Facebook and Yelp retreat from daily deals

Facebook scrapped its group buying program after only four months, while Yelp cut its Deals staff in half.

NEW YORK (CNNMoney) -- Groupon's success in the daily deals space spawned hundreds of copycat sites and inspired big companies like Google to hawk their coupon services. Skeptics said the near-immediate market saturation meant Groupon's business was easily replicated -- and therefore doomed.
But two key rivals in the field have already scaled back their deal efforts.
Facebook pulled the plug Friday on Facebook Deals, after only four months of testing the offering out in five cities. When Facebook announced the deals program in April, sites including ReadWriteWeb proclaimed it a game-changer, saying "Groupon doesn't stand a chance."
Facebook "learned a lot from our test ... [and] we think there is a lot of power in a social approach to driving people into local businesses," the company said in a written statement. "We'll continue to evaluate how to best serve local businesses."
A Facebook representative confirmed that check-in deals -- discounts that pop up when Facebook users share their location with the site -- will remain. The buy-in-advance deals, however -- the ones that directly imitated Groupon -- are being scrapped.
Meanwhile, reviews site Yelp cut half of its Deals staff on Monday. Yelp Deals launched one year ago in San Diego and soon expanded to cities across the country.
Yelp will keep running Yelp Deals, but it cut 15 positions and will redeploy some of those staffers internally to other projects. The deals service is just "one offering in our portfolio of ad products," Yelp said in a prepared statement.
"This shows that just having a big name and a big audience isn't enough to make daily deals work," says Jim Moran, co-founder of Yipit, which aggregates deals and tracks the space.
Groupon itself is not profitable, but it's growing: Its subscriber base now stands at 116 million, up from 83 million at the end of last quarter.
Hundreds of daily deal sites: Yipit is currently tracking more than 360 active daily deals sites in the U.S. -- and each month, dozens of new ones launch, while others disappear.
July had 36 launches and 38 shut-downs. That's the first time since Yipit began tracking that more sites closed than opened.
But the fallen sites aren't necessarily an indicator that daily deals are becoming passe, Moran says. The number of deals is increasing: Yipit is now tracking more than 30,000 offers per month.
"Clearly, people are interested in deals, and the market is growing," Moran says. "It comes down to offering deals in a certain context -- and if that's not right, a service can fail quickly."
Yelp Deals "started incredibly strong," Moran says, scoring an average of more than $30,000 in gross revenue per offer at the beginning of the year. The industry average is $10,000 per offer, while bigwigs Groupon and LivingSocial average $13,000 per deal.
As Yelp Deals expanded to more cities and more offers, though, revenue per deal declined to about $10,000. As a result, Yelp scaled back the number of offers. It ran more than 60 deals each month in June and July. August is on track for fewer than 30.
"I do think there's a space for Yelp and Facebook to benefit, but they need to figure some things out," Moran says. "And other big companies, like Google and Amazon, seem to be very well positioned."
Google (GOOG, Fortune 500) has embarked on a slow but steady march into the deals space in recent months, with its new Google Offers in a few cities as well as Latitude check-in deals. This month Google acquired The Dealmap, which aggregates local deal and displays them on a map.
Last week Amazon (AMZN, Fortune 500) launched a deals site called AmazonLocal, which includes offers in 30 cities. Amazon is also an investor in LivingSocial.

The month that changed tech forever

Google's CEO Larry Page (left), HP's CEO Leo Apotheker (center) and Apple's chairman Steve Jobs all took the tech industry for a ride in August.

NEW YORK (CNNMoney) -- While an earthquake and a hurricaneslammed the East Coast in August, the West Coast endured a different kind of turmoil.

Within a 10-day span this past month, Google reinvented itself as a hardware company, Hewlett-Packard moved to ditch PCs and become a software company, and Apple lost its iconic CEO.

The three Silicon Valley Goliaths now face transitions that will reshape the technology landscape.

"We're being knocked off our axis here," said Laura DiDio, principal of research firm ITIC. "What's happening now would have been unthinkable just a month ago."

