How It Works

DreamAds appear only during your REM sleep, as a footer overlay to your dream. According to scientists, things that we see during our sleep are up to 10 times more influential than the things that we see in our real life. And this is exactly what makes DreamAds a potential cash-cow for Google.

DreamAds works with a very light apparel that you put on your head. It is said to be so light that you won't even feel it and so it won't disturb your sleep in any way. The apparel will be distributed for free, starting with a beta rollout in San Francisco - dates as yet unknown. Here is a concept drawing of the device, which we got from our Google source:

Full image

On the business model, we were told us that the ultimate goal is a CPA model (Cost Per Action), whereby ads are embedded into dreams so that users can 'action' them. However the current technology isn't that sophisticated. So in the first version of DreamAds, Google will start with a 'Cost Per Impression' based ad model.

Conclusion

This is an intriguing product that has the potential to take Adsense to the next level. Google will probably be able to make around $500 per DreamAds apparel user. And with the upcoming CPA version, the high relevancy could increase Google's revenues to $5,000 per person. Think about that: $5,000 * 1 billion users means an unparalleled distribution model for advertisers and a gigantic revenue source for Google.

Our source didn't confirm this, but we've heard a rumor that Google has already started a private beta program with a limited number of trusted testers in the Mountain View area. ReadWriteWeb will stay on top of this story and bring you updates as they happen. In the meantime, please share your thoughts in the comments.

GSP kicked off with the Charlene Li keynote. Charlene talked about the social graphs provided by the Facebook Platform and OpenSocial as "the air of tomorrow's web." What she meant was that the social graph is going to be an essential piece of tomorrow's web, and the sites which don't embrace it will most probably become extinct.

The second keynote came from Amit Kapur of MySpace. Amit gave important insight about the monetization of their network, but admitted that "social networking is hard to monetize," which is something we have also heard from Google. Amit said that regular contextual advertising doesn't work well for social profiles and that's the reason why MySpace is focusing on their own monetization technologies, which they call, HyperTargeting. HyperTargeting is already in use by big clients such as EA, Microsoft, Taco Bell, Proctor & Gamble, and FOX. But he added that they are also planning to release a self-serve solution for long-tail advertisers. Presumably, it will be a social doppelghanger of Google AdSense.

The third keynote was given by Benjamin Ling of Facebook. He made some important announcements, including the new E-Commerce APIs that they are planning to release soon, as well as the new user-driven localization solutions that they will provide for app makers. Facebook Platform investors at the event were unanimous in their belief that the E-Commerce APIs are big news, because it means new business models and revenue sources for app producers. On the other hand, their localization solutions seem to be just another step in their recently debuted internationalization efforts. Indeed it would be inconsistent to offer a localized platform which barely has any localized apps on it. And the good thing is, since this is user-driven, the costs for app makers to get international is low and also linearly dependent on their merits.

Day One Announcements

Following the keynotes, there were a number of interesting announcements made, including:

• NetVibes introduced Ginger. Ginger is a social version of NetVibes that allows you to pull in friends from your existing social networks, share news with them and follow their reading activities. In other words, as NetVibes' Chris Damsen noted, Ginger makes Facebook, your private place on the web, a more public place.
• MyBlogLog introduced Bluetooth capabilities and a new FriendFeed-like feature. The Bluetooth feature allows you to see other MyBlogLog users who are close by. When we tested it with Ian Kennedy of MyBlogLog, at least 10 MyBlogLog users who were attending the conference showed up on our list. In some sense, this new feature brings MyBlogLog's distributed social networking into the real world.
• Bebo, Myspace, hi5, and Friendster are launching or have already launched their own OpenSocial-based platforms.
• Chris Messina of Citizen Agency introduced his distributed social network project, DiSo. DiSo's architecture depends on existing open standards such as OpenID, XRDS-Simple, and microformats. It sounds very geekish for now and is too-focused on technical aspects, instead of the social realities that actually make a network work. But it has the potential of becoming the "Linux" of social networks.

Day Two

Compared to day one, day two began with more technical topics. MySpace's Jim Benedetto gave some information on their new platform, which extends existing OpenSocial v0.6 standards with MySpace specific features like bulletin boards. The interesting point about the MySpace Platform is that it is going to launch very restricted. All app submissions will have to go through a safety review process by humans. Hence there is going to be an unavoidable lag between releasing an app and its availability on the network. But all these limitations will be slowly removed with a measured approach, according to Jim. He said that this is to prevent spam and protect the long-term value of the platform.

As most of the app developers in the conference noted, including representatives from RockYou! and Slide, restrictions by platform providers will definitely cut down their fast viral growth opportunities, but the applications that create a real value for the users will still be able grow virally, perhaps at a slower pace but stickier.

One of the shortest but definitely most informational sessions of the event came from Roger Magoulas of O'Reilly Media. He showcased some very interesting numbers and statistics that O'Reilly has collected from the Facebook appsphere. In summary, he showed that:

• installation numbers are no longer as big as they used to be
• active usage rates have dropped significantly too
• most of the apps are released under the "just for fun" category
• there is more adoption and engagement in "games"
• there is a tendency towards winner-takes-all; 1% of apps have 75% of app users, 20% have 99%

Later, in a session that brought together top Facebook game developers, including Mark Pincus of Zynga, there was agreement that social games will replace casual gaming, just like Facebook messages are replacing emails. Also Mark noted that live games don't work so well on Facebook, because once people leave the game, they don't come back; so in order to create real engagement, asynchronous models (as in Scramble) are far better, because people love to email their friends and call them back to the game.

