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Archive for February 24th, 2008

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AUGUST 20, 2007

 

THE FUTURE OF WORK — MANDEL ON ECONOMICS

Which Way To The Future?
Globalization and technology are drastically changing how we do our jobs—and that’s both a promise and a problem

podcast

COVER STORY PODCAST
 

The “Future of Work” is hardly a new topic. In fact, over the past quarter century, at least 20 books have used that phrase as part or all of their title.

So with all the words spilled on this question already, why is BusinessWeek addressing it now? The answer is simple: The U.S. and the global economies are coming to a crossroads that no one could have anticipated just a few years ago. Globalization and technology together are creating the potential for startling changes in how we do our jobs and the offices we do them in. Offshoring, for one, means work can be broken into smaller tasks and redistributed around the world. And the rapid growth of broader, richer channels of communication—including virtual worlds—is transforming what it means to be “at work.”


Yet despite the technological and organizational progress, it’s not clear whether we should look ahead to the future of work with enthusiasm or fear. Are Americans’ jobs going to become more interesting and complex as rote tasks are moved offshore or eliminated by technology? Or will managers and workers be ground down by competitive pressures that leave little time or room for creativity and innovation?Truth is, the trends prevailing in today’s workplace provide ammunition for optimists and pessimists alike.

On the positive side, employers are hiring workers with higher and higher levels of education, and jobs are demanding ever more sophistication. According to the Bureau of Labor Statistics, 34% of adult workers in the U.S. now have a bachelor’s degree or better, up from 29% 10 years ago. What’s more, the modern workplace no longer resembles the factory assembly line but rather the design studio, where the core values are collaboration and innovation, not mindless repetition. Talented people are still in high demand, and there’s no evidence yet that work has become less interesting because of outsourcing. “On balance, I don’t think that jobs are being fragmented,” says Paul Osterman, a labor economist at the Massachusetts Institute of Technology.

Fully 60% of respondents to a BusinessWeek poll expect working conditions for the average person to be better in 10 years than they are now. That’s according to an online survey of 2,000 U.S. executives and managers done in late June and early July. And in the same poll, 82% of respondents said that self-fulfillment will be a more powerful motivator than fear if we look 10 years out.

Then again, there are persistent signs that the gloomier outlook is gaining traction as well. Job satisfaction in the U.S. plummeted in 2006 to a record low. That’s according to a survey of 5,000 households done for the Conference Board. Only 47% of workers were satisfied with their jobs in 2006, down from 59% in 1995. “The demands in the workplace have increased tremendously,” says Lynn Franco, director of consumer research for the Conference Board, especially as technology has made it ever harder to get away from the job.

Even more disturbing, two decades of rising incomes for educated workers seem to have come to a halt, at least temporarily. When adjusted for inflation, the real wages and salaries of U.S. workers with at least a bachelor’s degree are barely higher than they were in 2000, an unpleasant surprise in a world in which education is seen as the route to success.

The wage stagnation, combined with the 60% rise in college tuitions since 2000, seems to be discouraging many young Americans from getting a college education. The percentage of 25- 29-year-olds with at least a bachelor’s degree has actually fallen during this decade. This raises the real possibility that this generation of young Americans may actually be less educated than the previous one, creating a growing gap between the kinds of people companies need and the workers who are actually available.

What can you do? Whether you are a manager or worker, this Special Report provides the intellectual tools and information you need to move toward the more optimistic vision. We’ll look at the future of work—both in the short run and much farther out—from the best way to manage a global virtual team to the pros and cons of branding yourself, to the seemingly farfetched use of brain chips—yes, brain chips—to enhance your capabilities.

The first section examines work from the perspective of managers, focusing in particular on how to get an organization full of people from different cultures and backgrounds to collaborate efficiently and effectively. That’s not an easy task, but we’ll see how global giants, such as IBM (IBM ), Nokia (NOK ), and Dow Chemical, (DOW ) are able to accomplish it. Meanwhile, successful Indian companies—among them Infosys Technologies Ltd. (INFY ) and Satyam Computer Services (SAY )—demonstrate how they recruit, train, and retain workers in a hyper- competitive environment.

The next section peeks into the future from the perspective of workers. We’ll explain how to avoid being “Bangalored” or “Shanghaied”—that is, having pieces of your job sent overseas. Our report’s reassuring message: “The offshoring trend is moving with the speed of a road paver rather than a hot rod, so there’s time for alert Americans and Europeans to scramble out of the way.” That means moving up the value chain to take advantage of new opportunities. It also can mean literally moving from one country to another, as we describe how Europe’s mobile labor force easily crosses national borders, perhaps giving a glimpse of where the rest of the world is heading.

