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cyber war        2008-2009
http://www.nytimes.com/reuters/2009/05/29/us/politics/politics-us-security-cyberspace.html
http://www.reuters.com/article/reutersComService4/idUSL1981632120080319

cyber attacks
http://www.nytimes.com/2009/07/09/technology/09cyber.html

online gossip

October 12, 2008
The New York Times
By RICHARD DOOLING

Omaha

“BEWARE of geeks bearing formulas.” So saith Warren Buffett, the Wizard of Omaha. Words to bear in mind as we bail out banks and buy up mortgages and tweak interest rates and nothing, nothing seems to make any difference on Wall Street or Main Street. Years ago, Mr. Buffett called derivatives “weapons of financial mass destruction” — an apt metaphor considering that the Manhattan Project’s math and physics geeks bearing formulas brought us the original weapon of mass destruction, at Trinity in New Mexico on July 16, 1945.

In a 1981 documentary called “The Day After Trinity,” Freeman Dyson, a reigning gray eminence of math and theoretical physics, as well as an ardent proponent of nuclear disarmament, described the seductive power that brought us the ability to create atomic energy out of nothing.

“I have felt it myself,” he warned. “The glitter of nuclear weapons. It is irresistible if you come to them as a scientist. To feel it’s there in your hands, to release this energy that fuels the stars, to let it do your bidding. To perform these miracles, to lift a million tons of rock into the sky. It is something that gives people an illusion of illimitable power, and it is, in some ways, responsible for all our troubles — this, what you might call technical arrogance, that overcomes people when they see what they can do with their minds.”

The Wall Street geeks, the quantitative analysts (“quants”) and masters of “algo trading” probably felt the same irresistible lure of “illimitable power” when they discovered “evolutionary algorithms” that allowed them to create vast empires of wealth by deriving the dependence structures of portfolio credit derivatives.

What does that mean? You’ll never know. Over and over again, financial experts and wonkish talking heads endeavor to explain these mysterious, “toxic” financial instruments to us lay folk. Over and over, they ignobly fail, because we all know that no one understands credit default obligations and derivatives, except perhaps Mr. Buffett and the computers who created them.

Somehow the genius quants — the best and brightest geeks Wall Street firms could buy — fed $1 trillion in subprime mortgage debt into their supercomputers, added some derivatives, massaged the arrangements with computer algorithms and — poof! — created $62 trillion in imaginary wealth. It’s not much of a stretch to imagine that all of that imaginary wealth is locked up somewhere inside the computers, and that we humans, led by the silverback males of the financial world, Ben Bernanke and Henry Paulson, are frantically beseeching the monolith for answers. Or maybe we are lost in space, with Dave the astronaut pleading, “Open the bank vault doors, Hal.”

As the current financial crisis spreads (like a computer virus) on the earth’s nervous system (the Internet), it’s worth asking if we have somehow managed to colossally outsmart ourselves using computers. After all, the Wall Street titans loved swaps and derivatives because they were totally unregulated by humans. That left nobody but the machines in charge.

How fitting then, that almost 30 years after Freeman Dyson described the almost unspeakable urges of the nuclear geeks creating illimitable energy out of equations, his son, George Dyson, has written an essay (published at Edge.org) warning about a different strain of technical arrogance that has brought the entire planet to the brink of financial destruction. George Dyson is an historian of technology and the author of “Darwin Among the Machines,” a book that warned us a decade ago that it was only a matter of time before technology out-evolves us and takes over.

His new essay — “Economic Dis-Equilibrium: Can You Have Your House and Spend It Too?” — begins with a history of “stock,” originally a stick of hazel, willow or alder wood, inscribed with notches indicating monetary amounts and dates. When funds were transferred, the stick was split into identical halves — with one side going to the depositor and the other to the party safeguarding the money — and represented proof positive that gold had been deposited somewhere to back it up. That was good enough for 600 years, until we decided that we needed more speed and efficiency.

Making money, it seems, is all about the velocity of moving it around, so that it can exist in Hong Kong one moment and Wall Street a split second later. “The unlimited replication of information is generally a public good,” George Dyson writes. “The problem starts, as the current crisis demonstrates, when unregulated replication is applied to money itself. Highly complex computer-generated financial instruments (known as derivatives) are being produced, not from natural factors of production or other goods, but purely from other financial instruments.”

It was easy enough for us humans to understand a stick or a dollar bill when it was backed by something tangible somewhere, but only computers can understand and derive a correlation structure from observed collateralized debt obligation tranche spreads. Which leads us to the next question: Just how much of the world’s financial stability now lies in the “hands” of computerized trading algorithms?

•

Here’s a frightening party trick that I learned from the futurist Ray Kurzweil. Read this excerpt and then I’ll tell you who wrote it:

But we are suggesting neither that the human race would voluntarily turn power over to the machines nor that the machines would willfully seize power. What we do suggest is that the human race might easily permit itself to drift into a position of such dependence on the machines that it would have no practical choice but to accept all of the machines’ decisions. ... Eventually a stage may be reached at which the decisions necessary to keep the system running will be so complex that human beings will be incapable of making them intelligently. At that stage the machines will be in effective control. People won’t be able to just turn the machines off, because they will be so dependent on them that turning them off would amount to suicide.

Brace yourself. It comes from the Unabomber’s manifesto.

Yes, Theodore Kaczinski was a homicidal psychopath and a paranoid kook, but he was also a bloodhound when it came to scenting all of the horrors technology holds in store for us. Hence his mission to kill technologists before machines commenced what he believed would be their inevitable reign of terror.

•

We are living, we have long been told, in the Information Age. Yet now we are faced with the sickening suspicion that technology has run ahead of us. Man is a fire-stealing animal, and we can’t help building machines and machine intelligences, even if, from time to time, we use them not only to outsmart ourselves but to bring us right up to the doorstep of Doom.

We are still fearful, superstitious and all-too-human creatures. At times, we forget the magnitude of the havoc we can wreak by off-loading our minds onto super-intelligent machines, that is, until they run away from us, like mad sorcerers’ apprentices, and drag us up to the precipice for a look down into the abyss.

As the financial experts all over the world use machines to unwind Gordian knots of financial arrangements so complex that only machines can make — “derive” — and trade them, we have to wonder: Are we living in a bad sci-fi movie? Is the Matrix made of credit default swaps?

When Treasury Secretary Paulson (looking very much like a frightened primate) came to Congress seeking an emergency loan, Senator Jon Tester of Montana, a Democrat still living on his family homestead, asked him: “I’m a dirt farmer. Why do we have one week to determine that $700 billion has to be appropriated or this country’s financial system goes down the pipes?”

“Well, sir,” Mr. Paulson could well have responded, “the computers have demanded it.”

Richard Dooling is the author of “Rapture for the Geeks: When A.I. Outsmarts I.Q.”

    The Rise of the Machines, NYT, 12.10.2008, http://www.nytimes.com/2008/10/12/opinion/12dooling.html?ref=opinion

Amid the Gloom, an E-Commerce War

October 12, 2008
The New York Times
By BRAD STONE

WHEN the e-commerce giant eBay emerged from the last recession seven years ago with an aura of invincibility, its chief executive, Meg Whitman, boasted that “eBay is to some extent recession-proof.”

As the online auctioneer’s revenues and stock price kept climbing, one of its primary rivals, Amazon.com, just limped along.

How times have changed.

Ms. Whitman, now co-chair of Senator John McCain’s presidential campaign, retired from eBay earlier this year as the company struggled with stagnation. Amazon, meanwhile, has emerged as one of the most vibrant and reliable retailers in the country.

And in an unmistakable sign that Internet companies are indeed exposed to the gathering economic storm stemming from the credit crisis, Ms. Whitman’s successor, John J. Donahoe, laid off 10 percent of eBay’s 16,000 employees last Monday.

Mr. Donahoe noted that eBay was already feeling the effects of the downturn. “This looks like it is going to be a more typical economic cycle that impacts consumer spending,” he said. “We are not immune.”

That the economic crisis is washing up on Silicon Valley’s shores shouldn’t, perhaps, come as a surprise. Most tech companies are defenseless against waning advertising, business spending and consumer interest in big-ticket items like computers. Over the last three months, investors have punished tech companies like Google, Microsoft and Apple, extracting a fifth to a half of their market value.

E-commerce, though, was once thought to be a refuge from economic storms. People who stay away from the mall might actually be more tempted to shop online and hunt for deals, or so the thinking went.

But analysts are now revisiting that assumption. Many consumers, citing an uncertain economy, say they will clutch their wallets tightly this holiday season regardless of where they shop: 48 percent surveyed recently by eBillme, an online payment service, said they planned to delay purchases.

Traditional, brick-and-mortar stores had wrenching, double-digit declines in September sales and are bracing for a bleak holiday season. No one is certain to what degree online retailers will feel that same pain, because digital vendors have never endured a deep, protracted economic slump before.

“We still feel pretty good about this year, but I worry about next year and beyond,” said Brian J. Pitz, an analyst at Banc of America Securities. “Are people going to spend when they can’t get home equity lines of credit, a student loan or a car loan?”

For eBay and Amazon, the twin giants of e-commerce, the financial meltdown has arrived at a particularly crucial time. After years of claiming that their businesses were complementary, not competitive, the companies are now on a collision course.