Some other interesting notes we picked up during the course of the event:

• Facebook advertising is starting to get very profitable. Peanut Labs announced that they distributed $200K to their members just in the past 1 week.
• New advertising models (besides CPC and CPM) are emerging inside the Facebook Platform. The CPI (Cost Per Incentive) model of SocialMedia and the CPE (Cost Per Engagement) model of VideoEgg are just a couple of examples. With CPI, the user is invited to install other apps; with CPE, the user is shown a lightbox page which appears as a new layer on top the Facebook canvas page that he was actually looking at.
• Facebook called on people to produce productivity apps and focus on the long-term value, not viral growth.
• The OpenSocial crew presented Shindig, an open source, Apache-incubated OpenSocial framework for those who are interested in hosting OpenSocial apps inside their network. They have also introduced CAJA, a Javascript sanitization sandbox which allows Javascript code to be embedded into OpenSocial apps safely.
• Investors noted that app makers shouldn't expect to become instant millionaires with their applications. They also highlighted the importance of long-term value and stickiness.
• Facebook app makers are concerned about Facebook's moves to release their own apps; like Pages. They think that Facebook should just provide the platform and not be involved with new apps anymore.

A Brief Interview with Jia Shen

At the end of the day, I had the opportunity to sit down with Jia Shen, the CTO and co-founder of RockYou! and ask him a few questions. Jia acknowledged to me that his company has had a tremendous advantage over others by entering the field early, he also said that these platforms are becoming less permissive for viral growth because of their new safety restrictions - which is why those who plan to make a Facebook app are strongly encouraged act as quickly as possible.

I asked Jia about their ad network, how it was going, and what is the percentage of revenues from non-RockYou! inventory. He told me that it is going well and that the non-RockYou! inventory now accounts for a majority of the revenues generated on the network. He noted some of their clients include Coca-Cola, Johnson & Johnson, and Sony. He also said they are not planning to enter the long-tail advertising race right now.

As for localization and the growing number of international social networks opening up new platforms; he said that they will look at the specific characters of the network that they are entering and make necessary changes to their apps if required. But he added most of their apps are generic so they don't expect big changes. I asked him whether they're planning to make acquisitions to get the leading app makers in outside markets, and he told this is not their primary strategy yet, but if they do, their first target will be big demographics such as apps for Spanish speaking countries.

Jia also said that they have no preference between the Facebook Platform and OpenSocial, they will embrace both, but they support standards and the idea of writing once, running everywhere.

Conclusion

All in all, GSP was a very useful event for anyone working in the social networking industry. There were a number of enlightening sessions and key people who drive the social future of the web were in attendance. As Charlene Li noted, users will get suffocated without the portable social graph; so as a web developer, you'd better catch up with these latest developments and get ready for the future of the web in order to keep your visitors happy. The move of Sheryl Sandberg from Google to Facebook is more than enough to tell you where we are headed.

While Microsoft’s revenues are dispersed into many areas such as home software, enterprise software, entertainment, and Internet advertising, Google’s revenues currently depend solely on online advertising. While this may sound like a weakness, Google is currently well ahead of the competition and the barriers to entry in online ads are pretty high. Microsoft knows that, otherwise they wouldn’t be so ambitious about acquiring Yahoo!

But what Microsoft can do here is to change the rules of the online advertising game by making it more open in general and less profitable for Google. There have been many companies who have claimed to make advertising more open; OpenAds and RightMedia (which is now owned by Yahoo!) are just a couple of them. But what these companies actually did was make the advertising process more transparent. Advertising is still under the control of networks which manage literally everything; publishers, advertisers, parameters, matching algorithms, etc.

However if one can split up this "network atom" and divide it into more efficient parts, things will be very different. See the graph below:

In an open advertising model, the inventory silo, placement silo, and parameter silo are controlled by many different organizations, which can interact with each other and create advertising mashups. Today Google provides these silos under the following services:

• Inventory Silo: AdWords
• Placement Silo: AdSense
• Parameter Silo: PageRank, Google Analytics, Gmail, FeedBurner etc

The most crucial part of the advertising network is the inventory silo. Therefore, in order to make the open advertising model a reality, a company (presumably Microsoft) would have to jumpstart things by opening up its inventory silo - so that others could use that inventory to create new applications for placement, parameters, etc. What would happen is:

1. Companies would give away parameters that can be used with the open inventory. In return, they generate revenue when their parameters are used to place ads.
2. Publishers would no longer be stuck with "contextually relevant" ads, but could instead use any of these parameters or mash them up for optimal results on their pages.
3. New 3^rd party companies would emerge and they would make the whole process easier and more efficient for everyone involved.

The graph below summarizes the ecosystem I’ve just described:

With this model, a web page that consists solely of a Flash game is not stuck with Google’s "contextually relevant" option. It can mash up a bunch of parameters, or get help from 3^rd parties and choose the best option for itself.

As shown above, this creates a whole new economy for parameter providers. It also opens new doors for 3^rd parties for matching inventory with providers, mashing them up, analyzing and finding the best solutions for advertisers and publishers. It would also enable advertisers to make bids by filling out some XML files and allow the best ad to be displayed on particular page in the best way for a particular visitor.

Gain for Everyone

This model would not only eliminate the dominance of a single network and create a whole new economy for a lot of players, but also it could prevent a possible bust in the Internet industry.

Today’s online advertising is far too linear. Whoever clicks gives the same amount of money to the publisher and the network. That is, under the current model, the click of a person with limited purchase power is worth the same as a click from Bill Gates.

But this unfair model is not sustainable. Because what it does is to shift money from real production to vaporware. The economy can only get better if clicks on ads produce real results. And that can only be established in an open model in which everyone participates, and all parameters are run in a fully competitive and flexible environment.

Conclusion

Yahoo! is too risky for Microsoft because of the size of the deal and possible inefficiencies. So my advice to Microsoft is to let Yahoo! remain as the online media mogul. Let Google be the search giant. Instead, focus on shaking up the advertising industry by pushing it toward a democratized structure, make it work for everyone, and weaken Google's business model before it takes a bite from your Office and Windows revenues.

• The Turkish population on Facebook is estimated to exceed 2.1 million, which places Turkey just behind the USA, UK, and Canada, and ahead of English-speaking Australia.
• 10 out of the 150 most active applications on Facebook are in non-English languages. 1 is in Spanish, the other 9 are in Turkish.
• There are 6 non-English apps in the first 10 pages of the Recently Popular list - they are all in Turkish.

