If you’re a technology company, it’s painful to bury an obsolete product before it’s well and truly dead. Most established companies can’t bring themselves to do it, choosing instead to keep limping down the comfortable old path—which is why they so often lose out to newcomers (can anyone say Nokia or Siebel?).

By 2008, the writing was on the wall at Mindflash. The Santa Barbara, CA-based company had been around since 1999, selling learning management systems to big, Fortune-1000 companies, who used it to train new employees. Mindflash made a lot of money on each sale—the software cost about $50,000 to install—and it had a growing, cash-flow-positive business.

But there were some problems. Companies had to buy their own servers to run Mindflash. The software wasn’t just expensive to purchase up front—it was also costly to customize and maintain. Companies without full-time engineering and IT support couldn’t even think about using it. And it was so difficult to create new training material for the system that only two or three people inside each organization would ever bother to learn how to do it.

Contrast that to the emerging pattern in the Software-as-a-Service (SaaS) world, where software is usually available for a modest monthly subscription price, lives on remote servers accessed via the Web, and is far easier to use, meaning almost anyone inside an organization can master it. Mindflash’s investors and founding engineers looked at fast-growing SaaS businesses like Salesforce.com and figured it was only a matter of time before someone came along with a Web-based corporate training software package that would steal away the company’s livelihood.

That’s when Mindflash made the fateful decision to disrupt itself, rather than wait to be disrupted.

Mindflash CEO Donna Wells

“They did something a lot of companies talk about and almost none do,” says the company’s current leader, Donna Wells. “They looked at the successful product they had and the niche market they were serving and said, given the direction technology was going, it was highly likely that two guys in a garage were going to reinvent their existing product and cannibalize their business.”

It was in order to cannibalize itself, rather than be cannibalized, that Mindflash hired Wells, a veteran of big consumer-facing businesses like American Express, Charles Schwab, Expedia, and Mint.com, as its new CEO in early 2010. Wells immediately brought in outside design and engineering consultants like Adaptive Path and Universal Minds to jump-start product development on a new Web-based training software system. She also moved the company from Santa Barbara to Palo Alto, where there would be easier access to software talent, and hit the fundraising trail, eventually collecting $4 million in new financing from the company’s original 1999 investor, the Investment Group of Santa Barbara (IGSB).

When the new Mindflash system was finally released to the public in September 2010, it contained not a single line of legacy code. “Almost every company has the intelligence to recognize when they are coming up to an inflection point in technology and that they might be on the losing side of that,” Wells says. “Very few have the gravitas to say, ‘Let’s become that company rather than watching as we’re put out of business.’”

Mindflash didn’t completely abandon its old users—there’s still an on-premise version of the training software for customers who can’t stand to part with their enterprise systems. And it didn’t break free of all competition: Louisville, KY-based eLeap offers similar Web-based business training software. But Mindflash has made an irreversible commitment to the cloud, even going so far as to … Next Page »

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LivingSocial will skip the IPO and get acquired. Hundreds of smaller daily deals startups will shut their doors. Groupon’s special product offerings will crash and burn.

Those are among predictions for 2012 from Seattle’s Tippr, a daily deals startup that focuses mainly on offering white-label services to publishers that want their own discount brands.

Headed by CEO Martin Tobias, Tippr has taken a pugnacious approach to its competition in the bubbly daily deals sector, unafraid to call out the big names or use its Paul Allen-sourced patent portfolio to wage court battles and takeovers. Not surprisingly, Tobias’s predictions for the year ahead in daily deals reinforce his own position—that standalone consumer brands are hard to build and unsustainable, and partnering with dedicated publishers is the place to be.

So apply that filter when assessing Tippr’s 2012 prognostications. But recall that, with the astronomic ascendance of Groupon (and the whole sector) in the past year or two, there’s going to be plenty to watch in the months ahead—and these guesses are probably as good as anyone’s, if not better:

• LivingSocial Will Be Purchased
In September, it was rumored that the No. 2 daily deals brand behind Groupon (NASDAQ: GRPN) would shelve its IPO ambitions amid a slack market and seek more private fundraising instead. Tippr’s Tobias says that pattern will hold, and LivingSocial—whose investors include Amazon.com—will tie up with “a major e-commerce player. By merging with a company backed by both a large Rolodex and bank account, LivingSocial will be poised to successfully leapfrog Groupon and render it a mere also-ran in the daily deals landscape,” Tippr says.