First came Google (GOOG, Fortune 500), announcing on Aug. 15 that it would be acquiring Motorola Mobility (MMI). The company has long touted the benefits of open-source software, yet here it was threatening its smartphone partners by buying a handset manufacturer. Pending regulatory approval, Google will begin making its own devices, just like Apple and Research In Motion (RIMM) do -- the companies Google eclipsed with its Android operating system.

HP (HPQ, Fortune 500) is the nation's biggest technology company and the world's largest personal computer maker, but it announced Aug. 18 that it is seeking to spin off its PC division to focus instead of software and services.

It was an about-face for a company that splurged on Compaq a decade earlier, using that foundation to make its PC business into the industry's most successful. HP's PC sales are almost double the annual revenue of its next largest competitor, Dell (DELL, Fortune 500).

Less than a week later, on Aug. 24, Apple (AAPL, Fortune 500) announced that Steve Jobs had resigned as CEO. Jobs had been on medical leave since January, but the news still sent shockwaves throughout the technology industry.

Though Apple will hardly be rudderless without Jobs, the company's co-founder has a unique genius that will be hard to replace: Jobs launched hit after hit, somehow knowing what consumers wanted before they knew they wanted it.

These kind of major disruptions happen from time to time -- but they can topple giants. Before the PC boom, no one had heard of Microsoft (MSFT, Fortune 500), and RCA was among the biggest consumer electronics retailers.

"A few decades ago, cheap PCs and fast processors created a number of companies out of nothing," said Zeus Kerravala, analyst at Yankee Group. "We're going through something similar now. With mobile and wireless, we're seeing a transition again. Companies are positioning themselves and gathering up the necessary assets."

The ripple effects are already visible.

Samsung is widely believed to be eying webOS, which HP is looking to sell off. Why? Because Samsung is a Google partner that relies on the Android operating system, and the Motorola acquisition is a threat to its business.

IBM (IBM, Fortune 500) and Oracle (ORCL, Fortune 500) suddenly have to pay closer attention to HP, which shifts from a hardware partner of theirs to a potential direct rival in the software and services business.

Meanwhile, everyone is watching new Apple CEO Tim Cook for signs of how his leadership will differ from his predecessor's. Apple's influence extends beyond the tech industry -- it's also a key player in the music, publishing and wireless fields. And it's Innovator #1 in the consumer-gadgets market.

"Steve Jobs doesn't just drive Apple," said Rob Enderle, president of Enderle Group, a tech consultancy. "He has been driving the PC, tablet, and smartphone markets for a number of years."

Who will lead the way now?

It's an open field. Welcome to the new Silicon Valley.

BYOD - Bring your own device to work

Employees who choose their own gadgets are a headache for tech support. But new software is here to help.

FORTUNE -- Life was a whole lot simpler for IT departments back when BlackBerrys ruled the workplace. Today's offices are populated with iPhones, Android-powered gadgets, and a slew of tablets -- and a growing number of companies and institutions even encourage employees to "BYOD" (bring your own device -- i.e., buy whatever you like) for work-related calls, e-mails, and other communications.

Now a cadre of companies is stepping up to help beleaguered IT teams handle device proliferation. MobileIron, based in Mountain View, Calif., sells software that enables its customers -- including the University of Chicago and semiconductor company KLA-Tencor (KLAC) -- to track, manage, and, most important, secure a broad range of wireless phones and tablets on all the major mobile operating platforms.

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MobileIron's software lets a company's techies monitor their fleets of phones and remotely wipe a device clean of sensitive data if it falls into the wrong hands. It also offers a tool that allows employees to do some self-maintenance of their machines, such as registering for Wi-Fi access or locating a lost device. And if workers miss an important update or start using their devices in an unauthorized way, the system alerts the IT department. "MobileIron gives us the ability to reach out to our iPad users," says Malcolm Collingwood, senior technology strategist at Proskauer, a New York City-based law firm that recently outfitted 600 attorneys with iPads. "If Apple (AAPL) comes out with security updates, we can very quickly see who has upgraded to the latest version of iOS and then follow up with people who haven't."

The idea of mobile management has been around a few years -- MobileIron launched in 2007 and rival Good Technology of Redwood Shores, Calif., in 1996 -- but the field has exploded in the past 18 months. Gartner earlier this year published an analysis of the industry and identified 23 companies offering device-monitoring tools, including full-service security and enterprise-software companies such as Intel-owned McAfee (INTC) and Sybase, an SAP (SAP) company.