Further, some of Facebook's fascinating visitor numbers coming out of ComScore and other web metric firms come from the Turkish effect. I had the chance to ask Facebook CEO Mark Zuckerberg about it at the Crunchies event, and he agreed that Turkey was having an effect on Facebook's traffic. This is actually a threat for Facebook. Because if non-English speakers dominate an entire network, it could lead to the alienation of the existing user base, similar to what happened with Orkut in its early days. Honor Gunday, the founder of one the largest social networks in Turkey, Zurna, enviously calls this "Orkutization."

Secondly, this investment in Yonja is not the only success we've heard about lately out of Turkey. As Mike Butcher recalls, cember.net was recently acquired by the European business networking leader Xing. This is actually a rather big move, because while LinkedIn has a very strong position in America, they have zero presence in other locations. LinkedIn might be fast being erased by Xing's global expansion. In a global, connected world, that's not a good sign for LinkedIn. And note that Xing is already a public company. So if LinkedIn delays an exit a little more, it may lose its advantageous position, even in the US. In other words, I'm not as optimistic about LinkedIn as our own Bernard Lunn. A small delay may make us call LinkedIn, LinkedInDust.

Similarly when you take a look at Alexa's ranking of Ning's biggest networks, you see that they are either adult-oriented or Turkish. So Ning is being nourished by Turkish traffic as well.

Last but not least, Turkey's high potential in social networking comes from its very young demographics. The number of young people in Turkey exceeds even the most populated countries in Europe. Moreover, the Internet penetration is quite high, and similar to Brazilians, Turkish people have very social characteristics; Turkey was the 2nd biggest market for Live Messenger, after all.

As for Mike's question, some influential people behind the world's most popular social networks come from Turkey. To name a couple, the founder of Orkut and the project manager of Windows Live are Turkish. So, "what is it about Turkey," is not actually the right type of question, although I can understand Mike, because Turkey is generally still a market in the dark, awaiting more exploration.

However, with web 2.0 and the rise of Rich Internet Applications there are renewed hopes for entrepreneurs to be able to compete with Microsoft's Office juggernaut. Now these smaller players can leverage the sharing & collaboration capabilities of the Internet, remove installation & maintenance frictions, and provide globally accessible office software.

By snapping up Virtual Ubiquity, Adobe has become the latest player in the web office market, but Google, Yahoo!, Zoho, and even Microsoft, are all established players in the game as well. Let's take a look at all of the major contenders and their strategies:

Google Apps

Google, whose web office solutions are based on AJAX, probably has the strongest and most clear online office strategy among the big companies. In order to provide offline capabilities (still a must for many, especially outside the USA) Google developed Google Gears, which is a set of browser plugins and Javascript libraries that enable AJAX applications to run offline.

Google built its web office suite via acquisitions. The startups they have acquired are: Gtalkr (instant messaging), Writely (word processing), iRows (spreadsheets), JotSpot (wiki), Tonic Systems (presentations), and Zenter (presentations). By acquiring outside talent in the web office space, Google was able to bring together a team of well focused engineers to execute their Google Apps vision.

All of Google's offerings are freely available thanks to their ad-based business model. For enterprises, Google offers an ad-free subscription based model.

Google is betting on centralized servers and thin clients. That's why they are spending $600 million to build a new data center in North Carolina - the purpose is to provide 100% uptime which is a must for enterprise grade acceptability.

Microsoft Office Live

Microsoft, the old stalwart of the office software space has a dilemma: they need to find some way to simultaneously compete with the free web based offerings from their rivals, while not hurting their existing massive revenue stream from their ubiquitous PC-based office suite. For that reason, Microsoft is not in a great position to make bold moves in the web office market.

Perhaps that's why Microsoft's vision is evolutionary, rather than revolutionary. Microsoft doesn't believe in Google's thin client model and it betting that people will continue having strong computers at home and in the office. Microsoft is not trying to centralize software, but instead keep it on the client side. In traditional terms, this means more privacy as well.

That's why, with Office Live, Microsoft is centralizing only the data storage tier. Microsoft's assumption is that every computer will have Microsoft Office installed - that's why they are readying the release of a free, limited and ad-supported version of their Office suite. Further, like Google, Microsoft recently invested $550 million to build a massive data center in San Antonio, with the purpose of providing full availability for its upcoming enterprise grade services.

Making Office free and universally accessible seems like a good idea, but personally, I'm skeptical of the user satisfaction level in a world where all applications are shifting to the web.

Yahoo! / Zimbra

Yahoo! made a late entry to the web office market by acquiring Zimbra for $350 million in mid-September. Zimbra is certainly a great web-based enterprise application provider and will bring a lot to Yahoo!, but Zimbra focuses mainly on groupware features and competes directly with Microsoft Exchange - not Microsoft Office. It is not yet known what Yahoo! will do with Zimbra. They could choose to focus on its office functions (spreadsheets, word processor) and take them out of beta. Or, alternatively, it may use Zimbra to position itself as the leading email communications company, with both hosted, ad-supported (Y! Mail) and ad-free, enterprise (Zimbra) offerings, rather than compete directly in the contentious online office market.

In any case, by following Zimbra's approach, Yahoo! appears to be betting on a decentralized office 2.0 structure. Maybe that's because Yahoo! does not want to invest in beefy server farms like their rivals, which is risky, and possibly is more concerned about privacy than others.

Adobe / Virtual Ubiquity

Yahoo! was not the only major player to enter the web office space in September: Adobe's Virtual Ubiquity acquisition seemed to announce that company's intention to compete for online office market share. Adobe uses its Flash and Flex technologies to power its fledgling office suite. However, there are some obvious concerns here:

• Adobe is inexperienced compared to rivals such as Google, Yahoo!, Microsoft at offering hosted services
• Enterprise-grade acceptability of Flash technology as an office suite backend is questionable

Alternatively, Adobe may have less ambitious plans and the reason why they snapped up Virtual Ubiquity may be to showcase the possibilities that the Flex platform can bring.

