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Subprime Hits The Subcontinent


"It is like looking a client in the eye and telling them that their child is ugly. It is not what people want to hear." — David Rosenberg, chief economist at Merrill Lynch, on talking about the possibility of a recession, following the recent jobs decline, as reported by the Financial Times

As people make social-networking sites a bigger part of their lives—swapping weekend updates with friends or creating business profiles—they're leaving behind a vast trail of personal data. A crop of new companies has sprung up to pull that information together—and make a buck from it.

Around 30 startups, with such fanciful names as Rapleaf, Spock, and Wink, are building services that specialize in tracking people and their reputations, and sites where people can edit their social-network profiles from one hub. As they fan out, these companies are raising questions about what privacy means now that every experience or memory is fodder for sharing online.

Finding information about people on the Internet is hardly new. What's different is that much of the rich repository of data that individuals are creating about themselves on social networking sites (BusinessWeek, 8/15/07), blogs, and video- or photo-sharing services is increasingly being collated and massaged for a variety of purposes. So much for the idea of sharing with a select group of like-minded souls.

Take what happened at Spock, a people-search service that launched last month and has indexed 100 million people. Spock created a screen for folks on Facebook to fill out about themselves and their friends. Only problem: Many participants took it as a joke and called one another prostitutes and pimps. Those terms popped up as descriptions under Spock profiles.

The fiasco underscored a broader problem. Anyone who registers on Spock's site can add photos or short descriptions to any profile. Spock members vote on whether the description remains, and the person being profiled may be outvoted. To get objectionable information removed, users have to contact Spock. Spock says that it has ways to prevent abuse, including e-mail alerts when changes are made to your profile.

Some sites argue they're actually giving people more control. Rapleaf, which says it has built up 50 million personal profiles from information on MySpace, Amazon.com's (AMZN) Wishlists, and Facebook, lets people track their own and others' reputations online. Enter an e-mail address and a profile comes back "graded," based on data the company's software scooped up, as well as on the address holder's job title, the e-mail account's domain, and ratings from others on Rapleaf. Users can edit their profiles and block certain private information.

Most social networks let members block people-search engines by marking parts of their profiles as private. But few bother with those controls. And even when profiles are accurate, they may be used in ways people don't want. Another Rapleaf service, TrustFuse, sells personal information to companies to match with their own lists for marketing and sales. Currently Rapleaf doesn't sell the data it collects from the users of its own consumer sites. But its privacy policy leaves that option open.

Green living—everything from recycling to buying organic food or cloth diapers—is a hot issue in Britain. Some 56% of 1,580 people polled in July and August by insurer Norwich Union said living an ecologically irresponsible life was as much a taboo these days as drunk driving.

That may explain why a staggering 90% of those surveyed said they had lied to friends and neighbors about living in an earth-friendly way.

Women were most likely to feel pressure to cut their carbon footprint. Less than half the men said a green lifestyle was a social requirement in Britain.

What prompts so many to prevaricate rather than go green? One-fifth of survey participants said they didn't know how to make their lives more eco-responsible. And, says James Dalby, a fund development manager at Norwich Union, almost half said that sustaining such a lifestyle was too expensive.

America's subprime mortgage woes areslowing the pace at some of India's fastest-growing outsourcers. On Aug. 17, about two weeks after the crisis hit, WNS Global Services (WNS) told analysts it was lowering its forecast for the year.

The reason: Loan-processing work from Tucson's First Magnus Financial and eight other distressed lenders was drying up. In response, WNS lopped $16 million from its original 2007 projected sales estimate of $307 million. "It is just a temporary blip," said CEO Neeraj Bhargava. Investors weren't convinced: WNS shares fell 16%, to 18.75, after the conference call.

Mumbai's WNS wasn't the first to be affected. Back in January, iGate Global Solutions in Bangalore warned investors that clients such as GreenPoint Mortgage (closed down by parent Capital One Financial Corp. on Aug. 20) were sending iGate fewer loan applications to process. So iGate, too, reduced revenue forecasts in response.

The good news? The setbacks aren't catastrophic, since the mortgage sector represents a small percentage of the outsourcers' diverse client base, accounting for roughly 7% of total business at iGate (down from 10%) and 9% at WNS. Besides, some Indian outsourcers insist they see the crisis as an opportunity. "When companies are looking to cut costs," says Kris Gopalakrishnan, CEO of Infosys Technologies (INFY), which lists GreenPoint Mortgage as a client, "they outsource more."

Could the buyout jitters be easing? Banks are worried that $300 billion in loans and bonds committed to pending private-equity deals won't be bought by wary debt investors. But stock investors are expressing a little less concern that these buyouts may have to be restructured. Shares of six of the biggest buyouts in the works are now trading for an average 4.7% less than what was originally bid for them, according to Thomson Financial. But back on Aug. 1, the difference was 7.6%.

