Marketplace | Steve Henn Steve Henn was Marketplace’s technology and innovation reporter for the entire portfolio of Marketplace programs until December 2011. en 2011 in review: The changes in Silicon Valley

Jeremy Hobson: If I had to pick one bright spot for the U.S. economy in 2011, it'd probably be the one about 350 miles up the California coast from where I am right now, in Silicon Valley. Despite the tough economic headwinds, the tech industry continued to innovate, produce and even add some employees.

Here now to wrap up the year in tech for us is Marketplace's Steve Henn, who joins us from -- where else? -- Silicon Valley. Hi Steve.

Steve Henn: Hey.

Hobson: So let's start by talking about the biggest companies in the tech world, like Apple, HP and Google.

Henn: Yeah. I think the big story for all three of those companies is changes at the top. All three have new CEOs. Obviously, with Steve Jobs passing, Tim Cook is now in charge. And he's going to face lots of challenges. He has to find a new salesperson; I mean, one of the huge assets that Jobs brought to the table was he could build tremendous amount of excitement for Apple products. And he needs to convince the markets and consumers that Apple products will still amaze. But obviously, you know, Apple's not the only company that's going through leadership changes.

Hobson: Right, what about Google? We've got a new CEO there too, where Larry Page took over for Eric Schmidt.

Henn: Larry Page came in earlier this year with a mission: One was to make Google a player in social -- so they launched Google+, that's going pretty well. But the other was really to bring some focus to the entire company, to focus what Google does, make it easier to understand for consumers -- but at the same time, protect that spirit of innovation that allowed it to do things like build a self-driving car.

Hobson: What about HP, Steve? I guess this would probably be considered the dinosaur of Silicon Valley at this point, but another change at the top at Hewlett-Packard.

Henn: Yeah, you know, HP is this iconic company here, but it had a terrible, terrible year. It started 2011 with a relatively new CEO Larry Apotheker. Probably his biggest misstep was in July, he announced that HP -- which is the largest computer-maker in the planet -- wanted to get out of that business. And in weeks, he got fired. So now Meg Whitman -- you know the former CEO of eBay and Republican gubernatorial candidate in California who ran against Jerry Brown last year -- is now in charge. She has a real turnaround battle in front of her. So we'll see how it goes.

Hobson: Well it wasn't just leadership changes in Silicon Valley that were the big story of this year. There were a lot of things happening where you are that are going to affect all of us who use tech devices.

Henn: Yeah. One of the biggest is the cloud. The cloud's been around for a while -- Apple launched iCloud this year; other companies have been selling cloud computing for a while. And 2011 might not have been the year it broke through, but it definitely was the year it became more and more common in people's everyday lives. So the cloud's already had an enormous impact on business, but I think in the next year, you're going to see it try and take over your personal entertainment system.

Hobson: How is that going to happen, Steve? How are we going to interact with the cloud next year?

Henn: If you think about it, services like Netflix -- when it streams movies -- they're really based on cloud computing. You may not own any DVDs, but with Netflix or Amazon Prime or instant streaming, you can access tens of thousands of films instantly online -- watch them on your computer or your tablet or your TV. Those films live in servers you don't own. That's the cloud. And you can share and stream any kind of data that way. Apple, Amazon, Microsoft, Google -- they're all interested in dominating your television set. They want to deliver your shows and your music and your movies into your home. There's a huge advertising and subscription windfall there, sort of the pot of gold at the end of this rainbow. And the fight over who controls that is shaping up to be one of the biggest tech battles in 2012.

Hobson: So maybe we'll have even more remote controls in the living room.

Henn: No, it's all going to be voice-activated.

Hobson: There you go. Marketplace's Steve Henn in Silicon Valley. Steve, thanks so much and happy new year.

Henn: Happy new year to you too.

Fri, 30 Dec 2011 06:00:00 GMT
The economic divide in Silicon Valley

Jeremy Hobson: When you hear the term "Silicon Valley," what do you think of? A really futuristic oasis where geniuses ride down the streets on their Segway scooters? A place where every other storefront is an Internet startup with the potential to change the way we live?

Well in fact, what we think of as Silicon Valley isn't really a valley at all. The tech community extends from San Francisco south toward San Jose. There are wealthy venture capitalists living in the hills, families living in garden spots like Palo Alto -- and, of course, some people are getting left behind.

Marketplace's Steve Henn takes us on an economic tour of the landscape.

Steve Henn: Early this fall, Sean Parker threw a party.

You may remember Parker. As a kid, he helped create Napster. He was the bad boy in the movie "The Social Network." His stake in Facebook made him a billionaire.

The party was for Spotify, a streaming music company he has a piece of. And it was pretty fabulous. There were whole roast pigs turning on spits. The indie band The Killers played, and Parker chartered jets from L.A. and New York to bring in the beautiful people. By the middle of the night, Snoop Dogg was hanging with Facebook founder and boy billionaire, Mark Zuckerberg.

The wealth being created in Silicon Valley these days can be mind-blowing. And for the programmers and engineers who keep the money machine running, the recovery is well underway.

Gary Swart: Just from here to San Francisco, there are four billboards that say 'We are hiring.' So Groupon, Twitter, Facebook, Zynga -- everybody's fighting for talent.

Gary Swart is the CEO of oDesk. He helps tech firms hire employees from all over the world. They work remotely. It's one way to avoid the bidding wars for software programmers.

