"If you're not paying for the product, you are the product."

I’ve worked for, and even run, many companies in the last 20 years with various business models. Some provided something free in an attempt to build an audience large enough to sell advertising, some charged customers directly, and some did a combination of both. All treated their users with varying levels of respect. There was no correlation between how much money users paid and how well they were treated.

For example, at JPG Magazine we sold something to our audience (magazines, subscriptions, and ultimately other digital services) and we also sold ads and sponsorships (online and in print). We made it 100% clear to our members that their photos always belonged to them, and we had strict rules for what advertisers could do in the magazine. We also paid our members for the privilege of including their photos in the printed magazine (as opposed to Instagram’s new policy that they can use your photos however they want, even in ads, without paying you a dime).

This example is much more complicated than the black and white “you’re the product” logic allows. In some cases, users got the service for free. In others, they paid us to get the magazine. In still others, we paid them! So who/what is the product?

And just because you pay doesn’t mean you’re not the product. Cable TV companies take our money and sell us to the channels, magazines take our money and still sell ads, banks and credit cards charge us money for the service of having our money. Any store that has a “loyalty card” takes our money for products but gives us a discount in exchange for the ability to monitor what we buy. In the real world, we routinely become “the product” even when we’re already paying.

1. This is the first change to Google's rankings that isn't in the best interest of its users. Google has argued that these new changes will actually benefit users by pointing them to "better" results. That argument is effectively that sites that they are demoting in the rankings are akin to "spam" sites. But there's a very big difference here. Spam sites tend to be sites that the person doing the searching doesn't want and which clutter up the results. For content searches, the searches that Google will be demoting actually might be the ones that the consumer does want. Google has always been pretty religious about making sure the search results best matched what the searcher was, in fact, looking for. But it's now changing that policy. That seems like a dangerous step down a potentially very slippery slope.
2. Admitting that it's willing to cave to the interests of businesses, rather than users, will lead to more such demands. Already, we've seen companies complain about how Google rankings work -- and Google could always point to the fact that it determined how to rank its results based on what was best for users. But that's no longer the case, as others can point to Google caving in this one instance. Expect other industries to start asking for special treatment here, too. Google can fend these requests off, but it's going to start to get a lot of them.
3. It's never enough. The industry will always want more: As we've already discussed, the MPAA and RIAA aren't satisfied with this move, and will continue to pressure Google to do even more. Opening the door here won't mean that they'll suddenly be satisfied. It's just going to convince them to keep up what they'd been doing in the past: complaining to anyone and everyone that Google doesn't do enough.
4. Google's defense in anti-trust cases just got that much more difficult: Google has always argued in the antitrust efforts against them, that the ratings results are the best for users, not for any particular business. But this new effort will be pointed out time and time again to show that's not always the case, as those on the other side of antitrust fights will start asking why the RIAA and MPAA get special treatment, but others can't.
5. This will harm new innovations: As we noted above, Google claims this shouldn't hurt YouTube. But, imagine if Google had this in place years back, when YouTube was first starting out. It gets a bunch of DMCA notices early on, Google "filters" it down, and YouTube never becomes "YouTube" -- one of the most important tools that many artists today use for promoting, distributing and monetizing their works. Did it have lots of infringement early on? Hell yes. Did it develop new tools that tons of artists now find so valuable that they rely on them every day? Yes. Would that have happened if Google had demoted them early on? Probably not.
6. This may hold back other search engines: This one Google might not mind. As the entertainment industry has done with things like Content ID, it will now argue that all other search engines, by default, should do the same thing -- even though most of them may not have the tools or the DMCA data to make this work effectively. In doing this, Google may end up burdening other search engines -- especially upstarts -- in the space. Google may not mind this, but historically Google has at least been a reasonably good neighbor in not actively trying to undermine competing search engines.
7. This won't hold back infringement. At all. The underlying rationale for this is that the RIAA and MPAA think that people searching for content online are too stupid to realize the difference between a paid link and a free link. They think that if someone does a search on the name of a movie along with "free online," that if they're shown an authorized fee-based offer, they're willing to pay for it. There's little evidence to support that. The people doing such searches know exactly what they're looking for. The real problem is not that Google is showing it to them, it's that the traditional entertainment industry players aren't providing users what they want.

“Nobody wants another SOPA moment,” Rep. Jason Chaffetz (R-Utah), a vocal critic of SOPA, told POLITICO. “The nerds are more powerful than anyone thought, and the tech industry flexed its muscle like never before.”

Rep. Jared Polis (D-Colo.) said the anti-SOPA movement showed a certain “coming of political age” for the tech industry, and his colleagues in the House are treading carefully.

“They’re involving the tech community more and are more interested in listening,” said Polis, who also opposed SOPA. “They’re paying closer attention now.”

“The rational observers realize there’s a significant overestimation of high tech’s ability to control the netroots,” said one industry lobbyist.

Another lobbyist said it’s “nearly impossible” to get the tech community to engage on policy issues, especially complicated measures that are highly technical, such as cybersecurity, or dry, such as online taxes.

“SOPA was an inflection point and people on the Hill are certainly going to take more notice next time around,” the lobbyist said. “But one incident like that isn’t going to be the huge game changer.”

...…long-held stance on how third-party websites access proprietary AAdvantage member details… Because travelers’ AAdvantage account numbers and passwords can be used to claim AAdvantage mileage awards out of their accounts and access personal details, American will always protect this information.

We simply cannot permit websites that have not satisfied our security requirements the access needed to track AAdvantage balances or any other function that is otherwise secured behind AA.com login credentials.

* The burden should be on the content owners to establish infringement, not on the subscribers to disprove infringement. The Internet access providers will treat the content owners’ notices of infringement as presumptively accurate--obligating subscribers to defend against the accusations, and in several places requiring subscribers to produce evidence “credibly demonstrating” their innocence. This burden-shift violates our traditional procedural due process norms and is based on the presumed reliability of infringement-detection systems that subscribers haven't vetted and to which they cannot object. (The content owners’ systems will be reviewed by “impartial technical experts,” but the experts’ work will be confidential). Without subscribers being able to satisfy themselves that the notification systems are so reliable that they warrant a burden-shift, content owners should have to prove the merits of their complaints before internet access providers take any punitive action against subscribers.

* Subscribers should be able to assert the full range of defenses to copyright infringement. A subscriber who protests an infringement notice may assert only six pre-defined defenses, even though there are many other possible defenses available in a copyright litigation. And even the six enumerated defenses are incomplete. For example, the “public domain” defense applies only if the work was created before 1923--even though works created after 1923 can enter the public domain in a variety of ways.

* Content owners should be accountable if they submit incorrect infringement notices. A subscriber who successfully challenges an infringement notice gets a refund of the $35 review fee, but the MOU doesn’t spell out any adverse consequences for the content owner that make the mistake – or even making repeated mistakes. Content owners should be on the hook if they overclaim copyright infringement.

* Subscribers should have adequate time to prepare a defense. The MOU gives subscribers only 10 business days to challenge a notice or their challenge rights are waived (a subscriber might get an extra 10 business days "for substantial good cause"). This period isn’t enough time for most subscribers to research and write a proper defense. Subscribers should get adequate time to defend themselves.

* There should be adequate assurances that the reviewers are neutral. The MOU requires that reviewers must be lawyers and specifies that the CCI will train the reviews in “prevailing legal principles” of copyright law – an odd standard given the complexity of, and jurisdictional differences in, copyright law. We’re especially interested in the identity of these lawyers, and why they are willing to review cases for less than $35 each (assuming the CCI keeps some of the $35 review fee for itself). Perhaps there will be a ready supply of lawyer-reviewers who are truly independent. Given the low financial incentives, another possibility is that the reviewers will be lawyers tied—financially or ideologically—to the content owner community. To ensure that the reviewers remain truly neutral, reviewer resumes should be made public, and checks-and-balances should be built into the reviewer selection process to ensure that the deck isn’t stacked against subscribers from day 1.

Attention:

Our records indicate you have redeemed Rewards Points using an exploit. Please note that future use of exploits may result in disciplinary actions, up to and including the permanent banning of your account.

We will keep your account active at this point, but have rolled back your account to 06/08/2010, the date prior to the redemption of these unauthorized Reward Points.

"In several weeks we're going to be making a change to how Amie Street handles downloads, and we want to be certain you are fully informed in advance about this change. In brief, starting on August 5th we'll only be able to offer a single download of your purchased music unless you've encountered a technical problem.

Although most people only download their music one time, we've noticed that you have done so more than once on occasion. We realize that the ability to re-download files has been important to you, so it's understandable that you might be disappointed to see this no longer available. Unfortunately a number of factors beyond our control, including legal and royalty concerns, have made this impossible going forward.

We're very happy to say, however, that you can continue to stream all of the music you've purchased on Amie Street. That means wherever you have access to the internet, you also have immediate and unrestricted access to stream the entirety of your Amie Street music collection from your Library.

To make sure that downloading music continues to be as easy as possible, we'll be keeping a close eye on the user experience and making updates to the site as needed. The primary voice that directs any such changes will be yours, so if you have suggestions based on your experiences using the site, we'd love to hear from you. Tell us exactly what you like and don't like, and we can make Amie Street even better!

Peace,

The Amie Street Team""

Many Western technology companies have heeded that call, but have found themselves cast onto the rocks of Chinese shores including companies like Microsoft, Google, Cisco, eBay, and Yahoo! The massive markets just never seem to have materialized in the Orient for these giants, or when success has loomed on the horizon the murky Chinese bureaucracy has stepped in to snatch defeat from the jaws of victory. Partnerships have vaporized overnight, and (particularly in the case of Cisco) core Intellectual Property has been outright stolen, reverse-engineered, or redistributed. Perilous waters, indeed.

So it was with this skepticism that my friend Gersham viewed the latest piece of propaganda emerging from our friends in China that we have now reached the new height of 338 million Chinese Internet users; a 13 percent increase since the end of 2008, and just about exactly one quarter of the country's population. All of this, of course, seems to have been tabulated and distributed by the slightly inaccurately-acronymed Chinese Internet Network Information Centre (CNNIC) which, by its own admission,takes orders from the Ministry of Information Industry (MII) to conduct daily business. In fact, google Chinese Internet Traffic and you'd be hard-pressed to find data that did NOT originate from the CNNIC. Hmm. Call me a cynic.

Gersham pointed me toward the Firefox Download Stats, where, as of this writing, Germans have made 4,948,666 downloads of various Firefox versions compared to only 672,972 for China. Again, Germany has a population of 82Million vs. 1.3Billion in China. As a control, Americans have downloaded Firefox 7,959,727 times as of this writing. Do the Chinese really just prefer Internet Explorer?

In January 2009, Comscore measured the Chinese internet audience at closer to 180 Million users, still an impressive 18% of the Internet population. This site quotes murky Nielsen Online data pegging Chinese Internet Users at roughly 300 Million. Beyond these hearsay reports, empirical measurements are difficult to come by.

So, let’s throw up our hands and try to reverse-engineer the data using published stats. According to June 2009 data from Comscore, Google has captured 65% or so of US Search Traffic. This made it the #1 web site in the world, with 157 Million US Visitors in June, according to Comscore. In the Chinese Market, Baidu has captured 73% of Chinese search, with Google in the Number Two spot. Yet Baidu.com barely moves the needle by comparison, according to compete.com, alexa.com, and others, hitting roughly 600,000 unique visitors per month globally. High-side estimates of the Internet's penetration in the US peg it at 72.5% of the populace, or about 220 million. This makes the data on Google's penetration vs the addressable market reasonably accurate (71% if you do the math). Following this logic, if Baidu in fact has 73% of China's purported 338 Million users, it should be ranking as the #1 web site by far, with 246 Million unique visitors per month. In fact if any of this data were true, then Chinese sites should occupy at least 4 of the Top Ten global web sites.

Whatever your opinion of Compete's and Alexa's relative methodologies, it's impossible to reconcile anything even close to the numbers coming from the Chinese Government. If that isn't good enough for you, let's turn to profits. While serving what was allegedly the world's largest internet audience, Baidu appears to be tracking to earn about $500 Million in revenue this year. Google's revenue appears to be tracking to about $23 Billion for 2009 with its pithy 157 Million unique visitors. Any way you slice it, if China's internet userbase is as large as Beijing says it is, and if Baidu's market share of that audience is what it's widely purported to be, then both the number of uniques reported by external traffic sites and the revenues reported by the public company that owns Baidu should be exponentially greater.

These stats seem to either indicate that Chinese do not use search very often, or that there just aren't too many of them heading out into the wilds of the Internet. Either way, statistics emanating exclusively from bureaucratic sources within Beijing, particularly those which seem to fly in the face of all other external metrics, are not to be believed. The thesis of this post is not to suggest that China is NOT a massive opportunity for online properties and other technology purveyors, it is simply an attempt to point out that, like in a lot of cases in dealing with the People's Republic of China, things are not what they may seem. Pay no attention to the man behind the curtain.

The maddening part of writing this blog entry is that we realize that there is no immediate win here for users. Please know that we take very seriously our role of representing users such that we are able to provide more and more content in more and more ways over time. We embrace this activity in ways that respect content owners' -- and even the entire industry's -- challenges to create great content that users love. Yes, it's a complex matter. A tough mission, and a never-ending one, but one we are passionately committed to.

For those Boxee users reading this post, we understand and appreciate that you're likely to tell us that we're nuts. Please know that we do share the same interests and won't stop innovating in support of the bigger mission.