Digital Media

Correction 2:19 p.m. PDT: An earlier version of this story and its headline significantly mischaracterized a key metric used in the IC3 report. The overall finding of the report was that complaints regarding Internet-related crimes rose 33 percent in 2008.

Complaints of Internet-related crimes soared 33 percent last year, countering two years of consecutive declines, according to a report released Monday by the Internet Crime Complaint Center (IC3).

The IC3 Web site received 275,284 complaints last year, up from 206,884 the previous year. The organization referred 72,940 of those 2008 complaints to federal, state, and local law enforcement agencies. The IC3 is a partnership among the Federal Bureau of Investigation, the National White Collar Crime Center, and the Bureau of Justice Assistance.

Referred complaints, which ranged from online auction fraud to identity theft to non-delivery of goods purchased online, cost consumers about $264.6 million last year, with the median dollar loss reaching $931 per complaint, according to the report. In 2007, the losses were less: $239.1 million.

(Credit: Internet Crime Complaint Center)

(Credit: Internet Crime Complaint Center)

As far as complaint categories of Internet crimes, non-delivered merchandise after sending a payment or delivering the goods but never receiving a payment, were at the top of the list, according to the report. Of all complaints received, 32.9 percent were related to this offense.

Internet auction fraud accounted for 25.5 percent of the complaints, while credit card and debit card fraud made up 9 percent, according to the report.

(Credit: Internet Crime Complaint Center)

Even though complaints of crimes involving non-delivered goods occurred the most, that category didn't hit consumers in the pocketbook like check fraud, which carried a median loss of $3,000.

And the most common means to engage in an Internet crime was e-mail, the report noted. In 74 percent of the reported crimes, e-mail was used, followed by Web pages in nearly 29 percent of the cases.

Want to find a reputable dentist? How about a cozy bar for that perfect second date? A few years ago, you would have consulted friends. Today, chances are good that Yelp is the place you go.

But what if you found out that some of the reviews were written by hired hands--or that reviews were either removed or placed higher or lower on the page based on whether the merchant was willing to pay Yelp for special services?

Those are the allegations being made in an expose in the East Bay Express this week. The newspaper reported that six business owners said Yelp sales reps promised to remove or move negative reviews in exchange for advertising and that in six other instances positive reviews disappeared or negative ones appeared after owners declined ad deals.

The allegations could have consequences for Yelp, which was founded in July 2004 as a site where people can post reviews and ratings of businesses. It operates in about three dozen U.S. cities, as well as in Canada and the U.K.

In his rebuttal to the article posted on his blog, Yelp Chief Executive Jeremy Stoppelman denies all the allegations and questions the story's sources, including one named source he claims had reviews removed because they were deemed to be fake.

"There is irrefutable evidence that we do not do that," Stoppelman told CNET News on Thursday when asked whether the placement of some reviews is determined by advertising deals. "It's absolutely ridiculous that somebody would say we are going to write a review and call a business (to sell advertising). That's not how you build a sustainable business...Trust and integrity are key to staying in business."

The problem, according to Stoppelman, lies in the company's secret sauce for filtering out reviews.

At the mercy
Basically, merchants are at the mercy of a computer algorithm just like Web sites are at the mercy of what is known as the "Google Dance"--the monthly update of the Google search engine's index. One tweak of the Google index can potentially make or break a business.

... Read more

Botnets increasingly used to perpetrate click fraud, Click Forensics reports.

(Credit: Click Forensics)

Thanks in part to armies of compromised computers, click fraud reached an all-time high in the fourth quarter.

Click fraud lets Web sites increase revenue from ads supplied by services such as Google's AdSense or the Yahoo Publisher Network, though those companies take measures to screen out bogus links so advertisers don't have to pay. But that doesn't stop people from trying, according to a new report from Click Forensics, a company that monitors for click fraud and sells detection services.

"The overall industry average click fraud rate grew to 17.1 percent for the fourth quarter of 2008. That's up from 16.0 percent in the third quarter of 2008 and from the 16.6 percent rate reported for the fourth quarter of 2007," the company said Wednesday.

Humans can click on ads, but increasingly fraudsters turn to botnets, the swarms of computers taken over through remote attacks that can do fraudsters' bidding without computer users' knowledge.

"Traffic from botnets was responsible for 31.4 percent of all click fraud traffic in the fourth quarter of 2008. That's up from the 27.6 percent rate reported for the third quarter of 2008 and the 22.0 percent rate reported for the fourth quarter of 2007," Click Forensics said.

Henry Blodget is again at the center of controversy but his news blog is among the fastest growing.