• 200 Groupon Clones Will Bite the Dust
Even after a wave of consolidation and continued battles for third place and beyond, Tippr says there are still more than 600 companies in the group-buying sector. That means consolidation will continue. Data from the industry aggregator Yipit pegs the number of failed deal sites this year at more than 170, and Tippr predicts that more than 200 will go down in flames in just the first half of 2012.

• Year of the White Label
Tippr shifted its primary focus to providing white-label services to online publishers earlier this year, and Tobias previously told us about his bullish bet on that approach—lower (or nearly zero) costs to acquire an audience being a big part of the calculation. So it’s no surprise that he thinks next year will be the prime time for providers chasing that model. Tippr says that in 2012, white-label providers could make up about 20 percent of the market.

• Branded Sites’ Futures: Instant Contextualized Deals
Also along the lines of the deals-as-a-service idea articulated above, Tippr says the big-name providers Groupon and LivingSocial will find profitability—but only after they start pairing their discounts with relevant content of other types, rather than building standalone commerce brands. Tobias says that Google, Facebook, and other big-audience players will come at this problem from the other end of the spectrum, adding deals in context with the content they already have.

• Lacking Loyalty, Groupon Goods Will Come to a Dreary Demise
Groupon’s foray into direct e-commerce, Groupon Goods, doesn’t have a very bright future in Tippr’s eyes. Tobias cites research from Forrester that suggests a plurality of customers would buy a given good at full price anyway—hinting that those shoppers aren’t loyal to the Groupon discount, but more to the product. “Merchants, lacking the customer acquisition required to justify the steep discounts, will opt out of the site’s partnerships,” Tobias predicts.

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It’s a big month for Collabor, a Maynard, MA-based maker of software that powers online communities—for banks, nonprofits, manufacturers and a slew of industries in between. The company is working on closing its first ever outside funding round and has just cross the 1-million-user mark across the sites its technology powers.

The five-year-old startup is working on collaboration software—a space that’s occupied by players large (Microsoft) and small (startups like Wiggio). Its big target, unlike many others, says CEO and founder Sandeep Kaujalgi, is organizations that are looking to collaborate with players beyond the company walls, rather than internal organizational collaboration.

“Our focus is almost solely on a business reaching out to other businesses, customers, stakeholders, membership organizations,” Kaujalgi says.

Collabor’s software, called Work 2.0, plugs into an organization’s existing databases. But Collabor prides itself in creating completely customized designs and interfaces for each client, depending on their business needs and audience. Within an organization, different types of users will have completely different functions available to them, based on the user profiles set up in the system.

“All collaboration is built on who the user is,” Kaujalgi says. “Our product looks completely different from company to company.” Work 2.0 offers functions such as sharing reports, polls and quizzes, photos, calendars, and user forums, and automatically translates content written in one language into the language of the user who will be reading it.

One of Collabor’s clients is Connected Living, a provider of online sites for helping seniors in residential communities keep in touch with their families from afar. The Work 2.0 software powers an interface for seniors that involves large buttons and colorful graphics, for an audience not used to Web browsing.

Another customer of Collabor’s is … Next Page »

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Perminova, a San Diego startup developing Web-based software for use in cardiology centers, says today it has raised $7 million in a combination of equity and credit financing. The company says it is pioneering healthcare’s move from outdated client-server technology to secure cloud-based computing.

The company was founded several years ago by Gregory Feld, a professor of medicine at the University of California, San Diego, and director of UCSD’s cardiac electrophysiology program. What began as a database for tracking electrophysiology procedures and patient care, though, has evolved into a more comprehensive workflow system provided as software-as-a-service for everything from patient scheduling to post-procedural documentation and billing.

The company’s first product, Perminova EP, is being used by the UC San Diego Health System and at New York’s Mount Sinai Hospital.

