Google banned 30,000 advertisers post Economic Resurrection
Ad police suddenly affordable
By Cade Metz in San Francisco • Get more from this author
Posted in Music and Media, 15th January 2010 21:40 GMT
In the fall of 2008, when the worldwide economy began to melt, Google responded by shamelessly expanding ad coverage on its web-dominating search engine, letting more ads onto more pages. But now that the economy has recovered, the web giant has suddenly become more much vigilant in its efforts to weed out what it considers low-quality advertising.
According to new data from AdGooRoo - a search marketing consultant that tracks search ads from a network of servers across the globe - Google permanently banned 30,000 accounts from its AdWords ad system at the beginning of December. That's roughly 5.3 per cent of its active advertisers. Ad coverage dipped nearly 10 per cent in the wake of the mass axing, and yet AdGooRoo's data indicates that Google's revenues surged in the fourth quarter, thanks to increased competition for placement among the web's top ad spenders.
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In other words, when the economy was in the tank, Google needed all the extra revenue it could get. But now that the economy is healthy again, it can step up efforts up to remove what it sees as inappropriate ads. The big boys are spending more, so it doesn't need as many clicks to boost the bottom line. What's more, by shrinking ad coverage, Google can actually drive more traffic to the big spenders. If you cut 30,000 advertisers, those still on the search engine get more clicks - and the more clicks, the more those big spenders pay.
Google announces its fourth quarter financials next week, and AdGooRoo data is typically a reliable indicator of what's to come. "Our ad coverage metric confirms that something big went down at the Googleplex last month. Ad coverage, which has been steadily climbing for the past 12 months took a sudden and precipitous dive in December," reads the firms latest search-ad report, due out on Monday. "Ordinarily, this would foreshadow a weak quarter, but we believe that this small drop will be more than offset by strong ad revenues."
Two years ago, in January 2008, Google famously began an effort to shrink ad coverage on the world's most popular search engine. This continued through the middle of 2008, and when the subject came up during Google's quarterly earnings call that July, senior vice president Jonathan Rosenberg attributed the shrinkage to Google's "continued focus on quality" advertising.
"[Google co-founder] Larry [Page] says we'd be better off showing just one ad [per page] - the perfect ad," Rosenberg said, indicating that coverage would continue to shrink.
But then he was interrupted by Google's other co-founder, Sergey Brin, who piped up with what can only be described as a shocking moment of candor. "There is some evidence that we've been a little bit more aggressive in decreasing coverage than we ought to have been," Brin said. "We've been reexamining some of that."
The economy was softening, and sure enough, coverage soon began to expand. According to AdGooRoo's numbers, Google's search engine showed 57 per cent more ads per page in the fourth quarter of 2008 than it did in Q3, as the economy imploded following the infamous demise of Wall Street stalwarts Lehman Brothers and Merrill Lynch.
Google had made significant changes to AdWords that fall, and naturally it said this would also improve ad "quality." So, whether Google is shrinking ad coverage or expanding it, the only aim to provide the world with better ads.
But surely it's obvious that Google is dialing up and down as the economy rises and falls. And now that the economy is on the rise again, the company has renewed efforts to crack down on ads it doesn't like. Google started banning advertisers en masse in early October - just as it was about to announce that the economic meltdown was over - and this house-cleaning came to head on December 3.
The official line is what you'd expect from the Mountain View Chocolate Factory. "Google is constantly working to ensure that we’re showing ads to our users that are relevant, in accordance with our ad policies, and safe for users. To that end, we perform regular reviews, using both manual and automated processes, in order to detect and disable ads that violate our policies," it told Search Engine Land.
But surely, the timing is no coincidence. ®
Saturday, 16 January 2010
Thursday, 14 January 2010
Challenging China
Chinese surprise at Google pull-out threat
By Chris Hogg
BBC News, Shanghai
Google's warning that it might pull out of China over cyber attacks has surprised human rights activists here.
They seem unfazed that China is accused of trying to hack into their Gmail accounts. But a major foreign firm like Google being prepared to speak out and challenge the government so directly is unusual.
The Chinese authorities will be infuriated that Google has made its announcement before negotiations with officials have got under way.
China has so far said little publicly in response.
I would bet on a harsh reaction from the Chinese government
Dan Sefarty, Viadeo
An unnamed official quoted by the state news agency Xinhua said only that the authorities were trying to find out more about Google's suggestion it might leave the country.
The company's main Chinese rival Baidu is less reticent. In a blog post that has since been taken down, the firm's chief architect Sun Yunfeng claimed Google was just trying to play down its market failure.
