In the fast-evolving advertising arena, Spongecell is a prime example of how a hard pivot with different technology in place can transform a company’s fortunes.

On Tuesday the New York company, which adds interactive functions such as video and Twitter feeds to banner ads, announced it raised $10 million in a Series B round led by Safeguard Scientifics. Spongecell CEO Ben Kartzman says the new funding will go towards product development and other needs. More importantly, though, Kartzman also says Spongecell more than doubled its revenue last year compared with 2010, as he previously expected.

As Spongecell fills its coffers, grows its staff, and expands into new territory, it is hard to imagine that four years ago the company was running out of cash, letting employees go, and searching for a new direction.

Spongecell’s current technology transforms static banner ads into more interactive tools to engage consumers. In addition to Twitter and other social feeds, Spongecell can insert video, maps, coupons, and other features in the ads to grab attention. For example, when users mouse over banner ads for the Mini Cooper the ad plays a video clip that promotes the car. “Video is the fastest-growing segment of the online ad space,” Kartzman says.

Including the latest funding, Spongecell has raised about $14 million in total from backers that include Google executive chairman Eric Schmidt. In 2010, Spongecell generated $3.8 million in revenue and Kartzman says the company more than doubled that figure in 2011, though he declined to give specific numbers.

That is a much different tale compared with Spongecell’s early history. The company, founded in 2006, initially offered a widget platform for ad agencies to use for online promotions. When that did not bring in enough business and Spongecell’s cash ran … Next Page »

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If you’ve turned on your TV anytime in the last, oh, decade or so, you’ve no doubt been bombarded by ads imploring you to “ask your doctor” about Drug X. And you’re well familiar with the routine: You get treated to happy images of folks dancing, perhaps, or walking their dogs in pretty green meadows, while a soothing voice in the background tells you that Drug X may cause you to lose your ability to drive safely, lose your vision, or lose your mind.

Forgive the exaggeration but you get the picture.

Well, the FDA isn’t pleased with the pharmaceutical industry’s advertising practices. So it’s proposing a new set of rules that would not only limit the ability of drug advertisers to use so many cheerful images, but may indeed force them to place more emphasis on their products’ potential side effects.

The FDA actually proposed the new rules back in 2010. But it re-opened the matter to public comment on January 27, after it published the results from an experiment it sponsored to measure the impact of distraction on consumers’ ability to understand the risks and benefits of drugs being advertised. The rules would pertain to direct-to-consumer (DTC) ads for prescription drugs on television or radio.

The original proposal is rather bulky. But here are the basics of what the FDA is suggesting: The agency wants to amend the rules for DTC advertising to more clearly define the standards for determining whether side effects are presented in a “clear, conspicuous, and neutral manner.” For example, the new guidelines would dictate that the adds cannot include “distracting representations,” such as statements, images, or sounds that might draw the audience’s attention away from those laundry lists of potentially adverse events.

So what exactly makes an ad distracting? The FDA’s proposal doesn’t really spell it out clearly, but you can get a hint of what the agency was thinking in the newly released report on its study, which it titled, “Experimental Evaluation of the Impact of Distraction on Consumer Understanding of Risk and Benefit Information in Direct-to-Consumer Prescription Drug Television Advertisements.” The FDA planned the study to answer a number of questions. Among them: Do visual images that are positive in tone affect viewers’ ability to comprehend the risks inherent in a product? Do positive images influence how people feel about the product? And if the advertiser super-imposes text onto the images—spelling out the side effects—does that change how viewers perceive the product?

All good questions, to be sure. To answer them, the FDA asked 2,000 consumers to go online and watch an ad for a fake blood-pressure drug called Zintria. But the participants didn’t all see the same ad. Some heard the side effects cited while watching “mildly” positive images (rocks, chairs, metal arches), while others saw “strongly” positive images (babies, puppies, girls jumping with beach balls). Some viewers saw the side effects spelled out in superimposed text, while others didn’t.

Not surprisingly, those who watched cute babies and puppies while hearing about the side effects felt better overall about the product than those who watched the more boring images. Both groups, however, understood Zintria’s risks just fine—and they really got it when the side effects were displayed on the screen in clear text, too.

The FDA has published the study on the Web and re-opened the proposed rules to comments, which the public can submit up until February 27 (instructions below).

We here at Xconomy are plenty distracted by the plethora of peppiness in drug advertising. Here are our votes for … Next Page »

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Snapette was supposed to be an unusual way for Sarah Paiji to spend the summer between her two years at Harvard Business School. It was a mobile app idea she started working on last winter with Harvard alum Jinhee Ahn Kim, aimed at enabling women to better share and find fashion products in brick-and-mortar stores.

Then, two days before school was set to wrap up that first year, a Twitter interaction with the colorful Silicon Valley investor Dave McClure more or less changed all that, Paiji says. She tweeted an infographic about local shopping, which McClure then retweeted. He also directed his Twitter followers to sign up for the Snapette fashion app. The resulting traffic clued Paiji in to the fact that McClure was someone important in the startup world.

At the suggestion of friends, Paiji reached out to McClure, who runs the 500 Startups seed fund and accelerator in Mountain View, CA, to share some more information on her company. “He liked the idea but said he doesn’t know anything about fashion,” she says. So McClure passed Snapette along to his 500 Startups partner Christine Tsai and Jess Lee, founder of fashion tech startup Polyvore, to take a look at the company. Snapette got the OK, the 500 Startups fund invested an initial $50,000, and Snapette left its digs at Boston’s MassChallenge program to join McClure’s accelerator—three weeks after it had already started.

