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Several retail Web sites experienced technical problems Friday, the latest reminder of one of the Internet’s oldest rules: If you encourage people to visit your Web site, make sure the site can handle the extra traffic.

Online stores were also crowded Friday

While the spotlight was on the hassles experienced by shoppers taking advantage of post-Thanksgiving sales at stores, those who decided to shop from home ran into troubles too. Several sites, including Amazon.com, and Saksfifthavenue.com, experienced some slowdowns, according to Keynote Systems, which is monitoring the performance of many popular e-commerce sites this holiday season. (Keynote sells tools that help businesses test their Web sites, so take that for what its worth.) Sears.com was down for large chunks of the day.

What’s happening to these Web sites is the online version of the gridlock that happens at many malls: So many people are trying to get through the sites’ front doors at the same time that the lines back up, slow down, and stop altogether in some cases.

It shouldn’t come as a surprise that people are shopping online Friday. This year, retailers have been promoting online sales more heavily than in the past. In the case of Sears.com, the promotions seem to have worked too well: The site was unavailable for many visitors between 10 am and 12:40 pm EST Friday, according to Keynote. (It was also down when we tried to access to access the site at 3:30 EST.) A spokesman for Sears said that traffic was “higher than anticipated” and that the company was taking steps to ensure the site would be available on Monday—another popular online-shopping day.

The history of the commercial Web is filled with examples of companies that have promoted an online event only to have the sites crash from the increase in traffic the promotion generated. Often, these incidents involve scantily-clad women—a Victoria’s Secret online fashion show that almost crashed the entire Internet in 1999 is the iconic example; and New York Magazine crashed its Web site in February when it published pictures of actress Lindsey Lohan sans clothes. But that’s not always the case: Oprah’s Web site experienced technical problems in March after the talk-show host promoted a video interview posted there, for example.

-Ben Worthen

Image: Reuters

Source: WSJ.com: Business Technology

That was nice while it lasted: After dropping precipitously earlier this month, the number of unsolicited spam emails being sent is on the rise again.

Spam is back

The civilized world recevied a respite from Viagra pushers and imitation-Rolex peddlers two weeks ago when McColo, a Web-hosting company that ran sites for several prominent spammers, was shut down. The volume of spam sent over the Internet dropped between 40% and 80% overnight. More importantly, it stayed there.

Until Monday that is. Now spam is on the rise again, with the number of such messages sent jumping close to 100% over the last couple of days, according to email-security company MessageLabs. And it’s just a matter of time until the amount of spam sent reaches its old level.

Here’s why: The emails aren’t sent by individuals who spend their lives touting penny stocks; they’re sent by armies of computers called botnets, which look and act like normal computers, except that the owners have unknowingly installed software that lets a hacker commandeer them from time to time.

The hackers who ran the botnets used Web sites McColo hosted to communicate with the millions of computers they controlled. When McColo was knocked offline, the hackers had no way of telling the computers what spam emails to send. So the computers stopped sending messages.

But now the hackers are beginning to reestablish contact with their computers, most commonly through new Web sites that the computers were programmed to check if they didn’t receive instructions for a set amount of time. So far, two prominent—albeit oddly-named—botnets, Asprox and Rustock, have come all the way back. Another, Srizbi, which at one point was responsible for about half of all spam, is just starting to reestablish contact with its computers, says Matt Sergeant, senior anti-spam technologist at MessageLabs.

“This was never the end of spam,” says Sergeant. “It was a minor victory. Things will go back to the way they were.” He adds: “Two weeks is longer than anyone expected it to last.”

-Ben Worthen

Source: WSJ.com: Business Technology

Technorati has become the latest Silicon Valley start-up to announce a staff restructuring and salary cuts.

Chief Executive Richard Jalichandra wrote in a blog post that management members are taking pay cuts ranging from 15% to 25% and employees are taking a 10% cut. There were also six layoffs at the company, which in June broadened its blog-search business by launching an ad network.

