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With its push into international markets heating up, Facebook appears to be setting its sights on a handful of popular ‘copycat’ social networks whose web sites bear an uncanny resemblance to its own.

StudiVZ, the German social network that the company filed suit against on Friday (Click here for a copy of the complaint), claims to have 10m users scattered across Germany, Austria, and a handful of other countries in Europe. That’s a lot of people, the most active of which ostensibly aren’t using Facebook’s German-language site.

From the looks of it, StudiVZ should be an interesting test case for Facebook’s intellectual property claims. The site, it’s fair to say, looks almost exactly like Facebook - except that it’s red, not blue. It has groups, a section for photos, and even its own version of the Facebook “wall” where friends can leave each other messages. Many of the page layouts look identical to those on Facebook.

Ten million users is nothing to sneeze at (StudiVZ recent sold to a big German publisher for a suspected 100m euros). But a bigger challenge to Facebook could come from clones elsewhere, especially in China, where Xiaonei, another site that bears striking resemblance to Facebook, boasts more than 15m registred users and has raised $435m in venture funding.

Various tallies around the web have identified at least nine other major alleged Facebook clones. It’s not clear whether Facebook intends to pursue other alleged copycats. But with its lawsuit Friday, Facebook has put them on notice.

Update: StudiVZ responds

It took almost 48 hours (thanks in part to Facebook’s decision to file its suit late in the afternoon on a Friday, long after Germany closed down for the weekend) - but StudiVZ has finally issued a response to the Facebook suit. The money quote, from Marcus Riecke, chief executive:

“There are numerous social networks. Facebook was not the first and certainly isn’t the only one. By attempting to harm studiVZ through a meritless California lawsuit, Facebook is arrogantly laying claim to an international monopoly over social networking sites that the facts show it does not deserve.”

Full statement after the jump.

Continue reading "Attack on the clones?"

OK, so it wouldn’t do to make too much of one month’s worth of data. But credit where it is due: Microsoft in June finally managed to take back a small amount of market share from Google in the US search business, according to comScore.

Its share of search queries had declined steadily over the previous 12 months, dropping two percentage points or so to a low of 8.5 per cent in May. So an increase back to 9.2 per cent has at least stopped the rot - for now.

Could this be a sign that the new Live Search Cashback service is having an effect? (I’ve asked Microsoft for more information on this, will update if it’s forthcoming.)

Of course, for Steve Ballmer it still looks like a case of far too little, and far too late. The odds must be on him pitching another new offer for Yahoo’s search business (or even the whole company) before that company’s shareholder meeting on August 1st.

Wall Street’s trigger finger always starts to twitch when Google’s earnings roll around. In the most recent quarters the shares have notched up one day movements of - 9 per cent and + 20 per cent the day after earnings reports. That’s made it a bumpy ride for investors this year.

So it’s no surprise that the stock dropped 8 per cent in after-market trading on Thursday after Google failed to meet the Street’s second quarter earnings forecasts (of course, Google steadfastly refuses to dignify such forecasts by issuing guidance of its own.)

When I got a brief word with CEO Eric Schmidt just now, he pretty much brushed off this discrepancy as a failure by Wall Street analysts to take account of Google’s lower cash balances. “As best we can tell,” he said, “they [analysts] didn’t back out the cash we paid for DoubleClick.” With less money in the bank, interest income dropped by around $80m, accounting for the earnings “disappointment” (outgoing CFO George Reyes was at pains to stress that the company hadn’t taken any investment losses in the rocky financial markets.)

Was there any other new information to justify a sharp drop in Google’s shares? Hardly. The company wheeled out Hal Varian (the former UC Berkeley economist known to students across the US as the author of the seminal university textbook on the subject) to explain that the company’s click-based advertising was holding up well even in the most economically sensitive sectors, with the exception of real estate.

As Schmidt summed it up when I spoke to him, things are playing out exactly as the company had expected three months before: “We’re basically the same as we were last quarter.” (He was quick to add that Google did not believe it was necessarily immune from an economic slowdown, but that its form of advertising should do better than most at such times.)

Gartner and IDC released their latest PC shipments figures on Wednesday, showing computer shipments up either 16 per cent or 15.3 per cent in the second quarter, depending on who you ask.

Given the uncertainty in the global economy, it’s tempting to view the numbers - which were better than expected - as a sign that trouble in the financial and housing sectors has yet to spread to the IT sector. But do not be fooled: beneath these rosy headline figures lie clues about an impending slowdown.

IDC said growth in computer shipments in Asia was slower than expected during the quarter- a situation it blamed on rising energy prices and other inflation concerns cutting into IT spending there. If true, that would undercut one of technology bulls’ key arguments heading into the current downturn - that robust sales in Asia and other fast-growing emerging markets should help offset weakness in the US.

