VentureBeat

RockYou, a company that started out two years ago making simple slideshow widgets for MySpace, and, more recently, applications for social networks including Facebook, is now invading Asia.

It has taken on strategic funding and sweet deals from big regional partners: $14 million from Japanese carrier Softbank, which is the largest shareholder in Yahoo Japan, and $3 million from the venture arm of Korean carrier SK Telecom.

Redwood city, Calif.-based RockYou could be setting itself up to make some serious money. The company has managed to reach more than 100 million monthly users across social networks, and has been experimenting with a range of advertising services. But its new partners are giving it access to users who have proven they’re happy to pay for virtual goods and mobile services.

SoftBank and RockYou are setting up a joint venture company that will develop widgets for computers and mobile devices in Asian markets, focusing on Japan, China, Korea and Russia. Softbank has notably invested $400 million in Chinese social network Xiaonei. Often referred to as China’s Facebook clone due to the two sites’ similar interfaces, Xiaonei introduced a developer platform for hosting third-party applications earlier this year, using a version of Facebook’s platform.

RockYou will fit in nicely with Xiaonei, as it is one of the largest developers of Facebook applications. In fact, Facebook redesigned its user profile page earlier this year, moving apps to a separate page — in part to try to kill RockYou’s SuperWall, a media-sharing app similar to Facebook’s wall feature. SuperWall is still doing fine. Note: Applications are basically widgets with additional features enabled by the hosting site, such as letting a Facebook user invite friends to try the app.

Meanwhile, Xiaonei has just introduced a virtual currency system for buying and selling virtual goods. Users buy the currency, called Xiaonei Dou, using real money, then pay to buy virtual goods within games built by third parties. Overall, virtual goods are a $1.2 billion business in China, Sequoia Capital’s Roelef Botha said earlier this summer — larger than the country’s advertising market. Virtual goods are in promising but early stages on Facebook and other sites popular outside of Asia.

The joint venture company will also build apps for Yahoo Japan, one of the country’s most popular sites; Yahoo Japan is slated to launch a version of Yahoo’s developer platform at some point. Softbank also has a business relationship with leading social network Mixi, a popular site that is planning to launch a developer platform later this year.

RockYou hasn’t focused on building mobile apps up to this point. But Softbank is carrying Apple’s iPhone, and has access to more than 700 million mobile users around Asia. Reaching these users will be another focus of the joint venture.

Meanwhile SK Telecom will help RockYou reach Korean users. SK Telecom owns Cyworld, a virtual world that gets around 17 million Koreans signing on a month. That site is still figuring out how to offer a developer platform. The U.S. version of Cyworld uses OpenSocial, a developer platform standard used by most Facebook rivals, that RockYou has build extensively for. An OpenSocial implementation on the Korean site wouldn’t be surprising.

These two investments are an extension of RockYou’s third round of $35 million from earlier this year, bringing the total amount of funding to $52 million. The company opaquely discussed this latest funding earlier this summer.

Virgin Mobile USA has agreed to acquire Helio mobile phone division from SK Telecom and Earthlink for an investment that totals $50 million.

The deal is part of a consolidation trend in mobile. Nokia this week agreed to buy Symbian, the mobile phone software maker, for $329 million. And Microsoft agreed yesterday to buy Portugal’s Mobicomp. Mobicomp is a mobile software company specializing in the storage and backup of data.

The deal ends a high-profile attempt by South Korea’s SK Telecom to break into the U.S. market with a uniquely designed series of cell phones. But SK Telecom will own about 17 percent of Virgin Mobile USA after the deal closes.

It also sheds light on the strategy being pursued by Virgin Mobile USA to get out of its own mess. The U.S. market has turned brutal, and Virgin’s stock has plunged. Back in April, we reported Virgin Mobile USA was considering mass layoffs, or possibly raising money from a private equity firm. This deal suggests the company may try to buy itself out of trouble.

Warren, N.J.-based Virgin Mobile USA will issue 13 million shares at $8.50 a share, or $39 million, in exchange for an 80 percent stock. It will also assume $10 million in debt and other considerations. Both Virgin Mobile USA and SK Telecom will inject $25 million each into the combined entity.

The two companies hope they can reach a bigger scale together. Virgin Mobile has 5.1 million subscribers in the U.S., but Business Week points out that they are not on long-term contracts. Earnings were down 75 percent to $4.8 million in the first quarter. The company expects to lose about 130,000 to 160,000 customers in the second quarter. Why? In a word, it’s the iPhone.

Helio brings the company some 170,000 customers who spend about $80 a month. The combined entity will be known as Virgin. Helio had interesting models when it hit the market, such as the Helio Ocean model that could flip out a phone-like number keypad in one direction and a text-messaging alphabet keyboard in another.

Talks about an acquisition were rumored for some time. SK Telecom actually denied in May that Virgin Mobile was in talks to buy Helio. The deal is expected to close in the third quarter.

This could be a replay of Sprint buying Nextel. And it raises a question as to whether the MVNO, or mobile virtual network operator, model which Helio pursued (and even Disney failed at) can succeed in the U.S. MVNOs lease their wireless spectrum from other carriers.

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Here’s the latest action:

New partnership brings Helio to Virgin Mobile — Virgin Mobile USA will acquire the U.S. arm of South korea-based SK Telecom, namely, a mobile operator called Helio, according to the Financial Times. Both mobile operators have been struggling to make money by piggybacking on the infrastructure of existing carriers. This announcement doesn’t offer any sense of how they might bounce back; it just seems loaded with more bad news, like the estimate that Virgin Mobile USA will lose up to 160,000 users in the second quarter of this year.

Starbucks will stop selling CDs — Starbucks is abandoning its plan to become an entertainment hub where customers can pick up a CD or iTunes gift card along with their lattes, reports Silicon Alley Insider. All in-store music offerings should be gone by September. Starbucks customers may not notice, since they weren’t buying many of those CDs anyway, but this is more bad news for the struggling music industry, which once saw Starbucks as an opportunity for growth.

Digg competitor Mixx adds community-building features – Mixx, another site that allows users to vote on media content, is launching a new feature called Mixx Communities. Users can now set up their own Mixx sites, allowing them to build a Mixx community around specific topics. Another competitor called Reddit already enabled user-created pages, and even went a step further last week by going open source.

Intel doesn’t want Vista either — Intel has decided that it won’t upgrade the computers of its 80,000 employees to the latest and arguably least popular version of the Microsoft operating system, according to The New York Times’ anonymous source. That looks pretty bad for Microsoft, since the software company and chip maker have had a famously close relationship; some observers dubbed the pair “Wintel.” On the other hand, it’s not that surprising, because it’s pretty darn hard to find anyone who wants Vista on their computer. (Aside from VentureBeat writer MG Siegler, that is.)

Social network Multiply lets you backup your videos and photos — With an application built on the Adobe AIR platform, Multiply users can automatically backup all the media in selected folders on their computers. The site charges $20 per year for unlimited storage. In some ways, the move makes sense, since there’s so much media hosted by social networks like Multiply anyway.

Craigslist to overtake eBay in 2009? — The online marketplace market (what a mouthful) is going to have a new leader within a year, predicts entrepreneur and blogger Andrew Chen. Spurred by a comment at the GigaOM’s just-finished Structure conference, he looked at traffic numbers from Compete and Quantcast. As eBay traffic falls and Craigslist traffic rises, the latter will overtake the former in 2009, Chen says.

Vint Cerf: Video downloads will be more popular than streaming — The current model of video sites like YouTube won’t last, says Google’s Vint Cerf, the computer scientist frequently described as “the father of the Internet.” In a (streaming) video at Beet.TV, Cerf argues that as web video’s popularity increases and its technology improves, most users will start downloading videos to their computer, rather than streaming them off a site.

updated
Helio, the mobile phone service provider, is getting ready to announce a new round of firings this week, a source close to the matter tells us. These layoffs are expected to include senior level officials within the company.

[Update: Spokeswoman Brooke Hammerling has responded, saying the rumors are "totally false."]

This rumor follows Earthlink founder Sky Dayton’s resignation as chief executive of Helio, at the end of last month, and continued evidence company is losing money and shows no sign of stopping the flow or red ink.

Earlier today Helio announced it was significantly lowering the price of its unlimited plan from $145 a month down to $99. While this action alone would seem to be in line with its South Korean parent SK Telecom’s plans to expand Helio’s customer base, when coupled with the job cuts, one can’t help but wonder if another Voce Wireless situation could be just around the corner.

Helio is a so-called MVNO, or a network that uses the infrastructure of other carriers to offer their services. MVNO’s have had a poor track record. Amp’d Mobile crashed last year into bankruptcy, and mobile networks from ESPN and Disney have also failed. Meanwhile, the premium MVNO Voce drastically slashed its prices in the months leading up to last Friday when the company’s service suddenly went out and now appears to have joined the MVNO graveyard.

Helio did, however, receive a $70 million injection from SK Telecom in November. With the investment, SK Telecom gained controlling rights in the company, versus Earthlink.

That $70 million was said to be part of a promised $100 million investment announced in July (see our coverage; scroll down) — another cash injection that became necessary after the company’s continued losses. The company had already soaked up $440 million, and said last year it expected a net loss of $330 million to $360 million, compared with a $192 million shortfall in 2006.

In September SK Telecom announced they would be willing to add another $100 million on top of it all, for both handset development and to expand its customer based worldwide.

How long can these cash injections continue?

We’ve separately heard that Helio may fare better than its erstwhile rivals due to its strategic relationship with SK Telecom — Helio can get cheaper handsets from SK Telecom than rivals could buy cheap handsets from non-strategic manufacturers.