Case Study: A Content Company Weighs Becoming a Technology Company

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Case Study: A Content Company Weighs Becoming a Technology Company

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Advertising: Vice Media Buys a Tech Company to Experiment With Content Distribution

ADVERTISING, journalism and technology continue to converge. The latest example: Vice Media’s acquisition of Carrot Creative, a digital agency that creates apps, websites and games for media companies and brands.

In its new home, Carrot will experiment with ways to distribute Vice’s editorial content. The agency will also focus on building digital initiatives for brands that work with Vice.

“We take our learnings as a media company and offer them to brands which are now trying to work like media companies,” said Andrew Creighton, the president of Vice Media. “It gives us an extra resource.”

A person familiar with Tuesday’s acquisition, who was not authorized to speak publicly, said the deal was valued at $15 million to $20 million in stock and cash.

Vice has long looked for ways to reinvent its business.

Vice, which began as a magazine in 1994, has since moved into video, television, advertising, music and events, among other fields. A spin through
Vice’s Brooklyn offices reveals as many studios, editing suites and lushly appointed meeting rooms as there are writers hunched over computers.

The company has grown through technology, Mr. Creighton said. “We started with desktop publishing,” he said, then “when we got into video we took advantage of the democratization of broadband and video production tools.” Two years ago, Mr. Creighton said, less than 10 percent of those who watched Vice videos were on phones. Now the number is escalating fast, and will most likely hit more than 50 percent in coming years.

“We’re growing into multiple new verticals,” said Mr. Creighton, pointing to news, fashion and sports efforts that will start next year. “We have a solid website, but we were focusing on content rather than tech, and now both go hand in hand.”

The acquisition of Carrot, said Mr. Creighton, will add to Vice’s technological capacity.

For example, Carrot has found that viewers take in and share material from either media companies or brands differently on different devices.

“The smaller the screen gets, the smaller the audience gets,” said Mike Germano, the chief executive of Carrot Creative. A smartphone has an audience of one, a tablet perhaps two and the TV many more.

He added that technology and content, brands and media companies, were no longer separate. Mr. Germano, who has worked with brands such as Ford, Jaguar and Red Bull, compares what he does to “Mutual of Omaha’s Wild Kingdom,” the animal-themed TV show that began in the 1960s.

“That was how people saw giraffes and lions for the first time, and that’s what we’re getting back to now,” he said. “When you don’t feel like you’re watching an ad, when they’re providing a service, that’s when you build a relationship with people.”

The changing nature of the industry, though, is also raising concerns. The Federal Trade Commission recently expressed concern that so-called native advertising or sponsored advertising could mislead consumers. “By presenting ads that resemble editorial content,” said Edith Ramirez, the chairwoman of the F.T.C., at a conference last week, “an advertiser risks implying, deceptively, that the information comes from a nonbiased source.”

Vice says it clearly delineates between editorial and branded content.

Such digital advertising has been on the rise as media companies look to bolster ad numbers.

Trade commission officials, citing recent surveys of online publishers, said that 73 percent offered native advertising and an additional 17 percent were considering it this year. About 41 percent of brands and one-third of advertising agencies use such methods, the officials said. (The New York Times is among the publications that will begin the practice in 2014.)

Mr. Germano noted that the proliferation of digital devices would change how people consume information, just as the Internet has changed how people buy things. And consumers, he said, can enjoy those just the same.

He cited a recent experiment in which a basketball player, Victor Oladipo, wore Google Glass to the N.B.A. draft, giving users of the website the Verge a player’s-eye view of proceedings.

“That’s not something that might make ESPN happy,” Mr. Germano said, “but it’s an example of how media is really changing.”

AOL Posts Higher Revenue and Buys Company

In line with its ambitions to become a platform for live broadcasting and programming, the company also said that it had acquired Adap.tv, a video advertising company that allows purchases across the Internet and on television. The cost was $405 million.

Under the terms of the deal, AOL will pay $322 million in cash and about $83 million in stock. That is more than the $315 million it paid for The Huffington Post two and a half years ago and thus is its biggest acquisition since becoming an independent company.

Video, with its ability to command higher advertising rates, has been one of the biggest points of focus for Internet media companies for some time. AOL has been seeking to amass sources of video content as part of its bet that consumers will increasingly watch video online instead of on television.

“AOL is a leader in online video, and the combination of AOL and Adap.tv will create the leading video platform in the industry,” Tim Armstrong, AOL’s chairman and chief executive, said in a statement. “The Adap.tv founders and team are on a mission to make advertising as easy as e-commerce, and the two companies together will aggressively pursue that vision.”

AOL executives added in a phone interview that the acquisition was not as much about promoting their own content as it was about diversifying the company’s earnings into a revenue stream — the infrastructure for ad purchasing for online video — that it thinks has tremendous potential.

In addition to the Adap.tv sale, AOL trumpeted the fact that its ad sales were up 5 percent. However, that growth was tepid compared to overall digital ad spending in the United States. That spending grew by 14.8 percent, to $10.01 billion, in the second quarter of 2013 compared with the same period last year, according to Emarketer, an online advertising research firm.

Despite positive growth in advertising and traffic, up 3 percent year over year, the earnings revealed the company’s continued dependence on revenue from subscriptions to the AOL portal, a declining business. Looking at adjusted operating income before depreciation and amortization, or income earned from regular operations, the membership business was a net positive at $151.6 million, but still down 4 percent year over year.

Wall Street’s reaction was mixed, and AOL’s stock rose 1.4 percent, to $36.69 at the close of trading. Analysts were pleased that AOL seemed to be cutting losses. The brand groups, for example, cut losses from $15.2 million for the quarter a year earlier to $1.4 million this last quarter. Though losses increased in this area for AOL networks, Mr. Armstrong said that was because the company was in “investment mode.”

But many worried about whether AOL paid too much for the Adap.tv purchase, which will be completed in September.

Adap.tv, founded in 2007, counts Spark Capital, Redpoint Ventures and Gemini Israel Funds among its investors.

