sábado, 23 de junio de 2012

The First Five Years of the iPhone Obsession

On June 29, 2007, the first iPhone went on sale. The Apple (AAPL) device benefited from breathless advance buzz but also had its skeptics: It cost $600 and had no physical keyboard, limited e-mail options, and no copy-and-paste. In hindsight, it was clearly dumb to bet against Steve Jobs & Co. Apple has since sold more than 217 million iPhones worldwide and sparked a commercial, cultural, and—most surprising—behavioral revolution. According to a study of medical workers at the Baystate Medical Center in Springfield, Mass., 76 percent say they’ve experienced “phantom vibration,” that insistent buzz from an imagined text or phone call. Scientists speculate it’s the result of random nerves firing, biochemical noise that our brains easily tuned out until they were reconditioned by the iPhone.

“The iPhone has changed everything about how we relate to technology, for both good and bad,” says Larry Rosen, a psychologist, professor, and author of iDisorder: Understanding Our Obsession with Technology and Overcoming Its Hold on Us. According to his research, nearly 30 percent of people born after 1980 feel anxious if they can’t check Facebook (FB) every few minutes. Others repeatedly pat their pockets to make sure their smartphone is still there. Indulging those tiny, persistent urges brings us only a brief respite. “The relief is not pleasurable,” says Rosen. “That’s the sign of an obsession.”

Obsessions aren’t all bad for everyone, and this one has been profoundly good for Apple and its partners. The Cupertino (Calif.) company’s annual revenues climbed from $24 billion in 2007 to $108 billion last year; its stock price is up almost 400 percent over the same period. Samsung (005930), Foxconn (HNHPF), AT&T (T), and other partners have all enjoyed some of the windfall. Apple has paid out more than $5 billion to app developers and created a mobile marketplace that enables a startup like Instagram to go from zero to a $1 billion valuation in 18 months. Even though the pie is growing, some have been squeezed out: In the quarter the iPhone was introduced, Nokia (NOK) and Research In Motion (RIM) earned a collective $2.7 billion on their handsets. Now RIM is exploring strategic options with bankers, and Nokia recently announced another round of layoffs.

The App Store’s 650,000 offerings help people massage Excel data on the go, monitor their blood sugar, and entertain their kids. More subtly, the iPhone’s tremendous commercial success has made “user-centered design” a buzz phrase in business. Before the iPhone, most tech products were designed to appeal to the engineers who made them and cost-conscious IT managers. The first iPhone arrived with a “manual” that ran only a few pages. Its Jobsian focus on beauty and simplicity has influenced countless products and services, from Jawbone’s minimalist audio gear to Dropbox’s easy file-sharing.

Until now, the cost side of the iPhone equation hasn’t received much attention. That’s starting to change. The latest iPhone-inspired cottage industry has nothing to do with old-timey photo filters but books that examine the device’s biological and societal impact. In addition to Rosen’s iDisruption, there’s Gregory Jantz’s #Hooked: The Pitfalls of Media, Technology, and Social Networking and James Steyer’s Talking Back to Facebook. While much of these authors’ concern focuses on social media, the smartphone is what lets people stay constantly connected. “The great thing about the iPhone is that we carry it with us all day long,” says Rosen. “The bad part is that we carry it with us all day long.”

That makes people lab rats in a real-time psychological experiment that’s altering behavior at lightning speed. Centuries after Gutenberg invented the printing press, literacy remained a rarity. By 2016, Cisco Systems (CSCO) expects there to be more mobile devices than people. Thanks to the ubiquity of smartphones, many museum-goers “skip the step of actually looking at the artwork and move straight to photographing,” says Elizabeth Broun, director of the Smithsonian American Art Museum in Washington. Storm-chasers have been emboldened by mobile weather maps and are a scourge to rural police departments, who must deal with their arrival during general evacuations, says technology historian Edward Tenner. For every feel-good story about an autistic child lighting up at the sight of a new app, there’s a story like that of actor Alec Baldwin getting kicked off an American Airlines flight for refusing to quit his Words With Friends game.

The big question: Is the iPhone a “bicycle for the mind,” as the late Steve Jobs said about the first Mac, or a crutch that does too much of our thinking for us and increasingly takes the place of real human connections? The answer may clarify as the devices get more powerful and more intrusive. Future generations of the iPhone “will gently nudge you to help you do the things you want to do,” says Bob Borchers, a venture capitalist with Opus Capital who used to run iPhone marketing for Apple. “Why couldn’t the phone know that I want to be more fit, so the next time I have 15 minutes of spare time, Siri could say, ‘Do you want me to set aside this time for you to work out?’”

Whether that vision inspires you or creeps you out, there’s one very big check on the revolution wrought by the iPhone: The capped data plan. Phone companies have been ditching all-you-can-eat plans and forcing users to pay for bandwidth as they go. Sanford C. Bernstein (AB) analyst Craig Moffett says that in the first quarter 2012, AT&T wrote bigger checks for Apple—$3 billion worth—than it did for investments on its own network. In the end, we may not be the ones to decide the costs of detox.

The bottom line: The iPhone is a colossal hit that’s impacted human behavior, but the economics of cellular networks may limit future reliance.


View the original article here

The New Republic of Porn

Stuart Lawley navigates Bear’s Club Drive in his midnight sapphire Rolls-Royce Phantom Coupe, a $464,000, 3-ton, 12-cylinder land yacht so well-engineered that ensconced in its butter-soft leather, one barely senses motion at all. Lawley docks gently at a French-style chateau adjacent to the 15th fairway of a luxuriant tropical Florida golf course designed by “the Golden Bear,” Jack Nicklaus. Celine Dion owns a place nearby, Lawley mentions. Michael Jordan is building on two lots just around the bend. Lawley’s one-story, five-bedroom, 9,300 square-foot stone manse has a perfectly green lawn made of plastic. “AstroTurf,” he confirms. “I rather like it.” The previous owner, an auto parts heiress, has moved to a larger spread elsewhere in the development. She was eager to sell, Lawley says. He offered $3.8 million, all cash, take it or leave it. She took it. There’s a catch, however: In early June, the homeowners’ association delayed the closing because some members were uneasy about Lawley’s occupation. “The neighbors are worried that a ‘big-time pornographer’ is moving in,” Lawley says. “Bollocks!”

Photograph by Colby Katz for Bloomberg Businessweek

The son of a municipal bus driver, Lawley grew up in Britain’s industrial West Midlands. By the time he was 37, he had made two decent-size fortunes selling fax machines and creating business-to-business websites. In 2000 he moved to the Bahamas to work on his golf swing and sidestep a $40 million tax bill. He does not consider himself a pornographer. “Until I invested in ICM Registry in 2003,” he explains, “I was like any other normal bloke. I had looked, furtively, at dirty websites maybe three or four or five times.”

These days, he owns ICM, a 12-person business in Palm Beach Gardens, Fla., that operates the top-level domain name “.xxx,” an alternative to “.com.” The domain is designed specifically to showcase pornography. On a wall of Lawley’s office on PGA Boulevard, the framed item bearing his company logo is an oversize cerulean-colored condom. ICM’s spokesmodel, the curvaceous Nina Mercedez, markets herself online as “THE HOTTEST LATINA in the XXX industry.” So, let’s be adult about it, in the words of ICM’s slogan, and stipulate that Lawley is in the porn business.

Assume you want to charge customers for videos and live webcam conversation featuring male-to-female transvestites. You could come up with a catchy name and buy an address ending in .com from GoDaddy or another website retailer. If you did, VeriSign (VRSN), a separate company based in Reston, Va., that operates the digital infrastructure for .com sites, would get a cut of your fee. In online argot, VeriSign is a “registry.” Lawley’s ICM is also a registry, and its .xxx sites are available via GoDaddy, too. As for the transvestite porn site, it’s called shemales.xxx, and it’s already been taken.

Since ICM went active last fall, online shingles have been hung for, among others, orgy.xxx, bollywood.xxx, and german-sex-portal.xxx. For several years, Mercedez, a former Miss Nude Universe, has run a cluster of .com sites. Lately she has also leased space at ninamercedez.xxx. If a potential fan Googles “Mercedes,” or “Mercedez,” “they’ll probably get cars or car parts,” she notes. If they want to see Nina Mercedez having sex, and they search for her name and .xxx, “they know they’re going to get porn.” Mercedez has built enough of a following that she shows up fairly high in search results anyway, but the ability to quickly find the porn you’re looking for is, in a nutshell, what the investment bankers would call Lawley’s value proposition.

Within the virtual realm made up of “top-level domains”—.com, .net, .org, .gov, .edu, and so forth—Lawley portrays .xxx as a responsibly run red-light district. Go there if you want wall-to-wall copulation of a decidedly unsentimental strain; stay away if you do not. The days of “Ding, dong, pizza delivery man?…” porn with a goofy plot and two principals are fading. Much of what’s online now is Web-quick, more revolting than titillating, and involves a level of brutality one dearly hopes is feigned.

Not to worry, says Lawley. It’s all just fantasy for consenting adults. Parents can use free browser settings or commercially available software to block all .xxx sites. What’s more, he promises that on his domain, legitimate customers can indulge carnally without fear of credit-card fraud, viruses, or inadvertent encounters with illegal child porn. As part of the purchase price of a .xxx site, Lawley includes daily scans by the Internet security firm McAfee (INTC), ensuring that the sites are protected from scammers using porn as bait to steal personal information.

