and corporations to establish viable cyberdefenses. A recent National Research Council report is attempting to make a start. The report, the first part of a broad attempt to find viable options for a cyberdefense policy, identifies three general approaches, each with its own drawbacks.

The first is a passive defense in which security is strengthened in preparation for an attack. This has been the de facto approach for some time, but it fails for two reasons, according to the NRC’s Committee on Deterring Cyberattacks. Passive defenses have been too focused on improving vendor and user security, to the detriment of securing infrastructure. For passive defenses, they have to withstand an infinite variety of evolving attacks. As the authors write, that “places a heavy and asymmetric burden on a defensive posture that employs only passive defense.”

The second option is to take a Cold War approach akin to nuclear deterrence. If the United States’ Internet infrastructure is attacked, the theory goes, it should retaliate with its well-developed offensive capabilities. The problem, as evidenced by recent events, is that conclusively identifying the perpetrators is difficult. In security circles this is known as the attribution problem: The attacks may come from servers based in China, but proving the ultimate culprit is often impossible, whether it’s a foreign government or a rogue group.

The last of the general approaches is to focus on combating antagonistic behavior by establishing multilateral international agreements. Of course, as with our current agreements, they’re hard to enforce and collecting intelligence on the development of cyberarmies and the origin of cyberattacks is unimaginably hard. The authors seem most optimistic about this approach, but it still only applies to state actors and not rogue groups.

The report ends with a list of over 50 questions. It’s only the beginning of a search for viable options, but while each of the approaches mentioned above have their problems, combining all three approaches may yield the best results.

The much-hyped launch of the iPad underscored just how much mobile data Apple’s customers will generate and consume in the coming years. But today that data often flows through the domain of the company’s arch-frenemy, Google, leading industry analysts to predict that Apple would do well to create a mobile search engine of its own.

Dating back to sunnier days in the relationship between the tech giants, Google services are tightly integrated with Apple’s mobile devices, providing maps and default web browser searches. That gives Google highly valuable data on the behavior of nearly
half of all mobile users in the United States.

Piper Jaffray analyst Gene Munster thinks there is a 70 percent chance that Apple will come out with its own search engine in the next five years — an extension of the nascent war between Apple and Google over the lucrative mobile advertising market.

Munster added in a research note that Apple could even offer a better experience than Google by leveraging data from its App Store and utilizing its devices’ touch interfaces to display results in a more user-friendly way.

Movie studios are looking for new tactics against illegal file-sharing and other copyright infringement, from hiring young, tech-savvy turncoats to taking legal action against digital pirates and the search engines they use. The increasingly aggressive moves reflect the growing severity of the industry’s global problem: Piracy is so commonplace in Spain that soon it may not make financial sense to sell DVDs there at all.

The latest move is all too familiar for the music industry’s own travails: sue the downloaders. Over 20,000 movie downloaders have been sued over the past few weeks by US Copyright Group, a DC legal firm that is actively seeking out companies that want to sue. The firm is drumming up business with an aggressive pitch to movie copyright holders, stating on its website: “We are here to recover losses for copyright holders and to stop film
piracy. We are here to SAVE CINEMA.”

The Motion Picture Association of America has expressed interest in US Copyright Group’s approach, but hasn’t signed on yet. A recent history lesson suggests why: The Recording Industry Association of America sued thousands of people before abandoning the wave of lawsuits in 2008. The campaign was an unambiguous public relations disaster, illicit music downloads continue apace, and the industry has continued to struggle.

One alternative to suing individuals is taking action against the companies that facilitate downloading. The MPAA just landed another victory against Isohunt, one of the world’s leading search engines for torrents, files that are used to share both legal and illegal content. A U.S. judge just ordered Isohunt to remove all infringing content from its site; the site’s administrator said that would effectively force him to shut it down.

The problem is that fighting filesharing sites is a massive game of Whack-a-Mole: Bash one and three more pop up. Again the history lesson is telling: After the music industry smashed Napster, dozens and then hundreds of smaller services took its place.

The final recent tactic is to hire spies. On Monday, TorrentFreak, a Web site which covers torrents, reported on a a new job listing from Warner Brothers for an “IT literate” anti-piracy intern in the UK. According to the posting, duties will include:

Monitoring local Internet forums and IRC for pirated WB and NBCU content and in order to gather information on pirate sites, pirate groups and other pirate activities; finding new and maintaining existing accounts on private sites; scanning for links to hosted pirated WB and NBCU content and using tools to issue takedown requests

The yearlong internship comes with a $26,500 salary, but it’s a risky job, as Gizmodo points out. If your identity is uncovered, “you have, literally, the entire, worldwide community of pirates pissed at you.”

