Is Microsoft working on HTML5 design tools?

A few weeks ago, I wrote a post asking where the tools are that will allow mere mortals to write HTML5 that works like Adobe's Flash. Adobe has Dreamweaver, but it has a strong incentive to keep developers and users from migrating from Flash to HTML5. Microsoft has the Expression suite, but it also has Silverlight, so I thought that it wouldn't take up the challenge, either.

Yesterday, however, a Microsoft executive went on the record stating, and I quote, "The future of the Web is HTML5." That quote came from Dean Hachamovitch, Microsoft's General Manager for Internet Explorer, and although he was writing about web video, his comments can easily be seen as extending beyond just video.

It would make a lot of sense for Microsoft to go "all out" for HTML5 support, not just in IE but in its Expression Studio authoring tools as well. Silverlight has miniscule market share compared to Flash, so Microsoft could cannibalize Silverlight without hurting its revenues. Further, by making Expression Web a better HTML5 graphical development tool than Dreamweaver, it could steal market share from both Dreamweaver and Flash.

Adobe is vulnerable, and no one smells blood in the water better than Microsoft. Expression Studio 4 could be Microsoft's opportunity to leapfrog at least some components in Adobe's Creative Suite 5. Microsoft can offer Silverlight for those developers who want it, and to provide capabilities that won't be implemented in HTML5 for some time, but it doesn't need to protect Silverlight the same way that Adobe needs to protect Flash.

Are the "open source" codecs really at risk?

Yesterday, Hugo Roy, the French Coordinator of the Free Software Foundation Europe, wrote a blog entry in which he criticized Steve Jobs' use of the word "open" when referring to H.264, which is a codec commercially licensed by MPEG LA. Roy said that Ogg Theora, which has been adopted by both Mozilla and Opera (and is being funded in part by Google) is a truly open-source codec. Jobs replied back, saying in essence, "not so fast." His response was as follows:

"All video codecs are covered by patents. A patent pool is being assembled to go after Theora and other “open source” codecs now. Unfortunately, just because something is open source, it doesn’t mean or guarantee that it doesn’t infringe on others patents. An open standard is different from being royalty free or open source."

The patent pool that Jobs is referring to has to be MPEG LA, and it's been assembled for years. Whether Jobs has any special insight into the matter or merely is repeating what's already been written about the topic is impossible to say, but my guess is that he's referring to a quote by Larry Horn, MPEG LA's CEO, in an interview with Jan Ozer:

"... In addition, no one in the market should be under the misimpression that other codecs such as Theora are patent-free. Virtually all codecs are based on patented technology, and many of the essential patents may be the same as those that are essential to AVC/H.264. Therefore, users should be aware that a license and payment of applicable royalties is likely required to use these technologies developed by others, too. MPEG LA would consider offering on additional licenses that would make these rights conveniently available to the market under a single license as an alternative to negotiating separate licenses with individual patent holders."

In a subsequent interview, Ozer tried to get clarification from Horn about MPEG LA's position on Ogg Theora through the following exchange:

Ozer: It sounds like you’ll be coming out and basically saying that to use Ogg, you need to license it from MPEG LA. Is that correct?

Horn: That is not what we said. We said no one in the market should be under the misimpression that other codecs such as Theora are patent-free. Whether MPEG LA would offer a license for such rights is a different matter and has not been determined. If the market would find convenience in a single license to address these intellectual property needs, then MPEG LA would be interested in providing one as it has for other codecs.

Ozer then interviewed Monty Montgomery of Xiph.org, which administers Ogg Theora, to get his take on the subject:

"For 15 years, Xiph.Org has carefully "played by the rules," fully within the bounds, intent, and letter of intellectual property and patent law. For the past ten years we've informed the entire world, including MPEG LA, of our specifications and algorithms in detail. We've requested in open letters that any group believing we are infringing to inform us so that we make take immediate corrective action."

"I predict that MPEG LA may counter that they know groups have been pressured into licensing patents in order to use Theora. This has been a recent back-room assertion. You might want to ask point blank if MPEG LA itself or any of its constituent members has engaged in this practice, thus manufacturing the evidence that "vindicates" their patent allegations. I beg you—tell me immediately if you get a straight answer (or good video of any squirming)!"

"I'm sure you can tell I'm a bit peeved; this has been going on for over a decade. It's amazing they've never been called out on it."

Xiph.org has a responsibility to insure that the technology in Ogg Theora doesn't violate any of MPEG LA's patents, but MPEG LA also has a responsibility to protect its patents if it believes that they're being infringed. If MPEG LA has known about Theora and has failed to do anything about it, they may be precluded from doing anything about it by the courts. Or, Theora actually might not violate any of MPEG LA's patents, and Larry Horn was saber-rattling. Or, MPEG LA may be afraid that if it takes action against Theora, Xiph.org or its supporters may find prior art that would invalidate one or more of MPEG LA's patents, which would be a much bigger problem than Theora, since all the licensing revenues from that patent (or patents) would be at risk.

So, my suspicion is that Jobs was talking out of his hat. If there's going to be a lawsuit, let's see it.

HP dropping Windows 7 tablet: Bad news for Microsoft and Intel?

Yesterday, word unofficially came out that HP is killing the Windows 7-based tablet that it's been demonstrating for months, on the grounds that Windows 7 isn't an appropriate platform for building tablet applications and requires too much power. Another rumor started circulating that HP is planning to shift to non-Intel CPU designs for tablets (most likely ARM- or Snapdragon-based designs) because Intel's Atom processors use too much power.

If HP couldn't get Windows 7 to work as a tablet platform, it's unlikely that other vendors are going to have much more success. Microsoft compounded its problem by announcing that its Courier project, a two-screen, book-like tablet with a custom operating system and applications, has been killed. It now looks like Microsoft will only be a bit player in the tablet business, at least for a while.

Intel will similarly be hurt by HP's decision to shift to non-Intel processors for tablets. Both Intel and Microsoft are looking for new areas of profitable growth, and tablets are the hottest new platform. If Intel doesn't have a practical solution for tablets, it will miss a big growth opportunity, at the same time that sales of netbooks (the primary customers for Atom CPUs) are slowing.

