Yesterday marked the end for Xmarks, the Mitch Kapor-backed social bookmarking start-up that was founded in 2006.

What was most remarkable to BoomTown was the classiness and honesty of the goodbye, especially in Silicon Valley, which is loath to call a failure just that.

That was certainly clear in a terrific blog post about its history, titled “End of the Road for Xmarks,” written by its CTO and co-founder Todd Agulnick.

After noting Xmarks’ substantive growth as a browser synchronization service, he wrote:

“Tomorrow, however, will hardly be anything but typical, for tomorrow one of our engineers will start a script that will email each of our users to notify them that we’ll be ceasing operations in around 90 days.”

In the fascinating post, Agulnick did note that the company came close to selling recently. Actually, I heard it had gotten close twice and to no avail.

The San Francisco-based company–which had been called Foxmarks initially–had been seed-funded by Kapor, the well-known tech entrepreneur, and also got an additional investment from First Round Capital.

Xmarks garnered another $5 million in funding from Redpoint Ventures in 2008,

That year, it also hired Silicon Valley entrepreneur James Joaquin as CEO, whose job it was to carve out a business with Xmarks’ assets, including using its mass of data.

Xmarks had certainly been growing its user base and bookmarked Web addresses strongly, via a browser widget that recorded bookmarking information.

Earlier this year, it tried out an advertising product called SearchBoost, which gave advertisers additional analytics about their ads, as well as organic search results.

But all that ultimately did not translate into a viable business model for Xmarks.

At the time of launching this money-making effort in April, Kapor said that after growing its user base of actives, this was the next logical step for Xmarks.

“This is the effort to move from that category to the category of sustainable enterprises,” he said. “And that is certainly a good thing.”

But, as Agulnick concluded:

“We built it and it put it front of potential advertisers. Many were interested, but ultimately the feedback was negative: our user base was too small to be worth their time and attention.”

After thanking investors, employees, users and others, Agulnick ended:

“In the words of Douglas Adams, so long and thanks for all the fish.”

Indeed.

Looking back to happier times, here is a video interview I did with Joaquin in late 2008 about Xmarks’ prospects:

So, yes, the quote from Prince about the Internet being “completely over” made him sound like a Luddite idiot.

And adding that computers and other digital gadgets “just fill your head with numbers and that can’t be good for you” pushed the music superstar over the edge into seeming like that crazy ranting dude you often encounter on the street claiming the government has invaded his brain.

But–after spending several days here in Los Angeles this week, talking to execs, talent and others who toil in the entertainment industry–I can’t say what I am hearing is that much different in terms of the continuing frustration with the lack of decent business models to replace the ones that have worked for so long and been so lucrative for the entertainment and media industry.

From music to movies to television, the biggest minds here still sound perplexed as to what will finally be the golden ticket to carry them through to the inevitable next era of digital distribution.

Still, so many questions and so few answers.

Will consumers buy subscriptions to cloud-based content? Will advertising be enough to pay for broadcasting online? Who will pay for the high up-front production costs of most major entertainment projects? Can costs come down enough to make up the difference?

And while there is now a lot of interest around tablets, such as the Apple (AAPL) iPad, and Hollywood types seem to accept that their customers are shifting their buying and consumption habits around entertainment drastically, there still remains a level of outright hostility to it all that has not changed much.

“Why is the consumer always right?” said one exec to me this week in a typical statement. “You can’t have a business if there is no business model.”

Indeed. And, in fact, that’s just what Steve Levitan, co-creator of “Modern Family,” the ABC television hit, talked about cogently at the eighth D: All Things Digital conference last month, telling a largely tech-centric crowd some truths it much needed to hear.

(FYI: We’ll be posting the video of the entire interview session with Levitan and also longtime Hollywood player Lloyd Braun here tomorrow.)

As much as he himself loves tech products, Levitan noted that lack of a business plan or credit for consumption online made digital largely pointless to his work.

“At its core, 90 percent of my job is still sitting down in a room full of people and breaking stories,” he said. “And that requires virtually no technology.”

It’s a salient point and not so different from Prince’s saying: “I don’t see why I should give my new music to iTunes or anyone else. They won’t pay me an advance for it and then they get angry when they can’t get it.”

If you remove the sillier parts of his quote that preceded it, such a statement is not unreasonable from an artist who wants to be paid for his creative efforts.

Thus, instead of mocking that sentiment, perhaps it is time for tech leaders to figure out a way to keep talent from being dragged into the future without so much kicking and screaming.

Or, as Prince might sing: He was dreamin’ of being paid when he said the Internet was over, so sue him if he went 2 fast.

Speaking of which, Prince really deserves a little more respect, folks, if only for his classic “1999,” seen here (jacked onto the Web, natch):

Sometimes we move too fast.

That’s an apology of sorts, I suppose. But it’s not an apology for further loosening Facebook’s privacy safeguards or for the speed with which Facebook loosened them. In other words, it’s a comment on the execution of a policy, not on the policy itself.

