The New York Times reports that between shots of hard liquor at the office yesterday, one Lehman employee shouted: “Are they going to take my BlackBerry? Come on, come get it.” Oh, they will. Research in Motion's BlackBerry sales were already disappointing in August. With Lehman expected to lay off most of its 29,000 Lehman employees, Merill Lynch and Bank of America expected to cut some 20,000, and plenty of Bear Stearns bankers still unemployed, September could be worse. Their ex-employers may not repossess the hardware, but RIM makes its steadiest profits from the recurring monthly service fees paid by businesses to push corporate email to the devices.

New York's most successful tech company is financial information provider Bloomberg, which somehow manages to charge companies thousands of dollars a year per subscription for access to the terminals that every Wall Street trader has on his or her desk. But with Lehman cutting 29,000 and Bank of America cutting another 20,000, Bloomberg's already low-volume business just got smaller at a time when it is facing redoubled competition from Thomson Reuters.

The benefit of a merger between the likes of Bank of America and Merrill Lynch is that the new company can combine their infrastructures and cut redundant costs. Unfortunately for IP telephony provider Cisco, it's one of those redundant costs. After flirting with Avaya for a couple of years, Merrill Lynch returned as a Cisco client in 2005. Last May, Cisco announced it would deploy 100,000 phones to Bank of America. When clients combine, vendors lose.

On February 27, 2007, Salesforce.com announced its largest deal ever, signing Merrill Lynch as a client and adding 25,000 new subscribers. How will Salesforce.com fare now Merrill and those 25,000 accounts are moving to Bank of America? At worst, Bank of America will insist Merill's brokers and their assistants use the Soffront CRM software the bank signed up for in March. At best, Salesforce.com will lose several thousand accounts as the new company seeks to reduce reduncancies and lays off as many as 20,000.

Investment bank Marlin and Associates helped Rupert Murdoch and News Corp's subsidiary Fox Interactive find MySpace, but otherwise it's been Lehman Brothers advisers bringing their favorite startup clients to the Murdoch empire. IGN Entertainment hired Lehman in the summer of 2005 and sold to Fox Interactive in the fall. Then in April 2007, photo-sharing site Photobucket hired the investment bank only to sell to Fox in May of the same year. Without Lehman Brothers, how will News Corp. grow on the Web?

Startups raise money in rounds, often taking on multiple investors per round. Here's how the major types of funding work:

Venture capitalists

• A VC firm raises funds from investors, then invests it in startups, usually at upwards of $1 million per company (and sometimes as high as $12 million or more).
• A VC firm is buying a share of the company — anywhere from a tenth to a third, depending on how much the firm decides the company is worth before the investment.
• If the company needs more money a few months later, the firm may invest again, or a different firm might invest. Companies often raise funds from multiple firms in one round.
• VCs want at least three times their money back, though they expect most deals to fall through
• Many companies only take VC funding after they've used up the funding from their...

Angel investors

• These are often the first investors in a company, most always used before venture capitalists.
• Angels invest a few thousand dollars. As with VCs, several angels may invest in a startup at once, for a total round of anywhere up to about $1 million.
• They have less of a business interest but more emotional involvement.
• Angels can be friends and family of the investee, but some startups raise a preliminary friends-and-family round.
• Or they may go even smaller and rely on...

Personal credit

• When is it healthy to run up a 20%-interest-rate debt on plastic? When it's cheaper than running up a 200%-interest-rate debt on VCs.
• Of course, you could also rely on your own cash reserves, as many startuppers do with their second companies — Evan Williams, for example, who used his windfall from selling Blogger to Google to buy out the investors in his new company, Odeo.
• Ironically, credit card funding is a far cry from other way to borrow from banks...

Hedge funds

• The 90s bubble was partly blown up by VCs, but the big money came from hedge funds — an adventurous form of private investment fund.
• They're not as involved this time — the money's too small, at least for now — but they powered many a startup in the 90s, when more tech-savvy VC firms hadn't dominated the Silicon Valley funding industry.

So why are startups avoiding VCs? Because they're finding that angels, friends and family, and personal credit are less demanding funding sources, with lower expected returns, giving founders the freedom to take it slow and stay in control. Of course, VC money is hard to resist after a year of bootstrapping and dining at McDonald's.

For Start-Ups, Web Success on the Cheap [NY Times]

• The name: Goozex (Sounds risky to pronounce, like "Slartibartfast")
• The deal: Users pay a buck per trade to swap video games with other users.
• It's like: Lala with CDs or Peerflix with DVDs.
• The deal, detailed: Users get "points" for their games, so trading a good game for a lame one leaves you with some credit. No one has to trade Katamari Damacy for Daikatana.

• The backstory: Founder Jon Dugan was pissed when his local game store paid him about two bucks each for his used games, then resold them for up to $33. So he teamed up with some college friends to give gamers a better option.
• The look: Classic gray-and-green three-column layout with an intuitive list of game platforms on the front page.
• Gimmick: First trade's free for military users, who are known as heavy gamers.
• Will it survive: It's easy to get people to sign up for free accounts, and not too hard to get them to part with a dollar. It's harder to steal or rent videogames than music or movies. This is the killer market for online exchanges.

Anger From 1 Ripoff + 2 MBAs = a Game Plan [Washington Post]

"I thought all these egos would be bouncing off of each other," said Marianne from Treasure Island, "but this has been so warm and supportive. It's not about awards, it's more about celebrating new technologies." She was referring to the Vloggies, held Saturday night at the Swedish American Hall, and she was right about the atmosphere.

Going into this videoblog award show, I braced myself for an evening of cinematic navel-gazing, expecting clip after clip of disembodied faces staring into the camera, focused on their own reflection in the lens instead of communicating to an audience. I was pleasantly surprised. To me, the Vloggies clearly illustrated the varied world of internet video and, in a way, brought rationality to a medium easily construed as ridiculous.

On the other hand, Marianne was dressed as a fluffy yellow duck.

Jerry Zucker: "You like these jokes? I got a hundred more that we cut from "Naked Gun 33 1/3." [Laughing Squid]

In a sign of the vlogosphere's influence, actual famous people attended the show. Jerry Zucker, creator of Airplane! and The Naked Gun opened the night with a great speech (recorded here) about the beginning of his moviemaking career, drawing parallels to the world of vlogging. Daniel McVicar from The Bold and the Beautiful (and the McVlog) and Irina Slutsky from the vlog Geek Entertainment Television (who also organized the event for podcast company PodTech) very capably co-hosted the red-carpet affair.

Daniel McVicar shows his "doh" face while Irina Slutsky spies a cute guy in the audience. [Laughing Squid]

The usual group of internet celebrities showed up in support, including Scoble Show namesake Robert Scoble and Diggnation vlogger (and digg.com founder) Kevin Rose. Conspicuously absent from the ceremony were a few familiar Vlogerati, like ex-Rocketboom queen Amanda Cogdon and Favorite Male Vlogger Ze Frank (who sent Marianne the duck in his stead).

Big check, little prize. [Laughing Squid]

Alive in Baghdad was the big winner. This fantastic site - which takes a look at daily life in a war zone through interviews with Iraqi citizens - won a total of 7 Vloggies, including Judges' Favorite Vlog. Along with Josh Wolf, People's Choice winner for Favorite Male Vlogger, Alive in Baghdad demonstrates the capacity for internet videos to go beyond entertainment into true journalistic inquiry. In honor of its win, the Intel Corporation presented vlogger Brian Conley with a scant $2,000. It was enough to fund one Intel Core2Duo laptop, true, but the ridiculous size of the novelty check made the donation look meager in comparison. Given the state of the Iraqi power supply, I hope that Intel can cough up, at the very least, a solar battery charger and satellite internet connection, and throw in a couple flak jackets for the journalists.