(Credit: Silicon Alley Insider)

Words like "scumbag," "fraud," and "crook" once trailed after Henry Blodget's name anytime it came up in Silicon Valley. The budding Web-publishing mogul, who was once a superstar tech analyst before being accused of securities fraud, has spent the past five years trying to recover his credibility. Last week, his efforts may have suffered a setback.

This interview began in August, when I sent Blodget the questions. He e-mailed his answers on Wednesday, two days before Silicon Alley Insider, the technology news blog Blodget co-founded, wrote itself into a controversy. A member of the public posted a false report to CNN's user-generated news site, iReport, that claimed Apple CEO Steve Jobs had suffered a heart attack. SAI followed up with a story that clearly informed readers the rumor was unverified. Nonetheless, SAI appears to have helped fuel the investor panic that led to a 9 percent drop in Apple's stock.

Blodget and I corresponded again on Friday and he said if ever in a similar situation he would play it the same way. He wrote: "We described exactly what the report was, said we didn't know whether it was true or not, and said we were investigating."

Blodget isn't the kind to shy away from the spotlight, regardless of how hot it may be. He became famous a decade ago after he accurately predicted Amazon.com's stock price would double to $400. At Merrill Lynch, Blodget was a cheerleader for tech stocks in the late 1990s. After the dot-com bubble burst, Eliot Spitzer, the former New York State Attorney General, himself since disgraced, accused Blodget of fraud and he was banished from the securities industry for life. Since then, Blodget has launched a journalism career and helped turn SAI into one of the fastest growing tech-news blogs. The insights from this former Wall Street insider have been praised by publications, such as BusinessWeek.

Why journalism? After what you've been through, why didn't you turn your back on Wall Street, on technology, on predicting anything other than the weather?
Well, you've ruled out a lot of professions there--and, thankfully, I only got kicked out of one. What journalists do has a lot in common with what analysts do. After spending a decade learning some lessons the hard way, I didn't want to just throw all that experience in the trash.

I liked your story on The New York Times, when you sort of offered to buy the paper's digital unit. What's the best piece of journalism you've produced?
Yes, we'd love to buy NYT Digital. We're sorry we haven't heard back from Janet (Robinson, CEO of The Times) and Arthur (Sulzberger Jr., publisher) yet. The best thing I've written--or at least the longest--is probably a book called The Wall Street Self-Defense Manual: A Consumer's Guide to Intelligent Investing. An alternate title could have been, "I made all the dumb-ass mistakes, so now you don't have to."

You've hired two old-media types in Michael Learmonth (Variety) and Peter Kafka (Forbes). Doesn't that differ from what Michael Arrington and Om Malik are doing by hiring mostly young writers? How do you intend to grow Silicon Alley Insider?
Yes, Michael and Peter are pros. TechCrunch has a couple of pros, too, and Om's been a pro forever. This business is getting professionalized in a hurry, and strong reporting, writing, and editing skills are going to be increasingly important. (Sadly, Peter and Mike have both moved on, but we've hired new pros).

I think the growth opportunities for Silicon Alley Insider, TechCrunch, et. al., are similar to those of CNN in cable's early days, or broadcast news in the early years of TV and radio. This is a new form of news production, and you can't just jam a square old-media peg in a round hole. As an industry, we're still at the beginning of figuring out what is possible, and our hope is that will drive a lot of opportunity down the road.

Give me an example of how journalism can be rewarding.
It's great fun. I was complaining the other day about the ridiculous hours, and my wife said any job in which she can hear me laughing downstairs at 5 a.m. is fine with her.

What led you to put the $400 price on Amazon.com? Did you really see it coming or were you out to make a splashy prediction?
Are you serious? That was a decade ago. But, yes, I thought it was going to $400 ($67 in the current share-split). You humiliate yourself enough in that business without making predictions you don't actually believe. Clients do prefer clear, bold calls to mush-mouthed equivocation, but I wouldn't have made the call if hadn't thought the stock would get there.

Some people strongly believe that your punishment didn't go far enough. What does it mean when someone bans you from your chosen profession for life?
If that's the case, I'm sorry to hear it. The allegations were devastating to me. Over the course of the late 1990s, I had the privilege of earning the respect and trust of millions of people, and a few minutes after Spitzer's press conference everyone decided I was a scumbag. Fortunately, in the years since, a lot of folks have been willing to give me a chance to earn back that trust, and I will forever be grateful for that.

What do you say to investors who took your advice and lost?
The same thing I said at the time: I'm very sorry I missed the market top. I did get the big picture right--that the late-'90s boom was a bubble--and I'm glad I recommended that even aggressive investors only put a fraction of their portfolios in the Internet sector. But I got caught in the typical bubble trap, which was not wanting to miss further upside, and I'll always regret that. (For what it's worth, I also followed my own advice--and lost a boatload of money.)

