The UpStream

Yahoo Urged to Add AOL to Its Portfolio

posted Saturday Sep 27, 2014 by Scott Ertz

Yahoo Urged to Add AOL to Its Portfolio

Last week, Alibaba went public, outperforming even their own projections. While the record-breaking IPO made a lot of money for employees of the company, a lot of early investors got a big payday as well. One of those early investors was Yahoo, who banked $6 billion from its holdings. For public companies like Yahoo, with money comes hedge funds who have ideas how to spend it.

Hedge Fund Starboard Value wrote to Marissa Mayer, giving her ideas on where she should take the company next; particularly what she should do with the newfound Alibaba money. While Marissa has done a pretty great job of turning around the company, including an ongoing battle for the top visited domain with Google. She has done this by consistently looking for new companies to add to the portfolio, and existing properties to bring back to relevance.

Of all of the ideas pitched, the most intriguing is the purchase of AOL. While it might seem like purchasing an Internet relic, there are a couple reasons why this might just work. First, Mayer has proven herself an expert at reviving relics, such as Flickr. While Time Warner had no success with the brand, Mayer might be the one that could turn it around and make it a viable brand again. Failing that, she could use the expertise of AOL to bolster Yahoo's relevance.

That leads us to the second point. AOL has one area in which they thrive: news and video. Coincidentally, Yahoo is in the process of amping up their offerings on both of these areas. For example, they recently added Katie Couric as the face of their news team, hoping to increase homepage relevance. In addition, they have been really focusing on video, with live concert streaming, Saturday Night Live syndication and talk of a YouTube competitor.

Marissa Mayer responded, rather broadly, saying,

Going forward, we have great confidence in the strength of our business. The management team and the board of directors remain committed to building value for all shareholders through the continued execution of our strategy, investing in products that will drive sustainable growth: search, communications, digital magazines and video.

With a focus on video, and AOL's relatively high success rate in the video arena, this might just be a proper match.

Apple and the Terrible, Horrible, No Good, Very Bad Week

posted Saturday Sep 27, 2014 by Scott Ertz

Apple and the Terrible, Horrible, No Good, Very Bad Week

It isn't often that a company has an entire week they would like to Ctrl-Z. This week has been exactly that for Apple, or however you might accomplish an Undo on a Mac. It seemed that every time we turned around, Apple was making negative headlines again for a new reason. Between shoddy products, security disasters and knowledge thereof, plus an update that could brick phones, this is a week Apple would like to strike from the record. I don't think that's going to happen.


Let us begin with Bendgate, the unfortunate hardware issue amusingly named to mock Antennagate, which was another major Apple hardware issue. This issue, however, is not so easily fixed as to hold your phone by the top with just 2 fingers: this is destroying handsets, though not the first release manufacturing issue.

If you are a woman, you know the burdens of pants pockets - they almost do not exist in the front. This is why most women, especially younger women, carry their phones in the back pockets - there's actually room. Men, on the other hand, tend to carry theirs in the front pocket, halfway down their leg. Either way, the phone lives in a part of the body that receives pressure against a curved surface when sitting. While Samsung and LG are releasing curved screen phones, Apple's iPhone 6 is not even designed to be close to curved surfaces.

Because of the pressure placed on the phone when sitting, users on social media have reported that their phones has physically curved or bent. Apple has claimed that only 9 customers have complained of phones bending or curving, but the results on Twitter seem to suggest a higher rate of failure. Even if we are to assume Apple's number, how in the world could 9 phones have bent, other than cheap aluminum in the manufacturing?

Nearly every publication has tested the issue, with most coming up with the conclusion that the phone is far easier to bend than most other phones on the market, but still higher than what would be normal pressure. The iPhone 6 comes in around 55 pounds of pressure, whereas the Samsung Galaxy Note 3 comes in around 150 pounds of pressure. That is a pretty huge swing, but for anyone who has worn skinny jeans and sat on their phone, you know that more than 55 pounds of pressure is placed on your phone. Maybe Apple will blame Gap for this one the way they blamed BlackBerry for Antennagate.

iOS 8 Updates

Let us pretend that you plan on keeping your phone iPhone 6 in a bag protected with an Otterbox case, preventing all chances of it bending. The ability to use one of the most advertised new features of the phone, HealthKit, is something many customers expected to use right out of the box. Unfortunately, that wasn't really how it worked. Apple promised that iOS 8.0.1 would bring HealthKit, and it did. It also brought about TouchID failure and reception issues. Some users even saw their phones completely fail to download and install.

