Google, Yahoo, Facebook, MySpace. Those companies’ products spread over the Internet like a virus. But why hasn’t there been a runaway hit like those in the mobile software world? Why does it take so much longer to build value, and a strong customer base, in mobile companies than in certain Internet startups?

Dan Shapiro had some entertaining thoughts on this yesterday, as he spoke to the Mobile Northwest 2009 crowd in Seattle. Shapiro is the co-founder and CEO of Ontela, a Seattle-based mobile imaging startup, and he’s a veteran of RealNetworks and Microsoft. I won’t do justice to his presentation, but here’s the gist.

Hotmail was one of the first examples of viral marketing. By appending the message, “Get your free e-mail at hotmail.com” (or some such) to the bottom of each e-mail, Hotmail helped pioneer a new method of promotion that was “basically free, highly measurable, and ridiculously effective,” Shapiro said. Its number of new subscribers jumped from hundreds to tens of thousands per day.

Maybe there’s something about the viral distribution model that doesn’t fly in the mobile world, Shapiro thought. In epidemiology, he pointed out, researchers use a parameter called the basic reproduction number to gauge whether a viral outbreak will spread or die out. The corresponding number in the Internet world tells you how many people a given user will “infect,” on average: Shapiro gave some estimates for Facebook (6), Gmail (5), MySpace (4), and Twitter (1.5). He argued that Twitter hasn’t been spreading virally; it has used more conventional marketing through word of mouth and the press.

“Heterogeneity in the target population is the best protection to keep you from being infected by viruses,” he said. That means some people have different levels of resistance, different behaviors, different types of contacts, and so forth, so not everyone will get infected by, say, the latest flu bug.

And that same kind of variety that makes individuals different is exactly why mobile isn’t viral, he argued. He cited some survey stats to explain how fragmented this market really is: There are roughly 500 different types of handsets, about 30 per carrier; about two-thirds of people (65 percent) don’t have a data plan; three out of four people (75 percent) are on a different carrier from you; almost that many (70 percent) don’t have a smartphone. And despite all the attention it gets, 98 percent of mobile users don’t have an iPhone. (iPhone apps are definitely not spreading virally, Shapiro said. He also argued that Tegic’s T9 predictive texting did not spread virally; it was pushed out by carriers and handset manufacturers in a dedicated partnership.)

“We will not see the Facebook, Gmail, or Yahoo of mobile until this changes,” Shapiro said. He added that he’s not advocating one standard mobile platform; he’s just saying how it is right now.

So his advice for mobile entrepreneurs and investors was:

—Be skeptical of anyone peddling viral marketing in mobile.

—Build a business model that doesn’t require big adoption.

—Pick a market segment that’s homogeneous. (Examples: BlackBerry corporate users, Silicon Valley techies.)

—Use ubiquitous technologies like WAP (Wireless Application Protocol) and SMS texting.

—Wait… (”Things are getting better,” he said.)

Afterward, Shapiro said he thinks “Europe holds the future of the U.S.” Over there, wireless carriers have influence, but only about half of consumers get their services directly from carriers, versus about 90 percent in the U.S. “I think you’ll see the carrier role diminish,” he said, when it comes to mobile software.

Comments (1) | Reprints | Share:        

When Tom Clancy introduced a panel discussion yesterday at a forum on analytics software, the founder of San Diego’s Tao Venture Partners said the forum was “founded four years ago by people who had an interest in seeing San Diego get established as a leading cluster in the analytics space.”

The forum, which is sponsored by the San Diego Software Industry Council, offers an annual snapshot of local developments in a booming industry that has become crucial to business intelligence, data storage and management, and complex decision-making.

Since Robert Hecht-Nielsen founded HNC Software here in 1986, the number of companies that focus on analytics software in San Diego has mushroomed, with more than 100 companies specializing in neural networking, data mining, pattern recognition, and related algorithms and technologies for analyzing data. Yet Clancy and local experts who discussed “opportunities in analytics” lamented that San Diego’s standing as the birthplace of some key companies and technologies has gone largely unrecognized. Among the examples cited:

— HNC, which specialized in technology to analyze credit card transactions, was acquired for $810 million in 2002 by Fair Isaac and Co. and integrated with the Minneapolis, MN-company’s credit-scoring business.

—Urchin Software, a suburban San Diego Web analytics company that developed an assortment of tools for measuring website usage, page views, and other statistics, was acquired by Google in 2005 for an estimated $30 million. Seven months later, Google renamed its Urchin business Google Analytics, and made analytics tools available to Web users for free.

—WebSideStory, a San Diego company that developed website traffic analysis tools, rebranded itself as Visual Sciences in 2007 and was acquired later that same year for $394 million by Utah-based Omniture. (Last month, Omniture was itself acquired by San Jose, CA-based Adobe Systems in a $1.8 billion deal.)

—Carlsbad, CA-based analytics software developer Keylime Software was acquired for $9.5 million in 2003 by Pasadena, CA-based Overture, an advertising distribution network that was later acquired by Yahoo for $1.6 billion.

Such deals reflect a surging awareness of the value of data, says Stephen Coggeshall, a co-founder and chief technology officer for San Diego-based ID Analytics, which uses advanced analytics to search credit databases for telltale signs of identity theft. In terms of technology innovations that will likely lead to forming new companies, Coggeshall says …Next Page »

Comments (1) | Reprints | Share:        

Microsoft announced the integration of real-time status updates from Twitter and Facebook into its Bing search engine this morning at the Web 2.0 Summit in San Francisco. Senior vice president Yusuf Mehdi and Online Services Group president Qi Lu confirmed the company’s non-exclusive partnerships with the two social media networks on stage, followed by a short demo, discussion, and audience Q&A.