In a statement this morning, the company says its financing includes $3 million in Series A equity funding and a $4 million credit facility that can be accessed by the company as needed. Perminova CEO Craig Collins declined to identify the company’s investor, saying, “We have a large institutional investor and they don’t want to have their name out there.” He characterized the investor, though, as a super angel.

Collins says the funding will be used to expand product development, and for working capital, product development, sales, and marketing. “This round of funding provides us with an ample runway to gain market traction and market acceptance while creating a clear path to sustainable growth,” Collins says in the statement from the company.

“We now have the resources to expand our product offering, which will ultimately establish Perminova as the market standard in web-based software and cloud computing in healthcare,” added Collins. “This round of funding provides us with an ample runway to gain market traction and market acceptance while creating a clear path to sustainable growth.”

Perminova has been based at EvoNexus, the free startup incubator operated by CommNexus, the San Diego nonprofit technology industry group, since mid-2010. Securing financing, however, usually signifies that a fledgling EvoNexus company is ready to move out on its own. Collins indicated the company would likely move into its own commercial office space sometime in January.

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It was 1993 when the San Diego chapter of the American Electronics Association organized its first high tech industry awards to recognize local companies for their business excellence, technology innovation, community involvement, and sometimes simply for persevering in the face of adversity.

Since then, the nationwide organization that HP founder David Packard helped form in 1943 as the West Coast Electronics Manufacturers Association has morphed into the AeA, (in 2001) and TechAmerica (2009). Recently Tech America San Diego named the winners of its Eighteenth Annual High Tech Awards. The industry group handed out 10 awards in nine distinct categories:

—Software: Oceanhouse Media

—Internet/Web Commerce: Sorenson Media

—Computers and Related Products (two awards): AgigA Tech and One Stop Systems

—Communications Products and Services: MicroPower Technologies

—Software as a Service/Cloud-based Computing: ServiceNow

—Semiconductors, Industrial & Analytical Instrumentation: Creative Electron

—Cleantech: EcoATM

—Outstanding Emerging Growth: FieldLogix

—IT Service/Contract Services: Outsource Manufacturing-Made in San Diego

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The fashion, advertising, and finance sectors are teeming with startups, but it takes more than a catchy gimmick to impress Laura Sachar, general partner with StarVest Partners in New York. She says her venture capital firm this year has made new investments across the country in prosaic but solid companies such as Seattle’s Lucid Commerce, a television media agency; NewComLink, an Austin, TX-based provider of retail credit services; and Xignite, a financial market data cloud provider in San Mateo, CA, with offices in New York. (A new investment is also in the works, Sachar says, but it’s too early to discuss details.) StarVest Partners has invested $30 million so far this year, and its follow-on investments include fast-growing fashion flash sales website ideeli in New York, which raised $41 million in a Series C round in April.

In a recent interview with Xconomy, Sachar said StarVest focuses on proven management teams in need of expansion capital, and that it makes a point of seeking out companies that can benefit from the firm’s network of relationships in New York.

Xconomy: How does your experience with New York’s industries relate to the country as a whole?

Laura Sachar: The companies we are talking about can be attractive and build customers throughout the U.S., but they really leverage something unique that New York brings. That’s why we have a robust investment community and that’s why so many companies are being … Next Page »

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San Diego life sciences research and development, the engine that drives innovation, got some new digs at Isis Pharmaceuticals, and J. Craig Venter started the digging for the construction of a new genomics research headquarters. But we didn’t have to go digging for news; our roundup begins now.

—After meeting with federal regulators, San Diego’s Orexigen Therapeutics (NASDAQ: OREX) said it is restarting work on its experimental diet pill, a combination of naltrexone and bupriopion (Contrave), after declaring in June that it was suspending development of the drug. Orexigen shelved the program after the FDA said the company still needed to conduct a costly, long-term clinical study of more than 60,000 patients to demonstrate that the proposed diet pill wouldn’t increase the risk of heart attack or stroke. Orexigen found a way to move forward, however, by proposing a two-year cardiovascular study that would enroll 10,000 patients. Orexigen said the FDA’s feedback was “reasonable and feasible.”

