At a press event in a sunlit San Francisco cafe, Chief Executive Jack Dorsey introduced the “Square Stand,” a white, molded-plastic iPad holder that lets businesses accept credit cards with a mounted iPad and an integrated card reader.

Coupled with an iPad and Square’s free iPad software, which processes credit-card payments wirelessly and tracks sales, the new Stand represents a complete offering for small businesses that can replace existing point-of-sale systems, Dorsey said.

“We wanted to unveil not just a great piece of software that allows them to build their business up, but also hardware to match,” Dorsey said. “Square is extending its hardware story.”

Square’s Stand, which is aimed at brick-and-mortar stores such as coffee shops or clothing retailers, goes on sale online on Tuesday. It will become available at Best Buy, beginning in July for $299; iPads are not included.

Privately held Square, on track to process $15 billion in payments a year, has faced the challenge of thin margins, according to analysts, since it relies on middlemen such as banks and credit-card networks to complete transactions every time a merchant swipes a card through a Square reader.

RACING TO WIN OVER MERCHANTS

Square’s business model has prompted some analysts to encourage the company to focus on software that could bypass traditional credit-card companies rather than continue to develop physical card readers in the face of intense price pressure from competing payment processors.

For instance, PayPal, the online payment giant owned by eBay Inc, is going head to head against Square in brick-and-mortar stores by offering slightly lower processing rates and other incentives.

PayPal President David Marcus said on Tuesday that, beginning next month, PayPal will process payments for free for the rest of the year for any merchant that replaces its existing cash registers with one of PayPal’s new point-of-sale services.

But the new Square Stand could help the company win over merchants who can integrate the devices into their software network in the long term, analysts said.

The new Stand, is “about a merchant land grab. If you can catch a merchant at startup time and get them using your point-of-sale system, you have a long-term client,” Aite Group senior analyst Rick Oglesby said.

The local brick-and-mortar retail market is 20 times the size of online sales, and providing the offline equivalent of online e-commerce services represents a massive opportunity for companies, Oglesby said.

“The strategic piece of it is to become the online marketplace of the local commerce world,” Oglesby said.

Although Square has sold matchbox-sized card readers since its inception in 2009, the Stand represents a slight departure for a company that has focused on refining its software offerings in recent years.

Dorsey, compared with late Apple Inc chief Steve Jobs by Silicon Valley commentators for his focus on product design, recruited former Apple industrial designer Jesse Dorogusker last year to develop Square’s hardware.

Sporting a sharply tapered suit and Converse sneakers on Tuesday, Dorsey pushed back against the notion his company should focus on software.

“The thing people always say is, ‘Is the Square Reader going away? You’re not a hardware company,’” he told Reuters. “No, we love building hardware. The more hardware we can build, the better. But only if it’s additive. It can’t be distracting at all. And this is additive.”

(Reporting by Gerry Shih; Editing by Jeffrey Benkoe, Bob Burgdorfer and Jan Paschal)

The acquisition would provide Box’s users with more
interactive features such as the ability to annotate documents
or create slide shows, said Aaron Levied, Box’s chief executive.

Levied declined to disclose the terms of the deal. Crocodoc,
a seven-person start-up founded in 2007 by four engineering
students from the Massachusetts Institute of Technology, had
previously raised roughly $1 million from angel investors.

At the heart of Crocodoc’s technology is the ability to
convert documents in such formats as Word and PDF into ones more
suitable for the interactive Web.

Crocodoc said its licensing deals with existing customers,
which include LinkedIn Corp, would continue without
interruption although the technology could be rebranded.

Faced with competition from giants such as Microsoft Corp
and Google Inc, young storage companies like
Box and Dropbox in recent months have sought to differentiate
themselves and aggressively flesh out their functionality
through small acquisitions.

Privately held Dropbox, one of Box’s fiercest rivals,
signaled it would also expand its offerings when in March it
snapped up the design team behind Mailbox, an email app.

As Chief Executive Mark Pincus, 47, leads the online games developer he founded in 2007 through perhaps the most crucial year of his tenure, he is pushing to restore revenues by doubling down on “FarmVille,” the franchise that took Facebook users by storm four years ago and launched Zynga to stardom.