Zoho

Zoho is not as big or as well funded as the aforementioned players, but offers perhaps the most complete office suite on the Internet. Similar to Google, Zoho has a fully centralized approach and its solutions are based on Javascript technologies. Zoho's suite includes a word processor, presentation app, spreadsheets, wiki, CRM, web conferencing, project management, and much more. However, one problem that Zoho faces is that their applications are loosely connected. There is no single sign-on and sharing capabilities are weak or nonexistent between most of its parts. Trust among enterprise users may also be an issue - large corporations may feel more comfortable keeping their data with a public company. These factors put Zoho in a good position for potential acquisition.

Others

Smaller players, such as ThinkFree, suffer from being based on deprecated technologies like Java Applets. There is also gOffice, which seriously lacks usability.

Surprise Player, meebo?

meebo is one of the most successful online instant messaging clients, but with this week's annoncement of a platform there now exists the potential for a lot of development to occur around their user base. By allowing third-parties to tap into meebo's communication platform and users, the company's new development platform could actually be used to create intriguing web office applications. Below is a mockup of what a meebo platform app might look like:

The picture above imagines Google Presentations embedded into meebo.

Conclusion

Finally, we may see new web office attempts from Sun (JavaFX) and Laszlo (OpenLaszlo) - because, like Adobe, they are working hard to prove the readiness of their RIA platforms for the enterprise.

In any case, the future is online and all software makers will need to make their applications available through the web. For me, the big question is whether Google's thin client model will work or not. This model would lead us to live with dumb machines that hook into Google's server farms to do any real computation.

What do you think the future of Rich Internet Applications and specifically the online office will look like? Leave your thoughts in the comments below.

But today we can coin have a new, similar term: HaaS, for 'Hardware as a Service'. [Update: As several commenters have pointed out, in fact we didn't coin the term HaaS. It seems that Nick Carr was the first, in March 2006.] Hardware has always been available as a service through dedicated hosting providers, but it was never so well abstracted until Amazon introduced S3 and EC2. With dedicated hosting, you still had to deal with dirty hardware issues like scalability; but Amazon makes it a totally painless experience. In other words, the relationship between EC2-S3 and dedicated/virtual hosting is similar to the one between SaaS and ASP (Application Service Providers) - EC2-S3 is an evolved version of dedicated or virtual hosting services.

First of all, if you still don't know about S3 and EC2, I recommend you take a look at some past RWW articles on the topic; Alex Iskold wrote a very good introductory article about it. See also Alex's ETech report of Amazon CTO Werner Vogels' speech. Also, there are great articles on Amazon's official web site.

So what is Haas? A good comparison can be made with Google Adsense. In early 2000, Google enabled web publishers to generate revenue from their content. Google introduced a fair pricing model that worked for everyone, from personal publishers to big media companies. As a consequence, some earned pennies with Google AdSense, while others earned millions of dollars per month.

In other words, Google fragmentized the Revenue side of web business and made it available to everyone. But the Costs side of the web business remained the same for a very long time. There was an ongoing inefficiency and nobody did much about it. Virtualization, which was made commercially available first by VMware, changed things a little and lowered the prices of hardware. But things were still pretty much the same; publishers still had to pay for resources they didn't use and deal with the hassles of maintenance.

Now what Amazon is doing with EC2 and S3 is to fragmentize the Costs part of Web business. Publishesr no longer need to deal with scalability - they pay exactly for what they use. In other words, resources are allocated more efficiently than ever - which was what happened with Google AdSense too, as the below diagram shows.

Can Amazon Follow Google's Example, on the Hardware Side?

Another way to ask how big is HaaS: "Will Publishers follow the same pattern as with Google Adsense and pick more fragmentized and efficient hardware options?" If the advantages are obvious, there is no reason for them not to embrace Amazon's offerings. However, there are a few differences that may slow down or even inhibit this process:

• Amazon S3 & EC2 is less viral than Google AdSense. Google Ads were spread all over the Internet - everywhere you go, you see Google Ads and you want to give it a try yourself. Amazon's offerings work in the background and they're not visible to users, hence they're not especially viral. However, Amazon could try things to make their product more viral - e.g. offer discount prices for web sites that promote that they're powered by Amazon EC2.
• It is tough to switch your existing infrastructure to Amazon S3 & EC2.  On the other hand, you can start using Google AdSense using a simple copy-paste.
• The fact that the EC2 pricing is linear may make it not so attractive for big publishers. Even so, Amazon should cut deals with the top web sites, to try and influence other sites.

It's also worth pointing out that VMware, the first virtualization software company listed on NASDAQ, performs very well and shows the potential of HaaS. Amazon EC2 is not a direct substitute of virtualization, but it shows the potential of offering super-efficient hardware services over the Internet.

Conclusion

It's intriguing to watch Amazon, the old favorite dot com era e-commerce site, transform itself into a technology company with their new and innovative HaaS unit. Amazon is leveraging its deep scalability know-how and expertise, and it's making web publishing even easier and cheaper. As a result, it should eventually bring great value to Amazon.

Some may be wondering why Amazon is de-focusing and entering into something that is far from its DNA as an e-commerce service. To respond to that question, take a look at the table below, which compares some financial data of Internet bigcos:

In terms of 2006 annual revenue, Amazon is even stronger than Google and well ahead of the others. However, in terms of market capitalization, it is ranked only 4th. That's because of Amazon's more traditional, less technology intensive business model - which pushes their net profit margin down with high inventory costs.

That's why, in order to remain strong, Amazon is investing more and more in technology - which will increase its net profit margin.

We will see how HaaS complements SaaS; and how many SaaS startups will shift their infrastructure to Amazon's server farms. And let's not forget that Google and Microsoft are both increasing their HaaS efforts - the Google Dalles server farms for example. Nonetheless, HaaS gives Amazon hope for increased profit margins and stock price in the long term.

