VentureBeat

updated
Lithium Technologies, which builds and operates social networks for enterprises, has raised $12 million in venture capital today.

The company’s clients include Dell, AT&T, Sony PlayStation, Univision, and PayPal — all businesses with large user communities and heavy customer service and product support needs. Lithium’s community sites are designed to help these clients streamline the interaction with their customers and improve brand loyalty. To get an idea of how the sites function, take a look at the one Lithium designed for Dell. With features such as Dell forums where customers can engage with each other to answer support questions and share tips, the main point is to build brand loyalty in a two-way conversation with consumers.

The idea is to use best practices to stir up people like Jeff Stenski, a Dell customer who has voluntarily spent the equivalent of 141 days of his time over the years and posted more than 22,000 answers to technical support questions on Dell’s community web site. Stenski’s answers have been viewed more than a million times, saving Dell more than $1 million, according to Lithium. That prompted Forrester Research analysts Charlene Li and Josh Bernoff to call out Lithium in their social networking book, “Groundswell: Winning in a World Transformed by Social Technologies.”

A number of startups have moved to deliver similar social networking communities to the enterprise market. Marc Andreessen’s Ning social-networking platform can be used to build enterprise communities. Liveworld, Igloo, HiveLive and KickApps also promise companies that they can build thriving social networks. But Lithium has attempted to set itself apart by using game-like motivators such as leaderboards, rewards, reputations and profiles.

We mentioned the trend of using game-like features in non-game applications in our earlier story about Funware. In the Dell IdeaStorm voting, the most-frequent contributors can get “iSquared powers,” meaning they get ten times the voting power of other community members when it comes to selecting which of the IdeaStorm product ideas are the best.

“We’re managing sites for companies that collectively get a billion page views a month,” said chief executive Lyle Fong. “Our job is to get those one percent of users who are hardcore fans and turn them into the company’s biggest evangelists.”

Lyle Fong, by the way, is the brother of Dennis “Thresh” Fong, a professional video game player who won a Ferrari at age 20 when he was crowned the world’s best.

The boyish-looking Fong brothers of Los Altos are legendary in video games. Dennis dropped out of UC Berkeley to play video games for a living. He picked up honors as the world’s best “Doom” and “Quake” player. He was one of the first people to actually make video gaming a profession, winning big cash prizes and the Ferrari.

Dennis co-founded another company, GX Media, with Lyle. At first, they were selling gaming computers out of a dorm room. In 1997, they founded Gamers.com, a site that offered news and community forums for hardcore gamers, as well as game fan site FiringSquad.com, started with their other brother, Bryant. They raised $11 million in venture financing from CMGI in 1999 and lived the good life. Gamers.com even threw a party at the Playboy Mansion during an E3 show.

In 2001, Ziff-Davis bought Gamers.com and GX Media spun out Lithium Technologies under Lyle. Dennis went on to found Xfire, an instant-messenger service for gamers which was purchased by Viacom’s MTV for $102 million. Dennis is now head of the startup Raptr, a gamers social networking client.

Lithium is based in Emeryville, Calif. This second round of funding was led by Benchmark Capital. The cash will help the company expand its marketing and product development as it faces new kinds of competitors. The company previously raised a $9 million round from Shasta Ventures and Emergence Capital Partners in 2007.

A number of companies decided to compete with DEMO for media coverage today by announcing some rather large acquisitions:

Paypal ponied up $170 million for Fraud Sciences, which prevents online fraud;

Nokia paid $153 million for Trolltech, which helps developers build cross-platform applications;

GSI Commerce gave $157 million for E-Dialog, an e-commerce company;

Finally, Imeem bought Anywhere.fm, an internet radio service.

