Tuesday, October 31, 2006

Satellite Radio Is Asked to Pay More
Music Group Wants Royalty Increase

By Chris Kirkham
Washington Post Staff Writer
Wednesday, November 1, 2006; D04

A music industry group is asking XM Satellite Holdings Inc. and Sirius Satellite Radio Inc. to pay at least 10 percent of their revenues for the right to play songs over their networks.

Unlike land-based radio stations, which pay royalties only to songwriters and music publishers, federal law requires satellite radio, digital cable and Internet companies that broadcast music to pay the artists and record companies.

The two subscription satellite radio companies have been paying about 6.5 to 7 percent, analysts estimate, although the figures are not publicly disclosed. That agreement expires at the end of this year, and the Copyright Royalty Board, an arm of the Library of Congress, will determine the rates the companies pay for the next six years.

Both District-based XM and Sirius, based in New York, have offered to pay less than 1 percent of their revenues in royalties, a figure the music industry regards as excessively low.

"I'm not even sure that amount would pay the talent fees for Howard Stern's guests, and that's just insulting" said John L. Simson, executive director of SoundExchange, the nonprofit group representing artists and record labels that proposed the 10 percent rate. "It's clear that we are a major component of their success, and we ought to be treated as such."

SoundExchange suggested that XM and Sirius pay either 10 percent of revenue or $1.10 per subscriber, whichever is higher, during the first year of a new contract. At the per-subscriber rate, XM could face royalties of about $9 million, assuming it achieves its forecast of signing up as many as 8.2 million subscribers by the end of the year.

XM, like Sirius, has yet to make a profit, and its stock price is down for the year.

Under SoundExchange's proposal, rates would gradually increase to 23 percent of sales, or $2.75 per subscriber, by the year 2012, because of the projected increase in the number of satellite radio subscribers.

In a written statement, the satellite companies countered that "consumers, artists and the recording industry all benefit from satellite radio's multibillion-dollar investment in a dynamic new promotional platform for music."

They also took issue with SoundExchange's proposal to increase rates over time, noting that the value of a performance shouldn't change.

The Copyright Royalty Board will hold hearings before it decides on new rates, a process that many say could take 18 months. Until then, XM and Sirius will continue to pay the current rates. If an increase is approved, they will be required to pay the difference retroactively.

SoundExchange is responsible for distributing royalties to artists and record labels based on the number of times a song is played on satellite radio or satellite television or by webcast.

Because of the way copyright laws have evolved, performers still get a small amount of royalties compared with the publishers and songwriters, who control the copyright.

Last year SoundExchange said it collected $43 million in royalties and expects to collect about $55 million to $60 million this year. That's compared with about $780 million collected by music publishers and songwriters, SoundExchange said.


Intelligence agencies launch 'Intellipedia'

By Greg Miller
Times Staff Writer

4:52 PM PST, October 31, 2006

WASHINGTON -- The CIA and other U.S. intelligence agencies have created a new computer system that uses software from a popular Internet encyclopedia site to gather input on sensitive topics from analysts across the spy community, part of an effort to fix problems that plagued prewar estimates on Iraq.

The new system, dubbed "Intellipedia" because it is built on open-source software from the Wikipedia Web site, was launched earlier this year. It is already being used to assemble intelligence reports on Nigeria and other subjects, according to U.S. intelligence officials who on Tuesday discussed the initiative in detail for the first time.

After being criticized for downplaying dissenting views on Iraq's alleged weapons programs, "we're trying to transform the way we do business," said Michele Weslander, a senior official overseeing the initiative for the director of national intelligence, John D. Negroponte.

The system allows analysts from all 16 U.S. intelligence agencies to weigh in on debates on North Korea's nuclear program and other sensitive topics, creating internal Web sites that are constantly updated with new information and analysis, officials said.

The system, which is not accessible to the public, is divided into three classification categories ranging from "sensitive but unclassified" to "top secret." Officials said that the program is still under development and has not replaced existing procedures used to create intelligence reports delivered to President Bush and other policymakers. But it is being used to assemble preliminary judgments for a forthcoming National Intelligence Estimate on Nigeria and could someday supplant the more cumbersome mechanisms used to create such reports.

"I think in the future you'll press a button and this will be the NIE," said Michael Wertheimer, assistant deputy director of national intelligence for analysis.

The system is based on the software used by millions of Internet users to create encyclopedia entries at www.wikipedia.org. But unlike that largely anonymous environment, the individuals who add material to pages on the intelligence system have to attach their names to their contributions.

More than 3,600 analysts and other intelligence officials have registered to use the service since it was launched in April, officials said.

In a meeting with reporters at the Office of the Director for National Intelligence, officials showed how analysts from multiple agencies had used the network to post frequent updates on recent events, including the crash of a small plane into a New York City apartment building last month and North Korea's test of a missile in July.

Officials said they were not making the network available to members of Congress or other policymakers, largely because of a reluctance to disseminate material that analysts view as a work in progress.

The officials acknowledged some concerns, including the possibility that making sensitive information available to a much larger group of intelligence officials could increase the risk that secrets might be leaked to the press. They said that partly for that reason, detailed information obtained from satellites or from human sources is being kept off the system.

But they stressed that disseminating material to the widest possible audience of analysts is key to avoiding mistakes like those that contributed to erroneous assessments that Iraq possessed stockpiles of banned weapons and was pursuing a nuclear arsenal.

One official said that dissenting views that were treated as footnotes in prewar estimates on Iraq will be much more prominent on the new system, and that doubts about sources are likely to surface earlier and be more difficult to ignore.

"It moves us away from homogenized intelligence," said Sean Dennehy, a CIA official involved in creating the new system.

Sunday, Oct. 29, 2006
Borat Make Funny Joke On Idiot Americans! High-Five!
Sacha Baron Cohen is either horrible or hysterical. You choose

The giant mustache, the mesh underwear, the car dragged by mules, the wine made of fermented horse urine--sure, it seems as if comedian Sacha Baron Cohen is mocking Kazakhstan. He is not. He's mocking you. After all, you're the idiot who doesn't know where Kazakhstan is or if it's the kind of place where, as Borat claims, there's a "Running of the Jews." And more important, you're the idiot who believes so much in cultural relativism that you'll nod politely when a guy tells you that in his country they keep developmentally disabled people in cages. Or, worse yet, you're the person who tells him it's not a bad idea.

That's Baron Cohen's awesome trick: preying on the fear, fascination and, most of all, patronization of the other--the foreigner, the rapper, the gay guy. For the trick to work, we have to believe that other countries are so inferior, it's plausible that their citizens would wash their faces in the toilet. He's been exploiting this by videotaping the reaction of unsuspecting people to his characters' horrifying behavior since 1998, when he started on England's short-lived The 11 o'Clock Show, and later on HBO's Da Ali G Show. His characters--aspiring rapper Ali G, gay Austrian fashionista Brüno and Borat Sagdiyev, the U.S.-loving Kazakh--get away with astonishing rudeness because people are too weirded out by youth culture, flaming gay guys and foreigners to question them. When one of his guises gets too famous to sucker people into being interviewed, he molds himself into another one. He could be any outsider society avoids by giving a pass--a religious freak, a veteran, an old man. "Ali G played on people's ability to think that young people are so different from them they wouldn't recognize absolute stupidity and the fact that they were being made fun of," says Andrew Newman, a writer and producer on The 11 o'Clock Show. "And now Borat does the same thing but with countries they haven't heard much about."

