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Thursday, 14 July 2011
Google Social App 4.0. or 5.0.? Hard to Keep Track
By Patrick Clark 
Google+, the search giant’s latest attempt to create a social network, was launched on June 28. Here, some earlier Google forays.
Open Innovation: The New Imperative for Creating And Profiting from Technology
The information revolution has made for a radically more fluid knowledge environment, and the growth of venture capital has created inexorable pressure towards fast commercialisation of existing technologies Companies that don't use the technologies they develop are likely to lose them. Key features Over the past several years, Hank Chesbrough has done excellent research and writing on the commercialisation of technology and the changing role and context for R&D. This book represents a powerful synthesis of that work in the form of a new paradigm for managing corporate research and bringing new technologies to market Chesbrough impressively articulates his ideas and how they connect to each other, weaving several disparate areas of work R&D, corporate venturing, spinoffs, licensing and intellectual property into a single coherent frameworkPrice: $19.95
LawPivot's Jay Mandal, Startup Counsel
Jay Mandal Gabriela Hasbun for Bloomberg Businessweek
By Olga KharifIn Silicon Valley, there’s a vocabulary of asceticism: “ramen-profitable” and “bootstrapping” are terms to live by for young companies that need to make every dollar count. It’s hard to scrimp on legal fees, however. Incorporating a company or raising venture capital requires professional legal advice that can cost thousands of dollars.
Jay Mandal, the former lead mergers-and-acquisitions lawyer for Apple, thinks he can help. He quit his lucrative corporate gig in 2009 to found LawPivot, a Q&A website that matches cash-sensitive startups with the lawyers who might be able to help them. Companies visit the site and pose questions, such as whether they need to trademark a brand or how to minimize liability from negative user reviews.
Behind the scenes, LawPivot’s algorithms funnel the questions to its roster of lawyers based on expertise and quality of past responses. For now, companies can ask three questions per month for free, though LawPivot plans to charge a subscription fee of $80 a month.
That’s a deal, compared with most lawyers’ hourly rates. “I use it to supplement my current legal counsel,” says Ajay Kamat, the 26-year-old co-founder of Micromobs, a collaboration software startup in Mountain View, Calif., that has used the site for six months. “I easily saved thousands.” Lawyers don’t make any money for answering questions, but they do get leads on potential clients. Yusuf Safdari, senior counsel at the Palo Alto office of Pillsbury Winthrop Shaw Pittman, says he scored three paying clients by answering 50 questions through LawPivot in the past year. “It’s great, the time efficiency,” Safdari says. “Instead of me going to fancy events to find clients, clients are finding me.” More than 800 lawyers and 1,200 startups have used the site.
Mandal, 37, is a fourth-generation lawyer whose grandfather served as a justice in a state supreme court in India. After graduating from law school at the University of California, Berkeley, he spent six years working in corporate law at firms including Pillsbury Winthrop before joining Apple. He’s also a startup veteran: In 2003 he co-founded IPpro, which lets U.S. companies outsource patent work to lawyers in India, where it can be completed for a fraction of the cost. “I consider myself an entrepreneur first and lawyer second,” Mandal says.
Mandal lived the ramen-profitable life while building LawPivot. After quitting Apple, he and co-founder Nitin Gupta recruited four engineers. The six holed up in a room above the garage of Mandal’s home in Fremont, Calif., where his wife, Anamika, kept everyone fed with Indian snacks during all-nighters. After raising $600,000 from investors, including Google’s venture arm, late last year, Mandal moved his team into office space in Mountain View. “My wife misses them,” he says. “They were there all the time.”
Algorithms direct legal questions to experts
Law degree from University of California, Berkeley
“I consider myself an entrepreneur first and lawyer second”
Friday, 8 July 2011
A Baby Nespresso for the Diaper Set
Alamy
By Thomas MulierMost parents have spent at least one night frantically searching for a clean bottle, mixing and heating formula, and then waiting for the liquid meal to cool to the proper temperature—all while trying to soothe a hungry infant. Nestle, the company that’s built its Nespresso home espresso makers into a $3.9 billion business, thinks it has a way to help: a little Nespresso just for junior.
The Swiss company’s new BabyNes machine heats capsules of Nestle formula, eliminating the clumps that can form when mixing powdered formula, and then dispenses a precise amount into a waiting bottle. It can be operated with one hand, leaving the other free to deal with a fretting child.
Such convenience doesn’t come cheap. The BabyNes—which went on sale to Swiss shoppers in May and will roll out globally starting in 2012—costs $300. The capsules of Nestle formula that go into the machine cost triple the price of its pre-sealed espresso. Using BabyNes daily tacks an extra $650 on to the annual cost of a new mouth to feed, compared with traditional powdered formula, according to Bloomberg calculations.
Susanne Seibel, an analyst at Barclays Capital, figures BabyNes is a product for families without budget constraints and won’t immediately go mainstream. That may explain why Nestle—the world’s largest food company—is starting in Switzerland, where 1 in 10 households is worth more than $1 million, according to Boston Consulting Group. “There is no price sensitivity when it comes to babies,” Seibel says. “People tend to go slightly overboard.”
BabyNes joins the ranks of high-end baby products ranging from $979 all-terrain Bugaboo strollers to a $29.95 device that warms up wet wipes before they touch baby’s bottom. Top-selling infant gear on Amazon.com include a $139 color video monitor and the $14.54 NoseFrida Snotsucker Nasal Aspirator.
Annual sales of BabyNes machines may reach 500 million Swiss francs ($600 million) within two years, estimates Jon Cox, an analyst at Kepler Capital Markets in Zurich. The hassle-free system also may help prolong the time parents use infant formula before starting children on solid food, he says.
Eager to repeat Nespresso’s annual sales growth rates of as much as 40 percent, Nestle is rolling out machines that make tea, soluble coffee, and even smoothies. By getting consumers hooked on the machines and selling proprietary capsules online, the Swiss company locks customers into its brands and eliminates middlemen.
Nestle competes with Beaba, a French maker of the Bib’expresso, which costs about half as much as BabyNes and doesn’t tether parents to a single formula brand. Advertising could be a bigger challenge, however, since the World Health Organization’s marketing code on infant formula recommends countries ban promoting breast milk substitutes. Nestle has been the target of boycotts since 1977, when a group called Infant Feeding Action Coalition said babies were dying in developing countries where some mothers watered the powder down to make it last longer or mixed it with contaminated water.
Martin Grieder, who was at Nespresso for eight years before heading the formula venture, says Nestle embraces the WHO code. A spokeswoman says Nestle follows the guidelines in 152 “high-risk” markets, including China, India, and Russia. In low-risk nations such as the U.S., it follows national laws, which can be looser. BabyNes’s website and brochures tell consumers breastfeedingis best.
