E-Reader Market Shrinks Faster Than Many Predicted

Nearly three years after the first iPad was introduced, the tablet has come a long way. Now there are plenty of smaller, cheaper tablets that are pretty powerful. So why buy a more primitive e-book reader?

That appears to be what a lot of people are thinking this year. The research firm the International Data Corporation found a surge in shipments this year of what it called “smart connected devices,” including tablets, smartphones and PCs. That market grew 27.1 percent from last year, to 303.6 million shipments, according to IDC.

Meanwhile, e-book readers are losing momentum. This year, worldwide shipments of e-book readers will fall to 14.9 million units from 23.2 million units last year - a 36 percent drop, according to estimates by IHS iSuppli. The research firm eMarketer noted these trends in a report published on Thursday.

Forrester Research is seeing a similar trend. In the United States, manufacturers sold nine million e-book readers this year, down from 15.5 million last year, according to Sarah Rotman Epps, a Forrester analyst. Next year, the number of e-book readers sold will be 7.5 million units, and in 2014 that number will drop to 5.3 million and keep falling from there, Forrester predicts.

Does it make much sense anymore to buy e-book readers? They are still far cheaper than tablets - the cheapest Kindle costs $70, while the cheapest Kindle Fire tablet costs $160. But many people are choosing to pay extra to get the features of a tablet, Ms. Rotman Epps said. In a survey conducted by Forrester, 12 percent of respondents said they had bought a tablet instead of an e-book reader, and 39 percent of tablet owners said they wouldn't buy an e-book reader in the future.

“It's looking like e-readers were a device for a particular moment in time that, more rapidly than we or anyone else thought, has been replaced by a new technology,” Ms. Rotman Epps said in an interview.

That doesn't mean Amazon and Barnes & Noble, which have been big sellers of e-book readers, need to worry. Those companies have been offering touch-screen tablets for a while now. The companies that will be most vulnerable to this trend are those that primarily make e-book readers, like Kobo, Ms. Rotman Epps said.

Web Service Raises $7 Million to Automate Your Life

IFTTT, the nifty Web service that offers a way to automate tasks online, just got a nice holiday present: a significant chunk of change from the venture capital firms Andreessen Horowitz, NEA and Lerer Ventures.

The company said on Thursday that it had raised $7 million in a Series A round of venture capital, in addition to the $2 million in seed financing it raised in January.

Linden Tibbets, the chief executive and one of the founders of IFTTT, said his first order of business would be to hire more people.

“FIrst and foremost, it's going to be about expanding the team,” Mr. Tibbets said. Right now, IFTTT has eight employees. Mr. Tibbets would like to double that in 2013.

But the company's second order of busin ess is perhaps its most important: making the service more palatable to a broader audience.

“The way to do that isn't building a complex tool,” Mr. Tibbets said. “It's building a simple one that people can understand and use very quickly.”

Right now, IFTTT (pronounced “lift” but minus the l) has tasks, called “recipes,” that appeal to fairly tech-savvy users. For example, popular recipes can comb through Craigslist for a particular listing and e-mail those listings as they appear, or send notifications each time a new book is added to Amazon's list of free e-books.

But Mr. Tibbets has his eye on expanding IFTTT's catalog of recipes to include more user-friendly functions.

“There's going to be e-commerce alerts, flight tracking and deal finding,” Mr. Tibbets said. “Within 20 seconds of signing into IFTTT for the first time, you'll find something that interests you.”

The company is also looking to branch out into the physic al world. IFTTT has already teamed up with Belkin around that company's line of WeMo devices, which let people wirelessly control home electronics from anywhere. And IFTTT plans to do more in the coming months.

“I think people are starting to get that connecting traditional things like light bulbs and home electronics to the Web makes sense, and it's something they want and will pay for,” he said. “It's exciting to see IFTTT emerge at the center of that.”

More than 2.5 million recipes have been created on IFTTT, according to the company. Of those, 700,000 are available for public examination. Each day, three million to four million tasks set up through IFTTT are run.To date, more than 600 million recipes have been executed through it.