In his new unscripted film, Borat: Cultural Learnings of America for Make Benefit Glorious Nation of Kazakhstan, Baron Cohen takes his interactions with real people and strings them into a plot: a mockumentary about American culture gets sidetracked by a cross-country quest to meet and "make sexy time" with Pamela Anderson. Along the way, the hidden cameras capture a Southern dinner party's dismay with Borat's bathroom habits, and the guests' reaction on the arrival of his date--a black hooker. All the marks are unaware they're being fooled, which is hard to believe, especially when a gun dealer responds to the question "What kind of a gun would you recommend to kill a Jew?" with a nonchalant "I'd recommend a 9-mm or a Glock automatic." (Baron Cohen is Jewish.) The detailed legal releases, which it seems no one ever reads, were presented to people as if they were permission forms for being interviewed by a Kazakh TV show.

There hasn't been a comedy this edgy in a long time. And there certainly hasn't been one that the comedy élite is this excited by. After seeing an early screening, Curb Your Enthusiasm creator Larry David jokingly asked Borat director Larry Charles, a friend, to put his name on the movie. Even though many people have not heard of the film--Fox last week reduced the number of screens the movie would be shown on from more than 2,000 to 800 for this weekend's opening--it's being discussed on college campuses everywhere. Which is impressive, since a big part of the marketing campaign has been conducted inadvertently by the government of Kazakhstan. It first threatened legal action against Baron Cohen, then took out a somewhat unsuccessful four-page tourism ad in the New York Times ("The country is home to the world's largest population of wolves"), and finally gave up and invited the comic to visit. Baron Cohen is considering the offer as the ultimate opportunity to conflate his made-up character with reality. "I would absolutely love to go," says Borat director Charles. "Even if we got shot down on the tarmac, it would be a good way to go. That's pretty good bonus material for the DVD."

Charles and his tiny crew were just about that fearless during the making of the film. Baron Cohen was more so. For the two-month shoot, he was in character from early in the morning until night. The crew shot so much footage that Charles is trying to sell the unused parts to HBO as a series. Even when the cops came--which the director says happened at least 50 times--Baron Cohen never dropped character. It's an impressive, perhaps insane, performance: Johnny Knoxville with a sense of humor, Andy Kaufman with a desire to please, Peter Sellers set loose on the public instead of David Niven. "It's like Marlon Brando's performance in On the Waterfront," says Charles. "Before that, everything was stylized, the John Barrymore school. After that, you couldn't act in the old style anymore. I believe that Sacha's performance does the same thing."

At a time when the major TV networks can't figure out what makes people laugh, Baron Cohen, 35, is the leader of a brand of aggressive, cheaply shot street comedy that stretches from the lowbrow Jackass to the more intellectual Stephen Colbert. It's the honesty of real reactions, mixed with the personal risk, that makes kids giggle in discomfort. Picking Kazakhstan, a real country, is part of that Andy Kaufmanesque confrontation, as is Baron Cohen's insistence on doing interviews as Borat. "There's something funny about it being a genuine place," says fellow British comedian David Baddiel, who went to the same private high school and Cambridge a few years before Baron Cohen. "That's what makes Sacha's comedy modern, because if that had been an older comedian, Borat would have been from Stupidlandia or something."

By not even winking at his ruse, Baron Cohen is able to get his interviewees to show their inner selves, and it often isn't pretty. By making misogynistic, racist statements in the friendliest way and asking people to high-five over them, he gets folks to say things they wouldn't if they knew the film was going to be shown in their own country. "Political correctness has led to a more civil society because people with racist attitudes have taken them underground," says Borat producer Jay Roach, who directed Austin Powers and Meet the Parents. "It's a fascinating social experiment to observe this character walking amongst us, revealing this."

Clueless, desperate-to-fit-in, optimistic foreigners are a classic comedy trope--the Clouseaus, Cousin Balkis, Morks, Two Wild and Crazy Guys--because they spotlight the ridiculousness that we accept. When he's at a rodeo, driving the crowd into a frenzy with anti-Iraqi, pro-war cheers, Borat demonstrates how much aggression is intertwined with patriotism. And his attempts to be American pinpoint exactly how the world sees us: garish, violent, nouveau riche, a land of Donald Trumps and 50 Cents.

If Borat does well, it could change comedy in two ways. First, if high-grossing movies can be made with just a video camera and a few guys in a van, the studios might find real competition from every fool with a digital camera and access to YouTube. Second, it might limn the generational divide in the way music used to. Because any normal person over 35 is going to find Borat horrifying. What exactly is funny about being invited to nice people's homes and handing them your feces?

But Charles doesn't look at it like that. "I never felt like we tricked anyone in a cruel way. We gave people a chance to be themselves," he says. Some come out well, and others don't. The difference is that if you're over 35, you think you have the right to keep your regrettable moments private. If you're under 35, you realize that everything is public now. Even if your racist rant were for a show in Kazakhstan, it would be on the Internet anyway. Never trust anyone under 35. Especially if he has a video camera.


Google Catches The Wiki Wave
Rachel Rosmarin, 10.31.06, 4:30 PM ETBurlingame, Calif. -

Joe Kraus, chief executive JotSpot, joined an exclusive club Tuesday. All 27 employees of his tiny company, which creates "wikis" and other online collaboration tools, will pack up and move six miles from Palo Alto, Calif., to Google's Mountain View headquarters.

Kraus' company joins a select roster of startups that have found new homes at the Googleplex in recent years. “Since we're just getting started on a long and exciting road in online collaboration for both consumers and our enterprise customers, joining forces with the JotSpot team comes at a great time,” wrote Google Vice President of Product Management Salar Kamangar on the company’s blog. Terms of the deal were not disclosed.

“It feels liberating,” Kraus said Tuesday afternoon. “Now I’m not the only one whose problem it is to figure out the business model.”

Three months ago, Kraus’s company was just one of many trying to figure out how to make money by giving consumers and corporations a place to edit and store files together online--and fending off competition with deep pockets.

“This is so hard as a startup,” Kraus told Forbes.com on Aug. 31. “It means you’re competing for early adopters--which means competing with Google. And Google doesn’t need to have its products make money.” (See: "Office 2.0 Redux.")

Now that he’s joined his competitor, Kraus’ company has stopped charging its 30,000 paying customers, who previously forked over up to $200 per month. JotSpot also has several hundred thousand users working with its free offerings; the company will retain relationships with corporate customers like Intel, Symantec and eBay.

“Google will ultimately figure out a successful business model from its whole suite of collaboration technologies, whether that’s advertising or something else,” says Kraus.

After acquiring online word-processing product Writely earlier this year (see: Google’s "Office Invasion Is On"), Google merged it with its own online spreadsheets program into one service. JotSpot also makes online spreadsheet software, which means Google will likely combine the products or eliminate one of them.

