VentureBeat

Wal-Mart’s digital music download store is, quite-frankly, awful. That could soon change however with a shift in policy.

Wal-Mart is ditching the DRM it had been using to protect songs sold though its online store and will instead focus on DRM-free music, Wired reports. Because it had been a Windows-based DRM, no songs sold through the store worked on the most popular digital music player, Apple’s iPod, and its music suite software, iTunes. Not only that, according to Wal-Mart’s own site, unless you are using a Windows-based PC with a current operating system and Internet Explorer, you can’t even access the site.

When you are struggling to keep up with the likes of iTunes, AmazonMP3 and soon, MySpace Music (our coverage), making a restrictive site is probably not the best idea. No doubt, that is the reason for the change.

A large downside of this shift to DRM-free music is that Wal-Mart will lose the support of two major record labels, Sony/BMG and Warner Brothers. Wired believes those labels will be back shortly, but correctly wonders why Wal-Mart wouldn’t just wait until they had a deal in place and make a major announcement like MySpace Music did recently.

Wal-Mart could soon be another legitimate player in the digital music war we spoke of last week.

[photo: flickr/code poet] 

The trend has been clear for a while: Digital music is the future of the industry. Now we have the data to prove it. Apple’s iTunes music store has surpassed Wal-Mart to become the number 1 retailer of music in the United States.

Okay, so a digital store is the top seller of music in the United States, now what? War.

As was reported yesterday, MySpace is entering the fray with MySpace Music (our coverage). Amazon, already a strong competitor in traditional music sales, also has a solid digital offering with AmazonMP3. These three behemoths should shape the landscape for years to come.

Apple continues to dominate the space currently, but it might have a few chinks in its armor. Of the four major music labels, only EMI is currently allowing iTunes to sell DRM-free versions of its catalog. Steve Jobs himself has said this will be the future of the industry, yet iTunes is failing to deliver on this promise (our coverage). AmazonMP3 has all of the major labels providing DRM-free tracks, while MySpace Music already has three of the four on board (interestingly, with only EMI holding out).

This lack of DRM-free music is hardly Apple’s fault — it’s clear the record labels want a legitimate contender to iTunes to lessen Jobs’ stranglehold on their industry. DRM-free music is the leverage they have at the moment, and they are using it.

However, the unwillingness to provide DRM-free tracks while still offering up the protected versions on iTunes is also assuring that Apple will keep selling iPods. The truth is that most people still do not care about DRM-free or even necessarily understand what it means. They want a fast and simple way to buy music online — and no one does that better than Apple. By purchasing all of those protected tracks on iTunes, they must also keep buying iPods to play them.

Buying iPods, in turn, will keep them using iTunes. Round and round we go. This is a cycle the other services will need to negate to compete. While Amazon is playing the DRM-free card, MySpace Music can hope its huge social network can make for a more compelling musical experience than iTunes.

There has been talk that Apple could switch things up and move to a subscription-based version of iTunes (our coverage). While it may seem odd that Apple would switch from a strategy that has led to its dominance (selling individual protected tracks), Apple may also see the writing on the wall with these two strong competitors coming for them.

So what about the other big names in music sales?

Wal-Mart dominated the music purchasing landscape for a long time thanks to its brick and mortar stores. The company has a digital download service, but it is foolishly restricted to users who are running Windows XP, 2000 or Vista, use Internet Explorer as their browser and Windows Media Player as their digital music player. Those kind of limitations are not going to win over many iTunes users.

Another retail power, Best Buy, also has a digital music store, but it is laughably complex. First of all they have a system where you have to purchase digital download cards (yes, actual physical cards) or buy a group of songs online. They also have a streaming service via a partnership with Rhapsody , but once again, access is very restrictive to select operating systems and browsers.

This looks to be a three horse race for now between iTunes, AmazonMP3 and MySpace Music — at least until Facebook gets involved.

Here’s the latest action:
1) US internet ad market is big, getting bigger
2) San Francisco, home of the carbon tax?
3) Google Maps adds user ratings to local search
4) Wal-Mart launches cleantech accelerator
5) Visits to Facebook appear to drop
6) Proofpoint raises $28 million for email security
7) Piczo suffers from walled garden approach
8) Covad could save Silicon Valley municipal wireless
9) Fundability funded for entrepreneur/investor network
10) Google joins group to build transpacific optic cable

US internet ad market is big, getting bigger — Two separate analyst groups estimate the US online ad market at $21.1 billion and $22.5 billion, respectively. Either number works out to well over 20 percent growth from last year. The global market is estimated at $45 billion. TechCrunch has a slightly longer summary.

San Francisco, home of the carbon tax? — Mayor Gavin Newsom said he’d like to set up a plan to tax the carbon emissions of businesses in San Francisco this morning, during an early morning keynote at the Cleantech Forum. Confusingly, this appears to be a ballot issue for the city, separate from an emissions tax already being considered for the entire Bay Area. Newsom’s plan also involves congestion fees for inner-city driving, a measure typically only considered by much larger cities like London and New York. For a rundown of some possible pitfalls, Earth2Tech has a good brief.

Google to become a Yelp competitor? — If not Yelp, fill in the name of your favorite local listing service. Google Maps now has user ratings and “neighborhood refinements”, a pair of user-generated stats that could help you find the best local businesses by pushing them up in Google’s search results.

Wal-Mart launches cleantech accelerator — Also at the Cleantech Forum, Wal-Mart announced the cleantech accelerator, an open call for applications from green and energy-efficient technologies that could benefit the retail giant’s business. No word on whether proof of residence in China is required to apply.

Visits to Facebook appear to drop — Traffic to Facebook has dropped about 27 percent from its peak, according to the latest Hitwise stats. However, the drop can probably be explained away by a post-holiday seasonal trend. The average time users spend on the site has continued to rise.

Proofpoint raises $28 million for email security — About $58 million had already gone into Proofpoint prior to this round, so this latest investment pushes the Cupertino firm into the funding stratosphere, at least as email companies go. We’ll have more details tomorrow.

Piczo suffers from walled garden approach — Teen-oriented social network Piczo appears to have taken a serious traffic hit in the United Kingdom, perhaps due to its more restrictive joining policies. The network aims to create a safe place for 13 to 16 year olds, but being closed isn’t helping it against its more popular competitors, including Bebo, MySpace and Facebook (which opened up last year). Piczo has laid off about a quarter of its staff, according to Valleywag.

Covad could save Silicon Valley municipal wireless — By focusing in on business use instead of trying to address the much broader consumer base in the region, high-speed wireless firm Covad might manage to revive the plan for municipal WiFi in Silicon Valley, which appeared to die last year. The network would serve group including local fire and police, which would in turn help pull in more grant money. More from InfoWorld. Another promising venture in the municipal wireless space is Meraki, which plans to roll out free WiFi in San Francisco, as we recently reported.

Fundability takes $500,000 second funding — Fundability, a connection platfom for entrepreneurs and investors, appears to have received a fairly unusual second round of funding, at one-sixth the size of its $3 million first round in January. The company also launched its online marketplace for the public, claiming that several startups already received funding on the platform during the private beta. We’ll see how it fares now that the rabble can come in. The investment amount was reported by VentureWire (subscription required).

Google joins consortium to build transpacific fiber-optic cable – The move is the first time an Internet company has invested in an ocean-spanning cable. Story here.

1. Amazon S3, VentureBeat go down
2. Montalvo Systems vs. Intel, with chip for handheld devices
3. Fox Interactive to introduce “music Hulu for MySpace”
4. Yahoo’s board moving against Yang
5. Google searchers are wealthier, buy more online
6. Xobni hires Jeff Bonforte away from Yahoo, to be its new CEO
7. Stormfisher raises $350 million for biofuel project
8. Cable veteran Philip Balboni moving to online news site
9. Nielsen buys Audience Analytics
10. Air commuter conference coming up this spring
11. Report: Online Community Best Practices
12. Wal-Mart chooses Blu-Ray

Amazon S3, VentureBeat go down — Online data storage service S3 went down. Affected startups include SmugMug, 37Signals, Twitter and many others. Lots of coverage on Techmeme. Earlier today, VentureBeat was down because of separate hosting problems.

Montalvo Systems taking on Intel, focusing on a chip for handheld devices — It has designed a chip for smartphones, notebook computers and other portable devices, that should run software that works on Intel or AMD chips. The company’s plans have been outlined in some detail by Michael Kanellos at CNET (our previous coverage ).

Montalvo’s chips, however, will fundamentally differ from the latest Core or Opteron processors from Intel and AMD in that the cores on its chip won’t be symmetrical, i.e. identical to each other. Instead, Montalvo’s chips will sport a mix of high-performance cores and lower-performance cores on the same piece of silicon, similar to the Cell chip devised by IBM, Toshiba, and Sony, according to sources close to the company.

It has received more than $73 million venture and private equity firms including Bay Partners, NEA-IndoUS Ventures, U.S Venture Partners, Leapfrog Ventures, CMEA and Adams Street Partners.

Fox Interactive to introduce “music Hulu for MySpace”– The project, which is still being put together, intends to sign up all the major music labels as content providers — who would get equity. The music would be distributed on widgets and contained in a portal page, similar to video-sharing site Hulu, which Fox is a part of. The music on MySpace would be DRM-free and ad-supported. PaidContent has the scoop.

Yahoo’s board moving against Yang — Founder and chief executive Jerry Yang and a small group sympathetic members are trying to avoid a sale to Microsoft at all costs. But Yahoo Chairman Roy Bostock is leading an informal group of board members and billionaire Ron Burkle who think that Yang may be ignoring his fiduciary duty to maximize shareholder returns. The New York Post has more.

Google searchers are wealthier, buy more online — Hitwise numbers here. See chart for more.

Xobni hires Jeff Bonforte away from Yahoo, to be its new chief executive — Bonforte was previously a vice president who helped lead the growth of Yahoo Messenger. Company blog post here.

Stormfisher raises $350 million for biofuel project — It turns agriculture and food-industry byproducts into methane gas, which reduces the levels of waste in landfills. The investor is private equity firm DenHam Capital, which has already sunk many millions into biofuel projects.

Cable veteran Philip Balboni moving to online news site — He’s leaving New England Cable News to join online international news company Global News Enterprises LLC, which is slated to launch in April with more than 70 international correspondents. The new company has taken on around $8 million from angels. (Photo via Columbia University.)

Nielsen buys Audience Analytics – The web measurement company says the Provo, Utah-based startup will improve its ability to handle large quantities of audience measurement data

Air commuter conference coming up this spring — Tech commentator Esther Dyson and publisher Imaginova are teaming up to organize the fourth annual Flight School from July 4-6, an event that brings entrepreneurs together to talk about innovation in aviation and space travel. The focus is still on “air taxis” — basically, smaller planes making local flights on-request — but Flight School’s scope will be broader this year, Dyson told us. Since the conference began, air taxis have become a marketplace reality through companies like DayJet, and commercial space flight is becoming more and more practical too, Dyson said. She added: “When I was a kid, I took it from granted that I would go to the moon. Now it looks like I’m going to have to work pretty hard to get there.”

Report: Online Community Best Practices — Forrester analyst Jeremiah Owyang delivers the report (buy here). Its tagline is “Communities Are A Powerful Tool, As Long As You Put Members’ Needs First.”

Wal-Mart chooses Blu-Ray — More here. Meanwhile, Toshiba may be ready to give up on HD DVD.

PayPerPost is a Florida start-up that lets bloggers get paid for writing about products and other companies.

It has just got $3 million in funding from Silicon Valley venture firm Draper Fisher Jurveston and others.

People have said this is a controversial company, because regular readers can get duped if bloggers don’t disclose they are getting paid.

Others have said that the real intent of the service is to help the advertisers paying for the blog posts to boost search result rankings for their companies (the more bloggers writing about their company, the more incoming links the company is likely to get, and thus the higher it will go in results).

We talked with Josh Stein, venture capitalist with DFJ, who led the deal, and he’s steadfast in his belief that the company is doing a “good, valuable” service. He concedes it’s controversial: “Like many things, if you look at the most cynical interpretation of it, you could see how it could be a source for bad.”

But he said that some companies feel so much pressure to get more users — no matter how many users they may already have — that they’ll want to generate publicity for their new products. And they should have the right to pay someone to write about them. Bloggers, Stein said, have to decide what sort of disclosures they want to make with their readers about this, and whether it fits with their ethics. But the market should decide that, not PayPerPost. “The blogger knows better than we do what their social contract is with their reader base.”

The ethics question arose today in the Blogosphere, when it emerged that public relations firm was writing a fake blog on behalf of Wal-Mart (UDPATE: Although see comments below about dispute on this):

In case you missed the story, a blog ostensibly authored by a couple traveling across America in their RV and spending nights parked in WalMart parking lots turned out to be a fake blog, the brainchild of WalMart’s PR counselors at Edelman. While fake blogs (and other fake social media) are nothing new, it’s dismaying to see it emerge from Edelman, which has some of the smarter new-media people on its staff (Phil Gomes, Michael Wiley, Steve Rubel and more), and which touts itself as the PR firm that truly gets social media. This is the third time (as Todd Defren noted in his post) that Edelman has botched the whole social media thing on WalMart’s behalf…

DFJ’s Stein said PayPerPost is about to release some tools that give bloggers a variety of disclosure policies to put on their blogs if they use PayPerPost. These can be badges on their blog that say the blogger is paid for some posts, but doesn’t disclose which ones, or it can say the blogger discloses when any post is paid for, and so on.

PayPerPost launched three months ago, and Stein says the response has been “dramatic.” Even before the publicity emerged this month after DFJ invested, the company had made $100,000 in revenue. Every day, ten or fifteen new advertisers arrive at the site, looking for more bloggers to pay, he said.

Notably, what got Stein excited about PayPerPost, he said, is his recollection of his own scorn for search engine Overture, when it launched. That site was for paid results only, and he remembered thinking all the same thoughts that PayPerPost is getting criticized for: “I thought it was the sleaziest, dumbest idea I’d ever heard of.” Of course, Overture went on to become a popular company, when Google borrowed many of its aspects, and the model was refined. “I told myself, ‘I’m not going to make the same mistake again,’” he said.

Techcrunch first wrote about the company here.

Below is an example of a PayPerPost listing: