December 18, 2011

Fight for online sales grows

As the growth of mobile computing devices pumps adrenaline into online retail sales, a handful of major players are jockeying for position in the massive marketplace.

With $34 billion in 2010 sales, Amazon.com is the clear market leader. But auctioneer eBay and discount retailer Walmart also are emerging as powerhouses in online merchandising. Overstock.com, also known as O.co; Staples; Macy's; J.C. Penney and Target are carving out significant online niches.

But the real online-retail juggernauts could be waiting in the wings.

Facebook and Google are exploring ways to add e-commerce to their heavily used Internet sites.

"Social media is trying to go from a meeting place to a selling place," said Karla Martin, who heads the retail practice for international management consulting firm Booz & Co.

And Apple, which already is successfully selling music, videos, electronic books and other media products, also is looking for ways to expand its retail options.

Customers are increasingly comfortable with conducting online transactions, and the number of people who use their tablet computers and smartphones to shop is growing. Scottsdale resident Lisette Hill already has made the transition. She estimates she has done 90percent of her Christmas shopping online this year. She shopped Nordstrom's online store and bought gift certificates from daily-deal site Groupon.

"It's much more convenient," Hill said.

She added she was particularly attracted to Nordstrom because of its offer of free shipping for online purchases and returns.

"I know exactly what I want, and I don't want to be wandering around a store trying to find everything," she said.

As more shoppers become like Hill, companies are fighting to become one-stop online shops and to attract customers. They are expanding their online inventories and services and developing software and applications, or apps, to help navigate their online stores, compare prices and make purchases. They also are leveraging social-network sites such as Facebook and Twitter to communicate with customers and glean important data about trends and products.
Online, mobile growth

Tablet computers and smartphones have vastly increased the opportunity for consumers to connect with online stores and for those stores to promote themselves to consumers.

Forester Research estimates that holiday online sales will jump 15percent this year to $60billion, outpacing a 2.8percent rise in overall sales forecast by the National Retail Federation, an industry group.

While the estimated $60billion in online sales is still a fraction of the $465.6billion in projected overall sales, the number gets bigger every year.

ComScore, a company that tracks online retail transactions, partially attributed a 22percent jump in online sales on Cyber Monday to more people using their tablet computers and smartphones to shop. Cyber Monday is the first Monday after Thanksgiving and a traditionally busy day for online retailers.

While the impact of smartphones on online commerce is still emerging in the U.S., Martin said the impact of tablet computers such as the iPad is already huge.

Online retailer eBay reported that payments via such mobile devices rose 550percent on Cyber Monday this year compared with a year earlier.

Office-supply chain Staples launched an iPhone app earlier this month that allows customers to shop and make purchases using their smartphones.

"More and more customers are turning to their mobile devices to not only shop but do research," said Staples spokesman Mark Cautela.
Shifting marketplace

As technology improves and the marketplace changes, online retailers keep reinventing themselves to give customers what they want and to maximize their own profits.

As companies battle to become one-stop online superstores, they are adapting to changes in consumer behavior and technology. The business models are changing.

Instead of selling goods stored in company-owned warehouses, online retailers are increasingly fulfilling orders directly from manufacturers who maintain the inventory or hosting third-party vendors who use the sites as virtual storefronts.

About 40percent of Amazon.com's sales now come through "Amazon Associates" and third-party sellers.

Third-party sellers allow online retailers to feature a vast inventory of products at various prices without having to physically warehouse them.

Even Walmart uses third-party sellers, known as marketplace vendors, to add variety to its product offerings without having to carry the products in inventory.

This model would make it easy for Facebook, Google and others to develop significant online retail presences by hosting third-party retailers instead of having to develop networks of warehouses and distribution centers.
Walmart's strategy

With its network of 9,000 stores, Walmart is the world's largest brick-and-mortar retailer, and it has made clear its intention to become the No. 1 online retailer, as well.

Analysts predict a long battle for online supremacy between Walmart and current leader Amazon but don't venture to forecast a winner.