That’s the downside to catching pirates — sometimes they catch you first.

Of all the companies hoping to benefit from the potential of the iPad as an advertising platform, the biggest may be Apple itself.

The company is planning to introduce a new mobile advertising system on April 7th, four days after the iPad’s official launch, according to MediaPost’s Online Media Daily. Such a system would accelerate an already-tense fight between Apple and Google for dominance of the mobile advertising market, which could be worth as much as $6 billion by 2014, from just under $1 billion last year.

Details of the system are few and far between, but speculation abounds. Here’s FastCompany’s Kit Eaton’s take:

The result is likely to be an uber-precise, user-targeting ad placement
system with an associated analytics package that Apple may wind into
the iPhone’s code so developers can access it through apps.

Establishing such a system could prove contentious, given that Google secured a patent on location-based advertising just this month. Last November, Google acquired AdMob, a mobile advertising platform that Apple had been courting as well. In January, Apple shocked the advertising community
by buying Quattro Wireless, a mobile advertising developer on which the
new system is reportedly based. On Friday, Jobs and Google CEO Eric
Schmidt were spotted having coffee, suggesting the Apple-Google relationship may be on the mends, but their body language indicated otherwise.

According to a report by AdMob (pdf), the iPhone was running on 44 percent of U.S.
smartphones last month and Android was running on 42 percent. Worldwide, however, the
iPhone still dominated with a 50 percent share, compared to the
Android’s 24 percent.

Foreign Policy’s Evgeny Morozov has a lengthy post on today’s news that Russia may pump $100 million into launching a national search engine and what it might mean for Google. The state says the search engine will
facilitate safe access to information and filter banned content, but
Morozov reads between the lines and points out that it is more likely a
move to control the domestic flow of information.

Today Google is a very distant second in the Russian search market. The largest search engine is Yandex, which controls a crushing 62.8 percent of the market. Google has a 21.9 percent share. Since September, 2007, Yandex’s market share has never dipped below 55 percent, according to statistics at liveinternet.ru. Google’s share has yet to break 25 percent.

To add insult to injury, Yandex has come out with its own browser based on Chromium, the Google-sponsored, open-source project on which Google’s Chrome browser is based, according to TechCrunch. Yandex’s browser seems indistinguishable from Google’s and, apparently, it’s also called Chromium.

Yandex will also be spared by the possible national search engine, says Igor Ashmanov, a Russian internet pioneer and key consultant to the government on the search engine. “This won’t
help to topple Yandex, but it would help overtake Google,” he said, according to Morozov’s translation of a Russian-language interview.

Morozov also provides some interesting context on the viability of a Russian search engine:

The idea of national search engines is
not new. Europeans have been toying with similar plans for a few years now but
to no avail — there was simply not enough political will in Europe to make that
happen (who now talks about Quaero, a much-discussed
European alternative to Google that never really took off the ground?). Russia,
on the other hand, is a different case: the Kremlin wants to build this new
engine for reasons that have nothing to do with national pride or the need to
preserve national heritage. All Kremlin wants to do is to establish firmer
control over the information flows in the country and given that they have
quite a few unfair advantages — both market-based and legal — they may as well
succeed.

With mobile platforms on the rise, and almost half of Netflix customers streaming movies online, the company is taking its sweet time to bring the two together.

Blockbuster’s announcement Wednesday that they have a new streaming app for mobile phones is a reminder that Netflix has been lagging on their own
promise to bring mobile streaming to life.

Blockbuster, which announced last week that it might have to file for Chapter 11 bankruptcy protection, has long played catch-up with Netflix. Netflix launched its subscription service in 1999, and had more than a million subscribers when Blockbuster finally launched a competing service five years later. Netflix went live with its movie-streaming feature in 2007; Blockbuster’s service went up a year and a half later.

This is why it’s odd that Blockbuster beat Netflix to the mobile-streaming punch, albeit with a roll-out that is limited to a single phone model on T-Mobile’s network.

Shouldn’t mobile streaming be the next step for the company? Netflix CEO and founder Reed Hastings doesn’t think so. He told the Wall Street Journal in January that big devices are the priority: “Until we get our TV ubiquity and our Blu-ray ubiquity
and we are getting close on video game ubiquity we would next turn to
the small screen.” (On Thursday, the company told customers with Nintendo Wii’s that a disc with software that enables Netflix on the device was in the mail.)

