Wow. There is money out there: a retail deals site called Groupon has raised a whopping $30 million Series B funding round led by Accel Partners, one of Facebook's early backers. Existing Groupon investor NEA, which led the company's $4.8 million Series A round in January 2008, also contributed.
Here is the gist of Groupon: there are currently editions for 26 U.S. cities. The site advertises a deal each day from a selected local establishment like a restaurant, nail salon, or gym. There's a heavy discount involved. But enough members have to opt into the deal in order for any of them to get it. Groupon takes a cut of earnings if the deal hits the "tipping point" and goes live; otherwise, the featured merchant does not have to pay.
They've been profitable since June, founder and CEO Andrew Mason told CNET. So why raise $30 million? "We want to roll out to another 50 cities or so next year," he said, adding that early in 2010 it hopes to expand to Canadian cities, "so it's just going to help us increase the rate of customer acquisition and focus on building new technology." He wouldn't say what that new technology is, but he did add that the company went from 10 to 120 employees in the past year and planned to continue to grow at that rate.
The company grew out of an existing start-up called ThePoint, which applied a similar "collective" model to community and activism projects, before switching entirely to the retail model.
A look at one of Square's receipts for Sightglass Coffee, a San Francisco establishment in which founder Jack Dorsey has invested.
(Credit: Square)Small business is front and center for Square, the new mobile-payments company founded by Twitter co-founder Jack Dorsey. Previously in a quasi-stealth mode (OK, more like San Francisco's worst-kept secret), Square has now launched in beta, is accepting e-mail requests for preliminary accounts, and has put up a basic Web site to explain the company's premise.
The Square hardware is a small, inexpensive card reader that plugs into the audio jack of a compatible device, including a mobile phone (it's starting with the iPhone and currently has job postings up for BlackBerry and Android engineers). It processes credit card payments, geotags their locations on a map, and e-mails a receipt to the buyer.
"Even though a majority of payments has moved to plastic cards, accepting payments from cards is still difficult, requiring long applications, expensive hardware, and an overly complex experience," the Square Web site explains, talking about how the company premise was hatched when now-executives heard about an artist whose sales were hindered by the fact that he was unable to accept credit card payments.
What hadn't been reported before is that loyalty programs and microdonations are built in as well. Square can track a history of your purchases at a given establishment for discounts and promotions, effectively replacing the buy-10, get-one-free card at coffee shops. Additionally, Square donates a cent of each transaction to a nonprofit organization that the merchant chooses.
CNET first reported the company's name (it had been code-named "Squirrel") as well as some of the details about its business model: low production costs, possibly to the point where the devices can be distributed for free, and profits from transaction fees. (It's not clear whether they actually will make them free.)
Square has set up offices in San Francisco, New York, and St. Louis, with a team of 11 employees announced on the Web site. It's backed by Khosla Ventures and some angel investors.
eBay on Sunday confirmed that a "technical issue" had caused search queries on the auction site to be messed up over the weekend, resulting in limited or no search results. The company says that it's being cautious, though, and is holding back on some advanced search features until the issue is fully solved.
"We are happy to report that critical search functionality was restored overnight on Saturday and we are seeing normal activity levels today," a post on the company's eBay Ink blog read Sunday. "As part of our effort to restore critical search functionality as quickly as possible for sellers and for buyers, we have kept some secondary search features temporarily offline. This includes refining search by certain item specifics, such as color or clothing size, and having Store Inventory Format results included in the main search results."
In a statement, eBay also said the technical issue was caused by "a surge in live listings as sellers ramp up for the holiday season. eBay currently has more than 200 million live listings, 33 percent more than at this time a year ago."
Some eBay members still weren't satisfied with the explanation. "I had a one day auction ending today, (and) no one was obviously able to bid on it because they couldn't search for it," one commenter said on the eBay Ink blog. "Will I get a credit for this?"
"eBay should credit all sellers with active listings during this time," another said. "These issues have cost sellers many bids and sales. Once again eBay is screwing sellers."
