Google bets big on mobile advertising in $750-million acquisition of AdMob

Google Inc. has shown which way it believes the winds are blowing by forking over $750 million for mobile advertising firm AdMob, one of the Web giant's largest acquisitions to date. 

As AdMob itself has described, the volume and effectiveness of mobile advertising has been skyrocketing over the last several years as more advanced smartphones have caught on, making it easier to deliver more kinds of graphical and text-based advertising to phone-toting consumers.

In a recent report, AdMob said that the number of mobile ads it served had increased nearly 540% from September 2007, to 10.2 billion per month from 1.6 billion.  

As mobile phones morph further into pocket Internet devices, and consumers grow accustomed to performing online functions like search, gaming and instant messaging on their handsets, opportunities for advertising companies like Google will grow rapidly, analysts expect. 

Google says the number of searches performed by smartphone users has increased by a factor of five over the last two years, led primarily by iPhone users and owners of Google Android phones. At least a dozen new Google-powered phones, such as last week's launch of Verizon's Droid, are expected to be released in the coming year.  

Google also says that marketer spending on mobile advertising is growing at 30% annually.

AdMob was founded in 2006 by Omar Hamoui, a Web entrepreneur looking to generate traffic for his mobile-based website. The company has taken funding from venture firms such as Sequoia Capital, Accel Partners and Northgate, and the company's clients have included Ford, Coca-Cola, Electronic Arts and Paramount Pictures.

Google, which already owns a major stake in mobile advertising with its DoubleClick Mobile unit, said it expects regulatory scrutiny of the AdMob deal but hopes the pact will be approved within a matter a months.

-- David Sarno

Skyline Solar taps auto parts maker for power plant components

Machines that used to stamp out car parts are now making arrays for solar panels. Credit: Skyline Solar.

Skyline Solar, a Silicon Valley start-up, has become the latest green energy company to tap the struggling auto industry’s manufacturing muscle.

The company announced today that components for its solar power plants were being made in a Troy, Mich., car factory operated by Cosma International, a division of auto manufacturing giant Magna International.

The same machines that stamp out doors, hoods and other car body parts are now making long metal arrays that hold Skyline’s photovoltaic panels.

“It’s literally just carving out a piece of an existing facility and putting through a product that for all intents and purposes could be a new make and model of the next family sedan,” said Bob MacDonald, Skyline’s chief executive.  “Every time there’s a new model year for a Ford Mustang, they have a tool and die set they put into this press. So you just have a different tool and die in there that forms a new shape for Skyline.”

The bottom line, said MacDonald, is that Skyline has slashed its capital costs by taking advantage of Cosma’s existing manufacturing capability. He said Skyline of Mountain View, Calif., has contracts in place for small-scale solar farms. He said he could not divulge the details of those contracts but noted that Skyline has begun to receive shipments of arrays from Michigan.

It’s also a good deal for Cosma, whose parent company has agreed to acquire Opel from General Motors.

“Renewable energy trends and forecast data suggest significant growth potential for this market -- we expect to participate in this growth potential,” Tracy Fuerst, a Magna spokeswoman, said in an e-mail.

Fuerst said the company was manufacturing components for other solar companies, which she declined to identify because of confidentiality agreements.

Skyline is not the first solar start-up to beat a path to the Motor City. In September, Stirling Energy Systems of Scottsdale, Ariz., inked a contract with a Detroit-area company called Tower Automotive to make metal support structures for Stirling’s solar dishes.

The same month, solar panel and equipment makers agreed to set up shop in an abandoned Ford factory in Michigan.

 -- Todd Woody

ReachLocal, with 146,050% growth in five years, tops Deloitte's Fast 500 list

Zorik Gordon, chief executive and founder of Woodland Hills-based ReachLocal, which topped the list for the fastest-growing technology companies, in a photo from October 2007. Credit: Mel Melcon / Los Angeles Times.

Deloitte's Technology Fast 500 rankings were released today, showing the fastest-growing technology, media telecommunications, life sciences and clean technology companies in the United States.

The top 10 companies on the list posted an average revenue growth rate of 53,798% over a five-year period beginning in 2004, and primarily fell in the biotechnology/pharmaceutical and communications/networking categories.

