US start-up raises $10m for ‘finance Siri’; Investors offered virtual assistant to research global events

Investors turn to virtual ‘Warren’ tool for complex answers

January 22, 2014 4:08 pm

By Arash Massoudi in New York
Forecasting the market impact of a catastrophic US hurricane or an explosion in a Middle Eastern country usually requires serious time and brainpower.
Now a group of trading technology executives has teamed up with former Googleengineers and entrepreneurs to create a “virtual market assistant” – like Apple’s Siri, but for investors – that they claim will answer complex financial questions about global events instantaneously.
Kensho, a Cambridge, Massachusetts start-up, said on Wednesday its venture had secured $10m in seed financing from a group of investors including Google Ventures, Accel Partners, and Devonshire Investments, the private equity arm of asset manager Fidelity Investments.
The company said its assistant – named Warren to evoke the spirit of Warren Buffett – was already being tested by some asset managers and research teams.
The development highlights a growing interest among entrepreneurs and investors in taking technological advances widely adopted in consumer markets, such as the Siri virtual assistant on Apple’s iPhone, and applying them to financial services. Typically, such cutting-edge advantages have largely been the preserve of a small group of investors with large research and development teams.
Kensho said Warren could shorten investment research cycles from days to minutes and that it can currently answer 1m questions. That figure is set to rise to 100m distinct questions, and it will be able to respond to questions posed verbally by the end of the year, according to the company.
Daniel Nadler, Kensho chief executive, said: “A financial professional can watch the news, see a protest in Egypt and ask the system what happens to energy prices when there is civil unrest in the Middle East. Right now, what you would need to do is to go into a data provider, export spreadsheets, normalise them, create a time series and export that into a computer model.” The start-up is the first business run by Mr Nadler, 30, who is also a visiting scholar at the US Federal Reserve.
Warren relies on what Kensho says is one of the largest unstructured geopolitical and weather databases not run by the government. The company said it can answers questions such as: “What happens to Home Depot, home builder stocks, and cement company share prices following Category 4 hurricane landfalls in the continental US?”
Stanley Young, a former chief executive at Bloomberg Enterprise and an advisory board member at Kensho, said: “It is creating insight from data and allowing people to ask intelligent questions of the data.”
Kensho says Warren, which runs on a Nasdaq OMX cloud computing platform, will be rolled out to investors in the coming months at varying prices depending on the kind of investor.
The group has also appointed James Shinn, the former National Intelligence Officer for Asia at the CIA and the former assistant secretary for Asia in the US Department of Defense, to its advisory board.
David Jegen, managing director at Devonshire Investors, said: “Active asset management requires constant innovation to stay ahead, and we are just beginning to see how technology will transform existing approaches.”

Putting a price on your contacts; database used by bankers and lawyers as a way of identifying which employees were best placed to win new business; clients are paying up to $1m a year to use the data

Putting a price on your contacts

January 22, 2014 4:28 pm
By Maija Palmer
When Boardex started mapping the professional relationships between prominent business people, the London-based company was targeting corporate governance watchdogs as clients.
James Daly, chief executive, thought its database would be used to track connections between executives and board members to guard against cronyism in the wake of Enron’s 2001 collapse.
The product eventually took off – but not in the way Boardex intended. Corporate governance watchdogs were interested, “but they didn’t have the budget to spend on it”.
Instead, the database was picked up by bankers and lawyers as a way of identifying which employees were best placed to win new business.
Mr Daly says clients are paying up to $1m a year to use the data. “Two years ago it started to become a trend. Companies started looking at the relationships their employees had and recognised it as a form of capital.”
Technology such as Boardex’s is indeed making it easier to put a value on the adage “it is not what you know, it is who you know”, both for high-level employees and rank-and-file workers.
In recent years, for instance, companies such as Klout, Kred and Peer­Index have emerged, promising to measure the level of influence that an individual has online.
Factors such as how many followers someone has on Twitter and how influential those followers are can be condensed into a single number by Klout. Accenture, the consultant, is among those using it as part of its recruitment process in the US.
Profiles on the LinkedIn networking service are another guide to an individual’s connectedness, publicly listing how many contacts someone has (although it stops counting at 500).
But to what extent should employers track such indicators when they hire, promote and manage staff?
Michael Wright, head of talent acquisition for the Asia Pacific region for Group M, an advertising company, says that, while he would never hire someone solely on the basis of their Klout score or LinkedIn profile, it can be a useful filter for weeding out candidates.
“If someone has just four connections on LinkedIn and they haven’t bothered to upload a photo, it is a warning sign. They would be off our longlist of candidates for a role,” he says.
“If someone is looking to relocate from Europe to Asia and a quick scan through their contacts shows they have no connections in Asia, that would count against them as this is a relationship business,” he adds.
Paul Guely, managing partner at Arma Partners, a corporate finance advisory firm, says technical tools can only be a small part of the process.
He says: “I am a member of a number of social networks and I do get value from them in terms of seeing who knows who. But when I want to understand what “know” means – whether someone trusts this person, how much business they really do together – I have not yet found a substitute for the off-the-record phone call to someone who knows them.”
Russell Reynolds, an executive search firm, is one of the more than 250 companies that use Boardex’s software. Tim Cook, co-leader of its information officers practice, finds the software useful for looking at a candidate’s job history, but says it can never be a complete substitute for a recruiter’s own market insight.
“Knowing who is connected to who is interesting, but knowing who has excelled in their role and how they have done it is the insight on which we act,” he says.
The Boardex database maps relationships between more than 600,000 business people. If a bank wants to pitch to a company for work – to Intel, say – the software can indicate which of its employees are closest to Intel senior management.
The relationships are ranked by strength, “so that having met someone once at a cocktail party does not have the same value as having served on a board with them for 10 years,” Mr Daly says.
The most valuable information is not so much the direct connections, which might be known through other means, but the second-degree ones, which are more difficult to discover.
The system can also show a company areas where it lacks connections, as well as the impact a particular employee’s departure might have.
Mr Daly goes so far as to claim that its algorithms could put an overall financial value on a company’s relationships that would merit being placed on its balance sheet alongside other intangible assets. He believes such a number would be at least as valid as an estimate of goodwill – a notoriously finger-in-the-air asset created in takeovers.
But even as companies are offered new ways to value their employees’ relationships, there is concern in some cases over who owns those networks. Put bluntly: are your business contacts your own or the company’s?
Mr Daly talks of a “healthy tension” between individuals and their employers on this point. This is by no means entirely new. The loss of valuable connections has always been a threat to any relationship-based business, such as investment banking.
The tension is also creeping into the world of social media, however; courts have yet to work out a clear position on who owns what online when an employee leaves (see box).
Donna Ballman, an employment lawyer and author of the book Stand Up For Yourself Without Getting Fired, says that as “relationship capital” becomes more important, employment contracts will need to start including more clauses on ownership of online networks.
“This issue continues to be a hot topic in employment law. The courts frequently look to what the parties agreed in any contracts. I see provisions dealing with social media in employment agreements, confidentiality agreements, intellectual property agreements and non-solicitation agreements,” she says.
Even so, it remains unclear whether such contracts related to social media can be enforced. If any of the contacts are deemed to be in the public domain, for example, ownership clauses would not apply.
So how worried should you be if your own Klout score is less than stellar and you do not have a contact who knows Larry Ellison and can therefore make you stand out on the Board­ex database?
“It is just one tool in a very big toolbox,” says Mr Wright, of Group M. “The final decision on hiring needs human assessment. But it will be used more and more. I have a friend who says you are the product of the people you keep company with and I think there is some truth in that.”
Online poaching by former staff
Companies are used to clashing with former employees that try to poach clients or otherwise exploit professional relationships they had nurtured in their old role.
The rise of social media, however, has created fresh potential for conflict when well-connected employees quit. The question increasingly being raised is: who gets to exploit the departing worker’s online network?
So far, the case law in this area is mixed.
Litigation in the US between PhoneDog, a mobile phone review site, and one of its former employees, Noah Kravitz, was expected to be a test case last year.
Mr Kravitz had created a Twitter account, @PhoneDog_Noah, which he used to promote the company, gaining 17,000 followers in the process.
When he left the company he changed the Twitter handle to @noahkravitz but retained the 17,000 followers.
PhoneDog sued him for $340,000, putting a price of $2.50 on each Twitter follower, per month. However, the case was settled out of court and although Mr Kravitz did keep his followers, it is unclear whether he paid for them.