Much like Twitter's today, outages at eBay were rather prominent in the company's early days. They're not too frequent anymore. But this one came at a time when there are some sentiments of malaise among eBay sellers, some of whom use the auction site to make a living, and when it also faces increased competition in the e-commerce sector.
An analyst release from JP Morgan Chase said that it did not anticipate the outage would have an effect on eBay's fourth-quarter earnings. But, it contained a warning: "Although we recognize it is virtually impossible for a site of this complexity to not encounter occasional issues," the report from analyst Imran Khan read, "we continue to believe that eBay needs to make greater investments in the robustness and functionality of its site in order to remain competitive within the e-commerce space."
Offerpal Media, one of the companies at the center of a bitter dispute over misleading advertisements on social networks, on Thursday launched a revised policy designed to "forbid any offers that are misleading, deceptive or otherwise objectionable."
Companies like Offerpal are enlisted by many of the big gaming companies built on social networks like Facebook; they help those companies make money by letting game players earn points and virtual goods by completing offers and surveys rather than paying real money.
They make a lot of money doing so. So do the game companies, like Zynga and Playfish (recently acquired by Electronic Arts), which in turn advertise heavily on the likes of Facebook to recruit new players.
But then the negative press started to emerge: many of these "free" offers and surveys actually had hidden costs attached to them that weren't adequately disclosed. Some companies like Zynga started backtracking and going so far as to ban offers altogether. Facebook and MySpace, the two biggest social-network platforms, made very public revisions to their policies. But the controversy continued, and both Facebook and Zynga were named as defendants in a federal class-action lawsuit.
Offerpal, which replaced its CEO amid the controversy, has now come out and said that while it's setting a basic standard for advertisement quality, game makers and publishers enlisting Offerpal's services can opt to be even more stringent. "Offerpal will rate all offers by quality and allow its partners to select a quality level of compliance ranging from 'Level 1' for minimal restrictions to 'Level 5' for highly conservative restrictions," a release explained.
Will the new restrictions keep angry bloggers and consumers--not to mention lawmakers--at bay? More importantly, are they going to amount to anything more than smoke and mirrors? We'll see.
Sold!
Auction site eBay has, as long anticipated, sold off the Skype telephony service to a group of investors that includes Marc Andreessen's new Andreessen Horowitz group, Silver Lake, and the Skype co-founders' Joltid Ltd. The investor group now holds about 70 percent of the company; eBay retains the rest in a minority stake. Joltid was brought into the investor group as part of the settlement of a copyright suit that the Skype co-founders, Janus Friis and Niklas Zennstrom, filed against eBay over Skype's technology. At one point, that dispute was looking so ugly that eBay was reportedly considering rebuilding Skype's technology altogether.
The sale amounted to approximately $1.9 billion in cash and a note from the buyer in the principal amount of $125 million, for a total of $2.025 billion.
eBay's plans to get rid of Skype, a purchase that had never fit quite well into its auction business, had been well-publicized. Last spring, the company formally announced that it planned to spin off Skype as a publicly traded company in the first half of 2010.
The final $2.75 billion valuation is only slightly higher than the $2.6 billion that eBay originally acquired Skype for in 2005.
The simple concept of having virtual-good payments in games sent directly to your cell phone bill has gotten a lot of buzz--and stirred up a lot of rivalry. One of the start-ups looking to pull this off, Boku, announced Monday that it has signed on a dozen new gaming partners, both a few based on the Facebook platform and some others that are either Web-based or desktop downloads.
The partner companies are Waves, Cie Studios, Cyberstep, GameDuell, IGG, King.com, NHN USA, Ntreev, Outspark, PerfectWorld, Snap Interactive, and Zoosk. Most of them aren't household names: they're game manufacturers, not the games themselves, and some of them are most prominent outside the U.S.
There are a handful of companies trying to grab market share in this space, but the two who have been most vocal about making inroads have been Boku and rival Zong, which last month announced that it would allow members to sync credit cards with their phone numbers, allowing for larger payments and putting the company closer to direct competition with the likes of PayPal.