Steve Jobs goes on the record about Flash

Apple's position on Adobe's Flash is well-known, from the company's new iPhone Developer Agreement, Steve Jobs' remarks at an Apple "Town Hall" meeting, and a series of emails between an iPhone developer and Jobs. However, Jobs has now gone "on the record" with an open letter explaining Apple's decisions.

I've linked to the open letter so you can read it yourself, but here are the key arguments:

1. Despite Adobe's claims of openness, Flash is a proprietary platform and format controlled by Adobe. Apple's approach is to use HTML5, CSS and JavaScript, all of which are open industry standards controlled by standards committees.
   
2. Adobe claims that 75% of the video on the Web is in Flash format, but an increasing number of sites (including YouTube) also supply video in H.264 format that iPhone OS-compatible devices can use, so the problem is getting smaller every day. Jobs admits that Flash games won't run on iPhone OS, but there are over 50,000 games and entertainment titles already available for the iPhone, so the lack of Flash hasn't caused a problem.
   
3. Flash is the number one reason that Macs crash, and Symantec has reported that Flash had one of the worst security records in 2009. Flash doesn't perform well on mobile devices, and Adobe has been promising to deliver a full version of Flash for mobile devices for almost two years and still hasn't shipped. Apple doesn't want to subject iPhone OS users to these problems.
   
4. Most Flash video uses a Sorenson or On2 codec that requires software decompression, while H.264 can use hardware decompression. In Apple's tests, videos that can use H.264 hardware decompression play for 10 hours on an iPhone before the battery runs out, while viewing videos that require software decompression cuts battery life in half.
   
5. Flash was designed for keyboard and mouse interfaces, not touch, and the iPhone, iPod touch and iPad rely on touch.
   
6. Cross-platform development tools like Flash can't take advantage of new features as quickly as Apple rolls them out, so Flash developers can only use these features after Adobe supports them. Also, cross-platform tools encourage development of  "lowest common denominator" applications.

You may disagree with some of Jobs' arguments, but his open letter is the most comprehensive and clearest presentation I've seen of why Apple has decided not to support Flash.

HP buys Palm, but why?

Earlier today, HP announced that it will acquire Palm for $1.2 billion, a 23% premium over Palm's market value prior to the announcement. HP has more than enough cash on hand to complete the transaction without issuing more stock. The question is, why did HP buy Palm? What value do they see in the company, and what does this mean for the future of Palm's products?

Many people don't realize that HP has sold smartphones for some time under the iPaq label, but the company has miniscule market share. Growth in most of HP's businesses has been slowing; it needs to get into new markets, but it was getting no traction in smartphones by itself. By buying Palm, HP gets an existing line of smartphones sold through all the major U.S. mobile operators, along with some international distribution. The distribution agreements might actually be more important to HP than the existing Palm hardware line itself.

HP has said that it will increase Palm's R&D investment, and that it plans to port Palm's WebOS operating system to more devices. However, I wouldn't be at all surprised to see Palm go back to its previous strategy of offering phones with more than one operating system, when it sold different models that ran Palm OS and Windows Mobile. We could easily see Palm phones that run Android and Windows Phone 7 alongside WebOS-compatible models. This would make the Palm product line more appealing to mobile operators.

Will we see tablets running WebOS? Perhaps, but I wouldn't count on it in the near future. A lot of development work will have to be done to make WebOS work well on tablets, in the same way that Apple had to significantly rethink its iPhone OS to make it work well on the iPad.

Finally, will HP's acquisition of Palm make a big difference in the number of applications available for WebOS? Developer interest will be driven by sales of Palm's phones, not the acquisition of Palm by HP. If Palm's market share increases significantly, more developers will write for the platform, but the acquisition isn't going to open the app floodgates by itself.

This Year's Worst...Company...In America!!!

Feel free to say the title of this post like Keith Olbermann would, except that instead of Bill O'Reilly winning "Worst Person in the World" for the 343rd time, the company that wants to acquire Olbermann's network is the big winner. That's right, Comcast was named the "Worst Company in America" for 2010 by the readers of Consumer Reports' Consumerist blog. Comcast won the coveted Golden Poo award, which will be delivered to the lobby of Comcast's headquarters in Philadelphia by a trained French Poodle carrying a spray can with gold paint.

Here's a quote: "In a three-day, knock-down, drag-out bout with Ticket "Apollo Creed" Master, the little cable company that could showed just how badly their horrendous service, exorbitant costs, throttled internet and plans to acquire NBC Universal have ticked the Consumerist readers." Now, one could argue that perhaps Goldman Sachs or AIG are actually worse than Comcast, but they don't make appointments to take your money any time between 9 a.m. and 5 p.m., then fail to show up.

Hey kids, let's play Facebook Privacy Roulette!

Let's put two Facebook tricks together to violate a random person's privacy:

1. Type "http://graph.facebook.com/nnn" into your browser, where nnn is a number from 1 to who knows how big (try 4 and see who you get). If Facebook returns "false", try another number.
2. Open up another browser tab or window and type in "http://zesty.ca/facebook/". When the page opens, type the same number (nnn) that you typed in step 1 above, and find every piece of public information stored about that person on Facebook.
3. If you know your own Facebook ID number, type it in and find out everything that Facebook knows about you that it's making available to others.
4. If you don't like what you see, change your privacy settings or disable your profile.

Steve Jobs to speak at D8: All Things Digital, not Web 2.0 Expo

Dear John Battelle and Tim O'Reilly,

As you probably know, Kara Swisher announced today that Steve Jobs will be appearing at the D8: All Things Digital Conference in Rancho Palos Verdes in June. Apparently, he won't be attending the Web 2.0 Expo that you tried to get him to attend in San Francisco next month. Far be it from me to suggest that your press release promoting your conference thinly disguised as a call for more openness from Apple didn't have exactly the result you intended. Jobs will be interviewed at a conference...just not by you or at your conference.

