Monthly Archives: November 2007

Facebook’s Beacon Retreat

It appears that Facebook has heeded its critics and subscriber protests. While Facebook has not chosen to scrap its Beacon advertising system altogether, it has agreed to modify it so that users must explicitly choose to "opt-in" to the program before having their online purchases and product reviews shared with other Facebook users while logged into the service.

Here’s an excerpt from an AP story that hit the wires this morning:

Under the changes outlined late Thursday, Facebook’s 55 million users will be given greater control over whether they want to participate in a three-week-old program that circulates potentially sensitive information about their online purchases and other activities.

Facebook provided two different opportunities to block the details from being shared, but many users said they never saw the "opt-out" notices before they disappeared from the screen.

With the reforms, Facebook promised its users will now have to give their explicit consent, or "opt-in," before any information is passed along.

The concessions were made after more than 50,000 Facebook users signed an online petition blasting the system, called "Beacon," as a galling intrusion that put the Palo Alto-based startup’s pursuit of profit ahead of its members’ privacy interests.

Facebook users must remain vigilant. The company has demonstrated that it will sacrifice the privacy of its subscribers to justify and maintain its exalted market valuation of $15 billion. Stakes that high can skew people’s sense of propriety, with fear and greed tending to override salutary sensibilities — not to mention logic and reason, which can get shunted aside in the mad dash for big money.

The motivations and pressures that resulted in Facebook’s Beacon plan, which basically transformed its users into unpaid shills with no claims to privacy, are still in operation. Facebook cannot be trusted to deal honestly and openly with the people who use its services. Caveat emptor.

Maybe Facebook Users Should Think About Breaking a Bad Habit

Maybe I don’t understand the so-called Facebook Generation, but I think it’s time Facebook users started doing more than protest against the social-networking website’s online tracking and broadcasting of their online purchases.

Facebook’s Beacon system not only tracks where subscribers go online while their logged into the site, but it also sends news alerts to users’ friends about the goods and services they buy and view online. It then will run ads alongside these alerts for products or services associated with the purchases.

Here’s an excerpt from an article in the New York Times about protests against Beacon and Facebook’s apparent determination to resist making concessions to its users:

Under Beacon, when Facebook members purchase movie tickets on Fandango.com, for example, Facebook sends a notice about what movie they are seeing in the News Feed on all of their friends’ pages. If a user saves a recipe on Epicurious.com or rates travel venues on NYTimes.com, friends are also notified. There is an opt-out box that appears for a few seconds, but users complain that it is hard to find. Mr. Palihapitiya said Facebook is making the boxes larger and holding them on the Web pages longer.

Adam Green, a spokesman for MoveOn.org Civic Action, said that the organization was not satisfied with the changes and thought that Facebook should offer an opt-out to remove users from Beacon altogether with one click, and make sure it does not share private purchases at any time without permission.

The whole purpose of Beacon is to allow advertisers to run ads next to these purchase messages. A message about someone’s purchase on Travelocity might run alongside an airline or hotel ad, for example. Mr. Zuckerberg heralded the new ads in early November as being like a “recommendation from a trusted friend.”

I gave Facebook a try a while back, but I have no intention of returning to or otherwise patronizing a service that is so cavalier in its willingness to violate the privacy and trust of its subscribers. That said, some of Facebook’s avid users seem confused about how to respond the service’s privacy incursions:

“We know we don’t have a right to privacy, but there still should be a certain morality here, a certain level of what is private in our lives,” said Tricia Bushnell, a 25-year-old in Los Angeles, who has used Facebook since her college days at Bucknell. “Just because I belong to Facebook, do I now have to be careful about everything else I do on the Internet?”

Facebook has let it be known that it will exploit its denizens for all they’re worth. If it persists in doing so, the people who’ve made Facebook successful by patronizing it should withhold or rescind their support. That’s the only power a consumer has at his or her disposal, whether online or in the world of bricks-and-mortar retailers.

Dell Remains Company in Transition

Dell issued its quarterly results earlier today, and, judging by after-hours trading, investors’ initial response was one of disappointment. As of 7:21 pm Eastern, Dell’s share were down 10 percent from their end-of-day closing price.

While Dell’s third-quarter results weren’t terrible — the company met consensus earning expectations and slightly topped revenue projections — margins remain under pressure, and Dell continues to lose ground to HP and others in the consumer PC market in the USA. Dell’s guidance also is murky, clouded by concerns about spending by corporate customers in the beleaguered financial sector and by a slowing decline in the prices the company pays for computer memory and other components.

Notebook sales were up, but they’ll have to continue to improve at at even higher rate if Dell is to take share from HP and Acer worldwide.

Said CEO Michael Dell:

We embarked this year on a long-term strategy to reignite growth and our Q3 results indicate we’re making solid progress through investments in five key business priorities: consumer, emerging countries, notebooks, enterprise and small/medium business.

Based on tonight’s results, Dell is a company in transition, making headway in some areas, less in others, and needing to do more right across the board.

HP Could be Looking for Acquisitions Valued at “Billions of Dollars”

At HP’s Software Universe conference in Spain today, one of the company’s senior vice presidents said HP is intent on growing its software business, and that not all of the growth is likely to be organic.

That suggests more software acquisitions by HP, though Tom Hogan, the aforementioned senior vice president, wasn’t tipping his hand as to which companies HP might want to purchase.

He did offer the following commentary, however:

If we are looking for purchases, it will in the billions-of-dollars class.

That definitely narrows the range of acquisition candidates, especially with Oracle and, to a lesser extend, SAP, IBM, and HP itself buying up the sizable independent players still on the market.

