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The big post-Thanksgiving shopping day known as Black Friday wasn’t as awful for retailers — at least for online retailers — as some had feared, according to new data from comScore. That’s a good sign for the online economy, since Black Friday is usually seen as an indicator of how the rest of holiday shopping season will go.

Online shoppers spent a $534 million on Friday, up 1 percent from last year. That’s not a dramatic increase, but at least it’s growth. PayPal did even better — it told Reuters it saw almost 34 percent more transactions on Black Friday this year than last year. In comparison, for the first 28 days of November, online spending is down 4 percent overall.

Honestly, I can’t imagine why anyone would do their Black Friday shopping anywhere but the web — no sale is worth the insane crowds found in some stores. But then, I was never much of a Christmas shopper, so I’m probably not representative. It does look like online shoppers were taking advantage of the lack of lines, with most of them avoiding the Black Friday ritual of rushing out in the wee hours of morning. Instead, the heaviest traffic came between noon and 4pm, according to comScore. And what were they buying? Apple’s iPod touch was the top electronics item on Amazon.com (so perhaps shoppers then bought some of the on sale iPhone/iPod touch apps), while the most searched-for item on eBay was Nintendo’s Wii gaming console, according to Reuters.

ComScore also notes that today (Monday) may be an even more important indicator for online retail, since many web sites launch their holiday discounts on “Cyber Monday.” Business on Cyber Monday corresponds strongly with the gift-buying season that follows, so get shopping.

Virtual goods sales are starting to look better than real world goods sales these days. PlaySpan announced today that it has raised $16.8 million for its virtual goods platform and online payments business for online games.

Karl Mehta, chief executive of the Santa Clara, Calif.-based company said PlaySpan will use the money to expand into new markets overseas and investigate opportunities for its platform on social networks. The company makes both the system that lets game publishers charge players for digital goods and the payment system that gamers use to pay.

PlaySpan is cashing in on the trend toward free-to-play games, a model popularized in Asia in which users play for free but pay for upgrades to their characters and capabilities. The free-to-play genre is one of the fastest growing segments of the business, giving game publishers a host of new revenue options besides advertising and subscriptions. Players like it because they get more control over their gaming experience, paying as much or as little as they want, based on their progress in a game.

“Game companies are realizing they can make additional money if they have an infrastructure for electronic commerce,” Mehta said.

PlaySpan isn’t the first to offer this kind of infrastructure. But it does supply a convenient system and a different take on the business. Earlier models for digital goods were often set up without game publishers’ permission. That resulted in a lot of fraud, poor quality and annoyed game publishers who felt the secondary market operators were parasites. They’re called secondary markets because players are reselling what they’ve earned.

Companies like Player Auctions (based on Korea’s Itemmania virtual goods platform) continue to operate secondary marketplaces for games without permission. Live Gamer, based in New York, has successfully set up a number of secondary markets, where players trade directly with other players with the permission of game publishers. A dozen or so big companies, including Sony, have signed up with Live Gamer.

But PlaySpan focuses mainly on helping game publishers set up primary markets. In that business, it competes with Twofish, which raised $4.5 million in October. PlaySpan indexes all of the items in a game and markets them to gamers based on relevancy.

It takes into account a player’s character and experience level, then offers a virtual good just when a player needs it most, like on the 11th level of a game where a player needs a special sword to defeat a particular enemy. Within the game itself, a screen pops up and the player can buy the sword instantly, without needing to enter a credit card number.

Since the amount of money is so small, it’s like an impulse purchase, Mehta said. PlaySpan also offers secondary markets where players sell to other players, but that’s not its main focus. Generally, the company gets about a 10 percent fee on every transaction.

PlaySpan was founded in 2006 and raised its first round last year. A year ago, it had one employee — now it has 80. As it moves into social networking, it may run into virtual gift services such as Viximo.

To make its system work seamlessly, PlaySpan bought PayByCash, an online payment company, earlier this year. PayByCash has more than 70 payment solutions in 180 countries. It offers a prepaid Ultimate Game Card that retailers can sell to gamers who don’t have credit cards. The cards are available in 20,000 stores and can be used in more than 200 online games. The PayByCash business competes with eBay’s PayPal and other prepaid card vendors.