Google is clearly interested in bulking up it office software offerings. In addition to word processing, the company now offers a calendar, Web page design software, e-mail and spreadsheets. The price tag: zero. Much like Google's YouTube acquisition, the move is a no-lose proposition for Eric Schmidt and crew--if the gambit fails, the company has invested only a tiny fraction of its enormous resources. And if it pans out, it means more users will spend more time on Google sites, which means more revenue for the search giant and big headaches for software giant Microsoft.

Oct. 31, 2006

The viral revolution
(Tony Maciulis, MSNBC senior producer)

Tony Maciulis
Senior producer


After some much-publicized candid camera moments on the campaign trial, we were quick to dub this “the YouTube election.”

And, without a doubt, YouTube and other video sharing sites are changing the political game rapidly. There is George Allen’s “macaca” moment, Senator Burns nodding off at a hearing, and Harold Ford balking in Memphis, just to name a few.

Gone are the days when a candidate could make a mistake or test a stump speech in a small district without the fear of national humiliation. Any cell phone at any venue can become a weapon for the opponent.

But the Internet is changing the political landscape in a very positive way, as well. The Web provides an opportunity for every American to participate in the political process.

First, both parties have made use of the Web to make inroads in previously neglected districts.

For Republicans, that came in the form of a “netroots” campaign through websites like GOP.com. That site has a social networking section called “My GOP,” just like the popular site “My Space.” Operatives use it to identify registered Republicans in every district and then connect with them, whether in the virtual or the real world.

Democratic bloggers have made a real push to get more would-be Dems into the game. This election, Democratic candidates are running in 425 congressional races, up from 400 two years ago.

With just 15 seats standing between “minority” and “majority” in the House, this kind of effort is invaluable.

And the Web also provides a chance for unknowns or third party candidates to attract attention.

The 5th District in Oklahoma is considered “safe” for Republican candidate Mary Fallin, but there is a third part candidate on the ticket—Matthew Horton Woodson, an Independent with some, well, unique views on 9/11.

I discovered him, and his “Send Me a Buck” campaign, on MySpace. You’ll find lots of other candidates there, as well, all hoping for some help from their cyber buddies.

And it isn’t so crazy. Iraq vet and Democrat Paul Hackett came really close to beating Rep. Jean Schmidt in the solidly GOP Ohio District 2. Almost his entire war chest came from bloggers.

Of course, the gold standard today is still Howard Dean’s amazing Web campaign in 2004. He raised nearly $25 million in online donations from people who each gave $100 or less.

Joe Trippi was correct, the revolution will not be televised. But it will be viral!

The New York Times

October 30, 2006

BBC Plan for Web Ads Draws Fire

Critics in England have attacked plans by the BBC to sell advertising on its Web site. Now some of those critics inside the BBC are redoubling their efforts.

Employees from the Web site have circulated a 10-page document condemning the proposal, which they say could lead to less serious journalism and damage the BBC’s reputation. Management is “not seeing the bigger picture of what the BBC is really about,” said one employee, who did not want his name used for fear of reprisal. Earlier this year, more than 170 BBC Web site employees signed a petition protesting the idea.

The BBC, which is financed mainly from fees paid by British television owners and government grants, does not carry advertising on its public television channels, although BBC World, the corporation’s television show outside of Britain, does carry ads, as do its magazines. The BBC Web site is viewed by four million people a day, though the ads will be visible only to readers outside Britain.

Jennie Allen, a spokeswoman for BBC Worldwide, said, “We’re still working through the approval process.” She said the BBC hoped that the ads would go up before the end of its fiscal year in March.

BBC’s increasing commercialization is highly controversial in Britain. For-profit competitors complain that the corporation will steal valuable advertising revenue from them, and analysts say the BBC may be traveling down a slippery slope.

“In the end they have to be extremely careful about how they do it to be sure they don’t slide into becoming a commercial broadcaster,” said Roy Greenslade, a professor at City University and media critic at the Guardian newspaper.

If the BBC is successful at taking ads, people may say that the fee they charge the television-owning public should be removed, Mr. Greenslade said. “That immediately removes the independence that the broadcaster has,” he said, making it subject to the same commercial pressures of any other broadcasting organization.

BBC journalists worry that adding advertising to the Web site will lead to changes in news coverage. “There has to be a chance that advertisers wouldn’t care about us doing stories on poverty and African politics, they’d want us to do more stories on Madonna and Kylie,” one Web site employee said, referring to the singer Kylie Minogue.

Ms. Allen said the company was well aware that the idea was not popular with some employees. “There is absolutely no question of advertisers having any influence over the content,” she said.

Times Online
Extract from Richard Dawkins' new bookdetails of the 50th London Film Festival

MTV founder at front of queue to buy Hard Rock


THE co-founder of MTV, the pop-video television channel, is being tipped as the leading bidder for Hard Rock Cafe, the restaurant chain put up for sale by Rank Group, the British leisure company.

Robert Pittman, also a former chief operating officer of AOL Time Warner, the American media giant, is thought to be planning to buy the restaurant chain through his investment vehicle, Pilot Group.

He is one of a group of suitors for Hard Rock, which is famous for having its walls covered with rock-music memorabilia, including guitars and stage costumes. It has outlets in 40 countries, and sells 6m hamburgers a year.

Other contenders include the British private-equity groups Permira and TDR Capital, and the American buyout firm Apollo. Hard Rock is expected to fetch more than £500m.

The deadline for the next round of bids is November 6. Competition is “very intense”, according to one source involved in the auction.

Rank announced in July that it would carry out a strategic review of Hard Rock to find the best way to take the operation to a “new phase of its development”. It hired Merrill Lynch, the investment bank, to carry out the review. That process led to the current auction.

Pittman has long been associated with the music industry. He started his career at the age of 15, working as a disc jockey on local radio stations. He became programme director of an influential station in New York before making the jump into cable television and helping to launch the channel that would become MTV.

He left the channel, which turned the use of the pop video into an important promotional tool, in 1986 after a failed attempt to launch a buyout of the business from its parent company, Viacom.

He went on to join Time Warner in 1990, heading various divisions before leaving to run AOL, and rejoined Warner when the two companies merged in 2000. Pittman left two years later and in 2003 founded Pilot. He has since recruited several former colleagues from AOL.

Although Hard Rock is owned by a British company, most of its business is in America and analysts think it is likely the company will be bought by an American investor.

But that has not deterred the likes of Permira, which is trying to build its presence in the US, or TDR, which has experience of the restaurant sector after its investment in Gondola, owner of Pizza Express.

Hard Rock was founded in 1971 by American entrepreneurs Peter Morton and Isaac Tigrett. The first site opened near Park Lane in London - and is still famous for its constant queues of tourists — but the business did not begin its international expansion until 1982.

Rank first became involved in 1990 when it bought Mecca, which had previously acquired Tigrett’s interest in the chain.

The business is run today by chief executive Hamish Dodds. He is widely believed to be keen on staging a management buyout.

