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My gut reaction to the news that AOL’s Platform A would offer a guaranteed CPM (cost per thousand) for applications developers building widgets for Facebook and Bebo was that it’s a subsidy and subsidies are an unnatural and bad thing for business. Then I found out the guaranteed payment was only 40 cents, which made me wonder how in the heck anyone could make real money off such a low CPM.

That translates into $400 for every 1 million visitors. Even with multiple ads and millions of page views, such a rate is unlikely to generate a venture-level return. Obviously there are plenty of people building apps (such as Scrabulous) who aren’t looking for venture returns, but it still seems awfully low. However, making money for apps developers is only a side benefit of the program.

The real goal is to encourage apps developers to use the Platform A ad network to sell their ad space, in turn boosting the entire category of online social network advertising. Obviously the bigger that category grows the better it is for the struggling Platform A (and Facebook’s attempt to defend a $15 billion valuation.) Undoubtedly Platform A will net more developers, especially for ad space that provides a CPM of less than 40 cents, but I’m not sure if this will help grow the industry as a whole over the long term.

I’ve asked Platform A how much they anticipate spending on this effort, but a spokesman declined to tell me. That, however, is the central question here, because what Platform A is doing is selling the ad space at a loss (or covering that loss). If we recall the subsidized shipping of the dot-com days, it’s remarkably easy to predict how this adventure could end if Platform A doesn’t either raising the CPM rate or limit the guarantee. For those riding the Platform A gravy train it would be nice to know when it stops.

Outsourcing compute power is wonderful — until something goes wrong. Unfortunately, when an Amazon Web Service goes down it’s hard to know why, and it’s even harder to know how well a particular cloud is performing in the first place. To make the cloud more transparent, open source cloud management software vendor Hyperic has launched www.CloudStatus.com, a web site that lets a user peek in on the various compute clouds to see how things are running.

CloudStatus measures service availability, latency and throughput for cloud-based infrastructure and application services. The initial release provides metrics for Amazon’s Elastic Compute Cloud, Simple Storage Service, SimpleDB, Simple Queue Service and Flexible Payment Service.

Hyperic sends a software agent to make requests against various cloud services, and according to CEO Javier Soltero, it racks up quite a large bill doing do. The web site views are free, but Soltero says Hyperic also plans to launch a line of services for paying customers. It’s a decent idea, but my worry is that Amazon or another cloud provider could shut the service down, either by offering their own status service or by stopping the Hyperic agent. Given the rush to provide dashboards, application-testing products and other services on top of established computing services, I’m eager to see how startups keep their footing in the clouds.

If this story interests you then you should definitely check out our upcoming conference, Structure 08.

In an interview published this morning in the Financial Times, Microsoft CEO Steve Ballmer said he wouldn’t be looking to pick up any other Internet companies just because the Yahoo deal failed. One can only imagine how far shares of Facebook would have plummeted on that comment had the social networking site been publicly traded. Ditto for Slide and RockYou, both of whom recently raised money at lofty valuations.

“People don’t understand what they’re talking about,” Ballmer told the FT. “At the end of the day, this is about the ad platform. This is not about just any one of the applications.” And for Microsoft, according to the interview, the primary ad platform is search. That makes sense as search is a billion-dollar, proven business.

Application companies have some ad revenue, but right now they’re kind of like cable channels for the web, while an ad platform is the means to a business model that supports that cable channel. Microsoft wants to own the keys to the business model. So to prove their worth, it’s time for application developers to prove their business model.

Our growing ability to use the Internet as a giant database, apply that information in a creative way to build interesting mash-up applications, and then apply them to markets — stock, real estate or fantasy — is an area that holds a lot of fascination for me. But while a few efforts have produced rudimentary, data-based mashups that are good, so far none have been truly game-changing.

We’ve already showcased two startups — Skygrid and Placebase — that have impressed us with their ability to offer pointers that can be translated into actions on the real-world stock and real estate markets. Trulia and Zillow fall in that category as well, though I think they’re both eons away from where they should be. And today we’re adding New York-based Sense Networks to the interesting and growing list of intelligent mashup companies.

By combining historical and real-time location data acquired through either GPS and Wi-Fi, along with other real-world information, the company has come up with a “social navigation and nightlife discovery application” called Citysense. The mobile app, which runs on Blackberry and the iPhone and is currently limited to San Francisco, shows nightlife hot spots on a map in real time. You can then drill down to find information on, say, local bars and restaurants. But Citysense itself is actually a small part of a bigger story.

