VentureBeat

Updated

A host of Silicon Valley companies led by Google are ganging together to take on Facebook — the social networking company that is the toast of the town right now.

A group of Facebook’s cross-town rival, including Google, LinkedIn, Hi5, Friendster, Plaxo and Ning, are apparently responding, in an effort to see if they can stop Facebook from running away with the lead in social networking.

The OpenSocial project is introducing common standards to allow software developers to write programs for their various developer platforms. It centers around Google’s new project, called OpenSocial (URL to go live on Thursday, see press release below). The New York Times reported the news first. The project offers common APIs application developers can use to create applications “host” company sites that participate.

It’s the latest manifestation of a plan that can be traced back publicly to new Google hire and well-known software developer Brad Fitzpatrick’s detailed post in August. Then, he described how he hoped to develop ways of connecting users based on their social relationships between many web sites.

A set of common standards between social networks has long been proposed by some of Silicon Valley’s digerati, foremost among them Marc Canter, although the proposals have focused on letting users port their profile information from site to site. The OpenSocial effort appears to let the various sites maintain control over profiles, however, letting developers build applications that would fit into an area within the host site’s user profile page, but not necessarily port the profile itself — just like at Facebook.

Silicon Valley notables such as Joseph Smarr of Plaxo, Robert Scoble of Podtech and Michael Arrington of Techcrunch followed up together with Canter on Fitzpatrick’s post with a user’s “social web Bill of Rights”. The blog post described how users had the right to own and control their own data, including data about relationships with friends.

“The Internet is supposed to survive many threats,” Plaxo’s John McCrea tells us about OpenSocial. “What we’re watching is an immune reaction to the rise of walled gardens which threaten to Balkanize the web.

VentureBeat confirmed the news of OpenSocial this evening with Google. The company said other participants include Oracle, Viadeo, ING, Hyves, Tianji and Salesforce.com. Facebook is not a member, but was welcome to join the group, according to Joe Kraus, a Google product manager. Facebook’s spokeswoman Brandee Barker, when asked to respond, said “no comment.”

By sharing standards to develop applications, the sites will inevitably draw developer interest. Most developers we’ve talked with are stretched for time and resources, and they’ve flocked to Facebook because it was the one place that let them develop applications with clear rules and also the freedom to make money. By creating a second social network hub, Google and its allies could be a compelling home for developers. Had Google not done this, developers may have chosen to work with MySpace (expected to launch in a month or so), or not even bothered leaving Facebook.

One thing not yet addressed by OpenSocial is the money and advertising component. It’s fine to have common standards, but will those standards include the right to make money from applications, and to run advertising on the application pages, without interference from the hosting Web site? It appears to leave this for each host site to determine. We requested comment from Google on its own plans, but haven’t heard back on that [Update: A Google spokesperson said "we haven't ironed out any details yet," but was confident that OpenSocial's model "will create revenue opportunities for everyone."]

MySpace, Meebo and Bebo, all significant players with platforms, or planning platforms, are also were not listed as members of the group. Slide, a photo-sharing site not mentioned in Google’s materials, is believed to be participating, however. Flixster and RockYou were mentioned as participants, but are developers, not “hosts.”

Another big name that is absent from the list is Yahoo. While the real significance of the grouping is not yet known, for Yahoo to miss the boat on this wouldn’t be good. It has struggled enough over the past year.

See the press release below for available details, but the available APIs are 1) access to a user’s profile, 2) their friends, and 3) the ability to let their friends know that activities have taken place

Facebook provides developers with a markup language, for security reasons. However, OpenSocial does not have its own markup language, instead relying on normal javascript, html and Flash — all straightforward technologies that keep things simpler for developers than the Facebook platform.

Below is a draft press release from Google on the program:

MOUNTAIN VIEW, CA — November 1, 2007 – Google, Inc. (NASDAQ: GOOG) today announced the release of OpenSocial — a set of common APIs for building social applications across the web — for developers of social applications and websites that want to add social features. OpenSocial will unleash more powerful and pervasive social capabilities for the web, empowering developers to build far-reaching applications that users can enjoy regardless of the websites, web applications, or social networks they use. The release of OpenSocial marks the first time that multiple social networks have been made accessible under a common API to make development and distribution easier and more efficient for developers.

The proliferation of unique APIs across dozens of social websites is forcing developers to choose which ones to write applications for – and then spend their time writing separately for each. OpenSocial gives developers of social applications a single set of APIs to learn for their application to run on any OpenSocial-enabled website. By providing these simple, standards-based technologies, OpenSocial will speed innovation and bring more social features to more places across the web. Users win too: they get more interesting, engaging, or useful features faster.

“The web is fundamentally better when it’s social, and we’re only just starting to see what’s possible when you bring social information into different contexts on the web,” said XXXX. “There’s a lot of innovation that will be spurred simply by creating a standard way for developers to run social applications in more places. With the input and iteration of the community, we hope OpenSocial will become a standard set of technologies for making the web social.”

Learn Once, Reach Across the Web

One of the most important benefits of OpenSocial is the vast distribution network that developers will have for their applications. The sites that have already committed to supporting OpenSocial — Website Partner A, Website Partner B, Website Partner C, etc. –- represent an audience of well over 100 million users globally. Critical for time- and resource-strapped developers is being able to “learn once, write anywhere” — learn the OpenSocial APIs once and then build applications that work with any OpenSocial-enabled websites.

Several developers, including Gadget Partner Z, Gadget Partner Y, Gadget Partner X, etc., have already built applications that use the OpenSocial APIs. Starting today, a developer sandbox is available at http://sandbox.orkut.com so developers can go in and start testing the OpenSocial APIs. The goal is to have developers build applications in the sandbox so they can deploy on Orkut and ultimately other OpenSocial sites.

More Social In More Places

The existence of this single programming model also helps websites who are eager to satisfy their users’ interest in social features. More developers building social applications more easily translates directly into more features more quickly for websites.

“Orkut has tens of millions of passionate users who are constantly clamoring for new ways to have fun with their friends and express themselves through Orkut,” said Amar Gandhi, group product manager for Orkut, Google’s social networking service. “By using OpenSocial to open up Orkut as a platform for any developer, we can tap into the vast creativity of the community and make new features available to our users frequently.”

The common method that OpenSocial provides for hosting social applications means that websites can engage a much larger pool of third party developers than they could otherwise. They can direct resources that might have gone to maintaining a proprietary API and supporting its developer community to other projects.

Because OpenSocial removes the hassle from developing for individual websites, developers can unleash their creativity anywhere that catches their interest. This will translate into a wave of social features in contexts outside of the personal entertainment and games that are traditionally thought of as the social web.