Netflix is working on mobile, but they’re in no hurry. Earlier this month, the company surveyed customers on whether they would use an iPhone app to stream movies, although it seems that such a feature may first come to Windows Mobile users by the end of this year.

By not making mobile a priority, Netflix is letting others creep into the market. On Wednesday Fox Mobile Group announced a new mobile video-streaming service that will provide access to content from Fox, NBC Universal, and Discovery. And, on Tuesday, mobile entertainment startup mSpot announced that it was bringing its mobile service to Netflix’s home turf, the Web.

The service currently runs on 50 devices and most major mobile operating systems and it includes movies from Paramount, Universal, Image Entertainment, and Screen Media Ventures. mSpot isn’t a serious Netflix competitor right now, but isn’t that how the story always begins?

Pop quiz for all of you hotshot social media mavens: Your client’s Facebook fan page is overrun by angry protesters. What do you do?

That’s the situation Nestlé found itself in this week, when a Greenpeace campaign targeted the company for its use of palm oil suppliers who are allegedly destroying orangutan-inhabited rainforests. The fight made its way to Facebook, where Nestlé’s fan
page was assailed. Nestlé responded by warning users not to use altered versions of its logo and taking a snarky tone with its critics. Then it apologized.

If Nestlé’s experience underscores how not to handle public relations online, here are five lessons gleaned from past social media public relations disasters:

1. Don’t get defensive
Nestlé violated a basic rule of public relations, said BNET’s Rick Broida: “Don’t insult your customers.” Even if you applaud the moderator for acting like a living, breathing human being, the combative tone resulted in continued rants on the Nestlé’s Facebook page, even after the company announced it was ending its relationship with the palm oil supplier in question. Such an announcement should have been a lauded shift to a sustainable practice, but it was lost amid the vitriol.

2. Closely watch social networks for complaints
On February 13, director Kevin Smith was kicked off a Southwest Airlines flight, essentially for being too fat to fit in his assigned seat. He tweeted the episode that night and the next day, and his ordeal became a talking point across the Internet, but Southwest moved quickly to smooth things over. By the time the story was trending on Google, Southwest had already apologized to Smith via Twitter and posted an apology and explanation of its policy on its own blog.

3. Don’t stalk your customers
This one might seem obvious, but it was lost on the people at global advertising giant Saatchi & Saatchi when they created a viral campaign for Toyota. In 2008, the firm launched an ad campaign for the Toyota Matrix called “Your Other You,” which allowed people to set friends up for elaborate pranks in which an actor stalked them with e-mails, text messages and phone calls. Last fall, a woman sued the companies for $10 million claiming that she began crying all the time, lost sleep and began sleeping with a machete by her bed as a result of the campaign. “This sounds like one of those ideas that was great in the boardroom
and then on execution was a really bad idea,” Jeff Roach,
president and creative director of Glitteration, a marketing agency based in Oakville, Ont. told CanadianBusiness.com.

4. Be vigilant of how employees use social media
Last April, a video surfaced on YouTube in which one of two Domino’s employees did some generally nasty stuff like shoving pizza cheese up his nose, while the other narrated the video. Even though the food was allegedly never delivered, the company suffered a major public relations hit. According to one research firm, Domino’s rating among consumers went from positive to negative almost overnight. A spokesman told The New York Times that “even people who’ve been with us as loyal customers for 10, 15, 20
years, people are second-guessing their relationship with Domino’s, and
that’s not fair.” Welcome to the Internet, brother.

5. Don’t insult a cohesive community
In 2008, Motrin launched a video ad campaign which suggested that mothers who carry babies in slings do it to be fashionable, but suffer more as a result (and Motrin is there for you!). The video quickly went viral, but led to a backlash on mommy blogs, Twitter and Facebook. According to Fast Company’s Allyson Kapin, over 100 blog posts were up at the time with headlines such as “Motrin Makes Moms Mad” or “Motrin Giving Moms a Headache.” The campaign’s Web site was eventually shut down and an executive sent notes of apology to bloggers. The one bright spot, a company executive told The Wall Street Journal, is that the experience was a learning opportunity.

Here’s the Greenpeace video targeting Nestlé. (Warning: this might be graphic to some and involves a fake Orangutan finger and fake Orangutan blood.)

Have a break? from Greenpeace UK on Vimeo.