Rotem Perelmuter runs a recruiting website called Top Prospect. He says the market for tech talent is tight.

Rotem Perelmuter: I think it's never been tighter. I was here in the late '90s, and it was had ro find people then and I'd say it is at least as hard today.

His site will pay a finder's fee of up to $20,000 if you recommend a Facebook friend who lands a job Perelmuter trying to fill. In just two days this fall, he cut five checks and sent out tens of thousands of dollars.

So for the objects of the tech industry's affection, life on the leafy streets of Palo Alto has never been better. But for non-techies, not so much.

Claudia Warren: My name is Claudia Warren. I'm a mom of two girls that are college age.

Claudia and her family live in a little town called Millbrea. Like many small towns here, it's expensive -- nice homes, good schools. Claudia and her husband stretched to afford it. Now they're in trouble.

Warren: I've been unemployed for a year and a month. The business that I worked in prior, I was there for 15 and a half years. Fifteen and a half year, that's a long time to be somewhere.

Claudia was buyer at a baby store that went under. Her husband has a good job, but her paycheck mattered. And with no college degree, she can't find work.

Warren: Ahh scary. Money run out. It's tough.

Warren's daughter quit her traveling softball team to save money and she's joining the army reserves to pay for college.

There are lots of families like the Warrens here -- people living in the shadow of a job boom they're not part of. The unemployment rate in the heart of Silicon Valley is still higher than the national average for most of this recession.

Even in the wealthiest enclaves some families are quietly struggling. I know middle-aged engineers in Palo Alto -- guys with impressive degrees -- who have been looking for work for two years. But young companies like engineers with the latest skills.

And just across a little bridge from Palo Alto, on the other side of Highway 101, things are much worse. The border of East Palo Alto is probably less than a mile from Mark Zuckerberg's new house, but it is a different world. There are fewer trees, empty lots are strung with razor wire. Officially the unemployment rate is 20 percent.

Carlos Romero is the mayor.

Carlos Romero: We do provide a lot of service sector workers to Silicon Valley. Whether it's in the hotels, whether it's domestics, whether it's folks working in the restaurants, whether it's the construction industry. And all of those areas took a downturn.

Romero says when the recession hit, his city was still reeling from the last downturn, which destroyed thousands of good blue-collar jobs. The city built big-box stores and a fancy hotel for tech executives to try and fill the gap. It helped, but it wasn't enough.

Romero: A lot of the manufacturing has moved out. So folks who were from East Palo Alto who might have had the educational qualifications for those manufacturing jobs no longer have the ability to get into those jobs because they don't exist.

The jobs being created in Silicon Valley -- thousands of them -- are in high-tech. But many guys from here, like Marque Solomon, can't get them.

Marque Solomon: The people who actually end up in those types of jobs -- wow, I've never seen them walking the streets. The people that you see are unemployed.

Solomon been out of work for four years. He lives in a depressed section of east Menlo Park just around the corner from where Facebook's building its new headquarters. But that probably won't help him.

Romero: This is a knowledge-based society at this point and really a big part of our problem is dealing with folks -- you know we have a 30, possibly a 35 percent dropout rate in high schools.

Here's the thing: Some of the best public schools in California -- some of the most lavishly funded public schools in the nation -- are located just a few miles from here.

Peter Fortenbaugh: I don't know anywhere in the country where there is this stark of a change between the haves and the have nots.

Peter Fortenbaugh is the president of the local Boys and Girls Club.

Fortenbaugh: Basically, the kids the need the most get the least resources. And it just continues to get more extreme in our community.

Fortenbaugh says most of these kids simply are not being prepared for the kinds of jobs Silicon Valley is creating. And in a globally competitive market, unless something changes, he says they probably don't stand a chance.

In Silicon Valley, I'm Steve Henn for Marketplace.

Mon, 26 Dec 2011 06:00:00 GMT
Taking your friends and followers to the bank

Kai Ryssdal: I've been known to Tweet every now and then, but I'm nothing compared to the power users. There are people out there who put in hours everyday on Facebook and Twitter. And as it turns out that -- let's call it social networking passion -- may have an upside. If you're the type who knows how to win friends and influence people.

Marketplace's Steve Henn reports.

Steve Henn: When Charlie Sheen went off the deep end earlier this year, he launched a Twitter account. In just one day, he had more than a million followers, in a week he had two million. Then he cashed in.

Arnie Gulov Sing: A celebrity will earn between a few hundred to a few thousand to even the low five figures for a single tweet.

That's Arnie Gulov Sing. He'is founder and CEO of, a service that helps celebrities tweet for profit. He hooked Sheen up with Sheen tweeted about needing a "winning intern with Tiger blood." The tweet guided hopefuls back to

Sing: I think 95,000 people clicked on the tweet in the first hour and over a million people ended up visiting the website.

For, Charlie Sheen's tweet was the online equivalent of a Super Bowl ad. Suddenly the marketing world woke up to what to social networks and celebrity could do. The key was identifying who is influential online.

Joe Fernandez: People are now creating content so easily on Facebook, on Twitter, that measuring that and understanding that is going to be valuable.

Joe Fernandez is the founder of Klout. Klout rates people's influence online based on tweets, retweets and the size of your audience on social networks. It uses a scale from 1 to 100. Celebrities like Sheen have huge Klout scores in the '90s. Joe Fernandez's mom? Well...