Boku says it's sticking to the mobile-number-only strategy, choosing instead to ink more deals and emphasize its global reach: with the current round of partnerships, the company says it will have 200 million registered users added to its ranks (no word on how active they all are, or how much redundancy there is across games).
Additionally, Boku has made some infrastructure upgrades that it says will improve the user experience, including the ability to detect whether a phone number that has been entered is landline or mobile--and if mobile, what carrier it's coming from.
Amazon's acquisition of shoes-and-more retailer Zappos is complete, the e-commerce giant said in a release Monday. The company in July had announced its intent to make the purchase, for about $850 million in cash and stock.
Zappos, which made a name for itself based on outside-the-box customer service principles, will stay independent from the Amazon.com brand and will continue to operate out of its Las Vegas headquarters.
Numbers released by J.P. Morgan Research in conjunction with the acquisition announcement predict that Zappos will post moderate, single-digit growth for the 2009 fiscal year after raking in $635 million in revenues last year.
The heated mobile-payment wars are expanding...beyond mobile. Zong, one of the start-ups hoping to capture the market for online micropayments billed to a mobile phone, announced Thursday the debut of "Zong Plus," which lets members link credit or debit cards to their Zong accounts.
It's another move that pits Zong against Boku, a competitor that launched right around the same time with broader global reach--last month, it announced its expansion to subscription-based services in addition to on-demand micropayments.
At launch, Zong Plus is compatible with Visa, MasterCard, Discover, and American Express accounts,
"Today you've got a variety of products for different kinds of payments and services," vice president of product management Hill Ferguson told CNET News. "You've got PayPal. You've got several of us in this mobile payment arena. What Zong Plus does is just elevates us into a different mobile payment type."
On the surface, adding traditional credit card payments seems to defeat the purpose of Zong, which inherently tries to offer a simpler and more universal alternative for small payments (cell phone carriers put a cap on how much can be spent). But Ferguson said that Zong Plus, which is free for participating merchants to upgrade to, "is an optional feature for consumers who have payments cards and feel that the incentive that we offer is powerful enough for them to open up their wallet and type in the information."
What's that incentive? Part of Zong Plus is a loyalty program that will rack up points much like airline miles. In a participating game or other micropayments-linked application, this means that when enough points have been accrued, the member may be alerted that their next purchase is "on the house."
Whether it will work is still unclear. Zong has deals with social gaming and virtual-world companies like OMGPOP, IMVU, and Gaia Online, but there are still enough rivals offering similar packages as well as the off chance that a big e-commerce player like PayPal could launch a service of its own and snuff out the competition.
The announcement comes in advance of the Virtual Goods Summit in San Francisco, where pretty much any start-up involved in the latest generation of e-commerce (read: magic swords and Mafia dons) will be showing off its wares. Plenty of other companies will be making announcements, too, presumably some in the payments space.
The revamped Facebook gift shop.
(Credit: Facebook)It's not just music as rumored: Facebook announced on Wednesday a major overhaul to its "gift shop" feature, meaning that the social network just became an even bigger player in the burgeoning virtual-goods industry.
"We now are unveiling a newly stocked and redesigned Gift Shop, with new categories of gifts and additional gifts for charity, music, and sports from developers," a post on the company blog by Facebook's Will Chen read. With so many gifts available, we also introduced a new design to make it easier for you to browse and purchase gifts with different gift categories." It'll be rolling out over the next few weeks, he added.
Needless to say, this is a huge deal for the virtual-goods industry, which some estimate is now a billion-dollar business.
It also beefs up one of Facebook's few non-advertising revenue streams (though many of the virtual goods in the "gift shop" are licensed or sponsored)--even though in a talk on Wednesday at the Web 2.0 Summit in San Francisco, Chief Operating Officer Sheryl Sandberg downplayed rumors that the company would be making big moves into bringing commerce and payment transactions to its developer platform.