Ravi Jariwala, a spokesman for Walmart's online retail operation based in San Bruno, Calif., said there are more than 1million different products in the company's Internet catalog, compared with 100,000 to 150,000 in a typical Walmart Supercenter store.

"It significantly expands the assortment of product," he said. He added that many of the catalog products have limited demand, so it would not be practical to stock those items at all 9,000 retail stores.

"The online component helps us manage the inventory at the traditional stores," he said. Walmart also uses its online store to gauge demand for products and test the popularity of certain styles and colors.

Walmart allowed customers to pre-order certain electronic products for Christmas during the summer and used the information to determine the mix and quantity of products to be carried in its stores in November ad December.

"Our online operation and large network of physical stores is a powerful combination," Jariwala said.
Apps and favorites

To compete for customers, Internet retailers are expanding their online inventories and services and developing software and apps to help navigate their online stores, compare prices and make purchases. They also are leveraging social media.

"We want to be where our customers are, and increasingly, this is on social media," Cautela said. "We see Facebook and Twitter not only as an avenue to provide deals and savings but also to engage our customers in a meaningful way."

Martin said that links with social-media and search sites such as Facebook and Google could enable retailers to offer products to specific users based on their individual likes and dislikes.

"With online catalogs of a million or more items, the ability to narrow down choices and make suggestions becomes a critical marketing tool," Martin said.

But online retailers have to walk a fine line.

Martin said that some consumers could resent a social-network site being used for commerce, and while they want to get focused offers of merchandise targeted especially for them, they don't like the idea of being spied upon.

Staples is the second-largest online retailer, after Amazon. The company sold about $10.2billion worth of goods via online channels in 2010, roughly 40percent of its $25billion in total sales.

While Staples' niche is in office supplies, the company has successfully moved into electronics, back-to-school supplies and wireless telephones. Staples has 40,000 products in its online catalog, compared with 8,000 at its stores.

Consumers can also use Staples' iPhone app to determine which stores have an item they are looking for in stock and in what quantity.

EBay's iPhone app allows customers to search its 200million listings and comparison-shop with its barcode scanners. Barcode-scanner apps developed by eBay and Amazon have turned traditional stores into showrooms where customers can physically check out a product, then scan the barcode and find the cheapest price online.

Another eBay app called eBay Motors allows a customer to scan a vehicle's identification number, or VIN, and then search for parts specific to that vehicle.

Walmart also has an array of apps to help customers shop using their tablet computers and smartphones.

The company formed @WalmartLabs to develop online shopping technologies. Earlier this month, @WalmartLabs released its first product called Shopycat. The app gives Facebook's 800million users the ability to quickly find gifts for friends and family based on their tastes and interests. Shopycat mines "likes" and "dislikes" on Facebook pages and recommends specific gifts based on an individual's preferences.

With a catalog of a million items, the ability to narrow the selection and make recommendations is a key marketing tool for Walmart and other online retailers.
Delivery innovations

In order to compete with traditional stores, online retailers have had to work to deliver goods faster and lower costs.

The gold standard now among consumers is free delivery in one to two days, and online retailers are scrambling to deliver.

Nordstrom offers free delivery and returns on all its online sales. For $79 per year, Amazon
.com's Prime program gives customers unlimited free two-day delivery plus instant streaming of movies and TV shows and access to thousands of electronic books.

Staples offers free shipping during the holidays and also allows customers to order products online and pick them up at a nearby store.

Walmart offers free shipping of certain products to homes and will ship any product to a nearby Walmart store for free, often the same day it is ordered. Another service aimed at customers in areas where there are no nearby Walmart stores will ship the product for free to one of 650 participating FedEx offices.

Jariwala said the service is popular in urban areas such as New York where Walmart doesn't have a network of physical stores.
What's next?

As mobile computers and social networks make online shopping more convenient and relevant, analysts say the migration of retail sales from brick-and-mortar stores to the Internet will escalate.

That will create a fundamental shift in the traditional retail model, in which goods move from manufacturers to wholesalers and distributors and then to retail stores.

With more sales occurring online, there will be fewer physical stores, and they will be smaller. There also may be fewer individual retailers in general as online superstores such Amazon.com, Walmart.com and others emerge as one-stop shops for almost everything. Distribution channels also will change as more goods move directly from manufacturers to consumers. That could eliminate wholesalers and result in lower costs.

