With regard to their cloud music offering, it looks like Apple is now just about ready to rock and roll. It would seem that this is now coming together even faster than they anticipated. And that may be thanks to two unlikely sources: Google and Amazon.

CNet’s Greg Sandoval is reporting tonight that Apple has signed an agreement with music label EMI to offer its music through Apple’s upcoming new cloud music service. This means that Apple now has agreements in place with two of the four major labels (Warner signed last month). And Sandoval believes that deals with the remaining two, Sony and Universal, could be wrapped up as early as next week. Again, rock and roll.

With those deals in place, it means that Apple will be free to launch their cloud service anytime they please. And while we had heard the initial plan was to do so at their annual music event in the early fall, Apple could indeed move the launch up to WWDC in early June (just a few weeks from now). We haven’t heard anything definitive about this either way, but you can bet that Apple is thinking about it.

It would be a pretty savvy move. One that would make their rivals look bad. Really bad.

You see, while Apple is believed to have had the infrastructure work done for a while for their cloud music offering, the hold up was these label deals. Negotiations have been ongoing for months, and given the stakes, it seems likely that they could have gone on for many more months. Then Amazon decided to get ballsy.

They launched their own cloud music service in March without any of the labels signed on, surprising everyone. Legally, they said they had the right to do this since customers are placing this music in digital vaults in the cloud in the same way they might put music on an MP3 player. The labels, not surprisingly, disagree.

When Amazon did that, Google, which had also been negotiating with the music labels for at least a year, also decided they needed to get their offering out there. Last week at Google I/O, they launched Google Music in beta. Again, the labels were pissed off.

And guess who they ran to?

As Sandoval reported last week, following Google’s Music announcement:

Nonetheless, the hope in the music industry is that Apple’s music service will make the competing offerings look shabby by comparison and force Amazon and Google to pay the licensing rates the labels are asking.

So the labels, which for the better part of a decade now have been looking for someone, anyone to help counter Apple’s power in their business, is turning right back to Apple when they need help. And Apple will obviously gladly welcome them with open arms. After all, with these licenses, Apple will have secured the cloud music high ground despite being the last to launch.

Think about it. With these agreements, Apple is likely going to be able to do the one thing that is absolutely crucial for cloud music to take off: offer library syncing without uploading. In other words, Apple now likely be able to do what Lala (the company Apple bought in late 2009 and subsequently shut down) was able to do: scan your hard drive for songs and let you play those songs from their servers without having to upload them yourself.

It’s hard to overstate how critical this is. Right now, Amazon makes you upload your own library for any song you haven’t purchased from them since their service launched (those you purchase from them can automatically be added to your locker). Google doesn’t even have a music purchase option at all yet, so you have to upload music.

As Jason and I talked about on OMG/JK this week, that means hours or days of uploading — that’s what he had to go through. How many people are realistically going to do that? Not a lot.

But because neither Amazon nor Google have the label agreements — the key thing we warned about months ago when people were buzzing about Google Music rumors — they have no choice. Apple has a choice. And will fully take advantage of it.

Both Amazon and Google have complained that the terms the labels want are unacceptable and untenable for a business. Yet, it looks like Apple has been able to work them out. And that may well be thanks to, yep, Amazon and Google.

[image: flickr/dagoaty]

We’re entering into a new era of the Internet, where users are now looking to find validated sources within the mix of information overload that we all experience, said Steve Rubel, EVP of Global Strategy and Insights for Edelman during his presentation at Mashable Connect 2011. This shift is changing the nature of authority.

“The reality is, there’s too much content and not enough time,” says Rubel. “More content will be created today than existed in entirety before 2003.” With limited time and attention spans, people are experiencing information overload as well as “people overload.” Rubel called it a “friending arms race,” referring to the Facebook phenomena in which “he or she who dies with the most ‘friends’ wins.”

While Facebook is known as the most intimate of the large social networks, the simple truth is that the average user doesn’t know 20% of his Facebook friends. Rubel pointed to this — and the fact that in 2009, the New Oxford American Dictionary‘s Word of the Year was “unfriend” — to propose that the new “Validation” era of Internet life has begun, as of 2010.