"Would Google top executives still proclaim that they would 'do no evil'," he said, quoting the company's code of conduct, "and quit China if they had taken 80% of China's search market?"
Google's market share is estimated to be around 30% in China, about half the size of Baidu's, the search engine market leader.
The senior Baidu executive said the American company's move would "satisfy the imagination of those Westerners who have never been to China and understand nothing of China but still like to point fingers at China".
'Mismatch' in perception
Others in the technology sector here see this differently.
google.cn homepage ( archive image)
Gmail accounts of rights activists have reportedly been accessed
Dan Sefarty heads Viadeo, the firm that owns the Chinese social networking site Tianji.com.
"Google is rare," he says. "It's a US company succeeding in China. It has impressive market share and is atypical among other foreign companies who try to get into this very tough market."
He warns that Baidu has strong links with the government and may be lobbying hard to gain business advantage from this row.
"I would bet on a harsh reaction from the Chinese government," he says. "Look at what they have done with Facebook and Twitter, which have been blocked in China for six to nine months now."
Opinion is divided over whether or not Google really plans to withdraw from the country, the world's largest internet market.
Duncan Clark, an analyst at the Beijing hi-tech consultancy BDA, says he sees a "mismatch" in perception between the Chinese authorities and the foreign firms doing business here.
"People here think no-one can do without China, and I think now some companies are thinking no-one can deal with China," he told the French news agency AFP.
"There is a feeling that China is emboldened and that they don't need to have the same sort of dialogue [as before]," he said.
Google's senior US executives are well aware of the Chinese preference for gradual change, and also of the authorities' likely resistance on a matter of such ideological importance to them as control of the internet, an arena described by a senior public security official just a few weeks ago as a "battlefield".
Some analysts see Google's announcement as a gambit for what will be extremely tough negotiations with the Chinese, rather than an ultimatum.
But others suggest that the more Google bent towards the demands of the Chinese government, the more harm was done to its reputation overseas, and at some point it had to make a stand.
'Heroic' decision?
Whether you regard Google's market share as impressive or disappointing, compared to its dominance elsewhere, there is little doubt it is not a household name in China in the same way that it is abroad.
A Chinese flag flutters outside Google's China headquarters in Beijing
Google has about 700 staff in its China offices
But Hu Li, a student in Beijing, told the BBC he admired what he called the company's "heroic" decision to offer an unfiltered service, and hailed the announcement to pull out if it could not reach its objective.
Some people even laid flowers outside the company's Beijing headquarters, in the hi-tech Haidian district, as a mark of respect.
But this sentiment was certainly not shared by everyone.
Another man, an IT worker who would only give his surname, Zhong, said the American firm should respect China's situation regarding this kind of issue.
"China has been using censorship for a long time," he said. "Any change can only happen slowly - it won't happen overnight."
By Chris Hogg
BBC News, Shanghai
Google's warning that it might pull out of China over cyber attacks has surprised human rights activists here.
They seem unfazed that China is accused of trying to hack into their Gmail accounts. But a major foreign firm like Google being prepared to speak out and challenge the government so directly is unusual.
The Chinese authorities will be infuriated that Google has made its announcement before negotiations with officials have got under way.
China has so far said little publicly in response.
I would bet on a harsh reaction from the Chinese government
Dan Sefarty, Viadeo
An unnamed official quoted by the state news agency Xinhua said only that the authorities were trying to find out more about Google's suggestion it might leave the country.
The company's main Chinese rival Baidu is less reticent. In a blog post that has since been taken down, the firm's chief architect Sun Yunfeng claimed Google was just trying to play down its market failure.
"Would Google top executives still proclaim that they would 'do no evil'," he said, quoting the company's code of conduct, "and quit China if they had taken 80% of China's search market?"
Google's market share is estimated to be around 30% in China, about half the size of Baidu's, the search engine market leader.
The senior Baidu executive said the American company's move would "satisfy the imagination of those Westerners who have never been to China and understand nothing of China but still like to point fingers at China".
'Mismatch' in perception
Others in the technology sector here see this differently.
google.cn homepage ( archive image)
Gmail accounts of rights activists have reportedly been accessed
Dan Sefarty heads Viadeo, the firm that owns the Chinese social networking site Tianji.com.
"Google is rare," he says. "It's a US company succeeding in China. It has impressive market share and is atypical among other foreign companies who try to get into this very tough market."
He warns that Baidu has strong links with the government and may be lobbying hard to gain business advantage from this row.
"I would bet on a harsh reaction from the Chinese government," he says. "Look at what they have done with Facebook and Twitter, which have been blocked in China for six to nine months now."
