VentureBeat

Microsoft chief executive Steve Ballmer just said at the Web 2.0 conference here in San Francisco that the software giant will acquire 20 companies a year for the next five years, ranging from $50 million to $1 billion.

This steals from the playbook of News Corp, the media company that generated excitement among Internet companies after it acquired MySpace and others. There’s a tactic here: By declaring you are hungry, you get entrepreneurs coming to you to show you their wares — letting you get a glimpse of emerging technology even if you’re not going to buy it.

Google and to a lesser extent, Yahoo, have also acquired dozens of companies over the past few years, with Google much more acquisitive recently. Google has acquired at least 10 companies over the last year (there may be more than we’re unaware of), compared to Microsoft’s four. Yahoo has also acquired four. See list here.
With Google’s momentum lately, the fear and loathing that startups once had of Microsoft might be ebbing. Microsoft became famous during its hegemonic rule of the 1990s for engaging in negotiations with a start-up, and then pulling back at the last minute and launching an internal competitor. Now, with less time on its hands to stay in front of eager, nimble Web competitors like Google, and needing more goodwill from Internet developers for its latest initiatives online, Microsoft may lose some of its ruthless edge — or at least, be perceived to be losing it.

[Mark Coker contributed to this report.]

Web 2.0 Summit, co-hosted by O’Reilly Media and CMP, kicks off this Wednesday at San Francisco’s Palace Hotel. A who’s who list of Web 2.0 digerati will converge for three days of deal making, partying and more deal making.

If you didn’t have the budget to nab one of the $3,595 tickets for the event, fret not - VentureBeat reporters will be on hand to bring you frontline dispatches.

In preparation for the event, here’s a quick preview of what’s expected during the week, which includes some product launches by MadeIt, Userplane, Radar and Nokia.

Facebook’s Mark Zuckerberg, Google’s Marissa Mayer and Microsoft’s Steve Ballmer will all be speaking — and ears will be perked for the latest on reported acquisition talks between Microsoft and Facebook, and Google’s response to this.

EBay’s Meg Whitman will be speaking Thursday, right before her company’s Q3 earnings announcement the same day. Friday’s Wall Street Journal had an article about eBay’s struggle to juice its slowing growth rates. We also hope the moderator asks her questions about the departure of Skype founder Niklas Zennstrom, and about eBay’s associated $900 million write down. Speaking of Mr. Zennstrom, the Skype founder curiously disappeared from Web 2.0 Summit’s list of speakers sometime over the last few days. As recently as last Wednesday according to the Google cache, Zennstrom was listed as a speaker at the conference, where he was to participate in a session entitled, “Show Me.” Oops. Today, all references to Zennstrom are removed from O’Reilly’s conference agenda.

Wednesday evening, MySpace will host a dinner with News Corporation CEO Rupert Murdock and MySpace CEO Chris DeWolfe. We hope he speaks about his pending acquisition of the Wall Street Journal, and how he sees his new media properties meshing with his old media properties.

Several companies are expected to show off their latest Web 2.0 wares.

Thursday night, at a party promoted here, MadeIt.com, a new Web 2.0 online invitations site, will make its public beta debut. MadeIt.com plans to take on market leader Evite.com by adding social networking features to “keep the party going” after the party’s over, such as online photo sharing, video sharing, slideshows, story sharing, message boards and widgets. The company was founded by CEO Stephen Weir and his advisor, Jonny Hendriksen. Weir tells VentureBeat the company has been self-funded to date with about $80,000 in capital. The company is looking to do a seed round of up to $300,000 in the next three months to get to proof of concept stage, at which point it may seek a Series A. However, it enters a very crowded sector, filled with the likes of Socializr, Renkoo, Skobee, MingleNow and the related events sites such as Going.com.

On Wednesday morning at an invitation-only breakfast, cell phone maker Nokia says it will introduce a new N series handheld computer that promises to marry the mobility of a multimedia device with the Internet (yes, this is frustratingly vague, but we don’t know anything else). Other handheld computers in N Series family combine many of the features of an Apple iPhone - such as Internet browsing, photos, videos, games and maps, without the phone part.