—San Diego-based Independa, a wireless health startup developing technology to help seniors live independently, raised $1.6 million in an early stage financing round involving Miramar Venture Partners and City Hill Ventures, with an additional $200,000 loan from Silicon Valley Bank. Independa plans to spend the money on development of its Software-as-a-Service (SaaS) technology and to expand its marketing and distribution.

—NuVasive (NUVA: NUVA), the San Diego medical device company developing new surgical products and techniques for repairing the spine, said it gave more than it got in a continuing patent dispute with Medtronic. While a formal judgment has not yet been entered, a jury reviewing four of the nine contested patents determined that Medtronic should pay NuVasive $660,000 plus interest for infringing on a NuVasive patent. The jury also found that NuVasive should pay Medtronic $101 million plus interest for infringing three Medtronic patents.

—San Diego scientist J. Craig Venter and local dignitaries attended a ceremony Tuesday as construction began on a new $35 million building to house the West Coast headquarters for the J. Craig Venter Institute (JCVI). It’s going in near the Salk Institute and the new Sanford Consortium for Regenerative Medicine. A JCVI spokeswoman said the 45,000-square-foot building will be support 125 scientists and staff in a state-of-the-art, carbon-neutral building on the UC San Diego campus. The work will be focused on genomic research, including human genomic sequencing and analysis, synthetic genomics, and environmental genomics.

—Carlsbad, CA-based Isis Pharmaceuticals (NASDAQ: ISIS) has completed the consolidation of three R&D facilities into a single corporate and research facility. An Isis spokeswoman said the company’s 320 employees continue to be focused on research and drug development, with technology that enables the company to move three to five new drugs into its pipeline every year. The cholesterol-reducing drug mipomersen is the company’s most advanced drug.

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Software-as-a-service provider GlobalOne in New York said in a press release Wednesday it secured an initial funding commitment of more than $25 million from Columbia Capital. Four-year-old GlobalOne plans to use the funds to expand its services and market coverage. GlobalOne also appointed David Northington as its CEO. He previously served as chief operating officer of IT consulting services company Capgemini in North America.

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While Wall Street burned last week, Silicon Valley fiddled. There was Web-wide discussion of the meaning of the week’s blockbuster technology news, Google’s announcement that it will acquire Motorola Mobility—including right here at Xconomy.

—While many pundits focused on the 17,000-plus patents that Google will acquire if the Motorola deal goes through, our take was that this deal is really about Google’s desire for more control over the entire stack of mobile hardware and software reaching Android users.

—As if bowing to Android’s unstoppable momentum, Hewlett-Packard said it’s giving up on its webOS phones and tablets. To me, the disappearance of yet another mobile operating system—leaving only three real competitors (Android, iOS, and Windows Phone 7)—means that Microsoft will now have an even more important role as a counterweight to Google and Apple in the mobile market.

—In the midst of all the mobile news, I took a couple of days to put together a long feature on SecondMarket, the broker-dealer causing such a ruckus in Silicon Valley by offering startup employees a way to cash in their options and shares long before their companies go public or get acquired. Area CEOs told me they’re concerned about the way such secondary markets will alter the incentives that help them attract and retain the best workers—but SecondMarket says it just wants to help companies address employees’ growing need for liquidity in a more orderly way.

—On the energy and cleantech front, San Francisco-based Cleantech Group found that cleantech IPOs in the first half of the year have skewed toward biofuels, materials, and energy efficiency, with solar companies lagging behind. Bruce Bigelow had our report.

—The total valuation of public Software-as-a-Service companies reached a new peak of $21.3 billion in the second quarter of 2011, according to a report from San Diego-based Software Equity Group. The rise reflected increased demand for outsourced cloud computing services.

—In M&A news, Evernote bought Skitch, Digital Chocolate bought Sandlot Games, and Pleasanton, CA-based mortgage lending software maker Ellie Mae bought San Diego-based Del Mar DataTrac, as Bruce reported.

—In selected funding news, GoodData raised $15 million, Box.net raised $19 million, drchrono raised $650,000, and RelayRides increased the size of its latest funding round to $10 million, up from $5.1 million.

