"?> Davis Freeberg's Digital Connection » Web 2.0 http://davisfreeberg.com Fri, 23 Sep 2011 19:32:38 +0000 en hourly 1 http://wordpress.org/?v=3.3.1 At Midnight Hour – Vois Loses Their Voice http://davisfreeberg.com/2009/07/09/at-midnight-hour-vois-loses-their-voice/ http://davisfreeberg.com/2009/07/09/at-midnight-hour-vois-loses-their-voice/#comments Fri, 10 Jul 2009 07:29:17 +0000 Davis http://davisfreeberg.com/?p=1453 More often then not, companies like talking with bloggers because we give free publicity, but if you give enough interviews, then sooner or later you’re bound to step on a land mine.

After having spent a great deal of time researching Vois, I had a lot of questions with no answers, so I reached out to Herbert Tabin asking for an interview. Unfortunately, Mr. Tabin wasn’t interested, but Vois Co-founder Craig Agranoff was happy to chat in public.

To be fair to Mr. Agranoff, he came into the podcast expecting a cupcake interview on web 2.0 topics. Unfortunately, businesses don’t tend to like talking with critics, so I asked them to come on the air and then ambushed him with questions that I knew would be difficult to answer. Once Mr. Agranoff realized that I knew a little bit too much about their arrangements he cut the conversation short. While I can understand his reluctance to finish the conversation, I do believe that their are still many questions that haven’t been answered. As a public company, Vois should be more transparent. If Mr. Agranoff, Tabin or Schultheis want to come back on the show and tell their side of the story, I’d still love to have you on to finish the podcast.

A couple of things that might help in better understanding the questions and answers. When it comes to the market cap, Agranoff was correct. It closed today just shy of $13 million. I had assumed that the split had already taken place because there were two days where you would not have been entitled to the split if you would have purchased shares.

The other piece of information that might help is a little bit of background on Joel San Antonio. Before Vois went public, the shell that they used was named Medstrong International Corp. Mr. San Antonio was a Director for Medstrong and would have played a crucial role in negotiating the merger.

He is also the co-founder of Jicka.com, a Craigslist competitor that Agranoff, Schultheis and Tabin are also involved in. Jicka is a separate entity and isn’t publicly traded, but one of the trends that I noticed with some of Tabin and Schultheis’ former companies is that they liked to buy a lot of businesses and later respin them onto the public. Since San Antonio would have had to give up equity when he gave up Medstrong, this sort of arrangement looks suspicious.

Here is a bit more on San Antonio’s background,

San Antonio was the CEO of Warrantech, a rebate firm that was sued by AIG for their role in a $500 million toxic bet. According to USAToday,

“AIG paid its partners — the third-party administrators such as MBA and Warrantech, as well as credit unions and car dealers who sold the warranties and serviced the vehicles — based on how many contracts they processed rather than how the warranties performed. As a result, AIG suspected, some dealers packaged warranties with auto “lemons,” so customers could rehabilitate the cars at its expense.”

AIG wasn’t the only one upset, certain underwriters at Lloyds of London went so far as to sue Warrantech, alleging that they had been paying out phantom warranties without documentation.

“Underwriters asserts causes of action against Warrantech for fraud and negligent misrepresentation, alleging that they are subrogated to all rights Houston General may have to seek damages from defendants concerning claims wrongfully submitted and paid under the insurance policies. Underwriters also seeks to recover for spoilation, alleging that Warrantech destroyed certain evidence during the course of the arbitration proceeding.”

In 2004, the company was forced to restate earnings after an investigation by the SEC

SearchHelp Inc. is another dodgy publicly traded company that San Antonio has served as a Director for. Jeffrey Supinsky, the “head of business and development” is a former trader who was barred by the NASD.

I could go on and on, but don’t want to lose focus on Vois. For now, I’ll just have to be content with keeping an eye on this Craigslist killer.

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Vois.com – Golden Melody or Laryngitis? http://davisfreeberg.com/2009/07/09/voiscom-golden-melody-or-laryngitis/ http://davisfreeberg.com/2009/07/09/voiscom-golden-melody-or-laryngitis/#comments Thu, 09 Jul 2009 11:42:52 +0000 Davis http://davisfreeberg.com/?p=1441 MoneyOver the years, we’ve seen stock promoters use spam and junk faxes as a way to hype their securities and while these methods are still in use today, they lack a certain amount of credibility that most investors are looking for. With the masses growing increasingly numb to these tactics, the wolves of Wall St. have learned a new trick and have managed to hijack social media as a way to tout their shady opportunities.

For the most part, high profile bloggers have viewed these fly by night companies with the appropriate degree of skepticism, but over the last year and a half, one questionable company has managed to infiltrate the tech elite.

Vois.com’s first big splash on the innerweb occurred in November 2007, after TechCrunch highlighted the company as a publicly traded social networking site. In a quick post on the company they wrote,

“I can’t see VOIS winning any awards for its service, but those with a stock market fetish looking to play around with some investments in this space, VOIS gives you that option.”

Ironically, a mere month and a half later, Vois actually won Mashable’s Open Web Awards contest for best photo sharing site and finished at a strong 2nd to Facebook in the best large social network category. The win was so surprising that Mashable labled them a dark horse candidate.

In February of 2008, Mashable interviewed Vois Co-Founder Craig Agranoff and published another glowing review highlighting Vois’ efforts at raising $1 million. In the article, they wrote,

“Vois has gone in a new direction, giving its own users a piece of the pie, and it seems to be working out very well for the company so far.”

Maybe for the founders, but not so much for the other Vois shareholders. Mashable may have interpreted the $1 million in financing as a sign of Vois’ success, but the reality was much darker. Of the $950,325 that they raised, $95,033 went to the broker who did the placement. After they got their 10% commission, another $328,000 went to two former Directors and unnamed “consultants” that needed to be repaid because like today, Vois was in default on their debt.

If you had listened to the hype, you would have thought that Vois was the next Facebook, but behind the curtain, you’ll find plenty of skeletons waiting in their closet. Vois may envision their site as the new voice of social sourcing, but all I’m hearing is static.

Back To The Future

In order to understand the secrets locked inside of Vois, you must take a critical look at the footprints of its founders. While they may try to cast themselves as successful entrepreneurs, a closer inspection will reveal that they play the role of the villain in this tragedy.

To fully understand the events that led up to the creation of Vois, we’ll need to jump into the machine to 1985.

Gary Schultheis – President and CEO

After one year at the State University of New York at Farmingdale, a young Gary Schultheis left school and took a job with Airport Express International. He would continue working there until 1992.

During the 1980′s, Air Express International was a microcap shipping company. Their one claim to fame is that they tangled with the Lucchese crime family during the late 80′s. According to a 1986 RICO indictment against members of the family, Air Express management was being squeezed by the mob, in exchange for peace with their labor unions.

The crime family was interested enough in the corporate comings and goings, that they even went as far as to try and block a merger between Air Express and another air freight company that was also being shaken down. While it’s hard to blame Air Express for being a victim, one does have to wonder how they found themselves in this predicament to begin with. What did they owe the mob to make them think that they could try and get away with extortion? I don’t have the answers, but I suspect that the story goes much deeper than this.

After Schultheis left Air Express in 92′, it’s not exactly clear what happened to him for the next two years. Despite my best efforts, I wasn’t able to ascertain his whereabouts during this period. Not only are these details noticeably absent from Vois’ regulatory filings, but they also seem to have been suspiciously left out of other filings as well. There could be a simple explanation for this black hole, but I believe that investors deserve a full and complete bio from publicly traded CEOs.

In March 1994, Schultheis would show up on the radar again, this time as the President of a financial relations firm named Wall Street Enterprises (aka Wall St. Associates.) We don’t know much about Schultheis’ early years at the firm, but over the next two years, he would lay the groundwork for what would later become a lynchpin for future stock promotions.

Herbert Tabin – Secretary, Senior Vice President, Corporate Development and Director

In 1989, Vois Co-founder Herbert Tabin graduated from The State University of New York at Oneonta. In Vois’ SEC filings, Tabin doesn’t reveal much in the way of details, about where he began his career. Fortunately, he does tell investors that he worked for the American Stock Exchange and “three New York-based stock brokerage firms”, over a span of three years.

By doing a bit of digging, I was able to identify the three brokerage firms as Stratton Oakmont, Continental Broker-Dealer and Kensington Wells.

Stratton may not be well known outside of the finance community, but is a legend on Wall St. Before it was shut down by regulators, the company was the poster child for how boiler rooms operate. In fact, Martin Scorsese is currently making a big budget film about what happened at the firm, during the time that Tabin worked there.

Even if you can look past the wild tales of “shaving female sales assistants’ heads, tossing midgets and Ethiopian hookers, one cannot ignore this culture of deceit where Mr. Tabin received his formal Wall St. training.

The SEC consent judgment against Stratton describes exactly what this culture was like from 1989 – 1991,

“It is undisputed that, during that time, Stratton was operating a classic boiler room. The brokers sat “cheek by jowl” in a room the size of a basketball court. All of their desks were lined up side by side in rows. The firm held mandatory sales meetings every morning at 8:30 a.m. at which time sales techniques were demonstrated and scripts for the firms’s “house stocks” (i.e., those in which the firm made a market) were distributed. Brokers were expected to follow the scripts and only give customers the information they contained. Brokers were discouraged from doing any outside research, and told to rely on the firm’s research and representations. Aside from training in high pressure sales techniques, brokers received no instruction from Stratton management.

After the morning sales meeting, brokers were expected to spend the entire day (except for a lunch break) on the telephone.

The firm expected a high volume of sales, and if brokers did not stay on the phone, they were fired. Stratton was run like a “boot-camp”, with all of the brokers’ activities closely monitored and scripted by the firm’s principals. At the end of the day, a second sales meeting as held at which time each broker was required to report his production for the day.”

In case you were hoping that Continental Broker-Dealer or Kensington Wells might have a better reputation, I wouldn’t hold your breath. During the time that Tabin would have been at Continental, the firm was helping to financially engineer the fraud that inspired the hit movie Boiler Room.

In the case of Kensington Wells, things are just as bleak. After the company shut down, the NASD stepped in and charged 12 of their former brokers “with a wide range of sales practice abuses. The complaint alleges that the 12 brokers, who were based at Kensington Wells’ Mineola, NY headquarters, participated in or facilitated a boiler room operation through a series of fraudulent sales practices and other misconduct”

From September 1993 to March 1995, Tabin served as the vice president of HBL & Associates, a financial relations firm in New York city. There isn’t a lot known about HBL, but the rumor on the street is that it was being run by none then Larry Erber.

Erber is a recidivist stock felon who has had multiple run-ins with the SEC. In 1991, he pled guilty to securities manipulation and wire fraud. Despite being barred from the industry, Erber is rumored to have secretly purchased a stake in Paramount securities.

HBL & Associates didn’t have a lot of clients, but they did have one very important one. Between 1991 – 1994, Erber (and HBL & Associates), would tout a small company named Teletek. This is significant because the promotion would have been going on the entire time that Tabin was with the firm. As the scheme was unraveling, a short seller even went as far as to try and extort Erber into giving away free shares of Teletek.

“Carlson’s alleged misconduct occurred during a June 9, 1994 telephone call, in response to Carlson’s earlier call. Carlson initially “congratulated” Erber on the GLAD situation, because he felt that “there were strong similarities between the GLAD situation and Teletek,“and he wanted to let [Erber] know that I knew what he was up to, that he was up to another one of these stock manipulations, and that he wasn’t pulling the wool over my eyes.” Carlson then requested a block of Teletek stock at a discounted price in exchange for Carlson’s keeping silent about Erber’s alleged promotion and manipulation of Teletek stock:

‘Let me tell ya, we were intimately involved in getting GLAD delisted. OK? I am going to do the same thing to Teletek — unless I get some stock from you on a favorable basis. I am gonna do what’s called a magic trick – that’s where I take your money and I turn it into my money.’

Carlson repeated this quid pro quo later in their conversation: “so, on Teletek-either I get a block of cheap stock or I am going to play a magic trick on you-OK-I am going to get that stock delisted next.” Carlson then accused Erber of being an undisclosed owner of Paramount Securities, an act that would violate a federal court order restricting Erber’s participation in the securities industry. Carlson continued:

‘Ya, if you want me to serve you up and wrap your F***ing nuts around your head I will. So you decide what you want Larry, we either play hard ball or . . . I get some of this cheap stock that keeps on printing in this pig.’ Carlson concluded the conversations as follows: ‘[s]ave your breath-OK-buy me some stock or I’m gonna F***ing-I’m going to go after Teletek. Those are my terms-please get back to me-thank you.’”

Unfortunately for Carlson, Erber was recording the phone call and while Erber would ultimately face charges for manipulating Teletek, Carlson would end up being suspended from the industry as a result of his conduct.

After leaving HBL & Associates in 1994, Tabin would join a “merchant banking and venture capital firm” named LBI group. From April 1994 – Dec. 1996 he served as their vice president of marketing. While Tabin was working there, LBI provided consulting services to a fast food restaurant named Tasty Fries Inc.

Tasty Fries first hired LBL on May 23rd, 1996. You may not be able to buy a burger for a nickel anymore, but LBL learned an even better trick. In exchange for “certain business consulting services, including marketing for a 12 month period”, LBI was given an option on 4 million pre-split shares at .05 cents a share.

A little over a month after entering into the contract, employees at LBI paid $200,000 to exercise these options (despite only being 2 months into a 12 month commitment.) While we don’t know whether or not LBI was dumping their shares while they were performing their “marketing” duties, we do know that they were only able to return 1 million shares once the contract was rescinded.

Later, the SEC would deep fry the fast food restaurant and in 2004, CEO Edward Kelly would be forced to settle charges “for fraud, unregistered sales of securities, and reporting, record keeping and internal control violations.”

After Tabin left the company, LBI was accused of sending unsolicited pump and dump faxes to prospective investors.

Millennium Holding Group – Their Own Personal Death Star

Millennium Holding Group was created on February 27, 1996. Shortly after forming the group, Millennium would acquire Wall Street Associates, the firm that Schultheis had spent the last two years creating. This is the first known partnership between Schultheis and Tabin. In the 10-k Vois describes Millennium Holdings as a “financial consulting firm specializing in mergers and acquisitions.” On the surface, this sounds impressive, but take another look at the types of companies that they worked with and you can’t help but be aghast at the client list.

In April of 1997, American International Petroleum Corp. (AIPC) hired Wall Street Associates to “implement a five-part investor relations program, including stockbroker relations, media relations, shareholder/investor communications and Interent [SIC] coverage.” AIPC was a Kazakstan oil exploration company with refining facilities in Louisiana. In July 97′, Wall St. Associates/Millennium Holding Co. issued a press release letting investors know that “revised estimates of potential recoverable reserves in Kazakstan exceed one billion barrels.”

Of course those barrels of oil were never recovered and in October 2004, AIPC would be forced to declare bankruptcy in a Louisiana courthouse. Two years alter, the SEC would revoke AIPC’s stock registrations for failing to file current reports.

To get an idea of the type of hyping that Millennium Holdings was allegedly engaged in, just take a look at this Silicon Investor post where someone says that “Gary from Millennium Holdings” touted a potential $50 share price in an AOL chat session with investors. I’m not sure what the stock was worth then, but today you can buy a share on the pink sheets for only .002 cents.

I don’t know what it is about the name, but there must be something about Voice that Schultheis and Tabin like, because on June 23rd, 1997 they picked up over 300,000 shares of iVoice.com. A little over a year later, they acquired an additional 925,000 shares.