By saying “we move too fast,” Zuckerberg isn’t admitting that Facebook was headed in the wrong direction with respect to user privacy; he’s saying Facebook was headed in right direction all along, just a bit too quickly–for those of us with reasonable expectations or privacy, anyway.

Which makes you wonder about Facebook’s claim that its changing privacy policy and tools reflect “shifting social norms around privacy.”

Do they really?

Or is Facebook itself attempting to shift those norms in its quest for revenue? After all, there’s great money to be made in the sort of behavioral advertising that Facebook’s user data makes possible–great money to be made in monetizing our privacy and reputations.

So the unveiling this morning of what Facebook claims are “enhanced, simpler” privacy controls is interesting, to say the least. How does a company so clearly prejudiced against privacy assuage concerns that it might violate privacy?

With a new set of “granular data permissions,” Zuckerberg said this morning (here’s Facebook’s guide explaining them).

“First, we’ve built one simple control to set who can see the content you post,” he explained in a blog post published to coincide with the announcement. “Second we’ve reduced the amount of basic information that must be visible to everyone and we are removing the connections privacy model….Third, we’ve made it simple to control whether applications and Web sites can access any of your information.” (Click image below to enlarge.)

Evidently, there will be a simple control that applies to all content retroactively and to new products going forward. If, for example, you set your preference to friends-of-friends, that will be your historic default as well as your default going forward.

For applications, access to member information has been “dramatically” limited. There will be a single check box to opt out of information-sharing with third-party sites. Said Zuckerberg: “The net effect of this is that all applications are going to have restricted access to your personal information.”

And for Facebook Platform, the company is adding an “easy” opt-out for instant personalization. Finally, Facebook is differentiating between “basic directory” information and the more personal information in its members’ profiles. Directory information must be public so friends can find one another, and “allowing people to find you on Facebook is a very different use case than sharing your information.”

As a privacy tool overhaul, this is fairly substantial. And it does seem to address many complaints about the previous system. But it doesn’t do one thing that many critics have called for: Make the highest privacy settings the default.

Why not? Said Zuckerberg: “We’re trying to make the system simple to use. Facebook has never worked in a way where you sign up and only your friends can see your personal information. The point of the site is to allow you to connect with new friends and friends of friends. And that’s always been a really important part of how Facebook has worked. It’s really important to help people share simply by default.”

With their friends, perhaps. But not with anonymous companies. In that case, you’d think most people would want to limit that “sharing” by default. But that would undermine Facebook’s business model, wouldn’t it?

Evidently, outrage over the company’s privacy missteps hasn’t been sufficient to effect that particular change. “We really think about the trust issues,” Zuckerberg explained. “A lot of people right now are upset with us about these changes, and I take that really seriously…and I don’t mean to diminish privacy concerns….but all these blogs are talking about Delete-Your-Facebook-Pages campaigns and we’ve seen no meaningful change to our usage stats.”

So how does Zuckerberg answer accusations that Facebook doesn’t care about privacy, that his company preys on people who have an expectation of privacy but don’t necessarily understand the implications of putting their personal information on Facebook?

“People perceive that we don’t care about privacy and that’s just not true,” he said. “People want to share information and there’s got to be a balance. They’ve got to have control over how they share their information and that’s where the world is going….We’ve learned time and time again that privacy is a sensitive thing. Now we feel like we have a privacy model that will scale as we add more users….And hopefully, we won’t be messing with it for a long time.”

There was this from Google Senior Product Manager Rishi Chandra: “We’re going to have the same impact on the TV experience that the smartphone had on the phone experience.”

And then this from Google CEO Eric Schmidt: “TV has not been reinvented in any significant way since color television was brought in in the mid-1960s.”

With Google TV, Google clearly believes it is ushering in the rebirth of television. But, to Schmidt’s point, sure, TV hasn’t been reinvented in 50 years, but not for lack of trying.

The evolutionary path of the device is littered with failed Internet-TV initiatives. As the Time Magazine cover from Apr. 12, 1993 suggests, this is not a new idea. Nor has it been a successful one, at least not in implementations to date.

Steve Perlman’s WebTV, one the earliest products to bring the Internet to television, failed to gain significant market traction and didn’t do much better after it was acquired by Microsoft (MSFT) and turned it into MSNTV.

AOL TV, America Online’s (AOL) effort to extend its dominance from the PC to the television with a Web-TV hybrid, was scuttled in 2003, three years after it launched.

Brought to market with the help of some impressive hardware partners, like Hewlett-Packard (HPQ), Microsoft’s Media Center Extenders never really caught on.

Launched more recently, Yahoo’s (YHOO) Connected TV initiative hasn’t garnered much notice. Then there’s Kodak’s (EK) Theater HD Player, which doesn’t seem to be doing that well either.

So what makes Google (GOOG) think it’s going to succeed where so many have failed? Particularly with a platform that, frankly, looks a lot like TiVo (TIVO) with a Web browser?