Opinion is divided over whether or not Google really plans to withdraw from the country, the world's largest internet market.
Duncan Clark, an analyst at the Beijing hi-tech consultancy BDA, says he sees a "mismatch" in perception between the Chinese authorities and the foreign firms doing business here.
"People here think no-one can do without China, and I think now some companies are thinking no-one can deal with China," he told the French news agency AFP.
"There is a feeling that China is emboldened and that they don't need to have the same sort of dialogue [as before]," he said.
Google's senior US executives are well aware of the Chinese preference for gradual change, and also of the authorities' likely resistance on a matter of such ideological importance to them as control of the internet, an arena described by a senior public security official just a few weeks ago as a "battlefield".
Some analysts see Google's announcement as a gambit for what will be extremely tough negotiations with the Chinese, rather than an ultimatum.
But others suggest that the more Google bent towards the demands of the Chinese government, the more harm was done to its reputation overseas, and at some point it had to make a stand.
'Heroic' decision?
Whether you regard Google's market share as impressive or disappointing, compared to its dominance elsewhere, there is little doubt it is not a household name in China in the same way that it is abroad.
A Chinese flag flutters outside Google's China headquarters in Beijing
Google has about 700 staff in its China offices
But Hu Li, a student in Beijing, told the BBC he admired what he called the company's "heroic" decision to offer an unfiltered service, and hailed the announcement to pull out if it could not reach its objective.
Some people even laid flowers outside the company's Beijing headquarters, in the hi-tech Haidian district, as a mark of respect.
But this sentiment was certainly not shared by everyone.
Another man, an IT worker who would only give his surname, Zhong, said the American firm should respect China's situation regarding this kind of issue.
"China has been using censorship for a long time," he said. "Any change can only happen slowly - it won't happen overnight."
Yahoo sides with Google over China cyber attack
Yahoo sides with Google over China cyber attack
By Hibah Yousuf, staff reporterJanuary 13, 2010: 1:35 PM ET
NEW YORK (CNNMoney.com) -- Yahoo Inc. gave its support to rival Google Inc. Wednesday, denouncing an alleged cyber attack originating in China against Google's network infrastructure.
"We condemn any attempts to infiltrate company networks to obtain user information," a Yahoo representative said in an e-mail statement. "We stand aligned with Google that these kinds of attacks are deeply disturbing and strongly believe that the violation of user privacy is something that we as Internet pioneers must all oppose."
Google said late Tuesday that the attack's primary goal was to access Gmail accounts of Chinese human rights activists. The company said that the incident, as well as Chinese censorship rules, could force it to shut down its operations in China, which includes Google.cn.
The search giant's ongoing investigation suggests the attack targeted at least twenty other large companies from a variety of industries. Neither Yahoo (YHOO, Fortune 500) nor Google (GOOG, Fortune 500) revealed whether Yahoo was among the victims.
"Yahoo does not generally disclose that type of information, but we take security very seriously and we take appropriate action in the event of any kind of breach," Yahoo said.
Microsoft (MSFT, Fortune 500), which launched a Chinese version of its search engine Bing in June, said that the company has "no indication that any of our mail properties have been compromised."
0:00 /3:04Yahoo eyes Chinese expansion
In 2005, Yahoo sold its business in China to Alibaba.com, China's largest e-commerce company. Yahoo maintains a 39% financial stake in the company but Yahoo no longer has "operational control or day-to-day management over the Yahoo! China business," according to a Yahoo spokeswoman.
Google did not have any response to Yahoo's statement.
By Hibah Yousuf, staff reporterJanuary 13, 2010: 1:35 PM ET
NEW YORK (CNNMoney.com) -- Yahoo Inc. gave its support to rival Google Inc. Wednesday, denouncing an alleged cyber attack originating in China against Google's network infrastructure.
"We condemn any attempts to infiltrate company networks to obtain user information," a Yahoo representative said in an e-mail statement. "We stand aligned with Google that these kinds of attacks are deeply disturbing and strongly believe that the violation of user privacy is something that we as Internet pioneers must all oppose."
Google said late Tuesday that the attack's primary goal was to access Gmail accounts of Chinese human rights activists. The company said that the incident, as well as Chinese censorship rules, could force it to shut down its operations in China, which includes Google.cn.
The search giant's ongoing investigation suggests the attack targeted at least twenty other large companies from a variety of industries. Neither Yahoo (YHOO, Fortune 500) nor Google (GOOG, Fortune 500) revealed whether Yahoo was among the victims.
"Yahoo does not generally disclose that type of information, but we take security very seriously and we take appropriate action in the event of any kind of breach," Yahoo said.