MobileIron, which recently raised $20 million in funding and signed up 200 customers in three months, welcomes the competition. "We think there's an opportunity here to build a standalone, profitable business," says Bob Tinker, MobileIron's CEO. (The company is not yet profitable but has raised a total of $57 million.) "We're in a market that just got really big really fast." Indeed, with more companies giving their employees more wireless choices (Good says 60% of its customers already offer employees a BYOD program, and another 30% plan to do so by the end of the year), there's plenty of work to go around.

ARM wants to wrestle with Intel

ARM is gunning for Intel by trying to break open the old-line PC and server markets. Meanwhile, Intel is charging ahead with new mobile offerings.

FORTUNE -- Crack open your smartphone, and chances are there's ARM—not Intel—inside. The British chip designer commands the mobile market. Last quarter alone, 1.1 billion of its power-efficient microprocessors were shipped in phones and tablets. But Cambridge-based ARM Holdings (ARMH) has bigger ambitions. In recent months, it has been talking up plans to get its chip designs into PCs and servers as well.

Meanwhile, Intel's (INTC) been ramping up its efforts at penetrating the fast-growing mobile market. The world's largest chipmaker owns the PC and server markets, but has failed to get its processors into smaller mobile devices. Recently, though, Intel scored several (albeit small) tablet wins. And it has said a phone powered by its Medfield processor will be unveiled by end of this year.

The two companies have long been on a collision course, but their battle for each other's territory is about to heat up. By next year, Intel-running tablets and phones will have finally hit the market and ARM-based processors will have made their way into notebook computers (like those running Microsoft's (MSFT) upcoming Windows 8). That will leave Intel breaking into a hot new sector just as ARM begins cracking open an old-line market.Of course, neither company is going to have an easy time taking on the other's monopoly.

Intel has struggled to get a low-power processor into smartphones and tablets, but ARM executives are the first to admit they are worried about the encroaching competition. "You never discount Intel," says Ian Drew, executive VP of marketing at ARM and a 14-year Intel veteran. "I've worked there long enough to know that they are a supreme manufacturing company."

In addition to superior manufacturing capabilities, Intel's size—whether measured in manpower or revenues—dwarfs ARM's. Then again, ARM's business model doesn't require building multi-billion-dollar fabs. Unlike Intel, ARM doesn't actually manufacture chips. Instead, it licenses its technology to companies like Qualcomm (QCOM), Texas Instruments (TXN) and Nvidia (NVDA) and collects royalties on every device shipped with its architecture.

"ARM has great architecture and a lot of momentum behind them and Intel has superior manufacturing," says UBS analyst Uche Orji. "Calling this one will be tough—the answer to this riddle won't be clear until at least four to five years."

In the meantime, predictions of who will grab what portion of market share are running rampant. Research firm IHS iSuppli recently said it projects that by 2015, 22.9% of notebook shipments worldwide will be ARM-based systems.

In the long run, the rivalry could be good news for consumer electronics manufacturers—and possibly even for consumers. Why? Because increasing competition among chip suppliers could eventually drive down prices. But it's not clear either company will end up "winning" this match.

"I think they will both be successful to a limited extent," says UBS's Orji. "I expect to see some ARM PCs next year, and I also expect to see some Intel handsets in the market next year."

Facebook pays $40,000 to bug spotters

NEW YORK (CNNMoney) -- Facebook wants you to try to hack into its site -- and if you succeed, it will pay you for the details.

Facebook said this week that that it has paid out more than $40,000 under its new "bug bounty" security initiative. Launched three weeks ago, Facebook's program invites security researchers -- both the professional kind and hacker hobbyists -- to send it the details of any Facebook vulnerabilities that they uncover. If the report checks out, Facebook will pay a finder's fee of at least $500.It's willing to go higher for extra-impressive bug spotting.

"We've already paid a $5,000 bounty for one really good report," Facebook Chief Security Officer Joe Sullivan wrote in a blog post. "One person has already received more than $7,000 for six different issues flagged."

