Amazon CEO Jeff Bezos demonstrates the Kindle Paperwhite during Amazon's Kindle Fire event in Santa Monica, California September 6, 2012.

SAN FRANCISCO | Sun Dec 23, 2012 12:33pm EST

SAN FRANCISCO (Reuters) - When Amazon.com Inc CEO Jeff Bezos got word of a project at Google Inc to scan and digitize product catalogs a decade ago, the seeds of a burgeoning rivalry were planted.

The news was a "wake-up" call to Bezos, an early investor in Google. He saw it as a warning that the Web search engine could encroach upon his online retail empire, according to a former Amazon executive.

"He realized that scanning catalogs was interesting for Google, but the real win for Google would be to get all the books scanned and digitized" and then sell electronic editions, the former executive said.

Thus began a rivalry that will escalate in 2013 as the two companies' areas of rivalry grow, spanning online advertising and retail to mobile gadgets and cloud computing.

It could upend the last remaining areas of cooperation between the two companies. For instance, Amazon's decision to use a stripped down version of Google's Android system in its new Kindle Fire tablet, coupled with Google's ambitious plans for its Motorola mobile devices unit, will only add to tensions.

The confrontation marks the latest front in a tech industry war in which many combatants are crowding onto each others' turf. Lurking in the shadows for both Google and Amazon is Facebook with its own search and advertising ambitions.

"Amazon wants to be the one place where you buy everything. Google wants to be the one place where you find everything, of which buying things is a subset," said Chi-Hua Chien, a partner at venture capital firm Kleiner Perkins Caufield & Byers. "So when you marry those facts I think you're going to see a natural collision."

Both companies have a lot at stake. Google's market capitalization of $235 billion is about double Amazon's, largely because Google makes massive net earnings, expected by analysts to be $13.2 billion this year, based on a huge 32 percent net profit margin, according to Thomson Reuters I/B/E/S. By contrast, Amazon is seen reporting a small loss this year.

Amazon shareholders have been patient as the company has invested for growth but it will have to start producing strong earnings at some stage - more likely if it grows in higher margin areas such as advertising. Google's share price, on the other hand, is vulnerable to signs of slowing margin growth.

AD CLASH

Not long after Bezos learned of Google's catalog plans, Amazon began scanning books and providing searchable digital excerpts. Its Kindle e-reader, launched a few years later, owes much of its inspiration to the catalog news, the executive said.

Now, Amazon is pushing its online ad efforts, threatening to siphon revenue and users from Google's main search website.

Amazon's fledgling ad business is still a fraction of Google's, with Robert W. Baird & Co. estimating Amazon is on track to generate about $500 million in annual advertising revenue - tiny, given it recorded $48 billion of overall revenue in 2011. By contrast, 96 percent of Google's $38 billion in 2011 sales came from advertising.

But Amazon's newly developed "DSP" technology, which taps into the company's vast store of consumer purchase history to help marketers target ads at specific groups of people on Amazon.com and on other websites, could change all that.

"From a client's perspective, the data that Amazon owns is actually better than what Google has," said Mark Grether, the chief operating officer of Xaxis, an audience buying company that works with major advertisers. "They know what you just bought, and they also know what you are right now trying to buy."

Amazon is discussing a partnership with Xaxis in which the company would help Amazon sell ads for the service, Grether noted.

Amazon did not respond to an email seeking a comment.

STARTING POINT

Amazon can bring in higher-margin revenue by selling advertising than it can from its retail operations. By showing ads for products that it may not actually sell on its own website, Amazon establishes itself as a starting point for consumers looking to buy something on the Web.

Research firm Forrester reported that 30 percent of U.S. online shoppers in the third quarter began researching their purchase on Amazon.com, compared with 13 percent who started on a search engine such as Google - a reversal from two years earlier when search engines were more popular starting points.

Amazon now sells ads that show up to the side of product search results on its website. There were 6.7 billion display ad impressions on Amazon.com in the third quarter, more than triple the number in the same period of 2011, according to comScore.

That early success is a "huge concern" for Google, whose business relies heavily on product searches and product search ads, said Macquarie Research analyst Ben Schachter.

Partly in response, Google recently revamped its product search service, Google Shopping, by charging retailers and other online sellers a fee to be listed in results.

