Friday, September 30, 2005
Gap's New Sites Leave Competition in the Dust
Are Gap's new Web sites good enough to make up for the fact that the company turned away thousands of customers and millions of dollars in business while it got them up and running over the past two weeks? The answer appears to be yes, analysts said, thanks to a spate of promising innovations on Gap.com, BananaRepublic.com and OldNavy.com. In fact, the big question is how long it will take for competitors to catch up, and at what price.
"Gap's new sites leapfrog every other retail site out there today," said Carrie Johnson, a retail analyst with Forrester Research, an online consulting firm. "They're providing a customer experience that other retailers will quickly try to figure out how to copy." In particular, Johnson said, Gap's sites, which were shut down in late August and reopened to limited numbers of customers over the following two weeks, went far in solving what she called the "too many clicks" problem.
For instance, when women browse Gap.com's T-shirt section, they do not have to click to a new page to see details about the 16 shirts shown on each page. Rather, when they put the cursor over an item (called "mousing over" in industry parlance), they are invited to click on a "quick look" link for the shirt. That link yields a pop-up window that shows a model wearing the shirt alongside swatches of the colors it is available in. Mouse over any swatch, and the shirt takes on its hue and the window tells you what sizes are in stock.
When a shopper clicks "add to bag" from within that window, the site does not shuttle her to a checkout. Instead, another small window replaces the previous one, showing the shopping bag and asking her to consider multi-item discounts. If she ignores that window or clicks the "close" button, it disappears. Toby Lenk, president of Gap Inc. Direct, the company's corporate catalog and online division, said the mouse-overs and pop-up windows had cut the need to bounce the shopper off her browsing path each time she needed information.
Lenk declined to say how much revenue the company had lost by shutting out customers for a couple of weeks, but it was probably in the millions of dollars, given that the Direct division's sales last year were US$500 million. But competitors did not gain much from Gap's absence, at least in the early going. According to comScore Networks, an Internet research and consulting firm, the number of Gap online shoppers who also visited competing Web sites did not spike during the first week of the outage, the latest week for which statistics are available. The disruption would have been avoidable had the company merely been changing Web sites, Lenk said, but because it was overhauling all the back-office systems used to track inventory and manage promotions, among many other functions, a seamless transition was impossible. "I can't say we haven't lost a customer, but it's a small price to pay for where we're going to go," he said.
He would not disclose the cost of the new system, but analysts said the company could easily have spent $10 million or more on the yearlong project. Gap wrote its own software for all the major behind-the-scenes systems and all features the consumer sees on its sites. Gap did pay software vendors for peripheral Web site and back-office programs. The go-it-alone approach has raised as many eyebrows as the decision to shut down the sites. Johnson of Forrester said Gap's home-grown strategy "completely flies in the face of every retail technology trend out there." But Lenk said the company had little choice. "We looked at the things we wanted to do, and the scale at which we wanted to do them, and quickly came to the conclusion that the only way to ensure success was to go custom," he said. One advantage of building the systems without the help of vendors is that the Gap Web sites may keep the competitive advantages of their new features longer than they would have otherwise, because the people who built the features work for the company. Still, e-commerce technologists pride themselves on their innovative abilities, and Gap's new features could appear on its rivals' sites with unsettling speed and perhaps improved reliability.
Brought to you by Guardian eCommerce.
"Gap's new sites leapfrog every other retail site out there today," said Carrie Johnson, a retail analyst with Forrester Research, an online consulting firm. "They're providing a customer experience that other retailers will quickly try to figure out how to copy." In particular, Johnson said, Gap's sites, which were shut down in late August and reopened to limited numbers of customers over the following two weeks, went far in solving what she called the "too many clicks" problem.
For instance, when women browse Gap.com's T-shirt section, they do not have to click to a new page to see details about the 16 shirts shown on each page. Rather, when they put the cursor over an item (called "mousing over" in industry parlance), they are invited to click on a "quick look" link for the shirt. That link yields a pop-up window that shows a model wearing the shirt alongside swatches of the colors it is available in. Mouse over any swatch, and the shirt takes on its hue and the window tells you what sizes are in stock.
When a shopper clicks "add to bag" from within that window, the site does not shuttle her to a checkout. Instead, another small window replaces the previous one, showing the shopping bag and asking her to consider multi-item discounts. If she ignores that window or clicks the "close" button, it disappears. Toby Lenk, president of Gap Inc. Direct, the company's corporate catalog and online division, said the mouse-overs and pop-up windows had cut the need to bounce the shopper off her browsing path each time she needed information.
Lenk declined to say how much revenue the company had lost by shutting out customers for a couple of weeks, but it was probably in the millions of dollars, given that the Direct division's sales last year were US$500 million. But competitors did not gain much from Gap's absence, at least in the early going. According to comScore Networks, an Internet research and consulting firm, the number of Gap online shoppers who also visited competing Web sites did not spike during the first week of the outage, the latest week for which statistics are available. The disruption would have been avoidable had the company merely been changing Web sites, Lenk said, but because it was overhauling all the back-office systems used to track inventory and manage promotions, among many other functions, a seamless transition was impossible. "I can't say we haven't lost a customer, but it's a small price to pay for where we're going to go," he said.
He would not disclose the cost of the new system, but analysts said the company could easily have spent $10 million or more on the yearlong project. Gap wrote its own software for all the major behind-the-scenes systems and all features the consumer sees on its sites. Gap did pay software vendors for peripheral Web site and back-office programs. The go-it-alone approach has raised as many eyebrows as the decision to shut down the sites. Johnson of Forrester said Gap's home-grown strategy "completely flies in the face of every retail technology trend out there." But Lenk said the company had little choice. "We looked at the things we wanted to do, and the scale at which we wanted to do them, and quickly came to the conclusion that the only way to ensure success was to go custom," he said. One advantage of building the systems without the help of vendors is that the Gap Web sites may keep the competitive advantages of their new features longer than they would have otherwise, because the people who built the features work for the company. Still, e-commerce technologists pride themselves on their innovative abilities, and Gap's new features could appear on its rivals' sites with unsettling speed and perhaps improved reliability.
Brought to you by Guardian eCommerce.
Thursday, September 29, 2005
Latest US Bid to Ban Online Gambling Suffers Setback
Attempts by lawmakers to ban Internet gambling by U.S. residents hit a roadblock this week when a bill that would have made it illegal for banks or credit card companies to pay for online gaming was halted. A procedural move scuttled an attempted by Republican Senator Jon Kyl of Arizona to slip an amendment onto a spending bill that would have required that banks and credit card companies block payments to known Web gaming sites.
Dozens of such sites exist, despite the fact that such online gambling has not been legalized in the United States. Most of those sites operate from overseas or offshore locations and have been deemed by international regulators to have a legal right to operate in the U.S. because various states allow some types of gambling, from casinos to horse race betting. Similar bills have made it partway through the legislative process in the past, only to die in committee or fall short because the House and Senate could not agree on specific details.
This time an anonymous Democratic lawmaker blocked the attachment of the provision to the spending bill. Kyl vowed to press forward. "There should be no reason why we can't move forward on this," he said on the Senate floor. Any future attempts will be closely watched and likely fought by some parts of the gambling industry. The horse racing industry, for instance, is said to be worried that broad prohibitions on online gaming could be construed as rendering illegal interstate betting on horse racing now allowed by law.
The issue of online gambling has been a hot topic among lawmakers, regulators, law enforcement and private groups since the early days of the Internet. But recent surges in popularity of online poker playing and concern that people under 18 are able to use the Internet to gamble on sporting events has brought the issue to the forefront in recent months. Complicating matters was a ruling by the World Trade Organization that said that U.S. law enforcement agencies could not go after offshore betting sites because the U.S. itself did not have a single national gambling regulation but different rules in each of the 50 states.
Everything from casinos run by native American Indian tribes to state lotteries can be construed as legal gambling and the U.S. must allow international interests the same opportunities, that ruling states. But federal lawmakers have considered several proposals for an outright national ban on Web gambling. "The U.S. is going in a different direction from the rest of the world on this," said Sebastian Sinclair, an Internet gambling analyst with Christiansen Capital Advisors. "Most other places are either embracing it or at least recognizing the need to build in safeguards." The prohibition against online gambling in the U.S. has apparently no impact on growth so far, Sinclair added, with American gamblers expected to spend some US$11 billion online this year alone.
Concerns about online gaming include the ability for underage gamblers to take part and what some see as an increased risk of addictive behavior, since the Internet brings gambling to a user wherever he or she is and is available, 24 hours a day. Even as lawmakers considering banning online gambling, the U.S. casino industry is exploring ways to capitalize on the move to the Internet, which some say poses a threat to the profits of casinos in cities such as Las Vegas and Atlantic City. Las Vegas casinos recently began testing handheld gaming devices. So far, the devices are only approved for use within casinos themselves, though some see them as a precursor to more widespread gambling.
Brought to you by Guardian eCommerce.
Dozens of such sites exist, despite the fact that such online gambling has not been legalized in the United States. Most of those sites operate from overseas or offshore locations and have been deemed by international regulators to have a legal right to operate in the U.S. because various states allow some types of gambling, from casinos to horse race betting. Similar bills have made it partway through the legislative process in the past, only to die in committee or fall short because the House and Senate could not agree on specific details.
This time an anonymous Democratic lawmaker blocked the attachment of the provision to the spending bill. Kyl vowed to press forward. "There should be no reason why we can't move forward on this," he said on the Senate floor. Any future attempts will be closely watched and likely fought by some parts of the gambling industry. The horse racing industry, for instance, is said to be worried that broad prohibitions on online gaming could be construed as rendering illegal interstate betting on horse racing now allowed by law.
The issue of online gambling has been a hot topic among lawmakers, regulators, law enforcement and private groups since the early days of the Internet. But recent surges in popularity of online poker playing and concern that people under 18 are able to use the Internet to gamble on sporting events has brought the issue to the forefront in recent months. Complicating matters was a ruling by the World Trade Organization that said that U.S. law enforcement agencies could not go after offshore betting sites because the U.S. itself did not have a single national gambling regulation but different rules in each of the 50 states.
Everything from casinos run by native American Indian tribes to state lotteries can be construed as legal gambling and the U.S. must allow international interests the same opportunities, that ruling states. But federal lawmakers have considered several proposals for an outright national ban on Web gambling. "The U.S. is going in a different direction from the rest of the world on this," said Sebastian Sinclair, an Internet gambling analyst with Christiansen Capital Advisors. "Most other places are either embracing it or at least recognizing the need to build in safeguards." The prohibition against online gambling in the U.S. has apparently no impact on growth so far, Sinclair added, with American gamblers expected to spend some US$11 billion online this year alone.
Concerns about online gaming include the ability for underage gamblers to take part and what some see as an increased risk of addictive behavior, since the Internet brings gambling to a user wherever he or she is and is available, 24 hours a day. Even as lawmakers considering banning online gambling, the U.S. casino industry is exploring ways to capitalize on the move to the Internet, which some say poses a threat to the profits of casinos in cities such as Las Vegas and Atlantic City. Las Vegas casinos recently began testing handheld gaming devices. So far, the devices are only approved for use within casinos themselves, though some see them as a precursor to more widespread gambling.
Brought to you by Guardian eCommerce.
Tuesday, September 27, 2005
EBay Looks to Become Phone Giant
The motivation for eBay's acquisition of Internet telephony upstart Skype may be a mystery to most. Technology analysts first speculated that eBay's US$2.6 billion purchase of the free Voice over Internet Protocol provider, based in Luxembourg, was designed to enhance the multimedia capabilities of the auctioneer -- making its online auctions more like the open outcry auctions of the real world, featuring both bidding strategy and sound.
"The ease of communications would enhance eBay's trading business," said J. Kevin Gray, an intellectual-property attorney with the Dallas office of Fish & Richardson, "especially for a complicated transaction, such as real estate or automobiles, where detailed conversations between a buyer and seller might be desired." But now, telecom experts are saying that they think the move by eBay may actually have little to do with auctions and may be more of a play to become a telecom provider, a more agile version of the Bell companies. "The deal with eBay and Skype is a prime example of the ability to provide the emerging quad-play -- voice, video, data, wireless," said Eyal Bartfeld, chief executive officer of Integra5 Communications, a telecom-technology developer based in Burlington, Mass. "Service providers of all types are trying to get a piece of the action." Blogger and Internet telecom visionary Jeff Pulver, founder of Pulver.com, went even further in a recent posting to his own blog. The eBay and Skype deal "turns the entire telecom industry picture on its head," he wrote. The deal "demonstrates that voice, presence, text messaging and other IP-based applications will be essential for the company of the future."
Bartfeld believes eBay is moving into the telecom territory -- just like Google did in recent weeks when it announced it was going to be offering voice-enabled services with its Google Talk project. "To succeed and differentiate themselves in the marketplace, these cable, Internet and telecom service providers will need to provide unique services, service bundles and low costs," said Bartfeld. That will enable them to avoid becoming "just another" service provider, he added.
