While Google has bought plenty of small startups, almost none of those deals have amounted to very much. It almost seems like most of the startups disappear into Google forever. There are a few exceptions such as YouTube and (maybe) Writely. But the list of startups that have simply languished or died is much longer. TechCrunchIT is running an interesting post that suggests one of the key reasons: Google's proprietary tech stack. While Google is a big open source supporter for lower level infrastructure, once you get above that -- it's very much a strong believer in doing everything its own way. I've heard from friends at Google about the difficulty they've had learning to deal with Google's tech stack -- and certainly have heard how it's slowed down the progress of some Google acquisitions while they learn how to "transition."

In fact, some have pointed out that this is one of the side benefits to Google's AppEngine offering. Since it exposes some of Google's tech stack to folks for them to develop and run their applications, it will make it much easier to integrate them into Google at a later date. So, for startups whose strategy is to get acquired by Google (and, I should note, if you start with that strategy, you're probably going to fail), it may make sense to develop on AppEngine just because you're already signaling to Google that the integration costs are significantly lower.

Still, this highlights one of the major downsides to Google's belief that it can do everything much better than everyone else by starting from scratch: in doing so, it actually makes it much harder to capitalize on synergies from many acquisition targets. Yes, there are reasons to go against the "standard" way of doing things, but there are significant costs as well.

Permalink | Comments | Email This Story

As we predicted last month, the FCC's approval process for the XM-Sirius merger continues to drag on. This is becoming absurd. The merger was announced almost 18 months ago, which should have been more than enough time for the FCC to reach a decision, or at least come up with its merger conditions for the companies to consider. Yet it was only last month that Chairman Martin came up with his initial proposed conditions, and now Commissioner Adelstein is proposing even more restrictions as a condition of approving the deal. As I've pointed out before, the way antitrust law is enforced is problematic because of the unbridled decision it gives to government bureaucrats.

Adelstein's laundry list of merger conditions appears to have no particular connection to preventing the abuse of monopoly power, the supposed purpose of antitrust law. For example, he would require a 6-year freeze on price increases. If he believes the merged company would have too much market power, then he should vote to deny the merger. If, on the other hand, the merged company would not have too much market power, then a price freeze isn't necessary because competition will be sufficient to keep prices down. But the idea that they have too much monopoly power today, but won't in 6 years, doesn't make a lot of sense. His other major requirement, more minority-owned and non-profit channels, has even less connection to limiting the firm's market power. More minority-owned radio stations may or may not be good policy, but it has nothing to do with antitrust law, and it seems problematic for the FCC to impose those sorts of requirements as part of the merger review process.

Timothy Lee is an expert at the Techdirt Insight Community. To get insight and analysis from Timothy Lee and other experts on challenges your company faces, click here.

Permalink | Comments | Email This Story

We've been talking about the popularity of "technopanics," where the press (often spurred on by "advocacy" groups) push out a "but think of the children" campaign to worry about how child predators are using this or that kind of technology -- when the reality is that there is often little to no evidence that this is actually happening or a serious threat. Studies eventually show that the press blew the "threat" way out of proportion, but by then it's too late. The public already believes that there's a huge threat. This isn't to say that there aren't some folks who have used these sites to prey on children -- or that people shouldn't be aware that it's a risk. But most kids seem to have no problem ignoring or brushing off the extremely rare solicitations they might get -- usually because their parents or educators taught them to be cautious around random strangers.

So, with studies finally showing the lack of a threat on social networks, it seems that technopanic advocates have had to move on to things like gaming consoles. The latest is even more ridiculous. Apparently an advocacy group is trying to warn people about the supposed dangers of Google's Street View technology. Apparently, they're worried that child predators will use the tech to scope out where children live, because Google Street View might possibly maybe have caught kids playing outside. Is there any evidence that this has actually happened? Nope. Is there any reason to think that this makes sense for a child predator as compared to actually getting in a car and driving around and seeing what's happening out in broad daylight? Nope. It's just fear, fear, fear!

Amusingly, I found this story from Stephen Shankland at News.com, who points out that the same day that advocacy group put out its fearmongering press release, another group was announcing how you can use its new service, built on Google Maps, to see if any registered sex offenders live near you. So, while we have one group warning about how Google Maps can be used for evil, another group is pointing out how it can be used to see if there are any threats in the neighborhood.

