Intelware/Policeware Vendors Face Tough Choices and More Sales Pressure
April 20, 2020
The wild and crazy reports about the size of the lawful intercept market, the policeware market, and the intelware market may have to do some recalculations. Research and Markets’ is offering a for fee report which explains the $8.8 billion lawful interception market. The problem is that the report was issued in March 2020, and it does not address changes in the financing of intelware and policeware companies nor the impact of the coronavirus matter. You can get more information about the report from this link.
As you know, it is 2020. Global investments have trended down. Estimates range from a few percent to double digits. Now there is news from Israel that the funding structures for high technology companies are not just sagging. The investors are seeking different paths and payoffs.
“Post Covid-19, Exits May Seem Like a Distant Dream But Exercising Options May Become Easier” states:
With Israeli tech companies having to cut employees’ salaries by up to 40%, many have turned to repricing stock options as a means of maintaining their talent.
Repricing means that valuations go down.
Gidi Shalom Bendor, founder and CEO of IBI Capital subsidiary S-Cube Financial Consulting, allegedly said:
You can see the valuations of public companies decreasing and can assume private companies are headed the same way,” Shalom Bendor said. Companies that are considering repricing have been around for several years and have a few dozen employees, so even though an exit is not around the corner for them it is still in sight, he explained. “In some cases, these companies have even had acquisition offers made, so options are a substantial issue.
Ayal Shenhav, head of the tech department at Israel-based firm GKH Law Offices, allegedly said:
Pay cuts and the repricing of options go hand in hand.
Let’s step back. What are the implications of repricing, if indeed it becomes a trend that reaches from Israel to Silicon Valley?
First, the long sales cycles for certain specialized software puts more financial pressure on the vendors. Providing access to software is not burdensome. What is expensive is providing the professional support required for proof of concept, training, and system tuning. Larger companies like BAE Systems and Verint will have an advantage over smaller, possibly more flexible alternatives.
Second, the change in compensation is likely to hamper hiring and retaining employees. The work harder, work longer approach in some startups means that the payoffs have to be juicy. Without the tasty cash at the end of a 70 hour work week, the best and brightest may leave the startup and join a more established firm. Thus, innovation can be slowed.
Third, specialized service providers can flourish in regions/countries which operate with a different approach to funding. Stated simply, Chinese intelware and policeware vendors may be able to capture more customers in markets coveted by some Israeli and US companies.
These are major possibilities. Evidence of change can be discerned. In my DarkCyber video for April 14, 2020, I pointed out that Geospark Analytics was doing a podcast. That’s a marketing move of note as was the firm’s publicity about hiring a new female CEO, who was a US Army major, a former SAIC senior manager, and a familiar figure in some government agencies. LookingGlass issues a steady stream of publicity about its webinars. Recorded Future, since its purchase by Insight, has become more vocal in its marketing to the enterprise. The claims of cyber threat vendors about malware, hacks, and stolen data are flowing from companies once content with a zero profile approach to publicity.
Why?
Sales are being made, but according to the DarkCyber research team the deals are taking longer, have less generous terms, and require proofs of concept. Some police departments are particularly artful with proofs of concepts and are able to tap some high value systems for their analysts with repeated proofs of concept.
To sum up, projections about the size of the lawful intercept, intelware, and policeware market will continue to be generated. But insiders know that the market is finite. Governments have to allocate funds, work with planning windows open for months if not a year or more, and then deal with unexpected demands. Example? The spike in coronavirus related fraud, misdirection of relief checks, and growing citizen unrest in some sectors.
Net net: The change in Israel’s financing, the uptick in marketing from what were once invisible firms, and the environment of the pandemic are disruptive factors. No quick resolution is in sight.
Stephen E Arnold, April 21, 2020
Google Cloud: Thinner and Wispier?
April 20, 2020
The Murdoch paywall notwithstanding, DarkCyber was able to read “Google May Let Some Air Out of Its Cloud.” (My dog Tibby subscribes to the dead tree edition. DarkCyber is running an on going experiment to find out if the dead tree and the online units of the WSJ coordinate. So far the answer is “No.” How long has the experiment been running? More than 10 years.