On November 15th, 1999, iVoice hired Integrity Capital to perform a laundry list of “investor relation” services. At the time Robert Pratt was a principal owner of Integrity. In February of 2008, the SEC finally caught up with Mr. Pratt and accused him of running a pump and dump scheme.

In August 1997, Millennium Holdings group acquired shares in a company named MDI Entertainment. A few years later, MDI would sue Oxford International (another “investor relations” firm), alleging securities fraud.

In August 97′, Millennium took an interest in TearDrop Golf Company. Four years and several “acquisitions” later, TearDrop was forced to file for bankruptcy protection.

On Sept. 15th, 1997, Millennium announced that they would be taking on Sled Dog as a client. A little over a year later, Sled Dog would file for bankruptcy protection in Minneapolis. Given the short time between when Sled Dog hired Millennium and the bankruptcy, one has to wonder what type of due diligence Millennium was doing before taking on clients.

In November 97′, Millennium helped Mark Fixler, President and CEO of Fix-Corp International, Inc. secure an interview on Fox News. In 2008, Fixler would be named in a civil lawsuit, alleging, yup you guessed it, securities fraud.

In January 1998, Millennium Holdings was pitching Advanced Media Inc (ADVI) to potential investors. In September 2005, ADVI had their stock registration revoked for failing to keep their SEC filings up to date.

On March 12th, 1998, Winners All International, Inc. sued Millennium Holdings Group Inc. for breaching “a consulting agreement, common law fraud and fraud in the purchase of securities.” The statement of claim sought rescission of the agreement, restitution of the stock shares issued and a claim for $200,000 in damages. Millennium would later settle the lawsuit by paying out the $200,000.

In Sept. 98′, Millennium took on NetMed Inc. as a client. Less than 6 months later, OxyNet sued NetMed alleging fraud. Approximately, 3 weeks after the lawsuit was filed, NetMed declared Chapter 11.

In Sept. 98′, Millennium was also providing investor relations support to Silverado Gold Mines, Ltd. As if this story couldn’t get any more surreal, Silverado’s CEO would later appear “in a staged interview with a TV host, previously sued by the SEC in a multi-million dollar fraud case involving live goats and goat carcasses.”

Ten years after hiring Millennium, Silverado would eventually get busted after a series of damaging articles by the legendary business journalist, David Baines :)

In November 1998, Millennium Holdings announced that they had been hired to provide investor relations support for Keystone Energy Services Inc. Six months before they began their marketing campaign, Keystone was sued as part of a class action lawsuit for issuing misleading statements to their investors. In March of 2001, two Keystone execs, were indicted on 114 different violations. This case is especially notable because it was the first time that the state of Minnesota pursued charges on a pump and dump that involved the internet.

International Industries / International Internet Inc. / Evolve One – The Gift That Kept On Giving

After being involved in so many companies at the investor relations level, it was only a matter of time before Schultheis and Tabin would want to set up a company of their own to run. In preparation for public office, On May 30th, 1997, they formed a company named Mr. Cigar Inc.

They were supposed to be a cigar kiosk company, but after learning about a patent on the concept, the company decided to just be a distributor instead. On Jan. 26th, 1998, International Industries Inc. acquired Mr. Cigar Inc. and gave control of the company to Schultheis and Tabin through a reverse merger.

8 months after the acquisition, Transmedia Consultants (another financial relations company) would try to get their pound of flesh by suing them over some kind of grievance. While the suit would later be withdrawn for an unknown settlement, what was so damning about the lawsuit was that Transmedia was after the equity in Mr. Cigar Inc. NOT International Industries. This would suggest that stock promoters were lined up, even before Mr. Cigar Inc was bought.

On Jan. 14th, 1999, Bloomberg wrote an article accusing International Industries of adding to the “internet stock market mania” by issuing a press release announcing their acceptance into the Amazon affiliate program. Of course, we know today that even small time publications like my own, can easily get accepted into the program. At the time though, investors were so hungry for growth opportunities that they bid up International Industries by 100% on the day the press release was issued.

With the old economy starting to look stale, International Industries would change their name to International Internet in 1999. Later the company would be known as Evolve One.

On May 10th, 1999 International Internet announced a drastic change to their business model. Going forward, they wanted to act more like an internet incubator and try to acquire various businesses. Later they would spinoff these investments which would create new public companies for them to feed off of.

A month after announcing this change in business model, they acquired Auction Concept Inc., in the first of what would be a series of acquisitions.

Running low on funds, International Internet took to the street to raise money. In March of 2000, with the market near its high, they received a commitment for $11.25 million from Avenel Financial Group. Avenel was a financial firm controlled by Michael Pruitt. Pruitt will drift in and out of the story as time goes on, but this investment was notable for two reasons.

First and foremost, International Internet had just made an acquisition of Reconversion Technologies. Inc. on March 8th, 2000. As far as I know, this transaction was never reported as the related transaction that it was. Only two days later, Pruitt would be appointed as a Director of Reconversion Tech (now known as Healthsport.)

Another troubling connection between Pruitt and International Internet occurred on Jan. 14th, 2000 when International Internet LLC acquired a minority interest in Vertical Computer Systems.

Nine months later, One Travel Holdings Inc. (a company where Pruitt was the CEO) would enter into a contract with Vertical Computer systems to have them provide “internet, e-commerce and software services.”

On March 16th, 2001, International Internet registered to sell 550,000 shares of EResources Capital Group, Inc. EResources was yet another firm where Pruitt served as the CEO. Again, I couldn’t find a single related transaction disclosure.

While it’s easy to say that the SEC fell asleep at the switch on this one, Schultheis and Tabin did show up on their radar while they were working International Internet. In 2002, agents from the SEC recommended that “the SEC pursue a federal injunctive action against EONE for violations of the antifraud provisions of the federal securities laws.” Specifically, they were concerned about two false and misleading press releases that were issued in February 2000. Despite my best efforts, I wasn’t able to find out how this was resolved.

International Broadcasting Corporation – Ground Control To Major Tom

I never did quite figure out how Schultheis and Tabin acquired their stake in International Broadcasting Corp., but like many of the companies in this article, it also has had a troubled history. The firm was a collection of internet radio stations that broadcast everything from Blues to stock market commentary. Before it was IBC, the company was named “Explosive Financial Opportunities” :roll: Feldman Sherb & company was the auditor.

In May of 2002, IBC filed an SB-2 that brought Tabin and Schultheis’ positions under 5% (meaning that after the offering, Tabin and Schultheis would no longer have to report their trades or positions.) In the SB-2, IBC claims that “none of the selling security holders has or within the past three years has had, any position, office or other material relationship with us or any of our predecessors or affiliates, other than Tyler Fleming, who is Daryn Fleming’s brother and Sharon Fleming who is Daryn Fleming’s mother.”

Daryn Fleming, who was the CEO of IBC, may have disclosed his family relationships, but what IBC did not disclose was that Arthur Dermer, who also sold shares in the offering was (and still is) listed as a Director of the Tabin Family Foundation. I don’t know what his relationship to the family is, but it represents yet another related transaction that was hidden from the public.

Even before Fleming took on his role at IBC, he had prior relationships with Schultheis and Tabin. In July 98′, Fleming was hired to provide marketing to International Industries. As part of the promotion, he issued a positive “research” report on the company.

Despite the controversial nature of Fleming’s business model, the man knew no shame. A mere two weeks after his report on International Industries, he was highlighting a company that “helps investors who have been victimized by fraudulent and corrupt practices of brokers.”

In 1999, the Wall Street Journal would take Fleming to the woodshed for hyping stocks on the internet without disclosing that his firm, Wall St. West, was being compensated for the promotions. In the article, WSJ reporter Jason Anders, took a critical look at Fleming’s client base and included comments from Schultheis on why they hired Fleming in the first place.

“Gary Schultheis, president of International Industries says he hired Wall Street West to get some exposure for his company, particularly on-line. “[Mr. Fleming] said that he is very active in the internet, and that he had lots of places to get us good corporate exposure.” Mr. Schulteis [SIC] says he never specifically asked Mr. Fleming to post on message boards.

Mr. Fleming created a Silicon Investor message board to discuss International Industries, a Boca Raton, Fla., company that manufactures cigars and cigar vending machines. Mr. Fleming has posted 11 of the board’s 27 messages. When some participants complained that the stock’s price appeared to be slipping, he responded, “We think mostly big time investors bought [International], which is why we want to do a Wall Street West style SQUEEZE. This is where none of us will sell. In light of increasing demand, the stock could soar!!!!”

In 2005, Mr. Fleming would find himself in a bit of hot water after going on “Stock Talk Live”, one of IBC’s radio shows and making false statements to investors about acquiring various radio stations. Two years later, the SEC would lower the hammer and would file a complaint against him for fraud.

Interactive Golf Marketing/WowStores.com – More Than One Way To Skin A Cat

A little over a year after joining International Industries, Schultheis, Tabin and Rakesh Taneja purchased Interactive Golf Management (IGM), through a company named Estores.com. The purchase occurred on February 16th, 1999. One day later, International Internet, (which was also controlled by Schultheis and Tabin at the time) made a $20,000 investment into IGM. In March of that year, International Internet would end up acquiring 16% of the company. While it has been over ten years since this transaction took place, as hard as I tried, I still couldn’t find where it was reported as a related transaction.

After taking over, the group must not have been very happy with their golf swing, because they promptly changed the name of the company to WowStores.com. A short 7 months later, Tabin and Schultheis would leave the company after selling their stake to StockFirst.com

StockFirst was an “unbiased” financial site dedicated to emerging opportunities. The president of StockFirst at the time of the acquisition was David Hirsch. Before Joining StockFirst, Hirsch was working for a boiler room operation named First United Equities Corporation. While there, he was caught pushing two different microcap stocks on investors. In a settlement with the SEC, Hirsch admited to engaging in manipulative trading, lying to his clients about not earning commissions from selling them the stocks and refusing to let customers sell out of positions, unless they purchased one of the other house stocks instead.

Network Systems International/OnSpan/Double Eagle – Make Sure To Look Out For Number One

Of all the stocks that I’ll discuss in this report, Network Systems International was by far the most damning. On July 25th, 2000 Millennium Holdings Group conducted a private placement where they sold approximately $1 million worth of stock to investors. In addition, Tabin purchased another 2.7 million shares for a cool $1.5 million. After the transaction, Tabin would become the CEO of the new company.

While it would take nearly 6 years to unravel, this transaction would end up haunting Schultheis and Tabin for a very long time. Two of the $1 million investors, Richard T. Clark and Joel C. Holt would end up suing Schultheis and Tabin after things didn’t quite turn out as planned.

According to their complaint against the company, on May 8th, 9th and 10th, 2000, Tabin held a meeting in the Bahamas with Clark, Holt and other investors to discuss the acquisition of a small cap stock. Tabin’s attorney for the deal, G. David Gordon would also attend. From the complaint,

“At the meeting, Tabin solicited Clark and Holt, as well as others, to invest $1,000,000 for an operating company which was publicly traded and listed on the Small Cap NASDAQ Exchange. Tabin told Clark and Holt that the money would be used by OnSpan to acquire some operating business with independent managements [SIC] that would enhance the value of OnSpan’s stock and render a profitable return to its stockholders. Tabin told Clark and Holt that he would be buying out the ONSpan insdiers and assuming the role of OnSpan corporate director. Tabin told them that if Clark, Holt and other investors invested $1,000,000, then the insiders’ stock positions that he acquired would give them as a group effective control of OnSpan so that the business plan he had outlined for OnSpan could be carried out.”

Later in the filing,

“Tabin’s representations and warranties concerning the investment strategy and business plan never included, or even contemplated, that Tabin would remain a long term officer or Director of the Company. Nor would he draw a salary or other cash remuneration after he had assisted OnSpan in located and acquiring an operating business with an independent management. When Tabin made his statements and representations to Clark and Holt at the meeting, he made false representations of material facts, and omitted and failed to tell them of certain material facts, which would have had a substantial impact on their decisions to invest in OnSpan, and the absence of which, when considered in the context of the information that Tabin did provide to them, mad Tabin’s presentation misleading. These false representations and omissions of material facts include without limitation, the following:

(a) Tabin did not advise Clark or Holt, that their money had to be committed and in escrow to enable Tabin to acquire his interest in OnSpan, and that therefore he was not undertaking any risk until Clark and Holt had already assumed the risk of the investment.

(b) Omission of the fact that he already had an agreement with the current directors and management of OnSpan to purchase stock at a lower price than to be paid by Clark and Holt

(c) Omission of the fact that he had an agreement with one or more other John Doe investors to acquire a controlling interest in OnSpan as a group, instead of voting his shares with the shares purchased by Clark and Holt, and any other Initial Investors, for purposes which were contrary to his representations and warranties made to Clark and Holt. Tabin actual purpose included taking control of the Board of Directors of OnSpan so that the Board would be under the dominion and control of Tabin so that Tabin could direct the actions of OnSpan as he saw fit, including the dissipation of company assets and opportunities and the conversion or misappropriation of its assets by paying himself a large salary, and possibly other compensation and benefits, at a time that OnSpan had no revenue and no business operations whatsoever and while Tabin was drawing full compensations from Evolve One, inc., another company for which Tabin raised funds under the same or similar circumstances as OnSpan

(d) Omission of the fact that he was associated with acquiring another company, Vertical Computer Systems, Inc., in much the same fashion as he did for OnSpan, which was under investigation by the Security Exchange Commission for possible violations of federal securities laws.”

While it’s easy to look at a complaint like this and claim that it’s just Clark and Holt crying over sour grapes, there is supporting evidence to suggest that something may have been up.

On February 10th, 2009 the SEC charged David Gordon with securities fraud. In their complaint, the SEC claims that Gordon was part of a shell creation group that derived over $41 million in illegal profits from their pump and dump activity. Richard Clark would also be indicted as part of the scheme.

“To execute their scheme to defraud, Defendants, acting in concert with other persons, obtained market domination in the target stocks; engaged in coordinated trading activity, including the use of illegal matched orders; and created and distributed to the public deceptive promotional materials, all of which generated the false appearance of investor interest in the Target Stocks thereby artificially inflating the prices of the shares. Defendants, acting in concert with other persons, sold shares of the same three Target Stocks they were recommending that the public buy. This scheme is commonly referred to as a “pump and dump” because the perpetrators artificially inflate or “pump” the price of a stock and then sell their own shares (the “dump”), at the artificially inflated “pumped ” price.”

In case you think that Tabin was actually looking out the interests of OnSpan shareholders, I’d like to point out that once he faced legal liability, he was quick to offload the risk to the shoulders of OnSpan investors.

In 2006, Tabin and Schultheis would eventually settle the lawsuit by giving up their shares in OnSpan/Double Eagle in exchange for the Vois.com domain name. When Tabin finally did leave, Michael Pruitt would replace Tabin as CEO and Chairman of the board.

Marc A. Saitta – Chief Financial Officer

In this report, I’ve focused most of my comments on Schultheis and Tabin’s career, but one character who jumped out at me was Vois’ CFO Marc A. Saitta. I’m not exactly sure what connections he had with Vois, prior to its creation, but I found his prior employment at Smithsonian Business Ventures extremely interesting.

It would take another 7,000 words to go into all of the details behind the conspiracy, but essentially the executives at SBV found a loophole in the Government that allowed them to loot one of our Nation’s treasures. While investigating SBV, Senator Charles Grassley had a most appropriate quote,

“It looks like the leaders of Smithsonian Business Ventures were living like Thurston Howell and managing like Gilligan.”

