Google Wants to Buy Yelp – Are Regulators in Sync?

Rumours that Google wants to acquire Yelp (for $1.5 billion) hit the blogosphere and newswaves earlier today. While local advertisers may be part of the attraction (Google’s Place Pages for maps, etc.), I think the bigger story here is how Google continues to fortify its social search assets.  A smart move – particularly as social networking – with its mines of user profile data – continues to grow in relevance for online advertisers.  Commentators – most notably Wired – have mused that Google’s real competitor is Facebook (it’s social, not relevant search that’s key).  If you take that view, this acquisition makes total sense. Yelp – with 9 million uniques and $30 million in revenue for 2009  -is growing at a rate of 80%, while that same number for Citysearch, its nearest competitor, is around zero.  Yelp is an important acquisition for Google, as it builds its social search platform to compete with Facebook and others for online ad dollars.

The interesting question here is how regulators will view the Google-Yelp transaction. Will they view it in isolation, or will they analyze how this deal fits in with the seven other Google acquisitions currently pending with regulatory authorities? The ramifications are huge – particularly for the small, but growing mobile advertising market. Especially, since one of those 6 other transactions is Google’s bid to acquire AdMob, one of the largest providers of mobile advertising (see my post; Scott Cleland’s blog on antitrust concerns with this deal are also worth a read). Yelp is already on your app phone of choice – including phones featuring Google’s Android – and the synergies are almost poetic.  Plus, there are the persistent rumors that Nexus One (the Google phone), will be released next year.

All of this suggests that regulatory agencies – particularly the DOJ, FCC and FTC – need to be working very closely on merger reviews in the coming months – both with each other and with their state AG counterparts.  The outcomes of these decisions will be crucial to continued innovation and competition in communications and technology.  Plus, we might finally get some insight into how the tech friendly Obama Administration really views merger policy in these dynamic markets.

Cool, but Creepy

A footnote to my last post on the FTC roundtables: check out Kara Swisher’s interview today with Google’s Vic Gundotra and Amit Singhal.  Based on their description of Google’s new visual search product named Google Goggles – coming soon to an Android headset near you – we may already be seeing a product that will test the FTC’s ability to balance consumer privacy concerns against technical innovation.

I can think of numerous ways visual search can revolutionize business, travel and the daily errand.  For instance, right now, I’d love to find out the provenance of this supposedly antique table that we picked up at the Alameda Antiques Faire last weekend.  For visual search to work effectively,  i.e. for it to catalogue enough results to get me a relevant, real-time match, the product must incorporate persistent GPS and location tracking technology.  And yet, these are the types of features that give some of us a creepy pause in this era of unregulated online privacy.  Do I really want my phone to know that much about me?

Trying Another Form at the FTC’s first Privacy Roundtable

At the first of the FTC’s Exploring Privacy roundtables held earlier today, Chairman Leibowitz was asked whether the FTC approach to regulating privacy has been successful.  Artfully dodging the question, Leibowitz responded by likening the privacy issue to Winston Churchill’s view of democracy:

“it has been said that democracy is the worse form of government — except for all those other forms that have been tried from time to time.”

The Chairman’s remark encapsulated the spirit of the day, as a reinvigorated FTC dived deep into consensus building with a who’s who from the world of privacy policy. This is just the start of the inquiry, with another two roundtables to follow. The plethora of smart thinking and ideas that flowed in stream-of-consciousness fashion from today’s panelists were helpful to the evolution of a regulatory construct for online privacy.  Yet, many questions remain unanswered.  And even with all the bright minds in attendance, the contours of an effective regulatory scheme for online privacy remain unclear.

More research on web attitudes, custom and habits is needed. As we learned today, the personal data ecosystem is extremely complex and layered (like those privacy notices you can never find the bottom of).  Did you know that there are over 20 different categories of companies – including web marketers, search engines and online data brokers – that currently collect information in personally identifiable or aggregated form? Incidentally, the FTC did a great job of pulling together supporting material for the roundtable, including this slide on the personal data ecosystem that should be a must-view for anyone surfing or shopping on the web.