Ask a Ninja co-creator Kent Nichols shows off his unstoppable "double-fisted statues" maneuver. [Thomas Hawk]

Slight snafus haunted the night. The audio went out on Ze Frank's taped acceptance speech and the dubbing was delayed all night, making every video look like a 1970s kung-fu movie. Patrons at the open bar talked over Brian Conley's moving speech, and an overabundance of hungry party guests picked over scant appetizers at the afterparty at Café du Nord. On the whole, however, the hosts and presenters kept the show moving and the crowd entertained. One person at the mike even offered to tap dance for the audience when a clip refused to play.

Andrew Baron tries to show the ducky what traffic really means. [Chuckumentary]

One thing that struck me as odd: Andrew Baron, the producer of Rocketboom, accepted the Judge's Favorite News Vlog with a dark-haired beauty by his side - curiously, Rocketboom host Joanne Colan was back in New York working on some "TV stuff." Baron won the Ego Prize of the night for invoking Woody Allen in a condescending speech that managed to accept the honor while assuring the audience that he was really superior to all this nerdy stuff. Later on, he continued his pissing contest with Ze Frank by pretending to vanquish Marianne the duck in a tasteless photo op.

Valleywag party score: This event's ready for its close-up.

The "Vloggies" re-used statuettes from the "Goatses." [Laughing Squid]

Unless noted, photos are by Scott Beale of Laughing Squid. See his photo gallery: The Vloggies: Photo gallery [Laughing Squid]
Also see Thomas Hawk's gallery: Photos from the 2006 Vloggies [Zooomr]

As TechCrunch reported and Reddit announced this morning, Condé Nast bought social bookmarking site Reddit. I talked to Wired Digital general manager Kourosh Karimkhany, who will directly oversee Reddit as a Wired property.

Condé Nast first experimented with Reddit by collaborating on a small project, lipstick.com. It's a gossip site built on the same voting and bookmarking system used on Reddit. (The site is still "doing well," says Kourosh, who's not sure what will happen to it now.)

"They were a little bit skeptical of us," says Kourosh of Reddit's four-man team. "But we liked what they were doing," and Condé Nast was "pleasantly surprised" with the outcome.

The two companies started talking seriously this summer, he says. "I went to their Boston pad, we played some video games." And this month they wrapped up the buyout.

Wired Digital plans to expand Reddit, continuing the flagship Reddit.com site while "blowing out new products." He cites one deal with the Washington Post and its Slate site, made before Wired bought Reddit. Condé Nast also wants to integrate Reddit with some of its own titles.

"We want to distribute the Reddit technology widely throughout the net," says Kourosh — meaning Wired wants buyers to license the Reddit system. The company wants Reddit to "just focus on building out," which may involve adding to the current staff of four (all co-founders), who will all move from Boston to San Francisco and work at Wired's office.

Kourosh dodged one question — when I asked (twice) whether Wired had considered the more popular social news site Digg, he would only say, "Reddit was the right choice. We liked Reddit's open attitude. Came down to that."

Sounds like something went on — one could speculate that Wired got turned off by Digg's price or realized founder Kevin Rose wouldn't budge from his own plans for his site (which apparently don't include third-party licensing like Reddit's). When I asked Rose if Condé Nast had approached Digg, he declined to comment, saying his company doesn't respond to rumors.

Their reasoning? Napster and MySpace, says the Chron, were no fun once they went commercial. (Please — I was on MySpace before News Corp bought it, and if anything, it's gotten better.)

Reason 2: Censors and politicians want Google to regulate YouTube. Of course, Google's famous for fighting censorship — in America, anyway — and they can afford to ignore the shrill cries of prudes more than YouTube could alone.

Don't be scared that YouTube just deleted 30,000 videos from Japan — the site always had a policy of removing copyrighted content when asked. And that journalist's $150,000 copyright lawsuit? Even if he wins, that's pocket change.

And while MySpace serves more video than YouTube, YouTube is catching up fast.

Finally, Yahoo says it's not going to make its own YouTube. Yahoo's VP of marketing says, "We want to give users quality video experience instead of being a worldwide repository of video. A big part of our strategy is not to become a video flea market."

Three months ago, I thought YouTube would die. But now, for so many reasons, YouTube is better than ever. The only way from here is up.

Is YouTube dead? [SF Chronicle]

Webroot Software makes a really popular anti-spyware application called Spy Sweeper. It was the darling of the software world when it took a HUGE series A funding round ($108 MM) back in Feb 2005. Nevermind that the money was more of a buyout than an investment with the vast majority of the moola walking out the doors with the newly rich founders. Nevermind that the valuation the clueless venture capitalists put on the company basically ended any possibility of acquisition by anyone short of Google.

Webroot took what money was left and started chasing big names from the security industry. Nevermind that those big names were not qualified for the jobs they were given. Nevermind that the big names typically had little experience in the consumer market where Webroot had enjoyed its success. The big names came in and they have consistently mis-managed the company.

The real fallout started early in 2006 when they hired Gerhard Eschelbeck from Qualys to be their CTO and head of Engineering. His awful management style and inability to actually understand the Webroot business resulted in David LeBlanc (a well-known security architecture expert that Webroot lured from Microsoft in mid-2005) going back to Redmond. LeBlanc found it so messed up he left the job after less than a year to go back to his old job at Microsoft.

Leblanc was soon followed by Richard Stiennon, Webroot's well-known VP of Threat Research, and it all started falling apart from there. In the September 2006 quarter they had 25 people leave, nearly 10% of the entire company, and almost all in the organizations headed by Eschelbeck. Almost the entire product development team from Engineering to Product Management to Quality Assurance decided to get the hell out.

Was this a wake-up call for the management team? Well, apparently a few of them can tell that the ship is sinking and are getting off while they can. The latest news is SVP of Business Development Seksom Suriyapa (a high-profile hire from McAfee who started at Webroot in September 2005) and VP of Marketing Vinay Goel (hired from Check Point in may 2005) are leaving "to pursue other opportunities."

Why aren't the executives behind the company's personnel disaster (Eschelbeck, COO Mike Irwin and CEO David Moll) being held accountable by the board? Because the company still sells a zillion copies of Spy Sweeper in Best Buy and as long as the company is making money, who cares? The fact that the team that built the successful product is gone doesn't seem to have sunk in yet...

I'm poking around into the weeds at the side of the road looking for a "Web 2.0" (don't—just don't) startup to get rich in, preferably in six to eight weeks. Any leads?

Good question, Broad. There are several routes to dot-com success, all following an archetypal pattern: the Dirty Rotten Scoundrel.

Stage 1: Pick a startup

• Find something carpetbagging VCs are salivating for and will pay you cash for. "Citizen Media" is hot this month, what with the $1.65 billion YouTube buyout and Sequoia Capital's $5 million investment in PopSugar. That'll put you in Content Land, a magical place where companies get millions but spend pennies on bloggers (who, thanks to a weak dollar, are cheaper than Chinese World-of-Warcraft gold farmers).
• Or for a technology bid, play with buzzwords: Ruby on Snails, Abuser-generated content, Anti-bacterial Ajax. The stupider the phrase, the more exciting the business — after all, no competitors!

Stage 2: Grab the cash

• Shop for gullible investors. Smart ones will turn you down. Venture capitalist Paul Kedrosky, for instance, answered the reader's question with "Buy a tri-state lottery ticket."
• One way to find these investors is to look at other silly startups and see who paid them millions. Which distracted investor at Y Combinator invested in Kiko despite the plethora of other, better web calendar startups?
• Or run a blog search on Technorati for the phrases of an investor who's caught the fever: "__ doesn't get it" is the best mark of a true believer, but also look for "we talk through blogs" (the notion is pretentious and the use of we shows the writer thinks Web 2.0 is a club) and "Web 3.0" (especially if your startup works on mobile phones or 3d).

