VentureBeat

updated with valuation

RockYou, the Silicon Valley widget company that lets millions of people post slide-shows on Web sites and play games on platforms like Facebook, has raised $35 million more in a third round of funding.

VentureBeat learned of the news Friday, and confirmed it over the weekend with chief executive Lance Tokuda. The company will issue a press release later this morning.

Doll Capital Management led the round, providing $30 million. The remainder $5 million was provided by existing investors, Sequoia, Partech and Lightspeed. Tokuda said the company may raise more money later, but wouldn’t elaborate. The company has now raised about $48 million in total.

Tokuda said the company raised the cash to keep expanding. The round follows the $50 million round of cash raised recently by competitor Slide at a whopping $500 million valuation. I’m told RockYou raised this round of money at a valuation lower than Slide’s, but I’m not sure how much lower [Update: We're hearing the valuation was set in the $200 million to $230 million range]. RockYou had set out to raise money at a valuation of $400 million, though VentureBeat reported earlier that it was having trouble doing so on clean terms.

That’s a bit of a blow to Rockyou, since by all accounts it is competing neck and neck with Slide. RockYou says it may have a slight edge: RockYou’s reach stands at 87.5 million users a month, compared to Slide’s 63.7 million, according to traffic measurement company Quantcast.

[Update: While RockYou points to Quantcast, Slide counters by saying those numbers are misleading. Indeed, the numbers game can be confusing. On one hand, Slide says RockYou is an ad network and has added Quantcast pixels on all of its banner ads, including when they're on other publisher sites. Slide says it is not an ad network, and sells ad only on its own applications. RockYou then counters and says Slide counts some page traffic that isn't monetizable because it doesn't carry ads. This semantics game matters, because Slide's pageviews are twice as large as RockYou's. Finally, Slide says Quantcast pixels aren't placed on several of the sites in its network, including MySpace, Orkut, and Hi5.]

That Slide was able to raise money at a higher valuation than Rockyou may come down to two facts: 1) timing; economic woes have set in, and made investors a little more sober, and RockYou was slower to raise money; and 2) Slide’s founder Max Levchin is a veteran entrepreneur, having co-founded PayPal, another very successful company. RockYou’s founders (Tokuda pictured left, co-founder Jia Shen on right), by contrast, are on their first company. Slide, though, insists it deserves a higher valuation, and that Max is not the reason.

I should note that RockYou’s funding included the $1 million invested barely a week ago (reported by VentureBeat). That $1 million was a “bridge” financing to tide the company over until the larger round could be completed, said David Chao partner of DCM. RockYou needed the $1 million urgently to do an unspecified deal, Chao said.

Chao said it was clear from RockYou’s growth in page views, monthly unique users and overall Internet reach that Rockyou may become a top-ten Internet property globally (at least in terms of reach).

RockYou has been building an ad network to let advertisers target users of RockYou’s popular applications on Facebook and other social networks. The Quantcast numbers count traffic to pages that contain widgets where RockYou has the ability to insert advertising.

Chao said that advertising dollars flowing into social network sites have been small so far, but they’re likely to grow over time as advertisers get used to the medium. Already RockYou is making “double-digit” millions of dollars in revenues, he said, referring to this year’s run-rate. Contextual advertising will become popular on Rockyou, as advertisers find that they can target certain demographics, for example the different genders and age groups of users that play RockYou’s various games, Chao said.

Chao said RockYou would likely to build more complex applications over time, which may mean more sophisticated audiences and thus more lucrative advertising.

Tokuda said the company is moving to Redwood City, Calif., this month, from San Mateo, Calif.

Here’s the latest [updated] action:

1) NVCA thanks the Senate for blocking VC tax
2) Feedster goes belly-up
3) David Chao is new head of Doll Capital
4) Asian telcos may finally find a US toehold
5) Biofuels could be worse than gasoline
6) TechForward raises financing
7) Facebook blocked in Syria

Senate blocks carried interest tax — The National Venture Capital Asoociation expressed its gratitude to the US Senate for dropping a provision to change carried interest tax rates, again. This isn’t any real surprise — we reported in October that the bill would likely fail in Senate, as it has before. Senator Charles Rangel, the Democratic chairman of the Ways and Means Committee, promised to “continue to pursue this issue.” For more on why it’s an issue in the first place, check out our past post arguing in favor of the tax.

Feedster drops off the radar — The blog search site may or may not be dead, but its servers are no longer responsive and the company isn’t responding to our inquiries, either. The company first got funding back in 2004, but we hadn’t heard much from it since last year. Considering the trouble other, similar companies have had, including competitor Technorati, chances seem good that Feedster is done for.

David Chao taking helm retains leadership role within Doll Capital Management — You could see it coming, but it’s now official. David Chao is becoming the head [update: I’m told by Chao that he is not the sole leader of the firm, as a source close to the firm had originally told me. Chao tells me the firm has a management committee comprised of four partners that makes recommendations to the general partners, and he is on the management committee.] Chao is characterized by his hard-charging, workaholic attitude — which we’ve been following for years (see here and here). The Wall Street Journal was inspired enough to paint an admiring portrait of him in an article last year. Under Chao, DCM may tend to cut its losses more quickly and play a faster hand with its investments. He helped found the firm over a decade ago.