Many customers discovered that their cellular reception was less than optimal. In fact, it appeared to be iPhone 4 quality, which is not something of which to boast. Apple discovered an issue in iOS 8.0.1 that was iPhone 6 specific, for which they released a patch, iOS 8.0.2, which was capable of downloading, installing and fixing the reception issue! No need for Nokia to get offended this time.

Security: iCloud

The celebrity photo hacking issue has become almost epidemic - personal iPhone photos being stolen and leaked online. Apple initially claimed that their platform was secure and that the data could not have come from iCloud. Well, that is not exactly true. In fact, their platform is almost certainly to blame, and they know it.

In fact, Apple received reports 6 months ago from a security firm in London informing them of the iCloud API issue. Ibrahim Balic sent in reports to the company through various means, including email and the company's own bug reporting platform. In a March 26, 2014 email he said,

I found a new issue regarding on Apple accounts (sic)...By the brute force attack method I can try over 20,000 + times passwords on any accounts. I think account lockout should probably be applied. I'm attaching a screen shot for you. I found the same issue with Google and I have got my response from them.

Unfortunately, this problem was left unattended. In fact, it was entirely discounted by Apple.

Based on the information you provided, it appears that it would take an extraordinarily long time to find a valid authentication token for an account. Do you believe that you have a method for accessing an account in a reasonably short amount of time?

Time to hack is not an issue when there are Russian hack shops with hundreds of people, paid a dollar an hour, to exploit exactly these types of vulnerabilities. Coincidentally, celebrity photos were leaked to the public. Shocking, isn't it? A known vulnerability, reported and discounted, was eventually exploited by hackers on the Internet? That has never happened before. No, I'm sorry, ask Target and Home Depot about how well it works out after the class action lawsuits.

Security: Apple Pay

How secure will Apple Pay really be? Well, if Payment Token documents are even remotely accurate, not very. As you can see, the token that is passed around contains a tremendous amount of data, all accessible via Apple's NFC radio. This data includes Card number and expiration date, optional cardholder name.

Now, Apple will tell you that since it uses two-factor authentication on every transaction (iPhone and fingerprint), simply making this data available from the phone is not unsecure. The issue is that the iPhone fingerprint scanner is remarkably easy to fool. While it may not be "an easy attack" it is something to be concerned about. A simple lifting of your phone, and a hacking of the fingerprint scanner, and the ability to lift all of your personal credit information is EASY. In fact, this token has enough information to generate a whole new physical card. At least Apple is really good at protecting its data (see above).

Security: Bash Bug

When Steve Jobs returned to Apple after being fired, he brought with him the company he founded while he was gone: NeXT. This company had developed a UNIX-based operating system, which no one cared about, except Jobs. In fact, he cared so much, it kind of became MacOS X, which is still in use today. How could a "modern" operating system running on a 40-year-old backbone possibly cause a problem?

This week, a new bug was discovered, called Bash Bug. This simple command-line bug can cripple a computer with ease. Luckily, it only runs on UNIX-based machines. This means that UNIX, Linux (including Android, webOS and Tizen) and MacOS X are all susceptible. Because of the ease of use and nature of this bug, it is considered to be considerably bigger than Heartbleed, which nearly shut the Internet down for a few weeks; at least that part running on UNIX, Linux and MacOS X servers.

Apple claims that Bash Bug is not a real threat to MacOS X users, as the command line itself is not exactly a known feature to most, and the permissions required to execute it are, by default, not granted to any user of the computer. Oh, for that pesky root access I might believe this one, but Apple has already not been forthcoming about its security issues this week, so maybe don't believe this one as gospel, either.

