Allurent co-founder Joe Chung today stepped down (or rather up to executive chairman) as CEO of the online shopping interface and e-commerce company, Xconomy has learned. Graeme Grant, formerly the chief operating officer, has been named to take his place at the helm of the Cambridge, MA-based company.

Reached by phone, Chung, an Xconomist, confirmed that the staff had been told about the change today. (There has not yet been an official announcement, and Chung was still listed on the website as CEO at the time of this writing.) “I hired Graeme to take over the company someday a couple years ago, and that day is now,” Chung says. He calls the changeover business as usual, however. In his new title of executive chairman, Chung will be concentrating on big deals, partnership relations, and overall strategy—pretty much what he was focusing on already.

“I’m still an employee. I’m still there full time,” he says. “The reality is that our roles are completely unchanged. Graeme’s been running the company for well over a year anyway.”

Grant takes the helm as Allurent, which creates shopping interfaces and “experiences” such as virtual shelves and improved displays for online retailers, is in the midst of a transition. In March, during what Chung says was “pretty much the worst time you can imagine launching a new product in retail,” the company moved to an all-Software as a Service (SaaS) model that provides web retailers with plug-and-play interactive merchandising widgets that they can rent on as as-needed basis.

“We’re really in an environment where retailers need to get more out of every single customer that comes to their site,” he says. To that end, the online shopping world is shifting, from a time when e-retailers just put up products and a shopping cart on the web and figured customers would find them to the point where they have to actively manage each customer relationship. That involves creating better interfaces to attract and retain customers, and making shopping more easy and fun.

Chung says the new product line—Allurent on Demand—has been growing well despite the recession, and he predicted great things for Grant. “I’m very happy for Graeme in the sense that this is his first CEO gig, and he’s going to do a great job,” he says. “He’s a real rising star, and you’ll see a lot of him in our industry for sure.”

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What the Sam Hill (as my grandpa used to say) is a Daily Grommet? The answer comes in two parts. “Grommet” is the word industrial designer and entrepreneur Jules Pieri has appropriated for the kind of bewitching product that you might discover in an upscale shop in Puerto Vallarta or Tuscany or Vermont—something that’s so unique or beautiful or inventive that you just have to buy one and tell all your friends about it.

And the Daily Grommet is an e-commerce startup in Lexington, MA, that features one new grommet on its website every weekday. Through videos and short articles, Daily Grommet staffers—often Pieri herself—explain what’s so cool about the products they’ve chosen and the companies that make them. They also sell the products, on consignment from their makers. This week’s finds, for example, include an energy bar with ingredients picked by customers, a solar-powered flashlight (no, that’s not a contradiction in terms), and a garlic shredder that looks a little like a little two-wheeled Popemobile.

If you’re thinking that the Daily Grommet sounds like Hammacher Schlemmer meets RocketBoom meets VeryShortList, maybe with a dash of Martha Stewart, you’re not completely wrong. But there’s something stylish, original, and earnest about Pieri’s business that isn’t captured by any of these comparisons.

For one thing, as I can relate after visiting the startup’s office/studio in a quaint clapboard house just off Lexington’s main drag last week, the women who run the company (and they’re all women) are, like Pieri herself, genuinely nice people. They have a visible passion for uncovering little-known new products, testing and investigating them, and telling their stories to the world.

Left to right: Joanne Domeniconi, Jules Pieri, Jen Lockwood, Barbara Gordon, Patti Purcell, Wendy Chandor.

For another, the Daily Grommet has a common-sense business model that blends old-fashioned retailing with the best of Web 2.0-style interactivity. In addition to the daily videos, which are an easily digested two to three minutes in length, the startup is utilizing the full complement of social media channels, including a Twitter stream, an RSS feed, an e-mail newsletter, a Facebook page, and badges and widgets that fans can embed in their own websites. And every grommet gets its own permanent page on the site where readers can leave comments and even interact with the people who make the products. (The company often singles out companies that are so small or new that a feature on the Daily Grommet can be their first big break.)

It all amounts to a human-centered, high-touch approach that might just help to redefine what consumers expect from e-commerce sites. Whether such a business can be scaled up efficiently is an open question. But clearly, if you had the courage in this age of cloud-based software startups to start from scratch with a business that sells actual stuff, you’d want to take advantage of the media that people are using today for word-of-mouth exchanges, namely Twitter, blogs, online video, and the like.

And ideally, you wouldn’t just dilute these media with empty marketing messages, but you’d tell real stories about the people who make the stuff and what motivated them.

This is the kind of stuff Pieri thinks about. “Social media is not commerce media,” she says. “What travels in social media is news—whether it’s personal or national or just funny videos. I know that the stories around products have that same power, and the potential that people would want to …Next Page »

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Dan Weld spends a lot of time thinking about the Web and how to get the best information out of it. Weld is a professor of computer science and engineering at the University of Washington and a serial entrepreneur, having co-founded Netbot, AdRelevance, and Nimble Technology. He is also a venture partner with Seattle-based Madrona Venture Group. Some of his research projects include customizable software interfaces and ways to improve information finding on Wikipedia. He is an expert in Web search, information extraction, and adaptive user interfaces, so he seemed like the perfect person to ask: what is the big deal with Microsoft’s Bing, anyway?