Now, Paiji is working full-time on Snapette and has no foreseeable plans to return to business school. The 500 Startups demo day in August put Snapette in front of 700 investors.”If they’re interested, it’s hard to say you’re going to back to school and will do this on the side,” says Paiji.

“It was very thematic of the whole journey: unexpected,” she says.

(And this isn’t the first startup I’ve written about whose Twitter interactions with McClure ultimately led to inking an investment from him. The other one would be Cambridge, MA-founded and now San Francisco-based Baydin.)

Snapette officially launched its app in late August in conjunction with demo day, and Kim and Paiji finished up the year at Dogpatch Labs in Palo Alto, CA. The company also continued to be a part of the MassChallenge program remotely, Paiji says.

Just last month, it made the move to New York City (to Dogpatch Labs, again) to be near the “high shopping density of boutiques and users,” says Paiji, who I caught up with in Boston this week.

There’s plenty of buzz around social, local, mobile, and even fashion tech startups. So what makes Snapette different? Most of the plug-ins and apps and platforms aimed at better tailoring shopping to consumer preferences exist in the online world. Not so much for the physical world. “Our idea was, we would love to help women find great products in stores using crowdsourcing,” Paiji says.

Snapette’s iPhone and iPad interface provides a stream of product pictures that have been uploaded by the user community, with information on the brand, price, and store that carries it. Users can search streams near them, and get directions to the store selling the products nearby. They can also interact with and follow others in the Snapette community, share products to other social media outlets, and view a stream of what products are hot and trending based on likes and comments on Snapette.

“It feels like Pinterest for the real world,” says Paiji. (The comparison had to be drawn.)

Snapette has since expanded beyond this crowdsourced content, and is explicitly partnering with brands and boutiques looking … Next Page »

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Mark Lowenstein has made some pretty bold statements about what’s going to happen in the wireless industry this year. More mergers and acquisitions among mobile operators. Same goes for the handset makers. Mobile payments won’t take off just yet. And enterprises may have jumped the gun on tablets.

Lowenstein, a Verizon Wireless veteran and now managing director of the Boston-area consultancy Mobile Ecosystem, dishes out insights like this via his regular e-mail newsletter on the mobile industry, but I wanted to dig in with him a bit more deeply on what these big changes mean for startups and other innovative companies working in Boston and beyond.

Plus, the Xconomy newsroom has been a bit buzzy with mobile news lately, after we just announced our fourth annual half-day forum on the subject, Mobile Madness 2012 on March 14.

Lowenstein, an Xconomist, pinpointed a couple of different facets of mobile technology that aren’t necessarily new, but that are maturing and hitting new stages. Read on for those, and some of the startups around the country that are driving these trends.

—Enterprise Mobility: Big companies have been scrambling to put a mobile face on their business, and startups have been sprouting up or changing their approach to support them. “It’s not just about mobile enabling what they’re already doing,” says Lowenstein. “It’s about how it can be an additional potential revenue stream for them.” In fact, just this morning Framingham, MA-based Staples, one of the world’s largest retailers, announced it would be setting up a new e-commerce innovation facility in Kendall Square, with mobile as a big focus.

Businesses that need to build consumer-facing, brand-specific applications will continue to turn to mobile strategy and consulting firms to do the heavy lifting.

And companies that have previously developed individual applications for enterprises are now starting to sell the tools that allow companies and brands themselves to move much of their activity to the mobile front. That includes Boston-area firms like Raizlabs, Apperian, Modo Labs, and most recently, Verivo Software (formerly known as Pyxis Mobile).

—The App Marketplace. Speaking of apps, enough is enough. It’s been about four years and around half a million apps since Apple introduced its iTunes app store. “It’s been terrific, but one gets the sense that it needs to get to the next and more mature stage,” says Lowenstein. Meaning, a majority of apps don’t have a company behind them, don’t get updated, and don’t really make money. “They’re a fad, a fly … Next Page »

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This is a story about what goes on under the hood of your smartphone or tablet device. It’s also about Yahoo, the troubled Santa Clara-CA based advertising and information giant. But Yahoo doesn’t make a single mobile gadget of its own. So what’s the connection?

It turns out that Yahoo (NASDAQ: YHOO) has ambitious plans to help publishers get more efficient about how they push content out to mobile devices. Specifically, Yahoo wants to become the new middleman of the mobile publishing world, giving media companies software that they could use to reach users of iPhones, Android devices, Windows phones, and other gadgets without having to bow to the programming approaches favored by their powerful makers—namely Apple, Google, and Microsoft.

To show how the system might work, Yahoo launched a fancy personalized news app back in November called Livestand. The app lets you select feeds from Yahoo partners like Forbes and ABC News and browse their stories on customized, magazine-like pages. It’s full of nifty user-interface elements like a 3D sideways-scrolling publication gallery. So far Livestand only runs on the Apple iPad, and at first glance it’s pretty similar to Flipboard, Zite, Google Currents, and a number of other social news reader apps. But Livestand’s true importance is as a demonstration of what’s coming. The unique and potentially revolutionary thing about the app is its software design: it may look and act like a native iOS app, but it’s mostly written in Javascript and HTML5, the languages of the Web.