As I said in a previous blog post, your open letter would have had a lot more credibility if you had just stuck to pushing Apple to be more forthcoming instead of trying to sell your conference at the same time. It also would also have had more credibility if you had shown the same backbone standing up to Microsoft in the 1990s that you showed in your letter to Apple. But, just like then, this was all about economic self-interest, wasn't it?

Better luck next time.

Attention 3D filmmakers: Here's your $300 iPhone app

Want to calculate parallax and lens separation for shooting 3D film and video? RealD has the iPhone application for you--the RealD Professional Stereo3D Calculator. It does lots of great stuff, including automatically calculating the settings for each shot that will keep parallax within preset maximums. But that's not why I'm writing about it.

The reason I'm writing about it is...well, let's do it like the voiceover for a movie trailer: "In a world where iPhone apps cost $9.99 or less, RealD has released a $299.99 iPhone app! They dared to mark it down from $300! Directed by James Cameron and featuring 10-foot-tall, blue, furry iPads that don't cost much less than RealD's application, and Munchkin-sized iPhones that cost much less, the RealD Professional Stereo3D Calculator with improve your parallax and lighten your wallet!"

It may be worth the money, but it seems expensive to me. Any bets on how soon we'll see a comparable application in the App Store for under $30?

Is Jason Chen a journalist? Not according to Nick Denton

The home of Jason Chen, editor-in-chief of Gizmodo, was raided by police from the San Mateo (California) Sheriff's Office last Sunday night to find evidence related to the theft by an as-yet unnamed individual, and purchase and subsequent publication of information by Gizmodo about a prototype Apple iPhone. A search warrant was issued by a San Mateo County judge at the request of a County prosecutor. According to CNET, police seized "three Apple laptops, a Samsung digital camera, a Seagate 500 GB external hard drive, USB flash drives, a HP MediaSmart server, a 32GB Apple iPad, an 16GB iPhone, and an IBM ThinkPad."

Once the raid was publicized, many parties (including Gawker Media, publisher of the Gizmodo website) claimed that the search warrant was improper and the raid illegal under both California and U.S. journalist shield laws. Gawker Media has demanded that police return Chen's (and presumably its own) property.

The question is whether or not Jason Chen is actually a journalist and is entitled to protection under shield laws. Nick Denton, the owner and publisher of the Gawker Media properties, was quoted less than a year ago in the Washington Post, saying the following: "We don't seek to do good," says Denton, wearing a purplish shirt, jeans and a beard that resembles a three-day growth. "We may inadvertently do good. We may inadvertently commit journalism. That is not the institutional intention."

In that quote, Denton is essentially saying "We're not journalists, so don't hold us to journalistic standards." However, when one of his editors got caught purchasing stolen property and committing extortion (refusing to return the phone to Apple unless the company sent him a written document that Gizmodo could publish to prove the authenticity of the phone), Denton's managers and attorneys claimed journalistic protection. You can't have it both ways.

It's up to state and Federal courts to decide whether or not Chen and Gizmodo are entitled to protection under journalist shield laws, and whether or not any of the evidence collected by police will be admissible in court. We're also going to hear a lot about persecution of journalists and the ever-popular "slippery slope" over the next few weeks. However, Chen and Gizmodo brought this on themselves. As he and his writers have repeatedly stated on the Gizmodo blog, they did it to get back at Apple for that company's policies on protecting information about unreleased products. They weren't revealing any illegal activity or acting in the public interest; their motivations for their actions were money and revenge. That's not journalism.

Update: According to posts on both CNET and the Wall Street Journal's All Things Digital, Jason Chen and Gizmodo can't use the California or U.S. journalistic shield laws to protect themselves if the police are investigating them for committing a crime (or crimes). That would make any discussion of whether or not Chen is a journalist irrelevant. As I pointed out above, there's no argument that Gizmodo purchased the iPhone prototype and should have known that the person selling it didn't own and had no right to sell it, meaning that Gizmodo purchased stolen property. Gizmodo itself reported that it demanded a written request from Apple before it would agree to return the prototype; it subsequently published Apple's written request as proof of the phone's authenticity. That's extortion.

Job offers: If it sounds too good to be true...

I moved to Silicon Valley many years ago, when I was young and stupid (as opposed to being old and even more stupid today.) After I'd worked in the Valley for a few years as a product manager, I was recruited by a good-sized technology company, and was offered a supervisory position and a big raise. The company I was working for had already told me that I had to relocate to a suburb of Boston in order to keep working there, and I wanted to stay in the Valley, so I resigned and took the job offer.

Almost as soon as I started my new job, I realized that I'd made a mistake. Within two weeks, I was told that the company didn't have the budget to allow me to hire anyone, so there would be no one to manage. The VP of Sales was supplying cocaine to his salespeople in order to keep them finding and closing deals; I spent time on the phone with screaming, coked-up salespeople almost every day, The CEO was famous for his insane temper tantrums if a visitor accidentally parked in his parking space. Shortly after I came on board, the company hired a VP of Marketing from an old-line technology company. This VP was more interested in the size and location of his office than he was in getting things done, and I learned after I left the company that he had actually had very little to do with the project that helped him land the job at my company, a project that he bragged about constantly.

I soon found out that the reason that I was offered a big promotion and raise is that the company had a reputation as an almost impossible place to work. I would have found that out if I had asked the right questions (like "What's your employee turnover rate?). I stayed in that job for six months because the recruiter told me that he'd only get his fee if I stayed that long.

The lesson here is pretty simple: If a new job sounds too good to be true, it probably is.

CableLabs announces 5Gbps cable data technology

Last week, Alcatel-Lucent's Bell Labs announced that it had developed a new technology that would allow DSL high-speed Internet speeds to reach 300Mbps at distances up to 400 meters, and 100Mbps at a mile. These are hypothetical numbers, and the real-world numbers are likely to be quite a bit lower. Nevertheless, a number of analysts got good and frothy about it; one said that it could "reshape the whole next-generation broadband competitive environment."