Here are a few notes on each:

Paypal’s acquisition of Fraud Sciences was an all-cash deal for $170 million. The company had taken less than $20 million in funding to date, from investors Redpoint Ventures and BRM Capital. Fraud Sciences tracks online buyers to pin-point suspicious behavior, and is supposed to be particularly good at detecting fraudulent overseas transactions, a particular pain point for Paypal. (Press release)

Nokia also paid cash for Trolltech, which was a publicly-listed company on the Oslo Stock Exchange, but also had investors including Index Ventures. Simply put, Trolltech’s application development framework, called Qt, makes it much easier for developers to build applications that work across both PCs and mobile phones, as well as on the web. That sets Nokia up nicely to compete with Google’s Android, which we’ve covered here. (Press release)

Neither GSI Commerce nor E-Dialog is well known locally, but the acquisition price should turn some heads for its investors, which include Flagship Ventures and Commonwealth Capital Ventures. The company had taken about $20 million in funding, according to Xconomy. (Reuters)

Imeem likely didn’t pay that much for Anywhere.fm, at least in comparison to the price of the above three acquisitions. Then again, for a three-man startup that came out of Y Combinator less than a year ago, with no venture funding, even a few million is significant. Anywhere.fm, which only ever took angel funding, has about 60,000 users and will continue to operate as its own service. It will likely benefit greatly from the business deals Imeem has made with the major music labels, covered in more depth here. (Press release)

Revolution Money, a new company backed by former AOL chief executive Steve Case, has launched a free online money transfer service to compete with PayPal. It has landed $50 million in a second round of funding.

The service is designed to be used on fast-growing instant messaging services such as AOL’s AIM and other social networking sites, and could appeal to younger users who balk at PayPal’s fees.

The Largo, Florida company is also offering a credit card it says will lower interchange fees for merchants. It is called RevolutionCard, and the company calls it the industry’s first anonymous, PIN-protected credit card. It will slash fees to 0.5 percent of a transaction, instead of the average of 1.9 percent charged by the credit card industry.

Revolution Money, formerly known as GratisCard Inc., boasts a number of other well-known executives on its team or advisory board: Ted Leonsis, former United States Treasury Secretary Larry Summers, former Charles Schwab CEO David Pottruck, and former MasterCard International President and CEO Russell Hogg.

The funding comes from Citi, Morgan Stanley and Deutsche Bank, and included Leonsis, and original controlling investor, Revolution, Case’s investment firm.

The money transfer service is called Revolution MoneyExchange. It is not yet open fully to the public, but users can register at the site to request an invitation when it is ready. It will allow online transactions, and is designed for social and instant messaging networks. Eventually, MoneyExchange says, it will let users link their accounts to the RevolutionCard, which can be used for offline payments.

Here’s the latest (updated) action:

Geomas says it has location-based search patent — The London based company says its patent is being infringed upon by some 20 large internet players, and this probably includes Google and Yahoo. Here’s a description of the patent. The company says it raising $20 million to help it extract licensing deals. It started by suing Verizon. (Via Techdirt).

KyteTV gets investment from Nokia — See our story here.

IPO market sees strongest month since 2004, but not for buyout firms - Eleven venture-backed companies raised $1.6 billion through initial
public offerings (IPOs) on US exchanges in May, higher than any other month since Oct. 2004, according to data from Thomson Financial and the VC lobby, NVCA. However, IPOs of companies backed by buyout firms have actually declined, raising questions about whether the bubbly investment activity in that sector is sustainable.

A PayPal-only search engine — TheFind, a shopping search engine launched paypal.thefind.com, a new shopping search engine built solely for browsing products from merchants who accept PayPal payments.

Google’s privacy upgraded — Google said it will keep the Web search histories of users for only 18 months instead of 24, responding to pressure from EU authorities. See story here. Meanwhile, search engine expert Danny Sullivan discovers Google is considering creating a dashboard (scroll to near bottom) where people can decide what aspects of their search and surf behavior Google can access.

Google opens the veil for advertisers — Google released its Placement Performance Report, which enables AdWords advertisers to see the exact sites on the Google content network where their ads appear. It also provides “site-by-site performance metrics – including domain, URL, impression, click, conversion and cost data – as well as aggregated metrics for traffic generated from AdSense for domain sites.”