Some Businesses Go Creative on Prices, Applying Technology

Some Businesses Go Creative on Prices, Applying Technology
By DONNA FENNJAN. 22, 2014
Many business owners struggle with pricing. Should their first concern be covering costs or figuring out what the market will bear? How do they determine what the market will pay without raising prices high enough that some customers flee? And can they offer discounts without damaging their price brand?
There may be no easy or universal answers to these questions, but new thinking and new technology has made it possible for some, like the airline and hotel industries, to use what is known as dynamic pricing to vary prices according to demand and fill seats and rooms more efficiently. Now, more small businesses are finding ways to adapt their strategies.
You can find consultants that charge for results rather than by the hour, restaurants that charge what is essentially a ticket price that varies according to how busy the restaurant is, and even some businesses that ask customers topay what they wish
.
And Uber, a Silicon Valley company founded four years ago, has a mobile app that connects a small army of black cars with people who need rides in 70 cities worldwide and employs “surge pricing.” Uber, which takes 20 percent of all fares, charges more when demand is high and the supply of cars low.
“You get far more cars on the road and they stay out longer when surge pricing is in effect,” said Travis Kalanick, a co-founder.
You also get some cranky customers. In the last few months, the company has received an onslaught of complaints when the cost of a ride rose to as much as seven times the normal rate during a snowstorm and on New Year’s Eve.
“One of the things we’ve learned,” Mr. Kalanick said, “is that the more crisply you deliver the message to the customer and the more you set expectations ahead of time, the more you get to a place where there’s no issue with it.”
Uber’s prices are controlled by an algorithm — technology that is increasingly available to even the smallest enterprises. Craig Clark, for example, sells more than 2,600 items — vintage china, bras, house numbers — on a variety of online marketplaces. Two years ago, he was collecting $2,000 a month in revenue from his sale of house numbers on Amazon.com.
“Six months into it, my sales went down all of the sudden,” he said. “Amazon went out and got a wholesale account and started selling the numbers themselves. So you’re not just competing against other sellers, you’re also competing against Amazon.”
Mr. Clark had been laid off from his job as an analyst for a telecom company outside Philadelphia, so his online retail ventures had become his only source of income. Like many Amazon sellers, he started re-pricing items manually, but found the process wildly time-consuming. And mistakenly pricing a Jenga game at $13.99, instead of $23.99, once cost him $1,200.
Then, he learned of FeedVisor, which makes re-pricing software. “You tell them what the item cost you, the commission you pay to Amazon, and your highest and lowest price,” said Mr. Clark, whose annual revenue is approximately $500,000. “FeedVisor then algorithmically decides the best price within your parameters and what everyone else is selling at.”
The company, one of many that sells re-pricing software, charges 1 percent of sales and provides a dashboard that lets sellers analyze sales and profits. Using FeedVisor last summer, Mr. Clark said his “sales on Coobie bras went up 25 percent almost overnight.”
FeedVisor reduced the price on the bras, which he was selling for between $19 and $23, by $2 or more to make them more competitive. That reduced his profit margin, Mr. Clark said, to 37 percent from 39 percent — but increased his volume. The software also produced sales increases on other items of from 15 to 40 percent, he said, and helped him unload stale inventory, such as a pallet of pots and pans. “I hadn’t sold one in six months,” said Mr. Clark, “and I got rid of them in four days.”
Restaurants, too, are using innovative pricing strategies. In September 2012, Groupon acquired a restaurant reservation engine, Savored, and has since integrated it into a new high-end division called Groupon Reserve. Instead of offering customers, say, $50 off a meal as traditional daily deals do, Savored lets restaurants offer customers a percentage off an entire meal in return for dining at a specified time.
Cacio e Vino, a Sicilian restaurant based in Manhattan, has been using the app for two years, said Christine Ehlert, the manager. “On Sunday, Monday and Tuesday, we offer a certain number of tables for a 40 percent discount,” she said. Wednesday and Thursday diners may get 30 percent off through the app and customers who make reservations for between 5 and 7 p.m. on Friday and Saturday get a 25 percent discount.
Ms. Ehlert said that she initially worried whether the discounting might damage her brand. “But since we only offer a limited amount of discounted tables at certain times,” she said, “I feel that we can explain to people that it’s a way to drive new business to us in off hours.”
Cacio e Vino pays Groupon a flat fee of $2.50 per diner. “The nice thing is that if it seems we’re going to be too busy,” Ms. Ehlert said, “I can call our rep at Savored and close out the deal.”
Before using Savored, she said, the restaurant typically had $800 in sales on Mondays and Tuesdays. “Now, it’s between $1,200 and $1,500,” she said, with a profit margin on the discounted customers that is about half that of the full-price customers. She said slightly fewer than half of the restaurant’s discounted customers come back, typically for another discounted meal.
Frank and Rhonda Duffy run Duffy Realty of Atlanta, one of a growing number of real estate agencies trying new pricing strategies. The Duffys charge an upfront listing fee of $500 and one third of 1 percent when a house sells. According to Zillow, the agency has about 800 active listings and had more than 1,400 sales in the last 12 months. Mr. Duffy said the agency’s 2013 revenue was $5.3 million.
For the reduced fee, the Duffys offer limited service. The firm adds homes to the local Multiple Listing Service, as well as on Zillow and Trulia, supplies sellers with a 60-point, do-it-yourself marketing guide, rents lockboxes for $100, and charges $94 for a home to be professionally photographed. One of the firm’s four listing specialists is likely to come to take your information. Then, a team of specialists, including client services representatives, buyer’s agents and contract negotiators, moves buyers and sellers through the sale process.
To provide an incentive to agents from other firms to bring buyers, the Duffys encourage sellers to offer the buyer’s agents commissions of 3 percent or even 4 percent. Most sellers do it, he said, because they still come out ahead. On the sale of a $300,000 home, for example, a traditional agent might split a 6 percent commission, or $18,000, with a buyer’s agent. A seller listing with Duffy will pay a $1,520 commission ($500 plus one third of 1 percent, or $1,020), plus 3 percent ($9,000) or 4 percent ($12,000) for a buyer’s agent, or a total of between $10,520 and $13,520.
The pricing model does not suit all sellers. “The danger is you’re not getting the advice and guidance,” said Frank S. Alexander, a real estate professor at Emory Law School. “What do you with inspection results, or during the due diligence period, or in a contract negotiation?”
For experienced sellers, or in a particularly hot market, that may not matter.

South Korea Is Building A Wireless Network That Would Be 1000 Times Faster Than 4G

South Korea Is Building A Wireless Network That Would Be 1000 Times Faster Than 4G
NINA ZIPKIN, ENTREPRENEUR
JAN. 22, 2014, 11:55 PM
How much would you pay for instant download ability?
South Korea’s Ministry of Science and Technology announced plans to spend about $1.5 billion to build a national 5G wireless network to be commercially available by 2020. With the new 5G — which would be 1,000 times faster than most 4G LTE networks — users would be able download a full-length, 800-megabyte film in just one second.
Yep, just one second. That’s it.
The country’s science ministry sees this plan as “preemptive,” noting in a statement on Wednesday, “Countries in Europe, China and the US are making aggressive efforts to develop 5G technology…and we believe there will be fierce competition in this market in a few years.”
South Korea is home to tech heavy-hitters like Samsung and LG, and is known for not only being an interconnected nation, but having the fastest internet in the world. The 5G network would not only be a boon for country’s mobile and telecommunications industries. Apparently the faster internet speed would make it possible for travelers on 310 mph bullet trains to get access to their e-mail and preferred social media networks.
When wireless reaches that speed in the U.S., well, watch out.

Internet opportunity map for Southeast Asia

Starting a business in Southeast Asia? Check out this opportunity map
January 22, 2014
by Nitin Mittal

Nitin is a senior manager of business development at SingTel-SoftBank InnoVentures.

I was inspired by Ron Hose’s Philippines startup report and decided to work on a high level Internet opportunity map for Southeast Asia. The countries included in this study are Indonesia, Thailand and Philippines. I hope to add Malaysia and Vietnam in a later update.
Since there has been a lot of discussion about looking at Southeast Asia as a whole, I thought it became necessary to understand the opportunity landscape at the regional level. This map serves as a starting point for early stage entrepreneurs who are trying to figure out what to build. The good news is that most areas are at an infancy to semi-mature stage, offering an immense opportunity for entrepreneurship in Southeast Asia.
I reached out to my business network in the above countries to rate each of the Internet categories on a five-point scale – Saturated, Mature, Semi-mature, Infancy, and Non-existent. The ratings given by venture capital and Internet industry experts were country-specific. The individual country ratings where then combined (weighted average using population and GDP per capita) to get a Southeast Asia level rating.
The scores for each of the countries were based on top of the know-how of the experts and the averaging does not use other relevant influencing variables like internet, credit card, or smartphone penetration. In other words, this categorization is more of a first attempt to develop a general idea of the opportunities.
Entrepreneurs should try to identify the large pain points that customers in their markets need solutions for based on these categories. The categories should also help entrepreneurs figure out where a speedy adaptation of a successful business model and product will happen for this region and what is unlikely to work.

Tokyo Launches Cab-Calling Mobile App

Tokyo Launches Cab-Calling Mobile App

January 23, 2014, 9:54 AM
KANA INAGAKI
The next time you’re in a long lineup waiting for a taxi in Tokyo, you might want to download a new application onto your mobile phone that will connect you with a nearby cab that can pick you up in a few minutes.
Is this the Japanese version of Uber — the hugely popular car-service app in the U.S. that has also spread rapidly to nearly 70 cities around the globe, including New York, London and Singapore? Perhaps not, but it seems like a step in the right direction.
On Tuesday, the Tokyo Hire-Taxi Association introduced a mobile app service that allows users to connect with around 6,500 cabs in central areas of the city. The app works on iPhones and devices using Android and Windows operating systems through Microsoft’sMSFT -0.66%
cloud computing system.
By April, the service is expected to work for about 9,200 taxis. There won’t be any extra charges to use the app, and payments will need to be made to the driver. (With Uber, the fare is automatically charged to your credit card.)
Japan has an incredible number of taxis — over 50,000 in Tokyo alone, nearly four times the number in New York. So getting a cab in the big city is usually fairly easy.
But not always. In the upscale shopping district of Ginza, for instance, there are long lines of waiting taxis everywhere, but you can end up walking in circles looking for the start of the line, the proper place to get a cab.
And despite being one of the most wired cities on the planet, mobile phone apps for calling cabs aren’t widely used.
Some Japanese taxi companies have individually created similar apps, but until now there had been no industry-wide system.
While the Uber app is already available in Tokyo, its service area is limited and its name not widely known. When Uber Technologies co-founder and chief executive Travis Kalanick visited Japan last April, he complained about the “very byzantine and complicated regulations” — from price rules to special operating licenses — that made it difficult for his company to enter the market.
For now, the new Tokyo taxi association app is only available in Japanese. And like most things in Japan, it features a cute mascot, called “Takkun,” a blue car with blinking eyes, arms and yellow wheels. The association says it hopes to expand the app’s coverage area and offer the service in English ahead of the 2020 Summer Olympics.
It might not be Uber, but it might be the closest Tokyo comes to making taxis fast and easy to call before the Olympics come to town.