This article has been revised to reflect the following correction:

Correction: August 7, 2013

An earlier version of this article misstated the quarterly revenue for AOL. It was $541 million, not $361 million, for an increase of 2 percent, not 7 percent. The error was repeated in an earlier version of the headline.

DealBook: Michael Dell Salvages Bid for His Company

Bits Blog: Coursera, an Online Education Company, Raises Another $43 Million

Ramin Rahimian for The New York Times Daphne Koller, a co-founder of Coursera, at the company’s offices in Mountain View, Calif. Over the next few months, Coursera plans to double its employees to about 100.

Coursera, a year-old company offering free online courses, has raised another $43 million in venture capital from investors active in both domestic and international education.

The new investors include the International Finance Corporation, the investment arm of the World Bank, and Laureate Education, an international higher education company with dozens of profit-making universities around the world, as well as GSV Capital, Learn Capital and Yuri Milner, an individual entrepreneur.

“We hope it’s enough money to get us to profitability,’’ said Daphne Koller, a co-founder of Coursera. “We haven’t really focused yet on when that might be.’’

Coursera, based in Mountain View, Calif., previously raised $22 million from Kleiner Perkins Caufield & Byers; New Enterprise Associates; and the University of Pennsylvania and California Institute of Technology, two of its university partners.

Over the next few months, Coursera plans to double its employees to about 100, and expand in several areas, including mobile apps and its Signature Track offerings, which charge a fee to students who want an identity-verified certificate upon successful completion of Coursera’s free courses. Since January, when the Signature Track option was first offered in five courses, Signature Track fees have produced more than $800,000, Ms. Koller said — and in the long run, she said, such revenue may be enough to make the company sustainable.

The company also plans to invest in international expansion, through localization, translation and distribution partnerships, and techniques for blended learning, in which Coursera’s online materials are used alongside classroom sessions with a professor.

“We see great potential for using some of the Coursera materials in our universities, so there is a strategic element to this investment,’’ said Douglas L. Becker, chairman and chief executive officer of Laureate. “The I.F.C. made the largest education investment they ever made in Laureate, and they’re joining us in this investment. Coursera allows us to invest in something we see as a rising technology impacting higher education, and gives us access to their content and curriculum.”

Coursera has grown with stunning speed since it began in April 2012, with four university partners. Now, the company works with 83 educational institutions on four continents, offering about 400 free college-level courses to more than four million students from every country in the world.

But after the initial burst of enthusiasm last year about massive open online courses, or MOOCs, and their potential for democratizing higher education worldwide, this year has brought some pushback. Faculty members at several institutions have expressed concern about how the courses may change higher education, how quickly university administrators signed on to work with MOOC providers, and whether the aim is more to save money than improve the quality of education.

So far, most of the students who have completed Coursera MOOCs have been college graduates, and it is still unclear how well the format will work to help students without degrees earn college credit for their online work. Coursera has recently started to market its materials for use by public universities in blended on-campus classes. Universities that use the materials will pay licensing fees, which Coursera will share with the universities that produce the courses.

At Melissa & Doug Toy Company, Thriving on the Basics

ESTHER BERNSTEIN, 6 years old with long blond hair, pulled on a pair of blue slippers with a gray tassel over the toe. She grinned.

“Look, Mom! I like these princess slippers!”

“Would you wear them to play dress-up?” her mother asked.

“Yes.”

Esther’s 9-year-old sister, Sydelle, grimaced and freely offered that she would not.

“Well, Sydelle, you’re too old for this toy,” her mother said. “You’re not the target market.”

It was a Sunday night, after dinner, at the informal in-home testing lab of Melissa and Doug Bernstein, better known as Melissa & Doug, the toy company and the signature that adorns all their products. This August, their company will turn 25, celebrating a quarter-century of anachronism. In a time when major corporations dominate the industry, making toys with all manner of batteries, digital gimmicks or movie tie-ins, the Bernsteins keep making money in wooden puzzles, coloring pads, blocks, trains and simple costumes (the police officer, the princess, the pirate). They hatch many of their ideas by watching children at play — often among their own brood of six.

From left are Sydelle, 9, Nate, 5, and Esther, 6.

They do little public relations and don’t advertise in magazines, or on radio and television. They don’t put coupons in Sunday newspaper inserts. They don’t rely on big hits, industry analysts say, just a steady stream of variations on classic toys mostly for children up to the age of 5. Nonetheless, their business has grown by double digits every year, to an estimated $325 million in revenue this year from $100 million in 2008 (and to 650 employees from 200), according to a toy company executive familiar with the company’s operations. Such figures make theirs a midsize toy business, of which analysts say there are fewer and fewer these days. In this industry, three huge players — Mattel, Hasbro and Lego — account for around $14 billion in sales, or about a third of global toy company revenue.

The Bernsteins have come a long way from the days when they drove a Chevrolet Malibu, owned by Mr. Bernstein’s father, to deliver products. Growing up in Westport, Conn., an affluent community, Mr. Bernstein, now 50, thought himself the poorest kid, living in a 900-square-foot house. Now their home is 36,000 square feet, one of the biggest in the same township, with hand-chiseled stone and antique ceiling beams — not to mention a bowling alley, an indoor full-court gym and a video arcade.

But they are, as Mrs. Bernstein, 47, puts it, restless, very restless — and challenges are upon them in an industry that, like so many others, is being rewritten in the technology age. Overall toy sales have slumped. Some specialty retailers have closed. Low-cost manufacturing has commoditized many items. But Internet sales have soared, meaning that the Bernsteins are having to adapt to online sales and marketing after years of building relationships with specialty stores.

Crucially, the rise of high-tech entertainment has changed how children play. Apps and video games have soared in popularity; on Amazon, you can even buy an iPod stand to accompany a potty trainer. The phenomenon can provoke conflicting feelings in parents. Should they give in to children’s yearnings for a phone app or video game? Or limit the screen time and offer up something simpler and more nostalgic, reminiscent of a childhood real or imagined?