Google powers search on Sina — Google will place its search box on the Website of Sina, China’s third largest site in terms of traffic. Marketwatch reports here. In return, Sina gets a share the search advertising revenues Google collects. This is the latest move by Google to try to catch Baidu, China’s leading search engine.

Technorati’s mysterious traffic surge — Techcrunch has details on why the traffic surge may be somewhat misleading.

[Updated: YouTube's video-music filtering technology not reliant on Audible Magic -- Google's video property YouTube will soon test a new video identification technology with two of the world's largest media companies, Time Warner Inc. and Walt Disney Co. It will be built by Google's own engineers, and not be solely reliant on Audible Magic, as we'd previously believed after this report. Audible Magic has had filtering problems, as earlier reported. It turns out, Audible Magic is being used for music filtering only; see Elise Ackerman's follow-up today,who also points to an agenda by Google to use the copyright controversy to build up a massive database of videos.]

Former Engadget editor Pete Rojas to form company focused on ad-driven music label — He teams up with Downtown Records to launch a new music label, dubbed RCRD LBL, that will offer the music of artists for free, but paid for with ads. See story here.

Quzhai latest foreign clone — Quzhai is a clone of StumbleUpon, with a little Digg thrown in. Notice how most clones seem to originate in Germany and China, somewhat understandable since they have two of the largest domestic non-English internet markets. Quzhai raised RMB 1 million seed funding from BV Capital.

Biomass it steaming hot — Bull Moose Energy gets $60 million for project in San Diego and other cities. See our story here.

Roundup of the latest action in Silicon Valley & tech:

PayPal’s origin explored, one more time — Online payments company Paypal has spawned more Internet entrepreneurs from its founding team than any other company we know. Yet PayPal had a rushed and tumultuous birth; if you’re curious about yet another version of PayPal history, this is worth a read: Co-founder Elon Musk (pictured here) rejects the version that suggests he was a lesser player.

Wikio, which looks remarkably like Digg, raises $5.3M — Aside from ranking stories in various theme areas, like Digg does, Wikio gives you ways to publish articles and personalize your news page. The Luxembourg-based company has closed a first round by Lightspeed Venture Partners and Gemini Israel Funds. Its team has big-name European new media types: Founder is CEO Laurent Binard, who was founder of Mediapps (European Software Publisher), and chairman is Pierre Chappaz, who was Yahoo Europe President and co-CEO of Netvibes. Wikio’s seed investors include Loic Le Meur (VP Sixapart Europe), Martin Varsavsky (CEO FON), Freddy Mini (COO Netvibes), Ouriel Ohayon (Editor Techcrunch France), and Jeff Clavier.

Infinera, the fiber optic company, to pull IPO trigger — This is the company with the power board, with folks like TJ Rogers and Vinod Khosla, that has raised a huge $315 million in venture backing so far. It is reportedly planning to file for an IPO, at a $1 billion-plus valuation, says LightReading, noting Infinera has sent lock-up agreements to shareholders.

Start-ups are killing big software companies — That’s the only conclusion you can draw if software sales are going up and sales of the big guys, SAP and Oracle, are falling. More here.

Stealth companies of the week — Thealarmclock mentions Ron Conway’s latest company, Portfolia, and Redwood City’s Twofish, but has few other details. Let us know if you know more.

Acquisition environment humming — Dow Jones (sorry, subscription only, so no link) cites analysts and others saying M&A activity remains robust for now. We wrote about secondary activity. There’s a notable quote of Foundation Capital venture capitalist Warren Weiss saying the firm sold five of its portfolio companies in 2006 - and “turned down an extraordinary five offers for every one it accepted.”

Good to have power players on your board — Video company Veoh has not escaped the shakeout happening among video start-ups now that YouTube has emerged as leader, but Veoh backer and former Disney CEO Michael Eisner has a way of making news. When Veoh announced a partnership with Wenner Media’s Usmagazine.com, to create a celebrity entertainment channel on Veoh, the NYT wrote about it (even though there are lots of celebrity entertainment sites already).

Google adds sponsored links to your search history — Details here.

Google in talks to buy Adscape Media, for ads in videogames — The search giant is in talks to acquire the San Francisco company, which delivers online advertising and also places ads within videogames, according to the WSJ. A deal could be reached next week. The company has a member of H.I.G. Ventures on its board. (The WSJ notes that Microsoft last year acquired Massive, a company that delivers in-game ads, for close to $200 million).

Kiptronic raises cash for ad-insertion in podcasts — Our story yesterday, in case you missed it, is here. Kiptronic inserts ads in audio and video files as they’re downloaded for off-line use; this is different from the broadcasting ad-insertion technologies. See Techdirt’s critique of broadcasting hype here. More analysis here.

IBM Joins social networking field — Details here.

ThinkFree wins Web-based office software comparison — Computer World compares various Web-based software packages, and rates ThinkFree (first) and Zoho (second) the winners. ThinkFree edged out Zoho because it is more compatible with Microsoft Office. In a significant partnership with Omnidrive, though, Zoho lets users open and edit documents directly within Web-based storage service, Omnidrive, and then save them too — a first, to our knowledge.

Lots of buzz about Google’s decision to use its homepage to promote its online payment product, Google Checkout, in its continued effort to encroach upon leader PayPal.

Read/WriteWeb has details.

Google’s homepage is one of the most popular, and it has remained spartan so that anything it promotes will likely capture the eye. We’re not aware of Google doing such overt promotion before. However, when we checked Google’s homepage ourselves, we didn’t see the promotion.

So Google generates a “media story” by putting up the promotion, and then creates another one by pulling it down?

SpotDJ, an angel-backed start-up in San Francisco, yesterday launched a service that lets people insert “spots” within iTunes music, which can be listened to by other SpotDJ users. The short spots can be descriptions of the song’s artist, a back-story to the song, or a recommendation about a different version.

Here’s how it works: Once you’ve downloaded SpotDJ, you can listen to a song on iTunes, and then hit the “spot this song” button. That lets you record a spot, and then other SpotDJ users can listen to it. If you don’t want to get bugged by random spots, you can set preferences to select only your favorite DJs. You can rate spots between 1 and 5, so that the community benefits places only the highest rated spots for a given song.

Strip out the junk from your Google search results — Oliver Humpage found that searching for products on Google can be annoying: Nothing but spam from Kelkoo, Pricerunner and other places clogged up his search results. So he wrote GiveMeBackMyGoogle.

Baidu starts (censored) Chinese version of Wikipedia — Chinese search engine Baidu has proven that it works well with Chinese authorities on censorship issues. Some of Wikipedia’s entries are blocked in China. We’ll see if Baidu can do any better.

Turns out, the plush looking MeeVee sign was for free — We mentioned new lavish looking sign of MeeVee, the personal TV and entertainment guide start-up, because some suggested it was a sign of a bubble era. We heard back from the MeeVee folks, who told us it was part of their lease extension negotiation. Also, the sign is visible from the 101, particularly at night, so it was a no-brainer, they said. No bubble perhaps, but it is true that the Silicon Valley corporate real estate market has tightened considerably lately (registration required).

The PayPal mafia and diagram, yet again — You may have seen the PayPal “Diaspora” stories before, about how the former employers of that online payment company have moved on to form other companies. The New York Times jumps in with another story about where all the PayPal folks ended up. It has a helpful diagram (if you’re registered with the Times, click on image here to go to the original version, which you can enlarge), and more background about where they came from, and how they still help each other out:

Mr. Thiel tapped his network of friends from Stanford, many of whom had worked at the Stanford Review, a libertarian magazine that Mr. Thiel co-founded in 1987. They populated PayPal’s business ranks. Mr. Levchin, for his part, hired engineers in large part from his alma mater, the University of Illinois at Urbana-Champaign…

Reuters reporter lives in Second Life — The news service has assigned a reporter to live within Linden Labs’ virtual world game, Second Life, and report what is going on there.