It runs on Sense Networks’ platform, called Macrosense, which has the ability to take geo-location data sent out by phones and vehicles, such as taxis, and map it to historical data, such as old traffic patterns, local restaurants and other geographical information. I would describe Macrosense as a machine-to-machine platform that can mash up many inputs to create real-time “heat maps.”

This is where it gets interesting: The company doesn’t want to take any advertising or charge people for the application. Instead, it wants to take the trend information it’s gathering and sell it to investors who want to trade based on that information — which is understandable, given that the company has been seed-funded by money from a hedge fund. And I like this idea, even though I have some concerns about privacy. The company says their system is based on “anonymous, aggregate location data.”

“Citysense demonstrates the power of combining anonymous, aggregate location data for social navigation,” said Sandy Pentland, chief privacy officer, co-founder of Sense Networks, and director of human dynamics research at MIT. “The idea is similar to automobile GPS systems sharing and pooling current road speed conditions so that everyone can avoid congestion.”

I’m still not entirely convinced. But if we put privacy concerns aside for a minute, the possibilities of this are mind-boggling. Imagine mapping foot traffic to, say, Gap or Apple stores. While it would never tell you if people were shopping or not, it would be a great indication of how hot (or not) the store was, enabling you to trade on the information. Take it one step further and mash it with web-based data or Twitter feeds: You could build a highly complex and near real-time view into what’s happening on the innerwebs.

Which reminds me: It’s time to call my buddies Paul Kedrosky and Tim O’Reilly so I can pick their brains about these trading mashups.

Just as any online content producer or web site owner is hungry for metrics about their web site, iPhone application developers are bound to want the same types of facts and figures surrounding the usage of their programs. New York City-based startup Pinch Media, which has received an undisclosed amount of funding from Union Square Ventures, First Round Capital and a handful of angel investors, offers iPhone SDK developers free code that gives them analytics based on unique users, active users and length of time the application is in use.

Not only has Apple has sold roughly 5.4 million iPhones to date, but it’s working hard to get the device into as many people’s hands as possible, launching it in country after country around the globe. At this point, it’s hard to gauge how large this market could become.

And with the iPhone SDK coming out in June at Apple’s Worldwide Developer Conference, we’re about to see an explosion of apps being offered by mobile developers. Indeed, as the iPhone ecosystem continues to evolve, startups that offer tools such as Pinch Analytics are going to be really valuable.

Today at Google’s developer conference, MySpace said it would use Google Gears to power search and sort functions for its email, giving users a highly sought-after functionality at little cost to MySpace infrastructure. The move is a great one for MySpace, which is really pulling out all the stops in its rivalry with Facebook.

Making social networking email more user-friendly and searchable was a top concern among Facebook users who questioned Mark Zuckerberg during his keynote at the South by Southwest event in March, so I’m guessing MySpace users also felt pain in that area, since the inbox functions are so similar. So MySpace is clearly following user demand with this announcement. It’s now left up to users to decide if they will use Gears. They will receive a prompt on their MySpace pages letting them know about the option.

Gears is an open-source development platform that an individual user downloads for free. The program then allows applications running in the web browser to access the user’s own CPU and storage. The enables offline access to web applications and richer web applications without breaking the site owner’s infrastructure. Sites need to be optimized to work with Gears, which MySpace has done. Other sites using Gears include Google’s Reader and Docs, as well as Zoho.

Because it offloads some of the processing power and caching to the user’s desktop, MySpace’s decision to use Gears has the added bonus of reducing some of the hardware demands required for MySpace to improve its email. I’ll offer more details on that aspect of after I chat with MySpace this afternoon.

Update: Allen Hurff, SVP of engineering at MySpace, talked a bit about the bandwidth and server savings for the social network, but also pointed out that using Google Gears or Adobe Air could allow for new services such as keeping months or years worth of status updates on a user’s computer or lead to an off-browser email client.

As for the user experience, he emphasized that one of the results of off loading processing to the user’s computer means information loads faster because the user isn’t waiting for it to hit a server and come back. He pointed out that most computers don’t use all of their processing power and memory right now, which means this isn’t an intrusive service on a machine.