According to Mehdi and Lu, the new deals are part of Bing’s ongoing plan to join “the emerging hot area of real-time information” with search engine technology to create a new kind of socially focused reader.

“We think about search holistically,” Lu said. “It’s about user intent…You are trying to build a mind-reader.”

During his speech, Mehdi demoed Bing.com/twitter, which went live in beta form only minutes after the announcement. “We are going to get access to all the Twitter information in real time,” he said, while organizing the tweet index by quality, relevance, and social significance to make searching easier and more efficient.

“We look at the people who are tweeting and we assign a social relevance score,” Mehdi said. The tweets are ranked by relevance, range, popularity, and interest, with stronger emphasis on tweets that are considered to be the most trustworthy and prolific. “If a particular tweet is being re-tweeted several times, you know it’s hot,” he said.

The new Twitter integration also includes a spam filter to improve searchability in the Twitter stream, a “tag cloud” of hottest Twitter topics, tweet ranking abilities, and top tweeted links. Bing will also automatically expand shortened URLs, like bit.ly and tinyurl, so that searchers will be able to see where the links will take them before clicking.

Meanwhile, the Facebook deal will allow Bing access to all publicly shared information from the social network’s users. According to Mehdi, this will launch “at a later date.”

The deals, described by Mehdi as “strategic partnerships,” come at the height of the “real-time search” competition between Microsoft and Google—efforts to help consumers get up-to-the-minute information about the world around them. In the last several months, Bing also has been on a partnership blitz, making a deal with PayScale to edge into the job search market, and signing a 10-year, $150 million agreement with Yahoo that gives Microsoft control of both companies’ search engine technologies.

And this is not Bing’s first attempt at going social, either. With Google now infiltrating what was Microsoft’s core client base—corporations—and dominating personal Web browsing and e-mail, Bing has been running a campaign to outpace the search giant in other areas. Both companies have been actively developing social media capabilities—Google using iGoogle to integrate content sharing, games, and communication tools into its users’ individualized homepages, and Bing utilizing already established social media. Facebook now employs Bing for the site’s search feature, and back in July, Bing began including popular Twitter feeds—like those of Al Gore and Ryan Seacrest—into its search results, in an attempt to get a leg up on the competition.

Google is said to be in similar partnership talks with both Twitter and Facebook. And although Microsoft’s deals are non-exclusive and do not preclude any future deals between the two social media groups and Google, it was clearly a sprint on the part of Microsoft to get in first in the social media race.

Passing over financial and operational details, Lu made it clear that this was not the last we’d hear of Microsoft’s forward-thinking, social media push. “A real-time corpus like Twitter…is still evolving and emerging,” Lu said. “This is just the beginning.”

Comments | Reprints | Share:        

Laugh, and the world laughs with you. Weep, and you weep alone (as the old saying goes). Or maybe not. Maybe no one weeps alone anymore, what with Twitter, Facebook, and the like.

This week’s release of a “sentiment analysis” product from Seattle-based Appature made me think about what’s really going on at the intersection of social media and semantic understanding of the Web. Appature is an up-and-coming, already profitable startup that has made its name in helping companies in the healthcare industry better understand their customers, so as to deliver more effective marketing campaigns. It has made inroads with big customers, like Johnson & Johnson and Microsoft Health Solutions Group.

Appature’s latest offering “allows marketers to close the loop between the pulse on the broad Web and their non-Web business in an immediately actionable way,” says Kabir Shahani, Appature’s co-founder and CEO. “It’s the linkage between the broader Web and the other information you already have about a customer or prospect, with immediate action built on top of this, that is the key here.” In other words, it’s not just about market awareness, it’s about directly driving revenues—by monitoring and understanding positive and negative feelings about brands, products, and other industry topics, gleaned from blogs, Twitter, Facebook, other social sites, and Web documents.

It’s a fast-moving trend, and there are now enough Seattle companies working on this kind of technology to put the Northwest squarely on the “Web sentiment” map. (I haven’t talked to companies in Portland, OR, yet, though Jive Software comes to mind.) Here’s how it all works, in a nutshell. If you’re a marketer, you can buy software to help monitor and summarize what customers are saying about your brand on the Web. If you’re a big company, or an individual with a reputation to protect, you can even do things like change the visibility of search results that pop up on your name. And if you’re a regular old consumer, you can keep track of things like what percentage of people (and who) are saying positive or negative things about the iPhone, Microsoft, or Kanye West.

That kind of software is exactly what Seattle-based Evri rolled out in August. Evri’s calling card is that it scours the Web every minute of every day, trying to understand the semantic meaning of sentences on Web pages and documents. What’s more, its software makes connections between all the entities (names, places, products) it encounters on the Web. The broader goal is to give people a better way to browse and discover information.

“One thing we do which is really different is we actually say who or what is expressing the positive or negative sentiment, as opposed to simply remaining ambiguous,” said Deep Dhillon, Evri’s chief technology officer. “One of the reasons we can offer these more involved capabilities is due to the depth of our technology stack—because we know, for every sentence, who the subject, verb, object, etc. are.”