Although the social networking has its own security team, Facebook launched its bug bounty program to tap into the collective wisdom of the site's 750 million users.

"We hire the best and brightest, and have implemented numerous protocols," Sullivan wrote. "We realize, though, that there are many talented and well-intentioned security experts around the world who don't work for Facebook."

Researchers from more than 16 countries have successfully submitted bounty bugs, Facebook said. Its public "thank you" list names dozens of contributors.

Facebook also took pains to assure bug-hunters that it won't take any legal action against those who submit bugs, even if they were uncovered through less-than-legal routes into Facebook's systems.

That's often how hackers find vulnerabilities, but even those without any ill intent -- so-called "white-hat hackers" -- can land in hot water with companies if they tell them about their intrusion.

WikiLeaks cables detail Apple's battle with counterfeits in China

Apple was slow to act against the booming counterfeit industry in China and other Asian countries, according to cables obtained by WikiLeaks.

The technology giant eventually organized a team in March 2008 to curtail the explosion of knockoff iPods and iPhones, according to an electronic memo from the Beijing embassy dated September 2008.

Yet, three years after Apple moved to crack down on widespread counterfeiting and put pressure on China, progress has been slow. Gadget piracy isn't a high priority for the Chinese government, the U.S. reports and experts say.

Members of Apple's recently formed global security team were recruited from Pfizer after they executed a series of crackdowns on counterfeit Viagra production in Asia, the report says.

John Theriault, formerly Pfizer's security chief and, before that, a special agent for the Federal Bureau of Investigation, leads Apple's global security unit. Don Shruhan, who worked for Theriault at Pfizer, is now a director on Apple's security team in Hong Kong.

Shruhan told the Beijing embassy official that his group at Pfizer spent five years planning raids on counterfeit drug rings, the cable says. He said he's "afraid" of the volume of imitation Apple products being produced in China and about the inexperience of Apple's lawyers in dealing with Chinese authorities, the report says.

An Apple spokeswoman declined to comment. A Pfizer spokeswoman, who declined to comment on personnel matters, said the company has a strong global security team to handle the increase in counterfeit medicine worldwide.

WikiLeaks, a group that publishes private government documents, posted tens of thousands of previously unreleased U.S. diplomatic cables last week. The reports from the Beijing embassy detailing Apple's piracy crackdown were unclassified, but many were described as "sensitive" and "not for Internet distribution."

In December, Apple said it removed an application from its mobile store that let people browse WikiLeaks documents from their iPhones "because it violated developer guidelines." The company suggested that the app broke laws or could be harmful to people, but many free-speech advocates cried censorship, as they have in the past when Apple has pulled apps.

The fresh WikiLeaks documents shed new light on Apple's struggles with intellectual-property theft in China, but the subject hasn't completely flown under the radar.

Last month, international news media were rapt after discovering that China is home not only to fake Apple gadgets but also toimitation Apple stores, which had many of Apple's signatures. The Chinese government ordered two of the five unofficial stores to close because they had not secured proper business permits, but a spokesman for China's Kunming government defended the others, saying they sell authentic Apple merchandise, according to Reuters.

Apple owns and operates four stores in China. The three in Beijing and the one in Shanghai are Apple's highest trafficked and top grossing stores in the world, Peter Oppenheimer, Apple's financial chief, said in an earnings call in January.

But the hunger for Apple products is insatiable there. That's why stores have begun to sell the products without Apple's permission, while others are hawking cheaper, lower-quality gadgets that are aesthetically similar and bear the chic Apple logo.

China's Guangdong province, the country's most populous region, has become a hub for manufacturing and selling counterfeit Apple products, two of the newly surfaced cables say. The Foxconn Technology Group, which assembles products for Apple, operates factories in Guangdong.

Workers typically smuggle parts from the facilities in order to make replicas, said Lilach Nachum, an international business professor for Baruch College in New York who travels frequently to Asia. It's the cost of doing business in China, where many American companies go for inexpensive labor and efficient industrial plants, she said.

"Not to go to China is not really an option," Nachum said. "Companies cannot afford to do that. No one can afford to do that."

China's counterfeiting ring is responsible for supplying India with fake Apple products, the 2008 cable says. In raids, Indian officials uncovered shipments that had moved from China through Hong Kong, the report says.