Adding to the clouded outlook, Gartner analyst Mikako Kitagawa says that the rise in the number of computers shipped masked steep declines in average selling prices, particularly in the US and Europe. While it is common for PC prices to fall from year to year, steeper than expected price cuts could hit PC makers’ profit margins, and prolonged price pressure could put the squeeze on smaller PC makers. Ms Kitagawa says the industry “could ultimately see a significant wave of consolidation if stronger vendors continue to press their pricing advantage.”

So what is the bottom line? Unfavourable economic fundamentals mean that “demand could remain depressed in the coming quarters if economic pressures continue, even with sustained price decreases,”  says David Doud, an IDC analyst.

It looks like London ad agency Beattie McGuinness Bungay is the first to have cracked the code for using Apple’s new App Store as a vehicle for corporate sponsorship.

The free game it produced for Carling, which makes great use of the iPhone’s accelerometer, has made it into the top ten list of most-downloaded free apps. That puts it ahead of things like Google’s new mobile search application and MySpace.

You can bet that every Adland tech geek with a taste for the viral is even now switching his or her attention from YouTube to the latest Apple toy.

This YouTube video shows someone playing the game (the highlight is the free virtual pint you get for winning.)

Google doesn’t set the prices for its adverts, advertisers do, by bidding in an auction. So if advertisers are willing to pay more on Google, it must be because Google delivers better clicks (or leads.) Why should anyone get hurt if Yahoo wants to feed some of its own inventory into the Google auction to take advantage of this?

That’s the basic argument that the two companies pulled out again today as they locked horns with Microsoft in front of two Congressional committees.

It sounds fine in principle. The reality, though, is more complicated. There are both short- and long-term reasons why at least some advertisers might benefit from keeping the two companies’ advertising systems at arm’s length.

The short-term case is that keyword advertising systems are not like the stock market - these are not “perfect” markets where it is easy to arbitrage away inefficiencies between the systems. Prices may be lower on Yahoo because of illiquidity - there are just fewer clicks for some search terms, so some advertisers won’t feel it’s worth incurring the fixed costs of running a Yahoo campaign.

Other advertisers benefit from this effect. They will lose out if Yahoo feeds these lower-value searches in future to Google to benefit from that company’s greater liquidity.

(There was some evidence today to support that argument: according to research from SearchIgnite, it is the low-volume “long tail” queries where Google does best in extracting higher prices for its adverts than Yahoo.)

The long-term case is that the company which runs the auction gets to decide how it works. If competition between markets declines, price competition between advertisers is not on its own enough. This is not the New York Stock Exchange - Google’s governance doesn’t give its users, or outside regulators, any say.

The lack of transparency accentuates this. Google doesn’t just look at the prices that advertisers bid when deciding how to rank adverts, it also applies a “quality score” to determine how “useful” it thinks an advert will be to users. There is no way for outsiders to assess the fairness of this process.

Google also sets minimum prices for some keywords (a recent change that it said was to spare users from the clutter of low-value adverts, but which also had the effect of putting up prices for some advertisers).

As a marketing exercise to boost interest in its forthcoming game Spore, Electronic Arts’ release of  Creature Creator has been something of a masterstroke.

The software allows users to create all manner of strange creatures and objects that can be placed in the surreal world Spore develops, from single-cell creatures to masters of the universe.

The $10 retail version has been top of the PC charts since its release and more than 2m copies of a free version have been downloaded.

Will Wright, creator of Spore and previously The Sims, expressed surprise at the response in his presentation at EA’s press conference at E3 today.

EA’s inimitable in-house genius said his idea for the release was to help populate the Sporepedia database of creatures that players could tap for use in the game when it is launched on September 7. Users can upload their creations for anyone to add to their version of the game.

While he expected around 100,000 creatures to be uploaded by launch, based on his experience with the similar Sims character creator, that figure was reached 22 hours after the software was released on June 17. More than 85,000 videos have been uploaded to YouTube of the creatures moving around.

Famous names including Sir Richard Branson, Carlos Santana, Brian Eno and David Lynch have created their own Spore creatures and put them on display.

Right now 1.75m species have been uploaded to Sporepedia and Wright noted that the milestone had been passed where the figure exceeded the 1.6m known species on Earth.

He said it had taken 18 days to do this compared to God doing something similar in seven days, which, by some madcap calculation, made Spore fans 38 per cent God, he said.

That is the idea of the game after all - you can play God and oversee the creation of a planet. Wright has also been working with National Geographic on a documentary where scientists use the game to demonstrate evolutionary biology.

For all its ingenuity and initial buzz, Spore still has a long way to go to surpass The Sims, which sold its 100-millionth copy in April.

Wright said he was hearing the same kind of stories as when The Sims first came out – of husbands bringing the Creature Creator software home and wives, who had never played games before, becoming hooked.

“I think that bodes well for the accessibility of Spore,” he said.

And for sales as well Will, don’t forget the sales now.