Fernandez: She has a relatively high Klout score with me -- but overall it's probably like 10 or 12.

But somewhere between Joe's mom and Charlie Sheen, there's a B-list in social media. And with some effort, you could be on it. Klout is trying to build a business by connecting marketers with regular people who can sway their friends online.

Fernandez: So we actually reach out to those people.

Say you are passionate about cars. You write about them and tweet about them all the time. Then Klout hooks you up.

Fernandez: Audi wants to give you a free test drive of the A8. You are going to get to keep it for the weekend, you are going to get a stipend to go stay up in Napa or do whatever.

If you are influential on almost any area, you could benefit. HP's given away free laptops through Klout to techies with big Twitter followings. Red Bull has sent snowboarders on paid vacations.

Another business called Top Prospect has made it even easier to make some money from your social network. You sign up at the site, then it trolls through your friends on Facebook and LinkedIn, looking for candidates for jobs Top Prospect is trying to fill.

Brooks Morgan: A guy that I knew was looking to move out the Bay Area and I couldn't hire him at the company I was at, but I wanted to do him a solid and hook him up with a job.

That's Brooks Morgan. He recommended a friend for a job he saw on Top Prospect. His friend, who is a programming rock star, got the position. Morgan got a $10,000 -- $10,000 just for helping a friend land job. Morgan admits he still feels a bit guilty.

Morgan: I took him out to a nice dinner.

Henn: For $10,000, I hope you took him to the French Laundry.

Morgan: Not quite that nice, but I probably owe him that.

It's the same old story -- even online -- it's not what you know but who you know, and maybe who you can influence that matters.

In Silicon Valley, I'm Steve Henn for Marketplace.

Wed, 21 Dec 2011 06:00:00 GMT
Twitter gets royal treatment

Kai Ryssdal: Big news for Twitter today, which is going take more than 140 characters to set up. Saudi Prince Alwaleed bin Talal -- the nephew of Saudi Arabia's King Abdulla and one of the richest men in the world -- is taking a $300 million stake in the company. Which is, in turn, raising some of questions.

Marketplace's Steve Henn reports.

Steve Henn: The prince has been dubbed the Warren Buffet of the Arab world.

Marwan Kraidy is a communications professor at University of Pennsylvania.

Marwan Kraidy: He's a very unusual prince in the sense that he is a global investor.

Prince Alwaleed owns stakes Apple, CitiGroup and General Motors. He has a slice of Silvio Berlusconi's Italian media empire and is the second largest shareholder in News Corp -- that's right: Fox.

While the prince says he's investing in Twitter simply to turn a profit, the investment still gives Marwan Kraidy pause.

Kraidy: It doesn't look very reassuring for people who are worried about who controls these media to have a member of the royal family of Saudi Arabia controlling such a high stake.

And Twitter's role in the Arab world is expanding. Arabic is the fastest growing language on the service, which was credited with a large role in the Arab Spring.

Although $300 million is princely sum to most of us, it's peanuts to Alwaleed, and his stake in Twitter is small. So, many free speech activists in the U.S. are not that concerned. Trevor Timm is at the Electronic Frontier Foundation.

Trevor Timm: Twitter actually has one of the best free speech policies as far as any of the social media networks go. They've been standing up to U.K. and U.S. pressure for years now, so to say that they would bow to Saudi Arabian pressure is a little premature.

For years, Twitter has grown by letting the tweets flow. Timm thinks it's highly unlikely a small Saudi investment will change that.

In Silicon Valley, I'm Steve Henn for Marketplace.

Ryssdal: Looked for the prince on Twitter, by the way. No luck.

Mon, 19 Dec 2011 06:00:00 GMT
Teen Mobile Data Tsunami  

Yesterday my editor was complaining that her 17 year old daughter refused to get a driver’s license. So what do you do when your teenager would rather be driven around LA than get a car herself?
I suggested that my editor threaten to take away her daughter's cell phone away. Of course - it's easy for me to say - I don't have a teenage daughter. There is mounting evidence that mobile phones  - especially smartphones - are replacing cars as the must-have appliance for any teen who is looking for liberation and fredom. And according to Neilsen, how teens use their phones is changing rapidly. Teens are calling less, texting more and using lots and lots more data. Three times more this year than last.
Teens have always been avid texters. According to Neilsen the average teenage girl sent and received 3952 text messages a month. That's more than 120 messages a day. The average boy sends and receives more than 2,800 texts.

But that doesn’t explain the surge in data useage. Texting is hardly new. It also doesn’t use a huge amount of data. And teen boys use more data than teen girls but are texting less. So something else is going on here.

What's happening is that more teens are getting smartphones, and, when they do, they are much more likely to start sucking down huge amounts of data. They are watching videos on their phones or using other data-intensive apps. In short, for many teens, their mobile phones have become the center of their universe.

 So who needs a car? Especaily if you mom's willing to cart you around. 

Fri, 16 Dec 2011 06:00:00 GMT
File-Sharing Site Sues Universal Music Group over takedown You read that right – It’s the bizzarro world edition of the copyright suits - a file-sharing site suing a record company.

The file-sharing site in question is Megaupload. It created a snappy promotional video for its site featuring, Kayne West, Kim Kardashian, Serena Williams, and Snoop Dogg. Macy Gray sang the original score along with a half dozen other artists. The music created for the add was original and kinda great. And it worked. The ad went viral.