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Global spending on information and communications technologies is fueling higher valuations for public software companies, according to a quarterly report released by the San Diego-based Software Equity Group. Much of that increased spending, however, reflects an intensifying demand for cloud computing and software as a service (SaaS), as big-company CIOs increasingly accept the notion of outsourcing many programs that were previously installed on corporate networks.

As a result, valuations of public SaaS companies have continued to climb, and more SaaS companies got acquired during the second quarter that ended in June.

For all sectors of the software industry, the Software Equity Group counted 397 buyouts and mergers with a cumulative value of more than $21.3 billion during the second quarter. That was down from a revised tally of 423 mergers and acquisitions during the previous quarter, although the latest quarter’s $21.3 billion worth of deals was almost twice the $11.1 billion total in the previous quarter.

However, that $21.3 billion was skewed by a single mega-deal—Microsoft’s May 10 acquisition of Skype for $8.5 billion. During the same quarter of 2010, the firm counted 378 mergers and acquisitions valued at a total of $17.2 billion.

The firm also counted nine software IPOs, which collectively raised more than $3 billion, at an average of $344 million. That was up sharply from the four software IPOs with an average valuation of $120 million during the previous quarter. The nine companies listed … Next Page »

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When the customer that would transform their business came calling, the entrepreneurs behind Seattle’s EVO Media Group weren’t exactly flying high.

After a $1.5 million fundraising round and a period of rapid hiring, the three-year-old startup was confronting an intractably slow economy and a target market that wasn’t generating enough sales. EVO was forced to cut staff—again—as it looked for a way to wring more money from its flagship website-building service, DevHub.

Things were about to get better. In October, EVO got an unsolicited lead on not just a new customer, but a whole new line of business, when a major phone directory company contacted the company to ask if DevHub was available as a private-label service.

Uh, yeah, they could handle that. Less than a year later, the private-label business is the primary revenue source—about half of revenues now, and growing every month—and has EVO on the road to sustained growth and higher profit margins.

The customers in DevHub’s sweet spot now are businesses like domain registration sites or yellow pages directories, which can offer website-building services as a way to land more small- and medium-sized business customers of their own. Those bring a lot larger base all at once than DevHubs’s old method of upselling a free product to small website or blog owners.

“We’re really targeting and talking to companies that have these captured bases of probably a minimum of 5,000 small businesses,” co-founder Daniel Rust says. “But we’re flexible, as long as they have a market or a base sort of idea. Right now, we’re working on rolling out a new implementation in New Zealand with a partner that’s going to start doing franchised website building.”

Rust and his co-founder, Mark Michael, sound cautiously optimistic that they’ve hit upon a strong, sustainable business at this point. But they’re also not shying away from the difficult lessons of the past few years, offering a remarkable frankness that might serve as a warning to young entrepreneurs bewitched by tales of swift success and seven-figure checks.

Right now, they say, EVO costs about $20,000 per month to operate. Contrast that with the biggest-spending days, when the company was burning through $120,000 to $150,000 a month. But here’s the rub: All that spending and a staff of about 20 allowed EVO to crank out the … Next Page »

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Software-as-a-service is driving strong growth at two San Diego Web companies, and several other tech companies raised cash last week. We’ve got the highlight reel, and our play-by-play analysis begins now.

—After its May 25 IPO, San Diego’s Active Network (NYSE: ACTV) reported its first quarterly financial results, showing a $5.5 million profit on $99 million in revenue for the second quarter ended June 30. Active Network CEO Dave Alberga says the Web-based registration services and media company is now targeting an estimated $10 billion market that was impossible to address before the rise of software-as-a-service.

—Another San Diego software-as-a-service company, ServiceNow, opened a new office in San Jose, saying it was a “long overdue debut” for the fast-growing company in Silicon Valley. ServiceNow plans to hire 50 people in San Jose by the end of the year, and its global workforce will hit more than 500 by the end of September.

—San Diego’s SmartDrive Systems raised $10.1 million from investors. Targeting fleet operators, SmartDrive provides a SmartRecorder device mounted above the dashboard to record driving behavior and determine what happened in accidents.