Microsoft might have no experience at big-time Wall Street wheeling and dealing, but you have to wonder how it got itself into the mess that was spreading in all directions on Monday.

For weeks it stayed clear of Carl Icahn, letting the veteran activist do the dirty work of roughing up Jerry Yang and the rest of Yahoo’s board. There was still some value in keeping to the high ground.

Then earlier this month, with every sign that a Yahoo deal was slipping out of its reach, Microsoft finally decided to throw its lot in with Icahn, promising to negotiate with him should he succeed in overturning Yahoo’s board and installing his own slate of directors.

Looks like a bad idea. The odd-ball combination of corporate raider and software rube has now produced a debacle that a gleeful Yahoo, desperate to be on the attack for once, is only too happy to exploit (Yahoo smartly got in first with its version of events on Saturday night, leaving it to Icahn and, finally, Microsoft to try to put their gloss on the matter.)

Beneath all the “he-said, she-said” back and forth are a couple of telling points.

One is that the software company seems to feel that it allowed Mr Icahn to lure it into new negotiations with Yahoo against its own better judgment. This tortuous sentence from the Microsoft statement says it all:

Among other things, the enhanced proposal for an alternate search transaction that we submitted late Friday was submitted at the request of Yahoo! Chairman Roy Bostock as a result of apparent attempts by Mr. Icahn to have Microsoft and Yahoo! engage on a search transaction on terms Mr. Icahn believed Microsoft would be willing to accept and which Microsoft understands Mr. Icahn had discussed with Yahoo!.

Did you follow that? The simple message: Icahn may not be the best ally and go-between to have on hand at times like this.

Making that point even more sharply is Microsoft’s belated and ineffectual attempt to characterise this latest proposal as simply an effort to sweeten the terms of the search deal it had already offered - not an move to unseat Yahoo’s board and management.

This is not how Yahoo chairman Roy Bostock took it - and it is certainly not what Icahn had in mind, to judge from his own letter today (he held out only the carrot of “keeping a number of the current board members” and letting Jerry Yang return to the largely honorary position of Chief Yahoo.) That gave Yahoo ample excuse to reject Microsoft’s latest offer.

With 18 days to go until Yahoo’s shareholder meeting, Microsoft has to use its ammunition wisely. Getting tangled up in Icahn’s scheming is not a good start.

Some Apple fans were finding it hard to make use of their new 3G iPhones on Friday as a flood of shoppers trying to activate their new handsets overwhelmed Apple’s iTunes servers. The overload caused Apple’s iPhone activation process to crash for part of the day, turning thousands of new 3G iPhones into glorified paperweights.

Tech-savvy Apple fans, many of whom waited in line for hours - and in some cases overnight - to get their hands on the 3G iPhone should have seen this coming. It doesn’t take a computer genius to figure out that, with tens of thousands of people queueing up from Tokyo to San Francisco, there was bound to be a crushing load on Apple servers at some point during the day.

But over-eager early adopters were not the only ones suffering yesterday, according to reports from the blogosphere. Apparently, owners of first-generation iPhones who plugged into iTunes for a software update also found their phones turning into bricks, as crashing iTunes servers left them unable to complete the update process.

The result was, as they say in California, a bit of a bummer.

By midday in San Francisco, the problems that had plagued both sets of users throughout the day were showing signs of easing. Asia had gone to bed, lessening the load on servers. By mid-afternoon, the frantic Twittering about failed software updates had largely ceased.

By all accounts, the 3G iPhone is one of the most exciting devices to launch this year (read Paul Taylor’s full review here). Too bad for Apple that its launch got off to such a rocky start.

After dinner and a few drinks last night, a very refreshed Rupert Murdoch stopped by for a chat outside the bar at the Sun Valley Lodge and revealed that he did not think Microsoft would succeed in buying Yahoo.

“They’re not going to do a deal,” he said. “There’s bad personal feelings…in six months [Microsoft] will walk away.”

It has been suggested that News Corporation is prepared to swap its MySpace social network for a stake in Yahoo but Mr Murdoch said any involvement by the company in the takeover saga was “not likely”.

With his sons James and Lachlan chatting on the terrace outside, Mr Murdoch then talked about his experience at a conference session earlier that day. He had attended a presentation given by Niall Fitzgerald, the deputy chairman of Thomson Reuters, and had taken exception to Mr Fitzgerald’s comments about the US.

Mr Fitzgerald had suggested that the US was viewed negatively around the world because of foreign policy mistakes. “People in Europe forget that the US saved them from two world wars, from Nazism, communism…and America never asked for a penny.”

The conversation turned to the US election and Mr Murdoch revealed an admiration for Barack Obama. The New York Post, which is owned by News Corporation, has already endorsed the Democratic candidate.

“There’s a sliver of hope that America could be great again under Obama,” he said, adding: “I met him and was impressed. But you know what I’m like…I get to meet them for an hour and I’m seduced.”