Sweden is traditionally sees as a bastion of individual rights, but on 1 January 2009 it took a big step towards big-brother-like monitoring of international phone calls, e-mail and internet traffic.
All of the parties in the ruling government coalition were in favor of the sweeping data tracking measures included in the FRA Law. Interestingly enough every single Swedish political party’s youth organization has taken a position against the law. No wonder the Pirate party is quickly gaining followers from various youth groups with its anti-FRA stance as a centerpiece of their platform.
The FRA law allows supercomputers to scan all cross-border internet traffic in real time for trigger words and phrases. Once a trigger word, topic, name or phrase is identified, the communications will be reviewed in more detail and investigated further by Swedish electronic security service FRA (Försvarets radioanstalt). Electronic data monitoring has been introduced in Sweden like in other countries as part of anti-terrorist measures. Civil rights activists are concerned that this kind of monitoring may be used significantly broader than just for identifying terrorists, but also to find other potential violations such as software piracy, or to monitor any individual, group or religion’s activities for any reason.
Electronic Frontier Foundation (EFF) has been speaking out internationally against the growing proliferation of such measures. EFF this month filed a lawsuit entitled Jewel v. NSA over Obama administrations refusal to turn over oversight records related to social network surveillance. EFF described the allegations on its website as follows:
Evidence in the case includes undisputed documents provided by former AT&T telecommunications technician Mark Klein showing AT&T has routed copies of Internet traffic to a secret room in San Francisco controlled by the NSA. That same evidence is central to Hepting v. AT&T, a class-action lawsuit filed by EFF in 2006 to stop the telecom giant’s participation in the illegal surveillance program.
Running for President, at that time Senator Obama announced that there was:
little doubt that the Bush Administration, with the cooperation of major telecommunications companies, has abused that authority and undermined the Constitution by intercepting the communications of innocent Americans without their knowledge or the required court orders.
Now, in response to EFF’s Freedom of Informational Act demand for disclosure, President Obama’s administration has cited immunity and a “state secrets” exemption in refusing to turn over the records. EFF now seeks to have a federal judge to review the records in camera to determine if illegal surveillance of Americans has been carried out.
The program is reminiscent of the Department of Defense Total Information Awareness (TIA) program revealed by the New York Times in 2005. That program was exploring data mining that included the mapping of communications and related social networks, but was shut down by Congress in 2003 over concerns of the legality of surveillance. Of course after the Patriot Act and the amendments to the Foreign Intelligence Surveillance Act, most of such surveillance has been legalized in order to find and fight potential terrorist activities.
If the Judge forces the turn-over of documents we may soon find out the level of monitoring applied to Facebook, MySpace, Twitter and other social network communications. Meanwhile, we continue to remind people of the often forgotten obvious fact – your online posts and pics are not private or confidential.
I am posting an update to a social media valuation post from last week. There is a growing chorus questioning the high valuations and viability of business models of the social media start-ups.
More fuel was thrown on the fire this week with the announcement of the results of the latest round of fundraising at Ning.
Ning, a social networking start-up, raised $15 million at a $750 million valuation this week. The application allows anyone to launch their own personalized social networks (i.e. an entire network of Brüno aficionados, fans of the HBO show the Wire, or the Silvio Berlusconi support group).
Ning has a lot going for it: vip pedigree of founders – Andreessen and Gina Bianchini, approximately 200,000 active networks created to date, 30 million registered users, and it is revenue positive from the placement of Google ads.
To beef up the revenue model, the company will be rolling out is own proprietary advertising scheme, $25 premium service network subscriptions as well as virtual gifts. This series- E round led by Light Speed Venture Partners showed significant valuation growth over last year’s $500 million D-round.
The latest successful fundraising round however does not change the fact that revenue will still trail far behind the valuation. David Dines pointed out that even if 10% of the 200,000 active Ning networks subscribers pay up for the $25 “premium” monthly service upgrade, this would generate $6 M of revenue per year.
