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LOS ANGELES--Michael Eisner wasn't miffed enough at Veoh to stop him from investing in the company once again.

Last week, the former Disney chairman took the stage at Digitas' "Newfront," a showcase of Web video for potential advertisers held in New York. Joining him was Veoh's founder Dmitry Shapiro.

According to Silicon Alley Insider, Eisner used the opportunity to chide Shapiro about when Veoh, a company that bills itself as a Web TV network, is going to pay off. Silicon Alley Insider called the exchange between the two men "uncomfortable."

On Tuesday, Shapiro was at the OnHollywood Conference and he said he was dumbfounded after reading the story. He and Eisner were joking around and that everyone in the audience understood that except Silicon Alley Insider. What should have tipped off the blog's reporter, according to Shapiro was when Eisner started picking fun at Veoh for posting an ad for a penis enlargement herb.

Shapiro said Eisner is pleased with Veoh's progress and was part of a $30 million funding round the company closed recently that included such other investors as Intel and Adobe Systems. This was Eisner's second investment into the company.

Maybe the important question is whether Eisner should be down on Veoh. In a sector where YouTube has devoured almost everything video on the Web, Veoh says it has 28 million unique visitors worldwide. They spent more than 100 minutes each month on the site. The company is able to keep them there so long because it offers long-form content and a recommendation search engine that helps people find the clips that appeals to them.

Veoh's goal is to attract the best videographers on the Web or the people Shapiro calls "the YouTube graduates."

But when can he start putting cash into Eisner's already deep pockets?

"We'll be profitable in 2009," Shapiro said.

Every so often, I wonder if Silicon Valley is all it's cracked up to be. Sure, the confluence of venture capital, universities, and lawyers make it a veritable petri dish for the formation of technology companies, but there are a lot of other great places for innovation, right?

Well, if you go strictly by market capitalization, and look at the top 10 information technology companies, 6 of them are based in Silicon Valley: Cisco Systems, Google, Intel, Hewlett-Packard, Apple, and Oracle. In fact, if you map these company's headquarters, they'd all be inside a circle with a radius of just 10 miles. Amazing, when you think about it.

And these companies are far from just "headquartered" in Silicon Valley.

Google and Apple are very much centralized from a product and technology development standpoint.

Intel has research-and-development facilities in Oregon, Arizona, and Israel, but a significant amount of its R&D occurs at or near its Santa Clara, Calif., headquarters. The same is true of Cisco, though the networking giant owns several large subsidiaries--such as Scientific Atlanta--that are based elsewhere. Likewise for Oracle.

HP is somewhat more diversified, with product development for its Compaq unit in Houston, plus R&D facilities in Idaho, Oregon, and additional cities around the globe. But still, more of its R&D occurs in northern California than anywhere else.

Three of the four companies not based in Silicon Valley have research and development consolidated near their corporate headquarters: Microsoft in Redmond, Wash.; Qualcomm in San Diego; and Nokia in Finland.

IBM, on the other hand, is the most distributed company of the 10, with R&D facilities in New York, Massachusetts, Vermont, North Carolina, Texas, Minnesota, and a number of international locations, including London.

What does all this mean? Well, the data's essentially useless, unless you compare these companies to the same group, say 5 or 10 years ago. Luckily, I've got a good memory. It's not necessarily obvious from the data, but there does appear to be a trend toward more distributed R&D among large companies--if not domestically, then certainly internationally.

Although there are a number of new and growing U.S. technology hubs, none appears to be in a position to unseat Silicon Valley as the tech mecca.

Internationally speaking, China, India, Israel, Japan, and the United Kingdom each have technology development centers with tremendous growth potential. South Korea and Taiwan are nothing to sneeze at, either. Sure, they all have a way to go to match the confluence of resources and talent that Northern California offers. But the trend is there.

And while our qualitative analysis consists only of 10 companies, I do believe that it represents the industry as a whole.

In summary, as information technology penetrates further into the lives of more and more people, it stands to reason that innovation hubs will become more and more geographically distributed, if not also technically specialized.

And someday, a new technology may take root and ultimately supplant electronics as the driver of human innovation. It might be a form of biotechnology, nanotechnology, or something else entirely. In that case, all bets are off.

Updated 5/29/08 12:23 PM - Modification to paragraph on Intel R&D.

Any technology firm trying to cut deals in Hollywood should find themselves a good guide, say entertainment industry insiders.

"You need a Sherpa down here," said a Lynda Keeler, a former chief of Sony Pictures Digital Group. "Finding a good lawyer or agent to help navigate is important."

