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Avaak, a creator of video networking technology, received $7 million in its first round of private funding — money that will go toward putting the finishing touches on its new camera system, the Vue Personal Video Network. Even though it was initially developed for homeland security purposes, the company is now touting the Vue as a “lifestyle product” for regular consumers.

The company hasn’t revealed much about the camera, slated to launch in early 2009, except that it runs on very little power and comes with no wires attached. This portability will let Vue users instantaneously capture, view and share videos from anywhere at anytime, Avaak says. The company is aiming to sell the camera for personal, rather than commercial, use. Seed money came from the U.S. government, which uses a version of the cameras for homeland security and military purposes, namely allowing soldiers to see around blind corners by tossing or installing small durable models in obscured areas. Avaak received sizable assistance at the start of the year from the Center for Commercialization of Advanced Technology (CCAT, pronounced sea-cat), which helped the startup scout federal funds and speed up progress.

Less than a year later, the consumer market is catching on. Last month, the tiny camera landed San Diego-based Avaak a finalist spot in the Consumer Electronics Association’s i-Stage Competition. Some of the funding will be used to devise an appropriate marketing strategy. It’ll be interesting to see if they choose to capitalize on the security aspects of the product or more fun, casual uses.

The round was led by Trinity Ventures, joined by InterWest Partners and Leapfrog Ventures.

UpTake , the travel search engine formerly known as Kango, has raised over $10 million in a second round of financing.

Unlike many content-focused travel sites, which seem to proliferate daily (see TripWolf, IgoUgo, TripSay), UpTake has no illusions about becoming the first place people turn for travel info. It has instead built a strategy almost entirely based around aggregating high-quality content from other sources and pulling in traffic from travel searches executed on major search engines. According to Yen Lee, UpTake’s CEO, around 10 billion of these searches are made every year in the United States.

The company launched to the public in May. Lee, who was previously the general manager of Yahoo Travel, says the growth in unique visitors and page views per visit at UpTake have far exceeded what he experienced at Yahoo. The interesting detail is that only two percent of the site’s traffic originates from direct navigation to UpTake’s main page. The other 98 percent comes from high placement in search results for niche travel queries like “Monterrey things to do,” or “Carmel romantic hotels.”

Lee knows UpTake will never compete for the most frequently searched items like Las Vegas, San Francisco or New York, but says it can succeed by building a huge index of niches (pet friendly hotels, best girls’ nights out, and so on) and become a conduit from a travel query on Google to the rest of your plans. Meanwhile, it’ll have to find a way to outmuscle TripAdvisor, its closest competitor, which seems to show up above UpTake in almost every test search I tried.

But for a start-up five months into its public launch, showing up high on the first page of results sure ain’t bad.

Trinity Ventures led the round, which included previous investor Shasta Ventures. Lee says that most of the capital raising process took under a month.

An increasing number of entrepreneurs have been asking me what I think of the prospects for consumer Internet startups. Strategic purchases of companies seem to be slowing; advertising spending might be flat next year; and growth on the large social network platforms is getting harder. What’s a startup to do?

This heightened level of concern right now, I believe, is resulting from a fundamental shift in the value of consumer engagement. Several years ago, practically any type of consumer engagement was valuable. A large community of unique users either created a desired asset to a strategic buyer looking for Internet reach or, alternatively, provided enough impressions to get to profitability on an advertising-based business model. More traffic, more value.

These days, that’s no longer the case. The buyers have made their bets, and now, given all of the alternatives fighting for consumer attention, it’s much more difficult to become a top 50 U.S. destination site, roughly the level required to get to profitability and revenue above seven digits. Chasing unique users today as the primary business goal is no different from chasing eyeballs at the start of this decade. It’s not a complete business strategy.

Rather than get discouraged, I think this simply means that companies need to innovate. They need to move from engagement for traffic to engagement that matters.

Engagement that matters is a consumer experience flow that navigates the user to a place where he or she ultimately takes a specific “call to action” that leads to a purchase of a good or service. HotorNot, for example, moved to engagement that matters when it developed effective navigation paths for its community to purchase dating services and digital goods. Making this move transformed the company from a fun, entertaining site to one that generated meaningful profits and value.

Creating engagement that matters isn’t easy, but these questions might help frame the discussion:

What “Call to Actions” are valuable and plausible?