In a recent interview, Weld talked about the improvements Bing has made over Google and other current search engines (only slight), the future of Web search, and a hint at a project he is working on that he thinks could change the way we find information online.

The following is an edited version of our conversation.

Xconomy: Let’s start with your general impressions of Bing.

Dan Weld: I think it’s a nice, if small, advance. Some of the things they’ve done in this relaunch are primarily architectural and will support their plans for the future. In terms of what is actually available right now, the biggest change is integrating vertical search in a uniform way.

X: What does that mean?

DW: When you think of search, everyone thinks about Google, and maybe Yahoo, but there are many other kinds of search, like people searches (you can think about Facebook as a people search), travel search (Kayak and Expedia), health information sites. You can think about Wikipedia as providing a search for encyclopedic information. Shopping searches—Amazon is great in part because it makes it easy to find so much information about the products, and reviews of products. All of these are examples of vertical search experiences. Instead of having wide coverage, you have a better experience within a narrow range.

Bing has tried to marry those things into an integrated wide search experience. All of the engines have been doing this. If you do a search on Google for a movie, you might see information about show times and trailers at the top, for example. Bing has gone further in some directions than people have gone before, in this aspect. If you look at their tabbed pane, it lets you look at different kinds of information right there.

X: But doesn’t Google do that too?

DW: All the engines are trying to do it, but the way Microsoft has done it with Bing is somewhat better than what Google has done. With the shopping tab, you get a faceted interface, meaning you can narrow your search using categorical information, restricting yourself to a particular brand or price range. Those facets are specific to the object you’re searching.

X: So if this is just a small change, what kinds of big changes can we expect to see in the future?

DW: Lots of people are happy with search today, but that’s because they set their sights too low. I think search is going to change enormously in the future, and I think it’s going to do so by …Next Page »

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Yesterday we published Part 1 of our interview with Philip Jacob, founder of Cambridge, MA-based StyleFeeder, and Shergul Arshad, the startup’s vice president of business development. The two men talked about the remarkable growth of the personalized shopping site, which has taken in $3.5 million in venture capital since 2007 and is already profitable. In Part 2 below, Jacobs and Arshad share their changing perspectives on Facebook (where StyleFeeder has a popular third-party shopping application), the evolution of the company’s machine-learning technology, and the different ways StyleFeeder caters to male and female audiences.

Xconomy: You said you had a million registered users. Does that include all the people who access StyleFeeder from inside Facebook?

Shergul Arshad: No, if you count Facebook the number is much higher. 2.5 million people have installed the StyleFeeder app on Facebook. But usership goes up and down depending on the latest bug or redesign that Facebook is going through. It’s not fair to count all those.

X: How important is Facebook for you these days as a channel? At one time it was your main source of new members, wasn’t it?

Phil Jacob: It’s no longer what it once was. Facebook has really deemphasized applications through a series of user-interface changes that make it impossible at this point to scale to the level that a Slide or a RockYou got to. We still have people using it, and there is this viral nature where people can see what other people have posted to their Facebook feed, and it does drive some traffic, but the window of opportunity for third-party apps is gone. But it was a huge success for us, in terms of driving awareness and registered users. It was the single best thing we’ve done from a growth standpoint.

X: What are your thoughts about the direction Facebook has taken?

PJ: It’s interesting. They have this “verified app” program, and we just got rejected, even though we are the largest shopping app on Facebook, because we have clothes on our site, and one of the pieces of clothing we have are thongs. Out of 14 million products, that is the one that got us rejected.

So Facebook is in a weird situation. I think they are struggling for a number of reasons. Their capital costs are just crazy—at one point they were spending $2 million a week just on new storage for their photos…I don’t want to get into an East Coast versus West Coast thing, but I think there is also a difference in mentality that occurs when you actually start focusing on revenue. Everybody can get aligned behind that; we can have conversations with investors and the conversations are so much easier because they’re not asking who are you, what are you—the numbers are there. But if you keep changing your goal as time goes on, there’s always some other metric that seems to be the important one. Facebook seems to keep shifting, which I think is dangerous for them.

X: Their most recent redesign seems to have been conceived to make them more like Twitter—which, ironically, is another West Coast startup without a revenue focus.

SA: It was publicized that they at one point wanted to buy Twitter, and it seems like somebody pretty high up within Facebook said, “If we can’t buy them, we can clobber them at their own game.” I think, personally, that has caused a lot of backlash. People use the tools in different ways. I used to benefit from both Facebook and Twitter greatly, but I think Facebook is starting to be in a position where by constantly prompting people for status updates, you just get more and more inane banter. By suppressing the third-party apps, Facebook is in many ways biting the hand that was feeding them. With an app like poker, a lot of college-aged people can play poker all day, and that was driving page views and ad sales, which is their core revenue model. But if you suppress poker in favor of inane banter, you’ve put the page views toward banter creation versus extracting value.