Stage 3: Hit the circuit

• Stirr, SF Tech Sessions, SF New Tech, SV New Tech, SF Beta — you could not only schmooze every night of the week, you could demo your site to hundreds of young VC associates, biz-development pros, and flacks.
• Pick a persona: regular Joe who had an idea in the shower, bold innovator in the model of Google's Sergey Brin, or nerdy engineer (minus the anti-social part, unless you have a wingman to "force" you to meet investors).
• Your conversation partner is having a gin and tonic. You are having a Sprite — either discreetly order so no one knows you're the only sober one in the room, or always take your car. "Just a soda, sorry — driving."

Stage 4: Grab the cash, part 2

• This stage is a great option if you skimped on Stage 2. Bootstrapping your own company means you can find a buyer and keep the money for yourself.
• You did remember to weasel out of promising your partners and employees any money, right?
• Repeat after me: "My financial advisor advises me to decline a vesting requirement." Substitute with "attorney" or "yoga instructor" as necessary.
• No, you can't sell to Google. They may know how to buy a company like Dodgeball or Blogger and let it rot, but even a lousy purchase has to look great at first. Can you really fake it that well?
• Two words: News Corp.
• One word: Viacom.
• You can't have your funding and eat it too — it'll be damn hard to find a gullible investor and a gullible buyer, and all the paperwork will become evidence when your scam is finally uncovered.

Stage 5: Run away!

• Cook the books, open a secret account, transfer the money and book it.
• Exit strategy 1: Mexico.
• Exit strategy 2: Russia.
• Don't even think about it: New York City. They may be even more nuts over dot-coms out there, but they're all hucksters. You will be the soft guy with the money, and a mob of ravenous bloggers will sink their jaws into your larynx.

Of course, Valleywag's commenters will have their own evil ideas for netting a quick million or two. (Won't you, kids?)

Peerflix has a simple business model: Charge users a nominal fee to trade DVDs or CDs, pocket a buck per trade, and build volume. So how much should it cost to pull such a site into profitability? Maybe two million bucks? Not for Peerflix.

[CEO] Mr. McNair said the company in late 2004 raised about $2 million from the venture firms 3I and BV Capital.... That cash would have been more than enough to last until mid-2006, Mr. McNair said, but Peerflix raised another $8 million in October 2005.... More money is on the way.

Now how could this company spend more than $10 million in three years? Is this site that far from running on its own revenue? Of course not — the math below shows why Peerflix should already turn a profit, making it a bad idea to take VC money.

Boring arithmetic begins
Run the numbers: The Times says Peerflix makes two bucks (one per user) per trade, and users are making 5 trades a month. Peerflix boasts 250,000 members. Using the industry rule of thumb for free-registration sites — 1 active user for every 10 registered accounts — that means 25,000 users are making a total of 125,000 trades a month. Even if Peerflix is padding their numbers (they are), they should be pulling in at least a respectable $200k a month — $300k if you count the part spent on shipping costs.
Boring arithmetic ends

$3.6 million a year is fantastic for a little startup with $2 million invested. But for a company that took $10 million, it's nothing special. The CEO shouldn't be bragging — he just gave away more control of his company for no good reason. If Peerflix expands (into CD and book trading, for example) after getting this money, the venture capitalists own a hefty chunk of the new business.

Why did Peerflix take the money? Maybe they plan to expand but don't have the guts to bootstrap; maybe they got greedy; maybe the smooth-talking VCs tricked them into it. But now Peerflix is just another in a long line of startups diluted by wasteful VC money, ruining a perfectly profitable idea.

I'll Trade You My 'Titanic' for Your 'Spider-Man' [NY Times]

Of the two, Chen is the straight-talker, but that's not surprising. His purview is technology. It's difficult to shuck and jive about bits and bytes. Hurley, on the other hand [...] is an on-message kind of guy, the kind of executive who's comfortable (or at least effective) giving the same answer he's given scores of times already, no matter what question you ask him. As a result, what he says is well-coached and of limited value, a skill that should please his new masters to no end.

It's a bit like Jobs and Woz, a relationship that ended up with the former taking over, the latter getting pushed out (but not complaining about it), and one banning unauthorized biographies while the other shills his memoir on talk shows.

But could Hurley do the same to Chen? Doubtful — mainly because even in his business-bullshit moments, Hurley sounds more like the I-don't-really-mean-it Gen Yers in a typical homemade YouTube video than a mini-Jobs full of pseudo-inspirational aphorisms. Look closer at his BS: It's just normal business stuff. In fact, has Hurley ever spouted a Jobs line like "I want to put a ding in the universe"?

YouTube will stay independent, really! [Fortune]

At first it looked like Bonnie (pictured) had made the decision himself — for instance, he stays on as a director, which would be odd if he were fired for misconduct. But when the chief counsel and human resources head were fired too, it became clear someone — maybe those leading the internal investigation — forced Bonnie to take one for the team.

Now CNET named Neil Ashe as Bonnie's replacement. Ashe was key in bringing in CNET acquisitions like Webshots, TV.com, and mp3.com. Some inside CNET say Bonnie had long planned for Ashe to succeed him, but president and COO Barry Briggs (who came with the acquisition of ZDNet) will feel stung for being passed over. Briggs is publishing royalty, son of a partner at former ZDNet parent Ziff-Davis Publishing.

Cnet loses its heart and soul executive [SF Chronicle; photo by JD Lasica]

Google is, of course, an ad company. All but a negligible slice of Google's revenue comes from advertising, and Google is expanding its ad business (into newspapers and radio) as it trims its product line, consolidating its engineering work. The press pays attention to Google's ad business, but only from the deal side. When it's time to run a "corporate culture" article, everyone flocks to Google's engineering department, where they're greeted by engineers with Mouse Trap contraptions on their desks — and perky VP Marissa Mayer, who apparently holds 14 meetings a day in between 14-hour e-mail marathons.

Do ad salesfolk get 20% of their time to do personal projects? (Granted, word is that even engineers don't really get that any more.) Are advertising experts told they're special people running the world? Did Larry Brilliant ever chastise Wired for doubting the excellency of advertising professionals as he did in this exchange?

Are engineers really the best source for solutions to the world's biggest problems? I hope that you'll put in that Wired questioned the value of engineers.

And while the best engineers may be quirky, adorably camera-shy nerds beloved by TV interviewers, the best ad salespeople aren't so cuddly. (They're rumored to be hotter, for one — no homely "love ya like a brother" charm needed here.)

They're not the only ones making Google slicker, of course. Co-founder Larry Page himself looks pretty L.A. when he's hanging at swanky San Francisco parties. Even his girlfriend, Lucy Southworth, is looking blonder and tanner than those old Stanford photos. The whole fights over king-sized beds in Larry and co-founder Sergey Brin revealed the boys' more extravagant side too.

So next time a lazy reporter pulls the old "Hollywood Yahoo vs. Silicon Valley Google," remember who brings the money into the supposedly nerdy company — a team of slick salespeople with a slick former nerd at the helm.

So the big winner in YouTube is probably [venture capital firm] Sequoia. They've easily got 45-50% of the company.

It's interesting that they're selling to Google; Sequioa has always been a Yahoo company. Bunch of folks from Yahoo are limited partners in various funds and side-funds, most notably investor David Siminoff. (There are two kinds of partners. General parters — the guys you meet at parties and who have offices here — and limited partners, the folks who cough up the dough.)

Different firms have different rules for limiteds. And some have what they call "side funds" — pools of money into which CEOs, former CEOs, former partners, etc. can invest. So a firm will invest x and allocate some part of x to the side fund. This is how Kleiner Perkins got back into everyone's good graces: Google.

Is this a good sign for the Bubble?

So Sequoia's now got YouTube which, by the way, is the HotMail of Bubble 2.0. It's the deal that says we're a go. No one understands what it means, no one believes the "valuation," the founder'll be outta there in two years, yadda yadda.

