Google now competing with VCs

Googleuse-1Is there a technology space where the name Google doesn’t come up? Earlier we had an article about the hype surrounding the Google phone, yesterday was another one discussing a browser plugin that may pose risks to their advertising model, and now today we’ve got something totally different.
BusinessWeek published an article this morning, written by Aaron Ricadela, turning the spotlight to the multiple VC deals being made by Google:

Google (GOOG) has begun making VC-style investments to the tune of about $500,000 or less in promising startups, often buying those companies afterward, according to partners at Silicon Valley VC firms who spoke on condition of anonymity. In an effort to keep spotting promising deals, Google has been hiring a stable of finance pros. And it has invested more than $1 million in a Mumbai-based investment firm called SeedFund to gain access to technology such as automatic translation software that could help spur growth in India.

Ricadela reports that SeedFund has already invested in four deals, ranging from $500k to $750k, that may be aimed at adding more niche info to Google’s homepage “such as information about autos” or to “cultivate technology that can translate Web content from English into Indian languages.” With a size of $15M, the fund is small but well backed: partners include Motorola Ventures and Mayfield, a Silicon Valley firm.

On Google’s competition with VC’s:

By staking startups, Google hopes to avoid paying the higher prices companies can fetch once they take funding from traditional VCs. It’s possible that some of its investments are conditioned on Google having first-acquisition rights should a target opt to sell, some VCs speculate. Google didn’t respond to calls requesting comment. Making investments in startups also can help Google use more of its $4.5 billion in cash to cultivate tools that complement existing products. Google recently started a program called Gadget Ventures to fund entrepreneurs who build online tools using Google’s technology.

The article says that Google’s decision to jump into the VC market parallels increased VC investments from other corporations as well: “Companies that aren’t full-time investors pumped $1.3 billion into 390 venture capital deals in the first half of 2007, up 30% from the $1 billion invested in about 350 deals a year earlier.” The big names mentioned are Motorola, with almost $30M invested in the first half of ‘07, and Intel with $112M.

GalvuseBack in February an article on VentureBeat written by Matt Marshall also reported on Google’s move into the VC realm, highlighting the company’s previously mentioned investment in SeedFund as well as their investment in another venture firm, Erasmic, also located in India. One of Erasmic’s notable investments which recently found itself the subject of an MSNBC news story (video here) is Galvanon, a healthcare kiosk company that allows electronic self-service check-in for patients at hospitals and emergency rooms, greatly increasing efficiency by helping prioritize the severity of patients’ healthcare issues. If Google keeps using their $4.5B in cash reserves to make smart investments like this, don’t look for the giant to be toppled anytime soon.

AdBlock Plus could change web advertising landscape

NoadsEveryone hates pop-ups. Its gotten to the point where browsers now come with built-in pop-up blockers to combat those annoying ads that interrupt your web experience. Pop-ups, however, account for only a portion of the billions of ads sprawled across web pages all over cyberspace. From a business standpoint its these online ads that allow otherwise free content to be monetized, essentially fueling the internet. But what if there was a way to get rid of those, too? What if there was a way you could potentially never see another ad on a web page ever again?

The New York Times published an article this morning, written by Noam Cohen, profiling a free open-source plugin for Mozilla’s Firefox web browser that allows users to seamlessly erase advertisements from any page on the internet. Cohen writes:

Adblock Plus — while still a niche product for a niche browser — is potentially a huge development in the online world, and not because it simplifies Web sites cluttered with advertisements. The larger importance of Adblock is its potential for extreme menace to the online-advertising business model. After an installation that takes but a minute or two, Adblock usually makes all commercial communication disappear. No flashing whack-a-mole banners. No Google ads based on the search terms you have entered.

A quick look reveals that the Firefox web browser is used by 34% of internet users. With Firefox being used by one-third of the internet population, it has moved beyond just being a “niche browser” to becoming a major player in the browsing world. The reason for Firefox’s popularity has a lot to do with its open programming structure that allows for really cool plugins such as this one. If AdBlock Plus were to go viral, marketing companies would be forced to completely re-think the web advertising model.

GoogleuseSo far, this hasn’t happened; Wladimir Palant, the programmer responsible for the plugin, estimates there are about 2.5 million users of AdBlock, with 300,000 to 400,000 new users each month. No doubt that the buzz generated by the NY Times article and all the blogs responding to it, such as this one, will cause Palant to see a notable spike in those numbers. This could lead to a snowball effect that the large online advertisers couldn’t ignore, but for now, the biggest player has remained silent: Google refused to respond to Cohen’s request for comment. Palant says that AdBlock isn’t popular enough yet, and that attacking it would be a waste of time for a company like Google.
Not only would it be a waste, but it would draw tons of attention to a plugin that Google surely prefers no one ever hears about. Author Nicholas Carr comments on the delicacy of Google’s situation on his blog:

The company is in a particularly dicey position. The broad adoption of ad-blocking software could devastate its business, yet an outright attempt to block the use of such programs would run counter to its often-expressed commitment to give users what they want. If web users decide they don’t want to see ads, Google would face an extremely unpleasant dilemma. Either its business or its credibility would end up in tatters.

While Google remained silent, Microsoft, which is still the leading giant in the browser world with Internet Explorer, was not so shy. From the NY Times article:

In a statement, Microsoft spoke of its success in permitting third-party developers to “add value to the browser experience through the creation of add-ons.�? The statement continues: “The range of add-ons available does include ad blocking software. It would not be appropriate for Microsoft to comment on the merits or demerits of a specific add-on, or group of add-ons. Provided they have not been designed with malicious intent and do not compromise a user’s privacy or security, Microsoft is pleased to see new add-ons that add to the range of options that users have for customizing their browsing experience.�?