X: At the beginning, a big part of StyleFeeder’s story was around the machine-learning algorithms that Jason Rennie from MIT built to power your recommendation engine. Have you continued to refine and tweak that engine?

PJ: We don’t make dramatic changes to it. It works quite well the way it’s built. What I’m more interested in—and we have a big effort ongoing right now, with a product launch coming in another six weeks or so—is understanding more about the products we have on the site. We have thousands of data feeds coming to us, and as you might imagine, there is a varying level of data quality between Amazon at one end and …Next Page »

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StyleFeeder is that rarest of animals: a profitable Web 2.0 company, and on the East Coast to boot. It may also have one of the largest ratios of users to employees of any Web business: more than a million registered members, served by a grand total of only six full-time employees. I met all six a couple of weeks ago when I stopped by the company’s offices in hip Central Square, Cambridge, MA, for a progress report.

As I explained in a January 2008 profile, StyleFeeder offers a shopping search engine that uses sophisticated machine-learning algorithms to study users’ tastes and recommend new products from thousands of online retailers. Anytime a user clicks on a recommended product and ends up buying it, StyleFeeder earns a nifty commission. Recently, the startup rolled out a personalized shopping service for the Elle magazine website, and plans to expand the partnership with Elle owner Hachette Filipacchi Media to the publisher’s other websites, which cover the fashion, automotive, luxury design, women’s health, and hobbyist markets.

Software engineer Philip Jacobs started StyleFeeder in late 2005, sold it to now-defunct blog aggregator TopTenSources in 2006, and spun it out again in early 2007. The company has raised $3.5 million from Highland Capital Partners and Schooner Capital—a modest amount, as tech startups go. But it’s been enough to power the company all the way to profitability, thanks to some shrewd decisions that have kept the company’s costs low.

One, as Jacobs explained at Xconomy’s cloud computing forum last year, was to outsource the company’s entire IT infrastructure to Amazon Web Services. Another was to keep the staff small and hire freelancers to do much of the coding scut work. A third was to jump on the Facebook bandwagon at exactly the right time—-mid-2007, when the social networking site was opening the doors to providers of third-party applications. StyleFeeder’s intrinsically social approach to personalized product recommendations vaulted it to the number-one spot among Facebook shopping apps, which brought hundreds of thousands of new members streaming into StyleFeeder itself.

As Jacobs and Stylefeeder’s vice president of business development Shergul Arshad told me during my recent visit, the Facebook wave has largely crashed and dissipated for StyleFeeder (and for a lot of other third-party app providers). But that hasn’t slowed the company’s growth—a record 2.1 million unique visitors stopped at the site in March. I talked with Jacobs and Arshad about how they’ve managed that expansion, how the company’s relationship with Facebook has evolved, where its recommendation technology is going, and how women and men use the site differently.

As you’ll see, they didn’t need a lot of prompting from me to wax on about the company’s business model, which clearly still energizes them, even as the company approaches its fourth birthday. Part 1 of the lengthy interview appears below; we’ll publish Part 2 on Wednesday. [Update 4/29/09: Part 2 now published.]

Xconomy: It’s been a while since we talked about StyleFeeder. How have things been going?

Philip Jacob: We’re kind of in this interesting space. The economy has not done well, but we’re not only doing well, we’ve been doing really well for a long time. At this point, we’re profitable, which is unusual not only for a Web 2.0 company but for an East Coast startup.

We learn about people’s tastes and preferences and help them with their online shopping. If you say you like jeans, we know what kind you might like based on your other preferences. We have this tricked-up collaborative filtering system that powers personalized search and production recommendations and will also introduce you to other people who shop like you do. We are continuing to execute on that and adding new features and monetizing the site through affiliate relationships and our partnership with Hachette Filipacchi. We’ve been up live on the Elle Magazine site for about five or six weeks now.

We’ve done a lot with a little, which was an idea that was part of the original wave of Web 2.0 startups that sort of got lost. People started out taking $2 million or $3 million [in venture capital], which was great. But then when you start taking $10 million or $20 million, that starts to look like …Next Page »

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Stylefeeder, the Cambridge, MA-based personalized shopping engine that raised a $2 million Series A round in January 2008, has formed a partnership with Hachette Filipacchi Media (HFM) U.S., the publisher of Elle, Car & Driver, Woman’s Day, and a number of other fashion, automotive, health, and hobbyist magazines. Under the deal, announced today by HFM, Stylefeeder will provide personalized product recommendations to users of the Elle.com website and eventually other HFM websites.

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Seattle-based Frugal Mechanic, an auto-parts search engine, has received seed funding from Founder’s Co-op, a peer-to-peer investment firm also based in Seattle, according to TechCrunch. The exact amount was not disclosed, but is between $250,000 and $500,000. Frugal Mechanic was founded in July 2008.

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Seattle-based Amazon announced its sales for the 2008 holiday season were its best ever, peaking with 6.3 million items ordered worldwide on December 15. Best-selling items included the “Wall-E” DVD, Nintendo Wii video-game platform, Microsoft Office software, and, of course, the Amazon Kindle e-book reader.