Managers at the big TV networks and film industries say they are more receptive than ever to tech companies with good ideas and they say this has begun to draw Silicon Valley start-ups (see main story here).

Tech companies have plenty of people to learn the ins and outs from. One of them is David Tenzer, an agent at the Creative Artists Agency for 24 years before leaving to work briefly for video-sharing firm Revver in 2006. Tenzer has been a booster of digital entertainment for years and now is with Raskin Peter Rubin & Simon, a law firm that has designs on helping entertainment companies plan digital strategies as well introduce technology companies to Hollywood's power brokers.

Philip Lelyveld is also a good guy to know. He's the former vice president of Digital Industry Relations at Disney who is now on his own, advising entertainment-technology firms. Lelyveld said there is a large community of technologists who have been in Hollywood for years, mainly in the special effects fields. "You got an existing generation of people who have already made mistakes and the new wave can learn from them," he said.

Start-ups can also do themselves a favor by doing their homework, said Derek Broes, an executive at Paramount Pictures, in charge of finding new ways for the studio to generate revenue online.

"Make sure you won't be shut down based on the limitations of the business you're approaching," Broes said. "Many times, people come to me and say, 'Hey I want to do this with your content.' It's a contradiction many times to the creator and difficult to do or in impossible to do because of our business itself. Have a better understanding of what is possible to do on the content side."

The emergence of online video has begun enticing Silicon Valley entrepreneurs to Hollywood, and unlike an earlier migration during the dot-com era, the film industry is rolling out red carpets.

After spending three days at the Digital Hollywood conference, where I spoke with dozens of entertainment executives as well as tech CEOs, it's easy to spot what's going on: studio executives are more comfortable with online video and clip-playing gadgets than in the past. The entertainment sector also needs help figuring out how to make money from digital. On the other side, the geeks seem less dismissive of studio's copyright concerns and are much impressed with the film industry's glamor and riches.

"In the Hollywood culture, it's about the lawyers. It's an arm wrestle at a table. The (two industries) have a very different understanding of how to structure a deal."

-- Lynda Keeler, former Sony Pictures exec

"The new group descended so quickly on Los Angeles," said Philip Lelyveld, a former Disney executive who is now on his own as an entertainment-technology adviser, and has been a member of Hollywood's tech community for over a decade. "It's been in the last six or seven months where we suddenly saw a huge (spike) in activity. The reason for that is people are seeing startups built around content are suddenly becoming economically viable. The studios have also made their content more available. In some cases, they have made it clear that there are things that can be done with content that were still in dispute a few years ago."

Indeed, the film industry has begun galloping into the digital age.

News Corp. and NBC Universal launched Web video-portal Hulu in March. Earlier this month, the top movie studios agreed to allow Apple to offer flicks via iTunes the same day they're released on DVD. Two weeks ago, Warner Bros. Television announced it was bringing back the WB channel, the TV network shuttered 18 months ago, as an online-only play. According to one Warner Bros. executive, "the TV network of tomorrow won't be found on TV."

The new alliances, however, could still prove fragile. Tech entrepreneurs still complain that it takes too long to close licensing deals. The Studios continue to chafe when the whiz kids build services around their films or TV shows before they obtain rights--ala YouTube. And nobody can overlook the vastly different and often conflicting ways each side does business.

Lynda Keeler, a former Silicon Valley venture capitalist and chief of Sony Pictures Digital Group, said the techies are known for their willingness to work hard for options and equity--the possibility of a future payday. In Hollywood, she said, people want their money upfront. She remembers interviewing for a position with a venture fund after spending most of her career in entertainment. She asked the VC execs if they would like to speak to her lawyers.

"They said, 'Lawyers? We only use lawyers for term sheets," recalled Keeler, who now runs online retailer, Delight.com. "In the Hollywood culture, it's about the lawyers. It's an arm wrestle at a table. The (two industries) have a very different understanding of how to structure a deal."

Despite their differences, it's clear both sides see a profit in working together.

Derek Broes is Paramount's senior vice president of worldwide business development and the person assigned to find new ways for the studio to profit from its content. Lelyweld says Broes is among the group driving Hollywood's technology welcome wagon. To launch Paramount's VooZoo service, which allows Facebook users to send famous scenes from the studio's film library to friends, Broes got help from FanRocket, a developer of social-networking and media sites.

