Stand Up and Be Counted

Interesting news from the Census Bureau's 2007 Abstract of the United States ...

Among adults, 97 million Internet users sought news online last year, 92 million bought a product, 91 million made a travel reservation, 16 million used a social or professional networking site and 13 million created a blog.

Glam Raises $18.5 Million Series C Round

Here are the details ...

"In one year from launch, Glam Media has created a unique online media company reaching over 7 Million unique visitors a month," said Samir Arora, chairman and founder of Glam Media. "Glam's vision is to bring together the best content from traditional and indie publishers with emotive brand advertising to create the first contextual Web network."

Speak Up!

Yesterday, Larry Marcus spoke on panels at Digital Living Room and an IBDNetwork event. Here are the details:

Shaping the Landscape for the Digital Living Room

What are the business opportunities and challenges facing solution providers for the digital living room? We evaluate the dominant technologies, applications and services all competing to control the consumers' access to content. Broadband Internet, consumer electronics devices, mobile and wireless; portable players; networks. How do we determine the economic value of these services and products against digital rights protections for content owners? Our experts give an overview of nearterm and longterm predictions for the digital home market to help you develop a successful strategy.

Moderator: Michael Stroud, CEO iHollywood Forum
Nick Chakalos, Senior Director, Software Product Management
Connected Home Solutions, Motorola, Inc
Evan Young, Director of Broadband Services, Tivo
Stuart Cleary, Director, Broadband Content Services, Verisign
Jay Gill, S. Manager IBSG Service Provider Solutions, Cisco
Larry Marcus, Managing Director, WaldenVC

VC Outlook for 2007

Join IBDNetwork for its last event in 2006 featuring four venture firms who will discuss and defend their views on the 2007 tech market. In this roundtable discussion, feel free to contribute your own thoughts but be prepared to back them up!

Discussion points include:

- What sectors are poised for growth?
- What sectors are poised for consolidation?
- Top favorite companies?

Mark Albert, Partner, Perkins Coie

BA Venture Partners - Sharon Wienbar
SAP Ventures - Jai Das
WaldenVC - Larry Marcus

Keeping It Real

Real Girls Media announced that it has received funding from WaldenVC and 3i. Here are the details.

By combining editorial, user-generated content, and community, Real Girls Media Network aims to build the leading online destinations that address the totality of women's lives, not just specific life events. Unlike existing advertising-supported Web sites, RGM will enable women of all ages to easily submit and publish their opinions and stories. The first Web site,, which is due to launch in early 2007, is targeted for women aged 25 to 54. Additional sites aimed at other age groups will follow in 2007.

"Our unique offering allows real voices to publish like professional writers. We have invested in our proprietary technology to provide a simple process to enable access to the highest end publishing environments to women of all views, walks of life, and experiences," said Kate Everett Thorp, CEO of RGM. Member-written stories, reviews, and related photos will appear alongside staff-written articles about everything from parenting to careers. "Beyond editorial and user-generated content," Thorp said, "our properties will provide traditional community services such as reviews and forums to complete the connection of women, their purchasing power, and their influence in a centralized destination."

Palamida Emerges from the Pack

The Silicon Valley/San Jose Business Journal named Palamida as an Emerging Technology Award Finalist.

"We are excited to recognize the achievements of these emerging companies in technology-rich Silicon Valley," said Vintage Foster, publisher of the Silicon Valley/San Jose Business Journal. "The companies we are celebrating have pioneered technologies with the potential to profoundly impact people and their businesses."

Web 2.0 on the Bubble?

The Mercury News published an interesting observation from the always quotable Ross Mayfield about the Web 2.0 Conference that is going on this week in San Francisco ...

"The downside to the conference's success is that Web 2.0 may become the name of the bubble itself."

GigaOm's Om Malik certainly seems to think so ...

Gut Check

Analysts who cover Amazon may not be crazy about Jeff Bezos' new offering, but startups certainly should be ...

Amazon has spent 12 years and $2 billion perfecting many of the pieces behind its online store. By most accounts, those operations are now among the biggest and most reliable in the world. "All the kinds of things you need to build great Web-scale applications are already in the guts of Amazon," says Bezos. "The only difference is, we're now exposing the guts, making [them] available to others."

And, he hopes, making money. With its Simple Storage Service, or S3, Amazon charges 15 cents per gigabyte per month for businesses to store data and programs on Amazon's vast array of disk drives. It's also charging other merchants about 45 cents a square foot per month for real space in its warehouses. Through its Elastic Compute Cloud service, or EC2, it's renting out computing power, starting at 10 cents an hour for the equivalent of a basic server computer. And it has set up a semi-automated global marketplace for online piecework, such as transcribing snippets of podcasts, called Amazon Mechanical Turk. Amazon takes a 10% commission on those jobs.

Bezos is initially aiming these services at startups and other small companies with a little tech savvy. But it's clear that businesses of all kinds are the ultimate target market. Already, Amazon has attracted some high-powered customers. Microsoft Corp. (MSFT ) is using the storage service to help speed software downloads, for instance, and the service is helping Linden Lab handle the crush of software downloads for its fast-growing Second Life online virtual world. Highly anticipated search upstart Powerset Inc. plans to use the Amazon computing service, even though it's still in test mode, to supplement its own computers when it launches its service sometime next year. And the search engine marketing firm Efficient Frontier uses Mechanical Turk to determine the most effective keywords that drive traffic to Web sites.

Palamida Is in Good Company

Yesterday, Palamida's Mark Tolliver was on stage with Microsoft's Steve Ballmer and Novell's Ray Lane to announce Microsoft's pact with Novell to support broad collaboration on Windows and Linux interoperability and support. Here's an excerpt from an article in eWeek:

Mark Tolliver, chief executive of San Francisco-based Palamida, who was on hand at the news event to support Microsoft's play, said, "I think this just raises the idea that people who use software need to be informed customers."