Valuable “call to actions” are those instances that lead to a purchase or direct a customer to someone who can monetize that lead. Identifying these calls isn’t hard – “Click to buy this digital camera!” is an obvious one.  The challenge is designing the consumer experience so that the consumer is guided down a path, the engagement path, which leads that person to a plausible decision point to make a call to action.

The key to plausibility is deeply understanding what the consumer’s mindset is during the experience and finding offerings that fit and aren’t jarring. Ways to find plausible “call to actions” include surveying users to find out what they want or need; looking at comparable real life businesses to see what they offer; and examining the business models of proven online businesses from Web 1.0. Although Photobucket, the most popular photo hosting site in the U.S., was large enough to be profitable on an ad-only model, the team augmented the business with a number of different subscription service offerings (storage amount, mobile distribution, editing capability) in response to consumer feedback.

In defining these calls to action, don’t discount the obvious. For example, getting consumers to become engaged in investigating consumer products can lead to good affiliate or lead gen opportunities.  Sites concerning money can indeed sell financial services. And social sites can lead to dating offerings, although that’s a pretty crowded category. The key here is to respect the consumer and understand his/her needs and not just focus on getting him or her to push a button so that they can push a button again.

How do you lead users to that “Call to Action”?

Once a startup has a list of plausible “call to actions”, the team needs to figure out how to lead the customer to take that action. The two concepts that I find helpful here are dissatisfaction and guardrailing.

What’s often overlooked about consumerism is that consumers take “call to actions” when they’re dissatisfied. They take action to satisfy a latent or articulated need. What this means is that a startup’s objective is to navigate the consumer to a place where he or she can be satisfied by taking a “call to action” that benefits both the user and the company.

A business’s mission is to create satisfied customers profitably. It can satisfy the consumer’s need prior to getting money, but if the business’s services cost too much money, it will ultimately go out of business. Startups therefore have to balance how much satisfaction and dissatisfaction they provide through the engagement path. Too much of either one leads to an unsuccessful business.

An engagement path that I thought balanced satisfaction and dissatisfaction well was one offered by Tickle.com, a leading quiz website founded in 1999 and subsequently purchased by Monster. For a path within this website, the user takes a test and gets back a high level summary result. For those users who are still dissatisfied, they can buy the detailed results. By contrast, a navigation path that doesn’t work is the one in message boards. Consumers are primarily there for social engagement or to find answers to questions. Message boards are generally too effective at satisfying users’ needs and therefore don’t easily lead to other forms of monetization.

The second concept, of guardrailing, requires a longer discussion, but in short, the goal is to design a path that provides choices, but not too many, and helps steer users to the choice that best serves both users and the company. The book “Nudge,” by Richard Thaler and Cass Sunstein (Yale University Press, April 2008), dives into the design of “choice architecture”: which choice is first; should it be opt-in versus opt-out; and how many choices make sense?  I like the design of Tickle, Netflix and Classmates. They have targeted paths for very specific cohorts of consumers that operate a lot like the way video games keep gamers on the right path through a level.

I hope readers find these questions and concepts here useful.  I look forward to having conversations with anyone interested in theorizing about the future of engagement that matters. For future discussions, I can be reached at gus@trinityventures.com.

Game startup Trion World Network is today revealing how it is designing massively multiplayer online games with high graphics fidelity that will run across video game platforms — such as consoles, PC, mobile, and set-top boxes — a feat that no other video game company has yet pulled off.

The bold scheme will let the startup launch multiple games at once on what it calls the “Trion Platform,” which consists of software that runs on a bunch of game devices and exists on a network run by Hewlett-Packard. The games are cross platform because they run on servers in contrast to most desktop-based or console-based games.

“For decades, games have run on the clients, but we’re transforming them so they are completely server based,” said Lars Buttler, chief executive of Trion in Redwood City, Calif. “We think that will disrupt the industry.”

I’ll talk about the significance of shifting from client to server games below, but it’s a bit like how Salesforce.com disrupted traditional business software companies with its software-as-a-service, or how delivering software over the web has disrupted delivery through traditional means.

Trion may have amibitious goals, but it’s done some heavy lifting in just a couple of years: signing up partners and investors, building game design teams and creating a fundamental technology infrastructure. While most start-ups take on an innovation in just one part of the value chain, Trion is trying to create most of that value chain itself.

“It’s like Apple designing everything it needs,” he said. “It’s very risky, but highly profitable if it works. We’re not just doing a little piece. We’re bringing it all together.”