Bruno Fernandez-Ruiz

How Yahoo pulled this off, and what it could mean for content owners who don’t want to put all their eggs in Apple’s basket—or Google’s, or Microsoft’s—was the focus of a long Xconomy interview last week with Bruno Fernandez-Ruiz, chief architect for Yahoo’s platform technology group in Sunnyvale, CA. I’d heard Fernandez-Ruiz speak before about how Yahoo is betting on HTML5—the next-generation version of the markup language underlying all Web pages—as an antidote to overreliance on proprietary operating systems like Apple’s iOS. “If you only work in iOS you are bound to the rules of iTunes,” he said at a December talk in San Francisco. “Publishers want pixel-precise, ‘Cupertino-like’ experiences—and we can do that, but also make layouts fluid,” he said.

I wanted to know more about exactly how Yahoo can do this, so I invited Fernandez-Ruiz to my office and quizzed him about the state of mobile software architecture, the role of the Platform Technology Group inside Yahoo, and the true significance of Livestand. The story he told will be eye-opening for anyone who was under the impression that the future of mobile apps is in Apple and Google’s hands alone. Those two companies may control the lion’s share of the smartphone market at the moment, but if Yahoo goes through with plans to share the tools behind Livestand with outside developers, it could help push the siloed mobile-app world back in the direction of the open Web, where no single company is able to dictate how online software and services should work.

The first thing you need to understand about Yahoo’s publishing vision is that it’s coming from the Platform Technology Group. This is the same part of the company that created and then open-sourced key technologies that are now part of the Web’s infrastructure, such as Hadoop, which allows companies to run big, distributed software systems, and YUI, a library of JavaScript tools for building rich Internet applications. Yahoo built many of these tools as part of an effort that began more than half a decade ago to reduce what Fernandez-Ruiz calls a “technical debt.” The company was weighed down by all of the separate technologies its engineers had built to support services like Yahoo Music and Yahoo Movies, and it needed a central platform. “There was a realization around that time that we had to switch the company from being vertical to being horizontal, and start creating reusable technology that we could deploy across the whole place,” he says. “That is how Hadoop got started, for example.”

Technologies created by the Platform Technology Group, such as Yahoo’s Content Optimization and Relevance Engine (C.O.R.E.), also help the company and its partners tailor content to appeal to specific users based on their demographics. Fernandez-Ruiz says click-throughs increased 300 percent after Yahoo applied C.O.R.E. to … Next Page »

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Web startups, venture firms, life sciences companies, and a biofuels developer rounded out the deals news this week.

—Cambridge, MA-based Flagship Ventures announced it had closed a $270 million fund, surpassing the $250 million it had originally targeted for its fourth fund.

—Extreme Reach, a Needham, MA-based startup developing cloud storage technology for delivering video ads to TV and Web publishers, said it closed a $9 million credit line from TD Bank. The startup also acquired commercial talent rights management and payment firm Spotlight Business Affairs, in a deal that enables Extreme Reach’s ad distribution system to be in compliance with existing talent and rights agreements.

—Massachusetts regained the number two spot for venture funding and deals in the fourth quarter of 2011, with $959 million invested in 93 transactions, according to a report from the data firm CB Insights. Nationally, venture dollars and deals had their strongest showing in a decade, at $30.6 billion invested in 3,051 deals.

—Cambridge-based Constellation Pharmaceuticals inked a drug development deal with Roche’s Genentech unit that’s worth $95 million in an upfront payment and three years of research support. It’s also eligible for milestone payments and royalties on the products that could potentially result from the deal.

—Bedford, MA-based Joule Unlimited announced it had pulled in $70 million in financing from the aforementioned Flagship Ventures and other new and existing investors whose identities it did not reveal. The money will go to a New Mexico facility that Joule hopes will demonstrate its ability to scale its technology for producing fuels from sunlight and carbon dioxide.

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Some interesting developments in ad distribution and video this week. Needham, MA-based Extreme Reach, the maker of a video-ad platform for TV and Web, has secured more money for its growth and has made an important acquisition.

Extreme Reach said today it has closed a $9 million credit facility with TD Bank. The company also has acquired Spotlight Business Affairs, a commercial talent rights management and payment firm, for an undisclosed sum. The details sound kind of gnarly, but basically the deal means the company’s ad distribution system will be in compliance with existing talent and rights agreements.

The idea behind Extreme Reach, which started in 2008, is to help video advertisers and agencies distribute ads to TV stations, cable networks, and Web publishers—all with cutting-edge cloud-based storage and processing technology. Last September, I reported that Extreme Reach was growing fast and looking to raise a big financing round. Chief executive John Roland said at the time that the company was very profitable and had grown from 17 employees to about 90 in the previous two years, with 20 more hires and geographic expansion imminent.

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[Updated 12:20 pm] Here are a couple of notable Boston-area deals in digital advertising and marketing, each with a certain je-ne-sais-quoi European flair. Plus one more local company worth watching…

—Neolane, a social marketing tech company based in Paris with North American headquarters in Newton, MA, has closed a $27 million financing round led by Battery Ventures. The company’s previous investors also participated in the round. Neolane, which has 240 employees globally—just under 50 in New England—says it will use the money to expand its operations, particularly in North America. Neolane says it competes with IBM/Unica, Aprimo, and SAS.

—DataXu, the Boston-based digital advertising and marketing startup, has acquired U.K.- and Germany-based Mexad, a top European “demand-side platform” provider (meaning it gives advertisers tools to optimize when and where they place ads). Terms of the deal weren’t given. DataXu makes a software platform for advertisers who want real-time information and insights on consumer behavior across Web, mobile, and video channels. I spoke with CEO Mike Baker last year about DataXu’s recent growth and strategy in the ad-tech sector.

