Facebook settles privacy complaint with Federal Trade Commission

Facebook has settled charges with the Federal Trade Commission that it deceived users by telling them they could keep their information on Facebook private and then repeatedly making it public, according to the agency.

The settlement of an eight-count complaint requires Facebook to warn users about privacy changes and to get their permission before sharing their information more broadly, according to the FTC. Facebook has agreed to 20 years of privacy audits, it said.

"Facebook is obligated to keep the promises about privacy that it makes to its hundreds of millions of users," Jon Leibowitz, chairman of the FTC, said in a written statement. "Facebook's innovation does not have to come at the expense of consumer privacy. The FTC action will ensure it will not."

In a blog post, Facebook founder and Chief Executive Mark Zuckerberg said Facebook is committed to giving its users "complete control" over what they share and with whom.

"I also understand that many people are just naturally skeptical of what it means for hundreds of millions of people to share so much personal information online, especially using any one service.  Even if our record on privacy were perfect, I think many people would still rightfully question how their information was protected. It's important for people to think about this, and not one day goes by when I don't think about what it means for us to be the stewards of this community and their trust," he wrote. "I'm committed to making Facebook the leader in transparency and control around privacy."

Facebook also has created two new positions to make sure it takes privacy seriously, Zuckerberg said.

Erin Egan, a former partner with Covington & Burling, will become chief privacy officer for policy. Michael Richter, Facebook’s chief privacy counsel, will take on a new role as chief privacy officer for products.

Privacy watchdog Jeff Chester, executive director of the Center for Digital Democracy, said the settlement shows that Facebook "has long misled users and the public."

But another frequent critic, Rep. Edward Markey (D-Mass.), applauded the settlement.

"The settlement's privacy protections will benefit Facebook users and should serve as a new, higher standard for other companies to follow in their own efforts to protect consumers' privacy online," Markey said in a written statement. "When it comes to its users' privacy, Facebook’s policy should be: ‘Ask for permission, don’t assume it."

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Photo: Facebook Chief Executive Mark Zuckerberg greets a student as he arrives to speak at Harvard University. Zuckerberg, who dropped out of Harvard in 2004, met with students as part of an East Coast trip to recruit for the social networking company. Photo credit: Kelvin Ma / Bloomberg 

Facebook's IPO: Could it come in the first half of 2012?

Facebook's initial public offering has been the source of Wall Street speculation for months. Some thought the IPO would come this year, others have reported that it wouldn't arrive until late next year.

And on Monday, the Wall Street Journal added fuel to the Facebook IPO fire with a report that the world's largest social network, with more than 800 million users, is prepping to issue its first public stock offering in the second quarter of 2012.

The Facebook IPO could be a $10-billion offering based on a $100-billion valuation of the Palo Alto-based company. But as to when in the second quarter the IPO would come, well that hasn't yet been decided, the Journal said in its report, citing unnamed "people familiar with the matter."

As reported by my colleague Walter Hamilton over on our sister-blog Money & Company:

The timing of Facebook's IPO is likely to hinge in part on the condition of the stock market, which has not been kind lately to some other prominent tech IPOs.

In a major disappointment, shares of one of this year's most closely watched IPOs, online-coupon company Groupon Inc., have plunged recently. The stock closed Monday at $15.24, far below the $20 price at which it sold shares to investors earlier this month.

Earlier this month, Facebook co-Founder and CEO Mark Zuckerberg said on a PBS interview with Charlie Rose that indeed, his company was planning an IPO, but that the company hadn't yet decided when.

Zuckerberg also said that an IPO isn't something he spent "a lot of time on a day-to-day basis thinking about."

"We've made this implicit promise to our investors and to our employees that by compensating them with equity and by giving them equity, that at some point we're going to make that equity worth something publicly and liquidly, in a liquid way," he said. "Now, the promise isn't that we're going to do it on any kind of short-term time horizon. The promise is that we're going to build this company so that it's great over the long term, right. And that we're always making these decisions for the long term, but at some point we'll do that."

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Photo: Facebook co-founder and CEO Mark Zuckerberg walks around Harvard University in Cambridge on Nov. 7, 2011. Credit: Brian Snyder/Reuters

LinkedIn shares slump after insider sell-off

Silicon Valley is hoping a wave of newly minted millionaires will pump up the local economy with purchases of houses, cars, designer clothes, you name it.

Restrictions on selling stock are lifting for insiders. The first Internet company to generate some serious wealth for early investors and employees is LinkedIn. Insiders are typically prohibited from selling shares for six months after an IPO.

But LinkedIn isn't meeting with the same kind of euphoria on Wall Street.

Its shares have sunk to the lowest level since June as insiders sell off stock for the first time since the professional networking company went public in May.