"We're clearly on the cusp of a new era of e-commerce," Jariwala said.

by Max Jarman The Arizona Republic Dec. 17, 2011 08:05 PM




Fight for online sales grows

Go Daddy nets deal to grow globally

Scottsdale-based Internet domain registrar and Web-hosting service Go Daddy Group Inc. on Friday closed on an investment partnership that will allow it to tap more deeply into international markets, company officials said.

Under the deal, Go Daddy founder Bob Parsons has stepped down from his role as CEO but will stay on as executive chairman of the company's board of directors.

Warren Adelman, who has been serving as president and chief operating officer, was named Go Daddy's new chief executive.

Company officials did not disclose the specific amount of the investment but have indicated previously that it would boost the company's valuation to $2 billion. Reports by tech-industry analysts and journals have quoted investment figures ranging from $2.25 billion to $2.5 billion.

The investment capital comes through a partnership with three private-equity firms: New York-basedKohlberg Kravis Roberts & Co. L.P., Menlo Park, Calif.-based Silver Lake and Palo Alto, Calif.-based Technology Crossover Ventures.

Parsons said Friday that he was given the option to continue on as the company's top executive but decided that Adelman was better-suited for the job.

"I want to do whatever is going to help the company succeed," Parsons said.

He praised Adelman, who has been with Go Daddy for more than eight years, for his tireless work ethic, brains and attention to detail. "At the end of the day, he's better than I am," Parsons said. "Most of the stuff I get credit for is stuff that he did."

Parsons said he remains the company's single largest shareholder, a condition he said he insisted on when negotiating the investment deal, and still has a strong incentive to see the company do well. No single investment partner owns a controlling interest in the company, Parsons said, adding that all of Go Daddy's top shareholders want the same things and that he doesn't expect any disagreements among them.

"I'm very excited," he said about the investment deal. "I'm happy about it."

Since the investment partnership was announced in June, Go Daddy officials have talked about how the infusion of capital would allow the company to expand into new geographic areas internationally, including Latin American and Asian markets.

In August, Adelman told The Republic that KKR, Silver Lake and Technology Crossover would be valuable partners because of their experience managing fast-growing technology firms.

"We've gotten to this level, and we've brought in these folks who have seen it all, and we can tap into their knowledge, tap into their contacts," he said. "They bring a lot of intelligence and smarts to the table that could be really helpful for us going forward as we look to going from $1 billion (revenue) to $5 billion."

by J. Craig Anderson The Arizona Republic Dec. 16, 2011 06:20 PM



Go Daddy nets deal to grow globally

TV companies must lower volume on ads - USATODAY.com

LOS ANGELES — Shush, already. That's the message the Federal Communications Commission is sending with new rules that will force broadcast, cable and satellite companies to turn down the volume on blaring TV commercials.

On Tuesday, the FCC passed a set of regulations that will prevent commercials from being louder than the shows around them. It's all part of the Commercial Advertisement Loudness Mitigation (or CALM) Act, which President Barack Obama signed into law last December. The rules go into effect a year from now. Companies that don't comply will face unspecified FCC action.

Thunderous television ads have annoyed viewers for years. The FCC says people have grumbled about the issue for at least a half-century. But since 2002 -- due in part to all those clangorous car commercials, earsplitting electronics ads and booming beer pitches -- loud advertisements have been one of the top complaints the FCC receives.

Complaints grew in recent years, as ads became even louder. In the days of analog TV, louder ads took up more space on the airwaves. So, broadcasters toned them down to avoid interfering with other channels. Since the conversion to digital-TV broadcasts two years ago, loud ads no longer take up more airwave space than quiet ones. The change transformed the commercial break into a noisy arms race.

"Nobody wanted to be the quiet guy in the set of commercials," said David Unsworth, senior vice president of satellite and technical operations at DG, a company that distributes ads to broadcasters.

In a recent analysis, DG found that some ads were 10 times as loud as the programs they interrupted.