The moves by eBay, Google and even Microsoft, with its MSN Messenger, are changing the telecom industry in a dramatic fashion. The strategies will push the development of new technologies. "And the companies providing these solutions to the service providers need to be prepared to handle the many different types of service protocols traveling over rapidly changing networks," said Bartfeld.
There are some extreme critics of the deal, however. Last Friday a Goldman Sachs analyst, Anthony Noto, sent clients a memorandum saying that the purchase made little sense, and the objective of obtaining the VoIP technology could have been accomplished through a licensing deal. The auctioneer has some 100 million customers and sellers, and Skype has about 53 million users of its free Internet telephony service, about half of whom reside in Europe. Observers said that portals like Google, Yahoo, MSN and eBay make a major portion of their revenues through advertising today. By providing free telephony for those who visit eBay.com, the auctioneer might be able to significantly boost that component of its revenue stream. To be sure, the free Internet telephone services could still be blocked by firewalls and other security measures.
Look for other deals like this eBay and Skype acquisition in the coming months, however.
"This is the first wave of consolidation in the IP telephony business," said Roland Van der Meer, senior partner at ComVentures, a venture-capital firm based in Palo Alto, Calif. "Every major player in the Internet space, from Google to Yahoo, has an IP telephony play in the works."
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"The ease of communications would enhance eBay's trading business," said J. Kevin Gray, an intellectual-property attorney with the Dallas office of Fish & Richardson, "especially for a complicated transaction, such as real estate or automobiles, where detailed conversations between a buyer and seller might be desired." But now, telecom experts are saying that they think the move by eBay may actually have little to do with auctions and may be more of a play to become a telecom provider, a more agile version of the Bell companies. "The deal with eBay and Skype is a prime example of the ability to provide the emerging quad-play -- voice, video, data, wireless," said Eyal Bartfeld, chief executive officer of Integra5 Communications, a telecom-technology developer based in Burlington, Mass. "Service providers of all types are trying to get a piece of the action." Blogger and Internet telecom visionary Jeff Pulver, founder of Pulver.com, went even further in a recent posting to his own blog. The eBay and Skype deal "turns the entire telecom industry picture on its head," he wrote. The deal "demonstrates that voice, presence, text messaging and other IP-based applications will be essential for the company of the future."
Bartfeld believes eBay is moving into the telecom territory -- just like Google did in recent weeks when it announced it was going to be offering voice-enabled services with its Google Talk project. "To succeed and differentiate themselves in the marketplace, these cable, Internet and telecom service providers will need to provide unique services, service bundles and low costs," said Bartfeld. That will enable them to avoid becoming "just another" service provider, he added.
The moves by eBay, Google and even Microsoft, with its MSN Messenger, are changing the telecom industry in a dramatic fashion. The strategies will push the development of new technologies. "And the companies providing these solutions to the service providers need to be prepared to handle the many different types of service protocols traveling over rapidly changing networks," said Bartfeld.
There are some extreme critics of the deal, however. Last Friday a Goldman Sachs analyst, Anthony Noto, sent clients a memorandum saying that the purchase made little sense, and the objective of obtaining the VoIP technology could have been accomplished through a licensing deal. The auctioneer has some 100 million customers and sellers, and Skype has about 53 million users of its free Internet telephony service, about half of whom reside in Europe. Observers said that portals like Google, Yahoo, MSN and eBay make a major portion of their revenues through advertising today. By providing free telephony for those who visit eBay.com, the auctioneer might be able to significantly boost that component of its revenue stream. To be sure, the free Internet telephone services could still be blocked by firewalls and other security measures.
Look for other deals like this eBay and Skype acquisition in the coming months, however.
"This is the first wave of consolidation in the IP telephony business," said Roland Van der Meer, senior partner at ComVentures, a venture-capital firm based in Palo Alto, Calif. "Every major player in the Internet space, from Google to Yahoo, has an IP telephony play in the works."
Brought to you by the Privacy Seal Program from Guardian eCommerce.
Monday, September 26, 2005
AOL's Time May Be Up
In a deal that would unite two of America's corporate giants as partners in the Internet business, Time Warner is in advanced discussions to sell a stake in America Online to Microsoft, The Post has learned. According to two sources familiar with the matter, Time Warner is in talks with Microsoft about selling the stake in AOL and then combining it with Microsoft's Web unit MSN.
Under the plan being considered, Microsoft would pay some money to Time Warner for the AOL stake, leaving the two companies approximately equal partners in the venture.
While the deal could fall apart, the companies are hopeful they can wrap it up within the next couple of months. Talks are most advanced with Microsoft -- Time Warner preferred partner -- but the media giant has also had discussions with both Yahoo and Google over a sale or venture with AOL, according to a source close to Time Warner. Time Warner's inclination to partner with a large tech company suggests that even if AOL's most recent strategy of becoming a free portal is successful, it may not be enough to keep the unit within the Time Warner fold.
While AOL began testing the portal in June and has won plaudits for the quality of its videos and other features, the company has yet to make a big marketing push, even though it promised one by the end of August, noted Rich Greenfield, an analyst at Fulcrum. Greenfield, who said it's too early to judge whether the portal strategy is a success, believes Time Warner should wait before making a decision on the future of AOL. "I think it's too early for it to be sold or spun out," he said.
AOL has seen the number of subscribers decline from 26 million in 2003 to fewer than 22 million now, as users fled AOL's dial-up service for broadband. Its Internet portal strategy -- a reversal of its prior focus of offering exclusive content -- puts AOL in direct competition with Yahoo, MSN and Google. The AOL discussions come as Time Warner management has been reviewing numerous strategic moves to boost the company's share price. And as other media companies such as Viacom work out plans to break apart after years of consolidation, Time Warner is likely to be a starkly different company a year from now.
In addition to a likely AOL move, some or all of the company's cable unit will finally be spun off early next year. Beyond that, sources close to Time Warner's management say that Time Inc., the company's publishing unit, could be sold or spun off sometime next year if its performance doesn't improve. In addition to the strategic moves, Time Warner's Don Logan, who shares the No. 2 executive duties at the company with Jeff Bewkes, is expected to retire in 2006. Since the disastrous merger between Time Warner and AOL in 2000, about US$200 billion in shareholder value has been wiped out.
Until this year, company management had been hamstrung by fraud investigations by the Justice Department and Securities and Exchange Commission, but those probes were settled for $510 million. Time Warner's Chairman Dick Parsons later put aside some $2 billion to settle shareholder litigation. Meanwhile, the company has been targeted by corporate raider-turned-shareholder-activist Carl Icahn, whose group has been amassing a stake in Time Warner and pushing for seats on the board of directors.
Brought to you by Guardian eCommerce.
Under the plan being considered, Microsoft would pay some money to Time Warner for the AOL stake, leaving the two companies approximately equal partners in the venture.
While the deal could fall apart, the companies are hopeful they can wrap it up within the next couple of months. Talks are most advanced with Microsoft -- Time Warner preferred partner -- but the media giant has also had discussions with both Yahoo and Google over a sale or venture with AOL, according to a source close to Time Warner. Time Warner's inclination to partner with a large tech company suggests that even if AOL's most recent strategy of becoming a free portal is successful, it may not be enough to keep the unit within the Time Warner fold.
While AOL began testing the portal in June and has won plaudits for the quality of its videos and other features, the company has yet to make a big marketing push, even though it promised one by the end of August, noted Rich Greenfield, an analyst at Fulcrum. Greenfield, who said it's too early to judge whether the portal strategy is a success, believes Time Warner should wait before making a decision on the future of AOL. "I think it's too early for it to be sold or spun out," he said.
AOL has seen the number of subscribers decline from 26 million in 2003 to fewer than 22 million now, as users fled AOL's dial-up service for broadband. Its Internet portal strategy -- a reversal of its prior focus of offering exclusive content -- puts AOL in direct competition with Yahoo, MSN and Google. The AOL discussions come as Time Warner management has been reviewing numerous strategic moves to boost the company's share price. And as other media companies such as Viacom work out plans to break apart after years of consolidation, Time Warner is likely to be a starkly different company a year from now.
In addition to a likely AOL move, some or all of the company's cable unit will finally be spun off early next year. Beyond that, sources close to Time Warner's management say that Time Inc., the company's publishing unit, could be sold or spun off sometime next year if its performance doesn't improve. In addition to the strategic moves, Time Warner's Don Logan, who shares the No. 2 executive duties at the company with Jeff Bewkes, is expected to retire in 2006. Since the disastrous merger between Time Warner and AOL in 2000, about US$200 billion in shareholder value has been wiped out.
Until this year, company management had been hamstrung by fraud investigations by the Justice Department and Securities and Exchange Commission, but those probes were settled for $510 million. Time Warner's Chairman Dick Parsons later put aside some $2 billion to settle shareholder litigation. Meanwhile, the company has been targeted by corporate raider-turned-shareholder-activist Carl Icahn, whose group has been amassing a stake in Time Warner and pushing for seats on the board of directors.
Brought to you by Guardian eCommerce.
Sunday, September 25, 2005
Yahoo Will Begin Testing E-Mail Upgrade
Yahoo today will begin testing a sleeker version of its free e-mail service, shifting to a more dynamic design that mimics the look and feel of a computer desktop application like Microsoft's Outlook. The company plans to invite a "sizable" portion of its current e-mail accountholders to experiment with the retooled service, said Yahoo spokeswoman Karen Mahon, who declined to be more specific.
If the test goes well, all of Yahoo's e-mail users -- an audience that spans tens of millions -- eventually will be converted to the new system. Yahoo imported most of the changes from Oddpost, an e-mail startup the company bought for an undisclosed amount last year. The overhaul, described as the most extensive since Yahoo began offering free e-mail accounts eight years ago, represents the latest salvo in a technological tug-of-war for online traffic. For the past two years, Yahoo and its main Internet rivals -- Google, AOL and Microsofts MSN.com -- have been unveiling a series of upgrades aimed at attracting and retaining their Web audiences so they remain appealing outlets for advertisers.
Google, which runs the Internet's most popular search engine, shook things up in the e-mail market last year by introducing a free service that included 250 times more storage than some of its rivals. Yahoo and MSN subsequently matched Google, which responded by more than doubling its e-mail storage limit to 2.5 gigabytes. More recently, the major e-mail providers have been introducing other bells and whistles to keep their users happy and coming back for more ads. Yahoo's upgrade follows recent AOL improvements meant to make its e-mail service quicker and easier to use. "Last year was the year of storage in e-mail, but now the real competition seems to be about who has the coolest user interfaces," Radicati Group analyst Marcel Nienhuis said.
Yahoo's e-mail service is currently leading the pack, with 63.6 million unique U.S. visitors during July, according to the most recent figures from comScore Media Metrix, a research firm. AOL ranked second with 48.7 million visitors followed by MSN's Hotmail (44.4 million), Comcast Corp.'s Webmail (5.6 million) and Google's Gmail (5.4 million). With its changes, Yahoo's e-mail will look more like a traditional inbox that operates through a software program installed on a computer hard drive instead of being hosted on the Internet. Yet Yahoo's redesigned service still relies on a Web browser and won't require its users to install anything on their computers. Using "dynamic" HTML, Yahoo's e-mail accounts will feature an inbox containing all e-mails on the top of the page with a separate pane for reading e-mail below it. The feature is meant to enable users to scroll through an e-mail folder without having to click back and forth between Web pages. Yahoo's test audience also will use a computer mouse to "drag and drop" e-mails from one folder to another and search all the content, including attachments, stored in the inbox. "Our competition has been doing some interesting things in e-mail, but we think we have leapfrogged them all with all these new features," said Ethan Diamond, an Oddpost co-founder who works for Yahoo as a director of product management.
Brought to you by Guardian eCommerce.
If the test goes well, all of Yahoo's e-mail users -- an audience that spans tens of millions -- eventually will be converted to the new system. Yahoo imported most of the changes from Oddpost, an e-mail startup the company bought for an undisclosed amount last year. The overhaul, described as the most extensive since Yahoo began offering free e-mail accounts eight years ago, represents the latest salvo in a technological tug-of-war for online traffic. For the past two years, Yahoo and its main Internet rivals -- Google, AOL and Microsofts MSN.com -- have been unveiling a series of upgrades aimed at attracting and retaining their Web audiences so they remain appealing outlets for advertisers.
Google, which runs the Internet's most popular search engine, shook things up in the e-mail market last year by introducing a free service that included 250 times more storage than some of its rivals. Yahoo and MSN subsequently matched Google, which responded by more than doubling its e-mail storage limit to 2.5 gigabytes. More recently, the major e-mail providers have been introducing other bells and whistles to keep their users happy and coming back for more ads. Yahoo's upgrade follows recent AOL improvements meant to make its e-mail service quicker and easier to use. "Last year was the year of storage in e-mail, but now the real competition seems to be about who has the coolest user interfaces," Radicati Group analyst Marcel Nienhuis said.