The first major partner being announced today is the Sci Fi Channel, but Trion plans to have a whole portfolio of online game worlds. I’m duly skeptical until I see how good these games look and how fast they play. Server-based games aren’t new as a concept. Typically, they have lousy graphics quality and suffer from time lags because of bandwidth limits, said Billy Pidgeon, a game analyst at International Data Corp.

Coordinating fast-action games is so tough that they usually have to be limited to 16 to 64 online players in a single game. Trion wants to allow thousands of players in the same game arenas. Others who try to build massive game worlds with thousands of players always run into some trade-off that compromises the quality of the experience.

Buttler can see the company he wants to disrupt outside of his company’s window, since Trion’s home is within view of Electronic Arts‘ headquarters. The more focused target, however, is Blizzard’s “World of Warcraft,” which has 10 million subscribers worldwide and is the No. 1 online game. Read the rest of this entry »

Skyfire has raised a $13 million second round of funding as it ramps up its campaign in the mobile browser wars.

The Mountain View, Calif. startup’s goal, says chief executive Nitin Bhandari, is to make a browser that makes the mobile web experience as close to the PC-browsing experience as possible, rather than settling for the simplified web presented on most mobile browsers like Opera Mini. Some of that comes down to the interface: Like the iPhone’s Safari browser, Skyfire lets you see a full web page, then zoom in by touching the screen. Even more significantly, Skyfire supports web formats like Flash and AJAX that don’t work on many mobile browsers. For example, Skyfire is the only one to support the latest version of Flash, Bhandari says. And even with formats that other browsers support, Skyfire is the fastest. Jake Seid of Lightspeed Venture Partners, which led the round, says the browser is normally five to 30 times faster than the competition.

Skyfire is currently in private testing mode for smartphones with the Windows Mobile operating system. Although Bhandari describes the initial response as very positive, he says it’s too early to release any numbers to back that up.

The company plans to add compatibility with other platforms soon, starting with the Symbian operating system, and Bhandari says he wants to leave testing mode in late summer. Apple’s iPhone has been credited with leading the way in popularizing mobile web surfing, but Bhandari says Skyfire doesn’t have any immediate plans for iPhone compatibility. That makes sense, since much of Skyfire’s promise is to bring a smooth browsing experience to mobile devices that aren’t as expensive as the iPhone.

As for making money, Bhandari will only say that there are players in different “layers in the [wireless] ecosystem” that are interested in partnerships.

Seid says one of the big reasons for Lightspeed’s investment is Skyfire’s vision of allowing phone users to access “the real web” rather than a watered-down mobile web. As an example, he points to Flash video site YouTube. Although the iPhone has a special YouTube application, and there’s also a YouTube mobile site, most mobile browsers can’t run videos from the real YouTube site.

Does that mean Lightspeed is essentially betting on the desire of users to access multimedia content on their phones? Not so, Seid says, because more and more web pages in general are moving onto Flash and AJAX: “It’s not a bet on [multimedia], it’s a bet that people want to access the web, period.”

Skyfire previously raised $4.8 million from Trinity Ventures and Matrix Partners, who also participated in this round.

updated

Since its launch in 2006, software from a Seattle startup called Wetpaint has been used to build nearly a million wikis where a company’s customers and fans create the content. That’s pretty impressive, but Wetpaint chief executive Ben Elowitz says some companies weren’t satisfied — it would be even better if they didn’t have to create the wiki on a separate site.

Wetpaint addresses that need with its new release, dubbed Wetpaint Injected, which does exactly what the name says — it injects wiki functionality into any webpage. So rather than creating a separate page for, say, a VentureBeat fan community (hey, it could happen), we could allow our readers to update our stories by adding wiki-style entries to the main page. And that, Elowitz says, improves traffic and search engine optimization to our main site, rather than pulling users to another page. (See screenshot of Wetpaint Injected at the game site IGN, below.)

When we wrote about Wetpaint more than a year ago, we were most impressed with its convenience — it was just really easy to set up a new wiki. The company has carried that approach over to its new product; Elowitz says the new functions can be added by just pasting a short snippet of code to a webpage. At the same time, the user-generated content’s look and format is customizable and should blend in with the rest of the page.

This is a smart move, and should further help Wetpaint stand out from competitors like PBWiki. As more and more sites add features — wikis, comments, polls — that allow them to interact with their readers, it makes sense to integrate those features as directly into the main browsing experience as possible. And the ability to add wiki capabilities to any page with just a few lines of code is totally unique, Elowitz says.

