Time for an update on Boston’s marketing tech cluster. It’s one of the real strengths of the local entrepreneurial ecosystem. And it looks like it’s getting stronger, with a couple of leaders making news this week. Here is a tale of two companies that have become competitors:

—Constant Contact (NASDAQ: CTCT), the Waltham, MA-based online marketing firm, has seen its stock price jump nearly 30 percent—from about $24 to just over $30—since Facebook filed for its IPO last week (coincidence?). Constant Contact has been positioning itself as a leader in digital marketing for small businesses across e-mail, social media, and Web platforms—especially social campaigns. The company also released some promising stats on its revenues and profits for 2011 and its most recent quarter.

—HubSpot, the Cambridge, MA-based marketing tech firm, said it has hired J.D. Sherman, Akamai’s former chief financial officer (also a former IBM exec). The company says Sherman is being brought in partly to help it prepare for a future IPO. HubSpot has been hiring aggressively and working on new products, while it pares away others (like Oneforty.com, which it acquired last summer). It remains to be seen whether the company will actually make it to an IPO before getting snapped up by Salesforce.com or some other suitor.

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With all the hoopla around social media and other newfangled marketing tools, people sometimes forget that Google is a $30 billion business—thanks mostly to paid search advertising.

Not Larry Kim. His startup, Boston-based WordStream, specializes in search engine marketing software. That means helping businesses make their paid text ads appear high up on the page, next to the most relevant search results—say, for instance, when people search on Google for car insurance. The approach sounds almost quaint, but the idea is what Kim calls “automated expertise”—basically, providing software as a service to help businesses navigate Google’s AdWords platform, as opposed to a consultant who charges $1,000 or more per job (and then goes away).

The company is releasing a free tool today, called AdWords Performance Grader, and it’s geared toward small- and medium-sized businesses. As Kim explains, the software analyzes their AdWords account, shows them where they’re doing well and not so well, scores them compared to other advertisers spending a similar amount, and suggests ways to do better, such as adding certain keywords, excluding others, and adjusting the text in their ads.

It’s part of a big push by WordStream to add thousands of more users this year. The company has been growing fast, bringing in record revenues in each of the last four months, says Kim, the founder and chief technology officer. The startup currently has hundreds of customers, he says.

WordStream started in 2007 and has raised $10 million in venture funding from Sigma Partners and Egan-Managed Capital. The company went through a restructuring in the past year, which included bringing on new CEO Ralph Folz, who previously co-founded digital marketing firm Molecular (bought by Isobar in 2005). WordStream currently has 35 employees.

Kim originally came to Boston in 2000 and worked as a software engineer and then a search marketer and consultant for six years. He started developing the core technology behind WordStream to make his consulting work more productive. In the past decade, he has lived the classic consultant-to-startup life, including early days of working out of a Panera Bread café (free Wi-Fi) and the trials and tribulations of hiring a team and putting a product out there.

Paid search seems pretty complementary to what some bigger marketing-tech companies around Boston, like HubSpot and Constant Contact (NASDAQ: CTCT), are doing. Those firms provide a mix of social media marketing, e-mail marketing, customer relationship management, and search engine optimization. But WordStream is here to remind us that good old-fashioned search marketing is alive and well, in the form of automated software.

“We think it’s a billion-dollar market opportunity,” Kim says.

True, but who wouldn’t? The challenge for WordStream lies in continuing to develop a product that resonates with core users, and getting the word out more broadly about its offerings. We’ll be watching to see if today’s release helps the startup reach the masses.

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Boston-based Rue La La, the private sale and shopping site, said today it has opened a local deals site in San Francisco called Rue San Francisco. It’s part of a broader effort, called Rue Local, that has rolled out local deals sites for Boston, Philadelphia, Seattle, and (earlier this summer) Washington DC, Los Angeles, and New York City; Miami and Chicago sites are slated to follow later this month. Rue La La started in 2008 as part of Retail Convergence, led by CEO Ben Fischman. In late 2009, Retail Convergence was acquired by GSI Commerce. Then in March 2011, eBay agreed to buy GSI Commerce and spin out Rue La La (and another GSI division) as a separate company, with eBay retaining a 30 percent stake in the company.

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Maybe it’s because I’m hungry, but I’ve been thinking about the future of restaurants lately. Like a lot of people, I eat out far too often, and I have strong feelings about the way the experience should go—the food, the service, the ambience, and so on.

