VentureBeat

Spending in IT trends downward — Growth in spending is slipping from 7 percent to 5 percent this year, according to a Goldman Sachs report summarized on CNET. Cost cutting measures are getting the most new investment, with server virtualization topping the list.

Google may start auto or music service — Having successfully predicted that Google would start Google Health and a virtual world, which turned out to be Lively, research firm Hitwise has turned back to its data to predict the search giant’s next moves. The results suggest something related to either autos (perhaps bad news for these two ) or music (which could affect many more companies).

Yahoo may want to buy Demand; Demand may not want to sell — Demand Media, a large domain speculator and advertising business that qualifies as one of the Internet’s most heavily-funded companies, may be on Yahoo’s acquisition radar, reports TechCrunch. One small problem: Demand don’t wanna sell, at least according to All Things D. Were the acquisition anything more than pipe dreams, Yahoo might offer up to $2 billion.

Senator grills ad startup over privacy — “Deep” targeting firm NebuAd may not survive in its current form, if the chair of the Senate Commerce Committee has his way. The Senator took issue with the startup’s tracking of users’ surfing in a hearing on Wednesday morning, and especially with the company’s opt-out policy, which he said should be opt-in, only. We’ve previously covered the company’s technology in some depth. Separately, Facebook’s privacy officer testified on his own company (transcript here), and Google and Microsoft said that they would support new privacy legislation.

Senate approves expansion of Internet surveillance –Also on Wednesday, the Senate passed expanded wiretapping provisions to allow more government surveillance of citizens, just hours after the Commerce Committee was criticizing businesses for making efforts to do the same. Neither opt-ins nor -outs from FBI snooping were discussed.

Gaming investor? Headed to E3? Don’t bother — Long-running and highly successful gaming conference E3 has turned into a lame duck, according to Wedbush Morgan analyst Michael Pachter, who told TheStreet.com that the event is “virtually useless for retail and investors.” Of course, some might argue the booth babes are reason enough for a visit.

Could all Internet traffic be encrypted? — If the famed Swedish file-sharing community the Pirate Bay has its way, the answer is yes. The group is proposing a network-level encryption plan called “Transparent end-to-end encryption for the Internets”, or IPETEE, in response to a local law that allows Sweden to snoop on the Internet communications of its citizens. Incidentally, the idea would also put a stick in the spokes of US surveillance programs, as reported above. But the plan may never see the light of day; NewTeeVee has more, including a brief history of TPB’s failed schemes.

Former Virgin exec joins Valhalla to invest in mobile — Saj Cherian, a former executive at Virgin Mobile USA and NBC Universal, has joined Virginia-based Valhalla Partners as a principal. Cherian will focus on mobile investments. MocoNews has a brief interview.

Venture capitalists: Now with less arrogance — The latest bubble to deflate for VCs is their egos, according to the Silicon Valley Venture Capital Confidence Index. Early-stage investors are bummed out over a lack of exits, particularly through IPOs. The full .PDF report is here, while ZDNet has a shorter summary.

Zimbra wins a battle in the educational email market — Yahoo-owned Zimbra has won a pretty significant victory with a decision by Stanford University to use the service over its competitors, which TechCrunch names as Gmail and Microsoft Exchange.

A tale of private equity gone horribly wrong — John Devaney lost his investors’ money. Not part of it; not most of it; all of it. Normally investors would pull out when things looked bad, but Devaney froze their funds before managing to lose them. Today’s feel-good private equity story is at the New York Times.

You may be used to typing in top-level domains (TLDs) like .com, .net or .edu when heading to websites, but the Internet Corporation for Assigned Names and Numbers (ICANN) hopes to change that with a decision to open new TLDs for registration, according to today’s Wall Street Journal.

Under the new rule, ICANN would let anyone with $50,000 to $100,000 register any TLD they want, so for example, our web address could become venture.beat, rather than venturebeat.com.

The WSJ has more on what the decision may mean for regular consumers and businesses, but there are also a couple ways it could change the Internet landscape for startups — most notably, domain speculators like Demand Media and Marchex (NASDAQ: MCHX).

Those companies, and other speculators, have plowed billions of dollars into millions of hot domain names, sometimes backed by high-profile investors like Oak Investment Partners or, for Marchex, public shareholders. The idea is generally to buy up lots of obvious domain names, like business.com, which held an early sales record at $350 $7.5 million. Most good names that are auctioned get less, but still routinely receive six figures.

Those domains are worth so much because of a kind of traffic called type-in traffic, which is distinct from search traffic from Google or linked traffic. Right now, if a web surfer — especially an unsavvy one — wants to find, say, exchange rates, they might type exchangerates.com in hopes of finding an exchange calculator (they’d be disappointed).

Although the strategies of the two companies are different (Marchex, notably, wants to build out a locality-based content business), they both rely on one crucial assumption: that the dominant TLDs, primarily .com, continue to be the first thing people type in when they’re looking for something, whether it’s exchange rates or Disney.com. So what happens if ICANN manages to reeducate Internet users, and popularize sales of new TLDs?

The simple answer is that a lot of speculators will lose a lot of their own, and their investors’ money. While Demand and Marchex might be able to build up viable content portals around sites like chicagodoctors.com, the money they plowed into those names will be meaningless — as well spent on chicago.docs or chicago.dr, or any other name you can imagine. The game will become even more about search, type-ins traffic will wither.