Prior to the Validation era, the Internet experienced two other distinct eras, says Rubel. The first was the era of “Commercialization” (1994-2002), in which publishing was “costly and inaccessible to the masses.” As a result, media companies and brands ruled the digital space and the dot-com boom gave rise to a few new players, including Yahoo, Amazon and Google.

With the dot-com crash, though, publishing costs decreased, enabling almost anyone to be a publisher — thus, the era of “Democratization” (2002-2010). Cue the entrance of mainstream bloggers and Twitter fiends, accompanied by the shift of authority and trust from brands to individuals.

Edelman publishes an annual “Trust Barometer,” which gauges attitudes about the state of trust in business, government, NGOs and media across 23 countries. In 2006, during the pinnacle of the era of Democratization, the study found that people trusted their peers most when forming opinions about companies. Rubel pointed to the rise of social media to explain this finding.

The 2011 Trust Barometer survey illustrated an essential shift in trust, with academics, experts and technical experts within companies rising to become the most trusted sources. Meanwhile, the authority of peers has notably declined 4% since 2009.

With this shift in authority, Rubel proposes that as of 2010, the Internet has entered the Validation era, in which Internet users are beginning to “find the signal in the noise” and hold on to only those pieces of information and people that are most important to them online. The rise of intimate social networks such as Path, and group messaging apps such as GroupMe, Beluga, Fast Society and Kik, is an indicator that “people want to be closer to people they care about and let all the riffraff set aside,” says Rubel.

How do brands gain authority in the age of digital overload, then? Rubel pointed to the “Media Cloverleaf” as a solution, calling it the brainchild of Edelman’s CEO Richard Edelman. The Media Cloverleaf features four distinct spheres of media which should all be utilized to engage the public on a regular basis, he said. This is the idea of transmedia storytelling. Here are the four spheres of media:

Traditional media encompasses the big media companies that have “survived and thrived.” This includes radio, TV and print media outlets.
“Tradigital” media includes “digitally native media companies that are largely blogs, sometimes niche-focused, sometimes horizontal,” explained Rubel. These outlets are characterized by having high social amplification, SEO sophistication and sometimes a blur between advertising and editorial, says Rubel.
Owned media was defined by Rubel via a quote from Andy Heyward, former President of CBS News: “Every company can be a media company.” This is the idea that every brand can create valuable content.
Social media platforms such as Facebook and Twitter are driving increased engagement with brands and increased traffic to the other media spheres.
Consumers see these media channels as one, not as four distinct areas, Rubel warns. As a result, the opportunity for businesses is to “propagate new ideas across the Cloverleaf.” Here are Rubel’s five steps for success:

1. Elevate the Experts

Find your company’s subject-matter experts and empower them to “cultivate new ideas and engage in meaningful conversation around them,” advises Rubel. These experts could be employees or even your most valuable customers. Start by setting them up with press interviews or enabling them to represent your company on Twitter, Rubel suggests.

Cisco Together, for example, is an owned media project from Cisco that brings together subject matter experts to discuss how technology is connecting people in all new ways across various industries.

2. Curate to Connect

Rubel pointed out an unprecedented opportunity for companies and individuals to gain authority and become thought leaders by being the ones who “separate art from junk for people to understand it.” Curation is just as important as creation.

Social video king YouTube, for example, is finding new ways to curate the massive amount of videos that YouTube users upload on a daily basis. Most recently, the company partnered with curation startup Storyful to put together playlists for each day of the Egyptian protests.

3. Dazzle with Data

“People on the Internet do not read,” Rubel says. “They read 20% of a webpage before they move on; 57% never come back to that page; and we spend 15-20 seconds on a webpage before we move on. We are a global planet of fruit flies.”

The solution is to make data and information more visual and entertaining. The New York Times understands this idea and even employs a team specifically for data visualization. From visualizing America’s consumption of meat and how various groups of people spend their days, to making interactive maps of homicides in New York City and minorities in China, The Times has produced some of the most compelling graphics on the web.

4. Put Pubs on Hubs

Publish your company’s content, such as slideshows and white papers, on hubs like SlideShare and Scribd, so that interested parties can access it and “go deeper” when they want to.

Facebook, for example, is using Scribd to publish guides and case studies for developers, journalists and Facebook Page administrators.

5. Ask & Answer

“Be a source of knowledge,” says Rubel. Social media is a great outlet for doing just that. Rubel recommends that companies empower all of their employees to ask and answer questions via social media, instead of putting a few people in charge of that responsibility.