Apple's early plans to go after counterfeiters, according to a cable, involved first targeting offending retailers and street vendors; next, Apple would work with police to raid manufacturing facilities; and finally, the company would pursue online resellers. The plans closely resemble Pfizer's successful strategy, the cable says, citing Shruhan, the Apple director.

"Shruhan said that low-profile retail raids are a good option for Apple, a company that wants to stay away from too much publicity surrounding this issue," the cable says. Theriault, Shruhan's boss, briefed Steve Jobs, then CEO, on the plans in 2008, the cable says.

But Apple is having limited success. In countless stores and at tables setup on streets, merchants purporting to sell iPods, iPhones and iPads at deeply discounted prices are prevalent, said Wini Chen, a student in San Francisco who recently returned from studying abroad in Beijing.

"They'll say, 'Yeah, we have iPad. We'll give you a really good deal,'" Chen recalled from her shopping trips. "If I really want to buy a knockoff Apple product, I could probably do that in 15 minutes."

Chinese officials readily cooperated with pharmaceutical companies on their raids, but that hasn't translated to software, as Microsoft has discovered, or electronics, as Apple is learning, said Nachum, the professor. Whereas a defective pill could cause sickness or death, a shoddy iPod has less dire consequences.

Apple had planned to strengthen its case with the government by arguing that defective batteries could blow up and injure people, and that lost tax revenue could have a significant economic impact, the cable says.

The arguments weren't very effective. China's government declined to investigate a facility in March 2009 that was manufacturing imitation Apple laptops because it threatened local jobs, says a cable dated April 2009. A different arm of China's government scrapped plans for a raid on an electronics mall in the Guangdong province because it could have driven away shoppers, the cable says.

iPhone hacker Comex says he's landed an internship ... at Apple

A 19-year-old who is probably the world's most noted iPhone hacker said Thursday he's been hired by Apple, the very company whose products he's been hacking into.
"It's been really, really fun, but it's also been a while and I've been getting bored," Nicholas Allegra, who's better known by his pseudonym Comex, posted on Twitter. "So, the week after next I will be starting an internship with Apple."
Apple did not immediately respond to a CNN request for comment on Comex's internship at the company.
Forbes writer Andy Greenberg revealed Comex's identity this month, calling him the "iPhone uber-hacker who keeps outsmarting Apple."
In the story, he noted that Comex was looking for an internship, and he suggested that Apple give him one.
"Now it has," he wrote Friday.
Comex started the website jailbreakme, which lets iPhone users jailbreak their phones simply by visiting that site. A jailbroken iPhone can run apps that are not approved by Apple for sale in its App Store.
The phones also can then be "unlocked," which makes it possible to use them on wireless networks that Apple hasn't approved. International travelers like that feature.
Other Apple hackers have praised the site as being incredibly sophisticated. Dino Dai Zovi told Forbes that Comex's work is as impressive as Stuxnet, a computer worm that apparently targeted Iran's nuclear facilities last year.
It's fairly common -- more so than you might expect, at least -- for big tech companies to hire once-nefarious hackers. These coding gurus are sometimes better versed in the security vulnerabilities of a company's products than anyone else in the industry.
And, these companies hope, the former hackers could use these skills to make their products safer.
The blog MacRumors says Apple has made similar hires in the past:
"Earlier this year MobileNotifier developer Peter Hajas was picked up as an Apple summer intern."
VentureBeat, however, says that's a new phenomenon for the world's largest tech company:
"Hiring hackers isn't new in the tech world, but it's a fairly recent development for Apple, which has usually tried to squash hackers by more traditional means."
Greenberg, at Forbes, says these hires don't always go well:
"George Hotz, one of the first iPhone hackers, was sued by Sony after reverse engineering the PlayStation 3, a move that set off a wave of user anger at the company, resulting in more than 20 retaliatory hacking attacks by the hacker collective Anonymous and others."
But he argues the Comex hire may be good for Apple:
"Apple, by taking the carrot instead of stick approach, has saved itself that massive PR headache. And by hiring someone who actually understands its products' security weaknesses, it may just be making its users safer, too."