Topping the list was Woodland Hills-based ReachLocal, whose revenue jumped from $100,000 in 2004 to $146.7 million by end of fiscal 2008, or a 146,050% growth rate. It is the only Internet company to take the top spot since Google received the honor in 2004. (The majority of the companies on the list belong to the software sector.)

ReachLocal "brings order to the fragmented Internet by connecting advertisers, publishers, and creative solutions providers together on one platform," according to the company's website.

Zorik Gordon, 37, founded the company in 2004 after dropping out of dental school and working for two Internet start-up companies. His goal was to "democratize Internet advertising" by disseminating elite technology, marketing and advertising tools to small businesses.

ReachLocal has more than 500 Internet marketing consultants who can track clicks, impressions and phone calls and advise businesses on making marketing improvements. The company then helps place small business on various Web platforms and increase their searchability on major search engines.

"We bring tier one advertising technology that's had been only available to top companies down to a historic group of people that could never access these tools and technologies," Gordon said.

-- Melissa Rohlin

KaChing aims to shake up the mutual fund industry

Venture capitalists love to use the Internet to disrupt traditional businesses. But surely by now no business is left undisturbed.

Not so, says Andy Rachleff, a founder of Silicon Valley’s Benchmark Capital. He thinks he’s found a big one, what he says is “a $10-trillion market that has not had any innovation in the last 25 years and has not been affected by the Internet.”

It’s the mutual fund industry. And some valley heavyweights have joined Rachleff in his bid to rock that world: Netscape co-founder Marc Andreessen, Hewlett-Packard executive Ben Horowitz, Open Table CEO Jeff Jordan, and Kleiner Perkins Caufield and Byers partner Kevin Compton.

This team believes that mutual funds take investors’ money, but only tell them what their holdings are on a quarterly basis. The funds also charge all sorts of hidden fees. The Internet is famous for bringing transparency to a variety of businesses, but mutual funds, Rachleff says, are as opaque as ever.

Enter kaChing, a start-up that Rachleff has not only backed but has joined as its chief executive. KaChing has been around for about 18 months, accumulating 400,000 users with a Facebook application, but is now ready to unveil its business model.

The company offers up a website that any investor can use for free. The investors – some professional, some amateur – state their philosophy and show their stock picks. KaChing will then rate those investors, using a formula akin to the one that Ivy League universities use to evaluate their institutional fund managers, and anyone with a rating of 140 or more will be tabbed as a “genius.”

Any other investor can log onto the site and see what the geniuses are picking. But if you decide you like one of them, you can plunk your money down – minimum $3,000, which Rachleff says is far less than the institutional level typically required for such services – and invest like the genius of your choosing. Every time the genius makes a trade, you make the same trade at the same time, and get an e-mail alerting you to it.

To be sure, other companies out there have similar ideas. Other so-called social investing firms include Covestor, Cake Financial and PersonalRIA. Plenty of people have an eye on that mutual fund disruption.

And success is far from guaranteed. KaChing will have to persuade people to put their money behind stock-pickers who, while the site may call them geniuses, don't have the backing, brand names or Morningstar ratings of Fidelity, Pimco, Vanguard or other big funds.

-- Dan Fost

Green technology tops venture capital funding

Tesla Roadster is charged through a power plug at the Frankfurt Auto Show. The maker of the electric car got $82.5 million in venture capital funding in the third quarter. Credit: Frank Augstein/Associated Press

Green technology attracted the largest share of venture capital in the third quarter with global investments rising to $1.59 billion, according to a survey released Wednesday by the Cleantech Group and Deloitte.

That’s a 10% increase from the second quarter but still down 42% from the same period last year.

Dallas Kachan, managing director of the Cleantech Group, said the third-quarter numbers are preliminary and he expects total investment to have risen by 15% to 20% when the final figures are calculated.

“Clean tech continues its recovery despite the lowest level of venture capital investment overall since 1997,” said Kachan. “Clean tech has gone from a niche category to 27% of all venture investment. It eclipses the amount being currently invested in biotech and software.”

In a sign that government policy is driving green tech investment, the biggest deals of the third quarter were for companies that have been beneficiaries of federal loans and grants.