The problem is that the competitors aren't standing still. Today, CableLabs, the U.S. cable industry technology consortium, announced that it's working on a new, very preliminary technology that will enable downstream data speeds as high as 5Gbps--more than 16 times faster than the new technology announced by Bell Labs. The CableLabs technology is a radical rethink of how to send data over coax, and isn't compatible with the current DOCSIS standard. That means in order to use the new approach, cable operators would have to throw out all their cable modems and much of their head-end data hardware.

However, even the current DOCSIS architecture still has a lot of headroom; Cisco and Broadcom have demonstrated a DOCSIS 3.0 cable modem with a maximum downstream speed of 300Mbps. According to Broadcom, such a device could download a two-hour-long HD movie in approximately two minutes.

Of course, once you can download a two-hour HD movie in two minutes, do you really need any more speed? Probably not today, but new applications always arise that take advantage of whatever bandwidth is available. That's why the high-speed Internet services will continue to leapfrog each other; you can never be too rich or have too much bandwidth.

FCC: Will AllVid be CableCARD Part Deux?

Last Wednesday, the U.S. Federal Communications Commission (FCC) issued a Notice of Inquiry concerning its plan for next-generation set-top boxes. The FCC's intention is to encourage a retail market for intelligent set-top boxes that can support just about any video service, including cable, satellite, IPTV and over-the-top Internet video content. The FCC tried to do the same thing several years ago with its CableCARD initiative, but even the Commission now recognizes that CableCARD has failed.

The original concept was to enable consumers to purchase cable set-top boxes from any of a variety of suppliers, and then rent a CableCARD that would be compatible with individual cable operators' conditional access, authentication and encryption systems. Somewhere between the original concept and actual implementation, the wheels fell off. CableCARDs could only handle one channel at a time and were one-way only, which meant that they couldn't be used for on-demand, pay-per-view or interactive applications. Two cards were required for DVRs in order to watch one program and simultaneously record a second program. The monthly lease price for CableCARDs wasn't all that much less than complete set-top boxes. Cable operators still required installers to come to customers' homes in order to set up CableCARDs, and few installers were trained on how to set them up properly. As a result, CableCARD was a bust.

In the FCC's new proposal, consumers would purchase a "smart video device" (set-top box) that would work for any "multichannel video programming distributor" (MVPD), including cable, satellite and IPTV operators, as well as Internet video providers. Then, each MPVD (except for the Internet video providers, who would connect via Ethernet or WiFi) would supply a "set-back" device, also called an "AllVid adapter", which would serve as a tuner and also perform conditional access, authentication and decryption functions. The FCC would like the AllVid adapters to connect to the smart video devices via Ethernet and to use standard IP protocol to send and receive audio, video and data, so technically, an AllVid adapter could be connected to a conventional network router and make video content available to any device on a home network.

The FCC's goal of "one box to rule them all" is laudable, but it's likely to have many of the same problems as CableCARD. First of all, despite the Commission's attempt to redefine terms, consumers would have to have at least two set-top boxes: The smart video device and one or more AllVid adapters. The AllVid adapters would be proprietary to each service provider, so for example, if a consumer moves from an area serviced by Comcast to one serviced by Cox Cable, they'll have to lease or buy a new AllVid adapter. AllVid adapters are likely to be even more expensive than CableCARDs, since they'll perform many more functions.

Two important goals of the new AllVid strategy are to make over-the-top Internet content an "equal partner" to video from service providers on television sets, and to prohibit service providers from limiting access to over-the-top content. However, service providers will fight hard against the new proposal in order to maintain content control in the living room. They're likely to argue that AllVid adapters will be set-top boxes in all but name, so why not allow them to continue to lease all-in-one set-top boxes to consumers? They'll also argue that they've just invested an enormous amount of money to implement the Commission's CableCARD mandate, and now the Commission wants them to throw out that investment and implement another unproven technology. Satellite and IPTV service providers, who were unaffected by the CableCARD situation, would be covered under the new plan, so it's likely that they'll oppose the FCC's recommendations as well.

If the FCC hadn't already tried and failed with CableCARD, I'd give AllVid a better-than-even chance of success, but in its present form and with CableCARD's experience behind it, I give AllVid very little chance of making it to market. AllVid would elevate over-the-top Internet video content from a bit player in the living room to an equal partner, and the incumbent service providers will do almost anything to keep that from happening.

What's red and red and red all over?

Silicon Alley Insider has been digging into Microsoft's earnings report, and what they found about Bing and Microsoft's online business isn't encouraging in the least. The good news is that the market share of Bing, Microsoft's search engine, went up by four percent in the last quarter. The downside is that the company's online losses brought the projected annual loss to $3 billion from a business that only has $2.2 billion in annual revenues. More importantly, Bing's traffic increases are coming from a combination of buying traffic from other sources and moving traffic from Live Search to Bing during the quarter.

For example, Microsoft is paying Yahoo 88% of the gross sales revenue from traffic sent to Bing from Yahoo. That means that Microsoft has to pay operating costs, including sales commissions, out of its 12% of gross revenue. Further, Silicon Valley Insider estimates that 100% of Bing's revenue increases in the quarter were paid right back out in traffic acquisition costs.

The bottom line is that Microsoft has lost money on its online businesses for every quarter since March of 2006, and it lost $713 million in the most recent quarter. So why is Microsoft doing this? Surely the company no longer entertains the notion that online is going to be a big profit generator. I think that Microsoft is now more interested in restraining Google's growth than it is in making money in online. Whatever traffic it can divert to Bing, even if it's unprofitable to Microsoft, is traffic that Google can't sell any advertising against.

So, people who are wondering why Microsoft is continuing to bleed money in online are looking at the wrong metric. Microsoft is trying to slow Google down in order to keep Google from having the resources necessary to ravage its Windows and Office businesses.

Facebook's new initiatives: Is the safest approach to wait and see?