Finally, the third section of the Special Report considers the impact of technology on the workplace, ranging from improved telecommuting to new techniques that help sleep-deprived workers, a serious problem in many occupations. In the future, advances in communication could enable new forms of workplace organization and mass collaboration of an unprecedented sort.

Beyond that, we ask: Will this be an invigorating “new world of empowered individuals encased in a bubble of time-saving technologies? Or will it be a brave new world of virtual sweatshops…?” For example, Wikipedia, the tremendously successful online encyclopedia, harnesses the efforts of thousands of volunteers to create something of great utility to society. But using a similar innovation in a profit-making corporation carries both enormous promise and problems.

In fact, the emerging ways that the workplace is being restructured have not yet been stress-tested. They have evolved in a period of rapid global growth, and no one knows how they will react if the world economy hits a rocky patch. We have entered uncharted territory—and that’s why this special report offers guideposts rather than a Google-esque road map.

Still, when the future of work comes to pass, will it be a bright or bleak one for most people? “I’ll be optimistic,” says MIT’sOsterman. We are, too.

 READER REVIEWS

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Wikia Wants to Shake Up Search

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Wikia Wants to Shake Up Search

Jimmy Wales, co-founder of Wikipedia, is launching a new kind of search tool, with results that rely on users’ input and open-source software

Jimmy Wales isn’t entertaining David-and-Goliath delusions when it comes to battling Google at Internet search. Wales, co-founder of online encyclopedia Wikipedia, knows his new Web-search tool won’t come close to reaching Google’s (GOOG) market share any time soon. But he’s got what may be an even grander agenda: Wales wants to shake up how people search the Web, whatever engine they use.

Wikia Search debuts Jan. 7, the result of more than a year of development (BusinessWeek.com, 12/27/06) and $14 million in funding from Amazon.com (AMZN), venture capital firm Bessemer Venture Partners, and a who’s who of angel investors including Netscape Communications co-founder Marc Andreesen, LinkedIn co-founder Reid Hoffman, and Lotus Development founder and Electronic Frontier Foundation co-founder Mitch Kapor. The search engine is being launched by Wikia, a San Mateo (Calif.) for-profit that evolved from a company Wales co-founded in 2004.

What separates Wikia Search from many other Web-search tools, including Google’s, is that it will incorporate human input with methods based on computer programs. A potentially more important distinction is that Wikia will publish the code undergirding the search tool. Opening the source code fits with the growing movement in the field of technology, including within Google, toward open software.

Soliciting User Input

Wales hopes other search companies will follow Wikia’s lead, becoming more transparent in their methods and integrating more user input. “It’s a political statement as much as anything else,” says Wales. “I think that we should be concerned about secret…proprietary software, a small amount of companies controlling a huge amount of flow,” he adds. Wales says Wikia’s goal is to “produce something of decent quality that will impact and push other players in the industry toward more openness.”

The quality quotient will depend largely on user participation. Wikia Search will encourage users to rate the effectiveness of search results. In subsequent queries, Wikia Search will favor those results deemed most helpful in prior queries.

Unlike the nonprofit Wikipedia, Wikia Search will generate revenue by selling ads that appear alongside search results. In fact, the search engine will have no apparent connection to Wikipedia. The Wikia Search site, which went live at http://www.wikia.com on Jan. 7, will have more in common with Google’s familiar layout than with the online encyclopedia’s.

Can It Live Up to the Hype?

Wikia Search has been generating buzz for months, and may draw enthusiastic participation early on, according to industry analysts and observers. The challenge will be getting early adopters to return, and bring their friends. “You can look at a lot of these different services: They’re announced, they spike, they get a lot of attention in blogs and publications,” says Tom McGovern, chief executive of search engine Snap.com. “But then you get into the marketing problem of convincing that person to come back two days from now and do another search.”

Wales cautions against expecting too much from Wikia Search too soon. As for any search engine, especially one with a strong human component, it will take time for Wikia Search to produce pertinent search results. “Don’t expect Google-quality searches on Day 1,” he says. “That’s just not going to happen.”

Wales is banking on the sense of community that has built Wikipedia into a popular, if flawed, source of information on the Web. “Wikipedia started with nothing and steadily built an audience over six years to become the No. 8 Web site on the Internet,” he says. “An audience will stay if they have a sense of ownership, which is what we’re providing with the search project.”