Silicon Valley solar panel maker Solyndra raised $198 million and also scored a $535-million loan guarantee to help finance construction of a solar module factory. Electric carmaker Tesla Motors, meanwhile, both took in $82.5 million in venture capital funding while receiving a $465 million low-interest government loan to help it build a factory to produce its Model S sports sedan.

“Large government grants are opening the floodgates for venture capital,” said Kachan.

 --Todd Woody

TechCrunch50: Women get short shrift

At TechCrunch50 . Credit: magerleagues / Flickr.

It's a common refrain, but it always bears repeating: Why aren't women better represented at technology conferences?

TechCrunch50 is no exception. "It's like a 20 to 1 ratio of men to women at this conference," said Stella Yu, a personal brand advisor from San Francisco. And that ratio manifests itself, she believes, in what happens on the stage.

"Last year, they dissed Closet Couture. They said, 'It's not going to work. Nobody wants to see what's in your closet.' It's because everyone on the panel was male." Yet Closet Couture had a favorable write-up in Vogue and continues to do well.

Yu said the same thing happened this year with LearnVest, a personal finance site for women. Judges Kevin Rose and Bradley Horowitz said they were skeptical. "This didn't resonate with me," Horowitz said.

The conference does feature some women trying to rectify the situation. In "the pit" -- the area where start-ups have tables, corralling people and demonstrating their wizardry, the Girls in Tech table is raising money to support Girls Inc.

"We're trying to promote and educate the younger generation about careers in technology," volunteer Tonia Dinh said. "A lot of girls may be interested in the field, but it's predominantly men."

-- Dan Fost

TechCrunch50: MySpace looks for friends

It's the sad fact of life for MySpace, a sponsor of this week's TechCrunch50 conference in San Francisco: Silicon Valley loves Facebook and Twitter. MySpace? Not so much.

Yet that doesn't stop Rupert Murdoch's favorite social network from trying. Chad Russell, who runs MySpace's OpenSocial team, is at the conference, trying to persuade developers to create apps for the one-time social networking leader. MySpace, he points out, still has 170 million users -- dwarfed by Facebook's 250 million, but still a significant population.

"It's almost like we're back to square one," Russell said. "We're pitching again, like we were a few years ago."

"This is a Facebook crowd," he said, noting that Facebook and Twitter get a lot of positive coverage on the TechCrunch website, which covers Silicon Valley and is hosting the conference. "They take their leanings from on high."

OpenSocial, which Russell works on, is an effort launched by Google two years ago to get developers to build applications that can run across a number of social networks, including MySpace, LinkedIn and Google's Orkut. Facebook has its own system and has not signed on to OpenSocial. "They're anti-open standards," Russell said. "All of Facebook has closed protocols."

As for MySpace's newfound role as underdog and Web 2.0 whipping boy, Russell said, "Some of it we deserve. Some of it we don't."

-- Dan Fost

Venture capital funding still slow in Southern California

For many SoCal start-ups, the bank vault is still closed. Credit Anonymous Account via Flickr.

The numbers for start-up investments are out, and in Southern California, they're not so good.

It's a familiar refrain: venture capital funding is tight;start-ups need to sit and wait until venture capitalists have some more funding money. The bad news is that those in Southern California might have to wait a little bit longer.

Nationally, investors put $5.27 billion into start-ups during the second quarter of this year, up 32% from the first quarter. But Southern California attracted only $433 million in venture investment in the second quarter, down 12% from the first quarter. That's according to a Dow Jones VentureSource report scheduled to be released Saturday.

In Los Angeles, venture capitalists invested $111 million, down 34% from the first quarter. That’s down 74% from the same period last year.

“Los Angeles had another challenging quarter,” said Mike Schoenfeld, venture capital advisory group leader at Ernst & Young.

Nationally, investment in information technology crept up 8.5% from the first quarter. But the amount invested during the second quarter, $1.9 billion, is a 41% decline from last year's $3.2 billion. And for the first time since Dow Jones started keeping track in 1992, investment in the healthcare sector outpaced investment in information technology. Venture capitalists put $2.23 billion into healthcare deals in the second quarter.

Things aren't likely to turn around until venture capitalists see more IPOs and mergers and are able to exit their companies, said Samit Varma, a partner with Santa Monica's Anthem Venture Partners.