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In the shopping spirit of the season, I thought it might be useful to give a quick update on what the year’s best-selling tech gadgets have been on Amazon.com, and how Amazon’s own foray into gadgets is going. Probably too late to help with your own shopping list, but nevertheless here are a couple notable items from the blogosphere:

—Forget Blu-ray players and iPhones. Wired’s blog notes that four of the top 10 best-selling electronic gadgets on Amazon this year are GPS devices from Garmin. That includes the #1 item of 2008, the Garmin nüvi 350 GPS navigator. Who needs maps anymore? (OK, I do.)

—Amazon’s own gadget, the Kindle e-book reader, is apparently sold out for Christmas, and its stock as a search term on Google spiked in October to nearly triple its level during the summer, according to TechCrunch. Google searches for the term “Kindle” have since fallen off somewhat, but remain high. The Kindle faces competition from Apple and Sony, and it will be very interesting to see what all this means for the future of books.

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Both traffic to online retailers and actual sales appear to have been up moderately on Cyber Monday, the Internet equivalent of last week’s Black Friday bricks-and-mortar shopping binge. But it wasn’t because of the big discounts allegedly being offered by e-retailers as a way to get recession-stung consumers to open their wallets, according to an analysis by David Parker, CEO of Cambridge, MA-based DigitalAdvisor.

In fact, the average discounts on popular consumer electronics products—as tabulated by BeatThat, a comparison shopping site owned by DigitalAdvisor—have been unexpectedly small this season, Parker reported in a post on his company’s blog yesterday.

I wrote about BeatThat back in August, shortly after the site emerged from beta testing. The site’s shtick is that it offers a $2 cash reward to any user who finds a product listed on the Web for less money than the lowest price currently listed on BeatThat. The reward creates “an incentive for the deals to keep coming in until, quite frankly, you just can’t find a better one,” Parker told me back then. His blog post yesterday, while certainly aimed at highlighting BeatThat’s ability to find the rare steep discount, also underscores the site’s function as a kind of barometer of the e-retailing scene.

“The press is full of articles and newscasts saying that retailers and manufacturers have slashed prices this holiday season,” Parker writes. “An analysis of the lowest prices on hundreds of popular consumer electronics products by BeatThat.com, however, reveals that prices have fallen on average a small amount—and that the biggest discounts are on specific models only.”

Parker’s post shares some specific numbers for the main product categories tracked at BeatThat. Between August 1 and November 30, the average percentage price drops were as follows:

GPS devices: 18.9%
MP3 Players: 14.1%
Camcorders: 12.6%
Digital Cameras: 11.2%
TVs: 6.9%
Printers: 5.6%
Average for all six Categories: 7.6%

Parker calls those numbers “interesting, but not what we at BeatThat expected, particularly given all the press lately about huge discounts. TVs only down 7 percent?”

Parker also dug through BeatThat’s data to see which categories retailers are discounting most often. He found that 32 percent of GPS devices were lowered in price by 25 percent or more between August 1 and November 30; 31 percent of MP3 players; 12 percent of digital cameras; 11 percent of printers; 5 percent of camcorders; and just 4 percent of TVs.

Black Friday and Cyber Monday didn’t bring any big improvements, Parker says. Between November 20 and November 30, only 17 percent of GPS devices and printers were marked down by 10 percent or more; only 8 percent of MP3 players, digital cameras and TVs; and only 3 percent of camcorders.

The basic message, according to Parker: the dominant strategy for electronics retailers this season has not been to offer widespread discounts, but to mark down and heavily advertise a few selected items as a way to get shoppers in the door (or onto the website). “Overall, prices were essentially flat,” Parker writes. “A classic case of the ’squeaky wheel’—a small number of products that fell in price got a lot of attention.”

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Seattle-based Amazon (NASDAQ: AMZN) today announced a new application for Apple’s iPhone and iPod touch. The most interesting feature lets you take a picture of a product, which Amazon then tries to match with similar products available for purchase online. The broader application lets users browse for products from Amazon and other retailers like Target and Macy’s.

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Seattle-based Amazon announced it has completed its acquisition of Victoria, BC-based AbeBooks, an online marketplace for used, rare, and out-of-print books. The deal was originally announced on August 1. With the purchase, Amazon (NASDAQ: AMZN) also owns 40 percent of LibraryThing, a literary social site based in Cambridge, MA, which competes with Seattle-based Shelfari, another recent Amazon acquisition.

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Today is Cyber Monday—the Internet sequel to the Black Friday retailing rush. And according to Cambridge, MA-based Akamai, whose global network of content servers is used by hundreds of large e-commerce sites to accelerate website performance, traffic to e-retail sites is approaching record-breaking levels today as consumers try to complete their holiday gift-giving online.

Akamai’s Net Usage Index for Retail, which aggregates data for a representative set of more than 280 retail sites using Akamai’s services, showed that as of 10:00 a.m. this morning, Eastern time, about 5.32 million people per minute were visiting retail sites supported by Akamai. That number already surpassed the 2007 Cyber Monday peak of 4.6 million visitors per minute.

But by 11:00 a.m. traffic had risen to some 5.80 million visitors per minute. And it seemed on track to surpass the global retail traffic record of 6.50 million visitors per minute, set yesterday (November 30).