—ClickSquared, a Boston marketing software startup, has closed $9 million in equity financing led by Staley Capital, with existing investors also participating. The company, which started in 1999, does e-mail marketing and delivery, customer analytics, and campaign management, among other things. [This deal was added to the roundup after the first two were published---Eds.]

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MediaBrix, a New York-based developer of a social media advertising platform, closed a $4 million Series B funding round. MediaBrix CEO Ari Brandt says Edison Ventures was the sole investor in the round. Edison Ventures principal Ryan Ziegler, and Mike Leo, CEO of the advertising software maker Operative in New York, joined MediaBrix’s board in conjunction with the new financing.

MediaBrix’s platform lets brands create ads that run via social games, Facebook, and other social networks. Its customers include brands such as Nikon, Paramount Pictures, Chrysler, and The CW Network.

Brandt says his company’s platform plugs into the application programming interfaces (APIs) of social networks and shows the ads during natural breaks in the action of apps and social games, like when players complete tasks or reach new levels. “They can run video, polling, or store locators,” Brandt says. The ads appear in games created by developers such as 50 Cubes in San Francisco and PuzzleSocial in New York.

MediaBix formed in May when Germany’s Smartclip spun out its North American division, Smartclip USA, through an asset transfer sale, Brandt says. SmartClip USA was renamed and reincorporated as MediaBrix, he says. MediaBrix also closed a $1.5 million Series A round in May led by Revel Partners.

Brandt says the Series B funding will got towards accelerating product development as well bulking up the technology and sales teams. MediaBrix has a staff of 17 and Brandt says the company plans to hire up to 15 employees within the next four months.

Earlier this month, MediaBrix hired new senior sales staff in Los Angeles, which opened its office this week, and Chicago.

With the latest funding under its belt, MediaBrix is in no hurry to chase more cash. “The plan is to grow organically right now,” Brandt says. “This round should carry us to where we want to be.”

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Kirkland, WA-based digital discounts startup Pirq has raised $1.95 million from Rally Capital, the venture firm headed by former Nextel CEO Dennis Weibling. Pirq is led by CEO James Sun, an entrepreneur best known for appearing on the NBC program “The Apprentice” with Donald Trump.

Sun says the money will be used to expand Pirq’s employee base by adding developers and sales staff to its team of about 30 people. Pirq offers an iPhone and Android app that lets users get real-time coupons from places to eat or drink in their area. But it doesn’t work on a group-buying model like deals-industry leaders Groupon or Living Social.

Instead, Pirq installs a software program that monitors the ebb and flow of business and allows restaurants, coffee shops, and other vendors to offer special prices during slow times to get people in the door.

Sun says that’s proven popular with clients like Zoka, a Seattle-area coffee shop that uses Pirq’s service. Sun says Zoka had run a Groupon offer before, but was inundated with customers all at once, irking both the deal-seekers and the regulars who had to stand in a big line. Pirq is intended as a more nuanced way of using coupons to fill in gaps in the business.

Interestingly, Sun says there is still a good amount of early stage investor interest in startups considered part of the “deals” phenomenon, even after Groupon’s sometimes-wobbly IPO and questions over the sustainability of the fast-growing businesses. In fact, Sun says, Pirq chose to do a smaller round with local investors even though some notable (but unnamed) names in California were interested. That gives the startup, which is currently earning revenue, the potential to raise more money later at a higher valuation, Sun says.

That reminded me of some recent comments from Martin Tobias, the CEO of Seattle’s Tippr, who thinks that local deals done right still have a lot of future because they are finally delivering on the promise of online advertising for small, service businesses.

“In the valley, they’re still very bullish on this whole idea of deals and local—especially if you’re playing in mobile commerce,” Sun says.

You can see on the SEC form that Pirq’s parent company, GeoPass, was considering investments of up to $5 million before settling on the just-under $2 million figure from Rally. Pirq is a joint venture with Passport Unlimited, a company that offers discount memberships at higher-end restaurants. Passport Unlimited’s Roger Blier is Pirq’s chairman.

Pirq currently only operates in the Seattle area, but plans to reach into more markets soon, and could add verticals beyond restaurants and other hospitality businesses in the next year or so. Sun wouldn’t discuss any download numbers, but said that Pirq’s goal is to get about 100,000 downloads whenever it enters a market. The startup currently has about 170 merchants signed up in the Seattle area, he says.

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Boston-based Fiksu, a startup focused on mobile app marketing, is introducing a new service today that it says will get consumers paid mobile apps for free, while still bringing mobile app developers revenue and traffic.

The service, FreeMyApps, allows consumers to rack up credits by trying free, mostly advertising-supported apps from select sponsors, and then redeem those credits for paid, premium-content mobile apps. The developers of the free mobile applications bid to promote their apps to consumers in the FreeMyApps system, similar to the way they would bid in other online advertising platforms. Paid app developers, meanwhile, also bid to get their content in front of consumers who are ready to cash in their app credits. The hope is that the FreeMyApps platform will drive a great enough volume of users and downloads that the price paid for the bids and the iTunes store cut will be worth it.

The consumer doesn’t have to put in cash for premium content apps, just their time testing out other free apps. “What’s so unbelievably exciting about the process is that the consumer wins big,” says Fiksu vice president of business development Craig Palli.