Aside from arrogance, that is?

Well, there’s an impressive list of partners. Certainly, adoption of Google TV stands to benefit quite a bit from Sony (SNE), Logitech (LOGI) and Dish Network (DISH) baking it into television sets, Blu-ray players and set-top boxes. And sources tell me other electronics manufacturers will soon join them. Content partnerships with Netflix (NFLX) and Amazon (AMZN) will also help.

But the partnerships that matter most with an effort like this–cable company partnerships–are entirely absent. The simple fact is that cable companies like Comcast (CMCSA) and Time Warner (TWX) not only distribute the majority of the set-top boxes in the U.S, they also have a strong hold over content providers. Unless Google can convince them that their current business model is in need of something like Google TV, pushing the platform into the mainstream is likely to prove quite difficult.

[Image Credit: Time Magazine]

On Thursday, Adobe co-founders and co-chairmen Chuck Geschke and John Warnock followed suit with some thoughts of their own. Their eight-paragraph essay, “Our Thoughts On Open Markets,” mentions Apple only once, but when it does, it is to lambaste the company for its position on Flash, a position the two claim “could undermine this next chapter of the web–the chapter in which mobile devices outnumber computers, any individual can be a publisher, and content is accessed anywhere and at any time.”

I spoke to Geschke Thursday afternoon about the pair’s letter, Adobe’s (ADBE) new “We ? Apple” ad campaign and Apple’s (AAPL) stance on his company’s software. Below, a transcript of our conversation.

John Paczkowski: What is Adobe is hoping to get out of this new “We Love Apple/Freedom of Choice” campaign?

Chuck Geschke: We mostly are using it as a way to communicate with our customers and partners to assure them that we’re not going to change our strategy and to inform the rest of the community of what the pluses and minuses are of not supporting Flash on the iPhone and the iPad. Our customers, a large percentage of them, are the people who generate and distribute information and content, and for them they have one production stream that they use to do that and they’ve gotten used to the fact that we’ve worked very hard to open up the standards that we support so that we can offer them ubiquity of output on all kinds of platforms. So the fact that Apple is precluding that puts them in a tough position because it means that they’re going to have to create that content twice, and that’s not very productive. It’s certainly more expensive than what they do today. And as you know, the content industry is an industry under a lot of cost pressure these days.

JP: Both Apple and Microsoft have said publicly now that Flash has issues with reliability, security, and performance. Do you think those complaints are legitimate?

CG: I think they’re old news. Go to our Web site and read the actual facts about Flash. We enumerate the facts about Flash there as we see them. [Microsoft and Apple] may have a different set of facts that they believe are accurate. It’s up to you to decide. But I will tell you that the Flash version we’re coming out with now–where, for the first time with the Mac platform, we can actually get to the lower-level interfaces–is going to run like the wind. And the same is true on Windows.

JP: Shouldn’t Apple have the right to define the means by which apps for its own platform can be written?

CG: They absolutely have the right. No one says they don’t.

JP: Cross-platform mobile apps tend not to take advantage of native features unique to each device. What do you have to say about complaints that write-once-run-anywhere software results in subpar apps?

CG: Well, people don’t say that about Photoshop. They certainly don’t say it about Acrobat….I’m a little confused about what the real examples of that are. If there’s a problem with the performance of Flash as demonstrated on the iPhone, it’s because we haven’t been able to access the inner layers of hardware and software we need to to provide the kind of performance we can provide on other platforms. But that’s Apple’s choice, not ours. And now, of course, you can’t use it at all.

JP: So you don’t think write-once-run-anywhere is limiting at all?

CG: Not really. I mean there may be certain features in certain environments that you’ll want to do customization for, but the more you go down that road, the more you get the experience of HTML on the Web, where the kind of browser, hardware and OS you use determines what your experience. That’s because HTML is not well codified and standardized and people sort of roll their own.

JP: How much of Adobe’s revenue comes from Flash?

CG: I would share that number if we disclose it, but I’m not sure that we do. It isn’t a huge amount of revenue, but it is an extremely popular platform that all of our apps have the opportunity to exploit when it’s distributed everywhere. Flash tools aren’t the largest piece of our business, but it’s a significant one and obviously we feel it’s extremely important to our customers and partners who want to build third-party apps in an environment where they can, in fact, put them on a variety of devices without having to re-implement them.

JP: So could Apple’s exclusion of Flash hurt Adobe sales?

CG: I don’t think it will have a significant effect. As well as Apple is doing, if you look at the number of platforms out in the market and the number of release of new ones that will occur over the next six to 12 months, it’s going to be huge. That’s a much bigger population, and we’re just focusing on making our technology operate as effectively and efficiently as possible for it.

JP: In his “Thoughts on Flash” essay, Jobs accused Adobe of abandoning Apple. “Apple went through its near death experience, and Adobe was drawn to the corporate market with their Acrobat products,” he wrote. Is Job’s implication here a fair one?