Which raises the question of just how far along the semantic technology …Next Page »

Comments (3) | Reprints | Share:        

In the mid 1990s, three on-ramps led us on to the information superhighway: AOL, Prodigy and CompuServe. For a monthly fee, users were served up a customized version of the Web offered by one of these network providers. They took a walled garden approach, offering applications only through their services and limiting e-mails within their networks. For a while, it worked. But soon, consumers and application developers alike were clamoring for more—and, fortunately, the walls around the World Wide Web came tumbling down. Untethered from these artificial constraints, developers created innovative Web-based applications, sites and services available to all—regardless of their provider—and consumers began logging onto the Web in droves.

The subsequent Internet boom that took place is well known. It’s hard to imagine where we would be now if those walls had remained. The Web 1.0 movement showed us that technological innovation flourishes when markets are open. Yet despite the lessons learned, we find ourselves repeating history in the U.S. mobile marketplace. With so much hype about the “mobile Internet,” did you ever wonder why we have yet to see a mobile start-up grow to the scale of an Amazon, Google, Yahoo or Facebook?

Clearly, the innovation and growth of Wireless 1.0 was led by Europe and Asia. The question is whether the U.S. will lead the Wireless 2.0 era. While our European and Asian counterparts understood and embraced open mobile networks early on, closed markets here in the U.S. constrain progress. Consumers here can’t buy just any mobile device with any software and use it on any network. The carriers argue that this level of control is necessary to ensure network “quality.” AT&T made the same argument about the quality of the landline network before the 1982 divestiture. But as of this writing I’m still unaware of anyone who bought a landline phone at Target, plugged it in at home and thereby brought down the AT&T landline network.

From 1999-2007, we saw an explosion of wireless innovation in Europe and Asia, where mobile devices weren’t limited to one network and developers could build and distribute wireless applications to virtually any mobile consumer. Japan had wireless Internet through NTT DoCoMo’s i-mode as early as 1999. Meanwhile, in Europe, the introduction of the open GSM standard created an environment where early interoperability and network openness were standard.

During this same time period, U.S. mobile innovation was largely sluggish, stuck in the walled garden model. While you could argue this was acceptable during that time period because our technology had not caught up yet, we only need to look at the iPhone and BlackBerry app stores to know that we are now capable of more. Apple—and the ecosystem that has surrounded it—has shown the world that an innovative company can create a great product with a direct-to-consumer path to market.

Smart phones (such as BlackBerry phones and the iPhone) are built on open technology by default, and carriers cannot block access to these devices. Apple has proven that a friction-free ecosystem can be built to allow independent software vendors (ISVs) to address this market. But alas, smart phones account for less than 25 percent of the market, and won’t exceed 50 percent for several years—an eternity in high tech. So for the foreseeable future, the vast majority of the U.S. mobile market will be comprised of feature phones, which only run software approved by the wireless carrier.

Herein lies the problem and the solution. What kind of innovations would emerge in the U.S. market if we could replicate for the 200 million feature phone users what Apple has created for the iPhone? I’m not talking about the iPhone’s elegant form factor or usability. Rather, I mean …Next Page »

Comments (3) | Reprints | Share:        

Microsoft’s new search engine, Bing, is growing faster than its rivals, including Google, according to Nielsen Online. The report says Bing’s share of the Web search market was 10.7 percent in August, up from 9.0 percent in July, representing a 22 percent increase in its total number of searches. Google’s market share increased slightly to 64.6 percent, while Yahoo’s dropped to 16.0 percent. Bing was launched at the beginning of June, and has received generally positive reviews. Earlier this week, Bing rolled out a “visual search” feature, which lets you browse results by pictures instead of text.

Comments (1) | Reprints | Share:        

A report today that Google is in talks to acquire Cambridge, MA-based video hosting company Brightcove met with curt no-comment reactions from both companies, and has been flatly contradicted by one analyst.

The report, which surfaced on Twitter Wednesday afternoon, came from Mark Glaser, a San Francisco-based freelance technology writer who is also executive editor of Media Shift, a PBS-hosted blog on digital media. Glaser wrote: “Source with knowledge of deal tells me video service Brightcove in talks with Google about buyout in $500m to $700m range.”

But Dan Rayburn, an analyst at market research firm Frost & Sullivan who follows the online video industry, reported on his Business of Video blog later in the afternoon that Glaser’s report was wrong. “I received a call from one of the parties involved in the Google/Brightcove rumor who would not talk on record but confirmed with me that the rumor that Google is buying Brightcove is in fact false,” Rayburn wrote. “I won’t say which side, Google or Brightcove the employee is from, but it’s someone I trust.”

No further details of the alleged talks between Google and Brightcove appear to have surfaced, and the companies themselves haven’t confirmed or denied the rumor. “We aren’t commenting on the rumors,” Kristin Cronin, a spokesperson for Brightcove, told Xconomy. “We don’t comment on rumor or speculation,” said Andrew Pederson of Google’s corporate communications office.

If Google were to acquire Brightcove, it would be a spooky repeat of recent history—because last year, a Silicon Valley-based search giant really did take over a video hosting company based in Cambridge’s Kendall Square. Alas, Yahoo’s February 2008 acquisition of Maven for $160 million didn’t go well: Yahoo closed down Maven’s hosting service in June, and has dispersed former Maven employees to other divisions of the company.