If you had to rub your eyes and re-read that a few times, we don’t blame you. Microsoft… standing up for the user? Not quite. As Carr notes, “Microsoft knows that ad blockers pose a far greater threat to Google than to itself.” What better way to take down the Google behemoth than to erase its very foundation: ad revenue. A commenter on Carr’s post by the name of Leigh Hunt goes one step further, referring to an article he wrote that suggests if Microsoft continues to lose to Google in the market share battle, they “should simply add an ad blocker to Internet Explorer and enable it by default.”

While we don’t see this type of drastic action being taken by Microsoft anytime soon, one thing is certain: if AdBlock reaches the tipping point and goes viral, it will be very interesting to watch what happens.

Comparison screenshots of TechCrunch’s front page with and without using AdBlocker. Click to enlarge.

Without AdBlocker: (note the ironic Google banner)

With AdBlocker turned on:

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MeetingSense funded for $3M

BoxuseLast week, San Diego-based MeetingSense received $3M in a series A round from TVC Ventures. MeetingSense is a software product that the company’s website describes as “easy-to-use software that dramatically improves meetings by helping to capture, distribute, and then manage notes, action items, and much more.” The software, which sells for $99 with volume pricing available, integrates with Microsoft Outlook to send out meeting invitations as well as distribute post-meeting summaries and task items. They have a free, live online demo available for anyone interested in checking out the program. From a recent announcement touting the software:

“Online tools have changed the way business meetings are scheduled and held but little attention has been paid to capturing and sharing meeting metadata such as discussions and next steps,” said Mark Levitt, Program VP for Collaborative Computing and the Enterprise Workplace, IDC. “MeetingSense is designed to pick up where the other tools leave off.”

And from a review posted in May on InfoWorld:

MeetingSense 2.0 is one of those rare products that uncovers — and then solves — a common business need near perfectly. The only possible improvement I can see is tighter integration with online services, such as Microsoft Live Meeting, WebEx, or Adobe Connect Professional (formerly Breeze). Still, while each of these has some similar features during a meeting (such as note taking), no other product I’ve used matches MeetingSense’s meeting organization and information management tools. It’s somewhat ironic that companies using this product actually report fewer meetings because of productivity improvements. But I doubt anyone’s complaining.

Jeb Spencer, Managing Partner at TVC Ventures, was named as Chairman of the Board for MeetingSense at the time of funding.


Trilogy Studios receives funding

TrilogyuseTrilogy Studios, a videogame company based out of Santa Monica, received $3.2 million in funding during a series B round last week from unnamed investors. Trilogy Studios, which bills itself as a “Next Gen and Virtual World development studio,” is currently being lead by CEO Michael Pole. From 2003 to 2005, Michael held an Executive Vice President position at Vivendi Universal Games, heading up their worldwide development. During this time he headed up development of popular game titles such as The Hulk, Chronicles of Riddick, and Scarface, among others.
In July of this year, Trilogy Studios announced a partnership with MTV to develop a virtual world title based on the television network’s popular show “Pimp My Ride.” From the announcement:

Trilogy Studios is utilizing its skill set in making world-class console games and elevating the experiences found in today’s online virtual worlds. The company is focusing its new virtual worlds around people’s passions, from specific entertainment properties to genres such as music, film, television and sports. Trilogy’s virtual worlds combine game play attributes from next generation console games with the broadcasting, social networking and e-commerce capabilities found in some of today’s most successful online business entities.

Michael Pole: “Trilogy takes virtual worlds beyond basic 3D chat rooms, turning them into living, breathing worlds where people come together to share their entertainment passions . . . We’ve developed a business model that enables media companies to successfully monetize their franchises through virtual world networks including micro-transactions, in-game advertising and sponsorships, premium subscriptions and e-commerce.”

In the virtual world, which has yet to be released, fans of the show can create customized avatars, trick out cars with a variety of different upgradable parts, and then take them for a spin on a race track.

Virtual World News covered the partnership announcement, including additional commentary from Trilogy’s CEO:

“With this business model, since we’re working with just extraordinary content, there’s four rivers of revenue,” Pole said. Trilogy is focused on building out the process for microtransactions, advertising, premium subscriptions, and ecommerce with real-world products.

“We allow you to do things and try them in the virtual world and then experience them in the real world. And we’re looking at any number of items, from shoes and hats and tennis shoes. A guy sees a pair of shoes, say some Vans or maybe an Adidas sweat suit, and he likes it, he can order them and have them delivered.

One of the most interesting parts of the interview is where Pole weighs in on the difference between the closed-off virtual worlds he is creating versus a wide-open world such as Second Life, which got a lot of buzz due to the in-game ads it had attracted from big name sponsors such as IBM and Coca-Cola:

Pole sees the private worlds as a necessary alternative to more open platforms like Second Life.

“What we’ve found is that content providers like MTV and others are not as comfortable handing over their intellectual property to create a world within a world,” he said. “Everyone’s afraid about the protection of intellectual property and the gray market and black market and distribution online. What we’re presenting is the opportunity to take advantage of the new frontier.”

With the majority of in-game advertising done by companies inside Second Life failing, privately branded worlds such as “Pimp My Ride” just may be the key to turning interactive 3D environments into profits for businesses. I think Michael Pole is on to something here, and I expect more good things to come from Trilogy Studios in the future.

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