Co.mments, which provides a service to track conversations taking place in social media, will close shop by the end of the week. The company has been online for one month shy of 3 years.

Seems like the comment tracking market is rather crowded. And perhaps difficult to monetize. I also think the closure is a sign of a growing trend as more and more venture capital backed Web 2.0 companies fall short of profitability… and their investors lose patience..

Source: Marshall Kirkpatrick, “Co.mments Bites the Dust,” ReadWriteWeb, January 7, 2008

PlaySpan, a marketplace and micro-transaction payment system for virtual goods in over 200 different video games, has raised $16.8 million in series B funding from existing investors Easton Capital Group, Menlo Ventures, Novel TMT Ventures, and STIC.

PlaySpan’s investors have reason to be impressed. Over $50 million worth of transactions have gone through PlaySpan this year, and the company is generating revenues in the millions of dollars.

Source: Erick Schonfeld, “PlaySpan Raises $16.8 Million For Virtual-Goods Marketplace”, TechCrunch, November 2 2008

Let this be a lesson to all of you who make millions online and then decide to start a hedge fund. Don’t take on too much debt!

Just ask PayPal founder Peter Thiel, whose hedge fund firm Clarium Capital Management LLC, has seen its Clarium LP fund incurring a 40 percent loss in the three months to October 2008.

Clarium’s approach has essentially been to borrow money in order to invest it. This can give investors huge returns when times are good… but when times aren’t so good, it can be disastrous. As at October 31, Clarium had $4.40 in borrowings for every $1 in equity capital. Apparently, the fund is still in good health, but investors are understandably becoming nervous…

Peter Thiel started Clarium after selling PayPal to EBay Inc. for $1.5 billion in 2002.

Source: Henry Blodget, “PayPal Founder Peter Thiel’s Hedge Fund Blows Up,” Silicon Alley Insider, November 6, 2008

Legendary Silicon Valley venture capitalist John Doerr, polled executives from the companies his firm, Kleiner Perkins, has funded, and came up with 10 tips for new and struggling tech startups in the current economic environment:

1. Act now and act fast, including, if possible, raising more capital.
2. Whatever tough decisions you make, be careful to preserve the vital core of the business.
3. Save or raise 18 months or more of cash.
4. Defer capital expenditures. For example, instead of buying more PCs or more software, use web-based applications.
5. Negotiate with suppliers and vendors to get more favorable (longer) payment terms.
6. Get everyone in the company selling - not just your products and services, but your ideas and the company itself. Focus on increasing revenues.
7. Replace cash-based bonuses with equity-based bonuses. Consider a voluntary salary deduction program to keep staff on.
8. Invest cash in a safe place e.g. Treasury bonds.
9. Monitor indicators of whether and the extent to which revenues are coming in. Ideally, you’ll want indicators that tell you whether you’ll be getting revenues or not 90 days in advance.
10. Regularly communicate with staff, investors, and customers.

Source: Jason Kincaid, “VCs Speak On The Economic Downturn: Batten Down the Hatches”, TechCrunch, October 29, 2008

Last Tuesday, Angelsoft released version 3.0 of its angel funding platform, which aims to connect startup entrepreneurs with over 400 angel investment groups and 11,000 investors from around the world.

To avoid investors being overwhelmed with the 2,000 monthly start up applications that go through Angelsoft, Version 3.0 lets entrepreneurs present their business idea to three investment groups at a time. Meanwhile Angelsoft 3.0 also has a ‘Digg-like’ feature which allows investors to rate existing portfolio companies.

On the basis that highly rated companies will rise to the top of the list, this allows second and third-round investors to focus on the more viable companies. Startups cannot, however, rate investors.

For all the apparent popularity and functionality of the platform, few deals have actually been completed via Angelsoft. Evidently, only 1.32 percent of startups have been funded and just 24.72 percent have been screened using the site.

Source: Don Reisinger, “Angelsoft 3.0 Launches With 400 Angel Investment Groups In Tow”, TechCrunch, September 2, 2008, Angelsoft

You’ve probably heard Internet marketers and consumers alike rave about online video.

Internet marketers because they have been enjoying the benefits of higher conversions from showing videos, along with the viral effect of having their videos seen and shared on sites such as YouTube.

Consumers because they enjoy being able to view video and download content from the Internet.

But the companies hosting much of that video content are, frankly, struggling to make a buck. Well, enough of a buck, anyway.

Witness the following:

• Investors have poured an estimated $8 billion into U.S. online video companies - including Google’s $1.65 billion purchase of YouTube and several smaller deals such as Sony’s acquisition of Grouper/Crackle for $65 million.
• Yet YouTube, which commands a greater than 50 percent share of all video views, will generate just $200 million in ad sales in 2008, and none of the online video companies is profitable.
• And according to YouTube’s own sales manager, Brian Cusack, it has only been able to sell ads against less than 3 percent of the total videos on the YouTube site.

Will the industry implode? Don’t bet on it. While it may take some trial and error before online video companies work out a viable business model - and some companies WILL implode in the process - online video is here to stay.

And that’s because of all those marketers and, more importantly, all those CONSUMERS who love online video. That’s a hungry market folks. The web video companies just need to work out how to feed ‘em without starving in the process.

Sources: Michael Learmonth, “The Cost Of Online Video: $8 Billion And Counting”, Silicon Alley Insider, July 11, 2008, Michael Learmonth, “Is The Web Video Bubble Bursting This Year? Or In 2009?”, Silicon Alley Insider, July 23, 2008, Michael Learmonth, “YouTube Exec: We’re Selling Ads Against ‘Less Than 3%’ Of Our Videos”, Silicon Alley Insider, July 22, 2008

Believe it or not, not all Google touches turns to gold. And despite years of success, Microsoft has faltered too.

But let’s not exaggerate - both companies posted respectable earnings results. They just missed Wall Street’s profit expectations. Unfortunately, doing so meant they suffered bruising stock price declines.

Google reported strong quarterly growth, achieving $3.87 billion in revenue, excluding commissions paid to advertising partners. However, its expenses were higher than expected, and on top of lower than expected interest income, it missed Wall Street’s earnings per share forecasts. As a result, investors drove down its share price by over 7 percent to $493 a share in after-hours trading on Thursday.

Microsoft, in record earnings, achieved $60 billion in revenue for the 2007-8 fiscal year. But it too missed Wall Street’s profit expectations, causing its stock to drop by more than 6 percent in after-hours trading.

Let’s face it. Wall Street is kinda nervous right now and even the slightest disappointment seems to send the bears into panic.

Source: Brad Stone, “In Surprise, 2 Tech Titans Disappoint”, The New York Times, July 18, 2008

If Carl C. Icahn seizes control of the board of Yahoo, Microsoft’s purchase of the No. 2 Internet search company could be back on the agenda.

In co-ordinated statements released to the media over the weekend and on Monday respectively, Mr Icahn and Microsoft signaled that the companies would renew acquisition talks if Icahn wins his proxy fight and takes control of the board.

So what’s standing in Icahn’s way? Yahoo’s largest investors need to vote on whom they think should remain on, or join, the board. Should the vote go Icahn’s way the current board will be replaced by Mr Icahn and his supporters, while Yahoo-founder and current CEO, Jerry Yang, will be out the door.

Microsoft’s interest in buying Yahoo - or simply its search technology - coupled with its plans to purchase semantic search engine Powerset, seem only to highlight the company’s frustration with being a distant third in both the search and search advertising markets.

Source: Miguel Helft, “Microsoft Is Icahn’s Ally in Pursuit of Yahoo”, The New York Times, July 8, 2008