Companies should also be attracted by the fact that the feature is free for up to 100,000 impressions per month, and then charges based on a revenue-sharing model.

Elowitz says Wetpaint’s approach has already started paying off, with 925,000 websites built on the company’s platform and 20 percent growth in recent months. But he also says it’s time for the company to start growing more aggressively, which is why he’s raised a $25 million third round of funding, bringing Wetpaint’s total financing to $40 million. That’s a hefty sum, particularly when you recall that we were already startled by the size of Wetpaint’s $9.5 million second round. But Elowitz says the funding matches the company’s ambitious plans to “wikify” every page on the web.

The round was led by DAG Ventures and an undisclosed investor, with participation from existing backers Accel Partners, Trinity Ventures and Frazier Technology Ventures.

Update: Kara Swisher reports on yet another investor, Fidelity Investments (perhaps that “undisclosed” lead investor that Wetpaint mentioned?). Fidelity is the same major institutional backer that invested big bucks into Slide. And in the comments below, PBWiki’s Chris Yeh notes that his startup offers a similar feature, but hasn’t emphasized it.

The Indus Entrepreneurs Conference (TiEcon) kicked off today with near-record attendance of more than 4,000 people in spite of the economic slowdown.

The conference for entrepreneurs is in its 16th year and has become a powerhouse networking event for South Asian investors and tech entrepreneurs with strong ties to mainstream tech leaders.

This year, as I walked through the crowded halls, I could overhear conversations in the hallway, catching whispers of “we haven’t pitched anyone” or  “our valuation  is higher.”

Attendees today heard speeches on entrepreneurship from PayPal founder Peter Thiel and Intuit Chairman Bill Campbell. Such big names show how much clout the TiE group has now.

“Even in harder times, people still want to come and hear inspirational stories from well-known entrepreneurs,” said Ajay Chopra, (pictured) co-chair of the conference and recently named general partner at Trinity Ventures. “We try very hard to get the big names here, and we get a lot of help from our successful members who know people at senior levels.”

The theme to many of the talks is “entrepreneurship unbounded,” Chopra said. That means that the domains are global, not just local, and they stretch across industries from solar to social networking.

Beyond the talks with tech luminaries, the conference has crowded exhibits and networking events. About 40 venture capitalists were scheduled to participate in “speed dating” presentations from about 200 entrepreneurs. For a few minutes at a time, the entrepreneurs could pitch VCs who had a specific interest in certain kinds of companies. About 40 percent of the start-ups are from consumer web companies, Chopra said. Another 20 percent are software-as-a-service companies, with the remainder from all industries. Last year, NextPlane was one of the dating game companies that received funding as a result of its participation.

As a VC himself, Chopra said that seeing so many companies at once can be efficient. Last year, he looked at 350 companies but invested in only two.

Matt Marshall, VentureBeat’s founder, moderated a panel on how to build buzz for start-ups with well-known tech investors/veterans James Joaquin of Bridgescale Partners, Krishna Kolluri of New Enterprise Associates, Dave McClure of Stanford University, and Indu Navar, CEO of Serus. (Disclosure: Marshall is my boss).

Some tips: McClure suggested companies built a Web site prototype quickly and then start soliciting feedback, all the while remaining quiet about publicity until the bugs are worked out. He also said that soliciting feedback is much more valuable than staying in stealth mode. Kolluri agreed, saying that companies in stealth often feel insecure about their competitive advantage over rivals. McClure also said that start-ups can get a lot of free publicity by staging public fights with their would-be rivals. (It’s not the nicest tactic, but it gets attention).

Vishal Sikka, the chief technology officer of software giant SAP, said in an interview at the conference that he finds TiEcon invaluable as both a South Asian and a tech executive. SAP has more than 4,000 of its 50,000 employees in Bangalore, India.

“The ability to attract influencers here has been growing over the years, along with the growth of the South Asian technology economy over the past two decades,” Sikka said.

The conference is staged by 400 volunteers. The overall TiE group has 46 chapters in 11 countries with a membership that tops 12,000.

The event, which costs $299, is being held all day Friday and Saturday at the Santa Clara Convention Center.

Updated

Job site Jobster has raised another $7 million in a fourth round of funding. It’s not a huge amount of cash, but it comes on top of the $48 million that Jobster previously raised at a $100 million-plus valuation.