Microsoft (MSFT, Fortune 500), which launched a Chinese version of its search engine Bing in June, said that the company has "no indication that any of our mail properties have been compromised."
0:00 /3:04Yahoo eyes Chinese expansion
In 2005, Yahoo sold its business in China to Alibaba.com, China's largest e-commerce company. Yahoo maintains a 39% financial stake in the company but Yahoo no longer has "operational control or day-to-day management over the Yahoo! China business," according to a Yahoo spokeswoman.
Google did not have any response to Yahoo's statement.
Google Turns on Gmail Encryption to Protect Wi-Fi Users
Google Turns on Gmail Encryption to Protect Wi-Fi Users
google_logoGoogle is now encrypting all Gmail traffic from its servers to its users in a bid to foil sniffers who sit in cafes, eavesdropping in on traffic passing by, the company announced Wednesday.
The change comes just a day after the company announced it might pull its offices from China after discovering concerted attempts to break into Gmail accounts of human rights activists. The switch to always-on HTTPS adds more security, but does not help prevent the kind of attacks Google announced Tuesday.
All Gmail users will now default to using HTTPS, the secure, encrypted method for communicating with a remote server, for their entire e-mail sessions, not just for log-in. Session-long HTTPS has been an official option for Gmail users since 2008 (and unofficial for much longer), but Google says it hesitated turning it on for all since the encryption does slow down the service.
“Over the last few months, we’ve been researching the security/latency tradeoff and decided that turning https on for everyone was the right thing to do,” Gmail Engineering Director Sam Schillace wrote in the Gmail blog.
This option often wasn’t necessary when people used fixed and trusted connections, such as their home or office DSL or cable lines. But as Wi-Fi connections, especially public ones, became more popular, hackers began using simple sniffing software to snoop on people’s online activities with the goal of stealing passwords.
Still, the switch doesn’t encrypt e-mail — it simply encrypts the communications in transit between Google’s servers and a user’s computer — the same as when you use your bank’s website. E-mails sent to other people are transmitted in the clear as they have always been. True encrypted e-mail can only be read by the sender and receiver, regardless of how they move across the internet.
For those whose schools or workplaces routinely monitor employee or student internet usage, the change also shields their e-mails from the IT department.
A coalition of privacy and security experts called on Google publicly to make the change last June, saying that Google was putting millions of people at risk by not using encryption as the default for their cloud computing services.
Users who find the service slows them down or determine that it’s overkill for their needs can turn the HTTPS off in their account settings.
Rival free e-mail from Yahoo and Microsoft do not use HTTPS throughout their sessions, nor do social networking sites or other so-called cloud-computing services.
Instead, most of those services use the secure HTTPS protocol only for logging in, and fall back to unencrypted browsing thereafter. Failing to use HTTPS full-time increases one’s vulnerability to a host of nasty hack attacks when using an open or badly secured network, particularly a public Wi-Fi spot.
google_logoGoogle is now encrypting all Gmail traffic from its servers to its users in a bid to foil sniffers who sit in cafes, eavesdropping in on traffic passing by, the company announced Wednesday.
The change comes just a day after the company announced it might pull its offices from China after discovering concerted attempts to break into Gmail accounts of human rights activists. The switch to always-on HTTPS adds more security, but does not help prevent the kind of attacks Google announced Tuesday.
All Gmail users will now default to using HTTPS, the secure, encrypted method for communicating with a remote server, for their entire e-mail sessions, not just for log-in. Session-long HTTPS has been an official option for Gmail users since 2008 (and unofficial for much longer), but Google says it hesitated turning it on for all since the encryption does slow down the service.
“Over the last few months, we’ve been researching the security/latency tradeoff and decided that turning https on for everyone was the right thing to do,” Gmail Engineering Director Sam Schillace wrote in the Gmail blog.
This option often wasn’t necessary when people used fixed and trusted connections, such as their home or office DSL or cable lines. But as Wi-Fi connections, especially public ones, became more popular, hackers began using simple sniffing software to snoop on people’s online activities with the goal of stealing passwords.
Still, the switch doesn’t encrypt e-mail — it simply encrypts the communications in transit between Google’s servers and a user’s computer — the same as when you use your bank’s website. E-mails sent to other people are transmitted in the clear as they have always been. True encrypted e-mail can only be read by the sender and receiver, regardless of how they move across the internet.
For those whose schools or workplaces routinely monitor employee or student internet usage, the change also shields their e-mails from the IT department.
A coalition of privacy and security experts called on Google publicly to make the change last June, saying that Google was putting millions of people at risk by not using encryption as the default for their cloud computing services.