As for questions about security and keeping email on public machines, he said MySpace could one day choose to offer an encrypted version of the data stored on machines, but said it would slow down the service. However, for those deciding to check email on public computers, and are worried their email will linger, users are given the option to wipe their data.

Strands, a Corvallis, Ore.-based startup that has shown success in the music social recommendation space, is relaunching Strands.com into a private beta online activity aggregation service. The company hopes to take the lifestreaming features offered by Web 2.0 darling FriendFeed a step further by adding the ability to build a “taste profile” based on your social media usage patterns.

Through the taste profile, Strands intends to battle the information overload from services such as Twitter and FriendFeed by using your online social circle to filter out relevant content you will find pertinent. “Hot Posts” will show you which online media items, such as news stories and videos, are currently popular among your friends to help you discover new things.

The company recently raised $55 million in capital and reports sales of $12 million in 2007. When I asked Jason Herskowitz, Strands’ VP of Social Media, how the company plans to monetize its new offering, he said Strands is merely looking for eyeballs to drive sales of its other offerings, such as Strands Social Player and Strands Business Solution.

I’m skeptical about how successful the new Strands.com service will be — it’s yet another service to sign up for and adopt. However, if implemented correctly, the service stands to bring the signal-to-noise ratio of lifestreams down to a tolerable level.

Last week I ran into Troy Lane Williams, founder of PeoplePad, a stealthy Austin-based startup that’s creating some kind of front-end portal for the semantic web. I have no idea what the finished product will look like, but Williams’ previous startup experience has colored PeoplePad’s product and its formation.

Williams may be familiar to readers who recall his involvement in Questia, the pre-Google Books, subscription-based online library that launched in 2001 with $150 million in backing. Questia is still in business, but Williams left in May 2007.

Wisdom from Williams includes:

• Shut up. I had to push to get Williams to talk to me. After a big launch for Questia and watching other complicated technology companies receive media hype they couldn’t live up to, Williams says he’s not letting PeoplePad into the public eye until March 2009. He’ll do a limited beta this fall, though.
• When it comes to the web, free is where it’s at. The last decade has taught Williams that the mass market isn’t going to pay for online informational content, which means advertising is a must, as is getting cheap — but also high-quality — content. He cites Wikipedia as an example.
• The Internet isn’t for passive reading. Williams dealt with large blocks of text at Questia; he even criticizes Wikipedia for being too text-heavy. “We need to structure data around lists and data boxes instead of around snippets, so people can get to the key points,” Williams says. Data doesn’t have to be text and a site shouldn’t restrict itself to “spiderering around the web” for all of its information.
• What’s good for people is better for machines. If it’s easier for people to enter short amounts of data, it’s also easier for machines to read that data using properties of the semantic web.
• Use existing technology if you can. Williams says he’s not out to build new semantic databases or semantic programming languages; instead PeoplePad will use services from companies such as Metaweb or Radar Networks.
• Usability is key to the success of a consumer-oriented site. The semantic web is less powerful if grandmothers, dentists and other not necessarily tech-savvy can’t use it.

After hearing all this, I suggested to Williams that he was building a sort of Mahalo powered by the semantic web, but he says he’s not. Perhaps after Williams wanders down Sand Hill Road this summer looking for his first round of capital, more information will leak out. Readers, any guesses?

It has been a long time coming, but Powerset, a San Francisco-based contextual-semantic search engine has finally launched. I urge you to try it out, for this is quite an impressive search effort, despite the fact it is currently limited to searching Wikipedia along with some supplementary results from Metaweb’s Freebase. I think it has made Wikipedia much easier to use. I like how you can do more topic-based searches and get a holistic view of the information you’re looking for. Danny Sullivan over on Search Engine Land has an elaborate and fantastic indepth review of Powerset, and that frankly obviates the need for any other review.

That said, Powerset faces an uphill climb, especially when it comes to consumer mindshare. I think Google has become so synonymous with search that it is virtually impossible for a newcomer to establish a toehold. Powerset’s approach is different, and its tactic of applying its technology to specific content repositories such as Wikipedia is smart. But will they (web searchers) come and use Powerset?

At our recent GigaOM PM event, Chad Walters, director of engineering, search and platform at Powerset, gave a talk about how his company was using Hadoop and other clever technologies to meet its immense infrastructure needs. Here are some bits from OStatic’s live blog coverage of the event:

Powerset applies deep natural language processing (based on technology licensed from Xerox PARC), which means the company needs 100 times more processing horsepower than a simple keyword searching and indexing. Powerset uses a distributed database system called HBase in tandem with Coral, its Document Processing System. Coral uses Hadoop as its job control machine. Powerset uses 92 eight-core machines to do processing.