The topic of traditional versus high-technology toys is one that particularly piques Mrs. Bernstein. “When you’re using a computer or an app, it’s giving you all the information you need,” she said. “It’s a completely reactive experience.” But she thinks she knows why that is so appealing. “Parents are so scared of having their kids say, ‘I’m bored.’ It’s synonymous with, ‘I’m a bad parent,’ and so they never allow kids to feel boredom, which equals frustration, and so kids don’t get to the point where they have to dig deeper and figure out what to do.”

Plenty of toy companies have joined Melissa & Doug in this niche, competitors whose simple offerings aim to entertain — but not too much. Companies like Haba, which makes blocks and wooden toys from sustainable woods, or Alex, which makes arts and crafts for “active fun.” But few companies can reach the size of the Melissa & Doug operation without facing a tough decision: Do you keep trying to expand on your own, pushing into larger retailers, or do you sell to a major toy maker?

Israeli Electric Car Company Files for Liquidation

JERUSALEM — The vision was ambitious. Better Place, an electric vehicle infrastructure company, unveiled plans more than five years ago to pioneer a system of quick-service battery swapping stations across Israel to enable unlimited travel.

The company’s founder predicted that 100,000 electric cars would be on the roads here by 2010.

But on Sunday, Better Place announced that its venture, a flagship enterprise of Israel’s image as a start-up hub, was coming to an end.

Dan Cohen, the company’s third chief executive, said in a statement that financial difficulties had left the company no option but to file for liquidation in a district court and to request the appointment of a provisional receiver “to find the best way to minimize the damage to its employees, customers and creditors.”

The announcement followed a string of setbacks in the emerging electric car market. Fisker, a carmaker, is in financial distress; A123 Systems, a battery supplier for Fisker, and, more recently, Coda Holdings, another carmaker, filed for bankruptcy. Tesla, the prominent car manufacturer, has had success, though, repaying its government loan last week after a successful sale of new shares.

Israel had been considered a perfect testing ground for Better Place’s green project, given the country’s small size and high gasoline prices. The electric car fit into Israeli dreams of reducing oil dependency; the initiative gained the support of the government and was embraced by Shimon Peres, the president of Israel. President Obama, during his March visit here, praised the Israelis’ innovative spirit, mentioning electric cars as one of several examples.

Yet the project was hobbled by problems and delays, and the company’s idea failed to gain traction, with fewer than 1,000 cars on the road in Israel and another few hundred in Denmark.

Mr. Cohen said on Sunday that the vision and the model had been right, but that the pace of market penetration had not lived up to expectations. Without a large injection of cash, he said, Better Place was unable to continue its operations.

“This is a very sad day for all of us,” Mr. Cohen added. “The company brought with it a vision that swept along many people here and around the world.”

About $850 million in private capital has been invested in the company, which has 350 employees in Israel. The largest shareholder, with about 30 percent of the stock, was the Israel Corporation, a large holding company that focuses on chemicals, energy, shipping and transportation. The corporation’s decision not to invest further in Better Place led to the motion for receivership.

The Better Place model for electric car use emerged from an effort among manufacturers and suppliers to establish a standard infrastructure in the nascent industry.

Under terms that resembled a cellphone plan, subscribers to Better Place bought their cars and paid about $350 a month to lease access to the batteries, swap stations and charge points. But only one car manufacturer, the French automaker Renault, signed on to adapt its Fluence Z.E. sedan to enable battery switching, limiting the customers’ choices and the company’s potential.

The battery has a range of about 100 miles. For those traveling longer distances, Better Place set up a network of switching stations where it promised that swapping a depleted battery for a fully charged one would take about the same time as filling a car with gas, so that range would no longer be an issue.

“It’s not the future of gas stations; it’s the end of them,” the company Web site boasted.

About three dozen switching stations now dot Israel, which is about 260 miles long from north to south, but they often look deserted.

The company was founded in Palo Alto, Calif., by Shai Agassi, an Israeli entrepreneur who had previously been a top executive at SAP, the German software company. It then moved from California to Tel Aviv.

In October, Better Place said that Mr. Agassi had been succeeded as its chief by Evan Thornley, the company’s top executive in Australia. The company said Mr. Agassi would continue as a board member and shareholder. Mr. Thornley left after only three months, over differences regarding the direction of the company, according to Globes, the Israeli business publication. He was succeeded by Mr. Cohen.

In February, Better Place announced that it was winding down its operations in North America and Australia to concentrate on its core markets in Denmark and Israel.

Mr. Cohen said on Sunday that the company would do what it could to continue to serve its customers and operate the recharging network, until the liquidator decided on a course of action.

A Data Trove Now Guides Drug Company Pitches

The information allows drug makers to know which drugs a doctor is prescribing and how that compares to a colleague across town. They know whether patients are filling their prescriptions — and refilling them on time. They know details of patients’ medical conditions and lab tests, and sometimes even their age, income and ethnic backgrounds.

The result, said one marketing consultant, is what would happen if Arthur Miller’s Willy Loman met up with the data whizzes of Michael Lewis’s “Moneyball.” “There’s a group of geeks, if you will, who are running the numbers and helping the sales guys be much more efficient,” said Chris Wright, managing director of ZS Associates, which conducts such analyses for pharmaceutical companies.

Drug makers say they are putting the information to good use, by helping a doctor improve the chances that their patients take their medications as prescribed, or making sure they are prescribing the right drug to the right patients.

Some doctors, however, expressed discomfort with the idea of sensitive data being used to sell drugs, even though federal law requires that any personally identifiable information be removed. “I think the doctors tend not to be aware of the depths to which they are being analyzed and studied by people trying to sell them drugs and other medical products,” said Dr. Jerry Avorn, a professor of medicine at Harvard Medical School and a pioneer of programs for doctors aimed at counteracting the marketing efforts of drug makers. “Almost by definition, a lot of this stuff happens under the radar — there may be a sales pitch, but the doctor may not know that sales pitch is being informed by their own prescribing patterns.”

