The Latest from TechCrunch

Yext Spins Off Pay-Per-Call Ad Business As Felix
Pinvolve Converts Facebook Pages Into Pinterest Pinboards, Increases Repins By 150%+
Topps: Iconic Trading Cards Brand Goes Beyond Cardboard With First-Ever Mobile Apps
Reminder: The TC DC Mini-Meetup Is Tonight
U.S. Consumer Financial Protection Bureau Gets Open Source, Publishes on GitHub
Indian Government To Launch BlackBerry Messenger Snooping System ‘Soon’
The Lumia 900 Becomes Amazon’s Best Selling Phone, Topping The RAZR MAXX And Galaxy Nexus
Zoomingo’s New App Turns Spotting And Rating Deals Into A Game
Dow Jones Says Q1 2012 U.S. Venture Fundraising Up 5 Percent, NVCA Reports 35 Percent Decrease
The ‘Dogbnb’ Wars Escalate: Rover Raises $3.4M in Round Led By Madrona
With New Monthly Grooming Kits For Men, Birchbox Isn’t Just For The Ladies Anymore
Here’s Lenovo’s Latest Android Tablet, The 9.7-inch IdeaTab S2109
SEC Filing: Chris Sacca Raising $25M For New Fund, Lowercase Spur
Woopra’s New Dashboard Lets Publishers See Exactly Who’s Visiting Their Site
AOL Sells 800 Patents For $1.1 Billion To Microsoft [Memo To Staff]
Study: CIOs May Like To Talk The Social Media Talk, But Only 10% Walk The Walk
“The Hacker Company”: Facebookers Snag A Vintage Sign For New HQ
Sephora Doubles Down On Tech: In-Store iPads, Revamped Website, Pinterest Tie-In
Strategy For Startups: The Innovator’s Dilemma
Hooking Users In 3 Steps

Yext Spins Off Pay-Per-Call Ad Business As Felix

Posted: 09 Apr 2012 09:00 AM PDT

Yext has made the famous startup pivot, shifting focus from its pay-per-call advertising service to a new product called PowerListings. But rather than simply abandoning its old business, the company is announcing today that it’s spinning off the pay-per-call part of the company into a wholly-owned subsidiary called Felix.

Yext CEO Howard Lerman says the pay-per-call business was doing just fine (it’s supposedly profitable and on-track to bring in nearly $30 million in revenue this year), but he saw an even bigger opportunity in PowerListings, a service that helps businesses update and synchronize their listings across more than 40 local search services in real-time. Now, he says that splitting the two companies seems like the best way to “maximize the value of both.”

The two teams were already working on separate floors, so in some ways this is just making the split official. At the same time, Lerman says the pay-per-call business has been neglected recently in favor of PowerListings, so with this news, we should see some “new momentum” behind the older product.

Another bonus: Until now, a technical bug meant that businesses could only sign up for either PowerListings or pay-per-call advertising. Starting tomorrow, they can sign up for both.

So why “Felix”? Yext co-founder Brent Metz, who will serve as CEO of the new company, compares the name to Siri, the mobile personal assistant technology that was acquired by Apple. Felix, Metz says, is a different kind of voice-activated intelligent agent — instead of helping you accomplish basic tasks on your iPhone, it listens to customer phone calls and determines which ones were actually good for your business. Metz wants to build out this technology further, to help businesses understand which calls are leading to sales, which ones aren’t, and why.

Yext itself, meanwhile, will continue to focus on PowerListings, which Lerman says has grown to more than 40,000 paid subscriptions in less than a year. The company was one of the startups launching products at the TechCrunch50 conference in 2009, a demo that led to a $25 million funding led by Institional Venture Partners.

Pinvolve Converts Facebook Pages Into Pinterest Pinboards, Increases Repins By 150%+

Posted: 09 Apr 2012 08:50 AM PDT

The folks behind a forthcoming fashion catalog for the iPad, Bazaart, have launched an interesting side project in their downtime (what’s that?) from their participation in DreamIt’s new Israel-based startup accelerator program. In need of something similar for themselves, the company launched a Facebook app called “Pinvolve” which converts Facebook Pages into Pinterest pinboards.

To use Pinvolve, you have to first be logged into Facebook as one of the page’s admins before installing the app. Once up-and-running, Pinvolve creates a new section on your Facebook page which presents all your photo posts in a Pinterest-like fashion – that is, in the typical image pinboard style that’s now associated with the popular social networking service.