The end of the $1 million taxi. It is the way Uber threatens to restructure the taxi economy that is its most important contribution

Uber Has Changed My Life And As God Is My Witness I Will Never Take A Taxi Again (Where Available)
JIM EDWARDS
JAN. 22, 2014, 9:25 PM 8,801 13
Last weekend I stepped out of a taxi in front of my house and realized I just don’t have to put up with this garbage anymore:
It started in line at the taxi stand, with the driver trying to get another customer — a total stranger — to share the ride with me. Then the driver expressed his disappointment that I wasn’t going very far (I guess he was hoping for a bigger fare). The interior of the car was filthy; the seats were ripped and worn. The car itself was an ancient Chevy Caprice. In the 10-block ride, the driver carried on a conversation via his headset the entire way, in a foreign language. (Research shows that talking on a phone, even hands free, while driving is as good as driving drunk.) His English was rudimentary at best. That turned out to be a good thing, because I couldn’t understand what he was trying to say when he insulted me for not tipping him enough.
I was too tired to explain to him that nothing he had done warranted encouragement.
No more.
And now I’m done with taxis.
As long as cars are available on my Uber app — which connects limo drivers with customers based on a mapping and pricing algorithm that delivers rides that are often cheaper than metered taxis — I’m taking Uber instead.
Don’t underestimate Uber. What it does is incredibly simple but incredibly clever — and it’s going to fix bad taxis forever.
If you’ve ever taken a taxi in the New York metro area — especially outside Manhattan — “the depressing taxi experience” will be familiar to you. New Yorkers swap awful taxi tales like they’re war stories. We’re almost proud of them.
I’m not saying all taxi drivers are awful. I’ve had some really great taxi drivers. But it is not a generalization to say that really bad taxi experiences are too common to be ignored. If service at Starbucks was as routinely disappointing as service from taxis, Starbucks would have gone out of business long ago.
Yes, taxi drivers should be able to speak English.
Different American cities set different rules for taxis, and that plays out as wildly different levels of service depending on the standards they’re required to meet. Taxis in Las Vegas are great, for instance, and I’ve never had a Vegas driver who wasn’t fluent in English. In Jersey City, N.J., however, it’s unusual to get a driver who can converse beyond the minimum exchange required to get the fare from A to B.
This “speaking English” thing is important. The job requires drivers to be able to communicate in the language of the customers they’re serving. They need to be able to obey instructions from law enforcement. And it would be nice if they could chat politely with their fares, like Vegas drivers do. (In case you’re about to accuse me of being racist, turn the situation on its head: If I was to announce I was moving to France to become a taxi driver but I wasn’t going to bother to learn French, you’d laugh at my stupidity.)
Uber fixes this because it requires drivers to pass an orientation before they can start accepting fares. They can’t get through the orientation unless they can converse in English, a driver told me recently. And, of course, an Uber driver who can’t communicate will get low ratings from customers, and eventually dropped from the system.
Good behavior is rewarded.
Unlike regular taxis, the Uber system punishes bad service.
It works both ways, too, because the drivers get to rate the passengers as well. Be rude, late or drunk once too often and suddenly you’ll find there is never a driver willing to pick you up. The customer-driver mutual rating system creates reciprocal obligations in which both sides are incentivized to be as nice as possible.
English isn’t the only new standard Uber sets. It requires drivers to have a car that is at least as modern as 2007. And it allows customers to choose the type of car they hail. It’s the opposite with regular taxis, where you get what you’re given. That’s why my awful taxi ride home was in a car you couldn’t sell on CraigsList, whereas Uber cars range from merely unremarkable — which is a good thing in taxi — to totally cool.
And then there’s the taxi “call.” How many times has a cab dispatcher told you on the phone the driver is just “five minutes away,” after you’ve been waiting for 20 minutes? The Uber app shows you where the car is and measures its arrival in minutes. You can even text or call the driver to make sure.
This is impossible with regular taxis.
The end of the $1 million taxi.
But it is the way Uber threatens to restructure the taxi economy that is its most important contribution. In many cities like New York, a limited number of “medallions” are sold giving the owners the right to operate taxis. Because they are limited, the price of them can be astronomical. In New York, medallions sell for more than $1 million each.
How is a taxi operator supposed to get that money back? By providing the cheapest possible vehicle with the cheapest possible labor, and running both into the ground. That’s why taxi companies rent their vehicles to drivers. They need the guaranteed income. The taxi system is almost designed to provide the worst service possible, and to pay drivers the least it can.
All Uber requires is a modern car and a clean record. Drivers get a simple cut of each fare. There is no $1 million entry fee that needs to be clawed back. And there is no car rental that needs to be earned before the driver makes any money.
Every Uber driver I’ve asked loves being an Uber driver. A lot of them say they like being able to dip in and out of it when they feel like — simply by switching their app on or off.
What about the hated ‘surge’?
The downside, of course, is that Uber has “surge” pricing which makes rides dramatically more expensive during periods of heavy demand. I’ve noted before that if you know what you’re doing you can actually save money using Uber. And in New Jersey particularly, there’s a nice oversupply of drivers because New York drivers with a New York Taxi & Limousine Commission license can legally drive for Uber in New Jersey, too.
But Uber has a surprise even for people who hate the surge: Uber Taxi. On the street in New York the other day, I hailed an Uber taxi, and a yellow cab picked me up, and charged me the regular rate in cash. It was actually an improvement on a regular yellow cab because instead of standing in the street and waving my arm like an idiot, he drove to me. Uber even makes hailing a cab easier! (During a New York winter this is not a trivial consideration.)
Uber basically provides superior service and superior cars at rates that are either identical, or cheaper, than taxis. Occasionally during a surge the price is more. But that seems like a small price to pay for sweeping away a rotten, broken system full of waste, rudeness and inefficiency.
Now that I’ve been using Uber regularly, I don’t see that I ever have to offer taxi companies encouragement ever again.

Robots will stay in the back seat in the second machine age; A new machine era needs workers with fresh skills

Robots will stay in the back seat in the second machine age

January 21, 2014 12:19 pm
By Andrew McAfee and Erik Brynjolfsson
A new machine era needs workers with fresh skills, say Andrew McAfee and Erik Brynjolfsson
It is easy to be pessimistic about jobs and pay these days. More and more work is being automated away by ever more powerful and capable technologies.
Not only can computers transcribe and translate normal human speech, they can also understand it well enough to carry out simple instructions. Machines now make sense of huge pools of unstructured information, and in many cases detect patterns and draw inferences better than highly trained and experienced humans. Recent advances include autonomous cars and aircraft, androbots
that can work alongside humans in factories, warehouses and the open air.
These innovations are quickly leaving the lab and entering the wider economy, bringing new challenges for workers from tax preparers to burger flippers. Many have concluded that the era of large-scale technological unemployment has finally arrived. For these observers, labour trends visible in many countries – declining real wages and social mobility; rising inequality and polarisation; persistently high unemployment – are only going to accelerate as technology races ahead.
But the world is not ready to give up on human labour. Humanity is entering a second machine age. The first, spurred by the industrial revolution, was mechanical; this one is digital. The first augmented our muscles; the second, our minds.
History may not repeat itself but it certainly does rhyme, and the industrial revolution’s waves of mechanisation contain important insights for our time. The early decades of the 20th century are particularly illustrative. During that time, electric power, the internal combustion engine and other advances transformed industry. To John Maynard Keynes and others, they also seemed likely to lead to technological unemployment.
But instead, these innovations led to demand for very different kinds of workers – those that used their heads in addition to, or instead of, their hands and their backs.
Many societies responded to this demand by investing in education. The US invested especially heavily, and it is no coincidence that it raced ahead in productivity and living standards.
At the same time, entrepreneurs invented whole industries that drew on this new kind of workforce. Educated workers found they could demand high wages, which they spent on a wide array of goods and services, completing a virtuous cycle. Instead of technological unemployment, then, the postwar decades saw the emergence of a large, stable and prosperous middle class.
The lesson is clear: the industrial revolution started a race between technology and education – and, for most of the 20th century, humans won that race.
The second machine age will require workers with different skills. It once made sense to stress the memorisation of facts, and the ability to follow detailed instructions. But computers are already good at all of these, and getting better quickly. We will need to reinvent education and facilitate life-long learning.
Which human skills will still be in demand? We have yet to see a truly creative computer, or an innovative or entrepreneurial one. Nor have we seen a piece of digital gear that could unite people behind a common cause, or comfort a sick child with a gentle caress and knowing smile. And robots are still nowhere near able to repair a bridge or furnace, or care for a frail or injured person.
People will have important roles to play in the second machine age. But the difficulty many companies have in finding the employees they need up and down the skills ladder shows that our education systems are not keeping pace.
Before resigning ourselves to an era of mass unemployment, let us ensure that we are giving our people the skills they need to work alongside the astonishing technologies we are developing. Instead of assuming that human workers are marginalised, or that technology can never destroy jobs, let us instead work to give humans the tools and environment they need to thrive.
The writers are authors of ‘The Second Machine Age’