Online traffic was impressive on Black Friday as well, peaking at 5.96 million visitors per minute at 12:00 p.m., well above 2007’s Black Friday peak of 4.04 million visitors per minute. About half of Friday’s peak traffic was from North America.

Akamai agreed to supply Xconomy with additional data as the day continues, so please check back for updates to this story.

Update, 4:10 pm, 12/1/08: Monday e-retail traffic through the Akamai network reached a peak of 6,713,653 visitors per minute today at roughly 2:30 p.m. Eastern time, setting a new record.

Traffic from North America peaked at around 1:45 pm at 3,106,453 visitors per minute. (Data for additional regions is online here.)

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Want to simplify your holiday shopping lists this year? What about keeping track of who’s picking up the kids from the airport, or who’s going to watch the bird in the oven while you entertain guests? A Seattle startup appears to be gaining traction in helping people manage these kinds of tasks. Cozi, a software company that helps busy families organize their calendars, track to-do lists, and stay in touch, announced it has registered more than a million family members on its free Web-based service.

It’s been a busy and productive year for Cozi, as the company has made the jump from personal-computer software to a Web 2.0 service. In the process, it has added some partnerships with big companies like Whirlpool, Unilever, Best Buy, Gannett, and Meredith Corporation’s Better Homes and Gardens brand (just announced yesterday). And in the middle of the year, it began its advertising model and has signed on dozens of companies like Target, American Express, and Universal Studios.

Cozi launched its software product in the fall of 2006 and is backed by just over $16 million in funding, from Gannett and other investors. It was founded by veterans of Microsoft, Expedia, and Amazon. Most of its customers are based in the U.S., but Cozi also boasts users in about 125 other countries. “Reaching 1 million family members confirms the belief we’ve had all along that families will embrace technology to organize their busy lives and to stay connected to each other as long it simplifies rather than complicates family life,” says Carl Weinstein, Cozi’s chief marketing officer.

I asked Weinstein about the challenges associated with increasing numbers of users. “From a technical perspective, this is growth we expected and have been prepared for,” he replied. “We foresee no technical challenges that we haven’t already anticipated at this point. We’ve just finished the final phase of creating a highly scalable database architecture which will enable us to grow well beyond this level of use with little if any R&D overhead. As we add new features, and that is a big priority for us looking forward, we’re always considering scalability and redundancy given the size of our customer base.”

So where does it all go from here? Not surprisingly, Weinstein is upbeat. “This all bodes really well for Cozi in 2009. Our business model is strong, we are heavily focused on new feature development and our research indicates that more families than ever are ready to ditch their old ways of organizing for a modern solution,” he says. “Given that most families, regardless of how much technology they use personally at work or elsewhere, are still using pen and paper to manage the family, we are very excited about our prospects for the future.”

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You usually only hear about startups when they’re successful, but Seattle-based ClayValet is an exception. Two weeks ago, founder Mikhail Seregine announced that he was shutting down his four-person company, an online shopping service that allowed customers to ask questions about products and get personal recommendations. He followed up this week with a really informative post on his blog (and on Seattle 2.0) where he explained what happened with ClayValet, and what he’s learned from the experience.

It’s an example of the willingness of Seattle startups to help one another through difficult times. And, as Tony Wright of RescueTime recently pointed out, it’s sometimes easy to forget that most startups close down. (Usually, the founders just keep it quiet and find other jobs.) You should read Seregine’s original post, but what happened was that ClayValet, which was built on top of Amazon’s Mechanical Turk, simply didn’t get enough traffic and users. Towards the end, Seregine talked with three potential acquirers who were actively interested, but no deal could be structured.

I called Seregine yesterday to chat about lessons learned. The Stanford University and Amazon.com alum sounded fairly upbeat as he plans the next stage of his career. I learned that he was the first engineer on the Mechanical Turk project (he was at Amazon from 2002 to 2006). He started building a private alpha site for ClayValet in early 2007, and got funding from an angel investor. But he ran into several major obstacles. The company lacked expertise in a number of critical areas, such as consumer websites, enterprise sales, and promotion. So it struggled to create an interactive site for a new audience, and to engage customers, who often found generic Google searches to be good enough.

The most important lesson for next time (he plans to stay in the same general space), Seregine says, is to find a co-founder—and the right co-founder. “That’s important. There’s a lot of important decisions that need to be made. You can make better decisions if you have time to research them and have people who have the right experience.” It may sound obvious, but to start a company, you really need someone to bounce ideas off, someone to own parts of the business, and someone just as motivated and invested in its success, he says.

Next up would be to find the right company advisors, and meet with them every month. At least for Seregine, one advisor would be a serial entrepreneur—one who has seen successful exits. Another would be a business advisor with lots of sales contacts in the industry. And another would be a technical person to provide feedback on software and design.

Rounding out his list of lessons learned are things like working out a more targeted revenue model with specific customers in mind and a specific distribution channel for reaching them, and getting the planning balance right—not so much as to impair flexibility, but enough not to magnify inherent risks in the technology and the market.