Permalink | Comments | Email This Story

Following the EU's misguided proposal to extend performance copyrights on songs from 50 years to 95 years, a group of professors from intellectual property, legal and innovation positions, have gotten together to send a highly critical letter, pointing out why such a copyright extension is not necessary and, in fact, will be quite harmful. Here's a snippet of the letter: Unanimously, the European centres for intellectual property research have opposed the proposal. The empirical evidence has been summarised succinctly in at least three studies: the Cambridge Study for the UK Gowers Review of 2006; a study conducted by the Amsterdam Institute for Information Law for the Commission itself (2006); and the Bournemouth University statement signed by 50 leading academics in June 2008.

The simple truth is that copyright extension benefits most those who already hold rights. It benefits incumbent holders of major back-catalogues, be they record companies, ageing rock stars or, increasingly, artists' estates. It does nothing for innovation and creativity. The proposed Term Extension Directive undermines the credibility of the copyright system. It will further alienate a younger generation that, justifiably, fails to see a principled basis. Hopefully, European politicians will actually pay attention to this condemnation of the proposed extension.

Permalink | Comments | Email This Story

A couple of years ago, we wrote about a proposal to restrict search engine companies from doing business in foreign countries whose Internet policies the United States government deems "repressive." In March, we noted that it was back. Jonathan Zittrain has written up an analysis of the latest version. It would supposedly "prevent US companies from aiding the censorship and surveillance operations of repressive foreign governments." It would target "Internet Restricting Countries," which are countries that are "directly or indirectly responsible for a systematic pattern of substantial restrictions on Internet freedom."

Now, I understand that the intent is to target truly repressive regimes like China and Cuba, but I have to wonder about how this is being defined. After all, you could argue that the United States's gambling ban is a "substantial restriction on Internet freedom." Ditto for the recent FISA bill, which allows warrantless dragnet surveillance of Americans' international calls. Likewise, some European countries restrict Internet freedom with regard to Nazi memorabilia. And of course the Australian government forces its ISPs to censor online pornography. Will American companies be prohibited from doing business in the United States, France, Germany, and Australia? Somehow I doubt it. All of which is to say that putting the US government in charge of drawing up a list of countries with bad Internet policies seems like a bad idea. The list will wind up being a political football rather than an objective assessment of countries' internet policies, and in any event it will hurt American businesses a lot more than it will promote human rights abroad.

Timothy Lee is an expert at the Techdirt Insight Community. To get insight and analysis from Timothy Lee and other experts on challenges your company faces, click here.

Permalink | Comments | Email This Story

Over the years, we've seen numerous ideas and recommendations for ways to fix copyright, and a popular one is getting rid of the automatic creation of copyright on new works, requiring individuals to actually register that work -- often combined with a shorter time limit on copyrights that would have a renewal option. Larry Lessig has long supported such a system. The thinking is that this still lets those big companies who want to hoard their copyrights forever do so, but opens up plenty of other orphaned content that is locked down just because Disney doesn't want to lose the copyright on Mickey Mouse. Benjamin Krueger points us to Andrew Dubber's recent proposal of switching to a five-year renewable copyright plan, that also includes a use-it-or-lose it clause. Basically, copyright holders who want to retain their copyright can do so, but they have to renew the registration once every five years. And, during those five years, the content has to be available commercially one way or another. This way, if content is being neglected, ignored, abandoned or orphaned, it makes its way into the public domain in short order, where perhaps others can make it more useful. This would seem to fit much more closely with the original purpose of copyright law, though (as per usual), I'm sure there will be many complaints from copyright holders about how such a system would destroy their rights. When reading through those, though, note that they never seem very concerned with the rights of the public either.

Permalink | Comments | Email This Story

Last week, we asked you how you would sentence a convicted spammer, and you came up with all sorts of colorful solutions. I doubt it influenced the judge much, but she's now sentenced the spammer in question to almost four years in jail, noting that she hopes it will serve as a warning to other spammers, especially unrepentant ones like Robert Soloway: "This individual has refused to stop his criminal conduct, notwithstanding two separate civil judgments and an injunction by a U.S. federal court judge. I suggest to you the only effective way to stop Soloway is a long prison sentence during which he'll be incapable of continuing this criminal activity." Of course, on the very same day the sentence was handed down, another spammer escaped from the minimum security prison where he was serving a 21-month sentence. Federal Marshals and the FBI are apparently now searching for him. Perhaps Soloway will have a bit more security.

