Unwanted email continues to clog the Internet in high volumes – often depositing malicious programs if it can slip past the filters meant to catch it, according to Microsoft’s latest report about online security.

It’s not exactly good news for Microsoft Chairman Bill Gates’ famous prediction, in 2004, that the problem of spam would be “solved” two years from that point.

However, the report does show that Internet users aren’t actually receiving most of those unwanted messages. Using Microsoft’s Forefront Online Security for Exchange as an example, the Internet security report says about 97.3 percent of total email volume was identifies as spam and filtered out in the second half of last year.

That was down from 98.4 percent in the first half of last year. The company attributed the decrease to the disconnection from the Internet of McColo, a hosting provider that alleged spammers were known to use.

“The vast majority of the e-mail messages sent over the Internet are unwanted,” Microsoft said in the report. “Not only does all this unwanted e-mail tax the recipients’ inboxes and the resources of e-mail providers, but also the influx of unwanted e-mail traffic creates an environment in which e-mailed malware attacks and phishing attempts can proliferate.”

Gates made his spam prediction at the World Economic Forum in January 2004.  One of the potential solutions he cited was “charging” e-mailers in the form of extra computer cycles — requiring the production of a digital code or “stamp” to deliver a message.

The idea was to making massive bulk emailing too expensive without affecting ordinary volumes of email. Microsoft Research explored the concept in its Penny Black project – named after the 19th Century British Postal System’s similar effort to shift the cost of mail to the sender, using stamps.

The Penny Black project at the company is no longer active, but Microsoft is still involved in a wide-range of spam-related research and prevention. In an email, a company representative pointed out that a lot has changed in the past five years:

"We’re continually evolving our spam-fighting technology to make it more robust and applicable to the current time. Technology from five years ago, like computational charging, is no longer effective today. With our technology advances, we’ve been able to reduce spam that enters customers’ inbox by 80% since 2006. …

"We have succeeded in blocking nearly all of the techniques spammers were using in 2004. What we’re fighting today is the next generation of service abuse that’s significantly evolved in the last five years. We use an assortment of technologies to fight spam, which we don’t share publicly to prevent giving spammers insight into breaking the system. For information about what spam technologies we do publicly share, visit mail.live.com/mail/spamfighting.aspx."

Of course, some things never change: According to the report, about half of unwanted email messages tracked by Microsoft in the last six weeks of last year were for pharmaceutical products.

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and Microsoft set to open swanky new Redmond shopping center  

Google may not need to worry about much competition from Microsoft yet, but maybe the Seattle region’s shopping malls should.

The central "Commons" area of Microsoft’s new Entertainment & Devices complex in Redmond feels more like an open-air retail destination than it does a corporate campus. When it opens soon, employees will be able to dine in well-regarded regional restaurants, eat in an upscale food court, and pick up items from boutique shops.

Thanks to the compromise worked out earlier this week, they’ll also be able to lift a pint at the Spitfire bar — as long as it’s after 3 p.m., and as long as they’re part of a scheduled employee event.

All in all, it’s shaping up as a unique spot in the middle of the Redmond campus, complete with an adjacent sports field. Here are a few photos taken during a walk through the central courtyard earlier this week.

 

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and Amazon’s Jeff Bezos on Kindle sales and The Karate Kid  Amazon.com released CEO Jeff Bezos’ 2008 annual letter to shareholders today. Among the highlights: Bezos says sales of the electronic Kindle reader "have exceeded our most optimistic expectations." He also says Amazon is "investing heavily in Amazon Web Services, in tools for third-party sellers, in digital media, in China, and in new product categories." Bezos also makes a reference to the iconic ’80s movie "The Karate Kid" — in the footnotes, no less.

Read on for the full text.