Amazon has accelerated its courtship of small online vendors, allowing them to sell on its site — becoming more like eBay. And eBay, desperate to revive itself, has decided to emphasize traditional, fixed-price sales of both new and old merchandise — becoming more like Amazon.

AT stake is more than e-commerce bragging rights. On the Internet, size matters. Larger companies can collect more information about consumers, negotiate better deals with partners and use that leverage to expand their dominance (for example, Google versus Yahoo in search).

“This is a pivotal holiday season for eBay,” said Jeffrey Lindsay, a senior analyst at Bernstein Research who has covered the Internet for a decade. “What people fear is that Amazon is basically building a bigger sales base than eBay and will use that knowledge to sell people more and more of the things they want to buy online.”

Indeed, the balance of power in e-commerce seems to be shifting faster than anyone expected. Just three years ago, eBay had 30 percent more traffic than Amazon. Today, its total of 84.5 million active users is barely ahead of the 81 million active customer accounts that Amazon reported in June.

Amazon has exceeded eBay in other measures as well.

EBay’s market capitalization was three times Amazon’s in 2005, back when Wall Street loved the fact that it carried no inventory and generated huge profits. This year, eBay’s stock has lost over half its value and, in July, Amazon’s valuation surpassed eBay’s for the first time.

In a series of interviews, Mr. Donahoe acknowledged that eBay, based in San Jose, Calif., didn’t adapt fast enough to shifting e-commerce winds. He now embraces a “turnaround mind-set” and is refocusing its Web marketplace toward shoppers who don’t want to waste time in online auctions.

“There are times when I wish we can close this store and just open a new store, but we can’t,” he said. “We need to make bolder, more aggressive changes to the eBay ecosystem even if they are unpopular.”

Up in Seattle, meanwhile, Amazon’s chief executive, Jeffrey P. Bezos, says that after years of failed experimentation, third-party vendors — the foundation on which eBay was built — now account for about 29 percent of sales on Amazon. The company has endured and outlasted critics who long complained about its high fixed costs.

Last year, it impressed investors with accelerating growth, and its stock price revisited the highs of the dot-com boom, before waning euphoria and market pessimism erased more than half of those gains this year. Mr. Bezos credits Amazon’s tolerance for risky, expensive bets like the Kindle electronic reading device.

“Our willingness to be misunderstood, our long-term orientation and our willingness to repeatedly fail are the three parts of our culture that make doing this kind of thing possible,” he said.

EBay’s recent problems have made Mr. Bezos and his team look like shrewd and patient stewards of the Amazon franchise. And Amazon’s second wind is making eBay look as if it has missed one of the greatest opportunities in the Internet’s short history.

“EBay could have closed the door to Amazon back when Amazon was mostly just a platform to sell books and music,” said Scott Devitt, an analyst at Stifel, Nicolaus & Company, the investment bank. “But what eBay did in those days was to take a very hands-off approach and let the marketplace control itself. And that ended up being the downfall of the business relative to others that have succeeded.”

OVER the summer of 2004, at the annual executive retreat that eBay insiders call “Telluride,” a product strategy team argued that eBay needed to break into the promising world of digital media. Pointing to the popularity of services like Napster and the new iTunes music store from Apple, the group predicted that media like books, music and movies would inevitably be distributed digitally, over the Web.

EBay, they argued, needed to ride that wave.

That insight — which did catch on at Amazon and is now responsible for high-profile efforts like the Kindle and Amazon’s MP3 store and video-on-demand service — went nowhere at eBay.

“Nobody really shut it down. The process shut it down,” says a former eBay executive who was on the product strategy team but requested anonymity to avoid alienating former colleagues. “The company was obsessed with making quarterly numbers.”

Whether passing on digital media was a mistake at eBay is still an open question. But the anecdote illustrates larger problems. More than a dozen current and former eBay executives, from all levels of management, say eBay routinely failed to reorient its core business.

They say eBay avoided fiddling with its auction model because it was wary of disrupting a long-profitable equilibrium between buyers and sellers.

EBay has known for years that some Web buyers were looking for a different experience. Surveys suggested that auction participants were alienated by untrustworthy sellers and hidden shipping fees, and increasingly preferred the certainty of instantly buying items at a fixed price.

Although eBay executives recognized and routinely acknowledged the problem, they never took bold, direct steps to address it.

In 2005, the company acquired Shopping.com, a comparative shopping site that catalogs products for sale elsewhere on the Web. But for years eBay did not promote the company’s listings, primarily because its vocal community of sellers — the ones paying fees to eBay — protested whenever eBay sent buyers to other retailers.

Josh Koppelman, who founded the e-commerce site Half.com and sold it to eBay in 2001, says that there was an understandable cultural reluctance inside eBay to alienate sellers. “We got paid a fee to provide a service to a community,” he said. “Hurting members of that community was difficult.”

Instead of imposing critical fixes to its slowing model, eBay searched for high-growth businesses elsewhere, acquiring Skype, the online calling service; StubHub, the ticketing site; and a series of classified-advertising Web sites.

The company did create a whole new site, called eBay Express, where it tried to satisfy buyer interest in a simpler shopping experience. EBay Express automatically amassed all the fixed-price, non-auction listings on eBay properties and presented them in an organized way with only one payment system, PayPal — also owned by eBay.

But in the two-year life of eBay Express, eBay never directed any meaningful traffic to it, fearing that it would interfere with the more profitable and popular auction-oriented site. The company shuttered eBay Express this year and has said it will move some of its innovative features to eBay.com.

Contributing to intransigence, according to several former executives, were deep divisions and constant hand-wringing among its managers over the most fundamental question: What is eBay?

One camp believed that eBay was a discount palace and that it had to continually offer deals to buyers in whatever shopping format they wanted.

But another group, resistant to change even as late as last year when eBay was clearly losing ground, believed that the brand was tied up in the excitement of auctions. Emphasizing traditional shopping destroyed what made eBay special, they argued.

“Today online shopping is mainstream, but it’s also becoming boring,” Bill Cobb, then the president of eBay North America, wrote in a June 2007 blog entry that typified this thinking. “We’re investing in the quintessential eBay experience of buying and selling — person to person — in an auction format.”

Ms. Whitman seemed to moderate this constant debate while never actually settling it. At times, she also seemed unwilling to leave auctions behind.

In an interview last week, while on a break from traveling with the Republican vice-presidential candidate Sarah Palin, Ms. Whitman said it was hard for her to reflect on these kinds of divisions within the company, or on missed opportunities.

“There was no shortage of realistic looks in the mirror, where we asked ourselves if we were doing the best job that we could do,” she said.

She also addressed another notion raised by former eBayers, who say executives were dismissive of Amazon but focused obsessively on Google, the search leader whose tentative moves into e-commerce were viewed inside eBay as acts of aggression.

“Google is a disruptive competitor. It’s not a marketplace and it’s not a retailer but has a different way of marrying buyers and sellers,” she said. “I don’t think you can overstate any competitive threats.”

But paranoia about Google, these former executives say, fueled strategic missteps like the Skype acquisition, which Google had also pursued. Ms. Whitman and other eBay managers spent considerable energy trying to integrate Skype, and last year eBay wrote down $1.4 billion of the $3.1 billion acquisition.

As eBay obsessed about Google, the online retailer from Seattle was encroaching on its turf.

CONVERSATIONS with Jeff Bezos of Amazon inevitably provoke two kinds of outbursts. One is that famous, barking laugh that punctuates even seemingly mundane sentences. The other is his paean to the wisdom of long-term thinking.

“We are willing to plant seeds that take five to seven years to grow into reasonable things,” he said in an interview. “You can’t do big, clean-sheet invention unless you are willing to invest for long periods of time.”

Mr. Bezos has delivered these kinds of odes to patience and risk tolerance for nearly a decade. The company’s appetite for enduring short-term pain for long-term gain is clearest when comparing it with its rival, eBay.

While eBay was buying into classified advertising, online payments and Internet telephony, Amazon spent hundreds of millions of dollars building its brand as a trusted retailer — hiring customer service representatives and returning money to customers when transactions went awry.

As eBay took a pass on digital media, Amazon dove in and frustrated investors for years with margins that were diminished by a bulky R.& D. budget — but produced promising businesses like the MP3 store.

Compensation at the two companies also reflects core differences. Amazon evaluates its executives annually and gives performance-based stock grants. Until this year, when Mr. Donahoe became chief executive, eBay gave cash and stock bonuses based on quarterly performance, rewarding managers for meeting Wall Street’s short-term expectations.

Similarly, Amazon’s push to recruit the small sellers who orbited eBay was marked, at first, by patience and often-embarrassing experimentation.

In 1999, five years after Mr. Bezos first plunged his stake into the ground as an online bookseller, Amazon invaded eBay’s territory, introducing Amazon Auctions and a way for retailers to set up stores on the site, called zShops. The efforts tanked.

The problem then “was that nobody came,” Mr. Bezos said. “Actually, sellers came, but the customers didn’t care and didn’t shop there.”

Amazon tried to promote this siloed merchandise on its site by linking to it on its more popular product pages. These so-called “smart links” were hotly controversial inside Amazon and became the subject of a rivalry between its retail and technology groups.