Next year, ICM plans to introduce a proprietary micropayment system. This service, Lawley promises, will help blue-chip pornographers fight back against the proliferation of free and pirated smut online. “We’re going to do for adult what Apple (AAPL) did for the music business with the iTunes store,” he predicts. Consumers who have become conditioned to grainy, poorly shot giveaways, Lawley says, will get reacclimated to paying for higher-quality hard core. Price, quantity, and specificity are key. Rather than the traditional model—$24.99 upfront for all-access monthly memberships—porn consumers will shell out 99? apiece for short clips of niche material (akin to buying a favorite song, not the whole album). Perhaps more compelling, people seeking porn on their mobile devices will have a convenient way to purchase a quickie on the run.

With more than 220,000 sites signed up so far, Lawley now presides, in his view, over a clean, well-lighted virtual mall. Site owners pay $60 a year for a typical .xxx domain, compared with less than $10 for a .com. ICM Registry auctioned “premium” names for much more. The aforementioned shemales.xxx went for $200,000; fetish.xxx, for $300,000; gay.xxx, for $500,000. In the last three months of 2011, its first active quarter, the tiny company took in $25 million.

Data: ICM Registry

While the proportion of the Internet devoted to porn has been exaggerated by conservative activists and marketers of parental-filtering programs, there is still room for ICM to grow. The most comprehensive study of .com porn, conducted by neuroscientists Ogi Ogas and Sai Gaddam for their 2011 book, A Billion Wicked Thoughts, showed that a modest 4.2 percent of the world’s million most popular websites were sex-related. A more impressive 13 percent of Web searches seek erotic content, the authors found. Lawley’s hope is that an increasing share of those searches will flow toward .xxx.

His ambition has provoked mixed reactions in the southern California precincts known as Porn Valley. Some stalwarts there accuse him of running a protection racket: bullying businesses, adult and otherwise, to shield their intellectual property by defensively purchasing .xxx names. “That’s blackmail,” says Christian Mann, general manager of Evil Angel, a production house in Van Nuys responsible for such works as Don’t Make Me Beg #4. ICM’s business plan, he adds, “is shocking. It’s scandalous.” Still, the Web affiliate that runs Evil Angel sites evilangel.com and buttman.com bought the .xxx equivalents, fearing that cybersquatters would get there first.

Manwin Licensing, a Luxembourg-based owner of hard-core digital real estate, has sued ICM in federal court in Los Angeles for “monopolistic conduct” and “price gouging,” allegations ICM denies. As early as April 2006, Hustler founder Larry Flynt wrote in an open letter that the .xxx domain “is an inherently dangerous idea with no real purpose.” He warned that its creation would encourage lawmakers in Washington and other capitals to mandate .xxx as an exclusive corral for adult material. “Only if it becomes a tool of censorship,” he added, “will it achieve its goal of preventing access to adult content by minors.” Lawley says that he does not necessarily favor stricter government regulation; on the other hand, he admits that curbs along the lines Flynt suggested could bolster ICM’s bottom line.

Data: A Billion Wicked Thoughts

The resistance to Lawley, whatever its merits, has the ring of desperation. ICM arrived at a moment of crisis for commercial porn. After enabling several boom years, the Internet has brought many smut marketers to their knees. Rampant freebies on “tube” sites have reduced global porn revenue by 50 percent since 2007, to less than $10 billion, including about $5 billion generated in the U.S. Those are rough guesses by Diane Duke, executive director of the industry’s trade group, the coyly named Free Speech Coalition. Speaking privately, some porn executives say the coalition’s revenue estimates are optimistic. In a field dominated by privately held companies, no provable statistics exist.

Setting aside moral judgments and potential social harms—we’ll get to those—it’s remarkable that Lawley is making any money at all. Especially since he had to fight for seven years, spending millions of his own dollars, to get permission for .xxx from the Internet Corporation for Assigned Names and Numbers (ICANN), a nonprofit regulatory body. His persistence in the face of hostile lobbying by competitors, religious conservatives, and the U.S. government suggests that if the stubborn British entrepreneur claims to have a money-spinning solution for the Great Porn Depression, he should not be underestimated.
In 2003, when Lawley began eyeing porn as a business opportunity, the industry was enjoying a giddy digital surge. The founding fathers of modern erectile entertainment—beginning with Hugh Hefner and Playboy in 1953, followed by Bob Guccione and the bawdier Penthouse, and Flynt and the proudly vulgar Hustler—nudged blue material out of backstreet bookstores and into the commercial mainstream. In the 1980s porn provided proof of concept for how to profit from home video, as VHS tapes allowed consumers to abandon peep emporiums for the living room couch. Porn sold next-generation DVDs and in the late ’90s quickly capitalized on the Internet, becoming one of the Net’s first killer commercial apps. Porn then encouraged Internet service providers and cable networks to invest in increased bandwidth and higher-quality streaming video.

As happened to other traditional media businesses, however, the Internet swiftly turned on pornography. First, DVD sales slackened. The Playboy and Penthouse franchises withered. In contrast, Hustler and more enterprising producers such as Evil Angel and Vivid thrived by diversifying online, at least for a while. Pretty soon the advent of free tube sites laid siege to even the more resilient smut-for-pay businesses.

Enter Lawley, pride of the British hinterlands. “Queen Victoria named the area where I grew up the Black Country,” he says, a reference to the factory soot Her Majesty saw from the window of her royal rail car. Flushed of cheek and with thinning blond hair, Lawley, 49, speaks with a broad Midlands accent, not the pinky-in-the-air cadences of a London posh. He aced his exams and went off to Imperial College London. “It’s the fourth-highest-rated school in the world,” he boasts, “the M.I.T. of the U.K.” A local engineering firm gave young Lawley a scholarship with the understanding that he would return with a degree in mechanical engineering and go to work in the British auto industry. London’s fashionable Knightsbridge opened his eyes to other possibilities. “I’m seeing people in Rolls-Royces and Ferraris,” he recalls, “and I said to myself, ‘Blimey, they’re not managers of some copper smelting plant outside of Birmingham.’?”

As a university student, he began selling burglar alarms door-to-door. An indefatigable extrovert, he sometimes took home ?1,000 a week. The entry-level engineering job would pay ?7,500 a year. Then, in 1985 he happened to see a demonstration of a Sharp facsimile machine. “?‘Bloody hell,’ I thought, ‘that’s fantastic. Every business in the U.K. will want one of those.’?” With his own savings and a ?2,000 loan from his mother, he founded Eurofax, a fax machine leasing company that by the end of the second year was generating annual revenue of ?1 million. During a recession in 1990 and 1991, Lawley bought out several struggling rivals. By 1997 he sold Eurofax for ?6.7 million, or about $10 million, and was kept on as chief executive officer by the new owners.

Lawley’s interest in fax machines diminished in direct proportion to his fascination with Maria Bartiromo’s breathless reports on CNBC about the Internet craze. In January 1999 he sold his shares in the fax empire and started a business-to-business website company. Ten months later, he raised ?7 million in an initial public offering. “There was a heat for Internet stocks,” he says, with cheeky understatement. By March 2000, his new company, Oneview, employed 155 Web designers and 250 salesmen. Members of Parliament attended office ribbon cuttings.

Photograph by Colby Katz for Bloomberg Businessweek

Then, on a flight home from a winter’s vacation in Florida, Lawley concluded that the frenzied music was about to stop. “Listening to Maria Bartiromo,” he recalls, “there was just too much excitement.” He hurriedly arranged to sell the Web company the same week in March that the Nasdaq stock exchange peaked. Just before the spectacular tech crash, Oneview went for the equivalent of $204 million. Lawley owned 51 percent, pocketing about $100 million after expenses.

His accountants pointed out that if he switched legal residence before the end of the British tax year on April 5, 2000, he could avoid a 40 percent capital gains tax. “Basically, I had two weeks to pack and get out,” he recalls. “I took the last possible plane out of Gatwick for the Bahamas.” Thus the $40 million tax savings. He and his then-wife had had a son in 1999, and he fancied the idea of retiring early and raising the boy barefoot on the beach.

Caribbean life was relaxing, he learned, if a tad boring. “America,” he says, “struck me as very family-oriented.” He thought a move to Florida might get his mercantile juices flowing again, and, not coincidentally, the state has no personal income tax. He bought “a big pile on the water” in the wealthy hamlet of Jupiter and transplanted the family to the U.S.

At a children’s Halloween parade in 2002, Lawley met another father who talked his ear off about ICANN, the nonprofit based in Marina del Rey, Calif., that oversees “top-level domains” (TLDs) under a contract with the U.S. Department of Commerce. The other dad, an Internet consultant, explained that ICANN, seeking to encourage competition, planned to expand the number of TLDs. Lawley decided to have a look.

He discovered that two years earlier ICANN had declined to approve .xxx—and that it hadn’t definitively rejected the idea, either. The proposal for the all-porn domain came from ICM Registry, a startup owned by a Canadian investor. “When I got into the research in 2003, I was stunned by the money to be made in the adult space,” Lawley says. “Billions were being spent, probably more than ticket sales for all [U.S.] movies and sporting events combined. This had gone way beyond porn-spam e-mail and pop-up ads for penis enlargement.”