I've been traveling for a few days, so this is the first opportunity that I've had to cover the announcements that Facebook made on Wednesday at its F8 Developer Conference. The biggest announcements were:

1. The Open Graph protocol, which enables website developers to integrate their sites and content into the Facebook social graph, primarily by providing descriptive metadata and adding "Like" buttons that allow Facebook users to share content and preferences with their friends.
2. A library of plugins that provide drop-in access to Facebook features for website developers and bloggers.
3. A new, simplified Graph API that's dramatically easier for developers to use and supports industry-standard OAuth 2.0 authentication.
4. Removal of the requirement that developers purge the personal data that they get from Facebook every 24 hours, requiring users to reauthorize access. Now, developers can keep and use the data indefinitely.

With these announcements, Facebook has become both a much richer social services integration platform and a much easier platform for developers to use. However, the response to the announcements has been mixed. The reason is Facebook's "shoot first and ask questions later" approach to privacy protection. You may remember Beacon, an ill-fated Facebook initiative launched in late 2007 that sent member's information to selected websites in order to allow those websites to personalize ads and content, and that sent web browsing history from the participating sites back to Facebook. Initially, Facebook members had no way to opt out of Beacon, but the company was forced to offer an opt-out option a few months later after enduring a firestorm of criticism. Facebook shut down Beacon entirely in September of last year.

Late last year, Facebook made dramatic changes to its default privacy settings, which made public an enormous amount of personal information that had previously been private. The company promoted the changes as a big benefit for members, but a backlash from privacy advocates forced the company to publicize its changes in more detail and make it easier for members to restrict access to their personal information.

Now, Facebook has introduced these new initiatives, which will enable potentially all the information that members have listed as "public" in their profiles to be shared with participating websites. In light of yesterday's announcements, Facebook's actions on privacy defaults last year now make more sense...for Facebook. By making much more personal information available publicly by default, Facebook's new services are far more valuable to partners and advertisers.

Facebook's previous "tone-deafness" about privacy issues and inability to think through the ramifications of its actions suggest that there could be some dangerous consequences, both intended and unintended, for Facebook's members, partners and the company itself. If I were considering implementing Facebook's new features on my website, I'd wait a few months for the inevitable privacy and technical issues to be addressed. As for Facebook members, they should go to their profiles immediately and decide whether or not they want to share their "public" information with Microsoft, Pandora, Yelp and who knows who else in the future.

Update: The Electronic Freedom Foundation is weighing in on some of the changes made by Facebook. It turns out that under Facebook's new scheme, there is no way for members to prohibit sharing of certain information, including (but not necessarily limited to) current city, hometown, education and work, and likes and interests, with Facebook's partners. In other words, that information becomes public, and you have no way of limiting access to just your Facebook friends unless you remove the information altogether. EFF is recommending that Facebook members protest the changes and/or remove the information, while TechCrunch reported that the changes are causing a number of Google's engineers, including some of the company's best-known privacy advocates, to leave Facebook altogether.

The strange case of Gizmodo and the iPhone prototype

You'd have to be living under a rock for the last 24 hours not to have heard about Gizmodo's reporting about a device that appears to be a prototype of the next-generation iPhone. (I'm not going to link to Gizmodo, for reasons that will become obvious.) Here's the 30-second summary, as I understand it:

• The phone was left at a bar in Redwood City, CA by an Apple engineer, and was found by another patron.
• Rather than turn the phone over to the bar management so that it could be claimed by the owner, the patron took it home and noticed that although the rubber cover looked like an iPhone 3GS, the phone inside was significantly different, with two cameras, a flash, two volume buttons, a higher resolution display and a more angular industrial design.
• The device was clearly labeled "Apple", and rather than contact Apple to see if it was their device, the finder of the phone took photos of it and sent them to Engadget, and probably others.
• Engadget published the photos and noted that the finder was offering to sell Engadget (and others) time playing with the phone.
• Gizmodo purchased the phone for a rumored $5,000 and confirmed that it looks like an iPhone to Apple's own software. The blog took videos and still photos of the the phone, and then disassembled it and identified a number of components labeled "Apple".
• At some point yesterday, Apple contacted Gizmodo and requested that the phone be returned. Gizmodo agreed to do so, on the condition that Apple request return of the phone in writing.
• Gizmodo then published the name and picture of the engineer who lost the phone.
• Finally, Gizmodo received and published a one-page letter from Apple requesting return of the phone.

On the one hand, this was a great "get" by Gizmodo. Apple is famous for keeping pre-announcement prototypes locked down, and letting a blog not only see but tear down the next iPhone a couple of months before its announcement was a security failure of the first order. However, Gizmodo did some really sleazy (and potentially illegal) things in the process of getting and reporting its scoop:

• The person who found the phone shouldn't have kept it; he or she should have left it with management at the bar. In the worst case, the finder should have contacted Apple and found out if they wanted the phone back. That's not good manners, that's California law on found property.
• Gizmodo has lawyers and should have known that buying the phone was tantamount to buying stolen property.
• When Apple asked for the phone back, Gizmodo demanded a written request that it could publish in order to corroborate the authenticity of the phone. (They may have also demanded an agreement by Apple not to prosecute; we may never know what side deals were made.)
• Gizmodo revealed the identity of the engineer who lost the phone but not the identity of the person who found it. Why Gizmodo found it necessary to "out" the engineer, I have no idea. There were rumors circulating that the phone was stolen from Apple, not lost, so perhaps Gizmodo thought that by naming the person who lost it, they would prove that it wasn't stolen. Possibly by "outing" the engineer, they thought that they were providing him some level of protection from retaliation by Apple. However, given everything else that's happened in this case, I think that Gizmodo was looking out for its own interests. In any event, they've managed to further damage the reputation of the engineer, who will now have to explain this event for the rest of his career.

The whole thing stinks, and it's not the first time that Gizmodo has played around at the edges and gotten burnt. You may remember a couple of years ago, when some Gizmodo correspondents took a gadget that turns off TV sets to CES in Las Vegas. They went around turning off displays in exhibitors' booths, sometimes in the middle of presentations, and took pictures of the carnage that resulted. That action got Gizmodo and its reporters banned from CES.

