History > 2007 > USA > Internet, Media (III)

Web Playgrounds of the Very Young

December 31, 2007
The New York Times
By BROOKS BARNES

LOS ANGELES — Forget Second Life. The real virtual world gold rush centers on the grammar-school set.

Trying to duplicate the success of blockbuster Web sites like Club Penguin and Webkinz, children’s entertainment companies are greatly accelerating efforts to build virtual worlds for children. Media conglomerates in particular think these sites — part online role-playing game and part social scene — can deliver quick growth, help keep movie franchises alive and instill brand loyalty in a generation of new customers.

Second Life and other virtual worlds for grown-ups have enjoyed intense media attention in the last year but fallen far short of breathless expectations. The children’s versions are proving much more popular, to the dismay of some parents and child advocacy groups. Now the likes of the Walt Disney Company, which owns Club Penguin, are working at warp speed to pump out sister sites.

“Get ready for total inundation,” said Debra Aho Williamson, an analyst at the research firm eMarketer, who estimates that 20 million children will be members of a virtual world by 2011, up from 8.2 million today.

Worlds like Webkinz, where children care for stuffed animals that come to life, have become some of the Web’s fastest-growing businesses. More than six million unique visitors logged on to Webkinz in November, up 342 percent from November 2006, according to ComScore Media Metrix, a research firm.

Club Penguin, where members pay $5.95 a month to dress and groom penguin characters and play games with them, attracts seven times more traffic than Second Life. In one sign of the times, Electric Sheep, a software developer that helps companies market their brands in virtual worlds like Second Life and There.com, last week laid off 22 people, about a third of its staff.

By contrast, Disney last month introduced a “Pirates of the Caribbean” world aimed at children 10 and older, and it has worlds on the way for “Cars” and Tinker Bell, among others. Nickelodeon, already home to Neopets, is spending $100 million to develop a string of worlds. Coming soon from Warner Brothers Entertainment, part of Time Warner: a cluster of worlds based on its Looney Tunes, Hanna-Barbera and D. C. comics properties.

Add to the mix similar offerings from toy manufacturers like Lego and Mattel. Upstart technology companies, particularly from overseas, are also elbowing for market share. Mind Candy, a British company that last month introduced a world called Moshi Monsters, and Stardoll, a site from Sweden, sign up thousands of members in the United States each day.

“There is a massive opportunity here,” said Steve Wadsworth, president of the Walt Disney Internet Group, in an interview last week.

Behind the virtual world gravy train are fraying traditional business models. As growth engines like television syndication and movie DVD sales sputter or plateau — and the Internet disrupts entertainment distribution in general — Disney, Warner Brothers and Viacom see online games and social networking as a way to keep profits growing.

But more is at stake than cultivating new revenue streams. For nearly 50 years, since the start of Saturday morning cartoons, the television set has served as the front door to the children’s entertainment business. A child encounters Mickey Mouse on the Disney Channel or Buzz Lightyear on a DVD and before long seeks out related merchandise and yearns to visit Walt Disney World.

Now the proliferation of broadband Internet access is forcing players to rethink the ways they reach young people. “Kids are starting to go to the Internet first,” Mr. Wadsworth said.

Disney’s biggest online world is Club Penguin, which it bought in August from three Canadians in a deal worth $700 million. At the time, more than 700,000 members paid fees of $5.95 a month, delivering annual revenue of almost $50 million.

Still, one world, even a very successful one, does not alter the financial landscape at a $35.5 billion company like Disney. So Disney is pursuing a portfolio approach, investing $5 million to $10 million per world to develop a string of as many as 10 virtual properties, people familiar with Disney’s plans said.

Tinker Bell’s world, called Pixie Hollow, illustrates the company’s game plan. Disney is developing the site internally — creative executives who help design new theme park attractions are working on it — and will introduce it this summer to help build buzz for “Tinker Bell,” a big-budget feature film set for a fall 2008 release.

Visitors to a rudimentary version of Pixie Hollow, reachable through Disney.com, have already created four million fairy avatars, or online alter egos, according to Disney. The site will ultimately allow users to play games (“help create the seasons”) and interact with other “fairies.” When avatars move across the screen, they leave a sparkling trail of pixie dust, a carefully designed part of the experience.

“We wanted to come up with a way to make flying around the site feel really good,” said Paul Yanover, executive vice president and managing director of Disney Online.

Disney’s goal is to develop a network of worlds that appeal to various age groups, much like the company’s model. Preschool children might start with Pixie Hollow or Toon Town, another of Disney’s worlds, grow into Club Penguin and the one for “Cars” and graduate to “Pirates of the Caribbean” and beyond, perhaps to fantasy football at ESPN.com.

“All the stars are aligning for virtual worlds to become a mass-market form of entertainment, especially for kids and families,” Mr. Yanover said.

If virtual worlds for adults are about escaping from run-of-the-mill lives, sites for children tap into the desire to escape from the confines of reality as run by mom and dad. “I get to decide everything on Club Penguin,” said Nathaniel Wartzman, age 9, of Los Angeles, who also has a membership to a world called RuneScape.

But shopping is a powerful draw, too; most sites let children accumulate virtual points or spend their allowance money to buy digital loot. “It’s really fun to buy whatever you want inside the game,” Nathaniel said in a telephone interview. For his penguin, “like for Christmas I bought a fireplace, a flat-screen TV and a Christmas tree,” he said.

Online worlds, which typically have low overhead and fat profit margins once they are up and running, charge a monthly fee of $5 to $15 and require the adoption of an avatar. Some sites are free and rely on advertising to make money; others are advertising and subscription hybrids. Webkinz relies on the sale of stuffed animals, which come with tags that unlock digital content.

The power of the virtual worlds business was shown recently when Vivendi announced a plan to buy Activision, a publisher of video games for consoles like the Sony PlayStation 3. Vivendi owns World of Warcraft, a virtual world for adults with more than nine million members and revenue of more than $1 billion.