More than 60 online games use the PlaySpan virtual goods platform. Participating game publishers include Aeria Games, Eve Online, Gala-Net, GamersFirst, Gravity, Ntreev, Outspark, Saga and YNK. All told, the system is available to more than 70 million gamers.

Investors in the second round include Easton Capital Group, Menlo Mentures, Novel TMT Ventures, STIC and other undisclosed investors. To date, the company has raised $24 million.

Poor eBay hasn’t had much luck lately. Even as its PayPal arm has done fairly well, the auction business that it’s known for has suffered, leading to a smoldering rebellion among sellers and a recent 10 percent work force cut. A new rival called Wigix wants to capitalize on those troubles, with a newly added feature intended to steal sellers directly away from eBay.

Wigix emerged in April offering standardized listings for common items and lower fees than eBay, which they openly compare themselves to. However, the site didn’t focus immediately on bringing in as many auctions as possible. Because it essentially has an online catalog of common items like electronics and cars, it first had to work on filling out its listings. With the help of 400 “category experts” who hope to make a tiny cut of sales, the site now has 1.5 million listing pages.

Its next big step is “Storefronts,” a way for power sellers, who have many items to sell and often make a living from online sales, to set up a virtual store listing all their items. Because listings for mass-produced items like popular DVDs or cell phones already exist, it’s fast and easy for sellers to create their store. Wigix also provides tools to track inventory and, perhaps most importantly, directly migrate listings on eBay, further cutting down the barrier to switching.

In a way, the early strategy Wigix has adopted is almost the opposite of what eBay is doing right now. The focus at eBay seems to be on satisfying buyers — to the detriment of sellers, who have had to deal with cumbersome rules and raised fees. Wigix, in response, is working hard to satisfy sellers’ complaints, and even its slogan is a direct dig at eBay: “Keeping Fees at Bay.”

That’s probably a smart strategy, because without listings, buyers will never arrive. If Wigix does manage to pull in a significant number of sellers, prices for common items will drop due to competition, and buyers will begin to take an interest in the site. Of course, luring either buyers or sellers is a chicken-and-egg problem, which is why the company is working so hard on making the site as easy to use — and switch to — as possible.

There’s also one more notable prong in Wigix’s strategy: search engine optimization. Because its listings are structured and standardized, and include a decent amount of useful information, they’re starting to show up high in Google searches. So people doing product research may well begin stumbling across the site, and potentially becoming clients.

Look out a few months from now to see whether the company is having any success. For now, it only has about 12,000 registered users, according to chief executive James Chong, and not many item sales. Of course, the company also has a potential recession to worry about, but that might turn into an asset, allowing the venture-funded outfit to slowly build awareness, sneaking in under eBay’s radar and coming out of the downturn as a strong rival.

Here’s the latest action:

Amazon is like Apple, eBay is like Microsoft — Or at least that’s the tech-industry analogy that comes to mind when reading this piece about the increasingly competitive battle between the two e-commerce giants.

“Black” silicon is a better light receiver — A silicon variation discovered in Harvard University’s labs and licensed out to a company called SiOnyx, is far more receptive to light than ordinary silicon. The substance (pictured) may be useful for X-ray machines, transistors, night-vision goggles and a number of other devices. Solar cells are also a potential use, although it will be quite a few years before we see commercialization. Lots at Xconomy.

Egnyte file-sharing service gets iPhone interface — More here.

Fraud ring funnels credit card data to Pakistan – The Wall Street Journal has the story.

Google is testing out search ads on YouTube — YouTube has overtaken Yahoo as the number two destination for web searches, behind Google. Meanwhile, the video site is now broadcasting some full-length TV shows.

Video streaming company Joost launches new browser — PaidContent isn’t all that impressed.

Add hearing loss to ways your iPhone can hurt you — Earbuds, like the ones that come with the iPhone, hurt your hearing when you listen to loud music, researchers say. Already, other researchers are finding that keeping your phone in your pocket while you talk using such earbuds also reduces your sperm count, guys. And using a mobile phone in the first place may increase the chance of brain tumors.

Micron buys stake in memory-maker Inotera Memory — For $400 million. That’ll make some memories.

Justice Department closes investigation into collusion by graphics chip makers — Nvidia and ATI Technologies won’t be facing anti-trust charges.

President Bush signs “anti-piracy” bill — One man’s piracy is another man’s fuel for innovation.