"Fan Rocket was a natural," Broes said. "We are a motion picture company that doesn't have a lot of technical experience and we're not in a position to be bringing in engineers on staff and start building things. The folks at FanRocket and Danny Kastner, their CEO, immediately got what I was trying to accomplish. We took off from there. VooZoo is only a first step in a larger strategy"

Broes is a former manager at Microsoft and Brilliant Digital Entertainment, the company that made news for bundling its Altnet P2P application into Kazaa. So he knows something about approaching the studios with a disruptive technology. He said the past friction between Hollywood and Silicon Valley was due to a lack of understanding of each other's businesses.

"I include myself in this," Broes said. "Back then it was almost like, 'Hey, look, give me your content. Look at all these people I have. I'll put ads around it and it will be hugely popular.' Well, they don't understand that the studios have certain restrictions in their business and have previous windows occupied by previous agreements. It wasn't a lack of wanting to go out and make money in a new way. It was just limitations of a legacy business that are now beginning to change."

Broes also said that for any of the new online ad models to work, corporate America must embrace new technologies. During a panel session at Digital Hollywood, Broes singled out the face-mapping system developed by start-up Big Stage. The company uses photos of a person's face to create a digital avatar and then computers manipulate the image to change facial expressions.

Broes asked why the technology couldn't be used for ads. Instead of showing Facebook users a commercial with actors, why not replace an actor's face with a viewer's. "If I can actually star in my own commercials, I'm going to watch them, Broes said."This is where the advertising community has completely failed at adjusting and adapting and being creative."

As for whether the geeks and movie people can get along, there's no doubt, according to Keeler, the former Sony executive.

Although she did not attend, Keeler said she heard that the much-publicized party thrown last month in Los Angeles by TechCrunch was a huge hit. "It was a mash of tech guys and beautiful women," Keeler said. "It showed the two tribes can get together...the children that come from this union are going to have it all, the good looks of Hollywood and the smarts of the valley...but it's going to be a painful pregnancy."

(Read my related blog: Advice for techies who want to star in Hollywood)

Microsoft CEO Steve Ballmer says he knows exactly what Yahoo is worth and isn't willing to go a dime over that, Silicon Alley Insider reported Thursday.

Ballmer, speaking to Microsoft employees in a so-called town hall conference call Thursday, also said an announcement regarding Yahoo is coming "in very short order," the blog site reported. But what he meant by that is unclear, since he also noted that he had "nothing to say today." A reporter for Silicon Alley Insider apparently listened in on the call.

Ballmer also didn't put a price tag to what he thinks Yahoo is worth, but his comments may indicate that talks between the two companies are still going on. The Yahoo comments came up during a question-and-answer session in which he reiterated Microsoft's three options: Make a friendly deal, go hostile, or walk away.

The Microsoft chief exec also explained to his employees that Microsoft needs Yahoo in order to gain scale in the online market. "(Yahoo) accelerates scale. Gets us more advertisers, gets us search. Yahoo's not a strategy. It's a part of a strategy. We're interested in paying for it at some level, and beyond that level we're not willing to pay for it," Ballmer said, according to Alley Insider.

Interestingly, Ballmer seems to believe that on the Internet, many people would think of his company as the underdog as it tries to play catchup with Google. "The world," he said, "is rooting for us."

Proximity communication--an interconnect technology being devised by Sun Microsystems that lets two devices swap data just by being near each other--isn't ready for commercial release, but the company is showing off samples.

At the Gartner Symposium/ITxpo in Las Vegas this week, David Douglas of Sun Labs showed off silicon that embodies the concept. Here is a link to a video on his talk on ZDNet. Douglas is holding the chips, which he didn't demonstrate in action.

In proximity communication, two capacitors sit near each other. When data is sent to capacitor one, it gets charged. The charge then transfers to the second, nearby capacitor. The signal then gets amplified. "And the data kind of goes on its merry way," he said.

Conceivably, proximity communication, and similar projects taking place at IBM and other companies, could both increase the speed and volume of data transfer between chips. It also might cut costs. A chip might have 5,000 internal connecting wires and 2,000 solder balls on the outside of its package, Douglas said. This could be eliminated. Computer designers could also get rid of dedicated silicon for swapping data.

Making sure that data doesn't get corrupted while getting wirelessly swapped in the high-temperature, high-speed environment that is the inside of a server, however, remains a challenge. Conceptually similar concepts include "through-silicon vias," which are tiny wires between chips. TSVs aren't wireless, but they do eliminate much of the bulk of packaging. Intel and IBM are both working on this technology.

It is not an overnight project. Sun first started talking about (but not yet showing chips for) proximity communication in 2004. The technology was part of a supercomputer bid for DARPA. The original goal was to come out with the computer in 2010. DARPA subsequently narrowed down the project, and Sun was no longer a participant.

It was just a matter of time. Silicon Valley, which has remained largely impervious to the increasingly global economic downturn, is starting to feel the strain, according to The New York Times. It's not that housing prices are in freefall (they're not) or that people are being laid off en masse (they're not), but rather that the exit opportunities have largely dried up. According to the Times:

During the first three months of the year, only five companies backed by venture capital investors went public on Wall Street...That is down from 31 in the fourth quarter of last year, and is roughly the same level as at the nadir of the dot-com bust.

There was also a sharp falloff in the acquisition of start-up companies by bigger corporations...There were only 56 acquisitions in the first three months of the year, down from 83 in the fourth quarter.

... Read more

We're all familiar with the notion that Silicon Valley's roots lie in the Bay Area's adventure-seeking gold rush history and the mind-expanding experiments and hippie culture of the 60s.

But you may have not realized that there are strong links between the tech start-up mindset and the Buddhist philosophy of Zen.

A blog called ValleyZen is exploring that connection.

"We believe there is a strong link between Zen and technology. The Silicon Valley spirit is incredibly Zen," says Drue Kataoka, a master Sumi-e Japanese brush painting artist who launched the blog in January with Bill Fenwick, a founder of the Silicon Valley lawfirm Fenwick & West.

What does being Zen really mean? According to the blog, it is exemplified by simplicity and elimination of clutter, naturalness, asymmetry, and tranquility. Other aspects include living in the present moment, acting spontaneously, being free of self-consciousness and fear, having discipline, being loyal, and moving fast, according to Kataoka.

I asked Kataoka recently how Zen she thinks Google is. She laughed before answering, in a roundabout way, that the most counterculture tech firms have been Netscape, Apple, and Google.

What about Microsoft, and Yahoo? On those firms the blog has more to say: "While Yahoo was never Zen, Microsoft arguably had some Zen aspects in its early technologies (many through copying Apple): intuitive graphical interface, common relatively simple menus in its Office applications. Its recent foray in search, however, has been far from Zen. AdCenter, MSN's Search Advertising product, has the least intuitive and slowest user interface of all major search players as well as the most cluttered and inefficient API...The question is, will the Yahoo acquisition somehow trigger MicroHoo to find its Zen? Or not?"

The blog features video interviews with Fred Turner, the Stanford professor who wrote From Counterculture to Cyberculture and VC Samurai, and Tim Draper, among others. So far, nothing on Oracle's Larry Ellison, a notable Japanophile.

Journalist Rebecca Fannin argues in her new book, Silicon Dragon, that China will gradually emerge as the world's center of innovation, supplanting Silicon Valley for venture capital and exciting technology.

Forbes.com asked her to explain her ideas in an interview:

You argue that China is "winning the tech race." But it seems like the more mature companies in China have followed American business models, and this innovative generation of companies is still very young. In what sense is China "winning?"

Well, you have to consider the time frame. It's going to be years before it becomes very pronounced, but China is slowly emerging as the next Silicon Valley.

If you look at venture capital money flowing in, it's a phenomenal rate. China has been the fastest-growing target for venture capital in the last four years: far faster than anywhere else in Asia or the U.S. or Europe.

Venture capitalists used to say they'd never invest outside a 30-mile radius of their offices. Now VC firms like Sequoia Capital, Kleiner Perkins Caufield & Byers, and Accel Partners are all focused on China. Virtually all of the major venture capital firms in the U.S. have teams and funds there. It's been a huge shift. And for every startup that's funded in China, there's a startup that's not funded somewhere else.

This is still a leading-edge trend. But Silicon Valley won't always be the center of the universe. If you talk to VCs, they'll agree with that.

I haven't read the book, but there is certainly a dose of reality in her assessment. What I wonder is whether the innovation will not be split into two types: language-dependent, and what I might call "pure technology."

For innovations in the tradition of Google, Amazon, and Web 2.0 applications, the translatability of applications or the size of the market supported by a given language is key. Chinese firms depending on a Chinese-reading audience will depend on the continued explosion of Chinese Internet usage and a huge surge in willingness to spend online. If these trends slow or reach a plateau, VC may not be so enamored with China-based ventures.

If, on the other hand, we're talking about raw development that speaks the language of science--equipment meeting international standards, biotech, energy innovation, etc.--then the market is not a problem, and I suspect the flood of skilled developers in China will indeed fuel a wave of innovation.

Whether all that's enough to supplant Northern California is not something I know how to estimate...