Somalian pirate operations are becoming increasingly sophisticated, according to a March 10 UN Security Council report, with a funding and incentive model that could double as a business school curriculum.

Here is a handy guide to the piracy business plan, based on some of their findings.

Step 1: Round up investors to provide start-up capital.

Step 2: Gather between eight and twelve pirates to form the at-sea team. They will need “a minimum of two attack skiffs, weapons, equipment, provisions, fuel and preferably a supply boat.” Each pirate should bring his own firearm in exchange for a class A share of the profits. If a pirate brings a skiff or a particularly heavy-duty firearm like a machine gun or, say, a rocket launcher, throw in another share. One more share to the guy who boards the besieged ship first.

Step 3: Assemble another team of about 12 people. Each class A pirate can contribute a friend or relative to this team. These are the class B investors and they’ll provide land-based protection. The B shares are typically set at a fixed amount, currently worth about $15,000.

Step 4: Hijack ship, take hostages.

Step 5: Find someone to front the cost of the siege — to be repaid with interest — while the ransom is negotiated.

Step 6: Collect ransom.

Step 7: Distribute profits. The lead investor gets a 30 percent cut, local elders are paid between 5 and 10 percent for anchoring rights and the class B holders receive their fixed-sum payouts. Whatever is left is split among the class A shareholders.

Bonus: You don’t want your pirates running off with the loot! Be sure to incentivize your workforce and set compensation levels fairly. Here’s a translation of a seized pirate document:

This is to notify all the ship’s staff that the company has given out a merit-based reward:

1. Gaanburi (pirate name) has qualified for it and the company has promised him $2000. Likewise, similar awards for Cadiin (pirate name) and Ina Cabdulqaadir Dhuxyaweyn (pirate name) will be announced soon. The company will continue its reward system and it is open to all. As the saying goes ‘the parents initially love their children equally but it is the children who make them love some more than the others’. So does the company. It is up to your abilities to qualify this easy-to-earn reward.

Hat tip to UN Dispatch’s Mark Leon Goldberg.

The future is in the hands of amateurs. Someone should tell the auto industry.

The Big Money’s Matthew DeBord wonders which car company will follow in Apple’s footsteps and develop what he calls the first iCar, “remaking mobility along the lines of technological innovation, and powering it with electricity.” He focuses mostly on the electricity bit, but it’s the first part of the quote that really matters.

The car company that leads the industry into the future will be the first one to internalize a key lesson of the past decade in tech: you need a platform that amateurs and third-party professionals can use to innovate from the outside.

Such a platform, ideally open source, could result in an explosion of development. In its first 18
months, Apple’s app store has accumulated an estimated 140,000 apps,
while the slightly younger market for Google’s open-source, mobile Android operating
system hosts 30,000 apps, according to MobileCrunch.

What the platform would be or specifically control is up to the industry, but it should allow easy access to the most of the functions of the car. While safety is a concern — imagine being
hacked and shut down on the highway — the car’s vital functions can be
isolated from such a platform.

It’s not that the industry doesn’t have cool technology to offer from within. Five major manufacturers are offering 2010 models that self-park and GM recently demonstrated an amazing augmented reality windshield (video below) that highlights road signs and the road itself in bad conditions.

But imagine if the GM windshield were opened up to third-party apps. The car could tell you when you pass a restaurant you like or let you know that the store coming up has an item on your shopping list. It could let you know that the gas station coming up on the right has the cheapest prices or is the last one for 60 miles and you only have enough for 30. GM will undoubtedly think of some such uses, but without a platform GM owners won’t be able to take advantage of amateur ingenuity or technological advances made after the car is released.

Car companies are notoriously slow to innovate. Even though they are showing off some interesting and useful in-car tech at this years’ South by Southwest Interactive festival, most of the innovations being touted won’t be available for at least five years.

Some within the industry are starting to understand the problem. “There’s definitely a case for the notion that customers
want to be able to change. The same user interface isn’t necessarily
appropriate for everyone, ” T.J. Giuli, a Ford vehicle software systems engineer, told CNET.

With access to a platform that can be updated and customized, we won’t have to wait for the industry to catch up.

There is at least one open source car company, Local Motors in Massachusetts, which was profiled in the February cover story of Wired magazine. But Local Motors is more focused on opening the construction end of things (the design was crowdsourced and customers put together the car in “assembly centers”) and less focused on the technology within.

Local Motors isn’t just tapping into a niche market of amateur mechanics. It’s harnessing a wider do-it-yourself boom that Wired’s Editor-in-Chief Chris Anderson has called “the next industrial revolution.”