Fiksu got its start in 2008 under the name Fluent Mobile, as a developer of a news aggregator mobile app. The startup pivoted its business to mobile app customer acquisition after realizing how much effort and money it had put toward getting users to download the news application, CEO Micah Adler told me in an interview this past spring. Since 2010 Fiksu has offered an algorithm-based platform called Fiksu for Mobile Apps for helping mobile publishers more cheaply and efficiently find loyal users of their apps.

FreeMyApps relies on the same algorithms as the Fiksu for Mobile Apps, and both services tap into existing mobile traffic sources and real-timing bidding exchanges to determine which sources will likely yield loyal customers The high volume of bidders is supposed to keep costs down for developers. The services are complementary to one another, says Palli, but FreeMyApps offers additional insight on which bids lead directly to app downloads. The company said that it has about 15 to 20 mobile app developers enlisted on both the paid and free side of the FreeMyApps service for today’s launch.

FreeMyApps requires consumers to complete quite a few steps to score a roughly $1 mobile app for free. But Palli said the FreeMyApps team has been testing the service among consumers for a few months, and “the response from consumers has been fantastic.”

Whether FreeMyApps’ strategy for recruiting engaged app users is effective may depend on the quality of apps that plug into its ecosystem. We’ll have to keep an eye on which apps developers choose to promote, and how much consumers are willing to work for their “free” bonus.

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Beware of CEOs who dress like their company logo. Beware of Jason Baptiste.

Just kidding. Baptiste is one of the most intensely likable startup founders around (emphasis on intense). His company, New York-based OnSwipe, is trying to take the tablet publishing world by storm. And not just with its aggressively stylish magenta-and-black color scheme.

OnSwipe makes a software platform for publishers to display their content and ads on tablet Web browsers, starting with the iPad. If that sounds a bit similar to Google Currents, the mobile publishing app that the Web search giant unveiled last week, well, Baptiste doesn’t seem too worried about the competition. In response to an article saying that “Google Currents might be OnSwipe’s nightmare,” Baptiste tweeted: “I fear Currents like Twitter feared Buzz and YouTube feared Video.” (OK, he doesn’t lack for confidence.)

We caught up with Baptiste earlier this month in Boston, where he spoke about the deeper ideas behind OnSwipe at Xconomy’s “6×6: Six Cities, Six Big Tech Ideas” conference (you can see photos here—Baptiste represented New York with flair). He also shared some broader views on the future of Web content and advertising, and argued for OnSwipe’s vision of browsing via tablets and touchscreens.

“Instead of a world with ugly text-like ads, we’re going to see a world with beautiful full-page, magazine-like advertising that will finally fill the gap” in the $50 billion in ad spending that’s expected to move from print to digital media, Baptiste said after his talk.

In a short video interview produced by my colleague Lilly O’Flaherty, Baptiste talked a little more about OnSwipe’s specific goals and challenges. You should check out the video below, but here are three highlights to whet your appetite:

1. “The tablet is the TV of this generation.”

2. “It’s not going to be 300 channels or 3,000 channels, it’s going to be millions of channels.”

3. “If Google gained its distribution by powering search, OnSwipe wants to gain distribution by powering [tablet browsing] experiences.”

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When you run a startup that focuses on mapping the floor plans of retail stores, there’s this inevitable question: What happens when Google, the company that has already mapped the entire world, decides to do the same thing as you? Josh Marti, the CEO of Seattle-based Point Inside, has heard it plenty of times.

“And our answer was always, yeah absolutely—whether they use our maps or their own maps, they’re going to see the value that indoor maps bring,” Marti says. His job as an entrepreneur is to make sure Point Inside is offering something more valuable.

That particular part of the job got even more important last week, when Google (NASDAQ: GOOG) announced that it was indeed bringing indoor layouts to the latest version of its maps application for Android.

As we’ve reported before, Point Inside thinks partnering with big players in location services can be good for its business, so I wondered whether Google’s new offering included the Seattle startup’s maps. Turns out, that’s not the case—Google appears to be partnering with retailers on its own, and also appealing to retailers to submit floorplans themselves.

Marti took this challenge head-on earlier this week during his demo of Point Inside at Xconomy’s Mobile Madness Northwest, a packed half-day forum on innovation in mobile computing. As Point Inside also detailed on its blog, the question isn’t necessarily whether Google can successfully map indoor spaces, he says—it’s whether Google’s business model of selling ads within those stores will be appealing to retailers.

To illustrate the point, Marti pulled up Google’s app and navigated over to a Home Depot store. Once there, he searched for “paint,” and was promptly redirected to a Lowe’s down the street.

That got some pretty hearty laughs from the crowd. But it’s serious stuff, both for retailers and smaller companies like Point Inside, which has some 1,300 locations using its indoor mapping service.

Marti puts it this way: Google’s overarching business model has been to index large amounts of information, attract eyeballs, and sell advertising. For a retailer, that could be a scary proposition: If Google makes the map, who owns the advertising inside your own store?

“Right now, the way it’s deployed today, it’s certainly a scenario where if you invite them in, you’d better be prepared to pay them to keep the competition out,” Marti says. “Assuming that the business model for websites is the same business model for physical locations, you’ll see that competitors are going to start buying ad words against each other and ad locations against each other.”

To be fair, that sounds like some pretty classic fear, uncertainty, and doubt from a competitor. And Marti is quick to acknowledge that this is still the very early public version of Google’s indoor mapping product—there’s no definite way of knowing how it will shake out.