Asian telcos are eyeing the US market — NTT DoCoMo, KDDI and other large Asian cellular operators have always been interested in the United States market, but past investments haven’t worked out well for them. The upcoming 700MHz auction, however, may provide them with a useful overseas toehold, especially if Google places a winning bid. More from BusinessWeek.

Biofuels could actually produce more carbon — We all know that corn-based ethanol is inefficient and wasteful (unless you’re a corn farmer). Going a step further, this Environmental Science & Technology article suggests that ethanol’s production might actually release more carbon into the atmosphere than just using gasoline. And another article from the same publication points out the polluting side of harvesting sugarcane in Brazil, a more effective source of ethanol. (For those of you about to point out cellulosic ethanol as an answer, check out this piece from our own Contributor series, written by UC Berkeley professor Ted Patzek.

TechForward, a company that lets consumers upgrade their consumer electronics after purchasing, raises financing — The Los Angeles, Calif., company raised an undisclosed second round of funding from Silicon Valley venture firm New Enterprise Associates, as well as First Round Capital.

Syrian authorities block Facebook –Apparently, the country took the action out of fears of Israeli “infiltration” of Syrian social networks, according to residents and media reports.

Trion World Networks, a company promising to deliver new kinds of interactive online games, has raised a whopping $30 million in capital without having launched a single product.

The huge financing is a bold bet that an unproven company, formed early last year, can nevertheless exploit a “disruptive cycle” in the media and entertainment world to produce new online games of value. Nate Redmond, a partner Rustic Canyon, the company’s lead investor said the company will distribute “dynamic games” across multiple devices.

Here’s the statement.

Lars Buttler, a former Electronic Arts executive, co-founded the Redwood City, Calif. (Silicon Valley) company along with Jon Van Caneghem, a video game designer. We mentioned last year it had raised a first round of capital from Doll Capital Management and Trinity. The team hasn’t disclosed many specifics, other than they want to build the games and entertainment around “channels” of live programming — and that there will be elements of virtual worlds and social networking thrown in.

The $30 million comes from venture capitalists and media giants. Venture firm Rustic Canyon led the round, which included Time Warner, GE/NBC Universal’s Peacock Equity and German publishing giant Bertelsmann’s investment arm, BDMI Invest.

Live, original programming costs money, and there’s a multitude of other companies — new and old — already producing video and game content. Presumably, therefore, Trion will be drawing upon the content of the media giants among its investors, and seek to deliver their content in new, more dynamic ways. There are a scores of new game and media companies emerging to do similar things.

San Francisco’s BitTorrent used to enjoy all the buzz surrounding video downloading. Its peer-to-peer file sharing technology allowed for cheap, easy distribution at a time when video streaming technologies were nascent. That’s changed, despite its announcement today of deals struck with major studios.

Today, it will unveil deals with Paramount, MTV Networks, 20th Century Fox and some other studios. Users will be able to purchase or rent movies from these sources, in a video store to be launched in February. The deals follows BitTorrent’s earlier deal with Warner Bros.

Trouble is, BitTorrent has never gained mass appeal among regular consumers. It is best as a back-end distribution protocol. Now major retailers have entered the market, from Apple, which offers its own movie downloading service, to AT&T, Amazon.com, Microsoft and WalMart (see news yesterday), offering similar services — all making it easy for regular folk to watch movies from their TV screens. You’d think BitTorrent would be more focused on becoming the distribution partner for some of these players, rather than try to become the consumer destination. There’s a summary story in the Mercury News today, which suggests consumers using BitTorrent’s service will be able to play downloaded videos only on their computers — though the company says it will try to change that, to allow watching videos in their living rooms.

There are rumors that chief executive Bram Cohen has departed, and that the company has raised at least $15 million in a venture round from Accel Partners, and existing backer Doll Capital Management (which invested $8.75M in BitTorrent more than a year ago). VentrueBeat has confirmed that Accel’s Ping Li is the point person on the deal. Stay tuned.

Update: BitTorrent tells VentureBeat there’s nothing to the rumor about Bram departing; he’s there to stay, a spokeswoman said.

A giant Chinese Facebook copycat has just been formed, in part by U.S venture backers.

Xiaonei.com, the college social networking site that has become one of the biggest players in China, and reminding many of Facebook’s site, has been acquired by Oak Pacific Interactive, which has its own Facebook version, 5Q.

Their goal is to merge to the two Chinese leaders, to create a giant in the market. Notable is that both companies have U.S. backers. Oak Pacific is backed by Silicon Valley venture firm Doll Capital Management, and buyout firm General Atlantic. Xiaonei, which means “on campus,” is backed by angel money in part from an unnamed “ex-CTO of Amazon.com.”

There are several other smaller players in the China market.