Among the current crop of ex-Microsofties building software startups, Emmanuel Marot is unique. Not just because he hails from Niort, a town in western France, by way of Paris (or for his impeccable fashion sense), but because he is trying to do something fundamentally new with Internet commerce.

It’s called scientific pricing, and it works something like this. The price of commodities is at the core of commerce. But prices are still typically set by trial and error—by guessing, and marking up by some amount over the cost to the seller. When you buy an espresso (Marot had two during our meeting last week), who’s to say whether you should pay $1.75 or $1.85? It turns out the right pricing can benefit both buyers and sellers.

This by itself is not new, of course. In the late 1970s, airlines started using a technique called revenue management to jigger their prices and boost sales, while also helping consumers get better deals. Hotels, car rentals, utilities, and retailers have followed suit. What’s new about Marot’s work is that he’s trying to bring this sort of automatic, “dynamic” pricing to the masses—for anything you might buy or sell in a classified ad on Craigslist, for instance. His new startup, Valu Valu, is rolling out its public beta Web-based software the week of February 23.

Marot and his business partner, Bruno Botvinik, moved to Seattle in September 2006 after Microsoft bought their Paris-based mobile search company, MotionBridge. Marot and Botvinik left Microsoft in May 2008 (”shortly after they removed our golden cuffs,” says Marot) to start working on Valu Valu. Why get out of mobile search? “It’s hard to make a serious business in mobile,” Marot says, in part because the market is driven by big, slow-moving carriers.

For the past couple of years, Marot has been reading about auction theory and the principles that underlie pricing. The need for something better than eBay or Craigslist became real in the fall of 2006 when he was trying to sell his son’s bike online. Should he ask for $80? $70? Marot got no offers until it dropped below a certain price ($60), but why was that? And the same thing for more expensive items, like a used kayak he eventually sold for $1,900. If he could come up with an algorithm to determine …Next Page »

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For those of you suffering from Microsoft overload these past few days, I’ve put together a quick roundup of the most locally relevant news from the software giant. Most of it happened away from CEO Steve Ballmer’s keynote at the Consumer Electronics Show in Las Vegas last night.

—Microsoft beat out Google and Yahoo to land a deal with Verizon Wireless to provide Internet search services on the carrier’s cell phones. The news was reported by Reuters and other media outlets in advance of Ballmer’s official announcement at CES. The five-year agreement is rumored to be worth more than $500 million (paid by Microsoft to Verizon). It’s not yet clear what the deal means for Medio Systems, the Seattle startup that handles some mobile search for Verizon and was reportedly involved in deal talks between Verizon and Google last summer.

—Closer to home, Microsoft said it is dropping out of negotiations to lease 300,000 square feet of new office space in the South Lake Union neighborhood of Seattle. A Microsoft spokesman cited the economy and changing market conditions as reasons for backing out of a possible lease. This comes on the heels of Google looking to sublease parts of its Kirkland offices. We’re going to see a lot more of this kind of thing in the next few months, I suspect.

—Lastly, Marcelo Calbucci of the Seattle 2.0 blog site has posted some predictions about what a hypothetical Microsoft layoff would mean to the Seattle startup scene. He predicts an influx of ex-Microsofties into startups, more “silly startups,” and more crowded coffee shops around town—not too surprising. But he also predicts higher costs for office space, not lower, because of increased demand. And further difficulties in the housing market. “It’ll be absolutely tough on the local economy in general,” he writes.

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Investors still see the mobile search and advertising market as one of the hottest tickets in the digital economy. Since its founding in 2004, mobile advertising startup JumpTap, neighbors of Xconomy just down First Street in Cambridge MA, has raised about $47 million from the likes of General Catalyst Partners, Summerhill Venture Partners, Redpoint Ventures, Valhalla Partners, and WPP. Up until yesterday, that is. Today the company announced that it has raised another $26 million, in a Series D round involving all of the company’s existing investors as well as new lead investor AllianceBernstein L.P. (NYSE: AB) of New York.