The write up reveals that the Google will spend less on data centers. Why?
Fallout from coronavirus
The real news article points out that if Google slows down its spending, the impact on outfits lower down the food chain will be negative.
Okay, but let’s consider another angle.
Advertising is slowing down. The costs for indexing for the Google search engine are going up. Google has been struggling with cost control even with the hard eyed CFO the company has counting beans.
What’s this mean?
Google will automate more, index less, and hunt for money by providing “We’ll do the ad allocation for you” type services. Imitating Zoom’s interface signals that me-too is more important than applying the Google magic wand to products and services.
Net net: The company’s showing that it has feet of clay-based silicon. After 20 years, these feet should be resistant to perturbations in the humanoid aspect of the firm’s business.
Stephen E Arnold, April 20, 2020
Pricing Exposed: Delightful and Dark Tactics
April 16, 2020
Pricing has been a core competency of blue chip consulting firms. The methods were passed from old timer to young sprout once the senior consulting believed the jejune MBA would not be forced out of the firm for failing to hit a sales quota.
Now some of these pricing secrets have been revealed in “The Definitive Guide to Pricing Plans.” If you have to figure out what to charge, you may want to download this story and tuck it into your “Useful Research” folder.
Here are two of the methods. The remainder appear in the source document.
- The decoy effect. Two options, and the customer is induced automatically to choose one.
- Fewer choices. Put the cattle in the kill lane.
Do these make sense to you? If so, you could apply for a job at McKinsey or implement one of these methods.
Remember: The objective is money no matter what the Economist says as it criticizes capitalists. Delightful.
Stephen E Arnold, April 15, 2020
Online Pricing: Analysis Misses the Door to the Bank
April 13, 2020
I spotted a discussion about online pricing written in 2018. The focus was Google. “Would Google Search Make More Money If They Charged 1 Cent per Search?” contains some interesting information. In fact, the write up underscores how those wearing blindfolds outside the online sector wake up in the dark only to discover they have been swallowed by a whale. (How did that work out for Jonah?)
The write up contains an analysis by Jasper who does “a little back of the napkin calculation.” The results are that Google could charge for each search and possibly generate more than it generates from online advertising.
Rop-ke, another participant in the discussion, points out:
But to tell you the truth, people would search a lot less if they were charged money per search.
In fact, Rop-ke pointed out that “Google will die.”
Alenda made clear that the free Craigslist killed newspapers. (Well, not quite, but Craigslist added to the hurt.)
The most recent comment about this article appeared on April 12, 2020. I quote:
They would until someone replaced them with a free service.
Several observations may be warranted:
- There are times when people will pay for online information. The most common is a “must have” situation. What would you pay for an online search for an antidote to save your child from death by poisoning? What would a person like Harvey Weinstein pay for an online LexisNexis search as part of his effort to avoid further prosecution in Los Angeles? The idea is that “must have” information will cause people to pay.
- Asking people to pay for online information splits the user base into two groups: Those who will pay to use the service and to have access if the service is needed. In general, only a small number of online information services can stay generate enough revenue to make the online service into a sustainable business.
- The modes of online access have shifted dramatically in the last 30 years. In 1980, one needed a separate device like a Texas Instruments Silent 700; today one can do a search talking to a smart television set. Most of those searching are not aware that their actions are an online search. The lack of awareness creates a clueless mass which can be converted to revenue.
How do online companies make money today? Let me highlight a few of the more popular approaches:
- Selling data either directly or indirectly. The user’s actions are the bits that matter. Even cash strapped enforcement agencies will pay for data when the investigation warrants.
- Online is a stepping stone to other businesses. Example? Online sales. The Amazon model is built upon search. Want a cloud service? Do a free search of the AWS documentation. The motivation is gratification like buying an eBook or shifting to the cloud so pesky information technology staff can be riffed.