The research firm IMS Health has tracked information about which drugs doctors prescribe since the 1990s, and over the last decade, the list of available information has expanded to include insurance claims data, which yields a trove of intelligence about patients’ medical diagnoses and insurance coverage. Additional details about patients, including income, education and ethnicity, can also be available.

One company, SDI Health, promises to provide clients with “actionable analysis” by tracking people — on an anonymous basis — as they move through the “patient experience.” That includes, according to their Web site, filling prescriptions at a pharmacy, visiting a doctor, being admitted to the hospital and undergoing lab tests.

“Through our unique and proprietary patient-linking technology, we connect all aspects of a patient’s behavior,” the company’s Web site states. IMS Health acquired SDI in 2011.

“The sales representative theoretically has the ability to understand not only the doctor’s behavior, and which other physicians are key opinion leaders that the doctor listens to, but also the behavior of that doctor’s patients,” said Jerry Maynor, the director of marketing for North America at Cegedim Strategic Data, one of the companies that performs data analyses.

Some said that tracking physicians’ behavior was no different from techniques other industries use to sell products, including following a consumer’s Internet activity. But David Orentlicher, a law professor at Indiana University who writes on medical ethics issues, said the pharmaceutical companies’ use of data has become more invasive. “A lot of the information comes out of the doctor-patient encounter,” he said.

Privacy advocates also pointed to research showing that people in anonymous databases can sometimes be re-identified. “It just seems like it skirts the edge of the laws that do exist,” said Adriane Fugh-Berman, an associate professor at Georgetown University Medical Center who is a critic of pharmaceutical marketing tactics.

Advertising: Microsoft, Weather Company and More Make Ad Pitches

It must be the television upfront season, yes? Well, yes and no.

As networks and channels preview for Madison Avenue their lineups ahead of the 2013-14 television season — hence the term upfront — companies that produce digital content like online video and streaming video are also putting on presentations in hopes of attracting advertising dollars from marketers and agencies, either diverted from television budgets or additive spending.

So eager are those companies to woo the television crowd that they are sponsoring this week, under the aegis of the Interactive Advertising Bureau, five mornings, afternoons and evenings of events, receptions and parties under the banner of the Digital Content NewFronts. To underline the difference, the official logo for the event depicts the words “Upfronts” with the “Up” crossed out and replaced by “New.”

Four companies opened the week on Monday: two digital media specialists, Microsoft and Yahoo; the Weather Company, which considers itself an expert in content on four screens: television, computers, smartphones and tablets; and The Wall Street Journal, which sought to draw attention to its video content and advertising with an event that Journal executives called Newsfront 2013. (Upfronts, NewFronts, Newsfront — it can get pretty confusing.)

For a publisher known for print media seeking to become identified in digital realms, “you’ve got to get to critical mass,” Michael F. Rooney, chief revenue officer at The Journal, part of the Dow Jones & Company division of News Corporation, said in an interview after The Journal’s 90-minute presentation.

The Journal, through offerings like WSJ Live and WorldStream, now has “enough inventory to get people to pay attention,” said Mr. Rooney, who also spoke during the presentation along with senior executives like Lex Fenwick, chief executive at Dow Jones and publisher of The Journal; Gerard Baker, managing editor of The Journal; and Chris Cramer, head of video operations.

The executives announced video initiatives that include “WSJ Startup of the Year,” an episodic documentary for WSJ Live, sponsored by the New York Stock Exchange and evocative of a reality competition series. Starting on June 24, 25 entrepreneurs will work with more than two dozen mentors like Richard Branson, Tory Burch and MC Hammer; the recommendations of the mentors, and viewer votes, will guide editors of The Journal as they winnow the contenders and select a winning start-up.

For the Weather Company, the presentation was the second in less than four weeks; the company offered a look at its 2013-14 programming lineup for the Weather Channel cable network at an event in New York on April 3. Asked before the presentation if the company was taking too many bites of the upfront apple, David Kenny, chairman and chief executive at the Weather Company, replied: “There are different capabilities here, a ton of capabilities. There’s a lot of unique content you can only do in digital.”

Another reason to take part in the Digital Content NewFronts, Mr. Kenny said, was that among the buyers of commercial time at media agencies, “there are some who buy both” television and digital, “but there are many who focus on digital and we need to show them what’s here.”

“And for us, a big leader in mobile, showing what mobile can be is important,” he added. “The mobile audience is here, and wouldn’t be at a cable upfront.”

Among the announcements by the Weather Company was an expansion of video content under the banner of Weather Channel Films, which will be on the Weather Channel network as well as available online, on smartphones and on tablets. The company is adding three Web series to the three it announced at the Weather Channel upfront; the series, with titles like “Alive” and “I Am Unstoppable,” will run from July through December.

“We want to superserve the weather enthusiast,” said Curt Hecht, chief global revenue officer at the Weather Company, using a term the company coined to describe its most ardent viewers, on whichever screens.

There will be an “investment in video content that you’ve never seen before from this company,” he added, a promise he underlined by repeating it at the end of the presentation.

Thumping house music — and dancers and acrobats dressed in sequined and gold-and-silver lamé body suits — welcomed guests to the Marquee club for the Microsoft presentation.

“As you know we are entering a world of always on,” said Keith Lorizio, vice president for United States sales and marketing at the Microsoft Advertising division of Microsoft. The setting was certainly “on,” with agency executives and employees lining the walls and crammed into the seats.

Mikhail Lapushner, chief executive at One Beat, a media company that focuses on creating content in the electronic dance music genre, announced a series of new shows that will be geared toward a young, dance-loving audience. “It’s all about the millennials,” Mr. Lapushner said.

One Beat, in partnership with Xbox, the Microsoft video game system, will create and distribute original content for the Web. Among the shows previewed were “Keep It Moving,” which chronicles the lives of four up-and-coming music promoters.

Contrasting with the youth-inspired theme, and the gyrating dancers who performed briefly at every transition between speakers, was a show called “Years of Living Dangerously,” a Showtime television series that will be focused on climate change; the show will also be seen online, at various Microsoft platforms.