Still, the long-term appetite for the youth-oriented sites is unclear. Fads have always whipsawed the children’s toy market, and Web sites are no different, analysts warn. Parents could tire of paying the fees, while intense competition threatens to undercut the novelty. There are now at least 10 virtual worlds that involve caring for virtual pets.

Privacy and safety are a growing concern, particularly as companies aim at younger children. Some virtual worlds are now meant to appeal to preschoolers, using pictures to control actions so that reading is not required.

And critics are sharpening their knives. “We cannot allow the media and marketing industries to construct a childhood that is all screens, all the time,” said Susan Linn, a Boston psychologist and the director of the Campaign for a Commercial-Free Childhood, a nonprofit group that has complained of ads for movies on Webkinz.com.

Operators shrug off worries about fads and competition. “Are features like creating an avatar a long-term advantage for anyone? Probably not,” Mr. Yanover said. “The viability and sustainability of this business comes from the shifting behavior of kids and how they spend their leisure time.”

As for privacy and safety, companies point to a grid of controls. For instance, Neopets restricts children under 13 from certain areas unless their parents give permission in a fax. Several Neopets employees patrol the site around the clock, and messaging features are limited to approved words and phrases.

“Parents know they can trust our brand to protect kids,” said Steve Youngwood, executive vice president for digital media at Nickelodeon. “We see that as a competitive advantage.”

    Web Playgrounds of the Very Young, NYT, 31.12.2007, http://www.nytimes.com/2007/12/31/business/31virtual.html

Wal-Mart Pulls Plug on Movies via the Web

December 29, 2007
The New York Times
By MATT RICHTEL and BRAD STONE

SAN FRANCISCO — Nearly a year ago, Wal-Mart Stores grandly announced plans to enter the movie download business. It has exited with much less fanfare.

Wal-Mart posted a short message on the Web site of its movie download service saying that operation had closed as of Dec. 21. The move went largely unnoticed for a week, an unmistakable sign that the service had not caught on with consumers. Gizmodo.com, an equipment review site, was one of the first to point it out Thursday with a headline: Wal-Mart Kills Video Download Store Before Christmas, No One Notices.

In a statement provided Friday, Wal-Mart said it had ended the business because Hewlett-Packard, a chief technology partner, had decided to discontinue essential infrastructure for the service.

Hewlett-Packard confirmed it indeed has scrapped the project. “The market for paid video downloads has not performed as expected, and the broader Internet video space continues to remain highly dynamic and uncertain,” the company said. H.P. said it has decided to redirect its research and development dollars into higher-growth areas.

Wal-Mart is the nation’s largest seller of DVDs. Its quiet abdication of digital downloads at the height of the holiday shopping season, while a stark contrast to the ballyhooed announcement of the service, was consistent with the ho-hum reaction by many consumers to the downloadable movie concept.

The technology can require relatively fast broadband speeds to download movies to a computer, and then quite a bit of technical knowledge on the part of the consumer to transfer the movie to a television for viewing on a larger screen.

Only Apple, which has sold more than three billion songs through its iTunes online store, seems to have had any success in selling movies. The company is expected soon to add digital movie rentals from 20th Century Fox to iTunes. It already lets users purchase films from Disney and MGM, and the company is reportedly talking with other movie studios to add their libraries to Apple’s online store.

Josh Bernoff, a technology industry analyst with Forrester Research, said that consumers were not nearly as enamored of movie downloads as they were of music downloads. With music, he said, consumers can download a song and listen to it many times in the convenient format of a portable digital player.

With movies, he said, “the experience of watching on an iPod or a computer is significantly inferior to what you get from a normal DVD.”

The problems are surmountable, but not soon, he said. “All these things can potentially get resolved, but we’re a long ways away from the simplicity and convenience that made iTunes such a success with music.”

Wal-Mart.com’s offering may have been further hindered by its digital rights management software, known as D.R.M., meant to protect the movie from being copied. It prevented downloaded movies from being watched on more than one computer or on popular mobile devices like the iPod. Wal-Mart.com’s digital movies were protected by Microsoft’s anticopying software and could be played only using Microsoft’s Windows Media Player program.

In a research note published Friday, Rich Greenfield, an analyst with Pali Capital, said the D.R.M. might have doomed Wal-Mart’s movie service. “We suspect a key reason behind Wal-Mart’s decision to exit the digital video download business was the need for D.R.M., which prevented the content from working with iPods,” he wrote. “Anywhere you look, Apple’s devices are winning, forcing content holders’ hands.”

High prices also hampered the service. Prices to buy a movie, a copy of which resides on the hard drive of the buyer’s computer, ranged from $12.88 to $19.88 on the day of the release; older movies cost $7.50. But it costs just a few dollars to rent a DVD or watch a movie through a cable system’s on-demand services.

Another challenge for the likes of Wal-Mart is that large, general-merchandise retailers seem to struggle to compete against entertainment-focused companies on the Web, according to Henry Blodget, an Internet industry analyst, in a blog post on Silicon Alley Insider about Wal-Mart’s decision to abandon the download service.

“One e-commerce refrain we’ve heard since 1995 is that once the established real-world brand get their act together, the online pure-plays will be toast,” he wrote. “We’re still waiting.”

There continue to be a number of companies offering movies for download. Apart from Apple’s iTunes, Amazon’s digital movie store, Amazon Unbox, allows customers to download movies to their computers or to transfer them to their TiVo set-top boxes. The Web start-up BitTorrent, which is more closely associated with the free software commonly used to make illegal copies of movies around the world, also has a legal digital movie store.

There continues to be many alternatives for movie renters and buyers, including expanding mail-order services like Netflix and Blockbuster, and expanding pay-per-view menus from cable and satellite providers. This fall, Silicon Valley start-up Vudu began selling a set-top box that lets users download movies from all the major studios and watch them on their television sets.