The opening for an outsider, he decided, was for a clearly demarcated, scam-free porn zone. “Online porn was dominated by short-term thinking and sleazy tactics,” Lawley says. “You had mousetrapping”—sites that wouldn’t let consumers escape—“and autodialing software that would just keep slamming your credit card month after month, even if you tried to cancel.” Malware programs infected customers’ computers, stealing personal information and paralyzing hard drives.

“There was an obvious, no-brainer path to profits,” he says. “This stuff has a legitimate right to exist. People want to buy it. If you clearly identify this material, it will get to willing consumers and won’t bother people who don’t want to see it.?…?No kiddie porn, no fraud, automatic virus checks—everything on the up and up.” Dot-xxx would provide a voluntary warning label that was self-explanatory and easy to filter out. In 2003 he bought 30 percent of ICM and launched a renewed campaign for the approval of .xxx.
At first, Porn Valley got behind him. Jim Kohls, then the president of Hustler’s parent, LFP Inc., wrote glowingly in July 2003 about ICM’s “industry-led, market-driven, non-regulatory solution for the creation of an adult-content top-level domain.” Integrating .xxx into the Internet, Kohls suggested, “will also create a line of communication between the adult industry and the global community.” On June 1, 2005, ICANN’s board reversed its earlier position and voted 6-3, with two abstentions and four members absent, to authorize its staff to negotiate a contract with ICM for the .xxx domain.

Unsurprisingly, this development received media coverage. Also unsurprisingly, Christian conservatives swung into action. The Family Research Council, Concerned Women for America, and other watchdogs lobbied the Bush administration to intervene. Thousands of scripted e-mails hit the Commerce Department, declaring: “I oppose the establishment of the .xxx domain. I do not want to give pornographers more opportunities to distribute smut on the Internet.” Patrick Trueman, then an attorney with the Family Research Council and now the head of a group called Morality in Media, repeatedly telephoned Bush officials. He says: “I have said from the start that .xxx would only encourage more abusive material that will damage our children.”

Lawley on his daily rounds in Palm Beach, Fla.Photograph by Colby Katz for Bloomberg BusinessweekLawley on his daily rounds in Palm Beach, Fla.

“We’re getting hammered by the religious community to not approve .xxx,” Meredith Attwell, a Commerce official, wrote to a colleague on June 15, 2005, in an e-mail obtained by ICM Registry under the Freedom of Information Act. A month later, Michael Gallagher, an assistant Commerce Secretary, wrote to ICANN that his agency “has received nearly 6,000 letters and e-mails from individuals expressing concern about the impact of pornography on families and children and opposing the creation of a new top-level domain devoted to adult content.” Gallagher called the volume of lobbying “unprecedented” and suggested that ICANN change course.

This situation raised a question reaching far beyond pornography—namely, who controls the shape and content of the Internet? The U.S. government built the computer networks that grew into the World Wide Web, and, as a practical matter, Washington can still shut down large portions of the Internet. In 1998, though, the Commerce Department signed a memorandum of understanding that transferred responsibility for the domain name system to ICANN, with the U.S. remaining in the background as guardian of crucial infrastructure. Some countries resent this continuing American role and have argued that the United Nations should manage the Internet, a notion regarded with bipartisan dismay in Washington.

At a UN conference on the Internet in 2005, a Brazilian representative decried the prospect of an .xxx TLD as indicative of ICANN’s insensitivity to traditional religious precepts. “They are talking about pornography,” the Brazilian said. “These are things that go very deep [against] the values in many of our countries.”

Under pressure from the U.S., Brazil, and several other nations, ICANN dithered over .xxx. This, Lawley says, left him “seriously pissed.” Based on the ICANN board’s friendly noises in 2005, he had acquired a majority stake in ICM and spent some $3 million in legal fees to revise and re-revise technical application documents.

His cause was not aided by shifting sentiment in Porn Valley, where some companies were beginning to suffer because of competition from giveaway tube sites (which make money by selling ads). Despite earlier support from some of its better known members, the Free Speech Coalition now mobilized against ICM. Lawley’s proposal that owners of .com sites purchase a raft of new .xxx equivalents struck struggling producers as extortionate. His claim that .xxx sites would be better policed further rubbed some rivals the wrong way. “He said .xxx would protect children, as if we hurt children,” says Allison Vivas, CEO of Pink Visual, an adult online and film company with offices in southern California and Tucson, Ariz. “We want parents to use screening software” to stop underage viewers, she says. Who did Lawley think he was? In an open letter in August 2005, the Free Speech Coalition accused him of “distort[ing] the truth in order to gain control of such a lucrative monopoly.”

Lawley was flabbergasted. He had made pilgrimages to adult industry trade shows in Las Vegas. He had bought porn purveyors expensive steak dinners and $200 bottles of wine—all for naught. Flynt had climbed into bed with the Bush administration and Concerned Women for America, a bizarre menage a trois thwarting Lawley’s plans.

Noting the industry dissent, ICANN’s leaders questioned whether ICM Registry represented the interests of its own would-be constituency, let alone the larger universe of Internet users. In a resolution approved by the board in March 2007, ICANN rejected .xxx, seemingly once and for all.

Lawley, who constitutionally can’t take no for an answer, continued to hound ICANN. He sought outside arbitration before the International Centre for Dispute Resolution, as provided for in ICANN’s bylaws. In September 2009, the center held a week-long ersatz trial in a Washington corporate law office. Five months later, a three-person panel issued a 70-page opinion explaining its 2-1 ruling in Lawley’s favor. ICANN years earlier had reasonably concluded that the .xxx domain “met the required sponsorship criteria,” the panel majority said. The subsequent moral and political objections did not justify an about-face.

The Obama administration, unlike its conservative predecessor, did not throw up roadblocks. And in the spring of 2011, the Commerce Department authorized the electronic connections necessary to put .xxx online.
“Why ghettoize the product?” Michael Klein asks. “Why make it easier for a government to filter out? Why give somebody the tool to do that?”

A former cable television executive who now serves as Hustler’s president, he oversees 1,400 employees worldwide from the 10th-floor executive suite of the Flynt Building at the corner of Wilshire Boulevard and La Cienega. That’s Beverly Hills, he notes, not the Valley. Klein wears a dark business suit, white shirt, and muted tie. Paintings of traditional fox-hunting parties hang on his office walls. When discussing porn, he refers only to “the product.”

Although Flynt has stepped back from day-to-day management of his company, the Hustler offices still reflect his bordello ideal: thick carpets, heavy drapes, rococo furniture, Tiffany lamps, ornately framed reproductions of Renoiresque lovelies. A receptionist sits between twin pillars behind an oversize desk bearing a fanned-out portfolio of Hustler, Hustler’s Taboo, and Barely Legal.

The porn industry doesn’t need automatic malware scans or more clearly labeled content, Klein says. All of Hustler’s websites are prominently marked adults-only and can be blocked by widely available software. “It’s up to the parents to set it up,” he adds. Klein vows there will never be Hustler sites on .xxx and says the company’s lawyers have sent ICM Registry a letter sternly warning against trademark infringement. “Most of their business,” Klein claims, comes from “defensive registrations.”

Lawley takes exception to that last barb, which he says is not accurate. About 83,000 .xxx registrations, or about a third, he allows, are “defensive”: ICM offers the service for a one-time fee of $150 to organizations that want to preclude having their names porn-jacked. Type in “.xxx” after McDonald’s (MCD), Pepsi (PEP), Penn State, or Bloomberg (owner of this magazine), and you’ll get a black screen with the message, “This domain has been reserved from registration.”

ICM has, for no charge, set aside other names, including Businessweek.xxx, CNBC.xxx, and Verizonwireless.xxx, after detecting what it determined were cybersquatters who bought the domains intending to try to sell them to the trademark holders. Likewise, ICM has for no charge voluntarily blocked .xxx pages for thousands of mainstream celebrities; there will be no AngelinaJolie.xxx or BradPitt.xxx.

Where Hustler’s Klein sees a nuisance bordering on irrelevance, Manwin Licensing warns of a Leviathan-in-the-making. Manwin, itself one of the biggest competitors in online porn, employs 1,000 people, many in Montreal. Capitalizing on rivals’ financial difficulties, it has been acquiring tube sites and rolling them into a conglomerate that includes YouPorn.com, xTube.com, Pornhub.com, and Brazzers.com. Manwin also manages online content under the Playboy trademark and runs Playboy TV worldwide.

Last November, Manwin sued ICM Registry under the Sherman Antitrust Act. Lawley must be stopped in his tracks, Manwin argues, because of “a serious danger that ICM will establish and monopolize?…?the .xxx name.” The suit predicts, among other ills, that an “economic phenomenon of ‘network effects’?” will kick in imminently: “Users expecting to find adult content on sites associated with ‘xxx’ will migrate to the .xxx TLD, attracting more providers, in turn drawing more users, in turn again attracting yet additional providers, and so on.”