Music files, as rumored, will be sold through a partnership with Lala. Right now, they are only available to Facebook users in the U.S.--less than a quarter of its total membership. For one Facebook "credit" (10 cents U.S., and currently available for purchase in 15 currencies from around the world), members can buy one another songs that can be played online. For 10 credits (a dollar), they can gift downloadable MP3 files. "Other people who are able to see the music gift (in that member's profile) will only be able to play the song in full once, after which they will be able to play a 30-second clip," Chen's post added.
This is a big move on Facebook's part for another reason: iLike, which powers the extremely popular "Music" app on the social network, and which allowed members to gift songs to one another through the third-party application, was acquired by Facebook rival MySpace this summer.
Instead, it's partnered with Lala--which is also one of the partners in the music initiative that Google is slated to launch next week.
But music isn't all that's new in Facebook's revamped Gift Shop. There are also sports gifts officially licensed by teams--branded virtual goods from a number of college sports teams as well as the National Basketball Association and U.S. Major League Soccer. Also rolled in have been the non-profit gifts that Facebook first debuted this summer. In addition to existing partners like Kiva and Project Red, virtual charity gifts will also be sold by popular third-party Facebook app Causes.
And images posted to the Facebook blog show additional categories--e-cards, which are pretty self-explanatory, and "real gifts," which bundle a physical gift sent in the mail along with the virtual gift. These have all been tested in a limited scope by Facebook over the past few months.
Leaked screenshots of a document that Facebook distributed to advertisers earlier this month revealed that an upcoming design modification to Facebook's home page will make birthday alerts--which also encourage members to buy gifts for one another--more prominent.
Facebook hasn't disclosed any financials related to how much advertisers pay for sponsored gifts, or how any revenue-sharing logistics pan out.
Other social-networking services are trying to get in on the action, too. Social-site creator Ning, for one, launched a gifts platform earlier this week.
More to come...last updated at 4:01 p.m. PT.
Facebook COO Sheryl Sandberg speaks with John Battelle at the Web 2.0 Summit about features we can expect from the social-networking site.
(Credit: James Martin/CNET)SAN FRANCISCO--Two of the biggest rumors about big, upcoming Facebook products--an ad network and a payment transaction platform--won't be making a big splash anytime soon, chief operating officer Sheryl Sandberg said in a talk on Wednesday afternoon at the Web 2.0 Summit.
"We're asked it all the time," Sandberg said on the question of whether Facebook would be launching an ad network for external Web sites using the Facebook Connect universal-login product. "We focus on building products for users and we think about the monetization later. And I'm not saying that in a cute way, because we are very focused on monetization."
Then there are the reports that Facebook will be launching a PayPal-like transaction system or large-scale virtual currency, a rumor that's been floating around literally for years. "There's a lot of speculation on payments, and (we) don't want to fuel the speculation," Sandberg said in her talk on Wednesday. She did say that Facebook processes payments internally for advertisers buying up inventory ("We needed people to be able to buy ads internationally," she explained) and that it's playing around with the "credits" system that it uses in its "gift shop" feature.
"We are doing some testing with a couple of developers to see if they can use credits in apps they have," Sandberg said. "That's all we're talking about right now. We're in a learning phase."
Some potential customers have hinted that Facebook may have already gotten too big to deploy such a product. When asked about the idea of a Facebook payment system, John Cahill, the CEO of teen virtual-world Meez, told CNET News earlier this week that he's skeptical about its potential.
"The bigger the social network, the harder it is for a currency," Cahill said. "I've spent some time in the payments space and the real-world currency space, and rolling out a payment system that can be used by millions of people is very, very difficult. If you get it wrong, you can destroy your community."
But Facebook is dipping one toe after another into the virtual-goods pool. Earlier on Wednesday, the New York Times broke the story that Facebook would be letting members gift songs to one another through a partnership with music service Lala. This would be the first concrete result of yet another longstanding rumor of a "Facebook music service."
Additionally, Facebook has partnered with a number of nonprofits for charity-focused virtual gifts.