To help push sales, Nestle lets buyers return a BabyNes unit within 30 days if they don’t like it. In a bid to address cost concerns, Nestle also plans to allow consumers to rent the machines or return them for about 30 Swiss francs (about $36) once baby outgrows them. Still, not all parents are convinced the BabyNes is a must-have. “It’s unnecessary spending,” says Andrea Pantoja, a mother of a 21-month-old girl in Geneva. “For powdered formula, all you need to do is heat water.”
The bottom line: Nestle, which invented baby formula in 1867, hopes to repeat the success of its Nespresso machines with its $300 BabyNes formula dispenser.
Mulier is a reporter for Bloomberg News.Jeff Hilbert, Master of the Game
Hilbert outside the Sega booth at the E3 video game conference in Los Angeles in June Emily Shur
By Devin Leonard“Let’s say you have a werewolf, a vampire, and a human, and you all have to battle for survival,” Jeff Hilbert says as he drives to a meeting in Los Angeles. “The human needs armor and weapons. Otherwise, as soon as one of the other characters touches him—boom!—he’s dead. The vampire needs to have speed, agility, and smarts. Otherwise, the werewolf can just rip his head off. You see? Everybody’s powers have to be balanced really carefully or nobody wants to play this game.”
Hilbert knows something about the dynamics of a successful video game. His talent agency, Digital Development Management, represents some of the trade’s leading game creators, such as Slant Six Games, the Vancouver (B.C.) company working on the latest version of Resident Evil, a franchise that has sold 45 million units worldwide and has generated four movies starring actress-model Milla Jovovich as the game’s zombie-slaying heroine.
DDM also represents Vatra Games, a Czech developer which is completing the next iteration of Silent Hill, a gloomy “survival-horror” series, which has sold more than 4 million copies and inspired its own budding Hollywood franchise, and Turtle Rock Studios, a Southern California developer whose principals were part of the team that created Left 4 Dead, another man-vs.-zombie property, which has sold more than 6 million copies.
In other words, Hilbert, who founded DDM six years ago, is a fulcrum in an industry that makes enormous sums of money and is challenging the cultural primacy of action movies, edgy cable television, and Stieg Larsson novels. This is especially true for young men who have grown up with game controllers in hand.
Hilbert, 46, has slightly graying, shoulder-length hair that makes him look like an aging surfer. He’s always grinning, as if someone just told him a pretty good joke. He works from his home in Burlingame, outside of San Francisco, rather than a plush Los Angeles office.
Still, like a typical Hollywood agent, Hilbert has his manic moments. Heading to the meeting in L.A., he gets lost and steers his rented Kia sedan with his right hand while he charts the route on his BlackBerry with his left. He can’t make sense of the directions and scolds his smartphone for providing him with misinformation. “This is the wrong way to do this,” he says. “Stop, stop, Google Maps!”
It takes several abrupt U-turns before Hilbert gets his bearings. It’s a bit like a scene from one of the Need for Speed racing games, which have sold more than 100 million copies and generated over $2.7 billion in sales. The current edition, Shift 2 Unleashed, was developed by Slightly Mad Studios, a DDM client.
Hilbert’s days tend to be unpredictable. “I was at a Boy Scout meeting the other day with my sons,” he says. “I had these other dads pitching me IPhone apps. Everybody’s into games these days.”
Talent agents have long been part of the book, movie, and music industries. This wasn’t always so in video games, but the arrival of people such as Hilbert is a sure sign of a maturing and increasingly influential art form. Two decades ago developers made games in their garages, advertised them on the backs of comic books, and mailed them to customers in zip-lock bags. They saw themselves as software designers rather than as “talent,” a word traditionally used in the entertainment world to describe the likes of Tom Cruise, Jennifer Lopez, or anyone else who does something in front of a camera or microphone or on a keyboard.
Agents go where there’s money, and the video game industry is overflowing with it. Revenues reached $25 billion in the U.S. last year, according to the Entertainment Software Assn. That’s more than double Hollywood’s theatrical receipts. In November, Activision Blizzard’s Call of Duty: Black Ops sold 5.6 million copies in the U.S. and the U.K. in its first day at a price of $59 each, plus special editions—a $360 million opening, according to the company. By comparison, Warner Bros. took in $125 million in ticket sales during the first weekend of the heavily promoted movie Harry Potter and the Deathly Hallows Part 1. The New York Times’s video game critic, Seth Schiesel, approaches the industry’s products with as much gravitas as his Arts page colleagues do Jonathan Franzen novels. And in a 7-2 decision on June 27, the U.S. Supreme Court struck down a California law that banned the sale of violent video games to minors. The court ruled that “like the protected books, plays, and movies that preceded them, video games communicate ideas” and are thus entitled to the same First Amendment protections. No wonder developers view themselves as auteurs in need of professional handlers.
The Future of Learning Institutions in a Digital Age (The John D. and Catherine T. MacArthur Foundation Reports on Digital Media and Learning)
In this report, Cathy Davidson and David Theo Goldberg focus on the potential for shared and interactive learning made possible by the Internet. They argue that the single most important characteristic of the Internet is its capacity for world-wide community and the limitless exchange of ideas. The Internet brings about a way of learning that is not new or revolutionary but is now the norm for today's graduating high school and college classes. It is for this reason that Davidson and Goldberg call on us to examine potential new models of digital learning and rethink our virtually enabled and enhanced learning institutions.This report is available in a free digital edition on the MIT Press website at http://mitpress.mit.edu/9780262513593.John D. and Catherine T. MacArthur Foundation Reports on Digital Media and Learning
Price: $14.00
Harvard Business Review on Inspiring & Executing Innovation
Fresh ideas can mean big profits--but only if they make it to market and sell.
If you need the best practices and ideas for creating and delivering new products and services--but don't have time to find them--this book is for you. Here are 10 inspiring and useful perspectives, all in one place.
This collection of HBR articles will help you:
- Decide which ideas are worth pursuing
- Adapt offerings from the developing world to wealthy markets
- Plan all-new ventures by testing and tweaking
- Tailor your efforts to meet customers' most pressing needs
- Make inexpensive products on a vast scale
- Measure and improve innovation performance
- Avoid classic pitfalls such as stifling innovation with rigid processes
If you need the best practices and ideas for creating and delivering new products and services--but don't have time to find them--this book is for you. Here are 10 inspiring and useful perspectives, all in one place.