The concern: LinkedIn, which floated a small percentage of its shares in the IPO, is now trading at an unrealistic valuation.

Shares in LinkedIn fell below $70 on Tuesday. LinkedIn has fallen 23% since early November when it said it would sell additional stock in a secondary offering.

LinkedIn's IPO was the biggest for an Internet company since Google's in 2004. The stock more than doubled on its first day of trading.

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Photo: Reid Hoffman, co-founder and chairman of LinkedIn Corp., left, and Jeffrey Weiner, chief executive officer of LinkedIn, center, stand with traders on the floor of the New York Stock Exchange on May 19, the first day of trading. Credit: Michael Nagle / Bloomberg 

 

LinkedIn insiders preparing to unload shares

The LinkedIn lockup is almost over and shareholders are winding up to sell more than 6.7 million shares. They are looking to realize gains in the stock, which has risen 74% since its initial public offering in May.

Bain Capital is unloading its entire stake in the professional networking company now that the lockup period restricting insider sales is expiring, according to filings with the Securities and Exchange Commission. Bain led a $53-million investing round in LinkedIn in 2008 which valued the company at more than $1 billion.

LinkedIn Chief Executive Jeff Weiner, its chief financial officer Steven Sordello and director David Sze are each selling 10% percent of their holdings. Chairman and company co-founder Reid Hoffman isn’t selling any shares. His stake in the company is worth more than $1 billion.

LinkedIn insiders will hit the sell button Nov. 21 when the company's six-month lockup ends. The sales will nearly double the number of shares available on the stock market. LinkedIn has benefited from the limited number of shares currently trading. Shares slid 7% to $72.80. LinkedIn closed as high as $109.97 in July but fell to the low $70 range in August.

LinkedIn also said it plans to sell almost 1.3 million shares to propel its growth.

LinkedIn's initial public offering was the biggest tech IPO since Google in 2004. It posted a loss in the third quarter as its revenue more than doubled. It was its first as a public company, as LinkedIn spends to expand its offerings around the globe. The company has more than 135 million members.

Analyst Mark May at Barclays Capital says he remains bullish on LinkedIn. 

"We believe the uniqueness of its global user base, the competitive moat created by network effects, the significant opportunity to expand share in both the corporate recruiting and advertising sectors, and the meaningful upside potential in margins all point to an ability for LinkedIn to sustain hyper growth and recognize significant margin expansion over time," May wrote in a research note. 

LinkedIn also announced a new app on Tuesday that with one click uploads to your phone a business card and all its contents.

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Photo: LinkedIn founder Reid Hoffman, center, and Chief Executive Jeff Weiner, right, after the opening bell at the Big Board as the company went public. Credit: Mike Segar / Reuters

RIM's BBX phones are 'going to surprise people,' investor says

Research In Motion Inc. has had a tough year and is currently sitting with a stock price that values the company at a price less than the overall value of its assets.

But the upcoming BBX operating system, which will run on a new line of RIM's BlackBerry tablets and smartphones, could be the company's savior and return it to consumer and investor favor, a major RIM shareholder told the Bloomberg news service in an interview.

"People think it's a melting ice cube," Leon Cooperman told  Bloomberg. "We think the new operating system is going to surprise people." 

But so far, neither Cooperman nor RIM have said exactly what will be so surprising in BBX, though RIM has said that its new line of BBX phones will focus more on touchscreens and less on physical keyboards, which have been a hardware trademark of BlackBerry phones thus far.

BBX, which is set to launch early next year, will also enable apps built for Google's Android operating system to run on BlackBerry devices.

As a RIM investor, Cooperman is betting that RIM's BBX plans pan out. He's the hedge-fund manager and founder of Omega Advisors Inc., which bought a stake of about $28 million in RIM last quarter.

Omega Advisors manages about $5.4 billion in investor funds, according to a LinkedIn listing on the company. 

After multiple product delays this year and an international three-day service outage, RIM's stock price has fallen more than 68% this year and on Monday morning was trading at about $18.61 per share as the company has given up market share to Apple's iPhone and phones that run Android.

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Photo: The BlackBerry logo on a Curve 9300 smartphone, manufactured by Research In Motion. Credit: Simon Dawson / Bloomberg

 

 

Richard Branson invests in Square

British business magnate Richard Branson has invested in Square, the mobile payments start-up run by Twitter co-founder Jack Dorsey.

Square declined to disclose exactly how much was invested by Branson, known for the Virgin Group of international companies that have taken him from a record-store owner to a billionaire, but did say that it was in the multimillion-dollar range.