Sun Microsystems and Fujitsu promise faster servers — The companies intend to increase the performance of applications like databases and online transaction software.

Tech outsourcing firm Infosys cuts forecasts — The cause is the firm’s dependence on business from the now-weakened U.S. financial sector.

EA has Spore expansion packs coming — The game-maker has confirmed.

Image recognition company Eyealike launches video advertising platform — TechCrunch has more.

The Dow Jones Industrial Average has not closed below 10,000 since 2004. Today it might. Well below. As of a little past 9 AM PST, the Dow is down just over 470 points to 9,854.59. The market is seeing a continuation of the bloodbath it saw last week when the Dow fell nearly 1,000 points.

The Nasdaq is once again doing even worse percentage-wise. It’s down well over 100 points today, off over five and a half percent. Many of the big name tech stocks are once again getting killed.

Today, Microsoft, which has largely been insulated from the massive hits its rivals have taken, is one of the largest losers, down $1.81 (6.88 percent). Apple is down $6.10 (6.28 percent), Yahoo is down $0.71 (4.44 percent), Sun Microsystems is down $0.42 (6.22 percent), Google is down $20.26 (5.25 percent), IBM is down $4.32 (4.18 percent), HP is down $2.51 (5.84 percent), Sony is down $1.17 (6.11 percent), Nokia is down $1.42 (8 percent), SanDisk is down $2.02 (11.04 percent), eBay is down $1.35 (7.13 percent).

I think you get the point.

While the reason for most of the tech losses can likely be attributed to the overall poor form of the market, eBay is leading the surge downward after it announced it would cut 1,000 jobs this morning. Its stock is at its lowest level in six years.

Meanwhile, Yahoo’s price target for its stock has been slashed from $24-a-share to $21-a-share by Sanford Bernstein analyst Jeffrey Lindsay. The analyst feels the likelihood of a deal between Yahoo and Time Warner to merge the Internet giant with TW’s AOL property remains relatively low, according to CNET.

The online and DVD-by-mail service Netflix meanwhile is getting killed today (down over 10 and a half percent) because it cut its fourth-quarter revenue estimates thanks to the bad economy. We can probably expect a lot more of that in the coming days.

Update: The Dow is now down over 700 points as of 11:30 AM PST. Right now it’s at 9,620.34, which means it has nearly lost 2,000 points in less than a month. On September 8, the market closed at 11,510.74.

The Nasdaq continues to have even worse losses. It is currently down 154.42 points, right around 8 percent off (the Dow is off nearly 7 percent).

Update 2: After bottoming-out at 9525.32, the Dow rallied to close at 9,955.50 — “only” down 369.88 points (3.58 percent). It still could not get above the 10,000 mark at close for the first time in nearly 4 years.

The Nasdaq rallied a bit as well. After bottoming-out at 1,777.02, it ended down 84.43 points at 1,862.96 (a loss of 4.34 percent).

eBay is a buyer this morning. The company announced that it will buy Bill Me Later for $945 million. As if that weren’t enough, eBay will also acquire both Danish classifieds specialist Den Bla Avis and Danish vehicle site BilBasen for approximately $390 million in cash.

But the San Jose, Calif.-based eBay also laid off 1,000 people, or 10 percent of its employees, and said that revenues in the third quarter were lower than expected.

eBay’s cutbacks had been expected. The layoffs will result in a pretax restructuring charge of $70 million to $80 million in the fourth quarter. The company is also laying off several hundred temporary workers, and its stock is off 60 percent from its peak a few years ago.

eBay, due to report earnings on  Oct. 15, said in July that it expected net revenues of between $2.1 billion and $2.15 billion for the third quarter. Its non-GAAP earnings per diluted share are expected to be between 39 cents and 41 cents per share. This morning eBay stock is down 8 percent to $17.40 a share. It is trading far below its 52-week high of $40.73 a share.

Like PayPal, which eBay already owns, Bill Me Later is an alternative payment e-commerce firm. It lets consumers pay for goods at more than 1,000 online sites without using a credit card. You supply your name, birth date and Social Security number (last four digits). Then it bills you later.

Bill Me Later’s largest shareholder is Azure Capital Partners. This deal adds to other big exits for Azure, which include VMware (bought for $635 million by EMC in 2003, WorldWide Packets — bought for $300 million earlier this year — and TopTier, bought by SAP for $400 million in 2001).

Bill Me Later raised about $200 million in venture funding and it said that it would hit $150 million in revenues next year. That means that eBay paid about 6.5 times revenues, a pretty good valuation in a turbulent market.

Michael Kwatinetz, general partner at Azure Capital, said that Bill Me Later was one of the first companies to use the web as a platform. That means that it uses a variety of web services in order to verify a buyer’s identity and to run a credit check on that person within the course of three seconds. Normally, credit card companies may take a week to do such verification for first-time buyers.

Bill Me Later has a system where it bills most of its customers electronically and most of those customers pay electronically. That keeps its costs low.

The stock market took a plunge again today. While it wasn’t quite as bad as Monday’s free-fall, the Dow fell 348.22 points (3.22 percent), the Nasdaq fell 92.68 points (4.48 percent) and the S&P 500 fell 46.78 points (4.03 percent). Not good.

Some of the major tech stocks, which took massive hits on Monday, only to partially recover on Tuesday, fell one again. Two in particular, Apple and Yahoo hit new lows today, while Google didn’t fare much better.

Apple’s stock now stands at $100.10-per-share. It hit the $100.00 mark today but avoided falling below it. The stock fell over 8 percent.

How bad has Apple’s fall been? Just look at the chart below. It looks like the Mariana Trench. While Apple hovered around the $180-a-share mark for much of August, September was brutal on the company. Now October is turning out to be even worse so far.

Apple’s stock has not been at the $100-a-share level since late April/early May 2007. That was during a time of amazing growth for the stock. By the end of 2007 it had surpassed the $200-a-share level. A correction followed in early 2008, but the stock went back up shortly thereafter. Now, it appears in rough waters after several analyst downgrades.

Another stock that fell in the 8 percent range today was Yahoo. It now stands at $15.58-a-share. The stock has not been this low since mid-2003 — yes, five years ago.

Yahoo’s market cap is now $21.59 billion. That’s significant because it’s almost exactly half of the $44.6 billion offer Microsoft made in the beginning of this year to buy the company, as AllThingsD’s Kara Swisher notes. It sounds like the perfect time for Microsoft (which fell much less than its tech counterparts in trading today) to swoop in for a half-off sale, right?

Wrong, say Microsoft sources close to Swisher. Microsoft chief executive Steve Ballmer was apparently so put off by the whole ordeal of trying to acquire Yahoo the first time around that he says he isn’t going to make an offer no matter what happens.

But as the saying goes: Never say never.

Everyone has a price, and Yahoo’s is getting cheaper by the day. If Microsoft is really serious about remaining relevant in the Internet game, it’s going to have to make a move for Yahoo sooner or later — no matter how Ballmer personally feels about it.

Some other stocks that took big hits today: Google fell $21.21 (5.15 percent), Sun fell $0.58 (7.74 percent), eBay fells $1.70 (8.15 percent) and Adobe fell 2.90 (7.61 percent).

[top photo: flickr/arainman]

Using the web site discovery service StumbleUpon right now is kind of like driving a hot convertible with the top up. It’s a cool car, and having the top on gives you better performance, but it’s just not quite as sexy. That top is akin to StumbleUpon’s toolbar web browser plug-in, which you currently must use to use the service. But tonight, StumbleUpon is dropping the top and letting the sun in.

The new version of StumbleUpon is all about accessibility — by anyone, anywhere. While it’s not getting rid of the plug-in toolbar entirely, you no longer need it thanks to some clever JavaScript code. This will allow anyone, both registered users and non-registered users alike, to visit the newly revamped StumbleUpon main site and start finding new and interesting content on the web — in any web browser.

If it works anything like the toolbar-driven version of the service — and from the demonstration I got at the StumbleUpon offices today by founder Garrett Camp, it certainly looks like it does — this is going to be a big development for the finding of good content online.

The plug-in was a limiting factor

Since it launched out of Canada in 2002, StumbleUpon’s focus has always been about directing users towards good content. It’s good at doing just that through a tailored process that includes a classification engine, a clustering engine and friend recommendations. I previously outlined how it works here. But all of that required the plug-in toolbar — and that was a barrier to entry for many people. Not only was it limited to users of Firefox and certain versions of Internet Explorer, many users — even those with those browsers — were simply not going to take the time to install a plug-in.