Three APIs available now

The OpenSocial APIs give developers access to the data needed to build social applications: access to a user’s profile, their friends, and the ability to let their friends know that activities have taken place. OpenSocial resources for developers and websites are available now at code.google.com/apis/opensocial.

Developers will have access to:
- Three JavaScript and Gdata APIs to access social functions
- A live developer sandbox on Orkut at sandbox.orkut.com

Websites will have access to:
- A tool to help OpenSocial-enable their websites
- A support forum for communicating with Google and other websites

All of these resources and the live developer sandbox are available now.

Developers already at work

Dozens of developers have helped test early iterations of the OpenSocial APIs and Google is grateful for the extensive feedback they have provided.

[List of all gadget developers]

Links to these gadgets are available at http://code.google.com/apis/opensocial.

Eric Eldon contributed to this article.

Updated

Microsoft has snagged a deal to invest $240 million into popular social network Facebook, valuing the company at $15 billion — a 1.6 percent stake. Microsoft has also agreed to advertise on Facebook in international markets.

We listened in on a well-staged official press conference call that the two companies did this afternoon — you can read most of the same information in the press release. Here are some highlights: Microsoft needs the international ad agreement because Facebook says nearly 60 percent of its 50 million active users are based outside of the US. Facebook also claims to be gaining 200,000 new users per day, worldwide.

The two companies will work together on new forms of advertising, including data from Facebook — as we’ve mentioned below.

Among things this money will be spent on: Facebook expects to hire a lot more engineers, doubling the number of employees to over 700 next year.

The announcement today did not deal with any joint efforts concerning integrating Facebook data into Microsoft products, or other non-advertising plans the companies may have.

Any other investors in the round have not been disclosed.

Yesterday, reports also surfaced that a new Facebook ad product, apparently trademarked “SocialAds,” will be previewed November 6 to some of Facebook’s closest advertisers. Conde Nast, Nike, Apple, Sony, General Motors, Coke, CBS, Chase and Verizon have paid $300,000 each to be “Landmark Partners,” meaning they are the first advertisers to try SocialAds, according to these reports, none confirmed by Facebook. When asked for comment, a Facebook spokeswoman responded: “Facebook does not comment on speculation or rumor.”

The idea of the deal is to focus on “demand fulfillment” by taking advantage of Facebook users’ high engagement with each other, Facebook VP of product marketing and operations Chamath Palihapitiya was quoted telling FastCompany.

Facebook has a unique set of data about users that may be able to provide more relevant targeting, more often, possibly putting Facebook in competition with Google’s Adwords and AdSense programs.

Facebook’s emergence into a major Internet player has been compared to Google’s rocketship rise a few years ago. Google’s search and other offerings have made billions of dollars in profit by showing related ads next to web pages and users’ search results. Facebook, growing users 3 percent per week, seeks a similar profit engine. Will SocialAds be a the answer?

Seth Goldstein, CEO of social network ad network SocialMedia, said his data shows social context for advertising drives viral adoption similar to how social context drives viral adoption of Facebook app’s. Scott Rafer, CEO of a third party application Facebook ad network, Lookery, said that other emerging yet small third-party Facebook ad platforms such as fbExchange and SocialMedia are effective at generating referrals — moving users between applications — but haven’t been applied to straightforward traditional advertising. As for his own company, Lookery, it would like to develop an ad product that tries to use age, sex and location to target ads. In the future when that product is released, Rafer would like to avoid using personal and interest information — hobbies, quotes, movies, books, music, activites, etc. — to target ads because it is not useful determining users’ “intent,” meaning where they are most likely to transact, because it lacks timeliness. Note our accompanying story today about Facebook’s opening of its mobile platform.

With Microsoft winning the investment in Facebook, it beats out Google, which was reportedly also negotiating to make an investment int he company. After the Microsoft-Facebook announcement, the Google founders suggested Microsoft overpaid: “Some of our competitors might be willing to spend a lot of money to secure deals. We are not willing to participate in those types of transactions,” Google co-founder Sergey Brin said following a meeting with financial analysts. Chief executive Eric Schmidt didn’t refer directly to Microsoft, but said: “Overbidding [by rivals] is a constant since I’ve been in the company. It always upsets me.”

[Disclosure: Doug Sherrets owns a small number of Facebook shares.]

Eric Eldon contributed to this article.

When respected traffic measurement company Comscore released data several days ago showing that Facebook’s U.S. visitors dropped more than 9.3 percent last month, it sparked widespread disbelief among bloggers and others. Facebook is hot, and growing. The data must be wrong!

Comscore has just published data showing Facebook worldwide unique visitors are up, to 73.5 million from 69.2 million, suggesting not all is too bad afterall.

So what’s with the earlier national numbers? Well, to everyone’s relief, there came the quick red herring explanation from Comscore competitor, Quantcast: Student members of Comscore’s panel went back to school in September, and so their surfing patterns were no longer being tracked. Facebook visits measured by Comscore plunged, even though the students were still using Facebook from their dorms. Comscore was wrong! Facebook was doing fine after all.

However, in talking with each of the traffic measuring services, including Comscore, Quancast, Compete and Hitwise, we’ve concluded the explanation isn’t this easy. While Facebook may be doing fine, it points to some serious problems with the leading measurement companies that are more complex than most people realize — and advertisers could get very unhappy.

Every one of the panel companies showed a decline for Facebook in September. Moreover, their panels are pretty sophisticated. They’re each tracking more than a million people’s traffic patterns. And Comscore even has a special “educational panel.” Comscore won’t say exactly how large it is, but it’s reported to be something like 15,000, filled with students, and in fact they don’t vanish from the panel in September. There is no “home bias,” as Quantcast alleged, Comscore tells us. The panel tracks student traffic patterns from student in their dorm-room computers, too. Andrew Lipsman, spokesman for Comscore, says it is “nonsense” to say the September decline stemmed from students vanishing from panel.

Moreover, Comscore readjusts the weight of its educational panel, so that its influence in Comscore’s data corresponds with the overall student population of the U.S.

So, if the panel methods are robust, and they’re all showing Facebook traffic down, you’ve got to assume Facebook dropped in September, right? The traffic companies tried to assert this politely: “I’m going to settle the question once and for all, said Bill Tancer, Hitwise’s manager of global research, at the Web 2.0 Summit in San Francisco Thursday. “It hasn’t plateaued, it’s just experienced a seasonable dip in traffic.”