The app also pulls in the Facebook likes and comments associated with each post, as well as the comments’ text. If a post has a lot of comments, however, only the first few will be listed on the main Pinvolve page, with a link to the rest provided below. When clicked, that link will take you to the photo’s page on Facebook.

However, Pinvolve isn’t just about redisplaying Facebook content with a Pinterest look-and-feel, it also provides tools that let you and the page’s fans re-share those posts over on Pinterest. When you hover over an image on the Pinvolve pinboard, Pinterest’s “Pin it” button appears. Clicking this will then re-post that content to Pinterest itself.

You can see an example of Pinvolve in action now, over on fashion model, blogger and designer Audrey Kitching’s Facebook Page here.

According to Bazaart co-founder Dror Yaffe, the idea for Pinvolve came from his team’s own need to market their content on what’s now the third most popular social network.

“We’ve been marketing our applications on Facebook and Twitter, but when Pinterest became a major player we were baffled,” he says. “As a young startup, our resources are very limited and it takes a lot of effort to market on another social network. So, as a side project, we’ve developed Pinvolve.”

Despite the fact that the company has done very little marketing or media outreach, (save for a bit coverage by Israeli sites), the app is already installed on over 1,000 Facebook Pages as of today. Using Pinvolve on its own page, Yaffe says they’ve increased their re-pins by over 150%, and this figure is consistent across the app’s early adopters.

Although the basic version is being made available for free, Facebook page owners are offered an option to upgrade to Pinvolve’s white label plan, which removes the “Get Pinvolve Now” button from the page, and allows you to customize the “like” button, the cover photo, and lets you link from the app directly to your Pinteret profile. For now, this option is available for the (pretty much no-brainer) price of $9.99. It will later bump up to $19.99.

To try out Pinvolve for yourself, head over to the app’s page here: http://apps.facebook.com/pinvolve.

Topps: Iconic Trading Cards Brand Goes Beyond Cardboard With First-Ever Mobile Apps

Posted: 09 Apr 2012 08:42 AM PDT

Topps, the company best known for its Bazooka bubble gum and for essentially inventing and popularizing trading cards in the 1950s, is today releasing its first-ever mobile apps in conjunction with the start of the 2012 Major League Baseball season. That’s right. People of all ages may remember collecting and trading their favorite players’ cards as youngsters, and though trading cards don’t quite enjoy the same level of ubiquity as they did in decades past, Topps’ cards remain iconic for most sports fans.

Over its 60 year history, Topps has moved beyond baseball, not only producing trading cards for all the major sports, but comic books and games as well. Yet if the trading cards and chewing gum company is ever going to get serious about becoming part of the digital era, mobile had to be a part of that strategy. And trading cards may just lend themselves well to a digital reincarnation — or so the company hopes, as today it moves beyond cardboard with the launch of its first iOS apps, Topps BUNT and Topps Pennant.

With its new iOS apps, Topps aims to leverage the sizable inventory of statistics, images, facts, and figures it has developed over the years, combining the history of the game with modern tech. Topps Pennant, the company tells us, presents a “modern box score” on both the iPhone and iPad, allowing fans to recreate more than 60 years of baseball — every team, season, game, and play going back to 1952.

Topps Pennant enables baseball fans to view box scores and live play-by-play of games from this season as well as from over 115K games from the past. While this is something that ESPN and others have been doing now for quite some time, Topps offers users the ability to view its exhaustive catalog of historical stats in good-looking, interactive infographics. The company has taken its time in developing apps that leverage all the capabilities of the iPad, so that even if you already have an app you use for box scores, this one’s worth checking out.

Topps BUNT, the company’s second iOS app, aims to bring fans a more user-friendly, accessible version of fantasy baseball, with a social game meant to act as a companion to the ongoing baseball season. As to how it works? Users create an account with Facebook or Twitter, pick a name and a personalized avatar, and then choose nine of their favorite players.

Users earn points based on how well those players perform, competing against other players, with scores being presented in a giant, multi-zone leaderboard. Users also get to check out game updates to track how their players are performing on the field in realtime, and trade the players that are batting below the Mendoza line.

Topps BUNT is really designed to be fantasy baseball for more casual fans, those who aren’t ready to commit to the more demanding, 162-game fantasy season. The team describes it as a mix between fantasy baseball, and popular iOS apps Turntable.fm and Draw Something. Having tested it out, the app definitely offers a fun, quirky baseball experience that could appeal to younger fans, especially those having grown up in the ubiquity of casual, Facebook-based social games.