Brightcove’s investors would likely welcome an exit scenario of the type Glaser described. The company has raised $91 million in venture capital to date from a group that includes Accel Partners, AllianceBernstein, Allen & Company, America Online, General Catalyst Partners, the Hearst Corporation, IAC/Interactive Corp., Maverick, Transcosmos, and the New York Times Company. A notional $700 million purchase would bring investors a return of almost 8x.

But the 160-employee company has had plenty of work to keep it preoccupied. It rolled out a simplified version of its video hosting platform last October and announced a major partnership with Adobe in April. When I talked with CEO Jeremy Allaire last fall, he said the company’s revenues grew by a factor of 5 in 2007 and a factor of 3 in 2008 and that he expected Brightcove to reach financial independence in 2009. And the company has now reached that goal, as Rayburn reported in June; it’s cash-flow positive and expects revenues of $80 million this year.

Comments (3) | Reprints | Share:        

San Diego’s DivX has been on something of a roll since June, when CEO Kevin Hell talked about the capability of someday moving television seamlessly from the living room TV screen to the computer screen and to the screens of wireless mobile devices.

The digital media company, which takes its name from the DivX codec standard, has been extending its reach further into consumer electronics, Internet video, and Internet Protocol TV (IPTV), which uses the Internet to deliver digital TV service. On one front, DivX is continuing to negotiate deals with consumer electronics manufacturers to incorporate its digital video compression technology in the latest HD televisions, Blu-ray disc players, and IPTV set top boxes. The company already has certified its technology for more than 4,500 different model devices. Meanwhile, on another front, DivX struck a deal with four Hollywood studios on Aug. 26 that enables consumers to download thousands of movies from an online store, FilmFresh.com, and watch them on DivX-certified device.

Kevin Hell

Amid this flurry of recent developments, DivX CEO Kevin Hell gave me a fresh take on the company’s strategy in a fast-moving industry, especially as it relates to Internet TV, which he says is undergoing a fundamental shift. “Internet TV has the potential to re-order and revalue the media value chain—at least the way that broadcast TV works today,” Hell says. As digital television moves increasingly beyond standard definition to high-definition—and from broadcast and cable TV networks to Internet-based video content on demand, Hell says, “We’ve positioned DivX as being the friendly, agnostic ‘any-to-any solution’—from any device to any manufacturer.”

Hell joined DivX seven years ago as chief marketing officer, and later served as the company’s president and chief operating officer before becoming CEO in mid-2007. From 2002, when he joined DivX, the San Diego media company has grown from 35 employees and less than $3 million in annual revenue to more than 300 employees and $93.9 million in sales last year.

Hell says DivX is counting on three broad trends: Video content is moving beyond the TV and becoming unbound from …Next Page »

Comments (1) | Reprints | Share:        

Tomorrow, Boston-based uTest, a startup that crowdsources software quality-assurance projects to a global community of 19,000 freelance testers, is expected to announce the official results of its first “Search Engine Bug Battle.” Xconomy got an early look at the data today, and the folks in Redmond and Bellevue, WA, may not be happy about the results: uTest community members found 321 distinct bugs in Bing, Microsoft’s new search engine, more than the three other tested engines combined.

On the up side for Microsoft, part of the reason Bing fared so poorly compared to the other three engines that testers examined—Google, Yahoo, and Google’s experimental new search engine, Caffeine—may be that Bing is new and high-profile, meaning that testers probed it with extra zeal. Some 85 percent of the 1,100 uTest members who entered the contest chose to make Bing one of the engines they tested. (The same fraction tested Google.) And after testing Bing, 10 percent of the contestants told uTest they liked Bing so much they would make it their default search engine.

Another mitigating factor: Bing “has the youngest code base, compared to Google or Yahoo, so you’d expect to see more bugs,” Matt Johnston, uTest’s vice president of marketing and community, points out. “They’re also introducing features that are new to the search space, including multimedia features, visual search, interactive roll-over features.”

In other words, Bing has more stuff for aggressive software testers to break. Just today, for example, Microsoft unveiled a new “visual search” feature at Bing: users can now initiate and refine their searches by clicking on images, at least in specific categories such as “U.S. politicians.”

uTest’s bug battles are quarterly contests in which the company’s freelance members compete to discover bugs in popular software applications. uTest hands out cash prizes to the testers who find the most. It’s the fourth such battle for uTest, and the first one to focus on search engines. (Previous battles focused on Web browsers, social networking sites, and Twitter applications.)

uTest members not only found more bugs in Bing—321, compared to 130 for Google—but those they did find were more urgent. Contestants described 60 percent of the Bing bugs as either “high severity” or “showstoppers”—those in need of immediate attention—whereas only 8 percent of the Google bugs were showstoppers. A similar percentage of Yahoo’s 70 bugs were classified as showstoppers (10 percent).

The company followed up on the bug competition by surveying members about their search engine experiences. Alas, Bing suffered here too. Asked what quality is most important in a search engine, 71 percent of the uTest contestants answered …Next Page »

Comments (1) | Reprints | Share:        

What’s it like in the world of corporate venture capital these days? For Jeff Schrock, it’s pretty stable and good. Probably more stable than at many boutique venture firms, which are under increased pressure to raise funds and get quick returns.

Schrock is a Seattle-based tech investor with Intel Capital. In a previous life, he co-founded Seattle startup Activate—which was bought by CMGI in 1999 and then Loudeye Technologies in 2001—before becoming an executive at Yahoo and then RealNetworks. He was most recently an investor with Monster Venture Partners, until he joined Intel Capital in late 2008. Schrock is a board member of San Francisco-based Transpera and Seattle-based LearnLive Technologies, and chairman of EVO Media, the Seattle makers of the DevHub publishing platform, which recently became “ramen profitable,” as Schrock puts it.