Yahoo's e-mail service is currently leading the pack, with 63.6 million unique U.S. visitors during July, according to the most recent figures from comScore Media Metrix, a research firm. AOL ranked second with 48.7 million visitors followed by MSN's Hotmail (44.4 million), Comcast Corp.'s Webmail (5.6 million) and Google's Gmail (5.4 million). With its changes, Yahoo's e-mail will look more like a traditional inbox that operates through a software program installed on a computer hard drive instead of being hosted on the Internet. Yet Yahoo's redesigned service still relies on a Web browser and won't require its users to install anything on their computers. Using "dynamic" HTML, Yahoo's e-mail accounts will feature an inbox containing all e-mails on the top of the page with a separate pane for reading e-mail below it. The feature is meant to enable users to scroll through an e-mail folder without having to click back and forth between Web pages. Yahoo's test audience also will use a computer mouse to "drag and drop" e-mails from one folder to another and search all the content, including attachments, stored in the inbox. "Our competition has been doing some interesting things in e-mail, but we think we have leapfrogged them all with all these new features," said Ethan Diamond, an Oddpost co-founder who works for Yahoo as a director of product management.
Brought to you by Guardian eCommerce.
Saturday, September 24, 2005
Skype-eBay Deal Draws Mixed Reaction
In a deal harking back to the days of dot-com euphoria, online e-commerce powerhouse eBay announced a US$2.6 billion deal to acquire Luxembourg-based Skype, a pioneer in free Voice over IP (VoIP) services on the Internet. The mega-sale drew fire from some quarters and praise from others. "I think this is too expensive a move for eBay to spend $2.6 billion for this company," Vamsi M. Sistla, director of broadband and digital media for ABI Research in Oyster Bay, New York, said.
According to a statement from eBay, the deal would total $2.6 billion -- $1.3 billion in cash and the rest based on the value of 32.4 million shares of eBay stock, which would be subjected to restrictions on resale. In early afternoon trading today, eBay was selling for $39.22, up 60 cents a share, or 1.55 percent. There are also provisions for a future pay-out based on performance of the combined companies. The price tag on those provisions is $1.5 billion, which would be paid out in cash or stock, at the discretion of eBay, in the 2008-2009 time period. Shareholders representing 60 percent of the privately-held Skype's stock chose the pay-out option in exchange for reduced up-front cash and stock payments.
Sistla maintained that eBay's move will add value to the company's existing services, but at a very high price. "My biggest qualm with this is they could have done far better by spending far less," he said.
He argued that VoIP technology is still in its infancy and its market environs is far from stable. "The quality of service is still an issue," he noted, "and regulators could jump in at any time and start charging tariffs." He argued that the deal opens eBay up to risks that have never been part of their business. He added, "At the end of the day, it could still be a good deal for eBay in the long run, but immediately it will hurt it's stock price and its revenue growth."
Hani Durzy, a spokesman for eBay, countered that the company paid a "fair and appropriate price" for Skype. By many traditional valuation methods, the deal passes muster, he noted.
"In two years, Skype has attracted 54 million registered users with no marketing whatsoever," he said. "Skype is a great standalone business and it has tremendous momentum," he added.
According to the eBay statement, Skype generated $7 million in 2004, expects to garner $60 million this year and $200 million in 2006. Durzy explained that the Skype deal is all about removing friction from e-commerce.
"Much like PayPal did," he said, "the acquisition of Skype can remove a key friction point in e-commerce, namely, communications. "Communications can be a friction point in e-commerce and prevent transactions from taking place," he contended, "just like payments was a friction point. The acquisition of PayPal in 2002 was all about removing that friction point."
Moreover, he maintained that Skype's technology will give eBay a new way to monetize e-commerce. It can accelerate sales, he explained, especially in "high-involvement" items, such as used cars, business and industrial equipment, and high-end collectibles. It may also open the door for pay-per-call services. "We may be able to provide a lead-generation capability for sellers," he said. "If we apply a pay-per-call model to lead-generation, then we've figured out a way to monetize that lead generation." While eBay is framing the deal in a neat synergistic package, there are those who see it as a classic case of diversification.
"They're a $500 billion market cap company, and they need to diversify," Jacob Guedalia, CEO of iSkoot, a VoIP to mobile-phone company in Cambridge, Mass., said. "General Electric, for instance, went from electricity to refrigerators to mortgages. "What's interesting about it is that, all of a sudden, it makes eBay a competitor in the portal space, competing with Google, Yahoo, and Microsoft," he concluded. "That's because they now own a lot of time that their customers spend doing stuff other than looking for stuff to buy at an auction." Durzy, though, played down the portal angle. "We are not a portal," he said. "We are an e-commerce player. We don't think that this deal puts us into the portal space."
Brought to you by Guardian eCommerce Privacy Seal Program.
According to a statement from eBay, the deal would total $2.6 billion -- $1.3 billion in cash and the rest based on the value of 32.4 million shares of eBay stock, which would be subjected to restrictions on resale. In early afternoon trading today, eBay was selling for $39.22, up 60 cents a share, or 1.55 percent. There are also provisions for a future pay-out based on performance of the combined companies. The price tag on those provisions is $1.5 billion, which would be paid out in cash or stock, at the discretion of eBay, in the 2008-2009 time period. Shareholders representing 60 percent of the privately-held Skype's stock chose the pay-out option in exchange for reduced up-front cash and stock payments.
Sistla maintained that eBay's move will add value to the company's existing services, but at a very high price. "My biggest qualm with this is they could have done far better by spending far less," he said.
He argued that VoIP technology is still in its infancy and its market environs is far from stable. "The quality of service is still an issue," he noted, "and regulators could jump in at any time and start charging tariffs." He argued that the deal opens eBay up to risks that have never been part of their business. He added, "At the end of the day, it could still be a good deal for eBay in the long run, but immediately it will hurt it's stock price and its revenue growth."
Hani Durzy, a spokesman for eBay, countered that the company paid a "fair and appropriate price" for Skype. By many traditional valuation methods, the deal passes muster, he noted.
"In two years, Skype has attracted 54 million registered users with no marketing whatsoever," he said. "Skype is a great standalone business and it has tremendous momentum," he added.
According to the eBay statement, Skype generated $7 million in 2004, expects to garner $60 million this year and $200 million in 2006. Durzy explained that the Skype deal is all about removing friction from e-commerce.
"Much like PayPal did," he said, "the acquisition of Skype can remove a key friction point in e-commerce, namely, communications. "Communications can be a friction point in e-commerce and prevent transactions from taking place," he contended, "just like payments was a friction point. The acquisition of PayPal in 2002 was all about removing that friction point."
Moreover, he maintained that Skype's technology will give eBay a new way to monetize e-commerce. It can accelerate sales, he explained, especially in "high-involvement" items, such as used cars, business and industrial equipment, and high-end collectibles. It may also open the door for pay-per-call services. "We may be able to provide a lead-generation capability for sellers," he said. "If we apply a pay-per-call model to lead-generation, then we've figured out a way to monetize that lead generation." While eBay is framing the deal in a neat synergistic package, there are those who see it as a classic case of diversification.
"They're a $500 billion market cap company, and they need to diversify," Jacob Guedalia, CEO of iSkoot, a VoIP to mobile-phone company in Cambridge, Mass., said. "General Electric, for instance, went from electricity to refrigerators to mortgages. "What's interesting about it is that, all of a sudden, it makes eBay a competitor in the portal space, competing with Google, Yahoo, and Microsoft," he concluded. "That's because they now own a lot of time that their customers spend doing stuff other than looking for stuff to buy at an auction." Durzy, though, played down the portal angle. "We are not a portal," he said. "We are an e-commerce player. We don't think that this deal puts us into the portal space."
Brought to you by Guardian eCommerce Privacy Seal Program.
Friday, September 23, 2005
Online Ad Industry Gearing Up for Broadband Revolution
Broadband ads are coming fast and the online marketing industry hopes to be ready. This fall, the Internet Advertising Bureau (IAB) will release a final set of guidelines and specifications for online ad formats that take advantage of broadband speeds to deliver multi-media marketing messages.
Greg Stuart, chief executive officer of the IAB, said the move is something of a departure for his group. Typically, the IAB gets involved with setting voluntary standards and guidelines for online advertising when the forms become financially significant -- typically business worth a billion dollars per year or more.
"Broadband is nowhere near that yet," Stuart told The E-Commerce Times. "But we've decided to take our collective time to set some guidelines because of our belief in the importance of this area going forward. We all believe this is going to be a big deal." The effort to establish guidelines -- a draft version was released in May for comment from online publishers, advertising agencies and others and a final version is due out sometime this month -- also underscores the uncertainty of the new advertising medium. "It's sometimes difficult for a marketer to get into a brand new space like this," Stuart said. "They don't know where to start. They don't want to feel like they've been taken advantage of." Of course, any guidelines would be voluntary, with neither publishers, marketers nor creative agencies bound to them. The concern is that with a brand new medium, and by all accounts a powerful one, on the horizon, broadband advertising doesn't become the Wild West of online marketing.
A number of factors are driving the rapid growth of broadband ads. While consumer adoption of broadband has made the ads possible, the rapidly changing demographics and the splintered nature of the TV advertising marketplace are driving marketers to seek new ways to reach consumers, particularly younger ones. Most analysts do not break out broadband-dependent ads in their predictions of Web advertising growth, but all agree they will contribute to the rapid growth of the overall segment. Morgan Stanley analyst Mary Meeker recently said that with broadband penetration expected to reach 50 percent of U.S. homes by 2011, the industry may see a long period of sustained growth. Stuart said the goal of the guidelines is to "try to make the marketplace work more efficiently" and give ad buyers confidence that they will have success in the format. Already, some have found ways to re-purpose television advertising for the Web. One such venue is car buying site Autobytel, which streams thousands of hours of car advertisements each month, many of them called up by users by choice. Many experts believe that element of self-selection, which goes beyond personalization to the point where users are seeking out ad campaigns based on word of mouth or media buzz, is where the true promise of broadband ads lie. "The truly successful ones won't be much like traditional TV commercials," Bruce Kasanoff, president of marketing firm Now Possible, said. Kasanoff sees more creative advertisements that include an immediate call-to-action from users. Because they can be targeted to certain sites, some experts also think the ads will push the envelope in terms of content.
One important consideration is the element of choice. How much control should the viewer have over an advertisement? Should they be optional, with a button to allow skipping past them? Should users be able to freeze, rewind and replay them at will. The IAB draft guidelines released in May suggested allowing users to have access to start and stop buttons as well as volume controls. They also suggest limiting ads that run before video the user is seeking to play to 15 to 30 seconds, though spots that run after such video clips can be of any length. Hairong Li, the editor of the Journal of Interactive Advertising, said that consumers crave such control. It's equally important, he said, that ads provide something useful. "Our research indicates that entertainment and information are two key elements of a good rich media ad," Li said. "With them, an ad is perceived less intrusive. Because they use up so much bandwidth and computer power, and because they often automatically include sound, such ads "should be activated by the consumer, instead of popping up automatically," Li added. "Giving the consumer the control over how to view it, plus being entertaining and informative, broadband ads could have larger impact than television commercials."
Brought to you by Guardian eCommerce.
Greg Stuart, chief executive officer of the IAB, said the move is something of a departure for his group. Typically, the IAB gets involved with setting voluntary standards and guidelines for online advertising when the forms become financially significant -- typically business worth a billion dollars per year or more.
"Broadband is nowhere near that yet," Stuart told The E-Commerce Times. "But we've decided to take our collective time to set some guidelines because of our belief in the importance of this area going forward. We all believe this is going to be a big deal." The effort to establish guidelines -- a draft version was released in May for comment from online publishers, advertising agencies and others and a final version is due out sometime this month -- also underscores the uncertainty of the new advertising medium. "It's sometimes difficult for a marketer to get into a brand new space like this," Stuart said. "They don't know where to start. They don't want to feel like they've been taken advantage of." Of course, any guidelines would be voluntary, with neither publishers, marketers nor creative agencies bound to them. The concern is that with a brand new medium, and by all accounts a powerful one, on the horizon, broadband advertising doesn't become the Wild West of online marketing.
