When you watch these ads, the ads check you out

by AP

Watch an advertisement on a video screen in a mall, health club or grocery store and there's a slim — but growing — chance the ad is watching you too.

Small cameras can now be embedded in the screen or hidden around it, tracking who looks at the screen and for how long. The makers of the tracking systems say the software can determine the viewer's gender, approximate age range and, in some cases, ethnicity — and can change the ads accordingly.

That could mean razor ads for men, cosmetics ads for women and video-game ads for teens.

And even if the ads don't shift based on which people are watching, the technology's ability to determine the viewers' demographics is golden for advertisers who want to know how effectively they're reaching their target audience.

While the technology remains in limited use for now, advertising industry analysts say it is finally beginning to live up to its promise. The manufacturers say their systems can accurately determine gender 85 to 90 percent of the time, while accuracy for the other measures continues to be refined.

The concept is reminiscent of the science-fiction movie "Minority Report," in which Tom Cruise's character enters a mall and finds that retinal scanners identify him and prompt personalized ads that greet him by name.

But this technology doesn't go nearly that far. It doesn't identify people individually — it simply categorizes them by outward appearances.

So a video screen might show a motorcycle ad for a group of men, but switch to a minivan ad when women and children join them, said Vicki Rabenou, the chief measurement officer of Tampa, Fla.-based TruMedia Technologies Inc., one of the leaders in developing the technology.

"This is proactive merchandising," Rabenou said. "You're targeting people with smart ads."

Because the tracking industry is still in its infancy, there isn't yet consensus on how to refer to the technology. Some call it face reading, face counting, gaze tracking or, more generally, face-based audience measurement.

Whatever it's called, advertisers are finally ready to try it, said advertising consultant Jack Sullivan, a senior vice president of Starcom USA in Chicago. "I think you're going to see a lot of movement toward it by the end of this year in the top 10 markets," he said.

Because face tracking might feel reminiscent of Big Brother, manufacturers are racing to offer reassurances. When the systems capture an image of who's watching the screen, a computer instantly analyzes it. The systems' manufacturers insist, however, that nothing is ever stored and no identifying information is ever associated with the pictures. That makes the system less intrusive than a surveillance camera that records what it sees, the developers say.

The idea still worries Lee Tien, a senior staff attorney with the Electronic Frontier Foundation, a civil-liberties group in San Francisco. Tien said it's not enough to say some system is "not as bad as some other technology," and argues that cameras that study people contribute to an erosion of privacy.

In general, the tracking systems work like this: A sensor or camera in or near the screen identifies viewers' faces by picking up shapes, colors and the relative speed of movement. The concept is similar to the way consumer cameras now can automatically make sure faces are in focus.

When the ad system pinpoints a face, it compares shapes and patterns to faces that are already identified in a database as male or female. That lets the system predict the person's gender almost immediately.

"The most important features seem to be cheekbones, fullness of lips and the gap between the eyebrows," said Paolo Prandoni, chief scientific officer of Quividi, a French company that is another player in face-tracking technology. Others include Studio IMC Inc. in New York.

The companies say their systems have become adept at determining a viewer's gender, but age is trickier: The software can categorize age only in broad ranges — teens, younger to middle-aged folks and seniors. There's moderate demand for ads based on ethnic information, but the companies acknowledge that determining ethnicity is more challenging than figuring out gender and age range.

Prandoni provided The Associated Press a limited version of Quividi's software, which uses an ordinary webcam to stream video to a computer. The trial version tracked gender only, using color-coded circles to distinguish male and female faces.

The sample size was too small to be statistically significant, but it was accurate about 80 to 90 percent of the time.

That might be as precise as the systems ever get, said Deborah Mitchell, a professor of consumer psychology at the University of Wisconsin-Madison. Even the human brain can't always determine gender, age or ethnicity.

Still, "even if it gets to 70 percent accuracy, that's still giving you a wealth of information," said Mitchell, who teaches in the Wisconsin School of Business.