Fearful that sending visitors to other pages would cut into their sales, retailing executives at Amazon took to removing them from the page at every opportunity, according to one senior Amazon executive who was there at the time.

SEVERAL years ago, the company introduced Amazon Marketplace, laying the groundwork for its current path by listing new and used items from third-party sellers alongside its own merchandise.

If Amazon didn’t stock a particular item, or if independent sellers could offer better prices, they would become the featured retailer on the page.

Amazon settled internal tensions by giving its retail managers credit for any products sold on their pages, even by third-party sellers. But Mr. Bezos says the arrangement still produces anxiety.

“Put yourself in place of our retail buyers,” he said. “You just purchased 10,000 units of a particular digital camera and you are told, if any third party anywhere in the world can offer a better price, we are going to give them the buy box and you are going to get stuck with the inventory. That causes some angst.”

Over the last five years, Amazon has lowered hurdles for independent vendors to sell on its site and recruited new groups of merchants as it has expanded into other countries and product categories — automotive parts in 2006 and office supplies this year, for example.

Amazon executives say they don’t specifically pursue top eBay sellers, but some merchants suggest otherwise.

David Duong, founder of Shoe Metro, a Web retailer based in San Diego, says Amazon representatives called him shortly after Amazon.com introduced a shoe category in 2005 and asked him to begin selling on the site.

“I guess they found us on eBay,” he said. “We were actually going to talk to them, but they beat us to the punch.”

Lately, small merchants and their trade organizations say, the outreach has become even more direct. The Professional EBay Sellers Alliance said that Amazon recently offered to waive some fees for the 800 members of the group, an organization of eBay power sellers, to woo them to its platform.

Because Amazon also sells many of the same products as its merchants, executives at eBay predict that competitive tensions will emerge as the Amazon Marketplace grows. Maybe so. It’s happened before.

Amazon once ran the Web operations of large traditional retailers like Borders, Circuit City and Toys “R” Us. One by one, those retailers concluded that outsourcing such a crucial feature of 21st-century retailing to a competitor was a bad idea.

But some of its newer deals with sellers indicate that Amazon is finding ways around those tensions, at least with small merchants.

Andrew and Deb Mowery of Fort Collins, Colo., who started selling home, garden and pet supplies on eBay in 1999, now make 60 percent of their sales on Amazon and about 20 percent on eBay. In addition to listing items for sale on the Amazon Marketplace, they are also a wholesale supplier to Amazon, providing it with products like heated pet beds.

Mr. Mowery is essentially competing with himself, but the arrangement works. “If they run out, I’ve got their back,” he said. “If I run out, they’ve got my back.”

Amazon wants to forge these kinds of close ties with other small sellers. A program called Fulfillment by Amazon, introduced in 2006, allows retailers to store their inventory in Amazon’s warehouses. When someone buys an item from that seller, Amazon ships it out of its warehouse in an Amazon box.

Integrating small merchants into its operations also allows Amazon to learn more about whom it can trust to sell on its site. Compared with eBay, the company says it exerts a far greater measure of control over its marketplace, calling certain vendors “featured sellers” and vetting others in product categories that are sensitive to fraud.

“At the end of the day, we believe it’s good for all of our sellers to make sure we are protecting the consumer experience first,” Mr. Bezos said. “Our first and foremost goal is to earn trust with consumers. If there are no consumers buying, nothing else matters.”

DESPITE Amazon’s success in courting independent sellers, its selection is still just a fraction of what eBay offers, and in some cases its prices are higher.

For example, there are hundreds of new, used and refurbished Trek racing bikes on eBay; as of last week, Amazon had three for sale. Acquisitive parents can buy a $90 Deux Par Deux baby sweater dress on eBay for under $30. But only a few of this French designer’s items are listed on Amazon, and for close to full price.

And that Lehman Brothers 150th-anniversary collectible tote bag, which every irony-obsessed stock market fan wants under the Christmas tree? It is available for purchase only on eBay, in auctions.

This is where Mr. Donahoe talks about a vision to fix eBay, and to create a Web discount store that offers a wide variety of new and old merchandise in auction and fixed-price formats. To get there, he must administer the sweeping, painful fixes that eBay has previously shunned.

“It was increasingly clear to me in 2007 that what felt like bold changes, and to the community felt like bold changes, were not bold enough,” he said.

His attempted fixes have started internally. In addition to making executive bonuses annual instead of quarterly, to keep employees from leaving and reward longer-term thinking, he moved the company’s focus to buyers instead of sellers.

He canceled the annual eBay Live conference next year with merchants — this year, it turned into an unwieldy complaint session — and began making eBay executives read weekly surveys that ask shoppers whether they would recommend eBay to a friend.

THE eBay facade is also undergoing its most significant renovation in its 14-year history as Mr. Donahoe tries to adjust eBay fees to tempt sellers to list more of their products at fixed prices.

EBay has also added a new 30-day listing at a fixed price that is more economical to many sellers than auctions. It has also disabled the feedback mechanism that allowed sellers to rank buyers and introduced a new “best match” search engine that promotes trusted sellers and good deals.

In another controversial change, eBay has struck special deals with large merchants like Buy.com, which pays no listing fees and offers more than half a million products on eBay.com.

The point of the arrangement is to ensure that eBay stays fully stocked in basics like batteries and printer cartridges. Other eBay sellers are enraged, though, arguing that the deal violates the sacred eBay tenet of the “level playing field.”

These sellers have vented their frustrations online about eBay’s changes. It’s hard to gauge whether the vitriol represents the majority view, but some less vocal, larger sellers on eBay say they have actually benefited.

“EBay has told all bad sellers to shape up,” said Jordan Insley, an electronics merchant who lives near Seattle. “I’ve seen a lot of sellers that used to sell a lot of product fall off the charts.”

Although he worries that buyer traffic on eBay is slowing, Mr. Insley says he will sell $13 million in gadgets this year on eBay alone. “I think eBay is moving in the right direction. We are sticking around.”

Still, Mr. Donahoe can’t count on that sentiment to carry the day. Few of his changes are expected to deliver any immediate results, other than alienating certain sellers.

Yet for eBay, the changes may be a matter of survival. The company need only look across Silicon Valley at Yahoo to see what can happen to wounded Internet companies with depressed stock prices.

In the meantime, he faces tough choices. He is weighing a possible sale of Skype by next year, and analysts think he will almost certainly make that move, since the company now acknowledges that Skype has little synergy with eBay’s other businesses.

That would free eBay to focus on its core marketplace, on getting through the torrential economic downpour, and on combating a challenger that is making greater incursions every day.

“I respect Jeff Bezos a lot as a leader and Amazon and what they’ve done,” Mr. Donahoe said. “But it is still early days in this industry. E-commerce is 7 percent of retail. I don’t think anyone thinks it’s going to end there. We think there is plenty of room for both Amazon and eBay to be successful.”

    Amid the Gloom, an E-Commerce War, NYT, 12.10.2008, http://www.nytimes.com/2008/10/12/business/12giants.html

Internet Traffic Begins to Bypass the U.S.

August 30, 2008
The New York Times
By JOHN MARKOFF

SAN FRANCISCO — The era of the American Internet is ending.

Invented by American computer scientists during the 1970s, the Internet has been embraced around the globe. During the network’s first three decades, most Internet traffic flowed through the United States. In many cases, data sent between two locations within a given country also passed through the United States.

Engineers who help run the Internet said that it would have been impossible for the United States to maintain its hegemony over the long run because of the very nature of the Internet; it has no central point of control.

And now, the balance of power is shifting. Data is increasingly flowing around the United States, which may have intelligence — and conceivably military — consequences.

American intelligence officials have warned about this shift. “Because of the nature of global telecommunications, we are playing with a tremendous home-field advantage, and we need to exploit that edge,” Michael V. Hayden, the director of the Central Intelligence Agency, testified before the Senate Judiciary Committee in 2006. “We also need to protect that edge, and we need to protect those who provide it to us.”

Indeed, Internet industry executives and government officials have acknowledged that Internet traffic passing through the switching equipment of companies based in the United States has proved a distinct advantage for American intelligence agencies. In December 2005, The New York Times reported that the National Security Agency had established a program with the cooperation of American telecommunications firms that included the interception of foreign Internet communications.

Some Internet technologists and privacy advocates say those actions and other government policies may be hastening the shift in Canadian and European traffic away from the United States.

“Since passage of the Patriot Act, many companies based outside of the United States have been reluctant to store client information in the U.S.,” said Marc Rotenberg, executive director of the Electronic Privacy Information Center in Washington. “There is an ongoing concern that U.S. intelligence agencies will gather this information without legal process. There is particular sensitivity about access to financial information as well as communications and Internet traffic that goes through U.S. switches.”

But economics also plays a role. Almost all nations see data networks as essential to economic development. “It’s no different than any other infrastructure that a country needs,” said K C Claffy, a research scientist at the Cooperative Association for Internet Data Analysis in San Diego. “You wouldn’t want someone owning your roads either.”

Indeed, more countries are becoming aware of how their dependence on other countries for their Internet traffic makes them vulnerable. Because of tariffs, pricing anomalies and even corporate cultures, Internet providers will often not exchange data with their local competitors. They prefer instead to send and receive traffic with larger international Internet service providers.

