VentureBeat

Jim Crowley, the CEO of Turbine, isn’t an easy man to get a straight answer from. I heard that his company, which makes “massively multiplayer online” games such as “The Lord of the Rings Online,” was raising a new round of venture capital about a month ago. That’s a big deal, since Turbine is one of the big success stories in this industry and raising a new round could mean big new projects are in the works at the Westwood, Mass., company.

Adam Mersky, Turbine’s PR man, told me the funding rumor wasn’t true. Then I interviewed Crowley on April 17, where he pretty much said the same thing. His answer was evasive, but it left an opening for the possibility that Turbine had already closed a round.

In any case, on Tuesday, the news broke that Turbine has indeed raised another $40 million in venture capital to fund its online computer game business, according to a report by peHub. The round was led by Granite Global Ventures and included Highland Capital Partners, Polaris Venture Partners, Tudor Ventures and Columbia Capital. To date, the company has raised more than $90 million.

Mersky still declines to comment on the funding. But I leave it to the reader to surmise from my Q&A with the secretive Crowley to figure out what Turbine is going to do with all of that money, if, in fact, the filing dug out by peHub is true.

From what I see, here is a logical theory. Turbine has raised $40 million, partly to expand the Lord of the Rings Online around the world more quickly; Crowley says the Asia expansion alone will bring millions of subscribers to that game. Turbine also wants to fund the expansion of properties like Dungeons & Dragons Online, which on its own isn’t generating enough revenue to fund expansion. And then the company has a couple of more secret projects in the works. My guess is that they’re going to do a console MMO game based on The Lord of the Rings Online. Taking the MMO to the consoles would be a big deal and would help it compete head-to-head with console MMO rivals such as Sony and NCSoft. But take a look at Crowley’s words and judge for yourself.

What’s the latest at Turbine?
JC: Our technology has been pushing the envelope. We are operating three worlds today. Asheron’s Call. Dungeons  & Dragons Online. And the Lord of the Rings Online. We are operating in 50 countries now with our worlds. We are growing like gangbusters on every dimension that you could possibly imagine. We are very focused on the topics of accessibility and distribution. That is both on how we can expand access to the worlds to more players and expand our markets. We are focused on global expansion. We are expanding the portfolio. There are things we can’t talk about there but there are lots of exciting things going on.

VB: You guys said you are not raising a round now. I initiated this call because I heard you were raising a round.
JC: One of the great things about Turbine, and one of the most exciting things about Turbine, given our success, we have a tremendous number of people who seek to partner with us, whether it be IP owners, or financial sponsors and or traditional VC firms. As a result, we have a tremendous amount of flexibility in avenues we may choose. At this specific time we are not out chasing money. I don’t expect to be in the near future. We had a lot of success in our past. We have had a lot of things that we have concluded that we have not yet made public.

VB: I had heard there were a couple of unannounced projects. Have you spelled out how many?
JC: We do have some unannounced projects. We have not articulated those yet, with the exception of the announcement of the Moria expansion to Lord of the Rings Online. We have a couple of more announcements as the year goes on. It’s very exciting in terms of expansion of our IP portfolio and geographies.

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Millennial Media, a Baltimore, Md., company that serves ads to mobile phones, has raised a $15 million a second round of funding.

A bunch of companies have launched to grab a portion of the lucrative mobile ad market. The cut-throat competition has pushed companies like Millennial into aggressive marketing tactics that cross the line. Earlier this year, we caught the company running a fake ad counter on its home page, which gave the impression of many more ads being served on its network than were actually being served.

With those sorts of tricks, you’ve got to wonder how investors can trust it, but apparently they do. Charles River Ventures led the round, which included existing backers Bessemer Venture Partners and Columbia Capital.

The mobile ad market is expanding quickly, with some estimates saying it will expand ten-fold within four years, to more than $16 billion — so minor marketing antics may be easy for investors to forgive.

Millennial Media raised a $6.3 million in a first round earlier this year, from Bessemer, Columbia and Acta Wireless. Competitors include AdMob (backed by Sequoia and Accel), Enpocket (acquired by Nokia), Third Screen Media (acquired by AOL), and ScreenTonic (acquired by Microsoft Corp).

In September, Millennial Media said it would serve ads on MySpace’s mobile site and other News Corp. properties, including IGN, FOXSports.com, AskMen.com and RottenTomatoes.com.

Gizmoz, of Israel, launches a service tonight that lets you create avatars that are more realistic and full-featured than those of competitors such as Voki or Meez.