Users who find the service slows them down or determine that it’s overkill for their needs can turn the HTTPS off in their account settings.
Rival free e-mail from Yahoo and Microsoft do not use HTTPS throughout their sessions, nor do social networking sites or other so-called cloud-computing services.
Instead, most of those services use the secure HTTPS protocol only for logging in, and fall back to unencrypted browsing thereafter. Failing to use HTTPS full-time increases one’s vulnerability to a host of nasty hack attacks when using an open or badly secured network, particularly a public Wi-Fi spot.
Wednesday, 13 January 2010
America's Financial Illiteracy
America's Financial Illiteracy
Thomas F. Cooley, 01.13.10, 12:01 AM EST
Protecting consumers in the confusing world of modern finance.
One of the common elements of the regulatory reform proposals being crafted by the House and Senate is that both propose to create a Consumer Financial Protection Agency (CFPA). Although there has been concerted opposition to the creation of a new bureaucracy, there is certainly some logic to the idea of consolidating existing consumer protection functions in one agency. Currently, responsibility for consumer protection is scattered across several existing regulatory bodies, and as a consequence the task has fallen between the cracks. Authority for enforcement is in the hands of at least 11 agencies. Each one has responsibility for only a subgroup of financial firms, and their mandates partly conflict. Among the agencies, the Federal Trade Commission (FTC) is unique in having consumer protection on the list of its primary mandates.
There can be no doubt that many consumers have been battered by bad decisions that they made about mortgages, credit card debt, auto loans and so on. And there is no doubt that some of these bad decisions were driven by unscrupulous business practices and that alarms should have been raised about certain lending practices that drove the increase in household leverage.
Our recent experience raises a legitimate and interesting question--what exactly is the role of the government in protecting people from their own bad decisions? It is important to bear in mind that for 30 years we have been in the midst of a major social transformation in which responsibility for risk management has shifted to individuals. In the past, the government and employers often made financial decisions for households, for example by providing health insurance, defined benefit retirement plans and social security; now households are on their own more than ever. We can't just shrug off the problem because if many individuals make bad financial decisions, it creates a negative externality.
Many of the most important decisions consumers make in their lifetimes involve financial products: a mortgage to purchase a home, a loan to purchase an automobile, credit to make a large durable purchase, investments for retirement and insurance to keep one's family secure. All of these financial products have become increasingly complex over time and there is a much wider range of product options offered by different providers, making decision-making more complicated. Consumers need to be financially literate in order to make well-informed choices about such complex products. A growing body of evidence suggests that many consumers lack the knowledge they need to evaluate and make decisions about financial instruments.
So, what should we do and how should the CFPA address this? We don't want a CFPA that limits innovation in financial products--it shouldn't be modeled after the FDA, which requires that products be safe and effective before being allowed into the marketplace. We certainly want the CFPA to monitor abusive practices and raise warnings when they occur. Although as I noted in an earlier column, lobbyists have been hard at work limiting the impact of the CFPA. One result is that House bill H.R. 3126 exempts all of the following entities from regulation by the CFPA: automobile dealers who provide financing; any person regulated by the Securities and Exchange Commission; any person regulated by a state insurance regulator; smaller banks and credit unions (those with $10 billion or less in assets); brokers and agents for mortgage, title and credit insurance; real estate brokers and agents; attorneys; and most retailers. The Senate proposal has fewer carve-outs but does exclude from CFPA regulation small banks and credit unions, merchants, retailers and other nonfinancial institutions that extend credit to consumers.
That suggests that the most important role for a CFPA may be to increase the public's financial literacy. The level of financial knowledge among U.S. households is shockingly low, and that fact is at odds with the trend of shifting risk management to households.
How bad is it? Two economists, Annamaria Lusardi and Olivia Mitchell, have been studying financial literacy and the effectiveness of efforts to promote it for many years. The results are not at all encouraging. To take just a few of their examples, they asked the following questions of a representative sample of Americans over the age of fifty:
1. Suppose you had $100 in a savings account and the interest rate was 2% per year. After five years how much do you think you would have in the account if you left the money to grow: more than $102, exactly $102, less than $102?
2. Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After one year would you be able to buy more than, exactly the same as or less than today with the money in this account?
3. Do you think that the following statement is true or false? "Buying a single company stock usually provides a safer return than a stock mutual fund."
Only 50% of respondents were able to answer the first two questions correctly and less than a third were able to answer all three. In a related study less than 18% of people surveyed were able to answer a simple two-period compound interest problem. This is pretty discouraging. Not surprisingly the extent of financial illiteracy differs with education, gender, race and age. Most efforts to improve financial literacy are not effective.