"Everybody's been trying to push the envelope using (digital) compression to make their spots as loud as they can," Unsworth said.

A few years ago, an annoying ad got to the ears of Rep. Anna Eshoo, the Democratic congresswoman whose district in California's Silicon Valley is home to Facebook and Hewlett-Packard Co. While watching a sporting event with family members, Eshoo was jarred by a "horribly loud" commercial. Her brother-in-law suggested she do something about it. She did -- with what started as a simple, one-page legislative proposal.

The measure became one of the most popular bills she has ever sponsored.

"What I never dreamed of was what kind of chord it would strike with people," Eshoo said.

The FCC rules require TV distributors to set up equipment to monitor the average sound level of ads as they come in. If they're too loud, distributors must adjust the sound levels before they can be aired. It recommends practices set out in 2009 by the Advanced Television Systems Committee, a standard-setting body.

If compliance with the rules places a financial burden on a company, the FCC will give it up to December 2014 to comply. Those concessions have helped reduce opposition.



TV companies must lower volume on ads - USATODAY.com

December 13, 2011

Netflix chief, although humbled, is still talking big

SAN FRANCISCO - To hear Netflix CEO Reed Hastings tell it, the boneheaded decisions that have dragged down the Internet's leading video- subscription service during the past five months eventually will be forgotten like a bad movie made by a great film director.

Shaking off the stigma of a massive flop won't be easy, a challenge Hastings acknowledged late Tuesday when he spoke at a UBS investor conference in New York. After his host mentioned the mystique surrounding Hastings as Netflix's fortunes soared a year ago, Hastings quipped, "Now, it's just pity."

The self-deprecating humor prefaced a 45-minute treatise on why Hastings believes Netflix will overcome its recent adversity and remain at the forefront of a shift that increasingly will turn watching Internet-distributed video into one of the world's most popular pastimes.

This comes as high-speed connections, mobile devices and more sophisticated televisions become commonplace.

Long-term vision

His long-term vision calls for Netflix to be selling Internet-video subscriptions at prices starting at $8 per month in most markets outside China.

"If you fundamentally believe Internet video will change the world in 20 years, we are the leading play on that basis," Hastings boasted. He quickly added a caveat: "As long as we don't shoot ourselves in the foot anymore."

Hastings sounded like he intends to stick around to lead the way, despite questions about recent moves that triggered a customer backlash and a staggering decline in Netflix's stock price that has wiped out three-fourths, or about $12 billion, of the company's market value in five months.

Netflix Inc.'s stock was trading at about $71 midday Wednesday, down from a peak of nearly $305 in July when the company infuriated its U.S. subscribers by announcing plans to raise its prices by as much as 60 percent.

The sell-off has surprised and humbled Hastings, who revealed on stage that he had curtailed his sales of his Netflix holdings earlier this year because he was convinced the stock would quickly hit $1,000.

Hastings said his biggest mistake was trying to phase out Netflix's once-trailblazing DVD-by-mail rental service more quickly than millions of customers wanted.

He and his management team concluded a few years ago that DVDs are destined to obsolescence, so they began concentrating on streaming video over high-speed Internet connections.

Ending Netflix's practice of bundling DVD-by-mail and Internet-streaming subscriptions together so people are forced to buy them separately was meant to push more households into weaning themselves from discs.

Instead, customers saw the move as a betrayal by a greedy company and canceled their subscriptions in droves.

"We became a sort of a Bank of America symbol, which is super unfortunate," Hastings said Tuesday in comments monitored on a webcast.

"We berate ourselves tremendously for that lack of insight because it didn't need to be that way. But, you know, in three or five years, we aren't going to remember it. It's going to be: 'Did we succeed at streaming?' That's all people are going to care about in three or five years. So, we are not losing too much sleep over it. We are charging ahead."

Damage to fix

There's damage to repair along the way.

Netflix entered October with 800,000 fewer U.S. subscribers than it had at the start of July, and the company has said there have been additional defections in the past two months, although the number hasn't been quantified.

The result: Netflix isn't bringing in as much money as it hoped to pay for an expansion in in Latin America and Great Britain and cover rising fees to license movies and TV shows for its video-streaming library. The shortfall will saddle it with a loss next year, the first time that has happened in a decade.