This, of course, is exactly what Lawley dreams of achieving, although he scoffs at the allegation that ICM will ever have an unlawful stranglehold on the porn marketplace. “We just want to help producers make more money from more adult content,” he says. Toward that end, he has asked ICANN for permission to start such additional X-rated TLDs as .porn and .adult, resulting, inevitably, in an online petition in opposition from Morality in Media. “America,” the conservative group says, “is already suffering an untreated pandemic of harm from pornography, and we need less, not more, pornography.”
“We didn’t know whether, if we built it, people would come,” Lawley concedes. He need not have worried. Last October, Corbin Fisher, a major gay studio in Las Vegas, said it would pay $500,000 for gay.xxx (the site is still under construction). In December, Clips4Sale, a downloadable video site, announced a $700,000 all-cash deal for a package of 30 premium names. Those big chunks of cash go to ICM. “We won,” says Lawley.

The next step in the development of .xxx, the “real game-changer,” as Lawley calls it, will be the micropayment system he plans to introduce in early 2013. To finance the system, he says he is negotiating with a “major name-brand” bank, which he won’t yet identify. “Online porn is suffering the way the music business suffered with Napster and file-sharing,” Lawley says. “If there were a totally reliable way to buy small bits of high-quality adult content, the way you can download a single song from iTunes, people would go back to paying for it, the way they went back to paying for music.” He sees a winning combination in 99? porn via mobile technology. “As Apple’s app store bans adult,” he says, “there is a huge market for adult apps” developed independently for .xxx sites. Lawley says designers are already at work.

Some producers who lobbied ICANN to slam the door on Lawley are coming around to acknowledging that he has gotten further than they anticipated. Pink Visual’s Vivas is one of those. She thinks “.com is still where it’s at,” as far as most porn buyers are concerned. But Lawley, she admits, “has made some good money on .xxx.?…?I can’t blame him as a businessman.”

For Lawley, ICM provides more than a way to augment his wealth. (After a recent divorce settlement—unrelated, he says, to his entry into the porn business—he is not quite as wealthy as he once was.) His son, who lives in Britain with his mother, is 13 years old. Lawley, never one to think small, wants to set an example of constructive capitalism. The father says he’s untroubled by his possible contribution to what sociologist Gail Dines describes in her 2010 book, Pornland: How Porn Has Hijacked Our Sexuality, as a society drowning in “images that degrade and debase women,” leading to heightened coarseness, distraction, and even addiction.

When confronted with such critiques, Lawley relies on an insouciant shoulder shrug and boys-will-be-boys bemusement, both common in his adopted field. “The stuff’s out there,” he says. “If you don’t like it, don’t look at it. I just make it available in a lawful, civilized way.”

He sees a progression: His West Midlands fax dealership went regional; the U.K. website business succeeded nationally. “I was keen to do something on a global scale, something I’d be remembered for, something my son would be proud of—‘that’s my dad.’?”

Along these lines, Lawley received an encouraging signal from the Bear’s Club development in late June. Despite initial hesitations, the homeowners’ association sent word that his purchase of the house at No.?160 had been approved. By late summer, the midnight sapphire Rolls Phantom Coupe will be parked out front, adjacent to the AstroTurf lawn.


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Women and Technology

Why Nuance Is Giving It Away

In 2009, Nuance Communications (NUAN), one of the largest players in voice recognition software, licensed its technology for use in a small mobile app. That app was Siri, which Apple (AAPL) bought in 2010 and turned into a major feature in the latest iPhone, allowing users to speak all types of questions and get answers from a virtual personal assistant. Although the terms of Apple’s arrangement aren’t public and neither side will share details, it was clearly a big win for Burlington (Mass.)-based Nuance, which now powers voice recognition on millions of devices.

That success has given Nuance, which also sells its voice recognition software to health-care and financial companies and is known for being a hard bargainer, a new respect for the value of freebies. In September, Nuance started offering free tools to mobile developers for building applications using Nuance’s speech recognition software. That’s triggered a wave of new apps where users can shop, search, play games, or otherwise use their phones through voice alone. “It’s a way to seed the market with our technology,” says Matt Revis, a vice president at Nuance Mobile, which makes money when appmakers upgrade to plans that offer customer service or more features. Siri is an example of “the types of situations we are looking to develop: smaller companies using us becoming big.”

Until the new rules kicked in, Nuance charged mobile developers about a penny each time the users of their apps tapped into voice recognition features. Startups had to charge customers a per-use fee—a very unpopular model—or cover the tab on their own. “If your app was too popular, the costs would explode,” says entrepreneur Alexander Marktl, whose startup, Sonico Mobile, makes a foreign-language translation app. “As a small app developer, it’s too dangerous.” And for iPhone devel-opers in particular, there were few other options. Google (GOOG), for instance, makes high-quality voice recognition software available to appmakers for free, but it only supports apps built for its Android operating system.

One beneficiary of Nuance’s change in strategy is Sonico. The Austrian startup’s iTranslate Voice, which made its debut on May 10, is the seventh-most popular paid app in Apple’s App Store, ahead of hit games such as Walt Disney’s (DIS)Where’s My Water? and Rovio’s Angry Birds. A user can say a sentence in one language, and the software repeats the phrase in any one of 30 other languages. The 99? app has been downloaded more than 500,000 times. Sonico selected Nuance’s most expensive service plan, but pays a flat rate for every app that’s downloaded instead of a per-use fee. Nuance’s new rates “made it possible to sell apps for cheap,” says Marktl.

Sonico’s app is one of about 140 new consumer mobile apps created by third-party developers that make use of Nuance technology, which also powers Amazon.com’s (AMZN) Price Check app, a way for shoppers to check online prices while browsing in physical stores. The app Voice Actions, made by Pannous, taps Nuance software to let users set alarms and reminders, get news, and do image searches. Revis says thousands more Nuance-powered apps are in the pipeline. Daniel Ives, a managing director at investment bank FBR Capital Markets (FBRC), estimates that Nuance’s revenue from mobile software will double, from about $250 million today to $500 million, over the next three to four years.

Globally, sales of voice recognition software for wireless devices should reach $21.3 billion by 2018, up from $3.5 billion last year, according to tech analysts WinterGreen Research. “Since the launch of Siri, the industry has had a lot more interest in speech,” says Revis.

The bottom line: More Siri-like smartphone hits could help Nuance’s mobile-software revenue double, to $500 million, within three to four years.


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Micha Benoliel's Open Garden

When Micha Benoliel was an MBA student in France in his 20s, he studied abroad in San Francisco for six months. One day he walked into the headquarters of Gap (GPS) to offer his services. He schmoozed a staffer and talked his way into the appointment book of then-Chief Executive Officer Mickey Drexler. “This could only happen in America,” says Benoliel, now 40. “This is the place you can change the world from.”

The meeting never happened—Drexler couldn’t sit down before Benoliel had to return to France—but Benoliel’s appreciation for the can-do attitude stuck. After spending much of his post-MBA career traveling the world, first as a salesman for a sporting goods company and then running his own programmer-for-hire business, he has landed back in the Bay Area as co-founder and CEO of Open Garden.

The startup makes a free app for PCs and Android devices that lets one gadget share its connectivity with any other around it. It’s like a no-fee version of “tethering,” which telecoms either charge extra for or put limits on. If multiple people in an area are using Open Garden, it acts as a traffic controller, sorting downloads according to whichever device has the fastest connection at any given moment.

Open Garden was a runner-up for the top startup award at the TechCrunch Disrupt conference in May. After the winner was announced, one of the judges, venture capitalist Fred Wilson of Union Square Ventures, penned a letter of dissent, calling Open Garden his favorite “by a long shot.” Writing on his blog, he said that “what they are doing is the most worthy of the conference name, Disrupt.” AT&T (T) feels differently: Spokesman Mark Siegel says Open Garden “unfortunately violates” company policies “by enabling unauthorized tethering,” and that the telco has asked Google (GOOG) to make the app unavailable to AT&T customers. Benoliel says “they cannot do anything … what we do is not illegal,” and as of June 20, Open Garden was available for download.

To create the technology, Benoliel joined forces with Greg Hazel and Stanislav Shalunov, programmers who’d worked on peer-to-peer projects such as BitTorrent. “It’s very difficult science,” says Ulevitch of Open Garden’s ability to communicate instantly and securely between devices. “If anybody is going to do it, it’s these guys.” The startup has received investments totaling $800,000 in funding and is raising another round, according to Benoliel.

The Nice native is the business mind at Open Garden, and says he’s always been attracted to technology. He taught himself to code when he was eight, and instead of practicing the piano he wrote a program that pressed keys on a virtual keyboard in time with a Claude Debussy track. He chose to locate Open Garden on Treasure Island, in San Francisco Bay. “We wanted to be in a different place than all the other startups,” Benoliel says. “There is free parking, free electricity, calm. Very little chance to be distracted by anything. Everyone can stay more focused.”

Skipped practicing piano to program, starting at age eight

Hawked sporting goods before becoming an entrepreneur

Millions of devices sharing Internet connections via Open Garden


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Technology in Schools is of Ultimate Importance

The Growing Power of the Meme

A scruffy, twentysomething man in a cardigan walks down the street, trailed by Sergio Flores, aka Sexy Sax Man, belting out a grinding tune. Cardigan guy passes someone “planking” atop a fire hydrant, someone else doing “the worm” along the sidewalk, and cats with limes on their heads, before Flores gets plowed over by an antelope, and our hero rides off on the beast through a crowd of dancing prisoners in orange jumpsuits into a sunset of animated, Pop-Tart cats making double rainbows in the sky.