FlowPlay

FlowPlay is a gaming social networking site that targets the teen demographic. It consists of Flash-based animatable avatars, enabling you to interact with your virtual friends without revealing who you are. The main part of the site though is Flash-based online games. They currently have 100 games, not all of them in-house developed - some licensed from others. While you play, you can earn virtual money - with which you can buy virtual things for yourself (e.g. clothing). After dressing up your character, you can go to places, bars and hang out with your friends, dance, chat and have fun. The fact that there is a virtual economy inside the platform makes it quite attractive.

metaplace is attempting to create an open virtual world. The founders think the potential of virtual worlds is high, but most current ones are walled gardens. Further most existing virtual worlds are huge desktop apps that you need to download and keep up to date. metaplace is lightweight and has its own markup, which makes it fully portable from the web to mobile worlds.

Loic Le Meur thought this was a good product and defined it as "the Facebook of SecondLife". On the other hand, Yahoo's Brad Garlinghouse said: whether we like it or not, there is already a popularized platform in the form of SecondLife - so this one is too late.

WooMe

WooMe started its presentation with some stats around real world speed dating market - which will approach $1 B in 2008.

WooMe brings speed dating to the virtual world. It consists of audio-visual sessions, using webcams. You can use it for dating or to find a partner to travel with. When you find someone (it needs both parties to agree) you have to pay $1 to get in touch.

The surprise of the presentation was that Skype founder Niklas Zennstrom is connected to this app.

The general concern of experts was whether this is just a 'feature company'. Loic Le Meur and Caterina Fake liked it. In my opinion, WooMe has the potential of being used as a Craigslist alternative too.

Zivity

Zivity's promise is to change the rules of user generated (adult) content. Apparently it's about democratization of adult content. You or your photographer put your erotic photos online, people vote, and you may make money. Membership is $10. 1 vote costs $1. 80 cents go to content creator, 20 cents to Zivity.

Sarah Lacey found this model logical and said this can be an online version of Playboy. MC Hammer warned about the potential abuse of 16 year old kids wanting to earn a little money from this.

Kaltura

Kaltura is another social video site - aka video wiki. This Israeli company is now based in New York. They raised $2M from Avalon Partners.

The idea sounds similar to StoryBlender (covered in an earlier TC40 report). You can take videos from YouTube, photos from Flickr, or other multimedia from your hard drive, and mash them up. You can even stream live video via your webcam.

Their new Facebook App allows you to greet your friends (birthday, graduation) with mashed up funny videos created in collaboration with your network.

Edited by Richard MacManus

xtr3D

xtr3D is trying to change the way we interact with computers. Their software replaces the traditional mouse and keyboard with real-time 3D motion analysis. Their "3D Human Machine Interface" can translate your physical movements into mouse moves and keyboard clicks.

BroadClip makes the MediaCatcher application for Facebook, which helps users to find DRM-free music via your trusted community (Facebook friends). The presentation was cut short by Jason Calacanis in the middle, and the team wasn't even on stage -- it was streamed. General consensus seems negative on this one.

mEgo

Los Angeles-based mEgo makes a widget/avatar that holds all your social networking profiles so that you can share it anywhere. Their single widget allows you to share your YouTube videos, Flickr photos, etc. everywhere. mEgo has an alternative offering which allow you to present your profile as a CV too, and is available for mobile clients. It has RSS and Twitter syndication from the widget.

Editor's Note: So could you take your Twitter feed and put it through mEgo and export it to your Twitter feed? Very M.C. Escher.

Wixi

Wixi is a media sharing platform that uses web desktop interface to make things easier and more straight forward (think: web OS). Using this interface, you can share your stuff with your friends and post them to your blog or social networking account. Wixi offers a Flash player which allows you to embed multiple pieces of media inside a single widget -- it is very similar to SplashCast.

Wixi has a number of social networking features as well, such as Feeds, which shows you what your friends are adding (think: Facebook Newsfeed).

BeFunky!

BeFunky is a cartoon avatar tool that "cartoonizes" your real pictures. It also allows you to warp pictures (i.e., they made Mike Arrington lose 20 pounds instantly) and share them on social networking sites. BeFunky also demonstrated rotoscoping software that turns live-action video into cartoon. They used a clip from the Matrix for their presentation.

Edited by Josh Catone.

AdBrite

AdBrite has announced a new product: SPOTTT.com. It's a link exchange program that is very similar to LinkExchange (from the web 1.0 era). Just to remind you; LinkExchange was sold to Microsoft for $265M in 1998.

Started by FuckedCompany's founder Philip Kaplan, AdBrite says they are bringing back LinkExchange with new innovations. Instead of LinkExchange's 2:1 ad publishing program, they have a 1:1 display program - this means for every one ad you publish, your ad is published on other sites as well. Tony Hsieh, co-founder of LinkExchange, is also assisting with the product.

Clickable

Clickable is an advertising business backed by Union Square - Pequot. The product interfaces existing advertising networks and makes the control very simple. They say they're in the simplicity and recommendation business. They try to solve the complex problem of advertisment management and smooth up the process.

At this event, they announced a new partnership with AdBrite.

Clickable's innovative user interfaces, like ActMap, aim to make things much easier for advertisers. This may make Clickable a valuable company in the very profitable online advertising market.

GotStatus

GotStatus is a server-side Google Analytics. What Google Analytics does is give you deep analysis of your website visitors, via a short Javascript snippet that you embed into your site. GotStatus does the same, but it's all done on the server side. That is, you place a Ruby snippet (but note: not all servers support Ruby by default!) and they do a deep analysis of your server statistics.

They also give you the possibility to share this data on your blog via widgets. However, I wonder who really wants to do that. It is private data after all, so the widget doesn't sound that useful.

GotStatus is an API driven, open system; the founders believe it can be further improved by the community. They eye a piece in the huge $8 B systems management market (source: Gartner).

PubMatic

PubMatic got their first media coverage from Read/WriteWeb in August 2007. Their service helps web site publishers run the highest paying ads from top ad networks. According to the company, the complexity of advertising management is growing every day - we are continously having more and more choices. Image ads, link ads, video ads, Google ads, ValueClick etc...

What they do is maximize your profits via an auction system for ads. However this sounds exactly the same as Yahoo's RightMedia. As far as I understand, the difference is that PubMatic looks at past data, while RightMedia does it in real time.

They claimed that a Windows Themes site improved their profits 106% with PubMatic; and a Sportsvite.com did the same in the rate of 90%.