Children\'s Online Privacy Rules: Winners and Losers

Now that the Federal Trade Commission has published its updated privacy protections for children online, Facebook may finally open its site to children under 13, industry analysts say.

But those very same new rules, they say, may prompt some small app developers to pull out of the children's market altogether.

The original rules, based on the Children's Online Privacy Protection Act of 1998, or Coppa, required operators of Web sites directed at children under 13 to notify parents and obtain their consent before collecting personal information from children, like their names, addresses and phone numbers.

The revised rules, made public at a press conference in Washington on Wednesday, widen th e list of children's personal information that will require parental permission to collect. It will now include children's photos, videos or voice recordings, the IP addresses of their computers and the locations of their mobile phones. The updated rule also requires social networks, advertising networks and other third parties to get parents' permission before knowingly collecting data from children's sites and apps.

But the rules have radically different implications for big Web sites and small app developers.

Some Silicon Valley executives and their lawyers lobbied for months to try to get the commission to water down some of its proposed rule revisions.

One of the agency's original proposals would have made social networks like Facebook and Twitter liable for collecting information from children's sites or apps, even if the companies had no actual knowledge â€" but just a “reason to know” - that developers had incorporated the social networks' plug- ins into their children's services.

In a meeting with Commissioner Julie Brill in September, Facebook executives including Sheryl Sandberg, the chief operating officer, opposed that requirement.

“Facebook representatives discussed the company's consideration of opening up the social media site to children under the age of 13,” an F.T.C. summary of that meeting said. In connection with that possibility, Facebook executives said they were concerned about the company's “potential liability for data collected by its ‘plug-ins' on other websites - the Facebook representatives pointed out that that it often does not know or have control when developers add the Facebook ‘plug-ins.'”

On that point, at least, Facebook got its way.

The final children's online privacy rule uses an “actual knowledge” standard for collecting informatio n about children. That means social networks and ad networks that collect information from children without knowing that their software is operating on a children's site or app will not be liable.

In an e-mail,  Erin Egan, Facebook's chief privacy officer, wrote:  “We are pleased the Commission clarified the limited circumstances under which providers of social plugins would be subject to Coppa when those plugins are displayed on other websites.”

Other lobbying efforts fared less well.

Representatives of app developers, for example, told federal regulators that thousands of small developers of children's apps had been able to comply with the old rule by choosing not to collect personal information from youngsters. Those app developers, they said, had outsourced the data collection to advertising networks and analytics companies because the apps themselves often did not have the financial or legal resources to handle children's personal information.

The new rule, however, gives children's apps and sites primary responsibility for the ad networks and social networks they incorporate into their services. That means even children's educational apps that do not themselves collect personal information from children will now have to redesign their user interfaces to notify parents of their partners' data collection practices and obtain parents' permission, said Tim Sparapani, the senior adviser for policy and law of the Application Developers Alliance, a trade group.

Because children's apps may incorporate different software from outside sources - for analytics, say, or interactive features - they may also face greater compliance burdens than established children's Web sites with their own resources, he says.

For example, the updated rule permits data collection from children for certain internal operations as long as that information is not used “for any other purpose.”

Support for the internal operations of the website or online service means those activities
necessary to:
(a) maintain or analyze the functioning of the website or online service;
(b) perform network communications;
(c) authenticate users of, or personalize the content on, the website or online service;
(d) serve contextual advertising on the website or online service or cap the frequency
of advertising;
(e) protect the security or integrity of the user, website, or online service;
(f) ensure legal or regulatory compliance; or
(g) fulfill a request of a child as permitted by §§ 312.5(c)(3) and (4);
so long as the information collected for the activities listed in paragraphs (a)-(g) is not used or
disclosed to contact a specific individual, including through behavioral advertising, to amass a
profile on a specific individual, or for any other purpose.

Mr. Sparapani said that app developers who incorporate free software to a nalyze use patterns for their children's apps, for example, will now have to notify their analytics companies that the children's data may not be collected and used for other purposes. And those analytics companies in turn may not want to provide free services if they cannot tap an app's user data for their own purposes. Some advertising networks, he said, could pull out of children's apps for the same reason.