—San Diego’s KidZui announced the debut of Zui.com, a search engine for kids. KidZui also extended its $4 million Series C round with an additional $2 million led by San Diego-based Mission Ventures. CEO Cliff Boro told me the company plans to use the cash for general corporate purposes.

—Qualcomm reached the halfway point in its Qualcomm Wireless Fitness Challenge. After four weeks, the 32 participants have burned a total of 1.9 million calories and lost a total of 48.5 pounds. Qualcomm hopes to eventually roll out a wireless health program to other companies.

—Google Ventures provided the lead funding in a $500,000 seed round for Nettle, a 10-month-old San Diego startup that is still in stealth mode with technology described … Next Page »

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At last week’s True University startup school event at Berkeley, Alex Bard, CEO and co-founder of San Francisco-based Assistly, moderated a session on freemium business models; his panel of startup veterans spent an hour delving into the pros and cons of offering free products as a way to drum up new business. It turns out the subject wasn’t just a theoretical one for Bard. This week Assistly, which offers a Web-based customer support platform similar to Zendesk, significantly overhauled the way it charges for the service. It made the first seat free for all customers, and greatly simplified its prices for other levels of service.

Granted, this might not be the most earthshaking news to hit the Bay Area technology scene this week. But Assistly’s move is a risky one that, in the short term at least, entails some loss of revenue; the young, venture-backed startup is balancing those costs against the hope of recruiting more customers down the line. So it’s an interesting case study in the thinking behind freemium products and pricing—which, needless to say, is a subject of great interest to many Silicon Valley startups, especially those using the Web as a delivery channel. I sat down with Bard yesterday to talk through the changes and the logic behind them.

As I explained in a profile article a few weeks ago, Assistly’s main product is a Web-based system that monitors Twitter, Facebook, and other social-media channels for customer complaints, and helps customer-support reps be more systematic about responding to them. Before this week, Assistly offered companies tiered pricing—a fairly common phenomenon in the world of business-focused Software-as-a-Service (SaaS) products. Companies could pay $39 per user per month for the lowest tier of service, $69 for the middle tier, and $99 for the highest. The differences were in the level of customer support Assistly itself offered to users, the number of Twitter and Facebook accounts that could be tracked, the number of e-mail inboxes that customers were allowed to plug into the system, and so forth.

Now, by contrast, the startup is offering a flatter pricing scheme, starting with the simplest price possible: nada. The first full seat on Assistly’s system is now free; adding a second user costs $49 per seat per month, as does every user after that. In addition, companies can pay $1 per hour for part-time usage—an option designed for employees or managers who only need occasional access to the platform. (There used to be a $19 monthly up-front fee to use the flex-hour option, but that too has been eliminated.) If customers want more functionality, “a la carte” upgrades are available; monitoring extra e-mail inboxes, Twitter accounts, or Facebook pages costs $29 per month per inbox, account, or page.

“When we launched the tiered pricing model, we thought it made sense,” Bard says. “Certain customers have certain requirements, and they could self-select the buckets. It’s a pricing psychology that Salesforce.com, 37signals, and a lot of SaaS customers have really put into practice well. And it does help you to optimize revenue.” If just a few customers opted for the $99 plan, for example, it could help to underwrite the much larger number of customers who selected the $39 plan.

But the more time the startup spent talking to companies in its target market of small-and medium-sized companies, including many who had opted not to use Assistly, the more it realized that its tiered pricing was having some unintended effects, Bard says. For one thing, … Next Page »

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Seattle-based Yapta, an online airfare and hotel rate tracking service, has a new partner: Concur (NASDAQ:CNQR), the online expense and travel management service for businesses, is making a $5 million strategic investment. The deal includes Concur using Yapta’s price tools for its TripIt Pro service, which helps business travelers manage their itineraries. Concur bought TripIt earlier this year for up to $120 million. Concur has made several other deals this year with an eye to expanding its travel footprint.

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[Corrected 6/27/11 8:25 pm. See Below] When I profiled Verve Wireless almost nine months ago, the Encinitas, CA-based startup was providing its web-based technology for some 750 newspaper publishers and broadcast stations throughout the United States.