Payments Startup Stripe Joins the Billion Dollar Club; New $80 Million Funding Round Will Help Company Battle PayPal

Payments Startup Stripe Joins the Billion Dollar Club
New $80 Million Funding Round Will Help Company Battle PayPal
DOUGLAS MACMILLAN
Jan. 22, 2014 7:45 p.m. ET

In the crowded field of online payments, venture capitalists are betting Stripe Inc. is a standout worth more than a billion dollars.
The payments startup has raised about $80 million in new funding this week from venture-capital investors including Khosla Ventures, Sequoia Capital, and Founders Fund, said brothers John and Patrick Collison, the company’s co-founders, in an interview. Stripe, at just over four years old, is now valued at $1.75 billion.
The lofty valuation for such a young company suggests Stripe is growing rapidly in the area of mobile payments—a market that Forrester Research estimates will add up to $90 billion in total U.S. spending in 2017—and posing a threat to eBay Inc. EBAY +0.48% ‘s PayPal, the digital-payments leader for more than a decade.
The San Francisco startup is among several companies trying to simplify how businesses accept payments online and through a mobile device. Stripe provides easy-to-use computer code that any merchant can plug into their website or mobile app to begin accepting credit-card payments. The company takes 2.9% of most transactions in addition to a flat commission of 30 cents per charge—the exact same rate set by PayPal.
“Payments are still startlingly disconnected and fragmented,” said Stripe President John Collison. “Less than 5% of consumer spending happens online today. It’s pretty clearly going to be much larger than that.”
The new funds will help fuel Stripe’s international expansion. Stripe, now accepted in just 12 countries, has plenty of work ahead to catch up to PayPal, which is in more than 190 countries. Entering each new country requires meeting local laws governing payment providers, and sometimes requires Stripe to team up with existing businesses, Mr. Collison said.
While the company doesn’t disclose its revenue or number of merchants, its software is now used in thousands of popular mobile apps, including ride-sharing service Lyft and grocery delivery app Instacart. Its total payment volume has doubled since last September, he said.
Stripe’s transaction total is likely dwarfed by PayPal, which processed $125 billion in purchases last year. But according to Khosla Ventures’ Keith Rabois, an early PayPal executive, Stripe has a competitive advantage because it created a simple new service that is popular with developers.
“PayPal has a lot of legacy technologies cobbled together, whereas Stripe has reinvented everything they are doing from scratch,” Mr. Rabois said. “Stripe has created a brand where all new developers start with the premise that Stripe is the right answer. If you were a developer today and you thought about using a different option, your engineers would think you’re insane.”
Stripe saved costs for Lyft, which began using the service a year ago to let drivers quickly process mobile payments. “Stripe removed the need for us to hire additional internal staff to process payouts to Lyft drivers,” said Lyft co-founder Logan Green in an email.
For its part, PayPal stepped up competition in mobile payments last year, when it paid $800 million for Braintree, widely seen as Stripe’s closest rival. On Wednesday, eBay said that activist investor Carl Icahn wants to split up the company, dividing its PayPal payments unit from its e-commerce site.
A spokesman for PayPal declined to comment.
Stripe has now raised more than $120 million from investors, who include PayPal alumsElon Musk
and Peter Thiel as well as Andreessen Horowitz, Redpoint Ventures and General Catalyst Partners. Stripe was last valued at close to $500 million when it raised funding in July 2012.
An engineer-heavy workforce, Stripe now has about 90 employees.
The company is in talks to power payments for a shopping feature on Twitter Inc.TWTR -0.14% ‘s social network, according to a person familiar with the discussions.

Facebook has launched a trial using its data to help marketers deliver advertisements on other mobile applications, opening the way for it to establish its own mobile advertising network

Facebook data trial paves way for mobile ad network

January 22, 2014 10:29 pm
By Hannah Kuchler in San Francisco
Facebook has launched a trial using its data to help marketers deliver advertisements on other mobile applications, opening the way for it to establish its own mobile advertising network.
The social media company said it was working with a small number of advertisers and publishers to help them reach people who spend time on apps other than Facebook’s.
The trial is a sign the social network is considering following the lead of Twitter, the messaging platform, in the use of its data to generate revenue from other properties across the web.
In a blog on its Facebook for Business site, it said the trial was different from past experiments because, instead of working with an outside ad-serving platform, it behaved more like a mobile advertising network.
“Our aim is to demonstrate even greater reach with the same power of Facebook targeting for advertisers both on and off Facebook,” the company said.
Brian Wieser, an analyst from Pivotal Research, said the move was “significant’, with the potential to threaten advertising networks such as Millennial Media and technology company rivals such as Google’s AdMob and Twitter’s MoPub.
“This is more of a one-stop shop competition and they are taking the opportunity because if you don’t, someone else will,” he said.
Twitter bought MoPub, a mobile advertising exchange
, last year shortly before it became a public company. The MoPub acquisition will allow Twitter to use the information it collects about users’ interests, based on who they follow, to serve ads across a range of other websites.
Facebook’s ad revenues have soared over the past year, helping allay investor concerns that advertisers would not follow users on to mobile devices. In its third-quarter earnings, it reported that almost half of its total advertising revenue came from mobile devices.
The company overtook Yahoo to win the second largest share of the growing US digital advertising market in 2013, following Google, according to data from research firm E-Marketer. Facebook has a 7.4 per cent share of the US digital ad market, up from 5.9 per cent in 2012.
Ad revenue is expected to show continued growth when Facebook reports its fourth-quarter earnings next week, as small businesses flood to the platform and mobile app install ads continue to thrive.
The company is also experimenting with video ads that play automatically as it looks to gain a slice of the global TV advertising market.
Shares in Facebook, which have risen 88 per cent in the last year, fell 2 per cent in afternoon trading on Wednesday.

Netflix: music to my ears; Future of movie site could look a lot like Pandora’s present

January 22, 2014 11:16 pm
Netflix: music to my ears
Future of movie site could look a lot like Pandora’s present

To divine the future of Netflix, think about music rather than video. Netflix is proceeding nicely; it said on Wednesday that it added a better than expected 2.3m subscribers in the US, sending its shares up 17 per cent in late trading.
Recent headlines have been dominated, however, by copycats such as Verizon, Amazon, and Sony which are unveiling rival internet television services. The scrum in TV looks strikingly similar to last year’s tussle in internet radio. Pandora, the pioneer in streaming music, was pronounced dead repeatedly as deep-pocketed rivals including Apple, Google, and Spotify were expected to overwhelm it. But a funny thing happened: Pandora’s market share grew (now at 70 per cent of internet radio) and its stock price has surged more than 250 per cent since the beginning of 2013.
This week, Verizon announced it was buying Intel’s digital TV service, OnCue
. Amazon has been rumouredto be negotiating with cable channels for its own TV service. Sony and Apple also lurk. These services want to offer programming across devices. The challenge for the upstarts is to build an interface that consumers can easily navigate and to acquire the programmes they want to watch.
Pandora’s success is two-pronged. First, its listeners appreciate the algorithm that determines playlists. Second, its 70m users give it unique leverage with carmakers or electronics manufacturers that embed Pandora in cars or TVs. Similarly, Netflix has a large subscriber base (44m worldwide) that often prefers it for its original programming, such as House of Cards.
The question now is how competition will slow, rather than destroy, Netflix and Pandora. Both trade above 85 times 2014 earnings, reflecting how their entrenched positions are expected to translate into eventual earnings growth. For now, investors have agreed that first mover means first place.

Meet the Warby Parker of mattresses; Tuft and Needle is set to do to the mattress business what Warby Parker did for eyewear and TOMS did for footwear: blow it up.