I couldn’t help but ask Seregine about his experience with Amazon, and cloud computing technology. “I learned a lot,” he says. “They give you a lot of responsibility, even when you’re starting out.” ClayValet used cloud computing facilities, he says. “The less you worry about the hardware, the more time you have to worry about other aspects of the business.”

Lastly, I got his thoughts on the Seattle startup scene in the wake of ClayValet’s closing. “The community is really good in that it’s supportive,” Seregine says. “It’s not as big or diverse as down in the Bay Area. You can know a lot of the people here, there are fewer cliques, and not as much competition. On the other hand, the disadvantage is if you’re doing something specific, there’s fewer people to collaborate with or evolve ideas together and team up. The feedback I’ve gotten is useful, and I’m very grateful for it…I don’t think startups are dead.”

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When TechCrunch served up a headline yesterday saying Seattle startup Judy’s Book was “Back from the Dead,” I thought there might actually be some news. The same day, John Cook at TechFlash posted a much more informative story about the current state of the online reviews-and-shopping company, which was founded by Andy Sack and Chris DeVore in 2004 and had raised $10.5 million from Ignition Partners, Mobius Venture Capital, and others, before closing in late 2007.

For the record, though, the Judy’s Book site never completely went away. And nothing of note actually happened with it this week. (TechCrunch may have just noticed the site was live—the media works in strange ways.) The company has been under new ownership since early March, when it was bought by Geoff Entress, formerly of Madrona Venture Group, and Andy Liu and David Niu of Seattle-based BuddyTV. The three investors, who happen to be limited partners in Sack and DeVore’s seed-stage fund, Founder’s Co-op, make up the Judy’s Book board of directors. Sack and DeVore are not involved.

I spoke with Entress yesterday to get his take on the company, which currently has one full-time employee and several outsourced positions. Entress and his partners re-launched the site about two months ago. “We thought it was a real gem, and it was a shame for it to go away,” says Entress. “We refocused the site away from [retail] deals and back to reviews, where it had been…We’re running it very leanly. It’s cash flow neutral or positive on a monthly basis. The hope is we can grow it.”

What Judy’s Book had, and still has going for it, is a loyal user base, says Entress. The site lets users post and receive referrals and recommendations for local restaurants, stores, dentists, and other services—which is more like the original vision of Sack and DeVore, and similar to Yelp and other review sites. “It had a substantial amount of traffic, and we’ve been able to keep that,” says Entress. According to Compete.com, Judy’s Book had roughly 153,000 unique visitors in September—much less than Yelp (which has something like 17 million), but respectable nonetheless.

The business model will remain advertising-based, at least for the time being, says Entress. His team is busy working on some new features which he couldn’t say much about yet, though he did say they’ve been “encouraging members to create ‘favorite’ and ‘worst’ lists.” “It will be evolutionary rather than revolutionary,” Entress says.

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At a time of dwindling portfolios, mass layoffs, impending recession, and general financial queasiness, Web entrepreneurs should to go back to basics, focusing on services that help customers save money, say startup gurus like Paul Graham. That’s exactly what CheapToday did last week, launching a website and an e-mail newsletter that highlight the best deals on popular products around the Web, hand-picked by a team of expert bargain hunters.

In fact, CheapToday is so basic that it lacks features that are standard on other shopping sites, such as user reviews, user-contributed deals, and automated product searches: it’s just a list, updated daily, of about 100 discounted products in five categories (clothes, electronics, entertainment, health, and home).

This isn’t Web 2.0: it’s more like Web 0.5, circa 1997. But CheapToday’s founders, veterans of the U.K.-based travel site CheapFlights, are betting that simplicity is exactly what today’s consumers are looking for.

“It’s a very traditional model,” says Hugo Burge, the company’s co-founder and chairman. “Our mission is to help consumers find the best deals, wherever they are. We’re excited about the simplicity of it—nobody else is doing exactly this.”

Shopping sites are a venerable and popular category on the Web, and they do go through periodic reinventions. Purely automated comparison shopping portals like Become, PriceGrabber, Shopping.com, Shopzilla, and Froogle (now Google Product Search) are seeing new competition lately from user-driven sites like Bountii and BeatThat (profiled here), where consumers themselves can earn rewards for submitting deals they’ve discovered. These newer sites tap the expertise of Web “prosumers” who spend so much time online that they find product discounts even the search engines haven’t detected.

But at the opposite end of the spectrum, there may be another group of consumers who feel overwhelmed by the Web’s infinite morass of shopping and entertainment possibilities, and just want a few honest recommendations to help them past all the hype. The popularity of micro-publications such as Very Short List, an HTML e-mail newsletter from IAC that recommends exactly one product per day, may point toward this hunger for simplicity.

Whether online shoppers will be attracted to CheapToday’s extremely spartan feature set, however, is an unanswered question. The self-funded company is run by president and CTO Milenko Beslic from an office in Boston, together with a small “editorial shopping team” based in Chicago. The writers spend their days checking RSS feeds, newsletters, and e-retail sites for enticing prices, then write short blurbs for each deal saying why they stand out. (One recent item: “Sarah Palin Eyeglasses.”)