Rank’s new chief executive, Ian Burke, has been continuing the programme of asset sales begun by his Mike Smith, his predecessor. Since taking over last March, Burke has sold the Clermont casino in Mayfair, as well as various parts of Rank’s film-duplication business, Deluxe.

Once Burke has completed the disposals, Rank will be left as a stand-alone casino-and-bingo operator. Many leisure analysts think it would then become a bid target.

The Maidenhead-based group would be the last remaining quoted casino company in Britain, after the takeovers of Stanley Leisure and London Clubs International.

Rank shares closed at 248p on Friday, valuing the group at £1.4 billion.

BBC News
MySpace 'to block illegal files'
A web browser views the front page of MySpace.com
MySpace will now scan music files on its site
Social networking site MySpace is to block users from uploading copyrighted music to its pages.

It will use a file-filtering application to scan old and new content to weed out any unauthorised material.

Illegal files, the company said, would be removed and persistent offenders would be banned from the site.

Online sites are coming under increasing pressure from the music industry to stop copyright infringment on their pages.

MySpace is staunchly committed to protecting artists' rights
Chris DeWolfe

Last week Google, new owners of video-sharing site YouTube, vowed the company would not tolerate any copyright violations.

Selling downloads

MySpace, which reportedly has over 90 million users, is to use technology from a company called Gracenote to review and identify copyright files on its site.

MySpace CEO and co-founder Chris DeWolfe said: "MySpace is staunchly committed to protecting artists' rights, whether those artists are on major labels or are independent acts.

"This is another important step we're taking to ensure artists control the content they create."

MySpace will also soon be allowing unsigned musicians to sell music downloads from their pages. It eventually aims to begin selling copyright-protected songs from major record labels.

CNET News.com

YouTube takes down Comedy Central clips

Now people will have to go to the Comedy Central Web site to get their Jon Stewart fix.

YouTube is removing from its site all copyrighted content from the Comedy Central Network after receiving a request to do so, The New York Times reported on Monday, citing the blog site Newscloud. The removal includes video clips from "South Park," "The Daily Show with Jon Stewart" and "The Colbert Report."

Content from "The Colbert Report," however, still appeared on YouTube as of late Monday afternoon. YouTube declined to comment on the report, referring instead to the company's general policy.

"We don't control the content on our site. Our users post the content on YouTube--including videos, comments and ratings. Our terms of use and language on the site make it clear that users must own or have permission from copyright holders to post any videos. We take copyright issues very seriously. We prohibit users from uploading infringing material and we cooperate with rights holders to identify and promptly remove infringing content," YouTube's Julie Supan said in an e-mail.

Comedy Central already offers free viewing of video clips from many of its shows on the MotherLoad. The clips usually appear alongside an advertisement.

The comedy network is certainly not the first to balk at unauthorized use of content on YouTube. At the request of the NBC network last June, YouTube removed a "Saturday Night Live" video clip, after which NBC Universal worked out a deal with YouTube allowing specific clips from shows like "Saturday Night Live" and "The Tonight Show with Jay Leno" to appear on the site. Since being acquired by Google, YouTube has also cut content deals with Universal Music Group, Sony BMG Music Entertainment and CBS.

YouTube has also informed those suing people who post videos for copyright violations on its site that it would provide "copyright owners with user identification information" (after receiving a valid subpoena). Such is the case with Robert Tur, the journalist whose footage of the Los Angeles riots appeared in several places on YouTube.

At least some of YouTube's popularity may be because of the readily available copyrighted material that the site makes accessible for free. However, in the wake of the Google acquisition, some analysts have speculated that the site could go the way of Napster, losing its bulk of users once lawsuits force it to crackdown on copyright violations.

Representatives from Comedy Central were not immediately available for comment.

Monday, October 30, 2006

The Times October 31, 2006

McCartney divorce: now the lawyers are suing


THE fall-out from Sir Paul and Lady McCartney’s divorce battle has already embroiled the media and PR agents in alleged leaks and mudslinging.

Now, what promises to be one of the most high-profile legal fights in history has hit the lawyers themselves.

Fiona Shackleton, Sir Paul’s lawyer, is suing Associated Newspapers over suggestions that she would indulge in smear tactics.

Mrs Shackleton and her firm, Payne Hicks Beach, have issued a rare claim over an article in The Evening Standard that carried the headline: “So, Macca — where’s Mr Nice Guy now?” The piece by A. N. Wilson referred to Mrs Shackleton’s role as the Prince of Wales’s lawyer in his divorce from Diana, Princess of Wales. The late Princess’s lawyer, Anthony Julius, is representing Lady McCartney.

In the article, published on October 20, Wilson said: “I personally always support Anthony Julius against Payne Hicks Beach clients, for example since Julius championed the People’s Princess against her horrible little husband.”

He went on: “Just as Payne Hicks Beach tried to make out that Lady Di was a manipulative or dishonest person, we all knew by the end of that divorce where the truth lay.”

Mrs Shackleton, who later received flowers from the Princess despite being on the other side, prides herself on refusing to indulge in smear campaigns or publicity stunts.

In addition, at the time of the royal couple’s divorce, she was a lawyer with Farrers, not Payne Hicks Beach.

Mrs Shackleton and Mr Julius have a mutual respect for one another and are respected in legal circles.

Her approach to the McCartney divorce is likely to be low-profile, sticking strictly to the legal rules of the game, despite reports that Lady McCartney will do a television interview or that taped accounts of Sir Paul’s previous marriage may enter the divorce proceedings. Mr Julius, 50, of Mishcon de Reya, is similarly keeping his head down.

Mrs Shackleton, 50, is married with two children and has risen to the top of her profession, despite famously taking a third-class degree at Exeter University. “I have become a role model for people with Thirds,” she once said.

Mr Julius, who is known as the man who gave the Princess her wings, is highly respected for his intellect: he took a first-class degree in English at Jesus College, Cambridge. He is divorced, and his second wife is the journalist Dina Rabinovitch. He has four children from his previous marriage.

Mrs Shackleton refused yesterday to comment on the claim. Associated Newpapers said: “We have received a claim and are considering it.”


Togetherness In Baghdad
A surreal facet of the Iraq fiasco is the lag between when a fact becomes obvious and when the fiasco's architects acknowledge it.
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By George F. Will

Nov. 6, 2006 issue - Many months ago it became obvious to all but the most ideologically blinkered that America is losing the war launched to deal with a chimeric problem (an arsenal of WMD) and to achieve a delusory goal (a democracy that would inspire emulation, transforming the region). Last week the president retired his mantra "stay the course" because it does not do justice to the nimbleness and subtlety of U.S. tactics for winning the war.

A surreal and ultimately disgusting facet of the Iraq fiasco is the lag between when a fact becomes obvious and when the fiasco's architects acknowledge that fact. Iraq's civil war has been raging for more than a year; so has the Washington debate about whether it is what it is.

In a recent interview with Vice President Cheney, Time magazine asked, "If you had to take back any one thing you'd said about Iraq, what would it be?" Selecting from what one hopes is a very long list, Cheney replied: "I thought that the elections that we went through in '05 would have had a bigger impact on the level of violence than they have ... I thought we were over the hump in terms of violence. I think that was premature."