One company with a market valuation of billions of dollars that HP wont’ acquire is BEA, which recently spurned an inimical takeover bid from Larry Ellison and the swashbuckling crew at Oracle. As reported by Eric Savitz on his Barron’s blog, HP’s Mr. Hogan told Reuters about a week ago that HP wanted to remain agnostic in its support of application-server software such as BEA’s.

EA Says Google, Analysts Hyping In-Game Ad Revenues

Taking issue with estimates provided by Google and assorted market analysts, Electronic Arts Inc. CEO John Riccitiello said today that advertising from in-game revenue will not exceed $1 billion within the next three years.

Said Riccitiello:

You can’t be as bullish as analysts are on in-game advertising and be sane. In-game ad expectations are wildly high.

Analysts haven’t been the only allegedly insane individuals bullish about prospects for in-game advertising. Bernie Stolar, head of Google Inc.’s AdSense for Games unit, recently told trade publication GamesIndustry.biz that videogame ads will become a $1 billion industry by 2010.

Riccietiello begs to differ. He has good reason for skepticism, too. The Electronic Arts CEO says the videogame industry, including game publishers such as his company, needs to execute better in making room for and presenting advertisements within games. He says EA and others underestimated the difficulty of designing games, and the advertising space allocated inside them, for complex consoles such as Microsoft’s XBox 360 and Sony’s PlayStation3.

Another inhibitor of in-game advertising has been the lack of independent auditors that can measure and verify how many players are exposed to the pitches, though Riccietiello says industry efforts have been initiated to rectify that failing.

Zune Reviewers Damn with Faint Praise

Why do some consumer-electronics reviewers in the trade press and the mainstream media insist on encouraging Microsoft to persist in its delusional ambition to become a vendor of stylish and commercially successful hardware devices?

It just isn’t in Microsoft’s DNA to pull it off. Hardware design isn’t a core competence of the Redmond software behemoth, and the valuable resources that Microsoft spends in that pursuit can and should be apportioned elsewhere in its sprawling business.

The New York Times today features a review of Microsoft’s latest crop of Zune media players. Reviewer David Pogue begins by asserting that Microsoft "might finally be getting the hang of hardware," before going on to size up the Zune family alongside Apple’s dominant iPod brood.

For the most part, Microsoft still isn’t on par with Apple, as even Pogue concedes. Still, Pogue strongly implies that Microsoft doesn’t suck as badly at hardware as it did previously.

To me, that’s like saying the Miami Dolphins (0-11 so far this NFL season) aren’t quite as wretched as their record suggests or that the Oakland Raiders aren’t as bad as they were last season. The praise is relative, not absolute, and it depends on starting from an abject benchmark. It’s called damning with faint praise.

Microsoft should not have moved into the hardware business. The current crop of Zunes might be better than the last generation, but that’s not saying much.

Russo Deflects Blame for Alcatel-Lucent Disaster

In an article posted today on the BusinessWeek website, Alcatel-Lucent CEO Patricia Russo seems to throw nearly everybody under the bus for her company’s struggles.

When the Lucent-Alcatel merger was first announced, I said it would end in tears — for the merged company’s customers, for its employees, for its partners, and for its shareholders. Still, even I underestimated the sheer scale of the unmitigated disaster the merger has become. It has been a debacle of epic proportions.

Now, as CEO Russo looks for culprits and villains to blame for the calamity, she manages to avoid implicating herself while casting aspersions on nearly everybody else in view.

First off, she seems to blame external critics of the merger, saying, "It’s easy to sit on the sidelines and make strategic judgments."

That might be true, Ms. Russo, but the external critics, including this one, don’t have the mandate to guide your company strategically, didn’t make your mistakes, and aren’t remunerated ludicrously inflated sums to provide corporate leadership. If you want to do the easy job of sitting on the sidelines and making strategic judgments, I’m sure many of your company’s shareholders would welcome your decision.

Next, Russo blames integration problems for many of the company’s difficulties, failing to comprehend that she and her executive team were ultimately responsible for the integration plan.

One of those problems, Russo now admits, was that integrating Alcatel and Lucent proved more disruptive than expected. Customers, uncertain about possible changes in the merged company’s product lineup, hesitated to place new orders. At the same time many employees were "distracted" by worries their jobs would change or be eliminated, she says.

Let’s see: Integrating Alcatel and Lucent was more disruptive than expected, with customers hesitating to place new orders because of uncertainty regarding the product portfolio and employees worried about their job status. I’m just one of those outside critics Russo so disdains, but it sure sounds as if the lack of an integration plan, poor integration execution, and woeful communication — with customers and inside the company, with employees — were the causes of the integration mess. Those responsibilities would ultimately rest with the CEO, no?

Russo, though, sees other malefactors behind the post-merger difficulties of her company.

"Our competitors pulled the rug out from under us," Russo says. "They put forward some very aggressive pricing."

Imagine that? Competitors actually . . . well, they competed for business!  That must have come as a shock to the CEO and her crack executive team. Who could envision that rivals might try to beat Alcatel-Lucent in the marketplace? Obviously, Russo and company couldn’t foresee it, and they were apparently helpless to adjust to it.

Then, of course, there were product missteps and technological backwardness at Alcatel-Lucent. The blame for those miscues must be attributable to the growing legions of employees she’s been shedding rather than on Russo’s own shoulders, right? After all, she can’t be expected to mind the strategic store.

Have no fear, though. Russo, like every other failed CEO scrambling to save her job despite a miserable track record, says the worst is behind Alcatel-Lucent. She claims the company is back on track, with integration challenges addressed, product portfolio reordered, competitive vigor refreshed, and strategy reset.

Who are you going to believe, investors and shareholders? Are you going to believe Patricia Russo, or your own lying eyes? If I were you, I would say, in true Gallic tradition: "Patricia Russo, J’accuse."