So does Josh Bob. OK, it’s his job (though maybe he’s hungry too). Bob is the founder and CEO of Boston-based Textaurant, a startup that runs a mobile service aimed at taking the hassle out of waiting for a table, and boosting customer loyalty through deals and offers. Using the service, restaurants can send text alerts to customers’ mobile phones telling them their table is almost ready. So Textaurant does away with buzzers and pagers and tries to reduce the workload on the host, while helping the restaurant win over customers who would otherwise leave and not come back.

In case you’re wondering if this causes restaurants to lose out on business from people waiting at the bar, Bob says surveys show more than 40 percent of people will leave (and not even consider going to the bar) if told there is a long wait. That’s the lost business Textaurant is trying to save—and not just by texting them, but also by opening up a channel whereby restaurants can offer special deals and rewards.

The three-person startup is backed by Massachusetts angel investors (and 500 Startups’ Twilio micro-fund) and counts among its dozen or so customers Finale Desserterie & Bakery, Fire + Ice, and Red Robin Gourmet Burgers. It is a finalist in the MassChallenge accelerator program. (You can expect a rebranding and name change along with a new website in the next month, Bob says.)

Textaurant is part of a thriving mini-cluster of food- and restaurant-related startups around Boston that also includes Plummelo, I Am Hungry, Text My Food, Good Eats For Me, and Objective Logistics (see profile here). To some extent, the technologies offered by these companies are a subset of the local-marketing, loyalty, and deals systems that have permeated small-business life as of late. But restaurants have their own quirks and challenges. They are not usually the most eager adopters of new technologies, which can be very polarizing among their managers and staff.

“The restaurant industry has to change,” Bob says. “Anyone who doesn’t use technology will get left behind.”

So here’s his vision of what going to a restaurant will be like five years from now. You’ll decide you want to go to a certain type of restaurant (Italian or Chinese, say) or a particular neighborhood, he says. You’ll use your mobile device to look at Textaurant, which will show you that there are five Italian places nearby, say, and what the wait time is at each of them. You’ll check yourself in at one of the restaurants—with or without setting foot in it—and customize how the table alert will come to you (via text, voice, Twitter, or e-mail). You can also pre-order drinks for the table so they’ll be waiting for you when you sit down.

What’s more, your phone will be connected to your bill so you can accrue loyalty points based on purchases and receive special offers (like a free appetizer at the bar), he says. And on your way out, you’ll pay through your Textaurant account or another mobile system connected to your credit card or payment account.

Groupon, by the way, will have morphed into something else that’s probably unrecognizable today, Bob says. (Presumably along with other daily deal sites.) Not that it’s a bad thing, of course.

“There will always be significant value in helping businesses survive,” he says.

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If there is anything constant about Constant Contact, it is change. The online marketing company (NASDAQ: CTCT), based in the Boston area, is announcing today it has opened a new office in New York City. That by itself isn’t big news, but it’s part of a larger strategic shift in the firm’s technology approach—what is being called the biggest evolution in its 13-year history.

Constant Contact’s New York office, a 2,850-square-foot space in Tribeca, is expected to house more than 10 employees within the next year. For now there is a small team of five, brought over in the firm’s $15 million acquisition of Bantam Live, announced in February. Bantam focused on “social CRM”—social media technologies for helping businesses do things like add new customers, retain them, and better understand what they want, especially in online communities. The New York office, which is currently hiring engineers, apparently will be the hub for integrating social CRM into all of Constant Contact’s marketing tools and services. (The company, with more than 800 employees, also has offices in California, Colorado, and Florida.)

Indeed, the firm’s newest space is symbolic of bigger changes happening under the covers. It’s all part of the broad innovation strategy that CEO Gail Goodman laid out for me last month, as Constant Contact transitions from being known mostly as an e-mail marketing company to being known as a more diversified software-as-a-service firm.

That sounds kind of abstract, but here’s one concrete aspect. Bantam Live uses Ruby on Rails, a popular Web programming framework, for its software development. Constant Contact uses mostly Java, which is older and more established (especially for large-scale backend stuff), for its software and database systems. It’s a challenge—albeit not a unique one—to integrate the two. The goal is to make it so that Bantam’s social software for managing sales contacts, for instance, can talk to Constant Contact’s account management, security, and e-mail and social media marketing systems. As newer social features permeate older technology stacks, this issue is bound to become more widespread.

For Constant Contact, the integration (and a lot more) falls under the domain of Stefan Piesche, the firm’s chief technology officer. Piesche, who joined the company two years ago from Cobalt, oversees an engineering team of about 150, roughly half of them software engineers. “The company is changing its tune vertically and horizontally,” he says. “This requires a different approach on the technology side. But we’re not rewriting everything.”