Clearly there is tension between the approach advocated by those representing the consumer interest (CDT, CDD, EPIC, etc.), and those involved in what Commissioner Harbour described as a “digital arms race” – the race to monetize content and information and build massive ad-viewing bases in the digital economy. Consumer organizations are urging the FTC to adopt stricter privacy regulations – at a time when online advertising is exploding on both the desktop and mobile web.  Now, the FTC must engage in a careful balancing act – develop a regulatory framework that protects consumer data online while not impeding the growth of technological innovations that utilize profile data.

The discussion will continue at a second FTC roundtable on January 28^th.   Here are some of the discussions I hope to hear in round two:

• The volume of personal data that travels on the web today pales in comparison to the volume of data we will see in a future of web-enabled devices and integrated systems. Does a use-based classification system with individual opt-outs for each type of information really work with large volumes of information?  Or should all personally identifiable information be regulated in the same way, irrespective of use?
• Several panelists indicated that self-regulation is not working.  What’s the alternative? Is the failure of self-regulation attributable to the lack of clear government guidelines or engagement on what online privacy policies should look like?
• In 2008, for the first time, more people accessed the web through their mobile phones than through a desktop. As the FTC attempts to get ahead of the online privacy issue, what considerations should be given to privacy protections on the mobile vs. desktop web?

Retreat to the Walled Garden

Late last evening, GE announced that it had cleared a path to sell NBC-Universal to Comcast.  If consummated successfully, the deal would radically reshape the cable, entertainment and web media markets.  Already, there’s much speculation about how the deal will impact content distribution on the web.  Will this merged entity of cable plus content offer premium fare on a subscription basis?  Could this be the deal that starts a mass retreat to the walled garden?

The walled garden is definitely seeing a resurgence of interest among content owners.  What remains unclear is whether you can put up walls around a garden that’s been growing free and unfettered for much of its recent existence.  Will people pay for content that is now widely available for free?

Rupert Murdoch of News Corp. appears to think so.  His company dominates entertainment (20^th Century Fox), cable (Fox News, etc.) and the web (MySpace, etc.).  But it also owns many of the newspapers that continue to struggle to survive in this age of online content aggregation (although some, like the Wall Street Journal, have successful online subscription businesses). In a fascinating interview, Murdoch makes the case for why he wants to put News Corp’s coveted content behind a wall (while opining frankly on the US economy, Obama press secretary Robert Gibbs, and Fox News).  As he puts it, “there’s not enough advertising in the world” that can profitably support the kind of content that consumers currently demand online.

My thanks to the fabulous Kara Swisher for her pointer to the Murdoch interview (her recent blog post on News Corp-Google-Microsoft provides a thoughtful perspective on that particular three-way).

Of course, the walled garden was not a panacea for AOL – the pioneer of the walled garden – who is currently planning to lay off a third of its workforce as it spins away from Time Warner.  But the garden is a successful model for social networking sites like Facebook and Linked In.

Looking ahead, a few developments are worth watching. First, the retreat to the walled garden will impact websites – such as Hulu – that offer premium, first-run content for free.  Hulu, which shot to the web’s top 10 in its first month of launch, is a joint venture between News Corp, NBC and Disney.  The site relies on advertising (2 minutes vs. the 8 you get on real-time TV) and “will be profitable soon” according to NBC CEO Jeff Zucker.  It also plans to launch a subscription site of its own.  We hope it starts making money before a wall goes up (where else can you find 94 episodes of Bewitched all on one page?).

There will also be a marked impact on electronics manufacturers.  Gone are the days when people only watched network shows on TV and surfed the Internet solely on a PC.  Some manufacturers are already starting to wake up to this reality with devices– such as internet-enabled TV – which consolidate distribution into one big fat pipe.  As the content industry undergoes a metamorphosis, hardware will need to keep up.