Unfortunately, Grassley would never pick up on the microcap angle to the story and this was never fully investigated. Instead, SBV would eventually trip themselves up by signing a 30 year exclusive deal with Showtime to produce historical films. When Congress found out about SBV, they were furious. The investigation produced several lengthy hearings and a report that is over 100 pages long.

I’m not a fan of the political thrillers myself, but if a journalist wanted to take a closer look at SBV’s licensing deals, I think they’d find a story that is eerily similar to Vois, only involving extremely powerful Washington insiders.

The Auditor – Second Verse Same As The First

Over the last 20 years, Tabin and Schultheis have appeared with a wide variety of supporting cast, but one bad actor who kept reappearing during my research was Sherb & Co., Vois.com’s auditor.

In looking at the history of the firm, one must conclude that these guys are either incompetent, actively helping to perpetuate stock fraud or are simply the world’s unluckiest auditors.

Recently, famed short seller Manual Asensio cited China Sky’s use of Sherb & Co. as a major red flag for the company. In 2007 (right before Vois first hired Sherb & Co.) the auditor was reprimanded by the PCAOB after they looked at 8 of their clients and found material deficiencies in the audits. Specifically, they cited one case that “included a deficiency of such significance that it appeared to the inspection team that the Firm did not obtain sufficient competent evidential matter to support its opinion on the Issuer’s financial statements.”

Whether we are talking about Smart Online, Spear & Jackson, China Sky, ProNetLink, Light Management Group Triton, or Optionable, Sherb & Company has consistently failed to catch problems before they happen. That may be a benefit to someone who is trying to hide illegal behavior, but shareholders deserve a higher level of performance from someone who is so crucial in identifying and preventing fraud.

Over the years, Schultheis and Tabin have worked with Sherb & Co. enough times, that I think it’s fair to question whether or not the firm is considered independent. While I understand how hard it can be to identify firms that are engaging in fraud from that ones who just make mistakes, I can’t but help find it frustrating that Sherb & Co. has been able to have such a high failure rate and yet they’ve received little more than a slap on the wrist by regulators.

Given that Vois has been fooling the blogosphere for over a year now, some may ask why I choose to speak out on this issue now. While deep down inside I really didn’t want to make enemies with people I don’t know, I became concerned that a trap was being set after Vois announced that they were doing a 1 to 100 forward split. Through this use of financial engineering, they’ve been able to dilute their shareholders.

Why do I think that Vois is doing the 1 to 100 forward split now? It’s pretty simple really, they are out of money and likely won’t make it through December, unless they can offload warrant debt onto public shareholders that is. TheRichArab from Yahoo! Finance explains this point best,

“WARRANTS ARE LIENS. the company is doing the split to cover the WARRANT. which EXPIRE IN DECEMBER OF 2009. IF the warrant is not covered by shareholder capitalization then THEY THE COMPANY must pay the outstanding amount. IT IS SIMILAR TO OPTIONS, VS. MMs and US (you cannot option a pinkie).

SO, what does the company do when the stock has moved south ever since the LIEN of the WARRANT ISSUE? THE offer a 100 to forward split! Look at VOIS it has not moved at all since the SEC Filing – WHY? Because NOBODY F*ING CARES. The only paper in play is the WARRANT. They want that CAPITALIZED in order not to have EVEN MORE DEBT than they already have.

The Strike price previously on the WARRANT was 18.50
with the forward split it will be .1850 – 100 X less.
you will not get more share (nor will your PPS holdings be 100X less). But VOISW can convert to common shares at .1850! that is the play for us holding! AND I guarantee that this stock VOISW will reach .185 before and beyond the split! the company wants everyone in the warrants to succeed. they could care less about the company they are diluting with the 100 to 1 split. they simply dont want to go bankrupt on the LIEN, which looking at their company they are very close to doing.

So what do you do as an investor. RIDE THE WARRANT AND F*K the COMPANY. My prediction, this split will cause the warrant will be worth more than company stock – look at VOIS vs VOISW and the 3200% VOISW has made in 1 month versus the NEGATIVE SPIRAL CONTINUING with VOIS.

this is from company you can email them too

From: CRAIG A [mailto:craig@scommerce.com]
Sent: Fri 6/26/2009 9:55 AM
To: richarab
Subject: investor question

Hi richarab!

In regards to your question about whether the split affects both VOIS
and VOISW, I just wanted to clarify something. The common shares of
VOIS will split 100 for 1, and the exercise price of the warrants
split. So instead of exercising at $18.75 they would split at an
equivalent of .1875.

Thanks!”

Former convicted stock felon Barry Minkow describes financial fraud as “the skin of the truth stuffed with a lie.” The best con artists must pepper their lies with truths in order to perpetuate their fraud for as long as they can. You have to have people believe in the legitmacy of what you are doing, if you want to do more than pickpocket them.

Vois claims that they are a legitimate web 2.0 company with a “strong” management team that has taken many tech companies public. What they don’t tell the public is that over the course of their careers, the founders have been exactly one degree away from businesses and individuals who have been directly involved in fraud on multiple occasions.

Whether or not Vois’ founders are trying to pull the wool over their investor’s eyes, I’ll leave up to you to decide, but make no mistake about what is at stake.

People who are victimized by stock fraud don’t tend to be the sophisticated investors that the big name VC firms are going after, they tend be be an unsuspecting and unsavvy web 2.0 public that doesn’t understand the first thing about investments. Hopefully, before recommending a company like Vois again, we’ll see sites like TechCrunch and Mashable do better due diligence to help protect their readers.

*Just in case you didn’t get enough of this story in the article, tune in on July 9th at midnight PDT for part 2 of my expose as well as a a podcast where I confront Vois Co-Founder Craig Agranoff on the air.

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Netflix Closes Silo (again) – Forces Jinni To Disable Ratings Feature http://davisfreeberg.com/2009/06/29/netflix-closes-silo-again-forces-jinni-to-disable-ratings-feature/ http://davisfreeberg.com/2009/06/29/netflix-closes-silo-again-forces-jinni-to-disable-ratings-feature/#comments Mon, 29 Jun 2009 20:20:56 +0000 Davis http://davisfreeberg.com/?p=1320 Netflix SiloI love Netflix, but more than once their data policies have forced me to reconsider whether or not I should have a membership with them. You see, I believe that when you rate a movie, the data should belong to you. After all, you were the one that spent the time to input the rating and it’s personal to your tastes. In fact, I’d be willing to bet that once you get past 100 ratings, you can’t even find two rating profiles that are identical.

Netflix on the other hand, seems to feel that they own your ratings data and have guarded it closely. This wouldn’t be so important, if Netflix was the only movie site out there, but because they refuse to implement many web 2.0 features, there are many other movie sites that consumers may prefer.

Because I have memberships with about a dozen of these sites, it has created an awkward and cumbersome situation where I’m forced to to maintain a dozen different sets of ratings, instead of being able to sync them all together.

Since even small differences in how you rate a movie can have a big impact on the recommendations that you receive, whoever is able to get a consumer to input the most ratings is given a powerful moat around their subscribers.

For a long time, Netflix kept their silo closed, but about nine months ago, they opened up their API to outside developers. At the time, I saw this as a watershed event because it marked a change in philosophy from one of control to one allowing for innovation, inside or outside of Netflix’s site.

If you go their developer site, you’ll see that they still encourage people to use ratings data to create cool apps.

“The Netflix API allows developers full access to our catalog of movies and actors, and–when properly authorized–subscriber data, such as queues, ratings, rental history, and reviews.”

Regrettably, after opening up this data to outside developers, Netflix has apparently changed their tune and is now trying to take away this feature from their customers. From an email I received from Jinni.com,

“Hi Davis Freeberg,

Since March, we’ve offered an option to connect your Netflix account with Jinni. Until now, an optional feature has been importing ratings, so Jinni can quickly learn about your taste and recommend only movies you haven’t seen.

Unfortunately, Netflix has demanded that we remove the import ratings feature. If you already imported your ratings, they will stay on Jinni.

We, and many other developers and users, have been asking Netflix to open the ratings data for a while, to give you the choice to import your Netflix ratings as you wish. We’re working with Netflix now to initiate adding an import ratings option to their API – as your ratings actually belong to you.

As always, feel free to get in touch with questions. And stay tuned for new features and improvements that we’re working on now toward our public beta opening!” (Note: Bold added by me)

In the long run, I believe that this will hurt the company. I can understand Netflix’s desire to protect their competitive moat, but as a subscriber this upsets me to no end. Instead of letting me choose the most innovative movie site, they are making it more difficult for other sites to work with their data. This may not seem like a big deal to most, but preventing customers from accessing content in their preferred format, tends to create dissatisfaction. I feel that it also raises questions of anti-trust abuse when you consider Netflix’s market position and the grip that they are maintaining on their subscriber data.

Instead of using their rating silos to stop competition, I’d rather see Netflix forced to compete fairly by creating the best product out there.

I’m not sure that I’ll cancel my account, but taking this kind of a hostile stance against a competitor makes it hard for me to continue to recommend the service to others. I hope that Netflix reconsiders their stance on this issue and allow consumers to take full advantage of the openness of the web.

Update – Netflix responds on their developer forum“The API Terms of Service don’t allow an application to capture a subscriber’s user name and password, which is required to scrape user data from the site. While we do expose ratings via the API, we do recognized that there isn’t a good way to grab a subscriber’s full rating history. We’re working on the technical and legal details to allow developers to access this info without running afoul of our terms of service nor enabling a unsatisfactory user experience.”

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Why Is Redbox Afraid Of The Big Bad iPhone? http://davisfreeberg.com/2009/03/25/why-is-redbox-afraid-of-the-big-bad-iphone/ http://davisfreeberg.com/2009/03/25/why-is-redbox-afraid-of-the-big-bad-iphone/#comments Wed, 25 Mar 2009 23:17:05 +0000 Davis http://davisfreeberg.com/?p=891

Over the last few years, Redbox has been able to build an impressive DVD rental network by being innovative and flexible while their competitors were still laughing at the concept of kiosk rentals. Over time they’ve added features to the Redbox website that allow customers to browse and reserve titles online. They’ve linked their kiosks together so that unlike competitors (ahem: Blockbuster), you can actually rent a movie from one location and return it at another. Redbox’s core business may ultimately be, plain old boring DVD rentals, but there’s no denying that they’ve been an innovator in their industry. This is why I am so perplexed by their most recent decision to go hostile against iPhone owners.

Given the company’s reputation for thinking progressively, I was disappointed to learn that they’ve decided to take a technological step backwards by putting pressure on the Inside Redbox blog, to kill their Inside Redbox iPhone application.

I haven’t jumped on the iPhone bandwagon myself yet, but I can understand why some people think of their phones as an extra appendage. The apps store was a brilliant move by Apple and has created all kinds of interesting software programs that wouldn’t have existed if people had to rely on big companies to build them.

By taking advantage of the GPS features inside the phone, Inside Redbox was able to give iPhone customers the ability to look up which Redbox was closest to them at any given moment. It also allowed customers to find out whether a specific title was available before wasting time visiting the kiosk in person.

The best part about the application though, was it’s ability to reserve movies directly from the iPhone. This means that if you’re standing in line at a Redbox and the person ahead of you is taking too much time selecting a movie, you could theoretically use your iPhone to digitally cut in line and reserve the last copy of Harold and Kumar instead of having to wait impatiently.

When you consider that one of the biggest customer service complaints about Redbox are the long lines when customers try to return DVDs, it blows my mind that Redbox would discourage consumers from using their own mobile device by having them monopolize a kiosk instead.

Whether a customer prefers to order their movies from the internet, a kiosk or the middle of the store while shopping for groceries shouldn’t make a difference to Redbox. No matter what, they are still making a sale, even if they don’t have 100% control over the purchase.

Inside Redbox is mum on details and calls to Redbox’s PR agency didn’t shed any light on the situation, but the two most “controversial” features included in the app is a list of codes for free Redbox movies and the fact that the app relies on Redbox’s website for most of the content.

One theory for why Redbox doesn’t seem to care about iPhone customers is that while they’ve been able to get a lot of buzz using their free movie offers online, consumers haven’t been all that aggressive about redeeming the promotions. Since iPhone customers have access to the most recent free offers while they are actually standing in front of the Redbox kiosk, it makes it easier for customers to take advantage of their specials.

If this is the reason why Redbox killed the application, my response would be that Redbox hasn’t solved their problem, they’ve just made it more difficult to work out a reasonable compromise with their customers. It won’t take consumers very long to figure out that they can bookmark Inside Redbox’s list of free codes or RedboxCodes.com on their iPhones and still have access to the same information.

Rather then fighting progress, Redbox should be using the relationships formed through the application to streamline their movie promotions. They already restrict some of their offers to new customers only, so why can’t they work out a deal for iPhone promotions? Wouldn’t it be better for Inside Redbox iPhone users to have a 10% chance at “winning” a free movie instead of killing the app and forcing these customers underground? By trying to lower the wham hammer on this neat little application, they’ll only end up upsetting customers instead of addressing a weakness in how they’ve choosen to promote their service. Just because the iPhone app doesn’t fit into their mold of what marketing should be, doesn’t mean that killing it is the best solution.

A second theory for why Redbox may have requested that the app be pulled is that Inside Redbox uses Redbox.com’s website for a healthy chunk of their content. Some businesses may object to this and want to have 100% control over how their customers are “allowed” to use their product, but smart companies see the benefits of being open. In fact open API’s are becoming increasingly common in the tech industry. By allowing third parties to mashup and repurpose your data, entirely new creations are possible. This is why some of the most successful companies have business models that encourage outsiders to partner with them. The Inside Redbox app may repackage content from Redbox’s website, but when push comes to shove, it’s really no different than an internet browser. Is it really better for Redbox to force their customers to have a subpar experience using the Redbox.com website on the iPhone instead of an app that is specifically designed to be viewed on the small screen? I don’t think so.

Asking Inside Redbox to pull their program is a bit like asking Microsoft to not allow Redbox’s website to be shown on Internet Explorer. If Redbox really objects to how their content is being used, they have the power to change it. Instead of trying to kill the third party programs that tap into what they’ve already created, they should be encouraging their fans to mix, mash and experiment to create new experiences for their customers.

To date, Redbox has managed to stay ahead of the competition by being nimble and by nurturing a passionate and dedicated fan base. Their decision to now turn on the very fans who cared about them long before their mainstream momentum, says a lot about how fickle their business decisions really are. Instead of acting like the innovator that I know they are, they are acting like a big media company. Hopefully, Redbox comes to their senses and “authorizes” the use of an app that only makes their service more valuable to their customers.

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Where’s The Beef? Filtering Cats For Content http://davisfreeberg.com/2009/03/25/wheres-the-beef-filtering-cats-for-content/ http://davisfreeberg.com/2009/03/25/wheres-the-beef-filtering-cats-for-content/#comments Wed, 25 Mar 2009 20:50:21 +0000 Davis http://davisfreeberg.com/?p=726

If you ask the big content owners, they’ll argue that the only content on YouTube has either been stolen from them or is some kind of a lame cat video uploaded by your crazy neighbor. Unfortunately, in my seemingly endless quest to collect and document the best cat videos on YouTube, I keep getting distracted by some pretty amazing independent content producers. Here are ten of the artists who’ve impressed me the most, over the past few months.

Wicked Awesome Films – Kevin & Bobby create movie trailers of pop culture events. Whether they are remaking the latest films, riffing on popular internet memes or teaching underaged kids how to get alcohol, their quick 2 minute clips will keep you entertained and laughing. They tend to be a little over the top and crude at times, but that’s a big part of their charm. They are usually NSFW so be forewarned, but if you enjoy listening to shock jocks on the radio, you’ll love their videos.