Though some industry observers had declared farm simulation games a fad and predicted FarmVille 2′s early demise, the sequel to Zynga’s best-known title has defied expectations at its San Francisco headquarters, Pincus said in an interview. FarmVille 2 has clung to its perch near the top of Facebook charts and the number of people who play the game each day still hovers near all-time highs of 8 million, even six months after launch.

Given a glaring weakness in mobile games, however, one of Zynga’s current priorities is porting FarmVille 2 to mobile devices so players can move from PCs to smartphones and back without losing their data. That presented technical challenges that the company is ironing out, Pincus said.

“The ideal is to make that one seamless experience between Web and mobile so you can take your farming experience from work to home,” Pincus said. “We’re having to retool and reinvent around our process and technology.”

Pincus badly needs a reliable hit franchise. In the past nine months, Zynga has shuttered 20 titles and closed offices in Baltimore, Boston and Tokyo. It has trimmed 5 percent of its workforce, though its headcount of nearly 3,000 still dwarfs that of fierce rivals like Supercell, a Finnish company with 100 people that claims an equivalent amount of revenue, or the 600-strong Rovio, the publisher behind the “Angry Birds” games.

Gone is the swagger that defined the early years, when Zynga’s army of developers flooded the market with dozens of new titles from cooking games to bingo variations, its dealmakers splashed money to snap up smaller rivals, and its managers opened studios in cities around the world.

Wall Street is viewing Pincus’ shift with cautious approval, having been singed by Zynga’s abysmal stock performance — an 80 percent decline over the past year that began around the time it invested $180 million in then-promising game studio OMGPOP.

“Certainly their shareholder base wants to see more discipline,” said Sean McGowan, an analyst at Needham and Co. “When you have limited resources, it makes sense to start with a proven winner, then expand that franchise. But it needs to be a blend of sticking with the proven brands and realizing when people might say: ‘FarmVille 4? No, I’m done with that.’”

Investors place much stock on Zynga’s future prospects in Internet gambling, because of its massive poker-playing community and existing game software. But with meaningful income from real-money casino efforts likely to be months, if not years, away, it may have to risk “sequelitis” for now.

TABLES TURNED

Almost 18 months after going public, Zynga is staving off fierce competition from newer or nimbler rivals that mimic its games.

Supercell, founded in 2010, has scored with “Hay Day,” an iPad game that contains elements resembling FarmVille. With just one other game under its belt, Supercell says it is on track to make more than $800 million in revenue this year, roughly equal to the $860 million that Wall Street expects from Zynga in 2013.

Veteran video games publisher Electronic Arts Inc, one of Zynga’s earliest rivals, in recent weeks said it would lay off an undisclosed number of employees and focus on core franchises like Battlefield and sports titles.

Activision Blizzard Inc, another publishing heavyweight, has fared better thanks to the strength of series like “Call of Duty,” which has brought in more than $8 billion in cumulative sales since the first title launched in 2003. Yet even Activision is struggling to sustain revenue growth.

Zynga’s bottom-line could be shored up through a more streamlined pipeline, Pincus argued. Since FarmVille first launched, it has gradually honed its development process to reduce the resources and development costs required for each significant update by more than 80 percent, he said.

“As long as our players are interested in farming, we’ll offer a Farmville,” Pincus said. “It could be the Seinfeld of our era in gaming, a multi-season show that has a quality and a consistency that you can rely on.”

Zynga declined to address its game pipeline. Bing Gordon, an investor at venture capital firm Kleiner Perkins Caufield & Byers and a Zynga board member, said he has repeatedly nudged the company to develop FarmVille 3.

“Coca Cola has learned not to change their formula,” said Gordon, a game industry veteran who formerly served as chief creative officer at Electronic Arts. “If you’ve got something people want, keep doing it.”

BOLD BEATS

Even as Zynga seeks greater efficiency, it acknowledges it has been pressed to invest more to stay competitive.

At the heart of the company’s strategy has been its “bold beat” schedule, a roadmap first laid out by Pincus in 2009 to release significant upgrades and new features to games every quarter to keep players hooked.

Once criticized in the industry for low-quality graphics and rudimentary gameplay, the company’s latest launches and “bold beats” have placed a greater emphasis on elements like visuals that were once considered superfluous, game designers said.