What set the Wal-Mart effort apart was its own brand name, its strength in the traditional DVD business and a Web site that had nearly 800 million visits this year.

Several studio executives contacted about Wal-Mart’s decision said that the discontinuation would have little impact on studio profits, given the paltry size of the download market. One executive said Wal-Mart’s initiative had been experimental at best. The executives declined to be identified for fear of upsetting Wal-Mart.

This year, retailers and studios alike feared that online piracy, which has undermined the music industry, would devastate the television and movie businesses, too. As such, both groups sought to come up quickly with digital strategies that would make it easier for consumers to buy movies and television shows online. The television industry was quick to act, and now many of the networks, including ABC, NBC and CBS, offer various shows online as well as on DVD.

Movie studios, though, have been more cautious in their approach, particularly when dealing with Steven P. Jobs, Apple’s chief executive, who has been a leader in the move to offer entertainment online. The fear was that Mr. Jobs would undermine studio’s traditional DVD business in a bid to sell more iPods. With the exception of Walt Disney, where Mr. Jobs is the largest shareholder, the studios have been holding out for better financial terms.

In announcing the service last February, Wal-Mart said it had the participation of all six major Hollywood studios — Walt Disney, Warner Brothers, Paramount, Sony, 20th Century Fox, and Universal. The deal made Wal-Mart the first traditional retailer to sell downloadable movies.

Its failure in video downloads is not Wal-Mart’s first misstep in its effort to extend its profitable in-store movie business. In 2003, the company introduced a rival to Netflix’s mail-in rental service. Two years later, the company gave up the effort and said it would direct its customers to Netflix’s service.

In an interview last month, Raul Vazquez, chief executive of Wal-Mart.com, emphasized that the movie download service was still experimental: “This has been in beta. We want to understand what the customers want. And I think what we learned is that the initial experience of buying and downloading content needs to be better. We thought it was going to be easier for the customer to understand.”

Laura M. Holson contributed reporting from New York.

    Wal-Mart Pulls Plug on Movies via the Web, NYT, 29.12.2007, http://www.nytimes.com/2007/12/29/business/media/29movie.html

F.C.C. Reshapes Rules Limiting Media Industry

December 19, 2007
The New York Times
By STEPHEN LABATON

WASHINGTON — The Federal Communications Commission approved two new rules on Tuesday that are likely to reshape the nation’s media landscape by setting new parameters for the size and scope of the largest news and cable companies.

One rule would tighten the reins on the cable television industry. By stipulating that no one company can control more than 30 percent of the market, the rule introduces fresh regulation to an industry where there has been little of it, angering both the cable industry and Republican commissioners, who favor a free-market approach.

The other rule, which gives owners of newspapers more leeway to buy radio and television stations in the largest cities, is a step in the direction of deregulation. It is intended to help the newspaper industry, which is suffering from dwindling advertising revenue, and to recognize that the historical conditions that gave rise to cross-ownership restrictions have changed, now that more news sources are available on the Internet and cable television.

But the change drew criticism from newspaper executives, who said it was too modest to be meaningful, and from prominent lawmakers and commission Democrats, who called it a Christmas present to the nation’s largest conglomerates.

Both rules are certain to be reviewed by courts in the coming months. On Capitol Hill, some lawmakers said Tuesday that they would try to undo the rule about the newspaper industry.

Nevertheless, the votes were an important political victory for Kevin J. Martin, the F.C.C. chairman, who presided over a contentious meeting at which he re-established his control over the deeply divided agency. Mr. Martin had suffered a sharp setback three weeks ago when he was unable to find two commissioners to support a plan to regulate cable television more tightly.

The decisions were a blow to Comcast Communications, the nation’s largest cable company, which has grown substantially over the last decade through a series of acquisitions and will now be unable to buy more cable companies unless it can get the order overturned by a court.

By taking Comcast out of any bidding, the new rule was also a setback to smaller cable operators thinking of selling to other companies.

As for the relaxation of the newspaper-broadcast rule, telecommunications lawyers said it could pave the way for Rupert Murdoch to win permanent waivers to control two television stations in New York, as well as The New York Post and The Wall Street Journal.

In one 3-to-2 vote on Tuesday, Mr. Martin sided with the agency’s two other Republicans to relax the newspaper-broadcast cross-ownership rules in the nation’s 20 largest markets. Under the new rule, a company can own both a newspaper and either a television or radio station in those markets as long as there remain at least eight other independent sources of news. If it is a television station, the rule requires that it cannot be one of the top four.

Mr. Martin said that the change was a modest, though vital step toward assisting the newspaper industry, which is struggling financially as advertising and readership migrates rapidly to the Internet. “We cannot ignore the fact the media marketplace is considerably different than when the media ownership rule was put in place more than 30 years ago,” he said.

In a second 3-to-2 vote, Mr. Martin joined with the two Democratic commissioners to impose a limit to prevent Comcast, which controls nearly 30 percent of the market, from getting larger. Mr. Martin has been critical of the cable television industry for raising rates faster than the rate of inflation and for failing to offer consumers enough lower-price choices in subscription packages.

In a series of dissents, the commissioners took issue with Mr. Martin’s assessments.

“In the final analysis,” said Michael J. Copps, a Democratic commissioner who has led a nationwide effort against relaxing the media ownership rules, “the real winners today are businesses that are in many cases quite healthy, and the real losers are going to be all of us who depend on the news media to learn what’s happening in our communities and to keep an eye on local government.”

Robert M. McDowell, a Republican commissioner, was sharply critical of the cable restrictions.

“The cap is out of date, is bad public policy and is not needed in today’s public market,” he said. He called the cable rule “archaic industrial policy” that would surely be struck down by an appeals court, as a similar rule was six years ago.

Although Mr. Martin appears to have won a high-stakes battle over some of the most significant policy decisions of his tenure, he has expended significant political capital and made political enemies of powerful industry groups and influential lawmakers.