Permalink | Comments | Email This Story

About a dozen states have passed laws either requiring video games be labeled for content or banning the sale of certain video games to children. Every single time this has happened, the law has been struck down as unconstitutional. And, every single time, the same arguments are shown to politicians, explaining how such a ban is a clear violation of the First Amendment. Politicians know this. But they can't resist passing such laws, because it gets them headlines about how they're "protecting the children," even if the only real result is having to waste taxpayer money defending the law in court, where they always lose.

The latest to join the fray? New York State. NY has been working on such a bill for a while, and Gov. Patterson has signed it into law. Lawsuits are already being filed against it, and New York will almost certainly lose. Once again, we can't resist repeating the quote from Judge Richard Posner in striking down one of these laws: "Violence has always been and remains a central interest of humankind and a recurrent, even obsessive theme of culture both high and low ... It engages the interest of children from an early age, as anyone familiar with the classic fairy tales collected by Grimm, Andersen, and Perrault are aware. To shield children right up to the age of 18 from exposure to violent descriptions and images would not only be quixotic, but deforming; it would leave them unequipped to cope with the world as we know it." Yeah, but it does get politicians in the headlines, and who cares about deforming children when the headlines will claim they're protecting them?

Permalink | Comments | Email This Story

While there are plenty of gov't agencies that seem to rush into any chance to add more regulations that grant them more power, the FTC has a history of being quite reasonable and quite conservative about these things. You may recall that years ago, the FTC was against the idea of CAN-SPAM because it would effectively legalize plenty of spam, with one FTC commissioner noting that spam should be anything that you don't like -- and legislating against that is next to impossible. Specifically, he was worried (correctly, it appears) that in allowing lawmakers to define spam, it has merely opened up more possibilities for spamming.

That commissioner (Orson Swindle) is no longer with the FTC, but the Commission seems equally skeptical of any sort of national privacy standards, noting that any set standards would deal with the market we see today, not the markets of tomorrow, and that could create serious unintended consequences. It's so rare these days to see federal agencies not leap forward to try to regulate, and to actually worry about the unintended consequences of regulating too soon, that it's rather refreshing.

Permalink | Comments | Email This Story

Recently, we had a story about a lawyer who was suing a bunch of folks for uploading a pinball video game, with some questionable statements about how piracy was destroying the PC gaming industry. Of course, that's not actually true. An excellent post by Cord Blomquist explains how the PC gaming business is actually growing, but in different ways than most people expect. Sure, it may be harder to find certain types of video games that you see on consoles these days, but other games are thriving. But they're doing so by adopting different business models that aren't so impacted by unauthorized distribution. For example, they involve online services (ongoing MMO type games, where the payment is for service, rather than the software) or they focus on making money through other means, such as advertising or upselling premium editions. So, once again, we find that so-called "piracy" is really just a business model problem, not a legal problem -- despite what some lawyers might say.

Permalink | Comments | Email This Story

Back in January, Time Warner Cable admitted that it was considering adding usage caps and overage fees to broadband users. It recently started signing up new customers for these offerings (sometimes with absurdly low usage caps). Of course, it knows it can't just change existing customers over to such plans, realizing they'd be in for quite a set of lawsuits for selling people one thing and then completely changing the terms. However, it's now working on a way around this: trying to convince existing customers to upgrade to special triple play packages with "locked in" pricing for a year and then burying in the fine print that they also agree to the usage caps. Sneaky. Soon it won't be long before you won't be able to change anything on your plan without also agreeing to the new usage caps.

Permalink | Comments | Email This Story

My friend Jacob Grier weighs in on a story that's been getting a ton of attention: some guy went into a DC-area coffee shop called Murky Coffee (where Jacob once worked) and asked for an iced espresso. The barista told him that the shop has a policy against making iced espresso. The barista agreed to give the guy an espresso and a cup of ice so he could ice his own espresso, but a shouting match ensued and the customer wound up leaving a dollar tip with a message that's not printable in a family blog. The owner of Murky's Coffee responded here.