So what is to be done? One view is that we can improve welfare through the judicious choice of "default" options. For example, in the choice of mortgages or consumer credit plans, the default option could require financial service providers to include a "plain vanilla" product in their menu. This offering should be easy to understand even for the inexperienced customer. It would also serve as a point of reference in comparison to other products. Default options have to be prudently chosen, since consumers, especially those who are inexperienced, are likely to refrain from active choices.
There are a lot of unanswered questions about default options. Sweden, Mexico and Chile have accumulated experience with the use of default investment portfolios in retirement plans. So far the evidence suggests that the choice of default option can have a tremendous effect on retirement savings, but not always to good effect.
Clearly the best way to protect consumers is to educate them. As a society we don't seem to have figured out how to do that. It's time we did.
Thomas F. Cooley, the Paganelli-Bull professor of economics and the former dean of the NYU Stern School of Business, writes a weekly column for Forbes.
Thomas F. Cooley, 01.13.10, 12:01 AM EST
Protecting consumers in the confusing world of modern finance.
One of the common elements of the regulatory reform proposals being crafted by the House and Senate is that both propose to create a Consumer Financial Protection Agency (CFPA). Although there has been concerted opposition to the creation of a new bureaucracy, there is certainly some logic to the idea of consolidating existing consumer protection functions in one agency. Currently, responsibility for consumer protection is scattered across several existing regulatory bodies, and as a consequence the task has fallen between the cracks. Authority for enforcement is in the hands of at least 11 agencies. Each one has responsibility for only a subgroup of financial firms, and their mandates partly conflict. Among the agencies, the Federal Trade Commission (FTC) is unique in having consumer protection on the list of its primary mandates.
There can be no doubt that many consumers have been battered by bad decisions that they made about mortgages, credit card debt, auto loans and so on. And there is no doubt that some of these bad decisions were driven by unscrupulous business practices and that alarms should have been raised about certain lending practices that drove the increase in household leverage.
Our recent experience raises a legitimate and interesting question--what exactly is the role of the government in protecting people from their own bad decisions? It is important to bear in mind that for 30 years we have been in the midst of a major social transformation in which responsibility for risk management has shifted to individuals. In the past, the government and employers often made financial decisions for households, for example by providing health insurance, defined benefit retirement plans and social security; now households are on their own more than ever. We can't just shrug off the problem because if many individuals make bad financial decisions, it creates a negative externality.
Many of the most important decisions consumers make in their lifetimes involve financial products: a mortgage to purchase a home, a loan to purchase an automobile, credit to make a large durable purchase, investments for retirement and insurance to keep one's family secure. All of these financial products have become increasingly complex over time and there is a much wider range of product options offered by different providers, making decision-making more complicated. Consumers need to be financially literate in order to make well-informed choices about such complex products. A growing body of evidence suggests that many consumers lack the knowledge they need to evaluate and make decisions about financial instruments.
So, what should we do and how should the CFPA address this? We don't want a CFPA that limits innovation in financial products--it shouldn't be modeled after the FDA, which requires that products be safe and effective before being allowed into the marketplace. We certainly want the CFPA to monitor abusive practices and raise warnings when they occur. Although as I noted in an earlier column, lobbyists have been hard at work limiting the impact of the CFPA. One result is that House bill H.R. 3126 exempts all of the following entities from regulation by the CFPA: automobile dealers who provide financing; any person regulated by the Securities and Exchange Commission; any person regulated by a state insurance regulator; smaller banks and credit unions (those with $10 billion or less in assets); brokers and agents for mortgage, title and credit insurance; real estate brokers and agents; attorneys; and most retailers. The Senate proposal has fewer carve-outs but does exclude from CFPA regulation small banks and credit unions, merchants, retailers and other nonfinancial institutions that extend credit to consumers.
That suggests that the most important role for a CFPA may be to increase the public's financial literacy. The level of financial knowledge among U.S. households is shockingly low, and that fact is at odds with the trend of shifting risk management to households.
How bad is it? Two economists, Annamaria Lusardi and Olivia Mitchell, have been studying financial literacy and the effectiveness of efforts to promote it for many years. The results are not at all encouraging. To take just a few of their examples, they asked the following questions of a representative sample of Americans over the age of fifty:
1. Suppose you had $100 in a savings account and the interest rate was 2% per year. After five years how much do you think you would have in the account if you left the money to grow: more than $102, exactly $102, less than $102?
2. Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After one year would you be able to buy more than, exactly the same as or less than today with the money in this account?
3. Do you think that the following statement is true or false? "Buying a single company stock usually provides a safer return than a stock mutual fund."