Rather, newer pieces of code written in Ruby are being embedded, rather cleverly, into existing Java applications so as to maintain a “very cohesive user experience” where “customers don’t see the difference,” he says. The end result: the user sees one unified product, even though it’s made up of multiple sets of products and new features.

Imagine performing this integration on the scale of 450,000 business customers and 8,000 partners (including hundreds in the New York area), and you start to get a feel for the … Next Page »

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By some counts, the Boston area is home to two of the top four local deals sites in the U.S. I’m talking about BuyWithMe (based in Boston and New York) and Eversave, which is based in Wakefield, MA. The big boys in the field, Groupon and LivingSocial, certainly have a strong presence in Boston, but they are based in Chicago and Washington, DC, respectively. Another frontrunner is Tippr, based in Seattle.

Observers have been predicting consolidation in the sector. So far, that has taken the form of these top players scooping up smaller players. Until last week, that is—when Eversave’s parent company, Prospectiv Direct, was snapped up by Connecticut-based marketing firm Affinion Group for $30 million plus earnouts.

But who the heck is Eversave (and Prospectiv), and what can it teach us about the deals sector?

“We’re a marketing company, not a daily deal company,” says Jere Doyle, Prospectiv’s founder and CEO. That gives him immediate credibility in my book, because it means he’s thinking much bigger than your typical Groupon clone.

Let’s back up a bit. In the mid-1980s, Doyle founded a European company in the travel sector with the nondescript name of Global Marketing. That company went on to get bought by an English firm, LSI, in 1998, also for tens of millions of dollars. In 1999, Doyle started Prospectiv with the idea of providing coupons for local businesses that consumers could print from the Web. Just one problem: There weren’t enough people printing stuff online. Also, the dot-com bust was upon them, and “people were saying Internet was over,” Doyle says. “We started at the worst possible time.”

So Prospectiv made a key switch to focus on national brands and coupons, rather than local, and play to its core strengths in customer acquisition for big businesses. After some tough slogging, the company started to build a national following. “It was nasty in the Internet world back then,” he says. “We didn’t have a lot of prospects, but we never lost hope.”

Fast forward to 2008-09, and the recession hit the company hard. It was time for another strategy shift, and Doyle found it by going back to his original idea: serving local merchants and … Next Page »

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Affinion Group, a marketing and customer engagement company based in Stamford, CT, said today it is acquiring Wakefield, MA-based Prospectiv Direct, an online marketing firm that owns Eversave, a daily-deals website that’s active in 20 U.S. metro areas. The price of the acquisition is $30 million plus earn-outs over the next two years; the deal is expected to close sometime this quarter. Prospectiv started in 1999 and is led by CEO Jere Doyle.

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These are two startups that aren’t household names in the Boston-area tech scene, but probably should be. One started in 2009, raised venture capital when it was tough to get in the downturn, and is currently adding new features and generating some buzz. The other started five years earlier, in 2004, bootstrapped itself to profitability, and counts among its customers the world’s largest retailer and the world’s largest bank.

One has a geeky, conceptual name that sounds like a small, green Jedi master. The other’s name is more literal and sounds like a Sith lord, if I had to pick a side. (You tell me which is more badass.)

Yottaa and SiteSpect are united by at least one common thread: the desire to make websites run faster. Though the companies are at different stages and have different challenges, they are competitive in the realm of Web performance optimization—software that recodes webpage content to streamline it for browsers. “It’s like scraping barnacles off a boat,” says Eric Hansen, founder and CEO of Boston-based SiteSpect, the elder company.

It’s also a relatively recent product direction for SiteSpect, which has built much of its core business on marketing technologies like A/B testing of website features, behavioral targeting, and mobile content optimization (e.g., iPhone vs. iPad). According to Hansen, who previously founded and ran Worldmachine Technologies, his current company is the only provider of this kind of software that doesn’t require page tags or changes to customers’ existing sites. Its customers include Walmart, Expedia, MTV, MSNBC, Staples, and CSN Stores.

Meanwhile, Cambridge, MA-based Yottaa started just two years ago with the idea of making “every website faster and better,” says founder and CEO Coach Wei, who previously founded Nexaweb Technologies and worked at Hopkinton, MA-based EMC (NYSE: EMC). Yottaa’s customers include mid-sized e-commerce and retail sites (e.g., CSN Stores again), sandwich shops, and Web marketing agencies. All want to monitor and improve the speed of their sites—and track the resulting impact on sales, conversions, and other business metrics.