This leads to odd routing arrangements, referred to as tromboning, in which traffic between two cites in one country will flow through other nations. In January, when a cable was cut in the Mediterranean, Egyptian Internet traffic was nearly paralyzed because it was not being shared by local I.S.P.’s but instead was routed through European operators.

The issue was driven home this month when hackers attacked and immobilized several Georgian government Web sites during the country’s fighting with Russia. Most of Georgia’s access to the global network flowed through Russia and Turkey. A third route through an undersea cable linking Georgia to Bulgaria is scheduled for completion in September.

Ms. Claffy said that the shift away from the United States was not limited to developing countries. The Japanese “are on a rampage to build out across India and China so they have alternative routes and so they don’t have to route through the U.S.”

Andrew M. Odlyzko, a professor at the University of Minnesota who tracks the growth of the global Internet, added, “We discovered the Internet, but we couldn’t keep it a secret.” While the United States carried 70 percent of the world’s Internet traffic a decade ago, he estimates that portion has fallen to about 25 percent.

Internet technologists say that the global data network that was once a competitive advantage for the United States is now increasingly outside the control of American companies. They decided not to invest in lower-cost optical fiber lines, which have rapidly become a commodity business.

That lack of investment mirrors a pattern that has taken place elsewhere in the high-technology industry, from semiconductors to personal computers.

The risk, Internet technologists say, is that upstarts like China and India are making larger investments in next-generation Internet technology that is likely to be crucial in determining the future of the network, with investment, innovation and profits going first to overseas companies.

“Whether it’s a good or a bad thing depends on where you stand,” said Vint Cerf, a computer scientist who is Google’s Internet evangelist and who, with Robert Kahn, devised the original Internet routing protocols in the early 1970s. “Suppose the Internet was entirely confined to the U.S., which it once was? That wasn’t helpful.”

International networks that carry data into and out of the United States are still being expanded at a sharp rate, but the Internet infrastructure in many other regions of the world is growing even more quickly.

While there has been some concern over a looming Internet traffic jam because of the rise in Internet use worldwide, the congestion is generally not on the Internet’s main trunk lines, but on neighborhood switches, routers and the wires into a house.

As Internet traffic moves offshore, it may complicate the task of American intelligence gathering agencies, but would not make Internet surveillance impossible.

“We’re probably in one of those situations where things get a little bit harder,” said John Arquilla, a professor at the Naval Postgraduate School in Monterey, Calif., who said the United States had invested far too little in collecting intelligence via the Internet. “We’ve given terrorists a free ride in cyberspace,” he said.

Others say the eclipse of the United States as the central point in cyberspace is one of many indicators that the world is becoming a more level playing field both economically and politically.

“This is one of many dimensions on which we’ll have to adjust to a reduction in American ability to dictate terms of core interests of ours,” said Yochai Benkler, co-director of the Berkman Center for Internet and Society at Harvard. “We are, by comparison, militarily weaker, economically poorer and technologically less unique than we were then. We are still a very big player, but not in control.”

China, for instance, surpassed the United States in the number of Internet users in June. Over all, Asia now has 578.5 million, or 39.5 percent, of the world’s Internet users, although only 15.3 percent of the Asian population is connected to the Internet, according to Internet World Stats, a market research organization.

By contrast, there were about 237 million Internet users in North America and the growth has nearly peaked; penetration of the Internet in the region has reached about 71 percent.

The increasing role of new competitors has shown up in data collected annually by Renesys, a firm in Manchester, N.H., that monitors the connections between Internet providers. The Renesys rankings of Internet connections, an indirect measure of growth, show that the big winners in the last three years have been the Italian Internet provider Tiscali, China Telecom and the Japanese telecommunications operator KDDI.

Firms that have slipped in the rankings have all been American: Verizon, Savvis, AT&T, Qwest, Cogent and AboveNet.

“The U.S. telecommunications firms haven’t invested,” said Earl Zmijewski, vice president and general manager for Internet data services at Renesys. “The rest of the world has caught up. I don’t see the AT&T’s and Sprints making the investments because they see Internet service as a commodity.”

    Internet Traffic Begins to Bypass the U.S., NYT, 30.8.2008, http://www.nytimes.com/2008/08/30/business/30pipes.html

As Web Traffic Grows, Crashes Take Bigger Toll

July 6, 2008
The New York Times
By BRAD STONE

SAN FRANCISCO — Alex Payne, a 24-year-old Internet engineer here, has devised a way to answer a commonly asked question of the digital age: Is my favorite Web site working today?

In March, Mr. Payne created downforeveryoneorjustme.com, as in, “Down for everyone, or just me?” It lets visitors type in a Web address and see whether a site is generally inaccessible or whether the problem is with their own connection.

“I had seen that question posed so often,” said Mr. Payne, who perhaps not coincidentally works at Twitter, a Web messaging and social networking site that is itself known for frequent downtime. “Technology companies have branded the Internet as a place that is always on and where information is always available. People are disappointed and looking for answers when it turns out not to be true.”

There is plenty of disappointment to go around these days. Such technology stalwarts as Yahoo, Amazon.com and Research in Motion, the company behind the BlackBerry, have all suffered embarrassing technical problems in the last few months.

About a month ago, a sudden surge of visitors to Mr. Payne’s site began asking about the normally impervious Amazon. That site was ultimately down for several hours over two business days, and Amazon, by some estimates, lost more than a million dollars an hour in sales.

The Web, like any technology or medium, has always been susceptible to unforeseen hiccups. Particularly in the early days of the Web, sites like eBay and Schwab.com regularly went dark.

But since fewer people used the Internet back then, the stakes were much lower. Now the Web is an irreplaceable part of daily life, and Internet companies have plans to make us even more dependent on it.

Companies like Google want us to store not just e-mail online but also spreadsheets, photo albums, sales data and nearly every other piece of personal and professional information. That data is supposed to be more accessible than information tucked away in the office computer or filing cabinet.

The problem is that this ideal requires Web services to be available around the clock — and even the Internet’s biggest companies sometimes have trouble making that happen.

Last holiday season, Yahoo’s system for Internet retailers, Yahoo Merchant Solutions, went dark for 14 hours, taking down thousands of e-commerce companies on one of the busiest shopping days of the year. In February, certain Amazon services that power the sites of many Web start-up companies had a day of intermittent failures, knocking many of those companies offline.

The causes of these problems range widely: it might be system upgrades with unintended consequences, human error (oops, wrong button) or even just old-fashioned electrical failures. Last month, an electrical explosion in a Houston data center of the Planet, a Web hosting company, knocked thousands of Web businesses off the Internet for up to five days.

“It was prolonged torture,” said Grant Burhans, a Web entrepreneur from Florida whose telecommunications- and real-estate-related Web sites were down for four days, costing him thousands of dollars in lost business.

Web addicts who find themselves shut out of their favorite Web sites tend to fill blogs and online bulletin boards with angry invective about broken promises and interrupted routines.

The volatile emotions around Web downtime are perhaps most prevalent in the discussion around Twitter, on which users post updates on who they are with, where they are, and what they are doing.

According to Pingdom, a Web monitoring firm, Twitter was down for 37 hours this year through April — by far more than any other major social networking Web site.

Instead of simply dumping the service and moving on with their lives, Twitter users have responded with an endless stream of rancor, creating “Is Twitter Down?” T-shirts, blog rants and YouTube parodies, and posting copies of Twitter’s various artfully designed error messages.

“This is a free service. It’s not like anyone’s life is depending on Twitter,” said Laura Fitton, a consultant and self-described passionate Twitter user.

“Twitter is all about the things we discover we have in common, so right there, Twitter failing is a huge thing we have in common,” she said. “It’s fun to complain to each other and commiserate.”

Twitter has said its downtime is the result of rapidly growing demand and fundamental mistakes in its original architecture.

Jesse Robbins, a former Amazon executive who was responsible for keeping Amazon online from 2004 to 2006, says the outcries over failures are understandable.

“When these sites go away, it’s a sudden loss. It’s like you are standing in the middle of Macy’s and the power goes out,” he said. “When the thing you depend on to live your daily life suddenly goes away, it’s trauma.”

He says Web services should be held to the same standard of reliability as the older services they aim to replace. “These companies have a responsibility to people who rely and depend on them, just as people going over a public bridge expect that the bridge won’t suddenly collapse.”

By some measures, despite the high-profile failures, the Internet is performing better than ever.

“There are millions of Web sites and billions of Web pages around the world,” said Umang Gupta, chief executive of Keynote Systems, which monitors companies’ Web performance. “These big high-visibility problems are actually very rare.”

But perhaps they are not rare enough. One morning last month, Google App Engine, a service that lets people run interactive Web applications, was unavailable for several hours.

Among those affected was Mr. Payne, who had just shifted downforeveryoneorjustme.com over to Google’s servers. It was inaccessible as well.

    As Web Traffic Grows, Crashes Take Bigger Toll, NYT, 6.7.2008, http://www.nytimes.com/2008/07/06/technology/06outage.html

Larger Prey Are Targets of Phishing

April 16, 2008
The New York Times
By JOHN MARKOFF

SAN FRANCISCO — An e-mail scam aimed squarely at the nation’s top executives is raising new alarms about the ease with which people and companies can be deceived by online criminals.