While at Mashable, I have sourced experts from “Help a Reporter Out,” Quora, Twitter, Facebook, blog comments and many other online outlets. Answering and asking questions online is just as valid as doing the same thing in person. The Internet is not just a playland; it is an extension of our offline lives, a place where individuals and companies can become highly influential and respected.

One of China’s largest microblogs reported Thursday that it added 40 million registered users in just two months, reflecting a surge in interest in Twitter-like microblog services in the country.

The Chinese company Sina reported the figure during an earnings call. Sina’s microblogging service, also known in Chinese as weibo, now has a total of 140 million registered users.

Sina is investing heavily in engineering and marketing in connection with weibo and its video service, which resulted in the Internet portal’s net profit in the first quarter dropping to US$15 million, down year-on-year by 38 percent.

Competitor Tencent reported on Wednesday that its own microblogging service had 160 million registered users a year after it was launched.

Microblogs have begun to surpass in popularity the Facebook-like social networking sites in the country, according to analysts.

The online social networking needs met by pure-play social networking sites like Facebook are not very high in China or other Asian cultures, Sina CEO Charles Chao said.

Sina’s target is to go beyond 200 million users by the end of the year, he said.

This number would put Sina on par with US-based Twitter, which now has about 200 million registered users. But while Twitter was launched in 2006, Sina’s microblogging service went online in 2009.

China is one of the world’s largest Internet markets, with 457 million Web users, according to the China Internet Network Information Center. Microblogs that are based in China have grown in popularity after Twitter was blocked in the country in 2009, following ethnic rioting in the country’s western Xinjiang region.

As competition heats up among Chinese microblogs, Sina plans to incorporate more social networking features to foster stronger relationships between users. It will be adding an instant-messaging feature to the service in the next one or two months. The plan builds on Chao’s view that pure-play social networking sites and microblogging will converge in the future, and share many of the same features.

After a prolonged delay, Google on Wednesday unveiled its first notebooks loaded with the Chrome operating system, a widely anticipated push to get consumers to use online applications rather than download software to their computers.

The debut at Google’s fourth annual software developers conference in San Francisco escalates the already heated rivalry with Microsoft and its lucrative Office franchise.

The notebooks, which Google calls Chromebooks, will go on sale June 15 in the United States, Britain, France, Germany, the Netherlands, Italy and Spain, the company said.

The first devices from Samsung will cost $429 with Wi-Fi and $499 with 3G. Another from Acer will cost $349. The notebooks can be ordered in the United States from Best Buy and Amazon. Previously, Google Chromebooks were only available through a pilot program.

Google co-founder Sergey Brin plugged the new notebooks, which boot up in seconds.

“Chromebooks is venturing into a new model of computing that I don’t think was possible previously even a few years ago,” Brin said. “It’s a much easier way to compute. Ultimately the most precious resource is the user’s time.”

Brin estimated that 20% of his company still relies on Microsoft Windows, and said that he hopes the percentage will quickly decline.

“It’s a flawed model fundamentally,” Brin said. “Chromebooks is a new model that doesn’t put the burden of managing your computer on yourself.”

He added: “Companies that don’t use that model I don’t think will be successful.”

Google also announced the launch of Chromebooks for business and education. Businesses will pay a $28-per-user monthly subscription, and students and teachers will pay $20 a month.

Sundar Pinchai, senior vice president of Chrome, said the Chromebooks boot up in eight seconds, are always connected to the Web through built-in mobile broadband and have long battery life and built-in security.

Google also said Wednesday that the Chrome Web browser over the last year has more than doubled to 160 million active users, from 70 million active users.

The announcements came on the second day of the Google I/O conference. On the first day, Google announced services to rent movies and listen to music on Android devices.

Brin said Google considers itself fortunate to have had success on the Web with Chrome and on mobile with Android.

For merchants or the local businesses that list on Dianping, “for the last 8 years, we have been trying to give comprehensive targeted marketing solutions.” If you are a small new business starting out, getting momentum of repeat customers is always difficult. For many local Chinese businesses that are not marketing savvy but are very good at what they do, sites like Dianping work very well to market to millions of consumers.

