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Google is making a bold play to enter mobile payments, and PayPal doesn’t like it one bit. Shortly after Google announced its new mobile wallet for Android phones today, Paypal filed a lawsuit against Google and two former PayPal executives who now are in charge of mobile payments at Google (Osama Bedier and Stephanie Tilenius).
The complaint (embedded below) alleges “misappropriation of trade secrets, and “breach of fiduciary duty.” It revolves around Osama Bedier, who was the VP of Platform, Mobile, and New Ventures at PayPal before he was recruited to work at Google by Android chief Andy Rubin, Google co-founder Larry Page, and Bedier’s former PayPal colleague Stephanie Tilenius (who now heads up Commerce and Payments at Google, and I interviewed yesterday onstage at Disrupt NYC).
The lawsuit reveals that Google was negotiatiating with PayPal for two years to power payments on mobile devices. But just as the deal was about to be signed, Google backed off and instead hired the PayPal executive negotiating the deal—Bedier. The lawsuit lays out the sequence of events:
By 2010, the executive in charge of the negotiations for PayPal was Osama Bedier. The executive in charge of the negotiations for Google was Andy Rubin. PayPal and Google had a deal finalized and signature-ready on October 26, 2010. By that time, unknown to PayPal, Bedier had just finished a series of job interviews with Google senior executives, culminating with a meeting on October 21 between Bedier, Google Senior Vice President Jonathan Rosenberg, and then-President of Google Larry Page.
Though Google’s leadership had directed negotiations toward the October 26 finalization months earlier, it now balked when presented with the very deal they had requested. The companies had a term sheet, a two phase roll-out with dates, and all other details nailed down. But, in the interim, Google’s leadership had interviewed Bedier, Rather than inking the October 26 deal, Google instead at the last minute professed a shift in mindset on the entire structure of the deal.
Bedier was offered a job at Google on October 31. He didn’t take it immediately, but after a few months of back and forth, he finally accepted the job in January, 2011. All of this coincided with Larry Page taking over as CEO, and a shift in Google’s strategy to build instead of partner in mobile payments.
The lawsuit notes that Bedier knew all of PayPal’s future plans for mobile payments, as well as an internal detailed analysis of Google’s weaknesses in the area. Not only that, it accuses him of storing “confidential eBay information in locations such as his non-PayPal computers, non-PayPal e-mail account, and an account on the remote computing service called ‘DropBox.’”
What did Bedier do with all of these “trade secrets”? The implication is that he used his knowledge of PayPal’s strategy to craft Google’s mobile wallet strategy (yup, the same one revealed today). He also used that knowledge to sell Google’s mobile wallet to big retailers:
Bedier has also been part of a Google team making sales calls to major retailers, PayPal is informed and believes and on that basis alleges that during these sales efforts, Bedier has been and is improperly comparing Google’s products and services with PayPal’s products and services in discussions with customers that both PayPal and Google are courting. In particular, on information and belief, Bedier’s comparisons incorporate PayPal trade secrets, including PayPal’s schedule for deployment, anticipated features, and back-end approach to mobile payment, point of sale, and the benefits of a wallet in the cloud.
And finally, he actively recruited other PayPal employees, just as Tilenius helped to recruit him (which is why she is named in the suit as well). Assuming this thing gets settled before it goes to court, how much is hiring Bedier going to end up costing Google?
Google Inc. (GOOG) said it has doubled the number of video ads that it places on partner sites in the past year, a sign it’s making headway in a push to expand display advertising.
Demand for video ads also has boosted Google’s AdMob network, which targets applications and websites on mobile devices. Requests for the spots have grown an average of more than 70 percent month to month since July, the company said.
Google, which traditionally has gleaned much of its video advertising from its YouTube unit, is aiming to benefit from new online ad formats to sustain sales growth as it competes with rivals such as Apple Inc. (AAPL) and Facebook Inc. for user attention and marketing dollars. Spending on video ads may grow 39 percent in the U.S. this year, while the overall online ad market should grow 11 percent, according to research firm EMarketer Inc.