Prototype: Milk & Honey, an Online Shoe Company Started by Sisters

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Chinese Firm Is Cleared to Buy American DNA Sequencing Company

The Chinese firm, BGI-Shenzhen, said in a statement this weekend that its acquisition of Complete Genomics, based in Mountain View, Calif., had been cleared by the federal Committee on Foreign Investment in the United States, which reviews the national security implications of foreign takeovers of American companies. The deal still requires antitrust clearance by the Federal Trade Commission.

Some scientists, politicians and industry executives had said the takeover represented a threat to American competitiveness in DNA sequencing, a technology that is becoming crucial for the development of drugs, diagnostics and improved crops.

The fact that the $117.6 million deal was controversial at all reflects a change in the genomics community.

A decade ago, the Human Genome Project, in which scientists from many nations helped unravel the genetic blueprint of mankind, was celebrated for its spirit of international cooperation. One of the participants in the project was BGI, which was then known as the Beijing Genomics Institute.

But with DNA sequencing now becoming a big business and linchpin of the biotechnology industry, international rivalries and nationalism are starting to move front and center in any acquisition.

Much of the alarm about the deal has been raised by Illumina, a San Diego company that is the market leader in sequencing machines. It has potentially the most to lose from the deal because BGI might buy fewer Illumina products and even become a competitor. Weeks after the BGI deal was announced, Illumina made its own belated bid for Complete Genomics, offering 15 cents a share more than BGI’s bid of $3.15. But Complete Genomics rebuffed Illumina, saying such a merger would never clear antitrust review.

Illumina also hired a Washington lobbyist, the Glover Park Group, to stir up opposition to the deal in Congress. Representative Frank R. Wolf, Republican of Virginia, was the only member of Congress known to have publicly expressed concern.

BGI and Complete Genomics point out that Illumina has long sold its sequencing machines — including a record-setting order of 128 high-end machines — to BGI without raising any security concerns. Sequencing machines have not been subject to export controls like aerospace equipment, lasers, sensors and other gear that can have clear military uses.

“Illumina has never previously considered its business with BGI as ‘sensitive’ in the least,” Ye Yin, the chief operating officer of BGI, said in a November letter to Complete Genomics that was made public in a regulatory filing. In the letter, Illumina was accused of “obvious hypocrisy.”

BGI and Complete said that Illumina was trying to derail the agreement and acquire Complete Genomics itself in order to “eliminate its closest competitor, Complete.”

BGI is already one of the most prolific DNA sequencers in the world, but it buys the sequencing machines it uses from others, mainly Illumina.

Illumina, joined by some American scientists, said it worried that if BGI gained access to Complete’s sequencing technology, the Chinese company might use low prices to undercut the American sequencing companies that now dominate the industry.

Some also said that with Complete Genomics providing an American base, BGI would have access to more DNA samples from Americans, helping it compile a huge database of genetic information that could be used to develop drugs and diagnostic tests. Some also worried about protection of the privacy of genetic information.

“What’s to stop them from mining genomic data of American samples to some unknown nefarious end?” Elaine R. Mardis, co-director of the genome sequencing center at Washington University in St. Louis, said in an e-mail.

Dr. Mardis could not specify what kind of nefarious end she imagined. But opponents of the deal cited a November article in The Atlantic saying that in the future, pathogens could be genetically engineered to attack particular individuals, including the president, based on their DNA sequences.

BGI and Complete Genomics dismissed such concerns as preposterous.

You for Sale: Company Envisions ‘Vaults’ for Personal Data

“YOU are walking around naked on the Internet and you need some clothes,” says Michael Fertik. “I am going to sell you some.”

Naked? Not exactly, but close.

Mr. Fertik, 34, is the chief executive of Reputation.com, a company that helps people manage their online reputations. From his perch here in Silicon Valley, he views the digital screens in our lives, the smartphones and the tablets, the desktops and the laptops, as windows of a house. People go about their lives on the inside, he says, while dozens of marketing and analytics companies watch through the windows, sizing them up like peeping Toms.

By now many Americans are learning that they are living in a surveillance economy. “Information resellers,” also known as “data brokers,” have collected hundreds to thousands of details — what we buy, our race or ethnicity, our finances and health concerns, our Web activities and social networks — on almost every American adult. Other companies that specialize in ranking consumers use computer algorithms to covertly score Internet users, identifying some as “high-value” consumers worthy of receiving pitches for premium credit cards and other offers, while dismissing others as a waste of time and marketing money. Yet another type of company, called an ad-trading platform, profiles Internet users and auctions off online access to them to marketers in a practice called “real-time bidding.”

As these practices have come to light, several members of Congress, and federal agencies, have opened investigations.

At least for now, however, these companies typically do not permit consumers to see the records or marketing scores that have been compiled about them. And that is perfectly legal.

Now, Mr. Fertik, the loquacious, lion-maned founder of Reputation.com, says he has the free-market solution. He calls it a “data vault,” or “a bank for other people’s data.”

Here at Reputation.com’s headquarters, a vast open-plan office decorated with industrial-looking metal struts and reclaimed wood — a discreet homage to the lab where Thomas Edison invented the light bulb — his company has amassed a database on millions of consumers. Mr. Fertik plans to use it to sell people on the idea of taking control of their own marketing profiles. To succeed, he will have to persuade people that they must take charge of their digital personas.

Pointing out the potential hazards posed by data brokers and the like is part of Mr. Fertik’s M.O. Covert online profiling and scoring, he says, may unfairly exclude certain Internet users from marketing offers that could affect their financial, educational or health opportunities — a practice Mr. Fertik calls “Weblining.” He plans to market Reputation.com’s data vault, scheduled to open for business early next year, as an antidote.

“A data privacy vault,” he says, “is a way to control yourself as a person.”

Reputation.com is at the forefront of a nascent industry called “personal identity management.” The company’s business model for its vault service involves collecting data about consumers’ marketing preferences and giving them the option to share the information on a limited basis with certain companies in exchange for coupons, say, or status upgrades. In turn, participating companies will get access both to potential customers who welcome their pitches and to details about the exact products and services those people are seeking. In theory, the data vault would earn money as a kind of authorization supervisor, managing the permissions that marketers would need to access information about Reputation.com’s clients.