To our shareowners:

In this turbulent global economy, our fundamental approach remains the same. Stay heads down, focused on the long term and obsessed over customers. Long-term thinking levers our existing abilities and lets us do new things we couldn’t otherwise contemplate. It supports the failure and iteration required for invention, and it frees us to pioneer in unexplored spaces. Seek instant gratification – or the elusive promise of it – and chances are you’ll find a crowd there ahead of you. Long-term orientation interacts well with customer obsession. If we can identify a customer need and if we can further develop conviction that that need is meaningful and durable, our approach permits us to work patiently for multiple years to deliver a solution. “Working backwards” from customer needs can be contrasted with a “skills-forward” approach where existing skills and competencies are used to drive business opportunities. The skills-forward approach says, “We are really good at X. What else can we do with X?” That’s a useful and rewarding business approach. However, if used exclusively, the company employing it will never be driven to develop fresh skills. Eventually the existing skills will become outmoded. Working backwards from customer needs often demands that we acquire new competencies and exercise new muscles, never mind how uncomfortable and awkward-feeling those first steps might be.

Kindle is a good example of our fundamental approach. More than four years ago, we began with a long-term vision: every book, ever printed, in any language, all available in less than 60 seconds. The customer experience we envisioned didn’t allow for any hard lines of demarcation between Kindle the device and Kindle the service – the two had to blend together seamlessly. Amazon had never designed or built a hardware device, but rather than change the vision to accommodate our then-existing skills, we hired a number of talented (and missionary!) hardware engineers and got started learning a new institutional skill, one that we needed to better serve readers in the future.

We’re grateful and excited that Kindle sales have exceeded our most optimistic expectations. On February 23, we began shipping Kindle 2. If you haven’t seen it, Kindle 2 is everything customers loved about the original Kindle, only thinner, faster, with a crisper display, and longer battery life, and capable of holding 1,500 books. You can choose from more than 250,000 of the most popular books, magazines, and newspapers. Wireless delivery is free, and you’ll have your book in less than 60 seconds. We’ve received thousands of feedback emails from customers about Kindle, and – remarkably – 26% of them contain the word “love.”

Customer Experience Pillars

In our retail business, we have strong conviction that customers value low prices, vast selection, and fast, convenient delivery and that these needs will remain stable over time. It is difficult for us to imagine that ten years from now, customers will want higher prices, less selection, or slower delivery. Our belief in the durability of these pillars is what gives us the confidence required to invest in strengthening them. We know that the energy we put in now will continue to pay dividends well into the future.

Our pricing objective is to earn customer trust, not to optimize short-term profit dollars. We take it as an article of faith that pricing in this manner is the best way to grow our aggregate profit dollars over the long term. We may make less per item, but by consistently earning trust we will sell many more items. Therefore, we offer low prices across our entire product range. For the same reason, we continue to invest in our free shipping programs, including Amazon Prime. Customers are well-informed and smart, and they evaluate the total cost, including delivery charges, when making their purchasing decisions. In the last 12 months, customers worldwide have saved more than $800 million by taking advantage of our free shipping offers.

We’re relentlessly focused on adding selection, both by increasing selection inside existing categories and by adding new categories. We’ve added 28 new categories since 2007. One business that is rapidly growing and continues to surprise me is our shoe store, Endless.com, which we launched in 2007.

Fast, reliable delivery is important to customers. In 2005, we launched Amazon Prime. For $79 per year,1 Prime members get unlimited express two-day shipping for free and upgrades to one-day delivery for just $3.99. In 2007, we launched Fulfillment by Amazon, a new service for third-party sellers. With FBA, sellers warehouse their inventory in our global fulfillment network, and we pick, pack, and ship to the end customer on the sellers’ behalf. FBA items are eligible for Amazon Prime and Super Saver Shipping – just as if the items were Amazon-owned inventory. As a result, FBA both improves the customer experience and drives seller sales. In the fourth quarter of 2008, we shipped more than 3 million units on behalf of sellers who use Fulfillment by Amazon, a win-win for customers and sellers.