“Computers don’t wear shoes,” says Beslic—meaning that it’s hard for automated search engines to separate products that are fashionable or inspiring from those that are just cheap.

So far, there are no ads on CheapToday, and the site doesn’t even collect affiliate commissions on the traffic that it sends to e-retailers—one of the key revenue streams for most comparison shopping sites. “We want to gain people’s trust that these are the very best deals no matter what,” explains Burge. “We may take advertising placement and affiliate fees in the future, but we won’t do that until we get to a critical mass and we know the product is working and we can make sure that we don’t compromise the editorial quality.”

In time, the company may “layer on things that might be seen as more contemporary,” such as user feedback, Burge says. “But more than anything we are about simplifying purchasing decisions and making sure people get great quality at a great price.”

That formula echoes, in some ways, the strategy at CheapFlights, one of the oldest comparison-shopping engines for travel deals. When it was founded in 1996, it was Britain’s first search engine for comparing airfares, and though it grew into one of the top 20 travel search sites and expanded to the U.S. in 2003 (Burge directed the company’s U.S. operations), it has never handled actual flight bookings, the way giant competitors like Orbitz, Travelocity, and Expedia do—it simply finds the cheapest flights to any given destination, then directs users to sites where they can book travel.

Beyond the name, there’s no affiliation between CheapFlights and CheapToday, though Burge says he’s long wanted to try the CheapFlights model on a broader range of products. “Only 20 percent of Americans have passports, but 100 percent have wallets,” he says.

Burge says bad economic times are the best possible moment to launch a deals-oriented shopping site. He may be right: after all, he brought CheapFlights to the U.S. right in the middle of the airline industry’s post 9/11 dive. During down times, “You get a little more air time,” Burge says. “People are genuinely looking for good deals and bargains, and companies have plenty of inventory they want to get rid of, so there are deals out there.”

Of course, it’s possible that economic conditions will get so gloomy that consumers will simply zip up their wallets. But if that happens, CheapToday won’t be the only company suffering.

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I’ve always thought “Web services” is a boring name for one of the most lucrative areas of tech-business innovation. The term encompasses many interactions on the Internet—everything from Web-based software to shopping to social networks. A big question these days is how to monetize these Web services, and how to get revenue from all the various Web 2.0 applications that have emerged. Sure, there are traditional business models based on advertising, subscriptions, and transaction commissions, but what are cutting-edge companies doing with these models?

I had a feeling last night’s Washington Technology Industry Association (WTIA) event at the Westin Hotel in Bellevue, WA, would provide some unique answers—and I wasn’t disappointed. (The drinks and dinner, which I hadn’t expected, didn’t hurt either.) I’ll give a straight recap here, and try to follow up with more insights down the road.

The title of the WTIA panel was “Cashing in on Web services: The display ad model and beyond,” and it packed an all-star lineup of Seattle-area Web companies. The moderator was Scott Jacobson, a principal at Madrona Venture Group. Perhaps the most striking thing about the panel was how young everyone looked (I’m starting to feel old around these entrepreneur types):

—Matt Hulett, chairman and CEO of Mpire, maker of ad network WidgetBucks
—Andy Liu, CEO of BuddyTV, the largest TV destination site
—Mike Metzger, CEO of PayScale, the largest salary comparison site
—Spencer Rascoff, CFO of Zillow, the second largest real-estate site
—Tony Wright, co-founder of RescueTime, a time-management software site

Jacobson opened with some brief remarks about online advertising versus other revenue models. “You have to have massive scale to build a business on advertising,” he said. “But there are other ways…to make money, and we’re going to explore those here.” Indeed, it was interesting to see the different approaches taken by the five companies, based on each one’s product and size.

Mpire, though small in workforce (18 employees by the end of this year), has the sort of scale to make advertising work (1.2 billion impressions a month). Hulett explained his approach with WidgetBucks, an online ad network used by some 20,000 publishers, including many small bloggers, where the ads run alongside the content. “The state of online advertising is still in its infancy,” Hulett said. “The bar is pretty low right now. Publishers are looking for other solutions that monetize better than [Google] AdSense.” Jacobson asked whether advertising budgets are shifting away from display ads. “I don’t think anyone’s going to say online advertising is dead,” said Hulett. “There’s a little softness in display, but overall the area is strong.”

Liu spoke a bit about BuddyTV’s traffic (over 30 million pageviews a month), content, and user behaviors. The site includes news, videos, and trivia games for TV fans. “We always wonder, when do people spend time on our site? Most of it comes during the workday,” he said, to laughter from the audience. “We always build two things into the products. …Next Page »

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Sometimes you just have to write the story even when you don’t know all the details yet. This is one of those times. This is the story of H-Farm, an Italian design and investment firm, coming to America.

But it’s only Part One of the story—a preview, really. That’s because it won’t be until next month that I sit down with Riccardo Donadon, the founder of H-Farm, when he visits Seattle. In the meantime, my Italian isn’t what it used to be, so I can’t just call up the company and start asking questions (OK, I never could). So in case I missed something, please do comment or let me know.