Jack the Danger Bunny – Filmed in a style that is part documentary, part sitcom, and pure genius, Cait and Dan share moments of their dysfunctional relationship with the rest of the YouTube community. If their relationship in real life is anything like the show, I’m not sure how long the series will be around, but take advantage why you can because their silly antics make for some of the best videos on Youtube.

The Big Time Show – Gabe and Dave moved to Hollywood with a dream to make it big. Along the way, they’ve been documenting their progress towards trying to break into the world of show business. They’ve got the looks, are willing to work hard, sell themselves out and have no shortage of motivation. The only problem is that they seem to be lacking talent. Filmed as a reality TV show, their videos take a satirical look at the movie business and features a wacky cast of characters including their sleeze ball agent, a clueless photographer and a student director who isn’t even willing to cast these guys in a student project unless they’re willing to pay him. If you’ve ever wondered how bad b-movies end up making it to the big screen, this mockumentary provides all of the answers. Spinal Tap fans will especially love this series.

Scenic Videos – I tend to prefer watching Youtube online vs. taking advantage of it on my TiVo, but the Scenic Video channel was made to be displayed on a big screen television. They film relaxing nature scenes and let viewers play them in the background. If you play their clips while you sleep, you’ll have fantastic dreams. Most channels get attention by flashing lights or using loud buzzer sounds, but the low key nature of their videos is what makes this channel really stand out.

Rejected Jokes – This sketch comedy channel is produced by Ben Schwartz, a writer who has worked for Letterman, SNL and Robot Chicken. While not every one of his jokes ends up on television, his unique blend of dark humor fused with pop culture leaves you laughing even if his YouTube jokes are the leftovers. Sometimes Schwartz will do a stand up routine, while other times the skits are a little bit more complex, but either way they’ll make you smile.

Daneboe – Whether your watching his award winning expose on the Kool Aid serial killer or his LegoMan job inquiry, Daneboe’s Gagfilms will keep you entertained with his seemingly random videos. He doesn’t produce a ton of content, but when he does it tends to be very high quality. It’s one of my favorite channels for when I need to quick bite of comedy.

Visible Mode – Watching the Visible Mode channel is kind of like watching a car accident in motion. You know it’s terrible, but you just can’t stop your self from watching the destruction. Visible Mode has some pretty crazy ideas, but his demented sense of humor is a good fit on YouTube. After watching his experiments at bringing the combover back in style, I feel much more comfortable about my own receding hairline.

Timbotantrum – This channel is producing the excellent LA I.C.E. web series. It’s about a couple of immigration agents trying to clean up the streets of LA. In addition to the series, Timbotantrum also produces some very funny clips that tend to mock the pop culture we live in.

Sloncekandrej – Sloncek is a legend in the P2P community, but is relatively unknown on YouTube. At one point, his website SuprNova was the most popular torrent site on the net. Sadly, it all had to end after he started to receive a little too much attention in the local Slovenian press. After shutting down the site, he gave the domain to the Pirate Bay and started focusing on making videos instead. Recently, he’s been working on an excellent P2P news vidcast with Torrent Freak. The program is very professional and is a bit like watching the local news for people who care about P2P.

Beet.tv – Beet.tv is a good example of what modern TV studios must do if they want to succeed amidst the fragmentation of the internet. Most of their videos are interviews with influential people in the tech community, but they’ve also begun to cover other industries like healthcare. After filming and editing unique niche content, they then hyperblast it through a distribution system that includes sites ranging from MySpace to the New York Times. The combination of high quality unique content and fragmented mass distribution has worked out pretty well for them so far and I’m optimistic that the model will prove to be successful. Viral stories don’t always have the same immediate punch that you get from live TV, but if they end up being seen by just as many people, it can be even more powerful than traditional television.

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Your Movie Wish Is Jinni’s Command http://davisfreeberg.com/2009/01/26/your-movie-wish-is-jinnis-command/ http://davisfreeberg.com/2009/01/26/your-movie-wish-is-jinnis-command/#comments Mon, 26 Jan 2009 20:48:43 +0000 Davis http://davisfreeberg.com/2009/01/26/your-movie-wish-is-jinnis-command/ Suprise Ending

For those of you who are still not satisfied with the current crop of movie recommendation services, you’ll soon have a new choice available to you. Last week, I signed up for the private beta of Jinni and have been pretty impressed so far. Jinni is a new interactive movie rating website that is trying to do for movies, what Pandora has done for music.

While the site doesn’t stream any of the films that they recommend, they do offer convenient links to places where you can find the films online (Netflix, Blockbuster, Hulu, etc.) Apparently, the company has been live for a few months now, but I only just found out about them last week after seeing a review of the service on Read Write Web.

The site includes reviews, photos and even trailers for each film in their database, but their movie filtering software is the real bread and butter. Most of the content you’ll find on their movie description pages is pretty much available on any of the other movie sites, but their “movie genome” information is exclusive to them.

Through a process of human and computer intervention, they’ve categorized every film in their library using information from the movie’s plot, mood, genre, time period, critic reviews, story type, and attitudes. Viewers are then able to filter their search results by using these definitions.

For example, a search for the term bank brings up 134 movies, but if I filter this list by looking only at the “witty” films that include a heist in their plot and are set in the 21st century, I’m able to narrow my search down to just three films, Criminal, Inside Man and High Heel’s and Low Lifes. Since I haven’t seen any of these movies, it’s hard for me to tell how effective this really is, but by narrowing down broad based searches, it does enable me to discover movies that would have gotten lost in the volume of other search results.

On Jinni’s website you can find more information on the actual genome mapping process.

“The starting point of the Movie Genome is manual tagging by our team of film professionals. Each title has around fifty genes, among thousands of possibilities. Then, using advanced machine-learning technology, Jinni’s system learns from the manual tagging to begin automated tagging. This creates a level of consistency that creative human taggers can’t reach – especially important for similarity matches and recommendations, which won’t work unless you compare apples to apples and battles to battles as often as possible. Users who vote on genes, as well as the Jinni team, constantly check and improve the machine tagging.”

After playing around with the site, I was really impressed with the user experience, but I’m still on the fence about whether or not Jinni’s approach is the right way to go. On one hand, by creating “genome” fields around each film’s “DNA”, they’re able to accomplish a lot more with the data, but on the other hand, by restricting rating population to just their staff, it also limits the number of films that they are able to catalog. As an example, if I do a search for the plot Psycho, I get 270 results, but the same search on the user driven site Spout, gives me 509 movies. Now I’d be willing to bet that Jinni’s quality is better then Spout, but by not allowing their users to tag films, they may be giving up quantity through their process. Some people prefer quality over quantity, but I can’t help feeling like they are missing out on the wisdom of the crowds by excluding users from participating in the genome mapping process.

In addition to their movie filtering technology, Jinni also allows you to share more information about your own movie tastes and they provide personalized recommendations. While I haven’t tested the quality of their movie recommendation service yet, I do plan on putting them through my own blind taste test to find out how accurate their ratings really are. In the meantime, if you’re interested in trying the service, feel free to apply to their private beta or you can leave me a comment and I’ll be happy to share one of my invites with the first 10 readers to respond.

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Software You’ll Need When Your PC Hits The Big Start Over Button In The Sky http://davisfreeberg.com/2007/10/09/software-youll-need-when-your-pc-hits-the-big-start-over-button-in-the-sky/ http://davisfreeberg.com/2007/10/09/software-youll-need-when-your-pc-hits-the-big-start-over-button-in-the-sky/#comments Tue, 09 Oct 2007 17:15:52 +0000 Davis http://davisfreeberg.com/2007/10/09/software-youll-need-when-your-pc-hits-the-big-start-over-button-in-the-sky/ ComputerRecently, I suffered a computer meltdown and the good news is that I still have my data, but the bad news is that it’s cheaper to replace the PC, then it is to fix it. Since I was already in the market for a laptop, I decided to purchase one, while I took the time to figure out my home PC strategy.

It’s been a long time since I’ve had a new computer, so I was a little surprised at how long it took me to recreate my unique PC experience. Getting the right mix of bookmarks and software is key to taking full advantage of the horsepower that your computer has. At first, I thought that setting up my new laptop would be quick and painless, but I misjudged the sheer number of programs that I would need and forgot about the pesky bloatware to deal with.

Even after an aggressive campaign, I am still finding things that I need to uninstall. I did manage to get rid of the McAfee pop up that warned of my computer being comprised because I wasn’t paying them money :roll: but I’m still trying to remove the Vongo free trial offer that shows up in what seems like every menu.

Since I know that I’m not the only one to experience some frustration in setting up a new PC, I decided to keep a list of all the programs that are helpful, when you are doing a fresh install.

Web Browsing

Firefox – I’ve tried the new internet explorer browser, but it still can’t beat this open source underdog. Step #1 – fire up IE, so you can download Firefox, then delete all IE shortcuts, so you never accidentally launch the software again.

IE Firefox Plugin – As much as I try to avoid IE, sometimes there are services that are only supported by Microsoft’s browser. In order to avoid having to fire up IE, I install a firefox plugin, that allows me to use IE, in my preferred browser.

Email

Thunderbird
– I normally use web based email, but still like having Thunderbird, in case I need to archive my emails. I actually prefer Microsoft’s Outlook, but am not willing to spend the money when there is such a great open source product available.

Communication

Skype – I don’t use Skype as much as I should, but think that it’s a great alternative to cable telephone or Vonage. I’m still looking for a good program that can record my Skype calls, but this is still a pretty robust service.

TrillianThomas Hawk turned me onto this one. Why run separate Yahoo!, MSN and AOL instant messaging software, when one program can handle all three? Instead of being forced to choose your friends, you can show up on all three major networks easily.

System Resources

AdAware – This one isn’t fun to play with, but it’s important to have on your system. It can’t stop a full blown virus from invading, but it can help you find programs that are trying to sneak their way on board.

Spy-bot Search & Destroy – Spy-bot is a lot like AdAware, but I like to keep both programs available. One time I came across a download that blocked AdAware from starting, but was no match for Spy-bot. These services can’t replace the paid ones, but they go a long way towards helping to improve the security on your computer.

Google Desktop – I’ve had mixed feelings about Google Desktop from the get go, but still continue to use it. On one hand, it’s really helpful to be able to search my hard drive easily, but on the other hand, I also feel a little weird about Google desktop tracking me. I figure that the functionality is worth it, as long as I make sure that I’ve got a strong password for my login.

Java – I’m not even sure that I can tell you what Java does, but I do know that it is at the heart of some pretty cool applications. I’ve used the technology to play games, watch videos and watch live streaming content online and I don’t think that I’ve even scratched the surface of what it’s capable of.

Greasemonkey – GreaseMonkey allows you to mash up different parts of the web inside of your browser. It’s a very powerful plugin and is worth downloading, even if you’re not sure how you’ll end up using it. My favorite GreaseMonkey script is a plugin that allows you to see which movies in your Netflix queue, will be airing on TiVo soon.

Social Web

Commentful – This software will change the way you interact online. It allows you to leave comments on web entries and then notifies you when someone has added something to the conversation. In the past, I would comment, but would never follow up to see if there is a response, now I use Commentful to help me continue dialogues that would have normally fizzled out.

WordPress – There are lots of blogging packages out there, but I use WordPress. I like it because it has great fan support and offers a lot of functionality, that I can’t find in other blog packages. My favorite part is having the ability to completely change the appearance of the site, with a simple click of a button. With plenty of WordPress widgets, it’s easy to customize templates, to fit any personality.

Del.icio.us – There are many different bookmarking sites, but I primarily use Del.icio.us. By downloading their firefox plugin, all you have to do is right click and you can clip articles. This is a great resource for archiving things that you want to view later.

Google RSS – A good RSS reader can help you keep track of your favorite sites. Without it, I wouldn’t see a tenth of the content that I track. In the past I’ve used Bloglines, but when Google introduced RSS search capabilities, they won me over. This feature alone, allows me to track 1,000 times more content, then what I could handle in a more basic RSS program.

Photography

Picasa – Photoshop is great, but there are still free alternatives, if you don’t want to spend the cash. Picassa not only has a decent photo editing feature, but also allows you to post your photos online.

Zooomr – I visit Zooomr several times a day, in order to check my Zipline. I also use Zooomr to host my photos for this blog and play web games in their forums. There isn’t any software to download, but if you drag and click on the Zooomr link, you can add a bookmark to your toolbar.

Flickr – Flickr is another great photo sharing site. They are one of the largest photo sharing sites, so they have an even better selection of images. There isn’t anything to download, but they do have a bulk uploader, if you plan on hosting a lot of images.

Remote Computing

Orb – You need a TV tuner and media center software for this one, but if you have these components, then Orb is a no brainer to install. It allows you to placeshift your content, anywhere you can get a broadband connection.

UltraVNC – Even though, I upload a lot of things online, there are still times where I need access to my home computer. UltraVNC allows you to log into your system remotely, so that you can access your files, even if you happen to be on the go.

Digital Video

Adobe Flash – YouTube is one of my favorite sites and in order to see their videos, you’ll need the flash codec. Because of the sheer amount of content encoded in flash, this one of the most essential downloads on the list.

DivX – Flash is great because it has broad support, but I prefer DivX because it offers a high quality experience that you can take with you. You can download support for just the codec, but I prefer to download the DivX web player, so that I can watch Stage6 content as well.

Quicktime – I’ve never spent a lot of time using iTunes, but I do come across a lot of Quicktime movies on the net. If you already have iTunes, you won’t need this one, but if not, then this is a helpful plugin.

Real Player – I’ve had so many problems with Real Player, that I almost hate to download it, but there are too many interesting things in Real format, to completely ignore this format.

Music

Pandora – This is one of my favorite places to find new music. Over time, Pandora will start to figure out your interests and will suggest a lot of things that you don’t hear on commercial radio.

Foxy Tunes – This is a great program for finding and sharing music on the web. It not only allows you to search for cool music, but you can also insert FoxyTunes links into emails that you send to friends

Last FM – I prefer Pandora, but use Last FM because it is supported on my TiVo. I’m not sure how to describe a technology whose roots are based in scrobbling, but once you get the hang of it, you can start to find some really cool music.

Word Processing

OpenOffice – This open source software package contains all the features that you would expect to find in a high priced business software package. It works transparently with Microsoft files and is a great alternative for those on a budget.

Google Docs – I don’t think that it can replace Microsoft in the business world, but Google docs is a free alternative for home users. It allows you to create and share documents, spreadsheets and presentations.

Foxit Reader – Most people use the Adobe reader, but I only turn to it as a last resort. Adobe’s reader is an important program to have too, but it always takes too long to load and asks me if I want to update way too often. Instead I stick to Foxit and no longer have to wonder if my system will crash when I’m closing a .pdf file.

Calendar

Yahoo! Calendar – When choosing a calendar system it’s important to choose carefully, because the more time that goes by, the more you will be locked into that system. At this point, I have most of my important dates scheduled on Yahoo!, but still yearn for a better solution that offers me true data portability.

30 Boxes – If you love Ajax, you’ll be a fan of 30 boxes. The site allows you to open up your calendar to the social web. This is helpful for planning and sharing events. It’s an interesting concept, even if I’m still not ready to turn over my schedule to bill collectors and ex-girlfriends.

Games

TripleA – I highly recommend downloading this one, but don’t blame me if you drop out of society from playing it. TripleA is an Axis & Allies emulator that replicates the original game to perfection. It’s entirely fan built and is a great resource for playing out your own World War II fantasies.

FreeCiv – Sid Meier’s Civilization game had a huge impact on video gaming and this program validates it’s place in the pantheon of PC based programs. The program is a Civilization emulator where you can raise and develop your own society. I always try to be nice, but invariably, I end up attacking my neighbors.