Wikia Search will foster community by letting users build Facebook-esque profiles to forge ties to people with common interests. The engine will also use wikis, the online collaboration tools, to publish brief Wikipedia-like articles along with search results. “I have an understanding of what is important to community,” Wales says. Wikia Search also will take pains to combat the spam that can plague search engines that rely on user input, empowering the Wikia Search community to block troublesome users from placing content.

Still, Wales says it may take at least two years for the engine to reach the standard set by Google and competitors such as Yahoo! (YHOO) and Microsoft’s (MSFT) search tool. That may be too long for impatient Web surfers, says Danny Sullivan, editor-in-chief of the Search Engine Land Web site. “If it doesn’t come through the first time—that’s it,” he says. “People won’t go back again when there are so many other options.”

Hard to Break the Google Habit

The most popular of those options, of course, is Google. “Quitting Google is like quitting smoking,” Sullivan says. “It’s a habit that’s hard to break, and people don’t want to break it.” The Mountain View (Calif.) company had 57.7% of U.S. searches in November, according to Nielsen//Net Ratings. The closest rival was Yahoo, with 17.9%. “I don’t think [Wikia Search will] reach a meaningful market share in the foreseeable future,” says Snap.com’s McGovern. “In an industry valued at a lot of money, a 5% market share would be terrific, but I think that’s going to be very difficult to do.”

What it lacks in share, Wales hopes Wikia Search will make up for in influence. Already, Google has taken a page from Wikipedia with its plan to introduce Knol (BusinessWeek.com, 12/14/07), an online tool that gives users an incentive to pen authoritative articles on a given subject. The giant is by no means injured, but it may well be paying attention.

Burnsed is an intern for BusinessWeek based in Atlanta.

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Critics Wallop Wikia

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News Analysis January 8, 2008, 12:01AM EST text size: TT

Critics Wallop Wikia

And for good reason. The new search engine doesn’t even turn up Wikipedia’s own entries, and its interactive features are wholly inactive, for now

Wikia Search, the highly anticipated search engine conceived by Wikipedia co-founder Jimmy Wales, arrived Jan. 7 without many of its promised “collaborative” features, prompting a chorus of harsh reviews around the blogosphere.

Preliminary testing of the site by BusinessWeek.com produced disappointing results consistent with the widespread grumbles, many of which concluded that Wikia Search went live far too early with this Alpha version. Wales, who has touted plans to incorporate user feedback into search results, launched the site without any of those capabilities in place. For now, Wikia Search is little more than an ordinary algorithm-driven search engine mixed with a few Facebook-type frills such as user profiles that can be used to find others with common interests.

“A Complete Letdown”

The scathing reaction among bloggers and other commentators was epitomized by a TechCrunch.com piece bluntly titled “Wikia Search Is a Complete Letdown.” The article’s author, Michael Arrington, said that while poor results are to be expected early in a search engine’s life, expectations that the people behind Wikipedia might produce a second Web phenomenon had run wild. “Wikia search would be a disappointment even without the massive hype we’ve had to endure,” writes Arrington. “And taking that hype into account, this product is an inexcusable waste of time.” Over at SearchEngineLand.com, Chris Sherman offered another biting assessment: “It’s really just yet another crappy search service that may, potentially, if all goes well, eventually turn into something useful.” In a response posted on TechCrunch, Wales urged patience with the new venture.

In trying out the service, BusinessWeek.com put Wikia Search through a history test and the engine did not score well. In response to a query for “Abraham Lincoln,” three of the top four search results provided links to elementary and high schools bearing Lincoln’s name. Amusingly, Google’s (GOOG) results for the same query led off with Wikipedia’s entry about the former President—absent in Wikia’s own results—followed by a string of biographical articles that one might expect. By contrast, such entries were buried deep within Wikia’s results.

BusinessWeek.com also tested the new engine’s handle on current events. When searches were conducted for “New Hampshire Primary,” Google once again displayed the Wikipedia entry near the top amid a slew of links pointing to information on that state’s Jan. 8 primary. Also, Google’s first option was its “News Results” link, which led to 36,000 news articles about the primary. Wikia Search did a better job this time, matching some of Google’s top results. But yet again, no Wikipedia entry was displayed and, even worse, there were no links to news stories from top media outlets. Google yielded 1.86 million results in a tenth of a second, while Wikia Search took longer to manage only 8,971 results. Eventually, Wikia Search will feature wikis, like those seen on Wikipedia, at the top of every search, but that feature will take years for the community to write and refine.