- Online search facilitates a new type of revenue stream. If you want to make a fortune in digital currency, you need to find a digital wallet. Then you need to find a “how to.” For those providing that information, the payoff comes from getting their hands around money churn.
The problem with selling online information is that it is difficult to generate sustainable revenue, cover the infrastructure and other costs, and spin a profit. But when online provides options for other streams of revenue, the digital bits can be like gold dust.
Will Google charge for search? Maybe, but the company is charging to use its search infrastructure. The company offers a Microsoft Office killer for a fee. Google sells phones, mostly not so good, but like the Loon balloons, the company is trying. One can also rent the Google plumbing for cloud computing.
I am fond of pointing out that Google has one business model, a model it obtained in a moment of inspiration from Yahoo. Google was more clever than Yahoo’s management. Google has been more clever than many companies.
Will that cleverness come to an end when a better search engine comes along? Not likely. For now, online search seems easy to do and monetize. Every human construct winds down. But with Google’s seemingly free services rolling along, the firm has momentum. Its tie up with Apple suggests that no quick changes will occur.
What does persist? Some misunderstandings about the costs of offering online information in either free or for fee mode. I remarked decades ago that online is a fairly tricky business to make pay even for criminals selling contraband on the Dark Web.
Imagine how difficult it is for LexisNexis to pay for the technological debt it has strapped to its back. Most online companies are in the same slog. The New York Times talks about its rapidly growing online business. What the NYT doesn’t say is that the cost of its missteps in online which began when Jeff Pemberton’s in house online system was terminated with extreme prejudice. Yeah, I know the current crop of NYT managers will ask, “Technical debt. Who’s Jeff Pemberton?”
The cloud of unknowing about online continues to swell just like the ad revenues from search at Amazon, Facebook, and Google. These are not habits; they are addiction. There’s money in serving addicts: Perceived must havism.
Stephen E Arnold, April 13, 2020
Stephen E
Palantir Technologies: Evidence That Making Big Money Comes from a Financial Play, Not a Product
April 12, 2020
DarkCyber spotted an interesting item of information in “Palantir Eyes $1B in Revenue and a Break-Even Year, Setting the Stage for IPO.” Palantir has ingested more than a billion dollars since it was founded in 2003. (That seems to be 17 years!) The article points out that Palantir “will have its first break even year in 2020.” The message is that it takes time and significant investment to generate $1 billion in revenue and break even.
With dozens and dozens of companies chasing the intelware and policeware markets, what’s the likelihood that a start up will be able to generate enough revenue to:
- Fund customer support
- Invest in new features and technologies
- Attract and retain staff
- Market to sectors that are expensive, time consuming, and difficult to reach?
The answer is that Palantir is an excellent example of how a useful idea can struggle to generate sustainable revenue among customers under severe budget pressure and aware that the “next big thing” can be obtained either on a trial basis or at a low price.
DarkCyber gives Palantir credit for its perseverance, although its methods of obtaining some traction can be considered more than interesting. In fact, in its dealings with the Analyst Notebook file format, interesting does not quite capture the somewhat unusual techniques the firm found appropriate.
When Palantir goes public, will those patient investors reap massive paydays? The investors hope so. The employees hope so. But the lawyers and accountants know they will be paid.
What about the users of the system? DarkCyber does not know. Perhaps the seeing stone will reveal the answer?
Stephen E Arnold, April 12, 2020
To Monetize Is Not to Sell, Contends Google
April 7, 2020
Quite gradually, governments seem to be waking up to the problem of online privacy. The passage of the California Consumer Privacy Act, which went into effect on January first, is one example. The Electronic Frontier Foundation explains how Google is sidling around the law’s provisions in its article, “Google Says it Doesn’t ‘Sell’ Your Data. Here’s How the Company Shares, Monetizes, and Exploits it.”
Journalist Bennett Cyphers reminds us just how far Google has cast its data nets: Worldwide, the company commands 62% of mobile and 69% of desktop browsers; the operating systems on 71% of mobile devices; 94% of apps in the Play store; and 92% of internet searches. It runs code on about 85% of the sites on the Web while 73% of adults in the US employ YouTube. That is a mind-boggling amount of data on billions of people.