Userplane, which provides hosted communications applications such as chat, messaging and voice recording for online communities, plans to announce Userplane Feeds, a collection of free APIs so that developers can build the applications into their own sites.

On Friday, Radar Networks’ CEO Nova Spivack, who in a previous life founded EarthWeb, will unveil and name the company’s first Semantic Web application, most likely an online personal data organizer, according to a July feature in the recently shuttered Business 2.0 magazine. The San Francisco company, which is backed by Paul Allen’s Vulcan Capital, Leapfrog Ventures and angel investors, has been in stealth for a few years, yet has been been aggressively promoting its business, technology and ideas for the Semantic Web for quite a while (this is one of those “pseudo stealth” companies, promoting itself in public relations pitches to media outlets, even as it feigns secrecy). Friday’s anticipated announcement will also mark the start of the private beta for the not-so-secret service. In addition to naming its first product, the company says it will announce a strategic partnership. Stay tuned for later this week when VentureBeat’s Chris Morrison reports on Radar Networks’ product launch and tells us if the company’s first Semantic Web application is ready for prime time.

We’ve noticed a couple passes listed for sale on Craigslist here and here, or you can always crash the conference and join the unofficial Web 2.0 Summit LobbyCon unconference in the lobby of the Palace hotel.

Mark Coker is a contributing writer for VentureBeat. He’s founder of Dovetail Public Relations, a Silicon Valley technology marketing firm. He has no clients among the companies mentioned in the story, nor among their competitors. More on Mark at http://www.linkedin.com/in/markcoker

A number of startups are starting to bring the power of the Web to bear on complex masses of biological data. One of the latest is Compendia Bioscience, an Ann Arbor, Mich., computational biotech that’s focused on mining cancer-genomics data. The company just received a $2.4 million grant from the National Cancer Institute to further development of Compendia’s lead product, a program that combs through and analyzes publicly available data on gene activity in a variety of tumors.

In this respect, Compendia’s product Oncomine is conceptually similar to other recent biological data search-and-analysis programs launched by companies such as NextBio and GenomeQuest. (See our previous coverage here and here, respectively.) The main difference here is that Compendia is focused more on gene-expression data from microarray experiments — so-called “transcriptomics,” if you like that kind of phrase — than straight genomic data. These experiments involve testing biopsied tumor tissue with a “gene chip” that can identify which genes are especially active and those whose activity has been throttled down or even turned off. This sort of information has all sorts of uses — it can help identify genes responsible for the creation and spread of tumors and may also help in the search for new drugs.

Microarray experiments produce an enormous amount of information — a single microarray can easily produce hundreds of gigabytes of data, so these are some pretty huge databases we’re talking about. Oncomine currently claims to index more than 21,000 microarray datasets containing over 500 million data points.

In any event, it’s fascinating to see the Web 2.0 mentality start to take on the huge and rapidly growing piles of biological data that used to be locked up in individual laboratories — or even in somewhat hard-to-interpret public databases like GenBank. These efforts not only make it more widely accessible, they make it possible for the first time to conduct analyses over widely disparate datasets that simply couldn’t have been done before. Not for free, of course — Compendia, like its fellows, charges academic labs and pharma/biotech companies for the privilege of peering into this data more easily.

Over time, however, I wouldn’t be surprised if these tools continue to get cheaper and easier to use, particularly as individuals obtain greater understanding and control of their own genetic information and begin demanding ways to help them better interpret it. Watch this space. Things should start to get pretty interesting before long.

Venture capitalists invested about six percent more into Web 2.0 companies in the first half of 2007, but the increase was attributable to more deals in Europe and Israel.

Notably, early investors in Web 2.0 slowed their pace. For example, Silicon Valley’s Benchmark Capital backed just three deals during the first half of the year, with only one in the Bay Area. In 2006, Benchmark was the sector’s top global investor, with 16 deals. It was a similar story with Omidyar Network, Kleiner Perkins Caufield & Byers and Storm Ventures, the survey found. The data comes from a survey by Dow Jones VentureOne and Ernst & Young.