A major part of Wales’ plan is to allow surfers to rank the search results by helpfulness. There are five stars to the right of every search result. By clicking them, the user can give any result a rating, producing data that will affect Wikia’s future response to similar or related queries. However, when you try to rate a search result today, a window pops up with a message saying, “Sorry, these don’t actually do anything yet :(.” Another review of Wikia Search, from Allen Stern of CenterNetworks.com, cites this as a major problem. “I understand that it’s in Alpha and things will improve and change as the plan moves forward, however I would have liked it to be a bit more polished before hitting the public eye.”

Wales Counsels Patience

Only the social aspects of the new site stand out at this point. Users can create profiles similar to those offered by Facebook and MySpace (NWS), and another unique feature relates these profiles directly to the search engine: If someone conducts a Wikia search that matches an interest in your profile, your picture appears along with the search results. Wales hopes that incorporating common interests into the search tool will build community.

On the eve of the new site’s launch, Wales had told BusinessWeek.com, “This is a project to build a high-quality search engine. Don’t expect Google-quality searches on Day 1. That’s just not going to happen.” Wales reiterated that point in a posting on TechCrunch in response to Arrington’s article and other criticisms around the blogosphere. Wales says he hopes to make the public realize that today’s Alpha version is years away from his ultimate goal. Harking back to Wikipedia’s inauspicious start, Wales encouraged the public to wait patiently and have faith in the new site. Despite a dearth of encyclopedia entries at launch, Wikipedia has become the eighth most visited site on the Web, Wales notes.

Burnsed is an intern for BusinessWeek based in Atlanta.

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Design January 7, 2008, 1:03PM EST text size: TT

The Spare Design of Wikia Search

Google’s latest rival in the search-engine category looks eerily like…well, Google. But look beyond the home page and you’ll find many influences

Log on to Wikia Search, a new competitor to Google (GOOG), Yahoo! (YHOO), and Ask.com (IACI), and you’ll see a clean, no-frills page with a cartoonish logo and a simple search box. But Wikia Search is not just a Google clone. The new site takes a hybrid approach to search, combining technologies and features from a range of successful Web sites —search-related and non-search, including social-networking phenomenon Facebook. And when you look beyond the home page, Wikia Search’s design is just as eclectic. Its open-source design process has produced a site built on proven Web-design standards—and not just those established by Google.

It’s the latest project from Wikipedia co-founder Jimmy Wales and his San Mateo (Calif.) company Wikia, fueled by some $14 million from investors that include Amazon (AMZN) and Bessemer Venture Partners. Wikia’s long-term plan is to sell ad space on the site, although that business model is not in place yet because the technology and processes for selling and posting ads haven’t been determined. Wikia Search, a year in the works, launched on Jan. 7 with a public alpha test after weeks of private pre-alpha testing.

As late as Sunday evening, and even on Monday morning, Wales was engaged in answering e-mail questions from a small group of invited pre-alpha testers who were reporting bugs in the site’s design. The glitches included the listing of some highly rated search results below those of less popular ones—a problem that has been fixed, for now. Ironing out other problems will take more time.

Harnessing the Wisdom of Crowds

The design features a wide, blank rectangle beckoning you to type in a search word or phrase. The only text is the site’s name and standard links such as “About Us”—and those that hint at the open-source nature of the project, such as “Report a Bug.” The only graphic element visible is a cartoonish, smiling cloud, which is as goofy as Google’s brightly-colored, ever-playful home page logo.

Despite the obvious similarities to the world’s No. 1 search engine, what sets Wikia Search apart is its approach: Wikia Search uses Web-crawling software called Grub (purchased from LookSmart in July, 2007) and Lucene, an open-source search engine, but it adds humans to the search process. This hybrid offers software-powered search similar to Google’s blended with the human-driven “social search” exemplified by Yahoo Answers, which lets people post questions and harness the wisdom of the crowd.

The idea is to have a “trust network” of users, á la Wikipedia to help the software determine how germane sites are to a search. This includes engaging in so-called disambiguation, a term popularized by Wikipedia. As Wikia defines it, disambiguation is the process of distinguishing between words with more than one potential reference, such as George Bush or George W. Bush. Further details of how such intelligence might accommodate voluminous search requests have not been released. But in addition, mini-articles, posted and edited Wikipedia-style, are meant to help visitors to the search engine find quick, additional information on chosen topics.

Hiding Its Uniqueness

Users can engage in online wiki discussions of the search results, emphasizing the community-centric approach to search and further distinguishing it from Google.