VitaminWater shill Sergio 'Sexy Sax Man' FloresPhotograph by Robert MoralesVitaminWater shill Sergio 'Sexy Sax Man' Flores

To those who don’t spend enough quality time on such sites as YouTube (GOOG) or Reddit, the above scene might sound like a fever dream. In fact, it’s a television spot for VitaminWater that combines a number of popular Internet memes. The term is derived from genetics, describing the evolution of ideas and cultural phenomena by natural selection. These days, meme is the catchall for freely copied and altered tidbits of amusing online content, from animations and photo captions to viral videos that inspire a flood of parodies. (Think Honey Badger or S- -t Girls Say.)

Honey Badger don't care!Photograph by CorbisHoney Badger don't care!

Within weeks, most fade to oblivion, but those with endurance make the leap to the commercial world. Properly exploited, some memes can bring in anywhere from a few thousand dollars for a single licensed broadcast of a popular video to six figures for an integrated marketing campaign based around a meme. “These things?…?are the new Mickey Mouse or Bart Simpson,” says Ben Lashes, a former musician based in Portland, Ore., who manages popular memes such as Keyboard Cat (a piano-playing feline), Nyan Cat (the above-mentioned Pop-Tart/cat hybrid), and Scumbag Steve (a photo of a sleazy-looking man whose real name is Blake Boston).

In the past two years, Lashes has helped clients license memes to brands such as Nike (NKE), Nokia (NOK), Wonderful Pistachios, and Lipton (UL) Brisk Iced Tea, which uses the Scumbag Steve photo in a new Web ad. Lashes and Nyan Cat creator Chris Torres just signed with Jakks Pacific (JAKK), which makes Hello Kitty, among other toys, to license plush versions of Torres’s creation this fall. These are “not just dumb things on the Internet,” says Lashes. “These are the next huge pop culture characters.”

Keyboard cat is pay to playPhotograph by Charlie SchmidtKeyboard cat is pay to play

Viral Spiral, a year-old London company, employs a team of researchers to scour YouTube, blogs, and other dark corners of the Web around the clock, looking to sign a video’s creator before his work takes off. “We represent over a thousand videos,” says Chief Executive Officer Damian Collier, a British theater, television, and music producer who has also worked in law and finance. The company’s first client was the originator of the 2007 video Charlie Bit My Finger (British baby chomps on his older brother’s digit), the most watched YouTube video, with more than 400 million views. Viral Spiral has gone on to represent such recent hits as the Double Rainbow guy (nature lover gets hilariously emotional) and Isaac’s Lip-Dub Proposal (man surprises his beloved with an elaborately choreographed musical proposal). The agency manages the revenue a video brings in from YouTube’s embedded ads—Charlie Bit My Finger has earned the boys’ family about $500,000, according to ABC (DIS)’s Nightline—and sells its broadcast rights to news programs. It also pitches viral videos for use in major campaigns and has placed them in ads for Coca-Cola (KO), Sony (SNE), Google (GOOG), and others. “We handle legitimate licensing from our clients,” says Collier. “We negotiate, handle fees, do contracts, and make sure they get paid.”

The services Lashes and Viral Spiral offer may seem excessive for such ephemeral content, but as brands take greater notice of the attention Internet memes can generate, viral content is often commercialized without credit or compensation. Lashes and his lawyer regularly confront brands that use his clients’ memes without permission. “If I did not have Ben?…?on my side, Nyan Cat probably wouldn’t be doing as well as it is right now and many people would be profiting off my work,” says creator Torres.

During the 2012 Canadian broadcast of the Super Bowl, a Budweiser spot aired that showed an Ontario minor league hockey game instantly transformed into something worthy of the National Hockey League, with screaming fans, professional announcers, and a chicken mascot. It was singled out by several media writers as the most original Super Bowl ad of the year, a call that rankled Charlie Todd.

Todd is the founder of Improv Everywhere, a group known for orchestrating large-scale stunts, including the annual No Pants Subway Ride in Manhattan. In 2008, Improv Everywhere made a video called Best Game Ever, where hundreds of people swarmed a minor league ballgame. Even though Todd says the Bud ad was practically identical to his original effort, neither Budweiser nor its agency gave any props to Improv Everywhere. (Budweiser Canada says they were inspired by fans.)

“This has happened hundreds of times,” says Todd resignedly, noting that a cell-phone company in Europe had previously copied Best Game Ever for its own commercial. “Since 2009, it’s been pretty routine to see things done in our style and things repurposed that are so similar.”

Todd’s feelings are mixed, since the strength of his videos lies in the ability of others to turn his pranks into a meme by emulating them. “If you want to go start your own group?…?and mention you got [the idea] from us, I’m fine with that,” Todd says. “But it starts crossing the line when people start doing it for promotional purposes.”

Memes are a tremendous asset for brands because, like celebrities, they have an audience that recognizes and appreciates them. “You as the person who created something are not the most valuable person on the chain,” says Ben Huh, CEO of Cheezburger, a network of websites that includes Know Your Meme and I Can Haz Cheezburger, a site that parlayed the Lolcat meme (cat pictures with funny, misspelled captions) into a multimillion-dollar content network. “The MVPs are the people who change it, appropriate it, and turn it into something greater.”

Occasionally, an ad campaign will succeed in generating its own meme, which in turn can be copied by rival advertisers. “There’s a difference between ripping off and riffing off,” says Renny Gleeson, global director for interactive strategies at Wieden + Kennedy, the Portland ad firm that created the Old Spice ads, the best example of a commercial that went viral and became a widespread meme. The ads’ concept (studly spokesman walks through a series of surrealistic, impossibly manly scenarios) spawned several copycat ads, from Cisco (CSCO) to Dollar Shave Club. Gleeson welcomes the appropriation: “It’s an acknowledgment that you’ve accomplished something.”

For the originator of a meme, legal protections are slim, and that’s the way it should be, says copyright attorney Anthony Falzone, executive director of the Fair Use Project at Stanford Law School. “If you’re the first person to do the video S- -t Girls Say, that doesn’t mean someone else can’t use the same idea with girls saying different stuff,” he says. “Just because you’re the first one to do something doesn’t mean you should be the only one to get to do it.”

At Viral Spiral, Collier and his team protect only against the unauthorized use of images and sound from clients’ videos (covered under copyright law) and only at clients’ request. Lashes, meanwhile, will ink a licensing deal on two conditions. Rule One: It has to be cool. “When you create a meme, a lot of sharks in the water smell blood,” he says. “Once they use you, they can take advantage and kill the meme. I’ll never do that.” Rule Two: “It’s got to pay some bills.”

Sax is a Bloomberg Businessweek contributor.

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When a Kickstarter Project Threatens to Fail

The crowd-funding site Kickstarter, as we’ve written, can be a wondrous tool. Entrepreneurs post an idea for a new product and then turn to the Internet community to raise capital to fund its development. According to the site’s new statistics page, Kickstarter has helped 60,786 project creators raise $261 million.

When it works, the site pleases everybody. Creators find an easy path to start-up capital, investors get in on the ground floor—and in many cases, receive a finished product—and New York-based Kickstarter takes a 5 percent cut of the money raised.

Everyone’s happy. Except in cases when the whole thing goes horribly awry.

Cam Crate, an effort to create a durable carrying case for a DSLR camera, represents the rare example of a Kickstarter project that has pretty much gone off the rails. Matthew Geyster is a 25-year-old inventor in Boston who has previously turned to Kickstarter to develop such products as iPad sleeves and a dual-tip stylus.

In late 2011, Geyster used a two-minute video to introduce his idea for a weatherproof camera case. His product would allow people to “take your camera wherever you go, no matter what the conditions are,” he said in the video. The pitch worked. The project raised $24,601 from 370 backers and caught the attention of the tech blogs.

Then something completely ordinary happened. Geyster’s plans changed. He found that his design didn’t accommodate the “pick n pluck” foam insert needed to protect the camera, and a boxy new design looked much more conventional and less exciting. Meanwhile, his ship dates slipped. Backers who expected a product in the mail had to wait. “I was originally trying to ship by May but after a while realized there was no way I was going to make that,” Geyster says.

Financial backers—who had laid out $75 each, or more, for the case—grew incensed. They left hundreds of comments on the Cam Case Kickstarter page, complaining about the delays and the new design and wondering if they had been defrauded. The page now looks like it’s been taken over by a swarm of angry bees. “I’ve given Mr. Geyster one last opportunity to give me specific expectations on delivery,” wrote a disgruntled backer named JMag. “Barring that, I will proceed with my appointment at the State Attorney General’s Office.”

Geyster says it’s all been extraordinarily stressful and confesses to not having provided his backers frequent-enough updates. But he also believes some of their expectations are unrealistic. “Some people think of this as a window-shopping thing, when it’s not,” he says. “You are investing in someone’s idea instead of going to a store and paying to get it in a month.” He says most backers have been nice, though he’s received several e-mails threatening litigation.

On June 21, Geyster tried to calm the furious hive with an update on his project page. “Cam Crate is a project I’ve been working on now for close to a year, and to pull fraud on Kickstarter and ruin my reputation is not something I am doing,” he wrote. “Making products is my hobby and passion so please stick with me and see me follow through with this project.”

Geyster also says if he ever does another Kickstarter project, he’ll be more transparent with his investors. “People expect a little more out of you because it’s a project,” he said. “They want to know the back end of everything.”