Prudent Spending

The customer-experience path we’ve chosen requires us to have an efficient cost structure. The good news for shareowners is that we see much opportunity for improvement in that regard. Everywhere we look (and we all look), we find what experienced Japanese manufacturers would call “muda” or waste.2 I find this incredibly energizing. I see it as potential – years and years of variable and fixed productivity gains and more efficient, higher velocity, more flexible capital expenditures.

Our primary financial goal remains maximizing long-term free cash flow and doing so with high rates of return on invested capital. We are investing heartily in Amazon Web Services, in tools for third-party sellers, in digital media, in China, and in new product categories. And we make these investments with the belief that they can be of meaningful scale and can clear our high bar for returns.

Around the world, amazing, inventive, and hard-working Amazonians are putting customers first. I take great pride in being part of this team. We thank you, our owners, for your support, for your encouragement, and for joining us on our continuing adventure.

As always, I attach our 1997 letter to shareowners. Even as the rate of change accelerates, we hope and believe our focus on what stays the same should serve us well.

Jeffrey P. Bezos
Founder and Chief Executive Officer
Amazon.com, Inc.
April 2009

1 Prime is a global program. ¥3,900 in Japan, £48 in the UK, €29 in Germany, and €49 in France.

2 At a fulfillment center recently, one of our Kaizen experts asked me, “I’m in favor of a clean fulfillment center, but why are you cleaning? Why don’t you eliminate the source of dirt?” I felt like the Karate Kid.

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UW Press dabbles with Kindle, Amazon print on demand  The University of Washington Press is gearing up to sell books on Kindle — the first time it has made content available on Amazon.com’s electronic reader — and plans to shift publishing of 100 books to Amazon’s print-on-demand service, BookSurge. The UW Press joins a number of academic publishers who are working with Amazon to spur sales and expand digital distribution. Amazon, for its part, appears to be showing a growing interest in the academic market.

The UW Press is starting to convert the 25-book Weyerhaeuser Environmental Series into Kindle format, and will look at whether to add other titles.

“We decided rather than to jump in with both feet, we would use this series as our entry and do an analysis of it,” said Pat Soden, director of the UW Press.

BookSurge is an Amazon print-on-demand service that does printing and distribution of hard-copy books on an as-needed basis. The UW Press sees it as a way to derive some revenue from slow-selling or out-of-print books that are not cost-effective to print itself.

It’s not hard to see why Amazon is mining academia. The Association of American University Presses, an industry trade group, said its U.S.-based members published 6,000 titles and generated roughly $300 million in sales in 2008 (those figures don’t include sales by the U.S. arms of the Oxford and Cambridge university presses, which are the largest academic publishers in the U.S.).

On the Kindle front, Amazon’s interest in universities may be broader. The company, which released the second version of its Kindle reader in February, is said to be at work on a Kindle 3 with a larger screen. It reportedly will be tailored to newspaper and magazine readers, but there’s speculation it could also be targeted at college students as a textbook replacement.

Amazon spokesman Drew Herdener declined to say how many academic publishers are working with Kindle and BookSurge, but said, “our goal with Kindle is to offer every book ever printed, in any language, so we are making an effort across publisher types.” Amazon, he said, is “seeing quite a bit of interest from academic publishers in Print on Demand.”

Princeton University Press, which began converting books to Kindle format in September 2008, has about 500 Kindle titles and plans to add another hundred this fall. Priscilla Treadwell, electronic publications marketing manager for the New Jersey-based press, said Kindle “sales are encouraging,” but added that her office doesn’t have enough data yet to make a full evaluation.

She declined to discuss the costs of converting titles to Kindle and how Amazon splits revenue from Kindle e-book sales. Amazon and UW Press also declined to specify financial arrangements.

For now, Princeton is limiting its Kindle titles to so-called academic trade books, and is not putting college textbooks on Kindle, fearing that could cannibalize textbook print sales, Treadwell said. She also said the Kindle isn’t ideal for books that include a lot of illustrations, which don’t reproduce well yet in electronic form.

The Princeton, Oxford and Cambridge university presses are all customers of Amazon’s BookSurge, according to Amazon.

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