So far, hours after the site launched, the mini-articles don’t seem too detailed—the entry for Google, for instance, features the company’s stock ticker and extremely limited information, such as a list of services and links.

There is also a user rating feature—the same zero- to five-star graphic familiar to Netflix and Amazon users—for the searches. These ratings are fed back into the system and used to refine the search algorithm. Wikia will publish the source code for the search engine, making the tool completely open-source. Yet the design of the site, with its Google-like face, does little to emphasize Wikia’s unique approach to search.

“The first thing people are going to think when they see this is, ‘So what? Why I should I care, and why would I want to use this instead of Google?’ When someone looks at this site, does it give them a reason to expect something different or better than what they’re used to?” observes Jesse James Garrett, president and founder of Adaptive Path, a San Francisco user-experience design consultancy, via e-mail.

New Users Vs. Power Users

Wales acknowledges that while it seems he is copying some of Google’s design strategies, he is also informed by what’s wrong with Wikipedia’s text-heavy, busy design.

“At Wikipedia, we let things get too cluttered,” Wales admits. “Yes, [the design] is useful for power users” who want to create or add to complex entries with many different offerings, from photos to long timelines and many links. “But it’s a tough challenge to figure out how to support power users without overwhelming new users” with such a text-heavy design, he says.

In fact, when you delve into Wikia Search, it’s clear the site’s design was shaped by more than either Wikipedia’s clutter or Google’s success. Search results are presented alongside links to a social-networking site on a complex page that looks a lot like Facebook. Wikia Search users who sign up for a free account can even post photos and add friends. Wales hopes such features will attract a regular audience.

If it seems as if the site’s design has myriad influences, that might be because it is the result of an open-source process, says Wales. He didn’t hire a graphic designer or user-interface consultant. Rather, a Wikia member who lives in Dubai volunteered some mock-up pages, and another in Portland came up with the happy cloud logo.

Up To the Challenge

“The design philosophy is the principle of least astonishment. You should intuitively know what to do when you come to the site,” says Wales. “So I took cues from the design standards established by existing sites.”

Wales is going head-to-head with the world’s top search properties, and he insists Wikia Search is up to the challenge. While it remains to be seen whether the human-powered approach that worked so well for an online encyclopedia can expand to meet the demands of the search world—in November, 2007, Americans conducted 10 billion searches using the top five search engines, according to ComScore data—one thing is clear: The streamlined design of Wikia Search’s user interface draws upon the proven approach of using simplicity to attract audiences to an alternative search engine. That, of course, was the strategy Google itself once used to lure people away from Yahoo.

Jana is the Innovation Dept. editor for BusinessWeek.

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Yahoo’s Search for a Vision

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Technology January 22, 2008, 4:28PM EST text size: TT

Yahoo’s Search for a Vision

Of the many possible paths the struggling Internet company and CEO Yang can take, a strategic direction must be step one

Everyone from Wall Street analysts to former employees to advertising firms seems to know just what struggling Internet pioneer Yahoo! (YHOO) should do to turn itself around. And each “solution” is a doozy: Lay off hundreds or even thousands of employees. Get out of the search ad business and just use Google (GOOG). Sell out completely to Microsoft (MSFT).

As persistent as all these rumors have been over the past year or more, the most radical versions of those moves are still unlikely to happen until Yahoo addresses it’s overriding problem: Its leaders—in particular co-founder and Chief Executive Jerry Yang—need to decide once and for all what Yahoo stands for in a new era dominated by search and social networking. And they must clearly articulate how they’re going to get it there.

Start at the Top

So far, that hasn’t happened. Last October, Yang outlined a strategic direction that to many observers was more of a three-pronged to-do list than a cohesive vision of Yahoo’s future. He said Yahoo would look to be the starting point for Internet users, extend its ad offerings to other sites, and open up its technology base to outside programmers and publishers to come up with spiffy new services for the company’s Web pages.

But many people, most of all investors, don’t think any of that will help consumers understand why they should spend more time using Yahoo than Google, Facebook, MySpace (NWS), or countless other services growing much faster in popularity. Even people at Yahoo, says one executive, aren’t sure which projects they should focus on, so efforts to improve services continue to move slowly. “I don’t think they understand where to go,” says Sramana Mitra, a Silicon Valley Web strategist who has written extensively about Yahoo’s challenges on her blog. “They’re running around like chickens.”