MySpace spruces up its site to highlight its own video — Now that YouTube is more of a threat, MySpace has made a few minor changes to highlight its own video offerings. MySpace now features videos on its homepage (see top left hand corner). User profile pages now include a section called Video Space, which displays videos the user has uploaded.

A much better way to connect: two feet of cable — Apple chief executive Steve Jobs has a good line, saying Microsoft’s Zune music player is unlikely a threat to Apple’s iPod. He tells Newsweek:

I’ve seen the demonstrations on the Internet about how you can find another person using a Zune and give them a song they can play three times. It takes forever. By the time you’ve gone through all that, the girl’s got up and left! You’re much better off to take one of your earbuds out and put it in her ear. Then you’re connected with about two feet of headphone cable.

Starting an Internet business — I’ll moderating a panel about “Monetizing your Site” at the From Garage to IPO conference tomorrow at TiE in Santa Clara. Event details here.

PixSense, latest start-up to offer video compression, is hiring! — This Santa Clara start-up claims no one has been able to compress a video by 85 percent to share it via mobile phone.

It is offering such a feature to consumers and carriers. Some 90 percent of cell-phone users don’t have a set data plan, meaning they pay for bandwidth they use while sending pictures. PixSense will lower costs. It will also sell its technology to carriers, a spokesman told us. It has angel funding of $1 million and is a raising a venture round. The start-up has 30 people, and here’s the kicker: It plans to employ 150 by next year.

Veeker buys Thumbdrive, to pursue mobile video messaging — Veeker, a San Francisco company building a mobile video-message sharing service targeting young users, told GigaOM that it has acquired San Francisco-based mobile software development company ThumbJive, which also has employees in China.

Mercora, that Santa Clara radio song-sharing service, launches service for smart-phones — Mercora says its wireless music service “beat Steve Jobs to the iPhone…And we’ve beat Microsoft to the Zune.” Dubbed “M,” the service allows smart-phone users to listen to music that sits on their PCs. Further, M subscribers can share music with each other — by accessing each other’s PCs.
We wrote about Mercora here.

Piczo, another sleeper social site? — The San Francisco social networking site, which focuses on teens and photo-sharing, is boasting 17 million registered users. It has raised a total of $7 million, according to GigaOM’s Liz Gannes, who brings us an update on the relatively closed, privacy-conscious site. (We’d reported earlier only $4 million raised). Sierra Ventures and Catamount Venture are the backers.

PayPal prepares a way for users to store files — Techcrunch has the skinny on the yet-to-be released service, called DropBox, which creates a secure storage area within a user’s account. We called PayPay, and there is no intent to create a digital distribution platform of any kind. It is merely offering what most mainstream payment providers do, including a way to batch-process payments instead of settling one payment at a time, said spokeswoman Sara Bettencourt. She declined to provide more details.

Cynical blog Dead20, which has covered the valley’s Web 2.0 companies with scorn, is down — It has an error message saying “Bandwidth limit exceeded,” after the author, who has been writing in anonymity, is all but outed.

Facebook founder puts Microsoft on hold — The WSJ, in its recent story about Facebook, reported how Facebook executives told their Microsoft peers “they couldn’t do an 8 a.m. conference call because the company’s 22-year-old founder and chief executive, Harvard dropout Mark Zuckerberg, wouldn’t be awake, says a person familiar with the talks. Microsoft executives were incredulous.”

No surprise here. We, too, remember showing up for an interview at Facebook last year at 10am, and having Zuckerberg show up late. Only Facebook co-worker Matt Cohler was in the office, who told us some engineers had only just left after working through the night.

Remember Imeem, the company that lets you share your desktop contents directly with others? — It is raising money. It has also changed its business strategy. We’ll report more soon.

AdMob, a company that sells advertising on mobile devices, said it raised $3.6 million in its first round of venture funding — We reported earlier on the funding, but the SF Business Journal has the exact amount.