“The audience has fragmented,” said Mike Steib, director of video advertising at Google, the world’s biggest Internet- search company. “It is harder and harder for an advertiser to reach their audience as effectively and as fully as they have in the past unless they embrace video advertising across all kind of devices and across all kinds of content channels.”
Testing Video Ads
Mountain View, California-based Google, whose display-ad network serves more than 2 million outside websites, has been bulking up its services that let customers advertise using video clips. In March, it began testing some videos on its advertising exchange, yet another vehicle for display advertising that acts as a general marketplace for publishers and marketers.
“Video gets inside people’s heads,” said David Hallerman, an analyst at New York-based EMarketer. “Brand marketers want it because they can tell a story better.”
The company also has been pushing into video on its traditional search-based advertising platform. In March, the company rolled out a new video format for ads on online-query results that gives users a bigger player for watching clips.
While early adopters included Hollywood studios, which used the service to show off movie trailers, Google is attracting more interest from industries such as autos, technology and consumer packaged-goods.
“We’ve now got a variety of video formats that provide a valuable experience for users and advertisers alike,” Dennis Woodside, president of the Americas region at Google, said in an e-mailed statement. “We’re seeing tremendous growth across a range of sectors.”
Google shares fell $1.54 to $518.13 at 4 p.m. New York time on the Nasdaq Stock Market. The shares have dropped 13 percent this year.
Clicking Through
Volvo AB (VOLVB), the Swedish automaker, used video ads on mobile phones for two campaigns at the end of last year and the beginning of 2011, according to Jared Hopfer, associate director of mobile marketing at Mobext, part of France-based advertising agency Havas Media. The video popped up when users accessed applications on their smartphones, he said.
Users were given the option of clicking through to learn more about the product or find dealers. That kind of engagement was two to three times higher than ads that aren’t video, he said.
“In all mediums, video is one of the more interesting and often effective advertising vehicles,” Hopfer said. “In video, you’re dealing with sound and motion, where static advertising is not as lively. So it’s a lot easier to evoke emotion for a brand through a video.”
Faster Connections
The proliferation of online videos has conditioned consumers to watch advertising clips, driven by faster Internet connections on desktops and smartphones, Google’s Steib said. Advertisers that want to reach users who are watching less television need to market online, he said.
“For advertisers, online video has to be a part of the overall online media mix,” he said. “People who are watching video online are much more likely to have broadband, much more likely to have a computer, much more likely to have a high-end cell phone -- which all means they’re more likely to have higher income, higher level of education. They tend to be a little bit younger.”
While video ads may have advantages over other formats, they’re also pricier, EMarketer’s Hallerman said. A video in the place of a display ad might cost $10 per thousand impressions, while a static ad on some sites might be $2, he said.
Video’s Novelty
And the novelty of videos may start to wear off with users as they become more prevalent, Hallerman said. Even with the recent surge, video ads made up 5.5 percent of overall U.S. online ad spending last year, and will be less than 7 percent this year, EMarketer estimates.
“As there is more video used in banners and search, the more people will ignore them,” Hallerman said. Television, the other major video format, can make it more difficult for users to ignore commercials, he said.
Still, the overall growth in video ads makes it a format that Google must focus on, said Whit Andrews, an analyst with Gartner Inc. in Shrewsbury, Massachusetts.
“If you’re going to go after brand, and if you’re going to go after mood, and if you’re going to go after awareness, video is increasingly critical,” Andrews said. “Advertising is Google’s core business. Anything that matters in advertising is something that Google is going to pursue.”
A video screen displays a new payment service introduced by Google Inc. at an event in New York on May 26, 2011. Google Wallet will let consumers pay merchants and download coupons with a tap of their mobile phones.
Google Inc. was sued by PayPal Inc., the fastest-growing unit at online marketplace EBay Inc. (EBAY), over claims it misappropriated trade secrets from PayPal’s mobile- payment business.
Osama Bedier, a former PayPal executive now at Google, stole PayPal’s confidential information, the company said in the lawsuit filed yesterday in state court in San Jose, California. Stephanie Tilenius, another ex-PayPal executive now at Google, violated contractual obligations by recruiting Bedier, PayPal said.
Bedier “is now leading Google’s efforts to bring point of sale technologies and services to retailers on its behalf,” according to the complaint. “Bedier and Google have misappropriated PayPal trade secrets by disclosing them within Google and to major retailers.”
Both companies are trying to move into storefronts from online transactions and build their mobile businesses. PayPal, based in San Jose, California, is working with major retailers to develop a new type of point of sale system -- the equipment next to cash registers where consumers swipe credit cards.
Google, based in Mountain View, California, yesterday unveiled two services to let consumers pay merchants and download coupons with a tap of their mobile phones.
Aaron Zamost, a Google spokesman, said in an e-mail that the company hasn’t received a copy of the suit and can’t comment until it has reviewed it.
Android Talks
PayPal also alleges that Bedier, who left the company in January, discussed a job with Google while simultaneously leading negotiations to make PayPal a payment option on Google’s Android Market. He didn’t disclose the job-related talks, a breach of his fiduciary duty, the company said.
Tilenius, who left EBay in 2009, was under contract not to recruit employees, PayPal said. She messaged Bedier on Facebook Inc.’s social-networking Web site, telling him she had a “HUGE” opportunity for him, and sent him e-mails and text messages offering advice while he interviewed for a position, according to the complaint.
The case is PayPal v. Google Inc. (GOOG), 11CV201863, California Superior Court, County of Santa Clara (San Jose).
Google’s Marissa Mayer came prepared with some juicy mobile stats at the TechCrunch Disrupt conference in New York City today.
She revealed that Google Maps on mobile devices has just recently surpassed 200 million installs, accounting for 40 percent of Maps’ usage. Mayer predicts that by June, mobile devices will account for the majority of Google Maps usage.
It certainly makes sense for mobile to dominate Google Maps usage. With pretty much every smartphone packing in GPS capabilities, fast and accurate map applications are essential. Google Maps for mobile is Android-only at this point (Apple has developed its own Google Maps app for the iPhone and iPad) and is currently the best mobile map app available, with features like 3D buildings that would even cause iPhone owners to be jealous.
Mayer also said that 20 percent of Google searches are focused on local information, and that’s doubly true for mobile searches, where 40 percent of searches are about local information.
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Square COO and angel investor Keith Rabois took the stage today with Michael Arrington at TechCrunch Disrupt to discuss the mobile payments product, his investment strategy and more. As you may know, Square just launched a new version of its disruptive mobile payments platform this week. The company also reached some important milestones—500,000 card readers shipped, one million Square transactions in May, and the company is now on track to process $1 billion in payment volume within a year.
When Michael asked if Square will do better financially than PayPal, Rabois said there’s a 95 percent chance that Square will be worth more financially and be more valuable in the greater payments space. He explains, “we are not limited to just e-commerce, we actually enable real world payments, which is a much bigger market and is more valuable.”
Of course, Rabois is very familiar with PayPal’s market size as he was one of the first employees of the company, and went on to serve as PayPal’s Executive Vice President of Business Development and Policy. As for whether Square wll be more important culturally than PayPal, Rabois gives Square a fifty-fifty chance.
He says that Square is growing as fast (if not faster) than PayPal at the same stage of the company where was payola at this point (open to public for seven months). And PayPal is a free product and wasn’t making any money initially, whereas Square charges a 2.75 percentage on all transactions.
As for competition from Google with the search giant’s soon to be launched NFC feature, Rabois doesn’t seem worried. It’s an interesting technology but we don’t feel like it’s going to be competitive, says Rabois.
In four months simple Mac mail client Sparrow has been downloaded over 300K times, has raised $250K in funding from luminaries like Kima Ventures, Dave Morin (which definitely helped with the Facebook stuff) and from Tweetie creator Loren Brichter.