And Camp realized that. “The primary goal is to increase accessibility,” Camp told me with regards to this big evolution in StumbleUpon’s strategy. Right now StumbleUpon has over 6 million users, but the removal of the toolbar barrier could allow for 50 or even 100 million users to gain access to the service, Camp says.

Maybe an unreasonably lofty goal, but StumbleUpon has something very important on its side: Ease of use. The chart above shows the monthly number of searches per unique user across many popular sites on the Internet including Google, Yahoo and the like. You can see that StumbleUpon easily bests all of them by a large margin. That may seem shocking, but it really makes sense. With Google or any other search engine, you have to type in a query and hit “search” to find something. With StumbleUpon, you simply hit the “Stumble” button.

It’d be almost like if everyone just used Google to hit the “I’m Feeling Lucky” button — but could do so without having to type anything into the query field. Of course, Google doesn’t work that way, but StumbleUpon does because it keeps track of what you like and don’t like. Thanks to web cookies it can still do this without the toolbar now.

But as I said, StumbleUpon has no intention of getting rid of the toolbar plug-in anytime soon. In fact, Camp has a long term strategy with this new phase of the service which he hopes will lead to more people using the plug-in. The thought is that if you get them familiar with the service, users will want more customization that the plug-in can provide. The plug-in also allows for one-click submission of new content, while the web version requires a longer, manual process more along the lines of how you submit something to Digg or most other social news sites.

In an ideal world, StumbleUpon would have a Stumble toolbar built-in to browsers just as many now include search bars featuring Google search, Camp told me.

While the new web-based version will begin to roll-out tonight to select users, it will be a phased roll-out that will take place over the next few weeks, according to Camp.

Camp felt it was important to get this new version out the door and into the wild and notes that it should work in any web browser that is compliant with general web standards. That, of course, calls into question Microsoft’s Internet Explorer browser (which is generally bad with compliance to web standards). But while Camp says their have been some bugs, he’s certain they will be ironed out prior to launch.

More importantly, the feature will work in Safari, a popular web browser among Mac users (as Apple makes it), as well as Opera.

The new main page

Perhaps the real key to the new web-based StumbleUpon is the new stumbleupon.com homepage. Here you’ll find the best quality content from the service highlighted and broken down into several sub-categories.

Read the rest of this entry »

Here’s the latest action:

Google’s co-founder Sergey Brin starts his own blog — Dubbed “too“, Brin starts off by detailing his fears of getting Parkinson’s disease since it runs in his family. Compelling stuff. Too bad it’s nearly impossible to read with his choice of light blue text on a black background. CNET has more.

O’Reilly gets serious — Tim O’Reilly, founder of O’Reilly Media, used his keynote address at the Web 2.0 Expo in Las Vegas to call on entrepreneurs and developers to use their skills to make things that matter rather than simulated beer chugging apps for the iPhone. More from Webware.

Joost goes live in the browser — The web-based version of the online streaming video service is working, but also crashing a lot.

Making sense of Wall Street going bust — Venture capitalist and blogger Fred Wilson has a good post from a New Yorker’s perspective over at Silicon Alley Insider.

Rumor: eBay trying to sell StumbleUpon — The social discovery service, which we detailed here, is apparently up for sale after being bought by the auction giant in 2007, according to TechCrunch.

Ahoy! It’s “Talk Like a Pirate Day“ — And the Internet, as usual, is taking notice. FriendFeed has some small design tweaks. 12seconds is getting into it. But Google Pirate is rrrrguably the best.

EFF dishes out high profile lawsuits — The Electronic Frontier Foundation is suing some people and groups you may have heard of: President Bush, Vice President Cheney and the NSA. This is about illegal wiretaps.

The iPhone development story — A developer who built the app NetAwake, details the whole process from start to finish.

Online CPM-based image ads drop in revenue — Is it really surprising given the current economy? SAI has more.

Scrabulous killed in India as well — The board design is okay, but the name has to go. Valleywag has more.

What could be in the new MacBook Pro? — The new laptop is rumored to be coming next month. Computerworld lays out some options for what could be in it, including Blu-ray, SSD (Solid State Drive), and a built-in 3G card.