He thinks so? Clearly, and weirdly, he implies that the elections had some positive impact on the level of violence. Worse, in the full transcript of the interview posted online he said the big impact he expected from the elections "hasn't happened yet." "Yet"? Doggedness can be admirable, but this is clinical.

Anyway, what Cheney actually said 17 months ago was that the insurgency was in its "last throes." That was much stronger than saying we were "over the hump" regarding violence. Beware of people who misquote themselves while purporting to display candor.

The latest plan to pacify Baghdad—announced in June, declared a failure in October—was called Operation Together Forward. But U.S.-Iraqi togetherness is a sometime thing. Last April, The Washington Post's Jonathan Finer reported from Hawijah, Iraq, on a joint patrol to search for roadside bombs. The Iraqis refused to ride in armored U.S. Humvees, preferring pickup trucks because a cleric told them that anyone killed in an "occupier vehicle" would not go to heaven. Eventually, after threatening them with jail, U.S. Army Lt. Aaron Tapalman browbeat them into Humvees:

"About an hour later, the patrol came across a white bag on the roadside that Tapalman suspected might contain a bomb. When he asked some Iraqi soldiers to move it off the road, their commander balked, saying it wasn't his job. 'It is your job to protect the people,' Tapalman said, increasingly exasperated. 'I can go and move it myself, and you know what? I will, but don't you think your people should see you doing that kind of stuff? Someday we're not going to be here anymore.' The Iraqi soldier declined again, apologetically, and drove away."

A mordant joke told during the Cold War concerned asking an Italian, a Frenchman, an Englishman and a Russian to each describe his most cherished dream. The Italian said, "I want my country to produce the greatest artists." The Frenchman said, "I want my nation to produce the greatest philosophers." The Englishman said, "I want my country to produce the greatest parliamentarians." The Russian said, "I want my neighbor's cow to die."

The joke was no laughing matter because it turned on this truth: A history of brutalizing tyranny had stunted the Russians' aptitude for collective aspirations. Which brings us back to Iraq, which Patrick J. McDonnell of the Los Angeles Times covered for two years following the 2003 invasion. He recently returned. His Oct. 23 report ( "Into the Abyss of Baghdad") begins:

"I keep seeing his face. He appears to be in his mid-20s, bespectacled, slightly bearded, and somehow his smile conveys a sense of prosperity to come. Perhaps he is set to marry, or enroll in graduate school, or launch a business—all these flights of ambition seem possible. In the next few images he is encased in plastic: His face is frozen in a ghoulish grimace. Blackened lesions blemish his neck. 'Drill holes,' says Col. Khaled Rasheed, an Iraqi commander who is showing me the set of photographs."

Electric drills are the death squads' preferred instruments of torture. McDonnell:

"One evening I accompanied a three-Humvee convoy of MPs through largely Shiite east Baghdad ... The objective that evening was to patrol with Iraqi police, but the Iraqi lawmen are hesitant to be seen with Americans, whom they regard as IED [improvised explosive device] magnets. The joint patrol never worked out ... The next night, an armor-piercing bomb hit the same squad, Gator 1-2. A sergeant with whom I had ridden the previous evening lost a leg; the gunner and driver suffered severe shrapnel wounds."

For what?

The New York Times

October 31, 2006

Where ‘Every Band in the World’ Tries to Make It

Somewhere between Atlanta and Norfolk, Va., a band from Chicago named Bound Stems was in its van, barreling along a rainy highway on the way to the 26th annual CMJ Music Marathon, which starts today. Bound Stems are one of more than 1,000 bands appearing over the next five nights in more than 60 clubs around Manhattan and Brooklyn, hoping that half an hour onstage could change their lives.

“Every band in the world is coming,” said Bound Stems’ main songwriter, Bobby Gallivan, through a faltering cellphone. “I’ve heard of bands that made their big splash at CMJ. Obviously that would be awesome if it happened to us.”

The CMJ Music Marathon, the music-business convention devoted to independent musicians, was started by the magazine that monitors college radio and was initially called College Media Journal. As the big-time music business struggles to hold on, the small-time music business — self-made bands, independent labels, college radio stations, music Web sites — is more active than ever.

“With the anarchy and confusion and volatility out there,” said Bobby Haber, chief executive of CMJ, “there is so much concern, not only for one’s own job but for where the industry is going. People know they’re going to get their networking done here, and maybe they’ll get some answers.”

Uncertainty has been good for CMJ, which expects as many as 12,000 participants, who have signed up to attend its daytime panel discussions and nighttime shows. About 70 percent are not college students, but either musicians or the music-business personnel who pay the professional rate, up to $495 per laminated pass. The music marathon grows this year from four days to five, and it’s possible, Mr. Haber said, that in the future it could stretch to a full week.

The do-it-yourself strategies of punk and hip-hop work even better in the Internet era, when musicians no longer need anyone else to manufacture or distribute their recordings — just a Web page and a click or two — and a record company can be a printer and a CD burner. “In this environment,” Mr. Haber said, “the indies can be efficient, productive, successful and actually in the black, which doesn’t happen too often in the major labels today.”

Meanwhile, Web sites like MySpace and Purevolume (purevolume.com) make more music available than any battalion of listeners could ever sort through. “Everybody’s got access now, so it’s a little less exclusive,” said Matt McDonald, CMJ’s showcase director. “It takes away some of the tastemaker thing. But it’s better for the bands.”

Yet for musicians trying to turn a hobby into a career, hitting the road to perform live is still the time-tested way to be noticed, especially if there’s some Internet buzz to build anticipation.

CMJ promises musicians practical help by day, with panel discussions on everything from constructing a Web page to pitching songs for television. And at CMJ showcases and an increasing number of unofficial parties, day and night, the marathon holds out hope to musicians that they will play for an audience that includes the right connection. In a world of downloads, physical presence can still make a difference. And it’s easier to sell T-shirts in person after the set.

Making their way to CMJ, Bound Stems have been on the kind of tour that defines the indie-rock life: carrying their own equipment, sharing bills with slightly more experienced bands, headlining clubs that are packed in some cities and nearly empty in others.

The five-member band plays brisk, tightly wound guitar rock that works through pattern after pattern behind the fractured storytelling of Mr. Gallivan’s lyrics. There are touches of the band’s fellow Chicagoans Wilco and Tortoise in the music, but Bound Stems have their own impatient timing and oblique revelations. “You can learn without the system,” a song called “Western Biographic” declares. “Go ahead, because even a dark horse wins.”

Bound Stems got together in 2002 and finished recording their debut album, “Appreciation Night” (Flameshovel), last year, but waited to release it until this September so they could tour nationwide. They quit their day jobs this summer. “We’ve been thrown to the wolves,” Mr. Gallivan said.

After Norfolk, the band had more gigs en route — in Washington and Philadelphia — on the way to playing five shows in four days during the marathon: four semiprivate parties and then an official CMJ showcase on Friday night at 10:45 at the Knitting Factory Tap Bar. Mr. Gallivan thought the band would be paid for one of the party gigs, but he wasn’t sure.