Reviews, LBS check-in’s, group-buying – how it adds up well for Dianping

With the proliferation of mobile internet services, reviews, check-ins and group-buying are increasingly integrated to many apps. Soon it will become difficult to differentiate them all. But according to Michael, “it all adds up perfectly into our existing model.”

3 different needs from Merchants

1. Fill in capacity: “If you are a merchant, the most important thing is to get customers. If your store is new, or your business is doing alright but has a lot more capacity you need a large amount of traffic in a short time and group-buying fills in this capacity does this.” The quick-win to merchants is a low cost of acquisition per user with a high volume of users in a short time.”

2. Build loyal customers: “You can’t rely on the group-buying model as your primary marketing solution because it hurts your margins. So we offer paid search ranking (so users can see your listing first), we offer coupons of 10% discount which is a very healthy marketing solution.” Reviews and feedback is another way for users to trust the store and see what other people experienced.

3. Connect with customers: “LBS (location based service) is great way to interact with users and improve the relationship. In Shanghai, we did a successful campaign with Dairy Queen where if you check-in you can get a discount. Another thing we did to gain repeat purchases was to create a discount membership system through verified check-in.”

“Dianping’s advantage is that we can provide a total online marketing solution to the local merchants and there is nobody else who can offer the same. We have a huge user base, independent user review platform and a stable advertising method through coupons or group-buying. If there is someone else who only does group-buying, why would you use them? Dianping also has a very strong brand and expertise to manage campaigns.”

Ensuring integrity of Reviews

“In China, in some areas and categories we have seen some serious issues with credibility. There are merchants that try to short-cut or pay for good reviews or they want us to delete bad reviews, but they are not the majority. The fundamental principle of Dianping is that we are an independent review platform. We do have a strong team that specializes in ensuring the integrity of information but we can’t guarantee that we will catch all fake reviews.”

Dianping is open about buying an LBS

“We are very open about growing our team and if the people are right and fit the team, M&A could happen if the synergy is there. We need to keep growing our team from all aspects from R&D, Product, Marketing and Sales.”, says Michael.

Dianping has today 30 million unique visitors per month and 6 million mobile users. More than 50% of the mobile users are active and tend to view and review more. Last quarter, 50% of coupons were redeemed from mobile and it is expected that mobile page views will surpass web views in the near future.

There is no doubt that competition is heating up at the intersection between reviews, group-buying, LBS check-in sites. But with Dianping’s large ready inventory of merchants and users, they are a very strong contender to be the winner.

Lots of questions still surround Microsoft’s $8.5 billion acquisition of Skype.
Did Microsoft pay too much? What does this mean for Skype’s competitors? And how will the software giant change the VOIP service we know and love?

After Microsoft CEO Steve Ballmer and Skype CEO Tony Bates discussed the deal with the press, we have a better idea of what Microsoft hopes to gain.

After separating itself from eBay in 2009, it was clear that Skype was well on its way to an IPO. But Ballmer saw more value in buying the company outright. Microsoft tendered an unsolicited offer in April. When Bates saw that offer, he made the decision to sell.

So why was it such a good fit for Ballmer? During its press conference, Microsoft reiterated three talking points:

Skype’s immense size — 170 million active users — and growth plan.
The fact that 40% of Skype’s activity is video.
Skype’s role in mobile communications.
It is in this third area — mobile — that Microsoft has the most to gain.

Skype: Microsoft’s Key to the Wireless Carrier Kingdom?

Microsoft never seemed to miss an opportunity to tout the “170 million active users” figure in relation to Skype. It’s clear the user base attracted Microsoft to the company.

Microsoft, of course, is no stranger to huge user numbers. But momentum is shifting from the PC to smartphones and tablets. The lead that the software giant has on the desktop won’t magically translate to these emerging platforms –as the success of iOS and Android and the relatively poor start for Windows Phone 7 proves.

This is where Skype’s role as a cross-platform tool — both on the desktop and on mobile devices — becomes attractive. Skype instantly gives Microsoft a better foothold into platforms and ecosystems that it doesn’t control, in a market where it is not a leader.

Moreover, it also gives the company access to carriers that might not be Windows Phone 7 operators now, but want to use Skype. That’s not to say Microsoft will use its leverage with Skype to try to force carriers to adopt Windows Phone 7 (at least, not yet). This is more about building relationships, especially important in the context of the Microsoft/Nokia partnership.