You load your own photo, and Gizmoz morphs it into a three-dimensional image. You can dress it with a range of accessories — wigs, clothes, hair, makeup, skin color, and even make finer edits, such as facial changes. (See screen-shot at bottom of the Gizmoz creator page). You can then make recordings for your avatar, via a microphone, so that he or she speaks to visitors of your blog or profile page — such as in my example here. The avatar’s lips sync to my words. Or I could type in text, and it will be converted to speech (it just won’t sound like me).

If I want, I can insert the avatar within an “answering machine,” such as I have done above. Visitors respond with messages (go ahead, click on the widget, and leave a message for me!). I can be notified of your messages by SMS or by phone. I can choose a variety of backgrounds.

If you’re reading this RSS, which doesn’t allow Flash, you’ll have to go to our site to see an example)

I can also post these avatars within comments at MySpace. I can send them to friends in messages. Gizmoz will also offer a mobile service.

We’ve included a demo below to show more about how it works. Gizmoz does take a few minutes to get accustomed to. For example, there’s one tab for creating your gizmoz, and then another for creating the separate background and recording effects, and galleries for saving your creations.

The company raised $6 million from Columbia Capital and Benchmark Capital. The company, led by Eyal Gever, has worked for four years, and employs 20 people.

To achieve distribution, it has partnered with photo widget site Rockyou, and Freewebs, which will offer Gizmoz to its users. It is working with these and other companies to allow the avatars inserted within slide shows.

The service is free, but you’ll need points to buy extra gear for your avatar. It starts by giving you enough free points to play around for some time. However, then it will start charging. Will it make money? Tough to tell. This is another widget company, in an increasingly choppy sea full of widgets. However, at least Gizmoz is pushing technology forward on avatars (it takes 98 morph targets from your image to create facial movements). It all depends: Will it play in MySpace…or Facebook?

Gizmoz has more features set for summer/fall, which it isn’t revealing publicly yet, but based on our preview, promise to take avatars another level still.

Ruckus, which provides college students free unlimited PC and laptop download access to more than two million songs, has raised $10 million in a second round of financing.

The service is apparently making headway on competitor Napster, which offers a similar service. Earlier this month, Penn State dropped a partnership with Napster, in favor of Ruckus — because Ruckus did not charge it for the contract.

However, there’s no sign the company is making headway on revenue. Students are unlikely to upgrade to its paid premium service, because students are frugal — and because it competes with Apples’ iTunes. The company isn’t saying anything about revenue.

Indeed, the new money will be used to find ways to push advertising to support the basic free access, it said. It has signed contracts with 40 new schools over the past school year, for a total of 120 schools in its network nationwide. The site is also pushing social network features. Any student owning a .edu address can access the service — even those from schools without a contract. The music includes songs from all the major labels and various independent labels. It has added access to full-length films to its offerings, too.

The company charges $19.95 a semester to students wanting to download music to portable devices, and $14.95 a semester to download movies, but concedes that revenue from this is “nominal.”

Investors are Anschutz Investment Company and Columbia Capital. Existing investors include Battery Ventures, Eastward Capital, Pinnacle Ventures and Shelter Capital, although Pinnacle did not invest in this round. The Herndon, Va. company has now raised more than $33 million.

Ruckus’ parent company is Ruckus Network.

Serving ads on mobile phones is a lucrative business, forcing companies with a stake in the game to engage in aggressive marketing — perhaps too aggressive.

Millennial Media, one of a handful of Young Turks targeting this market, is a case in point. The company, which recently raised $6.3 million, has just launched a marketplace for advertisers and publishers that has a fake ad counter on its home page.

In its fervor to stay up with aggressive players like Admob and Third Screen Media, the company’s marketplace, called Decktrade, sports a counter (go to page here; see screenshot below) that gives the impression it is scrolling all the new ads being bid on within the marketplace. The counter (go to the page here; screenshot below) shows the bids, the click-through rate (CTR) and estimated cost per thousand impressions (CPM). The counter is moving rapidly.

You know it is fake because if you disconnect your computer from the Internet, the counter keeps ticking. A tipster pointed this out to us, after he’d done some analysis. The counter’s data is all hard-coded (download code as text); there’s only one phone for Turkey, the Nokia 6680, for example. What is odd, is how elaborate the scheme is. CPM values are set to be $8.5 + a randomly generated number, keeping ads at a nice high rate — all the better to get publishers eager to join. This is sketchy. If these sorts of randomized counters are being condoned by the industry and its insiders, we suggest people start calling companies on this; it’s misleading. We’ve requested comment from the company’s public relations firm, but have yet to hear back.