“We’re not adding social layers to mail for the sake of it,” says CEO Dom Leca. The basic idea is pulling contextual information from your social network that is relevant to the users, and Leca is working on pulling in data for LinkedIn and Twitter.
One of the neatest features of the latest release Sparrow 1.2 is that it has a Facebook Connect option that shows your recipients Facebook profile pictures and it gives you the ability to add them as friends if you haven’t already. “There is no mail client that uses all your social data so far,” says CEO Dom Leca. Hehopes Sparrow will be that.
Here’s the list of new features:
- Facebook friends profile pictures integration
- Add people as Facebook friends
- Unified Inbox
- Gravatar support
- Localization in 8 langages: simplified Chinese, Italian, Spanish, Russian, Dutch, German, Japanese, French and English
Sony brought its online gaming network, the PlayStation Network (PSN), offline today — though this time it was just for some scheduled maintenance. But the downtime was a frustrating reminder for many PlayStation 3 and PlayStation Portable owners, as well as developers, over how the company handled the PSN’s downtime.
“Thanks for the heads up. It’s nice to be prepared for downtime,” one commenter wrote on the PlayStation Blog’s most recent post about the scheduled maintenance downtime.
It was a frustration that echoed across a number of media sites and Sony’s own PlayStation blog. You can see a comparison of some of the blog posts about the PSN’s downtime — with the number of comments that appeared on the blog post and the general rating for each blog post. Commenters could rate each blog post on a scale of one to five, and any blog post rated well under the average rating for Sony’s typical blog posts is labeled in red.
Just about every post about the PSN’s downtime blitzed past the average reply count for posts. Posts about the initial response to the downtime wer rated poorly, and the ratings gradually went up as more information about the outage came to light. The posts that offered little information (such as when Sony said it didn’t know when the network would come back online) were rated the worst among the PlayStation Blog.
Sony finally brought its beleaguered online gaming network back online last week after hackers were able to break in and steal sensitive information about more than 100 million PSN and Station.com users. That ended a 24-day period where PlayStation 3 and PlayStation Portable owners were unable to download new content for their games and play their games online with other players. Sony laid indirect blame for the PSN’s downtime on hacktivist group Anonymous, which typically rallies a group of loosely connected hackers under moral or political banners to take down large companies. Anonymous has denied that it was involved in breaking into and bringing down the PSN.
The company said the PlayStation Store would remain offline and it would still likely be up before the month is over. That conflicts with several reports that suggested the PlayStation Store would be online today. It’s a bummer for PlayStation 3 and PlayStation Portable developers because they aren’t able to release downloadable content and new games on the PlayStation Store — all while other online game stores like the Xbox Live Arcade and Steam have remained online. Christian Svensson, senior vice president of game development studio Capcom, said on the company’s public forums that the downtime was costing his game development company “hundreds of thousands of dollars” because it could not sell downloadable games. Capcom is responsible for franchises like Street Fighter.
Obviously this isn’t a perfect snapshot of the community’s reaction to the PSN’s downtime. That will require some kind of sweeping survey. But the numbers seem to suggest that the community — at least, the community closest to the company that regularly participated on the blog — wasn’t as frustrated with Sony’s response to the downtime as the reaction from the rest of the world suggested. That could be because the PSN is free to use, unlike Microsoft’s Xbox Live, which charges a monthly fee to play online games and download arcade games.
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Yahoo announced Tuesday it will roll out a brand-new interface for its estimated 277 million users during the next few weeks. The company has been testing a beta version of this powerful upgrade for seven months and wants all its users to embrace this better working and smarter designed version of the popular service.
The most notable change users will notice is speed, as the service claims to be twice as fast as the old version. There’s also the new ability to send attachments up to 100 megabytes, a more powerful spam filter, and new social networking features, with Facebook and Twitter updates appearing inside Yahoo’s mailboxes.