Then the story gets weird. Universal Music Group (UMG) contacted YouTube with a takedown notice. At first, most assumed UMG was claiming that the work infringed on a UMG copywrite. And down came the song.

Thing was, UMG doesn't have a copyright to any of the material. And still doesn’t. Megaupload created the song and the video. The artists stood by the file-sharing. Megaupload contacted UMG and got nowhere. So instead, they talked to their lawyers and that's how a file-sharing site ended up suing a major record label.

Late last night, UMG responded. And the story is getting even stranger. Universal Music Group said in a court filing that it has a deal with Google that allows it take down not just copyrighted material appearing on Youtube, it can also ask YouTube to remove other videos it doesn’t like. It's not clear form the Universal public filings exactly when it would have these rights, but it alludes to them in a letter to Youtubes lawyers.
Here’s some of the legalese:

Your letter could be read to suggest that UMG's rights to use the YouTube "Content Management System" with respect to certain user-posted videos are limited to instances in which UMG asserts a claim that a user-posted video contains material that infringes a UMG copyright. As you know, UMG's rights in this regard are not limited to copyright infringement, as set forth more completely in the March 31, 2009 Video License Agreement for UGC Video Service Providers, including without limitation Paragraphs 1(b) and 1(g) thereof.


Only Google and UMG know what their contract actually says, but it’s intriguing. Does Universal Music Group have the right to ask Google to remove videos that mention or promote sites they believe promote piracy? What exactly do the paragrpahs referenced in that letter say?

In the meantime the Megaupload video is back up on Youtube and you can check it out here:
Fri, 16 Dec 2011 06:00:00 GMT
Zynga gets ready for IPO

Kai Ryssdal: Word is that Zynga, the online gaming phenomenon, is gonna go public this week. When it comes to IPOs, you never know almost 'til you know.

But Wall Street seems to think the stock offering could raise more than $1 billion. For those -- like yours truly -- for whom social gaming doesn't really do it, Zynga's is the company behind "FarmVille" and a whole slew of other popular online games. It's also one that's figured out how to make money by selling virtual stuff -- which is just kind of amazing.

Marketplace's Steve Henn reports.

Steve Henn: Zygna's best known for creating social games on Facebook -- like "FarmVille" and "Mafia Wars," which have attracted more 200 million users. Now Zynga's branching into mobile games. The thing about Zynga is its games can be addictive.

Michael Pachter: That's why Alec Bawldwin got himself booted off a plane last week. He didn't want to stop playing "Words With Friends" on his cell phone.

Michael Pachter is a video game analyst at Wedbush Securities. He says Baldwin may not be the ideal airline passenger, but...

Pachter: It's still a great advertisement for Zynga because I think that a lot of investors don't think that they know anybody who has ever played a Zynga game. And that's just not true. It's people like Alec Bawldwin and me.

Zynga's games are free. It makes money by selling virtual goods. Like make-believe cows on "FarmVille" or bloody chainsaws on "Mafia Wars." But only a tiny fraction of hardcore addicts ever spend a dime. This year Zynga's set earn more than $40 million in profits. But Wall Street thinks the company has serious potential. When the company goes public, it is likely to be valued at $7 billion to $9 billion.

Bill Blau: That's a lot.

Bill Blau an analyst at Garnter.

Blau: I don't know of other ways to calucualte it, to say it's not a lot -- but it is. There is clearly some hype that's built into this.

And lots of pressure, too. To live up to that stock price, Zynga's going to need a steady string of new hits. And lots of Alec Baldwins.

In Silicon Valley, I'm Steve Henn for Marketplace.

Mon, 12 Dec 2011 06:00:00 GMT
TV is the next consumer electronics battleground

Steve Chiotakis: Microsoft is revamping its XBox Live today. Trying to turn what began as a gaming console into a premium cable box to compete with the satellite and cable companies. Apple's planning to do the same thing next year by selling its own brand of television set.

As Marketplace's Steve Henn reports from Silicon Valley now, tech giants are looking to take control of your living room.

Steve Henn: Interactive TV is the next consumer electronics battleground.

James McQuivey is a consumer products strategist at Forrester Research.

James McQuivey: There is enough at stake here -- remember this is four to five hours a day for the average adult in the United States that they spend with the television.

Americans spend billions on their TVs, whether on their cable bills or streaming movies. The networks earns billions more selling ads. Tech companies want a piece. They're fighting to convince movie and TV studios to let them stream more content online.

McQuivey: And remember, every single one of these studios could be bought and sold by Apple, Google, Microsoft even, and that's a really, really tough position to be in as a content provider when you think content is king. But in reality, these companies are superior -- they are the emperor.

And how Americans watch TV is changing. McQuivey says folks want to watch what they want when they want it -- on any device. Technology can make this happen, and it might just transform what we all think of as a big dumb box.

In Silicon Valley, I'm Steve Henn for Marketplace.

Tue, 06 Dec 2011 06:00:00 GMT
Xbox adds new on-demand content

Kai Ryssdal: We had a spirited conversation at our morning news meeting this morning about the Xbox and about an announcement about it today. Not about its share of Microsoft's revenue or the latest sales of video games, but as a way to just watch TV. The game console will do what -- for most of us -- a set-top box does.

There was one guy around the room -- our morning producer Ethan Lindsey -- who understood how it works. So we dragged him into the studio to explain.