Is the smart money leaving Web 2.0?

Not necessarily. Sequoia Capital and Draper Fisher Jurvetson, two respected firms, are the most active investors in Web 2.0 globally in 2007. However, both firms invest widely outside of the U.S. Maybe Web 2.0 is over in the U.S.?

In the U.S., investments in Web 2.0 were virtually unchanged from the first half of 2006, with 67 deals and $357 million invested.

Globally, investors pumped a record $646.2 million into 101 deals worldwide in the first half of the year. Within Europe, the United Kingdom posted the most activity, with a record seven deals accounting for $22 million invested. Belgium, Ireland and the Netherlands each saw their first Web 2.0 deal completed in the first six months of 2007, the survey found.

From 2002 to 2006, some 40 percent of Web 2.0 deals were located in the Bay Area. That figure dropped to just 20 percent during the first half. Even New England drew more money for Web 2.0 deals than Silicon Valley, according to the survey.

Finally, valuations of Web 2.0 companies have more doubled over the last year, meaning venture capitalists are having to invest more than double the amount to get the same ownership slice as they did last year. See table below.

Here’s the definition of Web 2.0 used by the survey: “Companies included in this study have a business model that revolves around a dynamic interface facilitating participation through such methods as user-created content, networking, and collaboration. Applications include podcasting, tagging, blogs, social networking, mashups, and wikis. Technologies used in these applications include: AJAX, RSS, SOA, CSS, XHTML, Atom, and rich Internet applications.”

More details of the study here in PDF.

For years, web-based software has promised to radically transform the software industry. Cheap, simpler Web tools are much more attractive to corporate customers, compared to antiquated, expensive subscription software.

Large, incumbent business software providers are jumping on bandwagon to provide these tools — even as they try to find ways to protect their old, better-paid business.

IBM, for example, has been developing an “enterprise mashup maker” since last year — web-based wiki software called QEDwiki (see video example, below).

QEDwiki (”Quick and Easily Done”) is designed to help businesses quickly put together a set of software widgets customized for their particular operations using a drag-and-drop interface.

To flesh out QEDwiki’s offering, IBM has announced a partnership with a venture-backed data company called StrikeIron.

Durham, North Carolina-based StrikeIron provides live business data from financial markets, news wires, and 100 other sources, as well as tools to help integrate this data with companies’ existing business software.

IBM will now let QEDwiki users access some StrikeIron data services through specialized widgets (available here) that users can drag and drop into their wikis.

The data services include tax data about e-commerce transactions, ways to verify addresses and phone numbers, Maquest-based maps, and worldwide SMS.

These deals are a necessary step in the evolution of business software because decision-makers at large businesses are hesitant about working with startups, according to Forrester. Chief information officers at large companies report a “strong desire” to buy web technologies such as blogs, wikis, rss readers and social networking tools as a suite. But “equally strong” is their desire to purchase these technologies from incumbent business software providers, such as Microsoft and IBM, Forrester reported in March.

Salesforce has been a leader in trying to do something offer services from a larger platform. Even Google is going after this market. It has its own platform-type program running with third parties, called Google Enterprise Professional. Earlier this week, Google announced the addition of Etelos to its official list of “enterprise” partners. Etelos provides customizable web applications for businesses, including a customer relationship management set of widgets that integrates with a user’s Google Apps start page — another drag-and-drop interface to help employees manage their data.

Etelos tells us the it has around 6,000 businesses using its Google application since it launched in February. The company also provides server support for other developers building software that integrates with Google Apps, as well as a marketplace for applications that work with a wide variety of other web sites.

QEDwiki demo here.

There’s a social networking site for nearly every person, animal, and interest – but what about a social network for the person who matters most? That’s right, a social network for YOU, the proud recipient of Time Magazine’s Person of the Year.

Look in the mirror. Do you really know yourself? Could you be happier? Thanks to a new web site called Inpowr, which launched yesterday at the Web 2.0 Expo in San Francisco, you can finally learn how to build a better YOU 2.0.

Inpowr bills itself as the web’s first platform for self-exploration.