Hastings said he expects Netflix to enjoy robust subscriber growth next year, although he doubts the company will be able to match its performance during the first six months of this year when it added nearly 5 million subscribers. Virtually all the company's future growth is expected to come from streaming-only subscriptions.

"DVD will do whatever it will do," Hastings said. "We are not going to hurt it, but we aren't putting a lot of time and energy into it."

Netflix ended September with 25.3 million subscribers worldwide, including 23.8 million in the U.S. Nearly 14 million of the U.S subscriptions included a DVD-by-mail plan.

To ensure it will have enough money to finance its ambitions, Netflix recently raised $400 million by issuing convertible debt to one of its major stockholders and selling 2.86 million discounted shares.

That stock sale further irritated investors because Netflix spent nearly $200 million buying back 900,000 shares of its stock at an average price of $218 during the first nine months of the year.

Hastings said Netflix probably could have gotten by without the extra money, but he decided to raise the extra cash to avoid a "crisis of confidence" among the company's suppliers, including movie and TV studios that license their video and sell their DVDs to the company.

Increasing competition is another major concern hanging over Netflix. Amazon.com Inc., Walmart Stores Inc., Dish Network Corp. are already offering subscription packages that include Internet video.

Verizon Communication Inc. declined to comment on reports it may also enter the market.

by Michael Liedtke Associated Press Dec. 7, 2011 06:26 PM



Netflix chief, although humbled, is still talking big

Verizon Wireless won't put Google Wallet in new phone

NEW YORK - Verizon Wireless is blocking Google's new flagship phone from supporting Google's attempt to make the smartphone the credit card of the future.

In blocking the Google Wallet software from running on the new Samsung Galaxy Nexus, Verizon Wireless said Tuesday that it is holding off on providing a wallet application until it can offer "the best security and user experience." Verizon and rivals AT&T Inc. and T-Mobile USA are part of a consortium called ISIS that is planning its own payment system.

Google confirmed that Verizon had asked it not to include the wallet function in the Galaxy Nexus phone, due out soon.

The way Google Wallet is supposed to work, the phone can be used to pay for merchandise in some stores by tapping it to payment terminals.

Google calls the payment application a "wallet" because it can be loaded with payment "cards" from multiple sources. Right now, there are only two cards available: Citibank MasterCards and a prepaid card issued by Google. But Google is making the wallet available to any financial institution that wants to participate.

Google's plan is to make money by acting as a conduit between merchants and shoppers, using the Wallet as a way to deliver advertising and coupons. It's competing not only with ISIS but with Visa and MasterCard, which have their own wallet projects, and with eBay Inc.'s PayPal.

The Galaxy Nexus is the latest iteration of the Nexus line, which showcases new features and capabilities for phones running Google's Android software. In this case, the phone is the first to run a new version of Android, dubbed "Ice Cream Sandwich."

The previous Nexus phone, sold by Sprint Nextel Corp., is the only phone yet to work with the Google Wallet application. Sprint is not part of ISIS.

U.S. phone companies effectively have veto rights on features sported by the phones they sell. Because of the clout Apple Inc. has gained by making the world's most popular smartphone, it has been able to turn that around and dictate terms to carriers. Google doesn't have the same leverage. It tried selling the first Nexus phone on its own, without going through the carriers, but ended that experiment because of weak sales.

Congress and regulators have occasionally raised questions about carriers blocking specific third-party applications. These days, carriers generally don't block applications directly, leaving it to Apple and Google to police their app stores.

Verizon Wireless spokesman Jeffrey Nelson said that the company doesn't block applications but that Google Wallet is different because it accesses a security chip in the phone.

Examinations by Wired and other publications reveal that the international version of the Galaxy Nexus has the "Near-Field Communications" chip necessary to run Google Wallet. It's unclear whether the U.S. version will be lacking the chip or whether it will simply be blocked from running the Wallet application. Samsung Electronics had no immediate comment.