Gizmodo could have taken pictures of the phone and played with it, then voluntarily returned it to Apple without demanding a written request. It didn't have to name the engineer who lost the phone. It shouldn't have purchased the phone in the first place if it had a strong suspicion that the person who had it shouldn't have kept it. Scoops are wonderful, but when they involve breaking the law and helping to destroy the reputation of a person who probably would never have been publicly identified, it's no longer journalism and no longer deserves respect.

Copiers make more copies than you think

There's a frightening story on tonight's CBS Evening News. Since the early 2000s, digital copiers (typically, office copiers that also serve as printers and/or fax machines) have included hard drives. When these copiers are taken out of service, they're often sold on the used equipment market. CBS and a consultant purchased four digital copiers from a New Jersey company, solely on the basis of the number of copies made on them; the network had no idea where they'd come from, and paid an average of $300 per machine.

In a few hours, the consultant removed the hard drives from the four copiers and downloaded their contents. One copier came from the Buffalo, NY police department's vice squad, and had lists of wanted sex offenders and copies of complaints that should not have become public knowledge. A second copier from Buffalo's police narcotics squad had lists of suspected drug dealers that the department was pursuing.

A third copier had sensitive blueprints from a building being built near Ground Zero in New York, plus copies of payroll checks and paystubs including addresses and social security numbers. The final copier, from a medical insurance company, held a jackpot: Medical records for hundreds of patients, including medical histories, medications and diagnoses, none of which should have ever been released. The same company that supplied CBS with the four used copiers shipped two batches of copiers to Argentina and Singapore that same day.

If that doesn't scare you, it should. Anything that you copy, print or fax on a digital copier is likely to be stored on the copier's hard drive, and few companies have policies for purging those drives when they sell or return the copiers. Imagine what you'd find on the hard drives of copiers at FedEx Office, for example. Who hasn't used one of those copiers to copy bills, or to make copies of income tax forms?

An executive from Sharp's U.S. subsidiary said that the company is trying to make its customers aware that they need to purge their hard drives, but it charges a significant amount for the software. If this report gets traction, as I think it will, look for governmental inquiries and a call to make digital copiers purge their hard drives automatically or on demand, without requiring the purchase of additional software. For now, you might consider buying your own all-in-one machine to copy or fax anything of a sensitive nature.

What's the real impact of government vs. culture on new businesses?

I was at an entrepreneurial conference in Chicago this weekend. The keynote speaker started off with the requisite witty anecdotes, followed by statistics about the impact of new and small businesses on the U.S. economy. To wrap up, she barreled into an Objectivist rant demanding that government get out of the way of new businesses. She may have thought that her screed was motivational, but it only left myself and most of the people in the room thinking "WTF?".

So, what's the real impact of government on new business formation? Government can stimulate new businesses with R&D tax credits, accelerated depreciation and taxing capital gains at lower rates than regular income. However, tax rates themselves have very little to do with either encouraging or discouraging new businesses. Consider that Chicago's "structural environment" is, in many ways, superior to Silicon Valley: At least as many top universities, excellent infrastructure, significantly lower state and local taxes (a 3% personal income tax vs. 9% in California, for example), and a more lenient, business-oriented regulatory structure. Chicago is physically closer to many more U.S. markets and to Europe, and is only a few hours further away from Asia.

Nevertheless, even with all those advantages, the rate of startup formation in Silicon Valley is one to two orders of magnitude higher than the rate in Chicago. Why? The reason is cultural, not governmental. Silicon Valley has a culture that, for several generations now, has inculcated the belief that it's better to have control over your own destiny than to give control to your employer. If you're happiest when you're getting a regular paycheck with good benefits, you're not likely to try to start your own company, and if you do try, you're likely to fail.

Chicago's culture is far more the norm for U.S. big cities; most people are perfectly happy with regular paychecks and don't have the "fire in their bellies" to go out and change the world, or at least a little piece of it. The problem with that thinking is that the regular paycheck and benefits lifeline is going away. Companies are moving away from permanent employees and toward contractors, temps and outsourcing. As Daniel Pink wrote a number of years ago, we're becoming a "Free Agent Nation."

So, the biggest reason why Chicago doesn't rival Silicon Valley as a startup formation mecca isn't government policies, it's a mindset that believes that if we do a good job for our employers, we'll be taken care of. Until many more people here believe that they can do a better job of looking out for their own best interests than can an employer, Chicago won't become a startup mecca. The speaker at last weekend's conference got a part of the Objectivist pitch right; it's just that the problem isn't government vs. startups, it's dependence on big business to provide support vs. taking responsibility yourself.

A summary of beliefs (weekend edition)

John Battelle and Tim O'Reilly published an open letter to Apple this morning, chastising the company for its policies of limiting press contact to a few carefully-chosen editors, writers and analysts, dropping out of industry conferences, and discouraging company employees from blogging. Their letter got me thinking about some of the things that I believe:

• Battelle's and O'Reilly's open letter is both self-serving and hypocritical. As I noted on Battelle's blog, Microsoft did even worse things than Apple for years, and neither writer complained about it. Microsoft had a "scorched earth" policy with writers, editors and industry analysts who wrote negatively about the company or gave its products bad reviews. They and their publications weren't invited to Microsoft's press events, weren't allowed to interview Microsoft's employees, and didn't get access to beta software in order to write reviews or books. Losing access to Microsoft was equivalent to a death sentence for people covering the PC business. Microsoft's behavior was legendary within press circles, but became widely known only after the US and EU pursued antitrust charges against the company.
  
  I would give Battelle's and O'Reilly letter more respect if it had stuck to trying to get Apple to open up, but it led into a pitch for a forthcoming conference. Are they interested in getting Apple to open up in the public's interest, or in selling more tickets for their conference?
  
  Update: Fake Steve Jobs replies with an open letter of his own.
  
  
• I disagree with Apple's decision to ban cross-compilers and intermediate development platforms for the iPhone OS, but Apple has the right to do so unless it does something illegal. At least on the surface, I see no evidence of illegal behavior and no grounds for antitrust action.
  