ZSNES – This is a great open source emulator for replicating old arcade games. It won’t come in handy, if you want the modern day gaming experience, but it is useful if you ever wish that you could go back and play games from your childhood. Finding the games can be a little tough, but reuniting with an old friend, can make the journey worth it.

Peer 2 Peer

Limewire – If you don’t want to spring for the pro version, Limewire can be a little spammy, but it’s still a good resource, for those interesting in taking a bite of the forbidden fruit.

Emule – Another powerful P2P client. It doesn’t have access to the largest number of files, but it does offer a clean interface and is a good resource for when you can’t find things on the other P2P networks.

Bit Torrent – It’s one of the most popular programs on Download.com for a reason. This robust p2p system allows you to download and share tiny bits of content from multiple users at once. This helps to speed up the download times and helps to get around some of the uploading restrictions.

Fox Torrent – Fox Torrent isn’t as fast as the original Bit Torrent software, but it’s easy to use and makes downloading a breeze, when you don’t mind waiting for the content. The software integrates nicely into the Firefox browser and adds bit torrent capabilities to an already powerful internet browser.

Entertainment

Stumble Upon – I’m not a huge fan of the toolbar plugins, but I make an exception for this one. You can find some amazing stuff on StumbleUpon. It’s a great time killer, if you are ever bored and still have access to the internet.

Search

Wikipedia Firefox Plugin – I like to use the search bar that is built directly into the Firefox browser. The default supports Google, but there are a lot of other sites that will let you install plugins on your browser. It’s probably a good idea to double check the facts that you find on Wikipedia, but this plugin, makes easy to search the site, without having to go directly to their home page.

Stage6 Search – DivX Labs has built a plugin for Firefox and IE browsers, that allows you to search the Stage6 website, directly from your browser. I’ve found that this plugin comes is especially helpful, when I know that I’m looking for video content.

Del.icio.us – Most of the time, I prefer to use Google, but Del.icio.us can help you find articles that wouldn’t show up in simple keyword searches. I never know quite what to expect, but Del.icio.us search results tend to focus less on style and more on function.

Technorati – I love Technorati, even though the site only seems to work part of the time. I’d like to find another blog search plugin, but this is the only one that I know about.

MusicPortl – This search plugin allows you to enter the name of just about any artist and you can instantly find a wealth of information on your favorite band. MusicPortl aggregates their information so that you can see the latest YouTube clips, blog entries and Wikipedia information. This is a must, if you enjoy researching music.

Spout – If you love movies, you’ll love Spout. The site is a great resource for finding out information about your favorite films and for connecting with other film fans. This firefox plugin makes it remarkably easy to focus exclusively on movies, with your search results.

There are a lot of programs on this list, but I’m sure that I’m still missing some of the most important ones. f you know of any other services that should be included on this list, feel free to contact me or leave a comment and I’ll keep this post updated with other helpful programs that people suggest.

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TiVo’s Pay Per Post Hook Up Turns Into One Night Stand http://davisfreeberg.com/2007/10/08/tivos-pay-per-post-hook-up-turns-into-one-night-stand/ http://davisfreeberg.com/2007/10/08/tivos-pay-per-post-hook-up-turns-into-one-night-stand/#comments Mon, 08 Oct 2007 20:08:30 +0000 Davis http://davisfreeberg.com/2007/10/08/tivos-pay-per-post-hook-up-turns-into-one-night-stand/ It's TiVo TimeTiVo latest hook up with Pay Per Post is beginning to look less like a relationship and more like a one night stand, after the company responded to criticism of the program, by asking “postees” to pull the TiVo ads off of YouTube.

In fairness to TiVo, there is evidence to suggest, that they had intended these ads to carry a sponsored by TiVo disclaimer, but due to quality control issues at Pay Per Post, the ads were leaked without the proper disclaimers.

Even though I think that TiVo made a mistake by partnering with Pay Per Post to begin with, killing the campaign was the right antidote for dealing with this poison in our community. There will always be times when companies make mistakes, but it’s how they react to those mistakes that define who they are and in this case, TiVo made the right move by deleting the campaign.

By moving quickly to kill the campaign, TiVo demonstrated that they are willing to listen to their community and take action, even when they’ve misjudged the rules that their community plays by.

In the long run, this won’t represent more than a five second skip back in the history of TiVo, but I do think that other companies can learn a valuable lesson from TiVo’s experience.

User generated content is sexy and it’s tempting to try and manufacture buzz, but sooner or later, your customers will find out that you are gaming the system and they will attack. Steve Rubel said it best, when he recomended that marketers be careful about trying to manipulate the social web.

“Digg, Reddit, del.icio.us and other collaborative news sites are like Bengal Tigers. They’re beautiful to look at and admire, but they’re very dangerous to touch. If your stories end up landing on these sites, then terrific. Be happy. Include the metrics in your coverage reports. But seeding PR links is trouble waiting to happen, especially as these communities become barraged with spam and the users’ sensitivity meter goes to code red.”

If your brand has no value, then there may be no place to go but up, but if you think that there is any equity in your brand, then smart marketers will think twice before supporting this tumor on the world wide web.

Even if there were an upside to astroturfing YouTube with fake ads, this controversy alone should make companies rethink their support for the Pay Per Post brand. If by partnering with the company, you end up damaging the reputation of your brand, then what have you really gained by paying people to create fake testimonials?

If I was an ad exec and my marketing consultant suggested Pay Per Post to me, I would fire them and find a marketing firm that has better ethics and an understanding of what it really takes to build grassroot support. Instead of uploading fake ads to YouTube, TiVo would have been better off, by having someone search YouTube, LiveJournal, Blogspot and MySpace for real TiVo testimonials and then leave comments thanking them for the support.

There are lots of times when I make suggestions for TiVo and while not everyone of them is a great idea, I can tell you that I would freak out if someone who worked for TiVo, left me a comment validating an idea and promising to consider it as a future development. Even if TiVo never implemented my idea, knowing that someone from the company took their time to consider it, would be exciting enough. This isn’t astroturfing, this is interacting and responding to your customers.

Fake ads, will always run the risk of blowing up on you, but by being open and transparent with your fan base, it’s not that hard to turn happy customers into viral customers. Instead of supporting companies like Pay Per Post, businesses should instead be thinking about how to engage their existing fans.

While you may or may not agree that the ethics behind Pay Per Post are deplorable, it’s clear that the company is a lightning rod for criticism. Whether or not that criticism is fair, should be irrelevant to marketers. There are some who believe that even bad publicity is good publicity, but I don’t think that anyone wants to see their brand dragged through the social mud. It’s exciting to see grassroots support for your products, but if you are going get into the same cage as the tigers, then you shouldn’t be surprised when they turn on you and attack. If some PR hack recommends Pay Per Post as a way to build buzz, do yourself a favor and go hire someone who knows what they are talking about.

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TiVo Has Hard Drive Failure – “Hooks Up” With Pay Per Post http://davisfreeberg.com/2007/10/03/tivo-has-hard-drive-failure-hooks-up-with-pay-per-post/ http://davisfreeberg.com/2007/10/03/tivo-has-hard-drive-failure-hooks-up-with-pay-per-post/#comments Thu, 04 Oct 2007 04:49:21 +0000 Davis http://davisfreeberg.com/2007/10/03/tivo-has-hard-drive-failure-hooks-up-with-pay-per-post/ Bad TiVo No RemoteOver the years, I’ve seen a lot of different TiVo marketing campaigns. Some of them have been great and some of them have been bombs, but TiVo has never been afraid of taking risks, especially when it comes to generating publicity. Whether it was their funeral for the VCR or their ad throwing a TV exec out a window, they’ve been able to get pretty good bang for their buck, from the social web.

Despite my normal enthusiasm for TiVo’s PR stunts, their latest campaign has been a little over the top, for even my tastes. It started in late August, when TiVo issued a press release that declared that their new TiVo HD box, had all the features that people expect from a perfect companion. When I first read the release it was so syrupy, I could barely finish it.

I even almost wrote a snarky blog post, where I was going to point out that despite their claims, I’m actually looking for something a little bit different from my “hook ups”, then the family friendly criteria that they included in the PR fluff. Things like someone who won’t freeze up on me after I had been out drinking with the boys or someone with a pair of really big hard drives ;) or a companion that doesn’t get jealous when I play video games.

I ended up getting distracted and never wrote my post, but when I saw TiVo issue another lovefest press release, I just rolled my eyes and figured that I was in the wrong demographic to ever understand this one.

Normally, I wouldn’t have thought much more about this campaign, except while I was surfing YouTube, I came across several clips that appeared to be fan made videos expressing their excitement for the HD TiVo product. At first I actually thought that these were made by TiVo customers. There is definitely an indie feel to them. One of them actually does an amusing simulation of the world from TiVo’s perspective It wasn’t until I got to my my favorite video of the bunch :-) that I finally figured out why there was such a sudden rush of TiVo videos on YouTube. Of all the clips out there, this is the only one that I could find, that was honest enough to at least identify that it’s part of the Pay Per Post program.

Pay Per Post has been a very controversial company from the start. Because they pay individuals to make fake user generated content, that are really covert advertisements for sponsors, the FTC has even expressed some concerns over the truth in advertising issues related to their service.

Now I don’t think that there is anything wrong with TiVo paying someone to make commercials for them, but there is something wrong with conning consumers into believing, that they are witnessing legitimate testimonials when in fact, it’s really just a shill that is being paid to tout the product. If TiVo were requiring these video bloggers to put Pay Per Post on every video, I wouldn’t even see this as controversial, but 5 of the 6 ads that I saw, carried no warnings.

In the past, I’ve appreciated TiVo’s edginess in how they advertise. It may not always be to my liking, but I don’t mind them taking risks. This time though, they’ve crossed the line. By not clearly identifying this content as an advertisement, they have insulted the grassroots community that already spends so much time and effort evangelizing TiVo’s brand. By polluting their community with this vaporous buzz, they damage the credibility of every piece of user generated content, even if it really is being made by a legitimate fan.

If TiVo already had a terrible reputation or couldn’t get buzz to begin with, I could understand why they would stoop to this level, but their customers already love their products and spend plenty of time gushing over each and every little development. With as PR savvy as TiVo has been, it puzzles me why they would risk this kind of damage to their reputation, just so that they could get a few more videos up on YouTube?

If they really are proud of supporting these artists, why not put a big TiVo logo on the front of every clip and let YouTubers know that they are watching paid programming? If this was on the up and up, TiVo wouldn’t be hiding this, but because they want it to appear authentic, they’ve choosen to support Pay Per Post and let them do the dirty work.

As a member of the TiVo community, I love it when I see cool fan creations. It’s neat to be able to connect with other people who feel just as passionate about the TiVo experience. Over the years, TiVo has gotten a tremendous amount of grassroot support from the social net and to betray that trust is a huge blunder. By choosing to “hook up” with Pay Per Post for their latest ad campaign, they have introduced a toxic poison into the TiVoSphere that can only make it sick. TiVo needs to end this questionable form of guerrilla marketing, before they damage the credibility of their fan base any further.

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Zooomr Zips Where Others Zag: Adds RSS To Ziiipline http://davisfreeberg.com/2007/08/24/zooomr-zips-where-others-zag-adds-rss-to-ziiipline/ http://davisfreeberg.com/2007/08/24/zooomr-zips-where-others-zag-adds-rss-to-ziiipline/#comments Fri, 24 Aug 2007 18:22:14 +0000 Davis http://davisfreeberg.com/2007/08/24/zooomr-zips-where-others-zag-adds-rss-to-ziiipline/ ZiiiplineHot Donkey! I logged into my Zooomr account this morning and saw that they’ve released an RSS feed for my zipline. They’ve also paginated zipline for Zooomr pro accounts. This allows me to see more than just the last 20 or so entries from my contacts.

If you haven’t tried out zipline yet, you really should check it out. It’s like Twitter, only for photos. When Twitter first started to take off on the web, I couldn’t figure out why people would want to post mundane details of their life, but after playing around with Zooomr’s zipline over the last month or two, I’ve started to really appreciate the benefits to being restricted to just 250 characters.

For those of you who read my blog regularly, you’ll know that I have a tendency to be a little long winded with some of my posts. I try to write shorter blog entries, but once my mind gets preoccupied on a topic, it’s hard for me to keep things short and sweet.

For the most part, I think that people prefer unique analysis over a couple of sentences and a quick link, but the downside to this is that because of the amount of time it takes to write my posts, there tend to be a lot of topics I want to write about, but never get around to (or at least I don’t get around to it until it’s too late.)

Right now readers can use my Profilatic mashup if they are really interested in what I’m bookmarking and digging, but there is no way for me to explain why something might be of interest or my thoughts on a web page that I’m clipping.

When I first started using Zipline, it was really hard for me to get used to the 250 character limitation, but the more I use the service, the more I appreciate that it forces me to be concise.

Because the RSS feeds are so new, I suspect that it will take a few weeks before Zooomr gets the bugs worked out, but the major benefit of having access to my Zipline feed is that it allows me to integrate Zipline content into other areas of the web.

As an experiment, I’ve installed the BDP RSS Aggregator on DFDC. This allows me to mashup my zipline directly into my website. Right now, Zooomr hasn’t released an RSS feed for all of my friend’s ziplines, but by combining my own feed with the BDP RSS aggregator, it at least allows me to broadcast my zipline on the net and on other sites that I use.

I’m still having some problems with how the feed is formating, so I’ll still be experimenting with other widgets, but keep an eye on this feature because I plan on using it more regularly in order to showcase the many great blog articles that I come across each day.

As more users begin to experiment with the feed, I’m sure that we’ll see the community figure out even better ways to mashup the content, but for now this small feature allows you to do some pretty creative things with the technology that is already out there. If you’d like to subscribe to my zipline feed directly, you can find it here.

Update – I’m having trouble getting the feed to display right. The photos look good, but my posts are showing up twice. I know that there is a way for me to use html and tell wordpress to strip out the titles, but I’m still trying to find the code for it. If any one has any suggestions on a plugin that will let me publish just the content of the posts and not the headlines, feel free to make suggestions. In the meantime, I’m going to take the zipline down while I figure out a way to improve the cosmetics.

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DivX Goes Shopping: Buys Fine Art And Search Technology http://davisfreeberg.com/2007/08/21/divx-goes-shopping-buys-fine-art-and-search-technology/ http://davisfreeberg.com/2007/08/21/divx-goes-shopping-buys-fine-art-and-search-technology/#comments Wed, 22 Aug 2007 07:07:14 +0000 Davis http://davisfreeberg.com/2007/08/21/divx-goes-shopping-buys-fine-art-and-search-technology/
This amazing video was created by Mogcaiz. You can see more of his work at DeviantART.

Last week DivX released their 10-Q and while I was able to find the time to tune into their conference call, I didn’t get a chance to read through the actual document until this past weekend.

In the filing I didn’t find any bombshells or new lawsuits, but there were a few details on some of DivX’s recent acquisitions that did reward my curiosity. According to the filing, DivX made two purchases over the last quarter.

“In May 2007, the Company made an equity investment in a private corporation that aggregates and distributes art via its web community and facilitates an open forum where artists can exhibit their artwork and build community around that art in an effort to drive commerce. The Company’s investment consisted of $3.5 million cash for which it received certain shares of the private corporation’s Series A Preferred Stock and entered into an advertising and marketing agreement. The Company has preliminarily allocated approximately $650,000 of the investment to the advertising and marketing agreement, based on its estimated fair value, and the remaining $2.9 million will be carried as an investment.”