Tolliver likened the situation to that of the world of processed foods, where consumers can find out the nutritional makeup of the goods they purchase. The same should be true for software, he said. And Palamida's software enables enterprises to gain visibility into their software code bases and find out whether there is open-source code present and which licenses apply.

Tolliver said the Microsoft deal with Novell makes plain that more enterprises will need to take stock of what exactly is in their code, and opens opportunity for companies like Palamida.

"We're moving into a zone in the software world driven by this mixed open-source/proprietary-source community, and with commercial software having to intermingle with this huge amount of open-source software," Tolliver said.

He said Palamida was invited to the announcement by Microsoft, which "has been one of our customers for some time," and that Microsoft asked Palamida to sit in as a domain expert. "Our role was to be on hand as a firm who spends all day everyday on intellectual property and license compliance issues."

Here's a description of the day's events from Palamida's blog.

Myth Busters

In an article in Silicon Valley Watcher, BlueLithium "burst[s] the myth of contextual ads."

The conventional wisdom, as proposed by Google et al, is that placing advertising on a web page in its context gets the best results. Mortgage ads on mortgage pages, etc. In fact, Google recommends to its AdSense partners that Google ads should blend into the page, same colors etc.

BlueLithium, the online ad network, says that this isn't true when it comes to serving ads based on users' behavior. Its BL Labs research division found that out-of-context ads perform better ...

Picking Apart the VC Model

Check out Matt's most recent post on Here's an excerpt:

We may be best-served to return to the old days of venture capital with smaller funds, earlier stages, smaller investments and more hands-on VCs. At a time when companies are more capital-efficient than ever, some firms have become too large to make appropriately modest investments. Their model can force the GP to invest too much money at each deal and sit on too many boards to truly add value.

No Fooling

The Motley Fool weighs in on Internap's acquisition of VitalStream.

... Internap, long known for handling bandwidth, will blend VitalStream's network into its own, which would, at least in theory, substitute for the Akamai services it is selling. And that seems to be a pretty strong business. SEC filings show that Internap derived $5.2 million, or 11.8%, of its revenue in the current quarter from partners. What's more, that business was up 29.4% year over year.

Meanwhile, VitalStream has been flourishing. Revenue and gross profit have risen by a compound annual growth rate of 52.4% and 47.2%, respectively, over the past three years. And a recent deal for Eonstreams put the company front and center in enabling streamed video advertising.

So, yeah, this deal poses problems for Akamai, but they're minor in comparison with the overall opportunity. Accustream media research reports that total video streams over the Web have increased to 18 billion last year from 284.6 million during 1998. That's an average growth rate of -- wait for it -- 70% (!) annually.

Internap To Acquire VitalStream

ATLANTA – October 12, 2006 Internap Network Services Corporation (NASDAQ: INAP), a leading provider of performance network services over the Internet, today announced it has reached a definitive agreement to acquire VitalStream Holdings, Inc. (Nasdaq: VSTH). VitalStream is a leader in audio and video streaming services and a global provider of integrated rich media content delivery services that enable businesses to broadcast digital media content to worldwide audiences via the Internet.

“The marketplace for content delivery services is rapidly expanding as the needs for companies to integrate streaming audio and video into their Web presence become more critical and more complex. The combination of VitalStream’s content delivery services and our high performance intelligent route control solutions positions us to create the market leading platform for distribution of rich media content and advertising” said James P. DeBlasio, chief executive officer of Internap. “We will offer our combined customers a wider range of complementary products providing peak website performance, global scalability and new revenue opportunities including content monetization and on-line advertising. Together, we expect to become a formidable force in the rapidly growing streaming media and content delivery market.”

Under the terms of the transaction, Internap will issue approximately 11.9 million shares of common stock in respect of outstanding VitalStream common shares, which will represent approximately 26% of the combined company’s shares. This is an exchange ratio of 0.5132 Internap shares for every VitalStream share. In addition, Internap will assume VitalStream’s currently outstanding stock option plans. Based on the closing price of Internap’s stock on October 11, 2006, the transaction is valued at an aggregate purchase price of approximately $217 million. The acquisition is expected to close by the first quarter of 2007.

Read the full press release here.

Do the Math

Interesting article in The Wall Street Journal on the economic rationale behind Google's purchase of YouTube. [Subscription required.]

Google paid about $23 per YouTube unique visitor, 10 cents per trailing 12-month page views and 10 cents per trailing 12-month minutes of use, Bear Stearns analyst Robert Peck said. In comparison, Peck said, Google trades at 14 cents per trailing 12-month page views and 37 cents per trailing 12-month minutes of use.

"This is reasonable in our view, given Google's longer operating history and its more favorable earnings and free cash flow profile," Peck wrote in a research note. YouTube, which was only launched in 2005, gets about 34 million unique visitors each month, according to Nielsen/NetRatings.

... Peck also compared the YouTube deal to Google's partnership with MySpace and the $1 billion price tag that Facebook reportedly is seeking. In terms of unique visitors, YouTube is priced at a premium to the MySpace deal - which is only a partnership, not an acquisition - but at a discount to Facebook. On page views and times online, YouTube is priced at a premium to both.

... Citigroup analyst Mark Mahaney projected YouTube generating $224 million in 2007 revenue and $112 million in earnings before interest, taxes, depreciation and amortization, which would be a percentage of his 2007 Google estimates for $10 billion in revenue and $6.4 billion in Ebitda.

Mahaney noted that the $1.65 billion price tag valued YouTube at 14.7 times Ebitda, below the 19 times 2007 enterprise value/Ebitda multiple that Google currently trades at.

"Not bad," Mahaney said. Citigroup has provided banking services to Google.

Social Networks Splinter

The Wall Street Journal wonders today whether the social networking world is beginning to splinter. [Registration required.]