ZocDoc

Briefly, ZocDoc is the Yelp of medicals. The site is for dentist appointments. You can see dentists mapped on Google Maps, along with user feedback. The site also offers advanced search functionality. They claim to have 2% of dentists in their system already.

Edited by Richard MacManus

Xobni

Xobni ("inbox" spelled backwards), makes the Insight plugin for Microsoft Outlook that adds social networking features to your email. The plugin extracts a social graph from your email conversations. Xobni says that email is already used as a file manager, contact manager, todo list and social network and their software just ties those functions together. For example, the plugin can reveal connections between people who have emailed you and create a historical view of your contact with an individual.

Orgoo

Orgoo merges your email accounts into what they call a "cockpit," along with chat, SMS, and instant messaging, allowing you to organize all your social interactions in one simple location. With Orgoo you can search all of your Internet communication in one place, and even reply to emails via instant messenger.

Orgoo's user interface is very similar to new Yahoo! Mail and it is available for mobile devices, as well. They are planning to launch in Q4 of this year.

App2You

App2You is a custom application creator for non-programmers (or, as they say, anyone who can use Excel). Their pitch is aimed at people overwhelmed with by emails, phone calls, and other communications, but their database app builder can be used for more than organizing email. One of their pre-built app templates, for example, is an event manager.

App2You is not just about data collection, but about creating full workflows to manage the flow of your information.

Mint

Mint has been my favorite startup at TechCrunch40 so far. Mint is a financial application that hooks into your bank account and helps you keep track of your finances. You can see where your money goes (gas, food) via visually rich charts and graphs. The site also offers mobile access and can alert you whenever you start spending too much or when you need to pay a bill.

Mint, which goes live today, tries to save you money by recommending credit cards that suit your spending habits. For example, if you spend too much on gas, it recommends cards that give you cash back on gas.

Kerpoof

Kerpoof's mission is to change the way kids interact with the computer and become a top destination for children. They want kids to not just read stories but also to write them. They don't want kids to just watch movies but also make them. Kerpoof provides a great example of participatory culture. They seem to be after the big market of kid-centric social networks like NeoPets and Club Penguin. Their marketing message, however, is about teaching basic object oriented programming to kids (to attract parents maybe?).

Working inside the browser, users can pick pre-created scenes, place objects in the scenes, change perspectives, and add music & text to create their own stories.

I'm definitely far from their target market, but I can't help but wonder if this isn't just a bit too complex for children. Or if they are targeting older kids, isn't it too childish?

Edited by Josh Catone.

Note: for a full round-up of the day's action at TC40, check out Allen Stern's sterling effort at Center Networks.

Cake Financial

Cake Financial is a financial sharing platform backed by Ron Conway. It allows people to share portfolios and real time transactions with others. The site can be integrated with services such as E*Trade and Charles Schwab. This sharing feature allows you to chart yourself against other people and the market normals. You see what your friends are doing, you get notified in real time, and so on. So it's financials, enriched with social networking features.

My question: isn't this private information that you'd rather keep to yourself. Plus this may result in gaming and legal problems. However, since this business deals directly with money, it can create real addiction among its users and virally spread. So it may be a great success.

DocStoc

DocStoc is the "YouTube of documents." It allows you to share professional documents via a widely accepted and embeddable Flash interface. It offers basic features like categories and search. As a result, you can search for "venture capital companies in california" and you get the documents you want - full of contact info. Special ranking algorithms are based on user trustability. You can set documents to be private or public, and set whatever license you want. The site also includes other social networking elements, such as messaging and comments.

TeachThePeople

TeachThePeople's goal is to be the "ebay for education" [Ed: what was Bernard saying about Concept Extrapolation yesterday? ;-) ]. You can create classes on topics you are an expert at, then teach them and earn revenues. The example that the founders gave was:

Say you are Mark Andreessen, you are a great entrepreneur who has built many big companies and successfully exited - in that case, many people would like to learn from you, know your secret. By creating a "university" on this network, you share your knowledge and earn revenues. You can also set up a management team, assign assistants (in this instance, Jason Calacanis and Michael Arrington).

The site gives every teacher 5GB of storage space. It has advanced features such as discussion boards, Q&A, live chat, etc. It really seems to be a great platform for this purpose. The company says Y! Groups and others are great for communicating, but they can't specialize on topics such as guitar courses, Salesforce teachings etc. They say: you must be good at something, so why not monetize it.

CrowdSpirit

CrowdSpirit is an electronic products crowdsourcing site from France. You post an idea, people vote; if your product gets many votes, it goes to a marketplace where "fans" and "partners" may join you in purchasing and/or selling.

For me, this was the weakest idea of the event so far. Why would anyone want to share their ideas with an untrusted community, when the idea is not defendable?

Ponoko

So far in computing history we've had the personal pc, personal printing - now we get personal manufacturing. Personal manufacturing actually started with the likes of CafePress, but Ponoko takes it one step further. It allows you to make toys from .eps formatted Adobe Illustrator files. I don't think the public can easily get started with this advanced program, but the company claims it is easy.

How it works: you set up material type, color, and so on; then your product gets manufactured and shipped to you. You can even sell it in a marketplace and earn money.

The idea is good, but the market may be small and it will probably be way too hard for the average user to get started with it.

Edited by Richard MacManus

StoryBlender

StoryBlender is a promising video mashup startup from Korea. Video editing is not new, but this one's approach is like a 'video wiki'  - it lets you mash up videos collaboratively, with your friends and peers. The interface they demonstrated was very easy and straightforward. You can easily add music, video, text and animate things. No need to be a pro, no special skills needed.

At the end of the session, Don Dodge expressed concern about copyright (as an ex Napster employee, that was quite understandable!).

Tripit

Tripit solves a big problem. It is hard to plan travel; you have to deal with many sites, papers and other details. Tripit's mission is to make this process very simple. It's not a booking company, but they serve to manage your travels.

You simply forward incoming bookings to plans@tripit.com and it manages the rest. Their patent pending "itinerator" technology is a baby step in the semantic web - it extracts useful infomation from these mails and makes a well structured and organized presentation of your travel plan.