The only difference is that all the big media firms took a sniff at YouTube and they all passed. More proof of cluelessness. VIacom shudda bought 'em. Keep all those MTV/VH1 oldies on line forever and ever...

So YouTube is still gonna blow. How soon can everyone jump off this flaming dirigible?

This is all hypothetical but here's how it would work: Sequoia, which probably has control of the company, probably led the negotiation. Their shares are as good as cash or close to it.

Now, if they were very good and very smart, they got the founders a short "work out." (The shortest one I've heard of - ever - was Peter Thiel's at PayPal. He didn't have one. Nor did Toby at Outpost. They go to work at/with the new co but they are free to leave at anytime taking their comp packages with them.

Others - no so lucky. Employees: Unless they've negotiated for a "change of control" clause in their contracts, they'll have the same vesting schedule [the rate at wich employees get promised company shares] under the new owner.

So, for instance, let's say you have a package of 5,000 YouTube shares with a two-year vest. Okay, you hang around for a year and you're getting 2,500 shares. Two years, you get the whole five. Only now that the deal's done, you may be getting GOOGLE shares — not shares in some company that's not public and may never be.

Google Agrees to Buy YouTube for $1.65 Billion [NY Times]

High on the "will this startup tank after five months" checklist — I think it's number 14 — is "Does this company want to be the next Google?" Would-be search innovators fail for several reasons:

• They make the user click more than once. Searching isn't like browsing — users need to type a phrase, hit enter, and have all their best options one click away. That's why Ask.com's clustered Teoma search can only get press in USA Today and not a respectable tech outlet. It's also why Clusty failed to catch on despite constant hype.
• Portal creep: They have so many topical searches that they feel like directories. I haven't heard a thing about Kosmix, for example, ever since they took over $7 million in venture capital funding in January.
• They're too fancy for their own good. Snap.com's auto-preview feature is snazzy, but it's too slow. Maybe it'd work in two years, but can Snap wait that long?
• They try to get social. Please, I'm not going to convince my "community" to use Eurekster Swicki, and even when I do, I don't care what searches they use — basic search is not social. Tagging is, and that's what Yahoo's Del.icio.us already does.
• They're research projects that got caught up in Web 2.0 hype. See TagCloud, which readily admits this on its home page.
• Their only publicity is a spot on the Web 2 List.

So who the hell's Powerset and why will they beat Google?

Powerset's co-founder echoes many other would-be search kings when he calls Google search terms a "grunting pidgin interface." But he's actually thought of the answer, judging by a profile on news site VentureBeat: Take the phrases people already search with, and make them work.

Most Internet users have learned the halting language of search terms, but when AOL released the records of millions of real searches, it revealed that many users still try phrases.

The failed-or-failing search engines above come at search from the wrong end — they thought of a clever method and then justified it. Powerset tackles it the other way round: They want to parse the English language so the average phrase returns results relevant to it, not to its constituent words.

VentureBeat uses the search "books by children" as an example. Entered without quotation marks (as most users type it — people never learned to use quotes), the phrase gives sketchy Google results.

But it sounds like Powerset's ambitions reach much further than a three-word phrase. Co-founder Barney Pell, says VentureBeat, built a specialized language system that could take queries like "What were the top five products ordered over the past week?" and return a table of results.

Now, that would be a coup for general search — most impressive language systems, including the one Pell built, only work within strict topical boundaries. That's why when Ask.com tried to build a search engine using real questions, they opted to handcraft answers rather than automate the whole process. The load was just too much, and finding the real question among Ask's options was no better than poring through Google results.

But Powerset wants its system to truly understand those phrases. Such an engine would be an artificial intelligence. If the company can pull this off, it has a shot at rescuing the world from speaking Search Grunt.

More on Powerset, the secretive search engine [VentureBeat]

Yahoo
Pretty much everything is in trouble. Thankfully, Yahoo just bought a different online video startup, and they have their own video enterprise as well, so a YouTube buy isn't likely.

Anybody but Viacom

• The Daily Show. Viacom's Comedy Central hasn't sued YouTube for now, but if someone like News Corp. bought it, they'd feel a lot more litigious off a direct competitor cashing in on their work.
• South Park
• Clips from movies by Paramount Pictures and DreamWorks
• Anything from MTV, Nickelodeon, Spike TV, and VH1

Anybody but News Corp

• Everything from Fox, including The Simpsons and Family Guy.
• Movies by 20th Century Fox
• Fox News, but they just started suing anyway

Anybody but Disney

• ABC shows including Lost, The Nine, Grey's Anatomy, America's Funnies Home Videos, Extreme Makeover, Jimmy Kimmel, NBA games, college football, and dozens of old sitcoms
• Movies from Disney, Touchstone, Hollywood Studios, and Miramax
• Music from Buena Vista, Disney Records, Mammoth Records, and Hollywood Records
• Pixar movies
• The Muppets
• ESPN

Anybody but CBS

• Shows on the new CW TV Network
• 60 Minutes, the CBS Evening News, and the CBS Morning News
• Four soap operas
• The Amazing Race, Big Brother, and Survivor
• CSI: Whatever
• Other shows like Numb3rs, Without a Trace, The King of Queens, Letterman, and The Price is Right
• NCAA, NFL, and PGA games
• Old shows including MASH, The Twilight Zone, and Everybody Loves Raymond

Anybody but Playboy
Actually, YouTube's pretty covered there. It's damn hard to find porn on that site, as you already know.

Anybody but Sony
Oh geez, just too much to count. Sony owns half of BMG, which cuts out a huge chunk of music used to soundtrack videos. YouTube's deal with Warner Music means Sony will demand the same treatment. Hell, it could do that soon anyway. And don't forget movies by Sony Pictures.

Anybody but Time Warner
Sure, there's HBO, Cartoon Network, CNN, Warner Brothers, and New Line Cinema. But forget that, what about Road Runner? Remember how ISPs won the Net Neutrality debate? Yeah, videos from YouTube might come a little slower until its new owner pays for an upgrade.

But hey, I'm sure YouTube will do just fine and go public on its own.

Disruptor 1: Netvibes (Custom web portal)
Hero (pictured here not knowing he'll be Photoshopped to look silly): Founder Tariq Krim
B2 says: "Netvibes currently doesn't accept typical Web ads — the kind Krim denounces as 'Advertising 1.0, in your face.'" Instead he gets "sponsors."
B2 means: "Netvibes took $15 million in funding. It doesn't have income, just pointless deals that get media attention until a conglomerate buys the company."
Netvibes competitors B2 doesn't mention: Goowy, mobileGlu, Pageflakes, Protopage, Start, and over 30 others

Disruptor 2: Salesforce.com (Customer resource management/application platform provider)
Hero: CEO Marc Benioff
B2 says: "It's true that Benioff is known throughout the tech business for his bombast, and he's always predicting that Salesforce is about to do something amazing. But he's not all talk."
B2 means: "Benioff is about to launch a product update that will bring his company up to speed with competitors Microsoft and Oracle. Yawn."
Favorite Benioff quote: "We will destroy Oracle and SAP because they won't be able to respond to the innovation we are about to unleash."

Disruptor 3: Clearwire (Wi-Max broadband wireless provider)
Hero: Founder Craig McCaw
Actually, this guy's story checks out as far as I know — real business plan, real success. Feel free to correct me in the comments.

Disruptor 4: Zopa (Person-to-person loans)
Hero: The business model
B2 says: "Zopa is closing that gap by using the Web to allow personal lending on a massive scale. The startup was the first company to introduce peer-to-peer lending in the United Kingdom 18 months ago and is about to launch in America."
B2 means: "In America, Zopa will compete with Prosper, a personal lending site that already has a head start and funding from the same venture capital firm."
Proper term for Bessemer Venture Partners, investor in Zopa and Prosper: Player

The Disruptors [Business 2.0]

"A new bipartisan poll released today finds that an overwhelming majority of American voters favor video choice over onerous 'Net Neutrality' regulations," shouts the U.S. Senate Committee on Commerce, Science, and Transportation. But the same, "only 5 percent of likely voters had even heard of 'Net Neutrality.'"