My first thought was, hasn’t this problem been solved (like in 1999, or 2005)? Apparently the answer is no, if there are at least two companies going after it in Boston. Oh yeah, and last fall, Google’s team in Cambridge also released a free tool for webpage optimization, called mod_pagespeed. So it’s clearly a competitive and somewhat commoditized sector. (In case you’re wondering, companies like Cambridge, MA-based Akamai Technologies (NASDAQ: AKAM) tackle Web performance at the network level, whereas the newer companies focus on the browser level.)

SiteSpect sees its primary competition coming from Adobe (NASDAQ: ADBE) … Next Page »

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What do you get when you cross a Jewish guy from Argentina with a Turkish Muslim from London, and a female entrepreneur from New York who, by all accounts, shouldn’t even be alive?

Answer: You get Krush.

The Cambridge, MA-based Internet startup is unveiling its new site today. The company has an intriguing vision for helping clothing and lifestyle brands tap into the 16-to-24-year-old consumer demographic. It doesn’t seem to matter that the company’s founders—Alexis Kopikis, Alan Osman, and Gina Ashe—are all well past that stage in their own lives. They have hired a growing staff that reflects the diversity of their target demographic, and they have done a year and a half of research to understand how young people find and share products that they choose to identify with.

In short, traditional ads don’t work with the younger set, Krush says. High-school to college-age kids decide what to buy by watching what products their friends like on Facebook; they watch what people they admire are wearing on YouTube; they share their brand likes and dislikes broadly via social media; and they decide together what’s cool and what to buy based on all of the above. It’s a far cry from checking out the local mall or watching TV ads, though there is surely some of that going on too.

As Krush would tell it, marketing-tech and customer-research firms like BzzAgent and Communispace are great for 25-to-40 year olds (and older consumers), who tend to be more traditional in how they find new products and make purchasing decisions. Their tastes also don’t change as fast. But with the younger set, “this is a really different market,” says Ashe, who is Krush’s CEO.

The startup chose to target action sports—snowboarding, skateboarding, surfing, BMX—and streetwear brands first, because consumers are particularly passionate and social about how these brands reflect their own lifestyles. You’ll see kids posting items from big brands like Nike SB, Oakley, and Quiksilver, and emerging brands like Skullcandy, 10Deep, and Obey.

Krush plans to make money by playing matchmaker and connecting young people with these brands. Its software platform lets brands tap into consumers and fans to predict demand for their upcoming lines. The approach is a mix of crowdsourcing, social networking, game mechanics, and e-commerce—but I’m showing my age with those descriptions. The idea is that users browse future styles and gear and vote for their favorite items online—which could potentially help brands make decisions about what to produce and how to capture the biggest market.

For instance, Krush wants brands to use its platform to see which particular model of sneaker, or color of watch or headphones, gets the best (or worst) response. Brands can then drill down into Krush’s database and see detailed breakouts of consumer preferences by product type, features, geography, and so forth.

A key component: Users compete to see who has the most influence among their peers in terms of starting fashion trends. The top performers in this lovefest between brands and their fans will get recognition—and free merchandise. (Indeed, according to Krush, “kids respond to two things: stuff and fame.”)

The overarching goal here is to own the “product graph,” which is analogous to … Next Page »

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As the Web becomes more social, will search start to whither as a primary means for consumers to access the Internet? That’s been suggested by some folks in the tech world, as the rise of Facebook begins to create a dynamic layer on top of the “regular” Web that isn’t fully reachable by Google’s crawlers.

To get an update on the thinking behind this debate, we convened a couple of Seattle entrepreneurs who spend a lot of time researching and discussing the consumer Web: Rand Fishkin of SEOmoz and Ben Elowitz of Wetpaint. The result was a long, lively back-and-forth that generated some acquisition advice for Google, speculation about Facebook’s search deal with Bing, and interesting questions about which behemoth is scarier as the main filter of our information.

There was plenty more good stuff in the past week or so on the Xconomy Seattle tech beat, even with a short holiday week:

—Bob Buderi checked in from Boston with an exclusive update to Polaris Ventures closing down its Seattle office. Turns out the change is part of a broader move to expand in California, with general partner Brian Chee relocating to head up a coming-soon office in Palo Alto. Polaris co-founder Steve Arnold plans to continue working from Seattle, the firm said.

—I took a look at the story behind the HackStars program, a new-to-Seattle feature of the TechStars startup accelerator. HackStars recruits a pool of people who can code, design, and hack their way through projects that TechStars companies need some help with. If it works out, they might even wind up with a job—or a co-founder’s stake. That’s what happened with Sam Herbert of ADstruc, who unwittingly helped start HackStars by getting rejected from the main program and then brought on as a bit of extra technical help.