To some, the idea seems a bit quixotic.

Reputation.com, with $67 million in venture capital, is not making a profit. Although the company’s “privacy” products, like removing clients’ personal information from list broker and marketing databases, are popular, its reputation management techniques can be controversial. For instance, it offers services meant to make negative commentary about individual or corporate clients less visible on the Web.

And there are other hurdles, like competition. A few companies, like Personal, have already introduced vault services. Also, a number of other enterprises have tried — and quickly failed — to sell consumers on data lockers.

Even so, Mr. Fertik contends Reputation.com has the answer. The company already has several hundred thousand paying customers, he says, and patents on software that can identify consumers’ information online and score their reputations. He intends to show clients their scores and advise them on how to improve them.

“You can’t just build a vault and wish that vendors cared enough about your data to pay for it,” Mr. Fertik says. “You have to build a business that gives you the lift to accumulate a data set and attract consumers, the science to create insights that are valuable to vendors, and the power to impose restrictions on the companies who consume your data.”

THE consumer data trade is large and largely unregulated.

Companies and organizations in the United States spend more than $2 billion a year on third-party data about individuals, according to a report last year on personal identity management from Forrester Research, a market research firm. They spend billions more on credit data, market research and customer data analytics, the report said.

Illuminati Files: Kanye Caught Rockin’ Luciferian Pants At Versace Event, Documentary Makes Case For Camel And Company All Being Devil Lovers [Video]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Are your favorite MC’s pathetic puppets of the Prince of Darkness???

Kanye West got tongues wagging this week when he showed up to several events wearing pants covered in illuminati symbology.

You’ve got to watch the video where the guy makes the case for him being down with you know who.

That guy is definitely on one. If you’re into this kinda thing hit the flip and listen to him go on with even more examples of how Jay-Z and friends are some devil lovers…

Huawei, Chinese Telecom Company, Finds Warmer Welcome in Europe

Declaring that Britain was “open for business,” Mr. Cameron announced that his guest, Ren Zhengfei, the chief executive of Huawei, had agreed to expand the company’s already sizable operations in Britain with an investment of £1.2 billion, or $2 billion.

Given the typically close cooperation between the United States and Britain on security issues, the trans-Atlantic divide over Huawei and another Chinese equipment provider, ZTE, is striking. On Monday, the Intelligence Committee of the U.S. House of Representatives branded the companies security threats and raised the possibility that their gear could be used to spy on American interests if used in U.S. telecommunications networks.

Huawei has rejected the allegations as “little more than an exercise in China bashing and misguided protectionism.”

By contrast, said Roland Sladek, a spokesman for Huawei, “Europe is almost like a second home market for us.”

And for good reason. Huawei means jobs and investment for Britain and, more broadly, for Europe. The company already has 800 employees in Britain and a research center in Ipswich. The investment announced by Mr. Ren is expected to create 700 jobs in five years and additional technical centers in the country. In all, the company has about 7,300 employees in Europe.

Mr. Cameron’s government said it had no plans to change its relationship with the Chinese company in the wake of the U.S. committee’s recommendations. But in a trust-but-verify approach to the partnership, Huawei set up a Cyber Security Evaluation Center two years ago in Banbury, England. There, its engineers work alongside officials of Government Communications Headquarters, a British spy agency, to vet Huawei equipment for use in Britain.

“We recognize, of course, that no systems can be completely invulnerable, but by working together we can mitigate some of the risks,” said a spokesman for the Cabinet Office in London, who asked not to be identified as a matter of government policy.

Huawei counts as its customers many of the biggest telecommunications companies in Europe, including BT and Vodafone of Britain, Telefónica of Spain and Everything Everywhere, a partnership between France Télécom and Deutsche Telekom in Britain. The company’s equipment is in high demand, analysts say, as those companies scramble to roll out next-generation wireless broadband networks.

ZTE’s European telecommunications clients include KPN of the Netherlands. In Sweden ZTE is working with Hutchison Whampoa of Hong Kong on a high-speed wireless network.

As the world’s second-largest supplier of telecommunications network equipment, after Ericsson of Sweden, Huawei generated only 4 percent of its $32.4 billion in revenue in 2011 in the United States. In Europe, Huawei has gotten a friendlier welcome. Europe accounted for nearly 12 percent of its revenue last year, and sales in the region rose 26 percent last year, more than twice the company’s worldwide growth rate.

BT, which uses Huawei gear in the metal-clad sidewalk boxes where local telephone lines are fed into the company’s network, considers Huawei a “trusted equipment supplier,” the company said.

“We find them to be good value and high quality — that’s why they have been chosen as a supplier in a fiercely competitive international market,” BT added.

The company declined to comment on whether it had received any requests from U.S. officials to stop doing business with Huawei. The Cabinet Office spokesman said he was unaware of any such pressure.

“We don’t see this as an issue that affects our relationship,” he said.

Business Briefing | Company Earnings: Disappointing Results at a Business Software Maker

Along with the United States government, businesses will have important roles to play to encourage reform.

A Russian tradition flatters writers in a culture where literature has special prestige. But the surprise also promotes the cult of the unpredictable czar.

DealBook: Lenovo to Buy Cloud Computing Company

Lenovo, the personal computer maker, said on Tuesday that it would buy Stoneware, a maker of cloud-computing software, as the frenzy for cloud-based technologies continues.

Cloud-based computing, which allow users to access software and other services via the Web, has been a hot area for deal-making in recent years.

In May, SAP, the German software company, bought Ariba for $4.5 billion. Oracle agreed to buy Taleo, which makers human resources software, for $1.9 billion in February, after paying $1.43 billion for RightNow Technologies last year. In 2010, Dell bought Boomi, a cloud computing start-up.

With Stoneware, Lenovo will add education and government related-services, with products like webNetwork and LanSchool.