Though Google makes tens of billions of dollars each year off this data, it claims it is not technically selling it. The write-up explains two ways the company splits that hair. First, it builds user profiles filled with statistics and interests that it then sells to advertisers. Marketers then use those profiles to craft targeted campaigns. The second method is called real-time bidding; Cyphers explains:
“Real-time bidding is the process by which publishers auction off ad space in their apps or on their websites. In doing so, they share sensitive user data—including geolocation, device IDs, identifying cookies, and browsing history—with dozens or hundreds of different ad tech companies. Each RTB auction typically sees user data passing through three different layers of companies on its way from a device to an advertiser: supply-side platforms (or SSPs) collect user data to sell, ad exchanges organize auctions between them and advertisers, and demand-side platforms (or DSPs) ‘bid’ on behalf of advertisers to decide which ads to show to which people. These auctions take milliseconds, constantly churning away in the background of your browsing activity as companies at every level of the process share and collect more and more data to add to their existing profiles of users. … Real-time bidding is a convoluted, opaque system of data collection and sharing that enables profiling and surveillance by advertisers, data brokers, hedge funds, and ICE. It is at the center of everything that’s wrong with privacy in tech.”
The article describes how Google got this much power and elaborates on how it wields it, complete with
Illustrations and examples. Navigate there for those details. Not surprisingly, Cyphers concludes with a call for stronger laws, ones that make privacy the default setting. Is it too late to re-bottle that genie?
Cynthia Murrell, April 7, 2020
Acquisdata: High Value Intelligence for Financial and Intelligence Analysts
March 31, 2020
Are venture capitalist, investment analysts, and other financial professionals like intelligence officers? The answer, according to James Harker-Mortlock, is, “Yes.”
The reasons, as DarkCyber understands them, are:
- Financial professionals to be successful have to be data omnivores; that is, masses of data, different types, and continuously flowing inputs
- The need for near real time or real time data streams can make the difference between making a profit and losses
- The impact of changing work patterns on the trading floor are forcing even boutique investment firms and global giants to rely upon smart software to provide a competitive edge. These smart systems require data for training machine learning modules.
James Harker-Mortlock, founder of Acquidata, told DarkCyber:
The need for high-value data from multiple sources in formats easily imported into analytic engines is growing rapidly. Our Acquisdata service provides what the financial analysts and their smart software require. We have numerous quant driven hedge funds downloading all our data every week to assist them in maintaining a comprehensive picture of their target companies and industries.”
According to the company’s Web site, Acquisdata:
Acquisdata is a fast growing digital financial publishing company. Established in 2010, we have quickly become a provider to the world’s leading financial news companies, including Thomson Reuters/Refinitiv, Bloomberg, Factset, IHS Markit, and Standard and Poor’s Capital IQ, part of McGraw Hill Financial, and ISI Emerging Markets. We also provide content to a range of global academic and business database providers, including EBSCO, ProQuest, OCLC, Research & Markets, CNKI and Thomson Reuters West. We know and understand the electronic publishing business well. Our management has experience in the electronic publishing industry going back 40 years. We aim to provide comprehensive and timely information for investors and others interested in the drivers of the global economy, primarily through our core products, the Industry SnapShot, Company SnapShot and Executive SnapShot products. Our units provide the annual and interim reports of public companies around the world and fundamental research on companies in emerging markets sectors, and aggregated data from third-party sources. In a world where electronic publishing is quickly changing the way we consume news and information, Acquisdata is at the very forefront of providing digital news and content solutions.
DarkCyber was able to obtain one of the firm’s proprietary Acquisdata Industry Snapshots. “United States Armaments, 16 March 2020” provides a digest of information about the US weapons industry. the contents of the 66 page report include news and commentary, selected news releases, research data, industry sector data, and company-specific information.