Founded four years apart in the late 1990s, Bezos has long worried about Amazon's reliance on Google for traffic, according to people close to the company, while also being dubious about Google's high market valuation.

"He'd say: ‘This is the first time in the history of the world where the map maker is worth more than the territory that it's mapping,'" recalled the former Amazon executive of Bezos' comments about Google's popular online mapping service.

TENSIONS BUILD

Google's Android system is thriving but still has not cracked the nut of how to make money from mobile search ads and sales of digital goods like games, apps, music and video.

"If they can figure out mobile ads, that would truly be Google's second act," said Forrester analyst Sucharita Mulpuru.

But Amazon launched a broadside against Google in 2011 with the creation of its own version of Android for its Kindle Fire tablets that replaces key Google money-making services, such as a digital music and application storefront, with its own.

Not unlike Apple, "Amazon wants to control the experience on their devices," said Oren Etzioni, a University of Washington computer science professor. "That doesn't make Google happy."

The two are also clashing in cloud computing software.

Amazon started its cloud business more than six years ago, providing data storage, computing power and other technology services from remote locations. Google only launched its cloud computing business this year, but the market is growing so quickly there is still room to grab share, Etzioni said.

"I would not write Google off," he added. "Amazon has the early lead but it's very early."

TRANSACT OR DIE?

Still, mobile gadgets and cloud computing are currently tiny businesses compared with the multibillion-dollar opportunity presented by advertising and online commerce.

Google recently acquired BufferBox, a company with a network of lockers that shoppers can use to receive packages. It is also testing same-day delivery in San Francisco, hinting at growing interest in a larger role in online retail.

It is not talking about its full plans for retail, but some analysts think features such as same-day delivery or "pick-up" lockers, are valuable features it can use to enhance its existing online ad business. An ad for shoes, for example, might also make the shoes available for pick-up in a locker nearby, said Needham & Co analyst Kerry Rice.

If Google can own the search and the delivery, it will be able to provide the same experience as Amazon, with no inventory - "a higher margin, more efficient model," Chien said.

Earlier this year, Google launched a new certification service highlighting merchants that ship quickly and reliably and backing it with up to $1,000 in "purchase protection."

Google could create a database of products and send shoppers to a page that has a way to buy quickly through the company's payments service Google Wallet, Forrester's Mulpuru said.

Google could then send that transaction to the retailer who would ship the product to the consumer. That ability is critical, according to Schachter, who said if consumers lack the ability to purchase items through Google it will lag Amazon and eBay Inc.

(Editing by Edwin Chan, Peter Lauria, Martin Howell and Maureen Bavdek)

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1 of 14. An automobile sits upside down in the car lot of Mercedes-Benz of Mobile following a winter storm in Mobile, Alabama, December 20, 2012. The first major winter storm of the year took aim at the U.S. Midwest on Thursday, triggering high wind and blizzard warnings across a widespread area, and a threat of tornadoes in Gulf Coast states to the south.

CHICAGO | Sat Dec 22, 2012 10:45am EST

CHICAGO (Reuters) - Holiday travel could be a challenge from Michigan to the central Appalachian mountains as a blast of winter weather including heavy snow and high winds hits the region through Saturday, meteorologists said on Friday.

"Right now the Great Lakes are getting hit, from Lake Michigan to the east," said Pat Slattery, spokesman for the National Weather Service. "The big story for most people is it's going to mess travel up completely."

Pittsburgh is expected to take the biggest blow of any major metropolitan area, with 10 to 18 inches possible by Saturday evening. Western New York, including Buffalo, is looking at up to 14 inches, Slattery said.

The weather could be worse next week, with a potentially "really nasty system" that could bring tornadoes along with hail and high winds across the south on Christmas night into next Wednesday, according to Accuweather.com senior meteorologist Henry Margusity. That could stretch from Louisiana through northern Florida.

A "real big snowstorm" is expected for next Wednesday and Thursday, starting in Arkansas and moving north to Maine, with up to a foot of snow in some places. In New Hampshire and Vermont, "There will be snow on the slopes for New Year's Eve weekend," Margusity said.

This week's winter blast is part of the same system that buried parts of Iowa, Nebraska and Wisconsin in more than a foot of snow on Thursday, shutting down roads and schools.