For opposite reasons, both rules approved on Tuesday were sharply criticized by industry. John F, Sturm, president of the Newspaper Association of America, called the new cross-ownership rule “a baby step in the actions needed to maintain the vitality of local news, in print and over-the-air, in all communities across the nation.” Mr. Sturm said he favored eliminating the cross-ownership ban completely.

On the other hand, the cable television industry accused Mr. Martin of once again imposing unfair regulations on it.

David L. Cohen, an executive vice president of Comcast, said it was “perverse to see the commission approving huge mergers by the Bell companies while now telling cable companies, who compete toe-to-toe with the Bells, that they may not also grow larger and achieve the same efficiencies.”

Over the last year, the commission has approved a series of proposals over the objections of the cable television industry. Last December, it approved a measure to force municipalities to accelerate the local approval process for the telephone companies to offer video services in new markets. And two months ago, it struck down thousands of contracts that gave individual cable companies exclusive rights to provide service to apartment buildings.

Consumer groups, which have long pushed for tighter cable television regulation, criticized the change in newspaper cross-ownership. “We’re disappointed that he relaxed the rule,” said Gene Kimmelman, the senior lobbyist in Washington for Consumers Union. “But the new language creating a high hurdle in the small markets, if appropriately implemented, could significantly limit the number of mergers that get through, minimizing the danger to competition and diversity in local news.”

A significant chorus in Congress has been deeply critical of Mr. Martin and repeatedly requested that he delay action on the media ownership vote. On Monday, 25 senators led by Senator Byron Dorgan, Democrat of North Dakota, sent Mr. Martin a letter in which they vowed to take legislative action to revoke any new rule or nullify Tuesday’s vote.

But in a letter to lawmakers from Commerce Secretary Carlos M. Gutierrez, the administration expressed support for Mr. Martin.

Both the newspaper-broadcast ownership rule and the cable rule are certain to be reviewed by federal appeals courts. Three years ago, a federal appeals panel in Philadelphia struck down a series of deregulatory measures proposed by Mr. Martin’s predecessor, Michael K. Powell, including one that loosened the cross-ownership rules.

    F.C.C. Reshapes Rules Limiting Media Industry, NYT, 19.12.2007, http://www.nytimes.com/2007/12/19/business/media/19fcc.html?hp

Wikipedia Competitor Being Tested by Google

December 15, 2007
The New York Times
By MIGUEL HELFT

SAN FRANCISCO — Google is testing a new Web service intended to become a repository of knowledge from experts on various topics, one that could turn into a competitor to Wikipedia and other sites.

If it attracts a following, the service could accelerate Google’s transformation from a search engine into a company that helps create and publish Web content. Some critics said that shift could compromise Google’s objectivity in presenting search results.

The service, called Knol, which is short for knowledge, would allow people to create Web pages on any topic. It is designed to include features that permit readers to submit comments, rate pages and suggest changes. However, unlike Wikipedia, which allows anyone to edit an entry, only the author of a “knol,” as the pages in the service would be called, would be allowed to edit. Different authors could have competing pages on the same topic.

Google said that a main idea behind the project was to bring attention to authors who have expertise on a particular topic.

“Somehow the Web evolved without a strong standard to keep authors’ names highlighted,” Udi Manber, vice president for engineering at Google, wrote in an announcement of the test Thursday evening on a Google corporate blog. “We believe that knowing who wrote what will significantly help users make better use of Web content.”

Mr. Manber said the goal of Knol was to cover all topics, from science to medicine to history, and for the articles to become “the first thing someone who searches for this topic for the first time will want to read.”

That is often the role played by Wikipedia pages, which frequently turn up at or near the top of results presented by Google and other search engines.

“I think Google is looking at the growth of sites like Wikipedia, that aggregate knowledge, and feels it has to play in that space,” said Danny Sullivan, a search expert and editor of the Web site Search Engine Land.

Several other services have taken different approaches in their efforts to become repositories of knowledge on various topics. They include Yahoo Answers, Squidoo, Mahalo and About.com, which is owned by The New York Times Company.

Despite the existence of these services, as well as countless free tools for experts and ordinary people alike to share what they know online, Mr. Manber said Google thought many people who possessed useful knowledge did not publish it “because it is not easy enough to do that.”

Google declined to make Mr. Manber or anyone else available to discuss Knol, saying the project was an experiment that like many Google tests, might never be opened to the public.

While many technology analysts and bloggers noted that Knol appeared to be a direct competitor to Wikipedia, Jimmy Wales, that site’s founder, shrugged off the potential challenge.

Mr. Wales said that Google’s service would encourage competing, opinionated articles on any topic, whereas Wikipedia strived for objectivity and had a single article per topic that represented the collective knowledge of its authors.

“I’m looking forward to seeing what it ends up looking like,” Mr. Wales said.

Knol and Wikipedia would be different in other ways. While Wikipedia is a not-for-profit and ad-free endeavor, Knol has a more commercial bent: Authors could choose to have Google place ads on their pages and would get part of the revenue.

“At some point, Google crosses the line, where they are not only a search engine, but also a content provider,” Mr. Sullivan said. Technically speaking, he said, authors, not Google, would create Knol pages. “But it matters how it appears,” he said. “I do a search on Google, I go to some place that Google hosts and I also find Google ads.”

What’s more, Mr. Sullivan said, Google’s goal of making Knol pages easy to find on search engines could conflict with its need to remain unbiased. Google already carries content generated by users in a variety of services, including YouTube, the photo storage site Picasa and Blogger.

    Wikipedia Competitor Being Tested by Google, NYT, 15.12.2007, http://www.nytimes.com/2007/12/15/technology/15web.html

Remaking The Journal

December 12, 2007
The New York Times
By RICHARD PÉREZ-PEÑA

In the last few months, Rupert Murdoch has moved into an office at Dow Jones & Company, publisher of The Wall Street Journal. He has pushed the paper’s editors for shorter articles and more hard news. He has personally wooed reporters he wants to keep out of his competitors’ hands.

