VentureBeat

Like.com, a search engine that analyzes images for useful shopping information, has raised double digit millions in venture capital from Silicon Valley venture firm Menlo Ventures.

It’s also on a roll, in terms of both traffic and revenue.

Like.com lets you do things like search for the color, style or texture of shoes you want to buy, and then gives you a way to buy them. If your search term is, say “red snappy shoes,” it will find you only shoes that are red and snappy (try typing that into other search engines, and it won’t work very well).

We’re hearing Menlo is set to wire the money to Like.com over the next few days and that an announcement should be made in about two weeks. We’re also hearing from a source close to the company that Like.com has exceeded its internal revenue expectations, or about doubling the $10 million it had forecast at the start of the year — and that this produced a frenzy among venture firms to score the deal. Menlo beat out other firms by offering a considerable increase in valuation for the company.

In a recruiting email sent out yesterday, the four-year-old Palo Alto, Calif. company Like.com says it has more than 5 million monthly uniques, up from 3 million in February, and a whopping 15-fold greater than its year-ago traffic.

Previously, the company has raised $19.5 million from Bay Partners, BlueRun Ventures and Leapfrog Ventures.

Back in February, I wrote a piece about how Like.com’s progress is a sign that image search can work. That piece helped spark a minor controversy when investor Fred Wilson said I’d gotten some things wrong. I argued back, however, saying Fred had missed the point. Since then, Like.com has continued to execute well.

When people click through to buy their shoes, or handbags, or whatever they’re looking for, they do so directly from the retail merchants. Like gets a cut.

This is apparently an impressive turnaround for Like, which a year ago had stagnant traffic. At first, people just weren’t interested, or hadn’t heard of the site. But the company revamped its design, refined its results and moved to add things like texture search. I say it is an apparent turnaround, because it all looks pretty good on the surface. I’ve seen companies be able to manipulate their traffic considerably by buying it with search engine advertising. However, in February, the company’s chief executive Munjal Shah argued that the recent uptick in momentum wasn’t tied solely to such strategies.

[Update: See Munjal Shah's comment below. He clarifies that his company does buy traffic, but when I talked with him on the phone just now about the extent to which the growth is tied to that, he wouldn't comment.]

Yesterday, I wrote a piece about Like.com, a visual search engine company based in Silicon Valley that was reporting great progress: The young site has had rocketing visitor traffic over the past four months, and it’s headed toward profitability. People are using it to find the color or style of shoes they like, and then clicking through to merchants to buy them, and Like gets a cut, according to chief executive Munjal Shah, who showed me his internal data. The site today released its new, slicker look (see Shah’s post about it here).

In the piece, however, I also quoted Shah as saying Like.com is “killing” the social shopping engines, including Santa Monica, Calif.-based ThisNext. He argued that’s because shoppers don’t like sharing their shopping preferences with each other; shopping decisions are more solitary than most people think. Critics took me to task for not investigating Shah’s claims more deeply, so I decided to do a little more digging, even though I provided quite a bit of context and justification already in the original piece and in subsequent clarifying comments.

Namely, I talked with Gordon Gould (left), chief executive of ThisNext, and I’ve got a lot more to say: In short, ThisNext practically hasn’t gotten started yet, and it faces huge, perhaps insurmountable challenges. However, its vision — if it ever is realized — is more profound and much more powerful than Like.com’s. It’s true that Like.com is indeed killing ThisNext for now on a revenue basis. But it’s really not fair to use the “now” as our measure, because ThisNext is using venture capital to build out a bold, audacious “product graph” project and isn’t yet focused on making money, or even on maximizing traffic.

So let’s go back to the Like.com v. ThisNext debate, and I’ll tell you why I think that, in the end, this is an apples to oranges comparison that isn’t fair.

I initially told critic Fred Wilson his reaction centered too much around the traffic question and not about their respective revenues, which is what Like.com’s Shah says he’d intended to refer to. Both measures, I’d argue, should be looked at when judging success, because one can often be traded off against the other, especially in the early days of a company.

So first of all, let’s start with traffic. Fred showed an old Comscore graph through December, depicting how the traffic of both sites is comparable through most of last year. However, that graph showed Like.com’s traffic exploding upward in December, which Like.com’s Shah (left) explains was due to a number of factors, but none a primary driver. He admitted he was buying traffic (by placing ads next to Google search results; for example, next to a search for “red snappy shoes”), but he was doing a lot of other things too, which we noted here and here. His traffic continues to be robust through Jan and Feb, and is now at 3 million unique visitors. ThisNext, meanwhile, only got 1.4 million uniques in January, says Gould. So, no question Like is beating ThisNext, but ThisNext isn’t buying any traffic, Gould tells me.