A friend will lend the group a two-bedroom apartment in Brooklyn. To protect their equipment on the New York streets, band members will take turns sleeping in the van.

They aren’t expecting instant rock stardom. “We want to be able to play our songs and never grow up,” Mr. Gallivan said, laughing. “The moment it becomes work or it feels like it’s a job, it defeats the purpose of it. The goal is to be able to live off of it. We’d like to be able to pay the rent.”

BBC News
Pentagon mounts media offensive
US troops in Iraq
US officials believe bad news from Iraq gets undue coverage
The Pentagon has set up a new unit to focus on promoting its message across 24-hour rolling news outlets, and particularly on the internet.

The US Defence Department said it would expand its public relations work to fight "inaccurate" news stories.

Defence Secretary Donald Rumsfeld has said media manipulation by enemies of the US is the only thing keeping him awake at night.

Domestic support for the war in Iraq has fallen as US mid-term polls near.

The opposition Democrats are trying to win control of Congress from the Republicans.

'Correcting messages'

The newly-established Pentagon unit would use "new media" channels to push its message, a spokesman said.

"We're looking at being quicker to respond to breaking news," the spokesman said.

"Being quicker to respond, frankly, to inaccurate statements."

According to the BBC's Justin Webb in Washington, the Bush administration does not believe the true picture of events in Iraq has been made public.

He says the administration is particularly concerned that insurgents in areas such as Iraq have been able to use the web to disseminate their message and give the impression they are more powerful than the US.

A Pentagon memo seen by the Associated Press news agency said the new unit will "develop messages" for the 24-hour news cycle and aim to "correct the record".

A spokesman said the unit would monitor media such as weblogs and would also employ "surrogates", or top politicians or lobbyists who could be interviewed on TV and radio shows.

Go to CBSNews.com Home
The Art Of Image Altering

A photo of John Kerry and actress Jane Fonda at an anti-Vietnam rally is a combination of two separate photographs.

NEW YORK, Oct. 29, 2006
(CBS) What is real? What is a true likeness? The smiles on their faces are genuine, but what ends up in the family album may not look exactly the same.

We can now alter these class pictures digitally so no kid has a runny nose or a blemish in the final photo.

In our digital age, images fly at us with remarkable speed and frequency. Computers, television, cell phones — this flood of visual information pours into our eyes, and our brains then determine if we like what we see. But, more and more, my brain is asking, is it real? Or is it a contrivance? Has it been touched up for vanity? Or altered to make a political point?

For example, a photographer added more smoke to a picture of the war in Lebanon for effect.

"It was a pretty crude manipulation," Dr. Hany Farid, who teaches computer science at Dartmouth, told The Early Show co-anchor Harry Smith. The truth came out and the photographer was fired.

John Kerry's political enemies tried to pass judgment on his patriotism when they found this photo with anti-war activist Jane Fonda, which eventually turned out to be fake. Regrettably, Katie Couric lost a dress size or two to a photo editor at CBS Promotions. Flattery? Or a failure to communicate?

We assume the pictures we see in glossy magazines have been touched up, but what of the photos of your family and friends? Have they been touched up a little? And does it matter?

"A lot of people who do Match.com send me photographs," Farid said. "They're about to meet somebody and I can tell you the vast majority of images on dating sites have been at least manipulated in some way."

Farid helped invent software that can detect when an image has been digitally altered. Sometimes it really does matter, from a police surveillance video to medical malpractice images.

"Men taking the hairline and bringing it down a little bit — very common," he said. "And very easy to do. It's my favorite manipulation. I mean, some of the most famous portraits of Abraham Lincoln, for example, are his head in somebody else's body. Stalin famously airbrushed people out of photographs that fell out of favor. It's not that it hasn't been done. It's just that it's just so much easier and so much more prevalent now."

What makes it all so easy is Photoshop, made in Silicon Valley by Adobe. With Photoshop you can alter just about anything.

"When it comes time to work with images it's the standard," Dave Story, Adobe's vice president of product development, said. "Everyone uses it. Every image that you see in print, on TV, other places, you could be completely assured that Photoshop has likely touched that image."

In the fashion world models are modified to a level of perceived beauty that doesn't exist anywhere but on billboards.

Dove soap produced a short film that details the full Madison Avenue beauty process complete with computer manipulation that stretches the model's neck and adjusts her eyes to a size you'd never see on an actual person.

"You know it's so hard to be human in the face of all this stuff," writer for Adweek Magazine, Barbara Lippert, said. "And I think for young girls, it's really important to see this. Because, you know, there's no plastic surgery right now that can elongate your neck or make your eyeballs twice the size that you were born with. And so, all this illusion, all of this fantasy of what you want is just based on such non-reality that it really makes you crazy."

Very few digital artists walk that line between fantasy and reality as often or as successfully as Matt Mahurin. If you've visited a newsstand in the past 20 years, chances are you've seen his work in Rolling Stone, Esquire and G.Q. He has done about 40 covers for Time. He works alone in a spare New York studio, using only a small camera, a computer and — more often than not — his own face.

"I just painted my beard white and went out and got a coat and these Freud glasses," he said, referring to a 1993 cover of Time which featured a story on Sigmund Freud.

Weirder still, on another Time cover of a caveman it's Mahurin's face again, digitally reworked. On the Time cover after the Abu Ghraib revelations, Mahurin used a manipulated photo he took of himself to make an image of what appeared to be a torture victim.

"I think probably the way it's labeled inside the magazine is photo-illustration," he said.

Mahurin's most controversial work was the 1994 O.J. Simpson's mug-shot. Mahurin darkened the image, a step that he saw as editorial but others read as racist.

"My situation was, is that my work is taken in context ... I work dark images," he said. "I do dramatic images. I don't do -- you know, I don't do brightly colored things. I don't do greeting cards, I do dark images. And to me this was a dramatic moment. I've always believed in the power of images, and so for me that was, you know, that was all part of it. It's an experience that I would not wish on anybody, but I would not have traded it for anything either."

What we don't remember is the caption on the cover. The words, the explanation, are irrelevant: It's the image that's king in the end. Seeing is believing, but there are methods for telling the altered photos from the real thing.

"When you compare those two swatches, these four dots, I call them truth dots, which proves mathematically that this image has been doctored since it came out of the camera," Story said.

The images insist that we be as sophisticated as the software that's used. "The analogy I always like to draw is, imagine a pile of sand," Strong said. "And when does it go from a couple of grains of sand to a pile? And surely, taking one grain of sand on and off doesn't fundamentally change the pile of sand. But at some point, it's no longer a mound of sand, and it's just a couple grains. But where did that transition happen?

"And it's the same thing with an image. When you start disturbing pixels — little elements of an image — is one okay? Is two okay? Is three okay? And when does is stop becoming okay? And I don't think there's a simple answer to that."

Maybe it's a little like cosmetic surgery: if you've had too much, then you don't look like yourself anymore.
The New York Times

October 30, 2006

A Dot-Com Survivor’s Long Road

SAN FRANCISCO, Oct. 29 — When Jim Clark started Shutterfly, the online photo printing service, in December 1999, a 2-megapixel digital camera could set you back $800, investor enthusiasm for e-commerce was soaring and the words “Internet” and “bust” were rarely used in the same sentence.