That information is certainly valuable to Bill Ketcham, the chief marketing officer of Adspace Networks Inc. His New York company sells video advertising on 1,400 video screens at 105 malls around the nation.

Adspace is testing six TruMedia systems at malls in Winston-Salem, N.C., Pittsburgh and St. Louis. The kiosks display a daily list of top 10 sales at the mall, as well as paid advertising that comes largely from movie studios and TV networks.

A 15-second video ad that replays across Adspace's national network can cost as much as $765,000 per month. So advertisers expect rigorous information about who sees the spots — information that face tracking can now provide, Ketcham said.

For now, at least, Adspace isn't changing the ads based on who's watching — Ketcham said the kiosks' audiences are so large that it wouldn't be practical to personalize ads to individuals.

While advertisers like the face-tracking technology, another privacy advocate, Harley Geiger, questions whether it should be used on consumers without their knowledge. Geiger, staff counsel for the Center for Democracy & Technology in Washington, D.C., said advertisers should be telling consumers what details about them are being collected and for what purpose.

"With the technology proliferating, now or the short-term is the time to consider privacy protections," he said. "If you don't build it in at an early stage it becomes very difficult to build it into an already established system."

Microsoft Internet Explorer 8 RC1 Improves Security

By Thomas Claburn

Updates include architectural changes that mirror features found in Google's Chrome, Apple's Safari, and Mozilla's Firefox.

Microsoft has released Microsoft Internet Explorer 8 RC1, a near-final version of its new Web browser that's stable enough for widespread public testing.

Assuming that no show-stopping bugs or significant vulnerabilities are identified between now and whenever Microsoft is planning to offer the official release of Internet Explorer 8, RC1 represents the final form of Microsoft's browser, at least until the next revision.

Internet Explorer 8 has some catching up to do. Its global market share, according to Net Applications, is just 0.82%, compared with Google Chrome (all versions) at 1.04%, Mozilla Firefox (all versions) 21.34%, and Apple Safari (all versions) 7.93%.

The various versions of Microsoft Internet Explorer have 68.15% of the global browser market, down from 91.27% in 2004.

Among IE8's selling points are various safety and security improvements. These include architectural changes that put Web pages in separate processes, privacy enhancements, and online safety measures.

Microsoft has referred to IE8's architectural changes using the term "Loosely-Coupled IE," or "LCIE." In Internet Explorer 7, with a few exceptions, each browser window had its own process. But tabs, toolbar extensions, browser helper objects, and ActiveX controls also were managed by the same process. Thus, a crash in any part of this system could crash the browser.

In a move away from monolithic browser architecture, IE8's loosely coupled system puts tabs in separate processes, which in theory leads to better browser stability and less susceptibility to potential exploits. Google's Chrome browser also takes this approach, through in addition to running tabs on separate processes, it also gives plugs-ins separate processes. IE8 supports Data Execution Prevention, a technology that aims to reduce the exploitability of buffer overflows, which are commonly exploited for injecting malicious code. If programmers write their code with DEP in mind, many potential vulnerabilities could be eliminated.

IE8 also offers a private browsing mode called InPrivate, which allows the user to "launch a new browser session that won't record any information, including searches or Web page visits," as Microsoft puts it. This means that during InPrivate browsing sessions, which must initiated by the user, cookies, searches, Web history, and other information aren't stored where they usually are on the user's computer. Apple's Safari and Google's Chrome both offer similar technology, as does the current Mozilla Firefox 3.1 Beta 2.

Local privacy settings like this may be useful for hiding online activities from members of one's household, but they don't prevent one's ISP or visited Web sites from recording the IP address or other transactional information.

InPrivate Browsing protections are disabled if Parental Controls are used.