Change happens, he writes, “when industries democratize, when
they’re ripped from the sole domain of companies, governments, and
other institutions and handed over to regular folks.” It happened to publishing, broadcasting, and communications thanks to the Internet and now it’s happening to manufacturing.

Car makers should embrace the crowd or risk making the same mistakes those industries made.

Here’s the GM windshield demo:

China may have to move some metaphorical mountains to build its proposed 16,000-mile, high-speed train network from Beijing to London, with lines running to Southeast Asia, India and Europe. For a start, that means proving the railroad is economically viable for the 17 nations it will run through, and managing some treacherous diplomatic terrain.

A senior consultant on the rail project said that China wants participating countries not to pay in cash, but rather with natural resources. That tactic could represent “a sort of neo-imperialism desired by the countries to be colonized,” argues Yonah Freemark of Transport Politic:

Will they regret the selling off of their natural resources in exchange for better transportation offerings? Is this reasonable foreign investment on the part of China, or is it an attempt to take control of the economies of poor countries?

Even if China proves that its resource-exchange plan is mutually beneficial, it will still have to convince European countries that the rail line is economically worthwhile, especially as maritime transport is already so cheap.

China will also need to do some political maneuvering. For one, the railroad-for-resources plan might face outside resistance from places like India, which is wary of its neighbor’s growing economic heft, and from Russia, “which sees resource-rich Central Asia as its sphere of influence,” The Economist reports. Questions of whether China will be able to sign all the countries up “only
multiply when it is borne in mind that Tehran is one of the mooted
stops.”

The deal gets more complicated when considering allegations from manufacturers in Europe, who say that in complying with
Chinese regulations, they were forced to turn over technology that is now being used by the Chinese to undersell them both internationally and at
home. The Financial Times reports: “The official state policy on using foreign rail
technology is known as ‘introduce, digest, absorb then innovate.’”

Once China convinces the 17 countries that a high-speed line is both economically and politically acceptable, all that’s left is the small matter of laying 16,000 miles of track across international borders, with many countries using incompatible gauges of track. Considering the obstacles, this rail network may be derailed before it even breaks ground.

The Wall Street Journal has a story today on how Hearst Corporation hopes to develop thousands — that’s right, thousands — of news-aggregating iPhone applications centered on specific topics.

There are some pitfalls to avoid, but it looks like a smart new media move by an old media company.

Hearst expects the apps, which will draw on its photos and text from from across the Web, will cost “just a few hundred dollars of employee time.” As The Journal reports:

Dozens of applications already are available from Apple, with more expected to roll out over the next year. The apps sell for 99 cents and up for fans of the New York Yankees, Red Sox and other ball clubs, as well as for Rihanna, Taylor Swift, Coldplay and other musicians.

So, why is it a good idea? First, the app consumer is already used to paying for things. As George Kliavkoff, the executive in charge of the initiative, tells The Journal, “unlike the Web, we’ve always trained people that everything on the mobile device costs money.” Let other people figure out how to charge online. You might as well focus on a medium in which people already pay for content.

There’s also little disagreement that granular journalism, focused on niche topics, is a key part of the future of media. As City University of New York professor C.W. Anderson wrote in December, a key consensus to emerge among media professionals last year was the “the inevitable shrinking and nicheification of news organizations.” Niche is in.

AOL is making a big bet on geographical niches (also known as hyperlocal journalism) and, as I said yesterday, the niche site Politico will likely become profitable this year. PaidContent.org, which caters to the media and digital media sectors, is another example of a niche success.

But there are pitfalls. For the apps to sell, Hearst has to offer something — anything, really — that a simple Google search or RSS feed doesn’t. Even something as simple as breaking news alerts could be enough, I think.

Hearst will also need to steer clear of Apple’s app-purging police, which recently began clearing its store of “cookie cutter” apps that offer little more functionality than a simple Web site or RSS feed. Granted, Apple has been known to make exceptions for the mainstream media in their purges, but given that Hearst is working on the Skiff e-reader, a possible iPad competitor, who knows what Apple will do.

If Hearst can provide even some minor added value to the cheap apps though, the experiment looks like it could have real potential to subsidize the company’s journalism.

What is it with tech bigwigs dispensing a mix of obvious and poorly thought out advice to newspapers?

Google’s chief economist and the founder of the world’s first popular Web browser both argued this past week that newspapers need to more quickly move online (shock!), but neither address the key thing holding publications back: the ad revenue disparity.