It’s no secret that Nokia’s presence in the North American smartphone market is nonexistent. that’s one reason Nokia partnered with Microsoft. But when Nokia brings its first Windows Phone 7 handsets to market in a year or so, solid relationships with carriers by way of Skype can only help Nokia gain traction. And a successful Nokia makes Microsoft more successful by proxy.

Prepare for Video Ads in Your Skype

A very small percentage of Skype’s 170 million users actually pay to use the service. Skype’s IPO plans indicate that this was not a pressing concern.

But the company was looking to expand video advertising within Skype itself — and CEO Tony Bates mentioned video ads numerous times during the press conference.

Under Microsoft, Skype’s advertising muscle is far stronger. Microsoft has spent lots of time investing into ad platforms with Bing and the Windows brands, and that is sure to extend to Skype.

Skype users — especially those who use Windows — should expect to see video ads and portal homepage information coming to the app in the future. This makes sense. If Google or Facebook had purchased Skype, chances are they would take a similar approach.

Skype and the Enterprise: Wait and See

One of the final questions posed to Ballmer and Bates was what impact Microsoft will have on Skype’s enterprise ambitions.

During the past year, Skype has tried gaining traction in the enterprise space. While it is virtually unrivaled in the consumer space, Skype is hardly a key player in business. Skype’s infrastructure is less secure and less stable than offerings from competitors like Cisco.

When Skype experienced a major meltdown back in December, the company’s explanations for the outage might have been good enough for consumers who use the service for free, but would have been unacceptable for business and corporate customers. Meanwhile, Microsoft is entrenched in enterprise and has developed its own tools for internal corporate communications.

On the call, Ballmer skirted the question of how Microsoft would integrate Skype into its corporate solutions, only saying that he saw lots of potential to connect secure corporate communication with friends-and-family usage. That doesn’t mean that the technology can’t be adapted for the enterprise — in fact, we’re sure that’s is part of Microsoft’s long-term goal. But today’s Skype will likely differ significantly from the Microsoft Skype product aimed at enterprise users in the future.

A few hours ago, a friend of mine emailed me, lamenting a story that CNN was passing off as breaking news, even though it was far from being either news or newsworthy. His displeasure reminded me of a conversation I had with serial entrepreneur and startup guru Steve Blank when he came to my office to tape an interview. As we sat there waiting for the cameras to roll, we talked about what media is in this post-broadband, always-on world. I told Steve that the problem with most media companies is they define themselves by the product they hawk. Music television, CNN, Breaking News, The New York Times, The Wall Street Journal, ESPN or whatever — these are all products that define the media companies behind them.

And therein lies the problem. Unless media corporations stop defining themselves by their products, they are going to be unable to navigate the big shift that is changing the rules of the game — what I call the “democratization of distribution.”

The Distribution Democracy

Let’s talk about the television business for a minute. During the early days of television, access to spectrum determined who owned and operated the networks. CBS and ABC became the gatekeepers of attention — whether it was through 60 Minutes, Wide World of Sports or some other such program. Hit programs essentially ensured that viewers “attention” switched from one channel to another, and with it, the advertising dollars.

Then came analog cable and we saw the emergence of more media entities — for example, HBO, ESPN and CNN — which siphoned away attention from broadcast networks to all these new entities. With digital cable, attention got sliced and diced even more, but still the scarcity of “spectrum” inside the cable network pipes meant that there was finite amount of channels available.

Then came broadband, which essentially removed any channel scarcity. The distribution, which had been in the hands of a few large media conglomerates, was suddenly available to everyone. Today anyone, even talentless acts such as Rebeca Black can upload their video to YouTube and become instant celebrities. Justin Bieber, too, is a product of this channel-less revolution.

Just like television, we have seen the same drama unfold in the music, radio, newspaper and magazine industries. The gatekeepers of attention have been disrupted.

“Over 5 or ten years, fiber optics and the wireless explosion will completely crush the business models of old media companies and industries,” Eric Schmidt, former CEO of Google, said in an interview with McKinsey & Co. “For companies focused on content and distribution, distribution just goes away.” Schmidt rightfully argued that there is no need to think of content types by the distribution network they are tied to, because there will be one single network.

Media, as far as I am concerned, has been and will always be a game of attention. A few years ago, during the go-go years of the 1990s, Forbes or Fortune magazine had all our attention and thus were able to monetize that attention by selling tons of advertising against it. CNN could charge premium dollars during its heyday. The New York Times informed us (especially the New Yorkers) and held our attention and was able to monetize it.

Broadband and lately wireless Internet has changed the dynamics of attention. Rebecca Black (with her “Friday” video) and Foursquare are now media, thanks to their ability to grab our attention. Similarly, if people spend all their time scanning through photos on Instagram, then that too is media.

The distribution democracy, which has been accelerated by the emergence of wireless Internet and smartphones, is putting that capability in the hands of tens of millions of people, and we are starting to see the disruptive impact of that in our society.

There have been endless debates about the role of Twitter and Facebook in societal and geopolitical dramas, but I think they are merely tools that have thrived and have enabled changes because the distribution of information has been unshackled, a point so well argued by my colleague Mathew Ingram and New York University media professor, Jay Rosen.

Your Attention Please

One side effect of this distribution democracy is the sheer volume of information that is coming at us from all sides. The torrent of information threatens to drown us and encourages short-term thinking. In a speech earlier this week, Andrew G Haldane, an economist who works for the Bank of England, said:

Information is streamed in ever-greater volumes and at ever-rising velocities. Timelines for decision-making appear to have been compressed. Pressures to deliver immediate results seem to have intensified. Tenure patterns for some of our most important life choices (marriage, jobs, money) are in secular decline.

These forces may be altering not just the way we act, but also the way we think. Neurologically, our brains are adapting to increasing volumes and velocities of information by shortening attention spans. Technological innovation, such as the World Wide Web, may have caused a permanent neurological rewiring, as did previous technological revolutions such as the printing press and typewriter.

If that is indeed the case, and I do believe it to be true, then the concept of what is media needs to be rethought and re-imagined — and that also means that we need to start rethinking our tools of measurement and methods of monetization. And as for my friend who lamented about the quality of content on CNN, he should probably get used to it. With increased competition for attention, he can expect even more of the trivial bits as part of his info-diet.

Following the exposure of the Sony PlayStation 3 security flaws – and with so much of our data stored online – are we making it too easy for criminals to get hold of our information?

When over 100 million people’s details were garnered illegally from Sony recently, users were up in arms about their prized information being leaked.
But, according to one study, over two thirds of companies are planning to store at least some of their data in “the cloud” – a term used to describe putting data online rather than on a hard-drive.

With more businesses using the cloud, this sort of leak could become a more regular occurrence.

“While the potential of cloud computing is rapidly being revealed, so too are its vulnerabilities,” Brendan O’Connor, the Australian minister for Home Affairs, told the International Association of Privacy Professionals.

THE SONY CRISIS

Graham Cluley, security consultant

“People need to be more careful with their passwords and make sure that they have different passwords for different online accounts.

“People should also consider lying about some of their details. I have given Facebook a phoney date of birth for instance.”

Sony crisis: The expert panel

And, he believes, criminals “can hide data in clouds” if they are clever about it.
“Rogue cloud service providers based in countries with lax cybercrime laws can provide confidential hosting and data storage services,” he said.

“[This] facilitates the storage and distribution of criminal data, avoiding detection by law enforcement agencies.”

An easy parallel to draw is with the way Swiss bank accounts were rumoured to operate in the past.

While bank customers were offered the utmost of discretion with their financial transactions, that same courtesy could now be offered to those wishing to de-encrypt sensitive data.

Stealing secrets

To safeguard information, details are regularly encrypted to a high level, meaning that – until very recently – supercomputers were required to get any details in a useable form.

But now the internet itself is offering criminals the chance to super-charge their processing power to make decryption quicker, cheaper and easier than ever before.
William Beer, director of Price Waterhouse Cooper’s security division, says “even if credit card details are encrypted, there is software that may be able to decrypt it given enough processing power” once it has been stolen from the cloud itself.

PM David Cameron says cyber-crime is a top priority for national security
“Encryption is often seen as a silver bullet. We need to be very careful because there are many different types of encryption. It can introduce an air of complacency into organisations and what we’re starting to see are criminals actually looking to the cloud.

“It can provide massive amounts of processing power and [this] can actually de-encrypt some of the data. The irony of it is that they are using stolen credit cards to buy that processing power from the cloud providers.”