IE8 also includes malware protection in the form of the SmartScreen Filter, the Cross Site Scripting (XSS) Filter, and Domain Highlighting. The SmartScreen Filter is a warning page that loads when the browser detects an attempt to visit an unsafe site. The XSS Filter attempts to detect malicious code on compromised Web sites. And Domain Highlighting highlights the domain name of a URL in black to reduce the effectiveness of deceptive URLs, which are often used for phishing.

In all, IE8 delivers significant security improvements over its predecessors. But given the extent to which cybercrime relies on social engineering, users of IE8, like other modern browsers, would be well advised to remain cautious in the sites that they visit and the information that they disclose online. It's only a matter of time before someone figures out a way around IE8's new defenses. 

Microsoft Shuts Down Flight Simulator Game Studio

By Brian Heater and Mark Hachman

As the rest of the tech world scrambles to assess the implications of the recently announced 5,000 layoffs at software giant Microsoft, news has come in that might potentially spell the end of the company's nearly 30-year-old Flight Simulator series.

Microsoft confirmed Friday that the software giant has shuttered ACES Studios, the developer of the Flight Simulator series of games, whose latest incarnation is Flight Simulator X. The simulation is considered Microsoft's oldest product, whose original version first shipped in 1982.

However, a Microsoft spokeswoman said that while the studio has been closed, the software company remains committed to the Flight Simulator franchise, without explaining how future products can be launched without a dedicated software development team backing them.

"We can confirm the closing of ACES Studios, which was responsible for the Flight Simulator franchise," Microsoft spokeswoman Kelda Rericha told Appscout. "Following our annual strategy review process, IEB [Microsoft's Interactive Entertainment Business unit] is making adjustments within our business to align our people against our highest priorities. The closure of ACES Studios was one of those specific changes."

Rericha refused to disclose any further details regarding the future of the company. She did, however, suggest that the Flight Simulator series is likely to stick around in some form or another. "We are committed to the Flight Simulator franchise, which has proven to be a successful PC-based game for the last 27 years," Rericha added. "You should expect us to continue to invest in enabling great Live experiences on Windows, including flying games, but we have nothing specific to announce at this time."

Of course, the Flight Simulator franchise is a fairly broad one, and anything falling under the largely online Live umbrella would likely be fairly different than the game's traditionally resource-intensive online incarnation.

"It's definitely confusing; I wish I had more clarification on that that we could provide, Rericha added. "At this point, they're just not talking about it yet – how the product will, and if the product will, live within Microsoft."

Microsoft does not have a time frame on when it will provide additional information, Rericha added.

The most likely scenario seems that, like the rest of us, Microsoft is still attempting to assess exactly how such a large number of redundancies will affect its business strategy. Projects like Flight Simulator have likely been given a lower priority than, say, Windows or Office, and therefore their fates are still not entirely certain even in Redmond.

Numerous contractors also confirmed that they'd been let go in the ACES layoffs, including independent coders who were also fans of the series.

"One thing that every person at ACES will tell you is that the community and each of you in it mean the world to us for sharing our passion of flight, and so it really hurts that Gib and I can't tell you more," "PlaneEater, one of the affected contractors, wrote in a thread on SimOuthouse.com. "I was a FS fan before I joined the FS team, and being able to work on the sim we all love so much was a dream come true. I just want to thank everyone here for the time and passion they've poured into Flight Sim for so many years, and to let you all know that every person at ACES is in awe of how much the community cares about what we build."

It seems unlikely that Flight Simulator will go away entirely, even if it means branding a Live game with the name, fans speculated.

Personal Computer Dependency Weighing On Microsoft

By Jessica Hodgson

Microsoft Corp.'s (MSFT) dramatic revenue and earnings misses on Thursday validate the company's decision to expand beyond its core software franchises. But it remains unclear if new initiatives, like videogames and online services, will deliver significant profits anytime soon.

On Thursday, the Redmond, Wash.-based software giant posted worse-than- expected financial results for the second quarter, missing earnings by 11%. The company blamed the performance on falling sales of personal computers.