“Adding Stoneware cloud computing into the Lenovo line up presents a significant opportunity to leverage their success, and enhance our PC Plus offerings, all to the benefit of our customers,” Peter Hortensius, a senior vice president at Lenovo, said in a statement. “We have a history of innovation and embracing new technologies, and the talented team at Stoneware will fit in perfectly with our long-term strategy.”

The terms of the deal were not disclosed. Lenovo expects to complete the acquisition by the end of the year.

Van Heyst Group Aims to Turn Company Events Into Media Gold

Like the founders of the TED conferences after her, Della van Heyst understood the importance of putting smart people in front of an audience to express their ideas.

Back in the digital dark ages of the late 1970s, she introduced a conference that became the influential Stanford Publishing Course, a two-week retreat for people in the publishing industry. Over the years, industry luminaries like Nan Talese, Lewis Lapham and Helen Gurley Brown, as well as rising technology stars like Jeff Bezos, taught at the conference. From that success grew the Van Heyst Group, which Della ran with her daughter, Carrie, to plan conferences for large companies.

But a few years ago, Della was preparing to retire. (She is now 73.) It was then that Carrie faced “a dark night of the soul,” she said, as she wondered whether she could keep running the company.

In 2009, Della was continuing to orchestrate live conversations among business leaders, academics and celebrities, for clients that included Microsoft, Cisco Systems and Fortune over the years. But the recession was unkind to the events business, which is notoriously cyclical anyway. The Van Heyst Group’s revenue plunged when companies cut back on live events.

Her daughter’s concerns went beyond the financial. “The C.E.O.’s we deal with are remarkable people, but I feel like the issues they’re discussing belong to everybody,” Carrie said. “These very important conversations, which were the heart of our business, happened behind closed doors.”

She wondered: Was there a way to open the company’s events to more people? And could she add her own stamp to a business that was closely identified with her vibrant and inventive mother?

Today, Carrie van Heyst, 45, is answering yes to those questions by becoming involved in the media industry’s move toward live publishing — the simultaneous production of live events and spin-off content for print, video, the Web and mobile devices.

In the last few years, publications including The Washington Post, The Economist, The Wall Street Journal and The New York Times have introduced or accelerated conference offerings that cover business, political, cultural and other topics.

“It seems counterintuitive that in the digital age, physical events are gaining in popularity,” said Ken Doctor, a media analyst at Outsell Inc., a research firm, adding that, nevertheless, “events have become a significant third stream of revenue, behind circulation and advertising, for media companies.” He predicts that within a few years, live events may account for 20 percent of media company revenue, through a combination of ticket sales, sponsorship and advertising deals.

Some magazines produced conferences in the past, but typically for brand-building, not profit. It wasn’t until the ad drought of 2008 and the rise of social media and mobile computing that companies really started to grasp the potential of live publishing.

The viral success of TED Talks, the slickly produced videos from the TED conferences, helped prove the revenue value of live events combined with online content. One of the most-watched TED talks, by a brain researcher discussing her own stroke, has been viewed more than eight million times.

Although the videos themselves are free, they’ve significantly driven income for the flagship conferences, said Tom Rielly, director of fellows and community at TED.

MR. RIELLY worked with Della van Heyst during her Stanford Publishing days, teaching art directors to use design software. “The course was an elite program that you had to be invited to,” he said. “If you went, you were guaranteed an incredibly high level of schmoozing with movers and shakers in the publishing industry.

“Della was always early on topics,” Mr. Rielly said. “Not too early, but enough to give people a competitive edge.”

After Della left her job as director of strategic planning for the Stanford Alumni Association in 1994  to form the Van Heyst Group, she used her Rolodex to introduce C.E.O.’s and other senior managers to experts in technology and social trends.

At a 1995 Internet boot camp, for instance, she recruited Jerry Yang, a young Stanford graduate student who had just founded Yahoo, to brief Fortune 500 chief executives about the Internet. “I said: ‘Jerry, you have to wear a pressed oxford shirt or these people will not take you seriously. If you don’t have one, I will buy you one,’ ” she said.

Mr. Yang remembers the conversation, but not the shirt.

Company Says It, Not F.B.I., Was Hacking Victim

The company, BlueToad, which works with thousands of publishers to translate printed content into digital and mobile formats, said hackers had breached its systems more than a week ago and stolen the file.

A few days after the file appeared online, the company realized that its contents matched the stolen information, said Paul DeHart, BlueToad’s chief executive.

That version of events differs sharply from that put forth by the hackers last week. They claimed to have stolen the file from the laptop of an F.B.I. agent — and they said it was proof that the F.B.I. was tracking people through their iPhones, iPads and iPod Touches. They posted one million identification numbers but claimed to have 11 million more in their possession, along with personal information about the owners of the devices.

A spokesman for the F.B.I. denied last week that the file had been taken from one of its agent’s computers, and an Apple spokeswoman said it had never given any such information to the F.B.I.

Mr. DeHart said in an interview that BlueToad was voluntarily disclosing the theft. “We decided to come forward to apologize to our customers, partners and the public in general that this got out there,” he said. “We face thousands of attacks every day that we’ve been successful at defending. This one happened to get through.”

A security researcher first tipped the company off last week to the fact that hackers might have posted its data, Mr. DeHart said. David Schuetz, a researcher at the Intrepidus Group, a New York-based mobile security firm, mined the data in the hackers’ file for clues to its origin. He noted that several of the identification numbers were linked to device names that referenced Blue-
Toad.

After Mr. Schuetz contacted BlueToad, the company verified the data breach and alerted law enforcement and Apple.

Apple’s unique device identifiers — known as U.D.I.D.’s — are 40-character strings that are tied to a particular device. The company began discouraging app makers from using U.D.I.D.’s last year because developers and advertisers were taking advantage of them to track users as they moved from app to app, compiling a profile of user behavior that could be sold or used for ad targeting.

Trudy Muller, an Apple spokeswoman, said Apple recently introduced a system to replace the use of the U.D.I.D. and would soon be banning apps that tried to exploit them.