Once you sign up for the site (beta test it with password: web2expo), you’re presented with a quick quiz that examines your well-being across 36 areas of life. After completing the questionnaire, you’re presented with a pastel-colored lotus flower that scores you in the six main categories of well-being.

I scored well in most categories, though I only got an 86 percent score for accomplishments, probably because I’ve been kicking myself lately for failing to coin the Web 2.0 label before everyone else. It was so obvious! But I digress.

Once inpowr politely informs you of your deficiencies, it guides you to create an action plan for improvement. It suggested I improve my altruism to boost my accomplishments score. Was it bad karma for me to pick up that quarter I found on the floor after yesterday’s VC session? Maybe I should have Twittered a lost and found.

The service emails you after 21 days and prompts you to re-evaluate yourself so you can measure progress toward your goals, and identify the specific actions that led to the progress.

The site will soon implement social networking features so that users can harness the collective experiences of other users. Kind of like a 12-step program where God is replaced by your social network and a friendly lotus flower.

The technology behind the site is based on developmental psychology theories about how human beings relate to the perceived environmental realities of their physical, mental and social environments. The general idea is that with a little hand-holding from the site and encouragement from our friends, we can all be guided toward healthier lifestyles and attitudes which in turn lead to a virtuous circle of ever-greater health and happiness.

Looked at another way, for example, if you lack physical energy due to poor nutrition, your work life may suffer, which could cause you to lose your job which would impact your financial ability to support yourself, which would make you sad. Obviously, this is an oversimplification, though any geek worth his salt will tell you Web 2.0 is also about the interconnectedness of everything.

Psychobabble aside, there’s probably a sizeable market for inpowr’s services if it can reach a critical mass of community participation.

As a society obsessed by self-improvement with the assistance of quick fixes, we already spend hundreds of billions of dollars a year in the pursuit of greater happiness, whether it’s via anti-depressants, stimulants, diets, plastic surgery, mental therapy or self-help books.

A free web site that gently guides us toward healthier actions, lifestyles and attitudes may be just what the doctor ordered.

Although the company hasn’t yet revealed its model for generating revenues, many other health and well-being sites such as WebMD have already proven the desirability of this audience to advertisers.

The site is owned and operated by Quebec-based Humanix. The company closed its first $150,000 angel funding round in September, 2006 and a second $350,000 angel round in March 2007. Michel Chioni, Humanix’s president, tells VentureBeat the company is in talks with Canadian VCs for a possible $1-$2 million round.

Mark Coker is a contributing writer for VentureBeat. He’s founder of Dovetail Public Relations, a Silicon Valley technology marketing firm. He has no clients among the companies mentioned in the story, nor among their competitors. More on Mark at http://www.linkedin.com/in/markcoker

O’Reilly Media’s Web 2.0 Expo kicked off yesterday in San Francisco, with 10,000 attendees from 59 countries. VentureBeat’s Mark Coker took notes from the day.

The highlight was the evening’s Ignite event: Imagine packing a large conference room with about 600 geeks, giving ‘em all the free beer they can drink, and then entertaining them with a rapid-fire procession of sixteen fast-talking techies who each deliver a twenty-slide PowerPoint on an eclectic subject with only fifteen seconds per slide for total presentation time of five minutes. Add in a huge LCD panel television monitor on stage, facing the audience, displaying a steady flow of the audience’s raucous real-time commentary about the speaker’s performance, transmitted of course via SMS texting.

Notables:

Colin Bulthaup of Squid Labs talked about how his new venture, Potenco, aims to bring electric power to the two billion people in underdeveloped countries who lack access to the electric power grid. He told the audience that 1.6 billion people light their homes with dirty-burning kerosene lamps, which are the leading cause of tuberculosis. His solution? Generate electricity from human beings. We thought this idea had been debunked (see our post about the futile effort of capturing human energy via treadmills; see last item), but Bulthaup showcased a yo-yo-like device his new Alameda, Calif. company has developed that with a few arm pulls generates enough electricity to power interior LED residential lighting or other necessities such as cell phones. Listening to Bulthaup, we get the impression this may become a big business.