The results underscore Microsoft's symbiotic reliance on personal computers, a relationship that has been the cornerstone of its success but which may become a liability. Its Windows operating system ships on over 90% of the world's computers and Microsoft's relationship with manufacturers and third-party service providers who equip them for customers has guaranteed its sales and profits in the past. Now, with sales of PCs falling, so is Microsoft's revenue.

Unlike competitors that have transformed their businesses through diversification to reduce reliance on their original products, like International Business Machines Corp. (IBM) and Apple Inc. (AAPL), Microsoft's profitability remains tied to its core business. More than 80% of its $22 billion in annual 2008 profits came from either its operating system or the Office suite of software that runs on it. While Microsoft has made a credible success of moving into the server business, which generated $4.5 billion of 2008 profits, efforts to diversify, like its XBox game machine and Zune music player, have generated little in terms of profitability.

"Microsoft is a quasi PC company," said Israel Hernandez, an analyst with Barclays Capital. "Its fortunes are inextricably tied to those of the PC."

Analysts say Microsoft needs to draw profitability out of its other projects, particularly its attempt to become a force in Internet advertising. Hernandez said part of the reason investors pushed Microsoft shares to an 11-year low after the earnings announcement - shares closed 11.7% lower at $17.11 - was because they were worried by the company's revenue mix.

"There are some structural issues there," he said.

Microsoft's Xbox was a bright spot in an otherwise downbeat quarter, with revenues at the company's entertainment and devices unit growing 3.5%, ahead of expectations. But the entertainment and devices unit provided only a fraction of Microsoft's 2008 profit. Microsoft doesn't disclose whether the Zune, its two- year old music player, is profitable, but the digital music player market is dominated by Apple's iPod device.

Despite its efforts, Microsoft is unlikely to wean itself off of its reliance on PCs anytime soon.

"Windows is the air we breathe," Chief Executive Steve Ballmer said late last year at an analysts' meeting. "As many transformations happen in the PC business itself, we have to drive forward."

But investors are increasingly aware the company faces challenges from a broad range of companies that have a head start in the markets it's targeting. Those include Apple in the devices market and Google Inc. (GOOG), dominant in the Internet and moving aggressively onto Microsoft's turf through free software it offers that mimics the Office applications. Google has also rolled out an operating system for cell phones, challenging Microsoft in another area in which it had established itself.

All that makes observers pause when they look at Microsoft.

"Several emerging technologies threaten to displace Microsoft's Windows and Office franchises," Kevin Buttigieg, an analyst with Stanford Group, noted after the earnings. "Microsoft must deliver several new products and must execute well from a sales and services perspective."

YouTube tinkers with e-commerce program

by CNET

Google is trying to expand YouTube's e-commerce profile by offering viewers in Germany, Spain, and the Netherlands click-to-buy products, something that it had offered only in the U.S. and Great Britain, according to Peter Kafka at All Things Digital. 

Kafka reported Wednesday that in these countries YouTube isn't satisfied with just posting links to Amazon or iTunes at the bottom of the video page. 

The company is now linking in the form of transparent overlays that appear within the videos. The links can only be seen while watching clips on YouTube and can't be found on embedded clips. 

A YouTube representative was not immediately available for comment. 

Expect to see an increase in this type of experimenting at YouTube as Google tries to turn the Web's No. 1 video site into the cash cow many once predicted it would become. Google has acknowledged struggling to generate significant revenue from YouTube.

Obama is changing YouTube

By Jimmy Orr

Hey, do you want more Obama inauguration stuff but already have a hat, ceremonial coin set, commemorative dinner plate, plush velvet mural, bottle opener, bobblehead, chaps, and sockpuppet?

Good news. Now there’s a way to get free Obama videos and you don’t have to worry about being busted like the guy who leaked the new Guns ‘n Roses album.

YouTube

YouTube has announced downloadable videos on their site. That means if you like a video, you can click a button and it’s yours to keep.