Not so fast, Bill. There’s a big problem with even saying its seasonal. Facebook itself says traffic was up. It saw active monthly users – those defined as returning to the site at least once a month – increase to 19.4 million in September, from 17.7 million. That’s not merely growth. That’s huge. That’s a 10 percent increase! Globally, the growth is more impressive still: Facebook ended September with 44 million users, compared to nearly 9 million a year ago, spokeswoman Brandee Barker tells us. [Comscore, however, today says that number is 73.5 million, which looks to be way off. Facebook wouldn't undercount by that much.] Now, you can choose to be a conspiracist, and believe Facebook is fudging numbers. But here’s why that’s very unlikely. Facebook, a venture backed company in the midst of raising big cash, and has no interest in fudging. There’d be internal dissension, and investors and potential suitors would call them on it. This place is so incestuous – Silicon Valley is so networked, and so prone to leaks – they’d never get away with it. So, our default is to take Facebook at its word. Page view growth is also straight in line with the growth, says Barker, at 57 billion, up from 54 billion.

You can’t dismiss Faceook’s growth as being driven by “cookies” either. If you use Facebook, you’ve got to login. So if you’re using Facebook from the office, from home or the dorm, only one of you shows up in Facebook’s stats. In other words, Facebook’s way is more reliable than that used by other sites. Many companies use Google Analytics, which tracks visitors by placing a cookie on the visitor’s browser. This inflates the visitor count up to about 2.5 times, say experts at Comscore and elsewhere. Facebook confirmed that it only measures member activity: It isn’t counting random hits on their page from say, a non-member sitting in a cybercafé in China.

So where does this leave us? Well, unfortunately, it means you’ve got to throw out of the window any short term statistics trends from the panel guys. The New York Times has also just weighed in this morning with a story about the statistics mess.

One notable model is pursued by Quantcast, which places a pixel tracker directly on a Web site (with the permission of the site’s owner, of course), and so is as good as Google or your own server log in getting direct results. While Quantcast’s approach is promising, it also has serious shortcomings – in part because of misunderstandings from site masters about where to place the code (more on that in a second).

Moreover, panels break down badly for niche sites. If you have only a thousand readers, for example, it’s possible there’s no one on the panel reading you, and so the bias can’t even be compensated for with statistical methods.

Here’s a summary of key points on each measurement service:

Comscore – Notably, despite the decline it showed for Facebook in September, it shows unique monthly users for Facebook at 30 million in the U.S., a rate that is not only higher than Facebook’s 19.4 million, but ridiculously higher. And we’re talking only U.S. It’s global numbers are even more out of line on the high side. See chart below:

Comscore is the measurement company we all rely on (for example, VentureBeat partners with Federated Media to handle much of our advertising, and they tell us advertisers all track Comscore data). That it is apparently so wrong raises huge questions about the underpinnings of the Internet advertising economy. Advertisers may only pay for the page views their ads are being placed on, but they’ll never know for sure how many unique readers they’re getting.

To be sure, after cross-examining Comscore about its panel, we felt pretty comfortable with the seriousness of Comscore’s approach, and came away understanding why it is considered industry standard, even if there are apparently big bias problems with its end results.

Regarding the student Comscore panelists: Let’s say a student logs on from a dorm room, and then later logs on from a university terminal. Comscore doesn’t want to count them twice. For this reason, Comscore doesn’t track results from university terminals, Internet cafes or other public computers. That way, they avoid inflating numbers. [As noted, Google Analytics is misleading, as are most server logs, because they do double count users. They'll count you if you come in from home, and they'll count you if you come in from work, giving your browsers at each place separate cookies. Google provides you a number called “absolute unique visitors,” because it can’t tell how many of them are duplicates. Divide by 2.5, and you’ll get a rough estimate of real unique visitors.]

Here’s an example of why the double-counting issue is so frustrating: Sugar Inc. says it has 5 million “absolute” unique visitors, while Comscore shows it having less than two million. This would be understandable if Sugar was counting each visitor twice as they sign up from work and home. However, CEO Brian Sugar says 80 percent of his traffic comes between 9am and 5pm, suggesting there’s not a lot of home usage going on. In other words, even though Comscore says it isn’t double counting, Sugar still says Comscore “is so radically wrong.” (Sugar also says some of his sites aren’t tracked by Comscore — in part, perhaps, because they are too small for Comscore’s panel to pick up).

Comscore suggests the Facebook dip came because September is a seasonal month. February has 28 days and is the most seasonal. September is the second most seasonal. It has one fewer day than August, and has a holiday weekend in it. Search data shows major dips during this month too. But this doesn’t explain a nine percent dip.

Comscore data is relatively clean compared to other services. It doesn’t get its data through Internet Service Providers, like some other vendors do. This can be biased. High-speed internet users, via Comcast, are likely to consume twice as much content as dialup users, and they’re likely to traffic different site. Here’s another example of bias: Since SBC has a relationship with Yahoo, users of SBC are more likely to start on Yahoo’s homepage, thus distorting that company’s traffic. (Competing service s like Hitwise, Quancast and Compete all rely on ISP data).

Comscore has a 125,000 people on its core US Media Metrix panel for the U.S., but has a million in U.S. total counting panels it uses for other purposes. It has 2 million worldwide.

Hitwise – This company’s data is not easily accessible by the masses. You have to be a subscriber. It also doesn’t show unique, just relative market share. Here’s what Hitwise analyst Bill Tancer says of the “dip.” It is seasonal, he says, and it’s something he’s seen in past years. Looking at his chart, you’ll see the decline in Facebook’s traffic came earlier last year. This is logical. In past years, Facebook was more student focused, and traffic dropped when school was out. Only last year did Facebook allow non-students. These new users, many professionals, actually have more time to play with Facebook in August than they may in early September, when they’re back and rushing kids to school. Note how this year’s drop happened more pronounced in September. This is a highly plausible explanation. But again, Facebook has rejected these explanations.

Compete – These guys, like Quantcast, are no longer to be dismissed. It decided to pass on offering a direct pixel tracker, but it also has a panel of two million users. Like Quantcast, however, it relies on ISPs, which can be dangerous for the reasons explained above. It showed a 7.7 percent dip in Facebook’s traffic in September. It’s 24 million number is way higher than Facebook’s own numbers.

Quantast — Quantcast’s advantage is that it can put a tracker on your site, and get direct measurement. However, many sites are reluctant to give it such access. In return for giving Quantcast the tracker, the publisher must let Quantcast publicly release monthly user stats. Facebook does not use Quantcast. Quantcast’s panel also shows Facebook having 24 million unique in the U.S. (see chart). It also has a panel of two million, some of them ISP customers, and so it has the same bases as Compete and others.