I had the chance to try out the beta version of this massive facelift over the past few months, and it’s a considerable upgrade in terms of speed, organization, and efficiency. When the company says it works much faster, it’s dead on. I also appreciated being able to personalize the e-mail more with new colors. The only thing I don’t like about the update is a permanent vertical ad that always sits next to your inbox. Comparably, my Gmail account has no such ads.
There’s no doubt the revamp is aimed at stopping Yahoo users from fleeing to other services. Yahoo’s mail service has been slowly shedding customers to Gmail, which has 220 million users and keeps growing steadily. Yahoo lost 3 million users from April 2010 to April 2011, while Gmail gained 24 million users during the same period.
The makers of the Oscar-winning film The Hurt Locker are aiming to put users that illegally downloaded the film in a world of financial hurt. Voltage Pictures, which produced the movie, is working with the U.S. Copyright Group to threaten and potentially sue 24,583 BitTorrent users, according to TorrentFreak.
The lawsuit will be the largest BitTorrent suit in history and might be a sign of building momentum to fight against piracy fueled by BitTorrent clients and trackers. Just a few weeks back, more than 23,000 BitTorrent users were expected to get a legal notice from U.S. Copyright Group for illegally downloading The Expendables.
The makers of The Hurt Locker started the process of threatening legal action against BitTorrent users about a year ago with only 5,000 defendants. Now that they’ve added 20,000 more IP addresses to the list, the story is even more notable and deserves more scrutiny.
The U.S. Copyright Group is a business registered by the law firm Dunlap, Grubb & Weaver, and has no government ties. The company’s system is to threaten users with a “pay up or else” lawsuit to get them to pay a fee between $1,000 and $3,000. The Copyright Group has itself been sued in the past by Torrent users for fraud and extortion.
The Hurt Locker only made $49 million worldwide even though the film won the Academy Award for Best Picture, so it’s understandable the makers were frustrated with piracy. That said, there are other reasons why the film may not have succeeded the box office. Chief among those is that the film had small distribution on its initial run during the summer of 2009 and didn’t start making waves during awards season until it was already on DVD.
Zynga, the dominant maker of social games on Facebook, is reportedly poised to file for its initial public offering, according to AllThingsD.
Citing unnamed sources, the publication said that the filing with the Securities and Exchange Commission could come as early as this week or next week.
The move will give Zynga the option of raising money by going public or continuing negotiations with well-heeled investors who could make private investments in the company.
San Francisco-based Zynga was reportedly raising $500 million on a valuation of $10 billion a couple of months ago, but the round was never announced. Meanwhile, several internet companies such as LinkedIn and Russian search firm Yandex have gone public, showing that investors have a big appetite for fast-growing social media companies.
AllThingsD said that Zynga will likely price itself higher than $10 billion. The company now has a market capitalization of $9 billion, or double its pre-IPO price. Other big social companies preparing for possible IPOs — one of these days — are Groupon and Facebook.
Zynga is the dominant player in Facebook games, with more than 250 million monthly active users. Market analyst firm Appdata says that Zynga’s top game, CityVille, has more than 90 million monthly active users, making it the top game on Facebook. Meanwhile, Zynga dominates the rest of the top ranks with 45 million users for FarmVille, 35 million users for Texas HoldEm Poker, and 14 million players for FrontierVille.
Zynga had the early head start on social gaming on Facebook, but it isn’t as easy to amass a huge audience for a game on the social network now, since Facebook cracked down on spam-like viral messages. Zynga’s numbers have been subject to wild swings as users quit playing or take up new games. In the meantime, though, the company has been enormously profitable. It uses the free-to-play business model, where users play for free and then pay real money for virtual goods such as tractor fuel in FarmVille. Last year, Zynga reportedly generated $850 million in revenue and an operating profit of $400 million. The company has nearly 2,000 employees, and it has acquired 14 game companies in the last 12 months.
Sources told AllThingsD that Goldman Sachs will be among the lead bankers for the Zynga offering. Zynga also reportedly hired John Schappert, chief operating officer of Electronic Arts. That move hasn’t been announced, but sources confirm to us that has happened.
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