Most relevant for this blog, there will be an impact on law and policy.  Market definitions – always critical to the regulatory approval of a merger – are even more important in dynamic markets.   Regulators will need to get smart quickly about how media consumption continues to evolve in the digital age.  And the abundance of policy issues  – net neutrality and targeted advertising to name a couple – should make this debate a must-see.

Stay tuned!

A Busy Tuesday at the FTC

Yesterday was probably a hectic one for the FTC’s press corps.  First, news that President Obama has announced his intention to nominate Julie Brill as FTC Commissioner (he also nominated Edith Ramirez, a partner at Quinn Emanuel for the second FTC vacancy).  Julie brings an important perspective to the FTC, having served as consumer protection chief in the Vermont and North Carolina AG offices for over 20 years.  She is an expert on the most important consumer issues of our time: credit card reporting, pharmaceutical marketing, privacy and data security. We wish her a successful nomination!

Also yesterday, the FTC released an agenda for the first roundtable in its Exploring Privacy series, which aims to “explore the privacy challenges posed by the vast array of 21st century technology and business practices that collect and use consumer data.  The first one-day roundtable on December 7^th will consist of panel discussions on 5 topics:

• Benefits and Risks of Collecting, Using & Retaining Consumer Data
• Consumer Expectations & Disclosures
• Online Behavorial Advertising
• Information Brokers
• Exploring Existing Regulatory Frameworks

The FTC also announced that its second roundtable will be held in conjunction with the Berkeley Center for Law & Technology on January 28, 2010.

Finally, the FTC – along with the seven other agencies that regulate the financial industry – released a model privacy form.  The form and its model language are intended to guide financial institutions in their compliance with Gramm-Leach-Bliley (“GLB”), the federal law that governs how financial institutions collect and share consumer information.

For extra credit, here are those seven other agencies: the Board of Governors of the Federal Reserve System, Commodity Futures Trading Commission, Federal Deposit Insurance Corporation, National Credit Union Administration, Office of the Comptroller of the Currency, Office of Thrift Supervision, and the Securities & Exchange Commission.

Social Networking Under the Regulatory Microscope

These days, everyone is doing the social networking thing – especially companies looking to extend and impress their brand on online audiences.  Burberry just announced a social networking foray to help people share stories about their – uhm – first Burberry trench coat. Even the New York Times is getting in on the action, with tips on how to market your business on Facebook, while harvesting the “gold mines of demographic information” offered on this granddaddy of all social networking sites.

But even as companies race to embrace social networking in any possible form, regulators are increasing their oversight.  And if social networking is in your marketing plan, then you probably should take a look at these recent decisions – from federal and state regulators – that are “on point” for any site that features social networking technology.

First, there’s the FTC order (and whopping $250,000 fine) against Iconix Brand Group.  Iconix is home to some of the most durable brands in fashion – Bongo, Candies, London Fog.  According to the FTC, Iconix was collecting personal information from children under the age of 13 – on websites that were directed to this very tweeny, Britney-loving audience (Ms. Spears is the current spokeswoman for Candies).  This violated the Children’s Online Privacy Protection Act or COPPA – particularly as Iconix also failed to post a clear, understandable and complete privacy policy.

Iconix also ran foul of the FTC Act , by stating, in its privacy policy that it would not collect personal information from kids without their parents’ consent and would delete any personal information that it became aware of (but then proceeding to do the very opposite). FTC Chairman Jon Leibowitz’s summed up his thoughts with this pithy quote: “Children’s privacy is paramount, and Iconix really missed the boat by denying parents control over their kids’ information online.”

Second, there’s continued activity among state AG offices on certain marketing practices that take advantage of those huge address books members upload to their social networking accounts.  Just this past week, the New York and Texas Attorney General Offices settled with Tagged.com for violations arising out of its practice of sending promotional emails to the contact lists of their members without permission (yes, we’ve all got a few of those). In the words of NY AG Cuomo, Tagged “hijacked” the address books of its members, and then “blasted” those member contacts with spam.