DivX doesn’t name the actual artwork site in their filing, but since I already knew that they had purchased a piece of DeviantArt, this one wasn’t hard to figure out. Originally, I had thought that they were only partially behind the $3.5 million investment, but according to the filing, it looks like they put in all of the cash. DivX doesn’t disclose how much of a stake they got for their money, but they do disclose that it is less than 20%.

Without knowing the details behind the acquisition, it’s hard to determine whether DivX received good value for their money, but from a strategy standpoint, I really liked the acquisition. There are a lot of websites that can build a lot of traffic, but the question is at what cost. Newspaper websites get a ton of hits, but take away their print business and the business model can’t support the cost of writers, editors, staff, etc.

The great part about user generated content is that because it’s built around community, the customers are the ones that provide the content. In the case of DeviantArt, they’ve built a very positive environment around people who love art and by connecting artists together in this way they’ve been able to develop a community where creativity thrives.

If DivX wanted to sell art they could have spent $3.5 million on Google Adwords and bought the traffic, but they weren’t interested in selling art, they wanted access to the artists themselves. Through their investment, they will not only get access to DeviantArt’s traffic, but they’ll get the right kind of traffic visiting Stage6, content creators who are looking for venues to showcase their digital creativity. The acquisition won’t do anything to bolster their bottom line, but it does further connect them to the larger web community.

The second acquisition in the 10-Q was a little bit harder to figure out. It’s related to improving the search functionality of Stage6, but DivX didn’t release a lot of details on whose technology they actually purchased.

“In July 2007, the Company acquired all of the assets of a limited liability corporation engaged in real-time digital video processing for the purposes of producing enhanced video search and discovery services. The total purchase price for the acquisition is up to $4.25 million comprised of an initial upfront cash payment of $2.0 million, which the Company made in July 2007, and subsequent cash payments up to $2.25 million upon the achievement of certain technology related milestones. The Company will account for the acquisition as an asset purchase and periodically review for impairment.”

Without knowing whose technology they bought, it’s hard to get a feel for how powerful their new search will be, but I’m glad that they are taking steps to improve their search functionality. Search on Stage6 is one of the many areas that is still in “beta” mode. Sometimes you’ll find what you want, but it’s usually more by luck than query. I’d describe the issues in greater detail, but Neillithan has made a video that addresses the deficiencies better than I ever could.

As Stage6′s media collection continues to grow, relevant video search will be crucial in helping to make sense of it all. Searching by tags and keywords works for now, but it’s far from perfect. I don’t think anyone has perfected video search, but EveryZing is the furthest along and even they still have high failure rates on their speech to text functionality.

One of the frustrating parts about finding details is that they rarely answer more questions than they raise. While I was pleased to find out more about DivX’s search solution, without knowing who they actually acquired, it’s hard to determine how important this could be.

I have a theory about who DivX may have picked up, but I have to qualify it as even more speculative than my normal unreliable gut feelings. It’s really nothing more than a wild guess based upon the criteria that they lay out. Still, I’ve never been one to be shy about speculating even when I’m probably wrong, so here is my wild guess on who DivX may have acquired.

Of all of the companies that fit this criteria, Veatros seems the most likely candidate to me. Their site went offline in July, but before it went down, I know that they were looking for strategic partnerships for their search technology. One of their former employees, has his resume up on LinkedIn and I thought it was interesting to see him leave around the same time that a DivX acquisition would be taking place. According to his LinkedIn profile, he describes Veatros as having the fastest video search ever developed.

“Startup technology company spinning out of the University of Kansas with the fastest video search technology ever developed. Veatros technology can identify a video clip of as little as 2-3 seconds in length from a database of tens of thousands of hours in real-time.”

Susan Gauch is the owner of Veatros and she would certainly have the expertise to implement video search on Stage6. Veatros is really a side project for her, during her day job,she is an accomplished professor at the University of Kansas. Her entire career has been dedicated to researching and improving search. Her research has already been referenced in several video search related patents.

There’s no way for me to be sure if my guess is right, but if it’s not Veatros, then I would suspect that it would a company with similar characteristics. Irregardless of who the mysterious LLC turns out to be, improving their search is something that I’m glad to see DivX focusing on. Better content filters, mean a better experience for anyone visiting their site. If they can personalize video search, then the content on Stage6 will keep getting better.

Neither one of these acquisitions is a major move on DivX’s part, but it does give us some insight into part of DivX’s growth strategy. The video search investment makes sense from a tactical standpoint, but the DeviantArt purchase is far more interesting.

The passive nature of the investment raises the possibility that DivX is developing a venture capital arm to their business. They’ve already incubated Stage6 and with steady cash flow coming in each quarter, Divx is in a great position to make private investments where they see opportunities. It’s too early to know how aggressively DivX will pursue this aspect of their business, but if they continue to invest in emerging technology, things could certainly start to get interesting.

Update – It looks like my wild guess turned out to be right, but I may have been wrong about how they plan on implementing it. DivX released a press release this afternoon confirming that Veatros was in fact the company that they had acquired. In the press release, DivX says that their plan is to integrate the technology into their connected platform. Interestingly enough, they don’t mention Stage6 once in the release . . .

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Davis Freeberg’s Site Of The Week http://davisfreeberg.com/2007/08/21/davis-freebergs-site-of-the-week-26/ http://davisfreeberg.com/2007/08/21/davis-freebergs-site-of-the-week-26/#comments Wed, 22 Aug 2007 06:57:48 +0000 Davis http://davisfreeberg.com/2007/08/21/davis-freebergs-site-of-the-week-26/ 1, 2, 3, 4, I Declare A Kitten WarNormally, I’ve got a pretty anti-pet policy in life, but even I had to vote for this week’s winner of the site of the week contest. KittenWars is a website where pet owners upload photos of their kittens and where web surfers can then vote on which ones are the cutest.

I usually try to run and hide when people want me to look at photos of their fuzzy little furballs, but this is a cat fight I don’t mind taking part in. It’s like PickTheHottie, except for kittens.

I’m not sure why I’m so fascinated with games, but I’ve always been a big fan of any site that offers fun contests or challenges. KittenWars is no exception, there is something about the interactivity that really appeals to me. I keep telling myself that I’m going to click just one more time, yet I can’t stop voting on contest after contest. On the site, you can also find lists of the cutest (and not so cute) kittens on the site, but it was the voting that I found the most entertaining.

Congratulations to KittenWars for winning this week’s site of the week contest. The nominations for next week’s site are listed below, please vote in the sidebar. Feel free to contact me, if you’d like to nominate a site worth visiting.

WordPress Theme Generator

iBlocked

Rejected iPod Engravings

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Lycos Loses ‘Home Court’ Advantage: Patent Trial To Be Held In Their Own State http://davisfreeberg.com/2007/08/15/lycos-loses-home-court-advantage-patent-trial-to-be-held-in-their-own-state/ http://davisfreeberg.com/2007/08/15/lycos-loses-home-court-advantage-patent-trial-to-be-held-in-their-own-state/#comments Thu, 16 Aug 2007 02:22:43 +0000 Davis http://davisfreeberg.com/2007/08/15/lycos-loses-home-court-advantage-patent-trial-to-be-held-in-their-own-state/ The Battle Over Home Court AdvantageIt looks like TiVo, Netflix and Blockbuster will be packing their bags for Massachusetts, after they won the first of many legal scrimmages in their patent defense against Lycos. Lycos has asserted that all three companies have violated patents they own, on “information filtering technology.” The two patents that are at the heart of the case are related to the recommendation services that the companies provide.

After Lycos filed their lawsuit against the trio, ChoiceStream (the company that created Blockbuster’s suggestion service) filed a separate lawsuit, to have the patents thrown out.

In their lawsuit against Lycos, they argue that the patents are invalid because of obviousness and prior art. Because Choicestream filed their own lawsuit in the Massachusetts’ court system, TiVo, Netflix and Blockbuster sought to have their case transferred there as well. I’m not familiar enough with the legal subtleties to know why Lycos originally opposed the motion, but with Lycos’ headquarters in MA, the judge found the request reasonable enough and granted the motion.

While this development in the case, is only a minor footnote in the larger dispute, the legal filing did contain more background on the case, as well as a few interesting side details.

It turns out that Choicestream may actually end up playing a pretty important role in how this gets resolved. In the legal filing the judge writes,“ChoiceStream has employees in Massachusetts who possess information relevant to this action, and Lycos has indicated that it ‘may need to take some discovery from ChoiceStream.’”

I haven’t read ChoiceStreams lawsuit against Lycos yet, but it wouldn’t surprise me if they did end up owning some prior art. A year ago, they filed an application for their own recommendation patent, so it will be interesting to see what ends up coming out at trial.

It also appears MIT’s Media Lab could be called to give testimony. Part of their research was used to reject some of the original claims on one of Lycos’ patents. Believe it or not, they’ve actually been publishing research on “information filtering” since the late 80′s.

While it appears that this case is heading for trial, there is always the possibility of a settlement. Even though Lycos filed their lawsuit on Jan. 3, they didn’t actually serve TiVo, Netflix or Blockbuster until April 30th because they were engaged in “settlement discussions” with the companies. Since they now appear to be squabbling over who gets home court advantage, those talks have likely cooled off, but it wouldn’t surprise me to see either side at the bargaining table, especially if things start to look bad for them.

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Stage6 Traffic Explodes: Every Dream Has A Price http://davisfreeberg.com/2007/08/10/stage6-traffic-explodes-every-dream-has-a-price/ http://davisfreeberg.com/2007/08/10/stage6-traffic-explodes-every-dream-has-a-price/#comments Fri, 10 Aug 2007 12:03:54 +0000 Davis http://davisfreeberg.com/2007/08/10/stage6-traffic-explodes-every-dream-has-a-price/ Every Dream Has A PriceDivX reported their second quarter earnings yesterday and from a financial perspective, there really weren’t too many surprises. The core business remains strong, but Stage6′s growth is certainly starting to impact earnings. The company ended up beating Non-GAAP expectations by a penny, while revenue came in slightly above the $18 million, that the analysts had anticipated. The company guided toward higher revenue expectations for the 3rd quarter, but reined in analyst expectations for the fourth.

From a strategy perspective, things were much more interesting. Lots of exciting news to digest. On the call, DivX addressed their opportunity to gain market share in their core licensing business, the future of DivX connected and how other emerging technologies could fit into that, and perhaps most importantly, the reasoning behind their plans to separate Stage6 from the larger company.

Of all the strategies discussed, there was one that surprised me the most though, DivX has made the decision to try and bury their hatchet with Hollywood, in an attempt to get DivX DRM blessed by the studios. I’m less than optimistic on management’s chances, but if they could pull it off, it would make DivX Connected a pretty compelling solution.

Trapped Between DVD and VOD

The DVD player market continues to account for the majority of DivX’s core licensing revenue. At the end of March, DivX had 32% global penetration of the DVD player market. This was up from 21% from a year earlier. During this quarter, $14.2 million of their revenue represented royalties from their OEM partners. Sony actually accounted for over 10% of their licensing revenue and I still can’t find Sony DivX DVD players in the US.

At this point, DivX has achieved 90% penetration levels in France, Spain and Russia. In the US, the percentage of DVD players that included DivX doubled over a year ago and is now at 28%. In Japan, they still only have an 11% penetration level, but this is up from 5% a year ago. Over the last year, they’ve been able to successfully renew their contracts with their top OEMs and have been able to maintain pricing levels.

By growing their market share for the DVD player market, it has allowed DivX to continue to post impressive year over year growth, even though it’s clear that the DVD has peaked. Right now is an awkward time for DivX because there are so many uncertainties as to how the VOD market will end up shaking out. There are many pundits who are worried that DivX won’t be able to replace their DVD revenue as it tapers off.

To me, this seems a little foolish and is a bit like being afraid of the boogie man. The DVD market will not disappear overnight, it will live longer than the VCR survived. As people migrate to digital TV, DivX is in an excellent position to benefit from that. If their OEM partners see that there is no more demand for DVD players, it will make DivX certification an even greater necessity for them.

The transition to VOD will eventually happen on a mass scale, but it will still take years before the next generation of TV gadgets hits the mainstream.

When Greenhall was asked about how long he thought it would be, before the public started to move from DVD players to connected devices, he told analysts that because DivX’s ecosystem was so dependent on their OEM partners, that it was hard to forecast the transition, but that when it happens, the revenue will come quickly because their partners produce goods for the mass markets.

Emerging Technologies Will Open New Doors

Part of what makes DivX such a question mark, is the sheer size of their addressable market. They’ve established a nice business in the DVD market, but now want to expand DivX to a whole host of devices. During the earnings presentation, Hell listed the following technologies as a few of the markets that are on their hit list; Mobile devices, set top boxes, digital still cameras, game consoles, portable media players and digital televisions.

Of these potential markets, the cell phones have the most potential. Over this quarter, Samsung announced their second DivX enabled phone and will be selling the phone in the Chinese market. Since their first Samsung phone announcement, DivX has seen a lot of interest in working with other cell phone manufacturers.

Their OEM partners are excited about the technology and are coming to them for access. There will be more models announced in the future and while they didn’t give a time line, management seemed optimistic that the announcements would come soon.

On the set top front, during the quarter Divx announed that both St Microelectronics and NXP were both developing chips for a DivX set top box solution.

The box will allow you to plug in an external hard and play DivX files directly on your TV. This helps to solve the problem of getting DivX content to the living room, but still doesn’t help to add to the DivX content eco-sphere. You can’t take the TV off the box, but at least you can bring DivX to it. Hell also said that there was one more set top chip deal that hasn’t been announced.

Hell also included DivX HD as part of the emerging category. HDTV has been one of the hottest growth areas in consumer electronics. Users are starting to revolt. People love the DivX HD teasers on the stage6 website and from (cough) “others sources” on the innerwebs, but they can’t get it to the TV without some kind of a media center.

DivX wants to license their HD technology on top of HD-DVD and Blu-Ray players, but I think that they’d have a much better shot at convincing their OEM partners to sell a low priced DVD player with “DivX HD.” included. With as much as the studios are charging for the next gen players, a box with DivX HD certification and a dirt cheap price point, would appeal to consumers who know better than to try and pick a side in a Hollywood format war.

DivX Connected: Bringing Partners Into The DivX Community

DivX has talked quite a bit about their Connected initiative, but they’ve always left things a little sketchy on the details. Is it a box, is it not a box? Who could really tell, but after launching a prototype of their connected solution for beta testing, the company is now starting to open up on the details. DivX Connected can be a lot of things, but they see it being a similar experience to Apple TV, except minus the high cost and the restrictions on content.

The whole concept is really a lot larger than the prototype box. It’s about bringing a diverse set of partners together, in order to create a seamless experience for consumers. Hell describe their efforts on the program during the call. “We are engaged in a large cross section of partners to implement DivX connected on existing devices. From connected DVD players and digital televisions, essentially any devices that has connectivity and DivX playback ability.”

This philosophy of openness extends even beyond the hardware devices and includes the companies that are trying to sell internet video, as well as the content producers themselves.

“going forward we will focus on a broad range of content solutions through a powered by DivX model, working with a variety of partners to deliver content. In this model Stage6 becomes one of many partners using our technology. To make this happen we are doing two things, First we are increasing our focus on premium content and re-engaging in discussions with major content providers who want to take advantage of our significant footprint. Secondly, we’re building out our existing video on demand product platform so that we can offer out of the box scalable solutions to any distributor of digital content from online retailers to network operators.”

This is a big shift for DivX and one that could have important ramifications. From early on, DivX has bumped heads with the studio fat cats. In the past, DivX has relied on their users to distribute their codec through the P2P networks, but now that the studios are beginning to warm to internet delivery, DivX is seizing on this opportunity, in an attempt to beef up the content that they can offer their own consumers.