More than 230,000 homes and businesses remained without power in the eastern half of the United States Friday afternoon, following a series of snow and rain storms, power companies said. The hardest hit states include Michigan, New Jersey, New York and Wisconsin. This was down from 320,000 earlier in the day.

Friday brought sunny weather to Iowa, and the state's Department of Transportation has "every person and every piece of equipment we have out on the roads," according to state maintenance engineer Bob Younie.

"Salt and the sun is going to be our friend today," Younie said. "I'd like think we're going to get the roads back to pretty drivable conditions."

The storm Thursday contributed to a 25-car accident near Clarion, Iowa, that left three people dead.

The winter storm, named Draco by the Weather Channel, began Tuesday in the Rocky Mountains, marking a sharp change from the mild December experienced by most of the nation. High winds kicked up a dust storm in western Texas on Wednesday leading to one death in a traffic accident near Lubbock.

Chicago got just two-tenths of an inch of snow through midnight, but it was enough to end a record streak of 290 days without measurable snow, according to Accuweather.com.

Other snowfalls set records Thursday, including Madison, Wisconsin, with 13.3 inches, beating a previous record of 4.6 inches for the date set in 2000. Even heavier snow fell in Middleton, south of Madison, which got 19.5 inches, Slattery said.

Also setting a record was Des Moines, Iowa, with 12.4 inches, breaking a record of 4.5 inches set in 1925, according to Accuweather.com.

(Reporting by Mary Wisniewski; Additional reporting by Scott DiSavino in New York; Editing by Richard Chang, Gary Hill)

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A Christmas wreath is covered with snow on West 4th Street in Waterloo, Iowa, December 20, 2012.

BUFFALO, New York | Sat Dec 22, 2012 4:56pm EST

BUFFALO, New York (Reuters) - Powerful winds and snow whipped parts of the eastern United States on Saturday, carrying the promise of a white Christmas while threatening to cause problems for the many Americans traveling for the holidays, meteorologists said.

The storm moving in from the Midwest was sending strong winds into the mid-Atlantic states and southern New England. It buried parts of Iowa, Nebraska and Wisconsin in more than a foot of snow earlier this week.

The high winds threatened to delay flights at busy airports in New York, Philadelphia and Washington, meteorologists said.

Due to the winds, departing flights were delayed at Newark Liberty International Airport in New Jersey and at Washington Dulles International Airport, the Federal Aviation Administration said.

More than 87 million Americans are expected to travel 50 miles or more away from home over the holidays, the travel and auto group AAA has forecast. Nearly nine out of 10 will be on the roads, it said.

Residents in and around Buffalo, New York, awoke on Saturday to 4 to 6 inches of snow - the season's first significant accumulation in the notoriously snowbound region.

Typically, the area would have roughly a foot of snow by the Christmas holidays, but there has been little or nothing this year.

"There was something missing," Mayor Rob Ortt of North Tonawanda, New York, just north of Buffalo, said of judging the city's holiday lighting contest in the past week. "I think this was the first year there was no snow, not even a dusting."

"Everyone thinks of us as a place where snow is, and you relish it at Christmas time," he said, adding, "When we have snow around St. Patrick's Day, that's when people get annoyed."

The National Weather Service predicted a few more inches of snow for the Buffalo region on Christmas Eve and Christmas Day.

A new storm could bring snow as well to the central Appalachians, northern mid-Atlantic and southern New England on Christmas Eve or Christmas Day, Accuweather.com said.

Residents of Harrisburg and Scranton, Pennsylvania eastward to Hartford, Connecticut, and Boston could expect a white Christmas, it said.

"It could be a white Christmas after all in Pennsylvania, New Jersey, New York, New England and other areas across the nation," said Alex Sosnowski, Accuweather senior meteorologist.

New York City is likely to see a mix of snow and rain, he said.

RELIEF FOR SKI RESORT OPERATORS

Several inches of snow fell on Saturday in parts of western Pennsylvania. In central New York, snowfall of up to an inch an hour at times was predicted by the National Weather Service.

Ski resort operators in western New York greeted the snow with relief and said the cold air was making conditions ideal for snowmaking.