The story begins in 2005, when Donadon founded H-Farm as the first private Italian incubator of startups. Before that, he was an Internet entrepreneur, having created the online shopping site Mall Italy Lab (sold to Infostrada in 1999) and E-Tree (sold to Etnoteam Group in 2001). He started H-Farm in the scenic countryside of Cà Tron, near Venice and his hometown of Treviso. The company’s second principal, Maurizio Rossi, joined as an investor. Rossi came from the fashion and design industry, having worked for LVMH and sports-brand marketing firm Vista Point.

It’s an intriguing combination of design and technology expertise—and it shows in the eight or so companies that have been incubated by H-Farm so far. The group includes H-art, an interactive media company that does design for high-end brands like Gucci and Armani, and Zooppa, a user-generated advertising firm. H-Farm’s portfolio also has startups in mobile, graphics, consumer Internet, and retail—including social-shopping site Wishpot, based in Seattle and profiled here last week.

Which brings us to an even bigger Seattle connection. It turns out H-Farm isn’t just an incubator. “Using design thinking,” the company’s website says, “H-Farm is going to develop a worldwide interconnected network of innovative technology and new media start-ups.” In other words, besides spinning off companies, H-Farm seems to want to help its U.S. startups gain a foothold in the European market, while also introducing its broader portfolio to U.S. customers—and that requires setting up an office here.

Last month, H-Farm started renting office space near Seattle’s Pioneer Square—sharing it with Wishpot and another startup in stealth mode. It is H-Farm’s only office in the U.S., and the company plans to make it the major center of operations outside of Italy. H-Farm’s website says, “This operation will endow it with the possibility of significant growth on the other side of the Atlantic as well as the chance to increase its projects and activities.” Why Seattle? Max Ciccotosto, Wishpot’s co-founder, says, “They’d looked in the Bay Area, but they really got feedback that Seattle was the right market for them.”

To me, the West Coast makes sense for H-Farm’s expertise, and I suspect the choice of Seattle boiled down to personal and business relationships in the area. Ciccotosto, a native of Italy, says he originally met H-Farm last year through one of his investors, Rob Monster of Monster Venture Partners. “Rob said, ‘There’s a guy [from H-Farm] coming from Venice, can you meet him?’” It turned out Ciccotosto was going to a fashion-industry party hosted by Nordstrom’s that night, so he relayed the message to the H-Farm visitor, a senior employee named Marco Janeczek (who was born in Poland but raised in Italy). Evidently, the cocktails and fashion models were a hit—and pretty soon Ciccotosto was on his way to securing a Series A investment from H-Farm. The Italian firm has also gained several advisors around town, so it’s a well-connected operation.

I’ll be getting the scoop on H-Farm’s local strategy from Donadon soon. In the meantime, it doesn’t look like the firm is soliciting wide-ranging funding proposals from early-stage startups, à la incubators like Founder’s Co-op or Y Combinator, which we’ve been covering at Xconomy. So its role in the local innovation community is less clear at this point, but its outside perspective could be valuable. “These guys come with heavy global expertise,” says Ciccotosto.

H-Farm is accepting proposals through the end of September in a very specific area: new applications for the Apple iPhone. The company says it has received more than 100 proposals so far, and will invest $250,000 in the winner(s). It also says it will make a new call for proposals in October, in an area yet to be announced, so stay tuned.

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The “Give One, Get One” program introduced last holiday season by the Cambridge, MA-based One Laptop Per Child Foundation—which gave consumers in the United States and Canada the opportunity to buy two of the foundation’s XO laptops for $400, and have one sent to a child in a developing nation—was a success in several respects. It generated public excitement about the XO by giving the general public its first chance to buy the machine; it created more orders for the laptop, improving the economies of scale involved in its manufacture; and, of course, it meant that more children received laptops (100,000 more, according to the foundation).

But judged by the standards of most commercial consumer-electronics rollouts, the “G1G1″ program was a fiasco. The foundation didn’t have enough staff to respond the tens of thousands of orders that started rolling in as soon as the program launched. The company it hired to manage fulfillment, Miami-based Brightstar, lost thousands of customer addresses through computer glitches. Many customers—some of whom had planned to give the XO to their own children, grandchildren, neices, or nephews as holiday presents—didn’t receive their laptops until March.

Now OLPC says it plans to repeat the offer for the 2008 holidays—but this time, Amazon will be in charge.

IDG News Service broke the news on Wednesday, after speaking with an OLPC regional director who said the XO will be available from the Seattle-based e-retail giant starting around Thanksgiving. The director, Matt Keller, who runs the foundation’s operations in Europe, the Middle East, and Africa, said the foundation is still too small (with only 25 core staff) to handle such a large program on its own.

Boston Globe reporter Hiawatha Bray spoke with OLPC founder Nicholas Negroponte for a story published today that says the switch to Amazon should eliminate last year’s delivery problems. “Many things in the last G1G1 did not run as smoothly as we would have hoped,” Negroponte told the Globe. “Those things, mostly related to fulfillment, by their nature, are what Amazon can fix.” But Negroponte didn’t share additional information, saying Amazon would announce the details of the program when it’s ready.

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