Last month, Piczo attracted 10.2 million unique visitors, compared with Facebook's 15.5 million visitors, according to comScore World Metrix, a Web-tracking division of comScore Networks Inc. Piczo is also the No. 1 social-networking site in Canada, according to Chief Executive Jeremy Verba. The site's success has puzzled even its own founder, former software developer Jim Conning. "I didn't wake up one day and say, 'I'm going to start a Web site for teenage girls,'" the 40-year-old says.

The rise of these social-networking sites is another sign of the shifting tastes on the Internet, as niche audiences flock to new alternatives to MySpace and Facebook. That potentially spells trouble for those two incumbents.

The proliferation of these social-networking sites also comes as deal-making in the sector heats up. Big media and Internet companies, eager to gain more access to the young people who gravitate to social-networking sites, have recently eyed companies like Facebook. Facebook is in serious discussions to sell itself to Yahoo for an amount that could approach $1 billion. And last year, Rupert Murdoch's News Corp. bought MySpace for $650 million and quickly turned the site into a lucrative ad and promotional machine.

For now, however, the new sites are taking a modest approach to attracting visitors. Instead of trying to get people to ditch their MySpace and Facebook accounts, they're persuading kids to sign up for a third or fourth social-networking site, along with the ones they already use. "People used to pop up and say, 'We're a better MySpace,'" says Ben Bajarin, an analyst at the Campbell, Calif., research firm Creative Strategies Inc. "Now, all those sites have started to say, 'Well, we can't displace MySpace -- but we're complementary to MySpace.'"

This kind of evolution is inevitable, as the proliferation of cable television channels suggests, and it was one reason why we decided to invest in Real Girls Media, a digital network created by women for women. (There were many other reasons, of course, the principal one being our faith in Kate Everett-Thorp, RGM's CEO.) Glam - through its GlamSpace offshoot - also appeals to a very targeted niche of consumers who are interested in fashion.

Yes, there are too many social networks, but many of these are taking a completely undifferentiated approach to the market. A large number of these sites are chasing the same gaggle of high school and college students who are perfectly happy using MySpace and Facebook. RGM and Glam are definitely taking a different approach.

The Eyes Have It

In its October issue, Business 2.0 features BlueLithium in a story about technology's "next disruptors," or companies whose innovations are "game changers." That's BlueLithium CEO Gurbaksh Chahal in the picture above, picking eyeballs. (Eek.)

Glam Hits the Catwalk

Glam has launched a new social network for fashionistas. Here's a link to the press release.

"Fashion and style are converging more and more to bring together designers, celebrities and fashion-obsessed fans," said Samir Arora, founder and chairman of Glam Media. "For example, consider the ever-increasing popularity of celebrity events, fashion weeks and TV shows such as Project Runway. As more and more time is being spent online, we recognized the need for a social network for fashion and style, a unique environment to help people to network to be discovered."

Glam Takes "Central" Stage

Glam received a nice mention in The Wall Street Journal yesterday. [Subscription required.]

... [T]oday, a year-old company called Glam Media plans to launch a new fashion blog-ranking system called GlamCentral that will use criteria such as "most viewed," "most linked to" and "most commented on." Chief Executive Samir Arora says the new rankings will be useful to advertisers and fashion publicists, as well as Glam itself, which is looking to buy blogs.

"This is going to be the YouTube of the fashion world," says Mr. Arora. Scheduled for release next quarter is a search feature that will enable users to look through fashion blogs to find a particular string of text.

Real Girls Media

Real Girls Media's Web site is live. Check it out.

We're providing a new way for women - young and older - to reach out, find out, express themselves, connect, share their experiences and ultimately give - and get - something of value.

RGM sites combine real voices with guided editorial and the dynamism of an online community. Through our proprietary technology, we enable users to easily submit - and automatically publish - their thoughts and stories. And we give all visitors a variety of ways to engage with the content and the community.

Our flagship site, launching in 2007, is called DivineCaroline. It's a real place for 25-54 year old women. Whether you've got a lot - or a little - to say about your kids, your career or your world, you can say it here. Your words will be published right alongside those of your sisters and those of professional writers.

Eventually our network will consist of multiple sites and resources serving different age groups.

Great New Addition at BlueLithium

BlueLithium has appointed Scott Kauffman to the new position of President and COO.

"I'm excited to join BlueLithium, which is leading the way for a new generation of ad networks," said Mr. Kauffman. "Gurbaksh and his team have created the ability to turn user data from billions of ad serving interactions into higher ROI for advertisers and higher inventory value for publishers. I look forward to helping the company fully capitalize on this opportunity."

Rusty Rueff on MarketWatch

Check out Bambi Francisco's interview of SNOCAP CEO Rusty Rueff on MarketWatch.


Today, MySpace and SNOCAP formally announced a major digital music partnership. This past weekend, The Wall Street Journal, The New York Times, and many other publications ran stories about a possible deal.

It's a big announcement for both companies.

"Up until now bands faced the challenges of content availability, technology and distribution," said Tom Anderson, president of MySpace. "This music service enables artists and labels to oversee their own commercial and distribution platforms while lowering the barriers for all bands to sell music directly to their fans in a way that's easy and totally legal."

"SNOCAP's partnership with MySpace empowers the music community in a profound way by allowing artists to establish a direct commercial and social relationships with their fans," said Rusty Rueff, chief executive officer of SNOCAP. "Now, every artist can distribute their music instantly and directly to their fans, making them relevant whether they sell one hundred tracks, ten thousand tracks or ten million tracks."

The New Tastemaker

There's a great new article about Pandora in Sunday's New York Times.

If Pandora and other customizable services take off (and so far that’s a big if), they could shift the balance of power not just in how music is consumed, but in how it is made. “You now have music fans that are completely enabled as editorial voices,” said Michael Nash, senior vice president for digital strategy and business development at Warner Music Group, one of the four major music conglomerates. “You can’t fool those people. You can’t put out an album with one good single on it. Those days are over.”

Death Spiral

Interesting news from Universal and a new startup called SpiralFrog ...

A new online music company said today that it would make a huge catalog of songs from the world’s largest record company, the Universal Music Group, available for consumers to download free.

The company, called SpiralFrog, said its intention was to wean music fans, especially young people, away from illegal downloads and pirate music sites by offering a legitimate source that is supported by advertising instead of download fees.

SpiralFrog is the latest to offer a challenge to Apple Computer’s hugely successful iTunes service, which allows consumers to download songs legally for 99 cents apiece, and its many smaller imitators. Though the venture is not the first to try a free, ad-supported approach, the backing of Universal, with millions of songs in its catalog from thousands of artists like Eminem and Gwen Stefani, Elton John and Gloria Estefan, Count Basie and Hank Williams, promises to give it instant credibilty and scale.

Will SpiralFrog spell the end of iTunes? Definitely not. SpiralFrog only permits users to download music to one computer and one handheld device (it will not work with iPods, and consumers cannot use "their" music to make mixed CDs); ads are an integral part of the SprialFrog experience; and to date SprialFrog only includes content from Universal.

Consumers want to own their music - period. The labels have devised many different scenarios in which consumers rent music (SpiralFrog among them), but these are nothing more than a music industry conceit. Until the "hit men" grasp this fact, the world will continue to gravitate towards peer-to-peer downloads and iTunes.

We are betting that SNOCAP will play an important role in reinvigorating the music industry. SNOCAP allows consumers to purchase music without having to worry about downloading an incomplete file or a computer virus; it also gives artists the flexibility to determine their own pricing and DRM (if any). Our other music play - Pandora - helps people to discover new songs and artists and share their channels with their friends.

SNOCAP and Pandora are gaining traction because they provide as much benefit to consumers as labels. By contrast, SpriralFrog is trying to convince consumers that its music is "free" when it really isn't.

The only sound I hear coming from SpiralFrog is "croak."

VitalStream Is Fundamental

BusinessWeek Online has posted a great Associated Press story on VitalStream. Here's an excerpt ...

AUG. 21 12:40 P.M. ET Shares of VitalStream Holdings Inc., which provides video and audio streaming services for the Internet, jumped Monday after an analyst said the company was well-positioned to take advantage of advertising money flowing onto the Web.

Irvine, Calif-based VitalStream shares added 32 cents, or 3.7 percent, to $8.87 in midday trading on the Nasdaq. The stock began trading on the Nasdaq on June 21.

Mark Kelleher, an analyst for Canaccord Adams, initiated coverage of the company with a "Buy" rating and set a share-price target of $13.

"Content delivery is fundamental," Kelleher wrote in a note to investors Aug. 18. "VitalStream is one of only a small group of companies with a built-out content delivery network (CDN) to address this critical element of Internet infrastructure."

Innovation Never Tasted So Good

Large consumer-facing companies like Wal-Mart and Anheuser-Busch turn to Iconoculture for ideas about how that can take advantage of emerging trends. Iconoculture's analysts recently spotted a very enticing development that I think deserves some serious consideration.

Willy Wonka would be proud. U.K. artist Prudence Emma Staite builds edible set pieces full of life-size fireplaces, paintings and chandeliers that are all made of high-quality chocolate.

The deliciously interactive rooms have graced some of England's most elaborate society parties, but Staite's Food Is Art catalog also includes one-offs like plates, tea cups, shot glasses and jewelry.

Chocolate is just the beginning. Staite also has used cheese, bacon, pasta and vegetables as her media. Any kind of food is cultural fodder in her book of design.

Here's a link to Staite's site.

Do No Evil

Palamida helps companies answer the question, "What's in your code?" Sometimes, the answer is just plain funny. This comes from the Recent Finds section of Palamida's Web site ...

Over the course of auditing hundreds of projects in our M&A service work, we have seen it all. We keep mental track of some our favorite finds. And at the top of the list is always the blessing that comes with the SQLite database engine. SQLite is a C library that implements an embeddable, zero-config SQL database engine. The source code for SQLite contains no license because it public domain code. Instead of a license, the source code offers a blessing:

May you do good and not evil
May you find forgiveness for yourself and forgive others
May you share freely, never taking more than you give

It's not every day that your source code both provides functionality and words to live by.

VitalStream Appoints CFO

This from BusinessWire ...

VitalStream Holdings, Inc. (Nasdaq:VSTH), the world leader in audio and video streaming, today announced that it has further strengthened its management team with the appointment of Eric L. Mersch, age 38, as chief financial officer. Current CFO Mark Belzowski will remain with the company in a senior capacity.

Mr. Mersch joins VitalStream from Harrah's Entertainment, Inc., where he served most recently as vice president, finance for Harrah's Las Vegas and The Flamingo. During his tenure at the firm, Harrah's revenue doubled from approximately $4 billion to $9 billion, and he was a key manager in the Company's acquisition and subsequent integration of Caesars Entertainment, the largest acquisition in the gaming industry. Before joining Harrah's in March of 2003, Mr. Mersch was CFO of Andre-Boudin Bakeries, Inc. from June 2001 to December 2002 and Senior Associate, Corporate Finance at the technology-focused investment bank Robertson Stephens from March 2000 to March 2001. Mr. Mersch began his career in June of 1990 with the United States Navy, serving over a seven year period as Division Officer of the USS Los Angeles, Special Projects Officer, Chief of Naval Operations at The Pentagon and Lieutenant specializing in submarine operations and intelligence projects. He holds a Bachelor of Science degree in Economics from the United States Naval Academy, a Masters in Nuclear Power Engineering from the Submarine Officer Nuclear Engineering School and a Masters in Business Administration from Harvard Business School.