Meet the Warby Parker of mattresses
By Miguel Helft, senior writer January 22, 2014: 10:11 AM ET
Tuft and Needle is set to do to the mattress business what Warby Parker did for eyewear and TOMS did for footwear: blow it up.
FORTUNE — If Warby Parker could disrupt the eyewear business and TOMS the footwear market, why not use technology to try to disrupt mattresses?
That’s what two engineers set out to do some 18 months ago. The result is Tuft and Needle, a startup that began selling foam mattresses mostly through a slick website at the end of 2012. The company remains tiny, having passed the $1 million sales mark after one year in an industry that by some estimates generates $7 billion in revenue annually.
But in its short life, Tuft and Needle has earned something to brag about. Though its mattresses, at $400 for a queen-sized model, are relatively inexpensive, customers seem to love them. The young company began selling through Amazon in the fall, and its mattresses soon reached No. 1, when rated by customer reviews. Its products have earned 154 five-star and 16 four-star ratings. In the only negative review, a customer gave it a single star complaining that the mattress was too firm for his taste.
“It’s pretty cool to see this tiny team become the No. 1-rated mattress team on Amazon,” says Caleb Elston, the co-founder and CEO of Delighted, a startup that helps businesses collect customer feedback and that counts Tuft and Needle among its customers.
Tuft and Needle was co-founded by John-Thomas Marino, 28, and Daehee Park, 25. The two were college buddies at Penn State a few years earlier, where both dabbled in the startup world. After reuniting briefly at a Silicon Valley firm, they left in mid-2012 to launch their own company. “We wanted to take everything we learned tech-wise, in software and business processes, and apply it to something old-fashioned,” says Marino, who goes by JT. They picked mattresses after Marino went through what he describes as a significant amount of pain to buy a $3,200 memory foam mattress. “It was a terrible experience,” he says.
The two set out to research what it would cost to make mattresses. It was not easy going: Several manufacturers wouldn’t even talk to them. What they eventually found out is now summarized on their website and reads a bit like a consumer manifesto.
Most mattresses, they say, typically cost only hundreds of dollars to produce. But the markups to cover overhead, distributor fees, and profits are enormous — as much as 1,000%. “More of your dollars go to pay for the sales commissions, advertising costs, and outrageous profits than the actual ingredients of the product,” they write. In contrast, Tuft and Needle offers “an honestly crafted mattress at a fair price.”
Tuft and Needle’s claims have attracted some detractors. On a blog post on the website Hacker News, where Marino and Park described their approach, one critic described the company’s product as “very low end” and its marketing claims as “half truths.” Another commenter compared the mattresses to futons.
Marino says mass-produced futons are far cheaper to make and not really comparable to his company’s foam mattresses. He also says that manufacturers have been making increasingly thick mattresses just so they can charge consumers more. The company’s 5-inch mattresses are more comfortable than most thicker coil or foam mattresses, he says. “Thickness doesn’t matter,” Marino says. “It’s all spin.” (Many consumers seem to agree.) The company will soon release a 10-inch model that he says will silence its critics.
Tuft and Needle’s mattresses are made in the U.S., from three layers of foam, and are covered in a knitted fabric. They are assembled and shipped from a facility in Los Angeles. Marino and Park say they researched the ideal foam combinations and fabrics to come up with their first product. Like a tech company, they have continued iterating on the product, incorporating suggestions made by their customers. “We make changes to the product monthly,” says Marino.
The two also wrote their own fulfillment software to communicate with suppliers, who before that took orders via e-mail. As a result, the number of errors dropped dramatically. And they use analytics to determine the preferences of their customers and customize their website accordingly. The company is self-funded but has recently attracted the attention of investors, Marino says.
“The growth is consistent, and it’s all based on word of mouth,” he adds.
While it is officially based in Phoenix, the company is largely virtual, with its 10-or-so employees, most of them in customer service, who work from remote locations across the country. When they took the top-reviewed slot in the mattress category on Amazon, they celebrated with a glass of champagne. “We all got on a Skype call and tapped our glasses to the screen,” Marino says

Lucrative Role as Middleman Puts Amazon in Tough Spot; While Business Is Key to Growth, Conflicts Arise Over Counterfeit, Unsafe Products

Lucrative Role as Middleman Puts Amazon in Tough Spot
While Business Is Key to Growth, Conflicts Arise Over Counterfeit, Unsafe Products
SERENA NG and GREG BENSINGER
Updated Jan. 22, 2014 8:25 p.m. ET

Last spring, Amazon.com Inc. AMZN -0.62% moved to end its relationship with one of its biggest third-party sellers, saying that company had offered products that were illegal or otherwise prohibited.
Within months, however, an employee of the e-commerce company unwittingly reached out to that same seller, DAB Unlimited, to coach it on how to increase its volume.
That push and pull, revealed in filings after DAB sought bankruptcy-court protection, illustrates the conflicting priorities in Amazon’s increasingly important business of third-party sales. Amazon said it logged more than two million sellers and a billion products shipped world-wide last year. Some analysts believe third-party sales account for nearly half of all merchandise sold by volume on Amazon.com and eventually will eclipse direct sales of goods by the company.
The strategy has caught on with other retailers as well. Staples Inc., SPLS +1.39% Wal-Mart Stores Inc. WMT -0.65% and Sears Holdings Corp. SHLD -0.69% consider such arrangements a key source of variety and growth.
DAB and other companies use Amazon’s website, warehouses and payment systems to sell their goods over the Web, allowing the retailer to offer a much broader range of products.

But some third-party sellers have sparked customer complaints and friction between Amazon and the makers of branded products. Some manufacturers have said Amazon doesn’t do enough to curb sales of counterfeit goods and expired drugs from such vendors.
Amazon declined to comment for this article. On its website, the company says the sale of counterfeit products “is strictly prohibited.” Sellers are responsible for verifying the authenticity of their products and failure to do so can result in the termination of selling privileges, the site says.
“The risk to Amazon is that they can’t control the whole customer experience,” says Rick Watson, an Internet retailing executive who used to run the third-party sales section of Barnes & Noble Inc.BKS +1.49% ‘s website. He now is chief executive of Merchantry Inc., which helps Amazon and other retailers manage online commerce.
The competing concerns over third-party sales intersected at DAB, which sold more than five million items through Amazon’s website after setting up shop in 2006, says Dan Bellino, one of DAB’s founders. DAB sought bankruptcy protection in 2011 and was forced by Amazon to stop selling on the site last September.
DAB was the brainchild of Mr. Bellino and a friend who started the business in 2006 while in their 20s, in the basement of a Springfield, Mo., home. The name came from Mr. Bellino’s initials.
The founders soon capitalized on a new Amazon program to help set up third-party merchants. Under the program, called Fulfillment by Amazon, DAB arranged to send products to Amazon’s warehouses and paid the Seattle-based company to stock DAB’s goods and ship them to customers.
DAB initially offered around 50 items, mainly vitamins and supplements, then expanded into weight-loss pills, pet-care products and children’s toys. By 2010, the company was listing 30,000 items, enough to stock a chain drugstore. DAB collected more than $200 million in sales over its lifetime, Mr. Bellino says.
The fast growth of companies like DAB helps explain how Amazon revenue has increased at least 25% a year since 2008.
Amazon groups fees from third parties into a category called services, the revenue from which makes up about one-fifth of Amazon’s sales. Services revenue also includes sales from Web services, digital-content subscriptions and cobranded credit cards. The Internet retailer, which reports earnings next week, credited a 45% jump in services revenue for the company’s 23% increase in overall sales for the first nine months of last year.
But DAB shows the risks of working with third-party sellers. Between 2009 and 2012, Amazon received dozens of complaints from people claiming that DAB had sold them counterfeit or mislabeled items, according to internal Amazon documents filed in the bankruptcy case.
Mr. Bellino says that less than 1% of the company’s shipments were flagged for problems.
Maria Reyes, a 31-year-old pharmacy technician in Worthington, Minn., says she bought a bottle of 2 Day Diet capsules from DAB through Amazon.com in 2010.
After taking the pills, she felt dizzy and her heart began “racing very fast,” she says. Ms. Reyes says the capsules she had taken looked different from the actual products she found in online research. She says she tried to contact DAB through Amazon’s website but didn’t hear back.
Amazon investigated a negative review Ms. Reyes wrote in 2010 and sent a warning to DAB, according to the internal Amazon documents. The pills had been recalled by the Food and Drug Administration two years earlier because of the possibility they might be contaminated or contain high doses of ingredients that could put consumers’ health at risk. Ms. Reyes says she currently is in good health.
DAB declined to comment on Ms. Reyes’s purchase.
In November 2010, an Amazon investigator looked into a customer complaint that said DAB was selling fake Gillette Mach3 razor cartridges, according to the Amazon documents. Gillette, a unit of Procter & Gamble Co. PG -0.44% , separately had purchased the blades from the seller and concluded they were counterfeit.
The investigator recommended suspending DAB’s selling privileges. But a supervisor nixed the idea, citing DAB’s high volume with Amazon, according to the documents.
DAB’s Mr. Bellino says his company bought products “from manufacturers and distributors who were well known to be trustworthy and reliable” and didn’t knowingly sell counterfeit or prohibited merchandise.
About 97% of DAB’s customer feedback since its founding in 2006 has been positive or neutral, according to Amazon’s site.
Amazon has policies to prevent unauthorized sellers from listing some branded products, and its investigators comb through listings and customer reviews to identify sellers that may be violating its rules.
Amazon, eBay Inc. EBAY +0.48% and other e-commerce companies also are protected by a 2010 federal appeals-court ruling that put the onus on trademark holders to police the Web for counterfeit or other problematic merchandise.
Some manufacturers have said it can take months for Amazon to respond to requests to curb third parties that are peddling counterfeit, expired or damaged merchandise.
Johnson & Johnson last year suspended sales of scores of consumer products and over-the-counter medications to Amazon because it said the Web retailer wasn’t doing enough to prevent third parties from selling expired or damaged J&J products, people familiar with the matter said. The two companies are working out their conflict, and J&J has resumed shipping some items to Amazon.
SRAM LLC, a maker of high-end bicycle parts, has had problems getting Amazon to stop third parties from selling fake components labeled with its brands, says Maria Santos, a brand-protection manager at the Chicago-based company. Fakes were discovered after some customers complained about the quality of the parts, Ms. Santos says.
In October 2011, DAB filed for protection from creditors in bankruptcy court in Arizona, listing $1.5 million in assets and $9.1 million in liabilities. The company had been hurt by the recession and had overextended by trying to take over responsibility for warehousing and shipping its products from Amazon.
DAB continued to operate, soon turning a profit again, though it remains in bankruptcy court.
Last April, Amazon moved to terminate DAB’s selling privileges, according to bankruptcy filings. Amazon said it had previously suspended DAB and warned it against listing prohibited products, such as prescription-only medical devices and supplements containing a drug that is illegal in the U.S., but that the violations continued after the suspension was lifted.
DAB’s bankruptcy trustee responded to the court that Amazon’s move was unfair and that the Internet company had sold and allowed others to sell the same products.
The bankruptcy-court judge delayed a decision on DAB’s termination because sales through Amazon represented DAB’s primary source of income to pay back creditors.
Meanwhile, an Amazon account manager, apparently unaware of the conflict, contacted DAB’s Mr. Bellino about a new initiative to help third-party sellers improve their sales and ratings on Amazon.
Mr. Bellino wrote a note thanking the account manager, according to a bankruptcy-court filing. Mr. Bellino assigned an employee to oversee the project, naming it “Operation Mothership: ‘Amazon Ferrari.’ ”
In September, though, Amazon won a court ruling to terminate its agreement with DAB and its listings have been removed from the site. The company effectively is liquidating, a lawyer for the bankruptcy trustee said.
DAB’s online storefront remains, however, and customer feedback—mostly positive—continues to trickle in.