“Player expectations are higher than they used to be,” said Zynga Senior Vice President Todd Arnold, who overseas FarmVille and FarmVille 2. “You’re not able to launch a minimalist product as we used to be able to.”

For its leading franchises, the company is also investing more in quantitative and analytical tools. Every week, it shuttles players into a room deep inside its offices, where they are shown minute new design features. Their reactions are recorded by video cameras as well as a team of game designers sitting behind a two-way mirror in an adjacent room.

The company also holds periodic panel discussions with its most loyal fans to solicit suggestions for new features.

Linda Zoccolli, a retired daycare business owner in Moraga, California, suggested at a session in March that water was too scarce a commodity in FarmVille 2. Weeks later, she noticed the game began to feature periodic rainfall.

She has spent three hours almost daily for the past eight months tending her plot but hasn’t found it repetitive.

“As long as they come out with new quests, new items, it keeps it interesting,” she said.

(Reporting by Gerry Shih; Editing by Edwin Chan, Jonathan Weber and Chris Reese)

For David Rusenko, the 27-year-old founder and chief
executive of global website builder Weebly, the answer is: Of
course!

On Thursday, Weebly unveiled a refresh of its publishing
suite, which allows people to simply drag and drop page elements
like images and headlines onto a canvas to build a site. Using
the new form, mobile versions of websites – a critical concern
in a modern economy awash with smartphones – can be published
simultaneously with desktop versions.

The San Francisco startup’s update comes at a time of flux
for the Internet industry, which has been grappling with the
ramifications of users who are spending less time on the Web and
more time within closed ecosystems like Facebook Inc’s
social network or the cornucopia of smartphone apps – an economy
valued at $25 billion in 2013, according to research firm ABI.

Yet Rusenko is not willing to accept any talk of the open
Web’s demise. He argues that Web pages, more than ever, carry
more weight and meaning in an age of fleeting tweets and
malleable Facebook identities.

“The picture is becoming clearer,” Rusenko said. “Facebook
has focused on the conversation, but not really on absorbing the
Web into its walled garden.”

For a lot of people, “their digital identity is their site,”
he added. “It’s where they showcase their ideas and really put
themselves out there.”

Along with his Thursday relaunch, Rusenko unfurled a slate
of new growth statistics and research data showing that his
company, which has enjoyed healthy growth and now boasts a
network of 15 million sites that have been visited by 100
million people.

Weebly’s own extensive research showed that a majority of
people would not trust a business that had no website, yet 58
percent of businesses do not have a Web presence, Rusenko said.

In 2006, Rusenko, a fresh-faced graduate of Penn State
University, burst onto the Silicon Valley scene and garnered
plaudits in national magazines with Weebly, which quickly rose
in stature as the natural heir to GeoCities, the service that
fueled a webpage-creating craze in the 1990s.

After the initial acclaim, Weebly has kept a lower profile
while rivals like WordPress, the professional-grade blogging
platform, and Tumblr, the minimalist social blogging network,
have captured more media attention, but not the consumer Web
publishing market.

With its refresh, Weebly is now more oriented toward what
Rusenko called everyday entrepreneurs looking to “start
something”: amateur food bloggers, teachers, or crafts
enthusiasts who want to share their passion before potentially
launching a small business.

Weebly has been in talks with a payment startup to provide
an e-commerce platform for people wanting to sell goods, said
Rusenko.

The company is also introducing planning tools that offer
ideas and inspiration to help newcomers “identify their goals”
and lay out their pages, Rusenko said.

The company, which has 70 employees, has been profitable
since 2009, but accepted an undisclosed amount in funding from
Sequoia Capital in 2011 to continue growth.

“At the end of the day these are doers, these are makers,
and we want to help bring that dream to life,” Rusenko said.

Beginning next year, Peoplebrowsr will have to purchase
access to the full “firehose” of 400 million daily tweets
through one of Twitter’s authorized data resellers, according to
the settlement’s terms.

Peoplebrowsr, based in San Francisco, sifts through Twitter
and resells social media “intelligence” to clients that include
media organizations and the U.S. Department of Defense.

