Fryup: Gateway KO'd, Hitwise hit, Skylarov banged up

A round-up of the week's top stories: Gateway does a runner; Hitwise takes a hit; and Dmitry Skylarov and the DMCA.

What do you get when you add the country's third-largest PC manufacturer with the fourth? You get seventh, of course. That's pretty much what happened to Gateway after it bought PC Direct in 1998. PC Direct was the country's leading local manufacturer and was often held up by mainstream and IT press alike as being a shining example of a New Zealand company Doing Good. Gateway bought the company just as its star was beginning to fade somewhat and by golly it did a really good job of finishing it off.

The last Gateway press conference I went to was for the launch of the Pentium III chip PC way back in February 1999. Intel had announced the PIII would ship with an ID code embedded that, after intense pressure from lobby groups, they announced would be switched either on or off. Someone asked Gateway, who were first off the blocks with a PIII system in New Zealand, whether they would ship the chips with this ID code enabled or not. They didn't know.

We asked again - Chris Barton from the Herald bullied them relentlessly until the marketing manager basically snapped at him to stop asking the question. We really didn't have any others and of course made quite a fuss out of the whole issue.

Rumour has it that during the America's Cup regatta Gateway was to hold a press conference at the base of one of the syndicates to launch their iMac clone, the Neo. Basically a grey box with a built-in monitor, the Neo completely missed the point of what made the iMac such a cool "gotta get me one of those" toy. We didn't get to the launch because it was cancelled at the last moment after the US syndicate's boat sprung a leak and had to be towed to shore. Gateway's big push had been "we designed the boat on a Gateway system", which looking back is really quite funny.

And now they've gone. In an effort to curtail spiralling costs (up 26% on the previous year apparently) Gateway has reviewed its worldwide operation and decided it doesn't want one. Although it has yet to formally announce it, Gateway is expected to bail out of Europe in the next month as well as its other non-US interests in the following weeks. Apparently the cost of making a shipping a PC to any place outside the US is so high, Gateway can't make a buck. Doesn't seem to stop Compaq, Dell, IBM or Hewlett-Packard. Will the gamble pay off? I can't imagine shedding a huge part of your customer base, laying off 25% of your staff including 15% of the US workforce and turning your back on a bunch of markets is a good long-term strategy. It might mean Gateway can survive in the short term, though even that doesn't seem so sure.

Gateway closes NZ doors - IDGNet

Gateway's exit costs 19 jobs in NZ - IDGNet

Lessons to be learned from Gateway's demise - IDGNet

Gateway may exit New Zealand following company review - IDGNet

Hitwise takes a hit

Hitwise is one of the three large internet usage monitoring companies operating here in New Zealand. The other two are AC Nielsen, the granddaddy of them all, which runs a panel of 4000 carefully chosen individuals who surf the net from home and have software on their PCs to monitor where they go and what they do.

It's a model AC Nielsen uses in TV ratings monitoring and it comes in for a lot of flak from people because it uses such a small sample. AC Nielsen says that's not a problem because it carefully selects its panel members to ensure they are balanced across the population's demographics. The company claims it will launch a panel of business users shortly, but then it's been saying that for a while now. Since I would say most users surf from work it does cast a shadow on the results.

Red Sheriff adopts a different model - it's gone out to the website owners and added software to some of them to count the number of visitors. The Sheriff has just laid off a bunch of staff in Australia and it's Kiwi contingent is down to one person - and its research apparently costs an arm and a leg. While the service is a good one for the website in question, it doesn't tell you a lot about the competition and how it's doing. Hitwise took the third approach - it went to the ISPs and said "give us your logs and we'll see where your users go". This is perhaps the broadest approach of the three and seems to generate the best results. You can categorically say how many visitors came to your site, how long they stayed and where they went when they left. Combining that with AC Nielsen's figures on the types of users, how much they spend and that sort of thing, and perhaps also with Red Sheriff's numbers for your own site, lets you build up a picture of the internet that's pretty accurate.

Sadly, it doesn't work like that. Hitwise claimed to have four of the top six ISPs on its books but wouldn't say who it had. Xtra wasn't there, although it has been in talks with Hitwise about joining. Now Clear has jumped ship, claiming user privacy concerns. Hitwise has hit back, saying it has a PricewaterhouseCoopers report that says its privacy policy is top notch but that's kind of irrelevant. Without Clear or Telecom Hitwise doesn't have 80% of New Zealand's surfers and that's got to skew the results it produces.

Hitwise has told me it does have around 20% of the country's surfers, far more than either AC Nielsen's panel or Red Sheriff's user base and that means it still generates reliable results. But you have to wonder if the results are true to New Zealand as a whole or whether having results only from Ihug and some smaller players isn't going to make a mess of the whole thing. Ihug is still very residential-user focused, though it is trying to crack the business market. It's also got a huge customer base in Auckland with less of a presence in the rest of the country. Won't that produce odd results?

All this is making it very difficult to advertisers, the vast majority of which hold these kind of figures up as if they were written in stone. Without decent figures on usage or demography on the users, advertisers will continue to dabble in the internet rather than taking the plunge.

Hitwise loses Clear - IDGNet

Dmitry Skylarov and the DMCA

Skylarov is a Russian programmer who works for a Russian company in Russia. He was arrested leaving a Las Vegas conference by US law enforcement because of something he did in Russia that breaches US law - the Digital Millennium Copyright Act.

That's right - apparently US law extends to other countries and can be implemented as soon as you set foot on US soil. Skylarov and the company he works for have been indicted this week. Skylarov has been charged with five counts of breaching the DMCA and has been released on bail after spending some time in prison.

The thing is, what he did was perfectly legal in Russia and would be legal here in New Zealand and most other countries around the world as well. Most countries have a copyright act that includes the so-called "fair use" clause. Basically if you or I want to quote from a copyrighted work you can, be it for review, for parody, for comparison or even just to say "hey, this sucks".

In the US, however, things are different. Skylarov was looking at an e-book publishing platform produced by Adobe. He said "hey, this encryption sucks - look how easy it is to break!", and his employer was selling an application that did just that, which is I admit quite dodgy.

He showed up in Las Vegas at a trade fair to talk about this kind of thing. He said Adobe's encryption sucks and showed the audience that it was insecure. Adobe sicked the feds onto him and he got his collar felt. The question is, who is at fault here? Is it Skylarov for breaking US law or Adobe for producing insecure software? Would you want to know about the real security level not the marketing hype about the security level?

Questions are being asked about the legality of the DMCA when considered in light of the US constitution. Quite what happens to Skylarov is still up in the air. The question of US control of the internet and whether US law is becoming the defacto standard for us all is also still to be decided.

Russian arrested at hacker convention - IDGNet

Why Skylarov should go free - Slashdot

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