At first glance, it seems like if the customer wants his espresso poured over ice, that's what the customer should get. But Jacob makes an interesting point: Murky's fastidiousness (or pig-headedness, depending on your perspective) about coffee quality is part of what sets it apart from the run-of-the-mill coffee shops. Murky isn't just selling coffee, they're also trying to build up a clientele that takes coffee seriously. This reminds me of a great post Don Marti wrote a couple of years ago called "FUD is good for you." Marti pointed out that while it's true that Microsoft's disinformation about free software could actually drive away some potential customers from free software, that's not necessarily a bad thing. These are, after all, likely to be the least technically-savvy customers, customers who will consume a disproportionate share of tech support resources and unlikely to be repeat customers. In the long run, the company might find it's actually more successful because some of its customers were scared away by FUD. I think we can see the same kind of attitude at Apple. For example, Steve Jobs took a lot of heat when he unveiled the iMac in 1998 without a floppy drive -- one small part of a broader strategy of giving customers what Jobs thought was good for them rather than what they asked for. That attitude has alienated a lot of potential customers over the years, but it has also produced a lot of repeat customers who are more loyal than the customers of any other computer company. In contrast, the PC vendors that have tried to serve every customer have wound up in a brutally competitive market with razor-thin margins.

There are two lessons here. One, not all customers are created equal. To most customers, coffee is all pretty much the same, and one coffee shop is about as good as another. (Just as one all PCs and software stacks are pretty much the same.) But there's also a minority of customers who pay more attention to quality, and the latter will tend to be a lot more valuable because they'll be more loyal and more prepared to pay a premium for quality. If it's true that icing an espresso ruins it (personally I think coffee is all revolting, so I'm agnostic on the question), refusing to serve iced espressos may be a good business strategy; the customers it drives away probably wouldn't have stuck around for very long anyway. Similarly, Apple's high-handed approach to its customers seems to have worked fairly well for it. It's a niche player in the PC market, but it has proven to be an extremely profitable niche. Second, sometimes customers only discover quality after it's shown to them. It turned out that Jobs was basically right about the floppy drive; I bought an external floppy drive for my iMac but almost never used it. Similarly, Jacob notes that the coffee shop customer seems to have enjoyed the alternative iced beverage that was suggested to him. I doubt that particular customer will be back, but there may be others who develop a taste for the specialty coffee served at Murky and then start to notice the defects of coffee from run-of-the-mill coffee shops. Niche businesses can create loyal customers by guiding them towards more refined tastes, and this can be more rewarding than trying to comply with every whim of every customer.

Timothy Lee is an expert at the Techdirt Insight Community. To get insight and analysis from Timothy Lee and other experts on challenges your company faces, click here.

Permalink | Comments | Email This Story

Monster Cable has a long history of abusing trademark law to threaten and/or sue pretty much any company that uses the name "Monster" in its brand. That has included the TV show Monster Garage, a clothing store called MonsterVintage, Disney for the movie Monsters, Inc., the makers of Monster Energy drink, the Chicago Bears for having the nickname "Monsters of the Midway," and the Boston Red Sox for offering "Monster seats" on top of their famous "Green Monster" wall. We recently noted that it had also gone after Monster Mini Golf.

Of course, that's not how trademark law works. It doesn't give Monster Cable total control over the name Monster. It just gives the company the right to prevent others from using the brand in the same market in a way that is likely to confuse consumers. It's difficult to believe that anyone would think that Monsters, Inc., was somehow from Monster Cable. But, on and on it goes -- though, it appears that Monster Cable's lawyers were finally convinced to drop one suit. An anonymous reader points us to the news that Monster Cable has withdrawn its trademark challenge against the makers of Monster Deer Block, a salt and mineral lick designed to attract wild deer. Apparently, some lawyers for the makers of Monster Deer Block persuaded Monster Cable's lawyers that there was little chance of consumer confusion between the product and the makers of expensive audio/video cabling.