What's most misunderstood about your career as an analyst?
I think the most important thing to understand about stock analysts--still true today--is that they're not investment advisers. Analysts actually play a limited role in the overall investment process, which starts with asset allocation. Analysts come into play at the end of this process (and then only if the recommended portfolio includes an allocation to the analyst's sector). Internet stocks were great additions to aggressive portfolios for most of the 1990s, but they were never appropriate for conservative investors.

Eliot Spitzer. What do you think of how he handled your case? What is your opinion of what happened to him?
I actually have a lot of respect for Eliot Spitzer. I disagreed with many of his conclusions and tactics, but I admire much of what he was trying to do. I was as shocked as everyone else by his fall.

Much of the coverage about you in the past several years has been positive. What do you say to pundits who argue that you're trying to redeem yourself?
If the coverage really has been positive, I'm grateful. It was horrible there for a while. With regard to trying to redeem myself: Hell yes. As I said, I'm grateful to everyone who gives me the chance.

TechCrunch's Arrington criticized you for predicting Google would hit $2,000. Is it hard to make big predictions when critics are always going to make comparisons to your analyst days and accuse you of being dishonest?
Any time you stick your neck out, someone's going to hit you in the head with a two-by-four. But if there's one thing I've learned over the last couple of decades it's that if someone's not shrieking, you haven't said anything interesting.

Google $2,000 was a 10-year scenario. Last fall, when I wrote that post, Google was trading around $700 and $2,000 in 10 years would have produced a 6 percent annual return. Part of my point was that anyone who didn't believe the stock was going to $2,000 should dump it immediately. For what it's worth, I stand by that target. I just hope the stock drops to, say, $300 in the meantime, so the return justifies the risk.

Make another bold prediction. What company or sector has you most excited?
The Dow's going below 10,000, probably way below. But if you want to invest intelligently, ignore that prediction (not because it's wrong--because it's a prediction). Just keep making regular contributions to a globally diversified portfolio of low-cost index funds, and, in the long run, you'll come out OK.

Finally, what's the smartest thing you've done in the past year?
Not buying newspaper stocks.

Click fraud, in which advertisers have to pay for bogus clicks on text ads, dropped only a smidgen to 16.2 percent of clicks in the second quarter from 16.1 percent in the first, according to new data from Click Forensics, a company that monitors such activity.

Companies including Google and Yahoo with networks to show ads with search and on partner web sites have efforts to protect against click fraud. However, the company said Tuesday, click fraud is getting harder to counter.

"Although click fraud rates were relatively unchanged in the second quarter, we found that the methods used to commit click fraud have become increasingly more sophisticated and difficult to detect," said Click Forensics President Tom Cuthbert in a statement.

Specifically, botnets--networks of compromised computers that can be controlled remotely--now account for more than a quarter of click fraud traffic for the first time, Click Forensics said. The company obtains its data from its Click Fraud Network, which has drawn participation from more than 4,000 advertisers and ad agencies.

Click fraud, or the act of clicking on text search ads for ill-gotten gains, is the nuisance of the multibillion-dollar search industry.

So Click Forensics, one of the largest independent click-fraud auditors, has teamed up with Yahoo to take some of the pain out of the process for advertisers that want to recoup costs associated with fraudulent clicks.

Click Forensics on Wednesday said it built software in partnership with Yahoo that lets advertisers automatically query Yahoo when Click Forensics detects click fraud in a search-advertising campaign. Called Factr, or Fully Automated Click Tracking Reconciliation, the software is a new feature of Click Forensics' ad-auditing service, which can cost advertisers anywhere between $250 monthly and thousands of dollars a month, depending on an account's size.

"We're trying to automate what has been a tedious manual process for online advertisers," said Steve O'Brien, vice president of marketing for Click Forensics, based in Austin, Texas. "With a click of a mouse, advertisers can say, 'I want this report submitted to Yahoo, and I want verification from Yahoo that I'm getting what I paid for.' We handle the rest in (the) background."

Click Forensics estimates that about 16.3 percent of all search advertising traffic is related to click fraud.

So why isn't Google involved with project? O'Brien said that to date, Google has taken a different attitude toward click fraud, assuring advertisers that it has a fail-safe means of tracking rogue clicks and that it doesn't charge for it. Still, he said, "We're in conversations with them."

But with a new search pact between Yahoo and Google, advertisers could wind up receiving better customer service from Yahoo for the same campaigns.