A quick snapshot of Schrock’s current firm: Intel Capital has invested about $4 billion in some 400 companies, including a $1 billion investment in Kirkland, WA-based Clearwire (NASDAQ: CLWR). It has approximately 70 investors globally, about half in the U.S. and half international. The investment team is organized into eight sectors (including consumer Internet, digital home, and mobility) across 20 or so different geographies. Although Schrock is based in Seattle, his investment focus is not tied to the Northwest. But it’s where he has the most experience and contacts, so he has a unique perspective on the region.

In an e-mail interview, I asked Schrock about his new gig at Intel Capital, his specific investment themes, and the trends he’s seeing in consumer technologies and startups. Here’s a transcript of our interview:

Xconomy: Can you talk about your current role and responsibilities at Intel Capital, and how it fits into the arc of your career as an entrepreneur and investor?

Jeff Schrock: My job is to make profitable investments in companies which move computing and Intel forward. I am on one of our consumer investment teams—so it feels very familiar as much of my career has been in the consumer Internet. (Previously, I was an executive with both RealNetworks and Yahoo!) It is different, however, being on the other side of the table. I spent a good chunk of my early career as an entrepreneur asking, receiving, and sometimes begging for venture capital. I can empathize with the startups and entrepreneurs I have the pleasure of working with. But it’s still early in my investing career, so we’ll see if this makes me a better investor or not.

X: What is special about Intel Capital, and how does it differ from most VC firms?

JS: There are a number of things unique to Intel Capital. First, it is truly a global organization. It’s very easy to collaborate across sectors and geographies. This brings advantages to us, as investors, but also to our portfolio companies who can tap into a wealth of expertise and relationships. Secondly, because of the heritage as a manufacturing company, Intel Capital is very well organized. The decision-making process is quite transparent and structured. As an outsider who’s primarily worked in software companies, this was a welcome surprise. Lastly, Intel Capital is not a fund. Unlike our colleagues in boutique VC …Next Page »

Comments | Reprints | Share:        

It’s been quite a summer here in Seattle, with record droughts and a heat wave that left us all panting in line for an iced coffee. But despite a cool economic climate, Microsoft managed to stay as hot as the temperature outside its Redmond, WA, headquarters, with a series of big deals and other announcements that kept everyone sweating to keep up.

Here’s a rundown of the most important news from the software giant’s eventful summer:

—Microsoft started the season off with a bang, or rather a Bing, when it launched its new search engine at the end of May. Bing didn’t stop making headlines with its launch, forming a partnership with salary comparison technology startup PayScale in June and adding a limited Twitter search feature in early July. As Bing clambered up the search engine ladder, Greg spoke with Harry Shum, the vice president who runs the engineering team that created Bing, about why Bing is already doing so well.

—Bing’s debut had even stronger echoes than might have been expected. It appeared to help close a long-rumored deal with Yahoo in July that puts Bing technology behind Yahoo search for at least a decade. Microsoft had already hired away three search executives from Yahoo at the end of June before the partnership, which leaves Yahoo in charge of sales and distribution of advertising for both websites, as well as receiving a fair chunk of change.

—Microsoft expanded further into a new area this summer: life sciences, with the purchase of the Seattle-based assets of Rosetta Biosoftware from Merck, integrating it into its new Amalga Life Sciences platform. Rosetta’s technology analyzes how genes turn on and off, and will be added to Amalga’s genomic data analysis program. This represents Microsoft’s first real push into biotechnology after years of looking for ways into the market, as Luke reported. In another research-related move, Microsoft unveiled Trident, a scientific analysis tool to help researchers and businesses sort through and make sense of massive amounts of information quickly.

—In a deal as big as any launch this summer, Microsoft sold its digital advertising company Razorfish to French advertising firm Publicis just a few weeks ago for about $530 million, and signed a five-year strategic alliance with Publicis. Razorfish executives are looking forward to the more global reach that Publicis assures them, while Publicis gets a huge leg up in the digital marketing arena since Razorfish is already the largest company of its kind in the world. Online strategy expert Warren Gouk told Greg that the partnership could help out Microsoft a lot too, pushing up its advertising business.

—Microsoft made another European friend this summer, teaming up with Finland-based Nokia to adapt Microsoft programs to Nokia’s smartphones. The Symbian operating system created by Nokia has been a rival to Microsoft’s mobile OS, but putting its programs on Nokia’s phones helps Microsoft compete against Google, whose own mobile productivity programs have been chipping away at Microsoft’s market share.

—On a lighter note, Microsoft generated a lot of excitement at this year’s E3 expo with the demonstration of Natal, a new motion-capture system for the Xbox 360 that works without needing any goggles or other special equipment. There was also an announcement and demonstration of how players can use Facebook and Twitter on their consoles to communicate with friends while they play.

And looking ahead, Microsoft seems to be just warming up, with the upcoming October launch of Windows 7, which promises to fix Vista’s woes and improve upon its good qualities. It remains to be seen how well the new OS will be received, especially considering the chilly dismissal of Windows 7 as a rival by Apple in its announcement of its own new OS, Snow Leopard, set to launch just a month before Windows.