So respondents knew nothing about the questions they answered. Why does the Senate care about their answers? Because this poll was not a poll. It was propaganda.

The Senate committee ran a push poll, a fake survey skewed not to measure public opinion, but to manipulate it. Before the hired survey-takers asked voters whether they wanted a law "delivering TV and video choice" or one "enhancing Net Neutrality," they briefed respondents on a bill that would let TV providers get more competitive. (They didn't mention the Net Neutrality bill.) Pollsters then asked questions like, "In your opinion, which is the MOST important reason for your Senator to vote for this legislation?"

But it gets so much worse.

The poll also asked respondents which benefits they thought they'd see from letting cable companies compete. It never mentioned whether these benefits were real; instead of suggesting "lower prices" and "higher quality programming," the poll may as well have named "magical unicorn festivals" and "everyone gets to be on the Daily Show." It's a classic priming method — instead of demonstrating actual benefits of legislation, the Committee just shows that people think there are benefits. If America ran its government like that, we'd be voting for short-sighted $200 tax returns!

Oh. Right.

This poll is brought to you by the Senate committee controlled by Ted "series of tubes" Stevens. It's not just pro-big-business, it's completely abandoned reasoned debate in favor of rhetoric. It didn't just beat supporters of free speech and a fair Internet, it kicked them in the nuts and spit in their eyes.

Bipartisan Poll Shows the Majority of Americans Favor Video Choice Over Onerous Net Neutrality Regulations [Senate Commerce Committee]

Today, YouTube announces that Warner Music will publish music videos (and some other video) through the popular video site, with both companies profiting from ads. Also, YouTube says it invented a copyrighted-material-finding machine (?) that will scour through the site's many amateur vids and give Warner Music the option to nix them or license the music.

What does this mean for YouTube? Well, the ad revenue is just what it needs, and it's a lot better than the Paris Hilton video deal. But no one cares about that right now. It's all about this magical copyright finder.

While the casual reader (say Marshall Kirkpatrick, Web 2.0 consultant turned blogger) may think this is a good sign, the more experienced Mark Cuban says this is doom for YouTube. Cuban compares YouTube's current situation to Napster in 1999 pretending its business was legal. (At that time, Cuban was pretending that his startup Broadcast.com was worth the over $5 billion Yahoo paid for it. The dude knows his dot-com booms.) Cuban says users will give YouTube the finger once it starts cracking down on their casual soundtracking. (How many YouTube videos are just a kid dancing to a song?)

Dead 2.0, an anonyblogger who may or may not know what the hell he's talking about, adds that this deal doesn't mean Warner Brothers will pump movies through YouTube any time soon. "If you haven't actually worked with content companies before," he says, "you are generally less aware of the fact that the various departments almost never interact with each other, and consent from the group doing videos does not imply any bigger deals." Plus, Time Warner sold Warner Music two years ago.

In short, this deal is part of YouTube's shift from "we love our users" to "oh shit we need to profit." It's an archetypal path for startups — Napster had to escape the lawyers, the New York Times needs that subscription charge, and Yahoo needed that China market share more than it needed to protect some political dissidents. The rare company that stays in love with its users — Craigslist, for example — does so by sacrificing millions of ad and fee dollars.

Warner distribute videos through YouTube [AP on Yahoo]

1. Don't follow up e-mail pitches ("I was wondering if you had the chance to read this material," said the SS PR message. Oh, I had the chance. I also had the chance to watch Ron Popeil infomercials). The journalist you pitched probably gets ten to a hundred of pitches a day and deleted yours. This time you're marked as spam.
2. Life is not LinkedIn. Do not try to "make contact" with every nearby human being. There's a reason that "making contact" sounds like something you do with aliens.
3. There is such a thing as bad PR. Don't try to prove it.
4. Tech writers are cranky. (They're surrounded by geeks and suits who make twice their income right out of college but can't put a sentence together.) Ply them with drink.
5. Before you send an irrelevant press release, count to 10. If you still feel like sending it, count to 20.

Still worried you'll come off as a flack? Below, other PR-plagued writers share their horror stories.

Ex-writer Kourosh Karimkhany ("Identify me as 'burnt-out former wire service reporter'") has some anti-flack anger to work out with his therapist:

From my days at Bloomberg/Reuters/Wired, sure. Got plenty.

1. Don't send postal mail. 2. Don't send a fax. 3. If you call make sure you keep the pitch to 10 seconds. If you don't have me in 10 seconds, you're never gonna get me. 4. Spell and pronounce my name right.

5. Embargoes are satan spawn. Please realize that we as journalists know exactly why there are embargoes: to meet the deadlines and timelines of the marketing department. No self-respecting journalist — even sleazy ones like the ones at [gaming blog] Kotaku — would EVER want to go along with your marketing department's plans.

One writer says, "Don't call around deadline time [4-6 PM Eastern]. Actually, don't call, period. E-mail is just fine, unless we already know you."

Valleywag owner Nick Denton wrote about Silicon Valley for the Financial Times. He adds, "Don't ask for information that you can find on the website, e.g., 'Could you tell me the name of the editor?'" Also, "If you're taking an exec round for a demo, keep them wanting more. Nothing worse than being forced to sit through an hour-long demo that should have taken 10 minutes."

Publicist Paula Gould says she gets along with journalists because she doesn't "tackle them at conferences or stalk them. I hate those kinds of publicists. They expend a tremendous amount of energy on very little return."

At the very least, don't be creepy. "One time," says CNET writer Nicole Lee, "at this big trade show, a PR guy tried to set up an appointment with me. And i figured, last day of show, sure. I figured he had a booth or whatever.

"But no. he just had this hotel room. And it was a small company i hardly heard of. And he wanted me to show up in the hotel. And I'm like, 'Ummmmmm.... can we meet at the trade show?' And he's all 'no... it's too much trouble.'"

She didn't go.

I found Six Apart VP Anil Dash, dressed in a sweater. He welcomed me to the "kid's table" (I was in a jacket and a t-shirt reading "You Were Plan B") and we plowed through a crowd of suits and dresses that cost more than we do. Here's what I learned about some of Valleywag's favorite targets.

• Larry Ellison, Oracle CEO: Class act with a strong handshake. Looks damn good for 62 — Chuck Norris meets Dave Zimmer from Men's Warehouse. Gave SF Chronicle writer Dan Fost some commentary on the HP leak scandal; said he'll remodel the house again soon to make it feel more welcoming.
• Larry Page, Google co-founder: Dressed in a slick suit, rocking the urban mullet (seriously, he looks good in it. Very Hollywood). Recognized me when his girlfriend, Stanford grad student Lucy Southworth (also looking Hollywood), smirked and said "I know that face." Larry just stood there, hands in pockets. Awkward moment. Thankfully, a friend of theirs relieved the tension by yelling at me about my blog. As she spoke, Larry and Lucy slipped away. Lame. Larry's co-founder Sergey would have been a real man and punched me in the face. Still, it's flattering (though scary) that they've heard of me.
• Marissa Mayer, Google VP: Surrounded by college-age-looking kids. Stanford students? Cub reporters? When one gentleman tried to introduce me to her, she giggled (oh dear lord that giggle) and ran away. Must have been late for one of her famous fourteen-hour e-mail sessions.
• Kara Swisher, prominent Wall Street Journal writer: Threatened to physically beat me up. Afraid she was almost serious.
• Scott McNealy, Sun Microsystems founder, chairman, and ex-CEO: Didn't meet him, but saw him in just a white button-down (I hear that's all he ever wears). His successor Jon Schwartz wasn't present.
• Gavin Newsom, San Francisco mayor: Never heard of Gawker, thank God. Hair slicked back in its usual shape; I'm convinced he's actually a droid like Joe the Gigolo in "A.I."
• Melanie Craft Ellison, romance novelist: Not in tech, but married Larry Ellison. Charming, witty, and self-effacing. By far the best person to meet at this event. She's now writing a young adult fantasy novel and would like to hear about fantasy books with strong female leads. Any suggestions?