A number of factors are driving the rapid growth of broadband ads. While consumer adoption of broadband has made the ads possible, the rapidly changing demographics and the splintered nature of the TV advertising marketplace are driving marketers to seek new ways to reach consumers, particularly younger ones. Most analysts do not break out broadband-dependent ads in their predictions of Web advertising growth, but all agree they will contribute to the rapid growth of the overall segment. Morgan Stanley analyst Mary Meeker recently said that with broadband penetration expected to reach 50 percent of U.S. homes by 2011, the industry may see a long period of sustained growth. Stuart said the goal of the guidelines is to "try to make the marketplace work more efficiently" and give ad buyers confidence that they will have success in the format. Already, some have found ways to re-purpose television advertising for the Web. One such venue is car buying site Autobytel, which streams thousands of hours of car advertisements each month, many of them called up by users by choice. Many experts believe that element of self-selection, which goes beyond personalization to the point where users are seeking out ad campaigns based on word of mouth or media buzz, is where the true promise of broadband ads lie. "The truly successful ones won't be much like traditional TV commercials," Bruce Kasanoff, president of marketing firm Now Possible, said. Kasanoff sees more creative advertisements that include an immediate call-to-action from users. Because they can be targeted to certain sites, some experts also think the ads will push the envelope in terms of content.
One important consideration is the element of choice. How much control should the viewer have over an advertisement? Should they be optional, with a button to allow skipping past them? Should users be able to freeze, rewind and replay them at will. The IAB draft guidelines released in May suggested allowing users to have access to start and stop buttons as well as volume controls. They also suggest limiting ads that run before video the user is seeking to play to 15 to 30 seconds, though spots that run after such video clips can be of any length. Hairong Li, the editor of the Journal of Interactive Advertising, said that consumers crave such control. It's equally important, he said, that ads provide something useful. "Our research indicates that entertainment and information are two key elements of a good rich media ad," Li said. "With them, an ad is perceived less intrusive. Because they use up so much bandwidth and computer power, and because they often automatically include sound, such ads "should be activated by the consumer, instead of popping up automatically," Li added. "Giving the consumer the control over how to view it, plus being entertaining and informative, broadband ads could have larger impact than television commercials."
Brought to you by Guardian eCommerce.
Wednesday, September 21, 2005
Online Advertisers Turning to Pay-Per-Call
Personal-injury lawyer Frank Frasier wants the world to know about his business, but didn't think much of the search-based Internet advertising that's all the rage these days. Potential clients wouldn't learn much about him through it, he figured, and he really can't tell if they have a case without speaking with them directly. But Frasier's opinion of Internet search advertising changed recently with the recent arrival of pay-per-call. This technique prompts Web surfers looking for lawyers in his hometown of Tulsa, Okla., to pick up the phone instead of clicking an ad or sending e-mail. "We've gotten about a dozen calls and half turned into cases," Frasier said. "I'm a believer. It fits my needs."
Pay-per-call could be especially powerful for local businesses that have ignored the Internet, including those that don't even have a Web site, its advocates say. Most search advertising now takes a pay-per-click approach. Search engines such as Google auction the right to have a company's ad display alongside regular search results when a computer user types certain keywords, such as "Tulsa lawyers." Advertisers pay each time someone clicks on the ad link.
In pay-per-call, keywords also are auctioned. But instead of a link to click, the ad directs the user to the telephone. In one version, the user calls a special number that is forwarded to the advertiser's regular phone. In another, users type in their phone numbers and get a return call from the merchant. Either way, the advertiser is billed for the referral.
America Online and smaller Web portals have partnered with a pay-per-call pioneer called Ingenio Inc., whose investors include eBay and Microsoft Ingenio's chief marketing officer, Marc Barach, said the approach is ideal for small service businesses -- florists, lawyers, contractors -- whose customers ask lots of questions. "They do their business by phone. They probably don't have a Web site, or if they do it's not transactional," Barach said. "And customers who call them ... are really demonstrating their intent to buy. They're not just browsing." Judson Brady, who owns online florist Broad Street Flowers in Atlanta, said calls are much easier than clicks to convert to sales.
"You've got a much better chance of closing a sale when you're talking to them rather than having them look at your site and 10 other competitors' sites," Brady said. He estimated that he closes one sale for every 70 clicks, but with pay-per-call, it's one in three. As a result, pay-per-call ads cost more. Barach said Ingenio's average per-call charge is $7, compared with about 50 cents per click. Frasier, the lawyer in Tulsa, said he pays $10 per call.
Analysts say pay-per-call won't replace pay-per-click, partly because it is much more expensive, but they say it will find a niche. The Kelsey Group, a market-research firm based in Princeton, N.J., projects that pay-per-call will become a $1.4 billion to $4 billion industry by 2009. That would roughly parallel the recent growth of pay-per-click advertising, which jumped from about $100 million in 2000 to $3.1 billion last year, according to Jupiter Research. Advocates say pay-per-call will help address the so-called click-fraud that threatens to mar pay-per-click advertising. Merchants suspect that some repeated clicks on their Web links are bogus, generated by competitors and others only to run up a bigger bill for the advertiser, not to buy something.
Advertisers may believe fraud is less likely with calls because they get a person on the other end of the line. Ingenio says it uses other safeguards against fraud, including not charging advertisers for suspiciously brief calls or repeat calls from the same number.
Still, pay-per-call has its limitations. Although businesses that now rely heavily on the phone and Yellow Pages ads might embrace it, the large national advertisers will still prefer clicks, said Jupiter analyst David Card. "Nothing ever replaces anything," Card said. "When TV came along, radio didn't go away. This has the potential to unlock local ad dollars, but Amazon doesn't want to take phone calls." Furthermore, those smaller businesses for which pay-per-call is designed won't feel comfortable bidding on keywords, analysts say. Acknowledging that possibility, San Francisco-based Ingenio lets merchants cap the amount they'll pay each month. A competitor, ThinkingVoice, plans to offer flat fees. While pricing and other aspects of pay-per-call are sorted out, a growing number of companies see potential profit. One of the latest is Verizon Communications, which recently announced that it would begin offering pay-per-call ads as an extension of its online yellow pages, SuperPages.com, in a few weeks. Verizon has no plans to drop pay-per-click, where it has signed up 37,000 advertisers. Scott Laver, president of Verizon's Internet division, said Internet traffic is so heavy that there is room for both.
Laver also believes that Verizon's sales representatives, who know local businesses from years of selling Yellow Pages ads, will give it an advantage over Internet-only rivals such as Google and Yahoo. Neither offers pay-per-call, although Yahoo says it is studying it. Greg Sterling, an analyst at Kelsey, said Verizon's entry will give pay-per-call more legitimacy and prompt similar support from other phone companies that, like Verizon, already produce print directories. And for merchants, it's about dealing with the familiar telephone rather than the mysteries of the Internet.
"The adoption curve will be fast because it's not something that has to be explained," Sterling said. "People get it pretty quickly."
Brought to you by Guardian eCommerce Privacy Seal Program.
Pay-per-call could be especially powerful for local businesses that have ignored the Internet, including those that don't even have a Web site, its advocates say. Most search advertising now takes a pay-per-click approach. Search engines such as Google auction the right to have a company's ad display alongside regular search results when a computer user types certain keywords, such as "Tulsa lawyers." Advertisers pay each time someone clicks on the ad link.
In pay-per-call, keywords also are auctioned. But instead of a link to click, the ad directs the user to the telephone. In one version, the user calls a special number that is forwarded to the advertiser's regular phone. In another, users type in their phone numbers and get a return call from the merchant. Either way, the advertiser is billed for the referral.
America Online and smaller Web portals have partnered with a pay-per-call pioneer called Ingenio Inc., whose investors include eBay and Microsoft Ingenio's chief marketing officer, Marc Barach, said the approach is ideal for small service businesses -- florists, lawyers, contractors -- whose customers ask lots of questions. "They do their business by phone. They probably don't have a Web site, or if they do it's not transactional," Barach said. "And customers who call them ... are really demonstrating their intent to buy. They're not just browsing." Judson Brady, who owns online florist Broad Street Flowers in Atlanta, said calls are much easier than clicks to convert to sales.
"You've got a much better chance of closing a sale when you're talking to them rather than having them look at your site and 10 other competitors' sites," Brady said. He estimated that he closes one sale for every 70 clicks, but with pay-per-call, it's one in three. As a result, pay-per-call ads cost more. Barach said Ingenio's average per-call charge is $7, compared with about 50 cents per click. Frasier, the lawyer in Tulsa, said he pays $10 per call.
Analysts say pay-per-call won't replace pay-per-click, partly because it is much more expensive, but they say it will find a niche. The Kelsey Group, a market-research firm based in Princeton, N.J., projects that pay-per-call will become a $1.4 billion to $4 billion industry by 2009. That would roughly parallel the recent growth of pay-per-click advertising, which jumped from about $100 million in 2000 to $3.1 billion last year, according to Jupiter Research. Advocates say pay-per-call will help address the so-called click-fraud that threatens to mar pay-per-click advertising. Merchants suspect that some repeated clicks on their Web links are bogus, generated by competitors and others only to run up a bigger bill for the advertiser, not to buy something.
Advertisers may believe fraud is less likely with calls because they get a person on the other end of the line. Ingenio says it uses other safeguards against fraud, including not charging advertisers for suspiciously brief calls or repeat calls from the same number.
Still, pay-per-call has its limitations. Although businesses that now rely heavily on the phone and Yellow Pages ads might embrace it, the large national advertisers will still prefer clicks, said Jupiter analyst David Card. "Nothing ever replaces anything," Card said. "When TV came along, radio didn't go away. This has the potential to unlock local ad dollars, but Amazon doesn't want to take phone calls." Furthermore, those smaller businesses for which pay-per-call is designed won't feel comfortable bidding on keywords, analysts say. Acknowledging that possibility, San Francisco-based Ingenio lets merchants cap the amount they'll pay each month. A competitor, ThinkingVoice, plans to offer flat fees. While pricing and other aspects of pay-per-call are sorted out, a growing number of companies see potential profit. One of the latest is Verizon Communications, which recently announced that it would begin offering pay-per-call ads as an extension of its online yellow pages, SuperPages.com, in a few weeks. Verizon has no plans to drop pay-per-click, where it has signed up 37,000 advertisers. Scott Laver, president of Verizon's Internet division, said Internet traffic is so heavy that there is room for both.
Laver also believes that Verizon's sales representatives, who know local businesses from years of selling Yellow Pages ads, will give it an advantage over Internet-only rivals such as Google and Yahoo. Neither offers pay-per-call, although Yahoo says it is studying it. Greg Sterling, an analyst at Kelsey, said Verizon's entry will give pay-per-call more legitimacy and prompt similar support from other phone companies that, like Verizon, already produce print directories. And for merchants, it's about dealing with the familiar telephone rather than the mysteries of the Internet.
"The adoption curve will be fast because it's not something that has to be explained," Sterling said. "People get it pretty quickly."
Brought to you by Guardian eCommerce Privacy Seal Program.
Monday, September 19, 2005
Most Web Ads on Upside of Roller Coaster
With more and more advertising dollars chasing the Internet, sellers of online ad space are suddenly confronting soaring prices and growing competition for premium inventory. A number of companies -- so-called ad networks -- make money by selling ad space across multiple Web sites. The field is dominated by Google and Yahoo, but there are small, niche players as well.
While ad networks all depend on Web site publishers to turn over their ad inventories, they are affected in different ways by rising demand, depending on their business model. Some are clearly benefiting, while others are getting squeezed. Jumpstart Automotive Media, which specializes in selling space on automotive sites, is one of the beneficiaries. The company has locked up long-term, exclusive agreements with a handful of partners like eBay Motors and Automotive.com to sell their ad space.
The San Francisco-based company has already sold all of its available ad space for the fourth quarter as large automakers like Ford and GM shift huge amounts of advertising dollars online.
"We are sold out and I mean 110 percent for the fourth quarter," said Dillon McDonald, chief strategy officer. Other ad networks are also seeing a surge in demand -- in particular for the fourth quarter, when many advertisers launch holiday campaigns -- with some experiencing a shortage of inventory. "We are seeing lots of advertisers setting up campaigns scheduled to start in [the fourth quarter], with some sites already sold out," said Phil Kaplan, the CEO and founder of AdBrite.
Burst sells ad space across about 2,000 sites, mostly mid-sized publishers that range from Kiplingers.com to niche sites like Coolmath.com. CEO Jarvis Coffin said that while there is no shortage of new Web sites, it is getting harder for ad networks to snap up "cheap inventory."
"What we're certainly seeing is prices are going up," said Coffin. "Our CFO is fond of saying that you don't have a supply problem, you have a pricing problem." At the same time, publishers are getting savvy about how to get the most bang for the ad space. Some are holding back their inventory, figuring they can get a better deal if they wait.
Industry observers say ad networks are starting to offer rate "guarantees" -- a minimum price that they will sell the space for -- in order to entice publishers. "That's exactly what's happening," Coffin said. "Somewhere as a compromise between what we're able to pay and what you're willing to accept, we'll guarantee you a price in order to secure the inventory." Middleman Squeezed
Those feeling the most pressure are ad networks that act as resellers, meaning they buy all the inventory off a publisher and turn around and sell it for more. Those players are seeing their profit spread shrink because of the intense competition.
