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Conflict of Interest

Implications of Skype's IPO for eBay-Skype & Wireless Net Neutrality

Given that eBay's announced spin-off/IPO of Skype in 2010 is a material market event, this high-profile IPO represents a potentially tectonic development in eBay-Skype's (and FreePress') push for wireless net neutrality/Carterfone regulations and applying the FCC's broadband principles to wireless providers for the first time. There are much broader implications of this market development than many appreciate.

Some brief background information is helpful to understand the broader implications:  

  • Reports suggest that eBay's plans for a public IPO in 2010 is a result of eBay not being able to get a high enough private market price ($1.7b) for Skype and the fact that current market conditions are not ripe for initial public offerings. (eBay originally paid $2.6b for Skype and added an additional $500m later, then subsequently wrote down $1.4b of Skype's value.)
  • eBay-Skype unsuccessfully petitioned the FCC in 2007 to apply monopoly-era Carterfone regulations to wireless. The FCC did not grant the petition.  
  • The issue resurfaced again in Washington as FreePress, in a 4-2-09 letter to the FCC, argued that net neutrality should apply for the first time to wireless networks and specifically that Skype's voice application should be able to make calls over carrier's 3G networks.     

So how does eBay-Skype's pending IPO change the landscape?

Internet "history is written by the victors?" -- or is it "to the victor go the spoils?"

Winston Churchill prophetically said: "history is written by the victors." This truism is timely now given Eric Auchard's great column "How the web devours history," that I built upon in my latest post: "Will history be the casualty of an 'ecommony?' If info is free who will pay to archive it for posterity?" 

Given the Internet's natural first-mover dynamic, global scale and scope efficiencies and powerful reinforcing network effects, which I have written extensively on, could the Internet's 'victor' effectively write history by deciding what information ultimately gets archived and found?

To answer that question requires establishing some important baseline points.

Does collective intelligence have limits?

A tip of the hat to Andrew Orlowski of the Register for connecting some important dots others did not in his piece "Google cranks up the consensus machine."

  • Andrew noted the exceptionally important precursor that Google's Marissa Meyer indicated in a Techcrunch interview that, going forward, Google would cross it's neutral search line and begin editing search results produced by its currently human-intervention-free algorithm.

This is a big deal because Google has long preached that much of the value and relevance of Google's searches is that the search algorithm is fully automated and thus objective and not biased by human input.

Andrew is wise to ask what standards Google will employ in deciding which search results to effectively censor and which search results to vault to the top of the first page? And will they share them with us or will they be opaque like the advertising Quality variable? 

  • It is important to know what the standards will be because this is a very slippery slope with far reaching implications.

It will also be interesting to see if the guardians of free speech on the Internet also connect the dots that the heretofore "neutral" barrier is being breached for the Internet's dominant gateway to the world's information.

Lots to think about -- if this is indeed a paradigm shift for the Web 2.0 movement.

Google to compete directly with its media customers -- ads on Google News and Google Finance

"On Nov. 17, Google began running ads on Google Finance, a financial-news site, and said it would soon start showing ads to some users of its Google News service as well." That was the big news in the Wall Street Journal's front page story "Google gears down for tougher times."

Is Google, which owns the world's largest Internet audience, with over 700 million users, a direct competitor to all media? You bet!

The anticompetitive significance and conflicts of interest in what Google is now doing are very large.

To date Google lulled its competitors into a false sense of security in building an audience for Google News and Google Finance but not directly competing with Google's supposed media partners for online ads.

  • The Googleopoly is now behaving like any monopoly does.

The problem for media companies is that Google is a non-transparent black box, which represents itself to be an honest broker of ads -- when it is not. It obviously has a huge financial conflict of interest in serving ads.

  • How can Google claim to be an honest broker of online ads when it controls ~90% of all online avertising profits in the U.S. and is planning to blatantly self deal and front run the interests of their media customers?

What Google is proposing to do is the conflict of interest equivalent of auditing their own books, or grading their own papers.

Googlephobia? No just holding a bad actor to account

I consider myself of like mind with my friend Adam Theirer of PFF on most all issues of substance, however, I must take strong exception to his misguided take on Google and Googlephobia

In Adam's post "Googlephobia: Part 6 - the Left Begin to Turn on Google":

Google's CEO: "Do you believe we have good values?" -- or could they be sub-prime values?

Google's CEO Eric Schmidt met with the New York Times Editorial Board last week, most likely on a charm offensive in response to the Rosenkranz Foundation oxford-style debate about whether or not "Google violates its 'Don't be evil' motto." 

  • David Carr, a columnist for the New York Times who attended the Schmidt meeting and who wrote "Google seduces with utility", asked Mr. Schmidt if he should "be worried that I am putting all my digital eggs in in one multi-colored, goofy lettered basket,  he said. That depends on what you think of our company and our values. Do you believe we have good values?"

Once again, Google is truly its own worst enemy.

IRS investigating if Mozilla-Google tax treatment is legal -- Why the DOJ should investigate too

There are reports that the IRS is investigating whether tax exempt Mozilla, the foundation behind the popular Firefox browser, can legitimately claim tax exempt status when 88% of the Foundation's revenues come from Google in payments for being the default search engine for Firefox downloads. 

I believe the DOJ should also consider investigating the Google-Mozilla relationship to see if Google anticompetitively gained an advantage -- given the facts, timing and circumstances.

Why Google lost the formal debate over its ethics -- And a compendium of Google's ethical lapses

Google effectively lost its first formal debate over whether "Google violates its own 'Don't Be Evil" motto" at the Rosenkranz Foundation's Oxford-style debate in New York City, November 18. (Transcript here).

  • Before the debate the audience was polled and voted 21% against Google and 31% for Google and 48% undecided; after the debate and learning more, 47% voted against Google and 47% voted for Google, and 6% undecided.
  • Apparently, most all of the undecideds voted against Google -- that Google violated their own 'don't be evil' motto. 

What does this mean?

Conflict of Interest Questions for Google CEO Schmidt as a Transition Spokesman

Google CEO Schmidt apparently is representing that he is speaking for the President-Elect's Transition today in Washington given the attached press release, which twice mentions Mr. Schmidt's membership on the "Transition Economic Advisory Board" in an otherwise very brief release. 

  • Given the perception created, conflict of interest questions are relevant and should be asked of Mr. Schmidt today. 

 

Perception of Conflicts with the Transition Ethics Code:

Google Flu Trends -- sliding down a privacy slippery slope?

Google's new service www.Google.org/flutrends to help the Centers for Disease Control spot likely outbreaks of the flu geographically certainly has benefits, but I was surprised at the minimal coverage of privacy implications of this in the mainstream media -- for example in the NYTimes and WSJ.  

  • Per the NYT article: "Google Flu Trends avoids privacy pitfalls by relying only on aggregated data that cannot be traced to individual searchers."  

The big question here is can we take Google's word on this blanket assertion? There are excellent reasons why everyone should be highly skeptical.

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