Netscape founder Marc Andreesen on Friday told TechCrunch his longstanding recommendation that newspapers and magazines “should shut down their print editions and embrace the Web wholeheartedly.” Google’s Hal Varian made a similar argument in a Tuesday blog post. “The best thing that newspapers can do now is experiment,
experiment, experiment,” he wrote:

There are huge cost savings associated with
online news. Roughly 50% of the cost of producing a physical newspaper
is in printing and distribution, with only about 15% of total costs
being editorial. Newspapers could save a lot of money if the primary
access to news was via the internet.

Print is expensive and dying, online is the future. So what’s holding papers back? Maybe it has something to do with, oh I don’t know, money?

On his Reflections Of A Newsosaur blog, Alan D. Mutter points out exactly why Andreesen (and implicitly Varian) is wrong. In 2008, interactive advertising accounted for about 8 percent of industry ad sales, he writes. Even accounting for a $10 billion decline this year, he still estimates print revenues will be over $30 billion.

It doesn’t take a certifiable Silicon Valley genius to see that no business can walk away from some 90% of its revenue base without imploding. Andreessen should know this better than most, because he watched Netscape, the pioneering browser company he helped launch, go from supernova to black hole in a few short years.

Ignoring the Web is obviously suicide, but there is a reason publications are taking their time.

One of the biggest success stories in recent years is Politico, which was founded in 2007, and is expected to at least break even this year. How were they able to do it? With a print product. In his August 2009 Vanity Fair profile, Michael Wolff writes that Politico’s Internet cachet “has enabled a tabloid-size print version of Politico (also called Politico)
to thrive and more than double the company’s revenues.”

Google’s Varian points out why this is. On an average day, we spend about 70 seconds reading news online and 25 minutes reading it offline, he wrote. “Not surprisingly, advertisers are
willing to pay more for their share of readers’ attention during that
25 minutes of offline reading than during the 70 seconds of online
reading.”

And, ultimately, he does make an interesting point, albeit indirectly. Replace that 25 minutes offline with an equivalent time on a tablet, and publications can reap the benefits of high-value ads while also saving on printing and distribution. Now that’s an argument that makes sense.

[For another take on Google’s prescription for Web newspapers, read Derek Thompson’s 3 Big Problems for Online Advertisers]

Want to make an app for that? You better be prepared to sign one of the tougher contracts this side of Faust.

Apple’s developer agreement — recently unearthed by the Electronic Frontier Foundation —  severely limits the company’s liability and enables them to kill any application.

Details on the developer agreement have been scant until now, because it includes a strict confidentiality clause. But the EFF filed a Freedom of Information Act Request with NASA, which has its own iPhone
app. EFF’s conclusions:

Overall, the Agreement is a very one-sided contract, favoring Apple at
every turn. That’s not unusual where end-user license agreements are
concerned (and not all the terms may ultimately be enforceable), but
it’s a bit of a surprise as applied to the more than 100,000 developers
for the iPhone, including many large public companies. How can Apple get
away with it? Because it is the sole gateway to the more than 40
million iPhones that have been sold. In other words, it’s only because
Apple still “owns” the customer, long after each iPhone (and soon, iPad)
is sold, that it is able to push these contractual terms on the entire
universe of software developers for the platform.

The agreement’s release is especially interesting as it comes amid what Gizmodo aptly calls “The Great App Store Purge of 2010.” It began in February when Apple began removing some, but not all, sex-themed applications from its online App Store. The company then started killing apps that scan for nearby wireless networks. This week, Apple set its sights on “cookie-cutter applications,” which offer little more functionality than a simple Web site.

The license agreement must be signed by developers of applications for the iPhone
operating system, which runs on the iPhone, iPod Touch and iPad.

So what’s in the agreement? For a start, Apple reserves the right to suddenly kill any application — even after you’ve purchased it. “Steve Jobs has confirmed
that Apple can remotely disable apps, even after they have been
installed by users,” wrote EFF staff attorney Fred von Lohmann. “This contract provision would appear to allow that.” The contract also strictly bans tinkering with any Apple products, a limitation that Lohmann points out could prevent developers from making apps that work with open source software.

But one of the most audacious clauses is the one that limits Apple’s liability:

Section 14 states that, no matter what, Apple will never be liable to
any developer for more than $50 in damages. That’s pretty remarkable,
considering that Apple holds a developer’s reputational and commercial
value in its hands–it’s not as though the developer can reach its
existing customers anywhere else. So if Apple botches an update,
accidentally kills your app, or leaks your entire customer list to a
competitor, the Agreement tries to cap you at the cost of a nice dinner
for one in Cupertino.