“There’s not much I can say about the economy that hasn’t been said a hundred times already,” Jalichandra wrote. “We’re facing the worst crisis of our lifetimes, and no one can say with certainty what lies ahead or how long it will last.”

Technorati launched its ad network for blogs and social media sites in June in a change of direction from its roots as a blog search engine. To support the new features, the company raised a $7.5 million inside round of Series D funding. The company’s backers include Draper Fisher Jurvetson, Mobius Venture Capital and August Capital.

Technorati has made two acquisitions in recent months: Blogcritics.org, an online community of bloggers publishing on topics from music to politics, and ad network AdEngage.

-Ty McMahan, VentureWire

Source: WSJ.com: Business Technology

Following comScore’s glum e-commerce report, Stanford Group is backing the “sell” rating on Amazon that it issued earlier in the week, saying it expects the online retailer to see slowing revenue growth next year as inventory and price competition grow.

In the note, Stanford analysts Frederick Moran and Clayton Moran said: “Stifled lending, shrinking household wealth and a strapped consumer could cripple consumer spending, including online commerce, through 2009.”

Their channel checks indicate big declines for small retailers such as Blue Nile and Bidz.com, but they added “While Amazon historically has been among the most resilient retailers, it will likely be pressured by these difficult trends.”

So will Google, according to Merriman Curhan Ford, which initiated coverage on the search giant Friday with a rare “sell” rating.

The weak economy has a “dampening” effect on search-engine marketing, analyst Richard Fetyko said in a note, which leads to lower keyword prices and click-through rates on online ads. “These trends are not yet reflected in consensus estimates, in our view,” he said.

Merrill Lynch called the comScore report a “modestly negative data point” for Google, since e-commerce and search are so closely tied. It also maintained “underperform” ratings on eBay and Overstock in light of weakening consumer spending.

An Amazon spokeswoman said the company doesn’t comment on analyst reports. Google didn’t immediately respond to a message seeking comment.

UPDATE: A Google spokesman said it too doesn’t comment on analyst ratings.

- Andrew LaVallee

Photo: Kaleb Fulgham via Flickr

Source: WSJ.com: Business Technology

Online retailers are hoping that the United States is a nation of procrastinators.

Are shoppers turning off their computers?

Because the holiday season will be rough if current trends continue. The amount of money consumers spent online on retail goods between November 1 and November 23 fell 4% from the same period last year, from $8.51 billion in 2007 to $8.19 billion in 2008. That’s according to comScore, which tracks just about everything that happens online.

ComScore also surveyed 500 consumers and found that 47% said they’ll buy fewer gifts this year and 46% said they’ll buy less expensive gifts. The silver lining is that a third of Americans haven’t even started shopping yet. That’s in part why comScore is predicting that consumers will spend online the same amount—$29.2 billion—as they did last year when all is said and done.

One reason that consumers may be waiting: mainstream acceptance of “Cyber Monday,” the first workday after Thanksgiving when people are stuck in front of a computer all day and looking to kill time with a little shopping. Eighty-seven percent of retailers will have a special promotion for Cyber Monday, according to Shop.org, a division of the National Retail Federation. And 72.8 million people will shop online while at work this year, according to Shop.org.

Forrester Research came up with a more optimistic forecast, predicting that online sales will grow 12% in 2008 compared with last year. But the firm uses a different methodology than comScore, and based its prediction on a survey conducted in the beginning of October.

So it’s possible that more consumers have decided to close their wallets as the economy has worsened. Still, Forrester stands by its prediction.

-Ben Worthen

Image: Lotus Head via Wikipedia

Source: WSJ.com: Business Technology

Did you start off surfing your local flu hot spots and end up poring over symptoms for all the terminal diseases you’ve convinced yourself you have? You’re not the only one.

The Health Blog’s Scott Hensley today has written about “cyberchondria,” a phenomenon driven by the tendency of worst-case conditions to show up in health-related searches.