There’s a strong counter-argument to ICANN’s action having any real affect on .com, though. There are already dozens of top-level domains, but they are thinly used, even purposed ones like .mobi (for mobile phones). The introduction of more TLDs over the years has not seen sales of hot domains diminish, which by extension probably means speculators are making as much as ever. In a recent post on his blog, legendary domainer Frank Schilling said he’s confident in .com:

“[T]his will do little to quell the desire for meaningful .com, net and CC TLD names. Corporate IT departments overwhelmed by the task of managing existing .com typos simply won’t be up to the challenge of managing a corporate GTLD such as .COKE or .IBM. … The failure of former would-be contenders such as .travel, .biz and .pro to satiate demand for coveted names, shows us that adding more skim milk to the mix will not stop the cream from rising, and that cream is .com.” (Schilling’s emphasis.)

That may hold true, or it may be that ICANN has finally found a way to shift attention from .com, with the possibility for new TLDs that are actually meaningful or logical.

And a final argument is that it does seem unreasonable that 10 or 15 years from now, we’ll still be typing .com in for every major website. The Internet is a place of rapid change, and at some point, .com will start seeming archaic and unnecessary. But any real change would require a massive re-engineering of the web’s user-interface, at the very least, so it’s hard to imagine what those changes might be from here.

By the way, if you’re interested in a good read about the domain name speculation industry, check out WSJ reporter David Kesmodel’s brand-new book on the subject, The Domain Game. He opens with a look at Schilling, and goes from there. Kesmodel’s a good reporter.

Widget mashup site Mixmonsta has won a startup competition organized by startup pitch site Vator.tv and well-funded domain purchaser Demand Media, with participation from blogs including VentureBeat.

Huntingdon Valley, Pennsylvania-based Mixmonsta lets users mash together songs, videos and other images from their computers and phones within its flash-widget interface. Then, users can send the mashup clips to friends by email or by phone (see sample, below). It has been showing some decent traction, with more than five million video views, 380,000 total users and 30,000 registered users. Since many of the mashups are from music videos, some record labels have also been displaying Mixmonsta creations on their artists’ sites.

Runner-ups in the competition were NowLive, Zipidee, Clupedia and Woome.

Mixmonsta has won a range of things useful to any startup. Its chief executive, Voit Damevski, is getting flown to LA to meet with Demand Media’s merger and acquisition team, which could lead to an acquisition or investment. Demand Media, as our readers may recall, has raised a total of $355 million to buy up valuable domain names then run ads and content on them, and has been busy buying up other startups.

MixMonsta has also won six months of free hosting and streaming services from Verisign’s CDN network, a Sun Microsystems server and traffic analysis from Visible Technologies valued at $25,000. It has also won coverage on blogs like VentureBeat: Priceless.

Demand Media, the 18 month old company founded by former MySpace chairman Richard Rosenblatt, has gulped another $100 million chunk of venture funding for its domain name purchases.

The latest funding, led by Goldman Sachs, is the company’s third. The previous two, for $120 million and $100 million respectively, bring the total to a whopping $320 million.

Companies like Demand buy up lists of Web site names that users are likely to accidentally type into their browsers. People looking for the popular photo site Flickr, for example, may instead type in Flicker.com.

These faux sites are then plastered with ads and information vaguely relevant to whatever the hapless surfer might have been searching for. Once the surfer lands on a site, Demand Media serves an ad from Google or some other ad network, allowing it to collect money. That  strategy made millionaires out of domain-grab pioneers like Frank Schilling and Yun Ye.

Prices for domain names have inflated vastly over the years, which is one reason why Demand needs so much money. The name Business.com sold earlier this year for $360 million, making Demand Media’s assets look like peanuts.

Although Demand could be buying more domains in hopes of eventually selling itself for a premium or passively collecting revenue, it’s more likely the company is developing its web properties into more full-fleshed destinations. Last year, Demand acquired HillClimb Media, which produces web sites.

Competitor Marchex, which owns more than 100,000 domain names, has also revealed more of its business plans. It wants to develop each page into a local, vertical portal with real information related to the domain name, many of them involving city names (for instance, a site might feature “New York” and “plumbers”).

Besides Goldman Sachs, investors in the latest round include 3i Group, Generation Partners, Oak Investment Partners and Spectrum Equity Investors. Sources that talked with PEHub, which broke the story, said that the recent funding would probably be the company’s last.

For our previous coverage on Demand fundings, look here.

Demand Media, the company pursuing the audacious strategy of buying up a bunch of generic Web sites that have no staff generating real content of their own — to throw advertising on them — has raised another $100 million.

In May, we reported it raised its first $120 million. Lately, though, the company appears to be buying content as well, including acquring Hillclimb Media, a producer of niche web sites.

The chief executive is Richard Rosenblatt, the former chairman of the company that ran MySpace. No doubt he has grand expectations; nothing to lose from swinging for the fences. Among the half-dozen acquisitions in recent months, Demand Media also acquired eNom, which claims to be the second largest domain name registrar.

The financing was co-led by 3i, a London based public venture capital firm with offices in Silicon Valley, and Oak Investment Partners. Spectrum Equity Investors also participated in this round.

Rosenblatt is also chair of an Arizona search engine marketing company, called iCrossing. There too, he has received lots of cash ($15M) from Oak.

Brad Greenspan, a former chief executive of the company that ran MySpace, has been just as active, if not more so.