One way to deal with the issue is to merge, as ad networks Fastclick and Valueclick did earlier this month. Industry observers expect consolidation as Internet ad networks try to gain more clout.
Kevin Lee, CEO of online search marketer firm Did-It, said, "Everybody is fighting over the same inventory."
Brought to you by Guardian eCommerce.
While ad networks all depend on Web site publishers to turn over their ad inventories, they are affected in different ways by rising demand, depending on their business model. Some are clearly benefiting, while others are getting squeezed. Jumpstart Automotive Media, which specializes in selling space on automotive sites, is one of the beneficiaries. The company has locked up long-term, exclusive agreements with a handful of partners like eBay Motors and Automotive.com to sell their ad space.
The San Francisco-based company has already sold all of its available ad space for the fourth quarter as large automakers like Ford and GM shift huge amounts of advertising dollars online.
"We are sold out and I mean 110 percent for the fourth quarter," said Dillon McDonald, chief strategy officer. Other ad networks are also seeing a surge in demand -- in particular for the fourth quarter, when many advertisers launch holiday campaigns -- with some experiencing a shortage of inventory. "We are seeing lots of advertisers setting up campaigns scheduled to start in [the fourth quarter], with some sites already sold out," said Phil Kaplan, the CEO and founder of AdBrite.
Burst sells ad space across about 2,000 sites, mostly mid-sized publishers that range from Kiplingers.com to niche sites like Coolmath.com. CEO Jarvis Coffin said that while there is no shortage of new Web sites, it is getting harder for ad networks to snap up "cheap inventory."
"What we're certainly seeing is prices are going up," said Coffin. "Our CFO is fond of saying that you don't have a supply problem, you have a pricing problem." At the same time, publishers are getting savvy about how to get the most bang for the ad space. Some are holding back their inventory, figuring they can get a better deal if they wait.
Industry observers say ad networks are starting to offer rate "guarantees" -- a minimum price that they will sell the space for -- in order to entice publishers. "That's exactly what's happening," Coffin said. "Somewhere as a compromise between what we're able to pay and what you're willing to accept, we'll guarantee you a price in order to secure the inventory." Middleman Squeezed
Those feeling the most pressure are ad networks that act as resellers, meaning they buy all the inventory off a publisher and turn around and sell it for more. Those players are seeing their profit spread shrink because of the intense competition.
One way to deal with the issue is to merge, as ad networks Fastclick and Valueclick did earlier this month. Industry observers expect consolidation as Internet ad networks try to gain more clout.
Kevin Lee, CEO of online search marketer firm Did-It, said, "Everybody is fighting over the same inventory."
Brought to you by Guardian eCommerce.
Sunday, September 18, 2005
Phishing, Malware Scams Rise in Katrina's Wake
As heart-wrenching images of devastation and despair from New Orleans and others parts of the Gulf Coast of the U.S. continue to rivet Americans from coast to coast, computer security experts are warning that scammers have already devised elaborate phishing attacks and other online scams meant to target the outpouring of response to hurricane Katrina. The Federal Bureau of Investigation confirmed it had received complaints about Web sites ostensibly set up to aid victims of Katrina that are actually intended to pilfer credit card numbers and other personal information from unsuspecting victims and the Federal Trade Commission and Better Business Bureau issued consumer warnings.
Computer security firm Sophos also warned of an e-mail circulating with news stories inside about the disaster. Clicking on the links in the e-mail takes users to a site that attempts to load virus code onto a user's computer. Once infected, a computer can be controlled remotely and used by attackers to "spy, steal or cause disruption," according to Sophos senior technology consultant Graham Cluley. "The hurricane is a dreadful natural disaster, and it's sickening to think that hackers are prepared to exploit the horrendous situation in an attempt to break into computers for the purposes of spamming, extortion and theft," Cluley said. "Everyone should ensure they have defenses in place to properly protect against the very latest malware attacks." Attempts to capitalize on the tragedy were popping up across the Web. Auction site eBay said it terminated several auctions of Katrina-related domain names earlier this week.
Disasters of all types have been an opportunity for the Internet industry to shine and to show its dark side at the same time. Major sites such as Amazon.com and eBay, which helped raised millions of dollars after 9/11, are again posting links on their home pages to the Red Cross and relief organizations. However, the Sept. 11 aftermath also brought its share of scams, from people selling what were purported to be pieces of debris from the collapsed World Trade Centers on eBay to sites that stole money intended to aid victims.
With many Americans moved to donate to relief efforts, many scams were being reported that attempted to take advantage of that altruistic impulse. John Bambenek of the SANS Institute's Internet Storm Center said the institute is looking into more than 200 dot-com domains that have popped up in recent days that contain text dealing with Katrina. While many are legitimate, others have proven to be scams. Other scams have come in the form of e-mails that contain a link to PayPal, but when SANS attempted to reach e-mail senders to request a physical address to mail a check, no response came. The FTC, meanwhile, issued a warning to consumers who want to help to give directly to reputable charities and to be skeptical of any e-mail messages or phone calls seeking donations for the victims of Katrina. The Better Business Bureau said while the impulse to donate may be strong, the need for cash donations will still exist weeks from now, giving consumers time to plan their giving carefully.
Analysts say that if past tragedies are any indication, many of the people going online to donate or read news about the aftermath of Katrina are new to the Web, with many making donations that represent their first foray into e-commerce. To have scams target those users could result in a bad first exposure to online transactions and help slow e-commerce growth over time. Americans are also turning to the Web for information on the disaster and in search of ways to help. According to Nielsen//NetRatings, traffic to several hurricane-related sites has spiked in recent days. RedCross.org saw more than 1.1 million unique visitors on Wednesday alone, about the same number that visited the site during the entire month of December, 2004, when the efforts to aid victims of the Indonesian tsunami were under way. The research firm noted that the Web is playing an increasingly important role in donation collection, with the Red Cross saying that US$15 million of the $21 million that had been given as of yesterday has come over the Internet.
Traffic to weather sites and news outlets also surged in recent days, with the New Orleans-based NOLA.com site among the fastest-growing sites in terms of traffic.
Brought to you by Guardian eCommerce.
Computer security firm Sophos also warned of an e-mail circulating with news stories inside about the disaster. Clicking on the links in the e-mail takes users to a site that attempts to load virus code onto a user's computer. Once infected, a computer can be controlled remotely and used by attackers to "spy, steal or cause disruption," according to Sophos senior technology consultant Graham Cluley. "The hurricane is a dreadful natural disaster, and it's sickening to think that hackers are prepared to exploit the horrendous situation in an attempt to break into computers for the purposes of spamming, extortion and theft," Cluley said. "Everyone should ensure they have defenses in place to properly protect against the very latest malware attacks." Attempts to capitalize on the tragedy were popping up across the Web. Auction site eBay said it terminated several auctions of Katrina-related domain names earlier this week.
Disasters of all types have been an opportunity for the Internet industry to shine and to show its dark side at the same time. Major sites such as Amazon.com and eBay, which helped raised millions of dollars after 9/11, are again posting links on their home pages to the Red Cross and relief organizations. However, the Sept. 11 aftermath also brought its share of scams, from people selling what were purported to be pieces of debris from the collapsed World Trade Centers on eBay to sites that stole money intended to aid victims.
With many Americans moved to donate to relief efforts, many scams were being reported that attempted to take advantage of that altruistic impulse. John Bambenek of the SANS Institute's Internet Storm Center said the institute is looking into more than 200 dot-com domains that have popped up in recent days that contain text dealing with Katrina. While many are legitimate, others have proven to be scams. Other scams have come in the form of e-mails that contain a link to PayPal, but when SANS attempted to reach e-mail senders to request a physical address to mail a check, no response came. The FTC, meanwhile, issued a warning to consumers who want to help to give directly to reputable charities and to be skeptical of any e-mail messages or phone calls seeking donations for the victims of Katrina. The Better Business Bureau said while the impulse to donate may be strong, the need for cash donations will still exist weeks from now, giving consumers time to plan their giving carefully.
Analysts say that if past tragedies are any indication, many of the people going online to donate or read news about the aftermath of Katrina are new to the Web, with many making donations that represent their first foray into e-commerce. To have scams target those users could result in a bad first exposure to online transactions and help slow e-commerce growth over time. Americans are also turning to the Web for information on the disaster and in search of ways to help. According to Nielsen//NetRatings, traffic to several hurricane-related sites has spiked in recent days. RedCross.org saw more than 1.1 million unique visitors on Wednesday alone, about the same number that visited the site during the entire month of December, 2004, when the efforts to aid victims of the Indonesian tsunami were under way. The research firm noted that the Web is playing an increasingly important role in donation collection, with the Red Cross saying that US$15 million of the $21 million that had been given as of yesterday has come over the Internet.
Traffic to weather sites and news outlets also surged in recent days, with the New Orleans-based NOLA.com site among the fastest-growing sites in terms of traffic.
Brought to you by Guardian eCommerce.
Friday, September 16, 2005
Google Offers Print Ads to Online Customers
Google is raising eyebrows by probing for opportunities outside the digital world for the first time ever, announcing it would conduct a test of a program to re-sell print advertising space to customers of its online marketing programs. Google has purchased space in next week's issues of PC Magazine and Maximum PC magazine with the intention of re-selling that space to its online customers. The move marks the first time that Google ads will appear anywhere but online.
Google described the effort as a "limited test," with a spokesman describing it as part of the search giant's "continuing effort to develop new ways to provide effective and useful advertising to advertisers, publishers and users." Re-selling print ads in a bundle that could include various online ads -- paid search listings and contextual ads, for instance -- would put Google in the position of becoming an advertising broker. Most marketers now buy ads directly from print publications rather than working through brokers. Speculation in the advertising industry was that Google may experiment with various payment options for the print space, possibly auctioning it off the way it lets marketers bid on keyword placements or attempting to translate the pay-per-click-through model that works well online by pricing ads based on the number of visits to a certain Web URL or calls to a specific phone number they generate.
Some observers noted that the system may help smaller advertisers get prominent space in the magazines that they could otherwise not afford, since smaller ads are typically not inserted into the main part of consumer magazines but relegated to classified sections at the back. The Google scheme would let advertisers buy a fraction of a full page but still get placement as they would with a full-page advertisement. The ads reportedly do not include the Google logo, but a fine-print note saying that they are from Google advertisers and the words "ads by Google." Search Engine Watch editor Danny Sullivan said the move makes sense.
"Not only doesn't the move surprise me, but I personally expect we'll see more of it," Sullivan said. "There's no reason why Google or Yahoo can't move some of their advertisers into the print world.
Given their roles as information aggregators, Sullivan added: "I'm still expecting we'll see something like a print yellow pages from one or both of these major players."
In recent quarters, Google has said that one of the factors limiting its advertising revenue growth is the limited availability of space on which to display advertising, especially those that are text-based. Because Google typically deploys only three to four paid ads for each page through its contextual placement program, even the growth of blogs and niche sites may not be enough to meet the demand for those ads.
Print ads would help Google diversify its revenue stream, something that a few analysts have begun to call for, and also would make a logical fit with an expanded display ad effort, which Google has begun to roll out to go with its text ads that appear alongside search results and inserted into Web pages. However, Piper Jaffray analyst Safa Raschtchy said, the test was likely just that -- an experiment -- and said that it would be surprising if Google was to invest revenues in an off-line advertising effort, which seems to be well outside its core areas and off the beaten path from its many efforts to build traffic and loyalty as a search engine-turned-portal.
The big winners may be the smaller firms that work with Google. While larger companies likely already have relationships established with magazine and newspaper publishers, the offering might appeal to smaller companies looking to extend their brand-building efforts beyond the Internet.
Brought to you by the Guardian eCommerce Privacy Seal Program.
Google described the effort as a "limited test," with a spokesman describing it as part of the search giant's "continuing effort to develop new ways to provide effective and useful advertising to advertisers, publishers and users." Re-selling print ads in a bundle that could include various online ads -- paid search listings and contextual ads, for instance -- would put Google in the position of becoming an advertising broker. Most marketers now buy ads directly from print publications rather than working through brokers. Speculation in the advertising industry was that Google may experiment with various payment options for the print space, possibly auctioning it off the way it lets marketers bid on keyword placements or attempting to translate the pay-per-click-through model that works well online by pricing ads based on the number of visits to a certain Web URL or calls to a specific phone number they generate.
Some observers noted that the system may help smaller advertisers get prominent space in the magazines that they could otherwise not afford, since smaller ads are typically not inserted into the main part of consumer magazines but relegated to classified sections at the back. The Google scheme would let advertisers buy a fraction of a full page but still get placement as they would with a full-page advertisement. The ads reportedly do not include the Google logo, but a fine-print note saying that they are from Google advertisers and the words "ads by Google." Search Engine Watch editor Danny Sullivan said the move makes sense.