I sat down with eBay’s Max Mancini today at Web 2.0 Expo in New York. Max is the company’s Senior Director, Platform and Disruptive Innovation. That title sounds fluffy and new but Max isn’t a new hire, he’s been with eBay for close to five years and in the middle of the company’s mobile and social networking experiments. Here’s what he told me:

On mobile

EBay is looking at mobile extensions with buyers in mind, but not sellers. The company wants to offer ways to help you bid or track auctions from your phone (currently an iPhone app), and it wants to let you check eBay for price comparisons while you’re at the store. But why no focus on mobile extensions for the seller?

I asked why eBay doesn’t develop an app, for example, that lets casual sellers take photos from the iPhone and create a new listing on the spot, instead of going through photo download/upload on the PC. Mancini said that Project Echo, eBay’s developer program, is how it intends to service casual sellers through third party apps, and that serious sellers need a different kind of service than mobile interfaces and apps anyway.

I also asked why eBay is looking at mobile as a way for customers to connect to the platform but not to humans on the other side of the deal? Max said carriers don’t like Skype. So eBay doesn’t even bring up communications with them.

As for eBay’s development priorities vis-à-vis mobile platform wars, eBay sees most of its mobile activity happening at its mobile site, so it isn’t moving full steam to build applications on every major platform, just the iPhone. (Meanwhile, Big in Japan, another app that does price comparisons, won the first Android Developer Challenge, as we covered yesterday.)

On social networks

One interesting exploration is whether and how social connections between friends (the so-called “social graph”) can enhance seller trust ratings and thus facilitate purchases on eBay. EBay’s first exploration — or the “first inning,” as Mancini described it — was playing with Facebook apps. It built one, called eBay Marketplace, which lets you see what your friends are buying on eBay. This is somewhat similar to Facebook’s own Beacon advertising program. Note, eBay was an early Beacon experimenter. The company concluded that people want to keep social and commerce activities separate.

Instead of building social networking applications that live on other sites, eBay sees more promise in tying friend relationship data from social networks into its own interface in order prompt new purchases. Facebook will soon offer a way to do this through a forthcoming service called Connect. Meanwhile, rival MySpace already offers a software programming-heavy version called Data Availability, although eBay isn’t using it.

In any case, eBay’s conclusion about the futility of social network apps is somewhat misguided. It is not the first marketer to express frustration about that. The problem is maybe in expectations. For example, when my Facebook friend is notified that I just bought a particular digital camera through Beacon (or eBay’s marketplace app), they probably won’t immediately run to buy it. We already know that people don’t impulsively buy things from a social network in the same way they do at a retail store.

The problem is in figuring out to what extent that same piece of information influences my friend when they go to buy a digital camera at some point in the future. Will my friend remember my notification? Will they look for it on eBay? How much weight does my opinion have with them, anyway?

Social graphing will be crucial to influencing product and media consumption decisions — but they aren’t, always. We’ll see who cooks up an execution with measurable utility first.

[Image of Mancini via Dow Jones]

ChannelAdvisor, a company that lets online retailers manage product marketing across marketplaces such as eBay, Amazon.com, Overstock.com and a series of shopping comparison sites, has raised an additional $20 million, VentureWire reports. The company has also laid off 70 of the company’s 350 employees — including four vice presidents.

According to CEO Scott Wingo in the article, ChannelAdvisor’s revenue has grown more than 55 percent and has more than 5,500 customers including Wal-Mart Stores Inc. and Motorola Inc.

The North Carolina-based company raised $30 million from NEA and previous investors, last May. Total funding is now $88 million. Additional investors include Kodiak Venture Partners, Advanced Technology Ventures, Southern Capitol Ventures and eBay.

David Adewumi, a contributing writer with VentureBeat, is the founder & CEO of http://heekya.com a social storytelling platform billed “The Wikipedia of Stories.”

StumbleUpon is all about site discovery. I used to click on the “Stumble!” button and figured it would return me some random site based on the categories I said I was interested in. But then I noticed that the more I used it, better sites were being sent my way. This is because it’s not actually random, but rather sites are served up based on a series of processes that go on within the StumbleUpon Recommendation Engine.

I had the chance to meet up with co-founder and chief architect Garrett Camp at the StumbleUpon offices last week. He walked me through (in laymen’s terms) what actually goes on in the backend when you click the Stumble button.

As you can see in the chart below, there are three key parts to the Recommendation Engine. There are pages from the topics you marked that interest you, socially endorsed pages and peer endorsed pages. Socially endorsed pages are the ones that users you have befriended on the site like, while peer endorsed pages are ones from users who have similar voting habits (giving a site the thumbs up or thumbs down) as you.