JALOPNIK.COM

At jalopnik, one of Gawker Media's blogs, the subject is cars and the companies that make them. It's edifying, entertaining, and obsessively comprehensive. Recent posts cover the Frankfurt Auto Show (which ends on Sept. 23) and the new top dogs at Chrysler. On CEO Bob Nardelli's success in luring Toyota (TM) sales guru Jim Press as president and vice-chairman: "We're stunned like deer in the headlights of an oncoming four-door Jeep Wrangler with an optional roof light bar."

Consumers have become less forgiving of bad service, according to a recent survey sponsored by RightNow Technologies (RNOW), which sells customer relations software. Roughly 80% of the more than 2,000 adults in a 2007 Harris Interactive (HPOL) poll vowed never to buy from the same company after a negative experience, up from 68% in 2006. Some 28% of those surveyed said they cursed as they wrangled with customer reps online and by phone. About 19% admitted to shouting. How else do American consumers express their displeasure? Depends on where they live.

Northeasterners

Unlikely to get emotional, file a complaint, or spread bad reviews. (Maybe more Vermonters than New Yorkers were surveyed.) The pollster's theory: "They just take their wallet someplace else."

Westerners

More likely than the average disgruntled customer to turn to the Web. (Some 17% of these Silicon Valley-friendly folks vent on blogs.) And to nurse a grudge: 83% said they'd never do business again with the offending company.

Midwesterners

Surprise! The biggest swearers (34%). But they're also most likely to "get a headache" (20%), feel their "chest tighten" (11%), or cry (8%) after a bad encounter.

Southerners

Least likely to swear, but lead the pack of the 12% of respondents who fantasized about "picketing or defacing the company's headquarters."

Data: 2007 RightNow/Harris Interactive Survey

Leon L. Granoff, a 94-year-old real estate investor in Gardena, Calif., is offering individuals the opportunity to invest $20,000 of his money in an account on e*Trade (ETFC)—and receive 50% of the profits. The rest of the earnings go to the 35-year-old Leon L. Granoff Scholarship Foundation, which gives away close to $1 million a year.

Granoff started the program in February by e-mailing his scholarship students, who spread the word to their friends across the country.

By now, 78 "carrier pigeons," as he calls them, mostly undergraduates with no previous investing experience, manage $1.04 million of his capital. (They are responsible for paying the tax on the profits they keep.) BusinessWeek's Courtney Weaver spoke to Granoff about the unusual scheme.

With the turmoil in the markets, how do you expect neophytes to make a dime trading stocks?

The same way that [people] have been making money for the past 300 years. The market continually goes up and down. That's one reason for the requirement that at the end of a quarter they have investments in 24 different stocks. On average, the stocks will go up. Not all of them will, but some of them.

If virtually all the stock goes down—well, then, I'll take a loss on it. But I'm not worrying. If I were, I wouldn't get involved in it.

Why did you decide to make this offer?

Those kids, they're making money for my foundation without me doing a damn thing. [Financial] education is a secondary goal.

How many of the 78 carrier pigeons now in the program have started generating profits?

At the end of March—the end of the first quarter—the first pigeon had made $200. At the end of the second quarter, one had made $700 and another $800. I'm confident that in the not too distant future, they will be making thousands.

As a real estate pro, how do you assess the housing market?

Many people have been seduced by unscrupulous brokers providing them with ARM loans. It's a question of allowing enough for the problem to to work its way out. It will. I'm confident of that.

Strapped for credit? Your Second Life avatar can still go on a shopping spree. Singapore startup First Meta has launched what it says is the first credit card to be used in an online virtual community. Its MetaCard offers SL members credit in Linden Dollars (the SL currency), with limits of about $19 monthly (L$5,000, the price of, say, two "cars") for a basic MetaCard. SL members can get it by supplying the name of their avatar—no real-world credit check.

A gold card, with a monthly cap of $37, enough to buy a virtual house, must be backed up by a real credit card, and holders of both cards have to spend at least $1.86 a month or pay a fee of $1.12. The interest rate? Between 0.13% and 0.15% daily.

"Although the credit limits on our MetaCard may seem low when converted into U.S. dollars," says Douglas Abrams, CEO of First Meta, in Second Life "they provide consumers with quite substantial purchasing power."

So far, the MetaCard, which was launched in July, has attracted a fraction of SL members—about 100—who can use the virtual plastic at 140 of the merchants doing business with avatars. Most members are still part of a cash economy, buying Linden currency using their real credit cards.


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