Now let’s go to revenue. Like.com’s Shah says he’ll make more than $10 million this year, Gould says he’ll probably make about half that. Again, Like.com wins. But again, ThisNext’s Gould has an out: He’s not focused on making money at this stage.

Like.com is aggressively focused on an arbitrage business, buying traffic at a price and then making more money on the traffic it gets than what it pays for the traffic, Gould argues. ThisNext, by contrast, is in the “discovery” business, he says.

Like’s Shah is flat out wrong that people don’t consult with others when buying, Gould adds. If people are using Like.com, they’re likely to be further along in the shopping process, Gould concedes. But otherwise, people often go into the store and end up buying something they never planned to buy. “It happens all the time,” Gould said, both in offline and online shopping. If a cute saleswoman says you look terrific in those jeans you’re trying, you’re gonna buy those denims even if they’re $20 more expensive. If your friend likes them too, you’ll probably buy two pair. Online, people – especially women — send IMs and email back and forth with URLs and coupons of stores or products they’ve found, he says.

Some 70 percent of shopping is made on a discovery basis, and only 30 percent is made from search, Gould says, citing research. Research from Womma.org shows that 27 percent of social conversations have some meaningful discussion of products, suggesting that social interaction is powerful input into our decision making.

To help in the shopping discovery process, ThisNext is building what Gould calls a “product graph,” or essentially a compilation of the web of connections between people who buy trendy products and other people they influence, as well as a graph that tracks the products themselves. What you end up with is a dataset that lets you know who the influencers are and which products are popular in which populations. The challenge for ThisNext, then, is to grow large enough so it can become the leading “product recommendation” service across the Web.

For instance, if you are an influential flyfisher and recommend products to others from your MySpace page, ThisNext wants you to be able to access those same recommendations while on other sites, via social network platforms offered by Facebook and others. Right now, the site is trying to optimize its reach across the web, and so traffic to its home page isn’t the primary goal.

If it gets there — and this will be very, very hard, in my view — ThisNext could be a boon to the social sites such as Facebook and MySpace, which are looking to make money. By becoming a plug-in social shopping layer in each site (just like Photobucket offers the photo layer for MySpace, YouTube offers the video layer, and PayPal offers a purchasing layer, etc.), ThisNext would earn revenue each time a user buys something through it, via an affiliate payment. ThisNext would then share the revenue with these social sites. With an effective CPM advertising rate of about $30, ThisNext’s offering would be stronger than many other ways of making money, Gould says.

In the long run, eBay, which already has lots of information about its shoppers and preferences, could be headed in this direction and so poses ThisNext’s toughest competition going forward. Other players, however, have fallen by the wayside (Kaboodle was bought by Hearst and no longer looks like a threat, says Gould; and Stylehive and Stylefeeder appear too focused on fashion, he says).

To conclude, comparing ThisNext with Like.com seems premature. Has Like.com really killed social search? Yes, probably, in the short term, if you’re only looking at the numbers. But social shopping search and shopping technology is still in its infancy, and we haven’t given it a chance. It’s absurd to make any conclusion right now that social shopping search has lost to visual shopping search.

I’ve updated this story, given that I was attacked for not digging enough. See update here.

Just six months ago, things weren’t looking great for Like, a Silicon Valley company that offers visual search for shopping.

Its traffic wasn’t going anywhere.

But suddenly, over four months, the company has tapped a robust number of users, and it now expects to earn more than $10 million in revenue this year. It’s all driven by a steady refining of the site’s features. Now customers click through on items at a rate as high as 90 percent, compared to a year ago, when they clicked through 16 percent of the time, says chief executive Munjal Shah. Tonight, the company put the finishing touches on a new release.

Shah says visual shopping search is more viable than social shopping search, which offers a way to share what you are buying with friends. The reason, Shah says, is that shopping is a more solitary activity than people may realize. “We’re killing them,” he says, of social search engines — this includes ThisNext, for example. [Update: Fred Wilson calls me on this, saying the traffic trend isn't clear. The Comscore chart below shows that the two sites are both growing last year. But look at the hockey stick growth of Like in December. Shah's argument rests on Like.com's traffic since that time, i.e. through December, January and Feb. ThisNext's traffic didn't go anywhere in December, which is supposed to be a huge month for shopping. But it's true, we haven't seen ThisNext's traffic since then, so it's too early to fully test Shah's claims. Update II: I forgot to point out that, while Fred focuses on traffic, the more significant point Shah is trying to make goes beyond traffic: Like is getting superior click-throughs and revenue generation. He showed me internal stats for both traffic and revenue. I'm checking with ThisNext to see what they will share.]