The legal dispute between the two companies flared last late
year, when Twitter, which has been ramping up its operations as
it approaches a widely anticipated initial public offering,
began to exercise greater control over its content.

Although Twitter contends that individual users retain
intellectual ownership over their tweets, the company has moved
aggressively to block some firms from profiting off of its data.

Peoplebrowsr had been purchasing data from Twitter directly,
rather than through a reseller, on a month-to-month basis before
Twitter sought to end the arrangement last July.

Peoplebrowsr Chief Executive Andrew Grill said the
settlement gave Peoplebrowsr the eight months it needed to
“technically and commercially” figure out how to continue
providing the same kind of analytical services.

“We got out of this settlement what we needed,” he said.

Financial details of the settlement were not disclosed.

Twitter said in a statement: “We’re pleased to have this
matter dismissed with prejudice, and look forward to
PeopleBrowsr’s transition by the end of the year off of the
Firehose to join the ecosystem of developers utilizing Twitter
data via our reseller partnerships.”

(Reporting by Gerry Shih; Editing by Bob Burgdorfer)

The embattled publisher behind games such as “FarmVille” and
“Words With Friends” reported a surprise profit for its latest
quarter through steep cost-cutting, but Chief Executive Mark
Pincus said Zynga’s business, although stabilized, may not pick
up until the latter half of the year.

The company also reported a 13 percent slide in monthly
figures for the number of people playing its games.

“We know that 2013 is a year of transition,” Pincus told
analysts on a conference call. “We continue to expect
non-linear, uneven results.”

On an adjusted basis, Zynga reported earnings of 1 cent per
share, beating analyst expectations of a loss of 4 cents per
share. But the company also projected a second-quarter loss
between 3 and 5 cents per share, exceeding the 1 cent per share
loss analysts had expected.

The results and Zynga’s forecast sent its shares 9 percent
lower to $3.05 in extended trading.

Over the past 12 months, Zynga’s shares have shed two-thirds
of their value while investors have watched the company struggle
to keep hold of gamers who once flocked to its games on Facebook
Inc’s website.

“While we recognize the decline in the user base on a macro
level, we have the pipeline coming down,” Barry Cottle, the
company’s chief revenue officer, said in an interview. “That’s
going to happen over a period of time, not something that
happens in a quarter.”

The company aims to build up its business with gamers on
smartphones as it loses users on PCs, but doubts remain over
whether this can sustain its revenues and profits.

In recent months, Zynga and Facebook have revised their
business partnership, as the game company sought to establish a
more independent network even at the risk of getting less
visitor traffic from the social media giant.

Over the past year, Zynga’s monthly players have fallen to
253 million from 292 million, while its number of monthly paying
users shrank to 2.5 million from 3.5 million, the company said.

“The stock is down because of the guidance,” said Sterne
Agee analyst Arvind Bhatia.

But in the long term, he added: “We continue to think that
any hope for real growth for this nebulous company really
depends on what it can do in real-money gaming.”

REAL-MONEY POTENTIAL

In past quarters, Zynga has promised investors that it could
tap into a potentially lucrative new revenue stream by launching
real-money casino games around the world. The effort kicked off
in the last quarter in Britain, where such games are highly
regulated.

But executives on Wednesday stayed largely mum about the
progress of its real-money inroads in other markets, saying that
it could be at least months before Zynga could begin any
meaningful operations in the United States, where real-money
gambling is illegal in many states.

“We can’t tell you when the regulatory environment will let
us test that audience,” Pincus said.

Other analysts said it was unrealistic to consider the talk
about real-money gaming as anything but a long-shot for the
coming years.

“They’re kind of in dream mode here as they go through the
process of trying to materialize the business,” said Mike
Hickey, an analyst at National Alliance Capital Markets.

“They started with partnering in the UK market, which is
probably at least a year from ever being material.”

Zynga executives blamed their eroding user base on gamers
abandoning computers for mobile devices, but pledged to
recapture the market once it releases its slate of mobile games
due out later this year.

In the meantime, the company will continue to rely on its
brand-name franchises, such as its aging but still-robust
“FarmVille” series, to generate sales from both mobile and
desktop users.

Executives argued that Zynga, which has been the most
popular game publisher for Apple Inc’s iPhone, would be
better placed than rivals with its independent gaming network to
generate game downloads.