This collection of HBR articles will help you:
- Decide which ideas are worth pursuing
- Adapt offerings from the developing world to wealthy markets
- Plan all-new ventures by testing and tweaking
- Tailor your efforts to meet customers' most pressing needs
- Make inexpensive products on a vast scale
- Measure and improve innovation performance
- Avoid classic pitfalls such as stifling innovation with rigid processes
Price: $22.00
Tuesday, 5 July 2011
The Comeback: How Innovation Will Restore the American Dream
America seems to be on a downward slide. Our government spends too much; our economy creates too little; and we aren't preparing our children to compete in a global marketplace. Yet our politicians - Republican and Democrat alike - just don't get it. While once-great cities fall into decay, Washington thrives, living off the hard work and tax dollars of the private sector. It's time for an American comeback -- and it starts with innovation.Throughout its history, America's great innovators have been the drivers of our unsurpassed economic success. American innovation transformed a country of ragtag farmers into the epicenter of the world's technological progress. Innovation creates jobs, markets, and new industries where none existed before. Most importantly, innovation moves us forward as a nation, pushing us to succeed and strive for a better tomorrow. In short, innovation is the American Dream.
In The Comeback, Gary Shapiro shows us how to return innovation to its rightful place at the center of America's economic policy. The Comeback is a new blueprint for America's success.
Price: $24.95
Saturday, 2 July 2011
Can Jeff Weiner Realize LinkedIn’s Full Potential?
Jeff Weiner at the New York Stock Exchange the day of LinkedIn's IPO Mark Lennihan/AP Photo
By Douglas MacMillanThe morning of May 19, Jeff Weiner became the face of technology’s new era of bubbly optimism. After ringing the bell on the floor of the New York Stock Exchange, the chief executive officer of LinkedIn watched as shares of his company soared above $120, nearly triple the price set by bankers the night before. That valued LinkedIn at more than $9 billion, and Weiner quickly became a target for critics doubting the company was worth its sky-high valuation. This “is like a movie I’ve seen before,” said Citigroup Chairman Richard D. Parsons, who once led AOL Time Warner, in a CNBC interview.
It’s tough to find a tech CEO with more to prove than Weiner. He took the top job at LinkedIn in 2009, after seven years at Yahoo! struggling—and ultimately failing—to keep the Web portal competitive with Google in search. In the past two years he’s quadrupled Linked-In’s headcount to 1,500 employees, turned the world’s largest database of online resumes into a profitable service for job recruiters, and amassed a personal wealth of more than $160 million.
Now Weiner, 41, has the weight of Wall Street’s expectations on his shoulders. The stock price has cooled since the initial public offering, but it still values LinkedIn at $8.4 billion, a whopping 547 times the company’s 2010 earnings. If it keeps attracting new members and extracting more value from their professional profiles, Linked-In under Weiner could become the first publicly traded success story of the social networking era. If it doesn’t, the company risks becoming the latest poster child for the irrational exuberance of the tech sector.
When Weiner joined in 2009, LinkedIn was a fast-growing startup where scattershot engineering projects were pulling the site in different directions. Reid Hoffman, the LinkedIn co-founder who ran the company before hiring Weiner to replace him, says he’d built “a collection of very strong people, but not necessarily an effective team.” Weiner scuttled some of the less promising projects, including a business-to-business expert matchmaking service. He made LinkedIn’s “hiring solutions” business—which provides services for HR departments and executive search firms—the company’s top priority. “Jeff brought a philosophy of do fewer things and do them better,” says Mike Gamson, senior vice-president for global sales, who has been at LinkedIn since 2007.
Recruiting firms pay LinkedIn an average of $8,000 a year for each employee who uses its advanced tools to search through profiles on the site. Special features such as a “referral engine” let HR managers show their own employees the names of people in their networks and ask if any of them would be a good fit for a specific opening. Overall, hiring solutions are a hit. “The information is up to date, it’s accurate, and you’re able to decipher from that information whether or not that’s a prospect you want to go after,” says Daniel C. Grassi, a partner at executive search firm Boyden. Last year hiring solutions eclipsed advertising and subscriptions to become LinkedIn’s largest and fastest-growing division, generating $101.9 million in sales and accounting for 42 percent of revenue, up from 22 percent in 2008.
Earlier in his career, Weiner saw firsthand the folly of trying to do too much. After graduating from the University of Pennsylvania’s Wharton School, he found a mentor in Terry Semel, then a high-level executive at Warner Bros. When Semel became CEO of Yahoo in 2001, Weiner followed. There he helped oversee the company’s acquisition of Inktomi and Overture Services, search technologies that put Yahoo in competition with Google and put the young executive at the center of a polarizing internal debate: Was Yahoo a technology company or a content company? Weiner says he grew frustrated when resources that could have gone into better Web technology—he pushed to acquire YouTube but was overruled—were spread too thinly across too many businesses, from e-mail to news. Yahoo lacked “a clearly defined mission and core set of priorities,” says Weiner. Tired of the uphill battle, he left the company, along with many others. A Yahoo spokeswoman declined to comment.
The Real Veterans of Technology
By Antoine Gara 
Siemens: Topical Press Agency/Getty Images; Western Union: Hulton Archive/Getty Images; Diebold: Diebold Inc; Ericsson: SSPL/Getty Images; Nintendo: Tim Whitby/Alamy; Kodak: George Eastman House
When IBM turned 100 on June 16, it joined a surprising number of tech companies that have been evolving in order to survive since long before there was a Silicon Valley. Here’s a sampling of tech centenerians, and some of the breakthroughs that helped fuel their longevity.
Siemens: Topical Press Agency/Getty Images; Western Union: Hulton Archive/Getty Images; Diebold: Diebold Inc; Ericsson: SSPL/Getty Images; Nintendo: Tim Whitby/Alamy; Kodak: George Eastman HouseBofA Said to Agree on Space at NYC’s World Financial Center
June 29, 2011, 11:53 AM EDT By David M. Levitt
(Updates with details on Nomura’s Worldwide Plaza lease starting in seventh paragraph, adds shares in final paragraph.)