Today, more than 1,200 local newspapers and broadcasters use Verve’s platform to publish their content and serve ads to a variety of mobile users, including iOS, BlackBerry, and Android-based devices, according to Verve marketing vice president Greg Hallinan. That’s a lot of traffic, which led Verve to issue its first quarterly “Local Mobile Index” report today. Hallinan says it provides some unique insights into how mobile users are interacting with local media.

For example, Hallinan says the heaviest days for local media consumption on mobile devices fall on Tuesdays, Wednesdays, and Thursdays (Wednesday is the biggest day). That’s in sharp contrast to conventional newspapers, which attract their biggest chunk of readers on Fridays, Saturdays, and Sundays (Sunday is the biggest day). On a daily basis, the peak hours for mobile consumption are during the morning and evening commute, but Hallinan says the biggest block of mobile media consumption occurs during prime time, when he speculates that users are multi-tasking with their mobile devices while watching TV.

Verve says its local mobile index only measures how much small and medium businesses are spending on advertising within their respective markets. It does not include what national advertisers are spending in local markets, which Verve instead classifies as national advertising.

Some other findings from Verve:

—The single biggest category was automotive, which accounted for 28 percent of the spending on mobile advertisements.

—St. Louis was the leading metro area for local ad campaigns

—[Corrects the reference to how well ads work] While the iPhone has more traffic than Android devices (more than twice as much, according to Hallinan), display ads on Android devices perform 52 percent better than they do on iOS devices. Performance is defined as interacting with the ads.

Hallinan says Verve’s data also shows an 82 percent increase in local ad spending for mobile devices, as measured year-over-year for the same media sites (akin to same-store sales). “In some respects,” Hallinan says, ” ‘Main St.’ is moving faster than ‘Madison Ave.’ into mobile advertising.”

Verve also has been in fast-growth mode, hiring suburban Washington D.C.-based Tom MacIssac as CEO in January (so the company says it is now based in the San Diego and Washington D.C. areas), buying Deconstruct Media in February, and raising $3.5 million from investors in April. “We’re now at 45 employees,” Hallinan says, “and we just opened a New York office and hired six full-time national ad sales reps.”

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The ascent of smartphones and tablets is causing a seismic shift in the way media companies reach consumers. As an iPad and iPhone owner, I now consume the bulk of my media online. Whether it’s the Kindle App, Netflix, HBO Go, or Hulu, media companies have rapidly realized that they can use the new platforms to increase engagement with their existing audiences while also reaching new consumers who have grown up with Internet-based media as the norm rather than the exception.

Yet the advent of these new platforms and the services around them also raise the challenge of disintermediation. To be specific, look at the subscription initiatives recently launched by Apple, and to a lesser extent Google, governing how media companies can sell their digital wares via mobile app stores. In the iTunes App Store, media companies can now sell subscriptions, with Apple taking a 30 percent fee. Additionally, the original set of rules stipulated that a media company using the App Store could not sell that same digital subscription at a different price on their own or on any other store—though very recent reports suggest that Apple is backing down from that provision.

As the founder and CEO of both eMusic and Vindicia, which provides subscription billing services, I’ve learned a lot about subscription business models and how best to compete against free (especially when free is illegal). For me, this experience reaffirmed the central role that relationship management plays in the relative success of media companies.

As a backdrop for this discussion, it’s useful to understand a couple of basic media business concepts. First, media companies succeed not just because of great content, but because of the compelling experience they provide consumers. Netflix, for example, has set out to make the task of being entertained with video content dramatically easier. The Netflix Prize, designed to encourage the creation of better recommendation algorithms, was just the beginning of Netflix’s effort to solve the “I have access to everything—now what?” problem. In the newspaper and magazine world, publishers are realizing that they must make the experience of consuming their content more enjoyable if they want to compete with services like Twitter, Facebook, Flipboard, Instapaper, and Google Reader that intermix their stories with those from other sources. The positive experience is what creates long-term customer stickiness.