With inadequate direction from Yahoo’s leadership, it’s no surprise that nearly everyone has advice. Here’s the rundown on the possibilities—none of which seem likely to get Yahoo back on track in the absence of more fundamental thinking on Yahoo’s raison d’être:

Slash and burn. Fire 2,000 employees, Bernstein Research analyst Jeffrey Lindsay advised in a Jan. 11 report. He said that would give Yahoo more profits to pursue initiatives such as mobile search and video as well as acquisitions. The company is mulling layoffs, but more in the range of hundreds of employees. Deeper cuts, flagged privately by people at Yahoo as unlikely, sound more like wishful thinking by investors than sound advice. They presume that Yahoo is stumbling toward death’s door when it’s not: In its fourth-quarter report Jan. 29, the company is expected to show a 15% gain in sales, to $1.4 billion, though profits are expected to fall.

And despite a stock price that’s fallen 41% from last year’s Oct. 26 peak, a steady departure of executives, and continuing losses in its share of the Web search market to Google, Yahoo boasts strengths that belie the dire predictions of doom by naysayers. Yahoo gets 500 million visitors a month, still the most on the Web, and remains a leader in key areas such as e-mail, sports, and financial news and information. “They continue to have a ton of traffic,” says Kevin Lee, executive chairman of digital ad firm Didit.

That said, some layoffs seem both necessary and likely. Yahoo’s major acquisitions over the past year, such as Right Media, BlueLithium, and Zimbra, surely created redundant positions. If they haven’t been eliminated already, it’s time.

Give in to Google. Lindsay and others also think Yahoo should give up on its search efforts and just pay Google to drive its search engine. It’s easy to understand why. Yahoo keeps losing search market share to Google, whose engine handles from 56% to 66% of all queries, depending on who’s counting. By contrast, Yahoo’s share is usually from 18% to 21%. “The text-ad war has been lost,” says Scott Rafer, CEO of ad network Lookery and former CEO of MyBlogLog, which Yahoo bought a year ago.

But others think Yahoo would be crazy to cede such an important front, not to mention control of the Web’s most lucrative advertising opportunity. “It’s a pretty critical component of getting people to start with Yahoo and stay there,” says Ned May, director and lead analyst at market researcher Outsell. Just as important, data from searches, still the most important indication of a user’s intention to buy, ultimately may prove crucial for targeting display ads to individuals as well.

Notably, marketers and ad firms are rooting for Yahoo because they want a stronger No. 2 just to keep Google honest. “I would hate to see Google become almost a monopoly,” says Lee. If Yahoo can keep making even mild progress in search advertising—its revenue per search rose 20% in the third quarter—keeping it in-house seems worthwhile.

Sell out to Microsoft. If there’s one rumor that keeps coming back again and again, it’s this one. And with every replay, the speculation seems ever more driven by investors looking for a quick exit than by any actual deliberations by Yahoo or Microsoft. The software giant, which only last year spent the most it has ever put into an acquisition with the $6 billion purchase of aQuantive, seems unlikely to put up the upwards of $27 billion it would take to buy Yahoo. Such a deal would also carry big risks, as the merged company would likely lose even more ground to Google in the time it would take to integrate Yahoo’s and Microsoft’s operations and businesses.

Double down. In an impassioned call on the blog GigaOm on Jan. 22, Mitra advised Yahoo to forget about downsizing and “please put up a fight.” She said Yahoo has an unmatched opportunity on the emerging new Web, which she views as being dominated by highly specialized services. So, she advises, Yahoo should consider buying jobs site Monster.com (MNST) to complement Yahoo HotJobs, photo service Shutterfly to go with Yahoo’s Flickr site, travel sites such as Expedia (EXPE) or Priceline (PCLN) and more, to fill out the portal’s strengths in these specialized markets.

Problem is, Yahoo doesn’t seem to have the resources to get this aggressive. Its cash position of $2.2 billion trails laughably behind Google’s $13 billion stash and Microsoft’s $19 billion trove. And the stock market clearly isn’t valuing Yahoo’s shares enough to make them a powerful currency for deals. As much as Yang may want to follow this path, it’s unlikely he can.

There’s little doubt that very soon, Yahoo will need to focus on its potential advantages and jettison more operations that aren’t gaining traction. It has already started to do that, by buying ad firms Right Media and BlueLithium and deemphasizing flagging operations such as music, auctions, and third-tier social networking efforts like Yahoo 360.

No doubt more will be announced or at least hinted at during the Jan. 29 earnings update. Maybe there will be a significant layoff that will cut the fat or the old guard holding Yahoo back. Perhaps there’s a remote possibility of something more daring on the search front. But more than anything else, investors, partners, and employees will be looking to Yang for one thing: a clear, unmistakable statement about Yahoo’s strategic direction.