For his part, Mr. Clark had something of a Midas reputation when it came to technology investing, having started Silicon Graphics, Netscape and Healtheon.

But what was expected to be a sprint at the peak of the dot-com boom turned into a marathon — one in which Shutterfly, at times, appeared to be faltering. Late last month, the company finally crossed a finish line of sorts when it became one of just a few e-commerce companies to go public since the dot-com bust.

While the offering may have enriched Mr. Clark and other early Shutterfly backers, it has been a money-loser so far for most who bought into it. And it has not brightened the decidedly downbeat mood of venture investors, whose fortunes depend on a healthy market for public offerings.

Shutterfly’s shares had a brief run-up after their market debut on Sept. 29, but since then they have dropped to $13.35, or 11 percent below the offering price of $15.

“It’s been an extremely difficult I.P.O. market this entire year,” said Mark G. Heesen, president of the National Venture Capital Association, noting that only 37 venture-backed companies had gone public through the end of the third quarter. “Then you see something like Shutterfly, which a lot of people were excited about, but has not performed as well as we were expecting.”

Mr. Heesen cautioned that “one I.P.O. does not make a trend,” and he noted that eHealth and other companies that have gone public recently had done well. But he said there were no indications of a pickup in the overall market for initial offerings.

Citing restrictions imposed by securities regulators, Shutterfly declined to comment or make Mr. Clark, who is chairman, available for an interview. The company is scheduled to report earnings on Nov. 7.

While seven years is not an unusual amount of time for a venture-backed firm to go from start to public offering, the pace was often much quicker back in 1999. Coming in at the tail end of the boom, Shutterfly had no choice but to take its time — and weather some difficult periods.

“It’s been a long process,” said George Zachary, one of the original investors in Shutterfly. Attracting customers “was slower and consumed more money than we would have liked,” he added.

Mr. Zachary, formerly a partner at Mohr Davidow Ventures, the second-largest investor in Shutterfly after Mr. Clark, is now a partner at Charles River Ventures and no longer sits on Shutterfly’s board.

Shutterfly has been profitable for three years, but it is facing a digital photography market that is much different from when it started. Mr. Clark promised at the start that Shutterfly would usher in a revolution in digital imaging, and seven years later, there is no question that digital technology has revolutionized the world of photography. But Shutterfly appears to be more a product of the revolution than its standard-bearer.

Shutterfly’s two main competitors in online photo printing, Ofoto and Snapfish, have been acquired by Kodak and Hewlett-Packard, respectively. (The Ofoto service was renamed Kodak EasyShare Gallery.) These deep-pocketed patrons have challenged Shutterfly on price, hurting its profit margins.

Meanwhile, a large new crop of Internet companies is capitalizing on the explosion of digital images taken not just with cameras but also with cellphones. Most of these companies, which include Photobucket, ImageShack, Slide and Flickr, which was acquired by Yahoo last year, emphasize online sharing over printing.

Tapping a younger generation of consumers for whom photography has become a form of online self-expression, often as part of blogs or social networking sites like MySpace, they have, in some cases, dwarfed Shutterfly’s audience.

“The competitive landscape is very crowded,” said Sam Snyder, a research analyst at Renaissance Capital, an independent research firm that runs a mutual fund focusing on initial offerings. Shutterfly “has huge competitors breathing down its neck, undercutting it on price,” he said.

Early last year, the standard price of a 4-by-6 print was around 29 cents. Today, they cost 19 cents at Shutterfly, 15 cents at Kodak and 12 cents at Snapfish, though volume discounts are available.

Shutterfly was founded by Dan Baum and Eva Manolis, who had been engineering managers at Silicon Graphics. After receiving financing from Mr. Clark and Mr. Zachary, another Silicon Graphics alumnus, the fledgling company moved into a modest office suite above a Jenny Craig Weight Loss Center in Menlo Park, Calif.

The humble surroundings apparently did not impress representatives from major photo-printing equipment firms like Fuji and Konica, whom the company was courting. “They didn’t know whether to take us seriously or not,” said Mr. Baum, who is now an executive at Adobe.

Still, Shutterfly managed to obtain the hardware it needed, and by the time it was ready to open its virtual doors it had moved to new headquarters in Redwood City, Calif., where it is still based.

Coincidentally, the company was started the same day as Ofoto, which counted James Barksdale, the former chief executive of Netscape and therefore a business partner of Mr. Clark, among its investors.

“Ofoto and Shutterfly were like two identical petri dishes,” said James Joaquin, the former chief executive of Ofoto. He said that the shorthand for the rivalry between the two companies was “Clark vs. Bark.”

There were many similarities between the two — not just the features on their Web sites but also their enthusiastic embrace of the Internet boom’s get-big-fast mantra. That meant giving stuff away. Ofoto promised 100 free prints to its first million customers, a promotion valued at tens of millions of dollars. For its part, Shutterfly was giving away 85 percent of its prints by mid-2000.

The collapse of the Nasdaq, and the demise of e-commerce pioneers like eToys, Kozmo, Webvan and others, changed all that. “When we got into the postbubble, things really tightened,” Mr. Baum said. “It was tough. Fortunately, we had a real business.”

Still, by early 2001, the company was forced to cut a quarter of its work force, and kept having to go back to investors, including Mr. Clark, for more money. The extra rounds of financing continued even after the company turned its first annual profit in 2003.

By the time it was ready to go public, Shutterfly had received nearly $90 million in financing, and Mr. Clark owned 40.3 percent of the company, according to regulatory filings. Mr. Clark’s share has dropped to 30.4 percent since the public offering. His stake is valued at about $96 million.

Mr. Clark has moved to South Florida, where he has started a real estate development company with Tom Jermoluk, another Shutterfly investor and the former chief executive of the failed broadband company Excite@Home. Forbes recently estimated Mr. Clark’s wealth at $1.1 billion.

Shutterfly, which is now led by Jeffrey T. Housenbold, its fourth chief executive, has said it plans to use some of the proceeds from its $87 million offering to expand its printing and production operations. As 4-by-6 prints have increasingly become a low-margin commodity, the company has focused on selling more lucrative products, like customized calendars, greeting cards, photo books, mugs and mouse pads. The company now calls itself an “Internet-based social expression and personal publishing service.”

“Shutterfly’s specialty is a very robust catalog of photo gifts and merchandise,” said Alan Bullock, an analyst at InfoTrends, a market research firm.

Recent partnerships that Shutterfly announced with Scholastic Media and HIT Entertainment emphasize the merchandise business, Mr. Bullock said. The deals allow customers to place their own pictures — or more likely those of their toddlers — in books alongside well-known characters like Thomas the Tank Engine or Clifford the Big Red Dog. The books start at $35.

Shutterfly said it has sold about 370 million prints since its inception and has stored a billion photos in its online archives. Its sales grew to $83.9 million in 2005, up from $54.5 million the year before, while net income reached $28.9 million. Without a tax benefit of $24.1 million, profit for 2005 would have been $4.8 million. Shutterfly, whose sales peak in the fourth quarter, reported losses of $3.7 million in the first six months of this year.