Thousands of high-ranking executives across the country have been receiving e-mail messages this week that appear to be official subpoenas from the United States District Court in San Diego. Each message includes the executive’s name, company and phone number, and commands the recipient to appear before a grand jury in a civil case.

A link embedded in the message purports to offer a copy of the entire subpoena. But a recipient who tries to view the document unwittingly downloads and installs software that secretly records keystrokes and sends the data to a remote computer over the Internet. This lets the criminals capture passwords and other personal or corporate information.

Another piece of the software allows the computer to be controlled remotely. According to researchers who have analyzed the downloaded file, less than 40 percent of commercial antivirus programs were able to recognize and intercept the attack.

The tactic of aiming at the rich and powerful with an online scam is referred to by computer security experts as whaling. The term is a play on phishing, an approach that usually involves tricking e-mail users — in this case the big fish — into divulging personal information like credit card numbers. Phishing attacks that are directed at a particular person, rather than blasted out to millions, are also known as spear phishing.

The latest campaign has been widespread enough that two California federal courts and the administrative office of the United States Courts posted warnings about the fake messages on their Web sites. Federal officials said they stopped counting after getting hundreds of phone calls from corporations about the messages. At midday on Tuesday, one antispam company, MX Logic, said in a Web posting that its service was still seeing at least 30 of the messages an hour.

Security researchers at several firms indicated they believed there had been at least several thousand victims of the attack whose computers had been compromised.

“We have seen about 2,000 victims, more or less,” said John Bambenek, a security researcher at the University of Illinois at Urbana-Champaign and a volunteer at the Internet Storm Center, a network security organization.

Researchers were studying a list of the Internet addresses of infected computers that iDefense Labs, a research unit of VeriSign, had assembled by monitoring network traffic.

Personalized scam messages have been on the radar of security researchers and law enforcement officials for several years, but the latest variant is a fresh indication of the threat posed by such digital ruses.

“I think that it was well done in terms of something people would feel compelled to respond to,” said Steve Kirsch, the chief executive of Abaca, an antispam company based in San Jose, Calif.

Mr. Kirsch himself received a copy of the message and forwarded it to the company lawyer. “It had my name, phone number, company and correct e-mail address on it and looked pretty legitimate,” Mr. Kirsch said. “Even the U.R.L. to find out more looked legitimate at first glance.”

When the lawyer tried to download a copy of the subpoena and the computer restarted itself, they quickly realized that the file contained malicious software.

Several computer security researchers said that the attack was the work of a group that tried a similar assault in November 2007. In that case, the e-mail message appeared to come from the Justice Department and stated that a complaint had been filed against the recipient’s company.

The software used in the latest attack tries to communicate with a computer in Singapore. That system was still functioning on Tuesday evening, but security researchers said many Internet service providers had blocked access to it.

A number of clues, like misspellings, in the fake subpoena led several researchers to believe that the attackers were not familiar with the United States court system and that the group might be based in a place that used a British variant of English, such as Hong Kong.

“This is probably Chinese-based,” said Mr. Bambenek. “If all the key players are in China there is not much the F.B.I. can do.”

Several security researchers said that the real danger of the attack lay in a second level of deception, after the hidden software provided the attackers with digital credentials like passwords and electronic certificates.

“There are very subtle nuances to their attacks that are well known in the financial industry but are not well publicized,” said Matt Richard, director of the Rapid Response Team at iDefense.

Mr. Richard said the criminals were going after a particular area of the financial industry, but he would not elaborate. He said that law enforcement officials were investigating the fraudulent documents.

Calls to the Federal Bureau of Investigation for comment were not returned.

Although the software package used to deliver the eavesdropping program is well known, it was hidden in such a way that it avoided detection by commercial programs in many cases, researchers said.

“This is pretty well-known code,” said Don Jackson, a researcher at SecureWorks, a computer security firm. “The issue has to do with repacking it.”

Recipients of the e-mail messages are directed to a fraudulent Web site with a copy of the graphics from the real federal court site. They are then asked to download and install what is said to be a piece of software from Adobe that is used to view electronic documents.

“There are several layers of social engineering involved here,” said Mike Haro, a spokesman for Sophos, a company that sells software to protect against malicious software and spam.

    Larger Prey Are Targets of Phishing, NYT, 16.4.2008, http://www.nytimes.com/2008/04/16/technology/16whale.html

To Aim Ads, Web Is Keeping Closer Eye on You

March 10, 2008
The New York Times
By LOUISE STORY

A famous New Yorker cartoon from 1993 showed two dogs at a computer, with one saying to the other, “On the Internet, nobody knows you’re a dog.”

That may no longer be true.

A new analysis of online consumer data shows that large Web companies are learning more about people than ever from what they search for and do on the Internet, gathering clues about the tastes and preferences of a typical user several hundred times a month.

These companies use that information to predict what content and advertisements people most likely want to see. They can charge steep prices for carefully tailored ads because of their high response rates.

The analysis, conducted for The New York Times by the research firm comScore, provides what advertising executives say is the first broad estimate of the amount of consumer data that is transmitted to Internet companies.

Privacy advocates have previously sounded alarms about the practices of Internet companies and provided vague estimates about the volume of data they collect, but they did not give comprehensive figures.

The Web companies are, in effect, taking the trail of crumbs people leave behind as they move around the Internet, and then analyzing them to anticipate people’s next steps. So anybody who searches for information on such disparate topics as iron supplements, airlines, hotels and soft drinks may see ads for those products and services later on.

Consumers have not complained to any great extent about data collection online. But privacy experts say that is because the collection is invisible to them. Unlike Facebook’s Beacon program, which stirred controversy last year when it broadcast its members’ purchases to their online friends, most companies do not flash a notice on the screen when they collect data about visitors to their sites.

“When you start to get into the details, it’s scarier than you might suspect,” said Marc Rotenberg, executive director of the Electronic Privacy Information Center, a privacy rights group. “We’re recording preferences, hopes, worries and fears.”

But executives from the largest Web companies say that privacy fears are misplaced, and that they have policies in place to protect consumers’ names and other personal information from advertisers. Moreover, they say, the data is a boon to consumers, because it makes the ads they see more relevant.

These companies often connect consumer data to unique codes identifying their computers, rather than their names.

“What is targeting in the long term?” said Michael Galgon, Microsoft’s chief advertising strategist. “You’re getting content about things and messaging about things that are spot-on to who you are.”

The rich troves of data at the fingertips of the biggest Internet companies are also creating a new kind of digital divide within the industry. Traditional media companies, which collect far less data about visitors to their sites, are increasingly at a disadvantage when they compete for ad dollars.

The major television networks and magazine and newspaper companies “aren’t even in the same league,” said Linda Abraham, an executive vice president at comScore. “They can’t really play in this sandbox.”

During the Internet’s short life, most people have used a yardstick from traditional media to measure success: audience size. Like magazines and newspapers, Web sites are most often ranked based on how many people visit them and how long they are there.

But on the Internet, advertisers are increasingly choosing where to place their ads based on how much sites know about Web surfers. ComScore’s analysis is a novel attempt to estimate how many times major Web companies can collect data about their users in a given month.

Web companies once could monitor the actions of consumers only on their own sites. But over the last couple of years, the Internet giants have spread their reach by acting as intermediaries that place ads on thousands of Web sites, and now can follow people’s activities on far more sites.

Large Web companies like Microsoft and Yahoo have also acquired a number of companies in the last year that have rich consumer data.

“So many of the deals are really about data,” said David Verklin, chief executive of Carat Americas, an ad agency in the Aegis Group that decides where to place ads for clients.

“Everyone feels that if we can get more data, we could put ads in front of people who are interested in them,” he said. “That’s the whole idea here: put dog food ads in front of people who have dogs.”

Web companies also can collect more data as people spend more time online. The number of searches that American Web users enter each month has nearly doubled since summer of 2006, to 14.6 billion searches in January, according to comScore.

ComScore analyzed 15 major media companies’ potential to collect online data in December. The analysis captured how many searches, display ads, videos and page views occurred on those sites and estimated the number of ads shown in their ad networks.

These actions represented “data transmission events” — times when consumer data was zapped back to the Web companies’ servers. Five large Web operations — Yahoo, Google, Microsoft, AOL and MySpace — record at least 336 billion transmission events in a month, not counting their ad networks.

The methodology was worked out with comScore and based on the advice of senior online advertising executives at two of the largest Internet companies.

“I think it’s a reasonable way to look at how many touch-points companies have with their consumers,” Jules Polonetsky, the chief privacy officer for AOL, said of the comScore findings on Friday.

But Mr. Polonetsky cautions that not all of the data at every company is used together. Much of it is stored separately.

The information transmitted might include the person’s ZIP code, a search for anything from vacation information to celebrity gossip, or a purchase of prescription drugs or other intimate items. Some types of data, like search queries, tends to be more valuable than others.

Yahoo came out with the most data collection points in a month on its own sites — about 110 billion collections, or 811 for the average user. In addition, Yahoo has about 1,700 other opportunities to collect data about the average person on partner sites like eBay, where Yahoo sells the ads.

MySpace, which is owned by the News Corporation, and AOL, a unit of Time Warner, were not far behind.

ComScore said it recorded the ad networks using different methods and that the exact ordering of these top companies might vary with a different methodology, but the overall picture would be similar.