It pulls out information from Wikipedia for the places that you visit. It uses microformats - the iCal format, which is well integrated into GCalendar and other calendar software.

They claim that "instead of dealing with 20 pages of planning, you just print out 3 pages and everything is done for you".

Their future plans include a recommendation engine which will tell you where to go and who to meet.

Many experts at the conference found this startup very useful and easily monetizable.

Flock

The open source browser Flock was at Techcrunch 40 with the promise of v 1.0 very soon. Flock is a social web browser, satisfying the social needs of the new web. It lets you interact with your friends while you surf. This market is hot - me.dium tries to tackle the same goal from another path.

Flock can save your credentials from sites like Flickr, YouTube and Facebook, then e.g. you can share news from NY Times with your friends on Flickr with a simple drag n' drop.

Everyones concerns are the same thoug - why not do it via extensions and utilize Firefox? The Flock CEO replied that they are ambitious, they are not just aiming at single digits of users - they want hundreds of millions of users.

MusicShake

MusicShake is another mashup startup from from Korea. The motto is: user generated music. Just like docstoc, they are the YouTube of MUSIC. The service aims to make music creating very simple. Their example was a music created by a 9 year old in 5 mins, which was selected the number 1 user generated music in Korea's biggest social network: cyworld.

MusicShake takes 100% ownership of IP, has 170K music patterns (1M to come). They claim they have a real business model as well - end users can make money just by selling their music for a few bucks.

The attendants in the Palace Hotel really liked MusicShake, so it was a successful presentation.

8020publishing

The idea behind 8020publishing is: "web is killing printed magazines? No, the web can make it better". For them, magazines are good for inspiration and the web is good for planning. So they've made a hybrid and created a hypermedia - using the best of media and web. Their success story is JPG Magazine, in which over 100,000 people helped create each issue. Today they announced a new product: everywhere - which focuses on travel.

In 8020, content is created by the people. But the editorial proces is traditional.

It's a real business model, and on the web side of it, there are significant social network elements like profiles and comments.

Jason Calacanis' concern was that in traditional press, publishing and distribution are the biggest costs. So what's the advantage of this? The 8020 people replied: "it's not about cost but quality - being a part of a community" - which sounds very logical to me.

Edited by Richard MacManus

Cubic Telecom's mission is to make phone calls seamless and cheaper than ever. They do it by locating special wifi spots all around the world and making your calls via these spots. For GSM calls, they have a special cheap price as low as 15 cents per minute. You can call anywhere in the world anytime you want.

According to Om Malik, if they can scale, Cubic can be a viable business. However, they're going need to compete in a very commoditized market and it's likely that their profit margins will be way too low.

Yap

Yap is trying to enable speech for the mobile web. Small keyboards are really archaic interfaces and they impose a lot of frictions on the popularity of mobile browsing. Yap is trying to solve this with an innovative J2ME based interface, and distributed, lightweight speech recognition technology. They will soon announce their first round of VC funding.

The company will allow people to change their Twitter or Facebook status and send SMS via voice. In order to get established they'll need to cut deals with telecom carriers; but they have reason to be hopeful. The company includes people who created and popularized the iPod, IBM ViaVoice as well as ex-Cingular and Amazon executives.

Jason Calacanis said he likes this company. Their business model is mainly advertising; when you say "let's go have a cup of coffee," the service may reply with the location of the nearest Starbucks. See also Jott, a recently launched competitor.

Ceedo

Ceedo claims to enable mobile phone virtualization for PCs. When you connect your phone to your PC, it shows up a user interface which will make it much easier for you to use the capabilities. For example, you'll be able to use Picasa directly. They will also allow you to buy music for your mobile device immediately.

Personally, I didn't see anything revolutionary here. Just an interface; virtualization is way too serious for this kind of technology, in my opinion.

LoudTalks

LoudTalks is a neat idea from Russia. The founders say that today there are 2 ways of real time communication: telephone or instant messaging. They are building a desktop application very similar to ICQ or Skype that serves as an internet walkie-talkie. They try to eliminate the limitations of instant messaging - no emotions, time loss due to typing. It's basically a push to talk system. But it allows you to talk to many people at once. You don't need to be in a continuous dialogue with someone, you can talk and browse the web, do your job at the same time. When you go busy, incoming messages are stored so that you can listen to them whenever you are available. Neat idea, and similar to Twitter in my opinion - not a technological breakthrough but catches something that we missed in rush of finding the next big thing.

According to Marc Andreessen the main problem that they may face is distribution and he recommended them to use blog widgets (perhaps like meebome) to spread virally. See also long-time provider of a similar service, YackPack.

TruTap

TruTap brings social networking to mobile space. It's a free, universal mobile service which lets you see the status of your IM friends (MSN, Yahoo, ICQ, AOL supported). It allows you to blog and set your profile. You can make group messaging as well. The service is planned to go live in 16 weeks. They claim that they have already cut deals with key social networks and the service will be available in more than 200 countries. TruTap will be usable from your browser too. Developer APIs will be immediately available.

For me, there were such promises before too, but we didn't see anything viable. The deals these companies make will define their destiny. It's a fact that Nokia is already after this market and doing anything to capture market share. Time will show how it's gonna roll up.

Edited by Marshall Kirkpatrick.

This morning saw the first five startups at the TechCrunch40 event hit the floor and presented to journalists, investors, and early adopters. The first session focused on search startups. It's interesting to note that one third of the presenters at the TC40 are from outside USA. Below are quick reviews of the first five companies to present.

Powerset

Powerset is a natural language processing-based search engine that raised $12.5 million a year ago to create what many have touted as a "Google killer." Company founder Barney Pell said this morning that interacting with today's search engines is like talking to a 2 year old. What Powerset does to change that is index the web semantically and extract meaningful relations.

At present, Powerlabs has 3 specialized verticals based on restricted subsets of Wikipedia: Quotes, PowerMouse, Business. Business and Quotes are self explanatory, while PowerMouse searches Wikipedia entries for connections between topics. For example, you could search for "Yankees" and "home run" and find home runs related to the Yankees.