Only 50% of respondents were able to answer the first two questions correctly and less than a third were able to answer all three. In a related study less than 18% of people surveyed were able to answer a simple two-period compound interest problem. This is pretty discouraging. Not surprisingly the extent of financial illiteracy differs with education, gender, race and age. Most efforts to improve financial literacy are not effective.
So what is to be done? One view is that we can improve welfare through the judicious choice of "default" options. For example, in the choice of mortgages or consumer credit plans, the default option could require financial service providers to include a "plain vanilla" product in their menu. This offering should be easy to understand even for the inexperienced customer. It would also serve as a point of reference in comparison to other products. Default options have to be prudently chosen, since consumers, especially those who are inexperienced, are likely to refrain from active choices.
There are a lot of unanswered questions about default options. Sweden, Mexico and Chile have accumulated experience with the use of default investment portfolios in retirement plans. So far the evidence suggests that the choice of default option can have a tremendous effect on retirement savings, but not always to good effect.
Clearly the best way to protect consumers is to educate them. As a society we don't seem to have figured out how to do that. It's time we did.
Thomas F. Cooley, the Paganelli-Bull professor of economics and the former dean of the NYU Stern School of Business, writes a weekly column for Forbes.
Google Docs Becomes Google ‘Any File’ as Cloud Wars Heat Up
Google Docs Becomes Google ‘Any File’ as Cloud Wars Heat Up
Google is now offering a small virtual hard drive in the cloud so you can access all sorts of files anywhere — the latest salvo in an arms race to become the dominant player in cloud services.
As with many Google initiatives, this one may be deceptively modest: When it is completely rolled out, Google Docs will accept uploads of any kind of file — not just text and spreadsheets. That move heightens their competition with Microsoft, and takes on Apple and a number of small startups in the business of creating backup and storage space on remote servers.
This business is suddenly becoming viable with the ubiquity of broadband connectivity (which makes things almost as accessible as they’d be on your hard drive) and the popularity of netbooks (which are usually light on internal storage). Cloud computing also makes it possible never to lose data when you drop your beloved laptop, or when you don’t have it with you.
It’s already a crowded field, with all of the usual suspects: Microsoft’s cloud-based platform, Azure, is already available in a fully a la carte pricing scheme geared toward their core enterprise customers, and it offers a 25-GB online Skydrive for home users through its Microsoft Live services. Apple’s Mobile Me (once known as iDisk) has a 20-GB floor for $100 a year and a family plan in keeping with their mainly consumer focus.
For now, Google is portraying the initiative less dramatically, as a USB key rather than as a hard-drive replacement.
Instead of e-mailing files to yourself, which is particularly difficult with large files, you can upload to Google Docs any file up to 250 MB…. This makes it easy to back up more of your key files online, from large graphics and raw photos to unedited home videos taken on your smartphone. You might even be able to replace the USB drive you reserved for those files that are too big to send over e-mail.
While text documents and spreadsheets don’t count toward the total, the offering is actually quite underwhelming in terms of capacity: 1 GB, with extra storage available for $0.25 per GB/year. By contrast, Gmail now offers more than 7 GB of storage for e-mails and attachments, while Google’s Picasa lets you store 10 GB of photos.
But perhaps this is just a beginning of the famed Google Drive, a full-on hard drive in the sky. It’s one more step to make the free Google Docs into a compelling alternative to Microsoft Word — another attempt to break the hold Microsoft has on the desktop to transition users to using the internet even more (because that’s where Google makes its money).
If this is the precursor to something larger — say a giant Google drive that combines Gmail and Picassa, etc., Google ought to get themselves and their checkbook over to Dropbox, the little startup that offers a fabulous service that turns a folder on your PC or Mac into a shared storage drive. And if I were at Yahoo or Microsoft, I’d hope to get to Dropbox ahead of Google.
Google is now offering a small virtual hard drive in the cloud so you can access all sorts of files anywhere — the latest salvo in an arms race to become the dominant player in cloud services.
As with many Google initiatives, this one may be deceptively modest: When it is completely rolled out, Google Docs will accept uploads of any kind of file — not just text and spreadsheets. That move heightens their competition with Microsoft, and takes on Apple and a number of small startups in the business of creating backup and storage space on remote servers.
This business is suddenly becoming viable with the ubiquity of broadband connectivity (which makes things almost as accessible as they’d be on your hard drive) and the popularity of netbooks (which are usually light on internal storage). Cloud computing also makes it possible never to lose data when you drop your beloved laptop, or when you don’t have it with you.