Branson announced his investment in Square on Twitter on Tuesday, along with a blog post on Virgin's website in which he said: "I'm very passionate about helping people start and grow successful businesses, and Square is an incredible technology that inspires and empowers everyone to be an entrepreneur."

Square, founded last year, is known for its Square card reader, a small, white plastic cube that plugs into the headphone jack of smart phones and tablets and works with an app to handle credit and debit card payments.

The young firm has shipped more than 800,000 card readers to businesses and says it is on pace to process more than $2 billion in payments annually.

The San Francisco-based company, in which Visa is also an investor, is going up against heavyweights such as Google, MasterCard, PayPal and an alliance of AT&T, T-Mobile and Verizon in the quickly growing "mobile wallet" space that allows users to pay for things with smart-phone apps rather than credit cards.

Square's bid in that space is the Square Card Case app, which was recently updated for Apple's iOS 5 operating system to make use of geofencing and location-based technologies.

Branson's investment follows a $100-million investment by the venture firm Kleiner Perkins Caufield & Byers, which pushed Square past a $1-billion valuation.

That same month, Square named former U.S. Treasury Secretary Lawrence Summers and venture capitalist Vinod Khosla, who is also one of the founders of Sun Microsystems, to its board of directors.

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Photo: Richard Branson, center, at the Indian Formula One Grand Prix at the Buddh International Circuit in Noida, India on Oct. 30. Credit: Saurabh Das / Associated Press

AT&T delays expected close for T-Mobile takeover

AT&T has delayed into the middle of next year the expected closing of its bid to take over T-Mobile USA for $39 billion.

Federal regulators are scrutinizing the deal, which would sell the nation's fourth-largest wireless carrier to the nation's second-largest wireless carrier. AT&T had originally planned to get regulatory approval and close the deal by about March.

On Friday, the Dallas-based company is said in a filing with the Securities and Exchange Commission that it plans to have everything completed "in the first half of 2012."

The AT&T takeover of T-Mobile was challenged by the Justice Department in August when it sued to block the deal, arguing that it would lead to higher prices and less choice for consumers.

"We dispute the allegations and intend to vigorously contest the matter," AT&T said of the DOJ suit in its SEC filing. A trial date for the suit has been set for Feb. 13, 2012.

If AT&T's purchase of T-Mobile falls through, the company would be required to pay a "breakup fee" of $ billion and then enter into a broadband roaming agreement and transfer to Deutsche Telekom (T-Mobile USA's parent company) "certain wireless spectrum."

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Photo: AT&T Inc. signage at a company store in Chicago. Credit: Tim Boyle/Bloomberg

Groupon IPO: highest tech valuation since Google

Groupon's initial public offering is on at $20 per share, to give the Chicago daily deals site a valuation of $12.7 billion.

That's the highest tech valuation since Google went public in 2004 at a valuation of $23.1 billion, according to the San Jose Mercury News. So, can Groupon be the next tech industry giant that Google has grown to be?

Groupon seems to think so, issuing about 35 million shares on Friday that will sell for more than "the initially projected range of $16 to $18, as demand materialized despite lingering concerns about Groupon's accounting and business model," noted Times reporter Walter Hamilton in a story he wrote about the company's IPO.

The daily deals site will trade on Nasdaq under the symbol "GRPN." Groupon's chief executive, Andrew Mason, was in New York on Friday to ring Nasdaq's opening bell.

The Chicago Tribune's editorial board wrote that Groupon's IPO will help change Chicago's reputation "for a city with, at best, a mixed reputation as a hub of business innovation."

"Can it really be just three years ago that Northwestern University grad Andrew Mason and his gutsy financial backers launched their daily deal site, spawning a new industry?" the Tribune asked. "Can it really be that Groupon expanded from 37 employees in late 2009 to more than 10,000 today? It's an amazing business story."

It's also a business story that has left many investors questioning whether or not Groupon has a sustainable business model.

"There's fear — perhaps smugness on the part of rivals — that the company is a flash in the pan, too easily imitated and failing to pay off for its advertisers," the Tribune wrote. "Missteps in reporting its financial results have raised legitimate questions. The answers haven't always been satisfactory."

Currently, Groupon operates in 35 countries, with more than 3,000 employees and expected annual revenue of $500 million this year. The company is said to have turned its first profit after just seven months in business and makes its money by taking a 50% cut of each discount coupon it sells through its website.

In early trading on Friday, shares of Groupon rose nearly 50% to about $27.71 per share.

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Photos: Entrance to Groupon's headquarters in Chicago. Credit: Tim Boyle/Bloomberg

Doxo, a Jeff Bezos-backed bill-payment service, lands AT&T deal

Seattle-based Doxo wants to be your digital filing cabinet -- where you pay your bills and get any other sort of documentation from businesses online via web browser or mobile app.