Using the advertising multiple for big social network sites suggested by Raj Kapoor (Managing Director at Silicon Valley’s Mayfield Fund) of $.20 month of on site advertising revenue per user would add from $6 million active users an additional $14M per year for an approximate total revenue of $20 M per year.
Even for optimists, this kind of revenue numbers stand out sharply in contrast to the $750M valuation.
The steady drizzle of criticism questioning the viability of Web 2.0 social networking site’s “free” business model turned into a monsoon. A flood of stories swept over blogs and news reports querying why building huge audiences with cool new entertainment experiences has not translated into profits. Some of the additional attention was no doubt related to the reportedly “somber” and “bearish” tone the journalists witnessed at the Allen & Co. hosted conference of media industry heads in Sun Valley.Assuming even a very generous $0.40 CPM rate, Dodge calculates that your Facebook/MySpace app will not earn earn $1 million from advertising, until the app gets to the outrageous number of 2.5 Billion page views per month. [for perspective - Yahoo has a total of 1.5 billion searches per month and Google has a total of 6.1 billion searches]
Social Networking’s ‘Naked’ Truth, a CNBC.com story published on 10 July by Silicon Valley Bureau Chief Jim Goldman questions whether we are “staring another dot com boom/bust right in the face.” Goldman’s post blows the whistle on social media’s inability to generate profits in the foreseeable future.Facebook is addictive, even magical to millions. Same goes with MySpace, and Twitter, and LinkedIn, and Digg, Badoo, Classmates, Bebo, Flixster, Friendster, Orkut, and hundreds of others. They are powerful, fun, convenient. They offer value. And they build connection. Look no further than the Michael Jackson news tsunami to see how social networking affects our lives and drives information.
But with hundreds, even thousands of these sites out there already, with many attracting millions in venture capital, I simply ask, Where’s the return on the investment? What’s the business model to MAKE money and not merely to attract investment?
Partly this web 2.0 bashing is just the old media’s response to quickly losing entertainment market share to the “free” competition on the Internet, but there is something to these warnings of overvaluation. If the current advertising revenue rates remain the same, the Web 2.0 landscape will be forced to change, consolidate and find brand new new revenue models.
Looking at Zynga’s revenues and the profits of virtual gift business around the world, we can see that monetization can be done quite successfully with some formats. Warrent Buffet recently suggested that he would be willing to pay $5 per month for the pleasure of watching YouTube, and I know I was happy to pay $13,95 for HBO’s great programming in the US (although it took airing of such phenomenal content as the Soprano’s and Rome to get me to subscribe).
Financial Times headline “The Cold War in high frequency trading turns hot” caught my eye. It sounded very James Bond and high tech, not just another routine business numbers piece.
To pace my almost obsessive need stay up to date on the daily flow of business blogs, reports, news, analysis and other data streaming through the internet – I relax by reading modern fiction. The FT story sounded like some of the plot lines I have read in my favorites works by Chuck Palahniuk,
The crime plot sounding eerily similar to these authors’ books -
Sergei Aleynikov was about to receive a $1.2 million paycheck for allegedly hacking into Goldman Sachs’ computers and stealing 32MB worth of proprietary HFT trading code (technology behind 10% of the daily world total of equity trades). The information was related to Goldman’s proprietary equities electronic trading strategies. He had been clumsy covering up his tracks and was caught by the Goldman IT people who handed the matter to the FBI.
FT described as follows:
Aleynikov claims to have created a tarball – a Unix aggregate of a number of files (like a .zip file) – on June 5 to transfer some open source stuff on the Goldman server to the XP-Dev.com server. He says he encrypted the files, then erased the encryption software, the tarball and the bash history — which is basically a back up of the Unix commands used to amalgamate and transfer the files. Goldman’s security server, however, apparently prevents or at least alerts the company to bash deletions, which appears to be how Goldman found out about the alleged theft.