Earlier, VentureBeat reported Like.com had raised $3.3m more in financing, and that it is now getting 3 million monthly unique visitors.

Like lets you search for shoes, bag and jewelry by typing in terms related to their visual characteristics. Here’s how Like works: It converts your search term, say “red snappy shoes” into a visual search for only shoes that are red and snappy (try typing that into other search engines, such as Shopping.com, and you’ll get many other types of shoes in search results, many of them not red, and not snappy).

Like is being helped by other companies, such as Zappos, which take the risk out of buying things online. Zappos, for example, offers free delivery of purchases for shoes, and lets you return shoes if they don’t fit. This gives people more incentive to buy online, and they’re using Like.com to search for styles and colors before buying, Shah says. Once a person selects a shoe, Like.com lets them buy it from Zappos if it’s in stock.

Like will soon offer a way to search for certain materials/textures as well. It’s refining a way to return the trendiest items on the top of its results, in consultation with fashion experts about what color palettes and silhouettes are “in” at any given time.

It will fine-tune other features in coming months, some of which are being introduced now but aren’t perfect. For example, it will let you find accessories and other items that match products you’re searching for. But it will do things like recommend polka dotted shoes when buying a polka dotted dress — not necessarily the greatest match. But Shah says the point is to deliver and then incorporate feedback. The site is looking much better than the last time we looked at it, here.

See update to this story here.

Here’s the latest action:

 Facebook to launch people search in one month — Facebook will let search engines find and display very basic information from your Facebook profile, including only your name and the option to message you or friend you, it announced early this morning.

This way, if somebody searches for you on Google, this “public” page will show up — making it even easier for prospective employers to know where to find you on Facebook, and delve into your personal life. Of course, anyone else trying to find out abut you through Google now will know how to become your friend, which may help drive Facebook adoption even more.

The company says it will wait a month before letting this information loose for the search engines to find, so people have time to change their settings and keep their profiles hidden.

Business 2.0 to be officially shut down — As it proceeded to lop off the tech-business arm of its media empire, Time Inc., owner of Business 2.0, decided not to sell the magazine to Mansueto Ventures, owner of rival magazine Fast Company, reports The New York Times. The reason: it did not want to arm another competitor: The Business 2.0 brand and its 600,000 subscribers, in someone else’s hands could undermine its other business property, Fortune. Some Business 2.0 staff members will join Fortune, while most others reportedly will join other tech publications.

Microsoft releases Silverlight — After months of hype, version 1.0 of Silverlight, Microsoft’s multimedia plugin for developers has been released. It’s the company’s challenge to Adobe’s Flash online multimedia player. While Silverlight has gotten positive reviews from tech circles, it is trying to challenge Flash’s 90 percent-and-growing market share for multimedia players. Microsoft has made a number of major deals to promote Silverlight, including a video deal with Major League Baseball (screenshot left, with the sample here).

Rockyou’s integration of Like.com search results, needs work — Like.com, a visual search engine company that has changed directions since its founding, has integrated its search results into the slide shows featured on the popular photo site RockYou. See example at left. If you’re looking at a picture of a woman in a shirt, for example, Like.com will show you similar shirts and let you buy them. Or at least that’s the idea. It could use improvement, because the example given shows shoes and other items that have little resemblance to the shirt in the picture, and so Like is more likely to become annoying than useful. People don’t want to be distracted by advertising that isn’t relevant to them. In a Techcrunch piece, Like says its ads are getting $0.80 CPM, and that its sharing the revenue wtih RockYou. However, no word yet on the number of ad pages being served. (Via Techcrunch)

Palm scraps the Foleo its laptop-like companion to the Treo — The Foleo, from the beginning, had looked like a questionable project, and we were surprised it got as much publicity as it did. Who needs another device, when you’ve got a Treo and a high-powered laptop already? So Palm yesterday said it has canceled the project, and is taking a charge of “less than $10 million” for the work put into it.

NBC embraces Amazon after ditching Apple’s iTunes — NBC Universal canceled its contract with Apple’s iTunes, and instead announced its shows will appear on Amazon Unbox as soon as next week.

Synthasite, the Web site creator, gives out shares — The company is giving out 1,000 shares in its company to designers who create templates it can offer to users. It says its stock is worth $250,000, but its all very questionable, so participants beware.

MetaCard offers credit card for SecondLife — Details here.