And the company, which names Amazon CEO Jeff Bezos among its investors, recently inked a deal with AT&T to make use of the company's digital bill and documentation services which it believes will help its cause.

AT&T, the nation's second largest wireless carrier, has more than 100 million customers in the U.S., and of course Doxo sees each of them as potential customers. The company has raised more than $15-million in investor funds to date.

"It's great validation of what we're doing," said Steve Shivers, Doxo's CEO, in an interview. "We opened up Doxo to the public from a private beta on July 1. And we've seen very, very healthy growth. We have Sprint on board, accepting payments through Doxo and we have multiple utilities, our first credit union, we'll have our first government customers, healthcare and insurance customers soon too."

But AT&T so far is the biggest company, by far, to integrate into Doxo's system.

Doxo operates not by allowing its users to pay with credit or debit cards, but by withdrawing funds directly from bank accounts. The direct bank account withdrawal allows the company, its users and its integrated businesses -- such as AT&T and Sprint -- to avoid credit and debit transaction fees.

That, Shivers says, is the key as to why Doxo is a better route to go than automatic bill pay options through banks or even online payment options from companies themselves.

"I look out there and I see a lot of companies that are collecting money, mailing bills and other documents on paper and statements and they still don't even have a decent website and they aren't even offering online payment options," Shivers said. "There are lots of other companies that, if they offer online services, they're still sending a lot of valuable documents by mail. And if people go that route, they're going to have to set up a credit card or bank account with each business, and if they ever get a new credit card or switch banks, they have to go to the website of each individual business and change all the information for each autopay account."

"With Doxo, you never have to do that again. You can just change your payment information in one place and it keeps all your payments going with no interruptions."

Shivers said that Doxo can cut a business' mailing and collections cost by about 80% for each user who signs up for Doxo. On Thursday, the company also rolled out a new feature to its service that allows users to set limits on how much they pay automatically. If a bill is higher than a user's set limit, they get an alert to take a look at the bill before approving its payment or not.

Doxo makes its money when a user pays its bills through the service by collecting a fee from the business paid. Shivers wouldn't say just how much its fees are, how many users it has or how many businesses it has integrated into Doxo, but he did say that its user base is up more than 300% since opening to the public about four months ago.

However, the CEO did admit that the idea of having a person's bills coming into one place is a concept a bit foreign to many people.

"It still sometimes astounds me, the sort of 'no duh' complexity that can be eliminated by turning the payment concept around and focusing on the customer rather than the business," he said. "But I see that changing, and with every business like AT&T that we get signed up with Doxo, we can go to other businesses and say: 'Hey, your customers are probably also customers of this business or this business or this one. And Doxo will be easier for your customers, if they want to use it, and it will save you money.'

"There is a real network effect to what we're doing."

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Image: Doxo dashboard screenshots. Credit: Doxo

LinkedIn third-quarter loss disappoints investors

LinkedIn recorded its first quarterly loss since the online professional network's initial public offering in May.

The loss wasn't as steep as some analysts had predicted, but the stock fell as much as 8% in after-hours trading. It came as the company increased spending on research and development to attract more users around the globe.

LinkedIn lost $1.6 million, or 2 cents a share. It had earnings of $4 million, or 2 cents, in the third quarter of 2010. If not for certain items, LinkedIn said it would have earned 6 cents a share. Revenue more than doubled from last year to $139.5 million, more than the $128 million analysts had forecast.

Total operating costs more than doubled to $134.9 million as LinkedIn opened an office in Tokyo and bought IndexTank to improve search on its site.

This is an especially important quarter for LinkedIn because employees and other insiders can begin selling their shares starting Nov. 21. Investors may be nervous that the end of the lockup will usher in a tidal wave of sales that could cause the stock to drop.

LinkedIn made its hotly anticipated public trading debut before the economic turbulence that has delayed the IPOs of other Silicon Valley companies such as social gaming company Zynga. As such, it's a bellwether for the sector. Groupon, the daily deals company, is set to price one of the year's most closely watched IPOs on Thursday.

LinkedIn maintained its pace of adding about two new members a second, finishing the quarter with 131.2 million members. It continues to trade at about twice the $45 price it fetched at its IPO. It also hosted a town hall meeting on jobs with President Obama last month.

LinkedIn said Thursday that it has filed a registration statement with the SEC to sell more stock. The company said it planned to use the proceeds for "working capital and general corporate purposes." 

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Photo: LinkedIn founder Reid Hoffman, center, and CEO Jeff Weiner, right, applaud after the opening bell at the Big Board as the company goes public. Credit: Mike Segar / Reuters