Also see Dan Fost's report: Where Hollywood, politics and Silicon Valley collide [SFGate; Photo from Chronicle]

By Trent Lapinski

By now, everyone knows what MySpace is—or at least, they think they do. The generally held assumption is that MySpace is a social networking site: "a place for friends," as their slogan puts it. In reality, MySpace is the next generation of marketing, advertising and promotion, exquisitely disguised as social networking. Simply put, MySpace.com is Spam 2.0.

Spam in Sheep's Clothing

On July 11th, 2006, Hitwise reported that MySpace had "surpassed Yahoo! Mail as the most visited domain on the Internet for US Internet users." Clearly, MySpace has become almost ubiquitous—everyone and their mom have a profile up, from the fourteen-year old girl next door to Madonna. Tom Anderson himself—one of the site's founders and every MySpace user's number one "friend"—has over 109 million pals with profiles, and that's just today; by next week that number could easily have increased by millions. What's interesting is that most users don't know that Tom Anderson is more of a PR scheme than anything else—the mascot designed to give a friendlier feel to a site created by a marketing company known for viral entertainment websites, pop-up advertising, spam, spyware, and adware.

Most users believe that MySpace started as some kind of fluke—a happy accident that began in Anderson's bedroom or garage—and many still don't wonder, know, or care about the site's real business history and model. Heralded as a haven of DIY self-expression, MySpace was actually created by executives whose backgrounds are anchored in spam and mass marketing, and who are tied to investment scandals. With his almost alternateen good looks, Tom Anderson has served as an exceptionally convincing distraction. The PR campaign is one of MySpace's two strokes of genius, brilliant, but not groundbreaking.

The real genius of MySpace lies in it's re-imagining and repackaging of spam. While most internet users expend time and energy attempting to keep it out, MySpace is spam that they actually invite in.

Ancient History

Internet spam originated as classic, straight-up, unwelcome, in-your-face-and-inbox advertising and marketing. At its worst, it comes from "Nigerian Bankers" and swindlers peddling Viagra, and more likely than not, this early incarnation of spam—we'll call it Spam 1.0—is lurking in your inbox right now. eUniverse, the company that essentially created MySpace, was a pioneer in this field. Headed by CEO, founder, and Chairman Brad Greenspan, eUniverse (now Intermix Media), was a multimillion-dollar marketing and entertainment company known for sites like Skilljam.com, pop-up advertising, unsolicited mass emails, spyware, and the adware behind controversial peer-to-peer file sharing network Kazaa.

Also essential to the creation of MySpace is current CEO Chris DeWolfe, who from October 1999 through March 2001 acted as the VP of Sales and Marketing at Xdrive Technologies, Inc., a company that offered millions of users large amounts of free online storage during the dot-com bubble. The business of "free," while not necessarily a lucrative enterprise for an online file storage company, would prove to be an essential building block of Spam 2.0 and MySpace. As a source close to DeWolfe at Xdrive put it, "DeWolfe learned that people will sign up for almost anything that they find useful, and they could care less about the fine print."

Xdrive hit hard times when the dot-com bubble burst, and in March of 2001, DeWolfe was laid off along with his entire marketing department. He quickly set up a new email marketing firm named ResponseBase. DeWolfe recruited and hired most of Xdrive's former marketing team for this endeavor—specifically, the employees who had been responsible for the production of Xdrive's email-based newsletter called "Intelligent X." At its peak at Xdrive, 8 million users subscribed to "Intelligent X."

Tom Anderson, the eventual face of MySpace. was originally hired as a copyeditor in DeWolfe's marketing department at Xdrive, and accompanied DeWolfe to ResponseBase when Xdrive laid them both off.

DeWolfe's new company, ResponseBase, was purchased by eUniverse on September 9, 2002. At the time of the purchase, ResponseBase had upwards of 30 million e-mail addresses at their disposal. This partnering of ResponseBase and eUniverse was the moment of inception for MySpace, although at the time neither DeWolfe nor Greenspan knew what path they were on, and the actual, conscious conjuring of it wouldn't happen until later.

In terms of future visibility and pseudo-celebrity status—Tom Anderson, the friendly face of MySpace and every member's number one "friend" stayed with DeWolfe at eUniverse.

Also of interest, the acquisition of ResponseBase by eUniverse involved a finance partnership, TTMM, LP., consisting of Andrew Wiederhorn and his wife Tiffany. Wiederhorn was a high school classmate and past business associate of DeWolfe's, and in the late 90s DeWolfe was VP of Marketing at First Bank of Beverly Hills, a co. of WFSG purchased by Wiederhorn's former company Wilshire Financial Services Group. In late 2002, DeWolfe joined Fog Cutter Capital Group, Wiederhorn's new investment operation. At this time, Wiederhorn was under legal investigation for his activities with Wilshire Financial Services Group, and as of August 2004, Wiederhorn began an 18-month jail sentence for felony charges. Despite Wiederhorn's predicament, he kept a seat on the board. Donald Berchtold, Tiffany's stepfather, was temporary CEO while Wiederhorn was in jail. The investment group put Wiederhorn on a "leave of absence" and paid him an annual salary of $350,000 while he sat in federal prison. FCCG had a 3-year contract with Wiederhorn starting in 2003 wih an annual salary or $350,000 plus bonus. Ultimately, Wiederhorn served only 13 months in jail and upon his release, after completing mandatory work program, he received a $2 million bonus to cover restitutions from Fog Cutter Capital Group and resumed his duties as chief executive.

DeWolfe left Fog Cutter Capital Group just a few months before Rupert Murdoch's News Corporation purchased MySpace.

Recent History

The MySpace that we know was conceived about a year after the 2002 launch of Friendster. Preceded and influenced by Ryze, a social networking site which focused on business, Friendster offered a new twist: the site connected people through networks of friends for the specific purpose of dating and making new friends.

In August of 2003, Brad Greenspan received and accepted an invitation to join Friendster from Chris DeWolfe, who had been a member since June 2003. Once Chris DeWolfe, Tom Anderson, and other eUniverse employees had all set up Friendster accounts, the ball was rolling. Recognizing the potential of the Friendster concept, a plan was hatched to quickly mimic the appealing features of the site, re-brand it as MySpace, and then out-market them using eUniverse's resources. According to internal emails and documents provided by Brad Greenspan and sent between eUniverse executives and the team at MySpace, DeWolfe's squad worked fast: MySpace 1.0 was ready within ten days. As part of the internal testing and promotion of the site, the company held a contest to see who could sign up the most people. The hope was that if all 250 eUniverse employees brought on 10 friends, they would have a starting user base of 2,500. Even self-proclaimed loner Tom Anderson took part, stating in an email, "I am as anti-social as they come, and I've already got 20 people to sign up."

So it happened that MySpace essentially blossomed into Spam 2.0 out of seeds planted by DeWolfe during his Spam 1.0 days. eUniverse's business was booming when MySpace launched, so in retrospect it's almost endearing to learn how tentatively they tested and promoted the site. Considering the resources of connectivity that the project started with, MySpace was arguably assured a strong launch. At that point, eUniverse had over 50 million email addresses in their database, as well as over 18 million monthly web users. Originally, DeWolfe's business model was intent on selling accounts to MySpace, but it was Greenspan who proposed to keep MySpace free and to make profit through advertising. Greenspan and eUniverse even cannibalized valuable existing websites they owned, such as their paid dating service, CupidJunction—a top dating website with over 3 million users. Members at CupidJunction were encouraged to set up free MySpace accounts. Unfortunately, Greenspan was forced out of the company soon after MySpace's launch.

With the site quickly gaining popularity, and Greenspan no longer providing integral direction, DeWolfe and the MySpace team moved to create a false PR story that would best reflect the ideals and tastes of its growing demographic. They wanted to prevent the revelation that a Spam 1.0 company had launched the site, and created the impression that Tom Anderson created the site, and the lie worked.

The venture, of course, turned out to be a huge success. MySpace has spawned an incredibly successful twist on the age-old art of self-promotion, allowing—even encouraging—the marketing of everything from bands to businesses on their site. Essentially, they've opened up a channel through which to solicit and promote everyone and everything—most importantly the individual. The whole site is, in essence, a marketing tool that everyone who registers has access to. Users constantly receive spam-like messages from said bands, business, and individuals looking to add more "friends" (and therefore more potential fans, consumers, or witnesses) to their online identity. A testament to this strange new social paradigm is the phrase "Thanks for the Add," a nicety offered when one MySpace user "adds" another as a "friend."

Best yet, to use the site, members must log in, causing them to inadvertently view advertisements, and then read their messages on a page with even more advertisements. In the world of MySpace, spam is earth, air, fire, and water.

Super Publics and the Wisdom of Crowds

As for Brad Greenspan, who had offered his resources and full-fledged support, sought capital for the site. He was superseded by two eUniverse executives situated below him—Brett Brewer and Chris Lipp—who enabled an investment group named Vantage Point to assume a majority of preferred stock in eUniverse through defrauding stockholders. Once Vantage Point was in control, Greenspan was forced out of his position, maintaining 30% of shares in the company at the time, and only held 10% of the company by the time MySpace and Intermix Media (eUniverse) were eventually bought by News Corp. Various other corporate dramas have ensued, including the sale of Intermix Media (formerly eUniverse, and the umbrella company to MySpace) to Rupert Murdoch's News Corporation in a deal that has been described as a cash-out merger as a result of an unfair process and at an unfair price. Somewhat justifying suspicions, Viacom (the company that owns MTV) went on the record stating, "It's fair to say that we had an opportunity to participate in the process [of purchasing MySpace]. We looked closely at MySpace, but didn't fit our financial filters." Further justifying suspicions, The New York Times recently reported that Chris DeWolfe, Tom Anderson, and other MySpace employees now employed by News Corp. received multimillion-dollar bonus payments "to smooth the feelings that were ruffled when Intermix was sold, dragging MySpace along with it against the will of its founders, who received only a small portion of the sale price."

Base business details and corporate scandals aside, the crucial story here is how a site built on a foundation of spam has become one of the most culturally, socially, and technologically influential websites in the history of the Internet. To their credit—and an important key to the site's popularity—the MySpace team has intuitively gone with the flow, treating their users as co-developers (whether by luck or by wisdom), and allowing network effects from user contributions to steer their evolution in many ways—a fundamental difference between both Web 1.0/2.0, and Spam 1.0/2.0.

A social paradigm has shifted with the tipping of MySpace. It's incredible to consider, but Spam—as negative a connotation as it has—has morphed to enable and fuel the massive development of an incredible Super Public. Tom Anderson and Chris DeWolfe may not even fully recognize the fantastic longitude and latitude at which they stand.

It's no wonder that a site this popular has been a consistent newsmaker, repeatedly finding itself at the center of various controversies. MySpace has become a sort of Super Public portal—entry to a world defined by an ever-changing digital architecture that creates pathways for connection between individuals who might otherwise (even elsewhere on the internet) never have met. In addition to facing accusations of not sufficiently protecting its underage users and subsequently being sued for thereby enabling sexual assault, MySpace has inspired debate over free speech from high school students to porn stars.

What truly remains to be seen is not the repercussions of misleading PR campaigns or bad business deals, but whether MySpace teens will fall victim like Narcissus to the worship and distortion of their own (and others') online reflections, or if they will lead the way in navigating a new world comprised of Super Publics, where old cultures collide, and new cultures are born.

By Trent Lapinski.
trentl@gmail.com
trentl.com

Lapinski is a freelance writer who resides in Orange County. He is also a starving college student.

• Point out every joy in life as a sign of "bubble excess." No one gets credit for calling "bubble" if the house band is the reanimated bodies of the Beatles. That's why you must point out everything — a giant rocking horse, a rooftop party, any in-office snacks more elaborate than a bag of stale Cheetos — as a sign that the whole industry has gotten wildly out of control and is due for an earth-shattering crash.
• Refer ironically to "Web 2.0." If anyone asks you what it means, mutter something about pastel colors, rounded corners, and Ajax. Smirk while you are doing so, to show that pastel boxes are FUNNY AS HELL, but you're too cool to smile. (And smiling causes laugh lines that make you look old.)

• Complain about "sausage parties." At every party with a wide majority of male attendees, complain loudly that more women were not invited. Do this so you don't actually have to interact with the women who came to this party, because they are boring and ugly. Hot, engaging women only go to parties with lots of other women.
• Be under 35. Better, be under 21. If you are not under 35, pretend you are (no laugh lines!) or get married and then become swingers. All sexy people over 35 are actually swingers.
• Have a profile on every social site. Have a LiveJournal, a Facebook, even a 43 People account. But here's the trick — don't actually use them. Just use one, either something old like Tribe, or something new like Vox, and if anyone asks for an "add" on the others, explain that you forgot that site was around because you're just so busy nowadays. This makes you look more important than (but just as "plugged in" as) the other person.

Photo of Kris Tate (under 21) by Thomas Hawk [Flickr]

Pretexting is lying. Wikipedia says: "Pretexting is the act of pretending to be someone who you are not by telling an untruth, or creating deception. The practice of pretexting typically involves tricking a telecom carrier into disclosing personal information of a customer, with the scammer pretending to be the customer."

It's common. The Washington Post says: "A security specialist said it has been a 'tradition for decades' for chief executives of big companies to hire private investigators to spy on colleagues, calling it a 'common power play.'"

It's easy. "All you need is the last four digits of a Social Security number and a correct ZIP code," a repossession investigator told the New York Times, and "you can view the bill."

It works. Hewlett-Packard's probe outed board member George Keyworth as the leaker who shared important business information with CNET.

It's unethical. At least according to a former president of a trade group, the National Council of Investigation and Security Services, quoted in the Times.

It's illegal. The Gramm-Leach-Bliley Act outlaws unauthorized attempts to gain personal nonpublic financial information. (Lawyers disagree on whether the ban applies to phone records.) Phone providers view pretexting as illegal and sue those who attempt it. This is why many investigators say they've stopped the practice. A bill in the California State Senate could make the offense a state crime punishable by up to a year in jail.

It got Patricia Dunn and superstar lawyer Larry Sonsini in trouble. As chairwoman of HP, Dunn authorized the leak investigation that included pretexting for phone records. Dunn now says she did not know of or authorize any pretexting. Also, the San Jose Mercury News obtained e-mails in which Larry Sonsini (outside counsel to HP) told former board member Tom Perkins that this investigation was legal.

The phone companies are fighting back. Most notably, Verizon is pushing against pretexters and other dealers in personal phone records. For example, the company settled with a records vendor who agreed to stop selling phone records and to share how they obtained those records.

This isn't the last scandal we'll hear. The president of one security company says that heads of Fortune 500 Companies hire "fly-by-night organizations" to do their dirty investigative work all the time. Now that a pretexting scandal is front-page news, expect investigative journalists to hunt down similar stories.