Google and Verizon Wireless united in 2009 to push Android phones as the major alternative to the iPhone. Verizon Wireless' "Droid" advertising campaign set the tone, to the extent that many people still call all Android phones "Droids." The Google-Verizon Wireless relationship has cooled this year, as the carrier started selling the iPhone.

Verizon Wireless is a joint venture of Verizon Communications Inc. of New York and Vodafone Group PLC of Britain.

Verizon Wireless' refusal of the Google Wallet was reported earlier on Computerworld's blog.

by Peter Svensson Associated Press Dec. 6, 2011 05:39 PM




Verizon Wireless won't put Google Wallet in new phone

December 4, 2011

The World of Social Media 2011 - YouTube




The World of Social Media 2011 - YouTube

10 Tools to Make Your Business Mobile Friendly | Marketing Technology Blog

I’m still generally surprised by the number of sites that are not yet viewable on a mobile device – including very, very large publishers. It’s not just an opportunity to get some additional readers, customizing your site for mobile use can enhance your user experience since you know that folks are currently mobile! With the huge variety of screens and operating systems, optimizing for mobile isn’t a piece of cake anymore, though.

Here are 10 Tools to Make Your Site Mobile Ready.

bMobilized – a simple, basic tool that automatically converts your content to a mobile optimized site with some basic customization.



Dudamobile – out of all of the tools I tested, this may have been the easiest to use and implement! Their basic wizard could allow you to have a mobile site up in a few minutes. They also allow you to remove all their ads and use a custom domain for a few extra bucks.




FiddleFly – an easy custom mobile Website builder for agencies to work with their clients on building mobile sites.

Fiddle Fly from FiddleFly on Vimeo.



Mippin – is a basic mobile application builder for any mobile operating system that simply takes your RSS feed and syndicates it nicely into a mobile format.




Mobicanvas – a free, drag and drop mobile CMS with widget integration and basic reporting.



Mobify – Publishers and web designers around the world use Mobify Studio to create beautiful mobile websites. Mobify has published mobile sites for a number of content management systems, including WordPress, Drupal and others. Mobify also has an ecommerce engine.



Mobile Roadie – has built hundreds of custom applications for bands, sports celebrities and businesses. Their content management system is highly integrated and sophisticated.


mobiSiteGalore – Build your own Mobile Websitein minutes that looks rich in smart phones and graceful even in low end phones



Mofuse – is a mobile content management system that can also integrate a geographic store locator. Build, Launch, Measure, Integrate and Promote your mobile website.


WPTouch for WordPress – we use this plugin on our blog and it’s been fantastic. It’s easily customizable and presents the content beautifully.

Google-tied con artist gets 6 years

PROVIDENCE, R.I. - A career con artist who helped with a criminal investigation that led to Google Inc. forfeiting $500 million was sentenced Friday to nearly six years in prison for his role in a multimillion-dollar fraud scheme targeting 83 customers and a credit-card processing company.

David Whitaker's cooperation with the Google investigation was called extraordinary several times during his sentencing in U.S. District Court in Providence.

Assistant U.S. Attorney Andrew Reich said that, because of the probe, millions of Americans have been protected from rogue online Canadian pharmacies advertising prescription drugs through Google's AdWords program.

Google forfeited the $500 million to avoid criminal prosecution for accusations it improperly profited from ads placed by the pharmacies.

Google did not immediately respond Friday to a request for comment.

Whitaker, a 36-year-old Virginia resident who has been imprisoned since 2008, said before sentencing that the probe changed his life.

He said he learned from investigators honesty, integrity and how to be a better person. He said he also shed his misconception that he was a victim.

"I hurt a lot of people, and I've made a mess of my life," said Whitaker, dressed in a beige prison clothes. He added, "My apology would be to change."

Prosecutors also were complimentary of Whitaker.

"But for his cooperation, this would not have taken off," Reich said.

Judge William E. Smith also ordered Whitaker to pay more than $10 million in restitution, including more than $2.2 million that he and a co-defendant must pay to a credit-card processing company.

Whitaker faced up to 65 years in prison for his crimes, but Smith agreed to recommendations by his lawyer and Reich to make him eligible for a less severe sentence. Whitaker will be credited for the nearly four years spent in prison but still faces two years and two months of imprisonment.