“Discoverability becomes such an important factor in how
apps are found,” Cottle said. “If you look at challenges in
mobile, it gives us a distribution advantage in the
marketplace.”

Still, it was unclear if the company would be able to wring
as much revenue from mobile users as it had from desktop gamers,
analysts said.

“The majority of their games are lower-monetizing
experiences on mobile platforms,” Hickey said. “Certainly
they’ve attracted a large audience but it’s hard to get much
money from that audience.”

The company now derives 22 percent of its revenue from its
mobile platform, compared with 12 percent a year ago, but that
share remains modest compared with similarly sized technology
companies such as Twitter Inc, which gets more than half of its
revenue from mobile users.

On Wednesday, Zynga reported revenue of $263.6 million, down
18 percent from the year-ago quarter.

For the full year, the company projected that it could be
narrowly profitable.

“If we launch the right games and get the right sort of
engagement, there’s an opportunity that revenues will go up as
well,” Chief Financial Officer Mark Vranesh said. “2013 is going
to be bumpy. It’s going to be hard to predict.”

Shares fell 10 percent to $2.99 in extended trading.

The San Francisco-based publisher behind games like
“FarmVille” and “Words With Friends” said its number of monthly
players continued its decline to 253 million, the lowest figure
since the number peaked at 331 million at the end of the third
quarter of 2012.

On an adjusted basis, Zynga reported earnings of 1 cent per
share, beating analyst expectations of a loss of 4 cents per
share. But the company also projected that its second-quarter
loss would be between 3 to 5 cents per share, exceeding the 1
cent per share loss analysts had expected.

“The second quarter guidance is light,” said Sterne Agee
analyst Arvind Bhatia. “We continue to think that any hope for
real growth for this nebulous company really depends on what it
can do in real-money gaming.”

Zynga has struggled to keep users, who once flocked to its
games on Facebook Inc’s website. In recent months, Zynga
and Facebook have revised their business partnership, as Zynga
has sought to establish itself as a more independent gaming
network at the risk of receiving less visitor traffic from
Facebook.

Zynga has promised investors that it could tap into a
potentially lucrative new revenue stream by launching real-money
casino games around the world.

The company reported revenues of $263.6 million, down 18
percent from the year-ago quarter but above Wall Street’s
depressed expectations as the online game maker wrung more sales
htan expected out of its shrinking user base.

Zynga’s quarterly bookings of $229.8 million also topped
estimates but represented a 30 percent decline from a year ago.

For many, a single fake tweet from the Associated Press account that briefly roiled financial markets on Tuesday, driving the Dow Jones industrial average down about 145 points, vividly reaffirmed the fearsome, near-instantaneous power of the 140-character message.

But the security lapse also revived doubts about Twitter’s place in the media landscape – and its ultimate value – at a moment when its status as one of today’s essential information networks had seemed all but cemented.

Just a week after social media networks took criticism for helping circulate misinformation about the alleged perpetrators of the Boston Marathon bombing, Twitter’s security shortcomings fell under a harsh spotlight Tuesday after a hacker group commandeered the AP Twitter account and falsely reported that explosions in the White House had injured President Barack Obama.

The AP was only the latest hacking victim in recent days after Twitter accounts belonging to National Public Radio, CBS 60 Minutes and others were breached. Last year, Reuters News was the victim of hackers who briefly took over one of its Twitter accounts and posted false tweets.

The latest hack was by far the most significant: the single AP tweet stunned investors and effectively wiped out $136.5 billion of the S&P 500 index’s value in a matter of minutes.

Although the news agency later disclosed that one of its employees may have inadvertently given away company passwords as the result of a “phishing” attack by the hackers, security experts quickly faulted Twitter for its longstanding failure to implement two-factor authentication, a double-layered password feature used by the likes of Google Inc and Microsoft Inc that might have prevented the spate of high-profile Twitter hijackings.

“It’s one of those cases that we are seeing too often. It’s getting unnerving,” said Robert Quigley, a journalism lecturer specializing in social media at the University of Texas. “What media organizations need to do is pressure Twitter to have a more secure website.”