—Trinity Ventures led a $10 million investment in Act-On Software, an online marketing company based in Beaveron, OR. Previous investors Voyager Capital and U.S. Venture Partners were back for this round, which was based on a valuation of about $40 million—”a substantial step up,” according to founder and CEO Raghu Raghavan. It’s a nice Northwest success story: Raghavan started Act-On after leaving his previous company, Responsys, which relocated to California. He’s been vocal about staying in Oregon, saying there’s no reason to think a tech startup has to move south to succeed.

—Just before Groupon filed its IPO paperwork, a couple of Seattle players in the crowded online deals sector announced they were combining forces. We’re talking about Tippr acquiring DealPop, which was formerly part of WhitePages.com. Tippr’s strategy involves going heavily after online publishers, rather than working directly with merchants, as Groupon has done. Not to be outdone, Groupon came back the same day with some pre-IPO news: It’s partnering with Bellevue, WA’s Expedia (NASDAQ: EXPE) to provide travel discounts.

—Luke took a trip over to the new Bill and Melinda Gates Foundation headquarters for a preview tour, which included a speech from BillG, a smattering of local notables, and—seriously—a gospel choir singing “Lean on Me.” Oh, and amazing architecture, which Luke captured with some great snaps from his Windows Phone 7 device (coincidence).

—Briefly: Intellectual Ventures signed up a two-way licensing deal with Boise, ID-based Micron Technology; online property-tax challenge service ValueAppeal added $1.6 million in financing; and Clearwire (NASDAQ: CLWR) continued its makeover by shifting about 700 customer service workers to a vendor.

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Among the “Gang of Four” tech giants that Google Chairman Eric Schmidt says are driving consumer technology innovation, two iconic companies—Google and Facebook—are battling for an important title: Who will dominate the means of accessing, sorting, and connecting to the Internet’s flood of information.

With Facebook on the rise, and Google’s self-professed stumbles in seizing its own pipeline of social data, there’s been a fair amount of speculation about Google’s prospects for holding onto its position.

Here in Seattle, we happen to have two entrepreneurs who know a boatload about the ways that consumers and businesses are navigating the 21st century playing field for information. They have informed and sometimes sharply opposing views. And they happen to be friends. I figured this would make for an interesting discussion.

Ben Elowitz is one of the many people who have declared search engine optimization dead. With the rise of social networks as a primary homebase for consumers online, he says, the days of using a complex portfolio of tactics to rank higher in Google results is going the way of the dinosaurs.

As the head of Seattle-based online media startup Wetpaint, Elowitz says this development is just great—he sees the fragmentation of content in a search-dominated world as divisive for publishers.

Rand Fishkin, however, would have to object. As the CEO of Seattle’s SEOmoz, a search-marketing software company, Fishkin has made a career (and many international speaking engagements) of mastering search engine optimization.

He’s an expert on Google’s ever-changing algorithm, including its attempts to corral social media data. He’s also a leading advocate for “white-hat” SEO tactics—growing genuine prominence and relevance without trying to game the system.

In a busy downtown coffee shop recently, I set up the broad topics and mostly tried to stay out of the way as Elowitz and Fishkin covered all kinds of fascinating territory: When Facebook will get into search, and whether Microsoft is effectively blocking the effort; why Google (NASDAQ: GOOG) should buy Color and Quora right away, at any price; and whether it’s scarier for society to have Google or Facebook holding the master keys to the way we sift the Web.

At one point, we jokingly decided that in this debate, Fishkin was basically just standing for Google while Elowitz was the champion for Facebook:

Fishkin: “I have 30 times your revenue.”

Elowitz: “I’m growing at 69 percent and you’re growing at 3 percent.”

Fishkin: “Dammit!”

What follows are lightly edited excerpts of their conversation, broken into several topics. I’ll start with Elowitz contrasting today’s searches with a fond memory of the dawn of Google as a force … Next Page »

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Here in Boston, we fret about losing tech talent and leadership to the West Coast. So today, let’s celebrate the return of one of our own.

Michael Schreck has joined Boston-based digital publishing firm Zmags as its new CEO, as of earlier this month. Schreck, a prominent investor and entrepreneur, has spent the past eight years in the cultural wasteland of Orange County, CA, as CEO and managing director of Equity Pacific Group, a private equity shop. Before that, he made his name in Boston as a co-founder of a number of startups including m-Qube and Upromise, and a co-founder and general partner at venture firm General Catalyst Partners. He originally came to town in the early 1990s to work at Monitor Group and then attended Harvard Business School; now he’s moving back.

