Concerns over cybercrime bring United States back to Internet talks

News from Geneva that the United States has agreed to discuss Internet security with Russia and the United Nations raises hopes of a new treaty between the world powers to demilitarize cyberspace. The very existence of the talks represents a huge shift in U.S. policy since a new president took office in January, since the previous government in Washington had refused to discuss the subject with Russia for years, according to the New York Times. The negotiations also are further evidence of friendlier relations between Moscow and Washington since Barack Obama became president of the United States in January, as they are proceeding in tandem with talks expected to lead to a new round of cuts in the two countries' nuclear weapons arsenals. Talks with UN disarmament negotiators are expected to resume in January along with informal discussions at an Internet security conference in Germany. The renewed efforts apparently mean the Obama administration is taking the issue of computer security seriously despite differences with the Russians on enforcement issues, the Times said. Some experts say the two superpowers are trying to avoid an Internet arms race in which countries develop increasingly powerful cyberweapons to disrupt computer systems that control weapons and security in other nations, which is why UN arms control negotiators are becoming part of the talks. The United States had previously considered the negotiations as a purely economic matter. But last month, high-ranking Russian security officials met in Washington with representatives of the National Security Council and the U.S. departments of state, defense and homeland security, the Times said, setting up the January dates for serious negotiations.

Nothing from nothing leaves $100 million

Rich people still are different from the rest of us. Perhaps that's the best explanation yet for why venture capitalists ponied up an additional $100 million on Thursday for a bit of Twitter, the wildly popular Internet microblogging service. Twitter, a Web startup that lets people express themselves in 140 words or less, has attracted millions of users in its three and a half-year existence but no known revenue. The new cash infusion is expected to raise the value of the company to $1 billion, even though it only has 60 employees and does not plan to begin accepting advertising revenue until next year, according to the New York Times. Twitter's valuation is apparently based in large part on the numerous takeover offers it has received, notably from its chief rival, Facebook, and as well from Google and Microsoft. “Twitter is so likely to be successful at this point, it is almost impossible to envision a way in which Facebook can truly monopolize online content-sharing,” Keith Rabois, the vice president of strategy at Web social entertainment firm Slide, told the Times. Facebook has more than 300 million users but its continued domination of Web social networking appears to face a serious challenge from Twitter. “There have probably been less than five examples of companies that have grown like Twitter has,” John Borthwick of Betaworks told the Times. Betaworks created the link-shortening service Bit.ly. Twitter is "a new layer of innovation on the Internet," Borthwick said. “This investment is happening because it represents a shift.” And just who are the new investors? They include Insight Venture Partners, a New York company, mutual fund giant T. Rowe Price and current backers Spark Capital and Institutional Venture Partners, the Times said.

Negative market reaction to Yahoo-Microsoft deal probably reflects reality

That Google shares fell today after the long-awaited deal between Microsoft and Yahoo was finally announced was a given -- it can't be good for Google that two of its largest competitors for the Internet search market have joined forces. But the fact that Yahoo's share price also dropped does not bode well for the future of this arrangement. The 10-year deal, under which Microsoft's new Bing search engine will power searches on Yahoo sites in exchange for a share of revenue, still must be approved by regulators in the United States and Europe, according to the Reuters international news service. Yahoo and Microsoft were motivated to reach a deal in their effort to challenge Google's dominance in the search market. Google has 65 percent of the U.S. search market versus Yahoo's 19.6 percent and Microsoft's 8.4 percent, Reuters said. Yahoo turned down Microsoft's $47.5 billion takeover offer last year. Analysts quoted by Reuters said the market was not energized by the deal because Yahoo did not receive any upfront payment as expected. "Those that were looking forward to a take-out, the deal today was rather disappointing -- it's not as good as what investors expected," said Marc Pado of Cantor Fitzerald & Co. "Overall, it's a big positive for two companies that have been struggling to keep up with Google. This consolidates their resources and allows them to make a more concerted push as the No. 2 entity," said Ross Sandler of RBC Capital Markets. Yahoo CEO Carol Bartz applauded the deal and said the lack of an upfront payment was not a deterrent because the agreement would be lucrative for her company.
While Yahoo CEO Carol Bartz had previously said that any deal would require a partner with "boatloads of money," she said on Wednesday that the revenue share agreement in the Microsoft deal was more valuable to Yahoo than a one-time payment. "Having a big up-front cash payment doesn't really help us from an operating standpoint," she said in a conference call with Microsoft CEO Steve Ballmer, Reuters said. Microsoft is expected to pay Yahoo 88 percent of search revenue from Yahoo sites for the first five years, while the companies continue to keep their advertising businesses separate. Yahoo said the deal will boost its annual operating income by $500 million and to increase cash flow by $275 million. The companies said they were hopeful the deal would close early next year, Reuters said.

Newspapers should have figured this one out years ago

New talk today of cutbacks at the country's most respected daily newspaper publishers focused additional attention on the plight of that industry, which has been losing millions of dollars and subscribers since the Internet explosion. Today's news focused on announcements by the New York Times Co. and Washington Post Co. of new rounds of cost-cutting that will include layoffs and salary reductions, according to the Reuters international news service. The Times said it had laid off 100 workers and cut nonunion salaries, and had asked its unionized workers to make similar concessions. "This was a very difficult decision to make," said a memo sent to employees Times Chairman Arthur Sulzberger Jr. and Chief Executive Janet Robinson. "The environment we are in is the toughest we have seen in our years in business." The Post said it was offering another round of buyouts to its news, circulation and production staffs. But none of this was a surprise to anyone in the business. The old newspaper business model -- earning most of the revenue from classified advertising -- just doesn't work anymore because Internet sites can outdo traditional publishing in cost and reach. Yet newspapers have resisted long-term change and in large part failed to develop new revenue sources, leading to large-scale layoffs at U.S. publishers such as Gannett Co. and McClatchy Co. and closures of some of country's best-known newspapers, such as the Rocky Mountain News in Denver and the print edition of the Seattle Post-Intelligencer. The result has included a dizzying pace of newspaper mergers that created huge conglomerates that have proven unable to sustain themselves. This doesn't seem outrageously difficult. Small papers can make money, massive papers cannot. If the smartest people in the country can't figure out a business model that works with this information, maybe newspaper industry moguls should give up trying to become rich magnates and embrace the not-for-profit world instead. The country needs an informed, literate citizenry -- the very Constitution of the United States was written with the press in mind -- because even back in the late-18th century its advocates understood that the state cannot always be trusted to do the right thing. But if the titans of industry can't get figure out something as simple as this, it may be time to let the most unwieldy of them go under, start again with local, easy-to-print and distribute newspapers, and consign the mega-papers to the circular file of history.