Christy Canida of Instructables, a social networking web site, demonstrated how users are using it to share how they make fun things out of ordinary household items. If you haven’t heard of this site, take a look at examples like the 14-year-olds making intricate gunnery equipment with K’Nex toys - a kind of next-generation legos for today younger generation. Notice that the YouTube video (below) by this kid got 35 comments at YouTube’s site, but that the real dialogue takes place at Instructables, where he gets 670 comments. An example of how theme-oriented sites (verticals) are taking more action from broader sites (horizontals).

Jordan Schwartz of Microsoft Corp shared his personal adventures in beekeeping and taught the audience the waggle dance, which is how bees communicate to other bees. He likened the hive mind of bees to how users of social news sites like Digg.com do their own waggle dance about stories they discover. This isn’t just an analogy. Schwartz suggests there’s some real science behind this similarity between the hive — where bees that find interesting flowers come back and report it to their buddies at the hive, who then verify it and spread the news virally — and Web behavior. See his blog.

Jane McGonigal, a game designer at Avant Game, argued that the day we are lying on our deathbeds, we’ll measure the success of our lives by our happiness in the past. Inevitably, therefore, we’ll move away from thinking of the Web mainly as a way to be more efficient. By 2012, she predicted quality of life will become the primary metric consumers use to evaluate technologies, and referred to a rise of the positive psychology movement. She urged the techies in the crowd to focus their development efforts on technologies that hack reality to create more happiness.

Timothy Ferriss, author of a new book, The 4-Hour Work Week, shared his tips on how to eke more productivity out of a workday: Only answer your email twice a day; outsource everything possible to $5 an hour workers in India and Canada; and get rid of less profitable customers who consume a disproportionate amount of your time. His credentials? On his official web site, linked above, it’s difficult to ascertain what this self-described polymath actually does for a living, other than generating a lot of press coverage for himself by break-dancing in Taiwan, cage-fighting in Japan, and acting on a “hit” TV series in China. Nebulous credentials aside, the crowd loved him and voted him one of the two best presentations of the evening.

Web 2.0 Expo continues Monday and Tuesday.

Mark Coker is a contributing writer for VentureBeat. He’s founder of Dovetail Public Relations, a Silicon Valley technology marketing firm. He has no clients among the companies mentioned in the story, nor among their competitors. More on Mark at http://www.linkedin.com/in/markcoker

Updated

New Internet technologies, defined vaguely as “Web 2.0,” have gone mainstream, but the cycle of innovation may be slowing, suggests a venture capitalist.

Separately, data shows that venture investments in Web 2.0 companies last year increased strongly, but that valuations actually dropped.

Peter Rip, of Crosslink Capital, who has invested in several Internet companies considered Web 2.0-focused, including Riya, Vast and Teqlo, posits that one way to check the “energy dissipation” around Web 2.0 is to look at Web 2.0-centric media, including Techcrunch, Gigaom, and Technorati.

All three of these properties show a similar falloff in reach from their Q4 peaks, all notably right around the Web 2.0 Conference, he notes, pointing to graphs from traffic-measuring service Alexa.

Peter’s post is here. He suggests the early easy wins by new companies targeting Web 2.0 have been had. Now that Web 2.0 has gone mainstream, the hard work begins.

The real debate takes place in comments on Peter post, which he has already shut down.

Of course, Alexa data is notoriously unreliable.

Update: Another controversy is how Web 2.0 is defined. One good definition has been produced by VentureOne and Ernst & Young (we wrote about their definition here).

Today, the two released their latest report, which shows venture capitalists more than doubled their investments in this area last year (see table below), but that the valuation they placed on these companies actually dropped. On its face, this suggests a cooling in the hype around the sector. However, the value drop may stem from other factors. For example, investors may be having to find and invest in Web 2.0 companies earlier in their cycle, because the companies need fewer overall dollars to grow– and so bypass taking capital later on. That means the value of the companies is lower at the time of the investment, but doesn’t necessarily mean a cooling off of interest. Indeed, many investors we’ve talked with say valuations are higher than ever, once you factor in how early these companies are in their traction.