And this type of activity has actually been tested by German security researcher Thomas Roth.

He used a “brute force” technique that could previously only be possible with super-computers to break into encrypted WiFi networks.

The technique allows 400,000 different passwords to the encryption to be tested per second, quite literally knocking at the door until it caves in. No specialist hacking techniques need to be used.

This was done using a cloud computing service costing just a few dollars per hour.

Even if you have supercomputers, if your encryption is strong enough, it would still take years to break those passwords

Mark Bowerman, Financial Fraud Action UK Roth used Amazon’s Elastic Cloud Computing (EC2) system, which allows users to rent increased computing power by the hour or for as long as is needed – thus the name elastic.
Amazon says it continually works to make sure the services aren’t used for illegal activity and takes all claims of misuse of services very seriously and investigates each one.

While Roth was not doing this for illicit means – and could be done with any cloud system – the idea could be used, in principle at least, for the purpose of de-encrypting credit card details.

He is already experimenting with speeds that could allow one million passwords a second to be tried.

Hacking ‘master key’
What many see as most scary about this idea is that because the criminals using the cloud are using false information, they are very difficult to trace.

That said, there are data standards in relation to private information kept by companies which are particularly strict when financial details are held.
“You’ve got to meet the data security standard – it is the absolute minimum requirement,” says Mark Bowerman, a spokesman for Financial Fraud Action UK.

Credit card information is heavily encrypted when held online
“Beyond that, there are reputational issues to consider. If you are hacked and data is stolen, then it will be a serious concern both reputationally and financially as well.”
So what can be done to protect information yourself?

“Unfortunately, people have the habit of reusing their passwords for multiple different services,” says Rik Ferguson, of digital security company Trend Micro.
“Many people will have to consider that these criminals have both their email address and their common password.

“Once you own someone’s email account, that’s really the master key to everything because you can go through the password reset process of [a number of services] and of course, they come back to that email account. It’s the key to your online life.”
But, says Bowerman, if both you and the companies you trust with your data are careful with it, serious breaches are still very unlikely.

“Even if you have supercomputers, the computing power of hundreds of thousands of computers linked together, if your encryption is strong enough, it would still take years and years to break those passwords,” he says.
“It boils down to how good your encryption is.”

<< h/t to Gsimmons for flagging this article >>

On a Tuesday afternoon last month, engineers working for Sony Corp. were baffled when several servers running the company’s PlayStation Network suddenly turned themselves off and then back on.

Sony CEO Howard Stringer apologized to customers for a massive data breach of the company’s online game networks, in the first public comments from Sony’s top executive on the outage. Plus: is another hack attack imminent? We discuss with Dan Gallagher and Arik Hesseldahl

Analysts See Billion-Dollar Repair Bill
Sony CEO Apologizes for Data Breach
Letter from Sony CEO on Data Breach
Sony: Hacker Left Taunting Message

At the time, the unexpected rebooting seemed like an odd malfunction. The next day, however, the engineers found the first evidence that an intruder had penetrated Sony’s systems, prompting the Japanese company to take what it calls “the almost unprecedented step” of shutting down the popular online gaming network.

Sony Chief Executive Howard Stringer issued a public apology this week for what the company later disclosed was a data breach that compromised more than 100 million user accounts on three public networks, and a delay in informing users of the theft. Sony says the loss included users’ names, birthdates and passwords. It also hasn’t ruled out the loss of credit card numbers associated with the Sony PlayStation network.

Some analysts believe the incident, which has drawn the attention of authorities around the world, will cost the company more than $1 billion for measures that include new security and a $1 million insurance policy for any victims of identity theft. The company hasn’t provided its own estimate of the cost. It also hasn’t resumed operating the network, but has said it is in final testing and is expected to do so within days.

“Taken as a whole, the number of customers affected, the PR impact and now the legislative inquiries,” this ranks “at the top” of data breaches to date, said Cynthia Larose, an attorney specializing in privacy matters with Mintz Levin in Boston.

PlayStation Network, which is accessed by owners of Sony game consoles, uses 130 server systems, 50 software programs and has 77 million user accounts, according to a letter that Kazuo Hirai, president and group chief executive of Sony Computer Entertainment Inc., sent Wednesday to a U.S. congressional committee. That letter, and a similar account included in a letter Friday to Sen. Richard Blumenthal (D., Conn.) provide the most detailed accounts of the incident.

