Digital World: Dark side of the cloud

It's a sad day when an Internet start-up - especially a popular one - bites the dust.

It's a sad day when an Internet start-up -especially a popular one - bites the dust. VC and angel money beingscarce these days, and paying models not always easy to implement, morethan one on-line service that users believed in - and used - has gonethe way of all silicon.

Thescene in the office on that sad day reminds one of sort of a virtualshiva: now-former employees make the last copies of their resumes onthe office copy machine, the last paychecks are distributed, the bosssigns letters of recommendations for workers and whatever is left ofthe office supplies are distributed. And, of course, there's the lastlunch, with employees and managers reminiscing on their time togetherand promising to keep in touch.

Then there are the assets. The hardware that the service ran onare often taken by creditors or the VCs who will not be seeing a returnon their investment; the patents are either sold, rented out or frozen,in the hope that they will be used to innovate on another day. And, ofcourse, the final monetary accounting is taken, ensuring that formeremployees' pensions and other savings plans are kept safe.

What about the data? Ah, there's an interesting question. Wewould expect the information on hard drives and databases to be wiped;indeed, there would seem to be little use for user data after theservice has closed down. Of course, someone could mine the database fore-mail addresses and sell them, but the reputation of the company -especially the management, and most crucially the CEO - would beseverely tarnished. It's hard to imagine that an Internet start-upwhiz, who was able to raise millions of dollars to fulfill his or hervision, would stoop that low - or be that hard up for cash.

But there might be other information that could comein handy - depending on the nature of the service. Here is a quote froma well-known Internet service, where you can store information,documents and ideas for yourself or for others: "By submitting to[service] any ideas, suggestions, documents and/or proposals... youacknowledge and agree that... your contributions automatically becomethe property of [service] without any obligation of [service] to you;and you are not entitled to any accounting, compensation orreimbursement of any kind from [service] under any circumstances."

I'm intentionally not naming the service, because, in truth,this terms-of-service (TOS) agreement is not unique; Gmail's, forexample, says that they have a right to use your information in allsorts of ways. Gmail, the classic cloud application, stores all yourinformation on-line, and nowadays many people are using Gmail for theirmain mail account - meaning that they transmit all sorts of sensitiveinformation right to Google's waiting claws, which the company cantheoretically use for nefarious purposes.

But I'm not worried about Gmail; any companywhose stock price is in excess of $600 (GOOG, traded on the NASDAQ,closed on Monday at $625.68) doesn't need the petty business ideas andthoughts we may send through and store on their servers. Whatever wecan come up with, I'm pretty sure the Google people have alreadythought of, and they either have a pilot program in motion based onthat idea or have rejected it as non-applicable to their businessmodel.

But what about a service that stores information like Googledoes - including sensitive spreadsheets, business plans,communications, thoughts and ideas - shares of which are not trading at$625 a share and, in fact, are no longer trading at all, becausethey're bust? Could one of our business ideas - a really good one - endup the property of an ex-CEO or of whomever said CEO or the board ofdirectors sells the intellectual aspects of the former serviceprovider?

Concerns over computer-application and Internet-service TOS arenothing new, and there have been many celebrated cases of user TOSprotests; for example, the one against Facebook(, where users got nervous when Facebookclaimed the right to use any user content posted by anyone, in any waythey wanted to. According to the TOS that every user agrees to (but fewbother reading before agreeing), the Facebook people have a perfectright to take your photos and sell them to an advertising agency. Byclicking "yes" on a page that links to an agreement that says, "Youhereby grant Facebook an irrevocable, perpetual, non-exclusive,transferable, fully paid, worldwide license (with the right tosublicense)" and use in any way "any User Content you post on or inconnection with the Facebook Service," you've given them all thepermission they need to use you in a "Don't let this happen to you!"style ad campaign!

Partly as a result of the protests, Facebook has updated itsprivacy settings (, making it easier to optout of any potential use of your content for purposes you didn't intendthem to be used for. But what are those Facebook-posted photos andupdates worth anyway? It's not like the company is going to auction offyour photo to an ad agency for millions - and if your image is worththat kind of money, you've probably beaten Facebook to the ad agencyand made your own deal, anyway.

But Facebook and Google are in a league of their own - they'rewallowing in cash already and would have far more to lose if they werecaught selling, renting or otherwise profiting from user content. Asboth companies make clear on their Web sites and in numerous blogs, thelegalese in the TOS agreements is for their protection, such as whendata gets cached (and used) on a server not under their control andends up being linked to by an undesirable Web site. Numerous articlesof mine, for example, are linked from The Jerusalem Post server to sites of less-than-savory individuals (anti-Semites and the like), but it's clear that I couldn't hold the Post responsible for that.

But when it comes to smaller Web services whose future is iffy:beware. We want the convenience of the cloud, but not all cloud dataand information-storage services are created equal. I'm sure no CEOwould be the type to want to rip off an innovative business plan oridea I posted/stored on his or her service/servers. And under normalcircumstances it's almost impossible to conceive of such a thinghappening.

But when the chips are down and some CEO is downand out, it's entirely possible that his/her next Big Idea will be thevery same one you jotted down and posted in your (private) account - anaccount on a site where the TOS says that "your contributionsautomatically become the property of [service] without any obligationof [service] to you."

Ithasn't happened yet (to my knowledge), but on the day it does, thatfluffy white cloud will turn dark and angry - and become the harbingerof a hurricane.