These things come full circle. Ten years ago, Schreck was helping recruit big-name CEOs to run companies. Now he is the big-name CEO.

But why Zmags? My colleague Wade wrote about the company back in 2009, when it was best known for its platform for publishing digital magazines (hence its name). Over the years, Zmags also has been focused on digital marketing—helping brands design and develop interactive catalogs for the Web and mobile devices. The firm started in Denmark in 2006 and moved its headquarters to Boston in 2008. This month, Schreck succeeds former CEO Jens Karstoft, a co-founder who is staying on as vice president of strategic innovation.

Zmags is also rolling out a new digital merchandising and e-commerce service today, called CommercePro. The basic idea is to help brands optimize their catalogs, marketing materials, and shopping analytics across iPad, iPhone, Android devices, Web browsers, and other channels. A key feature: the new software lets consumers make purchases directly from within a Zmags catalog or magazine (on a Facebook fan page, say), and also helps brands keep track of what’s working and what’s not.

“You can imagine it, architect it, test it, and get the data back,” Schreck says.

It sounds like an intriguing opportunity for Schreck (see left), who has some deep perspective on digital and mobile marketing. In the early 2000s, he helped start m-Qube, which grew out of a previous startup called Proteus Mobile. Back then, Schreck says, the question was, “Is texting going to be big in the U.S.?” Major wireless carriers thought no—that consumers would leap-frog to an enhanced messaging system—but m-Qube stuck with its plan, keeping mobile-marketing content simple and short via SMS. But marketing via text messages severely limited what brands and marketers could do on mobile devices.

What’s changed in the interim? In a word, the iPad/iPhone. Schreck calls it “the great leveler—nobody could imagine that device [iPhone] until it appeared in our palm.” Schreck’s epiphany for his new job came to him during a boardroom meeting with a bunch of public-company CEOs. Apparently it’s a faux pas to have your laptop open during such meetings. But “we all had our iPads out,” he says. “It was weird, I’ve never seen anything like it.” There were different age groups represented in the room, from junior to senior execs, he says. “It was everybody. You could have an iPad there, it was this sort of information appliance. You couldn’t have a laptop. I thought, ‘This is amazing.’”

Indeed, according to Jeff Glass of Bain Capital Ventures, who worked with Schreck … Next Page »

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The humble coupon has become the epicenter of an Internet startup mania, the height of which I believe we witnessed when Groupon rejected a $6 billion buyout offer from Google last December.

In the wake of Groupon’s vertiginous arc, a mob of copycats has followed. With names like Weforia, LivingSocial, Tippr, and LevelUp (SCVNGR), they have proliferated to the point where deal aggregators like DealGator and Yipit now have currency. Relatively well-established Web companies like Google and Facebook, for whom bargain shopping is hardly a core competency, have leapt into the melee. It is, by all accounts, a contemporary gold rush.

Yet, there remains an open question: how valuable is Groupon as a service? Let’s say you run a local retail outfit, or a hospitality venture; will you benefit by offering some kind of social buying deal? While Groupon claims 97 percent of its featured retailers would want to repeat the experience, an independent study conducted by Rice University professor Utpal Dholakia says that at least 30 percent of businesses surveyed thought the Groupon they ran was unprofitable.

It’s worth noting that the survey relied on self-reported yes/no responses, and while it seems churlish to suggest business owners don’t really know if they’re making money or not, I think it is reasonable to point out that many small to medium businesses don’t have the resources to do the kind of closed-loop analysis necessary to definitively calculate return on investment (ROI) on promotion efforts.

Having conducted such an analysis for a local hospitality venture, I thought I’d walk through some of the potential benefits—and dangers—attached to social buying deals, and conclude with a fairly simple but effective method for calculating the ROI of a social buying deal. For the sake of brevity, I’ll assume we all understand the basics of group buying.

Cash Up Front… Sort of

One of the attractive parts of the Groupon-style deal is that it delivers a substantial pile of cash up front, before anyone actually walks into your establishment demanding goods or services at ludicrously discounted rates. This will sound tremendously appealing to anyone who’s struggled with balancing cash flows. Of course, it’s not all upside. First, Groupon takes a 33-50 percent cut for itself off the top of all revenues gathered from the sale of the Groupon. Second, the company delivers the remaining revenue in thirds—immediately and then after 30 and 60 days.

Breakage

Another benefit, though one you won’t find on the public portion of the Groupon site, is breakage; that is to say, the rate at which consumers will buy a Groupon and then never redeem it. The company’s representatives claim a roughly 30 percent breakage rate on average. This can go a decent ways towards alleviating the pain of offering your wares at bone-crushing discounts.

