VentureBeat

I spent four days this week at the Web 2.0 Expo at the Moscone West convention center in San Francisco. Here is a summary of the scene, including photos and my impressions of the show.

I attended the RockYou/Clearspring/Mixercast reception on Tuesday night at Bong Su, a trendy new Vietnamese restaurant. Three companies sponsored the party and so it made the Web 2.0 froth seem a little less excessive, since they can split the bill. There I met RockYou founder Lance Tokuda and enjoyed some fancy fried rice.

On Wednesday, Tim O’Reilly, the head of show organizer O’Reilly, kicked off the conference with a plea for innovation even in the midst of tough economic times.

“If you follow the headlines, you might as well stay home,” O’Reilly (left) said as he opened the speeches on Wednesday. He praised the Internet as the ultimate platform and its ability to create a revolution in human augmentation. That means that, with the web at our fingertips, we won’t have to remember much. He also told the Web 2.0 denizens to harness the collective intelligence of the web. He suggested we rise above the level of the single device and think about making software work across everything.

Go after the hard problems, he implored. “Do you think we’re really done yet?” We’re at the beginning, he said. And he cited a poem by Rainer Maria Rilke, “The Man Watching,” which O’Reilly said he read to his father on his death bed. It’s about how you can grow by being defeated by those who are greater than you are.

That led to the conversation with wunderkind Max Levchin, the CEO of Slide, an event which we used to introduce our live blogging. Eric Eldon caught up with Levchin afterward for a Q&A. The talk inevitably led to “how do you make money?” question that every Web 2.0 company has to grapple with. Levchin made a rare admission for a CEO. He said he was “extremely uncomfortable” being in front of the crowd and was happy that all he could see out there in the audience was a bunch of bright lights. You see, CEOs are just like the rest of us. Except they have a lot more zeroes in their checkbooks.

I was back bright and early the next morning to listen to John Battelle try to get Marc Andreessen to talk trash about Microsoft. But Andreessen (at left in image) was fairly diplomatic, saying only that he was happy there were “counter weights” to Microsoft such as Google. He was happy, he said, that the original ideas of the Netscape Navigator have survived (like the “back” button on browsers) and that something of Netscape lives on in Mozilla’s Firefox browser. He, like Levchin, has a company, the social networking platform Ning, in the $500 million valuation club. If Ning keeps going, it could become Andreessen’s third big start-up home run.

Read the rest of this entry »

Updated with commentary from RockYou

It’s a tale of two social network developer platforms. Hi5, a site popular in some Spanish-speaking Latin American countries and other regions around the world, launched its platform at the beginning of this month — and the third parties that have applications on the site are reporting impressive growth.

Leading widget company RockYou, for example, says its “SuperFive” application has already been installed two million times in the last couple of weeks. Why? Hi5 specifically offers ways for users to contact each other through third-party applications.

Meanwhile, applications on market leader MySpace’s platform have been seeing insignificant growth since it launched in mid-March — because MySpace has yet to introduce effective ways for applications to contact users. However, one top developer tells us that MySpace will soon be offering notifications, email messages, and other so-called “viral channels” already available on Hi5.

So MySpace may soon become the hot spot for applications that third parties have long hoped for. Meanwhile, Hi5 may have done a better job of addressing the spam problem.

Does “viral growth” = spam?

To get an idea of what I mean by “viral growth,” here’s a closer look at RockYou’s “SuperFive” application, which lets users send action messages like a “hug,” “tickle,” etc. to Hi5 friends. If this sounds familiar, it’s because 1) Hi5 already has a feature called “five” which is basically a copy of Facebook’s “poke” feature and 2) RockYou and competitors already offer Facebook applications where you can hug/tickle/poke your Facebook friends

I’ve been hearing that this messaging feature is actually useful for companies that want branded contact with users, like being able to “throw a Coke” at a friend (I made that example up, but you get my drift). Many developers have made good money from selling branded pokes/hugs/tickles.

Update: While this sort of application may seem silly to me, and to many VentureBeat readers, RockYou points out that many, many users find it meaningful — and who are we to judge that? RockYou also makes another interesting point.

Facebook, the first social network to offer a developer platform, has spent much of the past year shutting down ways that applications spam users — and trying to placate users who don’t want to use applications.

Hi5 has instead come out with a new notification system specifically for applications (see the bottom of the screenshot). This means that there is little risk of users feeling spammed by applications messages, because they can just ignore invites, etc. if they don’t want to deal with it.

RockYou says it has been working hard with Hi5 and other social networks to make sure that its user experience is non-intrusive.

The bigger picture

Another other story here is that Hi5 — and MySpace — allow applications built in the OpenSocial application standard to run on their platforms. OpenSocial lets a developer quickly modify an application so it can work on any site that conforms to OpenSocial’s specifications. RockYou and many other developers say that Open Social is saving them time writing code, even though each member social network requires some customization to fit its particular feature set.

It looks like Hi5 is going to stay at the center of developer attention, at least for awhile. As the San Francisco company bragged when it launched its platform, there’s only a 25 percent overlap between its 35 million monthly active worldwide users, and users on rival social networks: The average Hi5 user isn’t on MySpace or Facebook. This means that it is especially important for developers to build applications in languages besides English, top application developer Blake Commagere tells me. Hi5 even offered free language translation services to the first 100 apps submitted.