In “Cyberchondria: Studies of the Escalation of Medical Concerns in Web Search,” Microsoft researchers Ryen W. White and Eric Horvitz write that “the use of Web search as a diagnostic procedure — where queries describing symptoms are input and the rank and information of results are interpreted as diagnostic conclusions — can lead users to believe that common symptoms are likely the result of serious illnesses. Such escalations from common symptoms to serious concerns may lead to unnecessary anxiety, investment of time, and expensive engagements with health-care professionals.” More details from their survey of 515 Internet users are available in the 32-page report.

- Andrew LaVallee

Source: WSJ.com: Business Technology

The financial downturn has turned many venture capital investors off making huge new investments. But Tuesday, venture capital firm Battery Ventures plans to announce it is leading a $100 million round of funding in Pocket Communications Northeast, a provider of flat rate, unlimited use wireless voice and data services. Other investors include Pocket CEO Paul Posner and venture capital firm Charles River Ventures.

One lucky startup is getting funded

The investment comes amid jitters in the venture-capital industry because of the gyrating stock market. Many venture investors are now reining in their spending and concentrating on their existing startup investments, trying to get those companies to a profitable state. Only a few recent fundings have bucked the trend, notably vacation-rental startup HomeAway Inc.’s raising of $250 million earlier this month from venture investors to fund its future growth.

The $100 million funding in Pocket is the San Antonio, Tex., company’s first outside financing since it was founded in 2006. The wireless company has around 300,000 customers and makes more than $100 million in revenue a year, says Battery partner Matt Niehaus, who will join Pocket’s board of directors following the investment. Pocket plans to use the money to expand into markets in the northeast such as Hartford, Conn., and Springfield, Mass.

Niehaus says Battery began discussing an investment into Pocket three or four months ago. Despite the worsening stock market, Battery decided to forge ahead because the venture firm was taking a long-term view, he says. In addition, the investment is large enough that Pocket likely won’t need additional capital to become a profitable enterprise, he says.

While Pocket’s business may not do better in a downturn, Niehaus says there will likely still be plenty of demand for a provider that charges just a flat rate for unlimited wireless voice and data usage. “In this economic environment, we such a business model is more compelling,” says Niehaus.

-Pui-Wing Tam

Image: Tracy O via Flickr

Source: WSJ.com: Business Technology

First pizza, now cellphones.

Today TiVo is launching the beta version of a mobile site, m.tivo.com, that subscribers can use to search for and record TV shows from their cellphones.

Some Verizon Wireless customers already had access to TiVo’s remote-scheduling service (and the company said in September that it was developing similar functionality for Research In Motion’s BlackBerry), but the new free site extends scheduling features to Internet-enabled handsets regardless of carrier or manufacturer.

Scheduling is limited to people who already have TiVo and a Series2 or Series3 set-top box, but anyone can use the site to search for shows by actor or director names, titles or keywords. They can also and view “If you like this” recommendations for related programming.

The launch comes as the DVR company has been busy inking licensing and content-sharing deals. A week ago it announced a promotion with Domino’s Pizza that lets subscribers order deep dish through their TVs. Last month it struck an online-video agreement with Netflix, and over the summer it expanded its partnership with Amazon to include the ability to order products mentioned during some TV shows.

- Andrew LaVallee

Source: WSJ.com: Business Technology

When a Los Angeles man sued Apple for patent infringement Monday he filed the case in East Texas, not California. As many lawyers will tell you, the U.S. Distinct Court for the Eastern District of Texas has become a magnet for technology and other patent cases over the years.

East-Texas justice tends to favor plaintiffs in patent disputes

What fewer people know is why. The phenomenon dates to the early 1990s, says Michael Smith, a lawyer with the Marshall, Tex., office of Siebman Reynolds Burg Phillips & Smith LLP. He has argued more than 100 patent cases before the court–usually for the defense–and blogs about the court.