Comments | Reprints | Share:        

San Diego wind turbine maker Helix Wind made some more acquisitions, and out-of-business chipmaker Sequoia Communications arranged to sell its equipment in an online auction tomorrow. So it was a good news, bad news week for technology here.

—San Diego’s Sequoia Communications, which gained attention in the wireless chip industry when it introduced a multimode transceiver, has ceased operations. The nine-year-old chipmaker, which raised about $64 million from at least eight venture investors, was unable to secure additional capital.

—San Diego-based Helix Wind (OTC: HLXW), which is developing vertical-axis wind turbines, has agreed to buy the assets of two Oregon wind turbine companies in a bankruptcy case. The non-binding contracts for Abundant Renewable Energy and Renewable Engineering, which have the same owners, could be worth as much as $6.5 million. Helix has been moving to expand its product line of small-scale turbines.

—San Diego video codec developer DivX (NASDAQ: DIVX) and Yahoo (NASDAQ: YHOO) settled a lawsuit that DivX filed after Yahoo backed out of an Internet advertising agreement.

—San Diego-based Platformic, which makes Web development and content management technology, introduced a new mobile blogging tool, which the company says is ideal for journalists and professional bloggers.

—In a two-part “state of venture” quiz that Xconomy’s Bob Buderi put together with help from the Boston office of the Cooley Godward Kronish law firm, contestants learned that company valuations have been rising in the past quarter. The quiz, which is based on nationwide data, also shows that more than half of the Q2 deals were “flat” or “down” rounds. Check out the quiz here. The answers are here.

—Amid the nationwide downturn in venture capital investment activity, I’ve written a fair amount about the evaporation of San Diego’s hometown VCs. Now Connect, the San Diego non-profit group that serves as a catalyst for technology innovation, has proposed a series of initiatives to help fill the gap—including the formation of a seed fund. Connect CEO Duane Roth has said the initiatives will require more than $10 million, which Connect has begun to raise from both private and public sources.

—Xconomy has made it easier for you to get our electronic missives on your mobile phone by going to http://m.xconomy.com for the new mobile-friendly version of our site. But it’s only one of many new developments at Xconomy. And as always, you can sign up for Xconomy’s e-mail newsletters, including specialized newsletters, and our RSS feeds here.

Comments | Reprints | Share:        

Northwest tech giants Amazon and Microsoft have joined a coalition of companies, nonprofit groups, and individuals to work against a proposed settlement by Google regarding its thousands of scanned books according to an article in yesterday’s New York Times. The group, which includes new Microsoft ally Yahoo, will work to derail the settlement between Google and groups like the Authors Guild and the Association of American Publishers about Google’s right to digitize and publish books from libraries online. Google was first sued over its book scanning in 2005. The settlement reached sets up a way for Google to display and sell books online but is of concern to antitrust lawyers including some in the Department of Justice. The coalition against the settlement is tentatively being called the Open Book Alliance.

Comments | Reprints | Share:        

DivX (NASDAQ: DIVX), the San Diego video codec developer, says it has settled a lawsuit with Yahoo (NASDAQ: YHOO) over an advertising agreement that triggered some turmoil at DivX last fall. Terms were not disclosed, but DivX says the settlement will boost its third-quarter operating income by 29 cents per share. With about 32.8 million shares outstanding, that suggests a settlement of $9.5 million. DivX sued Yahoo in November, alleging the Internet search engine company had backed out of a two-year deal on toolbar distribution reached in September 2007.

Comments | Reprints | Share:        

Investor Jeff Schrock calls Seattle-based EVO Media a “ramen profitable” startup. Co-founder and CEO Geoff Nuval calls it “roast beef sandwich” profitable. Two guys, two spellings of the same first name, two different food analogies. But the message is clear: these guys are hungry.

Call it what you want, EVO Media is turning a profit some six months after launching DevHub—a free Web publishing platform that helps companies and individuals manage and monetize niche websites—and after going through a strategic downsizing. The company, founded in late 2007, had raised money from Monster Venture Partners and prominent angel investors including Alex Algard, John Cunningham, and Geoff Entress.

But early this year, EVO realized it would not be able to raise a favorable round of venture funding. So what did it do? Focused on getting revenue. Schrock, a tech entrepreneur-turned-executive-turned-investor (he co-founded Seattle-based Activate before his time at Yahoo, RealNetworks, Monster Venture Partners, and now Intel Capital), has overseen the company through this formative period as its chairman. (See more on DevHub in this TechFlash piece.)

The story goes back to the fall of 2007, when Nuval, a Stanford grad, moved to Seattle from Silicon Valley, where he had worked at Lehman Brothers Venture Partners, doing mobile and Internet investments. He had been introduced to fellow EVO co-founders Daniel Lee Rust (a tech expert) and Mark Michael (a sales expert) through his assistant at Lehman, a childhood friend of theirs. Rust and Michael were running a Web development shop for startups, but together with Nuval, they conspired to make a Web platform for themselves—one that customers could use to create sites. “The chemistry was awesome, the idea was compelling enough,” Nuval says. “I threw as much stuff as I could into my SUV and drove up here.”

Schrock met the team in early 2008, and was duly impressed. “One of the investment themes of Monster Venture Partners was capital-efficient development of technology businesses,” he says. “The founders here, they had a lot of the attributes I really admire and look for in startups. They were young, aggressive, intelligent, hard-working, and they had this set of tools and a balanced skill set. They figured out a way to turn blank domains into real working websites.”