Clearly, companies that market via social networking technology (and techniques) must be very cognizant of the patchwork of laws that regulate how a user’s personal information is used in online marketing efforts.  Recent studies show that users do care about their privacy online, and this suggests that a clear privacy policy that respects user personal information is good for compliance and business.  After all, it is the user (or in the case of children under 13, the user’s parents) that should decide when and how their personal information is being used.

Will Admob Acquisition Clarify the Role of Privacy in Web (or Wireless) Competition?

A couple days ago, I mused about how Google might monetize newly integrated features such as voice-activated GPS in the latest version of Android, its mobile operating system.  Almost in answer to my question, Google announced today that it will acquire AdMob for $750 million in stock. AdMob is a three-year old mobile advertising start-up that is a leader in the growing mobile advertising sector.  Already, AdMob provides advertising for mobile phones such as the iPhone and smartphones running Google’s Android.

Google believes that the acquisition will clear regulatory hurdles — but that remains to be seen.  The company faces a very different regulatory environment now then it did in March 2008 when it acquired Doubleclick.  At that time, Commissioner (and now FTC Chair) Jon Leibowitz acknowledged the concerns expressed by privacy advocates but supported the transaction on the grounds that online privacy needed to be addressed on an industry-wide basis (and not through a single merger decision).

Since then – and in large part to Leibowitz’s own initiatives as FTC Chair – a perfect storm has been brewing over how privacy should be regulated online.  The FTC will examine online privacy through its upcoming roundtables entitled “Exploring Privacy” and it’s likely that the mobile web will be part of the discussion.   For instance, the FTC’s April 2009 web commerce report notes concerns with spam and children’s online privacy on certain devices (such as those which have internet browsers and GPS technology).  And that’s just the FTC.  We’re not even delving into FCC Chairman Julius Genachowski’s interest in promoting wireless competition – a topic that has been well-covered in recent weeks.

Will regulators take this opportunity to better define what role privacy should play in web competition?  It’s an unanswered, yet important question – particularly for an industry whose growth is fueled by data and financed by advertising based on that data.  With the acceleration and developments in mobile advertising, the question is especially ripe for discussion. Let’s see who takes the bait and dares to provide an answer.

Senate Judiciary Moves on Data Security & Privacy

Yesterday, the Senate Judiciary Committee approved not one, but two pieces of data privacy and security legislation.  This swift, recent movement reminds us that the members of the Senate Judiciary – in particular Chairman Leahy of Vermont – are eager to see a federal data security law passed this session.

The Personal Data Privacy & Security Act of 2009, which was introduced (for the third time) by Senator Leahy in July, contains a number of provisions addressing electronic personal data.  This bill:

• sets out new requirements for business entities that maintain electronic personal data – particularly in the event of a security breach;
• establishes a new Office of Identity Protection within the FTC and authorizes the agency to develop standards for a data privacy and security program that would apply to entities dealing in electronic personal information;
• requires agencies to appoint a Chief Privacy Officer
• sets out baseline security information standards for the government (yes, I too am amazed that we still lack this on the federal level);
• enhances criminal penalties for identity theft and for willful concealment of security breaches involving electronic personal data;

and much, much more.

The Data Breach Notification Act, sponsored by Senator Diane Feinstein of California, requires that agencies or business entities notify a customer in case of any security breach involving that customer’s personal information.

Both bills pre-empt existing state law.  But they do not pre-empt state enforcement, and allow for civil actions by state Attorneys Generals and local law enforcement.

Announcing, the App Phone

The App Phone is about to create waves in the world of mobile computing … again.  The original App Phone – the iPhone – is purportedly the most successful gadget ever ever.  Now, Verizon will shake things up  with Droid, which runs on Google’s Android operating system and which, like the iPhone before it, is likely to have a significant impact on the mobile web.

App Phones illustrate the complexity of mobile web competition. It’s the killer phone, not the killer app – but it’s also the app that drives demand for the phone.  And to further this complexity, the competitive impact of App Phones and certain smart phones now reaches into other device markets thanks to powerful mobile web applications that mimic functionality seen on other devices.  And the most successful applications eventually get assimilated within the device itself, leading to a next generation of innovation in this dynamic market.