Pretexting [Wikipedia]
When a Stranger Calls, Beware of The Pretext [Washington Post]
An Industry Is Based on a Simple Masquerade [New York Times]

Below is the condensed version; for more, read the full version. — Nick

By Trent Lapinski

About four months ago I was hired by an online publisher as a freelance journalist to write an article detailing the history and business model of MySpace.com (the project has previously been mentioned on this blog). After months of journalistic research and interviews I finally sought comment from News Corp. Instead of getting comments or an interview from News Corp., they began harassing my employer. Due to groundless legal implications, the article I had written was no longer to be published. However, I now own the rights to my work and after weeks of looking for support and contemplating the situation I have decided to publish the article in its entirety on Valleywag.

It is possible that News Corp. may attempt to pursue legal action against me for publishing this work, but this article has been professionally fact checked and is the truth.

The reader's digest version below breaks things down very simply and quotes sections of the upcoming article, as well as provides links to documentation proving said information.

What News Corp. doesn't want you to know about MySpace

1. MySpace is NOT a viral success. MySpace was advertised on mass levels to reach the public. MySpace was created by a company named eUniverse (who later changed their name to Intermix Media). eUniverse was a marketing and entertainment company who had over 50 million e-mail addresses in their databases, as well as over 18 million monthly web users. eUniverse leveraged their resources to proliferate and advertise MySpace.com. eUniverse went as far as telling 3 million users of their paid dating website, CupidJunction.com, to sign up for free MySpace accounts. (CupidJunction message screenshot)

2. MySpace.com is Spam 2.0. MySpace has spawned an incredibly successful twist on the age-old art of self-promotion, allowing—even encouraging—the marketing of everything from bands to businesses on their site. Essentially, they've opened up a channel through which to solicit and promote everyone and everything, most importantly the individual. The whole site is, in essence, a marketing tool that everyone who registers has access to. Users constantly receive spam-like messages from said bands, business, and individuals looking to add more "friends" (and therefore more potential fans, consumers, or witnesses) to their online identity. A testament to this strange new social paradigm is the phrase "Thanks for the Add," a nicety offered when one MySpace user adds another as a friend. Best yet, to use the site, members must log in, causing them to inadvertently view advertisements, and then read their messages on a page with even more advertisements. In the world of MySpace, Spam is earth, air, fire, and water.

3. Tom Anderson did NOT create MySpace. Most users don't know that Tom Anderson (pictured) is more of a PR scheme than anything else—the mascot designed to give a friendlier feel to a site created by a marketing company known for viral entertainment websites, pop-up advertising, spam, spyware, and adware. As MySpace's popularity grew, the MySpace team moved to create a false PR story that would best reflect the ideals and tastes of its growing demographic. They wanted to prevent the revelation that a Spam 1.0 company had launched the site, and created the impression that Tom Anderson created the site, and the lie worked. According to Anderson, the bulk of his initial contribution is as follows: "I am as anti-social as they come, and I've already got 20 people to sign up."

4. MySpace's CEO Chris DeWolfe is connected to a past of spam and shady business associates and brought those connections to eUniverse/MySpace (see full edition for details).

5. MySpace was a direct assault on Friendster.com. The major key players in the ultimate development of MySpace have Friendster accounts, and name Friendster and its founder in their original business proposal. The current CEO of MySpace, Chris DeWolfe has been a member of Friendster since June of 2003 (MySpace was not conceived until August of 2003).

I am the co-founder of Kevo. We are launching in a few days. [Here they are.] Do you have a list of angel investors?

The search for an angel investor is a healthy part of every startup's growth. Angels are usually private individuals looking to invest thousands to hundreds of thousands in small companies in return for a share of ownership. They can be the only funding a company takes, or a step between bootstrapping and venture capital. Below, Sean Ness, the ringmaster at the monthly Stirr startup mixer, lists a host of angels for us (which we peppered with snark).

Individuals

• Ron Conway was the big daddy of them all, loved by some, hated by others for his role in the first boom. Here's some dirt on him. (Photo above by Dan Farber)
• Ram Shriram has taken his place.
• Josh Kopelman runs First Round Capital from Philadelphia.
• Aydin Senkut made his money from Google and word on the street is he just invests in lots of things, but doesn't know much. The Wall Street Journal's Pui-Wing Tam names him as one of a new generation of angels.
• Jeff Clavier is everywhere and pretty much meets with anyone interesting.
• Sun co-founder Andy Bechtolsheim wrote Google their first check (for a hundred grand).

Groups

• Band of Angels
• Sand Hill Angels
• The Angels' Forum

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Is it just me, or does this design feel like the lovechild of TechCrunch and GigaOM? But, like, smarter? First, the layout is useful and chock-full of info. Second, VentureBeat is refreshingly ad-free, save for a plug for site developers Rubyred Labs.

After the jump, we dig into the site, and there's a dollop of gossip at the bottom.

We assume this will change soon, leaving us bitter and disillusioned, because VentureBeat has some real original content here — a break from the identical articles of its main competitors. The featured story is just a roundup right now, but owner-writer Matt Marshall proves in other entries that he's still more insightful and engaging than other tech business blogs.

Everyone will notice the contributors' columns (good way to diversify without hiring writers, Matt!) but also check out the easily-missed news on the left. Personally, though, my favorite bit is the "deal map," outlining the shape of the tech boom in the Valley with little Google-Maps markers.

Marshall, by the way, built SiliconBeat on his own dime for ages; finally sick of the Mercury News, he's doing his own thing. It all came out in the comment thread on SiliconBeat, where Marshall wrote about the new site's name:

well, regarding the name, it was a tough one. i felt ownership rights [to SiliconBeat], because i came up with the name, bought the url, blogged on my own time, etc.

the merc felt differently. the good part is, we kept talking about it. we came to an arrangement, both sides agreed to drop the name for the time being. can't really say more, but let's just say the url won't be on the market any time soon.

VentureBeat [Official site]

Basics

• Name: Digg
• Pronounced: Just like "dig"
• Address: Digg.com
• What to call it: a social news site
• Who made the content: thousands of users
• Who made the technology: Digg employees

How it works

• How the front page works: Look at Digg.com. You're seeing a list of news headlines, each linking to an outside story. Clicking the yellow digg box for a story sends you to that story's comments page.
• How a Digg story works: Each story was submitted to Digg by a user. Other users then clicked "Digg this" to vote for the article. Take, for example, this story about Brian Williams interviewing George Bush. It began when the Digg user "Anarchrist" submitted it using a form page. This sent the story to the upcoming stories page.

• How a Digg story works, part 2: There, some of Digg's most dedicated users "dugg" (voted for) the story. When a certain number of users (usually about 40; the number is slowly rising as the site grows) dugg the story, the Digg system automatically moved it to the site's front page.
• Jackpot: Because most Digg users are casual browsers, a story with a few dozen diggs can earn thousands once it's on the front page. As of press time, over 200 users each gave the Williams/Bush story one digg.
• The descent: When a story hits the front page, it starts at the top of the page (and thus gets viewed more than any other story). The story slides down over the next few hours as new stories stack above it. Eventually it slips off the bottom of the page and onto page 2 (and so on).
• So who edits it?: Digg users can "bury" a story by marking it inaccurate, "lame," or several other pejoratives. Just like flagging on Craigslist, if enough users bury a story, it disappears from most feeds. Users can choose to see buried stories.
• Comments: Any registered user can comment on a story or reply to another user's comment. Users can also vote on these comments. More on this under "How Digg is broken."
• The Digg Effect: What happens when a Digg story links to you? You get a flood of traffic that disappears after a day or two. This article plots out the number of Digg users who visit a linked story, while this article examines their behavior.

How Digg is broken

• False rumors can hit the front page: This is the most common and most easily refuted criticism of Digg. Because Digg users can bury a story or leave illuminating comments, rumors are often quickly corrected, and in the end, readers know more than they did before. Digg users can thus turn a wrong story into the right story.
• It's made for geeks: Digg started by only covering techno