  
• I believe that Apple's application review process is broken, as the Mark Fiore situation once again demonstrated. Apple should be reviewing apps to insure that they work and don't introduce security problems into the iPhone OS environment. It should be enforcing its UI guidelines in order to provide a consistent user experience. It shouldn't be involving itself in the content of apps, unless that content has been stolen from someone else or is pornographic in nature (it fails the "no socially redeeming value" test.)  In general, Apple should support free speech, and its policy should be to approve apps unless there's something technically wrong with them.
  
  
• Adobe should focus on making Flash run as well as possible on non-iPhone OS platforms to help make those platforms viable competitors to Apple. HP and Adobe keep waving their hands and talking about how great the new HP tablet will be; Dell keeps leaking out photos of its 5" tablet, and now 7" and 10" pictures have surfaced. Adobe keeps talking about how it will have Flash 10 running on a flock of smartphones. How about a lot less talk and a lot more shipping?

Block search engines and increase ad clickthroughs?

PBS's MediaShift Idea Lab site has an article by Joe Boydston, VP of Technology and New Media at the McNaughton Newspaper Group and a 2009 Knight News Challenge Winner. Boydston runs the websites for three local newspapers that have employed paywalls for some time. In early 2008, McNaughton's management team realized that it was losing ad sales to Google, which was selling AdWords against the terms in articles on McNaughton's own sites. Searchers didn't have to go to the McNaughton sites to get to the articles, and the ad revenues went to Google. So, McNaughton edited its robots.txt files to bar search engines and aggregators from indexing its sites.

Common sense would say that traffic to the McNaughton sites should have gone down, as should have ad viewership, because the sites became "invisible" to Google, Yahoo!, etc. However, every significant metric actually went up (time on site, number of pages viewed per visit, etc.), and most surprisingly, ad clickthrough rates went up almost 10 times over the course of two years.

Boydston believes that the numbers went up because the sites have local news, sports and current events that aren't available from other sources. By denying access to the search engines and aggregators, McNaughton got more people to come directly to its own sites, where they saw more content and engaged more fully with the ads.

This strategy may also make it possible for publishers like McNaughton to run their sites without paywalls. After all, publishers generally impose paywalls because they can't sell enough advertising to be profitable. If they succeed in driving traffic back to their sites by cutting off search engines, their advertising will become more valuable...possibly valuable enough to make the sites themselves free.

The McNaughton strategy will work with sites for which there are no good substitutes with indexed websites. Small- and medium-market local newspapers, as well as high-value specialty publications, fall into that category. National  and major-market newspapers with many competitors probably won't succeed unless everyone decides to block the search engines and aggregators.

In any event, it does represent a possible Achilles' Heel for Google. If more and more publishers decide to block search engines, the value of Google's entire AdWords program will decline. Consider: If Microsoft  had simply paid publishers to block all search engines and aggregators rather than spent hundreds of millions of dollars on Bing, they could have "cut off Google's air supply" and forced Google into expensive revenue-sharing agreements.

vReveal: A godsend for Flip-style camcorders

MotionDSP just shipped version 2.0 of its vReveal software, and if you use a Flip or similar camcorder, it's the cheapest way to reduce shake and improve your video. The previous version of vReveal got great reviews, but it could only handle SD video, which made it useless for the new generation of HD camcorders unless you reduced your footage's resolution down to SD before using the software. Version 2.0 now supports HD in and out. The free version of vReveal 2.0 can only output at 480p maximum, but the premium version with 1080p out will set you back all of $39 (US).

Both versions include image stabilization, contrast and white balance adjustment, sharpening and video filters. The premium version can up-rez SD footage to 720 or 1080p, and can clean up video noise, especially from footage shot with digital zoom or in low light. Both versions greatly benefit from having a CUDA-compatible nVidia graphics card or GPU for application acceleration, but they work fine (just more slowly) without it. Also, vReveal is a Windows-only app, so OS X users are out of luck.

If you're using a higher-end camcorder, you probably don't need the features of vReveal or already have better software, but if you're using a Flip, Creative Vado, Sony or Samsung Flip clone and you have a Windows PC, the $39 that you pay for vReveal 2.0 could be the best investment in video quality improvement that you'll ever make.

Videoconferencing: "Good enough" is good enough

I'm watching seminars put on by Stanford University's MediaX program. The first seminar, on the impact and use of new mobile video technology for news gathering, was technically a little shaky, but informative. The second seminar, on the value of new video technologies in business and education, seems to be more a sales pitch for Cisco's telepresence technology and similar offerings than a real discussion of the value of video. (If you haven't seen Cisco's commercials, their telepresence model uses big screens that allow you to see the participants in both sides of a teleconference in near life-size. Cisco's even bigger telepresence systems, which haven't been featured in television ads, use specially-built rooms and wall-size displays to give the illusion that the participants are all in the same room.)

Cisco-style solutions are very expensive; tens or hundreds of thousands of dollars per site, with major bandwidth requirements. To vendors of these systems, Skype and similar services will never be a good substitute, because you can't see and hear every nuance of every participant. Sometimes the picture freezes. It's not immersive.

The problem with these arguments is that time and time again, high-end, high-quality offerings are rejected in favor of "good enough" solutions. CDs are being replaced by MP3 files that don't have the same sound quality but are far more flexible and less expensive to buy. Consumers eagerly watch video on their computers (or their phones, for that matter) that isn't the equal of what they can see on a HDTV, because they can watch what they want, how, when and where they want.

Teleconferencing works the same way. If I can use Skype or Apple's iChat to pull together an ad hoc videoconference with existing equipment and at little or no cost, do I really need to see if someone in the 23rd row is picking his nose? Just as consumers gravitate toward "good enough", smart businesses and educators will do the same thing.

Apple's iPhone review process: It's not a walled garden, it's a prison

Apple's recent decision to forbid usage of cross-compilers and intermediate development platforms for iPhone OS application development has been widely covered, as has been Apple's decisions not to approve new apps or to remove existing ones for a variety of content-related reasons. Yesterday, I wrote about Apple's decision not to approve an app by Pulitzer Prize-winning editorial cartoonist Mark Fiore because his cartoons disparage public officials. As the Columbia Journalism Review put it, that's the job description of an editorial cartoonist.