“What you are going to end up doing is choking off the monetary flow that monetizes the app,” Mr. Sparapani said.

He added that the rule's new requirements could push some developers to revise their apps to aim at teenagers - because teenagers' data can be freely collected.

“You can build an app with relatively no regulatory burden or you can build an app with high burdens and strict liability and a lot of monitoring,” he said. “Which one are you going to produce?”

Instagram Does an About-Face

11:14 p.m. | Updated
SAN FRANCISCO - In the aftermath of the uproar over changes to Instagram's privacy policy and terms of service earlier this week, the company did an about-face late Thursday.

In a blog post on the company's site, Kevin Systrom, Instagram's co-founder, said that where advertising was concerned, the company would revert to its previous terms of service, which have been in effect since October 2010.

“Rather than obtain permission from you to introduce possible advertising products we have not yet developed,” he wrote, “we are going to take the time to complete our plans, and then come back to our users and explain h ow we would like for our advertising business to work.” Users had been particularly concerned by a clause in Instagram's policy introduced on Monday that suggested Instagram would share users' data - like their favorite places, bands, restaurants and hobbies - with Facebook and its advertisers to better target ads.

They also took issue with an update to the company's terms of service that suggested users' photos could be used in advertisements, without compensation and even without their knowledge.

The terms of that user agreement said, “You agree that a business or other entity may pay us to display your user name, likeness, photos (along with any associated metadata) and/or actions you take, in connection with paid or sponsored content or promotions, without any compensation to you.”

Following a reaction that included customers defecting to other services, Mr. Systrom told Instagram users on Tuesday that the new policy had been misinterpreted. “It is our mistake that this language is confusing,” he wrote, and he promised an updated agreement.

That statement apparently was not enough. With more people leaving the service, the company, which Facebook bought for $735 million this year, reacted again by returning to the old rules.

Acknowledging those concerns late Thursday, Mr. Systrom wrote: “I want to be really clear: Instagram has no intention of selling your photos, and we never did. We don't own your photos - you do.”

Mr. Systrom said the company would still be tweaking its privacy policy to quell users' fears that their photos might pop-up on third-party sites without their consent.

But Mr. Systrom did not clarify how Instagram planned to monetize its service in the future. Facebook is under pressure to make Instagra m earn income.

“It's a free service - they have to monetize somewhere,” said John Casasanta, a principal at Tap Tap Tap, the maker of Camera+, a photo-filter app that has shunned advertising and instead charges users for premium features. “The days of the simple banner ads are gone. Their user data is too valuable.”

It was unclear whether reverting its terms of service would be enough to satisfy high-profile users like National Geographic, which stopped using its Instagram account in light of the moves, or other users who have aired their grievances on Twitter and Facebook.

The controversy has driven traffic and new users to several o ther photo-sharing applications.

Pheed, an Instagram-like app that gives users the option to monetize their own content by charging followers to see their posts, gained more users than any other app in the United States on Thursday. By Thursday morning, Pheed had jumped to the ninth most downloaded social-networking app in Apple's iTunes store, just ahead of LinkedIn.

O. D. Kobo, Pheed's chief executive, said Thursday morning that subscriptions to the service had quadrupled this week and that in the last 24 hours users had uploaded 300,000 new files to the service - more uploads than any other 24-hour- period since Pheed made its debut six weeks ago.

Another runaway success was Flickr, Yahoo's photo-sharing service, which redesigned its app last week to make it easier to share photos on Twitter. In a stroke of good fortune, it released the app to positive reviews just as Instagram announced it would no longer sync with Twitter, a Facebook rival.

The day before Instagram announced changes to its terms of service, Flickr's mobile app was ranked at around 175 in Apple's overall iTunes app charts. Since that day, the application skyrocketed to the high 20s.

Of course, most of these services are still tiny compared to Instagram, which claims to have more than 100 million members who have uploaded upward of 5 billion photos using its service. And it was unclear if the services' newfound members had also deleted their Instagram accounts or were merely dabbling in other offerings. But the migration, whether temporary or permanent, was a reminder of the volatility of success and that the fall to bottom can sometimes be as swift as the rise to the top.