A site called Streetfire however, shows the risk. Earlier this year, the race car enthusiast site chose to use Quantcast’s direct tracker (see our coverage). However, Quantcast soon disappointed, said Adam Bruce. First, it was causing too much latency, since it was piled on top of all the other scripts Streetfire was running. While Quantcast wasn’t taking much more time to load on average than other scripts, sometimes it would take seconds, says Bruce. Other times, it looked like the script would time out, and just not record any traffic at all. It depended on whether the tracker script was higher or lower on the page. If it was higher, Quantcast would load first, and perform accurately. If was lower down, it would the last to load, and sometimes readers would be gone before it could count them.

Finally, Streetfire decided to remove Quantcast from its site. But things didn’t’ get any better. Streetfire’s traffic has plunged, according to Quantcast site. It’s apparently due to misunderstandings. Bruce assumed Quantcast had defaulted to using its panel to measure Streetfire. However, this wasn’t the case. Streetfire still had some Quantcast tags on some Streetfire subdomains. That meant Quantcast’s servers were still relying on the direct tracker even though it was woefully underreporting, says Quantcast’s Feldman. The two sides are now trying to clear it up. Conclusion: If Streetfire, a venture backed company obsessed with its traffic couldn’t figure this out, imagine what most other sites will go through.

Konrad Feldman says Web performance problems are unavoidable, for all companies. However, he rejects the notion that his servers have suffered under increased load. Tracking is difficult, he said, It requires tracking billions of page views daily, and having to do it with no latency, and with enough backup measures to ensure nothing is lost. That means hundreds of terabytes of data.

While Facebook hasn’t signed up for Quantcast’s tracker, hundreds of others have, from Fox and CBS to new media companies, Hi5, Slide, and Rockyou.

Alexa – This is a toolbar. Toolbars are unreliable, and Alexa has been so discredited and so wrong in the past, there’s no point trying to debunk it. Its problems have been thoroughly documented.

Statsaholic – This is a repackaging of Compete data.

It’s official: MySpace, seeking to defend its status as the leading social network, will open up its platform to third-party developers over the next couple of months.

The news was confirmed tonight at Web 2.0 Summit in San Francisco, where News Corporation’s Rupert Murdoch and MySpace co-founder Chris DeWolfe were featured guests.

Like rival Facebook’s move six months ago, MySpace’s move will let developers build applications within MySpace and make money from them.

The full significance of this move — and of social networking platforms in general — is hard to tell. Despite the hype generated lately about the Facebook platform, few of the 6,000 or so applications are remarkable or particularly innovative. On the other hand, the applications are drawing traffic: Facebook’s platform applications see 14 million unique visitors a month, with 88 million visits for an average visit time of 4:30 minutes, according to Compete. We’ve heard estimates that the applications account for anywhere between two and 20 percent of Facebook’s overall traffic, something we’ve been trying to confirm.

MySpace, which still leads Facebook in overall users by a wide margin, was expected to make the move to embrace developers — as a way to ensure its leadership position.

However, MySpace has already let users install widgets from third parties. The difference is, now these widget-makers have the opportunity to build more complete applications for their existing MySpace users. Successful Facebook application developers will also have the opportunity to push their wares to MySpace.

RockYou and Slide, the leading widget providers on MySpace and application leaders on Facebook, both said that they have been waiting hungrily to push applications across MySpace and all the other social networks that plan to offer developer platforms — such as Hi5, Bebo and Tagged.

Even though Facebook’s open-platform move instigated the development of these rival platforms, Facebook’s has been a technical work in progress, with glitches still being regularly reported by developers.

News Corp.’s MySpace is opting for a slower approach, hoping to avoid some of the same problems.

In the next couple of weeks, the company says, it will release a directory of widgets already on its site.

Then, within the next couple of months, it will launch a platform that gives developers deeper access to MySpace data. Like Facebook, MySpace will offer application programming interfaces to its user data, so developers can build applications that run within MySpace. It will offer its own markup language for designing application user interfaces, and will let developers include Flash, Javascript and iFrames elements — also similar to what Facebook already offers. MySpace users will be able to share their profile information, activity on the site, lists of friends, and other personal data with developers’ third-party applications.

Asked by an audience member if MySpace planned to be more open than Facebook, DeWolfe smiled and said, “yes.”

It will initially offer third-party applications to only a subset of around two million MySpace users.

Next up: Google, which on Nov. 5 is expected to do something similar, starting with its social network, Orkut.
Separately, News Corp. CEO Rupert Murdoch confirmed that MySpace co-founders DeWolfe and Anderson have signed a contract to work for MySpace for two years. There’s been speculation the pair are making $30 million over that time.
Asked by interviewer John Battelle what he thought of Silicon Valley culture, Murdoch responded: “In many ways it’s the most exciting place on earth, the center of innovation.”
In response to the rumors that Facebook is possibly raising money at up to a $15 billion valuation from Microsoft, Murdoch said it would mean Newscorp is “totally underpriced.” Facebook is known to be making much money, with reports putting revenue at $150 million this year, mostly from a sweet revenue deal with Microsoft. Newscorp has a $70 billion market value and will make $5 billion if the economy holds up, Murdoch said. More coverage here.
[Mark Coker, who covered the Murdoch talk at the Web 2.0 Summit, contributed to this report.]

Is Google-the-Goliath sneaking into the Facebook building — via the basement?

Google is actively recruiting third-party developers with applications on Facebook to run Adsense ads within applications pages, VentureBeat has learned.

These aren’t just any old Adsense ads, according to our sources — developers have been inserting plain-vanilla Adsense into Facebook applications since the developer platform launched in May. Now, Google is specifically building this network for advertisers who want to be on Facebook, and will let advertisers run their ads across all Facebook apps that sign up for it.

Facebook has been clear about letting third-party developers sell ads on their own “canvas” pages on the site and keep all the revenue — a loophole that the Google seems to fit through just fine. See sample screenshots of what the Google ads will look like, taken here from Fantasy Stock Exchange and South Park Character Creator (and no, I don’t regularly use either app):

Microsoft has already inked an exclusive deal with Facebook to sell ads on Facebook pages within the US. By selling ads on third-party applications, Google is doing an end-run around this deal.

When it comes to Facebook and social networking, Google is apparently firing on all fronts.

Building relationships with Facebook advertisers also allows Google to test how to successfully monetize third party applications before it introduces its own developer platform. Google is apparently set to make an announcement on November 5 that it will give third party developers access to user data in Orkut, its own social network which is popular in Brazil and India but not in most other countries. To this end, it is also actively recruiting third-party developers on Facebook to develop on Orkut, we are told.