To help bring its brand into the smartphone era, Topps hired the former Head of Product at Nokia (and five-year product veteran at Microsoft) Michael Bramlage. The VP of Digital tells us that, in the sports media landscape, most of the apps out there are from broadcasters or the leagues themselves, so that once fans get past MLB and ESPN apps, there’s not a lot quality outside of geeky, fantasy baseball apps. In other words, apps for the number crunchers and serious fans.

In my experience, this is true; there’s plenty of room for new and better ways to explore stats and interact with the game, especially for younger audiences who spend a lot of their time on mobile devices. For MLB.com, for example, more than 50 percent of traffic emanates from mobile.

Topps is leveraging its close relationship with the MLB Players Association and unique archive of player data and photos to go after newer, more casual fans in what Bramage calls a big “game mechanics play.” In that sense, Topps is not just looking to digitize baseball cards. The company put a lot of research into what cards represented to baseball fans emotionally and is reconstituting the figurative elements on the iPad — not just porting, but trying to re-imagine what player cards will mean to a younger generation.

In terms of the apps, Topps Pennant will be priced at $3.99 for a universal app that includes optimized versions for iPhone and iPad. However, Apple is currently running a launch special that puts the app at $2.99. Topps BUNT is available for free (on the iPad).

For more, check out Topps at home here, or the videos on the apps below:

Reminder: The TC DC Mini-Meetup Is Tonight

Posted: 09 Apr 2012 07:58 AM PDT

Just a reminder: today is the most important day of the year. It’s TC DC Mini Meet-up Night! We’re here in DC and we’re looking forward to meeting with you all at RFD (810 7th St NW) at 6pm for some networking, some fun, and some start-up talk.

I’ve been doing these things in the US and Europe for a few years now and my style is very laid back and very organic. This is a very informal event – we won’t be having speeches, panels, or wonkery. We’re here to hear pitches, talk tech, and discuss what you’ve been up to. Come along even if you have nothing to launch. After all, maybe you’ll meet your next start-up partner tonight.

As a special bonus, DC meet-up folks will get to meet our new co-editor, Eric Eldon, who is coming in from San Francisco and who will be in Virginia with us that evening. It will be, as they say in Virginia, a hoot.

Furthermore, we are in Norfolk on Tuesday, and Richmond on Wednesday. You should have already RSVPed (did you?), you should have already picked out what you’re going to wear (did you?), and you should have your pitch ready (do you?).

Thanks to all those who helped out in organizing this and a huge thank you to our sponsors. We’re really looking forward to this opportunity to meet with you guys in the tech corridor. Feeling left out? Fear not. We’ll be hitting other cities this summer.

Tweet us at @johnbiggs or @jordanrcrook if you have questions or concerns.

Monday, April 9 – DC – RFD – 810 7th St NW – 6pm-10pm (??) – Our first event will be at RFD in NW. These guys have a huge selection of beers on tap and, if we play our cards right, we’ll have a few hours of open bar. If you haven’t RSVPed hop over to Plancast or email me at john@techcrunch.com with the subject “RSVP DC.” Try to include a rough headcount.

Sponsors

Canvas.co is DC's largest co-working community; designed for creatives, freelancers, independents and start-ups to be an inspiring environment in which to work and collaborate. There are no closed doors here; it's true co-working for community-centric creativity and collaboration. It's more than just space, beyond sharing and no one gets incubated here. Boasting 6,000 square feet of open-space, completely custom designed, from floor to ceiling. We believe that creativity comes from inspiration and that inspiration starts with your surroundings; you won't find any carpets, water-coolers or Ikea here.

Create Digital is a privately held Richmond, Va. based social agency that provides community management, web development and digital campaigns for Fortune 500 companies. Since 2010, Create Digital has consistently improved the web presences, customer engagement and online brands of its clients.

HomeSnap is the most intuitive real estate app you'll ever use. Simply snap a photo of any home to find out all about it, including its current value, last sale date & price, local schools and more. HomeSnap works for over 90 million homes across the USA.

Higher Logic’s mission is to provide your members, constituents, donors and volunteers with innovative ways to think together, share and collaborate. Higher Logic delivers solutions so you can extend your organizational value and attract a new generation of global members and constituents.

Applied Predictive Technologies (APT) is the world leader in helping organizations harness the potential of Test & Learn, a powerful fact-based approach for choosing, targeting, and tailoring strategic and tactical actions for maximum impact and profitability.