But in any case, Marti says Point Inside is confident that retailers will want to retain more control over their shoppers’ trips through the aisles. That’s what the Seattle startup, which presently has about 30 employees and is seeing growing revenue, offers through a white-label service for indoor navigation apps.

“They have a real opportunity to control their brand experience as well as maintain the relationship with their customers,” Marti says. “And that’s an important, lifelong theme for the retailers—they hate to be disintermediated by anybody.”

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How annoying is the Web? I’m not talking about the nonstop distractions, the social-media window into human stupidity, or even the endless pop-up ads that block your view of the screen. I’m talking about the utter loss of privacy that most consumers have suffered online, yet rarely think about.

Sure, the Web is a net positive (we hope), but there are costs. When you visit any website, you leave a record of who you are, where you are, and what you looked at. That by itself might not be traceable to your specific identity, but over time, sites can track you via social media, share buttons (Facebook “likes,” even if you don’t click them or log in), check-ins, and other online activities. Companies can then show you personalized ads based on your product preferences, zip code, and history of Google searches. Worse, they can create a profile of your activities, often combined with data from public records, and sell it to other companies to do whatever they want with it.

Trying to combat all of this is a small Boston tech startup called Abine (pronounced “uh-BEAN”). Its name stands for “A Bit Is Not Enough.” The company is working to give consumers more control over their personal information on the Web. I’ve heard a fair amount about this startup over the past year, but I recently had a chance to meet co-founder Andrew Sudbury and CEO Bill Kerrigan over a beer.

The timing seems good for Abine, what with the massive flak Facebook has been taking over user privacy lately. As Sudbury points out (along with others), Facebook treats its users not as customers, but as products. Meaning that each social network member’s profile, with its likes, recommendations, and social connections, can be thought of as just part of a $100 billion machine for marketers.

“We don’t want our users to be our product,” Sudbury says. Instead, he says, consumers pay Abine to help shield them from Web tracking and other misuses of their personal information. “We want to sell privacy services,” he says. “We want to be at the point of contact between the user and the net. We want them to use the Web without worrying that all their data is flying out the door.” For example, “users think they’re going to Boston.com, but they’re really going to 10 other websites,” Sudbury says. (That’s because their browser fetches different pieces of the website from other sites—things like ads and snippets of code that let advertisers know a little bit about who each visitor is.)

So what does Abine do about it? The company makes add-ons for browsers like Internet Explorer, Firefox, and Chrome; at the moment, different pieces of its software work for different browsers. The software, called Do Not Track Plus, blocks unwanted tracking by detecting all tracking requests … Next Page »

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Step right up, ladies and gentlemen, and behold…the eighth wonder of the world. No, not King Kong, I’m afraid. But how about a computer that can read and interpret human emotions and mental states?

That would be from Affectiva, a Boston-area startup co-founded by Roz Picard, a 20-year veteran of the MIT Media Lab. Picard (see photo, right) is the founder and director of the Media Lab’s Affective Computing research group, and she has done extensive work in computer vision, machine learning, and human-computer interfaces, with applications in autism communication, health and wellness, education, marketing, advertising, and other areas.

Picard is speaking at this Thursday’s Xconomy “6×6” event (Six Cities, Six Big Tech Ideas) in Boston. In advance of her appearance there, I sat down with Picard at Affectiva’s offices this week to get a demo of the company’s technology and to talk a little about the future of emotional and gestural interfaces.

One of the demos involved a computer tracking my facial expressions via webcam (and also my heart rate via blood flow to my face) while I watched a series of TV commercials. Based on indicators like raised eyebrows, smiles, or a furrowed brow (see example, below), the software tried to figure out how engaged, interested, amused, or disturbed I was during the course of each ad. It’s hard not to be self-conscious during all this, but I’m pretty sure the computer concluded: this guy hates all commercials. (And since I haven’t smiled since 1995, we’ll enlist my fellow editor Erin Kutz for the live demo on Thursday.)

Affectiva also will be rolling out a new product on Thursday—one that has applications in finance and healthcare, among other industries—but I’ll let Picard speak for that when the time comes.

Meanwhile, I asked Picard whether the field of affective computing would continue to advance incrementally (like speech recognition, say) or whether it would undergo a breakthrough of some kind. “I think it’s going to make some leaps,” she said. “There’s going to be a lot more happening by indirect measurement—nonverbal [cues] that people don’t really think machines can do. That’s going to really progress.”

To me, Picard’s work exemplifies what truly big ideas are about—for the first 20 years or so, they might be more interesting scientifically than commercially. But once the technology and marketplace gets to a certain point, a viable business can be built around them, even as the science continues to advance. And then who knows what will happen?

We’re looking forward to a fantastic 6×6 program and some great networking this Thursday (you can register here). Hope to see you there.

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Serial entrepreneur Ric Calvillo had planned to stay away from enterprise customers with his newest venture. He’s now CEO of Nanigans, a Boston-based startup that offers a Facebook advertising platform for enterprise customers with a couple thousand dollars to spend a day on online ads. Oops.

“We’re scaling right now with large accounts,” he says. “That’s exactly what I didn’t want to do”

Calvillo has twenty-plus years starting and running infrastructure software companies, like Conley, which sold to EMC in 1998. His last venture before Nanigans was Incipient, a company that sold its data storage virtualization and migration software largely to enterprise customers in the financial services space. “I picked financial services at the worst possible time,” says Calvillo. The startup, which raised $95 million in venture capital, struggled to gain traction and sold its intellectual property assets to Texas Memory Systems in 2009. Hence his resistance to the enterprise world.