"Not only doesn't the move surprise me, but I personally expect we'll see more of it," Sullivan said. "There's no reason why Google or Yahoo can't move some of their advertisers into the print world.
Given their roles as information aggregators, Sullivan added: "I'm still expecting we'll see something like a print yellow pages from one or both of these major players."
In recent quarters, Google has said that one of the factors limiting its advertising revenue growth is the limited availability of space on which to display advertising, especially those that are text-based. Because Google typically deploys only three to four paid ads for each page through its contextual placement program, even the growth of blogs and niche sites may not be enough to meet the demand for those ads.
Print ads would help Google diversify its revenue stream, something that a few analysts have begun to call for, and also would make a logical fit with an expanded display ad effort, which Google has begun to roll out to go with its text ads that appear alongside search results and inserted into Web pages. However, Piper Jaffray analyst Safa Raschtchy said, the test was likely just that -- an experiment -- and said that it would be surprising if Google was to invest revenues in an off-line advertising effort, which seems to be well outside its core areas and off the beaten path from its many efforts to build traffic and loyalty as a search engine-turned-portal.
The big winners may be the smaller firms that work with Google. While larger companies likely already have relationships established with magazine and newspaper publishers, the offering might appeal to smaller companies looking to extend their brand-building efforts beyond the Internet.
Brought to you by the Guardian eCommerce Privacy Seal Program.
Thursday, September 15, 2005
States Renew Online Sales Tax Push
Reviving an issue that has dogged the e-commerce industry since its earliest days, at least 18 states are stepping up efforts to collect sales taxes from online merchants, likely meaning more Web shoppers will be paying at least a little extra during the key holiday season. As part of a push to let merchants -- primarily those with brick-and-mortar stores as well as Web shops -- who have failed to pay taxes in the past move into compliance, the Streamlined Sales Tax program is offering a year of amnesty to those companies.
In exchange, companies will be expected to report and pay sales taxes to some 13 states that have been accepted into the program by putting systems in place to track and receive the payments. Payments will be entirely voluntary in another 5 states who have yet to be accepted as Streamlined states. The Streamlined Sales Tax program is also offering to help hire third-party service providers to handle tax billing and has created software programs to automatically detect taxable purchases. Many see it as a prelude to a widespread effort to force online retailers to pay taxes, with the states possibly banding together for legal action if necessary. The collection is slated to get under way on Oct. 1, which is also often seen as the unofficial early start to the most important stretch for e-tailers -- the fourth quarter and the holiday shopping season.
Most analysts expect the e-commerce industry to show no ill-effects from the stepped-up tax efforts, but some say smaller merchants are hurt because of the extra burden of tracking and reporting taxable sales. States have long argued that they are losing up to US$15 billion annually in sales tax that could be collected from online buys -- money that many states desperately need to fund schools, public safety and other programs cut in recent years.
The debate over online sales tax has raged since e-commerce began, with wide disagreement on whether implementing broad-based online sales tax would dampen consumer enthusiasm for buying online. In fact, many argued against such a tax on the grounds that putting one in place would stifle e-commerce while it was still in its formative, growth stage. For years, a 1992 Supreme Court ruling has been the touchstone for the industry. That ruling said consumers were responsible for paying sales tax for Web purchase if the merchant they were buying from had a "nexus" or physical presence in the customers' state. That has been interpreted to mean both stores and facilities such as call centers.
But many merchants have not followed the letter of that decision and many states have been hard-pressed to do much about it, with the enforcement of sales tax laws requiring enormous resources that many lack. The Streamlined Sales Tax program, which some 40 states have helped draft, is meant to offer a carrot to retailers through the year-long amnesty program that eliminates the possibility of back taxes being collected. Those back taxes could be substantial and the risk of having to pay them was brought into sharp relief earlier this year when a California court ruled that Borders was responsible for paying back taxes on online sales. The case, known as Borders Online v. the State Board of Equalization, dealt specifically with sales from Borders to California residents during 1998 and 1999. The court cleared the way for the state to collect some $1.5 million worth of taxes that should have been collected between 1998 and 1999.
Some major online retailers, including Amazon.com, have said they would not volunteer to collect and pay taxes to states until a better system is in place for establishing what sales require tax payments. The Direct Marketing Association has also come out against the streamlining effort, saying it has not addressed some of the complexities involved. Complexity is certainly an issue and one reason for the push to streamline. For instance, some states exempt items such as clothing from sales tax, unless those items are over a certain price threshold, at which point they become luxury items. And not all states collect either the same tax levy or tax the same set of items. In order to overcome those hurdles, states must draft rules that match the rules in other states in order to become part of the Streamlined Sales Tax coalition.
Forrester Research analyst Carrie Johnson said that consumer behavior and past studies seem to suggest online taxes would likely not stall the growth of e-commerce, but that some shoppers do turn to the Web for the ability to avoid paying them. "Shoppers would prefer not to pay taxes and it might affect some purchases," Johnson said. "The number one reason people shop online is convenience and the ability to comparison shop easily. An added 5 percent sales tax on the bottom line doesn't dramatically alter the convenience aspect of buying online."
Brought to you by Guardian eCommerce.
In exchange, companies will be expected to report and pay sales taxes to some 13 states that have been accepted into the program by putting systems in place to track and receive the payments. Payments will be entirely voluntary in another 5 states who have yet to be accepted as Streamlined states. The Streamlined Sales Tax program is also offering to help hire third-party service providers to handle tax billing and has created software programs to automatically detect taxable purchases. Many see it as a prelude to a widespread effort to force online retailers to pay taxes, with the states possibly banding together for legal action if necessary. The collection is slated to get under way on Oct. 1, which is also often seen as the unofficial early start to the most important stretch for e-tailers -- the fourth quarter and the holiday shopping season.
Most analysts expect the e-commerce industry to show no ill-effects from the stepped-up tax efforts, but some say smaller merchants are hurt because of the extra burden of tracking and reporting taxable sales. States have long argued that they are losing up to US$15 billion annually in sales tax that could be collected from online buys -- money that many states desperately need to fund schools, public safety and other programs cut in recent years.
The debate over online sales tax has raged since e-commerce began, with wide disagreement on whether implementing broad-based online sales tax would dampen consumer enthusiasm for buying online. In fact, many argued against such a tax on the grounds that putting one in place would stifle e-commerce while it was still in its formative, growth stage. For years, a 1992 Supreme Court ruling has been the touchstone for the industry. That ruling said consumers were responsible for paying sales tax for Web purchase if the merchant they were buying from had a "nexus" or physical presence in the customers' state. That has been interpreted to mean both stores and facilities such as call centers.
But many merchants have not followed the letter of that decision and many states have been hard-pressed to do much about it, with the enforcement of sales tax laws requiring enormous resources that many lack. The Streamlined Sales Tax program, which some 40 states have helped draft, is meant to offer a carrot to retailers through the year-long amnesty program that eliminates the possibility of back taxes being collected. Those back taxes could be substantial and the risk of having to pay them was brought into sharp relief earlier this year when a California court ruled that Borders was responsible for paying back taxes on online sales. The case, known as Borders Online v. the State Board of Equalization, dealt specifically with sales from Borders to California residents during 1998 and 1999. The court cleared the way for the state to collect some $1.5 million worth of taxes that should have been collected between 1998 and 1999.
Some major online retailers, including Amazon.com, have said they would not volunteer to collect and pay taxes to states until a better system is in place for establishing what sales require tax payments. The Direct Marketing Association has also come out against the streamlining effort, saying it has not addressed some of the complexities involved. Complexity is certainly an issue and one reason for the push to streamline. For instance, some states exempt items such as clothing from sales tax, unless those items are over a certain price threshold, at which point they become luxury items. And not all states collect either the same tax levy or tax the same set of items. In order to overcome those hurdles, states must draft rules that match the rules in other states in order to become part of the Streamlined Sales Tax coalition.
Forrester Research analyst Carrie Johnson said that consumer behavior and past studies seem to suggest online taxes would likely not stall the growth of e-commerce, but that some shoppers do turn to the Web for the ability to avoid paying them. "Shoppers would prefer not to pay taxes and it might affect some purchases," Johnson said. "The number one reason people shop online is convenience and the ability to comparison shop easily. An added 5 percent sales tax on the bottom line doesn't dramatically alter the convenience aspect of buying online."
Brought to you by Guardian eCommerce.
Wednesday, September 14, 2005
Gap, Old Navy Web Sites Shut Down
Already mired in a sales slump, Gap has closed its two most popular Internet stores so the clothing retailer can upgrade its online operations before the pivotal holiday shopping season. Both Gap.com and OldNavy.com have been closed for the past week, driving frustrated shoppers like Kira Storch of San Francisco to other Web sites to buy clothes. "I just felt stymied," the 33-year-old Storch said. "I thought most Web sites only shut down during the middle of the night." Banana Republic, another chain owned by Gap, also closed its site two days last week before reopening Aug. 26. Hoping to minimize the customer inconvenience, Gap waited until after most back-to-school shopping had been finished before launching a "soup-to-nuts" overhaul of its major e-commerce sites, said company spokeswoman Kris Marubio. She said the changes were too complex to enable the site to continue running. "We think this is going to make for a more compelling and exciting experience for shoppers," Marubio said.
The San Francisco-based company isn't saying when the sites will reopen. Instead, visitors are being asked to leave their e-mail addresses so they can be informed when the sites are selling clothes again. The continuing closure of Gap.com and OldNavy.com is likely to put another small dent in Gap's sales, which have been sagging in recent months. Gap.com and OldNavy.com accounted for 3 percent of the company's total revenues last year.
Brought to you by Guardian eCommerce.
The San Francisco-based company isn't saying when the sites will reopen. Instead, visitors are being asked to leave their e-mail addresses so they can be informed when the sites are selling clothes again. The continuing closure of Gap.com and OldNavy.com is likely to put another small dent in Gap's sales, which have been sagging in recent months. Gap.com and OldNavy.com accounted for 3 percent of the company's total revenues last year.
Brought to you by Guardian eCommerce.
Monday, September 12, 2005
Google Wants to Expand Offline Ads
In its first significant expansion beyond the Internet , Google has bought advertising in a handful of technology-industry magazines and resold chunks of the space to merchants already participating in its booming Internet marketing network. The company confirmed the test yesterday, but provided few other details in a statement.
"This limited test is part of Google's continuing effort to develop new ways to provide effective and useful advertising to advertisers, publishers and users," the Mountain View, Calif.-based company said. Spokesman Michael Mayzel declined to say whether the experiment will include general-circulation magazines or newspapers. Some of the first print ads arranged by Google appeared in the Sept. 6 issue of PC magazine. Ads from five different companies appear on a full page punctuated with the tag line, "Ads by Google."
Despite all its technological prowess, Google remains highly dependent on online advertising. Internet ads, mostly text-based links that appear alongside search results and other related Web content, accounted for virtually all of Google's US$712 million profit through the first half of this year. Ironically, Google doesn't advertise to promote its own brand and services.
Brought to you by the Guardian eCommerce Privacy Seal Program.
"This limited test is part of Google's continuing effort to develop new ways to provide effective and useful advertising to advertisers, publishers and users," the Mountain View, Calif.-based company said. Spokesman Michael Mayzel declined to say whether the experiment will include general-circulation magazines or newspapers. Some of the first print ads arranged by Google appeared in the Sept. 6 issue of PC magazine. Ads from five different companies appear on a full page punctuated with the tag line, "Ads by Google."
Despite all its technological prowess, Google remains highly dependent on online advertising. Internet ads, mostly text-based links that appear alongside search results and other related Web content, accounted for virtually all of Google's US$712 million profit through the first half of this year. Ironically, Google doesn't advertise to promote its own brand and services.
Brought to you by the Guardian eCommerce Privacy Seal Program.
Sunday, September 11, 2005
Yahoo Rolls Out More Robust E-Mail Search
Bidding to one-up rival Google, Yahoo is rolling out enhancements to its Yahoo Mail search functions, enabling users to search attachments and e-mail text for specific words, phrases and photos. Yahoo said the upgrade is an acknowledgement that many users are stuffing their mailboxes full of messages, an outgrowth of the race to provide nearly unlimited storage to users. Yahoo Mail users now have 2GB of storage space, enough for hundreds of thousands of messages.
Drew Garcia, a senior product manager for Yahoo Mail, said the new features will be gradually rolled out to users starting today, with all users having access to it within a few months. In addition to the ability to search the text of attachments, the upgrades include more refinement of search answers, with results broken down into five categories: Senders, Folders, Attachments, Message Status, and Date. From there, users can lump messages together, for instance, creating a list of all the messages that meet a search criteria and were sent by the same sender, those that contain photo attachment or those that were sent within a certain time frame.