Google also has scores of data collection events, but the company says it is unique in that it mostly uses only current information rather than past actions to select ads.

The depth of Yahoo’s database goes far in explaining why AOL is talking with Yahoo about a merger and Microsoft is willing to pay more than $41.2 billion to acquire the company.

Traditional media companies come in far behind.

Condé Nast magazine sites, for example, have only 34 data collection events for the average site visitor each month. The numbers for other traditional media companies, as generated by comScore, were 45 for The New York Times Company; 49 for another newspaper company, the McClatchy Corporation; and 64 for the Walt Disney Company.

Some companies are trying to close the gap. Walt Disney, for example, is studying how to combine data from its divisions like ESPN, Disney and ABC. The News Corporation is exploring ways to use information that MySpace members post on that site to select ads for those members when they visit other News Corporation sites.

IAC is using data from its LendingTree site to deliver ads on its other sites to people it knows are looking for mortgages.

Some advertising executives say media companies will have little choice but to outsource their ad sales to companies like Microsoft and Yahoo to benefit from their data. The Web companies may prove they can use their algorithms and consumer information to better select which ads for visitors better than media companies can.

“I think a lot of publishers are going to find they don’t have enough data,” said David W. Kenny, chief executive of Digitas, a digital advertising agency in the Publicis Groupe. “There’s only going to be a handful of big players who can manage the data.”

People who spend more time on the Internet, of course, will have more information transmitted about them. The comScore per-person figures are averages; occasional Web users have far less transmitted about them.

The comScore figures do not include the data that consumers offer voluntarily when registering for sites or e-mail services. When consumers do so, they often give sites permission to link some of their interests or searches to their user name.

The figures also do not account for information people enter on social network pages. MySpace, for example, collects billions of user actions each day in the form of blogs, comments and profile updates, said Peter Levinsohn, president of Fox Interactive Media, which owns MySpace.

Even with all the data Web companies have, they are finding ways to obtain more. The giant Internet portals have been buying ad-delivery companies like DoubleClick and Atlas, which have stockpiles of information. Atlas, for example, delivers 6 billion ads every day. The comScore figures do not capture such data.

Executives from Web companies said they had been working to inform consumers on their data practices.

These companies noted their consumer-protection policies. AOL, for example, lets users opt out of some ad targeting, Google lets users edit the search histories that are linked to their user names, Yahoo is working on a policy to obscure people’s computer identification addresses that are connected to search results, and Microsoft says it does not link any of its visitors’ behavior to their user names, even if those people are registered.

A study of California adults last year found that 85 percent thought sites should not be allowed to track their behavior around the Web to show them ads, according to the Samuelson Law, Technology & Public Policy Clinic at the University of California at Berkeley, which conducted the study.

    To Aim Ads, Web Is Keeping Closer Eye on You, NYT, 10.3.2008, http://www.nytimes.com/2008/03/10/technology/10privacy.html?hp

Adobe Blurs Line Between PC and Web

February 25, 2008
The New York Times
By JOHN MARKOFF

SAN FRANCISCO — On sabbatical in 2001 from Macromedia, Kevin Lynch, a software developer, was frustrated that he could not get to his Web data when he was off the Internet and annoyed that he could not get to his PC data when he was traveling.

Why couldn’t he have access to all his information, like movie schedules and word processing documents, in one place?

He hit upon an idea that he called “Kevincloud” and mocked up a quick demonstration of the idea for executives at Macromedia, a software development tools company. It took data stored on the Internet and used it interchangeably with information on a PC’s hard drive. Kevincloud also blurred the line between Internet and PC applications.

Seven years later, his brainchild is about to come into focus on millions of PCs. On Monday, Mr. Lynch, who was recently named the chief technology officer at Adobe Systems, which bought Macromedia in 2005, will release the official version of AIR, a software development system that will power potentially tens of thousands of applications that merge the Internet and the PC, as well as blur the distinctions between PCs and new computing devices like smartphones.

Adobe sees AIR as a major advance that builds on its Flash multimedia software. Flash is the engine behind Web animations, e-commerce sites and many streaming videos. It is, the company says, the most ubiquitous software on earth, residing on almost all Internet-connected personal computers.

But most people may never know AIR is there. Applications will look and run the same whether the user is at his desk or his portable computer, and soon when using a mobile device or at an Internet kiosk. Applications will increasingly be built with routine access to all the Web’s information, and a user’s files will be accessible whether at home or traveling.

AIR is intended to help software developers create applications that exist in part on a user’s PC or smartphone and in part on servers reachable through the Internet.

To computer users, the applications will look like any others on their device, represented by an icon. The AIR applications can mimic the functions of a Web browser but do not require a Web browser to run.

The first commercial release of AIR takes place on Monday, but dozens of applications have been built around a test or beta version.

EBay offers an AIR-based application called eBay Desktop that gives its customers the power to buy wherever they are. Adobe uses AIR for Buzzword, an online word processing program. At Monday’s introduction event in San Francisco, new hybrid applications from companies including Salesforce, FedEx, eBay, Nickelodeon, Nasdaq, AOL and The New York Times Company will be demonstrated.

Like Adobe’s Flash software, AIR will be given away. The company makes its money selling software development kits to programmers.

Mr. Lynch and a rapidly growing number of industry executives and technologists believe that the model represents the future of computing.

Moreover, the move away from PC-based applications is likely to get a significant jump start in the coming weeks when Intel introduces its low-cost “Netbook” computer strategy, which is intended to unleash a new wave of inexpensive wireless connected mobile computers.

The new machines will have a relatively small amount of solid state disk storage capacity and will increasingly rely on data stored on Internet servers.

“There is a big cloud movement that is building an infrastructure that speaks directly to this kind of software and experience,” said Sean M. Maloney, Intel’s executive vice president.

Adobe faces stiff competition from a number of big and small companies with the same idea. Many small developers like OpenLazlo and Xcerion are creating “Web-top” or “Web operating systems” intended to move applications and data off the PC desktop and into the Internet through the Web browser.

Mozilla, the developer of the Firefox Web browser, has created a system known as Prism. Sun Microsystems introduced JavaFX this year, which is also aimed at blurring the Web-desktop line. Google is testing a system called Gears, which is intended to allow some Web services to work on computers that are not connected to the Internet.

Finally, there is Microsoft. It is pushing its competitor to Flash, called Silverlight. Three years ago, Microsoft hired one of Mr. Lynch’s crucial software developers at Macromedia, Brad Becker, to help create it. Mr. Becker was a leading designer of the Flash programming language.

The blurring of Web and desktop applications and PC and phone applications is further encouraged by the cellphone industry’s race to catch up with Apple’s iPhone. The industry is focusing on smartphones, or what Sanjay K. Jha, the chief operating officer of Qualcomm, calls “pocketable computing.”

“We need to deliver an experience that is like the PC desktop,” he said. “At the same time, people are used to the Internet and you can’t shortchange them.”

Much software will have to be rewritten for the new devices, in what Mr. Lynch said is the most significant change for the software industry since the introduction in the 1980s of software that can be run through clicking icons rather than typing in codes. This upheaval pits the world’s largest software developer groups against one another in a battle for the new hybrid software applications. Industry analysts say there are now about 1.2 billion Internet-connected personal computers. Market researchers peg the number of smartphones sold in 2007 at 123 million, but that market is growing rapidly.

“There is a proliferation of platforms,” Mr. Lynch said. “This is a battle for the hearts and minds of people who are building things.”

The battle will largely pit Microsoft’s 2.2 million .Net software developers against the more than one million Adobe Flash developers, who have until now developed principally for the Web, as well as a vast number of other Web-oriented designers who use open-source software development tools that are referred to as AJAX.

Microsoft executives said they thought the company would have an advantage because Silverlight has a more sophisticated security model. “Desktop integration is a mixed blessing. There is potentially a gaping security hole,” said Microsoft’s Mr. Becker. “We’ve learned at the school of hard knocks about security.”

Microsoft’s competitors challenge its intent and assert that its goal is retaining its desktop monopoly. “Microsoft is taking their desktop franchise and trying to move that franchise to the Web,” said John Lilly, chief executive of Mozilla. He faults the design of Silverlight for being an island that is not truly integrated with the Internet.

“You get this rectangle in a Web browser and it can’t interact with the rest of the Web,” he said.

He said Mozilla’s Prism offers a simple alternative to capitalize on the explosion of creative software development taking place on the Internet. “There are jillions of applications. A million more got launched today. The whole world is collaborating on this.”

Up to now, it has been a low-level war between Microsoft and Adobe. Silverlight, for instance, got high marks from developers for its ability to handle high resolution video, but Adobe quickly upgraded Flash last year in response.

“We said, ‘Let’s put this in right now,’ ” Mr. Lynch said. With revenue last year of $3.16 billion, Adobe is large enough to fight Microsoft.

Adobe, the maker of Photoshop, Acrobat and other software, also has a strong reputation as a maker of tools for the creative class. "We’re one of the best tool makers in the world," said Mr. Lynch, who worked on software design at MicroPro, the publishers of the Wordstar word processor, and at General Magic, an ill-fated effort to create what could be called a predecessor to today’s smartphones, before joining Macromedia.

“Adobe’s known for its designer tools, but they realize that development — for the browser, for the desktop, and for devices such as cellphones — is a huge growth market,” said Steve Weiss, executive editor at O’Reilly Media, a technology publishing firm.