It’s already a crowded field, with all of the usual suspects: Microsoft’s cloud-based platform, Azure, is already available in a fully a la carte pricing scheme geared toward their core enterprise customers, and it offers a 25-GB online Skydrive for home users through its Microsoft Live services. Apple’s Mobile Me (once known as iDisk) has a 20-GB floor for $100 a year and a family plan in keeping with their mainly consumer focus.
For now, Google is portraying the initiative less dramatically, as a USB key rather than as a hard-drive replacement.
Instead of e-mailing files to yourself, which is particularly difficult with large files, you can upload to Google Docs any file up to 250 MB…. This makes it easy to back up more of your key files online, from large graphics and raw photos to unedited home videos taken on your smartphone. You might even be able to replace the USB drive you reserved for those files that are too big to send over e-mail.
While text documents and spreadsheets don’t count toward the total, the offering is actually quite underwhelming in terms of capacity: 1 GB, with extra storage available for $0.25 per GB/year. By contrast, Gmail now offers more than 7 GB of storage for e-mails and attachments, while Google’s Picasa lets you store 10 GB of photos.
But perhaps this is just a beginning of the famed Google Drive, a full-on hard drive in the sky. It’s one more step to make the free Google Docs into a compelling alternative to Microsoft Word — another attempt to break the hold Microsoft has on the desktop to transition users to using the internet even more (because that’s where Google makes its money).
If this is the precursor to something larger — say a giant Google drive that combines Gmail and Picassa, etc., Google ought to get themselves and their checkbook over to Dropbox, the little startup that offers a fabulous service that turns a folder on your PC or Mac into a shared storage drive. And if I were at Yahoo or Microsoft, I’d hope to get to Dropbox ahead of Google.
New York seeks millions of USD in unpaid taxes from Nigeria
New York seeks millions of USD in unpaid taxes from Nigeria
www.chinaview.cn 2010-01-13 08:33:13
NEW YORK, Jan. 12 (Xinhua) -- New York City announced on Tuesday that it would sue Nigeria over millions of U.S. dollars in unpaid taxes.
"The Nigerian government has failed to pay real estate taxes, interest and other charges for commercial offices and other non-tax exempt spaces in the 22-story building," the mayor's office said.
The city is seeking between 4.1 million U.S. dollars and upwards of 16 million dollars in unpaid taxes for the Manhattan tower at 822 Second Avenue. The precise amount owned is unknown "because of the refusal of the Nigerian government to supply documentation."
A Xinhua request for comment from the Nigerian Mission to the United Nations went unanswered before deadline.
"Especially in these tough economic times, we will go after every dollar that is owed to city taxpayers," said Mayor Michael Bloomberg in a statement.
The building, known as "Nigeria House," is used partially for tax-exempt purposes, including as offices for the Nigerian consulate and the Nigerian Mission to the UN.
However, at least since 2002, and the city believes possibly as far back as 1993, portions of the building have also been used for commercial and other non-tax exempt purposes. A Nigeria Airways office, for example, formerly occupied space in the building's lobby.
"Nigeria was given many opportunities to settle this debt to the city, but it declined to do so," said Commissioner Tiven. "The city seeks to be a good neighbor to foreign governments that own property in the city, but we also expect these governments to do their part and pay their taxes."
www.chinaview.cn 2010-01-13 08:33:13
NEW YORK, Jan. 12 (Xinhua) -- New York City announced on Tuesday that it would sue Nigeria over millions of U.S. dollars in unpaid taxes.
"The Nigerian government has failed to pay real estate taxes, interest and other charges for commercial offices and other non-tax exempt spaces in the 22-story building," the mayor's office said.
The city is seeking between 4.1 million U.S. dollars and upwards of 16 million dollars in unpaid taxes for the Manhattan tower at 822 Second Avenue. The precise amount owned is unknown "because of the refusal of the Nigerian government to supply documentation."
A Xinhua request for comment from the Nigerian Mission to the United Nations went unanswered before deadline.
"Especially in these tough economic times, we will go after every dollar that is owed to city taxpayers," said Mayor Michael Bloomberg in a statement.
The building, known as "Nigeria House," is used partially for tax-exempt purposes, including as offices for the Nigerian consulate and the Nigerian Mission to the UN.
However, at least since 2002, and the city believes possibly as far back as 1993, portions of the building have also been used for commercial and other non-tax exempt purposes. A Nigeria Airways office, for example, formerly occupied space in the building's lobby.
"Nigeria was given many opportunities to settle this debt to the city, but it declined to do so," said Commissioner Tiven. "The city seeks to be a good neighbor to foreign governments that own property in the city, but we also expect these governments to do their part and pay their taxes."
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