This is well illustrated by GPS – a must-have feature in today’s advanced smartphones, especially App Phones.  Until a couple years ago, GPS-navigation devices were sold separately from phones or smart phones.  But today, GPS mobile applications can give certain phones the same GPS functionality as an advanced (and pricey) standalone GPS device.

Droid will be the first phone to include Google’s GPS Service for mobile phones – with innovative features like voice-activation, turn-by-turn directions and live traffic updates.   The feature list should be enough to make GPS device makers cringe; the fact that Google is now offering the service on a free (eventually ad-subsidized?) basis makes the competitive picture even more interesting.  In fact, news of the Google GPS announcement recently sent shares of GPS device makers Garmin and Tom-Tom into a precipitous plunge.  It’s unclear what the future of pricey standalone devices will be – particularly if consumers can get that same functionality for free on their App Phone.

Innovations like GPS navigation are just one of the forces that are shaping mobile and App Phone competition.  There are other forces that are important to the future viability of this market – such as wireless broadband availability and deployment.  And then there’s the regulatory concerns with privacy on GPS enabled mobile phones as seen in the FTC’s report on mobile commerce issued earlier this year, as well as the much publicized interest by FCC Chairman Julius Genachowski in regulating a wireless market which he sees as being “all about mobile.”

Regardless of how mobile computing and App Phones evolve, it’s likely that these advances will continue to benefit a great many people.  The fact that voice-enabled GPS will be available for “free” will likely stoke consumer interest and demand for such features in future devices.  And advanced devices like the App Phones will continue to lead the explosive growth in mobile internet (which continues to outpace desktop internet adoption).   In many emerging economies, the phone is already a cornerstone of growth thanks to its portability and the power of today’s mobile applications.  In Kenya, for instance, mobile computing is replacing a national banking system, and allows villagers to send and receive money without a bank account.  Within this framework, the possibilities for App Phones are endless.

For now, I’d be contented with voice-activated GPS on my phone that actually works.  That’s why I look forward to purchasing my first Droid tomorrow.

In the interest of full disclosure, I am currently a Verizon Wireless customer who looks forward to purchasing her first Droid.  I do not have a business or client relationship with Verizon or any other company mentioned in this post.

Will Privacy Crash the Social?

After eight years, I am back in the Bay Area – and life is good.  The region is home, so I don’t have to deal with the first month of complete disorientation that usually accompanies a big move.  And while the streets and vistas are the same, there are new places to explore.  I’ve been relying on the advice and recommendations of friends – not a web search – to get me the skinny.  Why? Because when it comes to advice on where to eat or shop, I trust the word of a friend over an algorithmic result from a search engine.

This is the kind of thinking that is fueling the current revolution towards social search – a web search that combines “human” data with algorithmic data to get you the most relevant result.  And this trend is being fortified by a recent flurry of deals. Microsoft announced that Bing will include real-time results from Twitter and Facebook. Google just introduced Google Social Search, a tool that includes “relevant public content” (blogs, etc.) from friends and contact in your search results.”   Currently, social search is the belle of the ball.

As the social heats up, word comes of a new arrival – one that may just throw a wet blanket on this party.  Indeed, web privacy is a hot issue right now with the FTC’s Privacy Roundtables in December and imminent legislation from Rep. Rick Boucher.  Data privacy regulations will be particularly relevant to a technology that needs constant monitoring of user data to deliver real-time results.

As this all sinks in, the questions start a pretty dance in your head.  Should social search be differentiated from other types of web searches when considering a data privacy framework?  How much personal data is really needed to get the most relevant search result?  Should social search be treated differently on a GPS-enabled mobile phone? Is there a disconnect between the rising popularity of social search, and a recent study that shows that most Americans are not comfortable with tailored ads online?

Ah, the mind reels.  Time to get back to the dance.