Although Twitter has repeatedly declined to address its product roadmap, the company has signaled that it will soon unveil two-factor authentication, including a public job posting in February that suggested the company was hiring to tackle the problem.

Mark Risher, the founder of a security consultancy that counts social media companies Pinterest and Tumblr among its clients, said introducing more measures like two-factor authentication would make Twitter more cumbersome to use and potentially slow its user growth – a critical concern for a company that relies on advertising revenues. But he warned that a prolonged rash of high-profile hacks, and an eroding sense of user trust, would hurt Twitter more.

“There’s always a tradeoff between convenience and safety,” Risher said. “But a security issue damages Twitter’s brand.”

NEWSWIRE OR PLATFORM

For Twitter, the hacking has raised questions about its credibility just as it is beginning to assume a central role in a fast-changing media landscape, with the volume of tweets rising to more than 400 million a day. Earlier this month, the Securities and Exchange Commission ruled that U.S. companies may report material information such as quarterly results on Twitter, as long as investors are alerted in advance. Days later, Bloomberg L.P. said it would funnel Twitter directly into its terminals used by thousands of traders on Wall Street.

At the same time, the world’s leading news organizations and Twitter, which has 200 million users around the world, have become increasingly intertwined in a symbiotic, if sometimes troublesome, relationship.

Dan Gillmor, a journalism professor at Arizona State University, said the hacks have especially hurt news outlets because their Twitter accounts are often the primary way that their news reaches consumers who may not subscribe to a newspaper or have access to a newswire.

Twitter has touted itself as a critical newswire of sorts, such as during the 2011 tsunami in Japan, when it helped emergency responders locate survivors, or when it became a vital lifeline for some New Yorkers as television sets fell dark during Hurricane Sandy last year.

But last week, in the wake of the Boston bombings, some of those who previously viewed Twitter as an indispensable news source began turning against the service upon discovering that the wisdom of crowds is, in fact, an adage not often applicable on the Internet.

Steve Brunetto, a senior executive at Edgewave, a network security company, said Tuesday’s hacking undermined Twitter at a sensitive time.

“On the heels of the Boston Marathon bombing, everyone’s trying to figure out, ‘Okay, where does Twitter fit into that news cycle? Where does Twitter fit into disseminating information?’” Brunetto said. “They’ve got an opportunity to legitimize themselves as a real player in that information life cycle but they get knocked down a peg every time somebody says, ‘Oh, you can’t believe what you read on Twitter.’”

Jeff Jarvis, a prominent Internet pundit and a journalism professor at City University of New York, said that the confusion caused by social media in recent weeks was not an indictment of social media but rather a reminder that the onus falls on professional reporters to verify information.

“No, the Internet’s not broken,” Jarvis said.

The rise of social media means that “you now hear more bar-room debates and speculation than before,” he added. “But that doesn’t mean you should believe it more than you ever did.”

Tom Schrader, managing director for U.S. equity trading at Stifel Nicolaus Capital Markets in Baltimore, said there were a lot of clues in the false AP tweet that should have kept traders from reacting, in particular the wording of the message.

“We saw it, we saw the initial reaction. Initially our reaction was, pull your bids (until we) see whether this is legit or not. We found no legitimacy to it and went back into the market as normal,” he said.

Oli Freeling-Wilkinson is chief executive officer of Knowsis, a London company that picks out and amalgamates financially relevant tweets and other social media content for traders. “We do have spam controls in place, but it’s an ongoing war,” he said. “It’s much more difficult to work out what’s going on when people are hacking into official accounts, especially in the heat of the moment.”

While Twitter has occasionally signaled that it believes it could become more than a passive distribution network – a shift marked by last year’s purchase of Summify, a small startup that specialized in surfacing relevant news – it has also taken pains to distance itself from the content of tweets and maintain strict neutrality from a legal perspective.

Twitter Chief Executive Dick Costolo told an Online News Association gathering last autumn that Twitter’s primary responsibility was to create a platform, rather than to play an editorial role in determining which tweets people should see.

“A company trying to build media is creating or curating content, and that’s not the kind of company we’re creating,” Costolo said.

Gillmor, from Arizona State, said Twitter did not need to guarantee the quality or veracity of its content in order to grow into a media juggernaut.

“It’s not whether Twitter is credible or not, it’s what people do with it,” he said. “Every news organization feels it has no alternative but to use Twitter. But everyone at the traditional news organizations has to be thinking really hard about what that means, from whether the security is sufficient on these third-party platforms to what it means to be turning part of your stuff over to new kinds of publishers.”

(Reporting By Gerry Shih; Additional reporting by Jennifer Saba, Ryan Vlastelica and Caroline Valetkevitch in New York and Alina Selyukh in Washington; Editing by Claudia Parsons)

For many, a single fake tweet from the Associated Press
account that briefly roiled financial markets on Tuesday,
driving the Dow Jones industrial average down about 145 points,
vividly reaffirmed the fearsome, near-instantaneous power of the
140-character message.

But the security lapse also revived doubts about Twitter’s
place in the media landscape – and its ultimate value – at a
moment when its status as one of today’s essential information
networks had seemed all but cemented.

Just a week after social media networks took criticism for
helping circulate misinformation about the alleged perpetrators
of the Boston Marathon bombing, Twitter’s security shortcomings
fell under a harsh spotlight Tuesday after a hacker group
commandeered the AP Twitter account and falsely reported that
explosions in the White House had injured President Barack
Obama.

The AP was only the latest hacking victim in recent days
after Twitter accounts belonging to National Public Radio, CBS
60 Minutes and others were breached. Last year, Reuters News was
the victim of hackers who briefly took over one of its Twitter
accounts and posted false tweets.

The latest hack was by far the most significant: the single
AP tweet stunned investors and effectively wiped out $136.5
billion of the S&P 500 index’s value in a matter of minutes.

Although the news agency later disclosed that one of its
employees may have inadvertently given away company passwords as
the result of a “phishing” attack by the hackers, security
experts quickly faulted Twitter for its longstanding failure to
implement two-factor authentication, a double-layered password
feature used by the likes of Google Inc and Microsoft
Inc that might have prevented the spate of high-profile
Twitter hijackings.

“It’s one of those cases that we are seeing too often. It’s
getting unnerving,” said Robert Quigley, a journalism lecturer
specializing in social media at the University of Texas. “What
media organizations need to do is pressure Twitter to have a
more secure website.”

Although Twitter has repeatedly declined to address its
product roadmap, the company has signaled that it will soon
unveil two-factor authentication, including a public job posting
in February that suggested the company was hiring to tackle the
problem.

Mark Risher, the founder of a security consultancy that
counts social media companies Pinterest and Tumblr among its
clients, said introducing more measures like two-factor
authentication would make Twitter more cumbersome to use and
potentially slow its user growth – a critical concern for a
company that relies on advertising revenues. But he warned that
a prolonged rash of high-profile hacks, and an eroding sense of
user trust, would hurt Twitter more.

“There’s always a tradeoff between convenience and safety,”
Risher said. “But a security issue damages Twitter’s brand.”

NEWSWIRE OR PLATFORM

For Twitter, the hacking has raised questions about its
credibility just as it is beginning to assume a central role in
a fast-changing media landscape, with the volume of tweets
rising to more than 400 million a day. Earlier this month, the
Securities and Exchange Commission ruled that U.S. companies may
report material information such as quarterly results on
Twitter, as long as investors are alerted in advance. Days
later, Bloomberg L.P. said it would funnel Twitter directly into
its terminals used by thousands of traders on Wall Street.

At the same time, the world’s leading news organizations and
Twitter, which has 200 million users around the world, have
become increasingly intertwined in a symbiotic, if sometimes
troublesome, relationship.

Dan Gillmor, a journalism professor at Arizona State
University, said the hacks have especially hurt news outlets
because their Twitter accounts are often the primary way that
their news reaches consumers who may not subscribe to a
newspaper or have access to a newswire.

Twitter has touted itself as a critical newswire of sorts,
such as during the 2011 tsunami in Japan, when it helped
emergency responders locate survivors, or when it became a vital
lifeline for some New Yorkers as television sets fell dark
during Hurricane Sandy last year.

But last week, in the wake of the Boston bombings, some of
those who previously viewed Twitter as an indispensable news
source began turning against the service upon discovering that
the wisdom of crowds is, in fact, an adage not often applicable
on the Internet.