“La de da,” say tech enthusiasts who figured out how to rip copies of YouTube videos eons ago.

A haughty writer over a ITWire.com snips that there are a “zillion ways to download YouTube videos” already.

Important

But for us cavemen, this is kinda cool. Not to mention important says Stanford Law professor Lawrence Lessig.

“YouTube is rolling this out slowly, initially with content that aspires to be consistent with principles of open government,” writes Lessig. “I’m told it will be offered more generally. In any case, it is an important development.”

Portable

Other tech watchers say the development is a signal that YouTube sees the importance of portability. TechNewsWorld says letting consumers watch videos even when they don’t have Internet access is clearly where YouTube is headed.

“It’s clearly a step towards portability, and I think they’ve made it clear they want to be available on all screens — they want to be on the computer, portable devices and the TV,” said Phil Leigh, senior analyst for Inside Digital Media.

Everything is free!

So does this mean everyone will be able to download Numa Numa? Exactly how widespread will this become?

CNET’s Josh Lowensohn pinged Google and asked ‘em.

“Nothing further to announce at this time,” said YouTube’s Hunter Walk. “We’re just excited to have made this feature available in preparation for a historic week in American politics.”

The president-elect’s videos are now available to be downloaded on his YouTube channel (change.gov).  You can, for example, click to own any of his radio addresses.

Terms

If there was a big change at YouTube allowing mass-downloading, they would have to change their policies as that really smart IT writer astutely points out.

“YouTube’s terms and conditions state that video clips can’t be downloaded, so perhaps the download option will be quite limited, or perhaps the T&C’s will need to be changed,” writes Alex Zaharov-Reutt.

Simple

How simple is it anyway? A caveman could do it.

Go to this video and look for the “click to download” link in the far left corner of video screen. Click it and you’ve got it. By the way, it’s an 18mb file so if your computer’s hard drive is almost full, be aware.

Buying on Web to avoid sales taxes could end soon (AP)

Shopping online can be a way to find bargains while steering clear of crowds — and sales taxes.

But those tax breaks are starting to erode. With the recession pummeling states' budgets, their governments increasingly want to fill the gaps by collecting taxes on Internet sales, which are growing even as the economy shudders.

And that is sparking conflict with companies that do business online only and have enjoyed being able to offer sales-tax free shopping.

One of the most aggressive states, New York, is being sued by Amazon.com Inc. over a new requirement that online companies must collect taxes on shipments to New York residents, even if the companies are located elsewhere. New York's governor also wants to tax "Taxman" covers and other songs downloaded from Internet services like iTunes.

The amount of money at stake nationwide is unclear; online sales were expected to make up about 8 percent of all retail sales in 2008 and total $204 billion, according to Forrester Research. This is up from $175 billion in 2007.

Based on that 2008 figure, Forrester analyst Sucharita Mulpuru says her rough estimate is that if Web retailers had to collect taxes on all sales to consumers, it could generate $3 billion in new revenue for governments.

It's uncertain how much more could come as well from unpaid sales taxes on Internet transactions between businesses. But even with both kinds of taxes available, state budgets would need more help. The Center on Budget and Policy Priorities estimates that the states' budget gaps in the current fiscal year will total $89 billion.

Collecting online sales taxes is not as simple as it might sound. A nationwide Internet business faces thousands of tax-collecting jurisdictions — states, counties and cities — and tangled rules about how various products are taxed.

And a 1992 U.S. Supreme Court ruling said that states can't force businesses to collect sales taxes unless the businesses have operations in that state. The court also said Congress could lift the ban, which remains in place — for now.

As a result, generally only businesses with a "physical presence" in a state — such as a store or office building — collect sales tax on products sent to buyers in the same state. For instance, a Californian buying something from Barnes & Noble Inc.'s Web site pays sales tax because the bookseller has stores in the Golden State. Buying the same thing directly from Amazon would not ring up sales tax.