Facebook and Instagram declined to say whether they had seen any significant number of account deletions or if they were concerned about losing ground in the photo-sharing market to rivals. Some photo apps took direct aim at Instagram. Camera+ even went so far as to include a snide, holiday-themed reference to Instagram's stumbles in an app update on Wednesday.

“We'll never do shady things with your shared pics, because it just isn't right,” the update noted. “On that note, happy Christmas to all, and to all a good night!”

Instagram\'s Loss Is a Gain for Its Rivals

One app's loss is another app's gain.

The uproar over changes to Instagram's privacy policy update Monday has helped a number of photo-sharing applications garner unprecedented amounts of traffic and new users.

Pheed, an Instagram-like app that gives users the option to monetize their own content by charging followers to see their posts, gained more new users than any other app in the United States. By Thursday morning, Pheed had jumped to the ninth most downloaded social networking app in Apple's iTunes store, just ahead of LinkedIn.

O.D. Kobo, Pheed's chief executive, said subscriptions to the service had quadrupled this week and that in the last 24 hours users had uploaded 300,000 new files to the service - more uploads than any other 24-hour-period since Pheed first debuted six weeks ago.

In the wake of user uproar, Instagram announced late Thursday that it was reverting to its original terms of service agreement.

By then, competitor apps were already gaining momentum. Another runaway success has been Flickr, Yahoo's photo-sharing service, which redesigned its app last week to make it easier to share photos on Twitter just as Instagram announced it would no longer sync with the Facebook rival.

The day before Instagram first announced changes to its terms of service, Flickr's mobile app was ranked at around 175 in Apple's overall iTunes app charts. Since then, the application has skyrocketed to the high-20s.

Florian Meissner, one of the founders of a photo-sharing service in Berlin called EyeEm, said that he also began noticing an increase in the flow of new users around the time that Instagram began shutting down its Twitter integration last week.

But usage skyrocketed on Tuesday, after Instagam firs t released its new terms of service. Mr. Meissner did not share how many people flocked to the app but said that daily sign-ups had increased by a thousand percent and were still climbing.

Starmatic, a start-up that takes its influence from the toy Kodak camera of the same name, also said that the volume of photographs funneling through the application was at an all-time high this week.

“Starmatic has benefited from a massive buzz and arrival of disappointed Instagramers,” said Jean-Philippe Evort, one of the founders of Starmatic, in an e-mail.

Parker Emmott, the co-founder of Waddle, a private group photo-sharing service, said the company had not updated or marketed its service since early August but noticed an unexpected spike in usage this week.

“Everybody wants privacy and control, but nobody wants to do any extra work to have it,” Mr. Emmott said. “Instagram's changes seem to have helped push the privacy curve forward.”

Som e photo apps took direct aim at Instagram. One photo filter app, Camera+, even went so far as to include a snarky, holiday-themed reference to Instagram's stumbles in an app update Wednesday.

“We'll never do shady things with your shared pics because it just isn't right,” the app's update noted. “On that note, Happy Christmas to all, and to all a good night!”

For now, Camera+ allows users to apply filters to photographs and share them across other platforms, including Instagram. But John Casasanta, a principal at Camera+ maker Tap Tap Tap, said the app was planning to incorporate its own sharing features in coming months.

When it does, Mr. Casasanta said Camera+ would not sell user data or incorporate ads, but would continue to make money charging users a small fee - currently 99 cents - to use premium features. Mr. Casasanta said that model had worked well and expected Camera+ to make its ten millionth sale next week.

Of course, most of these services are still tiny compared to Instagram, which claims to have more than 100 million members who have uploaded roughly 5 billion photos using its service. And it's not clear if their newfound members have also deleted their Instagram accounts or are merely dabbling in other offerings. But the migration, whether temporary or permanent, is a reminder of the volatility of success and that the fall to bottom can sometimes be as swift as the rise to the top.

Facebook and Instagram declined to say whether or not they had seen any significant number of account deletions or if they were concerned about losing a foothold in the photo-sharing market to rivals.