Google isn’t evil and it isn’t being beaten down by the recession or fewer click-throughs on its ads. At least that’s the message CEO Eric Schmidt tried to convey during an interview with Maria Bartiromo that will air on CNBC after the close of markets today.

The grown-up Googler sat down with the Money Honey for a frank talk about Google’s most recent earnings, its plans to move into more enterprise applications, its hopes for monetizing YouTube, mobile phones — even its particpation in the 700MHz auction. Oh and how it’s still trying to avoid being evil.

The good news is that Google is still focused first and foremost on advertising, in particular on gaining as much share of that market as possible. The bad news is the click-throughs rates for search advertising in the U.S. are down, which prompted investors to shear some 40 percent off the firm’s market cap from the beginning of the year through mid-March, when numbers showing poor U.S. click through data surfaced. Schmidt argues that the lowered click-throughs will actually result in higher revenue because the quality of the ad viewer is higher — there is less casual clicking. He also points out that recessions drive advertisers to spend money on ad formats such as search because they can tell how effective those ads are.

Recessions do tend to drive advertisers toward measurable campaigns, and Google will likely benefit. However, the decreased click-through rates are something those not just Google’s investors are watching, but many in the startup community as well. Are consumers becoming more leery of search ads and tuning them out or are they really getting better at determining which ads are relevant to them, resulting in fewer, but higher-quality, clicks? The answer to that question could determine the success of many of the web-based consumer service providers hoping to make money on new ad formats — and on Google AdWords.

When it comes to online auctions I’m far more likely to be on the selling than the buying end. I am just not that into stuff. So I’m probably not the right person to evaluate a startup like Wigix, which launches its public beta today. The one-year-old business, which has raised $5.3 million from Draper Fisher Jurvetson positions itself as a stock market for stuff.

That’s a stretch. The company allows members to list their stuff (cars, electronics and ladies accessories are the most popular items so far), and see what other people might be willing to pay for it. For example, if I have a Nintendo Wii listed, I could set an “ask” price of $400 for it. If anyone meets that price then Wigix would automatically generate the transaction. If I merely listed my Wii I could see that others on the site are “bidding” $400 for them and set a price.

Thus, members can view their stuff as a “portfolio” of goods and see what the market value is. It’s a concept similar to iTaggit, which allows collectors to list their collections online, but is based on generating an eventual transaction. Unfortunately, the value in any sort of market depends on the market having liquidity, primarily through getting a lot of users selling and buying the same items. While the Nintendo Wii is a liquid asset, I’m less sure how liquid the market for a Prada bag would be.

So for Wigix to make it as an eBay killer (or even as a successful market) it needs to combine its transparency with liquidity– by gathering a lot of users and selling goods that a lot of people want to buy and sell. In contrast, eBay made its claim to fame by finding a market for items that few people wanted (like vintage beer signs) and then became a liquid market over time. I’m not sure Wigix can duplicate such a feat, but I admire it for trying.

Earlier this week, I got a tip from one of my reliable sources that Riya, a San Mateo, Calif.-based startup, was looking to either sell or license its core technology and instead focus solely on Like.com, its visual shopping search business. The money raised from the sale could then be put towards new business efforts without having to raise fresh VC capital. The company has raised over $15 million thus far from the likes of Blue Run Ventures, Leapfrog Ventures and Bay Partners. It raised an undisclosed amount of debt in November 2007.

It seemed like a radical idea for a company that debuted back in May 2006 to much fanfare and, at one point, was close to being acquired by Google. That deal fell through, however, and Google settled for Neven Vision.

But Riya’s story line then took a notable turn. In November 2006, Riya launched Like.com, a visual search engine that focused on goods such as fashion accessories, clothing and shoes.

I followed up on my tip, and spoke with CEO & founder Munjal Shah earlier today. He confirmed that indeed, they are shopping their technology around, but he didn’t offer any further details on the sale or who might be interested. My source says that there are some parties sniffing around. When asked if Like.com would license the technology from the buyer of the “tech”, Shah said. Like.com is only using bits of the Riya technology, and the compan