The search function will also key in on prefixes, letting people find contacts and messages even when they can't recall a person's full name. Garcia said the rollout would take some time because Yahoo wanted to index messages and create thumbnail images of attachments in the Yahoo Mail database. That will enable the same type of near-instant search results that users of Yahoo and other desktop search products get on their own e-mail accounts. "We are rolling out these features gradually to give us time to thumbnail the millions of photos and attachments and index the billions of messages Yahoo Mail users around the world have accumulated (we're talking about petabytes of data)," Garcia wrote in his blog.
Brad Hill, who writes the unofficial Yahoo Web blog, said the new features represent "the first serious challenge to Gmail since Google forced competitors to unsuccessfully chase its ever-expanding storage capacity." He added that it was smart of Yahoo to "put Google on the defensive where it really hurts, in search." Search Engine Watch Editor Gary Price said the Yahoo approach seemed to "raise the bar" on e-mail search, one set by Google's Gmail. Despite the advantages of the Yahoo approach, Hill acknowledges it may not have much impact on the Web mail or search wars. "The truth is that it's painfully difficult to get consumers to switch e-mail providers," he wrote.
Google launched the ongoing Web mail war last year when it turned the industry on its head with the 1GB of free space and the searchable storage functions of its Gmail product. Since then, Yahoo, AOL and others rushed to match or exceed those storage levels. Analysts say the investments in Web mail and the commitment to continually upgrade them with new features such as photo mail, search and links with instant messaging products, shows how vigorous the competition is to lock in users. Web mail is considered one of the stickiest of all Web uses, meaning that users with an account are more likely to return often and less likely to leave for a competitor.
In fact, the move is likely as much about defending its strong base of Web mail users against incursions as it is about wresting customers away from rivals. According to data from comScore Media Metrix, Yahoo has some 219 million e-mail accounts, making it second only to Microsoft's Hotmail , which has 221 million users. The search function also dovetails with a Yahoo effort to make its Web mail look more like a traditional desktop mail product, with the ability to preview messages and to move them into folders more easily. And eventually, such mail systems could become a logical single repository for vast quantities of information. With storage space plunging in price, portals can offer virtually unlimited free space, letting users store data on third-party servers, where they are theoretically safer from computer viruses and crashes, said Gartner analyst Alan Weiner. "This type of e-mail approach could develop into the system that collects, stores and sorts all sorts of information," Weiner said.
Brought to you by Guardian eCommerce.
Drew Garcia, a senior product manager for Yahoo Mail, said the new features will be gradually rolled out to users starting today, with all users having access to it within a few months. In addition to the ability to search the text of attachments, the upgrades include more refinement of search answers, with results broken down into five categories: Senders, Folders, Attachments, Message Status, and Date. From there, users can lump messages together, for instance, creating a list of all the messages that meet a search criteria and were sent by the same sender, those that contain photo attachment or those that were sent within a certain time frame.
The search function will also key in on prefixes, letting people find contacts and messages even when they can't recall a person's full name. Garcia said the rollout would take some time because Yahoo wanted to index messages and create thumbnail images of attachments in the Yahoo Mail database. That will enable the same type of near-instant search results that users of Yahoo and other desktop search products get on their own e-mail accounts. "We are rolling out these features gradually to give us time to thumbnail the millions of photos and attachments and index the billions of messages Yahoo Mail users around the world have accumulated (we're talking about petabytes of data)," Garcia wrote in his blog.
Brad Hill, who writes the unofficial Yahoo Web blog, said the new features represent "the first serious challenge to Gmail since Google forced competitors to unsuccessfully chase its ever-expanding storage capacity." He added that it was smart of Yahoo to "put Google on the defensive where it really hurts, in search." Search Engine Watch Editor Gary Price said the Yahoo approach seemed to "raise the bar" on e-mail search, one set by Google's Gmail. Despite the advantages of the Yahoo approach, Hill acknowledges it may not have much impact on the Web mail or search wars. "The truth is that it's painfully difficult to get consumers to switch e-mail providers," he wrote.
Google launched the ongoing Web mail war last year when it turned the industry on its head with the 1GB of free space and the searchable storage functions of its Gmail product. Since then, Yahoo, AOL and others rushed to match or exceed those storage levels. Analysts say the investments in Web mail and the commitment to continually upgrade them with new features such as photo mail, search and links with instant messaging products, shows how vigorous the competition is to lock in users. Web mail is considered one of the stickiest of all Web uses, meaning that users with an account are more likely to return often and less likely to leave for a competitor.
In fact, the move is likely as much about defending its strong base of Web mail users against incursions as it is about wresting customers away from rivals. According to data from comScore Media Metrix, Yahoo has some 219 million e-mail accounts, making it second only to Microsoft's Hotmail , which has 221 million users. The search function also dovetails with a Yahoo effort to make its Web mail look more like a traditional desktop mail product, with the ability to preview messages and to move them into folders more easily. And eventually, such mail systems could become a logical single repository for vast quantities of information. With storage space plunging in price, portals can offer virtually unlimited free space, letting users store data on third-party servers, where they are theoretically safer from computer viruses and crashes, said Gartner analyst Alan Weiner. "This type of e-mail approach could develop into the system that collects, stores and sorts all sorts of information," Weiner said.
Brought to you by Guardian eCommerce.
Friday, September 09, 2005
Google Print Faces More Opposition
Publishers continue to line up in opposition to Google's ambitious efforts to digitize and make public the content of several major libraries, saying an olive branch recently extended by Google doesn't go far enough to assuage copyright concerns. Within the past week, the Association of Learned and Professional Society Publishers (ALPSP) and the Association of American University Presses (AAUP) have both issued statements strongly opposing Google Print. The groups say that even with a moratorium on scanning of copyrighted books in place and even with an "opt-out" policy being offered, copyright-protected works will still be swept up in the push to put books online.
Google recently said it would suspend the scanning of copyrighted works -- except in cases where it had express permission from the owner-- until at least November. But publishers are balking at the "opt-out" approach that Google has proposed. The search engine has said that if it is not provided with a specific list of titles that publishers do not want scanned, it will proceed with the digitization process. The Google Print project includes several university libraries in the U.S. and the UK as well as the New York City Public Library. Despite the opt-out clause, "The revised policy is virtually the same as the previous one," The AAUP wrote in a statement opposing the plan. "Google still asserts that it may make digital copies of all books in copyright, and that they will respect the copyrights only of those who supply Google with a list of books for which rights must be recognized. In other words, Google, an enormously successful company, claims a sweeping right to appropriate the property of others for its own commercial use unless it is told, case by case and instance by instance, not to."
In a lengthy position paper on changes to Google Print, ALPSP noted that its problem was mainly with the library portion of the effort and that many publishers were willingly taking part in the Google Print project directly, providing books to Google so they can be scanned and searched. But on the library digitization effort, the group called for "an urgent meeting with representatives of all major publishing organizations, in order to work out an acceptable pragmatic way forward and to avoid legal action."
Google did not immediately respond to a request for comment on the latest developments. The library project is just one of several places where Google now finds itself facing copyright issues, with everything from its Web search and paid search listings to its news search functions all coming under attack for offering opportunities for copyright infringement. Ironically, many analysts lauded the Google Print project when it was first announced, saying the sheer ambition and scope of it -- at the time, the search engine said it would cost at least US$150 million to complete -- spoke well of Google's ambitions to help collect and categorize many different types of information. "When they announced it, it seemed to underscore that they were the only company on the Internet with the vision, ambition and technology to do this," Forrester Research analyst Charlene Li said. "It seemed to only enhance Google's reputation." Since then, however, Google has faced criticism on a number of fronts. European officials, for instance, have worried that the project would result in mainly English-language books being represented on the Web. And privacy advocates have expressed worries that the digital nature of Google Print would enable users' book-reading histories to be subpoenaed by law enforcement.
Google recently said it would suspend the scanning of copyrighted works -- except in cases where it had express permission from the owner-- until at least November. But publishers are balking at the "opt-out" approach that Google has proposed. The search engine has said that if it is not provided with a specific list of titles that publishers do not want scanned, it will proceed with the digitization process. The Google Print project includes several university libraries in the U.S. and the UK as well as the New York City Public Library. Despite the opt-out clause, "The revised policy is virtually the same as the previous one," The AAUP wrote in a statement opposing the plan. "Google still asserts that it may make digital copies of all books in copyright, and that they will respect the copyrights only of those who supply Google with a list of books for which rights must be recognized. In other words, Google, an enormously successful company, claims a sweeping right to appropriate the property of others for its own commercial use unless it is told, case by case and instance by instance, not to."
In a lengthy position paper on changes to Google Print, ALPSP noted that its problem was mainly with the library portion of the effort and that many publishers were willingly taking part in the Google Print project directly, providing books to Google so they can be scanned and searched. But on the library digitization effort, the group called for "an urgent meeting with representatives of all major publishing organizations, in order to work out an acceptable pragmatic way forward and to avoid legal action."
Google did not immediately respond to a request for comment on the latest developments. The library project is just one of several places where Google now finds itself facing copyright issues, with everything from its Web search and paid search listings to its news search functions all coming under attack for offering opportunities for copyright infringement. Ironically, many analysts lauded the Google Print project when it was first announced, saying the sheer ambition and scope of it -- at the time, the search engine said it would cost at least US$150 million to complete -- spoke well of Google's ambitions to help collect and categorize many different types of information. "When they announced it, it seemed to underscore that they were the only company on the Internet with the vision, ambition and technology to do this," Forrester Research analyst Charlene Li said. "It seemed to only enhance Google's reputation." Since then, however, Google has faced criticism on a number of fronts. European officials, for instance, have worried that the project would result in mainly English-language books being represented on the Web. And privacy advocates have expressed worries that the digital nature of Google Print would enable users' book-reading histories to be subpoenaed by law enforcement.
Other publishing groups have also lashed out at the effort, including the Association of American Publishers (AAP) and general interest book publishers such as Random House, Houghton-Mifflin and John Wiley & Sons. Many publishers have mixed feelings about Google Print. The industry may stand to gain, after all, from Google's efforts, as those who search for specific information in books go on to purchase them from links provided by Google to publishers themselves or third parties that sell the books. Legal experts, meanwhile, say the project is in a gray area of copyright law, with Google's claim of fair use having merit, but the search engine also exposing itself to considerable risk, since individual copyright infringements can carry penalties of up to $150,000.
Brought to you by the Guardian eCommerce Privacy Seal Program.
Thursday, September 08, 2005
Conn. Man Admits to Selling Microsoft Source Code
A Connecticut man known on the Internet as "illwill" pleaded guilty in New York federal court yesterday to charges relating to the theft of the source code to Microsoft's Windows operating software, considered among the company's crown jewels. William Genovese Jr., 28, of Meriden, Conn., pleaded guilty to charges related to the unlawful sale and attempted sale of the source code for Microsoft's Windows 2000 and Windows NT 4.0. The code had previously been obtained by other people and unlawfully distributed over the Internet, prosecutors said.
The source code is the blueprint with which software developers write computer programs. Access to a software program's source code can allow someone to replicate the program, and industry experts expressed concern that hackers reviewing the Microsoft software code could discover new ways to attack computers running some versions of Windows. A federal indictment filed against Genovese in February 2004, charged that, on the day Microsoft learned that significant portions of its source code were stolen, Genovese posted a message on his Web site offering the code for sale. Genovese was arrested when an investigator for an online security company hired by Microsoft and an undercover FBI agent downloaded the stolen source code from his Web site after sending him electronic payments for it, Manhattan U.S. Attorney David Kelley said in a news release. Genovese faces a maximum sentence of 10 years in prison and a $250,000 fine when he is sentenced in the fall. There was no published telephone listing for Genovese in Meriden, Conn. and prosecutors did not return a call seeking information about his attorney.
Microsoft had previously shared parts of its source code with some companies, U.S. agencies, foreign governments and universities under tight restrictions that prevented them from making it publicly available. A Microsoft spokesman said in February that the company was confident the Windows blueprints weren't stolen from its own computer network. The Redmond, Wash.-based company did not immediately return a message yesterday seeking comment.
Brought to you by the Guardian eCommerce Privacy Seal Program.
The source code is the blueprint with which software developers write computer programs. Access to a software program's source code can allow someone to replicate the program, and industry experts expressed concern that hackers reviewing the Microsoft software code could discover new ways to attack computers running some versions of Windows. A federal indictment filed against Genovese in February 2004, charged that, on the day Microsoft learned that significant portions of its source code were stolen, Genovese posted a message on his Web site offering the code for sale. Genovese was arrested when an investigator for an online security company hired by Microsoft and an undercover FBI agent downloaded the stolen source code from his Web site after sending him electronic payments for it, Manhattan U.S. Attorney David Kelley said in a news release. Genovese faces a maximum sentence of 10 years in prison and a $250,000 fine when he is sentenced in the fall. There was no published telephone listing for Genovese in Meriden, Conn. and prosecutors did not return a call seeking information about his attorney.