WeddingWire is one of the fastest growing wedding and event sites in the country. They say that “necessity is the mother of all invention” which is exactly why WeddingWire was created: to create efficiency and transparency in the wedding and event space.

Tuesday, April 10 – Norfolk – We Are Titans Offices – 259 Granby St 3rd Floor – 6pm-10pm – We will begin the night at the We Are The Titans offices, kindly provided by a team of titans who work there, and the perhaps we can move to another location later. Please RSVP here or email me at john@techcrunch.com with the subject “RSVP NORFOLK.” Try to include a rough headcount. We are also looking for sponsors, so please let me know in a separate, non-RSVP email if you’re interested.

Here’s a little bit about our first Norfolk sponsor:

We Are Titans is a product development shop that helps startups and established businesses worldwide build custom web and mobile applications. We have a track record of turning great ideas into profitable and effective products, and we’re big on candid communication over intimidating geek speak. Headquartered in Norfolk, Virginia, our team looks forward to talking with you about your project, and how The Titan Way can help bring the right product to reality, while saving you time and money.

Also sponsoring Norfolk is Create Digital.

Wednesday, April 11 – Richmond – SnagAJob HQ – 6pm-10pm – 4851 Lake Brook Dr – Finally, we’ll meet in Glen Allen, outside of Richmond, for our final meet-up. Thanks to SnagAJob for donating a space with a bar and some booze. We’re still looking for Richmond sponsors as well, so please email me directly. RSVP here or email me at john@techcrunch.com with the subject “RSVP RICHMOND.” Try to include a rough headcount.

Here’s a bit about our first Richmond sponsor:

Snagajob, the largest hourly employment network for job seekers and employers, is the only company to provide both sourcing and talent management solutions to the hourly industry. With more than 30 million registered job seekers and the leading hourly-focused talent management system, Snagajob has been fulfilling the dreams of hourly workers and those who employ them since 2000. Headquartered in Richmond, Va., Snagajob has been named the No. 1 Best Small Company to Work for in America by the Great Place to Work Institute. To find out more, visit snagajob.com and www.snagajob.com/employer-solutions.

Also sponsoring Richmond is Create Digital.

U.S. Consumer Financial Protection Bureau Gets Open Source, Publishes on GitHub

Posted: 09 Apr 2012 07:41 AM PDT

I’ve been harping for a while here on TechCrunch about the benefits of open source software. I often quote Canonical’s Technical Architect Allison Randal, who said “Free software is a fundamentally superior model for developing software.” Free and open source software enabled much of the innovation we write about here at TechCrunch, but it’s been slow to move into established enterprises, let alone the U.S. Government. That’s starting to change today with an announcement from the U.S. Consumer Financial Protection Bureau that states, unequivocally, “We use open source software, and we do so because it helps us fulfill our mission.”

The announcement goes on to state that “when we build our own software or contract with a third party to build it for us, we will share the code with the public at no charge.” The CFPB is making it clear that they get it with respect to open source software: they have a GitHub account for hosting their works and are sharing their open source policy as a GitHub gist in addition to a static HTML document on their own website.

According to Chris Willey, CIO at the Consumer Financial Protection Bureau, “Using open source software isn’t innovative compared to the outside world, and having a policy that says so probably seems odd to many in the tech community. But many federal agencies avoid open source software because they don't have internal policies and procedures that allow it.” He observes, however, that the policy to share by default is absolutely brand new within the federal government. “Some tech-inclined agencies like NASA, NOAA, NSA and FCC share code selectively,” said Willey. “We want to share everything we make.”

We are a citizen-facing agency, so keeping pace with the rest of the world is a high priority. We think our online presence should be on par with the web’s most popular tools and communities. Enabling outside developers to contribute to our products makes that goal more attainable.

I asked Willey what kind of advocacy — if any — the CFPB was doing (or planning to do) for open source software within the government. He shared that they’re using GitHub Enterprise internally, and have fielded a number of questions from other agencies about how they procured that and set it up. “It’s hard for us to have these conversations with other agencies without implicitly advocating an open source philosophy,” Willey told me. “So instead of trying to sell open source to other agencies on principle, we’re finding that it’s a lot easier to prove the value of open source software by showing our colleagues the great results it has gotten us.”