"They’re waiting until 2010 until the storm is over and the cycle becomes realistic again," he said.

Some of the local start-ups able to raise money this quarter include Generate, a Santa Monica media company that got $2 million, CoreObjects Software of Los Angeles, which raised $2 million, and HauteLook, a Los Angeles Web company that received $10 million.

-- Alana Semuels

Q&A: Silicon Valley Ubermensch Andreas Bechtolsheim explains what the big deal is with cloud computing

Andreas Bechtolsheim, co-founder of Sun Microsystems and chief development officer of Arista Networks, a Silicon Valley cloud computing company. Credit: Alex Pham / Los Angeles Times.

Google made waves in the tech world this week when it announced plans to release an operating system that would encourage wider use of something called cloud computing.

Although most have never heard of cloud computing, many do it every day. By uploading photos to Facebook, sending messages via Gmail or playing Club Penguin online, users are accessing programs and software files that live far away in cavernous, climate-controlled rooms containing thousands of computers.

To help explain this shift in the way we use computers, we turned to Andreas Bechtolsheim, co-founder of Sun Microsystems and chief development officer for Arista Networks, a Silicon Valley startup that supplies networking equipment used to build these massive arrays of cloud computers.

As it turns out, Bechtolsheim was also one of the first people to invest in Google back in 1998, when the company was just two Stanford geeks with a laptop. His  $100,000 investment in the company started by Sergey Brin and Larry Page, along with several other shrewd calls, turned the Birkenstock-wearing engineer into a billionaire.

We spoke to the 53-year-old serial entrepreneur recently about cloud computing, his investment philosophy and his latest venture, Arista Networks. An edited version of the conversation is below.

Q: What do you make of the potential for cloud computing, both as a market and a technology?

Bechtolsheim: It is a surprising evolution in the history of computing. Every application can now shift to the Web. You can access any application remotely. My startup does the networking plumbing for this.
IDC has estimated that by 2012 the market for cloud computing infrastructure will grow to $42 billion, up from $16 billion in 2008. It’s the fastest-growing slice of the spending on information technology. Right now, it’s small sliver of the overall pie. Most of the spending is for the applications. But it’s a growing slice of the pie.

Q: What are some uses of cloud computing?

Bechtolsheim: Hollywood uses high-performance clusters to ...

Facebook looks to Digital Sky for help with revenue potential abroad [UPDATED]

Facebook announced today that Russian venture capital firm Digital Sky Technologies had bought $200-million worth of preferred stock in the Palo Alto, Calif., social networking company, or just under 2% of Facebook based on a $10-billion total valuation. Digital Sky will probably also buy $100-million worth of common stock so that Facebook can use the proceeds to pay employees who wish to cash out on their vested shares.

Facebook Chief Executive Mark Zuckerberg said one of the primary reasons for the deal was Digital Sky's experience with social networks in various countries. The company's portfolio includes five Eastern European social networks, including Russia's Vkontakte and the company Forticom, which runs Odnoklassniki (Russia), Nasza-Klasa (Poland) and One.lv and One.lt in the Baltics.

On a conference call with reporters, Digital Sky CEO Yuri Milner said that his social networks were market leaders in 13 different European countries. "What we see over there is that the companies that are farther along the monetization curve are able to monetize significantly better than Facebook at this point," he said. 

But, he added, "we strongly believe that the same pattern would follow with Facebook." 

Zuckerberg said he was interested in how DST's social networks use a variety of successful monetization strategies, including advertising, virtual gits and direct payments from users.

"The fact that there’s so many different models for these social networks across the world is a demonstration that these products are really creating a lot of value for users, and therefore there are ways to monetize them very effectively," Zuckerberg said. "I'm really looking forward to learning and getting more of an understanding about how these models are working in Europe and Asia."

Facebook doesn't make its advertising revenue numbers public, but research firm EMarketer estimates the company's overseas ad revenue will grow to $70 million in 2009, a 75% increase over 2008. EMarketer projects Facebook's 2009 domestic ad revenue at $230 million.

Corrected, May 27th, 7:45 a.m.:  Because of a typographical error, an earlier version of this post stated Facebook's valuation for this investment at $1 billion.  The correct value is $10 billion.

-- David Sarno