It was a way to lower the cost of creating websites and content, Schrock says. WordPress had done something similar for blogs, but there was still no built-in way to make money from those sites. So Nuval and his team focused on tools for building and managing commercial sites. They raised …Next Page »

Comments (5) | Reprints | Share:        

In a press conference in New York this morning, Microsoft Business Division president Stephen Elop and Nokia’s executive vice president for devices Kai Öistämö announced that Redmond, WA-based Microsoft and Finland-based Nokia have formed an alliance that will create adaptations of Microsoft programs for Nokia’s smartphones.

Microsoft and Nokia will begin immediate development of Microsoft Office Mobile, a version of Office for use on Nokia’s Symbian devices. Other programs for productivity, communication and device-management will follow, and will be available for many types of Nokia smartphones. The deal extends beyond just development of the programs—the companies will jointly market the products they create together.

This is the second major recent alliance for Microsoft with a competitor, after making a major search and advertising deal with Yahoo just a couple of weeks ago. Similar to that deal, Nokia has been an important rival to Microsoft with its Symbian mobile OS competing with the Windows Mobile platform. This is the first time Office will be adapted for any mobile system besides Microsoft’s. And both deals help Microsoft compete with Google, whose free productivity applications have been chipping away at Microsoft’s Office dominance. Office is one of the most profitable products for Microsoft, so expanding the customer base seems like a good move for the company.

Nokia is the world’s largest producer of smartphones, but is facing intense competition from products like Apple’s iPhone and Research in Motion’s Blackberry. Putting Microsoft applications on its phones will help Nokia in “addressing the significant opportunity in mobile enterprise productivity,” according to Öistämö in the press release.

Comments | Reprints | Share:        

The big news of the week was Microsoft’s sale of Razorfish to Publicis (see directly below), but there were a few other important deals in software, biotech, and energy.

—Microsoft’s online advertising subsidiary, Seattle-based Razorfish, was bought by French marketing firm Publicis for approximately $530 million, as Bob reported. The payment is expected to include cash and Publicis Groupe treasury shares. In addition, Microsoft and Publicis have entered into a five-year strategic alliance whereby Publicis clients can purchase display and search advertising from Microsoft on favorable terms. Microsoft (NASDAQ: MSFT) originally acquired Razorfish in its 2007 purchase of aQuantive.

—Bellevue, WA-based Confirma, a medical imaging software firm, has been acquired by Merge Healthcare, a Milwaukee, WI-based health IT provider, for about $22 million, as Eric reported. Merge will incorporate Confirma’s MRI software into its IT offerings for doctors.

—Vancouver, BC-based Tekmira (TSX: TKM) formed a two-year partnership with Cambridge, MA-based Alnylam Pharmaceuticals to develop new particles to deliver RNA-interference drugs to diseased cells deep in the body, as Ryan reported. Financial terms of the deal weren’t given. Alnylam is funding the research effort and has exclusive rights to new discoveries, while Tekmira can use the discoveries for some of its own RNAi treatment programs.

—Seattle-based EnerG2 won $21.3 million in federal stimulus funding from the U.S. Department of Energy to build a new manufacturing plant in Albany, OR. The University of Washington energy-storage spinout is developing nano-scale materials to make better ultracapacitors for electric and hybrid vehicles and other applications.

—A few more terms of the Microsoft-Yahoo search deal, in which Yahoo will use Bing as its search engine and will control ad sales for five years, were spelled out in a filing with the SEC. Microsoft (NASDAQ: MSFT) will pay Yahoo $50 million a year for three years to cover transition and implementation costs. It will also hire 400 Yahoo employees, plus another 150 to assist with the transition. Yahoo (NASDAQ: YHOO) can opt out of the deal if it isn’t approved within a year, or if Microsoft and Yahoo’s combined share of the search market dips below an undisclosed percentage.

—Seattle-based Oncothyreon (NASDAQ: ONTY), a developer of cancer drugs, raised $15 million by securing commitments from investors to buy new shares and warrants, as Luke reported. Last week, the company said a small group of lung cancer patients showed long-lasting responses after taking Stimuvax, the immune-boosting vaccine therapy Oncothyreon is co-developing with Germany-based Merck KGaA.

—Seattle-based WatchGuard Technologies, a network security company, acquired Toronto-based BorderWare Technologies, an e-mail and Web security firm, as Eric reported. Financial terms were not given. WatchGuard plans to use BorderWare’s technology to make its security software more comprehensive and competitive.

Comments | Reprints | Share:        

So that’s what all those late-night phone calls were about. In the weeks leading up to the Microsoft-Yahoo search deal announced last Wednesday, executives from both companies would gather (virtually) at 9:30 pm PT every night, including weekends, for a conference call to discuss the latest developments. Dinners, baseball games, and camping trips were interrupted. The Microsoft search team, at least, has apparently been working seven days a week for many months now.

And for what? Besides working on improvements to their Bing search engine, they were hammering out many more parameters of the 10-year search and advertising deal with Yahoo, some further details of which have now emerged in a filing (Form 8-K) with the Securities and Exchange Commission.

For starters, Microsoft has agreed to pay Yahoo $50 million a year for three years, to cover “transition and implementation costs.” Microsoft also guarantees a minimum amount of gross revenue per search for 18 months. (Yahoo keeps 88 percent of search ad revenues and control of ad sales for five years, in exchange for replacing its search technology with Bing.) In terms of personnel, Microsoft will hire 400 Yahoo employees, plus another 150 to assist with the transition, according to the filing.