Google is also rumored to be in a three-way competition with Microsoft and Yahoo to sell ads on Facebook’s own pages outside of the US. Like its two competitors, it is also rumored to be trying to buy a chunk of Facebook.

So far, only third-party startups that have launched ad networks for applications on Facebook, including those run by RockYou, VideoEgg, Social Media, Lookery and others. Some of these networks sell contextual text and video ads within an application’s pages. Some even sell ads on popular Facebook applications for less popular applications, so the latter group can try to convince Facebook users to add their application as well. Also of note: We’ve also been hearing rumors that Facebook is working on its own ad network for applications within Facebook.

Whether anyone can make big bucks from third-party applications is another question. We’re hearing from developers that all of these ad networks work about the same. We’re hearing some — those with 50,000 active users or more - are even getting enough to pay for their servers, room and board. That’s enough to avoid taking on funding while you work out your long-term business strategy.

Google has responded with the usual “no comment.”

Plenty of moves by big companies in today’s action:

1) Yahoo expands stake in Chinese search portal
2) AT&T buys up $2.5 billion worth of 700mhz spectrum
3) Facebooks FBfund chucks initial applications
4) Twitter’s first attempts to monetize
5) More details on Google’s plans for Orkut
6) E.ON blows another $1.4 billion into wind power
7) Vlaze may be today’s MTV

Yahoo expands stake in Chinese search portal Alibaba – As China’s Alibaba.com prepares to go public next week, Yahoo has invested another $100 million into the company, raising its overall ownership stake to about half. The latest investment represents about 10 percent of the company; Yahoo already owned about 39 percent. The move reflects a growing realization by both Google and Yahoo that the Chinese search market is culturally different enough to make competition against entrenched local sites difficult.

Yahoo has also bet on Baidu.com, which went public in August 2005. Baidu is the largest search portal in China. It has captured enough market share to rank third overall in the world market, according to a comScore study. Alibaba, which folded Yahoo China into its site under the original deal, is China’s second largest search engine.

AT&T picks up spectrum from Aloha Partners — A $2.5 billion deal by AT&T will deliver 12 megahertz of spectrum in the lower end of the 700 mhz range to the telecom giant. The seller was Aloha Partners LP, parent of mobile TV company HiWire. The 700 mhz spectrum is important to AT&T’s plans for mobile video offerings: The 700 mhz spectrum is particularly effective for long range transmission, and penetrates walls and other obstacles more easily than other wavelengths. The acquisition also helps hedge AT&T’s bets, in case a rival like Google wins the FCC auctions for other parts of the spectrum. However, the news may not be the best for entrepreneurs: AT&T is not known for being open to innovation, and its dominance over mobile TV might spell slow growth for the market.

Facebook’s FBfund asks developers to resubmit applications – Last month, the company announced a $10 million fund that will award seed grants to third-party developers (our coverage). The company now says all interested developers need to resubmit their applications. It says it needs to make sure applicants understand the requirements of the application, as the company had been receiving applications with “similar or even identical ideas.” In the company’s own legalese:

As a result, and in order to protect other developers and us from claims that we or anyone else copied material without the creator’s permission, unless we agree otherwise in writing, we can’t promise that any materials or information you submit here will be kept confidential, or specifically that we or others might not develop similar or identical products or services.

You can apply here.

Twitter appears to be gearing up mobile ad unit — Some users, including CNET’s Caroline McCarthy, have noticed text ads slipping into Twitter’s mobile notifications. The text “tips” take the form of small, single-line advertisements slipped in between posts by users. The news of the new ads comes just as Jaiku announces its acquisition by Google (our coverage). it appears that Twitter may intend to remain independent, gearing up to protect its position and begin monetizing the service.

More on Google’s plans for Orkut, social networking – Google has been rumbling for months with secret plans to introduce more interesting social networking features across its web properties. Now, more specifics are leaking out. A Businessweek article yesterday confirms an earlier report that Google will be introducing a number of new features on November 5th. The article suggests, for example, that Google may let third party developers run applications for Orkut from their own servers — applications that also let developers provide Orkut data within other social networks.

E.ON lays down big bucks for wind power — Despite criticisms of wind turbines, including problems with their low output and unattractive appearance, it appears that investments in wind are paying off. Two big European players who both have operations in the United States made a $1.4 billion swap, with Ireland-based Airtricity trading off its US subsidiary to Germany’s E.ON. The acquisition adds 210 megawatts to E.ON’s total wind production, which will now be about 850 MW, with another 4.6 gigawatts still in production. Government subsidies have made the US market one of the world’s most attractive for wind power, with an expected growth of about 10 percent per year, and the field is wide open for entrepreneurs: Growth would be even higher, but production of the actual turbines used to generate wind power has not yet scaled to meet market demand.

Vlaze, an internet TV site and social network, shows impressive growth – If you combine social networking features with live shows that broadcast 14 hours every weekday, you might go from 10,000 unique visitors a year ago to more than 8 million last month. Well, at least if you’re Vlaze, the site formerly known as MusicPlusTV. The Los Angeles company is no longer just focusing on music-related content, but it compares itself to “MTV back in the old days,” back when MTV had more music and less lame reality TV shows. Vlaze shoots its videos in a huge studio in LA, but lets users contribute their own footage as well.

On Tuesday, I’ll be moderating a panel about how developers of Facebook applications can get money from venture capitalists.

Venture capitalists are looking for big hits and it’s not easy to please them. This panel features the leading investors in Facebook apps. If you’re going to get the skinny on funding, this is the place. The panel features Luke Nosek, Lee Lorenzen, Jeff Clavier and George Zachary.

The Graphing Social Patterns conference is offering VentureBeat readers a 15 percent discount if they sign up by the end of today. Here are details.

Digg, the popular news-ranking site that is trying to extend its popular beyond its young geek-oriented audience, has significantly revamped its user profile section. The changes are aimed to give the service much more of a community feel, letting you share Digg stories with friends, and giving more profile to your most recent activity and favorite articles.

More significantly, the changes appear to be a direct response to Facebook, which has exploited its sharing features to tremendous success, and has also talked about using it to become a news site.

Digg’s new features are explained in this video.

Digg joins an increasing number of companies incorporating Facebook’s popular “feed” concept, where users can track the activities of their friends. This tends to create more activity on the site, because friends are likely to click on stories liked by their friends. This is particular important for Digg, which depends on its users to read and endorse stories, and so it’s a prudent, obvious move. On the one hand, it makes it easier for cliques of people to conspire to jointly endorse a story — something that has plagued Digg because marketers have a strong interest in pushing their own stories to the front page. On the other, it may generate more legitimate activity and thus help the community override that nefarious activity.