Ethan Lindsey: I don't own a single video game. I'm not even a gamer. But I can use my Xbox to get college football games, Netflix, Hulu, HBO -- basically anything you can get on a normal TV, you can get on an Xbox and you're just not using it as an Xbox.

Ryssdal: So we got our technology reporter Steve Henn on the line to make sense of all this stuff. Hey Steve.

Steve Henn: Hey.

Ryssdal: So you heard the tape, right?

Henn: Yeah.

Ryssdal: Okay so why is Microsoft and Xbox making these changes?

Henn: Well, you know, this is their bid to get into the living room. As Ethan already discovered, he can watch ESPN, he can watch all these other channels. And Microsoft is adding HBO Go, Xfinity, Youtube, Major League Baseball. I talked to Ross Honey, the GM for Xbox entertainment and advertising division, and this is what he said:

Ross Honey: So our vision here is to aggregate as much content as possible that our users want to watch all on the Xbox.

Ryssdal: All right. But aren't you just swapping out one box on top of your TV for another box on top of your TV?

Henn: Well, kind of. You know, and at this point Xbox can't deliver everything. So it's not going to scan through all of your 250 TV channels and find shows on that. But in some ways it's even bigger than that. It could change the way you interact with your TV. So, instead of using your remote, you could use -- if you have Xbox Kinect -- voice commands or hand gestures. So, let's say you want to watch a William Macy movie. You could just walk into your living room and say "Xbox, Bing William Macy." And it will show every movie William Macy was in from "Tale on Despereaux" to "Fargo." And it will show you three or four different ways to watch it. What's available on Netflix, what you can get from Zune through Microsoft and other things as well. So it's going to change how we search for television. And that actually is just the beginning. You know, Kinect has has artificial intelligence built in.

Ryssdal: Yeah, 'cause that's all we need with our TVs.

Henn: Right. A TV that's smarter than you. But it will be able to tell if it's you in the living room or your kid. It could tell if you're paying attention to the ad it's showing you. So advertisers potentially would love this. It's a much better way to measure whether or not an ad is effective or not.

Ryssdal: Give me a sense of scale because this sounds technically complicated and like it makes sense to 14 people in the whole universe.

Henn: Well, you know, it can't be that complicated. I was talking to some analysts and something like 10 million people in the United States are doing it. I haven't set one up in my living room but you hear that half of all data traveling over the Internet during prime time watching hours is Netflix streaming.

Ryssdal: Yeah.

Henn: Well, apparently half of that is actually streaming to an Xbox. So it's already huge before they've added all this new content.

Ryssdal: Does that mean that the days of Scientific Atlantic set-top boxes that we all have now are soon to be gone?

Henn: Yeah, the days may be numbered. You know, the cable companies don't really love the set-top box business. They'd like to get out of it. This might be one cheap easy way for them to do that. So stay tuned.

Ryssdal: Steve Henn. Thank you, Steve.

Henn: Sure thing.

Mon, 05 Dec 2011 06:00:00 GMT
How the cost of college could be lowered

Steve Chiotakis: Meanwhile, President Obama meets at the White House today with a small group of university and college presidents on how to reduce the cost of higher education. But what can the president -- or the federal government for that matter --actually do to force college tuition down?

Here's Marketplace's Steve Henn.

Steve Henn: Well... not much. Maybe a stern lecture, some embarrassment.

But David Breneman, a economics professor at the University of Virginia says colleges themselves could do a lot to reduce tuition and preserve quality education -- if that becomes a priority.

David Breneman: Most college president are hired for their supposed ability to raise revenue, not manage costs down.

Breneman is a former college president himself. He says cutting costs is tough: it creates fights.

Breneman: Frankly, if there is any hope of getting costs under control it's going to come from some form of technology involvement.

This semester at Stanford, professor Peter Norvig tried an experiment. He opened up his class to anyone online -- for free.

Peter Norvig: Maybe we'll get 10,000 people. And I said, "Nahh."

In the end 140,000 students from all over the world signed up. Norvig hopes this is just the beginning of what tech can do in higher ed. Maybe more paying students could lead to lower prices.

In Silicon Valley, I'm Steve Henn for Marketplace.

Mon, 05 Dec 2011 06:00:00 GMT
Is Carrier IQ spying on you?

Hidden software in your smartphone might be spying on you. Until an uproar this week, chances are you had never heard of a company called Carrier IQ, but if you own a smartphone, it's possible this little California company has collected lots of information about you.

Carrier IQ makes software that has been pre-installed on mobile phones used by millions of consumers. "It is installed by the wireless carriers like Sprint and AT&T,"  says Chris Soghoian, a security and privacy researcher at Indiana University. "It is insanely difficult to remove. In fact, you probably have to violate your warranty and perform the equivalent to a lobotomy to remove it from your device."

The software is supposed to provide the wireless carriers with diagnostic information on the ways that consumers are using their phones.

"So this could be your signal strength, how many calls are dropped. But to provide I guess as broad a base of data as possible, the software also captures every keystroke that is entered on the device, which can include your passwords and the web pages you're viewing and the emails and the text messages that you're sending. It can also capture your location, the applications that you're using on your device," Soghoian says.

Carrier IQ declined to speak with Marketplace for this story; however it did issue a statement, saying "While we look at many aspects of a device’s performance, we are counting and summarizing performance, not recording keystrokes or providing tracking tools."