Steve Brunetto, a senior executive at Edgewave, a network
security company, said Tuesday’s hacking undermined Twitter at a
sensitive time.

“On the heels of the Boston Marathon bombing, everyone’s
trying to figure out, ‘Okay, where does Twitter fit into that
news cycle? Where does Twitter fit into disseminating
information?’” Brunetto said. “They’ve got an opportunity to
legitimize themselves as a real player in that information life
cycle but they get knocked down a peg every time somebody says,
‘Oh, you can’t believe what you read on Twitter.’”

Jeff Jarvis, a prominent Internet pundit and a journalism
professor at City University of New York, said that the
confusion caused by social media in recent weeks was not an
indictment of social media but rather a reminder that the onus
falls on professional reporters to verify information.

“No, the Internet’s not broken,” Jarvis said.

The rise of social media means that “you now hear more
bar-room debates and speculation than before,” he added. “But
that doesn’t mean you should believe it more than you ever did.”

Tom Schrader, managing director for U.S. equity trading at
Stifel Nicolaus Capital Markets in Baltimore, said there were a
lot of clues in the false AP tweet that should have kept traders
from reacting, in particular the wording of the message.

“We saw it, we saw the initial reaction. Initially our
reaction was, pull your bids (until we) see whether this is
legit or not. We found no legitimacy to it and went back into
the market as normal,” he said.

Oli Freeling-Wilkinson is chief executive officer of
Knowsis, a London company that picks out and amalgamates
financially relevant tweets and other social media content for
traders. “We do have spam controls in place, but it’s an ongoing
war,” he said. “It’s much more difficult to work out what’s
going on when people are hacking into official accounts,
especially in the heat of the moment.”

While Twitter has occasionally signaled that it believes it
could become more than a passive distribution network – a shift
marked by last year’s purchase of Summify, a small startup that
specialized in surfacing relevant news – it has also taken pains
to distance itself from the content of tweets and maintain
strict neutrality from a legal perspective.

Twitter Chief Executive Dick Costolo told an Online News
Association gathering last autumn that Twitter’s primary
responsibility was to create a platform, rather than to play an
editorial role in determining which tweets people should see.

“A company trying to build media is creating
or curating content, and that’s not the kind of company we’re
creating,” Costolo said.

Gillmor, from Arizona State, said Twitter did not need to
guarantee the quality or veracity of its content in order to
grow into a media juggernaut.

“It’s not whether Twitter is credible or not, it’s what
people do with it,” he said. “Every news organization feels it
has no alternative but to use Twitter. But everyone at the
traditional news organizations has to be thinking really hard
about what that means, from whether the security is sufficient
on these third-party platforms to what it means to be turning
part of your stuff over to new kinds of publishers.”

(Reporting By Gerry Shih; Additional reporting by Jennifer
Saba, Ryan Vlastelica and Caroline Valetkevitch in New York and
Alina Selyukh in Washington; Editing by Claudia Parsons)

Google’s successful bid came after Apple Inc had
expressed interest in buying Wavii to incorporate the startup’s
natural language technology into Siri, Apple’s voice-activated
personal assistant feature, said the person, who declined to be
named because the deal has not been publicly announced.

Google and Wavii declined to comment.

Google’s purchase comes several weeks after Yahoo Inc
paid a similar amount to acquire Summly, the news
reader and Wavii competitor founded by 18-year-old Nick
D’Aloisio in London.

The deals have taken out of play two small companies that
sought to enhance how consumer experience news – a significant
concern for Google and Yahoo, which both maintain highly
trafficked news sites.

In separate interviews last year, Wavii founder Adrian Aoun
and D’Aloisio acknowledged the competition between the two
startups.

D’Aloisio touted Summly’s superior user interface, which
condenses articles into several easy-to-read paragraphs. Aoun
played up his app’s technology, including a proprietary
algorithm that boiled down complex news stories into sentences
of just a few words.

Wavii’s investors included Paypal co-founder Max Levchin,
former Facebook executive Dave Morin, and Fritz Lanman, a former
dealmaker at Microsoft Corp.

Most of the startup’s employees are expected to relocate to
Google’s headquarters in Mountain View, California.

News of the acquisition was first reported by Techcrunch.