Permalink | Comments | Email This Story

Bill Snyder has an article calling Google "Microsoft's evil twin" because if it completes its merger with Yahoo it will have 90 percent of the advertising market and will be able to jack up the price of online ads. Snyder cites the concept of "network effects" and suggests that Google's market share advantage will "weaken of Microsoft's e-commerce infrastructure will further discourage competition and stifle innovation." This argument is confused. Almost every business enjoys "network effects." Wal-Mart, for example, is able to use its large base of customers to extract lower prices from suppliers, and is then able to use its lower prices to attract more customers. That's a network effect, but it's not a problem. What regulators have traditionally been worried about is not "network effects" in and of themselves, but network effects combined with technological lock-in.

In the Microsoft antitrust case, for example, the "network effects" argument was that various vendors had invested billions of dollars in research and development on technologies surrounding the Windows platform, and that these investments created an almost insurmountable barrier to entry for new operating system vendors: the creator of a new OS would have to persuade hundreds of companies to spend billions of dollars re-designing their products for a new platform. In contrast, the switching costs in the advertising market are extremely low. A small website owner selling inventory on one advertising network one week can easily switch to another the next. Larger sites might take a little longer but it's still not a large investment. Switching costs are even lower for advertisers, who can advertise on multiple networks simultaneously and shift their allocations on a daily basis.

There are a ton of small advertising networks focusing on niche advertising markets. Without the risk of barriers to entry due to lock-in, there just isn't much reason to worry about Google's large market share. If advertisers and website operators become frustrated with Google's advertising network, they can and will switch to another one. And Google, knowing how low the switching costs are, will still have plenty of incentive to treat its customers well.

Timothy Lee is an expert at the Techdirt Insight Community. To get insight and analysis from Timothy Lee and other experts on challenges your company faces, click here.

Permalink | Comments | Email This Story

After the Supreme Court rejected most of the Communications Decency Act as being unconstitutional, Congress tried again with the more friendly sounding Child Online Protection Act. It sounds nice. Who doesn't want to "protect the children," right? But it was basically the same thing as the CDA, and court after court has struck it down as unconstitutional. The Supreme Court has already weighed in on some aspects of the law, kicking the case back down to the district level, where the judge noted the law was unconstitutional. The government appealed (of course), and subpoenaed data from just about everyone. You may recall the legal fuss over the government's demand that pretty much every search engine hand over their logs? That was part of the case the government was trying to make -- and about the best they could do was to prove that (gasp!) there's some porn online.

Of course, since porn is legal, proving that there's porn online is hardly a rationale for restricting free speech -- which is what COPA would do. It would require sites to make sure that either no adult content showed up anywhere on their site, or verify the age of everyone who visited their site. That is quite an extreme limitation on free speech, which is exactly what court after court after court has said. And, now we can add to that the Appeals Court who has now struck down COPA yet again, pointing out that it's a clear violation of the First Amendment and chilling to freedom of speech. It also noted that there's simply no reason that parents can't deal with themselves through the use of filters: "It is apparent that COPA, like the Communications Decency Act before it, 'effectively suppresses a large amount of speech that adults have a constitutional right to receive and to address to one another,'... and thus is overbroad. For this reason, COPA violates the First Amendment. These burdens would chill protected speech." Interesting that this comes at the same time that Andrew Cuomo and NY State are bullying ISPs to effectively do what COPA would have demanded. Hopefully Comcast will send Andrew Cuomo a copy of the Appeals Court decision. In the meantime, the Justice Department is indicating that it will appeal to the Supreme Court -- so this case is still not over.

Permalink | Comments | Email This Story

At some point, people need to realize that there are some people out there who just do jerkry things. In fact, at some point or another, probably most everyone is a jerk to someone else. It's no fun to be on the receiving end of someone being a jerk -- but it happens. However, in the last few years, there's been this silly focus on trying to turn online jerks into criminals. We've already highlighted such an effort underway in the US, but now a bunch of teachers in Canada are pushing to make cyberbullying a criminal offense. Yes, it's important to deal with cyberbullies, but charging them with a crime clearly goes too far.

Permalink | Comments | Email This Story

When challenged on what they're doing, organizations like the RIAA and the IFPI will often claim that they're just trying to help musicians. That's obviously untrue, as they represent the record labels -- who have a long history of an antagonistic relationship with the musicians they work with. We're seeing more and more cases where this conflict is being made quite clear as the RIAA and IFPI attacks fan actions that the musicians in question would prefer be left alone. Reader Xavier sends in this example of a music blogger who received a cease and desist from the IFPI that not only contained numerous mistakes, but was disputed by the musician himself.