While still in its early days, Hi5 may have found a good balance between growth and spam-control.

We’ve been covering how a wide range of web companies have been looking to raise rounds that value them in the hundreds of millions of dollars. Add another one to the list: Widget company RockYou. According to rumors, San Mateo, Calif.-based RockYou hired investment bank Morgan Stanley to help it raise a round that would value it at up to $400 million.

Just yesterday, we reported that ad network Federated Media may be close to closing a $30 million round that would value it at $200 million. On Monday, we reported that instant message aggregator Meebo was raising a round that would value it at up to $250 million.

A number of web companies that have grown large in the last several years are now looking to raise money, or sell, including RockYou archrival widget company Slide, which closed a $50 million round last December that valued the company at $550 million.

Blogger Kara Swisher additionally reports that RockYou entertained large purchase offers but instead is looking for the right strategic investor. The company has declined to comment on this article.

Starting this Tuesday, MySpace is giving all developers the chance to start building their own applications for the site using its developer platform. Then, in a month, the company will let users start adding any of these creations.

MySpace is the largest social network in the world, with more than 110 million unique visitors a month, so the platform could quickly rival Facebook’s, which itself has spawned thousands of applications that are used by millions.

Because of MySpace’s heft, a few companies will likely see the vast majority of their users embrace these MySpace applications — especially since Myspace applications will soon begin working on other Open Social member social networks, like Google’s Orkut.

Companies like Slide, RockYou and others that have grown large widget empires both on MySpace and most other social networks, and have also gained millions of users on Facebook. Their MySpace widgets, if nothing else, are massive advertising vehicles for their new apps. Their Facebook applications are where they learned how to use developer platforms to virally gain users.

In fact, these companies — Slide, RockYou — need to win. They need to reach as many users as possible, because they’ve taken millions in venture funding, they’re still trying to figure out ways to monetize, and they’re relying on reaching as many social network users as possible to scale whatever business model ends up being a hit. MySpace, despite Open Social’s inclusion of other social networks, is the last big social network target.

The Facebook advantage:

The official line is that tomorrow any developer will be able to access MySpace’s specialized platform code documentation, sample application code, a developer sandbox for creating and testing applications, forums, and blogs from the platform development team, as Adam Ostrow notes in his early look at the platform.

MySpace appears to leverage the many third-parties that already own widgets on millions of its users’ profile pages. It has added a feature, code called “action scripts,” in its platform that will let existing widgets use the platform to let the widget’s users easily invite friends, or add user data such as photos.

Widgets are snippets of code that are embedded in a web page and, besides action scripts, don’t normally have any way of connecting to data contained in the page they’re located on. Applications are more complex because they use social data, such as lists of users friends, to spread virally.

Take the most simple instance of an application platform at work. You can invite 20 Facebook friends to an application, using Facebook’s application programming interface provided in its platform to access your list of Facebook friends. A widget on MySpace has until now had no way to know who your friends are, nor a way to invite them to add the widget using Myspace’s interface.

The reality is that the biggest winners among Facebook application developers, such as Slide, RockYou and others, know how to use these viral channels better than a MySpace widget-maker that has never built an application. These two companies, and others that already have millions using their Myspace widgets, will be able to experiment with application-izing their MySpace widgets even as they build MySpace versions of their successful Facebook applications, using their knowledge of what works for growing applications.

Slide has just raised $50 million on a $550 million valuation, with the intent to reach the most users in the world (it already reaches more than 150 million, according to Comscore). It is developing ways for advertisers to reach users. Example: Branded items, like an image of a movie star, that shows up within a user’s widget or application.

RockYou has also raised millions in venture funding. It sees a big opportunity in selling advertising on its applications that lead users to add other applications.

Slide, Rockyou and other widget-makers have recently gained the attention of advertising agencies on Madison Avenue, that are experimenting with ways they can use these social networks to reach massive numbers of users. If these widget (and application) makers can figure out how to pair users and advertisers in a way that users can deal with, and that pays, their scale means they will make lots of money.

Update

Companies that make widgets grew quickly last year. The largest four — Slide, Myspace, Clearspring and Rockyou — each reached more than 100 million people around the world last November, according to web analytics company Comscore. [Update: Some widgets companies are taking issue with Comscore's numbers. See below for more.]

Given the recent surge of interest in widgets from advertisers, these numbers help explain why Slide was recently able to raise $50 million at a valuation of $550 million (our coverage). If it can monetize its pageviews, it could be sitting on a gold mine.

Slide grew from 117 million monthly views last April to nearly 144 million last November while Rockyou grew from 82 million to 104 million, both largely through Facebook applications. See the two tables below for a more detailed comparison of the top widget makers between April and November. The most popular Facebook app is RockYou’s Super Wall, with more than 23 million monthly Facebook users, according to Comscore.

Widgets are snippets of code that you can embed on other sites, that allow you to do things like display YouTube videos or links to the latest posts from your blog. They also, in Comscore’s reckoning, include Facebook applications, which allow third-party developers to connect the widget with its user data, such as lists of friends.

Facebook only opened up its platform for third parties to build applications in late May, so Comscore’s November numbers include this data but its April numbers (here) don’t — which helps show you the difference Facebook applications have made.