With all the job sites out there, we’ve been skeptical about Jobster’s (and other sites’) ability to be heard above the noise. Since we voiced that concern more than a year ago, even more sites have emerged — for example, I’ve covered NotchUp, which has the novel hook of paying job seekers for an interview, and there were two very different job sites making their pitch at the most recent Y Combinator demo day.

Some of our concerns were assuaged by chief executive Jason Goldberg’s salesmanship, and the fact that Jobster has signed up a bunch of corporate customers. But Goldberg actually left in December, replaced by Jeff Seely, who helped sell trading site Sharebuilder. Presumably, the new funding is part of Seely’s efforts to revitalize the Seattle startup. Investors included Ignition Partners, Trinity Ventures, Mayfield Fund and Reed Elsevier Ventures.

Update: I asked Christian Anderson, Jobster’s director of corporate communications, what the funding means for the company, but he told me he can’t say anything. It sounds like there may be more news (perhaps some new features, or a new focus?) in the pipeline.

Video games are becoming an addiction for venture capitalists.

Fluid Entertainment, a kid-oriented online video game company, is near a test launch of its massively multiplayer online game and it is the latest to benefit from a round of VC money. The company’s game has relatively simple Flash-based graphics for children ages six to 11 and has an environmentally conscious theme, said Greg Jones, CEO of the Mill Valley, Calif.-based company.

The company has raised $3.2 million in a first round of venture funding from Trinity Ventures and a small amount from the Band of Angels. The funds were raised last August, but the 14-employee company has no immediate need to raise more, Jones said.

Fluid was founded many years ago by Scott Matthews to make games for a variety of publishers such as Electronic Arts. But Matthews always wanted to make his own original game and recruited Jones and Internet marketing veteran Jen Chapin to develop an online game.

Tim McAdam (pictured below), a partner at Trinity, said the investment in Fluid is the fourth major video game investment by his firm. Others include PlayFirst, a publisher of casual games; Hidden City games, maker of trading card games such as Bella Sara; and online games company Trion World Network. He said in an interview that Fluid fits in with the venture company’s belief that casual online PC games are a nascent opportunity.

“The niche here is where Webkinz and Club Penguin have done a good job getting traction with young kids with older technology,” he said. “This will focus on next-generation social play. We think Fluid can be a game changer, no pun intended.”

He added: “There will be a tsunami of interest around virtual goods. You are starting to see it already in games like World of Warcraft, Second Life, and Yaya Online. We believe a combination of subscription, virtual goods, and real-world goods is a way to build a large company over three to five years.”

Jones said that the company is very close to an open beta of its online game and that it will launch in the summer of this year. He said the company will describe the game in the next several weeks.

“We’re not trying to build World of Warcraft,” he said, referring to the hardcore fantasy role-playing online game with 10 million subscribers. “We layer in a meaningful purpose to the game that affects real world behavior around environmentalism and sustainability.”

Young kids haven’t participated in online games due to parental fears of online predators, lack of credit cards, and the lack of targeted content. But competitors who have gotten over those barriers include, as McAdam mentioned, Club Penguin, which Disney bought last year for $700 million, and Webkinz. Runescape, a free online role-playing game, generates $60 million a year in revenue through various alternative models such as micro-transactions.

Jones said that he was aware of the two-part sales process that requires buy-in from kids and parents alike. Kids have to see the games as fun and parents have to see it as safe and worth the price.

Jones said he has been an angel investor for five years. Before that, he started and ran the WorldRes hotel reservation web site.

PlayFirst, the publisher of the popular online game, Diner Dash, has raised an eye-opening $16.5 million in its third round of financing.

The company stands out because it’s one of the first mainstream American online game publishers to embed micro-transactions, small payments for access to new game content, into its game. The marquee title, Diner Dash: Hometown Hero involves controlling a waitress who runs around a restaurant trying to keep her customers happy. PlayFirst offers one playable restaurant and a standard avatar for free, but to soup up your avatar or get access to new restaurants, you pay small bits of cash.

Until Hometown Hero, the only way to play Diner Dash games was to drop $20.

The company is also announcing a partnership with widget-maker RockYou, to distribute one of PlayFirst’s games on Facebook.

The micro-transactions move has paid off: The company says it has doubled its revenues since 2006 and that Hometown Hero is on track to outsell its predecessors by a significant margin. The forums are more active, and 50 percent of the transactions involving the game are micro-transactions of $5 and under.