"It hurts not to be open yet," said Andy Minier, ski racing coordinator at Kissing Bridge ski area, about 30 miles south of Buffalo.

On Saturday, high winds were buffeting the New York City metropolitan area, eastern Pennsylvania, Delaware and New Jersey, the National Weather Service said.

It predicted hazardous conditions due to winds for upstate New York, northwestern Connecticut, southern Vermont and western Massachusetts.

Wintry air blowing off the eastern Great Lakes was causing icy conditions in western and northern Pennsylvania, upstate New York and West Virginia as well, Accuweather said.

On the Gulf Coast, meteorologists say, dangerous thunderstorms and tornadoes are expected on Christmas Day.

The affected areas are likely to be southeastern Texas, central and southern Louisiana, southern Mississippi, southern Alabama and the Florida Panhandle, Accuweather said. Cities in those areas include Houston; Baton Rouge and New Orleans in Louisiana; Gulfport, Mississippi; Montgomery and Mobile in Alabama; and Pensacola, Florida; it said.

(Additional Reporting and writing by Ellen Wulfhorst, Editing by Mohammad Zargham)

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OSLO | Sun Dec 23, 2012 1:02pm EST

OSLO (Reuters) - West Antarctica is warming almost twice as fast as previously believed, adding to worries of a thaw that would add to sea level rise from San Francisco to Shanghai, a study showed on Sunday.

Annual average temperatures at the Byrd research station in West Antarctica had risen 2.4 degrees Celsius (4.3F) since the 1950s, one of the fastest gains on the planet and three times the global average in a changing climate, it said.

The unexpectedly big increase adds to fears the ice sheet is vulnerable to thawing. West Antarctica holds enough ice to raise world sea levels by at least 3.3 meters (11 feet) if it ever all melted, a process that would take centuries.

"The western part of the ice sheet is experiencing nearly twice as much warming as previously thought," Ohio State University said in a statement of the study led by its geography professor David Bromwich.

The warming "raises further concerns about the future contribution of Antarctica to sea level rise," it said. Higher summer temperatures raised risks of a surface melt of ice and snow even though most of Antarctica is in a year-round deep freeze.

Low-lying nations from Bangladesh to Tuvalu are especially vulnerable to sea level rise, as are coastal cities from London to Buenos Aires. Sea levels have risen by about 20 cms (8 inches) in the past century.

The United Nations panel of climate experts projects that sea levels will rise by between 18 and 59 cms (7-24 inches) this century, and by more if a thaw of Greenland and Antarctica accelerates, due to global warming caused by human activities.

GLACIERS

The rise in temperatures in the remote region was comparable to that on the Antarctic Peninsula to the north, which snakes up towards South America, according to the U.S.-based experts writing in the journal Nature Geoscience.

Parts of the northern hemisphere have also warmed at similarly fast rates.

Several ice shelves - thick ice floating on the ocean and linked to land - have collapsed around the Antarctic Peninsula in recent years. Once ice shelves break up, glaciers pent up behind them can slide faster into the sea, raising water levels.

"The stakes would be much higher if a similar event occurred to an ice shelf restraining one of the enormous West Antarctic ice sheet glaciers," said Andrew Monaghan, a co-author at the U.S. National Center for Atmospheric Research.

The Pine Island glacier off West Antarctica, for instance, brings as much water to the ocean as the Rhine river in Europe.

The scientists said there had been one instance of a widespread surface melt of West Antarctica, in 2005. "A continued rise in summer temperatures could lead to more frequent and extensive episodes of surface melting," they wrote.

West Antarctica now contributes about 0.3 mm a year to sea level rise, less than Greenland's 0.7 mm, Ohio State University said. The bigger East Antarctic ice sheet is less vulnerable to a thaw.

Helped by computer simulations, the scientists reconstructed a record of temperatures stretching back to 1958 at Byrd, where about a third of the measurements were missing, sometimes because of power failures in the long Antarctic winters.