You can hit “share” and then “shout” to send a message to friends about articles you like. You can select favorites, that put your favorite articles on your profile. Your profile also shows the latest ten things you’ve done, comments you’ve made, shouts, and friends you’ve made. The profile has all sorts of information including age, name, picture, location, favorites sties, an about section, personal photos, and then your friends’ activities — just like Facebook. You can customize it all with filters.

Digg will notify you via email when certain activities happen, such as when someone adds you as a friend or a story you submit becomes popular. You can control what emails you want to receive in the email settings section of your user profile. You can find your friends’ profiles on Digg by searching for them by their email address. If you don’t want to enable others to search for your profile, you can specify that in privacy settings.

Harvard student Aaron Greenspan says he came up with the idea for Facebook before Mark Zuckerberg founded the popular company of the same name.

Greenspan’s claims, backed up by emails, are the latest salvo in the controversy surrounding the true origins of the social networking company. His claims have surfaced before, but in a New York Times story just published, Greenspan goes to greater lengths at proving his case.

In 2003, Greenspan sent an email to Harvard students describing the newest feature of houseSYSTEM as “the Face Book,” an online service for finding other students. It was four months before Mr. Zuckerberg started his own site, originally “thefacebook.com.” In other emails, Greenspan also discussed key features that Zuckerberg would later implement in his own company. Greenspan even corresponded with Zuckerberg, and the two apparently talked about joining up, but Zuckerberg ultimately decided to go it alone, raising capital and creating his own vastly more successful company.

Most significantly, however, Greenspan doesn’t appear ready to sue Zuckerberg. He says he’s come to terms with Zuckerberg’s success. The real outcome of his assertions is likely to be a further weakening of the lawsuit filed by Tyler, left Cameron Winklevoss, two of the co-founders of ConnectU, who said Facebook was their idea and that Zuckerberg stole it from them, and are pursuing their claims in court.

Still, Greenspan has been critical of Zuckerberg. See his open letter to Zuckerberg, for example. In his “Authoritas: One Student’s Harvard Admissions,” a 306-page autobiography, he notes many of the features he originated before Zuckerberg, and describes his frustration at how Zuckerberg got media attention from Harvard’s Crimson (see his references to Zuckerberg here).

updated

Facebook has acquired Parakey, a Mountain View, Calif., startup that had been working on a new way for people to work seamlessly on applications while online and offline.

Founded by former Mozilla Firefox browser developers Blake Ross and Joe Hewitt, Parakey had worked in secrecy for two years on a project it hoped would make online life much less complex for regular people. They called their PC download “a personal operating system.”

Notably, Parakey is Facebook’s first acquisition. Financial terms of the transaction were not released.

We wrote about Parakey here, based on an early description of the company’s plans to Spectrum. It was backed with seed funding from Sequoia Capital, O’Reilly AlphaTech Ventures, MSD Capital, YCombinator, Thomvest, Paul Buchheit, Ron Conway and Warren Zide (see Blake Ross’ post).

Here’s how we described it:

It turns your computer in a hybrid Web site-hard drive, where you can choose what to make public online and what to keep private. Everything else is seamless between the Web and your desktop, letting you avoid the hassles that come with downloading photos, for example, and putting them up on the Web.

…Even though Parakey works inside your Web browser, it runs locally on your home computer, which allows Parakey developers to do things inside your Parakey site that a traditional Web site could not do, such as interact with your camera.…Everything you encounter while surfing — online photos, videos, tunes — you can drag right onto your Parakey page, end of story. …you can manage your content quickly and efficiently, even if you’re off-line.

Notably, however, Adobe, Microsoft and others have released their own technologies tho help developers bridge the gap between online applications and the desktop. Given Parakey’s secrecy, its difficult to tell how much its software has been duplicated by these other frameworks. However, reading the Spectrum piece, now many months old, you get the feeling Parakey has gone fairly deep.

Ross and Hewitt have joined Facebook as part of the acquisition, Facebook said in a statement. They’ll work to develop the Facebook developer platform, which has become a popular place for third-party developers to show case their applications for Facebook’s 30 million users.

Ross and Hewitt are best known as the co-founders of Firefox, downloaded more than 300 million times. Hewitt also built a popular web development tool called Firebug.

Update: Here’s more description, from (Parakey investor) O’Reilly’s blog:

The platform, written in Python, C++ and JavaScript, offers a means of building applications that merge the best of the desktop and the Web. Like desktop apps, these apps work offline, offer more privacy than pure websites, run quickly, and integrate with the system. But like Web apps, they are also more creative, visually alluring, accessible from anywhere and potentially accessible by anyone. In short, Parakey apps are designed to be both useful and social, a combination that is too rare today….What separates Parakey from others in this space is that we’re building not just the platform but also the first set of applications on top of it….

Update: Ross has an early notable observation about Facebook, “From what I’ve seen so far, it is truly amazing. For instance, all the data is stored in a sqlite database that runs on Mark’s iPhone.”

updated

Serial entrepreneur Sean Parker’s new philanthropy focused company, Project Agape, launches tonight, with a special version of its software tailored for Facebook users.

It is called Causes on Facebook.

Just as significant as its launch, however, is its intent to showcase the strengths of Facebook’s new “Platform,” a set of tools to allow developers to build applications upon Facebook. More on that in a second.

Project Agape is the most ambitious social network we’ve seen that lets people mobilize around causes of their choice. It has been secretive until now, providing a sneak preview to a handful of people, including VentureBeat (see coverage). Even today, its release for Facebook’s platform is a limited one. A more extensive version will be released next month.

A competitor, Change.org, launched just two days ago (see our coverage). That network focuses on political change. Its service tries to tap users to choose slates of politicians and other recommendations to effect change. But that site is bare bones, and still has relatively few users.

While Agape too is new, its advantage is formidable. Its software is by far the most integrated of any third-party company into the Facebook platform. Any of Facebook’s more than 24 million users can select Agape from a menu, and with one-click install it on their Facebook toolbar for continuous use. See early screenshots at bottom.

Here’s how it works:

Called “Causes on Facebook,” it allows you to create a cause, or promote an existing one to their friends You can pick from 1.5 million non-profits in the U.S. It uses Facebook’s “feed” feature to notify friends when you’ve joined a new cause. Finally, it allows you to promote the cause in other ways, building up points through a reward system, letting you show off virtual trophies that you win on your profile page after say, donating money. Ultimately, it wants to make it easier to raise money for causes. It launches with formal partnerships with ten non-profits.