If you’re wondering why Myspace, Clearspring and Google suddenly appear in the tables below, its because Comscore also started counting the companies’ widgets more accurately. Myspace offers widgets like Myspace Video, Clearspring offers white-label widgets for other companies (in contrast to the others) and Google offers YouTube video widgets. Comscore has been tweaking how it tracks widgets, and it still isn’t perfect. See here for more.

Note, also, that many of the smaller of the top ten companies on both lists, like BunnyHeroLabs, have popular widgets on Myspace, but haven’t focused on Facebook.

[Update: Widgetbox's vice president of product and marketing, Pam Webber, has just sent us the following email, excerpt below taking issue with Comscore's methodology:

There are some issues with the Comscore data that are interesting to note.

Comscore does not currently track JavaScript widgets. That is affecting Widgetbox, in particular, as a large percentage of our widgets are JavaScript. Our internal numbers have us at 25 million unique viewers monthly.

Comscore is double counting unique viewers. In particular, Clearspring does widget tracking for Rockyou. So, one viewer is being counted by both Clearspring and by Rockyou for the same widget.

In our call with Comscore yesterday, they confirmed the double counting and are working on adding JavaScript widgets to the report. They are working with us to make sure our numbers are included accurately and expect it to be corrected in future reports.]

The context here is that more web users are joining social networks and are becoming familiar with smaller sites on the web, that serve their niche interests. They are going to these sites instead of large portals like Yahoo or MSN. In turn, widgets are a new way for content creators and advertisers to reach these users across the web. Here’s an excellent AdWeek article that goes into detail on how widgets are now of great interest to advertising companies on Madison Avenue.

Here are the top Facebook applications, worldwide, followed by the April-November worldwide comparison of widgets. (You can find US data here.)

In the latest evolution of this fast-paced but not yet lucrative world of widgets, Clearspring, a leading widget company, has launched an ad network for widgets (sample widget left).

It comes at a time when advertising agencies on Madison Avenue are finally getting comfortable with the idea of buying ads in widgets to get their client companies in front of social network users. A market for widget ads is forming, although its still unclear which forms of widget ads will deliver the best results.

The McLean, Virginia will use Adify’s ad technology, including ad serving, ad operations and ad reporting. PointRoll will be the exclusive provider of its ad units and technology that allows interaction within ads.

This news follows other widget-related announcements last week. Leading advertising network Advertising.com launched its so-called “WIDGNET” network, another ad network. Webs.com (formerly Freewebs.com), launched what it calls a “Social Gaming Network” — interactive gaming applications that run in social networks and rely on social network data. As in-gaming advertisers like MochiMedia are showing, this niche can be quite valuable.

Also, PointRoll — the Clearspring partner — will give advertisers the option to “widgetize” their rich media banners, so the next time an ad for a theatrical release expands over the page you are reading, you can “snaggle” a widget from the ad and put it on your MySpace or Facebook page.

Widgets are taking over advertising, content syndication, social gaming, and more.

For the uninitiated, a widget works when a website owner places an embeddable snippet of code on a web page. Widgets are also called gadgets, Widgets with a capital W (at Yahoo), minis, flakes, snippets and badges. Facebook applications, and now Google-led OpenSocial applications, are more advanced: These widgets offer third parties access to their data, so applications can design interactions around your relationships.

Otherwise, what distinguishes a widget company is largely semantic. YouTube is a massive widget distributor while MySpace (and now Facebook) are huge widget receptacles. MySpace, as the first mass-scale social network to allow users drop widgets into their page, is largely responsible for the growth and reach of widget companies like Photobucket and Slide. Now Facebook and other company’s platforms are similarly responsible for the birth of a new category of start-ups, technologies and revenue streams.

The advent of Facebook’s platform in May changed the game for widget companies because — beyond the new access to valuable user data - it let third parties make money without fear of being banned. Myspace, for example, sometimes blocked Photobucket, although it eventually bought it.

Now these widget companies are gunning for Madison Avenue, with overlapping but increasingly differentiated strategies to build, distribute, and track widgets across social networks.

Or is Madison Ave gunning for them? Ro Choy, VP of Business Development for RockYou says the adoption of Facebook applications by large advertisers has been “radical.”

Here’s who’s in the game and what they’re doing:

Clearspring

Clearspring earned its reputation as the market leader developing widgets for Big Media, and counts among its clients NBC (exclusively), Disney (recently launched over a dozen widgets for ESPN) and Turner.

Clearspring’s network allows advertisers to distribute their widgets across properties like Break.com, The Huffington Post, NHL.com, 20^th Century Fox, and paparazzi haven X17online. Virgin Mobile is sponsoring a Futurama widget running on Fox’s site (see screenshot). Clearspring gets a cut of the revenue as well as possible development fees. If Fox wants to offer one of its own advertisers a widget integration, Clearspring now gets a cut of that deal too.

Peggy Fry, a former vice president of sales at Netflix and AOL Time Warner, is well-positioned to head up the advertising effort for Clearspring, and several people I interviewed attested to Clearspring’s mindshare in the market.

In an interesting twist, Clearspring and Webs.com are bedfellows. The two companies share a common venture backer, Novak Biddle, and Clearspring offers widgets for Webs.com’s millions of websites, Clearspring CEO Hooman Radfar saidin an interview.

However, one executive familiar with the situation notes that the relationship is growing uncomfortable as the companies deal with overlap in services.

There are other, smaller players that are trying to do what Clearspring does, including Musestorm for example (see our coverage).

Webs.com (formerly Freewebs)

Webs.com’s sales efforts are being led by Chris Cunningham, a regular on the Madison social circuit, who’s become a go-to widget evangelist and educator for ad agencies. The company is trying to monetize the millions of pages people have created with Freewebs service, which lets people create their own web pages. The company wans to make sure ads are relevant for its users, and so wants to match them according to each site’s subject matter.

Webs.com builds and distributes widgets, but relies on companies like Clearspring and YourMinis to provide the tracking analytics for how widgets perform. It wants to distribute widgets through its new game network.

According to a source, the company has a quarter-million dollar deal on the table to develop a Facebook app for a client. Webs.com already includes P&G, Ford, Universal Pictures, Sony and AT&T in their roster of ad clients.

YourMinis

YourMinis, a service launched by Mark Cuban-funded Goowy, lacks the sales presence of Clearspring or Webs.com but is another notable widget contender. Clients from CBS (multiple deals in place) to MTV, AOL, Redbull and Real Networks use YourMinis to build, syndicate and track brand-content widgets. Similar to Clearspring, YourMinis syndicates its widgets to the top social networks, blog platforms and Facebook apps, but also offers desktop extensions to Adobe AIR and Mac Leopard.

Developers whose widgets get under 50,000 views a month use YourMini’s services for free, while clients above that threshold pay a widget development fee and a monthly fee for syndication, hosting and analytics.

The company is experimenting with widget monetization, including looking at skinning widgets and inserting unobtrusive text links, CEO Alex Bard said.

Slide.com

Slide has enjoyed its position as the largest widget distribution service online, with three of the top ten Facebook applications (apparently ceding the #1 Facebook app spot to RockYou’s SuperWall last week). Since the company’s user base is built upon consumer-powered widgets like photo slideshows, its approach to monetization has been markedly different. In August, Slide started allowing users to incorporate branded images into their widgets, with Paramount Pictures, AT&T Wireless, Activision and the Discovery Channel as early ad partners (VB coverage here).

Slide is emphatically not in the business of making and distributing branded widgets. It is more focused on carefully monetizing their existing ones. Within Facebook, Slide is now experimenting with skinning canvas pages (pages where users interact with Apps) and it recently ran a campaign with Comedy Central, allowing users to skin their slideshows with a promotion for the Sarah Silverman show. Nam notes that an impressive 5 percent of users clicked further to watch a video promo of the show from within their slideshow. Unlike RockYou’s ad network, Slide appears to have no plans to leverage its Facebook presence for pay-for-play for other widgets.

RockYou

Before Facebook Apps, RockYou was focused on doing things like adding features like glitter text to its Myspace slideshow widget. As of last week, they now hold claim to the most popular app on Facebook (their SuperWall has surpassed Slide.com’s FunWall) and they’re reaching some 40 million Facebook users a month, by Quantcast’s measure.

They launched an ad network shortly after the Facebook Apps launch (VB coverage here) designed to leverage their presence on Facebook to promote other apps. They started by offering cross-installs and now offer banner-style advertising on their canvas pages.

RockYou’s opportunity for real advertising dollars has been a bit unclear. Goowy CEO Alex Bard notes: “If you think about the majority of what RockYou is doing, let’s call it widget advertising revenue, it has come from promoting other applications. It hasn’t been in true ads, right? I’ve got an application, I want to distribute it as quickly as possible. More like a widget distribution network.”

Indeed, RockYou VP of Business Development Ro Choy notes that half of the top 50 apps on Facebook are paying clients in RockYou’s ad network. He also points to deals with Expedia, Paramount, Sony Pictures and CBS News to explain their foray into traditional ad dollars. Paramount didn’t want to take the leap into developing a full Facebook App, so instead they developed a quiz for the upcoming Sweeny Todd theatrical release. It’s integrated into the existing Likeness Quiz App, is seeing some 15-30K completed quizzes a day, and is getting virally extended through Facebook Feed updates. This mass reach on Facebook and readiness to leverage it has garnered interest from major agencies like Ogilvy, Digitas and 360i. Average RockYou deal size? $30-70,000, par for the widget course, the company says.

RockYou works with partners to build applications too, including with ContextOptional, Trignos and RealBranding. RockYou handles distribution. Clearspring provides their tracking analytics.

1) LGC Wireless to be acquired by telecom components company
2) Rumors abound that News Corp. is buying RockYou for hundreds of millions of dollars
3) Myspace + Skype: newly-joined parts of the “Web 2.0 address book”
4) Apple finally decides to return developers’ love
5) Treemo, another mobile and online content sharing service, raises 2.5 million
6) LiveScribe, a near-magical pen for taking written and audio notes at the same time, raises $22 million

LGC Wireless to be acquired by telecom components company — LGC Wireless, which sells technology that improves spotty wireless coverage in garages or in thick-walled buildings, will announce the purchase by the end of the month, we’re told by sources. LGC’s offering always made a lot of sense, because coverage from the main carriers like Sprint, Verizon and others have been poor in many shielded areas. Problem is, the carriers balked at paying for the company’s services, seeing it as a needless expense: Most consumers seem to simply sigh and put up with crappy service. LGC kept plugging away though, and nine years and $93 million in venture backing later, it is finally getting bought by a large, unnamed telecom components company.

Rumors abound that News Corp. is buying RockYou for hundreds of millions of dollars – Last night, Valleywag posted an anonymous tip that Rupert Murdoch’s News Corp. will buy top widget-maker RockYou for the bubbly purchase price of $800 million — considering the company is still developing its revenue model. Today, an apparently different anonymous tipster told Facebook-focused blog AllFacebook a similar rumor but with a lower price: A mere “$300 and $500 million, with earnouts that could push the $600 to $650 million range.” We asked RockYou and the company flatly denied the rumors, saying only that the tipsters must “have us confused with a different company.” Murdoch will be presenting at the Web 2.0 conference in San Francisco later today. We’ll see what he has to say about any possible acquisitions, as well as any news about the rumored Myspace developer platform.

Myspace + Skype: newly-joined parts of the “Web 2.0 address book” – The social network subsidiary of News Corp. and the internet calling subsidiary of eBay will introduce a feature in November to let Myspace users make Skype calls through Myspace’s instant-messaging feature.

This pairing of social information and a popular communications service is the tip of the proverbial iceberg, according to Tim O’Reilly. He thinks that social networks will grow into a “social network operating system” that combines social information about you and your friends together with all of your contact information from across email, phone and IM.

This, remember, is also the original vision behind Facebook’s developer platform — the thousands of toy-like widgets on Facebook right now are just another small chunk of the iceberg’s tip.

Apple finally decides to return developers’ love — Since the iPhone release earlier this year, developers have hacked, cracked and otherwise abused the phone’s software platform in every way imaginable, despite repeated cautions from Apple that the phone’s firmware shouldn’t be tampered with. In many cases, the result of installing outside applications has been an unusable iPhone.

The company has finally decided to respond to strident pleas and threats from legions of unhappy developers by releasing a software developer’s kit (SDK) next February. The SDK, which will give developers easier access and more information to create new applications, should encourage innovation and even some startups based on the iPhone platform.

Now, to connect your social information on Facebook with your contact information in your iPhone.

Treemo, another mobile and online content sharing service, raises 2.5 million – PaidContent has more on the Seattle company.

LiveScribe, a near-magical pen for taking both written and audio notes at the same time, raises $22 million – The funding was led by VantagePoint Venture Partners, reports PEHub. Our previous coverage of the company is here; check out the video, below, to see more.

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.

Facebook, the booming social network company, is quietly creating a technology that would let advertisers target Facebook users based on the “massive amounts of information people reveal” about themselves, according to a story in today’s WSJ.

The new ad plan, reportedly being led by Matt Cohler (pictured top), vice president of strategy and business operations, and Chamath Palihapitiya (pictured below), vice president of product marketing and operations, may produce some serious concerns among some of Facebook’s partners.

Advertisers placing ads on your profile page will have access not only to your age, gender and location, as they do now, but also on details such as favorite activities and preferred music, according to the piece. They wouldn’t have access to your name however — and thereby have no way to target you as as an individual. Rather, Facebook would let advertisers target groups with similar characteristics.

But the biggest bombshell of the piece is this line: “In addition, the ads would show up on Facebook pages that feature services provided by other companies, one person says.” If true, this suggests Facebook wants to advertise on pages controlled by third-party developers on Facebook’s “platform.” This could be a slap in the face to those parties because Facebook had previously said it would let them make money by running their own advertisements. However, the sourcing and wording of the article on this matter is vague. It’s quite possible that Facebook may let third-parties access the technology, and agree to some sort of revenue share, letting all parties win. It’s all speculation at this point.

A Facebook spokesperson declined to comment for the article. Worth noting is that numerous companies have launched their own ad networks to run on Facebook’s third-party applications (these companies include Lookery, RockYou and VideoEgg). Microsoft, which has a large deal with Facebook to run its own ads, may have its own concerns about the program. The advertising rates advertisers are getting on Facebook is being highly debated. Some reports suggest rates are as high as $10 CPM in some cases. However, a source told us recently that Microsoft is losing money on every ad it serves on Facebook. We ran this by Facebook two weeks ago, but a spokesperson declined to comment on rates, saying only that the relationship with Microsoft was strong. Microsoft recently extended its partnership with Facebook, suggesting things can’t be too bad, or even that Microsoft itself may be in on the ad targeting plan being developed. Again, we don’t know.

RockYou, one of the world’s two most popular online photo and video widget makers, is introducing an ad network that will allow advertisers exploit RockYou’s reach across Facebook.

RockYou, like other large Web sites offering photo and video sharing, is looking aggressively to make money — and lucrative advertising can be difficult to come by. It is dependent on users who post personal and sometimes provocative material, many advertisers are willing to pay a few cents, if that.

Recently, its applications have become popular on Facebook. So one way to exploit this is to make money from other applications who have money to spend to promote themselves — a sort of Trojan Horse ad distribution model that has sneaked inside the walls of Facebook.

It’s just the latest in a series of moves by sites to attack Facebook’s 32 million-user platform to make money, with ad-network Lookery being a recent example of the same.

Under RockYou’s model, a large company that wants to launch an application to grow its brand presence on Facebook can pay RockYou to advertise on inventory RockYou makes available on applications it serves to users.

In the following example, when a user adds RockYou’s Super Wall application to their Facebook profile, they’ll also be asked if they want to add another application from My Greeting Cards. If you follow the link, you’ll be led to install My Greeting Cards.

The application installation page has been bringing the company a conversion rate of $20 per 1000 user impressions, or CPMs, according chief executive Lance Tokuda. That’s a extremely high, compared to what RockYou and other companies gets for their regular ads — in part because it gets ads straight in front of users who are in a active, decision-making phase.

RockYou has eight applications right now (with two more in the works) and claims to have at least one of its apps installed by a third of Facebook users, including Horoscopes, X Me and Super Wall.

Tokuda has been publicly highlighting the company’s ability to cross-sell RockYou’s applications for weeks. The message is working: The company is set to announce Monday that a top brand will use RockYou to launch its own application.

Only around five percent of the 1500 application currently on Facebook are “viral,” Tokuda tells us.

Graph and table courtesy of Appaholic.

Slide, Rockyou and HotorNot, three companies with the largest number of users on Facebook, are showing continued traffic growth on their own sites.

The finding, reported by Quantcast, a service that tracks traffic trends for Web sites, suggests that sites failing to embrace Facebook may be missing out on potential growth.

For some, this is also encouraging evidence that Facebook’s platform, launched in May, isn’t necessarily weening users entirely off their own Web sites. While Facebook allows third-party sites to advertise on their applications on Facebook, many sites prefer to maintain control over their users’ experience, and are hesitant to trust Facebook’s promise that it will remain hands-off. Despite the pledge by Facebook’s executives that sites are free to make money on their apps within Facebook, its terms of service says Facebook can change its policy at any time.

Slide, Rockyou and HotorNot have their own Web sites, and have also launched multiple Facebook applications. Some boast millions of users, foremost among them Slide’s Top Friends, which is the most popular Facebook application, nearing ten million users on Facebook. Top Friends lets you display your favorite Facebook friends in a box on your Facebook profile.

These graphs show the rate of growth that each company experienced to its .com site since . We’ve been hearing the same thing from developers of other successful Facebook applications who also have freestanding sites. Example: a Facebook application for anonymous gossip, Socialmoth has been driving traffic to its previously launched Socialmoth.com.

However, Slide also tells us that they’ve been seeing double-digit growth to Slide.com for months — that site whent from 117 million unique viewers in April to 129 million in May; Facebook’s platform didn’t launch until late May. Also, HotorNot.com has been undergoing some major changes over the past couple of months.

Each of these companies make money by running ads on their freestanding sites. They are also already experimenting with new ways to monetize both in and out of Facebook.

RockYou, for example, has been running ads in Facebook, within its casual gaming application “Games.” Slide, meanwhile is working on big plans to use the data it collects about what its users like in order to develop better tools for predicting other things they will like.

Then again, some sites don’t seem to care. iLike is another company with both leading Facebook apps and a quality, free-standing site. Its chief executive, Ali Partovi, says he doesn’t seek to drive traffic to iLike.com from Facebook. That’s because ads in Facebook may in fact be more targeted and thus more lucrative. Facebook pages include basic personal information on people, such as age, location, gender. To this end, iLike has made changes to its free-standing site that it knows will slow growth in order to boost growth on Facebook.

This data also justifies these companies’ land-grab approach to Facebook. Each has been launching as many apps as possible, cross-selling their users internally between their own applications to drive up overall growth, and buying other applications or hiring those applications’ developers into their companies.

It also may add more fuel to the fire driving many developers to build applications within Facebook. (For a more heart-on-sleeve explanation of how it makes developers feel, see this post.)

So what’s happening on other sites that these companies are pulling in users from, such as Myspace? RockYou’s traffic throughout all other social networks has been holding steady “in comparison to Facebook where it has been exploding,” company chief executive Lance Tokuda told us.

Where does this leave Facebook? Are these companies driving additional traffic to Facebook through their sites and their apps? Facebook tells us this is may be one of many factors. It is now at 32 million active users, and still doubling every six months — it attributes its recent growth not only to the platform launch, but becoming more of a hit with international audiences (London recently overtook Toronto as the city with the most Facebook users). It has also been introducing ways to more easily import contacts from other sites. For example, its AOL contact list importer, which was introduced only earlier this month.

“The viral loop of people inviting each other to most social networks revolves around a user posting a widget to their page and having friends see their page.

The viral loops for Facebook (there are multiple) revolve around the news feed, the mini-feed and the invite request. Not around people coming to your page and interacting with it”

That’s Lance Tokuda, chief executive of RockYou, telling us in the interview (below) about one of the reasons why Facebook Platform is such a big deal for his company. RockYou provides widgets to social networks and other sites to help people personalize their online spaces. (Our most recent coverage here.)

Here’s a quick reminder about RockYou’s top applications on Facebook to date. The chart above shows the progress of three of them until yesterday (the curves are still climbing):

Horoscope (1,649,621 users)
Add this app to your web page and and get horoscope updates every other day (covering any of the zodiac signs).

X Me (1,207,575 users)
A new take on Facebook’s popular "poke" feature, the app allows for more action-based communication, for example "hug her, slap him, tickle them!"

Slideshows (649,993 users)
Turns Facebook photo albums into animated slideshows, including the option to embed a photo strip into your profile.

Games (60,976 users, launched Friday night)
Play a variety of popular online game within Facebook. There’s even a revenue stream in place: games runs MochiAds at the beginning.

And here’s a Q&A VentureBeat had with co-founders Lance Tokuda (left) and Jia Shen (right):
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VentureBeat: First of all, I’ve seen that RockYou has three of the most popular apps on Facebook. Why is this?

Lance Tokuda: We’ve devoted significant energy to studying the Facebook demographic and running users studies on what is popular. We didn’t just port our Myspace features over to Facebook. We reinvented them for the new platform. That’s why we believe, for example, our slideshow is over eight times more popular than Slide’s with Facebook users. [Editor’s note: Slide has a separate application, Best Friends that has since become one of the overall most popular applications since this interview was conducted, currently with almost 2,989,431. That is a different story, which we’ll get to another day.]

Jia Shen (co-founder and chief technology officer): We really spent a lot of time, dedicating the entire company to making a very engaging initial product offering — [but] there’s no doubt that Horoscope got much bigger than we expected. There were a lot of challenges due to the fact that Facebook didn’t allow flash to play.

LT: Specifically, we interviewed Facebook users to see what their pattern of usage was. One thing we discovered is that the viral flow for Facebook’s platform is very different from the viral flow in other social networks. The viral loop in most social networks revolves around a user posting a widget to their page and having friends see their page. The viral loops for Facebook (there are multiple) revolve around the news feed, the mini-feed and the invite request. Not around people coming to your page and interacting with it. (There is a possible loop there but it is weaker.) X Me is an example of a viral loop driven by the mini-feed and the news feed. It has almost no presence within a person’s profile page.

[Editor’s note: A user adds a new app to their own profile, which generates a note in their mini-feed about doing so, which in turns gets rebroadcast to all their friends via the news feed. The more friends add the app, the more likely other friends will read about it in their own news feeds.]

VB: RockYou has previously relied heavily on Flash. For example, if a Myspace user goes onto a profile page with a RockYou slideshow, the slideshow will be triggered to begin playing. Facebook hasn’t supported auto-play. How has this affected you?

LT: The lack of auto-play with Flash almost kills the viral loop around friends visiting your profile. We’ve received a number of requests for this feature and we’re still hoping that Facebook will find an auto-play solution at some point. They are considering an opt-in solution. Without opt-in, I’m sure they would meet strong resistance from their loyal users. With opt-in, I think the experience might be positive by adding more engagement to their site.

VB: Is that what you’re advocating to them?

LT: They’ve mentioned to us it as a possible solution. In the end, it is [Facebook CEO Mark Zuckerberg]’s call and it’s his responsibility to create the platform he envisions for his users. Even without in-page Flash, Facebook is revolutionary in its virality.

VB: So what is it about Horoscope that made it so popular, looking back?

LT: We knew that the Horoscope would be popular due to the demographic and its growth on other networks. But Horoscope really took full advantage of the viral loop around the mini-feeds. We had no idea that the loop would allow for such rapid user acquisition.

VB: Have your other applications relied on news feed more? Can you compare the importance of each for the applications you’ve built?

LT: All apps are using the mini-feed and all the top growing apps are also using the invite request so it’s a combination of viral loops that is triggering the explosive growth of apps such as iLike and Flixster.

VB: Now that you’re getting all of these users, how are you going to make money from your apps? How will they evolve alongside the existing features on RockYou.com?

LT: We have different monetization strategies around different apps. Nothing we’d like to disclose right now. As for features evolving, our user studies show that some of [RockYou.com's features] will convert well over to Facebook and others will require major investment which we are undertaking. Facebook created an open environment for monetization which we greatly appreciate. I’m sure sites will be testing multiple different models.

VB: How much of your company is still focused on Facebook vs. your other offerings?

LT: We’re investing a large portion of our resources, especially in this early stage when seeding is critical and the viral channels have not been burned out

VB: How do you see the viral channels burning out?

LT: With every viral channel: Email, Myspace profiles, Myspace bulletings, Facebook requests, Facebook mini-feed events, etc… the response rate will always be highest when the channel is brand new. As more and more sites use the channel, the user response rates will decrease over time.

VB: Do you see a tapering off yet on Facebook? What is the state of this effect on Myspace right now?

LT: Not yet but the platform was launched less than two weeks ago. On Myspace, the viral loop around the Myspace bulletin for example is much weaker. It was most viral in the first 3 months. One advantage that Facebook has around the feeds is that they have an algorithm they constantly tune which tries to optimize the ‘interestingness’ of the events in the news feed. If they do a great job of tuning the algorithm, it may be possible to keep the viral cycle alive indefinitely by only posting truly interesting events worthy of action.

VB: Do you see Myspace doing anything like this? Do you see Myspace introducing any kind of feed or "platform"?

LT: I haven’t seen Myspace heading in this direction. They’ve been open to other sites and they’ve looked for acquisitions of strategic assets (e.g. Photobucket and Flektor).

VB: Do you see a flow of users from Myspace to Facebook? Is RockYou part of that flow, at all? Do people start on Myspace, then go to RockYou, then go to Facebook? Or simply, do you see RockYou driving traffic to Facebook at this point? do you expect it to more?