Right now, businesses don’t pick their codecs based on quality, they use the ones that the studios tell them they are allowed to use. People like to complain about internet video services not supporting Apple, but that is because Apple refuses to license their codec to anyone. DivX wants to go the other route to try and work with everyone, but until DivX DRM can get Hollywood’s blessing, they’ll be frozen out of the mainstream market.

I’m skeptical that the studios will be particularly eager to work with DivX, but if they could pull it off, it would open plenty of doors for them and would certainly be a game changer for the company. On the call, Hell said that they are trying to go after this opportunity in two ways.

“First we’re going to be focusing on the studios themselves and other providers of premium content to get adoption and format approval from them. In addition, we’ll also be working with other content distributors, folks like Amazon, Netflix, Movielink, etc. so that we can enable their platforms and again we’re moving into a role here where we don’t want to be a storefront, in terms of the DivX Corp business. We’re looking to power other people’s platform.”

It’d be easy for DivX to try and sell content themselves (in fact that’s part of what Stage6 is about), but this is a low margin business and DivX is better off letting others fight over the content. By charging for access, it leaves room for much healthier profit margins. It also gives them a greater exposure to consumers, than anything that they could accomplish independently.

Right now, Apple wants to lock everyone else out of the market, but this is why AppleTV is such a weak platform. Not only do you pay for it, but then you have to buy only their content. DivX wants to see a world where they can bring Blockbuster and Netflix together and let consumers decide which service they want to use. By maintaining their commitment to keeping their platform open, it improves their competitive position over Apple and Microsoft, but none of that matters, until Hollywood agrees to let companies distribute video content in DivX’s format.

A Start-Up Trapped Beneath The Microscope Of Public Scrutiny

Since the launch of Stage6, it’s been an unbelievable hit. The growth has shown no signs of slowing. Since it’s launch, it’s help to push 35 million DivX web player downloads, but hasn’t generated much in the way of direct revenues. For now Greenhall wants to build up the community, before trying to figure out how to make money off of it.

“Like many sites in a similar stage of their life cycle, we’re not actively trying to monetize this user base, yet. We believe that building a community first will enable us to explore a number of different revenue models in the future, but building the community absolutely comes first.”

Since the the site’s launch, the community has responded enthusiastically to the video sharing portal and what started out as a reasonable $1 million marketing expense during the 1st quarter, has now swelled to a $2.4 million bill for this quarter (of which 70% is bandwidth.) Next quarter DivX estimates that they’ll need to spend $4.5 million and another $5.4 million in the fourth quarter. Stage 6 has about 20 -30 DivX employees that work on the site.

With the traffic and the costs starting to add up, it’s no wonder that the company wants to raise outside funds and operate Stage6 as a separate entity. During the call, their CFO, Dan Halvorson gave the reasoning behind the plan,

“Most businesses, at the same point in their life cycle as Stage6, simply wouldn’t be public or part of a public entity. They need to make investments that don’t have immediate tangible ROI or have too strong an impact on a company’s balance sheet to justify. We believe strongly that Stage6 has built a foundation that not merely be sustained, but rather amplified. As such, our board and management, thought it would be best to value our alternatives and one viable option is that Stage6 would be separated out and run as a private company.”

DivX said tat they’d like to finish the break up as close to the end of the year as possible. I’m not sure if this is for tax reasons or strategic purposes, but in the meantime, they are estimating that they’ll need to put another $10 million into the site. Greenhall wasn’t sure, on how they’d end up valuing Stage6, but was open to possibilities and wanted to do what’s best for DivX shareholders.

They may look for a private equity deal or an institutional investment, but they want to keep their options open. After announcing their intent to separate the the two companies, they’ve already received inquiries from financial and “strategic partners” on making an investment.

Overall, DivX didn’t blow anyone’s socks off this quarter, but they did continue to show that their business is healthy and that their business model is valid. They also continued to demonstrate their commitment toward investing in their growth. The extra R&D may end up bothering some shareholders in the short run, but once they break the two companies apart, they’ll have two businesses exposed to the white hot internet video sector, instead of a house divided.

Disclosure: I own stock in Netflix

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Davis Freeberg’s Site Of The Week http://davisfreeberg.com/2007/08/07/davis-freebergs-site-of-the-week-24/ http://davisfreeberg.com/2007/08/07/davis-freebergs-site-of-the-week-24/#comments Tue, 07 Aug 2007 15:43:08 +0000 Davis http://davisfreeberg.com/2007/08/07/davis-freebergs-site-of-the-week-24/ Walk This Way

This week’s winner of the site of the week contest was Walk2Web. Walk2Web is a site that allows you to analyze outgoing links on a particular website or blog. On the site, you enter a domain name and then you can trace how that site might be connected to others.

This functionality can come in handy in a couple of ways. On it’s most basic level, you can use the site to find new web pages, that may be relevant to sites that you already pay attention to.

On a deeper level, you could also use Walk2Web to help identify connections that wouldn’t seem obvious without being able to see the big picture. While, some of the connections don’t reveal anything, if I wanted to learn more about a blogger’s social network, I’d try running their site through Walk2Web, in order to see which websites are showing up on their radar.

In order to play around with the site, I decided that I’d play a game of Six Degrees of Davis Freeberg, in order to see who I might be connected to, in the vast maze that makes ups the innerweb.

When I put my domain into the site, it gave me several paths to go down, but I decided to pick, Just Talking Out Loud as my first step. From there, I discovered Andreas Viklund’s internet blog. Andreas is a 27 year old blogger and web developer from Sweden.

From there, I found Kelly’s World. The cats on Kelly’s World are a little bit freaky, but I did like the technology and video game coverage on the site. On Kelly’s World, there is a link to site named 54 North.

54 North is still in development, but there is an interesting link to Centro Flamenco on the web page. Centro Flamenco is an oasis for Salsa dancers. They dance company was founded in 1989 and performs throughout Canada each year. Salsa dancing isn’t my particular cup of tea, but that’s only because I was born with two left feet.

On Centro Flamenco, there was a link to web photographer, David Cooper. I’m not sure if David has set up a Zooomr account just yet, but on his website you can see some examples of his work.

Normally, David’s website isn’t something that I would stumble across on the net, but thanks to Walk2Web, I was able to see that I’m actually connected to his site in a convoluted way. Part of what makes the web such a unique experience is the ability to travel deeper and deeper into a story. By creating an easier way to understand the link relationships that exist between websites, Walk2Web has made a filter that is entertaining and useful.

Congratulations to Walk2Web for winning this week’s site of the week contest. If you’d like to nominate a web page for the site of the week, please contact me and I’ll be happy to look at it. The nominations for next week’s site are listed below, please vote in the sidebar.

Six Degrees Of Kevin Bacon

Pfigg

Cell For Cash

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Ebaum Sells Out: Pockets $20 – $50 Million For 10 Million Visitors http://davisfreeberg.com/2007/08/06/ebaum-sells-out-pockets-20-50-million-for-10-million-visitors/ http://davisfreeberg.com/2007/08/06/ebaum-sells-out-pockets-20-50-million-for-10-million-visitors/#comments Tue, 07 Aug 2007 05:11:26 +0000 Davis http://davisfreeberg.com/2007/08/06/ebaum-sells-out-pockets-20-50-million-for-10-million-visitors/

Last Thursday, we saw another major deal in the internet video space when Eric Bauman agreed to sell Ebaum’s World for anywhere between $17.5 – $50 million, depending on performance considerations.

The site was purchased by a small company named Handheld Entertainment (ZVUE). Handheld is a microcap company that makes a low end mp3 player. Over the last 9 months, they’ve had a pretty rough run in the market. After announcing the acquisition of Dorks.com for $1.5 million last November, the company saw their share price spike to $7 per share before settling to a little under $2, prior to the Ebaum purchase.

During that time, the company also purchased Putfile for $7.1 million, FunMansion.com for $1.1 million and Yourdailymedia for $1.06 million. By themselves, these sites seem trivial, but collectively, the traffic does start to add up.

Before the Ebaum purchase, I had never heard of Handheld, but over the weekend, I dugg into their conference call announcing the buyout and found a lot of good video stats buried in the presentation.

-Ebaum’s traffic is incredibly sticky. They average close to 22 page views per visit. Of all the video sites, they are ranked #2 in the amount of time that their users spend on the site. #8 in terms of traffic. With Nielsen changing the way they measure traffic, this could add an edge in attracting advertisers.

-Ebaum averages about 3.2 million unique visitors per week. A lot of these visits come from organic traffic. They estimate that 65% of their visits are repeat visitors. To help put this number into perspective, on Local.com’s (LOCM) most recent conference call, they said that they were getting a measly 10% of their traffic from organic sources. This is an important number to keep an eye on because when you have to buy your clicks, it eats into profitability.

-The number of 18 – 35 year olds that visit the site each week, is the same number that tunes into CSI or Law and Order each week. I found this stat to be the most fascinating. As media continues to develop, these micro communities will play an increasingly important role in media. I don’t have any data to back it up, but I would bet that the 18 – 35 year olds, who are visiting Ebaum’s World, are the ones who are less likely to be watching Law & Order to begin with.

-Handheld paid 6 times EBITDA for the site. If the site quits making money, then Bauman’s piece would be capped at the $17.5 million. If it does earn money, then he can earn another $27.5 million from a 60/40 split of the earnings. As part of the deal, Bauman will end up owning 2.5 million shares of the company. These will vest over the next 3 years.

-Prior to announcing the deal, Handheld not only secured financing that shareholders are allowed to vote on, but actually priced the warrants at a premium (albeit modest) to the current share prices. I still don’t have a good handle on the full impact the warrants will have on the company’s capitalization, but I can’t remember the last time I saw a microcap company actually price a private placement deal above market, let alone secure financing that didn’t have complicated contingencies attached. This shouldn’t be all that unusual, but sadly it is.

-Ebaum’s World earned $5.2 million in revenue last year and $1.6 million in net income. Personally, the ads are a little too aggressive for me, but it apparently hasn’t stopped others from spending time there. While the ads can be spammy, they also appear to be quite profitable. $1.6 million isn’t a huge number, but it does prove that online video can make cash.

With any microcap stock, there is always a high degree of risk and over the last 9 months, Handheld investors have had to learn that lesson the hard way. While I do think that there are some legitimate questions about the company’s hardware business, after the haircut they’ve taken, it’s hard to argue that this isn’t priced in.

Between the Ebaum purchase and their past acquisitions, the company has developed an impressive portfolio of web communities. The challenge now, is to find cost synergies and better ways to monetize these impressions. Because of the uncertainties surrounding their business model and the complexities of their previous financing, it’s hard to know how to value this one early on, but it’s one that might be worth keeping an eye on, even if it’s just for the juicy online video statistics.

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Slicing And Dicing: DivX Considers Breaking Up Company http://davisfreeberg.com/2007/08/01/slicing-and-dicing-divx-considers-breaking-up-company/ http://davisfreeberg.com/2007/08/01/slicing-and-dicing-divx-considers-breaking-up-company/#comments Wed, 01 Aug 2007 17:26:22 +0000 Davis http://davisfreeberg.com/2007/08/01/slicing-and-dicing-divx-considers-breaking-up-company/ DivX LogoLast week, DivX dropped a bomb on investors after they announced that they were planning on divesting their Stage6 website and that CEO Jordan Greenhall would be leaving DivX, in order to run the new entity. The company promised to provide more information on their upcoming earnings call, but this unexpected bizarre move was too much for skittish investors to handle and Wall St’s initial reaction was to sell.

DivX investors weren’t the only ones who have been scratching their heads over the announcement. Coverage on the net, raised more questions, than answers. NewTeeVee interpreted the move as a sign that the video sharing industry was in trouble and was struggling to find a business model.

“This is bad news for video-sharing sites, showing they’re having trouble holding their weight without the subsidy of venture capital or Google-level resources. Stage6 appears to have been too much to handle for its moderately successful public company parent.”

Zatz Not Funny appropriately enough, titled his post, DivX Dumps Stage6, but described the spin off more as a divorce, than a child weaning itself from a parent. 24/7 WallSt offered an even more bearish assessment of the move and called the spinoff “more than strange.”

While I can’t argue that DivX’s decision isn’t unusual, I do think that the market may has misread the implications on this one. In thinking through how the spin off would play out, I’m of the opinion that the move makes financial sense in the short run, but have to question whether future growth is being sacrifice for short term gratification?

Wall St’s Fuzzy Math

Whether you are talking about business, baseball or technological synergies, it is often the case, that the whole is greater than the sum of its parts. This philosophy has driven mergers, it’s forged partnerships, it’s even saved industries from collapse. By working together, businesses are able to earn profits that would elude them otherwise.

What happens though, when things get turned upside down? When an investment in one part of the businesses, actually causes another part of the business to lose a greater value? This is the exact situation that DivX finds themselves in. The sum of their parts, is actually greater than the whole.

This creates an interesting dilemma for management, because the more they invest in growing their Stage6 business, the more it impacts their current shareholders. On one hand, they want to see this growth asset continue to be successful, but on another hand, each dollar they are spending is eating into precious net income.
Dirivixtized
Because DivX earns such a high profit margin on their licensing business, investors have been willing to pay 25 times their profits, even though their revenue is miniscule compared to companies with a similar market cap. While this works in DivX favor on the money they bring in, it also works against them on the money that they spend to develop new businesses.

DivX has already said that they plan on spending $5 million on Stage6 this year and with no signs of their growth slowing, I expect that this number will only go higher. While DivX does have plenty of cash that they can invest in the venture, even at a $5 million price tag, they are still sacrificing $90 – $125 million in market cap, by subsidizing the site.

Meanwhile, there is real value that is locked into the Stage6 brand, but it can’t be released because DivX’s licensing business is so much more valuable. So far, the analysts have been more concerned about Stage6′s costs, than the 10 million visitors who are using the site each month. Trying to get a premium valuation on Stage6 won’t be easy, but there are certainly things that DivX can do, in order to make the property more valuable.

One move that they have already taken has been to replace their DivX ads with paid banner ads on the Stage6 website. If DivX also includes their stake in DeviantArt in the spin off, it would also help to boost Stage6′s valuation.

Recently, Break.com sold a 42% stake of their site to Lionsgate at a rumored price tag of $21 million in stock. At this price, it would value Break.com at $50 million.

Stage6 and Break.com both receive similar amounts of traffic, but with DivX’s global brand, the superior codec, and a solution for getting into the living room, I think that Stage6 would command a premium to these prices.

If DivX was able to spin off Stage6 for $80 million, then shareholders would not only be able to realize that value, but because they would no longer have to pay the bandwidth, the increased earnings could add $90 – $120 million to their market cap. Add in the $150 million in cash and the current $300 million valuation on the core licensing business and you’ve gone from a market cap of $450 million as a whole entity to $650 million in market cap with the company smashed up into pieces. From a valuation standpoint, the two business work against each other, but separated, it should value DivX at $18 – $19 a share, using the current multiples.

Tortoise Vs. The Hare

I can’t really argue with what DivX is doing. They have a responsibility to protect shareholders and if they can realize more value by splitting up the company, than they owe it to their investors to consider this carefully. From the short term perspective, I can understand why they would want to dice the company up, but if you take a longer term view of DivX, I can’t help but think of all of the things that they are giving up.

There is a part of me, that wants to believe that the two entities, will be able to compliment each other after the divestiture, but after seeing John Tanner leave, Jerome Rota shift focus to “media experience” and now Greenhall leaving to run Stage6, I can’t help but wonder, if the company is really just pruning themselves for the sale of their core technology licensing business.