These three factors are why it’s important to not only choose categories you like, but to choose friends with similar interests and to only vote up sites you really enjoy in order to get the best experience out of StumbleUpon.

When a site is first stumbled, it is put through both the Classification Engine and the Clustering Engine as shown above. The Classification Engine filters the page by topic and tags. Sometimes a user does this work, but sometimes it’s submitted without any of this information, so the engine has to determine where to put the content. This is a big job when you have over 30,000 pages each day being submitted, as StumbleUpon has.

The Clustering Engine sorts out the votes a site is getting so it can determine which sites are the quality ones that should be served. Again, this sounds simple enough until you realize that StumbleUpon has 5.6 million users. This engine is a key cog in what serves up over 10 million stumbles that take place every day.

Like any good social algorithm maker, Camp wouldn’t divulge all the little details of what goes into the promotion of sites, but he did say that things such a comments on stories and so called “quick stumbles” (when a user quickly hits the stumble button again after landing on a page without voting on it — they dub this a “soft not for me,” or down-vote) are taken into account as well.

This all makes for a system of “quality plus relevance,” as Camp put it.

I was interested to know how this method compared to Digg’s recently launched Recommendation Engine. Camp said he hadn’t look to closely at it yet, but that it seemed to employ many of the same ideas minus much of the content analysis.

As with any of these recommendation engines, the more data you have, the better it’ll perform. Since it was bought by eBay in May of last year, StumbleUpon has more than doubled its user base, but the company knows that this growth can only last so long given its major restriction: Right now, the vast majority of people who use StumbleUpon use it through a browser plug-in. This limits the service to either Firefox or Internet Explorer users (who happen to have this plug-in). That is why the team is pushing hard to perfect a web-only version of the site.

Creating a way to use the service no matter what browser you are on or what plug-ins you have installed could take the service to an even bigger level in terms of usage, Camp acknowledged.

You can see an example of how the web version of StumbleUpon looks here. (And above.)

Alongside adding potentially millions more users with the web-based version, StumbleUpon is finally gearing up to expand its friend limitation. Previously you could only have 200 friends on the service, that will soon be increased to 1,000, Camp told me.

StumbleUpon was launched out of Canada in 2002 and didn’t move to the San Francisco Bay Area until 2006. It took a $1.5 millon angel round of funding in 2006 before its purchase by eBay for $75 million.

EBay revenue rises, but stock price sinks — Despite a 22 percent increase in second-quarter profit, eBay is failing to convince investors that it knows what it’s doing. EBay’s earnings were buoyed by its online payments and advertising divisions, but its auction business is faltering as the company battles sellers, buyers, brand names and just about everyone else around. New CEO John Donahoe is working toward a solution, according to the NYT, but if it fails, there’s going to be an awfully large hole for next-gen auction startups like Wigix to fill.

National Public Radio opens its API — The government-supported radio station NPR, one of the nation’s best-known media institutions, has opened an API to let web publishers use its content. However, as Mashable notes, there are some very vague restrictions in the API’s terms, and some of the most popular shows are excluded.

“Spoken Web” a big opportunity in India — A voice-enabled parallel to the Internet presents a giant opportunity in the developing world, which has more access to mobile devices than computers, according to an interview with the director of IBM’s India Research Laboratory in ZDNet Asia. Check out the full text for more of his thoughts on mobile.

FundingSleuth opens to help keep track of companies — Josh Kopelman of First Round Capital has created FundingSleuth, a tool to track the public filings of your favorite companies and competitors. More info at Redeye VC.

Commercial algae plant slated for construction in Hawaii — Algae-to-biodiesel startup HR Biopetroleum has signed a MOU to build a commercial-scale algae plant producing biodiesel with the help of emissions from a nearby power plant. Earth2Tech has more details. Separately, oil giant Shell — which also has a joint venture with HR Biopetroleum — has upped its stake in Iogen, a cellulosic ethanol company based in Ottawa.

Green building tech seeks new US home — Investors looking for green building investments might be interested in RoofKrete, a United Kingdom startup that Grist has dug up. The company makes a semi-flexible ferrocement that’s long-lasting and insulates well.

Multicore chip startups to watch — GigaOm has a list of five of the most important startups helping to make multi-core computer processors mainstream.