Obtaining these types of information from many commercial sources poses a problem for a financial professional. Some reports are in Word files; some are in Excel; some are in Adobe PDF image format; and some are in formats proprietary to a data aggregator. We provide data in XML which can be easily imported into an analytic system; for example, Palantir’s Metropolitan or similar analytical tool. PDF versions of the more than 100 weekly reports are available.
DarkCyber’s reaction to these intelligence “briefs” was positive. The approach is similar to the briefing documents prepared for the White House.
Net net: The service is of high value and warrants a close look for professionals who need current, multi-type data about a range of company and industry investment opportunities.
You can get more information about Acquisdata at www.acquidata.com.
Stephen E Arnold, March 31, 2020
MiningLamp Technology: Another Palantir?
March 30, 2020
DarkCyber found “China’s Palantir MiningLamp Raises US$300 Million in Funding Round Co-Led by Temasek, Tencent” intriguing. Palantir Technologies, a company providing commercial and government services, has obtained about $2 billion in funding since it was founded in 2003. Furthermore, Palantir in the past 17 years has worked to become the Analyst Notebook and BAE NetReveal for some of its clients. Note that Analyst Notebook was founded in the early 1990s and BAE’s initial intelware products date from a few years later. In short, MiningLamp wants to become:
- A company that requires decades to gain momentum
- A company that requires billions in funding or the support of a giant industrialized services firm like BAE to survive
- Expert lobbying to spark and obtain government contracts
- Remain out of the public spotlight while endeavoring to displace products that are long in the tooth.
Does this make sense? Of course, the MiningLamp operation wants to be a global software and services company. The backers of MiningLamp want to have a seat at the table when certain types of projects are planned and executed.
The write up does not point out these rather obvious facts. DarkCyber learned:
Founded in 2014, MiningLamp gained initial success by offering online ad performance evaluations and fraud detection services for advertisers, before expanding the business to industries such as public security, smart cities, finance, logistics, entertainment, retail and manufacturing.
What’s MiningLamp’s technology deliver?
Although not as well known as US equivalent Palantir Technologies, which reportedly contributed to America’s success in hunting down Osama bin Laden, MiningLamp’s data mining software is used to spot crime patterns, track drug dealers and prevent human trafficking.
Plus, the write up points out:
The company’s software enables users to search huge volumes of heterogeneous data – information with a great variety of types and formats – and process that into actionable knowledge and insight using a combination of proprietary data management tools.
The interesting point is that advertising technology leads to a Palantir metaphor. The second fact is that the funding is anchored in Singapore and the allegedly independent company Tencent. There’s no reference to any other funding, including funding from Chinese government entities or fellow travelers. Finally, Singapore has become a hub for many companies engaged in Palantir-like activities. Need a bagel? Singapore has them because there are quite a few foreign nationals who crave this food essential.
Now how much revenue can specialized software companies generate. Analyst Notebook, BAE NetReveal, Recorded Future, and similar firms do generate revenues, but none of these companies bang into glass ceilings and walls. For example, how many government agencies are there that can pay hundreds of thousands of dollars and dedicate personnel to using these intelware systems? Are there other benefits to companies in the intelware business? The market for intelware is tough to move laterally. Talk about intelware methods and customers in non-government sectors, and many of the prospects get really nervous. There are good reasons.
Is MiningLamp another Palantir? Sure, it will require large amounts of cash, lobbyist support, and funding the peculiar and costly intelware marketing puzzle.
There are interesting facets to the MiningLamp effort, but DarkCyber does not think the answer will be found in providing Bluedot-type services or morphing into an outfit like Palantir Technologies. Palantir, DarkCyber recalls, has experienced employee protests, litigation with Analyst Notebook related to reverse engineering the ANB file format, and bureaucratic scuffles with procurement professionals.
Another Palantir? Maybe, maybe not. Those writing checks for $300 million may be surprised at the intelware market’s behavior. Will the Five Eyes sign up for MiningLamp licenses? Maybe, maybe not.