As frustrating as the agreement might be for developers, they always could just opt out, as some of the tech-savvy commenters at Slashdot point out. And at least one spurned developer has embraced the underground app store Cydia, which can only be accessed on devices that have been jailbroken, a process that allows users to run unauthorized software. But that’s a limiting option since only 8.5 percent of devices are jailbroken, according to Cydia’s creator.

Check out the EFF-hosted 28-page agreement for yourself.

Earlier this week, Spanish police and the FBI shut down one of the largest networks of hacked computers ever discovered.

The authorities were assisted by private companies and experts, proving a point I made last week: that companies can and should work with authorities rather than trying to stop such networks on their own through other, sometimes dubious, means.

The authorities this week arrested three people for running the “Mariposa” botnet, a network of 12.7 million infected and remotely controlled computers that the operators used to collect information on over 800,000 people. The botnet included computers at over half of the Fortune 1,000 companies and more than 40 banks. Last week, Microsoft secured a restraining order against the owners of 277 domain names linked to the Waledac botnet. The order enabled the company to strip them of their domains, an odd tactic that I argued gave the company too much power and may have caused some collateral damage by possibly dismantling legitimate domains.

The Spanish arrest proves that there is a viable alternative. The Register explains how Defence Intelligence, the private security firm which discovered the botnet last May, teamed up with the FBI and Spanish police, as well as antivirus firm Panda Security, to kill the network.

To control the Mariposa (Spanish for butterfly) botnet, the operators used a virtual private network, a means of securely connecting computers over the Internet. The VPN made it difficult for the authorities to track the botnet’s operators, but they were still able to shut it down on December 23, 2009. According to The Register, when that happened:

The gang’s leader, alias Netkairo, panicked in his efforts to regain control of the botnet. Netkairo made the fatal error of connecting directly from his home computer instead of using the VPN, leaving a trail of digital fingerprints that led to a series of arrests two months later.

Microsoft and other big companies take note: collaboration with authorities and a little patience is all you need to take down a botnet.

Google and Apple are emerging as top contenders in the fight for the mobile advertising market.

Mobile ad spending worldwide increased 74 percent last year, to $913.5 million, Entrepreneur magazine reports in this month’s issue. That’s a tiny fraction of overall ad spending, but the trend is clear if you look at the kids: more than a third of Millennials get their mobile ads on Apple devices, according to one report, and Google controls 21 percent of the space, according to Entrepreneur. The two tech giants are coming from opposite directions: Apple has a great phone product it wants to leverage for mobile ads; Google has a head start on mobile ads it wants to supplement with a new phone product. The bottom is line is both companies want a bigger piece of mobile advertising.

And the land grab has been accelerating. Last week, Google won a potentially crucial patent for location-based advertising, according to a Monday VentureBeat report.
What it means is still unclear, but some argue that the broad patent
may give Google a lock on the market. It could be a cause
of concern for small companies without large patent portfolios and it could raise questions among big companies, too. Still, VentureBeat notes that such patents are often defensive rather than offensive.

Apple was in talks with AdMob, a mobile ad network, in November, but Google ultimately bought it for $750 million. By January, Apple had found another advertising firm, Quattro Wireless, to buy, a move which shocked the advertising community. Yesterday, Silicon Alley Insider reported on Apple’s latest job posting for its growing mobile ad team, part of what The Insider calls a staffing “blitz.”

And then there are the underdogs. HootSuite, the popular Twitter client, has teamed up
with 140 Proof, a nascent Twitter ad network, to serve ads within Twitter streams for
mobile clients, TechCrunch reported
Tuesday. Mobclic, another ad network, bought an iPhone analytics
service, most probably to provide advertisers with more accurate
statistics about the people viewing their ads, according to paidContent. It beginning to look like 2010 could be the breakthrough year for mobile advertising.

A federal judge has allowed Microsoft to secretly deactivate nearly 300 domain names that the company alleges were part of a giant spamming network. While its intentions are good, Microsoft’s approach is problematic.

Microsoft argued that it had linked 277 domain names to a botnet, a network of compromised computers instructed to perform a task such as denial of service attacks and sending spam e-mails. Some computers in a botnet are run by spammers themselves, but the majority are “drones” or infected computers whose owners are unable to stop or unaware of the task being performed. Microsoft alleged the domains were part of a botnet called Waledac, which the company estimates includes between 30,000 and 90,000 drone PC’s, according to The Journal.