Here’s the latest action:

Americans watched 12 billion online videos in May — That’s up 45 percent compared to the same period in 2007. While Google’s sites — especially YouTube — remained dominant, accounting for 34.8 percent of videos watched, Fox Interactive Media (owner of MySpace) climbed to 6.4 percent, up 1.3 percent from the month before.

Tesla breaks production “logjam” — Chief executive Ze’ev Drori acknowledges that the electric car maker has been putting the old adage that “good things are worth waiting for” to the test, but he says nine Roadsters have already arrived in California (as of Saturday), with more due soon.

Forbes: San Francisco is the number one city for yuppies – Great, now my New York friends have something else to gloat about.

EBay wins case against Tiffany — The outcome of the four-year-old suit means that jewelery maker Tiffany & Co. and other trademark holders are responsible for policing online marketplaces for violations. That takes the responsibility off eBay and similar sites.

Enterprise social networking becomes a battleground — InfoWorld looks at the competition and concludes — surprise, surprise — that consumer-focused startups like Facebook and LinkedIn may beat out established software vendors like IBM.

Veoh takes ad program out of testing mode — The video site shows ads based on a user’s past viewing patterns. The ads are targeted at nine groups, including fans of action, cars, pop culture, anime, science fiction and family fare.

Ad agency Method launches venture program with boxee – Method’s venture effort, dubbed Method Ventures, wants to team up with startups that have just raised seed funding to help them fine tune their ideas. The first partner is boxee, a startup that integrates media content with social networking.

Solar company Greenvolts plans to raise significant funding — Chief executive Bob Cart says he hopes to raise a second round of funding at the end of the year, although at “less than $100 million,” the amount would be smaller than that raised by some other solar startups recently. Greenvolts raised $10 million last year.

Google still testing Digg-style search results? — Google has been experimenting with ways to let users vote on search results, and a TechCrunch reader spotted what may be the latest version of that test.

Obama takes flack for telecom reversal — Barack Obama is about as smart as politicians get when it comes to technology, and even plans to name a chief technologist for the country if elected. But he has finally managed to offend the devoted, by changing his opinion on telecom immunity for Bush-era wiretapping and endorsing a bill that would expand the government’s power for domestic spying and protect telecommunication companies that assisted the Bush Administration. Some 7,000 of Obama’s followers have converged on his website to protest, according to the NYT.

AOL possibly up for sale — Sources within AOL say that Time Warner CEO Jeff Bewkes is giving off the impression AOL is on the auction block, according to Silicon Alley Insider. Other sources disagree. Our take: Bewkes was elected CEO this year to clean house at Time Warner, and AOL has historically been a huge mess. If a good offer comes up, look for AOL to switch owners.

Thin-film solar to surge ahead by 2012 — The various forms of thin-film solar cells will take 28 percent of the market and reach $19.7 billion in sales by 2012, up from less than 10 percent of the market now, according to a report from Lux Research. Solar concentrator systems, by contrasted, are expected to “disappoint” for the immediate future, and organic and Grätzel photovoltaics will take longer than five years to mature at all.

Monster.com founder won’t even let newspapers have death — Before Craigslist, the first thing we all thought of for jobs was Monster.com. And before Monster, it was newspapers. In fact, Monster is often blamed for starting the landslide of listings away from newspapers, hastening their demise. Not content to let his old foes rest, Monster founder Jeff Taylor has started Tributes.com to add obituaries, one of the last revenue monopolies for newspapers, to the world of Web 2.0.

Publishers and analytics on the mobile web – That’s the subject for a free evening event, Mobile Monday, held at the San Francisco Microsoft campus next week, with companies in attendance including Admob and Opera, and a panel moderated by our own Matt Marshall. Keep in mind that our own MobileBeat2008 conference is coming up on July 24th.

McAfee returns results of S.P.A.M experiment — Ever wonder what would happen if you answered all your spam emails? Just to find out (and get some press), anti-virus software maker McAfee launched the Spammed Persistently All Month, or S.P.A.M., project with 50 volunteers. In a single month, the five US participants got 23,333 messages, not including junk mail arriving at their homes, leaving one, a realtor and housewife, “horrified”.

EBay fines $63.2M by French courts — In a decision only a capitalist-unfriendly European could come to, a French court has ordered eBay to pay