Jack Waterman, chairman and chief executive officer of VitalStream, commented, "As VitalStream has continued to grow and develop, we are pleased to be attracting world-class talent to our organization. We are excited to welcome Eric on board, further strengthening our management team following the recent appointments of Michel Maeso as Executive VP of Global Sales and Marketing and Chris Dion as VP of Business Development and International Sales. With a strong financial position and the addition of these high-caliber executives, we are well-positioned to continue to execute on the numerous opportunities in front of us."

"I am thrilled to be joining VitalStream at such an exciting time in the Company's development," said Mr. Mersch. "VitalStream is operating in a captivating, high-growth market, and I look forward to working with management and the board of directors to oversee the Company's financial growth."

In Time to the Music

Today's Chronicle profiles three Internet music services, and two of them (Pandora and SNOCAP) are WaldenVC portfolio companies.

ThinkEquity Reiterates Buy

From ThinkEquity's most recent report on VitalStream ...

VitalStream's advertising solution is starting to show its competitive edge as we had hoped, having recently learned that the company has won a contract for both content delivery and advertising. More important is the fact the company has taken the business away from one of its top competitors because of the value proposition its advertising solution provides to its customer. Going forward, we anticipate the company will be able to generate new business and take CDN market share from its competition by leading its sales efforts with what in our view is its competitive edge, its advertising solution.

Om Launches New Blog Venture

Om accepts a parting gift from Quittner
Many of us who have known Om Malik since his Red Herring days are not surprised at the success he has had with GigaOm, a must-read Silicon Valley blog. Om has now quit his day job as a reporter at Business 2.0 to pursue GigaOm full-time. On Friday, Josh Quittner, Business 2.0's editor, threw a fête for Om, who will continue his association with the magazine as a columnist. Way to go, Om! (Here are some more pictures.)

Tripping on The Long Tail

In today's Wall Street Journal [subscription required], Lee Gomes challenges Chris Anderson's wildly popular "long tail" hypothesis. For example, he points out that Anderson provides no examples of companies in which revenues from less popular "long tail" merchandise" exceeds sales of hit products.

But Gomes does not stop there.

Mr. Anderson told me the lack of an example of misses outselling hits doesn't diminish his basic point, which he said is simply that the role of the tail "is big and getting bigger."

By Mr. Anderson's calculation, 25% of Amazon's sales are from its tail, as they involve books you can't find at a traditional retailer. But using another analysis of those numbers -- an analysis that Mr. Anderson argues isn't meaningful -- you can show that 2.7% of Amazon's titles produce a whopping 75% of its revenues. Not quite as impressive.

Another theme of the book is that "hits are starting to rule less." But when I looked online, I was surprised to see what seemed like the opposite. Ecast says 10% of its songs account for roughly 90% of its streams; monthly data from Rhapsody showed the top 10% songs getting 86% of streams.

Bloglines, the widely used blog-reading tool, lists 1.2 million blogs; real ones, not computer-generated "spam blogs." The top 10% of feeds grab 88% of all subscriptions. And 35% have no current subscribers at all -- there's clearly no 98 Percent Rule in the blogosphere.

At Apple's iTunes, one person who has seen the data -- which Apple doesn't disclose -- said sales "closely track Billboard. It's a hits business. The data tend to refute 'The Long Tail.'

Music Man

The passion that people feel for Pandora is remarkable, especially since the company engages in little to no overt marketing. Here are CNET's impressions of a user meeting that Pandora founder Tim Westergren recently led.

Retail Therapy

Market Insight has launched a product advisor for notebooks and tablet PCs. Using this Web site, you can weigh various preferences against each other to determine the right computer for you. Market Insight also offers product advisors for cars, cell phones, digital cameras, PDAs, and TVs. Check it out!

Geezer Pleasers

Newsweek profiles Pandora in its latest issue.

Pandora works by asking you to pick your favorite artists and then programs a radio station for you. You can tweak the selections by giving thumbs up or down to a tune (when a Ratt song stuck its snout into a session, I exterminated it quickly) or by adding a new artist to the mix. One of the songs may well introduce you to a great band you never heard of—or it may expose the fact that you have a recessive musical gene for something completely unexpected. Westergren sometimes gets searing missives from rock snobs who are outraged that Pandora had concluded they might like Céline Dion. ("It's a social objection," he says. "So what if she's doing Las Vegas—she can sing!") The ad-supported site went public last November, and Westergren says he has more than 2 million users.

Open Season on Open Source Apps

The Picky VC takes on open source applications. Once again, he lets the chips fall where they may ...

At the risk of incurring the [wrath of] those who have already placed bets on the near-term successiirgk of open source enterprise apps, I'd like to point out a few structural impediments to near-term mass adoption of these "products." Oops, did I upset the open source purists by calling them products instead of "projects?" Well, I hope they are products, since the CIO does not want to buy your cool work in progress.

Is the Trend Google's Friend

Google Trends is another fascinating addition to Google's quiver. My search produced a couple of interesting results: interest in the search term "venture capital" has declined over the last two years; in fact, the very trendy "Web 2.0" eclipsed it in December. But Google has not had a "hit" in a long time. As Business Week points out in its July 10th edition, "An analysis of some two dozen new ventures launched over the past four years shows that Google has yet to establish a single market leader outside its core search business, where it continues to chew up Microsoft and Yahoo." Does Google need a hit? With a market cap of $122 billion, quarterly revenues in excess of $2 billion, and net profit margins of 26%, maybe not. But the media and Wall Street seem to expect something more from Google than better search: Google is now seen as a media company. In the media business, when a company releases a number of properties that fail to garner consumer interest, its stock suffers. One wonders if Google's disappointing record with new consumer applications will soon catch up with it.

VitalStream Joins NASDAQ

VitalStream goes live on NASDAQ today ...