“As an app developer BlueToad would have access to a user’s device information, such as U.D.I.D. device name and type,” she said. Ms. Muller noted that developers would not have access to more confidential information like passwords or credit card information, “unless a user specifically elects to provide that information to a developer.”

Mr. DeHart said BlueToad collected U.D.I.D. information to keep count of how many people used its services, but stopped collecting it after Apple discouraged its use last year. He said the stolen file contained identifiers collected by older BlueToad mobile apps, and that BlueToad had “nowhere near” the 12 million identification numbers that hackers claimed to have stolen.

Security researchers debate how much harm can be done using someone’s U.D.I.D. Most say the release of identifiers and device names poses little risk. They said that without more information about device owners — like their e-mail addresses or date of birth — it would be hard for someone to use the data to do harm.

But some researchers disagree with that assessment. Aldo Cortesi, a New Zealand security researcher, has called U.D.I.D.’s a “privacy catastrophe.” Last year, he demonstrated how, in some cases, U.D.I.D.’s could be used to find a person’s identity, determine their location and even hijack their Facebook profile.

Mr. DeHart said in an interview his company thought the data release posed little danger. “We’re aware of the differing opinions out there,” he said. “We have never associated these numbers with other account information and never used them for authentication purposes. We think the overall risk is very low.”

Mr. DeHart said law enforcement officials were still investigating the attack, but suspected that the hackers responsible were different from the hackers who claimed credit for the attack online. “The way we understand it, somebody got into our systems, took the information and, to prove themselves, handed it to this other group who exploited it for their own purposes,” he said.

Peter Donald, an F.B.I. spokesman, declined to comment on BlueToad’s announcement.

AntiSec, the hacking group that said it had taken the file from the F.B.I., is a subset of the loose hacking collective known as Anonymous. The group has frequently gone after the F.B.I. But the frequency of such attacks tapered off in March after several members of Anonymous, and a spinoff group, were arrested.

Messages sent Monday to the Twitter accounts of hackers who had claimed credit for the attack went unanswered.

Nick Bilton contributed reporting.

Bits Blog: Company Denies Role in Recently Uncovered Spyware

6:35 p.m. | Updated Adding discovery of latest sample of the spyware at end.

An executive at Gamma Group, a British company that sells surveillance technologies, denied on Wednesday that a spyware program running on servers in 11 countries is part of his company’s product line.

Gamma Group makes FinFisher, spyware that, according to the company’s promotional materials, can be “used to access target systems, giving full access to stored information with the ability to take control of the target system’s functions to the point of capturing encrypted data and communications.”

Martin J. Muench, a managing director at the company, said in an e-mail that the company only sells its products to governments for the express purpose of monitoring criminals. “The most frequent fields of use are against pedophiles, terrorists, organized crime, kidnapping and human trafficking,” he said.

But recent findings by security researchers suggest it is being used more broadly. Researchers believe they found FinFisher spyware in e-mails sent to three Bahraini activists — one in the United States, one in London and one in Bahrain — none of whom have criminal backgrounds. And they found that the spyware was communicating with a server in Bahrain. It was capable of grabbing images of users’ computer screens, recording their Skype chats, remotely turning on their cameras and microphones and logging their keystrokes. The word “FinSpy” — the name of part of the FinFisher product — appeared in the spyware’s code.

In an e-mail, Mr. Muench said he could not disclose Gamma Group’s client list or confirm whether his company had sold its spyware products to Bahrain. He said he thought the server the researchers found was most likely a proxy server, which redirects traffic to mask its true origins.

“The server that was found in Bahrain is very likely a custom-built software that was simply used as a proxy to forward traffic between two or more systems. It is not a product from the FinFisher product line, “ Mr. Muench wrote.

But researchers question this explanation. “The timing suggests that the Bahrain server was not a proxy,” said Bill Marczak, a computer science graduate student at the University of California, Berkeley, who has been looking into the malware.

Proxy servers typically take longer to respond to commands because they have to forward traffic elsewhere. Researchers compared the response time of the Bahrain server to nonproxy servers and found no difference in their response times.

Mr. Muench also disputed additional findings by researchers at Rapid7, a security research firm, which found evidence that FinFisher spyware was being run off 11 additional servers in 10 countries, including on EC2, a popular Amazon cloud service, in the United States.

As of Wednesday afternoon, the spyware was still being dispersed from an I.P. address hosted on Amazon’s service. Researchers tested its response time and believe it is a proxy server. Amazon has not responded to a request for further information about the owner of the I.P. address and why it continues to send out spyware.

Rapid7’s researchers were able to find the Amazon I.P. address and the 10 others because they shared a unique trait with the Bahrain server. They found that when they sent unexpected data to that server, it responded with an unusual message: “Hallo Steffi.” They then scanned the Internet to uncover other I.P. addresses that responded with the same message and found others in Indonesia, Australia, Qatar, Ethiopia, the Czech Republic, Estonia, Mongolia, Latvia, the United Arab Emirates and the United States.

“FinFisher servers would not respond in such a way and would not be able to be fingerprinted with such a technique,” Mr. Muench wrote in his e-mail. He added, “None of our server components send out strings like ‘Hallo Steffi.’”

“The core FinSpy servers are protected with firewalls which only allow incoming connections from the setup proxies, and therefore a global scan by third parties would not reveal any real FinSpy servers,” Mr. Muench said.

Mr. Muench added that Gamma Group was still investigating the malware samples found last week, but suggested that the company’s code may have been modified by someone else.

“We cannot confirm whether this is the actual FinFisher product as it does not match any of our released versions,” Mr. Muench said. “Any comment on how third parties may or may not have acted would be pure speculation on my part.”

As security researchers analyze the spyware, new samples continue to pop up. Late Wednesday, Morgan Marquis-Boire, the security researcher who first connected the Bahraini samples to FinSpy, said he had uncovered a new spyware sample running on a server in Britain. He said that the sample shared the same structure and functions as the spyware that was aimed at the Bahraini activists, and that he believed the spyware to be FinSpy.