June 29 (Bloomberg) -- Bank of America Corp. tentatively agreed to keep about 750,000 square feet of space at lower Manhattan’s World Financial Center, less than a sixth of its current lease, three people familiar with the discussions said.The Charlotte, North Carolina-based bank plans to stay in offices at 2 and 4 World Financial Center, according to the people, who asked not to be identified because the talks are private. A lease signing may be months away, two of the people said. The company’s leases for 4.6 million square feet (427,000 square meters), inherited with the 2009 acquisition of Merrill Lynch & Co., run out in 2013.The expirations represent more than half of the 8 million- square-foot World Financial Center, owned by Brookfield Office Properties Inc. The landlord also is facing the departure of Merrill subtenant Nomura Holdings Inc., which agreed to move its New York headquarters to Worldwide Plaza in Midtown.Brookfield has “a lot of wood to chop,” John Stewart, an analyst at Green Street Advisors Inc. in Newport Beach, California, said in a phone interview. “Three million square feet to lease is nothing to sneeze at. But Brookfield has shown they have the leasing platform that’s up to that challenge.”Bank of America’s downtown leases generate almost 10 percent of the New York-based landlord’s net operating income, Stewart wrote in a May 3 report.Nomura DepartureThe bank occupies about 2.7 million of the 4.6 million square feet it leases at the financial center, the rest of which is rented to subtenants including Tokyo-based Nomura, according to Brookfield’s regulatory filings.Nomura signed a 20-year lease for more than 900,000 square feet at Worldwide Plaza, according to a statement today from George Comfort & Sons, the building’s landlord. The securities firm will take 20 full floors in the 1.8 million-square-foot skyscraper at Eighth Avenue and 50th Street. Comfort bought the tower in 2009 for $590 million, less than half of what previous owner Harry Macklowe paid in 2007 at the height of the market.The deal demonstrates Nomura’s “commitment to build a top- tier investment bank in the U.S.,” Atsushi Yoshikawa, chief executive officer of Nomura Holding America, said in the statement. The company will move in mid-2013.Melissa Coley, a Brookfield spokeswoman, declined to comment yesterday, as did Peter Truell, a spokesman for Nomura in New York.Midtown and DowntownBank of America is “committed to both midtown and downtown Manhattan,” said T.J. Crawford, a spokesman. “At this point we aren’t prepared to discuss our future plans but we are always looking for ways to optimize our real estate portfolio.”The lender’s New York headquarters is 1 Bryant Park, a 2.1 million-square-foot tower that it co-owns with the Durst Organization in Midtown. Bank of America has been moving some Merrill employees to that building since the acquisition.Bank of America holds a 49 percent stake in 4 World Financial Center, Merrill’s former headquarters building.Brookfield has “made significant headway” in preparing for the lease turnovers, Green Street’s Stewart said.“There’s a lot of momentum right now in the lower Manhattan office market,” he said. “The hurdle doesn’t look as insurmountable as it looked two years ago.”Brookfield this year has signed more than 600,000 square feet of new leases at the World Financial Center with companies including OppenheimerFunds Inc. and Commerzbank AG, both of whom were subtenants of Merrill, the company said earlier this month.Conde Nast LeaseConde Nast Publications Inc.’s $2 billion lease of about 1 million square feet at 1 World Trade Center, a skyscraper rising across West Street from the financial center, has the potential to create “a more vibrant environment” downtown that will be attractive to other tenants, Stewart said.Citigroup Inc. and UBS AG have expressed interest in occupying offices at the World Trade Center site, according to people familiar with those companies’ space plans.“Lower Manhattan represents probably the best opportunities for quality space between the World Financial Center and the World Trade Center in that large-block arena,” Dennis Friedrich, Brookfield’s president and global chief operating officer, said June 6 at a conference sponsored by the National Association of Real Estate Investment Trusts. “That has been driving activity at the World Financial Center and some of our other downtown assets.”The company is in “serious discussions” on about 2 million square feet of potential leases at the financial center, Friedrich said. That number didn’t include Nomura, which the company had been working to retain.Brookfield announced plans earlier this month to spend about $250 million remaking the financial center’s retail portion, emphasizing waterfront dining and a “dramatic” glass entryway off West Street for commuters coming up from the transit hub now under construction at the trade center site.Brookfield fell 1 cent to $19.04 at 11:28 a.m. in New York Stock Exchange Composite trading. The shares have gained 9.2 percent this year, compared with a 7.5 percent advance in the Dow Jones U.S. Real Estate Index.--With assistance from Hugh Son and Ashwin Seshagiri in New York. Editors: Kara Wetzel, Christine Maurus
To contact the reporter on this story: David M. Levitt in New York at dlevitt@bloomberg.net
To contact the editor responsible for this story: Kara Wetzel in New York at kwetzel@bloomberg.net
The Rise and Inglorious Fall of Myspace
Alamy, Bloomberg, Getty Images
By Felix GilletteIn 2006, Jeremy Jackson—the buff, bronzed former Baywatch child star—couldn't imagine a world without Myspace. He was a single, underemployed actor in Los Angeles, an exhibitionist in need of an audience, and Myspace filled almost every need. He spent hours every day on the edgy social network, which was known as a pop music hub where artists such as Lily Allen and My Chemical Romance helped launch their careers. Jackson had more than a thousand "friends." He sold trucker hats and flirted with women. His profile page was decorated with Trojan Magnum XL condoms. He was the poster child for the Myspace lifestyle.
But things changed.
"I tried to cling to Myspace for a long time, hoping that someone there would come up with some idea to keep it alive," says Jackson, 30. "But my assistants and business partners finally beat it into my head that it was a dead horse. It's done. It's a joke. If you do stuff on Myspace, you just look sad."
Jackson still hustles for attention on the lower rungs of fame—he currently stars in season five of Celebrity Rehab, in which he battles his addiction to growth hormones for cable television viewers. But he now does his digital communing on Facebook and Twitter. He hasn't checked his Myspace page since 2009.
At its December 2008 peak, Myspace attracted 75.9 million monthly unique visitors in the U.S., according to ComScore (SCOR). By May of this year that number had dropped to 34.8 million. Over the past two years, Myspace has lost, on average, more than a million U.S. users a month. Because Myspace makes nearly all its money from advertising, the exodus has a direct correlation to its revenue. In 2009 the site brought in $470 million in advertising dollars, according to EMarketer. In 2011, it's projected to generate $184 million.
In February, News Corp. (NWS), which bought Myspace and its parent company, Intermix, in 2005 for $580 million, started officially looking for a potential buyer at an asking price of $100 million, according to a person familiar with the sale process. Yet even in the midst of a frenzy for social media that has seen LinkedIn (LNKD) valued at $6.4 billion and Groupon rebuff a $6 billion takeover offer from Google (GOOG), barely anyone wants to buy Myspace. On June 9 the News Corp.-owned tech blog AllThingsD.com reported that a group of investors led by Activision Blizzard (ATVI) chief Robert Kotick was closing in on a deal. "Getting people to come back to something that in their minds has become less useful is an incredible challenge on the Web—just ask AOL," says Richard Greenfield, an analyst with BTIG. "Myspace has become an eyesore for News Corp."
It's an eyesore for users, too. Many Myspace pages appear to be host bodies for the worst kinds of advertising parasites. On the upper right-hand corner of the page for Zaiko Langa Langa, an African band Googled at random, a photo of a blonde in a tight T-shirt appears, asking, "Want a Girlfriend? View Hundreds of Pics HERE!" (It's an ad for a dating site called True.) Farther down, someone has posted footage of nearly naked jiggling buttocks. There hasn't been an update from the musicians in weeks.