In a stunning move, Singapore and Indonesia-based mobile social networking company mig33 is now listed on the Australian Securities Exchange (ASX)

Mig33 is now listed on the Australian Securities Exchange
January 23, 2014
by Willis Wee
In a stunning move, Singapore and Indonesia-based mobile social networking company mig33 is now listed on the Australian Securities Exchange (ASX), the country’s primary stock exchange.
It did so via a reverse takeover, in which a listed company acquires a private company only for the shareholders of the latter to become majority owners of the combined group, a purportedly easier and less rigorous process than listing through the usual way.
In this case, mig33 is actually acquired by Latin Gold, an Australian company that does mineral exploration and project investigation. It now owns 720 million of Latin Gold Limited’s (ASX:LAT) shares. According to Google Finance, Latin Gold was traded at AUD$0.02 per share as of January 23. In other words, mig33 is valued at $12.73 million after the shares acquisition at the current share price. The numbers will obviously change as the share price changes.
The acquisition will see mig33 own 69.5 percent of Latin Gold while Latin Gold shareholders will own approximately 30.5 percent of the merged group. Founder and CEO Steven Goh, together with Andy Zain, Dmitry Levit, and John Lee will be appointed to the Latin Gold board.
Meanwhile, three of the Latin Gold directors will step down, which gives mig33 full authority to drive the Latin Gold business. Latin Gold’s name will be changed to mig33. As of yesterday, the company has halted trading on ASX due to a change of business activities. Goh told Tech in Asia:
We believe in the opportunity to bulk mig33 up to something much more interesting now and being listed allows us to realize that opportunity. [We] looked at Singapore and Australia [and believe that] Australia is a simpler, less risky, and easier path to getting there. Additionally, Australian tech companies are getting recognized valuation-wise and there is a history of billion dollar exits, whereas in Singapore the feedback is mixed.
There’s a precedent of Asian internet companies listing in Australia, with Patrick Grove’s iBuy being a prominent example. It raised $33 million through its IPO.
When we spoke with mig33 after its rebranding and transformation into a mini-blogging platform in October last year, the company was seeing 180,000 daily active users sending four million messages daily. It now has about three million monthly active users.

Google Is Raking In Huge Sums Of Money From A New Type Of Online Shopping That Hurts Amazon

Google Is Raking In Huge Sums Of Money From A New Type Of Online Shopping That Hurts Amazon
JIM EDWARDS
JAN. 22, 2014, 12:52 PM 14,440 9
Late in 2012, Google quietly introduced a new type of search ad. “Product Listing Ads” (PLAs) are those photo boxes that appear at the top of Google’s results pages when you search for stuff that is shopping related, like “Ugg boots” or “iPhone charger.”
Turns out the new format has been a huge success for Google, according to data from Marin Software, which buys PLA campaigns for its clients.
That’s likely bad news for Amazon.
PLAs push Amazon’s organic, non-paid search results farther down the page every time they appear. In search advertising, everyone knows that the top of the page is key. The bottom of the page is shopping Siberia — and that’s where Amazon’s pages are now frequently ranked on Google. Frequently, when you do a search that generates PLAs, the shopping ads will display ads for all Amazon’s competitors on that product line. But not Amazon.
Amazon is known to be highly sensitive regarding Google’s use of PLAs. The company has declined to buy any PLAs from Google to boost its search rankings. They must work, however, because several of Amazon’s subsidiary units —  Zappos, Diapers.com, Wag.com Soap.com, and BeautyBar.com — have upped their PLA budgets during the course of the year, according to Jefferies Research. (Amazon did not immediately respond to a request for comment.)
Those increased budgets from all of Google’s online retailers have swelled the search giant’s coffers in 2013, Marin says.
Analyst Ben Schachter and his team at Macquarie Capital agrees. In a pre-earnings note to GOOG investors yesterday, he wrote, “We expect a strong quarter from Google, and believe that PLAs in particular will drive upside, as PLAs pricing/competition has been better than expected.” Google will deliver its Q4 2013 earnings on Jan. 30.
This chart from Marin shows how spending on PLAs has quadrupled:

Marin Software
The data above are indexed, where 100 is the level in January 2013. Marin’s dataset looks at clients spending more than $100,000 a month on search ads. Nearly a quarter of retail paid search budgets during the Thanksgiving-Christmas season went on PLAs, Marin says.
“By December, retailers were allocating 23% of their paid search budget toward PLAs, a 92% increase over January,” the company said in a blog post:

Marin Software
The cost-per-click to advertisers went up as more advertisers spent money on them:

Marin Software
And the click-through rate was also higher than average:

Marin Software
“The image-based ad format resonates well with users – consumers can see what they’re looking for – and streamlines the shopping the experience. The large images and prominent placement help retailers lure shoppers to websites as well as stores,” said Matt Ackley, CMO of Marin Software. “We expect this percentage [of spending] to grow to 33% in 2014.”

IBM must keep head above the clouds to claim glory

IBM must keep head above the clouds to claim glory

January 22, 2014 7:27 pm
By Richard Waters
It falls to every new IBM chief executive to reinvent one of America’s most venerable corporate icons.
After Lou Gerstner countered a decline in hardware sales with a faster move into software and services in the 1990s, Sam Palmisano spent the next decade contending with the threat of Indian IT companies and open-source software.
Now Ginni Rometty faces her own moment of reinvention. The source of her discomfort: More computing workloads are moving to the cloud – which means that they are being farmed out to utility-type companies that do not want high-priced gear and services from the likes of IBM.
Even when choosing to keep their computing in-house rather than shifting it to companies such as Amazon, IBM’s big customers are copying the methods of the new cloud players. Essentially, that means buying lower-cost, standardised hardware, as well as software that automates processes that once required expensive humans.
One example of this will be on display next week in California at the annual gathering of the Open Compute Project. The brainchild of Facebook, this was set up to promote a basic standard model for server hardware.
Servers suffer the feature creep seen in many technology markets, as suppliers try to differentiate their products. Even the plastic bezels that they use to brand their machines are an unnecessary luxury, impeding airflow and increasing power costs for cooling. In the world as seen by Facebook, all such niceties will be stripped out.
The effect of this sort of thing goes much further than hardware revenues. If IBM’s customers move some of their computing to the cloud, they will no longer be paying for IBM services either. And the huge IT outsourcing market on which much of IBM’s revenues depend is also facing a sea change. If customers have more choices for how to manage their IT, they will no longer be as locked into the monolithic service contracts that have involved handing their entire IT operations over to companies such as IBM.
At least one corner of IBM’s hardware business still looks secure. Thanks to the massive sunk costs some customers have made in their existing systems, its mainframes – once written off as a casualty of the client-server revolution – are still going strong. But the future being forged by the likes of Amazon’s web services looks very different from the past.
This leaves two choices for the traditional IT hardware makers.
One is to become consolidators in a high-volume game. Some 70 per cent of the $53bn server business comprises so-called “volume”, or industry-standard, machines that command low profit margins, according to IDC.
This is not for IBM. Having sold out of the PC business nine years ago, it is in discussions about ditching industry-standard servers as well, according to people familiar with its plans.
Dell and Hewlett-Packard, with high market shares in industry-standard servers and PCs, face a tougher choice. Among the challenges these companies face is a new band of ultra-low cost white-label producers known as ODMs, or Original Design Manufacturers.
The other choice is to shift the discussion with customers away from the price of hardware and on to high-value applications and services that make a real business difference. Specialised hardware that serves a particular purpose sometimes still has an edge over generalised technology.
In IBM’s case, for instance, that looks likely to lead to a stripping back of its Unix business – the more expensive end of its server line that it does not plan to sell – to focus on the massive data handling needs of the analytics market.
This adds to the pressure on Ms Rometty. In her first two years on the job, she displayed the touch of a marketer rather than a technologist, as she sought to recast IBM’s portfolio of businesses in ways that appeal to a broader market.
That may be starting to change. Already this year, that has meant earmarking $1.2bn to build more data centres to compete with Amazon in the public cloud, as well as $1bn to build a business in what has become known as cognitive computing, or machines that answer questions posed of large bodies of data.
It is ironic that IBM has been a poster child of efficient cash management in the tech sector, returning a large slice of its free cash to shareholders in recent years while still maintaining an annual R&D budget of more than $6bn. To judge by the grumbling on Wall Street, it may be time for Ms Rometty to place some bigger bets.