JumpTap isn’t a household name, but it provides the technology behind the mobile Web search applications on Java, BREW, and WAP phones from a host of cellular operators, including AT&T, Alltel, Boost Mobile, and U.S. Cellular in the United States; Bell Canada, Rogers Wireless, and Fido in Canada; Telefonica in Spain; TeliaSonera in the Nordic and Baltic region; and Virgin Mobile.

Like Google, JumpTap places clickable ads alongside search results (it gets these ads directly from agencies and brands and from mobile advertising networks such as Third Screen Media—another Boston-area mobile company, acquired by AOL in 2007). The whole idea behind JumpTap’s service is to keep mobile users from going to Google and other traditional Internet search providers, and thereby reserve a bigger slice of search-related advertising revenue for the operators, for content-publishing partners such as Fox Mobile Entertainment and NBC Universal, and for itself.

Mobile carriers are definitely in the market for help selling search-related advertising: as we reported on Friday, Verizon is in talks with Seattle-based Medio, which raised $30 million in venture funding in 2006, about setting up a new all-in-one search service for its subscribers. But there’s disagreement over the actual size of the mobile advertising pie. Newton, MA-based market intelligence firm Strategy Analytics says global spending on ads for mobile platforms will hit about $1 billion this year and increase to $2.4 billion in 2009. Market research firm eMarketer, which counts text-message ads in its totals and makes more optimistic assumptions about economic growth in Brazil, China, India, and Russia, says spending will top $4.6 billion this year and $7.4 billion next year.

Regardless, it’s a growing market, and JumpTap says that it needed more cash to continue expansion of its global ad sales division—which has already grown sixfold this year, with the opening of offices in New York, Madrid, and Stockholm—and to further develop its search and behavioral targeting technology. Mark Mackenzie, vice president and head of digital media venture investing at AllianceBernstein, said in a statement that JumpTap has positioned itself as “the hub of the mobile advertising ecosystem” and that the company’s existing relationships with carriers, advertisers, and publishers put it in a good position to win more business and “define the way mobile advertising should be delivered.”

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And the wireless hits keep coming… Seattle mobile-search startup Medio Systems is moving towards a deal with Google and Verizon Communications to manage an all-in-one search service provided by the two giants, according to the Wall Street Journal. Medio already handles searches for limited types of mobile content for Verizon. Google would help Medio search the broader Internet, and so bring more complete search capabilities to Verizon devices. Medio would also work on bringing in additional content from companies like Facebook, splitting ad revenues with Google and Verizon—all this provided the deal goes through.

Most national media is focusing on the somewhat surprising partnership between Google and Verizon, which have been at odds over issues like wireless carriers having to open their networks to more services and handset companies (regulations that Google backed), and adoption of Google’s mobile operating system Android (which Verizon has resisted so far). The Journal article points out that telecom companies are realizing that their “homegrown” search services—partnerships with small companies like Medio and Cambridge, MA-based JumpTap— aren’t cutting it, and they need help from the big players in search.

Rafat Ali of MocoNews calls it “a good deal overall in simplifying the mobile search market.” But he also predicts that in the long term, the wireless carriers will have less and less pull. “As phones open up, users will be able to use whichever search engine they desire, not the ones deemed official by the carriers.”

From a Seattle perspective, it’s interesting to see Medio becoming a top player in the fast-growing (but still small) mobile-advertising business. Medio raised some $30 million in 2006 from Frazier Technology Ventures, Accel Partners, and others, so it has been doing well. But I think Ali is right when he predicts that the new deal might give Medio a lot more exposure and relevance, which could make it attractive as a future acquisition for Google, or another search company.

I bet Google has the inside track—Medio co-founder and CEO Brian Lent worked in the same lab as Sergey Brin and Larry Page as a graduate student at Stanford in the mid-1990s. Lent even had chances to join Google in the early days, but chose not to, as the P-I reported a few years ago. But the circle may yet be completed.

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