VitalStream Stock to Begin Trading on NASDAQ Capital Market Today; Management Will Ring NASDAQ Stock Market Closing Bell Tomorrow to Commemorate Start of Trading

IRVINE, Calif.--(BUSINESS WIRE)--June 21, 2006--VitalStream Holdings, Inc. (Nasdaq:VSTH), a world leader in audio and video streaming, today announced that the Company's stock will be listed and trade on the NASDAQ Capital Market under the symbol "VSTH" effective at market open today, Wednesday, June 21, 2006. Most recently, VitalStream's common stock traded on the OTC Bulletin Board under the symbol "VSHI."

To commemorate its listing on the NASDAQ Capital Market, VitalStream's chairman and CEO Jack Waterman and president and COO Philip N. Kaplan will be on site at NASDAQ in Times Square to ring the NASDAQ Stock Market closing bell on June 22, 2006 at 4:00 pm EDT.

"We are delighted that VitalStream's stock will be traded on the NASDAQ market, home of many of the world's leading technology companies," said Jack Waterman.

A web link to a broadcast of the NASDAQ ceremony will be available

VitalStream Approved for Listing on NASDAQ

This from Business Wire ...

VitalStream Approved for Listing on NASDAQ Capital Market; Trading to Begin June 21 Under Symbol ''VSTH''

IRVINE, Calif.--(BUSINESS WIRE)--June 16, 2006--VitalStream Holdings, Inc. (OTCBB:VSHI), a world leader in audio and video streaming, today announced that its common stock has been approved for listing on the NASDAQ Capital Market. VitalStream's common stock will commence trading on the NASDAQ Capital Market at the open of the market on Wednesday, June 21, 2006, under the new ticker symbol "VSTH." Until that date, VitalStream's common stock will continue to trade on the OTC Bulletin Board under the symbol "VSHI."

"The approval of our stock for listing on NASDAQ is a significant strategic milestone in VitalStream's progress and development as a publicly traded company," stated Jack Waterman, chairman and chief executive officer of VitalStream.

"Advancing to a listing on NASDAQ mirrors the growth we have experienced from a customer, product and revenue standpoint. VitalStream's mission is to help content owners distribute and monetize their digital media assets online and transitioning the trading of our stock to a world-class market complements the growth we are seeing in our business and our sector," added Philip N. Kaplan, VitalStream's president and chief operating officer.

High-Stakes Game

The San Francisco Chronicle caught up with Larry Marcus at a conference on digital media organized by IBD Network. Here's an excerpt:

One thing that was abundantly clear Tuesday: It's going to be crowded. Many companies are working on very similar ventures, whether it's podcasting, online music, communities, video or mobile applications.

"There's some real over-funding that's going on in a lot of spaces," said Larry Marcus, managing director of Walden VC, a San Francisco venture capital firm. He cited online video editing, social networking and blogging.

But at the same time, Marcus said, "The stakes seem as big as they ever seemed for Web companies. The opportunity to have a major impact is clear. It's more obvious that there will be a lot of value creation this time, because of the companies that made it in the first big wave of the Web. There are also more players from established companies and industries who realize the Web is an imperative."

1 + 1 = 4

Advertisers are increasingly recognizing the power of Internet radio. Check out this commentary from Media Daily News ...

Advertisers should also be aware of the precision targeting afforded to them by advances in centralized ad serving and geo-targeting for streaming audio. Audio streaming ad trafficking tools currently have the ability to deliver a unique ad in a live radio stream to each individual desktop based on that listener's profile. So, take that fast-food advertiser and imagine the streamed spot being for "our new deluxe salads" to the 35-year-old female user in cubicle 1 and for the "big burger meal" for the 21-year-old Web designer in cubicle 2. Both ads push to the station Web site (or trigger in the station's audio player) for a coupon good for that day only. That's truly leveraging the megaphone of the radio, with the pinpoint targeting of the Web.

And, according to a recent Magid/MediaSpan research study, radio Web site visitors are some of the most loyal on the Web, with two-thirds of station Web site visitors visiting the sites weekly, and nearly a quarter visiting daily. This "committed relationship" provides a perfect opportunity for local radio to develop Web/streaming/on-air promotions that leverage a dedicated audience who already have PCs, broadband and radios tuned to their favorite station. In the office, radio is a huge complement to the Web--and with add-ons like streaming and integrated station Web sites, the combo can help advertisers make the 1+1=3 leap.

Pandora, which offers each listener his or her own personalized radio stream, provides advertisers with an even more attractive environment for brand-building.

No Fish Story

Red Herring offers some insight into Palamida's recent funding announcement.

Analysts are optimistic about the potential market for open source licensing and compliance management software. Dana Gardner, a principal analyst with Interarbor Solutions, said the market could reach “dozens of millions just in the short term.”

Mr. Gardner said that the risk associated with just “one or two big lawsuits” justified the investments in managing software properly.

Enter the Video Ad Network

BlueLithium has just launched the first video streaming ad network with behavioral targeting capabilities.

BlueLithium's AdRoll allows advertisers to target streaming ads to people who've already visited their Web site-as they travel across other sites in the BlueLithium network. For example, a person who visits the site of a major wireless phone provider and then goes to other sites in the BlueLithium network would see a targeted video ad from that wireless phone company, driving them back to the site for upselling or to complete a purchase. AdRoll is the first and only streaming video network that enables advertisers to do behavioral retargeting, which has been shown to improve click-through and conversion rates by over 300 percent.

Palamida Closes New Round

Palamida just announced that it has closed a new round.

Palamida, a provider of software intellectual property (IP) management and compliance products and services, today announced that it has raised $8 million in its second round of venture capital financing. The Series B funding, which was led by Mitsui & Co. Venture Partners, includes Series A investors Hummer Winblad Venture Partners and WaldenVC.

"The international reach and reputation that Mitsui & Co. Venture Partners brings to Palamida will be invaluable as we expand worldwide, and we are very pleased that they are joining our existing investors," said Mark Tolliver, Palamida CEO. "The world of software development has changed, and today's software projects contain contributions from many sources, including open source. This 'mixed code' model demands increased attention to issues of intellectual property integrity, security and governance, and has created an exciting opportunity to help our customers ensure that their software assets are visible, traceable and manageable."

Picking Fights

The "Picky VC" is at it again ...

There is no Web 2.0 except in the minds of marketing folks who can think of no other way to differentiate their new product from the one that failed in the same space in 2001. That goes for all you VCs too. Let's stop justifying investments on some mythical macro trend in favor of Web 2.0. We need to justify investments based on market opportunity and defensible technologies. Maybe the honest VC tagline should be "Web 2.0 - because my partners won't let me invest in traditional software anymore."

Thinking Good Thoughts about VitalStream

An excerpt from a report released today by ThinkEquity Partners ...

With the macro shift in advertising dollars moving from TV to the newest content distribution channel, the Internet, we believe that [VitalStream's] recently announced EonStreams acquisition positions VSHI well to capitalize on this potential long-term, multi-billion-dollar opportunity. Moreover, EonStreams provides VSHI an up-sell opportunity to its installed base to offer content creators a monetization solution (more importantly, in a highly targeted and dynamic way) rather than just a cost center via CDN services. In our view, VSHI's unique CDN product offering should translate into incremental and higher-margin revenue opportunities as well as higher switching costs and lower churn rates among customers. Shares of VSHI currently trade at approximately 4.6x EV/'07 revenues. Our $16 price target is based on 7.7x our 2007 revenue estimate of $39M, which is an approximate 5 0% discount to AKAM's current valuation.

Web 2 dot Uh-Oh

In case you missed it, the Web 2.0 world is up-in-arms about Tim O'Reilly's plans to trademark ... Web 2.0. Here's Tim O'Reilly's take on the controversy.

Personally, I think the term has outlived its usefulness. To me, "Web 2.0" stands for "companies that do not have a business model."

And Now a Word from Our Sponsor ...

This from PC World ...

Google will soon begin selling video advertisements on the Web, opening a new front in its battle for a bigger slice of the online advertising market.

The ads will appear on Web sites that are part of Google's AdWords network, which includes partners like and The New York Times, rather than on Google's own properties. They'll be offered first in the U.S., Canada, and Japan, with other regions to follow shortly, the company said in its official AdWords blog on Monday.

Users will have the choice to click on the ads to start them playing, rather than having them launch automatically. Advertisers will bid to display their video ads alongside the existing text, Flash, and image advertisements that Google sells today.

This news follows hard on the heels of VitalStream's purchase of EonStreams, which specializes in online video ad insertion.

One-Stop Shop

This release from VitalStream just hit the wire ...

VitalStream Holdings Inc. (OTC Bulletin Board: VSHI), the world leader in audio and video streaming, today announced it has acquired Eonstreams, Inc., a privately-held provider of Internet advertising insertion and streaming solutions. The integration of Eonstreams’ advertising solution technologies into VitalStream’s content delivery network (CDN) will provide customers with a one-stop solution for delivering integrated streaming and digital advertising content on the Internet.

Internet Catwalk

In an article entitled Fashionably Late? Designer Brands Are Starting To Embrace E-Commerce [subscription required], The Wall Street Journal examines the increasing importance of the Internet to high-end fashion brands. Glam is playing an integral role in helping these brands merchandise their goods.

The rush for Internet riches comes after luxury-goods companies have poured money into buying or renting some of the world's most expensive real estate for extravagantly appointed boutiques. Many, like Prada and Louis Vuitton, hired famous architects and artists. Luxury-goods brands generate the bulk of their sales through their own stores, not at wholesale.

But as luxury labels reach critical mass in important markets like Tokyo's Omotesando neighborhood and Hollywood, the profit margins for each new store could soon start to shrink, analysts say. "There could be overcapacities soon," says Merrill Lynch luxury-goods analyst Antoine Colonna.

The Internet offers a new source of sales and higher profit margins.

LA Story

Larry Marcus judging online music startups at OnHollywood 2006
Larry Marcus and I just returned from the Always On OnHollywood 2006 conference, where Larry judged a group of online music startups. To see a video of these companies' presentations as well as Larry's commentary, which starts around the thirty-five minute mark, please click here.

I Want My User-Generated Content

At a Chuchill Club event last night entitled Video Goes Internet: The Future of What You Watch, representatives of WIRED, Google, MSN, MTV, ESPN, and Slingbox discussed the future of video over the Internet. Here are a couple of observations from the panel (in no particular order) ...
  • Traditional networks will only survive if they adopt a "voice" or point-of-view. While ESPN and MTV mean something to audiences, to the consumer, NBC, ABC, and CBS are just random assemblages of programming, signifying nothing.
  • Consumers are contributing a surprising number of homemade commercials to Google Video.
  • Because of rights issues, search engines will not supplant networks. Google is interested in linking off to other video networks. From Google's perspective, finding the right programming will still be a huge problem.
  • MTV and ESPN are designing programming for two-screen viewing.
  • Almost half of ESPN's daily audience of 4.5 million uniques watches videos on its site.

Vital Thoughts

ThinkEquity has raised its estimates for VitalStream ...

We believe business remains strong at VitalStream and expect the company to outperform our raised 1Q and 2006 estimates. We continue to believe VitalStream is the best way for investors to play the increasing demand for online streaming content, as the Internet grows as a distribution channel for interactive rich media and advertising. We are reiterating our Buy rating and raising our 12-month price target from $10 to $14.

Brands Take to the Web

This from the front page of today's Wall Street Journal [subscription required] ...

After years of cautiously experimenting with Web marketing, powerhouse advertisers like General Mills Inc. and Kraft Foods Inc. are cranking up online spending and increasing the range of brands they promote on the Web. General Mills, maker of Cheerios and Betty Crocker baking mixes, expects to nearly double online-ad spending in the current fiscal year. Kraft, home of Jell-O and Kool-Aid, plans to double its number of online-ad campaigns in 2006 and to increase the number of brands it advertises on the Internet by at least half.