Stephen E Arnold, March 30, 2020
NR2 Search
March 23, 2020
DarkCyber noted that NR2 made a public version of its innovation search engine available. This information and investment startup was founded about a year ago. NR2 won the K Startup Grand Challenge in 2019, beating 176 other startups from 95 countries.
The company says:
Powered by big data and artificial intelligence, we deliver insights that predict trends in innovation before they sweep the globe. We sit at the heart of China and Europe’s innovation hubs, enabling us to seamlessly link global investment to local innovation, accelerating growth and returns for both.
The company’s headquarters are in Paris. The founders are Maxim Parr, a graduate of HEC Paris (a business school with an eight percent acceptance rate),and Jordan Monnet, a PhD who is proficient in Mandarin.
The founders told the HEC publication:
We can learn so much about how innovation thrives by understanding data on start-ups. Our algorithms have found many characteristics present in disruptive companies and we use them to help our users identify the next generation of revolutionary companies. We started with Chinese start ups, but we are building out our search engine to capture innovation everywhere.
A query for analytics returned a list of companies shown below:
The companies listed were Chinese.
Clicking on the company Hesaitech returned a useful summary of the firm:
The icon allows the user to copy the link to the NR2.io entry.
Observations:
- Extremely useful resource in its present form. DarkCyber anticipates enhancements
- There are a number of monetization options available to this company
- Content valuable to investment firms and organizations looking for companies to explore deals or partnerships
- Data appear to be of high value because obtaining current information about venture funded firms in China and elsewhere can be time consuming.
We ran our standard queries for surveillance technology, facial recognition, and investigative software and did not immediately locate useful information. We think that this is a result of the search terms we tested.
DarkCyber will add this resource to our list of useful resources. Worth a look.
Stephen E Arnold, March 23, 2020
Artificial Intelligence: Delivering But Not Yet Arrived
March 22, 2020
Artificial intelligence is the basis for most technology currently in development, because it is capable of handling complex actions and is designed to learn. AI is the most advanced algorithms invented to this day, but what does that mean in reference to business and industry? Forbes published the, “Levels And Limits Of AI” to provide perspective on AI’s capabilities, while Andreessen Horowitz takes a similar yet differing approach in, “The New Business Of AI (And How It’s Different From Traditional Software).”
One thing both articles agree on is that AI is here to stay until something more advanced is designed. Andreessen Horowitz agrees humans will be involved with AI beyond creating the algorithms, but there is more required to get AI working correctly for a company. AI, according to Forbes, is designed to do three things:
“There are several “levels” of artificial intelligence. A few years ago my friends John Frank and Jason Briggs, who run Diffeo, suggested breaking artificial intelligence into 3 levels of service: Acceleration, Augmentation, and Automation. Acceleration is taking an existing human process and helping humans do it faster. For example, the current versions of textual auto-complete that Google offers are acceleration AI. They offer a completed version of what the user might already say. The next level, augmentation, takes what a human is doing and augments it. In addition to speeding up what the human is doing (like acceleration), it makes the human’s product better. An example of this is what Grammarly does with improving the grammar of text. The final level is automation. In the previous two levels there are still “humans in the loop.” Automation achieves a task with no human in the loop. The aspiration here is Level 5 autonomous driving like Aurora and Waymo are pursuing.”
Andreessen Horowitz breaks down the obstacles businesses will encounter with AI deployment. In short, there will be some, most of which are SOP when implementing any new technology. The only difference is that AI is smarter, but there is this consolation for humans:
“The need for human intervention will likely decline as the performance of AI models improves. It’s unlikely, though, that humans will be cut out of the loop entirely. Many problems – like self-driving cars – are too complex to be fully automated with current-generation AI techniques. Issues of safety, fairness, and trust also demand meaningful human oversight – a fact likely to be enshrined in AI regulations currently under development in the US, EU, and elsewhere.”
AI is a tool meant to simplify and advance society, essentially it is not meant to replace humanity. Common sense weighs in on deploying AI-based technology. The ROI is a big factor, but also consider the phrase, “if it is not broken, do not fix it.”
Whitney Grace, March 22, 2020
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