However, Trevor Eckhart, a 25-year-old software developer, posted this video:





 It shows that, in fact, the Carrier IQ on his Android phone was doing exactly that -- logging keystrokes -- even recording text messages before he saw them.




Although researchers including Soghoian say that although the software maybe capturing keystrokes, location and text messages, it doesn't mean it's transmitting that information back to the wireless carrier.

"But you do have this secret gremlin in your phone, watching everything you're doing" Soghoian says. "And the fear that many people are expressing is that this software hasn't really been vetted by the companies that make smartphones; it hasn't undergone thorough security review; and even if the carriers have great intentions and Carrier IQ is not trying to do anything sneaky, it still creates a goldmine for hackers or other nefarious persons who might later want to access this data. It just simply isn't secured very well."

Soghoian says the bigger issue is that millions of users didn't even know the software was there. "This Carrier IQ scandal is actually a mere symptom of the larger problem, which is the carriers are the ones that are deciding which functionality is enabled and disabled on our devices," he added.

Researchers are still sorting out exactly which phones in the U.S. are infected. Phones sold by AT&T and Sprint seem to be the most likely candidates both companies acknowledged they use the software. Verizon has said that they do not install Carrier IQ.

Apple's iPhone was designed to work with this software -- but unlike some other phones, you had to chose to turn it on.

Here's Carrier IQ's most recent statement, issued last night:

Operators Use Carrier IQ Software Only to Diagnose Operational Problems on Networks andMobileDevices.










Fri, 02 Dec 2011 06:00:00 GMT
Privacy Scare for Android You probably have never heard of Carrier IQ, but there’s a chance the company knows all about you.

The Mountain View, California-based firm’s software has been installed on millions of phones. Trevor Eckhart, an Android developer based in Connecticut, discovered it on an Android phone and analyzed what it does. He realized that the software secretly logs key strokes - pretty much records everything you are doing. He made a video about it.

Watch it and you can see the software logs text messages and encrypted web searches. On this phone at least Carrier IQ is grabbing most everything the user is doing. However, it appears the software behaves differently on different phones. On the iPhone it appears to collect less information and only sends it to carriers during diagnostic tests.

Carrier IQ says it does not log key strokes and the software helps identify "dropped calls and poor service" and "makes customer service quicker, more accurate, and more efficient."
The dispute between Eckhart and Carrier IQ has been simmering for about a week. Eckhart labled it a “root kit.” Them’s fighting words. Basically he’s saying  Carrier IQ built a secret back door to spy on what cell phone customers are doing. One law professor is suggesting the company is violating wiretapping laws.

Carrier IQ responded by threatening to sue Eckhart then backed of when the the Electronic Freedom Foundation came to his aid.
Thu, 01 Dec 2011 06:00:00 GMT
Spotify adds apps Spotify has always resembled the original Napster. It even has some of the same backers. Like Napster, you log on and pick the songs you want to hear. It’s a giant celestial juke box in the sky, and unlike FM radio (remember FM radio?), or Pandora where you tune in and a playlist is created for you.

But if you don't know what you want to listen to, you can be lost. The new apps should help.

Spotify has introduced apps, making it possible for app developers to build new services on top of its platform. Now when you log into the streaming music service, you’ll see a selection of apps on right-hand side. Publishers like Rolling Stone and record labels can create content with links to songs - even buying concert tickets could be built right in.
Thu, 01 Dec 2011 06:00:00 GMT
Why can't Apple's Siri find abortion clinics? Siri, the iPhone’s new digital assistant, might be able to help you hide a body in a nearby swamp, or find a prostitute, or just tell you what to wear to work in St. Paul on an early December morning. But recently, when it was asked to help find an abortion clinic in Manhattan, it came up blank.

Apple got some heat about this online this yesterday. Today, the company said Siri was not making a political statement, merely struggling with a glitch in the software. Anyone who has played around with Siri will understand (even if Siri might not).

Turns out when you talk to Siri, syntax matters. A lot. When I asked it for a Planned Parenthood this morning, Siri delivered. It found three locations within a few miles of downtown St. Paul. When I asked for abortion clinics, it struck out.

Truth be told, Siri is not all that smart. Despite more than a month of trying, Siri still can’t pronounce my Mom’s somewhat unusual Texan name, Suella. It can not comprehend or remember that my wife Emily is beautiful. Apparently I have to chose: my wife can be named beautiful or my wife can be named Emily.

Siri, beautiful is an adjective!

“Stephen, I don’t know what you mean by beautiful is an adjective.”

She just doesn’t get it.

Thu, 01 Dec 2011 06:00:00 GMT
Get paid to share your data Imagine a world where advertisers bid for a bit of your time and social networks paid for your data or the content you create.

I love this idea. Latanya Sweeney, a professor at Harvard, has talked it up, and now, finally, there’s a crop of social network businesses trying to make it work.

One is called Chime.

Instead of simply creating a free service like Facebook and then keeping all the money for itself by selling targeted advertising and data, Chime is offering to split the cash with the people who create the content: that's you.

Another start-up called Personal allows members to create online lockers of personal information and then allows them to chose to share that information with selected friends.