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viernes, 22 de junio de 2012

Comcast 'Invents' Its Own Private Internet

Comcast (CMCSA) went public in 1983. Track its share price, and you’ll see that it tootled gently upward as the company expanded its cable television service around the country. Then, in 1997, the share price spiked. This was the year the company began testing a new product—the cable modem, which offered Internet access at a blazing 1.5 megabytes per second, then 50 times faster than dial-up. Comcast didn’t invent the Web. It didn’t invent the cable modem, either. Like other cable operators, it happened to own the right network at the right time.

That history is helpful to remember as the Department of Justice begins an antitrust probe into whether Comcast, Time Warner (TWC), and other cable providers are now trying to manipulate the way customers use the Internet—specifically, whether imposing caps on the amount of data people can download monthly discourages them from using Netflix (NFLX), Hulu, and other rival online video sites and steers them to the cable companies’ own video-on-demand services, which aren’t subject to the caps.

Comcast spokeswoman Jennifer Khoury declined to comment on the investigation. In a May 15 blog post, executive vice president Tony Werner explained how Comcast is offering video over its own “managed network” via Microsoft’s (MSFT) Xbox: “We provision a separate, additional bandwidth flow into the home for the use of this service—above and beyond, and distinct from, the bandwidth a customer has for his or her regular Internet access service.”

Comcast’s defense of this tiered system rests on a semantic distinction: that there’s a difference between watching a movie through Netflix, which exists on what the cable companies call the “public Internet,” and watching the same movie through a provider’s on-demand service, which they say is a private network. In pushing the phrase “public Internet,” Comcast and other Internet providers want customers to accept that they are the proprietors of separate, special Internets. You can see this in the way they’ve tried to rebrand the Web as a private product. Comcast refers to its Web access as “Xfinity.” AT&T (T) calls it “U-Verse.” Verizon (VZ) doesn’t sell Web access, either. It sells “FiOS.”

Of course, these are just fanciful names for … the Internet. “It’s a very slippery thing,” says Michael Calabrese, senior research fellow with the Open Technology Institute at the New America Foundation, a think tank. “It is one pipe—and they control the pipe.”

There’s a reason it’s not called the Comcasternet. The Internet beat out rival private networks because it grew faster and created more value. Comcast was perfectly free to build the Comcasternet, but it didn’t. That’s not an accident. Every network benefits when all networks interconnect. For cable companies to claim now that they did in fact build a private network and that it shouldn’t be subject to the same rules as the rest of the Internet is a tough sell.

It’s hard to blame them for trying. They’ve had luck with this line of reasoning before. In a 2005 Supreme Court case, Comcast, among other cable companies, maintained that the Federal Communications Commission couldn’t regulate them as “telecommunications services”—Internet access providers—because cable companies bundled their Internet access with what the FCC considered “information services,” such as Web hosting and e-mail addresses. The justices agreed, 6-3. But in a dissent, Antonin Scalia ridiculed the argument with a withering analogy. A pet store “may have a policy of selling puppies only with leashes, but any customer will say that it does offer puppies,” he wrote. “Because a leashed puppy is still a puppy.” Now, as then, the cable companies insist they’re not puppies, and they don’t want to be leashed.

The bottom line: The Department of Justice is investigating whether cable companies’ video-on-demand services cripple Hulu and other competitors.


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A Content Cubbyhole for Avid Web Surfers

Nate Weiner, 28, has always had varied interests: photography, animation, programming, criminal detective work. While browsing the Web, he’d often e-mail himself articles and videos about his favorite topics with plans to catch up later. The links inevitably got lost in his overflowing in-box. Frustrated one night in 2007, he built Read It Later, a smartphone app for storing and viewing all the content that gets shunted aside during the course of a busy day. “When I get a bug for something, I have to get it done,” he says.

Since being relaunched in April under the new name Pocket, the app—which is available on iOS, Android, and Kindle devices—has had 2 million downloads, bringing its total to more than 5 million registered users. To save an article or video, users install a button or a bookmark in their Web browser and click it whenever they come across something they want to ingest later. Pocket has also integrated with more than 300 mobile apps, so fans of news readers such as Flipboard or Pulse can send an article to Pocket directly. Weiner’s app displays saved content in a layout with adjustable fonts and colors and stores them offline, enabling users to read clips even when they have no cell reception. Users save about 1 million items a day.

While other apps offer similar features, Pocket can save a wider variety of media, will soon be available on many mobile platforms, and costs nothing. Weiner and his team of seven are also developing new features, such as ways to easily categorize clippings and for users to directly send content to each other’s Pockets.

Weiner’s company is still experimenting with business models, including a monthly subscription. Last summer the startup raised $2.5 million from investors including Foundation Capital. “Nate is just one of those very unusual and very special entrepreneurs,” says Steve Vassallo, a general partner at the venture capital firm. “He has a very deep and intuitive sense for the product and the market opportunity. He feels it in his bones.”

Weiner and his twin brother, Max (who joined Pocket in 2010), taught themselves to program at 16. Their stepfather, a real estate agent, helped them get jobs building websites for condo developers in their hometown of Milwaukee. “Max was the right brain, and I was the left brain,” says Weiner, who prefers coding to design. “We worked really well as a team.” During his two years at University of Wisconsin-Eau Claire, Nate studied marketing and criminal justice before dropping out after his sophomore year.

He built the initial version of Pocket in August 2007 while working as a Web developer in Minneapolis. In 2010 he relocated to San Francisco. Weiner says he’s fielded several acquisition offers over the last year and turned them all down. “Nobody cared about this stuff as much as I did, or didn’t have the vision,” he says.

Studied marketing and criminal justice before dropping out

Pocket is available on iOS, Android, and soon, Windows Phone

None yet. His company is considering a subscription model


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Why Leica Is Opening So Many Stores

Selling a $27,000 camera is no snap—especially when that hefty price doesn’t even include the lens. For Leica Camera, the challenge is compounded by the fact that it has lost more than a third of its U.S. dealers, who have fallen victim to competition from the likes of Best Buy (BBY) and Costco Wholesale (COST). So at a time when an increasing number of brands are bolstering their ability to sell online, the German camera maker is rolling out its own stores to woo serious photography buffs.

Leica’s first U.S. outlet opened in Washington, D.C., last month, and the company is rolling out two more stores in Miami and New York this summer. By March 2016, Leica says its current roster of 37 stores will have grown to 200 worldwide. They’ll stock a range of models from the entry-level $700 V-Lux 40 point-and-shoot camera to the top-of-the-line $27,000 S2. “It is a high-risk strategy,” says Walter Loeb, president of retail consulting firm Loeb Associates. “Leica needs to establish itself more directly in the U.S., but it’s a small market for high-priced cameras, and it’s highly competitive.”

Leica is opening stores at a time when U.S. consumers are buying fewer cameras, given the quality and convenience of taking photos with smartphones such as Apple (AAPL)’s iPhone. Last year, Americans spent $6.2 billion on cameras, down 8.3 percent from 2010, the Consumer Electronics Association estimates. The average price per camera was $173. Leica says it has less than 1 percent of the U.S. market, while Canon (CAJ) and Nikon together command 42 percent, says researcher Mintel.

The original Leica, in 1925, was far smaller than the bulky shooters of its timePhotograph by SSPL/Getty ImagesThe original Leica, in 1925, was far smaller than the bulky shooters of its time

The retail rollout is the latest step in Chief Executive Officer Alfred Schopf’s turnaround strategy for the Solms (Germany)-based company. In 2004 the company dodged bankruptcy; two years later, French luxury handbag maker Hermes International (RMS)sold its 36 percent stake. Sales have since recovered, as Leica managed to merge its engineering prowess with new digital technology.

Leica’s new stores are luxurious and minimalist, like its cameras. The outlets feature black leather furniture from Germany and gray tiles from Italy. The sole color accent: the red featured in the Leica logo. Stores include a retail space, a studio area to demonstrate products, and a gallery—to exhibit photographs shot with Leica cameras—that can be converted into a lecture room for the company’s Leica Akademie photography courses. “We stand for a certain image of quality, and this is something we wanted to show in this environment,” says Schopf, who wouldn’t say how much Leica is spending on the stores. “We are showing a dedication to the quality of photography.”

Leica’s compact cameras, introduced in 1925, were revolutionary compared with the heavy plate cameras of the day. In 1932, about 90,000 Leicas were in use; by 1961, a million. Leica cameras, popular with photojournalists, went on to capture many an indelible image, from Alberto Korda’s portrait of Che Guevara to Huynh Cong Ut’s “Napalm Girl” to Jim Marshall’s iconic photo of Janis Joplin with a bottle of Southern Comfort.

By the time it introduced its first digital compact in 1998, Leica had lost customers to Canon and Nikon. Sales rallied after it introduced digital versions of its 1950s-era M camera, and today digital models bring more than 90 percent of sales. Revenues last year surged 57 percent, to €248.8 million ($309.7 million), while income leapt tenfold. Managers says the stores will draw more customers. Says Roland Wolff, director of corporate retail for Leica’s U.S. arm: “We want to share what people can do with the product.”

The bottom line: Mimicking luxury clothing designers, pricey camera maker Leica will open 160 of its own stores by 2016 to sell the allure of photography.