When the blogger received the cease-and-desist (which named the wrong song, but pointed to a specific URL on his blog), he sent the band a note via their MySpace page, to which the lead singer of the group responded: "You definitely have my blessing as one of the 4 holders of the copyrights to that specific recording. I actually think this is bogus. Anyways thanks for posting that on your site. It was lovely to see it out there doing the rounds. We didnt take it to radio so your helping with the pollenation of the nation." Of course, the blogger was (rightfully) worried that the IFPI might have his hosting company take down the site and/or charge him with a lawsuit, so he took down the song anyway. Nice to see the IFPI looking out for the best interests of the musicians, huh?

Permalink | Comments | Email This Story

There's a somewhat bizarre and ethically questionable post up on the usually excellent Patently-O blog, hyping up the fact that Google may lose its patent on PageRank (which Google only holds a license to, since Stanford actually owns it). First off, this isn't new or particularly surprising. It's talking about the upcoming decision on the Bilski case, which we've discussed at length. The decision could impact all software patents, and the author is merely using the Google name to get extra attention.

Even worse, it's misguided attention. Google is hardly a massive patent shop. It does get patents, but has rarely (if ever?) enforced them. And the idea that Google's success is somehow predicated on its patents is pretty ludicrous. Independent studies have shown, repeatedly, that Yahoo and Microsoft's search technology is just as good, if not better than Google's. But people use Google because they trust Google and are comfortable using it. Google has built up a reputation -- and that has nothing to do with its patents. If Google lost all of its patents today, it would have little to no impact on Google's position in the market. If anything, it might help Google, as it would also probably end a bunch of the silly patent lawsuits that have been filed against Google.

Finally, the post is ethically questionable, as its author, John Duffy, was hired by a software company, RDC, to write an amicus brief in the Bilski case pushing for the position that software should remain patentable. This is not disclosed in the post. In other words, he's clearly biased in favor of making sure that the end result of Bilski is that software patents remain in tact, and a little publicity campaign, stirred up by misleading claims that everyone's beloved Google will somehow be harmed could help push public sentiment towards allowing software patents.

Permalink | Comments | Email This Story

While the MPAA still wants you to believe that movie piracy is a huge problem, it's never quite able to explain how the movies that are most likely to be available for free online also happen to be the biggest box office winners. The latest example is with The Dark Knight, the latest Batman installment. It's getting tremendous reviews and had a record opening week, despite the fact that you could download it online. This isn't a surprise. Piracy has never really been a threat to the movie business -- which has always been more about selling the experience than the movie itself. And, things are even better with The Dark Knight because it's actually designed to look amazing on IMAX screens, which is an experience you just can't replicate at home. Somehow, though, we doubt the MPAA will give up its pointless claims about the "threat" of movie downloads.

Permalink | Comments | Email This Story

Well, this is just downright disturbing. Jon Healy has a quick summary of a totally unexpected and unnecessary proposed rulemaking from the Copyright Office that could add additional royalties that webcasters would need to pay (on top of the already onerous webcasting rates). Basically, the Copyright Office had been asked to decide on a totally different question concerning royalties back in 2000. That issue isn't even in question any more, as the two sides had already worked out their differences, and the Copyright Office didn't do much to give an official answer on that question anyway.

Instead, it came up with an idea out of the blue that music publishers are entitled to an additional mechanical royalty for non-interactive streams (e.g., webcasts, satellite radio, etc.). As Healy explains, this makes no sense and seems to go against previous agreements on these types of royalties. Mechanical royalties are supposed to be for actual copies of the music. Non-interactive streams are basically the same as radio -- which requires performance royalties, but not mechanical royalties.

This reminds me of the column by Rasmus Fleischer we wrote about a little while ago, where he noted how silly copyright law can get with all these different royalty rates that were designed for a different time. The borderlines between radio, streams, downloads, recordings and all other ways of accessing and hearing music are blending together, and trying to match the old rights to the new ways that people interact with music just leads to more problems -- such as multiple levels of royalties all being heaped upon the same single action, making it effectively uneconomical to actually do the most natural thing with music: play it online.

Permalink | Comments | Email This Story