But as Advertising Age reports that’s just step one:



Thu, 01 Dec 2011 06:00:00 GMT
Amazon’s Kindle Fire faces more questions about privacy
When Amazon built the new Kindle Fire, it created a web browser specifically for the tablet. That browser, called Silk, lives not only on the Kindle Fire itself, but also on Amazon’s huge servers in the cloud.  Using remote servers to capture and load web pages makes browsing the web on the Kindle Fire much faster, but it also could give Amazon lots of data about what exactly you are doing online.

Rep. Ed Markey (D-Mass.) wants to know more about how Amazon will use all the information it can now collect.  Markey has been asking the Seattle company for more details about how its browser works since shortly after the Amazon Fire was unveiled. Unfortunately for Amazon, the Congressman still is not satisfied with the answers he’s getting.

"Amazon is collecting a massive amount of information about Kindle Fire users, and it has a responsibility to be transparent with its customers."

"Amazon's responses to my inquiries do not provide enough detail about how the company intends to use customer information, beyond acknowledging that the company uses this valuable information," Markey said in a statement. "Amazon states 'Customer information is an important part of our business,' but it is also important for customers to know how the company uses their personal information."

Hearings anyone?
Thu, 01 Dec 2011 06:00:00 GMT
What remains of Napster

Steve Chiotakis: Napster is going the way of eight-tracks and cassettes. The music file sharing service was bought by Rhapsody, and by tomorrow will be completely merged into it. It's been more than a decade since an unknown college freshman rocked the music business with his idea of Napster.

Marketplace's Steve Henn reports.

Steve Henn: Shawn Fanning created Napster in 1999. It allowed college kids -- and quite a few grownups -- to instantly share music online.

Max Dawson is a media professor at Northwestern University. He says Napster set a standard that streaming music businesses are still trying to match.

Max Dawson: The sort of ease of use, the instantaneous access, that sort of celestial jukebox ideal.

Dawson says Napster was ahead of its time. It created a peer-to-peer network that foreshadowed social media today.

Dawson: Marc Zuckerberg was still in Pampers. And Friendster hadn't even debuted yet.

But the major record labels saw Napster as a tool for pirates. The industry sued and forced Napster to abandon its original business model.

The brand name lived on, but Napster never really recovered -- and neither did the music business. Downloads didn't stop. Eventually, Apple convinced the big labels to start selling songs online for 99 cents.

In Silicon Valley, I'm Steve Henn for Marketplace.

Wed, 30 Nov 2011 06:00:00 GMT
Will Facebook get serious about online privacy?

Kai Ryssdal: We can debate all day long whether there's any such thing as real online privacy in this digital day and age, but we do like to believe there is. Which is why we tend to get upset with companies that take that belief for granted.

Facebook has settled charges it violated users' personal privacy by sharing their information with clients and others without their consent.

Marketplace's Steve Henn has the details. Hey Steve.

Steve Henn: Hey.

Ryssdal: So Facebook, privacy -- big, long, complicated topic. What's this specific case about?

Henn: Facebook got in trouble for deceiving consumers, according to the FTC. Basically telling them they can keep their information on Facebook private and then repeatedly allowing it to be shared or made public.

Ryan Calo's the director of privacy at the Stanford Center for Internet and Society.

Ryan Calo: The main obligation you have in online privacy is that you have to give notice of your practices, and you have to adhere to that notice.

So basically, Facebook didn't keep its promise.

Ryssdal: Give me some examples, like what?

Henn: You might remember back in 2009, it made personal information like friends lists public, and it didn't warn consumers those changes were coming. You know, it's shared personal data with third-party app vendors, even when they didn't need that data to make their apps work. Facebook said it would verify the security on apps when it didn't. It promised it wouldn't share some information with advertisers and it did. And Facebook also failed to completely delete accounts after promising users it would, so you could delete your account and videos or photos you had posted on it might be available to others for months afterward.

Ryssdal: So what are the terms of the deal? What's the punishment, I guess, if you will?

Henn: Basically, Facebook is promising not to do it again. You know, it really, really means it this time. It's not paying a fine, but it is agreeing to allow independent auditors to come in and audit its privacy policies every six months for the next 20 years. Basically, when it makes a promise about how it's going to use your data now, there's going to be someone else coming in to make sure that they're actually living up to it. They're also promising to affirmatively get users' permission before they change their privacy policies again. So if they want to change how your data's shared, they actually have to ask you first and you have to say yes.

Ryssdal: Yeah, are they going to make it easier, though? Because if you want to go into Facebook and change your privacy stuff, it takes you three hours! It's horrible.

Henn: There are no details in the agreement about that. So how that process works is going to be up to Facebook, but if they change the rules of the game, they have to ask you and you actually have to click a button that says yes.

Ryssdal: Talk to me for a second about Google and about Twitter and other social media sites or wannabe social media sites that have a lot of our data -- how does this apply, if at all?

Henn: Well, you know, the FTC's already negotiated similar agreements with Google and Twitter. And the FTC says this is just more evidence that it takes protecting consumers' online privacy really seriously. And I think for large companies, the message is pretty clear: If you make a promise about how you're going to use consumers' data, you have to live by it; you can't change the rules mid-stream and say you're going to do one thing with information about one of your customers and then do another.

Ryssdal: Here's the thing though: Mark Zuckerberg -- nice guy though he may be -- he and his company have promised many, many times in the past that they're not going to do this again. And yet they always do something to privacy settings that makes it turn out bad for the consumer. How do we know they're going to keep their word?