There have already been rumors that Dolby was interested in buying the company and I could probably think of a few other companies that would at least be interested in kicking the tires. A takeover this early, always seemed improbable to me, but now that Greenhall has agreed to step down, I’m not sure what to think. With the stock down over 50% from it’s highs, I could understand if DivX’s VC shareholders wanted to find an alternative exit strategy over unloading more shares than the market can handle.

While DivX could always just sell the company outright, Stage6 could certainly complicate an acquisition. For years, DivX has remained beyond Hollywood’s legal grasp. While the studios have always expressed reservations over DivX’s technology, because consumers are the ones sharing the pirated films, it’s limited DivX’s liability.

Once they started their video sharing site, it didn’t take long for the lawsuits to start rolling in. In January, DivX reported that Universal Music Group had sued the company over pirated content that was uploaded to the website. While DivX is certain to argue that they were just hosting the video and would have been happy to comply with takedown notices, after years of legal frustration, I don’t see Universal dropping this. By spinning off Stage6, DivX would be able to help minimize the legal liability for an acquiring company.

If DivX isn’t positioning themselves to sell the licensing business than I’ve got to question whether or not this transaction will really help DivX in the long run. In the short run, it could boost their valuation, but DivX doesn’t need to raise money, they already have plenty of cash. If DivX really believes that Stage6 can become a profitable entity, than why not try to maximize the revenue potential of Stage6, without giving up control of the site? This may require some short term pain, but I believe that DivX’s entertainment ecosystem is still much too fragile, to risk giving up the leverage that Stage6 brings them.

When I look at DivX’s potential, I see a lot of opportunity, but I also see one very big risk. Just like it only took a child for the Emperor to realize that he wasn’t wearing clothes, DivX manufacturing partners could just as easily begin questioning whether DivX really adds value to their gadgets.

Early adopters are vocal about demanding support for DivX and as long as there are DivX files and devices to play them on, the ecosystem holds together. If more and more manufacturers start abandoning DivX though, then all of a sudden, their codec has very little relevance. While I believe that DivX is too entrenched at this point, to be fully cut out of the market, there are too many deep pockets trying to keep them out of North America, for the company to not consider this critical risk.

An independent Stage6 will most certainly continue to support DivX’s codec, but because of their responsibilities to their own shareholders, DivX wouldn’t be able to run the site at a loss, in order to shore up support for their licensing business.

Beyond Video Sharing – Stage6 As An Advertising Platform

Since Stage6′s launch, I’ve followed the development of the site with keen interest and during the times it’s been in Alpha/Beta stage, I’ve kept my criticisms limited. With the site considering a public offering though, user bugs and missed opportunities will become even less tolerable.

While the analysts have been more concerned about the potential for DivX to sell advertising on the Stage6 website, I think that DivX needs to thinking more multi-dimensional when it comes to their monetization strategy. Right now the video advertising marketing is still very much in it’s infancy and if the company was able to run Stage6′s ad business at a loss or at breakeven, then I believe that it would make the company a threat/target to sites like Google.

Last January, Greenhall said that he wanted DivX to become the Adsense for video. Since then we haven’t seen any plans launched, but DivX was rumored to be in negotiations to buy Revver at one point.

Even though I’m a fan of Revver, I can’t say that I really like the business model. While I think content creators should be rewarded for making good content, I think that there is easier money to be made by selling video ads with the help of the larger DivX community.

Google Adsense may be easy, but any blogger with a lick of traffic will tell you that the rates they pay are chicken scratch. While a public Stage6 wouldn’t be allowed to payout 90% of their ad revenue, a DivX supported Stage6, could afford to run a business at breakeven, if it contributed to the licensing sales.

Back in the 56k days of the web, I remember there being a lot of debate over whether web publishers should support graphic rich applications like flash. With so few people using broadband, webmasters needed to be sensitive to creating a smooth experience for everyone. At that moment in time, it would have been very easy for Adobe to fail, but instead of hitching their wagon to the content, they instead courted the advertisers. By doing this they were strategically able to position themselves in such a way, that businesses were actually paying money, in order to distribute Adobe’s flash product.

If DivX was serious about wanting to solidify their grip on their eco-system, they would take the same approach with Stage6. Instead of courting the content creators, they should be approaching the advertisers. Given the high quality of their video stream, I think that they would have a natural selling advantage over the current flash video ads. If you were in charge of the marketing budget at Take Two, would you rather have video gamers see a full screen high quality DivX ad or a small low res YouTube copy? To me, this is a no brainer and something that DivX hasn’t taken advantage of.

While there would be nothing to stop an independent Stage6 from trying to create their own ad network, if the company has to be sensitive to profitability, it would limit their ability to attract affiliates to distribute their DivX video ads. By paying out top rates to bloggers and independent publishers, Stage6 could become an advertising powerhouse. If Stage6 is only able to pay Google Adsense rates, than I think publishers will be reluctant to include the ads, when many readers would still need to download software in order to view them.

At this point, it’s probably too early to tell if Greenhall will take Stage6 in this direction, but I believe that placing so much emphasis on content has been a mistake for the company. While it certainly helps to promote Stage6 and DivX’s brand, the margins offer limited upside compared to the longer term benefits of an ad network or a premium service.

There is a lot of potential for the future of DivX and while breaking up the company makes sense on Wall St, I’m not sure that the long term price is worth the short term benefit. While it’s nice to see DivX management focused on enhancing shareholder value, unless they are planning on selling the company, I don’t see how splitting up the company helps their long term competitive position.

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Davis Freeberg’s Site Of The Week http://davisfreeberg.com/2007/07/31/davis-freebergs-site-of-the-week-23/ http://davisfreeberg.com/2007/07/31/davis-freebergs-site-of-the-week-23/#comments Tue, 31 Jul 2007 21:33:27 +0000 Davis http://davisfreeberg.com/2007/07/31/davis-freebergs-site-of-the-week-23/ Dazzlesphere?I love the web 2.0 movement, but I still wince every time I hear a wacky web 2.0 name. I’m not sure how each website or company came up with their name, but it’s fair to say that today’s generation of entrepreneurs, did not get straight A’s in spelling during Elementary school. Whether it’s Joost, Pownce or Zooomr, when it comes to 2.0 names, you can pretty much throw spelling out the window.

Even when you don’t have to worry about spelling though, coming up with a creative name for a business is still not an easy task. This is why I found this week’s winner of the site of the week contest so entertaining. The Web 2.0 company name generator not only semi-randomly suggests fun names for businesses, but they also allow you to check to see if the web domain is available (something that the CW network apparently forgot to do before merging the WB and UPN.)

Over the last week, I’ve played with the site quite a bit, but even though the random button would suggest good names, the domains were always taken. Finally, after my 1,000th attempt, I came across a web 2.0 name, that someone hadn’t already snatched up. Unfortunately though, something about BubbleBridge.com, just didn’t scream Freeberg, so I resisted the urge to register the domain.

Some of the suggestions that I loved, but were already taken, include Yakizio (not sure what it means, but it sounds cool), BlogStorm, Kavu, and Trumba. Unfortunately BlogStorm and Yakizio have been taken by squatters, but it does look like Kavu and Trumba are both being used by legit businesses. I’m not sure if they actually got their names from the 2.0 generator, but it would be pretty funny, if they picked the names for their businesses from the site.

If I was really going to name a business, I’m not sure that I’d depend solely on the web 2.0 generator for ideas, but it’s still a fun site to play with and would be especially helpful, if you wanted to assign code names to your household chores. Doing the dishes may be a drag, but rename them Operation BubbleBridge and start assigning RPG points and who knows, maybe you can con your kids into thinking that chores are fun.

Congratulations to the Web 2.0 Name Generator for winning this week’s site of the week award. The nominees for next week’s contest are listed below, please vote in the sidebar. If you’d like to nominate a site, feel free to contact me and I will be more than happy to look it over.

Chaos Faction

Viral Video Chart

Walk2Web

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Profilactic Launches V2 http://davisfreeberg.com/2007/07/18/profilactic-launches-v2/ http://davisfreeberg.com/2007/07/18/profilactic-launches-v2/#comments Thu, 19 Jul 2007 04:56:01 +0000 Davis http://davisfreeberg.com/2007/07/18/profilactic-launches-v2/ Solving The Online Identity Crisis

I have to admit that the first time I heard about Profilactic, I was a bit skeptical. After all, I already belong to 50 different social networks, but only have time to interact with half of them. While I like checking out new sites, there are also a lot of things that I sign up for, but forget about later. I didn’t know it at the time, but having to manage so many different social networks, is actually what makes Profilactic so useful to begin with.

When Shawn Morton told me that the site was going to be a place where you could create a profile to show your friends, I thought he was crazy. I mean after all, just about every web 2.0 site has someplace for you to write a quick bio. In my case, I’ve even got a blog where people can find out all kinds of information about me. I couldn’t see a reason why I would need to create a profile on a web 2.0 site, just to showcase my other profiles.

What I didn’t understand about Smorty’s plan though, was that he wasn’t talking about a static profile in the traditional sense. The site is not about what you’ve done or accomplished, it’s about what you are doing now and who are today.

Before I saw Profilactic, I could only think of someone’s profile as a quick bio with some links. I never thought about a profile being multidimensional, but what Smorty built was a dynamic profile that could display all of your day to day social activity on one website.

While conceptually, I couldn’t understand the appeal, after seeing it in action, I now have a different appreciation for how powerful Profilactic’s tools really are. Everytime I Digg a story, it lets people know. When I upload a video to YouTube or fav a photo on Zooomr, I can include that in my feed. Whether you are a MySpace fan or a Facebook user, Profilactic can take your identities there and fuse it into a more cohesive picture of your interests. It’s like Digg Spy, only for all of your social networks.

For every story that I blog about, there are at least 10 that I miss. Everyday, I find great content, but don’t have the time to give it the attention it deserves. Sometimes I will comment, sometimes I’ll bookmark or Digg the site hoping to come back and write about it later. Sometimes, I just find strange tidbits that I’m not really sure where to file.

Normally, these stories would fall through the cracks, but Profilactic allows me to set up a feed, so that people who are interested, can see other parts of my online life. Not everybody will be interested in what I’m doing, but for those who care about what happens away from DavisFreeberg.com, you can now track the various sites and links that I come across online.

As a blogger, I’m probably more interested than the general population in expressing myself online, but I recognize that a lot of people would rather listen in the shadows than stand in the limelight. While I can appreciate being able to build a central profile to share with my friends, there are also a lot of people who have no interest in sharing information about themselves.

While on the surface, you wouldn’t think that Profilactic would appeal beyond the exhibitionist crowd, it’s ability to track other people’s social movement is actually very appealing to my voyeuristic side. The data feeds that you can create allow you access to information that would normally be impossible or pretty time consuming to get at. While I’m not sure if this is a good or bad thing, if you want to cyberstalk someone, I know of few resources that offer more information about what someone is up to.

Intellectually, I know that nothing I do online is a secret, but sometimes it’s easy to forget how much information you really give up. Forget about needing someone’s social security number, with Profilactic, the user name is what’s most important. In an information age, this is both exciting and terrifying. On one hand, I could see this being very useful for keeping tabs on certain key people or even as a social network filter for certain topics or companies that I am interested in.

On another hand though, I’m not sure how comfortable I would be, if someone I didn’t get along with, was using it to track me. While I like having the ability to watch other people’s social activity, when it comes to actually being watched, I feel differently about it. It’s not fair to have a double standard, but it’s part of my human nature I guess.

Even though all of the data that Profilactic uses is public, I’m not sure that I’d want an ex-girlfriend to be able to watch all of my social activity or see that I had set up an account on HotorNot.com. People already freaked out when we saw tools introduced, that could notify you if your MySpace crushes became single. Profilactic can take this to a new level.

If you actually think about the amount of information that you give away online, it’s a little bit scary. If I upload a photo to Zooomr and geotag it, someone will know the date, time and location of where I was when I took the photo. If I bookmark a recipe, then it would be easy to guess about what I’m having for dinner and whether it’s taco night with the guys or a romantic dinner. While most of this information is pretty harmless, in the context of a bad relationship, it could be a little awkward.

It took me a while to reconcile the part of me that sees Profilactic as an excellent data mining tool with the part of me that is concerned about it being a not so good date mining tool. Eventually though, I realized that all of this information is already out there and that part of being in a social community, means that for better or worse, people get to see what you are doing.

If I’m not comfortable with Profilactic, than I shouldn’t be anymore comfortable with Digg, Del.icio.us or Pandora, but all of these sites are valuable resources and sometimes sharing what I’m doing is the best part. When you combine these various web 2.0 services with Profilactic’s ability to filter and aggregate this activity, you can get a much more comprehensive look at someone’s personality. If I have a problem with something showing up there, than I probably shouldn’t have dugg some drunk stripper orgy story to begin with.

At the end of the day, Profilactic’s technology may be a little unnerving, but only because it shatters the false illusion that you actually have privacy and anonymity to begin with. There is a saying that if you can’t beat them, join them and in this case, I’d rather take advantage of the social networks than to hide from them. If Profilactic can make finding and sorting this information easier, than I am a fan, even if I do end up embarrassing myself once in a while.

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Davis Freeberg’s Site Of The Week http://davisfreeberg.com/2007/07/17/davis-freebergs-site-of-the-week-21/ http://davisfreeberg.com/2007/07/17/davis-freebergs-site-of-the-week-21/#comments Wed, 18 Jul 2007 04:06:36 +0000 Davis http://davisfreeberg.com/2007/07/17/davis-freebergs-site-of-the-week-21/ RadioThis week’s winner of the site of the week contest was a site that got in early, on the Podcasting craze. Podcast Alley was quick to recognize that people wanted to express themselves via radio and from the start, they built their community around these content creators. Whether it’s been interviewing other podcasters, highlighting some of the best podcasts out there, or creating forums for fans to interact in, they’ve done a great job of creating a positive environment where podcasters can share information and ideas.

One of the things I love about the web 2.0 revolution, has been how multidimensional it’s made media. When the net first started, we saw flashes of what would come, but it was nothing like I expected. There was an occasional audio or video clip, but the quality was substandard and there was no interaction.

Now we have whole social communities that form around content. As the barriers to entry have been lowered, we’ve seen a proliferation of individuals who are eager to contribute in one way or another. I knew that one day, radio and video would make it’s way to the internet, but I didn’t expect a social revolution to drive it. It hasn’t happened overnight, but YouTube is disrupting TV, blogging is taking over the newspapers and podcasts are displacing radio.

People say that content is king, but when you have such a large explosion of information, content quickly becomes commoditized and it’s the businesses that can make sense of it, that become the new king. This gives the aggregators a lot more control, than the professional content creators like to admit.

I don’t normally listen to a lot of podcasts, but I do enjoy the format. Many of them are just as good as talk radio, except instead of mindless banter, I get to hear them talk about things that I’m actually interested in. This weekend, I had an opportunity to listen to Podflix’s review of George Romero’s Night of the Living Dead series.

Having recently watched the entire series, I was thrilled to be able to listen in on a bunch of guys, who enjoy talking about zombies eating people’s entrails. I know that not everybody is into horror films, but I love them and that is the beauty of podcating. What other’s consider amateur content, is A level material to someone who is interested. The key is matching up the listener’s interest with the content creators. Podcast Alley does a great job at this.

Congratulations to Podcast Alley for winning this week’s site of the week award. If you would like to nominate a site, feel free to send me an email. The nominations for next week’s contest are listed below. You can make your vote in the sidebar.

McAfee’s Site Advisor

No Phone Trees

Candy Wrapper Museum

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