With this investment, the company intends to accelerate development of new games, extend its reach into consoles like Nintendo DS and Xbox360, and expand into international markets, especially those in Asia. The partnership with RockYou gives the company access to the so-called “social graph,” but the implications of this aren’t clear, and even PlayFirst says it is not exactly sure where this will lead.

However, PlayFirst says it will be releasing a steady stream of apps each quarter, starting with simple game widgets and expanding into richer content, but declined to offer details.

DCM led the investment, and previous investors Mayfield Fund, Trinity Ventures, and Rustic Canyon Partners participated in the round. The company has now raised a total of $26.5 million.

Here’s the latest action:
1)Google’s hires astronaut, funds algae-in-space research
2) Google slowly but surely moves apps to work offline
3) AdaptiveBlue makes its “Smart Links” smarter
4) YieldBuild wants to improve the placement and color of text ads
5) Technology to let machines drive cars is six to eight years away
6) Network Physics dies, sells assets to Opnet Technologies
7) Facebook sued for messaging
8) Visto declares it wants to go public for fourth year in a row
9) NBC Universal has pulled it channel from YouTube, with Hulu on way

Google’s hires astronaut, funds more space research – Google has really pulled out the stops on its space exploration ventures. It has committed almost $3 million a year to support 15 researchers at NASA/Ames, including Jonathan Trent, who is trying to figure out how to capture methane emitted by algae in the South Bay and turn it into a sustainable energy source. The thinking is the algae can be used to sustain human habitats on the moon or Mars, and be clean too, according to the Mercury News, which carries the latest details. Google digitizing NASA’s historic documents and images, and working with the space agency to add a “disaster response” layer to Google Earth that would quickly incorporate fresh satellite images of an area after a disaster, such as an earthquake. Google has even hired astronaut Ed Lu (image left), a veteran of three NASA space missions to manage Google’s space competition. (Image courtesy of Patrick Tehlan)

Google slowly but surely moves apps to work offline — It is using Google Gears to make Google’s blog software, Blogger, work offline. There’s a YouTube demo of it here. Google Reader is already offline, and Gmail and Docs should come soon. (Sidenote: VentureBeat’s writers have been using Google Docs to edit stories, and we’ve been having serious problems with Google Docs lately. It’s not showing edits as they’re updated, leaving one writer with one version and another writer with another — leaving our editing process in tatters on more than one occasion. Hope they get the online basics fixed first, before the carried away with the off-line version)

AdaptiveBlue makes its “Smart Links” smarter — Bloggers can now add a line of code to their site, and AdaptiveBlue’s technology will automatically take links to supported sites (Amazon, IMBD, Last.fm, Yahoo! Finance and more) and make them dynamic. Clicking on a Smart Link to the book, Love in the Time of Cholera, for example, will bring up a window with a short summary of the book, links to stores, reviews, and the Wikipedia entry on the author. A Smart Link to a stock offers a summary of its performance, links to Google Finance, CNN Money and SEC filings. You previously had to create Smart Links manually, and this new feature reduces that significant barrier to adoption.

YieldBuild wants to improve the placement and color of text ads — The company’s technology automatically tweaks the format of text ads based on their performance. It is similar to the Rubicon Project, which automatically places ads from the ad networks that deliver the most revenue. However, the Rubicon Project works with both display and text ads and its network-matching is a more robust technology. It’s not hard to imagine Rubicon replicating YieldBuild’s functions but it is hard to imagine it going the other way around.

Technology to let machines drive cars is six to eight years away — That’s the prediction of Sebastian Thrun, a Stanford computer professor, who leads the Stanford Racing Team in this year’s DARPA Urban Challenge, and knows as much as anyone about how well machines can drive cars. He talks about technology that will keep the “car much better in the lane, can brake much, much earlier in a much more regulated way. That would conceivably allow us to increase the packaging density of cars by a factor of two or three. Say it’s two, so at 16 percent occupied, just cut the space between cars in half, all of a sudden you’ve doubled the capacity of the U.S. highway system. That’ll sustain us for another 30 years with the current traffic loads given that the population is increasing and using more highway space.”