That doesn't mean products purchased online from out-of-state companies are necessarily tax-free. Consumers are usually supposed to self-report taxes on these items. This is called a use tax, but not surprisingly, it tends to go unreported.

In hopes of unraveling the complex tax rules — and bringing states more money — 22 states and many brick-and-mortar retailers support the efforts of a group called the Streamlined Sales Tax Governing Board. The group is getting states to simplify and make uniform their numerous tax rates and rules, in exchange for a crack at taxing online sales.

Among other things, participating states need to change how they define things such as "food" and "clothing." For example, one state might now consider a T-shirt clothing and tax it as such, while another might consider it a sporting good and tax it differently.

In response, more than 1,100 retailers have registered with the streamlining group and are collecting sales taxes on items shipped to states that are part of the agreement — even if they are not legally obligated to.

The streamlining board also is lobbying Congress to let the participating states do what the Supreme Court ruling banned: They could force businesses to collect taxes on sales made to in-state customers, even if the businesses don't have a physical presence there.

New Jersey, Michigan and North Carolina are among the largest of the 19 states that have adjusted their tax laws to fully comply with the group's streamlined setup. Washington was the only state to join in 2008, but three more states are close to becoming full members of the group. And Scott Peterson, the group's executive director, expects another seven states — including Texas, Florida and Illinois — to introduce legislation in January that would make them eligible to join.

Undoing the patchwork can be difficult, even if the weak economy increases states' motivation to go after online sales taxes. Similar bills have been introduced in several states and failed, sometimes because of the cost of changing tax laws. New York, for example, decided against joining the streamlining board because it would require extensive revisions to its tax rules.

Besides various states and retailers such as Wal-Mart Stores Inc., Borders Group Inc. and J.C. Penney Co., the National Retail Federation, the industry's biggest trade group, also supports the Streamlined Sales Tax group.

Companies that handle Web sales only have organized as well. NetChoice, whose members include eBay Inc. and online discount retailer Overstock.com Inc., supports the states' tax simplification efforts, but its executive director, Steve DelBianco, says online retailers should have to collect taxes only in states where they have a physical presence.

But what if the meaning of "physical presence" is changed? New York essentially did that in April when its budget included a provision requiring online retailers like Amazon to collect taxes on purchases made by New Yorkers.

The new rule requires retailers to collect sales tax if they solicit business in New York by paying anyone within the state for leading customers to them. Since some Web site operators within New York are compensated for posting ads that link to sites like Amazon, the online retailers would have to collect taxes.

Matt Anderson, spokesman for the New York State Division of the Budget, said the state expects to reap $23 million during the current fiscal year, which ends March 31, from newly collected online sales taxes.

That's a sliver of the overall state budget for the same period, which is $119.7 billion. The state faces a revenue gap of $1.7 billion.

Yet Anderson said the state wants "to level the playing field and end the "unfair competitive advantage" Web-only companies have over brick-and-mortar stores that can't avoid collecting sales taxes.

Amazon complies, and collects sales taxes on shipments to New York. However, Amazon is still fighting the rule. It sued New York in April, alleging its provision is unconstitutional. Amazon also said it is being specifically targeted by the law. The case is pending.

Amazon declined further comment.

Salt Lake City-based Overstock is also suing New York over the law. Unlike Amazon, Overstock is not collecting sales tax in New York, because it ended agreements with about 3,400 affiliates in the state that were being paid for directing traffic to Overstock.com.

The Streamlined Sales Tax group hopes Congress takes up its uniform-tax idea in 2009. Peterson thinks the dismal economy boosts the chances of passage.

But Congress also will be occupied with economic stimulus plans involving bigger pools of money. And Mulpuru, the Forrester Research analyst, notes that for years there has been talk of taxing online retailers.

"It's a legal morass," she said. "In a best-case scenario, it's going to take a while to sort everything out."