Sony’s troubles began in January, after it sued a 21-year-old software wiz named George Hotz for posting software that let gamers reconfigure the company’s popular PlayStation 3 console. The suit enraged a loose community of vigilante technologists that calls itself “Anonymous,” which in early April made an oblique threat against the company. Sony’s PlayStation Network began suffering intermittent outages, which the company later linked to a denial-of-service attack—a common maneuver that attempts to overwhelm a target’s servers with a flood of data traffic. A week later, Sony said it settled with Mr. Hotz, but the denial-of-service attacks continued.

Sony said in the letters that its difficulties in discovering the intrusion that occurred later that month may have been exacerbated by its security teams working very hard to defend against the denial-of-service attacks. It acknowledged, however, that it may never know whether people who participated in the denial-of-service attack were conspirators in the data breach.

Though Anonymous has denied being involved in the data breach, senior Sony executives believe a person or people affiliated with the group are responsible for the data theft, according to someone familiar with their thinking.

On April 19, according to the letters, engineers noticed servers rebooting themselves when they weren’t scheduled to do so. They began combing through logs generated by the machines to find the problem. The network team concluded that “unplanned and unusual activity was taking place on the network,” and took four servers offline, working into the evening investigating the machines. The next day, the company mobilized a larger team to study the four machines, an effort that later led to evidence six more machines were possibly compromised, according to the letters. That afternoon, the network team discovered evidence of an intrusion and that data of some kind had been transferred off the PlayStation Network servers without authorization.

Unable to determine what type of data had been transferred, the team opted to shut the network down. Sony posted a three-sentence notice April 20 on its PlayStation website that said nothing about the data breach. That afternoon, the company retained a security consulting firm and began a two-day process of copying the contents of the servers so they could be analyzed. It later retained a second and ultimately a third outside firm, beefing up manpower as part of the painstaking analysis. The Federal Bureau of Investigation was notified of the intrusion on April 22, with a meeting set up to provide details five days later.

“We’re aware certain functions of the PlayStation Network are down,” wrote Patrick Seybold, a Sony spokesman. “We will report back here as soon as we can.”

By the evening of April 23, according to the letters, the company and its consultants were able to confirm that intruders had used “very sophisticated and aggressive techniques” to obtain unauthorized access to its servers. The intruders hid their presence from system administrators, obtained privileges to access restricted parts of Sony’s systems and deleted log files to hide their activity, Sony says. It took until April 25 to confirm the scope of the data believed to have been taken from its systems, Sony wrote in the letters. The next day, Sony told its customers their personal data had been stolen, urging users to change passwords and check their credit card accounts for fraudulent behavior. It later offered free time on the system and identity theft monitoring services as compensation in the U.S.

The company says it didn’t learn until May 1 of another likely theft at Sony Online Entertainment—another network serving games for PC users—involving nearly 25 million user accounts. That second discovery was made only after the Sony unit rechecked its machines—which earlier showed no evidence of the theft—using information developed by security experts working for Sony, according to the letter sent to Mr. Blumenthal.

“I wish we could have gotten the answers we needed sooner, but forensic analysis is a complex, time-consuming process,” Mr. Stringer said in his statement Thursday.

Sony has provided few specifics about the attackers’ techniques, citing worries that the information could be used to penetrate other similar systems. During a press conference last weekend, however, Sony senior vice president Shinji Hasejima indicated that the intruders exploited a vulnerability in a program called an application server—a flaw not known to Sony—to breach the company’s firewall defensive mechanisms.

The attack “came in as a normal transaction, which could not be detected by the firewall and went out as an ordinary transaction,” Mr. Hasejima said. “It was a very skillful approach.”

Though they deleted most traces of their activity, according to the Sony letter, the attackers did leave a file called Anonymous that included the digital posse’s tagline, “We are Legion.”

In a press release on May 4, Anonymous reiterated that it had not orchestrated the data theft. “Whoever broke into Sony’s servers to steal the credit card info and left a document blaming Anonymous clearly wanted Anonymous to be blamed for the most significant digital theft in history,” the group said. “No one who is actually associated with our movement would do something that would prompt a massive law enforcement response.”

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