Nanigans’ big customers aren’t huge financial firms, but companies in the fashion e-commerce, social gaming, and deal-a-day spaces, says Calvillo.

After getting out of Incipient, Calvillo says he spent time thinking about the next software space to play in. Cloud, SaaS, and social all came to mind, he says. Nanigans starting buildings its ad platform code (off of the Facebook Ads application programming interface) in November 2009 and incorporated in 2010.

“There’s a lot of room for innovation in the advertising optimization area in social,” he says.

Part of that optimization is “closed-loop feedback,” says Calvillo. Online ads can be tracked to see how they lead to actions like attracting new fans for a brand’s Facebook page or prompting customer purchases. But that feedback wasn’t being used to inform and adjust future ad spend on Facebook, says Calvillo. And that’s what Nanigans is looking to change.

Nanigans’ product, called Ad Engine, first measures the success of an ad campaign, then uses that information to automate decision making, like how much to spend on an ad bid and which audiences to target. The software can use historical data to determine how much a click on an ad should be worth in the future. And it can decide which Facebook users to put ads in front of based on variables like age, location, and likes on users’ Facebook profiles.

Nanigans is looking to take the human grunt work out of monitoring and optimizing Facebook ads. The engine only requires a person to input the ad graphics, their total budget for a campaign and daily maximum spend, and a genre for their product. “The system knows similar campaigns we’ve run, what are good audiences, and what audiences do we have that are known to work for those genres,” says Calvillo. It uses this information to plug the ad into the feedback loop and constantly optimizes based on the information and predictions it generates.

And Nanigans isn’t just making those predictions and changes based on how many clicks an ad gets, but how … Next Page »

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Three quick items from around the Seattle-area tech scene this week:

—Clearwire (NASDAQ: CLWR) shares have fallen sharply again on word from new CEO Erik Prusch that the Kirkland, WA-based wireless provider could skip an upcoming debt payment. Prusch discussed that possible step in an interview with The Wall Street Journal.

The Associated Press and ZDNet quote separate industry analysts’ reports with somewhat contradicting takes on the news: Optimism that majority shareholder Sprint could kick in much-needed cash, and skepticism that Sprint would pay up unless there’s some sort of restructuring.

The math is pretty clear: At the end of the third quarter, Clearwire had about $700 million in cash and about $4 billion in long-term debt. The $237 million payment in question is due Dec. 1, although there is a 30-day grace period.

—Frank Artale of Ignition Partners led a $15 million investment in ServiceMesh, a provider of cloud-computing platforms for businesses. As VentureBeat reports, Santa Monica, CA-based Service Mesh had been self-funded up until the Ignition-led investment.

It’s one of many cloud-computing investments we’ve seen this year from Artale, who has long experience in the sector as an entrepreneur, executive, and investor. Check out this profile I did in July, just before the flurry of announcements about Artale’s investments started hitting the news.

—Seattle-based startup Zoomingo, a new venture by the co-founders of language learning service Livemocha, raised $1.3 million from Naya Ventures, Benaroya Capital, and angels. Zoomingo is building an application and retailer platform that can deliver advertising and sales to consumers on mobile devices.

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When the ex-Microsofties behind local services site MiNeeds thought about expanding their business, they got what seemed like weird advice. They had built their company as a resource to help people connect with service providers like plumbers, painters, accountants, and more. But when they looked to expand into wedding services, they found a niche that didn’t think it should be lumped in with all that other stuff.

“The feedback was very strong, very consistent, and clear: I love this experience, but I need it to be beautiful and I want to feel it,” co-founder Raed Malhas says. “I’m planning my wedding. I don’t want there to be a carpenter there.”

Like typical guys, Malhas and co-founder Deniz Erkan thought that was nuts. We’re trying to build a strong brand name here! Why would we fragment our audience?

Raed Malhas

“Then we said, ‘You know what? We’re very data-driven,’” Malhas says. “We have a philosophy in this company: It’s not my opinion or your opinion. Let’s let the data decide.”

So they tested the idea with a wedding services site that had a special look and feel, and the results were basically a slam dunk. Conversion rates of people coming to the site for wedding services doubled, and MiWeddingNeeds was born. Even after a very quiet debut in February, some 5,000-7,000 brides per month are coming to the site to help plan their big day.

If MiNeeds does its job right, a good chunk of those brides-to-be could become repeat customers. More than a quarter of them are already searching for honeymoon packages to add on after the wedding, Malhas says. And it’s obvious where things go from there.

“Suddenly, she starts to think about the mortgage,” Malhas says. “When she comes back from the honeymoon, she starts looking for home-related services.” Baby-related services might not be too far behind. “The lifetime value of that bride is massive,” he says.

That success is a big part of why MiNeeds sees a bright future for its twist on local services search. The startup lets consumers post the services they want performed and gets professionals to bid for the business, offering up reviews and ratings to help make the choice. Outside of the wedding vertical, the startup still maintains its standalone site for all kinds of services, from photographers to house cleaners to lawyers. Investors include Paul Thelen, founder of Seattle’s BigFish Games, and former Yahoo chief data officer Usama Fayyad.