I was curious whether the CFPB’s policy is the natural result of more digital natives taking government jobs. According to Willey, it was “simply the byproduct of building a government organization from scratch in the information age: we are able to craft our technology philosophy with a modern perspective.”

“We wrote this policy to make sure that our team always has the freedom to use [open source] tools,” Willey continued. “It’s a freedom that many other federal agencies do not have, and that’s because they lack a policy–or, in some cases, because they have policies that strictly forbid open source software.”

Hopefully more government agencies — in the U.S. and around the world — will start to adopt similar policies for the benefit of citizens everywhere.

Indian Government To Launch BlackBerry Messenger Snooping System ‘Soon’

Posted: 09 Apr 2012 07:24 AM PDT

BlackBerry fans in India had best stay on the up-and-up lest they want to draw unwanted attention from the country's security agencies. India Today reported over the weekend that the country's government is on the verge of being able to capture messages sent though RIM’s formerly iron-clad BBM service.

Unnamed Indian officials were quick to point out to India Today that their forthcoming ability to capture and crack BBM messages will be used strictly on snoop on devices whose users are suspected of engaging in criminal or terrorist activity.

Thankfully, there seems to a be a fairly rigorous approval process that needs to take place before the snooping can commence — the Union Home Ministry must essentially issue a warrant to the agency in question (eight of them authorized to tap communications), who then must request access to the data from the trackee's service provider.

Given their focus on facilitating communication between employees, the government is less concerned with snooping on messages that pass through BlackBerry enterprise servers. That isn't to say that they can't do it — they would have to intercept the messages before the were encrypted by the BES, which they view as more an unnecessary hassle than a technical impossibility.

If some of this sounds familiar, it’s probably because RIM and India have had a long, and at times contentious relationship. The whole convoluted story first began to unfold in March 2008, when the Indian government began seeking a way to "lawfully intercept" emails and messages sent by BlackBerry users. India was (and remains) so wedded to the idea that they eventually threatened to shut down RIM's network within the country entirely if they didn't fork over that access. RIM fought the good fight for nearly two months, but eventually backed down rather than let themselves be shut out of the Indian market entirely.

The Indian government was unhappy with RIM's initial offer but finally got their wish back in October, when RIM (perhaps reluctantly) installed a facility in Mumbai that would effectively allow the government to poke around in user data as needed. And, well, here we are. BlackBerrys (and perhaps BBM in particular) have proven to be a useful method for people to communicate in the midst of chaos and confusion, but whether or not the Indian government’s newfound powers will help as much as they think remains to be seen.

The Lumia 900 Becomes Amazon’s Best Selling Phone, Topping The RAZR MAXX And Galaxy Nexus

Posted: 09 Apr 2012 07:15 AM PDT

And we’re off! Even though the Nokia Lumia 900 launched yesterday and was largely unavailable thanks to the Easter Bunny, the phone quickly skyrocketed to the top of Amazon’s best sellers list. The phone hovered around the 5th spot yesterday but jumped to the first and second spot today with the black version preferred over the cyan edition. This puts the Nokia’s large Windows Phone over top of Android’s star players, the Droid RAZR MAXX and Galaxy Nexus.

Part of the instant popularity likely comes from Amazon’s price of $50 with a two-year service plan. That’s $50 less than AT&T’s price and $150 less than the previously most popular phone from Amazon, the Droid RAZR MAXX.

The other factor could be that for some reason AT&T and Nokia launched the phone in the US on Easter Sunday. Brian X. Chen of of the NYT’s Bits blog found most NYC-based AT&T stores and resellers were understandably closed, making the phone rather difficult to find in person. Launching a pivotal phone on a Sunday is strange but launching it on a major national holiday is downright idiotic.

Amazon has long been friendly to Windows Phone. Out of the top 100 best rated cell phones, the top three are slightly older Windows Phones with Verizon’s HTC Trophy occupying the top spot. Judging by the Lumia 900′s current high rating, Nokia’s Windows Phone could soon join the rest of the family on that list as well.

Zoomingo’s New App Turns Spotting And Rating Deals Into A Game

Posted: 09 Apr 2012 07:07 AM PDT

Shopping discovery service Zoomingo, which helps you find nearby sales using your mobile phone, is out with a new iPhone app that introduces a gamification element to its platform. Local shoppers are now being encouraged to share the unreported sales they spot in the wild as well as rate those spotted by others.

By playing the new “Hot or Not” game within the app to rate deals, shoppers earn points while also training the service’s branded “ZoomSense” recommendation engine to present more deals matching their interests.