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Apple and Google Fight to Be Top Mapping App

Just a few years and several tech paradigms ago, Google (GOOG) and Apple (AAPL) were happy allies, and nothing demonstrated that better than their cooperation on digital maps. Since its 2007 launch, Apple’s iPhone has featured Google’s mapping software on its home screen, allowing iPhone owners to quickly find directions and see nearby terrain. Those days are over. On June 11 at the annual geek hajj known as Apple’s Worldwide Developers Conference, Apple Senior Vice President Scott Forstall announced a long-expected divorce: Google Maps has been ousted as a default app on the iPhone and iPad in favor of Apple’s home-cooked alternative.

The relationship has been challenged ever since Google’s Android operating system became the primary obstacle to the iPhone’s total planetary dominance. Maps are among the most popular apps on smartphones, and the location data they generate is essential for understanding and interacting with users—allowing companies to, say, send them ads for the nearest Starbucks (SBUX). Apple found itself uncomfortably dependent on a chief rival.

By 2008 the relationship hit new lows. Apple’s senior vice president for marketing, Phil Schiller, and Google’s senior vice president for engineering, Vic Gundotra, had fierce arguments that summer over which company owned the data coming from the iPhone’s Google Maps app, according to several people familiar with the incidents who were not authorized to speak on the record. Google continued investing in its own mapping technology, introducing features such as spoken, turn-by-turn directions, but that neat trick remained exclusive to Android—Apple either couldn’t or wouldn’t reach an agreement with Google to bring it to the iPhone. Apple “clearly didn’t want to be at the mercy of Google,” says Greg Sterling, a senior analyst at Opus Research. Both companies declined to comment.

Apple's maps offer beautiful helicopter-level city views - just like Google'sApple's maps offer beautiful helicopter-level city views - just like Google's

Apple’s new maps for the iPhone look remarkably like Google’s. There’s a satellite view similar to the one in Google Earth, real-time data on traffic, and voice navigation—an announcement met with thunderous applause by the several thousand Apple faithful at WWDC. After the event, Apple said its app’s data comes from the Dutch company TomTom (which makes personal navigation systems that are steadily losing market share to all-purpose devices such as the iPhone). Google will still make its mapping app available through Apple’s App Store, but it won’t be pre-installed on any new devices.

Google saw this coming. The search giant held its own mapping event on June 6 to announce a few new features. Google Maps will soon be available offline on Android phones, which means users can download portions of the cities they’re navigating to their phones so they won’t need a mobile connection to keep from getting lost. The company also announced an upgrade to the flyover feature of Google Earth. In place of the spare 3D images of the past, Google will soon introduce a crisp view that “really does create the illusion that you are flying over the city, almost as if you were in your own personal helicopter,” said Peter Birch, a product manager for Google Earth.

Google touted its fleet of airplanes, owned and operated by contractors, which fly in grid patterns over high-density areas taking photos of cities at varying angles. The company then uses technology that connects all those images into 3D models. Google also announced it was pushing into less-developed countries to photograph streets and map areas that are still largely blank. It showed off new camera-equipped backpacks and snowmobiles, which will help bring the eyes of its Street View service into rainforests and mountainous terrain.

Apple clearly has the money and competitive drive to match Google’s substantial investment. However this battle goes, as long these two keep butting heads, we’ll never have to ask for directions.

The bottom line: Apple’s mapping push represents a long-expected breakup with Google; the split is literally pushing the boundaries of digital maps.


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Will Facebook Friend Preteens?

When Mary Kay Hoal started a social networking website for kids in 2007, the mother of five wanted to create a wholesome service her young family could enjoy. She quickly realized that catering to children on the Internet requires paying a steep toll. Hoal says she burned through hundreds of thousands of dollars just so her site, Yoursphere.com, could comply with the Children’s Online Privacy Protection Act (COPPA), a 1998 law that sets strict rules for sites targeting preteens. Its main requirement: that sites get parental consent before collecting personal information about children or allowing them to open accounts.

Hoal, a Davis (Calif.) entrepreneur, tried working with a number of third parties—phone banks, credit-card companies, identity verification services—before settling on an e-mail notification to parents when their kids try to sign up. Parents must respond before the account becomes active. “It’s a headache for a website publisher,” she says.

The law that blew Hoal’s budget will take on new importance now that Facebook (FB), the world’s largest social network, is exploring whether to open its site to kids, according to Bloomberg News. Doing so could help the company tap a new population of potential members. Facebook needs the help: It already has reached almost 1 billion members, and a recent report by ComScore (SCOR) says the social network’s growth has slowed dramatically—a warning sign for some investors. Allowing preteens to create profiles would introduce a valuable new demographic for advertisers to reach.

And yet the idea of opening Facebook to youngsters makes some uncomfortable: “What’s next? Facebook for toddlers?” says James Steyer, chief executive officer of Common Sense Media, a child advocacy organization. “Facebook should not target children under 13. Period.” The problems of keeping children safe online became horrifyingly apparent on June 12 when Skout, a mobile social network popular with teens, partially suspended its service after three adult members allegedly raped minors.

Currently, preteens are not permitted to create a profile on Facebook. But many lie: A Consumer Reports survey last year claimed that Facebook has 7.5 million users younger than 13. Eric Goldman, an associate professor at Santa Clara University School of Law, says “having Facebook comply with COPPA might be better than the current situation, where Facebook basically treats underage users like adults.”

Facebook says it’s difficult to enforce age restrictions on the Internet, in part because parents help kids access online services. “We are in continuous dialogue with stakeholders, regulators, and other policymakers about how best to help parents keep their kids safe in an evolving online environment,” says company spokesman Andrew Noyes. Facebook declined to comment on whether it plans to lower its age limit.

The social network, which raised $16 billion in its recent initial public offering, could easily afford to implement a parental verification system—and given Facebook’s history of privacy-related public-relations blowups, it may want something that goes beyond what COPPA requires. Last year, when Vincent Cannistraro created WhatsWhat.me, a social site for kids, he was careful to follow COPPA by setting up ways for parents to e-mail or fax permission slips, or provide a credit-card number. (The free site charges the card a penny only to make sure it’s active.) In addition, the Waltham (Mass.) startup requires that every new member take a Webcam photo, which is reviewed by an employee to make sure the person in the photo is a child. Each time members log in, they take another Webcam photo. Facial recognition software checks to ensure the photos match. Cannistraro says adults try to register or log in under existing accounts “all the time,” but the added security blocks them.

To comply with COPPA, Facebook would also have to offer parents the option to not have their children’s online activities tracked. That could be problematic because Facebook makes the majority of its revenue by mining user data and serving targeted ads. If large numbers of parents opt not to let Facebook track their children, then advertising to them could become a challenge since online advertisers have come to expect a certain level of detail about who their ads are reaching. Chad Perry, founder of an Orem (Utah) social network for kids called ScuttlePad, says sponsorship negotiations with a publishing company fell through when he refused to link users directly to the company’s site. Perry says he forbade the practice because he can’t control content on a third-party site.

“I’m open to advertising but it has to be right for us—it has to be safe and not promote ideas that are going to affect kids in a negative way,” says Perry. “However, the only way to stay free in the long run is through advertising. And that’s our challenge every day.”

The bottom line: Facebook has the money to set up a system for obtaining parental approval, but courting preteens could affect its ad-centric business model.


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jueves, 21 de junio de 2012

A Sword Fighting Lesson With Neal Stephenson

Throughout movie history, cinematic swordsmen have flung their weapons and flipped their bodies around during combat, all to create an exciting visual spectacle. Consider the somersaulting Jedis in Star Wars, for example, or the jousting warriors in Gladiator. As difficult as it is to believe, much of what we see on screen is technically bad form, according to the past thousand years or so of sword-fighting historical practice. “Turning your back on a man with a four-foot long steel bar who is trying to murder you is generally not viewed as a wise strategy,” says science fiction author Neal Stephenson.

Stephenson, the droll writer of seminal novels such as Snowcrash and The Diamond Age, is talking about his passion for sword fighting to promote an unusual new project. Subutai, a startup he co-founded and named after Genghis Khan’s chief military strategist, aims to create video games and other media that accurately depict sword fighting as it was practiced hundreds of years ago by skilled warriors in battle—and these days by geeks in parking lots. Earlier this week, Subutai posted a video on the fundraising site Kickstarter, soliciting contributions to develop a game called Clang, a “Guitar Hero with swords” exercise that mines knowledge from the community of scholars and enthusiasts who are recreating the long-dormant martial art. Folks seem to like the idea and have already donated about $250,000. “It turns out what actually makes sense in this kind of combat was figured out a long time ago, in extreme detail, by people who lived and died this way,” says Stephenson.

Stephenson is talking about the project from the back of a south Seattle acrobatics studio, and helpfully gives me a few sword fighting tips. (You never know when they will come in handy.) One weapon on hand is a 13th century-style, two-handed long sword that thankfully, has dull edges. Stephenson is an enthusiast but not, he notes, an instructor. He says the first mistake novices make is to initiate a fight with their sword held defensively—upright and in front of their bodies. (Think Luke Skywalker preparing to confront Darth Vader.) Well, bad idea: Your hands are exposed. “A lot of people want to instinctively protect themselves, but getting hit on the hands is bad,” Stephenson says, snapping his sword toward the exposed arms of Mark Teppo, Subutai’s chief executive officer.