Mismanagement, a flawed merger, and countless strategic blunders have accelerated Myspace's fall from being one of the most popular websites on earth—one that promised to redefine music, politics, dating, and pop culture—to an afterthought. But Myspace's fate may not be an anomaly. It turns out that fast-moving technology, fickle user behavior, and swirling public perception are an extremely volatile mix. Add in the sense of arrogance that comes when hundreds of millions of people around the world are living on your platform, and social networks appear to be a very peculiar business—one in which companies might serially rise, fall, and disappear.
FarmVille Meets the Hollywood Tie-In
What's a Hollywood producer to do after selling the rights to the DVDs, TV show, action figures, and apparel tied to a summer blockbuster? It's 2011, and that means: branded virtual goods.
Social games played on Facebook are the new frontier for film and television tie-ins. This summer, two movies—Disney's (DIS) Cars 2 and Fox's (NWS) Mr. Popper's Penguins—and a popular Showtime (CBS) series will attempt to build buzz and some extra revenue by featuring their characters in Facebook games.
For help, studios are turning to developers with experience in social games, an overnight industry that's amassed an audience of more than 300 million people who will spend $4.9 billion this year on virtual goods—tractors on Zynga's FarmVille, and so forth—estimates research firm ThinkEquity. "We've been asked by every major media property in the world to do something in the last 12 months," says Peter Relan, executive chairman of CrowdStar, a game maker in Burlingame, Calif.
The most startling example of this incipient industry: Weeds Social Club, a game launching this month in conjunction with the June 27 season premiere of Showtime's hit show Weeds. Users buy and plant different strains of marijuana—from downmarket "Schwag Weed" to the pricier and more (virtually) potent "Jamaican Ganja"—and then harvest the crop before it withers. Players then set prices above or below street value, determine how much customer risk they're willing to take, and wait for a hooded-sweatshirt-wearing dealer—really—to swing by and pick up the goods. Along the way, users barter with friends, outfit their pad with flat-screen TVs, bongs, and other digital accessories, and spend real money on "favors"—game points that let them buy nicer goods. Players get pot-growing tips from Andy Botwin, a character voiced by actor Justin Kirk from the show, and perform tasks that correlate with the storyline from the latest TV episode. Eventually the game may be used to test out new characters or plot twists, says Curt Marvis, president of digital media at Lionsgate (LGF), the show's producer and distributor. "In the social realm, it's a living, breathing experience," he says, "one where you get a fan base of engaged users." The game has been approved by Facebook, and its creators say it does not break any laws.
Celebrities, brand names, and mature themes may lure older audiences to social games, which have tended to skew young. "There has been this philosophy of don't offend anyone, be very broad—this Hallmark card philosophy," says Marc Ecko, the urban-fashion icon. Ecko Code, his company's new social-game unit, developed Weeds Social Club and also plans to launch games based around Showtime shows Dexter and The Borgias, as well as one based on the life of Bob Marley. Ecko expects to make at least $1 million per month selling virtual goods within each app, and will share those revenues with the media companies who own rights to these brands. Says Ecko: "We believe there is a user out there that wants something with more teeth and more counter culture."
The bottom line: Hollywood studios' latest promotional vehicle: social games. Mature themes may broaden the apps' appeal.
MacMillan is a reporter for Bloomberg News and Bloomberg Businessweek in San Francisco.Raves for Robert Brunner’s All-New Nook
By Brad Stone 
Shrinking e-readers "has become an ergonomic issue," says Brunner Matthew Scott for Bloomberg Businessweek
Barnes & Noble may be lagging behind Amazon.com in the market for electronic readers, but lately there are reasons for the bookseller to brag. The company believes it has a 27 percent share of the U.S. market for e-books—a market that the Pew Research Center reports has exploded, with 12 percent of all U.S. households now owning e-readers, up from 6 percent in November. And while the original Nook and its tablet-like successor the Nook Color received mixed reviews, the company’s newest black-and-white e-reader, the All-New Nook, appears to be a critical hit. On June 17, Consumer Reports ranked the Nook ahead of the Kindle for the first time, praising its long battery life, $139 price tag, and minimalist design that focuses a user’s attention on reading.
At the center of Barnes & Noble’s efforts to keep up with the likes of Amazon and Apple is Robert Brunner, founder of the San Francisco-based industrial design firm Ammunition and a father, of sorts, to the portable computer. As director of industrial design at Apple in the late ’80s and early ’90s (before Steve Jobs’s return), Brunner helped develop the PowerBook, one of the first mainstream laptops, and the Newton, Apple’s influential but unsuccessful pen-based handheld device. As a partner at Pentagram Design from 1996 to 2007, he helped Amazon conceptualize and design the first Kindle—before the e-commerce giant brought all its hardware efforts in house. Now Brunner is playing the same role for the competition, helping an analog bookseller remake its business so it can compete with the big boys of digital. “We think Robert is truly one of the unique designers of consumer-electronic gadgets,” says William J. Lynch Jr., Barnes & Noble’s chief executive officer. “He pushes the team to ask, what do we want this product to do at its core?”
Brunner, 53, seems a trifle out of place in Silicon Valley, the land of khakis and cell-phone holsters. He sports designer sneakers and an Alessi watch from Italian architect Andrea Branzi and hobnobs with celebrities like Lady Gaga. He’s collaborating with the singer to recharge Polaroid’s moribund product line with tricked-out gadgets, including sunglasses that hold an embedded camera.
Nudging Barnes & Noble into the e-reading age, however, remains Brunner’s No. 1 priority. The bookseller approached him in 2008, when it saw, almost too late, that the book business was going the way of music and movies. The company knew “nothing” about digital media, Brunner says, “and wanted to know about how you would create a product and bring it to market.” Brunner and his new client settled on the goal of simplicity, removing as many buttons as possible and trying to put the actual reading experience front and center. “Books don’t have buttons,” he says, “so we felt that was not only an authentic place to be but also great competitively against the Kindle”—which has a keyboard, at the insistence of Amazon CEO Jeff Bezos.
Users still needed to control their device, though. Brunner believed that overlaying a touchscreen on top of a black-and-white eInk display would have made the device too difficult to read. His solution, used in the first Nook introduced during the 2009 holidays, was to include a large eInk screen for reading and a smaller color touchscreen to allow users to select books and turn pages. He now acknowledges that there were drawbacks to that approach. “Two displays doing different, related things created challenges for the user,” he says.
The All-New Nook is free of such design compromises: There’s only a 6-inch screen, surrounded by a black bezel, with just one obvious button. There’s no traditional touchscreen; instead, optical infrared sensors from a Swedish company, Neonode, surround the display and locate the position of a user’s finger. The device weighs all of 7.48 ounces. The soft contours of its back, covered in a synthetic rubber coating, allow it to fit snugly in a reader’s hands. “We probably could have reduced the thickness of the bezel, but then you don’t have anything to hold onto,” Brunner says. Shrinking down e-readers “has now become an ergonomic issue, not a hardware issue.”