The company is definitely not alone. There are several other players in the sector, including membership-based service reviews site Angie’s List, which just raised more than $100 million in its public stock-market debut. Other companies like San Mateo, CA-based startup Redbeacon or ServiceMagic, a unit of media conglomerate IAC, use a similar mechanism of letting professionals bid for consumer jobs.

MiNeeds claims more than 50,000 service providers have signed up so far to bid for jobs through its website. Servicemagic claims more than 80,000, and Malhas says Yellow Pages has in the neighborhood of 800,000. But MiNeeds seeing strong growth and should have more than 100,000 professionals signed up by early 2012, Malhas says.

“Once we go over six figures in terms of professionals, we’re no longer a small player. Even today, I’m sure people are eyeing us and thinking, ‘Who are these guys?’” Malhas says. “Once we’re over six figures, it’s at a point where they can no longer ignore us.”

MiNeeds, which has offices in Seattle and New York, is generating revenue but focusing on growth over profitability, Malhas says. The service is free to use for consumers and free to join for service providers, but MiNeeds requires a paid subscription from the skilled professional to actually communicate with possible customers. Prices are tiered, from about $25 to $100 per month.

As for the possibility of other verticals to follow the wedding example, Malhas says MiNeeds has hedged its bets by securing domain names and doing some preliminary research. So far, shopping for home or legal services, for instance, may not require a special site. But they’ll keep their minds open this time.

“Looking at the data there, it does not seem that we need to have a white label for each of those industries,” Malhas says. “Then again, I might be completely wrong, and it might be worth launching it to see the conversion rates.”

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Online real estate company Zillow, which announced a small quarterly loss related to its recent headquarters move, is acquiring Diverse Solutions, a company that provides online marketing tools for real estate agents. The stock-and-cash transaction is worth $7.8 million, Zillow (NASDAQ: Z) said Wednesday.

Zillow said its net loss for the third quarter was $750,000, including a $1.7 million charge related to the company’s headquarters move. Without the charge, Zillow said it would have earned $1.1 million for the quarter, compared to a loss of $1.5 million a year ago. Revenues for the quarter were $19.1 million, more than double the figure from a year earlier, Zillow said.

This is Zillow’s second quarterly earnings report since it debuted on the public markets earlier this year.

The Diverse Solutions acquisition is an attempt to further beef up Zillow’s “marketplace” revenues, which have driven the company’s revenue growth in recent years.

That income category includes subscription fees for real estate agents and advertising sold to mortgage lenders, along with charges for lenders to participate in the company’s Mortgage Marketplace.

Third-quarter revenue growth illustrated that trend even further: The “marketplace” segment more than tripled year-over-year to $11.8 million, while display advertising revenue grew by 57 percent to $7.2 million, the company said.

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This year’s MassTLC Innovation UnConference, in Boston on Friday, was as overwhelming—and inspiring—as ever. Apart from the “secrets of scaling startups” session, which I recapped in a separate story, there was a lot going on. Far too much for any one person to take in.

There were sessions on picking the right startup accelerator; building the right company culture; choosing board directors; common mistakes startups make; the talent and recruiting crunch; and the interplay between the New York and Boston innovation scenes, as well as sector-focused sessions on gaming, big data, analytics, mobile cloud, social marketing, and so forth.

To keep track of the main themes this year, I benefited from random chats with Lawrence Schwartz of Tokutek; Michael Raybman of WaySavvy; Gus Weber of Dogpatch Labs and Polaris Venture Partners; Semyon Dukach of SMTP; Vineet Sinha of Architexa; Jeremy Levine of StarStreet; Josh Bob from Textaurant; Dharmesh Shah of HubSpot; and many others. My colleagues Erin Kutz and Lilly O’Flaherty roamed the halls and sessions as well, so I will include some of their observations too.

Here’s a quick sampling of what we all learned about:

1. There are about 100 “big data” companies around Boston. That was the count given at one of several sessions focusing on big data and analytics, led by Steve O’Leary of Aeris Partners and Bob Zurek of Endeca (nice exit). For comparison, earlier this year MassTLC estimated the huge mobile/wireless cluster around Boston to be about 400 companies strong. Big data encompasses big companies like Netezza (part of IBM), Oracle, EMC, ITA Software (Google), Vertica (HP), and Progress Software, as well as upstarts like Hadapt, Jana, Ginger.io, Hopper, Kyruus, and Tokutek. The common thread is technology to help people and companies manage and make sense of tremendous amounts of data so they can make better business decisions.

2. If you’re tired of SoLoMo (social-local-mobile media) as a tech theme, try SoMoClo…the social mobile cloud. In case your eyes just glazed over, think of it this way: Google is mobile plus cloud (see Android). So is Apple (more mobile than cloud, but getting there). Facebook is social plus cloud. Whoever gets all three wins. Beyond consumers, an emerging sector for this technology is healthcare. Jeffrey Tingle of PolyRemedy talked about opportunities in making electronic medical records accessible by patients and doctors—along with the major challenges of privacy, security, and compliance.

3. Web content and advertising are becoming much more interactive—and that interplay leaves an opening for startups. “Traditional church-and-state separation of content and commerce is dying,” says Michael Raybman from travel site WaySavvy. “Sidebar display ads are totally 2005. Commerce and advertising are becoming personalized and contextual, while content is becoming increasingly actionable, where ‘share with friends’ is not the only action. This brings immense opportunities for the travel vertical.”

4. Just when you thought the engineering talent crunch couldn’t get much worse: Undergrads aren’t coming out of school with the right coding experience, and startups can’t afford the time or … Next Page »

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