CG: We never abandoned Apple. Apple now seems to be abandoning at least one aspect of our product line right now. No, we never abandoned them. We’ve always ported our apps simultaneously to both platforms. There have been times when Apple has changed its strategy on hardware or on operating systems that didn’t meet our product cycle, so there have been periods of maybe six months where we didn’t keep up with their latest release. But that’s our own business model; we can only afford to re-implement our products at a certain rate.

We have never, ever abandoned Apple and we don’t want to abandon them today. Everything you read in our new ad is true. I myself own probably between 8 and 10 Macintoshes — both laptops and work stations. I don’t buy PCs, I buy Macs.

JP: Why isn’t Flash an open standard?

CG: It is. What are you talking about?

JP: Flash is proprietary to Adobe. It’s not Open Source. Let me rephrase: Why isn’t Flash an open standard overseen by an open-standards body?

CG: As soon as Adobe acquired Macromedia, we openly published the SWF format and removed the requirement that you have a license to use it….No, we haven’t put Flash out to a standards body yet as we have with PDF and Postscript. But I wouldn’t be shocked if we do someday when it makes sense.

With the standards that we have built and made open to the entire world, we’ve tried our best to get them to the point where they’re mature enough so that we’re not doing design by committee. If you look at the amount of time it will take HTML5 to become a reasonably solid platform, it’s going to take a long time because there are an awful lot of vested interests trying to influence its development.

JP: Any thoughts on Steve Jobs’s claim that “Flash was created during the PC era–for PCs and mice”?

CG: What do you think an iPhone is? It’s a personal computer.

JP: One last question. What do you think of the iPad?

CG: I think it’s a neat thing. I personally have no particular interest in it; I’d much rather have a general-purpose computer. I think there’s definitely a market for that kind of product. We certainly know a lot of people that want to produce content for it and a large percentage of them are disappointed that they’re going to have to do that separately from the way they produce content for all the other devices they support.

PREVIOUSLY:

• Adobe to Apple: You Wanna Hug It Out? Let’s Hug It Out!
• Good Luck With That Alleged Antitrust Complaint Against Apple, Adobe…
• Adobe CTO: Flash on iPhone Doesn’t Suck and Apple Knows It
• A Possible Apple Antitrust Inquiry? Nothing to See Here…
• Microsoft on Flash: What Steve Said
• Adobe: We’re Done With You Too, Apple
• Apple to Adobe: I Know You Are, but What Am I?
• So Much for Flash on the iPhone
• Adobe: Flash for Mac Is Getting Better–Really!

So begins a research note from RBC analyst Mike Abramsky that’s a good representation of the market’s reaction to Apple’s latest blow-the-roof-off-the-sucker quarter.

The 90 percent spike in profit the company reported yesterday, which surpassed already lofty expectations, inspired a rush of analyst notes this morning, all of them enthusiastic, all of them containing raised target prices on Apple’s (AAPL) stock (Eric Savitz at Barron’s has the full run down).

Abramsky, for example, raised his target price to $350 from $275, and he wasn’t the only one. Chris Whitmore at Deutsche Bank did the same, saying, “Apple continues to show both impressive growth and profitability and is well positioned to benefit from the confluence of three major product refreshes beginning in the June quarter, namely: iPad, Macs and iPhone refresh expected this summer.”

Over at Broadpoint.AmTech, Brian Marshall raised his target to $320 for similar reasons: “Apple continues to gain share across its major product lines (iPhones, Macs and iPods),” he wrote in a research note. “Its business model is becoming stronger over time as well as the company benefits from an increasing richness of its revenue mix and when ASP cuts come, customers typically migrate up the ‘SKU stack’ and buy higher priced items with higher associated gross margins.”

And at Piper Jaffray, analyst Gene Munster dismissed Apple’s comically conservative guidance, upping his target to $323 from $299. Apple’s June quarter will be an encore to the one it just delivered, he said in a research note.

With a new iPhone waiting in the wings and the much ballyhooed iPad having just arrived at market, it does seem that way, doesn’t it? Consider this from Munster:

“Apple indicated that early iPad sales exceeded company expectations, which we see as a positive indication for the long-term investment prospects of the iPad segment. As the value proposition clarifies, we believe investors will begin to see the iPad as a Mac for the masses. In other words, the iPad is a lower-ASP device that accomplishes many everyday computing tasks as well as a Mac; as such, we believe the addressable market for the iPad is larger than many investors believe.”

If this proves true, expect Apple to deliver another of its “best quarters ever” when it next reports earnings.

At $258.14, Apple shares are trading up 5.54 percent today.

Yesterday, BoomTown interviewed Hollywood producer Lloyd Braun (pictured here) onstage in Las Vegas at the National Association of Broadcasters annual confab about the future of television in the digital age.

While broadcasters finally seem to finally be embracing the fact that everything in their world is going digital and that business models are fast-changing, it’s still a long and complicated road forward.

Braun, as well as many other longtime entertainment execs, are trying to forge the gap, by trying to operate in both worlds. While his stint as the top media exec at Yahoo (YHOO) did not go so well, he kept on the rocky digital content path, even as he continued to produce more traditional fare for television.

So last week, I motored down to Long Beach to the set of a very elaborate pilot for an action drama that he is shooting for NBC called “The Cape,” to talk about television, as well the latest Web site he launched in partnership with Microsoft’s MSN.

Called “Glo,” the Web site is a highly stylized women’s lifestyle destination in partnership with magazine giant Hachette Filipacchi Media U.S.

Glo is the second dramatic site designed, created and run by the Los Angeles-based BermanBraun, which is headed by Braun and his business partner, Gail Berman.

The first was an innovative celebrity site, Wonderwall, whose consumer engagement metrics have pleased advertisers so much that MSN ordered up another one aimed at fashion, decor, relationships and beauty.

Here’s the video of an interview I did with Braun, as well as MSN U.S. head Scott Moore, in the bowels of the Queen Mary’s engine room, where “The Cape” is being shot:

]]> http://allthingsd.com/20100413/digital-bromance-producer-lloyd-braun-and-msns-scott-moore-talk-about-online-content-on-a-tv-set/feed/ 1 http://allthingsd.com/20100408/xmarks-the-spot-kapor-says-start-up-can-find-buried-treasure-in-bookmarks-for-advertisers/ http://allthingsd.com/20100408/xmarks-the-spot-kapor-says-start-up-can-find-buried-treasure-in-bookmarks-for-advertisers/#comments Thu, 08 Apr 2010 07:19:41 +0000 Kara Swisher http://kara.allthingsd.com/?p=26260

Social bookmarking start-up Xmarks, which has been growing its user base and bookmarked Web addresses strongly, launched a new advertising product today called SearchBoost, which it hopes will finally give it a viable business model.

Using a tool that displays user ranking and review information from the free synching service, Xmarks Chairman Mitch Kapor said in an interview with BoomTown that the ad offering essentially “decorates” a paid search ad, thereby boosting click-through rates by 15 percent.

Xmarks, which was founded in 2006 and offers a browser widget to record bookmarking information, will also give advertisers additional analytics about their ads, as well as organic search results.

With detailed usage data on over one billion bookmarks rated and reviewed by users, this information will be attached to the end of search results from both Google (GOOG) and Microsoft (MSFT) Bing on Mozilla’s Firefox and soon, on Microsoft’s Internet Explorer and Google’s Chrome browsers.

Xmarks said the service will cost from $29 to $99 a month for advertisers and that it will also offer more elaborate plans.

In the interview, Kapor said the company is simply enabling the addition of existing and valuable information already gleaned from its millions of users and giving advertisers the ability to show it off.

Different colors–which you can see below, with orange for paid and blue for organic results–is used to distinguish between them.

“These reviews show up where they show up and advertisers can’t buy a ranking or a rating,” said Kapor. “If advertisers want to decorate their ads to increase their conversions by showing what users think, that’s a good thing.”

Added Xmarks CEO James Joaquin: “We are allowing advertisers a tool that is already reflecting what the user base is saying is valuable…the real benefit is for brands that already have a high rank to declare that.”

Launching its business model, Kapor added, after growing its user base to four million active users, is the next logical step for Xmarks.

“This is the effort to move from that category to the category of sustainable enterprises,” he said. “And that is certainly a good thing.”

Here is Joaquin’s entire blog post on the move:

Today’s a big day at Xmarks. We’ve launched a new service for search marketers called SearchBoost, designed to increase the performance of paid search ads by displaying relevant Xmarks ratings and reviews next to sponsored links on Google and Bing search result pages. SearchBoost is a premium service with pricing starting at $29 per month.

SearchBoost is the primary business model for Xmarks, allowing us to keep our browser synchronization service completely free. While we obviously devote resources to this business, we’ve also recently launched Xmarks for Chrome and a new Tab Sync feature for Firefox. You can count on us to continue innovating and improving our sync products.

SearchBoost is also a natural extension of our vision for Smarter Search: displaying crowd-sourced ratings and reviews to help users identify the highest quality results on their search page. A small but vocal minority have told us (and may tell us again on this blog ;-) that they’re not interested in this feature. That’s OK with us: we’ve made it very simple to turn the Smarter Search feature off in Xmarks Settings. Many other users have sent us kudos for this important enhancement to web search.

We hope you’ll find ratings and reviews on ads as useful as they are on organic search results. It’s important to note that Xmarks ratings and reviews are completely crowd-sourced from our users. Advertisers cannot pay $ to improve ratings or alter reviews.

Finally, quick shout-outs to our chairman & co-founder Mitch Kapor who has kept us focused on his orginal vision of aggregating bookmarks to improve web search, and Xmarks advisor Eric Ries who helped us think through the early concept stage of what is now SearchBoost.

]]> http://allthingsd.com/20100408/xmarks-the-spot-kapor-says-start-up-can-find-buried-treasure-in-bookmarks-for-advertisers/feed/ 0 http://allthingsd.com/20100323/a-deal-on-a-haircut-thats-what-friends-are-for/ http://allthingsd.com/20100323/a-deal-on-a-haircut-thats-what-friends-are-for/#comments Tue, 23 Mar 2010 21:19:29 +0000 Katherine Boehret http://solution.allthingsd.com/?p=1128

Last week, I went to my hair salon and paid half of what I usually spend because of a deal that I—and more than 2,000 other people—bought online two months earlier. When I bought the deal, I suggested it (via email) to two friends, who each bought it and I was rewarded with two $10 credits. I used those to buy a deal at a local restaurant that gave me $40 toward food and drink for just $20. And the cycle continues.

Welcome to the world of group buying, Internet style, where the power of the Web can be utilized to offer surprisingly large discounts to a sizable number of people for things they actually want to buy.

Many of the group-buying sites work by negotiating deals with local merchants and promising to deliver crowds in exchange for discounts. The sites differ from other buying sites in how they work and what they do to reward users who share deals.

Several of these group-buying sites are available nationwide, mostly in big cities. I focused on Groupon.com, which is available in 42 cities, and LivingSocial.com, which works in 13 cities. Both are popular in Washington, D.C., where I live, though others may be more well-known in your area. If group-buying sites aren’t popular near you yet, they may soon start working there thanks to business models that allow them to work in all sorts of locations.

Other sites offer similar or slightly different selling techniques. Woot.com, a pioneer of group buying on the Web, started in 2004 by specializing in flash sales, selling a different item each day for just 24 hours or until it sells out. The site evolved from a wholesale distribution company and is known for its focus on selling technology gadgets. Another site called Tippr.com works in Seattle (not D.C., where I live, so I can’t yet use it) and uses a patented technology that makes discounts bigger as more people join a deal. New York-based Gilt.com and Ideeli.com focus on selling high fashion items at less expensive prices and can offer deals that last longer than a day.

Here’s how sites like Groupon and LivingSocial work: They ask retailers in a city to offer steep discounts ranging from around 50% to 90% off on things that would appeal to locals. Examples include 79% off spa services, 54% off at paintball, 57% off at a restaurant with Malaysian cuisine and half off for doggie day care. The site lists one retailer a day and takes a portion of the revenue generated by a deal. (Groupon usually takes half while LivingSocial takes between 30% to 50% depending on the arrangement with the merchant.)

Some sites, like Groupon, will only make the deal official if a certain number of people purchase it, while LivingSocial and others offer the deal regardless of how many people buy it.

People can be notified of these deals by signing up for daily emails from the site or by checking social networks like Twitter and Facebook. They may then purchase deals by logging onto the group-buying site and printing vouchers from the site. With most sites, you’re buying a deal for at least half off the real cost (i.e. paying $20 for $40 at a restaurant).

Both Groupon and LivingSocial will work with iPhone apps. Once downloaded, users can enter their login credentials into these apps so they can access that account’s purchased deals, allowing them to show the coupon on the iPhone at the establishment to get the deal.

Each deal comes with restrictions. For example, most of them expire within about six months or so (the date is printed on the coupon voucher and saved in your online account so you don’t forget). Some deals restrict the number of coupons per person, like the way my salon’s deal restricted people from buying more than three coupons; if three were purchased, they all had to be used in the same visit.

Since these sites work best when many people use them, they use a rewards system to motivate people to tell their friends about the deals they’ve bought. If someone shares Groupon with a friend using a special referral Web link, that friend must sign up for the site within 72 hours of clicking on the link. Then, when that person makes a purchase, the original sharer gets a kickback of $10 in Groupon credit to use toward future deals. This won’t work if the invitee isn’t a first-time Groupon customer.

LivingSocial’s rewards system works a little differently. If you buy a deal and share it with friends using a special Web link, you can get the deal free of charge if three friends use that link to sign up for the site and buy the deal. Separate from that, LivingSocial encourages users to invite friends to simply sign up for the site. If the invitee signs up, he or she gets $5 toward deals. If he or she purchases a deal, the original inviter also gets $5 toward deals.

Both Groupon and LivingSocial put a lot of emphasis on choosing deals that will serve as city guides to the hip and fun activities going on around town. Groupon divides some of its 42 cities into areas: For example, Washington, D.C., is divided into The District, Northern Virginia and Montgomery County—three unique zones that locals will appreciate seeing listed separately.

Not every deal is successful on group-buying sites. Groupon’s idea of selling tours of Gary, Ind., shortly after Michael Jackson’s death didn’t convince enough buyers to want to visit the King of Pop’s hometown. LivingSocial admits that some of its deals were too specific to be popular, like a dog-training class that didn’t fetch enough buyers. The site’s CEO Tim O’Shaughnessy says there might not have been enough people with new dogs at the time of the deal.

If you haven’t tried one of the many group-buying Web sites and you live in an area where they’re available, you’ll want to check them out—or find someone who already uses them to invite you so you can both get rewarded.

Edited by Walter S. Mossberg.

Write to Katherine Boehret at mossbergsolution@wsj.com

Buying in Numbers

With most group-buying Web sites, getting more people to buy into the deal gets you a better discount.

My colleagues are lapping the last one up, with good reason: The OK Go are fun to write about, because they make cool videos and because lead singer Damian Kulash is very quotable when he talks about the state of the music business and his band’s relationship with EMI.

For instance, here’s a stinging part of his exit interview with New York Magazine today:

Q: What other problems were you having with EMI?
A: ?The issue is that they just don’t have any money. The reason a band signs with a label is because they can provide start-up capital, and their business model has sort of collapsed. There was lots of little bones of contention, like when there were chances for us to promote things and they just didn’t have the money to do so. It was a lot easier to be generating the budget ourselves or through corporate partners.

EMI has issued a boilerplate quote wishing the band success–it’s going to create its own label–and leaving it at that.

And EMI does have real money problems. In part because everyone who sells music right now has money problems and in part because private equity fund Terra Firma paid too much and took on too much debt when it bought the label three years ago.

But here’s the thing. If EMI’s executives allowed themselves to speak candidly, they would likely point out that while the OK Go made great videos, it didn’t seem to make music that many people wanted to buy.

Soundscan says the band has sold all of 500,000 albums in the U.S., both in physical and digital form, in its three-album tenure at EMI. That’s 488,608, to be exact. Plus another 25,000 single tracks.

That’s not awful. But it’s not the kind of sales that would inspire a big label to spend big money promoting an act. Even when the industry’s business model was still intact.

But the band really does make nice videos that people like watching on Google’s (GOOG) YouTube. If it can figure out how to turn these into dollars, it’s all set.

OK Go–This Too Shall Pass from OK Go on Vimeo.

This week: We took a coffee break (and made an interview and video) with Mehdi Maghsoodnia, CEO of BookRenter, a company that claims to be “numero uno” in online textbook rentals, a bone of contention between it and larger competitor Chegg.

Who: Mehdi Maghsoodnia

What: Chief Executive Officer

Why: BookRenter is in a battle with competitor Chegg. Mehdi freely admits that Chegg holds more market share, but says his model has the staying power to outlast it. Presumably, Chegg begs to differ.

Where: bookrenter.com (Web site); @bookrenter (Twitter); Campbell, Calif. (analog place)

Who else: BookRenter is in a battle for the hearts and minds of college students everywhere. On one side, it competes with college bookstores, Amazon (AMZN), and a trial-rental program from Barnes & Noble (BKS). Once a customer goes the way of rental rather than purchase, BookRenter has to fight with Chegg, the textbook service now led by longtime Silicon Valley exec Dan Rosensweig and whose eggshell has been stuffed with $144 million in venture funding.

Five Stats You Won’t Find in His Facebook Profile

Worst Job Ever: I used to sweep the grounds for a hotel in San Francisco, called Roberts at the Beach Motel (it’s still there). It was right next to the zoo, and the wind would blow all the dust, sand and junk into the hotel, and my job was just to sweep the floor. That was not at all fun.

Geek Crush: I’m a fanatic in terms of business models, and I track the careers of people I admire. I keep track of Maynard Webb, who used to be the COO at eBay (EBAY). I track people with clever minds and clever ideas.

Gadget of the Moment: I love my Apple (AAPL) iPhone–for the first time recently I traveled without my laptop. It was great. The app environment is fascinating. If you look on my phone, the apps are in two distinct sections. One is all the games that keep my kids busy, and the second category is functional things for me. News feeders, banking…and I watch all kinds of videos on the TED app when I’m traveling.

International Businessman of Mystery: I was born in Iran. Then, we moved to London. I traveled a lot and lived all over. I realized early on that a consequence of that is I’m culturally very unmarketable. It’s pretty impossible to market to me. Which, by definition, means I’m not the greatest marketer, because I don’t know what makes people want to buy things.

It’s All in the Family: I sit on the board of Nature Air, an airline in Costa Rica. It’s the first regional green airline, and it’s the family business.

Bio in 140 Characters

Mehdi grew up global, but landed in Silicon Valley. He spent time as a VC then moved to head CafePress. Now he’s CEO at BookRenter.

The Five Questions

Let’s get right into this. How are you guys different from Chegg?

When I was at CafePress, we were the biggest online t-shirt retailer in the world. We spent a lot of time getting shirts in from China, organizing them, putting them in bins, tracking them, printing them and so on. I observed how much of our management bandwidth and resources went into back-end fulfillment as a retailer. I came out of CafePress and was sitting on the venture side when I saw Chegg and BookRenter. I said, “These are two teams satisfying specific demands out there, but with totally different business models.”

Chegg was trying to do everything–taking on warehousing, buying the books, etc. There were many companies doing that, by the way. Amazon among them. The BookRenter team was clever, and they said, “Let’s flip this on its head.” Investing in a book as stock is a losing venture, because your individual investment on the book loses value over time. You also lose money on leasing the warehouse, forklifts, all of it.

At BookRenter, we have all kinds of partnerships that handle those logistics, including recent partnerships with school bookstores themselves. We are in a cyclical business, where maybe four months out of the year we are handling books, and, in the other eight, the books are in the students’ hands. Our costs adjust within those cycles as quickly as changes happen.

How do you track and price all the books when you don’t own them?

So, most of the business is done today on an inventory capitalization model. That is to say, you have a position on what books you have. Everyone buys books and then has to find a match for that book in a rental relationship.

BookRenter takes a very different approach. Our software system creates rental relationships in real time, which means it figures out prices and availability for every new rental. If you come to us and say you want to rent a biology book, the system turns around and queries our suppliers and decides who will be able to get us that book at the lowest overall cost. Our cost algorithm is complex and takes into account things like the reliability of the provider for meeting its commitment on that book.

Once the determination has been made, only then do we take a position on that book and add it to inventory. I can offer as many books as [Chegg] or anyone else, because I’m offering that book virtually. I only pay when I have a paying customer.

You’ve got a lot to say about how you are going to gain on Chegg. Is this really a market that is worth the fight?

Oh yes, the market is growing very fast. We saw 300 percent growth year over year in January. The textbook business is a $9-billion-a-year industry. Someday we hope that a third of that is rentals. The value proposition is there. Renting is cheaper than buying. It’s even cheaper than buying used. Eighteen months from now, we are still going to be a smaller player, but we have the longevity.

Do you do this for the competition, or is it something else that drives you?

I’ll be honest. The best possible outcome for us is that Chegg stays prosperous. Both of us are fighting the same battle in terms of converting some of the buying market to a renting market. So, we are all in the same market development boat. But what I really like about this is the process. I see our business as a 0.9 version, so there are so many things we can still work on.

Organizationally and market-wise, it’s a very exciting thing to design a system for. You have to balance the needs of all kinds of partners. It’s like playing multidimensional chess with very good players. It’s just fun. Also, the growth factor is great. If I had to solve these problems in a business that wasn’t growing, that’s not a lot of fun.

I’ve been there man, that’s deadly. You put a lot of intellectual work into it and you can’t get anyone to care.

As a current student, I’ve got to ask: How have you dealt with undoubtedly the biggest customer problem–highlighting?

[Laughs] You know, that was a real issue early on. Our early policy was no highlighting at all, of any kind. It turned out that students didn’t seem to mind [the highlighting], and in fact many liked it. It was like someone had already done the work of showing them the important parts of the book. Today, we will only charge for damage if there’s been a real issue, like, someone spilled water all over the book and really ruined it.

The In Living Color Interview

]]> http://allthingsd.com/20100305/almost-famous-mehdi-maghsoodnia-of-bookrenter/feed/ 0 http://allthingsd.com/20100301/boomtown-terrorizes-beet-tv-online-video-roundtable-video-of-that-and-more-of-course/ http://allthingsd.com/20100301/boomtown-terrorizes-beet-tv-online-video-roundtable-video-of-that-and-more-of-course/#comments Mon, 01 Mar 2010 19:15:11 +0000 Kara Swisher http://kara.allthingsd.com/?p=24840

Here’s a whole lot of video from a panel discussion about the future of online video that BoomTown moderated last week in San Francisco.

Held at the offices of CBS (CBS) Interactive, it was organized by Andy Plesser, the kingpin of Beet.TV, the online video news site. Plesser moderated the second half of the two-hour (!!!) session, and I did the first hour.

One tweet of the event noted: “The Beet.TV just started and @karaswisher is already terrorizing the panelists.”

I beg to differ! I was strafing the giant panel in order to tame it!

The group assembled included Gregg Colvin of News Corp. (NWS) digital unit Fox Interactive, Karin Gilford of Comcast (CMCSA), Revision3′s Jim Louderback, Anthony Soohoo of CBS Interactive, Adobe (ADBE) exec Jennifer Taylor, and many, many others.

Topics included advertising, creative, innovative business models and much more about the online video space.

Here’s the full video, as well as an interview with me about my bad video practices (yes, I look exhausted, but the panel did last forever).

And I added a third video, which is a part of the longer one, in which I asked what devices or companies the panelists thought were the most promising.

The answer, for the most part: Those from Apple (AAPL), including its iPhone, iPod and, even before launch, iPad. Not surprisingly, however, given the Flash feud, Adobe’s Taylor picked the Google (GOOG) Nexus One mobile phone.

Here are the videos:

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