The deal includes its fair share of escape clauses. Yahoo can opt out if Microsoft and Yahoo’s combined market share of search falls below an undisclosed percentage—currently they combine for about 28 percent of search queries in the U.S., as compared with Google’s 65 percent. Yahoo can also back out if the deal isn’t approved within one year (by July 29, 2010). Lastly, Microsoft can end Yahoo’s exclusive selling of search ads for Bing results after five years. If that happens, Yahoo would get 93 percent of the ad revenue from its sites; but if Yahoo wants to keep exclusive control over ad sales for Bing, it would get 83 percent of the revenues.

Will the deal work? That’s a search query you won’t find an answer for just yet—unless, perhaps, you and all your friends switch to Bing.

Comments | Reprints | Share:        

Last week’s heat wave did nothing to slow the deal announcements in the Northwest. We saw plenty of action in software, Internet, and biotech.

—The big news was the Internet search deal finally announced between Microsoft (NASDAQ: MSFT) and Yahoo (NASDAQ: YHOO), who have been hammering out the details for months. As Eric and I reported, the 10-year partnership puts Microsoft in charge of both companies’ search engine technology, while Yahoo will run advertising sales and distribution for Yahoo Search and Microsoft’s Bing. (Bing technology will be used on both companies’ search sites.) The deal is structured around revenue sharing, whereby Yahoo gets 88 percent of the money made through the partnership for at least five years. Bing will get some much-needed scale and resources, and Microsoft said it plans to spend several hundred million dollars on the integration process.

—Redmond, WA-based Concur (NASDAQ: CNQR) acquired European business software developer Etap-On-Line, as Eric reported. Financial terms were not released. Concur makes software to help companies process and manage expenses, travel, and vendor invoices.

—Portland, OR-based Webtrends acquired Seattle firm Widemile, which focuses on multivariate testing and site optimization technology. Financial details were not announced. Webtrends makes Web analytics software for business intelligence applications.

—Seattle-based Delve Networks, a video management and media platform company, formed a partnership with Akamai, the Cambridge, MA-based digital media content distributor. Financial terms were not disclosed. The two companies are teaming up to provide an online video platform to help customers publish videos online and distribute them to any digital media player (including mobile devices). The move is seen as an effort to better compete with online video firms like Brightcove, also based in Cambridge, MA.

—Seattle-based Amnis raised the first $839,000 of a venture round expected to be worth $1.5 million, as Luke reported. Amnis, which makes a scientific instrument used to produce detailed images of large numbers of cells, raised the money from existing investors CVF LLC, MedVenture Associates, OrbiMed Capital, and angels. The company’s customers include the National Institutes of Health, the Pasteur Institute in France, and large drugmakers like Amgen and GlaxoSmithKline.

—Wilsonville, OR-based electronic design automation firm Mentor Graphics (NASDAQ: MENT) bought Embedded Alley Solutions, based in San Jose, CA, for an undisclosed price, as Eric reported. Mentor plans to use Embedded Alley’s mobile software development programs to improve its own operating system.

—Covance (NYSE: CVD), the Princeton, NJ-based drug development services company, has agreed to acquire a Seattle laboratory run by Merck’s Rosetta operation, as Luke reported. Merck has been winding down this operation since October, but has agreed to pay Covance $145 million over five years for genomic analysis services from the Seattle lab, called the Rosetta Gene Expression Laboratory, based in South Lake Union.

Comments | Reprints | Share:        

Microsoft and Yahoo officially announced this morning that they had reached a search engine and advertising agreement. Amid intense speculation, and after more than a year of disagreements over minor and not-so-minor details, the two companies have signed a ten-year agreement that puts Redmond, WA-based Microsoft (NASDAQ: MSFT) in control of both companies’ search engine technology, and Yahoo (NASDAQ: YHOO) in charge of the sale and distribution of advertising for both its own search engine and Microsoft’s Bing search engine.

As part of the announcement, Microsoft and Yahoo launched a website dedicated to explaining and promoting the agreement. “It establishes the foundation for a new era of Internet innovation and development,” Yahoo CEO Carol Bartz said in the press release attached to the website. Microsoft now owns an exclusive license to the Sunnyvale, CA-based company’s search technology, including the right to integrate it into its own search platforms, a process that will cost hundreds of millions of dollars, according to Microsoft CEO Steve Ballmer in a conference call with reporters and financial analysts this morning.

Even before that integration, the Bing search algorithm developed by Microsoft will be used on the search engine sites of both companies. According to Ballmer, expanding Bing onto Yahoo will give the fledgling search engine, just a few months old, the room to compete more effectively, both in terms of users and advertising dollars. The press release does not mention Google, the colossus of Internet search, by name, instead referring to it as “one company that dominates more than 70 percent of all search.” But it’s hard to imagine Microsoft and Yahoo would have reached an accord without Google overwhelmingly outcompeting them. At the moment though, Google employees are not allowed to comment on the deal.

On the other end of the deal, advertisers wanting to use either company’s search engine will have to go through Yahoo, although this only applies to so-called premium advertisers. Yahoo will use Microsoft’s AdCenter program to run this business, and AdCenter will still be the program for self-serve advertising. Although Yahoo is in control, both companies will still have their own …Next Page »

Comments (2) | Reprints | Share: