Online video ad rates keep coming down, but that could be a good thing. BrightRoll, a large video ad network, is reporting that cost-per-thousand (CPM) rates for pre-roll video ads across its network are down on average by 37 percent from a year ago, but total revenues across its network are up 84 percent. Cheaper ads are leading to more spending by advertisers overall.

The chart above shows average CPMs on BrightRoll’s network indexed to 100 at the beginning of 2008. The average CPMs are now in the mid-teens, and seem to be leveling off. They were down 4.5 percent from last quarter.

BrightRoll says online video advertising started a rapid post-recession comeback in the first quarter of 2009 (which is about when video platform company Brightcove starting seeing an uptick in business also).

The third quarter saw an acceleration video advertising. BrightRoll tracked a 46 percent increase in the number of video ad campaigns, compared to the previous quarter, 31 percent more advertisers, and a 64 percent increase in requests for proposals (RFPs). If BrightRoll’s data is indicative of the industry as a whole, online video advertising should remain a bright spot this year.

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Editor’s note: More and more mobile app developers are deciding to make apps for Android, even though it still doesn’t have the same reach as the iPhone. In this guest post Kevin Nakao, the VP of Mobile for Whitepages, makes the argument for taking the Android plunge now (as he is preparing to with a new Whitepages Android app launching next week). Follow him on Twitter @knakao

Mobile games publisher Gameloft might have thrown in the towel on Android, but that is a mistake. I certainly understand why they gave up on Android. Since launching in February of this year, our own Whitepages Caller ID app has become a top ten grossing Android application, and yet we’ve seen less than $54,000 in revenue. While our iPhone app download counts are in the millions, our Android app downloads are a mere 17 percent of this volume.

Despite our meager return on investment this year, I believe that the real potential for Android app developers lies in the New Year. Here’s why:

End-To-End Goodness

In addition to being an open platform that facilitates device innovation, Android offers choice and progress when it comes to the marketplace where consumers discover and download applications. While iTunes and The Official App Store are the only places consumers can download apps for their iPhone, Android’s open platform allows merchants like MobiHand and HanDango to set up storefronts, ultimately providing more purchasing options for consumers. Google’s focus on improving its the user experience in its own Android market will also continue to boost revenues for app developers. For example, when the recent 1.6 OS (Cupcake) upgrade provided a much needed facelift for the market, we saw an immediate 18 percent lift in sales for our paid Caller ID application.

Billing Options Get Greener

While Google still has a long way to go in terms of reaching as many consumers as iTunes does, with the power of “what’s hot” and capabilities like in-app purchases, they have begun to enlist an armada of players—including carriers with deep experience in integrated billing—to create better markets for the merchandising and sale of applications. In early November, T-Mobile announced that they will launch their own Android market with integrated carrier billing, giving consumers the ability to charge applications to their phone bill. Also on the Google market roadmap is the ability for publishers to offer subscription purchases.

The low friction of bill-to-phone capabilities for consumers and the recurring revenue benefits of subscription services have the potential to drive significant revenue into the hands of developers. For example, we recently launched a service that allows consumers to text any number to 566587 (LOOKUP) to identify unknown callers and the bill-to-phone conversion rates have been two times what we have seen with the application market conversion rates. Thirty-four percent of our customers selected the unlimited subscription option over a single-use fee.

“Always With Me” Needs to be “Always On”

With the influx of more applications that require persistence—streaming music, Facebook, Skype, IM, & Caller ID—Android’s ability to run more than one application at a time is becoming more important. The “always with you, always on” benefits of mobile will be a key advertising opportunity especially for location-based offerings. Publishers will be able to use Android to generate more revenue by staying in front of users to produce more ad impressions. Advertisers also will be able to reach consumers closer to the point of sale, and take advantage of geo-triggered offers. Higher frequency of usage should also reduce churn for subscription-based services.

T-Mobile Got It Started Right, Verizon Will Unleash the Beast

T-Mobile launched the first Android phone in the U.S., and embraced the open platform. Any other U.S. carrier might have been tempted to meddle, but T-Mobile proved that an open platform would not be riddled with malware and abuse. With Verizon now going big on Android, we will start to see significant uptake. Verizon has 89 million customers with an average Data Revenue Per User of $15.69 to T-Mobile’s 33.5 million customers and $10 in Data Revenue Per User. Sprint has the highest data revenue per user of $19 and 48.3 million customers. In short, Verizon and Sprint will attract many more customers willing to spend more money on Android applications.

Android Needs To Be A Player, Not An iPhone Killer

For the same reason developers support multiple game platforms, browsers, and operating systems, Android just needs to achieve enough consumer scale to justify the investment. As long as Google stays focused on providing freedom in an open and competitive ecosystem, app developers will be rewarded. In just six months, we handily recouped our investment from launching an Android application and expect a significant return next year as Google leverages the reach and power of players like Verizon, T-Mobile, Sprint, Motorola, HTC, Dell, and Samsung to grow its platform.

Think Different

Future app developers should approach Android with more than a simple port of an existing iPhone application. Our initial interest in Android was motivated by innovation and new product features that required integration with core device functionality offered by Android but firewalled on the iPhone. Android’s absence of an approval process facilitates rapid product development and the open platform provides the opportunity to innovate, giving every developer the freedom to compete and earn a place in the consumer’s pocket.

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Editor’s note: Today, being a news junkie requires not just the ability to keep up with hundreds of breaking stories a day, but the ability to redistribute those stories to your followers and news sites. To get some insight into the modern news junkie, we asked Mrinal Desai to share with us how he screens the news in the guest post below. Desai is the co-founder of CrossLoop, but some of you may recognize him more from Twitter or Techmeme, where he tips stories every day—580 of those tips have appeared as headlines since the beginning of this year. You can read his last guest post here.

Like many out there, I have been, am and always will be a news addict. For many news junkies, it is the fleeting, current fix of information about a breaking topic that interests them, only to be replaced by the next headline. They jump from headline to headline, forgetting the one they just read as they move on to the next one.

For me personally, news is not only timely information on the current state of affairs but also a way to take a deep dive, to connect analysis and information together and learn through application.  I am looking for insight.  It could be patterns, it could be knowledge about an industry or it could be an opportunity to become introspective and ask questions.

Keeping this in mind, here is a snapshot of my consumption and distribution of news both offline and online.  I’ll divide the way I screen the news by the screens on which it comes to me.

No Screen:

• I don’t start a day without reading The Wall Street Journal in print
• Currently, I get 4 magazines and I go through them on the weekend: The Economist, The Atlantic, Wired and Fortune. Before they stopped, I used to also get Business 2.0 and MIT’s Technology Review.

Screen 1 – MacBook Pro:

Apps: Twitter, Google Reader, Techmeme and a little bit of Facebook

Twitter: I’ve been a user since January 2007.  Its always on for me. I invest a significant amount of time in figuring out who/what to follow based on my interests.  Today this ‘list’ stands at 489. Building this list is a continuous process and it typically consists of people who can teach or inform me of something, news sources and people I respect and with whom I want to build a long term relationship with independent of business. Of this, I have a column/list/group called “Pigeons” (birdie, early days of communication—you get it, right?).  I read each and every tweet of this group. I have about 75 in this group. 15 of my personal favorites, apart from @techcrunch and all those who write for it @techcrunch/team, are:

@bxchen – Technology Reporter, Wired
@148apps – iPhone App Reviews
@msuster – General Partner, GRP Partners
@jennydeluxe – Technology Reporter, The New York Times
@scobleizer – everything social media
@Learmonth – Reporter at Adage
@jasonhiner – Executive Editor at TechRepublic (CBS Interactive)
@leplaporte – Technology Journalist and Broadcaster
@appadvice – Editor, Webware (CBS Interactive)
@taylorbuley – Technology Reporter, Forbes
@sarahintampa – Writer, ReadWriteWeb
@reckless – Nilay Patel, Engadget
@gizmodo – Everything gadgets blog
@dmac1 – Technology reporter, Business Week
@joshk – General Partner, First Round Capital

You can follow them all in one click on the Twitter List I created called “Fifteen”

Screen 2 – iPhone: I have played with a few iPhone news apps, both paid and free.  These include the mobile apps from the Wall Street Journal and the New York Times , Byline, Fluent News, News Fuse, BBCReader, NPR News, ReadItLater, ZenNews, and News Pro. I also visit mobile news sites. Being a little glued to Techmeme, I was very excited to see its new mobile version for smartphones—the icon took a spot right away on my home screen:

After experimenting and trying them all out, though, my current favorite native iPhone app is Newsstand (iTunes Link) which stays on my dock. Its a $4.99 app but it does the following extremely well for me:

1. Synchs beautifully with Google Reader and is fast.  It allows me to organize my folders, move them up and down and importantly very easily “Mark all as Read”

Below is a snapshot of my Feeds and a folder creatively named ‘Top News” that I keep a close watch on every day.

2) Newsstand has a lot of social goodness to share through Twitter, Delicious, ReadItLater and Instapaper

What’s Missing:
—bit.ly so that I can track data on the links I share as I do on Tweetie 2 with my API key.
—Sharing on Facebook
—Ability to RT or @respond to my twitter stream that I subscribe to as an RSS feed from within Google Reader.

Before social media, I always shared news via email to specific people. Now I have replaced email with these easy tools:
—Twitthat bookmarklet. One click.
—Twitterbar a Firefox Add-on customized with a prefix. One click.

—Google Reader’s Share is connected to my Twitter account. One click.
—Facebook Share bookmarklet or if I want it all on one place, I recommend Shareaholic.

Screen 3 – TV. I do not get my news here since I watch very little TV.