It plans to use Facebook’s “social graph,” or the network of relationships users have with their friends, and their friends’ friends. The point is to mirror real life, where activists and other fund-raisers reach out to influencers and ask them to reach out to their own followers. (We wrote about this in our first post). Facbook Photos and Facebook Events have done well by building on this. “Cesar Chavez would ask a farmer to gather their friends in their hut, and he would talk to them,” explains Joe Green who co-founded Agape with Parker.

The two go further, arguing that young people have become alienated from political and social causes precisely because there has been no way to mobilize online. They point to an “erosion of social capital” caused by modern lifestyles. A decline in local chapter-style organizations has left a void, they say.

Parker’s convinced this will work because Facebook’s users exhibit a higher level of engagement than most sites. About 50 percent visit the site daily, with an average use-time of more than a hour.

One advantage Agape has is how it sits on top of Facebook’s platform. New internet companies find it hard to attract users from scratch. Most try a “sucking” strategy. Photo, video and other companies, for example, let users place so-called widgets on sites like MySpace, and by trying to suck those users back to their own sites with links, registrations and so on. Agape’s method is different because it seeks to remain native to Facebook, with style and features that make it look like just another Facebook application. It uses Facebook’s mark-up language, “FBML.” Its icon is similar to that of Facebook Photos and Groups.

The close partnership stems from Parker’s relationship with Mark Zuckerberg, chief executive of Facebook. Parker was an early collaborator at Facebook, before leaving the company more than a year ago. Green, meanwhile, was Zuckerberg’s roommate at Harvard.

“Causes on Facebook,” is just one of 80 applications built by 65 companies on Platform. Zuckerberg announced more details about the platform just now during his keynote address. He emphasized that Facebook will encourage companies to make money from advertising and other transactions, giving them free access to the “canvas” pages of their applications to do as they please. This contrasts with the more closed nature of other networks, such as MySpace, which notoriously shut down access to Photobucket when that company tried to promote sponsorships. Zuckerberg also called on to the stage representatives from Microsoft, Amazon and Slide to announce integration partnerships.

Update: One attendee, I think it was Saar Gur from Charles River Ventures, went so far as to say this might represent the “end of Web 2.0.” Most new consumer Internet companies will feel forced to launch from within Facebook, because of its huge base of young, interested, experiment-happy users. If you can’t succeed there, can you hope to do so outside? So Facebook becomes the platform. Provocative thought, and clearly an overstatement, but it stayed with me.

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Facebook is growing quickly, adding between 100,000 and 150,000 new users per day, the company tells us, with the highest growth rates coming from abroad.

Particularly noteworthy is its traction in Canada, where it has more than 2 million active users, around 11 percent of the site’s total. A remarkable 20 to 25 percent of Toronto’s population is using Facebook, with more than 500,000 users. Ontario even banned the site in governmental workplaces because it was so distracting. Growth rates are several times higher outside the U.S. than in it.

The break-neck growth shines a spotlight on two challenges possibly at odds with each other. The first is pragmatic: find more ways to monetize, possibly with an eye to go public. The latest example of Facebook’s efforts here is Marketplace, its classified-ads service. The second strategy is more exploratory, but more exciting: provide a user’s “social context,” such as a list of their personal interests, their friends and groups to other sites and applications. This creates an online social ecosystem of sites offering any number of services.

The company has been working towards the latter goal since last August via Platform, its API (application programming interface). However, the launch of Marketplace is in direct competition with a number of startups using Platform. The danger the company now faces is scaring off companies, especially startups, that are considering it as the way to tap into the site’s ever-expanding user base.

What happens in Facebook… happens everywhere

There was no single factor that led to the “tipping point” in Canada, the company said. This appears to be a snowball effect, which started on US college campuses in 2004. The more people join, the more relevance the site has for non-users.

The U.K. is second behind Canada, in terms of growth, with more than 1 million users. The next most prominent countries are, in order: Norway, Australia, South Africa, Lebanon, Egypt and India. An Egyptian newspaper, for example, says that the site has “caught on in Egypt because it provides more privacy, allowing users to control their settings” so only their friends can see their data.

As we’ve already noted, growth has been happening across demographics. In the US, however, the site is still disproportionately popular among college students, according to Compete. And while Facebook and Myspace are both growing fast around the world, Facebook’s growth rate is faster. Here’s the latest data from Comscore:

Unique Visitors (000)
WORLDWIDE Jan-07 | Feb-07 | Mar-07
Total Internet : Total Audience 746,934 | 739,835 | 762,736
MYSPACE.COM 94,769 | 98,509 | 106,935
FACEBOOK.COM 24,840 | 24,782 | 32,115

NON-U.S. (International) Jan-07 Feb-07 Mar-07
Total Internet : Total Audience 593,488 | 585,634 | 602,762
MYSPACE.COM 35,983 | 38,058 | 44,874
FACEBOOK.COM 6,727 | 8,400 | 12,294

Increasingly, the company’s decisions about how to monetize will have ramifications for potential partner sites everywhere.

From tipping point to balancing act

Meanwhile, Facebook continues to focus on the “Platform” API as a driver of growth. An ecosystem of sites using this has slowly formed, providing a variety of entertaining pastimes, such as being able to check out cute members of your peer group. Another example could be if Facebook were to incorporate Netflix data into profile pages so that you could see which movies people have rented “to facilitate borrowing.” Interesting: That’d let me borrow a Netflix video from a friend without actually getting it from Netflix :) Other lucrative niches may be found, such as a mash-up of ticket sales for events on Facebook, creating a sort of StubHub (a focused site that did so well that eBay was forced to buy them). However Harjeet Taggar, co-founder of competing classifieds site Boso.com, wonders how many of these areas will bring money: “Once you start getting into niches of niches you’re getting further away from big business.”

Notably, Oodle, a classifieds-ads startup, also integrated its services with Facebook — just a few days before Facebook launched its own Marketplace. Like Marketplace, Oodle enables people to share postings with a friend and to see who else in their group has something available.

Indeed, companies considering building on Platform will need to be reassured by Facebook that it won’t try to wipe them out of business. That’s just one part of the challenge to manage its brand as it grows. One pundit, Donna Bogatin at ZDNet, recently ripped that “Facebook stood for something, once,” an online extension of college campuses “by and for the students.” Now, she said, “it stands for what’s best for Facebook: unlimited demographic diversification and commercialization…” while still clinging to its college-kid image. Its continued success indicates that most people don’t think that, or don’t care. Like Google and MySpace, critics will emerge, but as it keeps offering a useful service, the larger user base stays loyal.