And last week, he oversaw the replacement of top executives, including The Journal’s publisher, with his own lieutenants.

And he hasn’t even bought the company yet.

That will change on Thursday, when in all likelihood shareholders will vote to approve the sale of Dow Jones to Mr. Murdoch’s company, the News Corporation. But Mr. Murdoch has already seized the reins of Dow Jones and The Journal, setting in motion what amounts to an overhaul of the look, content and staff of one of the world’s most prized newspapers.

“He’s not wasting any time,” said one Dow Jones executive who, like most of the people interviewed, asked for anonymity because they were not authorized to discuss the changes being made. “He’s already calling the shots, making decisions. We know that’s his M.O., but it’s amazing to see.”

For The Journal’s editors and reporters, this is a time of both anxiety and anticipation about what will happen when more than a century of independent family ownership reaches its end.

During the protracted takeover battle last spring and summer, many of them expressed concern that Mr. Murdoch would shape The Journal’s news pages to promote his own business and political interests — a News Corporation practice that The Journal itself documented in a long article — or simply cheapen the august paper.

But Mr. Murdoch also pledged to open the purse strings to expand The Journal’s reach, a prospect many people welcome at a newspaper with years of stagnant advertising revenue. Already, The Journal has offered significant raises to journalists it wants to hire and to some who were considering leaving the paper, with Mr. Murdoch calling some reporters personally to ask them to stay.

Mr. Murdoch has said that he wanted The Journal to step up its coverage of politics and national and international affairs, making it a more direct competitor to The New York Times. He has lobbied for more hard news and more succinct articles — a marked shift in tone for a newspaper whose signatures include long, often quirky news features that start on the front page.

There has even been talk of a front page with articles short enough to start and end there rather than continuing on inside pages, and of taking the words “Wall Street” out of the paper’s name to give it broader appeal, according to people who have been briefed on the matter. Both ideas were quickly dismissed, but the fact that they were raised even semiseriously shows how unconstrained by tradition the new owner is, these people said.

“This kind of decisiveness and moving rapidly, not just at the top but deep into the organization, is unusual in media takeovers,” said Louis Ureneck, chairman of the journalism department at Boston University. “There tends to be some patience about getting to know the operation and making a smooth transition. But he’s operating like a young man who’s bought a sports car and can’t wait to hop in and drive it around.”

None of that should be surprising from Mr. Murdoch, who is known for being sure of what he wants to do with each of his many properties — often molding them to reflect his own views and wasting no time in doing it. His habit of detailed, personal control contrasts starkly with decades of hands-off ownership by the Bancroft family, which viewed almost any involvement as unethical meddling.

The takeover puts vast resources behind a newspaper that is marginally profitable at best, in part because it has defied the industry trends of cutting staff and circulation. The News Corporation has $29 billion in annual revenue compared with $2 billion for Dow Jones, and Mr. Murdoch has shown repeatedly that he is willing to invest in his properties — even to take heavy losses on some of them — in order to win audiences and advertisers away from their competitors.

With a bodyguard and his longtime secretary in tow — as well as the occasional News Corporation executive — Mr. Murdoch has been a frequent presence in Dow Jones offices, meeting with executives, the editorial page editor of The Journal, Paul Gigot and, in the main newsroom two floors below, Marcus W. Brauchli, the managing editor.

In a handful of walks through the newsroom and a visit to The Journal’s printing plant in South Brunswick, N.J., Mr. Murdoch, 76, has revealed little about his intentions, employees say. But they add that at each stop, he has asked questions about their work and displayed an astonishing command of detail about what they do, from production schedules to running the presses.

There are already firm plans to eliminate The Journal’s Marketplace section, containing articles on business trends and technology, in the first half of next year, with a new section taking its place, according to people at Dow Jones and the News Corporation who have been briefed on the changes. The editor of Marketplace, Melinda Beck, recently left that post to write a column on health, and no replacement has been named.

There are also plans to replace dozens of the newsroom staff, while other personnel changes reflecting Mr. Murdoch’s priorities have already begun, including building up the Washington bureau and shopping for reporters and editors to hire away from The Journal’s competitors.

When the takeover battle was under way last spring and summer, some of The Journal’s reporters and editors accused Mr. Murdoch of shaping his company’s journalism to reflect his own interests. Such criticism became far more muted as the takeover approached. There is anxiety about changes, real or rumored, tempered by optimism.

“I think there are a whole span of people who say, ‘Hey, let’s see what he does, let’s give it a chance,’” said Byron Calame, a former deputy managing editor of The Journal who has also served as the public editor of The Times. “The idea that there might be more assets, more resources put into the news-gathering gives some people hope.”

Mr. Murdoch has acted like a man in a hurry since the end of July, when the controlling Bancroft family agreed to sell him Dow Jones for more than $5 billion. Days after the family’s decision, Mr. Murdoch had an office built for him in the 11th floor executive suite in the World Financial Center in Lower Manhattan where Dow Jones is headquartered.

Within weeks, teams of executives and managers from the two companies were meeting to compare advertising strategies, look for joint ventures and to debate the future of The Journal’s paid online subscription system, which Mr. Murdoch dislikes.

Indeed, Mr. Murdoch, who tends to muse out loud about big ideas that might be dropped later, told investors in Australia and one of his newspapers there that he would stop charging readers of The Journal’s online site, WSJ.com, but the statement came as a surprise to executives at both companies who later said they did not believe a final decision had been made.

People close to top Dow Jones executives say that it has been made clear to them that they would be replaced almost immediately either to consolidate operations with the News Corporation or to put Murdoch loyalists in control, or both. The first confirmation came last week, when Dow Jones announced that Richard F. Zannino, the chief executive officer, and L. Gordon Crovitz, the publisher of The Journal, would leave their posts.

The Journal will dismiss two to three dozen people on its news staff of about 750, probably through buyouts, officials at both companies say. The aim is not to reduce head count, which could actually increase, but to make room for a wave of hiring in areas Mr. Murdoch wants to expand and in some cases, simply to be rid of people.

Since last summer, at least 10 reporters and editors have left the paper, and some of their jobs remain vacant. Many more, concerned about the paper’s new direction, have reached out to other publications about job prospects.

A year from now the newspaper could have a large contingent of reporters and editors hired under Mr. Murdoch and not rooted in The Journal’s traditions. They would also be people who did not live through the anxious months when many newsroom employees opposed the takeover and questioned Mr. Murdoch’s journalistic ethics. “It has the makings of a pretty big cultural shift,” a veteran reporter said.

An agreement between Mr. Murdoch and the Bancrofts gives Mr. Brauchli, the top newsroom executive, total control over most of the newspaper’s content, and over newsroom hiring, firing and job assignments — at least in theory. But experts have predicted that with control of The Journal’s budget, Mr. Murdoch would eventually hold sway over the newsroom.

People who work with Mr. Brauchli say that some of the changes contemplated or under way might have occurred even without the takeover — including the recent appearance of more hard news and political news on the front page — and that in some areas he agrees with Mr. Murdoch’s agenda. But they also concede that the future owner’s influence is powerful, his stamp unmistakable.

A number of Mr. Brauchli’s recent personnel moves align with the new priorities.

Several highly regarded reporters and editors are being relocated to The Journal’s bureau in Washington, including a new chief of the bureau, John Bussey. Gerald F. Seib’s column on Washington, Capitol Journal, is being revived.

The Journal has been hiring new reporters and has made lucrative offers to a number of prominent journalists at The Times and elsewhere, mostly unsuccessfully.

The Journal has lost some big names, like Henny Sender, a prominent reporter who went to The Financial Times. But so far, the departures do not amount to a large-scale defection.

“A lot of us are at least a little worried about what this place will become,” said one veteran reporter at The Journal. “But right now our attitude is, wait and see.”

    Remaking The Journal, NYT, 12.12.2007, http://www.nytimes.com/2007/12/12/business/media/12murdoch.html?hp

Apologetic,

Facebook Changes Ad Program

December 6, 2007
The New York Times
By LOUISE STORY

Mark Zuckerberg, founder and chief executive of the social networking site Facebook, apologized to the site’s users yesterday about the way it introduced a controversial new advertising feature last month.

Facebook also introduced a way for members to avoid the feature, known as Beacon, which tracks the actions of its members when they use other sites around the Internet.

Mr. Zuckerberg’s apology — in the form of a blog post on Facebook — followed weeks of criticism from members, privacy groups and advertisers.

“I’m not proud of the way we’ve handled this situation, and I know we can do better,” Mr. Zuckerberg wrote.

Facebook has also been meeting with advertising agencies in recent days and discussing their concerns about Beacon, according to one executive who was invited.

Facebook originally presented Beacon to the advertising community as an opt-in program that its members would choose to use. It planned to sell ads alongside the messages sent to people’s friends about their purchases and activities on other sites. Some advertisers like Coca-Cola have expressed surprise that Beacon then required users to take action if they did not want the messages sent out.

“This is a bit of an example of Facebook being, as we refer to it, ‘out over your skis.’ They got a little bit ahead of themselves,” said Elizabeth Ross, president of the digital advertising agency Tribal DDB West, a part of the Omnicom Group.

Ms. Ross said advertisers did not want Facebook to push its users into a system like Beacon against their will.

But that was what happened for a few weeks after Beacon was introduced Nov. 6. Facebook gave users two notices that it planned to broadcast their actions to their friends — one when they were on an external Web site making a purchase and the other when they came back to Facebook.

The notices were small at first, and when users ignored them, Facebook assumed the users had granted permission.

After more than 50,000 Facebook users signed a petition about Beacon that was initiated by the political group MoveOn.org Civic Action, Facebook changed its policy last Thursday so that users who ignored the warnings were considered to have said no. But a Facebook executive said then that the company would not offer users a universal opt-out for Beacon.

“We need to make sure we give them the ability to see what things can do for them,” Chamath Palihapitiya, vice president for product marketing and operations at Facebook, said in an interview last Thursday.

Although Facebook has made the changes that MoveOn.org and others requested, some users said they believed the company had not been forthcoming.

“I feel like my trust in Facebook has been violated,” said Christopher Lynn, 30, a Facebook user who also writes a blog on social media. “Facebook created this space that was a private space, where we share our experiences, and to share this data behind our backs is upsetting.”

Robert French, a communications professor at Auburn University in Alabama, has been lecturing about Beacon recently, and he said his students — nearly all Facebook users — were shocked to learn about Beacon.

Privacy groups are working on a complaint to federal regulators about Facebook’s advertising program. In addition to Beacon, the new program includes profile pages created by advertisers and ads sent to users based on what they write about in their profiles.

Jeff Chester, executive director of the Center for Digital Democracy, said Mr. Zuckerberg should have explained Facebook’s full advertising and data collection program to users.

“The user needs to decide how their information is going to be used, whether it’s going to be used for targeting at all, which advertisers have access to it and whether Facebook has the right to collect and analyze it,” he said. “Facebook is saying it is a safe place for you to share your innermost secrets; what’s not being told to users is that they are selling those secrets.”

    Apologetic, Facebook Changes Ad Program, NYT, 6.12.2007, http://www.nytimes.com/2007/12/06/technology/06facebook.html

Web the Perfect Medium for Ad Targeting

December 1, 2007
Filed at 3:00 a.m. ET
By THE ASSOCIATED PRESS
The New York Times

NEW YORK (AP) -- Golf club manufacturers have long placed ads in printed golf magazines. Movie studios tend to run television spots before a weekend rather than after. Targeting got even more precise as advertising moved to the Internet.

At first ads were largely targeted to Web sites or sections geared to specific topics. An ad for food products might appear on a cooking site.