A safer option, Stephenson demonstrates, is a stance like von tag. He holds the sword upright near his shoulder, a little like a ballplayer holding a bat. Another stance is called Posta di Donna, in which the sword is also cocked at the shoulder, but pointed downward. Teppo, wielding his own sword, demonstrates various defensive maneuvers for each, like a chess player responding to an opponent’s opening gambit.

Many of these tactics were developed during medieval times. If someone leveled an allegation and there were no witnesses, Stephenson explains, a judicial duel would be set up. The accuser was required to make the first move in the fight, which put him at a natural disadvantage; it is meant to deter spurious accusations. (This is a process the U.S. Supreme Court might consider reviving.)

Using Teppo to demonstrate further, Stephenson then shows off a few offensive maneuvers. Striking from von tag with a powerful, lunging assault could cut Teppo in half, he notes. But if Teppo were simply to back up and step out of the way, “I’m standing here like a complete a——, with my sword out of the action,” he says. The smarter option is to snap off the assault near his opponent’s head. Proper footwork is crucially important, “or you fall down.” (Note: Think twice before working with Neal Stephenson.)

Subutai wants to capture all this subtle precision in its games, which will use a sophisticated, Wii-like motion controller. The end product will probably look nothing like what we’re used to seeing on television or in movies. Stephenson doesn’t begrudge those depictions of sword fighting. Even though the HBO series Game of Thrones anachronistically combines fighting styles from different eras, he commends the program for showing characters who practice and hone their skills. “This is a small detail and very important,” he says. “No one is just instinctively waving the sword around. They are actually studying something.”

Stephenson doesn’t even begrudge Star Wars “because it brought the romance and beauty of this kind of fighting” back into popular culture. He admits that getting it right doesn’t always make for great entertainment, which will be a big challenge for Subutai. “Historically accurate long sword fighting just isn’t very cool,” Stephenson says. “It tends to be over very quickly.”


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Bromium's Tiny Prisons for Malware

Computer security relies on a simple principle: Keep the bad stuff out. This might mean using clever gear to monitor your network. Or it might take the form of antivirus software that keeps nasty worms from burrowing into a PC. But if heinous code does get through, there’s little to do other than find a place to cry.

A startup called Bromium flips traditional logic on its head—and lets attackers right inside the castle walls. When users run Bromium’s software, which will be available later this year, every time they open an e-mail attachment or a browser tab or another application, it creates a temporary, virtual compartment to house the task. Like a nurse observing a quarantined patient, the software watches the cordoned-off code. If it senses misbehavior—such as malware trying to exploit a security hole in Adobe Reader—it dissolves the compartment before damage can be done to the rest of the computer. “The bad guys will always get in,” says Simon Crosby, the co-founder and chief technology officer at Bromium. “It’s about limiting what they can do.”

Like Crosby, a number of the top executives at Bromium came from XenSource, a big-brained startup that did pioneering work in the software virtualization field now dominated by VMware (VMW). The software maker Citrix Systems (CTXS) bought XenSource for $500 million in 2007. Crosby and his co-founders formed Bromium—a name they say simply sounded cool and wasn’t taken—in 2010 in Sunnyvale, Calif. The startup has raised about $36 million from top-tier investors.

One of them is Intel (INTC). In recent years the chipmaker has started including special security technology in its products. Intel’s hardware-based bodyguards create much stronger barriers against attacks than software and can prevent, say, a malicious application from reading and remembering users’ keystrokes as they enter passwords. Bromium’s software, in essence, manages the functions in these new Intel chips.

David Johnson, an analyst with Forrester Research (FORR), says traditional security measures are “beginning to break down” as attackers grow ever more sophisticated. “New exploits regularly elude traditional antivirus and anti-malware and can be notoriously difficult to eradicate,” he says. “Bromium’s approach is unique because it addresses security by essentially assuming that any [application] is compromised at any time and then limiting the effects of it or the damage a given attack can do.”

It also helps that Bromium is lean. Most PCs contain about 100 million lines of code. Every day, hackers look for vulnerabilities to exploit in that mind-bogglingly large set. Bromium kept its application small to avoid the same problem. “Bromium has about 100,000 lines of code, so it’s much easier to harden and secure that,” says Paul Burns, the president of industry analyst Neovise. Burns calls Bromium’s approach “very innovative” but adds that “we’re going to need a bit more time to see the impact.”

Crosby says Bromium’s solution is practical because it doesn’t require users to be hypervigilant, always worrying about what they click on and downloading security updates. “We’re gullible,” he says. “This is about building computing systems that let humans do what they want to do.”

The bottom line: Bromium has raised $36 million to build security software that makes use of new Intel chip capabilities.


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Rich Russian Wants More Robots

Dmitry Grishin, the chief executive of Russian e-mail and social networking giant Mail.ru, has an elaborate wedding fantasy. He sees robotic drones flying around the guests and snapping their every move from every angle. “People today have very standard pictures,” Grishin says. “If you have drones, you can attach a camera and make very nice and different movies and pictures.” Add some bartender robots, and you get quicker refills, too.

On Friday, Grishin, 33, declared his intentions to fund a robotics revolution. He’s going to set up an investment company—Grishin Robotics—in New York, backed by $25 million of his dollars, that will look out for startups doing promising robotics work. Grishin intends to focus on consumer, as opposed to industrial robotic, applications. ”I think it’s very important to bring robotics to the mass market,” Grishin says. “Huge innovation will only come when people see the results in their everyday lives.”

In the mid-1990s, Grishin studied robotics while at university in Russia. He found that a lot of the technology was expensive, which limited it to industrial settings where large companies could afford to make the necessary investments. These days, cheap but powerful cameras, sensors, and other electronics are being used to form the basis of robotics projects. Grishin hopes to find 10 to 20 companies per year doing interesting work and to give them about $500,000 each.

The Mail.ru Group, a Russian investment company co-founded by Grishin, has stakes in Web giants Facebook (FB), Zynga (ZNGA), and Groupon (GRPN), among others. It’s also behind the Mail.ru service, which is Russia’s largest e-mail provider and a purveyor of social networking, instant messaging, and gaming sites.

Grishin wants to transfer his experience driving fast-paced consumer Web services to the robotics realm. “I believe in the Internet culture where you aim for big audiences and innovate quickly,” he says. “Robotics innovation should not happen at big corporations but instead in small startups with 20 to 30 engineers.”

Grishin Robotics will be located in New York, as it’s close to the thriving robotics scenes in Boston and Pittsburgh and not too, too far from Silicon Valley. “There’s also good work being done in South Korea, Germany, France, and Japan,” Grishin says. “You need a true international city, and New York is a great example of that.”


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Microsoft's Surface Tablets Raise the Bar for PC Pals

On a wonderfully bright Monday afternoon in Hollywood, Steve Ballmer, Microsoft’s (MSFT) chief executive officer, appeared at an art and film studio to deliver what looks like Microsoft’s finest, most controversial product in ages. In fact, it’s a family of products—a line of “Surface” tablet computers aimed at both consumers and workers.

As it does with the Xbox, Microsoft has opted to make the Surface tablets—both hardware and software—on its own. This stands as a huge affront to Microsoft’s longtime PC partners. Making matters worse, the Surface products look far better than anything else the PC makers have shown to date on the tablet front. Even Apple (AAPL) has been put on notice, if the hoots and hollers from the event were any indication.

The first Surface device shown weighs about 1.5 pounds and is 9 mm thick. A second, the Surface Pro, is slightly thicker and heavier. Both tablets come with a built-in kickstand, so you can stand them up to watch movies and the like. Microsoft also did something innovative with its new tablet covers. It had them attach to the the tablets with a firm click and designed them to be keyboards. The Type Cover has keys printed into the cover while the slightly bigger Touch Cover has raised keys.

The keyboard/cover combo is a fantastic idea that immediately makes you question future laptop purchases. That’s yet a further blow against Microsoft’s PC buddies. When Windows 8 launches this fall, Microsoft will sell the tablets through its own online and retail stores and nowhere else. The company declined to reveal pricing details at the June 18 event.

In an interview afterward, Ballmer said Microsoft’s PC partners had been made aware of its plans. When asked to describe how they felt about Microsoft’s moves, Ballmer responded that he had used very precise language on stage and would not go beyond that. (He said nothing on stage that I recall as to how they felt.) As for plans to sell the tablets beyond Microsoft’s own channels, Ballmer again would not budge. “That’s all we are going to announce today,” he said. That’s that, then.

During his speech, Ballmer talked about the push and pull of software and hardware: Sometimes the hardware makers can’t keep up with the software makers’ innovation. So Microsoft decided to take matters into its own hands and showcase all that Windows 8 can do at a time when the company is feeling tremendous pressure from Apple. “This is a tool to surface your passions,” Ballmer said.

Steven Sinofsky, the head of Windows, followed Ballmer on stage and was visibly nervous. His voice shook, as did his hands—to the point that he wrecked a couple of touchscreen demos. Still, he returned again and again to the industrial design work Microsoft did to make the Surface products. Gushing about the kickstand, he said: “The hinged design is like that of the finest luxury car.” About the cover, he said, “Click. You heard that. It’s solid. It feels great in your hand, like a book. It just fits there.”

Microsoft designed 200 custom parts for the tablets and said that if you tried to cram a piece of sticky tape inside the device, it would bulge with imperfection. Steve Jobs would be proud.


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