Hof is BusinessWeek‘s Silicon Valley bureau chief .

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Google Is Watching You

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News Analysis June 22, 2007, 12:01AM EST text size: TT

Google Is Watching You

Digital privacy advocate and secret smoker Kevin Bankston was outed on Google’s Street View. So, what else does the Internet know about us?

Kevin Bankston didn’t think anyone would notice his little cigarette break. His family didn’t know he sometimes snuck a smoke. So Bankston was surprised when a photo of him smoking outside his San Francisco office appeared online several years ago on Amazon.com’s (AMZN) now-defunct A9.com map service. He was even more shocked when, in May, he found out he was caught again on candid camera—possibly smoking—this time by Google’s (GOOG) new “Street View” map service.

Bloggers began buzzing about Bankston’s double-lightning-strike luck, and the two photos now appear all over the Internet. A Web search for “Kevin Bankston smokes” reveals more than 20,000 links. “I felt somewhat embarrassed and a bit spied upon,” says Bankston. “I am now thoroughly outed as a cigarette smoker.”

Privacy Advocates Seek Protections

Coincidentally, Bankston also happens to be one of the leading advocates for digital privacy. An attorney for the Electronic Frontier Foundation, he’s trying to turn his personal problem into a larger point: In the quest to fill the Web with information, online companies are often trampling on individuals’ right to privacy, says Bankston.

Of course, the trade-off between privacy and Web innovation is nothing new. The Internet’s most popular services enable people to do everything from research ailments to virtually tour Times Square—for free. But when you type in a Web search, your words are stored by Google and other search providers, along with information tying those words to your personal computer. If you surf the Web, the pages you visit and what you do on them are tracked with “cookies,” tiny text files that download to your computer so they can report back to their ad network owners.

But while Web services have long made their money tailoring advertisements to individuals based on their online doings, more users are paying attention, and some are starting to balk. Consumer advocates and privacy experts have renewed

cries for stricter guidelines—even new laws—that would change the way many Web companies do business.

Curbing Data Retention

Government agencies in the U.S. and overseas are taking notice. The European Union’s Data Protection Working Party has heavily criticized Google’s retention of search data. In the U.S., the Federal Trade Commission is reviewing whether to allow a string of proposed acquisitions of ad networks by major search companies. Those deals—Google’s $3.1 billion takeover of DoubleClick (DCLK), Microsoft’s (MSFT) $6 billion buyout of aQuantive (AQNT), and Yahoo!’s (YHOO) $720 million purchase of Right Media—would enable the big search providers to start tracking which Web sites individuals visit outside their own networks (see BusinessWeek.com, 5/21/07, “Behind Those Web Mergers”).

Already, some of the pushback has resulted in change. In June, Google said it would scale back how long it retains search data from 24 months to 18 months and would consider letting its cookies expire earlier. In response to complaints, Google also made it easier to have an image removed from its map services, which have captured people in compromising positions such as sunbathing and flashing underwear. Bankston’s photo is no longer on the site.

Many privacy advocates want more concessions. Bankston would like Google to blur the faces of everyone in its map pictures. Others would like to see search words and data stored only for as long as it takes to deliver the immediate search results and related ads. Still others would like all companies that use cookies to alert users regularly and proactively give them the option not to be tracked.

Targeted Ads Rely on User Data

If the most stringent calls are heeded, more than mergers would be at risk. Over the next four years, $9.6 billion is expected to be spent on ads triggered by a user’s online surfing activity, according to a June eMarketer report. While sites that feature auto reviews and fashion news would continue to attract ads, Web sites without such obvious draws would be hard hit by the loss of ads placed as a result of surfing behavior.

Many Web companies say the privacy concerns are, in many respects, overblown. After all, the information collected online is tied to a number representing a particular computer, not to a person’s name or Social Security number. And the companies say they’re only collecting the information to show say, a car ad, to someone who might be in the market for a car. They don’t want to know someone’s address, political views, or any other information that isn’t tied to a potential purchase. They just want to deliver fewer untargeted ads.

There’s reason for marketers to believe that people respond well to targeting. In his June report, eMarketer senior analyst David Hallerman found that users are more willing to receive ads related to things they like. “Although they are generally unaware that behavioral targeting is the cause, many consumers find ads that are systematically more relevant to their interests, preferences, or intentions to be more palatable or even welcomed,” wrote Hallerman. That’s not to say privacy is not a concern, he says. But it’s not enough of a worry to give up free services and content. “People are used to the fact that, in order to get something for free, they will see ads,” says Hallerman.