Then came search and the ability to target messages even more precisely based on what you're looking for.

But increasingly, online time is spent connecting with friends at News Corp.'s MySpace or Facebook -- places that aren't focused on a single topic and may not have good keywords in the text. Even when good keywords like ''Hawaii'' or ''Porsche'' are available, Web sites can't always meet advertisers' demand for popular topics like travel and autos.

Enter behavioral targeting.

If you've been browsing a lot of Web sites on Chrysler LLC's Dodge Grand Caravan, a ''cookie'' data file on your Web browser might mark you as being in the market for one. Next time you're on a Web site about cooking, don't be surprised if Caravan ads follow you there.

Although the concept has been around for years, enough Web sites are now participating in ad networks that advertisers can still reach a sizable group even if they target narrowly.

That's especially true for ''retargeting,'' a form of behavioral targeting in which offers and promotions for a company appear across the Web if you've previously visited that company's site but didn't buy anything. Think of it as a retail store employee chasing you down the street and around town with a coupon.

In the past, finding you again to deliver that promotion might have been difficult, because Web sites weren't a part of larger networks.

Web sites are also targeting more smartly.

Companies, for instance, are pouring through data on Web surfing to perhaps find that high-definition television owners also like to travel or buy expensive jewelry. Or they might find a correlation between reading obituaries and renting cars -- seemingly disparate, until you remember you need to get to the funeral somehow.

All that takes better technologies and better interpretation of data by humans, said Tim Vanderhook, chief executive of Specific Media Inc., an ad-targeting company.

''That's something that over time will get better,'' he said. ''We're in about the second inning of a nine-inning game.''

    Web the Perfect Medium for Ad Targeting, NYT, 1.12.2007, http://www.nytimes.com/aponline/technology/AP-Targeting-Evolution.html

A Hoax Turned Fatal

Draws Anger but No Charges

November 28, 2007
The New York Times
By CHRISTOPHER MAAG

DARDENNE PRAIRIE, Mo., Nov. 21 — Megan Meier died believing that somewhere in this world lived a boy named Josh Evans who hated her. He was 16, owned a pet snake, and she thought he was the cutest boyfriend she ever had.

Josh contacted Megan through her page on MySpace.com, the social networking Web site, said Megan’s mother, Tina Meier. They flirted for weeks, but only online — Josh said his family had no phone. On Oct. 15, 2006, Josh suddenly turned mean. He called Megan names, and later they traded insults for an hour.

The next day, in his final message, said Megan’s father, Ron Meier, Josh wrote, “The world would be a better place without you.”

Sobbing, Megan ran into her bedroom closet. Her mother found her there, hanging from a belt. She was 13.

Six weeks after Megan’s death, her parents learned that Josh Evans never existed. He was an online character created by Lori Drew, then 47, who lived four houses down the street in this rapidly growing community 35 miles northwest of St. Louis.

That an adult would plot such a cruel hoax against a 13-year-old girl has drawn outraged phone calls, e-mail messages and blog posts from around the world. Many people expressed anger because St. Charles County officials did not charge Ms. Drew with a crime.

But a St. Charles County Sheriff’s Department spokesman, Lt. Craig McGuire, said that what Ms. Drew did “might’ve been rude, it might’ve been immature, but it wasn’t illegal.”

In response to the events, the local Board of Aldermen on Wednesday unanimously passed a measure making Internet harassment a misdemeanor punishable by up to a $500 fine and 90 days in jail.

“Give me a break; that’s nothing,” Mayor Pam Fogarty said of the penalties. “But it’s the most we could do. People are saying to me, ‘Let’s go burn down their house.’”

St. Charles County’s prosecuting attorney, Jack Banas, said he was reviewing the case to determine whether anyone could be charged with a crime. State Representative Doug Funderburk, whose district includes Dardenne Prairie, said he was looking into the feasibility of introducing legislation to tighten restrictions against online harassment and fraud.

In seventh grade, Megan Meier had tried desperately to join the popular crowd at Fort Zumwalt West Middle School, only to be teased about her weight, her mother said. At the beginning of eighth grade last year, she transferred to Immaculate Conception, a nearby Catholic school. Within three months, Ms. Meier said, her daughter had a new group of friends, lost 20 pounds and joined the volleyball team.

At one time, Lori Drew’s daughter and Megan had been “joined at the hip,” said Megan’s great-aunt Vicki Dunn. But the two drifted apart, and when Megan changed schools she told the other girl that she no longer wanted to be friends, Ms. Meier said.

In a report filed with the Sheriff’s Department, Lori Drew said she created the MySpace profile of “Josh Evans” to win Megan’s trust and learn how Megan felt about her daughter. Reached at home, Lori’s husband, Curt Drew, said only that the family had no comment.

Because Ms. Drew had taken Megan on family vacations, she knew the girl had been prescribed antidepression medication, Ms. Meier said. She also knew that Megan had a MySpace page.

Ms. Drew had told a girl across the street about the hoax, said the girl’s mother, who requested anonymity to protect her daughter, a minor.

“Lori laughed about it,” the mother said, adding that Ms. Drew and Ms. Drew’s daughter “said they were going to mess with Megan.”

After a month of innocent flirtation between Megan and Josh, Ms. Meier said, Megan suddenly received a message from him saying, “I don’t like the way you treat your friends, and I don’t know if I want to be friends with you.”

They argued online. The next day other youngsters who had linked to Josh’s MySpace profile joined the increasingly bitter exchange and began sending profanity-laden messages to Megan, who retreated to her bedroom. No more than 15 minutes had passed, Ms. Meier recalled, when she suddenly felt something was terribly wrong. She rushed to the bedroom and found her daughter’s body hanging in the closet.

As paramedics worked to revive Megan, the neighbor who insisted on anonymity said, Lori Drew called the neighbor’s daughter and told her to “keep her mouth shut” about the MySpace page.