Exposing Yourself

Groupon claims to deliver “huge exposure” for its featured business customers. One such customer reported approximately 250,000 impressions resulting from being featured on Groupon. To do a rough, back of the envelope style calculation, I looked up what Facebook would recommend … Next Page »

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If you’ve noticed a recent change when you do an Internet search using Google, you’re not alone. Google is trying to improve the quality of the results it delivers to Web searchers and in a major way.

Google is so focused on search result quality that they’re paying extra attention to items they believe negatively impact search results, including so-called “content farms” like Associated Content and eHow, as well as the practice of paying for links to help a site boost its Google rankings. So while people won’t necessarily change how they use Google to search the Web, if Google has its way, what users get back from Google is going to be markedly different.

In the search field, there is a term known as the “long tail,” which is somewhat subjective. But let’s say for a moment that we’re talking about searches with three or more words in the query. Such searches have been steadily rising in frequency and often generate results from content farms that are able to churn out lots of content of questionable quality.

Content farms typically leverage user-generated content, non-paid content contributors, or outsource content creation to low-cost producers. The result is often vapid and poorly produced. Very often searchers see these content farms ranking prominently for long tail searches, but Google would argue that searchers aren’t necessarily finding what they’re looking for when they select these results.

For Google, the solution to this problem was to rewrite its search algorithm to lower the relevance of these large content farms, and allow smaller niche sites to flourish on many of these long-tail searches. This change affected 12 percent of Google’s U.S. search results, and although searchers may not easily recognize these changes, they are certain to have a significant impact on the user experience.

Among online marketers it’s common knowledge that links are the gold standard for getting a site to rank high on the non-sponsored Google listings. This is the reason that many online marketers spend so much time and money trying to acquire links to content from other sites. To simplify a major part of Google’s strategy in revising its algorithm, a page with a lot of links from other sites and pages around the Web must be relevant to users.

Links have become so important that companies will pay … Next Page »

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Needham, MA-based RatePoint, a marketing and reputation management company, said yesterday it has appointed Keith Cooper as president and CEO. Cooper was most recently president and chief operating officer at Boston-based Carbonite, the online data backup firm. RatePoint started in 2006, and its investors include Prism VentureWorks, .406 Ventures, and Castile Ventures. The company provides online and social-media marketing services for small businesses.

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This is not just another consolidation of local-deal sites. This is a life-and-death struggle for third place behind Groupon and LivingSocial (for now anyway). This is BuyWithMe vs. Tippr, Round Two.

New York- and Boston-based BuyWithMe said today it has acquired LocalTwist, a daily-deals site that is active in Seattle and San Diego, and soon to be up and running in more cities. Terms of the deal weren’t disclosed. LocalTwist is a relatively new division of Silicon Valley-based LifeStreet, a marketing and digital advertising firm.

The news is interesting not just because it marks BuyWithMe’s entry into a new city and competitive market (Seattle), but because Tippr, based in Seattle, is currently embroiled in a pair of lawsuits against BuyWithMe—one over alleged patent infringement, and the other involving a claim, by Tippr, that one of its former employees gave inside information to BuyWithMe.

As my colleague Curt reported last month, Tippr was granted an injunction against BuyWithMe in a strange case that alleges that BuyWithMe’s founder, Andrew Moss, “misappropriated” company financial information from a Tippr salesman, Andrew DeLorenzo, while the latter had been job-hunting. The litigation in that case, as well as the patent suit, is ongoing so neither side is going to comment on its significance to today’s news.

But I’ll comment. All of that was Round One. In Round Two, we’re now seeing BuyWithMe make a competitive foray into Tippr’s home turf. Tippr runs its own consumer-focused deals sites, but founder Martin Tobias has said its main business approach is to provide the underlying technology platform for local deals online. In that way, Tippr and BuyWithMe are actually somewhat complementary.

Except that Tippr has probably been guarding against the type of move we’re seeing today. I haven’t delved into the details of the lawsuits yet, but I’m wondering what Tippr’s next move will be in the competition we’re seeing between these two companies in Boston, Seattle, and beyond.

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Revenue-hungry state governments are licking their chops. Stuck with declining tax collections and soaring costs for services, they’re chasing Amazon.com around the country in a series of attempts to make it collect sales taxes.

That’s led some to wonder whether this high-tech round of whack-a-mole might be the front edge of a viral political movement that spreads across the country, wiping out tax-free shopping for millions of consumers and dragging down profit margins of Amazon.com and other e-retailers.

Fat chance.