Alibaba Outdoes Its Own Projections, Becomes Largest US IPO Ever

posted Sunday Sep 21, 2014 by Scott Ertz

Alibaba Outdoes Its Own Projections, Becomes Largest US IPO Ever

In June it was revealed that Alibaba had chosen the NYSE to list their record setting IPO. They expected to raise as much as $20 billion, becoming the largest US Initial Public Offering, not on the stock exchange that was once considered the go-to for tech companies.

As it turns out, their opening was even better than expected. Stocks opened at $68 and ended the day at $93.89. The opening price means that the company actually raised $21.8 billion, almost 10% higher than they had hoped. This is great news for the company, especially after the rather rocky time companies have had with IPOs in the past few years. Groupon failed pretty miserably in 2011, Facebook had its issues in 2012, whereas LinkedIn had major successes in 2012 and Twitter had mixed results in 2013.

So, with Alibaba technically being a Chinese-based company, why is all of this important? Well, it has to do with US filing and market capitalization. At its initial price, Alibaba's corporate value was $168 billion. All of the other US IPOs in 2014 combined have a market capitalization of $180.5 billion. With a single IPO, the new IPO capitalization for 2014 nearly doubled.

Not all companies going public for the first time are large, so let's take a look at existing companies' values. One of the companies that best relates to Alibaba is Amazon; the big difference being that Amazon sells directly to consumers, whereas Alibaba is more about pairing up wholesalers and distributors. Also, Amazon has aspects of their business, such as Amazon Web Services, Instant Video, etc. Amazon's current market cap is $158.3 billion - lower than the initial value of Alibaba by their entire IPO value. If you take into consideration current market value, there is more than a $50 billion discrepancy.

Another Chinese company listed in the US is Baidu, the Chinese Google, or so they believe. With everything from search to advertising and even a mobile operating system, Baidu has everything they need to be Google, and are even in the same physical market as Alibaba. So, how do they compare? A market cap of only $78.86 billion. That is about a third of Alibaba, which has far less to offer overall. Apparently it really pays to be in the right business, not every business.

Videogames for Ice Cream - What Could Go Wrong?

posted Sunday Sep 21, 2014 by Scott Ertz

Videogames for Ice Cream - What Could Go Wrong?

Apparently October is Domestic Violence Awareness Month and, in observation of this event, Marin County in California has created an oddly unrelated program. On Saturdays during October, Marin County will accept trade-ins of toy guns and violent videogames in exchange for ice cream. I'll give you a moment to let all of that sink in.

The program is headed by District Attorney Ed Berberian, who led a gun buyback program in California two years ago. For a state in such financial disaster, it was definitely a good idea to spend so much money they had to increase the budget to handle all of the buybacks. That same clear, concise thinking is what has led to this buyback program.

Thankfully they have learned from their prior mistakes and will not be offering their own money, or I suppose your own money, as it was paid out of tax money. Either way, this time their attempted buyback program will not affect the ailing state's bottom line. Unfortunately Ben & Jerry's has gotten involved with this crazy concept, donating ice cream for anyone who turns in a toy gun or videogame.

Development and community relations manager for the Center for Domestic Peace, Marla Hedlund, said in defense of this program,

Children reflect the culture they live in. This is really all about having a conversation with our community and our children about the culture of violence. We're trying to inspire people to become part of the movement to create peace in a violence-free environment.

Berberian added,

As we know domestic violence incidents almost always have children present and these children develop over time imprinted images of the family violence. These children then carry those experiences into their adult lives and often repeat the pattern of violence in their own family units.

The issue here is that time after time, studies have found that playing videogames does not increase your chances of being violent. In fact, for many people it decreases those chances, as it becomes an outlet for any aggressions collected throughout a normal day. Also, California has had a rough history with banning videogame sales. After a cost of $1.8 million for a failed court case, at least they aren't putting up their own cash this time around.

More Zynga Execs Leave, Company Fills in the Voids

posted Sunday Sep 21, 2014 by Nicholas DiMeo

More Zynga Execs Leave, Company Fills in the Voids

Earlier this year, Zynga said it would be shaking up its executive positions and since Don Mattrick took over as CEO, that's been a reality. Even through multiple quarters of missed projections, the company is still looking ahead. Now, two more senior developers have left the company and Zynga is bringing on new talent to fill the holes.