Shutterfly’s growth rate shows that customers like its products. The bigger challenge for the company may be whether it can stay profitable by staking out a position as the premium brand in a cutthroat market.

“It’s a tough story to sell,” Mr. Synder said.

  • Home
  • HomeGoogle ad sales outpace all comers
Updated 10/30/2006 8:06 AM ET
Piano teacher Cosmo Buono found Google's advertising system "quite a revelation."
By Peter Freed, USA TODAY
Piano teacher Cosmo Buono found Google's advertising system "quite a revelation."
So you want to advertise on Google? Tips on getting started:

Before you sign up at adwords .google.com, check out your competition to see how they're doing it. "You need to see what you're up against," says Perry Marshall, author of the upcoming Ultimate Guide to Google Adwords.

That will help you choose your search keywords. Let's say a florist wants to be found with "Cleveland florist" and "Cleveland wedding bouquets."

Once you register, Google will ask for search terms you're interested in and offer variations such as "Cleveland flowers" or "Cleveland floral."

Next, you need to set a budget (is $1 a day too steep?) and decide how much you're willing to pay for the search terms. The keywords are sold auction-style. The more you pay, in general, the higher your ad will appear.

In a spot check Thursday, Google's traffic-estimate tool showed that "Cleveland flowers" at 6 cents to 10 cents per click would result in ad position four to six, while "Cleveland florist" at the same price yielded positions 11 through 15.

To get to spots 1 through 3, you might need to up the bid to $1.70 to $2.50.

Or, you could tempt fate by keeping your small bid. Google will sometimes reward you with a higher position, even with lower per-click fees, if people click on your ad.

By Jefferson Graham
The most popular Web properties, in billions of visits:
Source: ComScore Media Metrix, September worldwide figures

Cosmo Buono calls himself a technology "dinosaur." But look to this longtime New York City piano teacher for insight on how Google (GOOG) keeps setting financial records.

Buono wanted to find contestants for an international piano competition he's staging. A student recommended that he advertise on the Google search engine, so he went online to give it a try. Now, when anyone searches for "piano competition" or "international piano competition" his ad appears near the top of search results.

His budget: $50. His response: 35 new contestants, so far. "I was up and running in 15 minutes," says Buono, 54. "For somebody like me who isn't comfortable with the PC, it was quite a revelation."

Google set a record again this month with a 70% third-quarter revenue jump that has Wall Street salivating. The stock hit new heights last week to nearly $500 a share. Citibank analyst Mark Mahaney says it's poised to hit $600.

Since it went public two years ago, its share of Internet searches has nearly doubled, while its ad revenue continues to dwarf rivals such as Yahoo (YHOO) and MSN (MSFT).

How does Google do it? With millions of customers such as Buono, who use its simple and ever-expanding search advertising program, AdWords, to reach customers. Google is on a roll because it is "the best and most used search engine," says Mahaney. "More people want to do searches on Google than Yahoo."

A simple concept

AdWords works on a simple concept: Advertisers offer their wares for a fee in the "sponsored search" section of search results, which appear on Google as well as AOL, Ask.com and EarthLink. Clients bid on keywords — the phrases people use when searching — and pay if someone clicks on an ad. Advertisers can pay from a penny to more than $1 per click, and set a monthly budget.

"The entire process of signing up was really simple," says Buono. "If I can do it, anyone can."

Google makes updates to AdWords every two weeks. The program has greatly expanded beyond the simple search ad. What's new:

Geo-targeting. Clients can choose which ZIP code they want their ad to appear in, and can have the ad appear on Google Maps.

Time-slot preference. Want your ad to run only from 9 a.m. to 5 p.m., when people are at work? No problem. Advertisers can refine their campaigns down to the hour.

Starter edition. For folks who want a simpler, speedier way to get an ad online. Google asks new advertisers to type in their ZIP code, website address, a 10-word ad, monthly budget and keyword search terms. Click "continue," and type in contact and payment information, and the ad is online.

"We're trying to make the process less intimidating," says Richard Holden, Google's director of product management.

Don't have a website? No problem. Google says 50% of small businesses don't have one. It will create a bare-bones site for new clients, with a basic listing that includes phone and e-mail contact, ad copy and a photo.

Permeating the Web

The companion to AdWords is AdSense, which expands the text ads across hundreds of thousands of websites and blogs representing what Google says is 80% of the Web. website owners share in revenues whenever an ad is clicked.

Clients include tech sites such as Engadget and Macworld and big guns such as MySpace (NWS), The New York Times (NYT), The Washington Post (WPO) and Slate.

Last week, Google moved to increase the reach of AdSense with a tool to let anyone create a narrow version of its search engine for a website or blog. A blogger with a fan site devoted to Beyoncé could add a search tool devoted to the singer. A wedding-planning site could tweak it to only have results from florists, caterers and venues.

website owners get the service free in exchange for showcasing Google ads.

"In terms of potential earnings, this is the biggest one to look at," says Chris Winfield, who runs 10e20, a New York firm that works with clients on Google advertising campaigns. "Millions of people will put this on their pages, and Google ads will be all over those pages."

This summer, Google began offering advertisers the ability to run video ads on the AdSense network.

Businesses upload an ad — which can be created with consumer-level video equipment and software — directly to Google. They choose the types of sites they want to appear on, from general interest to those devoted to beauty tips, entertainment or more.

"You walk into the buildings at Google, and can feel the blood flowing," says Rich Silverstein, of Goodby, Silverstein and Partners ad agency. "Instead of saying "We can't do that,' they say, "Let's see if we can.' " His agency created a video ad for automaker Saturn that ran on auto enthusiast sites via Google. The ad begins in outer space and ends by whisking the viewer to his or her local Saturn dealer. The ad was "geo-targeted" by ZIP code, with each ad tailored for the local market. "This is a relationship between the viewer and a company that's never been done before," says Silverstein.

While Google popularized search ads, the form was invented by Goto.com (later known as Overture), which Yahoo acquired. But Google has far exceeded Yahoo in customers and revenue.

Yahoo is revamping its search ad program to make it easier to use and more profitable. After several delays, it is to make its debut early next year. Last week, Yahoo said its earnings fell 38%, due to softer ad sales.

Google's lead over Yahoo is bigger than Wall Street realized when Google first was planning to go public in 2004, says Mahaney. "Yahoo is trying to play catch-up, and they're finding just how difficult that is."

Microsoft recently introduced its own answer to AdWords, Microsoft adCenter. But "MSN has 10% of searches, and Google has 50%," says Winfield. "It's good traffic, just not enough of it."

Google has been criticized by Wall Street analysts for being a one-trick pony. It makes all its money from search ads, while Yahoo has display ads, subscription fees and partnerships with high-speed internet providers. In search, says analyst Greg Sterling of researcher Sterling Market Intelligence, it is not too late for Yahoo to catch up. "Local advertising is a huge, $100 billion market, and advertisers want multiple options," he says.