The volley of lawsuits, rhetoric from fired-up tax collectors, and Amazon’s hardball response tactics are certainly entertaining to watch from afar. But any real resolution will almost certainly come from a much more boring, slow-moving effort to get state sales taxes on a common source code, and then change the federal laws.

Here’s why:

—It’s not clear that the newly popular approaches to wringing more sales taxes from Amazon customers are legally enforceable. That means potentially long court battles, such as one under way in New York.

—Amazon has shown no real signs of giving up its fight, even if that means cutting jobs. Some politicians are already knuckling under.

—Others are already working on a comprehensive fix. It’s the realistic vehicle for national online retail taxes, an approach that Amazon has supported, and everyone knows it.

The question here is not whether Amazon and other online retailers should have to pay taxes. It’s whether they have to collect taxes for the government.

In states where a retailer doesn’t have an office, the answer is generally no. The U.S. Supreme Court said so in a 1992 case, ruling that forcing a company to navigate the thousands of different … Next Page »

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Bellevue, WA-based BlueKai, an online-marketing data company, said today it has acquired TrackSimple, a media analytics startup also based in the Seattle area. Terms of the deal weren’t disclosed, but a recent filing with the SEC suggests the purchase price was about $6.8 million in BlueKai stock. TrackSimple was founded by a pair of ex-Amazon employees and raised a $2.5 million Series A venture round led by Ignition Partners in 2008. BlueKai has raised a total of about $35 million in venture capital; its investors include Battery Ventures, Redpoint Ventures, and GGV Capital. Xconomy first wrote about the company’s approach to providing Web-browsing data to advertisers and publishers back in 2008.

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As summer draws to an end, the deals seem to be trickling back in. Take a look at the highlights from the past week.

—Bellevue, WA-based technology business management developer Apptio raked in $16.5 million in Series C financing led by continuing investor Shasta Ventures. The four-year-old company, which designs software to help businesses manage the cost, quality, and value of IT services, saw a 300 percent growth in its bookings over the last year. And with money still in bank from both its $7 million Series A in 2007, and $14 million Series B in August 2009, analysts are starting to speculate whether the company may be getting ready for an IPO.

—Marketfish, an online marketing startup out of Seattle, raised $1.5 million in financing in a round led by Rustic Canyon and Accelerator Ventures. As part of the deal, Rustic Canyon principal Neal Hansch joined the company’s board of directors, and Accelerator Ventures’ founder and managing partner Alex Lloyd came on as a board observer. Marketfish provides e-mail and direct mail lists of potential customers for marketing agencies to purchase or rent.

—Seattle-based real estate website, Zillow.com, formed a partnership with Chicago-based Apartments.com, giving Zillow syndication of Apartments.com’s national database of 90,000 managed apartment rental listings. The partnership brings the total number of listings for single-family homes and apartments on Zillow to 150,000. Financial terms of the deal were not disclosed.

—Digital-media delivery systems developer MOD Systems raised $6 million in a round led by current investors, a lifeline in the Seattle-based company’s rocky history over the last two years stemming from co-founder and former CEO Mark E. Phillips’ very public indictment proceedings. The company develops technologies that allow consumers to purchase digital movies, TV shows, and music, and load them onto SD cards portably through touch-screen kiosks.

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San Diego’s Covario, the venture-backed analytics company that specializes in helping customers improve the results of their search-based marketing, has added to its Software-as-a-Service capabilities for tracking online search and display advertising.

The company says its latest innovation, the Covario Social Media Insight (SMI) solution, is an extension of its Web-based platform for Cross Media Optimization, or CMO. As if disambiguating acronyms like CMO isn’t hard enough as it is, Covario says it developed its CMO platform to help Chief Marketing Officers (a different kind of CMO) who want to improve their Current Mode of Operation (another form of CMO). Are you noticing a pattern here? It’s a confusing method of organization, to say the least.

As I’ve reported before, Covario has been expanding its software analytics tools to help customers improve their results in search engine marketing (SEM) and search engine optimization (SEO). Covario targets many of the largest companies in the world and its customers include such companies as IBM, Microsoft, Sony Pictures, T-Mobile, Lenovo, and Yahoo.

Covario is expanding its offering of Web-based tools to help customers measure their online marketing success as new competitors are emerging, such as BrightEdge, a startup in San Mateo, CA, that specializes in SEO management—and which Wade recently profiled.

In announcing the added social media capability of its CMO dashboard, Covario cites data from Forrester Research that says online consumer-generated comments—or “impressions”—about products and services totaled more than 500 billion last year. That’s close enough to the 2 trillion ad impressions that were created … Next Page »

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