Network Physics dies, sells assets to Opnet Technologies – The publicly traded Opnet has paid $10 million in cash to buy the assets of the Mountain View, Calif. Network Physics, which was backed with more than $51 million in eight years from VantagePoint Venture Partners, Sofinnova Ventures, SunAmerica Ventures, Lucent Venture Partners, Intel Capital, Trinity Ventures and Palomar Ventures. Network Physics sells an application performance management appliance.

Facebook sued for messaging — Facebook is being sued by an Indiana woman who alleges Facebook profited from its members sending thousands of unauthorized text messages to her mobile phone and other phones of others that previously belonged to other people. The messages allegedly included explicit language and unsettling remarks, and resulted in charges of 10 cents per message on her phone bill.

Wireless-email company Visto declares it wants to go public for fourth year in a row– This is quite remarkable. Why did it take this publication take so long to call it out?

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.

RippleTV wants to put its network of digital TV monitors in public places across the nation, and has received an additional $10 million to do so.

It hopes to replicate the phenomenal success that Focus Media enjoyed by providing doing the same Chinese elevators and office lobbies.

Draper Fisher Jurvetson led the round, joined by Trinity Ventures, which also invested in an earlier round.

The El Segundo, Calif.-based company places its TV screens in stores it has partnered with, such as Coffee Bean and Jack In The Box. It provides a web-based interface for displaying RSS feeds of news, weather, sports and other information to customers. Content deals are currently with ESPN, E! Entertainment, Yahoo!, CBS and MSNBC, and others. The company says it is reaching 10 million consumers each month in hundreds of retail locations across the country.

DFJ was also an early investor in Focus Media, which hit a home run with the same concept in China — although it first got big in elevators, not in fast food restaurants. It is now a public company worth more than $2 billion dollars. Replicating such success may be harder in the US: A minimum level of quality is expected by the public, retailers and privacy groups “that might not exist in other markets,” said Company chief executive Ali Diab.

Competitors, meanwhile, are putting TVs everywhere. They include Gas Station TV (on gas pumps), Wal-Mart TV Network (in their stores) and Captivate (in lobbies and elevators). Others include Seesaw Networks, Lamar Advertising, Clear Channel Outdoor, and Reactrix Systems.

Costs are dropping. A startup called RedPost in Goshen, Indiana, uses open source software — a modified version of DSL Linux server software running the Mozilla Firefox browser. Like Ripple, advertisers upload their own ads and content is delivered via a wireless connection.

Another challenge: Ads aren’t welcome everywhere. For example, Stanford University decided to end corporate advertising in its football and basketball stadiums back in 2000 to protect its brand.

Regional burger chain Jack in the Box started adding screens to restaurants in Washington, Texas and Arizona, according to USA Today. The two companies will be placing Ripple TVs in more than 2000 locations across the US. Ripple plans several thousand locations across the country by the end of 2008.

Ripple launched a self-serve ad server in March for both local and national advertisers. Companies can register, then create or upload images for ads and choose which stores to run their ads in. The company splits revenue with the hosting partners. These partners can pick and choose content, including blocking ads; for example, Jack In The Box won’t allow McDonald’s to run an ad campaign on its Ripple TVs.

Advertising rates depend on the value of the location: They go from $18 a week for one Jiffy Lube location, to $40 a week for one Coffee Bean shop. The more locations are added, the higher the rates.

Ripple is not profitable, according to USA Today, so one challenge is to make money.

The Market Potential

But trends in the out-of-home TV market show promise. The so-called “alternative out-of-home media” market, which includes networks such as Ripple, has been doing well over the last six years.

A study by PQ media says:

“ironically, the trends impeding traditional media — consumer fragmentation and control, advertising accountability and the emergence of digital technology — are the very catalysts stimulating the tremendous growth in alternative out-of-home advertising.”

Americans spend twice as much time outside of homes and workplaces now versus just a few decades past, the study found. “Alternative” advertising is especially valuable because it is impervious to channel or Web surfing, and “is immune to audience fragmentation.”

The study noted that advertising revenue from digital displays (also including digital outdoor billboards) is growing fast: spending rose 55.4 percent last year, to $233.2 million.

Ripple also cites that PriceWaterhouseCooper projects 6.5 percent compound annual growth (paid subscription) in the out-of-home advertising sector over the next five years.

Because Ripple relies on the web to work, the company places wifi transmitters at every location — providing extra bandwidth to customers for free.

We can see the free Wifi bonus especially appealing to college kids (and entrepreneurs) already headed to Jack In The Box for cheap food late at night.