(Reporting By Alister Doyle; Editing by Janet Lawrence)

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STORY: Andrew Locke has been obsessed with building for most of his life. This is his latest project - a full scale pinball machine made up entirely of K'Nex pieces, a child's construction toy. He has been receiving these construction kits for Christmas since he was very young. (SOUNDBITE) (English) ANDREW LOCKE, ENGINEERING STUDENT AT UNIVERSITY OF COLORADO, BOULDER, SAYING: "Yeah I think I was about five. My brother and I received a set for Christmas, and he never used it, and I did. And I built stuff for it all the time, and the next year, I got a bigger set, and I used them every year. And I'd build bigger things, and anything that came into my mind, I'd try to build. So yeah, every birthday and Christmas, basically, it was more K'Nex, because my parents knew I'd use them. So they just kind of amassed over the years." For this Christmas, Lock wanted to put his K'Nex collection to good use. He spent four months building the pinball machine, which he estimates is comprised of 20,000 K'Nex parts, including the forty pieces that were from the original set he received sixteen years ago. Lock, now a 21-year-old engineering student, says one of the most important lessons he has learned while building bigger and more sophisticated objects over the years..... is the value of patience. (SOUNDBITE) (English) ANDREW LOCKE, SAYING: "Patience is definitely a big one, there are spots that just don't work, and you think it's going to work and you build it, and it doesn't, and you start throwing things, until it works. And so, I don't know that I've necessarily gained knowledge in engineering school that I applied here, it's more, I just have the patience." Patience...and now the time to enjoy the fruits of his labour over Christmas.

Dec 21 - A 21-year-old student has transformed tens of thousands of K'Nex pieces, a toy construction system, into a full-sized, working pinball machine. Andrew Locke says he was motivated by a love to build, the same obsession that has inspired him to pursue a career in engineering. Ben Gruber reports.

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UPSOT: 'WE WISH YOU A MERRY CHRISTMAS' This Christmas carol rendition might sound faint, but then it is more than a century old. UPSOT: 'WE WISH YOU A MERRY CHRISTMAS' The song was recorded by Cromwell Wall back in 1902.. as his family gathered around the table for Christmas. It's believed to be the oldest Christmas recording ever uncovered... Wall made the recording using a phonograph and wax cylinders. Museum of London's Bill Lowry says the fact that the cylinders have survived all these years.. is hard to believe. Lowry and a team of digital sound restorers have spent months carefully digitising these recordings and bringing them back to life. SOUNDBITE (English) BILL LOWRY, DIGITAL COLLECTIONS MANAGER FOR THE MUSEUM OF LONDON, SAYING: "I've taken the digitised recordings and used current technology to try and reduce the surface noise, but I haven't wanted to go too far because if you take away the crackle and the other noises that come away they you reduce the authenticity of the recording." UPSOT: PIANO PLAYING The fragile cylinders' individual grooves were first carefully cleaned with a fine brush before the audio was digitised. Lowry then used sound restoration technology to delete and repair glitches - attempting to re-create how the recording would have sounded when they were made. UPSOT: CROMWELL WALL SPEAKING That is Cromwell Wall addressing his family on Christmas day 108 years ago. Museum curator Julia Hoffbrand says 24 of these century old recordings were successfully resurrected. She has her favourite. UPSOT: CHURCH BELLS PEALING SOUNDBITE (English) JULIA HOFFBRAND, SOCIAL AND WORKING HISTORY CURATOR AT THE MUSEUM OF LONDON, SAYING: "There's an amazing recording of the bells of Old Southgate church pealing in the New Year 1904. Cromwell apparently wheeled up the phonograph in his children's pram over a mile at midnight to record the sound of the bells." Wall family descendant David Brown donated the recordings to the museum in 2008. When they were finally converted, Brown's relatives gathered to hear the unique blast from the past. SOUNDBITE (English) JULIA HOFFBRAND, SOCIAL AND WORKING HISTORY CURATOR AT THE MUSEUM OF LONDON, SAYING: "Oh, they were very excited. Some of them hadn't heard their grandfathers speak before and it was quite emotional. They were very thrilled." And as they gather for this year's Christmas turkey the current Wall clan will raise a glass to their ancestors - thanking them for providing a such a memorable window into the past. UPSOT: WALL FAMILY MEMBERS SHOUTING 'HIP HIP HOORAY'

Dec 21 - The earliest known Christmas home recordings have been brought back to life. Using state-of-the-art sound restoration technology, experts at the Museum of London have managed to resurrect Christmas Carols performed and recorded by an affluent English family more than a century ago. Jim Drury reports.

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