LT: I’ll let the Alexa and Comscore numbers speak for themselves. We don’t track that particular flow but I can tell you that on average, our users have at least two online profiles in different networks. We see RockYou as facilitating the personalization of your profiles, wherever they may be. It is up to the user to decide where they want to go.

My belief is that multiple companies will invest significant efforts to leverage the platform [that Facebook has] created. Ultimately, that will translate to a better experience for Facebook users that could not be achieved by Facebook alone. The fact that they are open to people monetizing makes Facebook a viable platform for growing a business. It’s brilliant.

VB: How do you see Facebook handling potential copyright issues, especially concerning video and audio?

LT: That’s a good question for Facebook. I’ve already seen some audio applications that are both popular and appear to have copyright issues. We’ve just signed with Fliptrack, Snocap, Nettwerk Records, and Pump Audio to provide legal music content to our users on RockYou.com.

We’ve got music on RockYou.com and our slideshows can be embedded in Facebook by our users (with legal audio).

VB: Any new apps on the way, or changes to existing ones?

LT: We just launched Games on Friday night and have over 40K users in the first two days. Facebook has the only platform where acquiring 40K users in two days is our expectation.

This space is so viral right now, we’ll let you know as soon as we launch more.

(updated) Here’s the latest action:

Google’s Street View continued — More details from BoingBoing on the scary little 11-sided camera that Google and its partner are using for street-level photography shots — exposing peoples’ living rooms — including tabby cats — sunbathers in their bikinis, and some poor guy caught picking his nose.

Yahoo provides open access to its “Panama” search marketing APIs — Yahoo launches its “Commercial API,” so advertisers, developers and commercial partners will be able to build new applications and tools upon Yahoo’s search marketing technologies. Details here.

Agloco, the online pyramid scheme, launches Viewbar — We’ve written quite a bit about this company, which wants to let you make money, in the form of stock, by downloading its viewbar and surfing the Web with it. Until now, it hadn’t actually let you download the Viewbar. It has been so popular this morning we haven’t been able to get through despite multiple tries. Basically, the more you surf the Web, the more points you get, and the more stock you’ll get in Agloco. It is a pyramid because you also get more points the more your recruited friends use it, and their friends use it, and so on. Here’s our coverage of the Viewbar.

Cadence Design Systems in play — The San Jose, Calif. maker of software used to design computer chips has been in talks with buyout firms Kohlberg Kravis Roberts and the Blackstone Group, according to the NYT.

Glam strikes advertising deal with Google – Google will be the exclusive provider of search contextual ads for Glam Media, the network of online sites about woman’s fashion and lifestyle, Glam chief executive Samir Arora told VentureBeat last night. (Previous coverage of the fast-growing Glam here.)

SpaceTime3D offers 3D searching of the Web — A few companies have experimented with 3D browsing, and this is the latest effort. However, according to a review by the Mercury News’ Dean Takahashi, even this latest effort, eight years in the making, is not ready for prime time. It takes up to 30 seconds to load the feature-rich pages before you can continue scrolling, somewhat different from the company’s pitch when you arrive at its Web site: “Search at the speed of thought.” The start-up is based in New York City, and will be seeking venture capital soon, according to spokeswoman Amy Grenek.

Tesla Motors wins $561,000 – The state has awarded it money to help pay for charging stations for the electric car.

Cap and trade — California’s Arnold Schwarzenegger has started pushing the cap-and-trade program for pollution credits. The Merc has the story. It also has a piece looking at efforts by Silicon Valley leaders pushing solar power.

RockYou overtakes iLike as most popular on Facebook — On Friday, online photo widget company RockYou’s three applications — X Me, Horoscopes and Slideshows — dominated the most “recently popular” list of applications being downloaded on Facebook’s new platform. That came as RockYou paid for advertising on Facebook’s site (update: RockYou’s Lance Takuda clarifies that none of the growth came from the ads, because the ad erroneously pointed to a test version of an application not in the directory). Slide, meanwhile, promised Facebook users free beers if they added its application. Overall, though RockYou’s three main applications on Facebook now total more downloads (about 1.6 million) than that of any other company, including iLike.

Rout on Chinese market — The China stock market has fallen about 15 percent below peak over the past few days, after new tax reform was introduced.

Trivop, a video guide to hotels — Now, this is one of those obvious things. Finding decent hotel rooms is one of the most painful experiences of booking a vacation while on a budget. There’s also TVtrip, with more details here. [Update: Trivop said on June 18, 2007 it had raised 600,000 euros, from Mörten Lund, Steve and Jean-Emile Rosenblum, Oliver Jung and Lukäsz Gadowski.]

Acquisition of Feedburner confirmed — We reported this earlier. However, the official announcement is here. Mercury News story here.

Almost half of all companies going IPO are losing money — Of 84 companies having initial public offerings this year, more than 46 percent of the companies were unprofitable at the time of their listing, according to reports citing Sageworks data. That is the biggest percentage since 2000, when 71 percent were unprofitable. In part, this is because of life science companies going public, and life sciences companies tend to lose money. Jazz, for example, is the most recently, suffering from negative publicity around its drugs, as our own David Hamilton elaborated on last week.

Updated

When we reported that photo widget site Slide said it was the biggest independent widget maker on the web, with 150 million daily slide-show views, someone anonymously commented and said that RockYou’s numbers were better.

Either way, some bad news for both companies came out earlier today.