Cognitive Code

Cognitive Code makes an artificial intelligence platform called SILVIA (or, Symbolically Isolated, Linguistically Variable, Intelligence Algorithms). Their platform provides a technology for starting human-like conversations with machines and an intriguing interface to start dialogue. For example, you could tell SILVIA to open the most recent file on your computer and it will process your command via voice recognition, understand the meaning, and execute your request. Their linguistic variability technology allows them to understand what you mean -- you can give your command in many ways, but their software will still understand your intentions.

Cognitive Code says that they have already signed licensing deals with toy companies, but there are many more opportunities awaiting them.

CastTV

Founded by a husband and wife team, CastTV is a video search play that is attempting to index every video on the web. CastTV indexed videos from many sources, including user generated video sharing sites like YouTube, mainstream media like CNN, and paid download services like iTunes. They deliver their results using an impressive clustering technology that lets you drill down results by date, relevance, source, price, and more. When you search for Britney Spears, it asks you whether you are looking for her music or sex tapes, for example.

FAROO

FAROO is a P2P search engine that has no central crawler or index (so something like Wikia's Grub?). Their demo was blazingly fast and brought to mind my recent open source distributed Google clone article.

FAROO says their P2P search technology can save traditional search companies $1 billion. On the other end of the spectrum, the advantage for users is "revenue sharing and attention ranking," they say. They are committed to sharing 50% of all search revenues with users and the quality of their ranking is based on the time you spend on these sites; in other words, they follow you. This brings privacy questions into play.

For them, distribution is going to be a problem -- without people, there is no value in their technology. Wikia is known to be very open to small acquisitions, however, and already dabbles in this field, so could be a potential suitor.

Viewdle

Viewdle is another video search engine. Viewdle uses a facial recognition algorithm to search for people within videos. The main problem is that people need to be in their database to be covered, and so far they only index celebrities. Viewdle already have a deal in place with Reuters, who Om Malik thinks will end up buying them. Marrissa Mayer asked Viewdle how they plan to scale when their database enlarges to many people, and their answer was "contextual analysis," which will allow them to recognize faces after the environment.

Full disclosure: Emre Sokullu joined search startup Hakia as a Search Evangelist in March 2007.

They say "great entrepreneurs are great story-tellers." And that is exactly what flashed in the minds of journalists and developers who attended the launch announcement of the F8 Platform when 23-year-old Mark Zuckerberg appeared on stage. His youth and excitement had many people saying that Zuckerberg was channeling a young Steve Jobs. Today, because of the reasons we've discussed in the Pivots of the Internet article and all the acquisition offers that Facebook has consistently denied, Facebook is widely expected to take on Google as "the next big thing." Though their numbers are still far below MySpace and they have not garnered the traditional media attention that MySpace has, their growth rate is impressive and their vision is very promising. The Facebook Platform reminds many of us of Windows; and people are calling it "the social operating system" on which you can develop your Internet apps.

Mark Zuckerberg's F8 introduction speech:


Now flashback 25 years, here is Steve Jobs:

Facebook VC Funds

Perhaps the biggest sign of the Facebook Platform's economic value is the interest of angel investors and venture capital funds in applications developed specifically for Facebook. The biggest announcement so far has come from Bay Partners; a Cupertino-based VC that firm announced that it will invest seed-stage money into promising Facebook app ideas via their new AppFactory program (see our previous coverage). That such a well established VC company will focus so exclusively on Facebook is likely very good news for Facebook.

Google has announced a similar program called Google Gadget Ventures for its own platform, iGoogle. But Google's platform hasn't been able to create the same buzz as the Facebook Platform, and while Google is using internal funds to attract external developers, Facebook funding has formed organically, separate from the company.

New Opportunities

As a consequence of the two previous impacts, a new cottage industry has blossomed around the Facebook Platform. It has become the ubiquitous way of reaching mass users in a short period of time. The friction-free and viral nature of Facebook apps has caused some web innovators to shift their attention to developing for Facebook.

Many startups have changed their business plans to focus on utilizing the Facebook platform to spread their applications among the social network's 30 million users. Facebook app awareness has become a specialty that recruiters often look for in resumes. Some companies have even made small-scale acquisitions, apparently with the main purpose of acquiring talented Facebook developers (see SideStep's purchase of Extended Info).

Today an interesting competition has emerged between two already successful online slideshow companies; as Josh Catone stated in a previous article, the rivals have extended their fight to the Facebook Platform too and are battling for the broadest reach. These companies have made acquisitions in order to broaden their Facebook reach, see Slide's acquisition of Favorite Peeps, for instance.

Deprecated Strategies

With the introduction of the Facebook Platform, many Facebook/MySpace killer ideas have died. Hopes to take on social networking giants with more features have become nonsense; in other words, feature companies became obsolete. Even the strongest verticals, local social networks, have been affected by the move to open up Facebook to outside developers. As a result, many of these companies have been forced to change their strategy to stay afloat.

Perhaps the boldest strategy change so far has come from Ziki. The successful meta social networking site seems to have shifted its focus to people search, rather than simply social networking. Because the meta functionality was nothing but a feature on top of traditional social networking it was bound to be better as a Facebook app than as a full company. After all, in social networking, the most important parameter is critical mass (number of people that use your platform) and not the features you have. With the Facebook Platform, anyone can add meta features to Facebook, which is where the people already are.

Ziki's evolution from social network to people search.

Conclusion

In my opinion, these latest developments are enough to demonstrate why Facebook has already gained the reputation as "the next big thing" for many of us. It's very interesting that a private company, with revenues far less than the Google, can attract such mass attention from the media, users, VCs and an entire industry. I can only explain it with love: we all love Facebook's services, their culture and their decision to open their API. We hope that they can breathe fresh air into the industry. The only thing that bothers me is Facebook's so-called "dirty history" (the lawsuit against Zuckerberg from a Harvard classmate that contends he stole the original Facebooks source code). Hopefully, they'll resolve that problem and march on toward an IPO.