First, both senior vice presidents of games, Tim LeTourneau and Steve Parkis, have left the company. Their successes have been with all of the "Ville" games, specifically FarmVille. Also leaving the crew was the head of Social Slots, Maytal Olsha.

As we talked about in the past, new president of Zynga Studios Alex Garden was brought on in April, with the sole mission of hiring people from outside of the company that have different skillsets unrelated to gaming. In addition to that motive, Zynga will also be looking to give its existing employee new or expanded roles within the ranks. Jamie Davies, one of the critical members of the FarmVille franchise, will become the new vice president of games.

Externally, Zynga has brought in Tony Leech to be the new creative director. Leech's repertoire includes the role of producer for Hoodwinked and Escape from Planet Earth. Sketch artist, art director and production director for Pixar, Jim Pearson, will make his way over as art director for Zynga now. Start-up entertainment company Red Robot will see cofounder Pete Hawley fit into the GM and president of creative positions. Red Robot's John Davison has also joined the company as senior director of network content and has previously worked in the gaming industry press.

Zynga has also started up a new intellectual property, Zynga NaturalMotion. Julian Widdows, formerly with Codemasters Racing and the Dirt franchise will head up the team as general manager. Finally, a second GM has been added to NaturalMotion. Catherine Silvestre has begun employment at Zynga, and has previously worked for Warner Bros.

What do you think of all these additions? Will this put Zynga in a better position to fully understand its position in the space and move forward? Let us know in the comments below.

FTC Commissioner Brill Now Thinks Data is Good, But Still Concerned

posted Sunday Sep 21, 2014 by Scott Ertz

FTC Commissioner Brill Now Thinks Data is Good, But Still Concerned

A few weeks ago, FTC Commissioner Julie Brill made quite a stink about health data. She was concerned that companies collecting all of this health data might be able to predict health issues with it. She felt that she needed to get involved, reviewing policies to ensure compliance with HIPPA, which does not regulate the data she is referring to.

Good news: Brill is back and talking again about health data. She emailed VentureBeat this week, though I am not yet sure why. She had a lot to say, including,

I'm a big believer in the potential for data from mobile and wearable devices to help consumers lead healthier lives and improve public health, but appropriate privacy and security protections are critical to achieving this potential...

It's encouraging to see app developers and companies like Apple recognize that, if they're going to collect and use health data from consumers, they need to institute strong protections for this sensitive data.

In addition, I think Congress has an important role to play in encouraging innovations based on user-generated health data by enacting both data security legislation and baseline privacy legislation that address sensitive health information. And even before Congress acts, industry and other stakeholders should set out strong health data privacy and security best practices, to protect consumers and encourage the development of new products and services focused on consumer health.

Based on the comments in the email, I would assume that her decision to speak again, in this case to VentureBeat, is because of Apple's delay in releasing any and all HealthKit related apps for the newly released iOS 8. The thing that is most interesting to see in her comments is her apparent reversal on her positions. Today, according to the email, she believes that health data is good, not scary, and that Congress should be responsible for the possible legal issues, not the FTC.

This is a position I can get behind. If there are laws or regulations to be passed that handle health application data, it is Congress's responsibility to pass them. Are there possible issues involved here? Of course. However, as we are seeing here, companies that are involved, including Apple, are taking it upon themselves to ensure data security, in Apple's case to the detriment of the product's release schedule.

The other issue at hand is consumer confidence and choice. Before Congress gets itself involved in regulating the security of data collected by smartwatches and fitness bands, perhaps we should let these companies regulate themselves. Apple, which has proven itself not reliable in securing its photo data, IS concerned about protecting health related data. Will every company treat the data appropriately? Of course not. But this type of data should be trusted only to companies which you trust. Companies like Apple, Google, Microsoft, Fitbit and the like cannot afford to disrespect your data.

Because of this, a consumer should make an educated decision before giving their data over to anyone, right Julie? Well, she is still pushing for major regulation, with or without Congress's intervention. If they don't act, she will instead, legally or not. Hopefully her actions will not kill an emerging and already threatened marketplace: health.

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