Screen 4 – eReader
I have a Kindle that I use to read books and have not switched from print to this one yet for news. As you can imagine, I get enough news on my other screens all day and like some time away from it.

Below is a visual of how I personally share news and the tools I use. Everything goes through Twitterfeed as my central hub for news going in and out.  Note that lately I stand undecided between Seesmic and Tweetdeck. (Image courtesy: Zurb, click to enlarge).

I spend a significant amount of money on news—4 print magazines, 2 newspapers with one online and iPhone apps.

The only screen I care about:

• well written analysis
• Unique and timely content/information
• Thought provoking story telling
• “Connection” with the writer—literally or figuratively from a style perspective
• Delivery channel. Find me—the “paperboy route” has changed

How do you screen the news?

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You didn’t think that successful entrepreneurs were this pious did you? Neither did I. After all, what did God have to do with Google aside from Jeff Jarvis stealing his book title from fans of Jesus and their much copied meme? Did God build the Internet? Did he build the microchip?  I’ve never been religious myself and have always believed that with hard work and determination, you can surmount just about any obstacles. But I also learned the hard way that you can do everything right and fail. Sometimes you do just about everything wrong and make it big. My belief: success is 51% luck and 49% execution. You need to execute with precision, but a little luck goes a long way. It is always good to have God on your side. So it was interesting and illuminating (pun intended) to see what other entrepreneurs thought about this.

To collect and collate precisely that type data, I and several colleagues (with the support of the Kauffman Foundation) researched the backgrounds, motivation and success factors of company founders in several high growth industries including aerospace and defense, computer and electronics, health care, and services. Our earlier paper titled Anatomy of an Entrepreneur revealed that these founders typically came from middle-class backgrounds, have parents who are less educated than they are, and tend to be married with children when they launch their first company. Most had always wanted to start their own companies. They were driven by a desire to build wealth, commercialize business idea they had and to stop working for others.

For a new paper, titled Making of a Successful Entrepreneur, we analyzed the factors which made these company founders successful. Nearly all (96%) said that prior work experience was an important factor in their success and 58% ranked this as extremely important. The vast majority (88%) said that previous success and failures were important. But lessons from failures were judged as extremely important by more respondents than lessons from success. That’s right, those that had experienced failure valued it more highly than their successes.

Management teams were ranked as important by 82%. The next highest ranked factor was good fortune, with 73% ranking this as important, and 22% ranking this as extremely important. When asked what other factors played a role in their success, many who responded stressed the extreme importance of faith and God. It wasn’t just those with names from one religion who said this. Rather, it seems that Christians, Jews, Hindus and Muslims alike share the same beliefs. Yes, these people were on a Mission from God – or, at the very least, they strongly felt that their faith fed the entrepreneurial drive and the intangibles required to succeed in the brutal endeavor of making something from nothing, of birthing a company.

Another surprising bit of wisdom we got from these entrepreneurs was this. The Lord may be their co-pilot but their most trusted banker was the same guy they saw in the mirror every morning. Anyone who follows TechCrunch probably assumes that the vast majority of successful technology startups receive some sort of outside capital and that, in fact, the outside capital plays a key role in allowing these startups to get off the ground. But our sample of entrepreneurs told us that personal savings was the primary source of funding.

And this was not by a small margin. Roughly 70% of our respondents used personal savings to fund their first businesses. Even the serial entrepreneurs who probably could have tapped venture capital preferred to keep control of their own funding sources by bootstrapping. In second, third or fourth startups, over half of all entrepreneurs relied on personal savings to underwrite their launch.

My academic colleagues don’t like to hear this, but company founders didn’t rank university education as highly as other factors. Yes, 70 percent said their university education was important and Ivy-League graduates valued this more, with 86 percent indicating this was important. But only 20 percent of all entrepreneurs and 18 percent of Ivy-League graduates ranked university education as extremely important, however.  And the alum networks which are supposed to be really valuable for business contacts, weren’t ranked that highly. Only 19% of the entrepreneurs believed that university or alumni networks were important for their business. Even the Ivy grads didn’t think that their legendary networks were so important: only 29% ranked their legendary networks ranked these as important, and of these only 10.5% said these were extremely or very important.

Hardly any of the company founders ranked state or local government assistance as important. But those from the Midwest and Southwest put a slightly higher premium on this assistance than others, with 19 percent and 15 percent, respectively, ranking it as important. Entrepreneurs from New England put the lowest premium on it, with only 1 percent ranking it as important, followed by the West and South, both with 4 percent.  That seems logical, since high-growth startup mechanisms are most developed and the communities to support them most mature in the West and Northeast.

All told, even a skeptic like me was extremely surprised at how much these entrepreneurs valued things that no amount of money could buy – thriftiness (personal savings), faith (belief in the supreme being and oneself), and self-selected networks (friends and weak social ties). The moral of all this, I guess, is luck may be critical but self is essential to the successful startup.

Editor’s note: Guest writer Vivek Wadhwa is an entrepreneur turned academic. He is a Visiting Scholar at UC-Berkeley, Senior Research Associate at Harvard Law School and Director of Research at the Center for Entrepreneurship and Research Commercialization at Duke University. Follow him on Twitter at @vwadhwa.

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Old habits die hard. Rupert Murdoch believes that the future of the newspaper business is subscriptions—electronic subscriptions. He’s done with giving away his news for free on the Web and to search engines like Google. Instead thinks that Kindle-like tablet computers can save the media industry. It’s a notion that’s been floated before: an entire newsstand in a color tablet which delivers electronic versions of any newspaper or magazine you want for a monthly subscription of $15 to $19 a month.

It’s got to work, otherwise, he warns from his soapbox, “Newspapers will go out of business. All newspapers.” In an interview on his own Fox Business (embedded below), he explains his thinking:

ALEXIS GLICK: ARE YOU CONVINCED IT IS GOING TO WORK?

RUPERT MURDOCH: WE TEST MARKETED IT AND PEOPLE I THINK UNDERSTAND THAT IT’S PERFECTLY FAIR THAT THEY ARE GOING TO PAY FOR IT. IF IT DOESN’T, THE NEWSPAPERS WILL GO OUT OF BUSINESS. ALL NEWSPAPERS. THERE IS JUST NOT ENOUGH ADVERTISING TO GO AROUND FOR ALL THE SITES ON THE INTERNET. THE NUMBER OF SITES AND AVAILABILITY OF ADVERTISING ON THE INTERNET, THE AVAILABILITY DOUBLES AND TRIPLES EVERY YEAR BUT THE AMOUNT OF REAL MONEY GOES UP 10 OR 15% A YEAR. THE PRICE OF IT KEEPS COMING DOWN.

Forget for a moment that news websites will be perfectly readable on these newfangled tablets everyone keeps talking about. So Murdoch still has the problem of “>”leading” all of his media competitors into the promised land of subscription tablets by walling off their websites from readers. And also set aside the fact that newspapers and magazines are already available for paid download on Amazon’s Kindle, and that those subscription revenues are still miniscule. A full-color tablet with access to an entire newsstand’s worth of magazines and newspapers for a single bundled price would be a better deal and better experience than buying subscriptions a la carté from the Kindle.

But in the face of free content readable via a browser, the subscription model will be challenged. Even setting aside competition from newer media sites and blogs with lower cost structures and lean staffs, there is no way to completely wall off news from every traditional news organization. At the very least, the weakest newspapers and magazines with the lowest readership and share of attention will find that they are better off remaining free and selling Web ads than taking crumbs from the new electronic subscrtiption pie. (Presumably the subscription revenue will be divvied up based on demand, with the most popular titles getting the largest portion).

Apparently, Murdoch also has no interest in simply playing Bing off of Google and making the search engines pay for the right to index his news either. Asked whether he was “moving towards an exclusive deal” with the “aggregators and the Googles of the world” to make them “pay for News Corp. content,” Murdoch replied:

NO, NO, NO. I DON’T KNOW THAT THEY CAN AFFORD TO DO THAT. IF THEY WERE TO PAY EVERYBODY FOR EVERYTHING THEY TOOK FROM EVERY NEWSPAPER IN THE WORLD, AND EVERY MAGAZINE, THEY WOULDN’T HAVE ANY PROFITS LEFT.

You got that? Even if he were to sell his news to Google, which he is not, Google doesn’t have enough money to buy it. Either that, or Murdoch is negotiating in public as Google’s search deal with MySpace comes up for renewal.

Video and partial transcript below:

Transcript excerpt via Fox Business News

ALEXIS GLICK: YOU HAVE MADE A LOT OF NEWS ABOUT AGGREGATORS AND GOOGLES OF THE WORLD AND WHETHER THEY SHOULD PAY FOR NEWS CORP. CONTENT. ARE YOU MOVING TOWARD EXCLUSIVE DEAL WITH THEM?

RUPERT MURDOCH: NO, NO, NO. I DON’T KNOW THAT THEY CAN AFFORD TO DO THAT. IF THEY WERE TO PAY EVERYBODY FOR EVERYTHING THEY TOOK FROM EVERY NEWSPAPER IN THE WORLD, AND EVERY MAGAZINE, THEY WOULDN’T HAVE ANY PROFITS LEFT. THEY HAVE DEVISED A BRILLIANT SEARCH ENGINE THAT SCRAPES ALL OF THE MATERIAL PUBLISHED IN THE WORLD, AND ON THE BACK OF THAT THEY SELL SEARCH, BUT THEY DON’T PAY FOR THE RAW MATERIAL. WE HAVE TO DO SOMETHING ABOUT THAT. WE CAN PUBLISH OUR PAPERS ELECTRONICALLY, AND OTHERS CAN TOO, AND PEOPLE CAN STILL GO TO A SEARCH ENGINE IF THEY WANT TO FIND OUT SOMETHING, NOT NEWS PERHAPS, BUT THEY SEE TERMS THAT NEWS REFERS TO IN NEWSPAPER STORIES AND MAGAZINES THEY CAN EITHER GO TO GOOGLE OR MICROSOFT OR WHOEVER. THEY’LL STILL HAVE A VERY GOOD BUSINESS.

ALEXIS GLICK: YOU ENVISION A WORLD THEN WITH A TABLET, A HANDHELD DEVICE OR SOMETHING OF THAT NATURE WHERE YOU CAN OFFER A FINANCIAL MARKETPLACE OR A SUPERMARKET FULL OF MEDIA CONTENT AND DATA ON A MULTI-TIERED SYSTEM?

RUPERT MURDOCH: YES.

ALEXIS GLICK: HOW DOES THAT WORK?

RUPERT MURDOCH: WELL, YOU’D BE ABLE TO GET ON IT, AS WOULD BE TRANSMITTED TO IT, A TABLET. TRANSMITTED THROUGH THE AIR OR OVER WI-FI. A REASONABLE SIZE, ATTRACTIVE TABLET IN FULL COLOR AND YOU COULD READ A NEWSPAPER ON IT. YOU PRESS A BUTTON WHEN YOU WANT IT OR IF YOU WANT TO PLAY EXTRA, MORE THAN THAT, BUT IF IT COSTS $15 OR $19 A MONTH, IF YOU WANTED TRAVEL MAGAZINES OR SOMETHING YOU CAN ORDER THEM UP AND HAVE THEM.

ALEXIS GLICK: ON THE TABLET, IF I PAY THE MAXIMUM AMOUNT I CAN HAVE ANYTHING I WANT?

RUPERT MURDOCH: ANY CONTENT. BOOKS, ANYTHING AT ALL. YOU JUST HAVE TO PAY. THAT’S THE FUTURE. IT COSTS A FORTUNE. THE NEWSPAPER INDUSTRY – THE NEWS INDUSTRY, PUT IT THAT WAY. LET’S NOT TALK ABOUT PAPER. THE NEWS INDUSTRY SPENDS A FORTUNE IN COLLECTING THE NEWS. IT NEEDS TO BE PAID FOR IT. THERE IS NOT ENOUGH ADVERTISING TO GO AROUND. IT’S ALRIGHT ON CABLE TELEVISION BECAUSE IT GETS PAID BY THE CABLE SUPPLIERS, MONEY, WHICH, OF COURSE, GETS PASSED ON TO THE PUBLIC. AS WELL AS SUPPLEMENTED BY SOME ADVERTISING AND IT HAS TO BE THE SAME WITH OTHER FORMS OF NEWS.

ALEXIS GLICK: ARE YOU CONVINCED IT IS GOING TO WORK?

RUPERT MURDOCH: SURE.

ALEXIS GLICK: WHY?

RUPERT MURDOCH: WE TEST MARKETED IT AND PEOPLE I THINK UNDERSTAND THAT IT’S PERFECTLY FAIR THAT THEY ARE GOING TO PAY FOR IT. IF IT DOESN’T, THE NEWSPAPERS WILL GO OUT OF BUSINESS. ALL NEWSPAPERS. THERE IS JUST NOT ENOUGH ADVERTISING TO GO AROUND FOR ALL THE SITES ON THE INTERNET. THE NUMBER OF SITES AND AVAILABILITY OF ADVERTISING ON THE INTERNET, THE AVAILABILITY DOUBLES AND TRIPLES EVERY YEAR BUT THE AMOUNT OF REAL MONEY GOES UP 10 OR 15% A YEAR. THE PRICE OF IT KEEPS COMING DOWN.

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Remember all that talk about Bing starting to fizzle in September? Well it didn’t happen, and now October numbers and Bing gained another half a point to reach 9.9 percent market share of U.S. searches, according to comScore’s qSearch service. Five months after launch, Bing has steadily gained two points of market share.

And it is keeping the pressure on, with deals to index realtime data streams from both Twitter and Facebook (Google also has a deal with Twitter, but not Facebook), a deal with Wolfram Alpha for nutrition and diet data, and the constant rollout of new features such as better video search.

The biggest loser in the search wars, however, continues to be Yahoo as it awaits approval to hand over search to Bing.  In a single month, Yahoo’s U.S. search share dropped 0.8 percent to 18 percent, and is down 3 percent since the beginning of the year.  Meanwhile, Google seems unfazed, gaining another half point itself in October to finish with 65.4 percent share.

Bing’s progress is encouraging (someone needs to compete with Google in search), but so far all Bing has shown is that it can take share away from its future partner Yahoo. Bing has yet to put a ding in Google’s share.  Perhaps it needs to do something radical, like cut deals with major news and media sites for exclusive rights to index their content.  Otherwise it will just keep eating away at Yahoo’s slice of pie, which it’s already been promised anyway.

U.S. Core Search Share, September 2009 (Source: comScore qSearch)

(Table below via JPMorgan analyst Imran Khan. Click to enlarge.)

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Some of the debut posts cover the movie 2012, Samsung’s new Android phone, and a recap of Apple’s legal victory over clone-maker Psystar. It’s a crowded field, but the appetite for gadget culture is seemingly endless.

Random Internet history note: This won’t be the first time that Time Inc. trots out a blog by the name of Techland. It used to be one of the Business 2.0 blogs, and then a Fortune blog (archived here). My former editor at Business 2.0, Josh Quittner, who is now at Time, bought the domain way back when. Now it’s up to Ha to bring it back to life.

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This guest post was written by Steve Poland, a former TechCrunch writer working on his soon-to-launch start-up InSeconds that allows sites to easily customize each visitor’s experience, resulting in optimized revenue for each visit.

Affiliate marketing is 15 years old this month—CyberErotica is said to have launched the first program in 1994. The adult industry has always been ahead of the curve, but I digress. Despite 15 years of existence, which is essentially an eternity in “online years”, the performance based marketing method is still in its infancy. Sure, there are lots of affiliate programs that exist for many online etailers (and other sites that seek sales, leads and visitors) and $2.1b was paid out last year from affiliate programs, but affiliate marketing is still not as easy as it should be for website/blog Publishers to implement and get compensated for their referrals.

For those that don’t know, affiliate marketing works like this—a company with a product or service for sale pays a referral fee to Publishers (marketing companies) that can drive sales, leads, or visitors to them. The Publisher is taking on the risk here—they might be outlaying their own cash on advertising to promote the product/service, or they are linking to that company’s product/service in the content of their site’s own webpages (when they could be linking to another company instead). The Publisher signs up for an account with the affiliate program and is then given “trackable links” to use in their content, which track referrals back to them. Most etailers have an affiliate marketing program in place—for example, Amazon.com’s Associates program will pay 4%-15% referral fees to you when a visitor of your website clicks a link on your site and makes a purchase at Amazon.com.

Twitter & Facebook Turn Everyone Into An Affiliate Marketer

Most recently, it’s not just websites/blogs that are referring sales, but rather individuals themselves, who are using realtime sites like Twitter and Facebook to influence their friends and followers by recommending products to buy, music to listen to, and movies to watch. These realtime discussions are becoming important sources of referral sales and leads for websites—if someone is asking on Twitter what digital camera they should buy, you bet your ass that Amazon.com wants anyone on the Internet responding to that user’s question to be linking to a camera for sale on Amazon.com (and not Walmart.com or BestBuy.com). Amazon.com wants to make sure that those influencers are compensated for referring people to buy from their website, which thus positively reinforces them to continue linking to Amazon.com product pages in the future.

Everyone with access to the Internet today is a Publisher. They are a voice. This has always been the case, but not the way it is now with Microblogging. Individuals were Publishers on a smaller scale via email forwards, email replies, IM, or most recently blog posts. Blogging broadened individual’s view points (influence) up to a global scale—no longer would they only influence just a few friends in a closed-circuit email, but they could influence the masses online. But blogging wasn’t realtime discussions. Instant messaging and chat rooms were always realtime discussions—but primarily on a one-on-one or small-group basis. Twitter and Facebook status updates, aka microblogging, has mashed the realtime nature of instant messaging with the global scale and voice of blogging.

Amazon.com Pioneers Affiliate Marketing, Again

As an early pioneer of affiliate marketing for site/blog Publishers (holding the patent on all the components of an online affiliate marketing program), it only makes sense that Amazon.com would now become an early pioneer of affiliate marketing for individual publishers—those who simply tweet and comment on their friend’s Facebook updates. Last week, Amazon.com announced they would start compensating individuals with referral fees for using Amazon.com links in their Twitter messages and in their Facebook status updates/comments. Although it will likely lead to more noise (and spam), I think we’re going to see many companies follow Amazon.com’s lead. I also think this has the potential of being a game changer, if some other pieces fall into place—more on this in a bit.

What has shocked me over the years is the number of links in webpages that aren’t trackable links. Most links in content are just regular links out to other webpages, which means that they don’t contain a tracking code that corresponds to them as the referring website—which means that when a sale is referred and occurs on a site that has an affiliate program in place, that affiliate program site doesn’t know who to pay the referral fee to (even though they honestly would like to, because it encourages future linking to them by that referring Publisher). In a perfect world, all the links on all the webpages on the Internet that link to Amazon.com product pages would be trackable links which would earn those websites referral fees for whenever their visitors click over and purchase products from Amazon.com. Ditto for all the links that have affiliate programs in place.

Affiliate Marketing for Publishers Still Not Quick and Easy, Yet

I would go out on a limb and estimate that 99.99% of all links on the web are not trackable links. Why? Because it’s been a bit of a pain in the ass, quite frankly. If you’re a publisher and you’re writing a content piece, you would need to go away from your writing, login to the affiliate program for the website you want to link to (i.e. Amazon.com Associates), and then generate the trackable link for the webpage you want to link to—ensuring that when your visitors click that link, that you’ll earn referral fees from Amazon.com when purchases occur. Not to mention that you have to signup for all of these affiliate programs; some of these programs are handled by third-party companies and become discontinued (making your links dead). And then there’s the money—if you don’t get very many visitors each month to your site, you may only earn a few dollars a month from affiliate programs, which then discourages you from putting forth the time to place trackable links into your content in the first place.

The lack of ease that sites/blogs have had to endure to use affiliate marketing over the years is the same for Individuals now. Amazon.com has said they endorse trackable links by users in social media, but it’s still not easy enough. Sure, you can go over to Amazon.com, login to your Associates account, and a button appears at the top of every product page saying “Share on Twitter”, which then creates a tweet with your trackable link in it, but that’s still one too many steps. People are lazy. More than half of Twitter users are using a Twitter application to do their tweeting. Until the affiliate programs are integrated into the social networking platforms (Twitter, Facebook, MySpace, forums) or the applications used on these platforms (Tweetdeck, Seesmic, Tweetie, bit.ly), this affiliate marketing by individuals won’t take off.

It’s in the interest of the platform (Twitter) to make this easier because it will ultimately allow their users to earn money. It’s in the interest of the users, because it earns them money and reinforces their usage of the platform (Twitter). It’s in the interest of the affiliate program (Amazon.com), because it positively reinforces users to share links to their site. (On the flip side, Twitter might not want to encourage this for fear of making teh spam problem even worse than it is).

“Facebook Credits” could become de facto Virtual Currency with a Facebook integration of Amazon.com

But if you really think about it, Facebook should really be integrating these affiliate program partners into its platform first. Facebook has the most to gain by integrating. You may have heard of the virtual currency system that Facebook has been working on—Facebook Credits. It will allow users to purchase Facebook Credits with cash and then use them in third-party Facebook applications, such as leveling up your character in a game or buying a virtual rose for a friend. To get people using this system, Facebook will likely give away some initial credits to every user, to get them to see how simple they are to use, then get the user to pull out their credit card and refill.

What about a constant refill of Facebook Credits every month to help spur more in-app activity/purchases? That could happen. Even if users were merely earning $0.44 or $1.32 monthly from their link sharing habits, if these referral fees were automatically turned into Facebook Credits, Facebook could really jump-start this in-app currency of theirs (and if they operate anything like Apple, they’ll nab 30% of all in-app money spent). This will work for Amazon.com and other affiliate program participants, as long as the user knows that the 1000 Facebook Credits they earned this month were from their sharing of Amazon.com links. Facebook would love it because these affiliate links would be an income generator for their users, encouraging their users to spend more time on Facebook, and of course there is revenue associated with users spending their credits. Finally, Facebook application developers would love it because they’ll be seeing a steady stream of revenue as well. Meanwhile, app developers and Facebook can steer clear of Scamville-type offers. With affiliate links, you only get paid if someone actually clicks through and buys something. Good referrals get rewarded,while bad referrals get nothing.

Plus, imagine the publicity for a Facebook or Twitter. I can see the headlines now, “Facebook now ‘employs’ 300 million people” or “Facebook lets 300 million people to start earning money just by sharing links”.

This is Now, Get Ready for the Effects

One effect of affiliate programs becoming integrated easily into these realtime platforms (and/or client apps) is that referral fees will go down. Amazon.com currently pays out 4%-15% on referral sales, but that’s because they know only a small percentage of their sales occur now from referrals (because of the lack of ease—and because of the laziness of sites linking to Amazon.com). But with a vast usage of trackable links, then for example, if sales remained flat and 5% of all purchases were referrals previously and now that number becomes 25%, then Amazon.com can’t be paying out 8% referral commissions (unless sales went up 5x too), so Amazon.com would reduce that to 1.6% referral commissions (8%/5).

Yes, this movement is going to turn up the volume of spam noise to us all via our use and searches on Twitter, Facebook, and elsewhere. Those people who you follow may get spammy, but their influence over you will go down (just like those people that send you too many nonsense email forwards). Everyone has a personal brand and if you spam your audience with tons of links, they won’t be listening to you as much.

But what I’m talking about isn’t the future—it’s here now, with Amazon.com leading the way. Those companies that don’t embrace affiliate marketing for Individual Publishers, will lose. If someone is tweeting about the new iPod, that someone is going to link to the webpages that will earn them money.

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At the beginning of 2009, during a now-famous strategy meeting, Twitter’s executives asked themselves, “Are we building a new Internet?” At the crux of that question was the realization that Twitter “introduced a new form of communication to the world.” Public micro-messages are now everywhere—on Twitter, Facebook, MySpace, Google, Bing, Yahoo, AIM. They are infiltrating every part of the Web, particularly as the backbone of realtime search.

Yes, status updates (which are a form of micro-message) existed before Twitter, but it is the growing public nature of these messages which makes them exciting. For one thing, they need to be public in order to be visible to search engines. But when Twitter and other companies talk about building a new Internet, they don’t mean that 140-character messages are going to replace web pages. Rather it is that these realtime streams are becoming the center of people’s attention on the Web, and sending them off in all different sorts of directions.

These streams are the new Internet not so much because of the micro-content which they contain, but because they are a more efficient means of communication. Remember, the Internet at its core is a communications system. The battle going on now between Twitter, Facebook, Google, and others is to control this new realtime layer of communications on the Internet. Each one wants to be driving the micro-message bus.

In computer terms, a message bus carries data between different parts of a computer or between different computers. Realtime streams can be thought of as a micro-message bus which carries information instantaneously between people. The power of a micro-message is its ability to carry data, usually in the form of a link. It is a vehicle for passing links and other information. The value of a Tweet or status update or a Yammer or a Wave is not only in what it conveys about the sender, but where it leads to.

Other kinds of data can take a ride on this micro-message bus as well. Geolocation data, photos and videos are among the most popular. Whoever is in the driver’s seat of this micro-message bus will be in an enviable position, which is why everyone is trying to clamor aboard in hopes of taking over the wheel.

Next week, at our Realtime Crunchup (tickets are still available), we’ll be examining how this new communications layer on the Internet is being built and who will be driving the bus. We hope you can join us.

Photo credit: Flickr/Jan Krutisch.

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After two straight quarters of annual declines (aka, the Great Ad Recession of 2009), it looks like online advertising revenues stabilized in the third quarter. The combined online advertising revenues of Google, Yahoo, Microsoft, and AOL rose 1.2 percent to $8 billion. While the online advertising industry is not out of the woods yet, it might be stabilizing.

At least it is for Google, which was the only one of the four horsemen of Internet advertising to see its ad revenues rise in the quarter (up roughly $400 million from both last quarter and last year). Yahoo, AOL, and Microsoft were all down on both a sequential and annual basis. (All the individual company figures are in the table below).  Google benefits more from search advertising and is less exposed to display. The question now is whether display advertising will follow the recovery already being experienced by search advertising.

Since these four companies account for such a large portion of total Internet advertising, looking at their combined advertising revenue numbers serves as a good indicator of the health of the overall online advertising industry.  I like to keep track of the combined total every quarter

These numbers represent global advertising revenues, and include network revenues paid to affiliates through AdSense and Yahoo’s ad network. Google’s licensing revenues for Google Enterprise Apps have been stripped out. For Microsoft and AOL, I include only the advertising portions of their online revenues as reported in their quarterly earnings statements.  Microsoft restated revenues for its online division last quarter, largely due to the divestiture of Razorfish, so the overall numbers changed a bit from previous posts.

Below is a table with all the numbers:

Online Advertising Revenues (in millions)

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Now that in-app purchasing for free apps has been live for a few weeks in the iTunes App Store, and Apple is now ranking the top-grossing apps, whether they start out as free or paid, we have some initial data on what kinds of apps are pulling in the most money from in-app purchases. (In-app purchases allow apps to offer a free version and then make money by requiring consumers to pay for additional features or content). Today, Distimo put out a report (download it here) which breaks down the top 40 grossing in-app purchasing titles by category (see chart below). Games, social networking, and book apps are doing the best job upselling consumers from free apps to paid enhancements. Music, news, and finance apps, not so much.

Games top the rankings of these best performing apps, with ngmoco’s Eliminate Pro (iTunes link) currently the No. 8 top-grossing app, validating ngmoco’s shift from a paid to freemium model. Mafia Wars (iTunes link) is another example. Seven of the top 40 grossing apps with in-app purchasing are games.

After games, social networking apps such as iRose (iTunes link), TweetPush (iTunes link), and Boxcar (iTunes link) are doing the best job convincing users to pay up after they download the free versions. Social networking apps take six of the top 40. Then comes books, with four of the top 40, including Comics (iTunes link)

It seems that apps which are addictive (like games) persistent (like social communications apps), or lengthy and easy to sample (like books) are doing the best with in-app purchases. It trickles down after that. There is one music app in the top performing apps—RJDJ (iTunes link), one news app, one finance app, and so on. People just don’t want to pay for songs, news, or stock quotes.

The Distimo report also compares the average price for the top 100 mobile apps in the iTunes App Store, the Android Market and the Blackberry App World. The Average price of an app in iTunes is the cheapest at $3.42, followed by Android at $4.30, and Blackberry Apps at $5.61. With more than 10 times as many apps as any of the other app stores, all that competition and proliferation of $0.99 apps probably explains why iTunes apps are the cheapest, even among the top 100. Also, Blackberry apps all have a minimum price of $2.99. Research in Motion just announced that developers will be able to include in-app transactions next year. It doesn’t appear that there is any official way to include in-app transactions in Android apps yet.

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Whenever Rupert Murdoch goes back to his home country of Australia, he loosens up and says things to the press (usually his own outlets) that he might not say in the U.S. Of course, everyone in the U.S. picks up on it and it becomes a big story, as it did today after Murdoch told his own Sky News that he might start blocking Google and other search engines from giving searchers full access to articles on the Wall Street Journal’s website, WSJ.com. Asked whether he realized that Google was sending his news site a ton of traffic, Murdoch responded, “”We’d rather have fewer people coming to our Websites, but paying.”

If Murdoch wants fewer people coming to the WSJ.com and other news sites he controls, blocking Google from indexing those sites is the perfect way to achieve that goal. Just over 25 percent of the WSJ.com’s traffic comes directly from Google or Google news, according to estimates by Hitwise. About 12 percent of that comes from Google News, and another 15 percent from Google search directly.

About 44 percent of visitors to the WSJ.com are new to the site, so Google is doing a good job of introducing new readers to the WSJ. But Murdoch clearly would rather have loyal readers than those delivered by search engines. Or at least that is his story, and he is sticking to it. Never mind that in order to get people to pay for content, they first have to be able to find it.

Meanwhile, the WSJ.com still has a deal with Google which allows the search engine to bypass the paywall and show readers the full text of articles when they click through. Perhaps the WSJ is learning that there it can’t be half-pregnant. Either you charge everyone for content, or you make it free, because if there is back door everyone will find it. All the strange arrangement with Google is doing is training people to search on Google News for stories on the WSJ, rather than go directly to the WSJ. But I digress.

Here is the full video interview with Murdoch below:

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Facebook is much more than a social network. Twitter is much more than an information network or serendipity engine. Each represent a dashboard for your attention, a foundation for conversations and collaboration, and a matrix for your social graph and contextual relationships. In other words, Facebook and Twitter essentially represent the entrée to the future of the social Web as each strive to host, what Facebook founder Mark Zuckerberg, and others, refer to as our personal social operating system (OS).

What Windows is to PCs and OS X is to Macs, Facebook and Twitter are to our social architecture and enterprise. Certainly there’s a David and Goliath element here depending on which company you immediately view as Microsoft or Apple. However, Mac and Windows are simply operating systems, not networks per se, and that’s where the metaphor of an OS breaks down. Either way, there is the perception that there is a competition between Facebook and Twitter for your attention and your network.

Why? At the very least, Twitter and Facebook combine the elements of productivity and interactivity, combining a social OS, a global network, and a platform for open development.

The fabric of our online activity stems from a sophisticated social framework that facilitates the exchange of information and sustains professional, conversational, and contextual connections. Facebook and Twitter, like Windows and Mac, allow us to interact cross platform, while hosting dedicated applications that support our engagement, productivity, and communication.

As much attention as we pay to this mythical clash between Facebook and Twitter, the truth is that it’s not unprecedented to maintain identities in more than one ecosystem. For example, I use both Mac and Windows-based systems, I use both Facebook and Twitter. Yet according to new data from Hitwise, it appears that the epic battle between the two perceived leaders in Social Media is one-sided—or perhaps better stated, dominated.

As of October 2009, Facebook accounts for 6 percent of all U.S. Internet visits while Twitter represents only 0.14 percent. In fact, visits to Twitter.com peaked at .20 percent between June and July 2009 and has slowly lost attention in the interim, a point TechCrunch has noted as well. At the Web 2.0 Summit in San Francisco recently, co-founder Evan Williams acknowledged the slowdown in traffic to Twitter.com in the U.S., for now, but he also stated that they are in the process of finalizing new features that will reverse the downward trend. Williams also reminded us Twitter continues to recognize growth in both mobile and abroad.

And, for those who take solace in the hope that traffic is migrating from Twitter.com to mobile clients, there is some truth to the theory. However, new visitors count for everything and Twitter needs to do a better job capturing new users and holding their interests after they register. The company needs to look further than its resident celebrities to attract and sustain traffic.

For the time being, regardless of numbers, Facebook and Twitter serve a purpose, and thus, remain the Mac and PC in the lives of many. And, until the day that I am forced or compelled to pledge allegiance to one or the other, I will continue to cultivate relationships across multiple landscapes and suggest that you do the same.

But which one’s the Mac and which one’s the PC?

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The following guest post was written by Edo Segal (@edosegal).

Media scarcity is dead. In the future my son will have a flash drive that he will pay $29 for that will have the capacity to hold all movies and music ever released by a major label, studio or tv/cable network. It will take 30 seconds to clone the data over the network to a friend who will pay $14.99 for a device with double capacity a year later. How does the media industry survive such a coming disruption?

For many of us that have been in this game for a while, the word “convergence” harbors some shameful vibes. It conjures up many false hopes, dashed dreams and misfires. Nevertheless, I would contend that convergence is upon us and it has arrived from an unexpected delivery man: Steve Jobs. Apple has created a media consumption experience that has reduced friction to such a point that soon the consumer will not know if he is buying music, a movie or a game. The notion of App is changing. The lines between these different forms of media are quickly blurring and soon will be completely artificial. Already these distinctions are merely fossilized conventions that stem from consumers’ discovery habits. As those evolve, like learning that it is easier to go to Amazon and search to find a product than going to aisle 9 at the store. The coming confusion of the consumption experience where a user won’t care or know if what they are buying is a movie, a game or a music track presents vast opportunity.

The prospects for the old media industry appear bleak, as the rest of the media industry follows the music industry into decline. Indeed in my discussions it is apparent that the smart money in Hollywood already sees the writing on the wall. While the trend will take longer, it is clear which direction the wind is blowing. The main lesson to learn is that the market will punish you if you don’t deliver the goods.

But the entertainment industry has a vested interest in the success of this new type of convergence, as within it lies the secret to its continuing prosperity. The only way to block the incredible ease of pirating any content a media company can generate is to couple said experiences with extensions that live in the cloud and enhance that experience for consumers. Not just for some fancy DRM but for real value creation. They must begin to create a product that is not simply a static digital file that can be easily copied and distributed, but rather view media as a dynamic “application” with extensions via the web. This howl is the future evolution of the media industry. It has arrived from a company that is delivering the goods. Apple has made it painless for consumers to spend money and get the media they want where they want it, proving that consumers are happy to pay for media if delivered in ways that make it easy and blissful to consume. For all the criticism Apple draws on the walled garden nature of its business, it has even come around to stripping DRM and allowing users to download mp3 files.

Even today if you look in the iTunes App Store you will see a myriad range of “Apps” that are just evolved ways to package media. While the traditional part of iTunes still mirrors the product taxonomy of a Tower Records, the App Store is creating a folksonomy of media products. It is where new ideas evolve, thrive and go instinctively based on market power. The App Store is where the action is. This is where evolution is unfolding as direct consumer spending spurs media development.

In preparing this post, Erick asked me, “Is Apple a media company?” I thought about that and the answer is really that Apple is what media companies are missing. The missing part of the puzzle is what made media conglomerates such juggernauts in the past. Namely, distribution. The internet is stripping them of their control over the how their products are distributed. Media companies used to be able to create scarcity merely by delaying the distribution of their products across different channels—theaters, pay-per-view, DVD, cable channels, network TV, and so on. The internet disrupts this ability to create media scarcity. It is such a huge disruption, in fact, that it threatens the fundamental profit engine of the media business.

Both during my time interacting with senior management at Time Warner (where I worked at AOL after it acquired the company I founded, Relegence) and with some of my current portfolio companies that are working with the film and music industries, it is clear to me that many of the smart people running these media companies understand which way the wind is blowing. The music industry, as the one that has suffered most of the carnage, is ripest for change. Executives there are receptive to new ideas and move forward quickly, leaving me somewhat optimistic. It is also clear to me that it is hard for the industries which have not endured their level of pain to flee the golden cage of media’s past. But for those firms which rise to the occasion, there will be vast rewards. People’s hunger for good content will not subside. It will continue to grow, but so shall the unbearable ease of pirating it. The premise of extending the media experience to the cloud is a core necessity for the survival and growth of the media industry. It is the only way to for media companies to weather the coming tsunami of increased bandwidth and the ever open web. Hybrid media packaging with both files and an application layer in the cloud is core to a lucrative future.

For a great example of how change is happening see what Britney did today at @BritneySpears. It was, I believe, the first time a major artist premiered a music video on Twitter. This drives people to Amazon or iTunes to buy the track but in the not too distant future it could be the start of much more than that. A complete experience will unfold that will be interactive and convert to new revenue streams. Not just a purchase of a track but of an app that pulls consumers into an experience and further promotes user engagement and virality. Media becomes a platform with a funnel of traffic and conversions to alternative revenue streams. All boosted by the frictionless billing that Apple has created in the App Store. Media executives will have realtime metrics for their success as it maps to revenue and in turn this will accelerate innovation and help redefine media.

If you are a media exec and you look at your product and at the end of the day it’s a digital file that can be copied, then you have a serious problem with your format. Think of your product like a pie chart of the value you are giving the consumer. If 100% of the value is in that file, it is not a sound approach for defending the future of your business. However, if a portion of the experience is derived thorough an integration with a Web component that will yield additional value in functionality or social elements, then it will be more sustainable. There are many such examples emerging in the app store (I am T-Pain, TapTap and many more). Applications that let consumers interact with the media. Create things and share them with their friends. These will not only make the consumer the one who markets your product, but also create an unprecedented level of engagement. That level of engagement will directly map to reduction in piracy as consumers will pay for this experience and wont be able to copy it. Sell access and experiences, not media files.

Guest author Edo Segal (@edosegal) has launched and sold several companies. In 2000 he founded eNow, which he sold to AOL in 2006 (after it was renamed Relegence). Today, he runs his Incubator/Investment vehicle Futurity Ventures, which recently launched a new search engine for wisdom.

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I mentioned a little bit about my first Columbus Day in California in a previous column. But I didn’t tell you the whole story. I was invited to three amazing events on the night of October 12. Venture capital firm Alsop-Louie—known as one of the wackier and unconventional VC firms—invited me to their legendary Columbus Day party. On that same evening I had an invite from Henry Chesbrough, Executive Director of the Center for Open Innovation at the University of California-Berkeley to attend a dinner party for his forum. Down in Silicon Valley I also had an invite to speak at an event with India’s former Minister of Disinvestment, Arun Shorie—the guy who was once in charge of privatizing the country’s moribund nationalized firms and who is as close as you can get to financial royalty in India.

It was a really hard decision which one to pick. And I found myself wondering, where else in the world would I have to face such a decision? The answer is nowhere. Silicon Valley, which has expanded to embrace the entire Bay Area as an engine of entrepreneurship and innovation, is a unique place of powerful and concurrent overlapping networks. As a new arrival to Silicon Valley and San Francisco, I had read about this and did believe it. But it was hard to understand to what degree these types of concentric circles of connections were pervasive in the Valley. I am now studying how some of these networks develop and their influence on success rates in entrepreneurship.

I am focusing on what is possibly the largest of these networks, an organization called The Indus Entrepreneurs (TiE). This started as an Indian network and served as a mechanism for those from the Subcontinent to help each other. Silicon Valley is the birthplace of TiE and remains its stronghold. But at the latest TiE Global Conference, held in Silicon Valley a few weeks ago, an interesting debate broke out among the Board of Directors. While the organization remained largely Indian in composition, a significant number of non-Indians had joined TiE and become very active members (some had risen to the role of chapter president). Some members of the board thought it was time to change the name of TiE from The Indus Entrepreneurs to The International Entrepreneurs. They eventually agreed to drop the “Indus” from the name and to just call the organization TiE. The fact that such a debate even took place illustrates both the power of networks to embrace outsiders and draw them in, as well as the power of these networks, when unconstrained by convention or conservative establishment rules, to grow in unexpected ways. It’s a metaphor for Silicon Valley.

Which brings me to Boston. Ever heard of Route 128? To my surprise, neither have any of my students at Duke or the entrepreneurs I’ve met in Silicon Valley. I’m surprised because it wasn’t so long ago that Silicon Valley was considered a poor cousin of Boston’s tech center—a cluster of technology companies located along this freeway which partially rings the city. Starting in the 1960s and on through the 1980s, Route 128 was, if anything, more closely associated with tech than Silicon Valley. Today few young technology workers even know where Route 128 is located, let alone its importance in the tech world. Silicon Valley has simply left Boston’s tech center behind.

In the 1980’s the Silicon Valley and Route 128 looked very similar—a mix of large and small tech firms, world class universities, venture capital, and military funding. If you were betting on one you’d have been wise to bet on Route 128 because of its longer industrial history and proximity to a large number of high quality educational institutions (Harvard, Yale, Brown, MIT, Tufts, Amherst) and proximity to Bell Labs and other large corporate research centers. You remember Bell Labs, right? It’s where the transistor was invented. Now, aside from big biotech breakthroughs, Boston is a distant second nationally to Silicon Valley in technology entrepreneurship. So, what happened to Boston?

A young professor at UC-Berkeley, AnnaLee Saxenian, wrote a book in 1994 which answers this question. At a time when Boston still thought it was the powerhouse of the tech industry, Saxenian declared Boston the loser in the tech race and explained why it would only fall further behind. This book was titled Regional Advantage: Culture and Competition in Silicon Valley and Route 128. It kicked off a firestorm of criticism from the Boston elite. Saxenian also alienated friends at her alma mater, MIT.

She noted that Silicon Valley had an amazing dynamism about it. There were extensive professional networks, job hopping was the norm, information was exchanged openly, and the culture encouraged risk taking. The Silicon Valley ecosystem supported entrepreneurial experimentation and collective learning. In other words, Silicon Valley was a very open network—a giant social networking site working in analog before the concept of such a thing even existed.

This organizational mechanism was in sharp contrast to that of Route 128. Dominated by large, vertically integrated, and secretive minicomputer producers such as DEC, Wang, Prime, and Data General. Technology, skill, and know-how were trapped within the boundaries of the large corporations.

The differences were evident at many levels: venture capitalists in Silicon Valley had deep roots in local networks and were far more nimble than their east coast counterparts; educational institutions and research labs in the West partnered with local startups as well as more established firms, while those in the East worked only with the largest corporations; and the meritocratic openness of Silicon Valley made it a magnet for non-traditional talent and immigrants.

By the mid-1990s the east had missed the shift from minicomputers to personal computers as the flexible Silicon Valley ecosystem sped ahead with innovation across a diversifying range of components and systems going from chips, routers, and application software to ecommerce and search engines. Today Silicon Valley is the leading location for cleantech venture activity, an area widely considered to be the next big value creation engine for the U.S. and the world.

Boston, however, is no slouch. The Route 128 community remains the second biggest in the U.S. in terms of venture funds committed. Boston has powerful research institutions, still, and lots of very strong companies. In some areas, such as biotech, Boston may even rival Silicon Valley. But overall, its pretty clear that the Valley has not only won but is racing further ahead.

Most entrepreneurs and engineers that come to Silicon Valley, come to experience this network and to embrace the culture it has created. That’s why I came, too. Network effects don’t just work for fax machines. But then again, most of them knew that intrinsically. University guys like me need to do a bunch of surveys to figure it out. They voted with their hearts and feet.

Editor’s note: Guest writer Vivek Wadhwa is an entrepreneur turned academic. He is a Visiting Scholar at UC-Berkeley, Senior Research Associate at Harvard Law School and Director of Research at the Center for Entrepreneurship and Research Commercialization at Duke University. Follow him on Twitter at @vwadhwa.

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Google released a new mobile navigation app today and GPS navigation companies such as Garmin And TomTom saw their shares take a plunge. The announcement shaved $1.2 billion off of Garmin’s market cap alone. Its shares are down more than 16 percent so far today to $31.60. TomTom’s shares are down 21 percent to $8.11.

And this is just for an Android app. But Google could very well make it available to other phones as well, and that is what has investors worried. GPS navigation apps are among the most expensive, and most lucrative, of all mobile apps. TomTom sells its iPhone apps for $50 to $100, with a different app per country.

Google just cut the traditional GPS navigation companies at the knees by releasing what may be a far superior product for free. It is not a standalone navigation app. Rather it taps into a lot of the resources Google makes available on the Web, including Google Maps, Streetview, voice recognition, and sophisticated search. You can use voice search just as you would look for something on Google’s search engine. “Where is the Pizza Hut in downtown Palo Alto”? If Google’s search engine can find it, then so can Google’s navigation app. Garmin and TomTom can’t compete with that kind of Web-scale computing power.

And Google is happy to give its navigation app away for free because it leverages many existing technologies it has already built for the Web, and it encourages more people to use Web-capable phones and do local searches on them. Its strategy is to give the software away for free, and make money on the search ads.

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After months of negotiations and holding both off at bay, Twitter now has agreements with both Bing and Google to give them access to its full feed of public Tweets. Both search engines have been yearning to drink directly from Twitter’s the realtime firehose of micro-messages and all that they carry. A rudimentary version of Bing’s Twitter search is already live, and it will soon add public Facebook updates to its search results as well.

While financial terms of the deals were not disclosed, full access to Twitter’s data stream is very valuable to both search engines. Depending on how much Twitter was able squeeze out of Google and Bing for these licensing deals, they are likely to provide its first major source of revenue. (Imagine, if they have to pay by the Tweet).

Tweets and other realtime data streams are valuable to Google and Bing because for many types of searches (news, events, sports, stocks, shopping, etc.), the most recent information is often the most relevant. And it’s hard to beat millions of people Tweetng out their thoughts—the “pulse of the planet,” if you will—for realtime information about every subject imaginable. Google and Bing need access to this stream of data if they want to keep their results fresh and relevant.

Up until now, they had to try to index Twitter’s site selectively by concentrating on high-profile Twitterers like celebrities. Twitter wouldn’t let their robots gobble up and index every Tweet because its servers wouldn’t be able to take that kind of pounding. But Twitter didn’t just want to hand over the feed of all of its public Tweets (the firehose) to the search engines without getting paid for it either.

Now that Google and Bing are getting the firehose, it could have a big impact on search results. For the search engines, the firehose is much more valuable than any single Tweet. They can index it and sift it, looking for patterns and spikes in keywords and shared links to get a better sense of what people across the Web are paying attention to at any given moment. This data can then be folded back into regular search results, even if the top result isn’t a Tweet.

For example, if a link to a post about healthcare reform on an obscure blog suddenly gains currency and is retweeted hundreds of times, that is a signal to perhaps rank that link higher in searches about “healthcare reform.” If people stop Tweeting about it, then maybe it goes down in the ranking. But Google and Bing can use the firehose as a rich source of signals to mine and then blend back into regular search results.

Of course, Tweets and other micro-messages will become part of results. And how the search engines display them and rank them will also determine how relevant their results are. Here is where it gets interesting because realtime search is a hard problem that has not yet been solved. Do you show the most recent, random Tweets first, or the ones with the most authority? And how do you rank a Tweet? We already have PageRank, but what we now need is StreamRank.

Many startups are tackling this problem, as is Twitter itself. And now Google and Bing can try their hand at finding the most important bits of data in the firehose. The results should be a more relevant, faster feedback loop between data appearing on the Internet and the search engines finding it.

Photo credit: Flickr/ZeroOne

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Yesterday at the Web 2.0 Summit, Morgan Stanley Internet analyst Mary Meeker did her annual data dump slide presentation, this year focusing on the growth prospects of the mobile Web. As usual, there were 3 or 4 slides that really captured the trends she was talking about, particularly the ones around iPhone adoption and how that phone in particular is catapulting mobile Web usage into the mainstream.

You can see her full slide show below (all 68 of them), but let me pull out the three iPhone slides that helps put its growth into perspective. The first one above shows the growth of data traffic on AT&T’s mobile network. It is 50 times higher than it was just three years ago. I added two arrows to show when the first iPhone launched in June, 2007 and the iPhone 3G in July 2008.

AT&T saw massive pops in data usage following those two launches as consumers discovered the unadulterated mobile Web for the first time. And it is not just the iPhone. With the ubiquity of WiFi, the iPod Touch offers pretty much the same experience without AT&T’s monthly fees. Taken together, the adoption of the iPhone and iPod Touch is outstripping the early adoption the desktop Internet, as represented by AOL and Netscape in Meeker’s chart below. It is also outstripping the early growth of NTT Docomo’s imode, which was the most successful example of the first generation of mobile Web adoption in Japan.

The chart overlays the first 20 quarters of user growth for each product. Only eight quarters after launch, the iPhone and iPod Touch has more than twice as many users (57 million) as imode (25 million), five times as many as Netscape (11 million), and eight times as many as AOL (7 million) at a comparable points in their histories.

The iPhone/iTouch combo is also the fastest-growing consumer electronics product of all time. Its adoption ramp is even steeper than videogame consoles including the Nintendo Wii, Nintendo DS, and Sony PSP. The original iPod and Blackberry aren’t even in the same league.

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Are you still confused about the latest twists in the AP’s copyright infringement case against artist Shepard Fairey for his use of an AP photograph as the inspiration for his famous Obama Hope poster? Just watch this Attack of the Show video in which TechCrunch’s Jason Kincaid explains how Fairey was caught lying about which image he used (a story Jason broke on Friday, even beating the AP), but still thinks he has a fair use case.

What this very public fight with Shepard Fairey boils down to, explains Jason at the end of the interview, is that if the AP “can take him down, everyone else will be scared to use AP material.”

Update: Earlier today, the AP filed an amended complaint with the court, noting the change in Shepard’s story. It also added his licensing company, Obey Clothing, as a defendant, suggesting it has evidence that he did indeed profit from the image at some point.

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As Microsoft and Yahoo await government approval of their pending deal to join their two search businesses at the hip, the two companies received an important endorsement today from the world’s top advertisers.

In a letter today from the American Association of Advertising Agencies, and signed by the CEOs of the Publicis Groupe, WPP, Interpublic, and Omnicom, the advertisers gave their full support to the deal, urging “the Department of Justice to bring its antitrust review to a speedy conclusion.” The letter notes that the deal would strengthen Microsoft’s and Yahoo’s search advertising offerings, and thus would be good for competition.

Advertising agencies are wary of being beholden to an evermore powerful Google, and thus want to foster alternatives which might act as a counterweight. Most industry watchers expect the deal to pass DOJ scrutiny.

Below is a copy of the letter sent by the AAAA:

AMERICAN ASSOCIATION of ADVERTISING AGENCIES

Nancy Hill
President
Chief Executive Officer

October 19, 2009

Advertising is the fuel that powers the Internet. Most websites depend on online advertising to survive – it’s what allows them to offer consumers free content and services.

A very important form of online advertising is search advertising – the sponsored links that appear when a search engine answers a query. A healthy, competitive market for search and search advertising is crucial to the Internet’s future.

We believe that Yahoo! and Microsoft’s proposal to combine their technologies and search platforms is good for advertisers, marketing services agencies, website publishers and consumers.

These benefits are too important to wait for. As leading members of the advertising and marketing services industry, we urge the Department of Justice to bring its antitrust review to a speedy conclusion. This proposal enhances competition, and should be allowed to take effect as soon as possible.

Sincerely,
Nancy Hill,
President & CEO

Maurice Levy,
Chairman and CEO, Publicis Groupe

Michael I. Roth,
Chairman and CEO, Interpublic Group of Companies

Martin Sorrell,
CEO, WPP
John Wren,
President & CEO, Omnicom Group

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Many of the most successful Web 2.0 companies, including MySpace, YouTube, eBay, Flickr and rising stars like Twitter are prime examples of a “viral loop”—to use it, you have to spread it. The result: Never before has there been the potential to create wealth this fast, on this scale, and starting with so little.

In Viral Loop, Penenberg tells the fascinating story of the entrepreneurs who first harnessed the unprecedented potential of viral loops to create the successful online businesses—some worth billions of dollars—that we have all grown to rely on. The trick is that they created something people really want, so much so that their customers happily spread the word about their product for them.
One such business was Hotmail. After their 20th venture capitalist meeting, Sabeer Bhatia and Jack Smith, former hardware engineers at Apple who first came up with the idea for webmail, finally raised seed money from famed VC firm, Draper Fisher Jurvetson.

PS: I Love You. Get Your Free Email at Hotmail

After the two sides worked out terms governing the initial $300,000 seed investment, Sabeer Bhatia and Jack Smith walked out of the Draper Fisher Jurvetson offices with a $50,000 bridge check and quit their day jobs. Working from home, Smith, after bringing onboard another engineer, got down to building a prototype. They also needed to come up with a name, which fell to Smith, who stayed up late with his wife to brainstorm. Sitting with a blank sheet of paper they listed possibilities that contained “mail” in some form. Out of two-dozen there was Cool Mail, Run Mail, this mail, that mail, but no “A-ha!” moment. Finally his wife suggested, “Hotmail.”

Smith wrote it down. He wasn’t sure about the “hot” part, but given everything else this seemed the best candidate. Then he noticed it contained the letters “HTML,” the acronym for “HyperText Markup Language,” the lingua franca of web pages. Smith canvassed Bhatia the next day while riding in an elevator to their attorney’s office. As usual, his friend initially gave it a cool reception but they were running out of time so he went along with it. On March 27, 1996 Smith registered the Hotmail domain.

At the same time he finished a prototype within two weeks, sharing it with a small circle of friends who provided valuable feedback, mostly relating to layout, how e-mail should be viewed and the index page arranged, the look and feel of the interface, how the columns should appear on the screen. Smith demonstrated it at the next meeting with Draper and Jurvetson, who were duly impressed.

Draper asked, “How are you going to get the word out there?”

“We’ll put it up on billboards,” Bhatia said. He also mentioned radio advertising.

“God,” Draper replied, ” that’s expensive marketing and we’re giving this away?” He thought for a moment. “Can’t you just give it out to all those guys on the web?”

That would be spamming, Smith replied.

I guess spamming is bad, Draper thought. He hadn’t heard the term before. Then he flashed back to Harvard Business School, where he had received his MBA—a case study his professor had covered in class: women holding parties for their friends then selling to each other. A certain percentage of the women at each party became salespeople by referring more business. Tupperware, that was it. He also recalled MCI’s “Friends & Family Plan,” which harnessed the power of social interactions to spread the product. He wondered if they could do something like that with webmail.

“Jack,” Draper asked, “could you put a message at the bottom of everybody’s screen.”

“Oh come on, we don’t want to do that!” Bhatia blurted out.

“But can you technically do it?” Draper asked.

“Of course we can technically do it,” Smith said.

“Oh, great,” Draper said. “And it can persist, right? You can put it on one message and if he sends an email to somebody else you can put it on that one, too, right?”

“Yeah, yeah,” Smith said, not convinced.

“So put ‘PS: I love you. Get your free e-mail at Hotmail’ at the bottom.”

Bhatia and Smith communicated through pained expressions. “Oh, no,” they seemed to be saying. Draper had seen that look before. Of all the investors in the world, why did we end up with this idiot? Frankly, he didn’t care what they thought. This just felt right.

“Wait a second guys, don’t you get it?” Draper asked. A tag line at the bottom of each message would act as free advertising. “I can send you an e-mail and you can send it to all your friends and they get it and they can sign up and send it to their friends and pretty soon it takes off.”

Smith said, “I don’t think…”

Bhatia interrupted. “Let’s move on to other business.”

Draper agreed to table the discussion for now, but had no intention of letting it go. He vowed he would keep pounding until they listened.

They launched HoTMaiL on Independence Day 1996. Not only did they like the symbolism—they viewed webmail as a populist tool because any user could log in from anywhere in the world—Smith had long promised the service would be ready by then. After turning on the registration function and hitting the switch in the early afternoon, Smith accompanied his tiny technical staff to Chili’s Grill & Bar in San Jose to celebrate. To keep track of signups he brought along a laptop with an attached radio modem receiver on the back, the antennae sticking up like a divining rod. Over quesadillas Smith counted 100 registrations in the first hour. After lunch they went to the movies, and by the time the summer blockbuster “Independence Day” began to roll he tallied 200 signups. Upon exiting the cinema, Smith logged in again to find that fifty more joined HoTMaiL. They were finding the site via word of mouth and word of mouse. People were talking about it, and letting their friends and family in on the deal via email, using the Hotmail message as a proof of concept: Eighty-percent of those who signed up said that they learned about it from a friend.

Growth was robust but not staggering for the week. At the next meeting at DFJ Tim Draper once again pushed the two young entrepreneurs to insert a tagline into each message. Bhatia and Smith were adamant about not adulterating email. It just wasn’t done. They would feel like they were polluting emails with advertising, and what about privacy issues? If someone is adding a tagline what else were they doing? A user would wonder what else they had access to and they were also fairly certain it was unethical. But Draper wouldn’t let it go. The benefits, he contended, far outweighed the risks. If they were predicating their entire business on the size of their user base, they should be doing everything in their power to increase it as fast as possible. “P.S. I love you. Get your free email at HoTMaiL.” The more he said it, the more he liked it.

The next day Bhatia phoned Draper with the news that they agreed to do it, but without the “P.S. I Love You” part. The impact was almost instantaneous. Within hours Hotmail’s growth took on the shape of a classic hockey stick curve. They started averaging 3,000 users a day, compounded daily. By Labor Day they registered 750,000 users and within six months they were up to 1 million. Five weeks after that they hit the 2 million user mark, adding more than 20,000 signups a day, with Smith desperately trying to keep the servers up and running. At times, the site became sluggish and suffered major outages. But through it all Smith, using little more than virtual spit and glue, kept Hotmail—they had dropped the awkward capitalization by this point—afloat.

The tagline with the clickable URL that Draper insisted that Bhatia and Smith insert into every outbound message served as a promotional pitch for the company. Simply by using the product every customer became an involuntary salesperson. This implied endorsement from a friend or peer made it more powerful—and more far-reaching—than traditional advertising. The receiver of a Hotmail messages could see a.) his friend is a user, b.) it works, and c.) it’s free. Successful consumer branding is often based on user affiliation. (The cool kids wear low cut jeans, so I will, too.) This plays to our tribal instinct. It also resulted in clusters of users. Bhatia sent a message to a friend in India and within 3 weeks Hotmail registered 100,000 users there. It also became the largest email provider in Sweden without spending a nickel on advertising there. In contrast, Juno blew through $20 million in marketing and advertising yet Hotmail gained three times as many users in half the time.

As Jurvetson related in what would become a famous white paper, the Hotmail adoption pattern was similar to that of a virus “with spatial and network locality.” A person’s email address book is a type of virtual social network that is not encumbered by geography. A certain percentage of contacts will be friends, family and colleagues who reside relatively near by; others may be scattered throughout the world. A Hotmail message sent across the country might result in a new cluster of users. Jurvetson noted a “mathematical elegance” to Hotmail’s “smooth exponential growth curves” in the company’s early days: cumulative users = (1+fan out) cycles. “We would notice the first user from a university town or from India, and then the number of subscribers from that region would rapidly proliferate,” he wrote. “From an epidemiological perspective, it was if Zeus sneezed over the planet.”

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Editor’s note: This is a guest post by Vivek Wadhwa, an entrepreneur turned academic. He is a Visiting Scholar at UC-Berkeley, Senior Research Associate at Harvard Law School and Executive in Residence at Duke University. Follow him on Twitter at @vwadhwa.

I spent Columbus Day in Sunnyvale, fittingly, meeting with a roomful of new arrivals. Well, relatively new. They were Indians living in Silicon Valley. The event was organized by the Think India Foundation, a think-tank that seeks to solve problems which Indians face. When introducing the topic of skilled immigration, the discussion moderator, Sand Hill Group founder M.R. Rangaswami asked the obvious question. How many planned to return to India? I was shocked to see more than three-quarters of the audience raise their hands.

Even Rangaswami was taken back. He lived in a different Silicon Valley, from a time when Indians flocked to the U.S. and rapidly populated the programming (and later executive) ranks of the top software companies in California. But the generational difference between older Indians who have made it in the Valley and the younger group in the room was striking. The present reality is this. Large numbers of the Valley’s top young guns (and some older bulls, as well) are seeing opportunities in other countries and are returning home. It isn’t just the Indians. Ask any VC who does business in China, and they’ll tell you about the tens of thousands who have already returned to cities like Shanghai and Beijing. The VC’s are following the talent. And this is bringing a new vitality to R&D in China and India.

Why would such talented people voluntarily leave Silicon Valley, a place that remains the hottest hotbed of technology innovation on Earth? Or to leave other promising locales such as New York City, Boston and the Research Triangle area of North Carolina? My team of researchers at Duke, Harvard and Berkeley polled 1203 returnees to India and China during the second half of 2008 to find answers to exactly this question. What we found should concern even the most boisterous Silicon Valley boosters.

We learned that these workers returned in their prime: the average age of the Indian returnees was 30 and the Chinese was 33. They were really well educated: 51% of the Chinese held masters degrees and 41% had PhDs. Among Indians, 66% held a masters and 12% had PhDs. These degrees were mostly in management, technology, and science. Clearly these returnees are in the U.S. population’s educational top tier—precisely the kind of people who can make the greatest contribution to an economy’s innovation and growth. And it isn’t just new immigrants who are returning home, we learned. Some 27% of the Indians and 34% of the Chinese had permanent resident status or were U.S. citizens. That’s right—it’s not just about green cards.

What propelled them to return home? Some 84% of the Chinese and 69% of the Indians cited professional opportunities. And while they make less money in absolute terms at home, most said their salaries brought a “better quality of life” than what they had in the U.S. (There was also some reverse culture shock—complaints about congestion in India, say, and pollution in China.) When it came to social factors, 67% of the Chinese and 80% of the Indians cited better “family values” at home. Ability to care for aging parents was also cited, and this may be a hidden visa factor: it’s much harder to bring parents and other family members over to the U.S. than in the past. For the vast majority of returnees, a longing for family and friends was also a crucial element.

A return ticket home also put their career on steroids. About 10% of the Indians polled had held senior management jobs in the U.S. That number rose to 44% after they returned home. Among the Chinese, the number rose from 9% in the U.S. to 36% in China.

When we asked what was better about the U.S. than home, 54% of Indian and 43% of Chinese said that total financial compensation for their previous U.S. positions was better than at home. Health-care benefits were also considered somewhat better in the United States by 51 percent of Chinese respondents, versus 21 percent who thought it was better in their home country. (Indian respondents were split more evenly on this).

These were a self-selected group, people who had already left. But what about the future, the immigrants presently studying at U.S. institutions of higher learning? We surveyed 1,224 foreign students from dozens of nations who are currently studying at U.S. universities or who graduated in 2008. The majority told us that they didn’t think that the U.S. was the best place for their professional careers and they planned to return home. Only 6 percent of Indian, 10 percent of Chinese, and 15 percent of European students planned to settle in the U.S.

Many students wanted to stay for a few years after graduation if given a choice—58% of Indians, 54% of Chinese, and 40% of Europeans. But they see the future being brighter back home. Only 7% of Chinese students, 9% of European students, and 25% of Indian students believe that the best days of the U.S. economy lie ahead. Conversely, 74% of Chinese students and 86% of Indian students believe that the best days for their home country’s economy lie ahead. National Science Foundation studies have shown that the “5 year stay rates” for Chinese and Indians science and engineering PhD’s have historically been around 92 % and 85% respectively (NSF tracks these 5 years at a time, and the vast majority stay permanently). So something has clearly changed.

For Silicon Valley, and for the U.S., this is the wrong kind of change. To some degree, these responses reflected the moribund U.S. economy and the rough job prospects facing students. With U.S. unemployment at 10%, who cares if we lose the next generation of geeks? There won’t be jobs for them for years, anyway, until the U.S. job market recovers. And sure, I know the xenophobes are going to cheer my findings. They believe that foreign workers take American jobs away.

But a growing body of evidence indicates that skilled foreign immigrants create jobs for Americans and boost our national competitiveness. More than 52% of Silicon Valley’s startups during the recent tech boom were started by foreign-born entrepreneurs. Foreign-national researchers have contributed to more than 25% of our global patents, developed some of our break-through technologies, and they helped make Silicon Valley the world’s leading tech center. Foreign-born workers comprise almost a quarter of all the U.S. science and engineering workforce and 47% of science and engineering workers who have PhDs. It is very possible that some of the smart Indians who sat in the room with me holding their hand up on Columbus Day will start the next Google or Apple. Many of them will build companies which employ thousands. But the jobs will be in Hyderbad or Pune, not Silicon Valley.

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Does the world really need another URL shortener? Apparently, the U.S. government thinks so. It just launched http://go.usa.gov as a link shortening service for government employees. It shortens links from any .gov, .mil, or .si.edu site.

For instance, http://go.usa.gov/llX takes you to a page on Nasa’s site with some nice satellite imagery showing the Fall colors in Wisconsin. And http://go.usa.gov/liO is a link to www.Recovery.gov (I think you save two characters n that one). The idea is that if you see one of these short links you know it is coming from a government employee, which doesn’t exactly make it official but is supposed to make it more trustworthy.

When you see a go.usa.gov tweet, it will be like getting a messge directly from Uncle Sam, or rather, one of his minions. But I mean, really, can’t they just use bit.ly like everyone else?

With commercial link shorteners such as Cli.gs and Tr.im falling by the wayside, maybe the government will start a short URL bailout next. Go.USA.Gov!

(Hat tip to Anil Dash)

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