Texas Instruments, Smith recalls, was looking for a place to file a patent case. The company is based in Dallas, but the court system in that city has a backlog of criminal cases that prevent civil lawsuits like patent disputes from going to trial on a timely basis. The Eastern District, which includes suburbs north of Dallas as well as communities to the east, doesn’t have a federal prison or a U.S. Attorney office so there are fewer criminal cases to take priority. TI filed its case there and it was resolved in less than a year. The company proceeded to file all their patent cases in the Eastern District for the next decade.

Since a patent case can be filed wherever the allegedly infringing product is sold–which is basically anywhere–other companies began following TI’s lead. Soon judges in the district learned the nuances of managing patent cases, which has two benefits, says Smith: It means that judges are less likely to get confused or overwhelmed and just dismiss a case; and that lawyers can anticipate ahead of time what evidence is likely to become part of the trial. Combined with the shorter waiting period, these factors can make it much cheaper for a plaintiff to see a case through.

The district has a reputation for being tough on corporate defendants. During a recent two-and-a-half-year stretch plaintiffs won 18 straight cases, according to Smith. In 2007, however, defendants won twice as many cases as plaintiffs.

Smith tells his clients that even though the judges in the district are less likely to dismiss suits than colleagues in other courts, they do a good job of considering the evidence and run a fair trial. “This is a good place to get sued,” he says.

-Ben Worthen

Source: WSJ.com: Business Technology

For those who thought Apple invented the iPhone, Elliott Gottfurcht of West Los Angeles has a surprise. The West Los Angeles real estate developer contends that he, not Apple, is responsible for technology behind some of the popular gadget’s fancy touch-screen and Web navigation tricks.

Did a real-estate developer invent a touch-screen feature

And now he wants Apple to pony up. In a lawsuit filed in U.S. District Court for the Eastern District of Texas, EMG Technology LLC–a new firm that has Gottfurcht as a managing member–said it was seeking unspecified damages and an injunction against Apple, basing its case on a patent it was just granted in October.

EMG is just the latest company to go after Apple, whose 3G iPhone has been enormously successful, selling 6.9 million units in the most recently reported quarter, which ended in September. But the case also shows how the patent system has evolved, making it easier for plaintiffs to file a claim.

According to Stanley Gibson, a lawyer for EMG and partner at Jeffer, Mangels, Butler & Marmaro, the original patent was filed in November 1999, but EMG itself was established only this month and has no other business besides the patent at issue.

Mr. Gibson was one of the lead trial attorneys in a patent case against medical device maker Medtronic Inc. that yielded a $1.35 billion settlement for his clients. He said EMG did not approach Apple and offer to license its technology for a fee before filing the lawsuit, a tactic that often precedes patent litigation. It also has not approached other companies to license the patent.

IPhones are known for an interface that allows users to double tap on a Web page to zoom in, reformat the screen and bring it into focus. EMG’s patent covers “the simplified interface of reformatted mobile content to provide optimum viewing and navigation with single touches on a small screen,” according to Mr. Gibson.

He said EMG currently has no plans to sue other smartphone-makers. “We’re just focused on the iPhone now,” he said. “That’s the one we’ve analyzed.”

The press release announcing the lawsuit names Gottfurcht as just one of EMG’s managing members and inventors of the technology, but Mr. Gibson was not able to provide details about how many other people were in the firm. It credits Gottfurcht as being the developer of LA-area properties that include Beverly Park, above the Beverly Hills Hotel.

Apple, which itself has more 200 patents related to the iPhone, has faced other lawsuits targeting the iPhone. It has agreed to settle at least one, by Klausner Technologies, that claimed that the iPhone’s visual voicemail features infringed on two Klausner patents for listening to messages out of the order they were received.

A spokesman for Apple said it does not comment on pending litigation.

-Yukari Iwatani Kane and Amol Sharma

Source: WSJ.com: Business Technology