On Monday, Microsoft was granted a restraining order against the domain-name owners, who have until March 8 to reclaim their addresses. The company said it tried to ensure that the targeted computers were only being used for the Waledac botnet, which was responsible for sending 651 million spam e-mails to Hotmail addresses over an 18-day period last month.

While the company’s fight on behalf of its users is admirable, its approach is questionable. For one, it runs the risk of collateral damage, as The Journal points out:

The single U.S.-based registrant of a suspect domain in Microsoft’s complaint, Stephen Paluck of Beaverton, Ore., said in a phone interview that he was doing nothing wrong from his Internet address, Debtbgonesite.com. Mr. Paluck said he didn’t know what a botnet was and wants Microsoft to return his domain name to him, which he last used to send email from in December.

It’s not difficult to imagine a legitimate website owner — perhaps with a hijacked PC — being mistakenly targeted. If even one of the domain names taken down belonged to a legitimate small business, the order would be financially disruptive.

The court order also sets a bad precedent by granting Microsoft the power to shut down domains. Just yesterday, the company convinced an Internet Service Provider to shut down a site that hosted a leaked guide to how Microsoft shares information with law enforcement agencies, ReadWriteWeb reported. Some, including the spokeswoman for the Electronic Frontier Foundation, a digital rights advocacy group, have argued that the move was a form of censorship. The editor of the guide argued that it sheds light on alleged violations of consumer privacy. While the ISP’s removal of the site seems more likely motivated by fear of Microsoft than a legal directive, the botnet court order establishes a new legal avenue for Microsoft to use to silence some critics, such as the editor.

But if Microsoft’s approach was a poor choice, how else can it keep up the necessary fight against spam? Engage law enforcement. As The Journal reported, the FBI and other overseas agencies
already pursue botnet operators. Law enforcement agencies should be the ones shutting down the spammers, not corporations.

The European Commission has launched the first-ever official antitrust inquiry into Google’s search and search advertising services. Despite Google’s estimated 90 percent share of the European search advertising market, it hasn’t necessarily done anything illegal. But its stranglehold may still be a prohibitive barrier to competitors, present and future.

The preliminary inquiry stems from three complaints. Two are from companies offering search services and claim that Google has purposely demoted their links in search results.

More interesting, though, is the third complaint from Ciao!, a German Microsoft-owned search engine, over a lack of transparency behind Google’s AdSense system. It’s a bit ironic that Microsoft is going to European regulators to complain about anti-competitive behavior. As the Economist explains, Ciao! and the industry group ICOMP, which includes Microsoft among its backers, take particular issue with the “black box” of Google’s ad selling algorithms.

It is not clear why certain advertisers have to pay a minimum bid, how advertisements are ranked or how it comes up with the amounts it pays websites when they run advertisements managed by the firm. Without more information, “advertisers and policymakers have no way of verifying whether the dominant firm has exercised its power responsibly,” ICOMP wrote in a recent paper.

While Google fiercely defends the secrecy of its ad program (its search algorithm is closely guarded, although Wired exposed some intriguing details this week) the basic structure is publicly available and will be critical to defending against accusations of abuse of power. It works something like this, according to Google’s annual
10K filing: Imagine Alan, Betsy and Carl all bid on the same
keyword at $1, $0.60 and $0.50 per click,
respectively. Alan will receive the best ad placement and pay $0.61,
Betsy will pay $0.51 and Carl will pay $0.01.

As The Financial Times reported, Google “has always maintained that advertising prices are set by auction, leaving it without any direct influence over pricing.” If it were to set prices, Google would arguably be running, not just participating, in the European online ad market.

Google’s defends its lack of transparency by arguing that advertisers can go elsewhere. But, as The Economist rightly argues, “in practice its big market share gives them
little choice.” Realistically, there is no alternative. The search ad market — running, admittedly, without price-setting
interference — is nearly entirely run within the confines
of Google “black box.”

If a competitor were to devise a better, even more effective, way to
advertise online, it would be incredibly difficult to begin to compete with Google and its command of online eyeballs. Its dominance effectively locks in advertisers.

To compete you need either to be incredibly well-funded, as Microsoft is, or to develop a game-changing way to advertise online. Merely offering a marginally better way  wouldn’t be enough. While Google’s dominance alone isn’t anti-competitive, the resulting barriers to innovation may be.