Microsoft had previously shared parts of its source code with some companies, U.S. agencies, foreign governments and universities under tight restrictions that prevented them from making it publicly available. A Microsoft spokesman said in February that the company was confident the Windows blueprints weren't stolen from its own computer network. The Redmond, Wash.-based company did not immediately return a message yesterday seeking comment.
Brought to you by the Guardian eCommerce Privacy Seal Program.
Tuesday, September 06, 2005
Lawsuits Cause Shift in File-Swapping Traffic
A new study says that eDonkey has become the most popular peer-to-peer (P2P) network for sharing video files, a sign file-swappers are changing tactics and technology amid a crackdown on unauthorized sharing of copyrighted material. Cambridge, England-based CacheLogic said that P2P traffic makes up the majority of all data traveling among Internet service providers worldwide. The company also said that key parts of that traffic has shifted away from BitTorrent, which has been hit by lawsuits and other crackdowns, toward eDonkey, with that network the most popular for sharing video files.
CacheLogic said its study of traffic across P2P networks, based on observations of file sizes and other characteristics from measurements taken on four continents earlier this summer, found that Gnutella was a favorite for audio clips, while FastTrack was dominated by short video clip files.
BitTorrent, meanwhile, while still seeing the vast majority of overall P2P traffic, is now being used more for swapping games, software and software updates in authorized, legitimate settings, such as open-source advocates who use it to move large files full of code. BitTorrent also saw less video traffic than in the past. Most of that traffic appears to have shifted to eDonkey, where the majority of the traffic is made up of large, data-intense files that indicate full-length video.
BitTorrent itself gained prominence after the first two waves of P2P networks -- the original Napster and then networks such as Morpheus and Kazaa -- were targeted heavily by the record and movie industries, which used lawsuits and other techniques to root out copyright infringing users. P2P users have been seen shifting their approaches, with some newer networks working by storing pieces of a full-length movie on different users' computers, theoretically making it more difficult to track and identify file-swappers. The shifting traffic also suggests a "game of P2P hide and seek," said CacheLogic Chief Technology Officer Andrew Parker, rather than a true decrease in sharing of movies and music. The entertainment industry has suggested that the rise of legitimate digital download sites, especially for music, but increasingly for movies as well, and other evidence shows a decline in the demand for file-sharing.
At the same time, however, pirated copies of feature films seems to be showing up on P2P networks faster than ever, sometimes even before the films are released to theaters.
Forrester Research analyst Josh Bernoff said legitimate download opportunities are essential to lowering levels of piracy taking place via P2P networks. While the music industry finally moved to offer those choices, the movie studios have been slower to get into the digital distribution act.
"Consumers say they're ready and willing to pay for downloaded content," Bernoff said. "The stage is set. It's just up to the studios and other player to figure out distribution questions" such as digital rights technology to prevent further piracy.
In the meantime, those sharing files illegally will probably not be able to hide for long, however. The Motion Picture Association of America (MPAA) has already sued some eDonkey users, though it has focused on more high-profile networks more heavily. And the entertainment industry has enjoyed some legal victories over P2P software makers. Kazaa and Morpheus face the renewed prospect of lawsuits from the studios after a U.S. Supreme Court ruling which said that if those companies enticed users to employ their software to steal copyrighted content, they could be held liable for the actions of end-users.
Brought to you by the Guardian eCommerce Privacy Seal Program.
CacheLogic said its study of traffic across P2P networks, based on observations of file sizes and other characteristics from measurements taken on four continents earlier this summer, found that Gnutella was a favorite for audio clips, while FastTrack was dominated by short video clip files.
BitTorrent, meanwhile, while still seeing the vast majority of overall P2P traffic, is now being used more for swapping games, software and software updates in authorized, legitimate settings, such as open-source advocates who use it to move large files full of code. BitTorrent also saw less video traffic than in the past. Most of that traffic appears to have shifted to eDonkey, where the majority of the traffic is made up of large, data-intense files that indicate full-length video.
BitTorrent itself gained prominence after the first two waves of P2P networks -- the original Napster and then networks such as Morpheus and Kazaa -- were targeted heavily by the record and movie industries, which used lawsuits and other techniques to root out copyright infringing users. P2P users have been seen shifting their approaches, with some newer networks working by storing pieces of a full-length movie on different users' computers, theoretically making it more difficult to track and identify file-swappers. The shifting traffic also suggests a "game of P2P hide and seek," said CacheLogic Chief Technology Officer Andrew Parker, rather than a true decrease in sharing of movies and music. The entertainment industry has suggested that the rise of legitimate digital download sites, especially for music, but increasingly for movies as well, and other evidence shows a decline in the demand for file-sharing.
At the same time, however, pirated copies of feature films seems to be showing up on P2P networks faster than ever, sometimes even before the films are released to theaters.
Forrester Research analyst Josh Bernoff said legitimate download opportunities are essential to lowering levels of piracy taking place via P2P networks. While the music industry finally moved to offer those choices, the movie studios have been slower to get into the digital distribution act.
"Consumers say they're ready and willing to pay for downloaded content," Bernoff said. "The stage is set. It's just up to the studios and other player to figure out distribution questions" such as digital rights technology to prevent further piracy.
In the meantime, those sharing files illegally will probably not be able to hide for long, however. The Motion Picture Association of America (MPAA) has already sued some eDonkey users, though it has focused on more high-profile networks more heavily. And the entertainment industry has enjoyed some legal victories over P2P software makers. Kazaa and Morpheus face the renewed prospect of lawsuits from the studios after a U.S. Supreme Court ruling which said that if those companies enticed users to employ their software to steal copyrighted content, they could be held liable for the actions of end-users.
Brought to you by the Guardian eCommerce Privacy Seal Program.
Monday, September 05, 2005
Top Five Methods to Prevent Internet Fraud
With more than 40 million recently compromised credit cards available to fraudsters, merchants are faced with the challenge of preventing the use of these cards on their Web sites. What once was considered a rather insignificant cost of doing business online, has become a highly organized and profitable criminal endeavor. With worldwide credit card fraud surpassing US$2.5 billion last year alone, merchants must be prepared to fight off more fraud than ever. There are however, certain things that merchants can do to reduce their exposure to fraud. Following are five fundamental methods to successfully reduce fraud.
1. Track Chargebacks. When a chargeback is received, it should immediately be matched to the original transaction record. This will provide valuable insight into how fraud was perpetrated, and will arm merchants with the necessary information to reduce future chargebacks. This research might also unveil that a chargeback is not actually related to fraud, but rather the result of a pervasive customer service issue that needs to be addressed, such as incorrect product listings or delayed shipments.
2. Create a Fraud Team. It is paramount that a merchant create a well-trained team whose sole function is to combat fraud. A small group of highly trained investigators will quickly become adept at discovering anomalistic transactions and should be encouraged to use any legitimate means to accomplish their investigations, even when those means lie outside the bounds of standard corporate protocol. This includes using non-network computers to research the fraudster underworld, or having access to engineering resources to implement necessary changes to the fraud mechanism. Daily meetings should be de rigueur for the fraud team, to disseminate late breaking attacks, and should include a member of the executive when possible, to communicate unfolding issues to the decision makers within the company. These meetings should not just cover details about blocked attempts, but more importantly, should detail every loss in order to prevent similar scenarios in the future.
3. Proper Tools. Fraud-detecting software is the merchant's first filter for highlighting possible fraud. Any investigation team can only review transactions that the fraud solution displays. If a fraud solution does not flag the appropriate set of suspect transactions, even the best team of investigators will fail. Conversely, if a solution presents too many transactions for review, the investigation team will waste valuable time reviewing benign transactions. Any fraud prevention solution must be regularly updated to capture the latest fraud attacks without overwhelming the investigation team. Updates should include: tuning the risk algorithms, updating hot lists, and collecting new data points for analysis.
4. Gather Better Data. If a police investigation were limited to only three elements -- hair color, eye color and weight -- the success of the investigation would be extremely low. Imagine if descriptions regarding gender or height, which are fundamental to any normal investigation, were not even available to the investigators. Without this data, the police might never find the appropriate suspect, or might spend an inordinate amount of time vetting all of the law-abiding citizens that match the same three criteria as the perpetrator. Similarly, many merchants attempt to detect fraud without utilizing all the elements of a transaction to enhance the accuracy of their investigation. Most merchants are sitting on a wealth of transaction data that is regularly being used by marketing, sales and finance to both increase and optimize business. This same data should be harnessed to increase the depth of an investigation, even if it does not appear pertinent to the practice of fraud detection on the surface. Merchants must think creatively about how to capture and use every available piece of data to increase detection.
5. Non-Intrusive. For years, cardholders have been told that they are not liable for any fraudulent purchases. While this provides security for the cardholders, the merchants are left holding the bag. Meanwhile, if a customer is required to jump through too many "verification" hoops to complete a transaction, they might simply take their business elsewhere. Merchants must be able to validate transactions without insulting the customer experience. Merchants that can provide their customers with an effortless buying process and who can perform exceptional fraud detection will be the ones who ultimately succeed. Any fraud prevention solution or methodology must be assessed in terms of its overall benefit to the merchant. A stalwart solution that reduces fraud, but negatively impacts the customer experience -- either by increasing "false positives" or by delaying order fulfillment, might be as dangerous to the well-being of a company as an ineffective fraud solution. The ultimate key to successfully combating fraud is to take a holistic approach when implementing a fraud solution and to remain vigilant to developing threats.
Brought to you by Guardian eCommerce.
1. Track Chargebacks. When a chargeback is received, it should immediately be matched to the original transaction record. This will provide valuable insight into how fraud was perpetrated, and will arm merchants with the necessary information to reduce future chargebacks. This research might also unveil that a chargeback is not actually related to fraud, but rather the result of a pervasive customer service issue that needs to be addressed, such as incorrect product listings or delayed shipments.
2. Create a Fraud Team. It is paramount that a merchant create a well-trained team whose sole function is to combat fraud. A small group of highly trained investigators will quickly become adept at discovering anomalistic transactions and should be encouraged to use any legitimate means to accomplish their investigations, even when those means lie outside the bounds of standard corporate protocol. This includes using non-network computers to research the fraudster underworld, or having access to engineering resources to implement necessary changes to the fraud mechanism. Daily meetings should be de rigueur for the fraud team, to disseminate late breaking attacks, and should include a member of the executive when possible, to communicate unfolding issues to the decision makers within the company. These meetings should not just cover details about blocked attempts, but more importantly, should detail every loss in order to prevent similar scenarios in the future.
3. Proper Tools. Fraud-detecting software is the merchant's first filter for highlighting possible fraud. Any investigation team can only review transactions that the fraud solution displays. If a fraud solution does not flag the appropriate set of suspect transactions, even the best team of investigators will fail. Conversely, if a solution presents too many transactions for review, the investigation team will waste valuable time reviewing benign transactions. Any fraud prevention solution must be regularly updated to capture the latest fraud attacks without overwhelming the investigation team. Updates should include: tuning the risk algorithms, updating hot lists, and collecting new data points for analysis.
4. Gather Better Data. If a police investigation were limited to only three elements -- hair color, eye color and weight -- the success of the investigation would be extremely low. Imagine if descriptions regarding gender or height, which are fundamental to any normal investigation, were not even available to the investigators. Without this data, the police might never find the appropriate suspect, or might spend an inordinate amount of time vetting all of the law-abiding citizens that match the same three criteria as the perpetrator. Similarly, many merchants attempt to detect fraud without utilizing all the elements of a transaction to enhance the accuracy of their investigation. Most merchants are sitting on a wealth of transaction data that is regularly being used by marketing, sales and finance to both increase and optimize business. This same data should be harnessed to increase the depth of an investigation, even if it does not appear pertinent to the practice of fraud detection on the surface. Merchants must think creatively about how to capture and use every available piece of data to increase detection.
5. Non-Intrusive. For years, cardholders have been told that they are not liable for any fraudulent purchases. While this provides security for the cardholders, the merchants are left holding the bag. Meanwhile, if a customer is required to jump through too many "verification" hoops to complete a transaction, they might simply take their business elsewhere. Merchants must be able to validate transactions without insulting the customer experience. Merchants that can provide their customers with an effortless buying process and who can perform exceptional fraud detection will be the ones who ultimately succeed. Any fraud prevention solution or methodology must be assessed in terms of its overall benefit to the merchant. A stalwart solution that reduces fraud, but negatively impacts the customer experience -- either by increasing "false positives" or by delaying order fulfillment, might be as dangerous to the well-being of a company as an ineffective fraud solution. The ultimate key to successfully combating fraud is to take a holistic approach when implementing a fraud solution and to remain vigilant to developing threats.
Brought to you by Guardian eCommerce.