Second, owning the customer relationship is critical to a media company’s long-term success. Engaging directly with customers can shape and improve the overall experience (see the point above), but it also provides media companies with the means to cross-sell and up-sell as appropriate.

So, while there is plenty to like about Apple and Google’s subscription initiatives, not least the rapid and broad market penetration of iOS (and Android) devices with compelling and convenient single-click payment options, it’s not hard to understand why media companies would have questions about the role Apple and Google are assuming as self-appointed middlemen.

Media and content companies realize that successful consumption of their content and services via these devices is partially driven by the platform itself—whether a byproduct of the curation capabilities of the storefront/device or the pricing policies of the platform. Media companies need to explicitly take these factors into account as they build their acquisition strategy on these different devices.

And whenever a third party enters the scene, it raises the question of … Next Page »

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Slackers hate it. Go-getters love it. And store owners and managers? Well, so far they seem to be buying it. I’m talking about Objective Logistics, a New Bedford, MA-based software startup that’s looking to transform work environments, starting with restaurants and retail stores.

“It’s polarizing as hell,” says CEO and co-founder Phil Beauregard.

If you believe controversial companies are good, you’ve come to the right place. Objective Logistics has created a Facebook-like interface that accesses the point-of-sale database of a given store, ranks the performance of waiters and salespeople compared to their peers, and rewards high achievers with perks like getting to choose their own work schedules. In certain establishments, that can mean an extra $1,000 in tips for working a busy Saturday instead of a slow weekday, for instance.

“We’re kind of ‘gamifying’ the labor market,” Beauregard says. “The real vision is, if I can rank productivity through technology, I can reward you and compel you to perform better.” He adds that his company is about “objective transparency through technology.”

And despite its clunky name, Objective Logistics has been attracting lots of buzz among venture capitalists—and customers—this year. The five-person company’s software was first deployed last month at Not Your Average Joe’s (it’s slated to go live in 15 of those restaurants), with several other local stores and major chains also at various stages of adoption. Objective Logistics has raised $750,000 in seed-stage funding from angel investors including Richard Darer, Greg Pesik, Serguei Netessine, Nigel Machin, and other Boston-area investors. The company might look to close a VC round in the next few months, Beauregard says.

Beauregard, who turns 30 next week, is a former investment banker who started Objective Logistics in early 2009. His partners in crime include co-founder Matt Grace, who was reputed to be the youngest product management director in Oracle’s history, and engineering vice president Dan Velcea, a 3Com and Credit Suisse veteran and a Romanian native who, in 1986, dropped his army-duty AK-47 … Next Page »

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San Diego-based Accelrys (NASDAQ: ACCL), which outlined its scientific Software-as-a-Service strategy for me just a couple months ago, says it has acquired privately-held Contur Software AB of Stockholm, Sweden, in a deal valued at $13.1 million. Accelrys says Contur provides Electronic Laboratory Notebook (ELN) software that enables scientific organizations to document their R&D. and to capture their intellectual property (IP). Contur, which offers its R&D documentation on a Software-as-a-Service model, says it has been especially popular among researchers in the food and beverage, chemical, and biotechnology industries, as well as academia. An Accelrys spokeswoman says the $13.1 million deal includes $500,000 to be paid upon reaching certain milestones.

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San Francisco-based MongoLab, a spinoff of ObjectLabs, has raised $3 million in a funding round led by Boulder, CO-based Foundry Group, according to an announcement yesterday from Foundry. MongoLab offers hosting and support for companies using the MongoDB database system developed by New York- and Redwood Shores, CA-based 10gen. Baseline Ventures, GRP Partners, Freestyle Capital, and Bullet Time Ventures also participated in the round.

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San Mateo, CA-based Hara Software, which offers Web-based software to help businesses monitor energy use, has raised $25 million in Series C funding, according to a report today in Dow Jones VentureWire. Focus Ventures led the round, with a range of other investor joining, including Itochu Technology Ventures, Jafco Ventures, Kleiner Perkins Caufield & Byers, Navitas Capital, Nth Power, and Energy Technology Ventures (a joint venture between Conoco Philips, General Electric, and NRG Energy). The company has raised $45 million all told.

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