Trading Privacy for Free Service

Web companies say they are not running afoul of any privacy laws. Google, for example, says the photos for Street View don’t capture anything that passersby couldn’t see as well. “All the imagery is being collected on public streets…It is just like what we are seeing walking down a street,” says Stephen Chau, product manager of Google Maps.

More important, many Web companies argue that consumers are not willing to sacrifice the availability of free access to services in exchange for more privacy. This year, Amobee, a Redwood City (Calif.) company that delivers ads to cell phones ran a series of trials offering consumers the option to choose between a paid download service and a free ad-supported service that would track some of their mobile Web-surfing behavior. For every consumer who paid for the content, 50 more took the free version with targeted ads.

Roger Wood, senior vice-president for Amobee’s Americas region, says people born after 1975 have completely different attitudes about privacy and are more receptive to the Web’s trade-offs. “Where you live, how many times a day you shop, how many girlfriends you have—they don’t care about that level of privacy,” says Wood.

But do younger generations care about privacy at all? Wood thinks today’s teens and twentysomethings do jealously guard their thoughts and feelings. However, a scan of the Internet shows evidence to the contrary. After all, people share everything from what they ate for dinner to their political views on publicly searchable blogs. “Lifecasters” like Justin.tv’s Justin Kan, who videotapes every moment of his day to stream live on the Web for public consumption, share their intimate conversations and moments. Likewise, millions have uploaded videos of themselves to Web sites such as YouTube and Metacafe.

Limits to Sharing

Despite all the sharing—or perhaps oversharing—privacy advocates maintain that many people do care. In her upcoming book, Privacy in Context, New York University professor Helen Nissenbaum argues that people expect varying amounts of privacy depending on where they are, even when online or in public. Nissenbaum points to the anger Facebook users showed when the social network installed a feature automatically updating all their approved “friends” to new posts. Clearly, she says, users expected that certain people would see the things they wrote, but that it would fly under the radar for most users (see BusinessWeek.com, 9/8/06, “Facebook Learns from Its Fumble”).

Similarly, many AOL (TWX) users were outraged after the company posted search records, identifiable only by a number assigned to individual computers, on the Internet. Online publications identified several users from the data and The New York Times came knocking on one user’s door, showing her searches about her family and friends’ health problems. Several people sued AOL (see BusinessWeek.com, 8/23/06, “Fallout from AOL’s Flub”).

Whether it’s a topless sunbather tanning on her roof in the Netherlands or just a guy on his cigarette break, most people don’t expect millions of Internet voyeurs to catch them in the act. Perhaps they’ll need to get used to it.

Join a debate about Google.

Holahan is a writer for BusinessWeek.com in New York.

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Google and Skype Are Friends?!

Posted by: Olga Kharif on February 06

On Feb. 6, Skype, Google and two well-known vc firms announced that they will jointly invest $21 million into a start-up called FON. FON is, essentially, trying to do what a number of earlier upstarts had failed at — monetizing on offering Wi-Fi services. FON’s idea is simple: It’s inviting people with home Wi-Fi networks to participate in its Wi-Fi hotspot sharing program. If you allow other members to hook onto your home Wi-Fi network, you can use all of FON’s hotspots — and FON expects to have some 1 million of those by 2010 — for free. Where the money is made is in co-called “alien” memberships, where people who don’t own Wi-Fi networks pay to use FON.

This announcement carried two surprises for me. One, Google is going after providing Wi-Fi service. Sure, we’ve all heard about how the search giant is trying to get approval to build a city-wide Wi-Fi network in San Francisco. But, just a week ago, Google told me it didn’t really have Wi-Fi plans beyond that. Clearly, that’s not so. And the long-standing speculations that Google is going to try and start competing with telcos is slowly but surely coming true.

Two, I was surprised that Google and Skype are banding together on this. I mean, the two companies are fierce rivals — expected to increasingly step onto each other’s toes in the coming months. Google’s upcoming VoIP service, Google Talk, is a direct competitor to Skype. Google’s upcoming classifieds service, Google Base, is a direct competitor to Craig’s List, an online classifieds service in which Skype’s owner, eBay, is an investor. Talk about an unlikely partnership!

I wonder if this means that the two companies are, perhaps, exploring a long-ranging partnership agreement. Perhaps, eventually, Craig’s List and Google could band together against the likes of Microsoft on classifieds? Perhaps Google and Skype will make their VoIP services interoperable, to compete with the likes of Yahoo and Microsoft? What do you think

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