    Adobe Blurs Line Between PC and Web, NYT, 25.2.2008, http://www.nytimes.com/2008/02/25/technology/25adobe.html

Tell-All PCs and Phones Transforming Divorce

September 15, 2007
The New York Times
By BRAD STONE

The age-old business of breaking up has taken a decidedly Orwellian turn, with digital evidence like e-mail messages, traces of Web site visits and mobile telephone records now permeating many contentious divorce cases.

Spurned lovers steal each other’s BlackBerrys. Suspicious spouses hack into each other’s e-mail accounts. They load surveillance software onto the family PC, sometimes discovering shocking infidelities.

Divorce lawyers routinely set out to find every bit of private data about their clients’ adversaries, often hiring investigators with sophisticated digital forensic tools to snoop into household computers.

“In just about every case now, to some extent, there is some electronic evidence,” said Gaetano Ferro, president of the American Academy of Matrimonial Lawyers, who also runs seminars on gathering electronic evidence. “It has completely changed our field.”

Privacy advocates have grown increasingly worried that digital tools are giving governments and powerful corporations the ability to peek into peoples’ lives as never before. But the real snoops are often much closer to home.

“Google and Yahoo may know everything, but they don’t really care about you,” said Jacalyn F. Barnett, a Manhattan-based divorce lawyer. “No one cares more about the things you do than the person that used to be married to you.”

Most of these stories do not end amicably. This year, a technology consultant from the Philadelphia area, who did not want his name used because he has a teenage son, strongly suspected his wife was having an affair. Instead of confronting her, the husband installed a $49 program called PC Pandora on her computer, a laptop he had purchased.

The program surreptitiously took snapshots of her screen every 15 seconds and e-mailed them to him. Soon he had a comprehensive overview of the sites she visited and the instant messages she was sending. Since the program captured her passwords, the husband was also able to get access to and print all the e-mail messages his wife had received and sent over the previous year.

What he discovered ended his marriage. For 11 months, he said, she had been seeing another man — the parent of one of their son’s classmates at a private school outside Philadelphia. The husband said they were not only arranging meetings but also posting explicit photos of themselves on the Web and soliciting sex with other couples.

The husband, who like others in this article was reached through his lawyer, said the decision to invade his wife’s privacy was not an easy one. “If I were to tell you I have a pure ethical conscience over what I did, I’d be lying,” he said. But he also pointed to companies that have Internet policies giving them the right to read employee e-mail messages. “When you’re in a relationship like a marriage, which is emotional as well as, candidly, a business, I think you can look at it in the same way,” he said.

When considering invading their spouse’s privacy, husbands and wives cite an overriding desire to find out some secret. One woman described sensing last year that her husband, a Manhattan surgeon, was distant and overly obsessed with his BlackBerry.

She drew him a bubble bath on his birthday and then pounced on the device while he was in the tub. In his e-mail messages, she found evidence of an affair with a medical resident, including plans for them to meet that night.

A few weeks later, after the couple had tried to reconcile, the woman gained access to her husband’s America Online account (he had shared his password with her) and found messages from a mortgage company. It turned out he had purchased a $3 million Manhattan condominium, where he intended to continue his liaison.

“Every single time I looked at his e-mail I felt nervous,” the woman said. “But I did anyway because I wanted to know the truth.”

Being on the receiving end of electronic spying can be particularly disturbing. Jolene Barten-Bolender, a 45-year-old mother of three who lives in Dix Hills, N.Y., said that she was recently informed by AOL and Google, on the same day, that the passwords had been changed on two e-mail accounts she was using, suggesting that someone had gained access and was reading her messages. Last year, she discovered a Global Positioning System, or G.P.S., tracking device in a wheel well of the family car.

She suspects her husband of 24 years, whom she is divorcing.

“It makes me feel nauseous and totally violated,” Ms. Barten-Bolender said, speculating that he was trying to find out if she was seeing anyone. “Once anything is written down, you have to know it could be viewed by someone looking to invade or hurt you.”

Ms. Barten-Bolender’s husband and his lawyer declined to discuss her allegations.

Divorce lawyers say their files are filled with cases like these. Three-quarters of the cases of Nancy Chemtob, a divorce lawyer in Manhattan, now involve some kind of electronic communications. She says she routinely asks judges for court orders to seize and copy the hard drives in the computers of her clients’ spouses, particularly if there is an opportunity to glimpse a couple’s full financial picture, or a parent’s suitability to be the custodian of the children.

Lawyers must navigate a complex legal landscape governing the admissibility of this kind of electronic evidence. Different laws define when it is illegal to get access to information stored on a computer in the home, log into someone else’s e-mail account, or listen in on phone calls.

Divorce lawyers say, however, if the computer in question is shared by the whole family, or couples have revealed their passwords to each other, reading a spouse’s e-mail messages and introducing them as evidence in a divorce case is often allowed.

Lynne Z. Gold-Bikin, a Pennsylvania divorce lawyer, describes one client, a man, who believed his wife was engaging in secret online correspondence. He found e-mail messages to a lover in Australia that she had sent from a private AOL account on the family computer. Her lawyer then challenged the use of this evidence in court. Ms. Gold-Bikin’s client won the dispute and an advantageous settlement.

Lawyers say the only communications that are consistently protected in a spouse’s private e-mail account are the messages to and from the lawyers themselves, which are covered by lawyer-client privilege.

Perhaps for this reason, divorce lawyers as a group are among the most pessimistic when it comes to assessing the overall state of privacy in the digital age.

“I do not like to put things on e-mail,” said David Levy, a Chicago divorce lawyer. “There’s no way it’s private. Nothing is fully protected once you hit the send button.”

Ms. Chemtob added, “People have an expectation of privacy that is completely unrealistic.”

James Mulvaney agrees. A private investigator, Mr. Mulvaney now devotes much of his time to poking through the computer records of divorcing spouses, on behalf of divorce lawyers. One of his specialties is retrieving files, like bank records and e-mail messages to secret lovers, that a spouse has tried to delete.

“Every keystroke on your computer is there, forever and ever,” Mr. Mulvaney said.

He had one bit of advice. “The only thing you can truly erase these things with is a specialty Smith & Wesson product,” he said. “Throw your computer into the air and play skeet with it.”

    Tell-All PCs and Phones Transforming Divorce, NYT, 15.9.2007, http://www.nytimes.com/2007/09/15/business/15divorce.html

May 20, 2007
By THE ASSOCIATED PRESS
Filed at 1:47 a.m. ET
The New York Times

SANTA CRUZ, Calif. (AP) -- The chilling sounds of gunfire on the Virginia Tech campus; the hateful taunts from Saddam Hussein's execution; the racist tirade of comedian Michael Richards.

Those videos, all shot with cell phone cameras and seen by millions, are just a few recent examples of the power now at the fingertips of the masses. Even the man widely credited with inventing the camera phone in 1997 is awed by the cultural revolution he helped launch.

''It's had a massive impact because it's just so convenient,'' said Philippe Kahn, a tech industry maverick whose other pioneering efforts include the founding of software maker Borland, an early Microsoft Corp. antagonist.

''There's always a way to capture memories and share it,'' he said. ''You go to a restaurant, and there's a birthday and suddenly everyone is getting their camera phones out. It's amazing.''

If Kahn feels a bit like a proud father when he sees people holding up their cell phones to snap pictures, there's good reason: He jury-rigged the first camera phone while his wife was in labor with their daughter.

''We were going to have a baby and I wanted to share the pictures with family and friends,'' Kahn said, ''and there was no easy way to do it.''

So as he sat in a maternity ward, he wrote a crude program on his laptop and sent an assistant to a RadioShack store to get a soldering iron, capacitors and other supplies to wire his digital camera to his cell phone. When Sophie was born, he sent her photo over a cellular connection to acquaintances around the globe.

A decade later, 41 percent of American households own a camera phone ''and you can hardly find a phone without a camera anymore,'' said Michael Cai, an industry analyst at Parks Associates.

Market researcher Gartner Inc. predicts that about 589 million cell phones will be sold with cameras in 2007, increasing to more than 1 billion worldwide by 2010.

Mix in the Internet's vast reach and the growth of the YouTube generation, and the ubiquitous gadget's influence only deepens and gets more complicated. So much so that the watchful eyes on all of us may no longer just be those of Big Brother.

''For the past decade, we've been under surveillance under these big black and white cameras on buildings and at 7-Eleven stores. But the candid camera is wielded by individuals now,'' said Fred Turner, an assistant professor of communications at Stanford University who specializes in digital media and culture.

The contraption Kahn assembled in a Santa Cruz labor-and-delivery room in 1997 has evolved into a pocket-friendly phenomenon that has empowered both citizen journalists and personal paparazzi.

It has prompted lawsuits -- a student sued campus police at UCLA for alleged excessive force after officers were caught on cell-phone video using a stun gun during his arrest; and been a catalyst for change -- a government inquiry into police practices ensued in Malaysia after a cell-phone video revealed a woman detainee being forced to do squats while naked.

On another scale, parents use cell-phone slideshows -- not wallet photos -- to show off pictures of their children, while adolescents document their rites of passage with cell phone cameras and instantly share the images.