Authorities arrested Whitaker in California after he was expelled from Mexico in 2008.

Authorities allege his Rhode Island electronics-equipment provider, Mixitforme Inc., bilked $7 million to $20 million from customers and a credit card processor.

After his arrest, Whitaker disclosed to investigators that he had been selling prescription drugs online in Mexico with the help of Google's AdWords program, Reich said.

Whitaker described how he developed relationships with Google employees who allowed him to place ads for drugs obtained from overseas without a prescription, Reich said.

Whitaker helped investigators construct phony websites that purported to sell the drugs, officials said.

by Laura Crimaldi Associated Press Dec. 3, 2011 12:00 AM




Google-tied con artist gets 6 years

Ill. Pump Failure Wasn't Cyberattack From Russia - ABC News

Mystery solved. A reported cyberattack on a water district in central Illinois turned out to be a false alarm set off when an American contractor logged onto the system remotely while vacationing in Russia.

Jim Mimlitz of suburban St. Louis says he hopes he'll be able to laugh about it someday. For now, the contractor is puzzled. Why didn't terrorism investigators pick up the phone and call him? He says he could have straightened out the matter quickly.

Instead, investigators assumed someone had stolen Mimlitz' password and hacked into the system from Russia, causing a water pump to shut down five months later. A blogger spread word of the possible hack, touching off a minor panic.

The truth is, Mimlitz was on vacation with his family in Russia in June. Someone from the Curran Gardner Public Water District near Springfield called his cell phone and asked him to check data on the system. He did, but he didn't mention he was doing so from Russia.

Months later, after the water pump failed, a repairman examining the logs saw a Russian IP address linking to the system with Mimlitz' sign-on. The water district reported that to a state agency and the Illinois Statewide Terrorism and Intelligence Center got involved.

The center released reports about a potential cyber compromise at the water district. The reports were meant to be initial raw reporting and not conclusive. A security consultant and blogger wrote about the reports and released the documents to reporters. The incident was reported as possibly the first successful cyberattack on the U.S. infrastructure.

"A quick and simple phone call to me right away would have defused the whole thing immediately," Mimlitz said. "All I did was I logged on. I tried to help. I looked at some data and gave them my advice."

The story of Mimlitz' vacation was first reported by Wired magazine's Threat Level blog. Mimlitz spoke to The Associated Press on Thursday.

There was no immediate response to requests for comment from the Illinois State Police, which took part in the investigation. A spokesman for the U.S. Department of Homeland Security referred to the department's previous statements saying there was "no evidence to support claims made" in the initial Illinois report "which was based on raw, unconfirmed data and subsequently leaked to the media ..."

Mimlitz has only kind words for the FBI and Department of Homeland Security investigators he met with last week for nearly four hours.

"I was as open as I could be," he said. "I wasn't trying to hide anything. I was just trying to help them find the problem. Even if the end result was not going to be good for me, that wasn't my concern. It was a very productive meeting and they were extremely sharp people."

Mimlitz's company — Navionics Research in Eureka, Mo. — helped set up the system that remotely manages computers controlling machinery in the water district. Security experts have pointed out such Supervisory Control and Data Acquisition systems are vulnerable to hacking.

"I think our system's very secure," Mimlitz said. "It doesn't mean we're not going to keep working on it."

by Carla K. Johnson Associated Press Dec 2, 2011


Ill. Pump Failure Wasn't Cyberattack From Russia - ABC News

MarilynMonrobot


Heather is currently conducting her doctoral research at Carnegie Mellon's Robotics Institute and running Marilyn Monrobot Labs in NYC, which creates socially intelligent robot performances and sensor-based electronic art.

Her work also includes: robotics and instrumentation at NASA's Jet Propulsion Laboratory, interactive installations with Syyn Labs, field applications and sensor design at Aldebaran Robotics, and she is an alumnus from the Personal Robots Group at the MIT Media Lab. She earned her bachelor and masters degrees at MIT in Electrical Engineering and Computer Science and has a minor in Mechanical Engineering.


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