“I don’t know what more possibly could be done to black-and-white e-readers,” says Allen Weiner, an analyst at Gartner, who calls the All-New Nook “truly as good as it gets.” Nevertheless, analysts expect Amazon to release a new Kindle and an IPad-like tablet this fall. One new frontier will be cost: Amazon, Barnes & Noble, and the rest are all trying to drive the price tag for e-readers under $99. Brunner also wants to add more social features, allowing people to meet others who are reading the same book—and even the same passages—at the same time. He also can’t quite accept that every tablet and e-reader has to be so boringly … rectangular. “I have a hard time believing this is the only solution,” he says, waving to all the similarly shaped devices arranged in front of him, including the original Newton and the two black-and-white Nooks. “Human beings don’t have any 90-degree corners on them.”
The bottom line: Barnes & Noble’s new Nook e-reader is getting rave reviews. Its designer, Robert Brunner, wants to make future versions more social.
Stone is a senior writer for Bloomberg Businessweek.Europe’s Highest Apartments Pierce Clouds in London’s Shard
June 21, 2011, 4:55 AM EDT By Chris Spillane
(Updates with Canary Wharf tower in eighth paragraph.)
June 21 (Bloomberg) -- No one moves to London for the weather, which is just as well if you buy an apartment at the top of London’s Shard skyscraper, the highest in Western Europe. Residents may sit in or above the clouds on about one in four days a year, obscuring the spectacular views.The highest home will be at 735 feet, on the 65th floor of the 1,016-foot (310-meter) tower near London Bridge. The bottom of the city’s cloud layer, known as the cloud ceiling, is at or below 700 feet for at least an hour for an average of 83 days a year, according to AccuWeather Inc. The Pennsylvania-based forecaster compiled the data in the eight years through 2010.“You’ll definitely have the experience at some point of looking out and only seeing the cloud bank below you, almost like you would in an aircraft,” said Stephan Reinke, a London- based architect who was one of the designers of the 1-kilometer (0.6-mile) high Nakheel Tower in Dubai.The Shard, funded by Sellar Property Group Ltd. and the Qatar Central Bank, became the U.K.’s tallest building when its 69th floor was constructed in December, overtaking the 771-foot tower at One Canada Square in the Canary Wharf district. The pyramid-shaped Shard, designed by Pritzker Prize-winning architect Renzo Piano, will have apartments, hotels, offices and restaurants opposite the City of London by the River Thames.‘Exceptional Views’Views from the apartments will be “exceptionally good” for 97 percent of the year, according to WSP Group Plc, which provides engineering services for the Shard. On a clear day, residents will be able to see for about 44 miles through their floor-to-ceiling windows, Sellar Property said.“Trying to estimate how many days the weather will play a part in what you see misses the point,” Irvine Sellar, the company’s chairman, said by e-mail. “The weather is part of the joys to be had from the views.”The Shard will have more than twice as much glass as the London skyscraper known as the Gherkin and will be completed in time for the 2012 Olympic Games, which will be held in the city. The 72-story tower will have about 12 apartments, said Baron Phillips, a spokesman for Sellar. He declined to give any prices because the properties aren’t being offered for sale yet.London’s highest apartments are currently in the Strata, a lipstick-shaped building in the Elephant and Castle district, and Pan Peninsula East Tower in Canary Wharf. Both are almost 490 feet tall.Selling prices for homes in the second tower start at 596,000 pounds and 95 percent of them have been bought, according to the skyscraper’s website.Low-Hanging Clouds“If you have a ceiling at 700 feet, anything above that would be in the clouds,” Kristina Pydynowski, a senior meteorologist at AccuWeather, said by phone. “If you have low- hanging clouds, they would typically be around for several hours, though that doesn’t necessarily mean the whole day would be covered.”The weather service doesn’t gather data on average cloud thickness.“The experience of being in a static object above the clouds is quite wonderful, though a lot of people would be quite nervous about something like that,” Reinke said by telephone.The Chicagoan, who has lived in London for 21 years, was one of the principal designers of the Nakheel Tower before the development was put on hold following Dubai’s property crash.Moscow TowersEurope’s tallest building is the 300.3-meter City of Capitals in Moscow, according to NBBJ, the firm of architects that designed the development. That will be beaten by the Russian capital’s Mercury City Tower, which will be 380 meters tall when it’s completed this year, according to skyscraperpage.com.The Shard’s 62,000 square feet of apartments, on floors 53 to 65, will sit above three stories of restaurants, 27 floors of offices and 19 floors of hotel rooms leased by Shangri-La Asia Ltd., Asia’s biggest luxury hotelier by market value.AccuWeather, a closely held weather forecaster for more than 2 million locations worldwide, used data from Heathrow Airport to compile its data. The company said that the cloud level is likely to be the same across London.--Editors: Ross Larsen, Andrew Blackman.
To contact the reporter on this story: Chris Spillane in London at cspillane3@bloomberg.net.
To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net.
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This handbook looks to provide academics and students with a comprehensive and holistic understanding of the phenomenon of innovation. Innovation spans a number of fields within the social sciences and humanities: Management, Economics, Geography, Sociology, Politics, Psychology, and History. Consequently, the rapidly increasing body of literature on innovation is characterized by a multitude of perspectives based on, or cutting across, existing disciplines and specializations. Scholars of innovation can come from such diverse starting points that much of this literature can be missed, and so constructive dialogues missed.
The editors of The Oxford Handbook of Innovation have carefully selected and designed twenty-one contributions from leading academic experts within their particular field, each focusing on a specific aspect of innovation. These have been organized into four main sections, the first of which looks at the creation of innovations, with particular focus on firms and networks. Section Two provides an account of the wider systematic setting influencing innovation and the role of institutions and organizations in this context. Section Three explores some of the diversity in the working of innovation over time and across different sectors of the economy, and Section Four focuses on the consequences of innovation with respect to economic growth, international competitiveness, and employment.
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GoPro’s Incredible Small, Durable Camcorder
By Peter Burrows 
Ever since his days at the University of California at San Diego in the late 1990s, Nicholas Woodman wanted a way for him and his surfing buddies to capture their exploits without having to take turns sitting on shore with a camera and telephoto lens. “No surfer wants to be the photographer, especially when the waves are good,” he says.