This sort of thing was bound to happen. The temptation to create the impression you are the market leader is great. EBay and Google showed the biggest marketplace wins. Mobile ad spending was only $871 million last year, but is expected to reach multi-billions in coming years. And the counter idea is a blatant copy of competitor Admob’s impressive counter. Three weeks ago, Admob raised $15 million from high-profile Silicon Valley investors Sequoia Capital and Accel Partners. Even then, we noted that companies appear to be getting carried away with their stats, and wondered aloud whether anyone is holding them accountable. Third Screen Media, for example, said on its Web site it served 175 million ads a month, after earlier telling the WSJ that it showed 350 million a month.

Here’s a copy of Millennial Media’s announcement about Decktrade. Millennial’s backing comes from Bessemer Venture Partners, Columbia Capital and Acta Wireless. The company is headed by Paul Palmieri, formerly with Verizon Wireless and Advertising.com.

(Update: Apologies for the earlier version. A switch in servers and move to a new version of Wordpress recently caused a glitch, causing a draft to be published instead of the final version.)

(Update: This morning, the company has changed its homepage, freezing the counter and saying it is only for “marketplace simulation.”)

(Updated) roundup of latest tech stuff:

Amazon.com answers Wal-Mart on video downloads — There are so many video download services, it’s easy to get jaded. Wal-Mart just announced its own download service, but the test site looks awful (it still badly garbled as of this writing). A more promising video service is the offering by Amazon Unbox to download movies directly to your TiVo. This is significant: It’s the first service letting people watch regular TV programming and Internet video from the same box. This will be rolled out beginning in a few weeks. Other services, such as CinemaNow, Akimbo and others require buying a new box, setting up a network or other steps that confuse or turn off most people. [Update: Just noticed that Amazon-TiVo consumers will have to order their videos from their PCs, instead of from their TiVO, so this is not as simple as we originally thought.]

News Corp. rethinking ad deal with Google — Google is dragging its feet on filtering copyrighted videos on its new property YouTube, so you’d expect the music and video companies owning the copyrights would play hard ball. No surprise, then, that MySpace parent News Corp. is apparently rethinking the advertising deal it signed with Google last year (see WSJ story). News Corp. is already upset with Google over the copyright issue.

Another RFID company trying to go public — RFID stands for Radio Frequency ID, and refers to the little radio tags retailers and others are placing on goods to track them better. It was supposed to be all the rage two years ago, but the early-bird companies wanting to go public look risky. First there was Alien Technology, which was rejected by the public markets. Now Applied Digital, which a Florida company that owns an implantable RFID unit, is trying for the second time, and still looks risky.

Talking of risky IPOs, Globalstar was always one — We always thought satellite communications company Globalstar rushed its IPO a bit, going public as soon as it got some decent revenues. But it did so after raising a bunch of cash, and not long out of bankruptcy. Were there unknown problems lurking at this company? We couldn’t tell. Now, it turns out all their satellites might just stop working because of technology problems, it discloses. Needless to say, the stock has plunged.

AT&T shuts down the famous Iowa phone-loophole scam — Or at least, it appears to be making progress in one case, FuturePhone.

Once high-flying video site Metacafe, imploding? — Traffic is apparently falling for the company, which recently located to Palo Alto from Israel. Company gets a new CEO.

MFG.com, online marketplace for custom manufacturers, raises $4M — The Atlanta company, seeded earlier by Amazon.com’s chief exec, Jeff Bezos, has raised its first round of venture capital, led by the European Founders Fund. Designers with sketchings and other designs to implement can get hooked up with specialty suppliers.

Google tracks not only your search history, but apparently your spam history too — In other words, if you tried to spam its search engine in the past, you may be permanently blacklisted.

Teliris raises $40 million for telepresence offering - It’s to difficult to understand why companies like Teliris, which is already established, is raising $40 million from Fidelity Ventures and Columbia Capital to build out its “telepresence” offering, when such large competitors Hewlett Packard, Cisco Systems and others have entered the market with similar high-end offerings. With communications costs going down, and more video-conferencing offerings launching for free (albeit perhaps with not such high quality yet), its difficult to know how companies, even large ones, can continue to justify spending several hundred thousand dollars on each room installation. But Fidelity has been a smart investor in the past, so maybe it knows something about the budgets of Fortune 500 companies that we don’t.

Lots of other financings — See VentureBeat’s Newswire for latest deals, including Beceem’s latest funding, to help build out mobile WiMax, Fonality’s funding for VoIP services, Bright Source’s funding for solar power plants, and Baynote’s funding to stave off upstarts like online behavior companies, Aggregate Knowledge.