Henn: I think it really comes down to the independent auditors, the fact that they're signing this agreement; if they don't live up to the agreement, there will be fines. There'll likely be class-action lawsuits because of this and any case, and certainly would be if they went down this road again.

Ryssdal: Do you trust Facebook?

Henn: Maybe.

Ryssdal: Steve Henn in Silicon Valley. Thanks Steve.

Henn: Sure thing.

Tue, 29 Nov 2011 06:00:00 GMT
'Dynamic pricing' spreads beyond airline flights

Tess Vigeland: Happy Thanksgiving weekend, everyone. Hope your travels went smoothly -- especially because in all likelihood you paid through the nose for those airline tickets. Anyone who's booked airfare knows the system is rigged against you. The airlines have computer algorithms that make it nearly impossible for you to pay the same as the guy next to you on the airplane. It's called dynamic pricing and we've covered it here before. But here's the bad news as you enter this holiday season: Other industries are starting to use the same method to price their products.

Here's Marketplace's Steve Henn.

Steve Henn: By now, most airline passengers know that airlines change their prices constantly to try and squeeze as much money from travelers as possible. It's why you may have paid twice as much for your seat as the guy sitting next to you. This process is called "dynamic pricing" and a few industries have been using it for years. But now...

Andy Boyd: Oh, it's a hugely expanding field.

Andy Boyd is a dynamic-pricing pioneer. He and wrote some of the earliest computer algorithms for airlines to change prices online automatically.

Bob Phillips is another pioneer. He says as more of the economy moves online, this practice is spreading.

Bob Phillips: Hotels, rental cars, freight...

Boyd: Ticket sales for concerts and for baseball games...

Phillips: Automotive, retail, consumer package goods, cruise lines...

Phillips says when its done right, dynamic pricing can boost profits at all sorts of businesses, like banks. Phillips, who's also a professor at Columbia University, has created a formula that mixes a consumer's credit score with a his or her likelihood to shop around. Banks use that combo score to know whether to offer that consumer a competitive interest rate or a high one.

So what does this mean to banks' bottom line?

Phillips: No, I can't give you a ball park. Let's say it can increase operating profit on the order of 7-12 percent.

And that's money coming out of consumers' pockets.

Keep that in mind while I bring in Oren Etzioni, a computer science professor at the University of Washington. Etzioni was flying to his brother's wedding a decade ago when he asked the traveler sitting next to him how much he paid for his ticket. Turned out that guy got a much better deal than Etzioni did.

Oren Etzioni: And I was actually somewhat incensed. I said, Wait a minute, why should that be? And I started thinking about can we use computer methods -- algorithms -- to figure out when is the right time to buy your ticket?

In other words, beat the dynamic pricing geniuses at their own game. Etzioni started collecting online price data from all the airlines -- then he created his own formula that could predict when the airlines would raise or lower their prices. His company was bought by Microsoft. And today, when you search for flights on Microsoft's Bing search engine, you'll see an arrow letting you know you if the price of that ticket is likely to head up or down.

Now Etzioni wants to do it again. He and his partner Mike Fridgen have launched

Mike Fridgen: So our tagline is "no regrets."

This time, they're predicting the prices of electronics -- phones, cameras laptops and flat-screen TVs. When Mike came by my office, my wife and I were debating whether or not to buy a new television.

Fridgen: Fantastic. Let's check 'em out. We're going to help you decide if you should buy or wait.

When we logged on to, it showed me the lowest price available for the TV we were looking at -- anywhere in the country. It showed me a price history for the product and when the next model would come out. Decide recommended we buy it -- and we did.

But what makes this site different is that it offers its best guess at whether the prices of those TVs are going to go up or down. Prices for electronics tend to bounce around.

Fridgen: You can see drops of $100-200 over the course of a couple of days.

Sometime though, computerized pricing goes haywire. Earlier this year, two computer pricing algorithms ran amok on Amazon. The algorithms eventually set the price of a classic textbook on fruit flies at more than $24 million.

In Silicon Valley, I'm Steve Henn for Marketplace Money.

Sun, 20 Nov 2011 06:00:00 GMT
Is Angie's List ready for its IPO?

Jeremy Hobson: Another online company goes public today. This time, it's Angie's List, which lost $40 million last year. The company is a hub for consumer reviews for plumbers, lawyers and the like.

Marketplace's Steve Henn has more now from Silicon Valley.

Steve Henn: Angie's List has been around the block. It's older than Google. It began before the first Internet bubble inflated, way back 1995. It's even shown up on game shows.

Alex Trebek on "Jeopardy": There's Craigslist and her list, named for Ms. Hicks, who was frustrated when trying to find a good contractor. Tom.

Tom on "Jeopardy": What is Angie's List?

At first blush, its business model seems kind of brilliant. Angie's List bundles up and sells consumer reviews. It doesn't pay the reviewers a dime, but today more than a million people subscribe to Angie's List for $30 to $60 a year. The company makes even more money by allowing well-reviewed businesses to advertise. So how is it that Angie's List is still in a hole?

Nick Einhorn: They are spending a lot on marketing.

Nick Einhorn is with Renaissance Capital. He says the company spends around $80 on marketing to sign up a single new subscriber. Einhorn says the question of investors is whether all that spending will ever pay off.

In Silicon Valley, I'm Steve Henn for Marketplace.

Thu, 17 Nov 2011 06:00:00 GMT