Update II:

VentureOne and Ernst & Young have released a very useful table of Web 2.0 investments and their details here (download Excel file)

And here is a ranking of the most active venture capital investors in this latest cycle (more detailed info here; downloads Excel file)

This year has become the “show-me” year. Internet start-ups showing no traction are getting shut down, or trimmed — abandoned by once wide-eyed investors.

The Web 2.0 bubble is bursting, but VentureBeat agrees with others that this is more like an “oozing.” New, innovative companies will continue to get funding from VCs, but with more caution. Investments amounts in Web 2.0, while booming, are so far nowhere near the absurd levels seen during the 1999-2000 period (see the Hornik-Dagres debate about this here), so the wreckage won’t cause as much pain. Back in 2000, trillions of dollars of market value were lost, because the entire U.S. economy had gotten sucked up into it. This time, not so.

Still, some pain there is.

Peerflix, the DVD-swapping company, is the latest company to lay off employees, VentureBeat has learned. The Menlo Park, Calif. company has shut its Canadian office, cutting an undisclosed number of workers, founder Billy McNair confirmed. We heard the company may have cut a quarter of its workfroce, but McNair wouldn’t provide any details. These appear to be the first layoffs hitting the “swapping platform” sector. See our piece last year about Peerflix, where McNair’s optimism stands in stark contrast to today. This company’s business model has been controversial from the start, as you’ll see from the comments.

In other developments:

FilmLoop close to death — FilmLoop, of Palo Alto, Calif., has reportedly laid off most of its staff of 30 employees after failing to find a buyer. The company raised $7 million in venture capital just eight months ago, from ComVentures. Co-founder Prescott Lee and a few others remain. FilmLoop let users create photo slide shows on websites, something that several other players let you do — from Slide, to Rockyou and Photobucket. Note our skepticism back when it raised its cash. It was very late to the game.

Jobster confirms layoffs — Rumors began last year. Jobster confirms 60 people, or 41 percent of its worforce, have been cut (its entire sales and support staff).

…meanwhile, consolidation in social networking continues — The German Facebook clone, StudiVZ has been sold for a reported 85 million Euros (less than the earlier reports suggested), to Holtzbrick Verlag, a German publishing giant that had invested earlier in StudiVZ.

…and the new ideas don’t seem that compelling — Decentral.tv, the San Rafael, Calif. start-up raised $2.3 million several months ago to launch “interactive broadcast broadband communities,” which we called vague at the time, but said we’d wait to see. Now it is apparently launching Kyte.tv, which offers video channels you can watch online or on mobile phones. We could be wrong (we’re relying on other accounts), but it doesn’t seem to push things forward. This follows plans by Old Media folks to launch Next New Networks, the latest niche video company — having raised $8 million — with nothing yet to show. Are they getting religion too late, or can they leverage their network to launch something compelling anyway? Time will tell. But companies that raise cash first, before launching and getting users, are rarely successes — though there are exceptions.

Similar thoughts, too for Twistage, based in San Francisco and New York, yet another start-up offering companies a way to use video on their own sites. It has raised under $1 million in angel funding, and moved into the Looksmart building in SF, reports Liz Gannes. Backers are Computer Associates chairman Lewis Ranieri and Jerry Colonna, formerly of Flatiron Partners. Several other companies are doing this, including Brightcove, Reality Digital (see our post here), vSocial and GridNetworks. On the hopeful side, thousands of companies will want to incorporate video into their sites in sophisticated ways, but on the downside, the technology is quickly becoming a commodity.

Othes putting off VC plans — Some companies are giving up looking for cash, in part because many VCs are getting skeptical. One very well known Web 2.0 investor tells VentureBeat he’s made his last Web 2.0 investment, though he didn’t want his name disclosed. One valley-based company Mojeo, originally told VentureBeat it would look to raise VC money to bolster its service to let people find out more local information on their mobile phones — by sharing their location with companies Yahoo, Google and Upcoming. Co-founder Mike Prince told VentureBeat that he and co-founder Dave Sutter have instead returned their focus to their day jobs, and passing on getting cash for now — though will continue to push Mojeo forward.