The shift underlines the Internet's threat to traditional media such as television and print magazines. It suggests that the boom in Internet advertising that has already fueled rapid revenue growth in recent years at Google Inc., Yahoo Inc. and other companies could continue as still other groups of more traditional advertisers step up online spending.

The packaged-goods companies say their customers are spending more time online and using the Web in new ways, such as watching TV shows and other video. 'Our job is to invest in where consumers are engaging with media,' says John Galloway, vice president of sports, media and interactive marketing at PepsiCo Inc.'s Pepsi-Cola North America unit. At his division, online spending is expected to rise to between 5% and 10% of the overall ad budget in 2006, from 1% five years ago.
[Bigger Buy]

Providers of consumer packaged goods accounted for more than 11% of the $145 billion in U.S. ad spending in 2005, according to research firm TNS Media Intelligence. But they spent just 1.6% of their ad dollars online last year, on average, compared with an overall average of 5.8% of total ad spending for U.S. advertisers, says TNS. These advertisers have been the most challenging targets for Internet companies, says Wenda Harris Millard, chief sales officer at Yahoo. That company has overcome some of their resistance by wielding new tools to show that Web ads can increase consumer spending.

These developments bode well for BlueLithium, which has focused heavily on brand-building campaigns.

Gump's Web Revamp

Gump's received a nice write-up from MSNBC/San Francisco Business Times.

Listen Up

A good two-part analysis of music subscription services on TechCrunch. I gave up my Rhapsody subscription about six months ago and haven't turned back. Everyone eventually reaches subscription overload, and for me, $120 per year for a music service that I only used once or twice a week did not make "cents." (It's clearly a subject that hits home: the number of comments speaks volumes.) I am currently buying music from a couple of sites mentioned in the article, listening to Pandora, and streaming (and burning) Internet radio using StationRipper, one of the best and most unsung programs out there.

Ignite Catches Fire

Ignite Technologies has a new CEO, and he's quite a catch. Jim Janicki formerly served as CEO of Calpont, a database solutions provider backed by Austin Ventures. Before Calpont, he grew MetaSolv Software from three employees to more than 600 and took the company public in 1999. In 2001, MetaSolv generated $130 million in revenue, leading Ernst & Young to name Janicki its "Entrpreneur of the Year."

Follow the Money

BlueLithium announced today that Bill Lonergan has joined the company as Chief Financial Officer.

VitalStream in the News

VitalStream is making news yet again ...

VitalStream Holdings, Inc. (OTCBB:VSHI), a world leader in audio and video streaming, today announced that it has effected a 1-for-4 reverse split of its common stock as approved by its Board of Directors on March 24, 2006. Upon today’s market open, VitalStream’s common stock will begin trading on a split-adjusted basis under the new trading symbol “VSHI” (OTCBB:VSHI).

Stream On

This item from Marketwatch underscores VitalStream's tremendous market opportunity.

CBS Corp. appears to be on track to set the record for the highest number of live simultaneous viewers on the Web without any major disruptions.

The media giant's unprecedented airing of the men's NCAA tournament live and free on the Web drew a peak of 268,000 simultaneous viewers Thursday.

That level of traffic would give CBS bragging rights for handling the largest audience at any one moment for a live entertainment program on the Web.

Since there were few people in CBS's virtual waiting rooms at the peak time, the network believes it can handle an even larger audience.

The numbers were so impressive that they prompted Yahoo to send out a release reminding everyone that the Internet media giant still holds the record for simultaneous viewers of a live event - in this case a news event, rather than entertainment. Yahoo's July 2005 Webcast of the Discovery Shuttle launch attracted 335,000 simultaneous users who watched the NASA ship return to space.

That surpassed Yahoo's coverage of Howard Stern's final day in terrestrial radio, which pulled in 214,000 simultaneous viewers, according to Yahoo. The Live 8 concert shown on Time Warner's site was said to have drawn 175,000 simultaneous viewers.

The Network Effect

OK, I'm biased, but in this interview I think Gurbaksh Chahal does a great job explaining how BlueLithium differentiates itself from other advertising networks.

The main distinction between networks is whether they use a rep model or an arbitrage model. In the rep model, the network is simply selling inventory on behalf of the publisher, as an alternative to the publisher employing their own sales force. In the arbitrage model, the network is buying inventory from publishers, re-assembling it into packages that match the audience requirements of the advertiser, then using advanced targeting and optimization technologies to further enhance the performance of the inventory. This is BlueLithium's model. A lot has been written about the relative strengths of each model, but it boils down to this: rep networks provide the convenience of buying a fully-disclosed portfolio of sites with a single IO. Arbitrage networks integrate new capabilities such as behavioral targeting/remarketing, semantic analysis, on-the-fly optimization and audience-centric buys to deliver strong bottom-line performance over and above the name brand value of the sites they run on.

Pandora Rocks On

Pandora has rolled out a number of very cool new features, including RSS feeds and interactive blog links. (See below right.)

Also, check out this very interesting interview with Tim Westergren, Pandora's founder.

Listen Up!

Pandora just rolled out some new features that should make it even more compelling than it already is. Check it out!

Dumb Money

I just read that Sprint has paid the NFL a record $12 million to sponsor this year's halftime show. The Rolling Stones are performing. Did Sprint pay for their services, as well? Memo to Sprint: fire your VP of Marketing. Spend your money on BlueLithium, instead. Like so many other major brands, you'll find it's a much better use of your money. (By the way, I'd be remiss if I didn't give a shout-out to Ford, which paid $40 million to put its name on Lions Stadium. I'm sure America will appreciate your largesse in the wake of your recent announcement to lay off 30,000 workers and close 14 plants in North America.)

Outtask Concurs

Yesterday, Concur Technologies, Inc. (NASDAQ: CNQR) purchased Outtask, a WaldenVC portfolio company.