The iPhone OS environment is looking less like a walled garden and more like a prison, where Apple carefully screens everything and removes anything that it deems offensive or dangerous. Whether through hubris, paranoia or internal miscommunication, Apple is making decisions that are starting to backfire in a big way. The company may have had good intentions originally--insuring that applications met minimum performance and UI standards, and that truly salacious content didn't get into the App Store--but the decision-making process has gotten completely out of control.

It's a lot easier to say "no" than to say "yes"; the personal cost to the reviewer of approving an app that's found to be offensive is likely to be much greater than rejecting the app in the first place. So, a lot of perfectly good apps get kicked to the curb in order to avoid risk.

I'm sure that Mark Fiore's app will get approved, just as other cartoon apps that were rejected initially got approved after Apple was sufficiently ridiculed, but the fact that this keeps happening indicates that Apple's review process is broken. My opinion is that the entire process needs to be turned on its head: Apple should be looking to approve applications unless there is something functionally wrong with them (in other words, they simply don't work.) It should use the comments feature in the App Store as a guide to identify apps whose content is offensive, and even then, Apple's position should be to protect free speech.

Apple's app approval process is completely out of control, possibly because it's simply overwhelmed by the volume of submissions. If that's the case, Apple should fix the process, whether that means adding reviewers, changing the review criteria, or inviting community participation into the review process. Apple's increasingly draconian rules on development platforms and content are the biggest threat that Apple currently faces, not any competitive products or services. If the iPhone platform runs into trouble, it'll be Apple's doing, not Google's, RIM's, Microsoft's or anyone else's.

All the big announcements at NAB in 35 seconds!

Google announced its new Search Stories feature today--based on the idea behind the company's 2010 Super Bowl ad. I used it to showcase the new products at NAB 2010 that I think will have the most impact:

Blackmagic Design brings DaVinci color correction to the masses

Talk to any professional colorist, and nine times out of ten they'll tell you that they love DaVinci's color correction systems. Yes, they can use the color correction systems that Avid, Adobe or Apple build into their software, but they don't have the power and flexibility of DaVinci.

About a year ago, Blackmagic Design acquired DaVinci. A lot of eyebrows were raised, since DaVinci systems were very expensive ($150,000 to $200,000 USD to start) and the most expensive Blackmagic Design product to that point was a fraction of the cost of even the cheapest DaVinci system.

At NAB this week, Blackmagic Design announced a $995 software version of DaVinci Resolve for the Mac. Mac buyers need a compatible control surface, such as the Tangent Wave, which costs approximately $1,600 (USD), a supported nVidia graphics card, and a Decklink HD Extreme 3D card for video input. Or, they can opt for DaVinci's own control surface, which adds $29,000 to the price. But for most videographers, they can get into Resolve for under $10,000, even if they don't already own a Mac Pro.

If buyers want to fully replicate the functionality of previous versions of Resolve, they can purchase the Linux version for $19,995 which supports up to 16 GPUs, plus the Resolve control surface for $29,000. By the time you purchase a multi-core Linux workstation (or workstations) with lots of RAM, hard disk and 16 graphics cards, you can hit $150,000, but you've got a system that performs as well or better than DaVinci's previous $800,000 solution.

I'm not a colorist, but I've spent days in a color correction suite with a professional colorist working on an earlier version of Resolve. It's an amazingly powerful tool, and to think that the same basic capability that took an entire room full of equipment five years ago is now available to anyone with a powerful enough Mac is mind-boggling.

Adobe's rumored to be planning to sue Apple, but over what?

According to ITworld Daily, Adobe is gearing up to sue Apple over the new restrictions on cross-compilers in the latest version of the iPhone Developer Agreement. (Standard disclaimer here: I'm not a lawyer, this isn't legal advice, and your mileage may vary.) What I'm not sure about are the grounds under which Adobe will sue.

Apple isn't a monopoly; the iPhone isn't the most popular smartphone (RIM's BlackBerrys still hold that distinction.) The iPad just started shipping, and companies have built tablets for years. A company can't be a monopoly in its own products, and Apple has the right to put whatever restrictions it wants into its own agreements, so long as those restrictions aren't illegal. It doesn't appear that Apple induced Adobe to implement its Flash-to-iPhone cross-compiler; Adobe made that decision by itself, to get around Apple's previous restrictions on Flash. Apple had no legal obligation to inform Adobe of its decision to ban cross-compilers before it made the announcement. No developer is forced to sign Apple's new agreement unless they want early access to the iPhone 4.0 SDK.

So, I'm not sure what grounds Adobe is going to use to sue Apple, if it files suit at all. After all, for several years, Adobe either refused to release applications for OS X or released them later on the Mac platform than on Windows. Premiere Pro was unavailable for the Mac for several years. Adobe's actions definitely hurt Apple, but Apple never filed suit against Adobe to force the company to port its applications to OS X in a timely manner.

This may all be a PR scheme on Adobe's part to try to get Apple to change its policies. It doesn't seem as though Adobe has very strong grounds for a lawsuit.

The best way to sell? Ask your customers

Last month, Inc. Magazine interviewed seven major companies to find out what their procurement executives are looking for and how to sell to them. The article has a lot of good tips; for example, don't send a proposal to UPS via FedEx. (Yes, people actually do that.) Every customer has guidelines that it follows for selecting vendors; Northrup Grumman, for example, looks for very targeted vendors who can deliver on time, while Intuit looks for financially stable vendors with deep expertise.

The key is that different customers are looking for different things, and what they're looking for often aren't the "speeds and feeds" of your product--it's your customer service, flexibility or financial stability. All too often, we try to sell on features and specifications and ignore our customers' other hot buttons. So, how do you find out what your customers want? Ask them! Inc. didn't have to hold guns to the heads of these procurement executives to find out what they want and don't want. Companies want to buy from vendors that will meet their needs, and if you fit into that category, you're ahead of the game before you even start selling. On the other hand, if you clearly don't qualify, you're much better off focusing on other customers.