Six weeks later, at a meeting with the Meiers, mediated by grief counselors, the neighbor told them that “Josh” was a hoax. The Drews were not present.

“I just sat there in shock,” Mr. Meier said.

Shortly before Megan’s death, the Meiers had agreed to store a foosball table the Drews had bought as a Christmas surprise for their children. When the Meiers learned about the MySpace hoax, they attacked the table with a sledgehammer and an ax, Ms. Meier said, and threw the pieces onto the Drews’ driveway.

“I felt like such a fool,” Mr. Meier said. “I’m supposed to protect my family, and here I allowed these people to inject themselves into our lives.”

The police learned about the hoax when Ms. Drew filed a complaint about the damage to the foosball table. In the report, she stated that she felt the hoax “contributed to Megan’s suicide, but she did not feel ‘as guilty’ because at the funeral she found out Megan had tried to commit suicide before.”

Megan had mentioned suicide several times, her mother said, but had never attempted it, and no one who knew her, including her doctors, felt she was suicidal.

On the advice of F.B.I. agents who did not want the Drews to learn of their investigation of the hoax, Ms. Meier said, her family said nothing publicly about the case for a year. Today, the Meier and the Drew families continue to live four houses from one another on a winding suburban street.

“There are no words to explain my rage,” Ms. Meier said. “These people were supposed to be our friends.”

    A Hoax Turned Fatal Draws Anger but No Charges, NYT, 28.11.2007, http://www.nytimes.com/2007/11/28/us/28hoax.html

Cyber Monday Online Sales

Jump 21 Percent

November 28, 2007
Filed at 7:45 a.m. ET
By THE ASSOCIATED PRESS
The New York Times

NEW YORK (AP) -- American consumers jammed online shopping sites on Monday, the official start of the holiday season for e-tailers, resulting in robust sales, according to an Internet research company.

ComScore Inc. reported on Tuesday that consumers spent $733 million online on Monday, a 21 percent gain from the same day a year ago. ComScore had expected that sales would exceed the $700 million figure.

While the first Monday after Thanksgiving kicks off the online holiday shopping season, it's not the busiest day for retailers, according to comScore.

Last year, the busiest online shopping day was Wednesday, Dec. 13, generating $667 million in sales. The Monday after Thanksgiving was actually the 12th busiest day in terms of sales for the 2006 holiday period.

Nevertheless, the first Monday after Thanksgiving, known as Cyber Monday, represents the first big sales surge, as consumers return to their office and click on their computers to shop. ComScore said that Monday's sales results represented an 84 percent jump from the average daily online spending totals during the preceding four weeks.

ComScore reported that the number of online buyers rose 38 percent from a year ago. But the average of dollars spent per buyer was down 12 percent. In a statement, comScore Chairman Gian Fulgoni said that he believes that deeper and broader price discounts depressed sales. He also noted that ''new Cyber Monday buyers'' tended to spend less online than returning buyers.

More than $10.7 billion has been spent online from Nov. 1 through Nov. 26, marking a 17 percent gain from the corresponding days last year, comScore said.

    Cyber Monday Online Sales Jump 21 Percent, NYT, 28.11.2007, http://www.nytimes.com/aponline/technology/AP-Holiday-Online-Sales.html

Murdoch Said to Stress

Free Access

to Wall St. Journal’s Web Site

November 14, 2007
The New York Times
By RICHARD PÉREZ-PEÑA

Rupert Murdoch says he plans to abolish subscription fees at The Wall Street Journal’s Web site, according to news accounts from Australia. This apparently was news to executives at his company and The Journal, who cautioned that the decision might not be final.

Mr. Murdoch made his statements in an address to shareholders in the South Australian center of Adelaide on Tuesday — late Monday night in New York — and in an interview carried in the Tuesday issue of his national newspaper, The Australian. News agencies reported that he said of The Journal’s Web site, “We are studying it and we expect to make that free.”

The Journal, one of very few large newspapers to charge for access to most of its Web site, has one million paying online subscribers. The fees they pay have been widely reported at $50 million a year, but a Dow Jones executive has said the figure is closer to $70 million.

Mr. Murdoch also said he intended to expand the size of the weekday Journal by 15 to 20 percent and to double the Saturday edition as he expands its coverage of national and international affairs. Mr. Murdoch’s News Corporation has agreed to buy Dow Jones & Company, The Journal’s parent, for $5.6 billion; the deal is expected to close next month.

Mr. Murdoch has repeatedly said he is inclined to make access to all or most of The Journal site free to draw many more readers and more ad revenue. He told Australian shareholders that he envisioned, “instead of having one million, having at least 10-15 million in every corner of the earth,” according to Reuters.

But Gary Ginsberg, executive vice president of the News Corporation for global marketing and corporate affairs, said in an e-mail message yesterday, “No final decision has been reached” on the subscription fees.

And a spokesman at the company’s headquarters in New York and executives at Dow Jones said they were surprised by reports of his comments, and had not heard of any decision.

Just last week, in a conference call with analysts and reporters, Mr. Murdoch seemed to be taking seriously arguments by Dow Jones executives that the decade-old fee system made sense.

“There are a lot of pros and cons,” he said then, including the possibility that a free Journal site could harm other Dow Jones businesses.

It may be true that the increased ad revenue from opening the site to all readers would outweigh the loss of subscription charges, but that strategy carries some risk, said Carl Fremont, executive vice president and global media director of Digitas, an online marketing company.

The Journal has an affluent readership, allowing it to charge high rates for online ads, but with many more readers, “you dilute the high premium quality of that audience,” Mr. Fremont said. In addition, he said, as Web sites post more ads, “I think we run some risk of alienating the audience through oversaturation, and we could see a decline in audience response.”

Murdoch Said to Stress Free Access to Wall St. Journal’s Web Site, NYT, 14.11.2007, http://www.nytimes.com/2007/11/14/business/media/14murdoch.html