Dabbling in Microsoft Is Enough for Gates

Dabbling in Microsoft Is Enough for Gates

JANUARY 22, 2014, 3:04 PM
By NICK WINGFIELD
Bill Gates, the chairman and former chief executive of Microsoft, is more involved with the company now than he has been in years. But he does not — repeat, not — want to run it.
Since Microsoft began a search for a new chief executive months ago, Mr. Gates and people close to him have said that he will not return to lead the company. For good measure, Mr. Gates said it again on Tuesday, in aninterview
on Bloomberg Television.
Yet Mr. Gates, even as he hobnobs this week with the powerful and wealthy in Davos, Switzerland, is deeply engaged at Microsoft. He is regularly meeting with company executives, offering input on products and weighing in on the search for a chief executive, according to several people who have either spoken to Mr. Gates directly or are aware of his recent comings and goings at the company. Those people would speak only anonymously to protect their relationship with Mr. Gates.
The precise nature of Mr. Gates’s current and future involvement at Microsoft has been a topic of speculation as the company searches for a new chief. That interest has only intensified as the search has dragged on longer than many investors and people inside the company had hoped.
When Alan R. Mulally of Ford, the presumed front-runner for the job at one point, dropped out, many people watching the process from a distance concluded that Mr. Gates’s presence at Microsoft was harming the process. What rational person would lead the company, this line of thinking goes, with Mr. Gates breathing down his neck and second-guessing his every move? (All of the presumed candidates are men.)
The reality of Mr. Gates’s status is a bit more nuanced. One of the people with knowledge of Mr. Gates’s activity at the company, who is also informed about board discussions, said Mr. Gates was willing to dial up or down his involvement with Microsoft based on the wishes of the new chief.
If the new chief executive wants Mr. Gates, a co-founder of Microsoft and one of the founding fathers of the tech industry, to chime in more often on company matters, Mr. Gates will do it, this person said. If the new chief executive wants Mr. Gates doing less around Microsoft, he will respect that, too.
Several people associated with Microsoft and Mr. Gates for years say they believe that he does not want to have to be called in to rescue the company from a perilous situation, which would require day-to-day attention.
The company is still healthy, but it has lost its advantage in several areas. If a new chief executive failed, the company could fall further behind. In interview after interview, most recently the one on Bloomberg Television, Mr. Gates has shown little interest in leaving his full-time work as a globe-trotting philanthropist with the Gates Foundation. Following the example of Michael Dell or Howard Schultz, executives who came back to lead Dell and Starbucks after those companies went astray, does not seem to be his ambition.
Mr. Gates is spending more time on Microsoft now, in other words, to avoid spending more time on it later.
“I think it will be very important for Bill to assure for himself that he has put in place a good steward for the company who can provide the right technical direction for the future, and not someone who just reduces costs for a couple years and leaves the company without the problems having been fixed,” said Rick Sherlund, a veteran Microsoft analyst with Nomura Securities.
A Microsoft spokesman declined to comment, as did a spokesman for Mr. Gates.
The future of Microsoft’s current chief executive, Steven A. Ballmer, is also an intense topic of discussion. Mr. Ballmer does not have a large foundation waiting to occupy him once his successor is found. He is a meaningful shareholder and board member of the company. And he is the architect of many major projects at Microsoft that are still in motion, including a broad reorganization of the company and the acquisition of Nokia’s handset business.
It is those initiatives that could complicate Mr. Ballmer’s dealings with his successor, should the new chief executive decide to change the playbook. For that reason, Matt McIlwain, a venture capitalist in Seattle with Madrona Venture Group, predicts that Mr. Ballmer will leave the company’s board in the next six to 12 months, when the spotlight has shifted to Microsoft’s new leader.
Mr. McIlwain says he also believes that Mr. Gates will end up doing more at Microsoft than in past years. He sees fewer hazards associated with that than with Mr. Ballmer staying involved.
“Bill has a strong personality, but he has more distance and perspective,” Mr. McIlwain said.
So the search for a new Microsoft chief executive continues. Progress on the search has slowed this week because of Microsoft’s earnings announcement on Thursday and Mr. Gates’s trip to Davos, said the person briefed on the process.
With Mr. Mulally and other external candidates fading, Mr. McIlwain and others speculate that Microsoft is leaning toward selecting a current Microsoft executive as its new chief. Many senior executives brought into Microsoft from the outside have not fared well at the company, and that point is widely discussed among employees. Mr. McIlwain said he favored Satya Nadella, who has led the company’s cloud computing efforts and big parts of its corporate software business.
Wherever the person comes from, the company cannot afford to have its body reject its new part. Mr. Gates seems acutely aware of that.

ESPN’s secret web weapon: ESPN3; The sports giant’s online streaming network is growing steadily. It may prove to be a key part of ESPN’s arsenal as its TV franchise faces new competition from Fox

ESPN’s secret web weapon: ESPN3
By Daniel Roberts January 22, 2014: 11:51 AM ET
The sports giant’s online streaming network is growing steadily. It may prove to be a key part of ESPN’s arsenal as its TV franchise faces new competition from Fox.
FORTUNE — With the vast array of digital subscriptions, apps, and streaming services now available to sports fans, it seems likely that soon enough you’ll never have to miss a single game or event. Quietly driving this market, to a large extent, has been ESPN3, ESPN’s somewhat under-the-sonar online outlet for streaming live sports events.
In 2011, the sports giant rolled ESPN3 (which had existed in various forms since 2005, originally as ESPN360, then ESPN3.com) into its WatchESPN online platform, where subscribers with access can watch everything from live sports happening across the globe to ESPN Classic games, all from a number of ESPN’s different channels and services. (For example, you can use WatchESPN to catch the popular radio show Mike & Mike or re-watch SportsCenter if you missed it.)
ESPN3 is where you can see an Australian Open tennis match live when it’s 3:30 a.m. in New York. It’s where you’d go to catch many of the NCAA Men’s Basketball games long before March Madness begins and they start showing up on basic cable. On this particular Wednesday, for instance, you can use ESPN3 to watch obscure French soccer matches like Chasselay vs. Monaco or Paris Saint-Germain vs. Montpellier. Tonight, you can find the X Games live from Aspen.
While ESPN3 does offer access to mainstream sports events like golf’s U.S. Open, many of the events that show up on there are more obscure. These “may not get the ratings,” says Steven Cohn, editor of Media Industry Newsletter, “but they do have niche, enthusiast audiences that advertisers might like. Plus the rights fees are next to nothing.”
And indeed, ESPN’s strategy with its streaming network appears to be working well. “We made a commitment to streaming live sports on ESPN3 over six years ago, and it has proliferated into a viable stand-alone network, now available in more than 85 million households nationwide on computers, smartphones, tablets, Xbox, Apple TV, and Roku,” says Amy Phillips, a spokesperson for ESPN. (The company will not share financial information on ESPN3, so it’s not clear whether or not the service is profitable.) According to ESPN Research & Analytics, viewers spent 711 million minutes with WatchESPN and ESPN3’s live and on-demand programming in 2013 (through November), a number that was up 91% from the year before. The month of November 2013 itself was in fact the service’s best month ever, with 2.2 million unique users (up 77% over the year before) spending 197.3 million minutes (up 170%).
Last summer Goldman Sachs, which had previously labeled the Walt Disney Company (DIS) a “conviction buy,” downgraded the stock to “neutral” due to concerns that the debut of Fox Sports 1 (FOX), which launched in August, would prove stiff competition for ESPN and its properties. The stock fell nearly 4% as a result, the biggest drop it had seen since November 2012. So far, ESPN seems unfazed. Disney stock is up 22% from a year ago.
ESPN3 “bundles” with cable packages from certain providers. For example, if your cable provider is Time Warner (TWC), you can access WatchESPN only if you have ESPN in your TV package. Comcast (CMCSA), meanwhile, includes it with all XFINITY Internet subscriptions. Thus the ability to watch ESPN3 through WatchESPN depends on your cable package, which can be frustrating for web users that don’t get ESPN. (It isn’t hard to find message boards on which people gripe about whether and how they can access ESPN3.)
Apparently, the bundling method is also frustrating to TV folks. Ted Hearn, spokesperson for the American Cable Association, tells Fortune, “ACA takes serious issue with the fact that ESPN3 is an effort to migrate the broken cable TV business model to the Internet.” That controversy has been bubbling for years, as many consumers and groups have argued that viewers should be able to pay for access to a web service like WatchESPN without having to go through TV providers.
For now, the migration has appeared to work well. According to an ESPN “2013 in Review” report on Jan. 7, “ESPN Digital Media wasn’t simply again the category leader, but accounted for nearly a third (31%) of all sports usage across digital platforms … Also, the focus on serving the sports fan on the go continued, with … WatchESPN now available to 55 million people.” College football’s BCS National Championship game, specifically, was a hit, generating 773,000 unique viewers on WatchESPN.
Like HBO with its popular HBO GO app, ESPN is unlikely to offer WatchESPN as a solo subscription product you could pay for without having ESPN on cable. Why should it? The service is continuing to thrive. ESPN is having its TV cake and eating it on the Internet, too.