And we’ll be learning more about Platform pretty soon here. Facebook is hosting an event next week officially titled “F8: Facebook Platform Launch.” F8. Get it?

Fate.

[Author Eric Eldon thought he was going to become a professional journalist when he graduated from college two years ago. Instead, he is co-founder of Writewith, a company that makes online word processing work for groups. You can reach him at eric@writewith.com.]

Here’s a summary of the more compelling tips given by several tech industry luminaries — including Facebook’s Mark Zuckerberg, Google’s Gmail creator Paul Buchheit, Sequoia Capital venture capitalist Greg McAdoo — at the Y Combinator Startup School event at Stanford this weekend.

The event attracted more than 650 aspiring entrepreneurs. Mark Coker, a VentureBeat contributing writer, was on hand and here are his notes.

FaceBook’s Mark Zuckerberg: Hire only young technical people

FaceBook’s founder and CEO, 22-year old Mark Zuckerberg, believes his social networking platform will push the world to be a more open place. Without doubt, FaceBook is a true phenomena. According to Zuckerberg, FaceBook has over 20 million registered users, serving 1.5 billion page views daily.

Judging from whispers among the audience, while people love the service and admire his accomplishments, many find Zuckerberg arrogant. A Google search on “mark zuckerberg” and “arrogant” yields about 675 results, but surely, there must be other Mark Zuckerbergs in the world. Or maybe not.

Maybe it’s part of his charm. He’s the cute boy-wonder robo-geek who is either oblivious to how he rubs people, or he doesn’t care because he’s smarter than us.

He stepped on the stage wearing his trademark Adidas sandals (he bought ten pairs before they were discontinued).

“I want to stress the importance of being young and technical,” he stated. If you want to found a successful company, you should only hire young people with technical expertise.

“Young people are just smarter,” he said with a straight face. “Why are most chess masters under 30?” he asked. “I don’t know,” he answered. “Young people just have simpler lives. We may not own a car. We may not have family.” In the absence of those distractions, he says, you can focus on big ideologies. He added, “I only own a mattress.” Later: “Simplicity in life allows you to focus on what’s important.”

He said it’s important to hire mostly coders, even in the marketing department, so if they want to change something on the web site all they have to do is log into the back-end and change copy on the fly.

The value of having coders on staff, he elaborated, is that technology is highly leveraged. “You can create an app once and people can continue to use it.”

Zuckerberg stressed the importance of rapid application development and iterations. FaceBook ships new code every night, he says.

Several more times during the talk, he spoke of how an important part of his job was thinking about philosophies.

Someone in the audience asked how Zuckerberg balances the whole work and family thing. He answered that he works all the time, and besides, he said, his girlfriend is still in school at Harvard so he’s apparently not distracted by her too much. “But now she’s moving out here so we’ll see,” he added. Presumably, this the same girlfriend Zuckerberg was with when he reportedly shut off his cell phone, delaying acquisition talks with Yahoo for a week.

Paul Buchheit: Gmail’s creator shares startup advice

As Google’s 23rd employee, Paul Buchheit was the creator and mastermind behind Gmail, arguably one of Web 2.0’s first killer apps.

His advice to entrepreneurs was to redefine their measures of success. While financial reward is nice, aspiring entrepreneurs should first and foremost seek out risk-taking opportunities where they can learn. He said startups allow employees to take on projects for which they have no qualifications. He referenced his own multi-year assignment to Gmail as a perfect example.

Buchheit, no longer employed by Google, encouraged entrepreneurs to innovate where tech giants like Google are afraid to. He cited the enormous success of YouTube. Even though YouTube launched after Google Video, he said Google Video was a bad product because Google was politically afraid to offend its media partners.

Paul Graham Asks: What’s stopping you from starting a startup?

Paul Graham made his fortune selling his ecommerce platform Viaweb to Yahoo for $49 million in 1998.

More recently, he has become something of a 21st century messiah for tech company founders. His numerous essays about tech startup strategy, along with his work as a founding partner of Y Combinator, have allowed him to influence a new post-bubble generation of software programmers. Some entrepreneurs are said to listen to recorded copies of his speeches over and over again in an attempt to internalize his gift.

Over the last few years, Graham has encountered a few prospective founders who were unwilling to accept his teachings.

His Startup School presentation answered those objections (VentureBeat has paraphrased):

Concern: Am I too young?
Answer: Don’t worry.

Concern: I’m too inexperienced.
Answer: Do it anyway.

Concern: I’m not sure I’m smart enough.
Answer: If you’re smart enough to worry about that, you’re smart enough to start a successful startup.

Concern: I appreciate the predictability of a regular job.
Answer: Envision yourself as a medieval serf who will till the same soil for the rest of your life. Mind numbing, right?

PayPal Founder Max Levchin: Imagine him as a 15-year old girl

Max Levchin was a co-founder of PayPal, which was acquired by eBay for $1.5 billion in 2002. Today, he’s founder and CEO of Slide.com, a service that reaches 50 million people per day with its hosted images and slideshows.

Levchin offered attendees a crash course in product management. Product management, he says, is 85% user interface and 15% channeling the user.

For user interface, Levchin told the audience to measure how their visitors interact with the sites. Slide.com tracks mouse clicks, mouse overs, abandonment rates, the funnel, and more. Levchin and his team mine the data for intelligence that helps guide future iterations of the site.

For channeling the user, Levchin says founders must step inside the minds of their target customers. In Levchin’s case, he says he must imagine himself as a 15-year-old girl with attention deficit disorder who’s looking for digital bling to dress up her MySpace or Zanga web page, while at the same time she’s chewing gum, talking on the phone, instant messaging with five friends, listening to music, and twirling her fingers through her hair.

Levchin cautioned his techie audience to keep their customers in mind and not go overboard with technology for technology’s sake. He pointed to the early social networking site, Friendster, which lost critical momentum when it ran into scaling problems because of a “cool” feature that calculated friend trees, and caused page load times of up to a minute. MySpace.com, by contrast, was successful because it cared less about technology and more about the user experience.

As a final word of product development advice, Levchin encouraged founders to think about the Bible’s seven deadly sins - especially greed, sloth, envy, pride and gluttony. These characteristics, he said, describe many of the primal motivations for users.

Ali and Hadi Partovi: Brotherly super duo provide tips

For those who say lightning never strikes twice, they haven’t met the Partovi twins. Ali founded LinkExchage, which was acquired in 1998 by Microsoft for $250 million. Hadi founded TellMe, recently acquired by Microsoft for a rumored $800 million. The brothers now jointly run the music discovery service iLike, and its popular independent music web site, G