Woodman, 36, eventually decided to solve the problem and founded GoPro in 2002. GoPro makes a small, durable, lightweight (just 3.3 ounces) camcorder and special mounts to attach the device to surfboards, helmets, ski poles, car hoods, or pretty much anything else. It’s become a phenomenon in the world of extreme sports, with back-country snowboarders, kayakers, scuba divers, and others using it to document their feats. Woodman’s company has sold hundreds of thousands of them through sports shops and is only now reaching beyond its X Game base with national TV ads and a distribution deal with Best Buy. “It’s a very cool story,” says Christopher Chute, an analyst with IDC. “GoPro may well be the world’s fastest-growing camera company.”
The stepson of Irwin Federman, a chip industry pioneer and successful venture capitalist, Woodman started an Internet marketing firm after college, but it didn’t survive the dot-com bust. He decompressed with a five-month surfing trip to Indonesia and Australia, where he began testing prototypes of a wrist-mounted camera. Once he got the design right, he borrowed and raised $30,000—in part by selling Indonesian bead-and-shell necklaces from the back of hisVolkswagen bus—and hired some buddies to cold-call surf shops and ask them to stock GoPro’s Hero line of cameras.
Corporate giants such as Samsung have worked on wearable camcorders for years, but GoPro’s devices, which cost $180 to $300, stand out for image and sound quality, ease of use, and ruggedness. They’re waterproof to 180 feet and drop-proof from 3,000 feet. (One was dropped from that height by a skydiver, who still uses it.) A skier can attach one to his helmet to record what he sees and another to the tip of his ski to film himself. The cameras are also becoming a staple on TV, where they have been used to help film dozens of reality shows, including Deadliest Catch and Whale Wars. George Lucas is using them to shoot part of his next film, Red Tails.
Woodman, who says GoPro is profitable enough to go public, wants to expand beyond hardware into media. One idea is for a cable show featuring extreme sports videos shot by GoPro users. The push into content is one reason Steamboat Ventures, the venture capital arm of Walt Disney, recently invested in GoPro. Says Beau Laskey, managing director of the fund: “There’s the potential for this to be much more than a camera company.”
Woodman’s Internet marketing company went bust in 2001
Began testing camcorder designs on a five-month surf trip
Reality TV shows and other media
Web Games Threaten the Console
Video game (left), Christian Bale in The Dark Night From Left: Rock Steady Ltd.; Warner Bros./Courtesy Everett Collection
By Brad Stone and Ashlee VanceThe annual Electronic Entertainment Expo is supposed to showcase the video game industry at its most dazzling. This year's E3, held in June in Los Angeles, felt more like a throwback. Taking center stage was the Wii U, the upcoming successor to Nintendo's game console, and the PS Vita, a new handheld gaming device from Sony (SNE). Major game developers showed all the daring and originality of Hollywood, touting sequels to sequels such as Gears of War 3, an eighth Call of Duty, a new Tomb Raider and, yeah, even a game called Donkey Kong Country Returns.
Amid the new hardware and endless franchise extensions at E3 was also something else—a glimpse into a future in which the 40-year-old console business slowly dies, and even hardcore gamers spend most of their time playing games over the Web. Hot gaming startups such as Zynga, maker of social games FarmVille and CityVille, and mobile phone game makers such as Rovio (Angry Birds) were mostly absent from the show. But there were other publishers and distributors of online games, which now feature all the action and graphical richness of traditional shoot-em-ups and strategy games. Their pitch: games that constantly update online, stream into the home, and free users from having to head to the nearest GameStop (GME) to get their fix.
Riot Games, based in L.A., is among the companies hoping to kill the console, or at least compete with it. Its fantasy game League of Legends has amassed millions of users and is neck-and-neck in minutes played with Blizzard Entertainment's classic World of Warcraft, according to tracking site Xfire. Gamers adopt a character and battle live in five-on-five matches with swords, arrows, and magic spells. The game is free to play; Riot makes money by selling users virtual astronaut outfits and other gear. Tencent, the Chinese video game giant, paid $400 million to acquire a majority stake in Riot in February. Trion Worlds, based in Redwood City, Calif., has a similar-size hit with its online role-playing game, Rift, which officially launched in March. The game costs $15 a month and resembles World of Warcraft with richer graphics. Lars Buttler, Trion's chief executive officer, is betting other genres will shift to the Web. Later this year, Trion will release End of Nations, a strategy game where players can join battles with as many as 50 others for control of a futuristic world.
One of the biggest bets on Web-based games, and perhaps the loudest criticism of the console, comes from Steve Perlman, the founder of WebTV and a lead engineer behind Apple's QuickTime (AAPL) video technology in the 1990s. A decade ago, Perlman started developing a new type of compression technology that would make it possible to pump rich graphical games from data centers straight to people's living rooms. The work culminated with OnLive, an online gaming service he launched last year. Gamers pay $99 for the hardware, which includes a wireless controller and black TV plug-in about the size of a deck of cards. (OnLive is working on technology that dispenses with the hardware altogether.) Users can opt to rent standard console games such as Homefront or Tomb Raider for a few days, buy them outright, or pay $9.99 per month for unlimited play. The company continuously upgrades its servers, and Perlman argues this will allow OnLive to keep up with the coming wave of processor-hogging, photo-realistic games such as Warner Bros. Interactive Entertainment's (TWX) Batman: Arkham City. (Warner is an OnLive investor.)
Like the video service Netflix (NFLX), OnLive tends to offer older titles. It has yet to convince major game publishers to release their latest and greatest directly over the Web. Perlman argues that will change as the economics of the PlayStation and Xbox become unsupportable. "The bill of materials for the next-generation consoles will be $1,200 to $1,400," he says, predicting Sony and Microsoft (MSFT) will have to pack ever more firepower into their consoles and then offer subsidies to make them affordable.
Michael Pachter, an analyst from Wedbush Securities, agrees that a shift from hardware consoles to the Web is coming but says it will be gradual. "Just like one day no one will have a cable box and we'll get all our video from the Internet, people will get their video games from the cloud," he says, predicting that sales of console games, now flat, will begin to decline in two or three years. Pachter also believes the console makers are in denial about this shift, evidenced by the hardware introductions at E3. "Housewives are playing Angry Birds or FarmVille, not Wii Fit or Guitar Hero," he says.
Sony and Microsoft cater to hardcore gamers and have cultivated a more mainstream audience by turning their consoles into home entertainment hubs. Jack Tretton, CEO of Sony Computer Entertainment America, believes Web-only game systems will struggle to match that breadth. "I think the future is flexibility," he says.
Consoles may evolve, but one casualty seems certain: the shrink-wrapped game. "Video games are the last bastion of the shiny compact disc," says Brandon Beck, Riot's CEO. "It's the very last thing an American 18-year-old is going to the store to buy."
The bottom line: New video games based on cloud computing are as visually rich as console games. The future of consoles looks bleak.
With Cliff Edwards. Stone is a senior writer for Bloomberg Businessweek. Vance is a technology writer for Bloomberg Businessweek.HP's Plan to Make TouchPad a Hit
The TouchPad starts at $500 for the 16 gigabyte model Noah Berger/Bloomberg
By Cliff Edwards and Aaron RicadelaDuring an interview at Hewlett-Packard's (HP) Palo Alto headquarters, Todd Bradley, the head of the $41 billion PC group, is, as always, full of praise toward his microprocessor suppliers. Intel (INTC) and Advanced Micro Devices (AMD) are "important partners," he says. Then he holds up a TouchPad, his company's first tablet computer, which is powered by a Qualcomm (QCOM) chip and HP's in-house operating system, webOS. It goes on sale July 1, starting at $500. "The AMD-Intel thing," he says, "I think that's kind of over."
Stunning as it is to hear a PC executive essentially declare the end of the Wintel era, HP had no choice but to distance itself from the Microsoft-Intel ecosystem. For years, HP used its supply chain prowess to lead a commodity PC market, and eke out 8 percent operating margins. Now, in the age of mobile, HP's margins are down to 5 percent or 6 percent. The TouchPad is part of a big gamble that began last year with HP's $1.3 billion purchase of Palm and webOS: to build an ecosystem of its own, despite a landscape littered with the carcasses of others that tried.
For this bet to pay off, HP needs a tech trifecta. First, webOS devices must offer Apple (AAPL)-like simplicity, built on top of loads of applications and content. It won't be easy, but HP could quickly outdistance most IPad rivals, including tablets running Google's (GOOG) Android operating system. Like Apple, HP controls both the hardware and the software, which gives the company a huge design advantage, says Tim Bajarin, president of tech consultancy Creative Strategies. "They at least are trying to control their destiny, while all the others are putting it in the hands of Google or Microsoft (MSFT)," Bajarin says. For instance, a webOS feature called Synergy lets developers design applications that talk to each other. Facebook friends' birthdays automatically show up in your contacts. Work and personal calendars, even those of a spouse, appear together. Users can make a call using their wireless carrier or Skype, without having to open separate applications. "The concept from the very beginning of this is, 'Your life is moving to the cloud,'" says Jon Rubinstein, who helped create the IMac and IPod at Apple before becoming chief executive officer of Palm.
Second, HP must break Apple's lock on developers. The TouchPad will launch with 300 tablet-specific applications. (IPad has 90,000.) A recommendation engine will make it easier to discover new apps. Users who like cooking might see Epicurious pop up on their suggested list. The company is wooing holdouts such as Netflix (NFLX) by offering slots in webOS Pivot, an app showcase on all webOS devices. It's a cross between an app store and digital magazine. "We'll come out of the gates behind, but I'm really confident we'll catch up," says Bradley.
Even if HP nails webOS and wins over developers, there's the obvious third task: getting people to buy the devices. With its 20,000-plus global sales force, the company has a good shot at landing corporate customers, Bajarin says. To sell to consumers, he says HP will have to train Best Buy and 600,000 other dealers to show customers the glories of webOS. HP has paid retailers to set up its own section within stores and is dispatching several hundred employees to demonstrate the product at retail this July, says Stephen DeWitt, Personal Systems Group senior vice-president. HP is spending hundreds of millions on an ad blitz starring Jay-Z and other celebrities.
Bradley and Rubinstein say that if the TouchPad's reception is lukewarm initially, they'll be patient. "We have a really good opportunity to become No. 2 in tablets fairly quickly," Rubinstein says. "Possibly No. 1."
The bottom line: HP has Apple-like control over webOS hardware and software. Now comes the hard part: winning over consumers and developers.
Edwards and Ricadela are reporters for Bloomberg News in San Francisco.Web Games May Hasten End of Console
July 1 (Bloomberg) -- Fourteen months after the Deepwater Horizon drilling rig exploded 50 miles (80 kilometers) southeast of Venice, Louisiana, killing 11 men and setting off the largest offshore oil spill in U.S. history, Transocean Ltd., the company that owned and ran the ill-fated 32,600-ton vessel, issued its official account of what happened and why. In a report released on June 22, Transocean said the fatal disaster and subsequent oil spill stemmed in part from faulty decision-making by BP Plc. Paul Barrett discusses Bloomberg Businessweek's latest cover story on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
From Building Minebots to Digging for Dirty Money
David Howells
By John TozziIn 2003, Jamie King was trying to develop machines that could replace humans in dangerous nickel and iron-ore mines. Then a robotics PhD student at Memorial University in Newfoundland, Canada, he used artificial intelligence to interpret the vast data streaming from the robots' sensors, which measured the distance of objects in every direction a thousand times a second. Although mining companies passed on the idea, King later discovered an unlikely new use for his minebot software: catching money launderers.
Banks collect huge data sets on the millions of transactions that move money in and out of their accounts. When university colleagues introduced King to a financial-software entrepreneur, he got a peek at such a pile of numbers and realized it looked "very much like a whole bunch of sensor readings." King co-founded Verafin in 2003 to sift bank data for patterns that could indicate fraud, drug trafficking, or terrorist financing.
At the time most banks used rules-based software that flags transactions if they match a pattern defined beforehand as suspicious, such as several transfers of money overseas in a short period. Verafin compares activity to an account holder's profile and past behavior and assigns each transaction a "probability score" that represents the likelihood it's legitimate. King says that evaluating probabilities lets Verafin discern suspicious patterns that slip through conventional systems. Say a drug lord in Chicago needs to get cash to Mexico. He might make wire transfers and deposits to multiple accounts, buy prepaid debit cards, and send payments to a shell company off-shore. By itself, any one of these actions might look perfectly fine. Verafin identifies the extremely low probability of such a pattern occurring innocuously, says King.
Verafin had C$9 million ($9.3 million) in revenue in 2009, the latest figures King will share. More than 700 banks and credit unions use Verafin's software, most with between $100 million and $20 billion in assets. Even relatively smaller banks, like Beach Business Bank in Manhattan Beach, Calif., with assets of $300 million, have to track "money that's moving around quickly and electronically, where you don't have as much information about where it's ending up," says Melissa Rickabaugh, the bank's anti-money-laundering compliance officer. She says Verafin will automatically flag an account when large deposits are followed quickly by wire transfers out, which the bank's previous software didn't do.
A native of Newfoundland, King describes himself as "an inventor who likes tackling hard problems," which is what first drew him to robotics navigation. Sniffing out money laundering has proven equally tough, he says: "It's always a challenge to stay ahead of the criminals."
Left a robotics PhD program in 2003 to start Verafin.
Software combs financial transactions for suspicious patterns.
700 institutions use it to comply with money-laundering laws.
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