Davos lacks the Valley’s revolutionary ambitions; The tech set stands out while a familiar crowd returns to the task of making the world nicer

Davos lacks the Valley’s revolutionary ambitions
By John Gapper
The tech set stands out while a familiar crowd returns to the task of making the world nicer
Thousands of chief executives, politicians, leaders of non-governmental organisations and media folk are once again assembled in Davos for their annual debates on how to improve the world. It is a worthy affair, with “stakeholders” discussing how best to combine business with societal good, like an ersatz global parliament.
The World Economic Forum is evolutionary – it usually misses the coming crisis but Klaus Schwab, its founder and impresario, is brilliant at adapting to the last one. It absorbed the 1990s anti-globalisation protests by inviting NGOs and companies to forge a consensus, and tried the same after the 2008 crisis with banks and regulators.
The trouble is, despite the parties and whirl of events, Davos feels old and staid. The excitement is with the revolutionaries – the technology companies that promise to remodel the world, not just to strike a compromise with the existing one. As the late Steve Jobs of Apple said: “It’s more fun to be a pirate than to join the navy.”
It is also more appealing, especially to the squeezed, alienated millenials whose problems will be debated by the baby boomers in Davos, quoting what their children have told them. Silicon Valley has loftier ambitions than hashing out a compromise with politicians in a Swiss valley.
Take Bitcoin, for example. Instead of tackling banks with tortuously negotiated capital and liquidity standards and more rules, why not disrupt global payment systems with a digital currency devised by an unknown hacker and backed by cryptography rather than a central bank? It feels like a lot more bang for the buck.
Compared with this, the multinationals that embody the Davos consensus such as Unilever and PepsiCo – those that carefully involve NGOs in inspecting supply chains, conserve water and make their processed food healthier – are reformers, not revolutionaries.
Technology faces its own credibility problems. Google and others have been targeted by politicians for avoiding taxes and embarrassed by revelations about the National Security Agency’s intelligence activities. The enterprises that promise liberation through technology have became conduits for government surveillance.
Yet a technology billionaire in a hoodie still beats a middle-aged executive in a suit for popular appeal. In an annual global survey conducted by Edelman, the public relations group, 79 per cent of people said they trusted tech companies, compared with 59 per cent for energy groups and 51 per cent for banks.
That helps them to get what they want from governments. Technology companies and venture capitalists mounted a swift campaign to defeat proposed US legislation to curb copyright infringement in 2012. A popular uprising beat film and music companies that backed the law.
Silicon Valley sometimes flirts with breaking off from pesky government altogether. Larry Page, chief executive of Google, proposes setting up experimental camps similar to Burning Man, the Nevada desert festival, with new laws that encourage innovation.Peter Thiel
, the venture capitalist, wants to see offshore floating communities “to peacefully test new ideas for government”.
The danger for businesses that rely on the Davos consensus is that it has a habit of turning against them
It sounds barking mad, but one cannot fault these men for their ambition, or having an overarching vision of the future. There is a clear echo of American immigrants, who moved from Europe to a frontier land where they remade the rules.
No matter how implausible, this sense of possibility has greater romantic appeal than endlessly debating the old order. To millennials linked to each other on Facebook or Snapchat like nodes on a digital network while struggling to find themselves jobs and homes in overburdened, politically paralysed nations, it is a clarion call.
The danger for businesses that rely on the Davos consensus is that it has a habit of turning against them. Companies were more trusted than governments in the Edelman survey, but many people still want tighter regulation of business. Britons want more energy regulation; Germans more financial regulation; and the Chinese more food safety rules.
Popular discontent initially focused on banks after the 2008 crisis but it proved contagious. Ed Miliband, leader of the UK opposition Labour party, is now mounting a rolling campaign against “broken markets” in various industries, accusing big businesses of price-gouging.
It is not obvious why the private sector should be on the defensive. Few industries were bailed out like banks, or enjoy the same safety net. Recession-hit consumers dislike price rises but those pressures will be eased by the return of growth. Public policy bears much of the blame for the economic difficulties of young people.
As the global economy recovers, the future is open. Will businesses follow the path of banks, dragged into regulatory and political disputes, or that of technology – trusted to offer a better life?
One lesson to learn from Silicon Valley is how to tell a story. A lot of apps are trivial compared with, for example, supplying energy, food or medicine. As Bill Gates noted acidly in an FT interview, vaccines and child nutrition matter more than connectivity in poor countries. Internet companies are wonderful advocates for their own importance.
A second is to talk directly to customers rather than simply to politicians or “civil society”. If people think they are doing something valuable, the Davos consensus will follow. It is time to get out more.

The 3-D Printing Market Is Going To Be 357% Bigger Than We Initially Thought

CREDIT SUISSE: The 3-D Printing Market Is Going To Be 357% Bigger Than We Initially Thought
ROB WILE
JAN. 22, 2014, 5:14 PM 3,068 3
If you need more evidence that 3-D printing and additive manufacturing are viable business sectors, try this.
A Credit Suisse research team led by Jonathan Shaffer has revised the firm’s 2016 projection for the market up 357%, to $800 million from $175 million.
The reason: overlooked opportunities among consumers and “pro-sumers,” which Shaffer defines as engineers, architects and educators.
3-D printing and additive manufacturing are basically used interchangeably to describe printing readymade objects and components from your own office or home, short-circuiting the normal, capital-intensive industrial production process.
Shaffer explains how this technology could gain widespread use:
We think eventually there could be near ~100% penetration amongst engineers as it becomes a common element of the engineer’s toolkit…The number of registered architects in the US [now stands at 222,500]. We think this represents another potential growth driver, although we acknowledge the computer design proficiency amongst architects is likely lower than among recent engineering graduates…We think children under 18 will be a primary driver of adoption; they are more likely to have heightened computer proficiency, and technological awareness is high in this age group.
“Pro-sumers” are the key. Shaffer says that professional and dedicated but amateur tinkerers will find great use for on-the-spot printing to help them realize prototypes. “We think eventually there could be near ~100% penetration amongst engineers as it becomes a common element of the engineer’s toolkit,” he says.
This group is also less sensitive to costs than regular consumers. “Reliability, print quality, build size and service are key pro-sumer concerns rather than simply price, and the new generation of printers do more to address these concerns,” he writes. Shaffer says the prices pro-sumers would be willing to pay for a new desktop unit tops out at $7,500 versus $1,500 for consumers.
Shaffer concludes by upgrading Stratasys to “outperform” from “neutral” with a target price $144 from $128, while downgrading 3-D Systems to “neutral” from outperform, holding the price target at $90. That’s because Stratasys bought MakerBot, which is among the leading brands in the market: Shaffer estimates sales doubled in the second half of 2013 alone, and will have more than tripled by 2016. He adds he was impressed by two new MakerBot models at CES he had not accounted for in his models.
The note came out Tuesday and caused the share prices of the companies, which had been trading in tandem, to instantly diverge. 3-D is in red:

5 Startups Google Might Acquire Next

5 Startups Google Might Acquire Next
MARC BARROS, INC.
JAN. 22, 2014, 9:15 PM 4,863 1
Google’s acquisition of Nest was monumental for the hardware community. Not only did it represent a major company seeing value in a startup, it cemented that startup’s place in Google’s ecosystem, which is no small feat.
Hardware is one of the most exciting startup frontiers, but at the same time is notorious for causing investors to lose hundreds of millions of dollars. Considered the double black diamond of startups, hardware is just plain hard business for entrepreneurs.
One of the things that makes it so challenging is a lack of consistent acquisitions. Hardware startups are often forced to become standalone businesses, winning capital from a handful of investors just to compete against multi-billion dollar conglomerates. Makerbot and Nest now have the opportunity to change this, but it won’t come without a fight. Here are a few startups who could turn things around for hardware makers–and why Google might have an eye on them.
Fitbit
With a simple wristband, this startup made tracking health fun. And by targeting users outside the tech scene, Fitbit found a way to connect with people like suburban moms, thanks to its suite of products that provide actionable results all day. From sleeping to exercising, Fitbit has built an experienced team that Google might find rather useful.
DropCam
DropCam makes networked video look easy, even though it’s anything but. A software company, it just happen to make a connected video camera that can serve a variety of applications, including watching your house, pets, and/or children. Dropcam could help Google improve its video products, especially as it tries to make Hangouts a staple at work.
Electric Imp
Tony Fadell knows Electric Imp’s team well, as it was founded by some of the best Apple engineers. Its focus on making Wi-Fi more accessible could also be valuable to Google as the latter moves further into the wearable tech space.
3D Robotics
If drones are the future, then 3D Robotics is the next Makerbot. Its drones are ubiquitous, while its rich developer community is helping them become the Android OS of drones. If the startup succeeds as the clear market leader, it could help Google build up its momentum in robotics innovation.
Thalmic Labs
Gesture technology is the future and this team is leading the way. Without personally knowing how deep its engineering and design teams are, Google may want a team to re-imagine gesture technology for all of the hardware products it is building.
GoPro
This startup owns action video/image capture, which has turned out to be a huge market. Its demographic is also technical and boasts a devoted user base that Google probably can’t get enough of. GoPro’s marketing prowess could also help Google sell people on the idea of Google Glass as a gadget that’s cool, not incredibly dorky.