One of the recipients of Kahn's seminal photo e-mail was veteran technology consultant Andy Seybold, who recalled being ''blown away'' by the picture.

''The fact that it got sent wirelessly on the networks those days -- that was an amazing feat,'' Seybold said.

Kahn's makeshift photo-communications system formed the basis for a new company, LightSurf Technologies, which he later sold to VeriSign Inc. LightSurf built ''PictureMail'' software and worked with cell phone makers to integrate the wireless photo technology.

Sharp Corp. was the first to sell a commercial cell phone with a camera in Japan in 2000. Camera phones didn't debut in the U.S. until 2002, Kahn said.

Though Kahn's work revolved around transmitting only digital still photographs -- video-related developments were created by others in the imaging and chip industries -- his groundbreaking implementation of the instant-sharing via a cell phone planted a seed.

''He facilitated people putting cameras in a phone, and he proved that you can take a photo and send it to someone with a cell phone,'' Seybold said.

Kahn, 55, is well aware of how the camera phone has since been put to negative uses: sneaky shots up women's skirts, or the violent trend of ''happy slapping'' in Europe where youths provoke a fight or assault, capture the incident on camera and then spread the images on the Web or between mobile phones.

But he likes to focus on the technology's benefits. It's been a handy tool that has led to vindication for victims or validation for vigilantes.

As Kahn heard the smattering of stories in recent years about assailants scared off by a camera phone or criminals who were nabbed later because their faces or their license plates were captured on the gadget, he said, ''I started feeling it was better than carrying a gun.''

And though he found the camera-phone video of the former Iraqi dictator's execution disturbing, Kahn said the gadget helped ''get the truth out.'' The unofficial footage surreptitiously taken by a guard was vastly different from the government-issued version and revealed a chaotic scene with angry exchanges depicting the ongoing problems between the nation's factions.

Kahn also thinks the evolution of the camera phone has only just begun.

He wouldn't discuss details of his newest startup, Fullpower Technologies Inc., which is in stealth mode working on the ''convergence of life sciences and wireless,'' according to its Web site.

But, Kahn said, it will, among other things, ''help make camera phones better.''

April 11, 2007
From The Times
Alexandra Frean, Education Editor

The founder of the Wikipedia online encyclopaedia criticised the Education Secretary yesterday for suggesting that the website could be a good educational tool for children.

Mr Johnson described the internet as “an incredible force for good in education” for teachers and pupils, singling out Wikipedia for praise.

“Wikipedia enables anybody to access information which was once the preserve only of those who could afford the subscription to Encyclopaedia Britannica and could spend the time necessary to navigate its maze of indexes and content pages,” he told the annual conference of the National Association of Schoolteachers and Union of Women Teachers (NASUWT) in Belfast.

But Larry Sanger, who helped to found Wikipedia in 2001, said that the site was “broken beyond repair” and no longer reliable.

Wikipedia is among the top ten most visited sites on the internet, containing more than six million articles contributed only by members of the public. But it has been criticised for being riddled with inaccuracies and nonsense.

Last month it was revealed that a prominent and long-standing Wikipedia contributor had lied about his identity, having claimed to be a tenured university professor, when he was in fact a 24-year-old college drop-out.

Concerned about the website’s integrity, Mr Sanger left Wikipedia, and two weeks ago launched an online encyclopaedia called Citizendium.org, which he said would be monitored and edited by academics and experts as well as accepting public contributions.

He told The Times: “I’m afraid that Mr Johnson does not realise the many problems afflicting Wikipedia, from serious management problems, to an often dysfunctional community, to frequently unreliable content, and to a whole series of scandals. While Wikipedia is still quite useful and an amazing phenomenon, I have come to the view that it is also broken beyond repair.”

Nick Gibb, the Tory schools spokesman, said: “A huge amount of the current curriculum, particularly in history, is devoted to teaching children to be discerning when it comes to information on the internet.

“It appears the Secretary of State is not quite as modern as he needs to be in this information age.”

Mr Johnson also used his speech to call on social networking websites to stop pupils posting inappropriate videos of and abusive comments about their teachers on the internet.

In one case a female teacher’s head was superimposed on to a pornographic photograph.

Mr Johnson said that the online harassment of teachers was causing some to consider leaving the profession. He called on the providers of websites to take firmer action to block or remove offensive school material, in the same way that they have cut pornographic content.

However, Chris Keates, the union’s general secretary, told Mr Johnson that his call was likely to have little impact.

March 23, 2007
From The Times
Ben Macintyre

We know what was written in the first telegram, sent by Samuel F. B. Morse in 1844: “What hath God wrought?” We know the words spoken by Alexander Graham Bell when he made the first telephone call in 1876, to his assistant, Thomas Watson: “Mr Watson — come here — I want to see you.” (The “polite telephone manner” had not yet been invented.) But we have absolutely no idea what was said in the first e-mail, just 35 years ago.

The digital age brought with it the false promise that everything written, filmed, photographed or recorded might now be preserved, for ever. The “save” key would eliminate the need for filing and storage. Since 1945 we have gathered 100 times more information than in the whole of human history up until that point. Entire libraries could be preserved on disks that fitted into a pocket. Paper was dead.

It has not quite worked out that way. Digital information may be impossibly voluminous and convenient, but it is also vulnerable and dangerously disposable. Already a vast amount of information has been lost. CDs disintegrate in just 20 years, whereas the Domesday Book, written on sheepskin in 1086, will still be with us in another millennium. Few people still write regular letters, but their replacement, the ubiquitous e-mail, is so easily deleted and forgotten, to say nothing of the fleeting text message.

Technology has already left behind the forms of electronic storage once expected to be eternal: the laser disk, the 5¼in, the 3.5in floppy, the Amstrad all-in-one word processor have all been flung into obsolescence, often taking their information with them. Only a small fraction of government bodies and companies even bother to archive their digital material. Who, save the most fastidious self-chronicler, takes the trouble to embalm their own e-mails electronically? Historians of the future may look back on the 1980s and 1990s as a black hole in the collective memory, a time when the historical record thinned alarmingly owing to the pace of technological change. Future biographers may be reduced to trying to extract personality from whatever electronic fragments survive, cheque stubs and those few ritual moments (birth, death and overdraft) when a subject still puts pen to paper.

I have recently spent many hours in the National Archives, ferreting through the wartime records of MI5.

The sheer richness of written material is overwhelming: letters, memos, telephone transcripts, diaries, scribbled notes in the margins. You can smell the pipe smoke and personalities wafting off the pages.

When MI5’s current files are released decades hence, historians will have a far drier time of it. Electronic messages not deemed to be of “archival” value are routinely deleted by civil servants, simply as an insurance policy — significant or potentially damaging information is strictly verbal, particularly since Jo Moore’s attempt to “bury bad news” by e-mail.

Arguably, the most important and reliable real-time histories of places such as Iraq and Iran are currently being written on weblogs, the online journals and discussion forums that are, by definition, mutable and impermanent. A historian 50 years hence would probably get the most accurate picture of life in Baghdad today by collecting and studying the blogs of the moment, but it may already be too late. The average life expectancy of a website is about 44 days, roughly the same as the common house fly.

Just as importantly, by committing to erasable electronic memory the things we once committed to paper, we may be denying future generations the chance to witness the warp and weft of our lives. Our ancestors were writers and hoarders. I have a collection of my grandfather’s letters in the attic, describing the life of a sheep farmer in New South Wales in the 1930s. They are of interest, I suspect, to no one but me, but to me they are invaluable, a chronicle of where I come from. What will we bequeath to our grandchildren? At best a bunch of antiquated disks that they may well be unable to open and read.

Anyone (with a magnifying glass and patience) can read letters, but there is a real danger that technology will leave much of the electronically written record marooned and illegible. The BBC’s Doomsday Project of 1986, intended to record the economic, social and cultural state of Britain for all time, was recorded on two 12in videodisks. By 2000 it was obsolete, and rescued only thanks to a specialist team working with a single surviving laser disk player.

When Nasa sent two Viking Lander spacecraft to Mars in 1975, the data was carefully recorded on magnetic tape. Two decades later, no one could decode it. The original printouts had be tracked down, and typed out again on paper.

And that, ironic as it seems, may be the answer. The Digital Preservation Coalition, a group encouraging governments, businesses and individuals to curate and preserve electronic information, recently published a report stating that “storage of printed copies of important documents is generally accepted as a reasonably failsafe method of preservation”.

This, then, is a plea for paper. So long as it is stored properly and acid-free, paper endures. Leave the ephemera to the electronic ether, but if you value certain words and images, preserve them on paper. The “print” button is a more faithful saviour than the “save” button.

Before the Battle of Trafalgar, Nelson sent his message to the fleet by raising flags using Sir Home Popham’s telegraphic code (a rather newfangled form of communication, which not everyone approved of) — whereupon the words were written down for posterity, on paper.

Today the same message would probably be sent by text — instant, easy, and instantly perishable: “UK xpx dat evry man wll do his duT.”

Vocabulaire / Encyclopédie > Média

Vocabulaire / Encyclopédie > Musique

Vocabulaire / Encyclopédie > Violence

The Guardian > Special Report > WWW
http://www.guardian.co.uk/online/0,3147,782450,00.html

The New York Times > Technology
http://www.nytimes.com/pages/technology/index.html