Points can be totaled up for a chance to win a weekly prize, too. For example, the weekly prize following the game’s first week was a Tory Burch Tote. (You can see it over here on Zoomigo’s Facebook page).

Zoomingo, for those unfamiliar with the service, is a mobile shopping platform from language learning service Livemocha's co-founders, Shirish Nadkarni (Zoomingo CEO) and Krishnan Seshadrinathan (CTO). The company launched back in October with a focus on clothes, shoes, jewelry, handbags, beauty and home products – products that appeal to the everyday bargain shopper, not necessarily the daily deal seeker.

Sales data for the app is compiled from over 70,000 retail outlets, including Nordstrom, Macy's, JC Penney, Williams Sonoma, Target, Kohl's, Dillard's, Wal-Mart and more.

Explains Nadkarni of the new Hot or Not game, it not only helps Zoomingo showcase more deals like those from smaller boutiques and local shops – areas where its data-sourcing techniques are limited – it also serves the dual purpose of helping customize the app to cater to shopper’s interests. The more you play (in theory), the better the recommendations will become.

The game itself is really simple – you just tap the “thumbs up” or “thumbs down” to rate an item, or, if you have no opinion, you can tap “skip this” instead. Each rating translates to 5 points. The top 50 points earners for the week are entered into the contest (a raffle).

Nadkarni says that today, Zoomingo users are rating over 20,000 deals every day, and are saving thousands of items to their shopping lists daily. The app is also listed in the top 10 of iTunes “Catalogs” category in the App Store. However, although the community may be engaged, it’s still relatively small – the service has over 100,000 to date.

The new iPhone version is available here.

Zoomingo has $1.3 million in funding from Naya Ventures, Benaroya Capital and several angels.

Dow Jones Says Q1 2012 U.S. Venture Fundraising Up 5 Percent, NVCA Reports 35 Percent Decrease

Posted: 09 Apr 2012 06:07 AM PDT

Thanks to big raises from venture firms like Andreessen Horowitz, U.S. venture capital fund-raising increased to $7 billion across 47 funds in the first quarter of 2012, which is a 5% increase in capital raised and a 34% increase in fund closings from the same period last year according to Dow Jones.

The report says that 23 early-stage funds raised $1.6 billion, which is a 35% increase in fund closings and nearly triple the amount of capital raised during the first quarter of last year. Dow Jones says that just three early-stage funds accounted for 79% of the total, and 12 funds targeting $50 million or less in fundraising held final closings during the first quarter.

TechStars’ David Cohen recently raised $28 million for a new fund, and SoftTech VC also raised $55 million.

Multi-stage fund-raising was strong for the quarter, with 17 funds raising $5 billion, a 13% increase in fund closings and 19% increase in capital raised. In early January, Andreessen Horowitz raised $1.5 billion for its Fund III. Dow Jones says that Andreessen Horowitz and Tiger Global Management, which raised $1.5 billion in March, accounted for more than half of the capital raised. In the past quarter, Charles River Ventures also raised $375 million for a new fund, as Bain Capital Ventures raised $600 million.

Capital committed to later-stage funds fell 77% to $449 million despite seven funds holding closings in the first quarter, compared to three in the same period last year.

"A few big firms continue to have no trouble raising large funds, as limited partners are sticking with what they see as safe bets when making their venture allocations," said Zoran Basich, editor of Dow Jones VentureWire. "But small firms are also finding some receptive LPs interested in investing in niche spaces, such as education, or specific geographic areas."

Thomson Reuters and the National Venture Capital Association (NVCA) have a different set of data that actually show a decrease in the amount raised by U.S. venture firms in Q1. Forty-two U.S. venture capital funds raised $4.9 billion in the first quarter of 2012, according to the report. This is a 35 percent decrease by dollar commitments and a 9 percent decline by number of funds compared to the first quarter of 2011, which saw 46 funds raise $7.6 billion during the period.

NVCA says the top five funds accounted for nearly 75 percent of total fundraising this quarter as the number of funds raising money during the quarter fell to its lowest levels since the third quarter of 2009, when 36 venture capital funds saw new capital commitments.

What accounts for the discrepancy? Perhaps NVCA isn’t accounting for early-stage funds, as Dow Jones is (which could account for the difference in number of VC funds raised). Also, NVCA says that classifications are based on the headquarter location of the fund, not the location of venture capital firm.

Additionally, the NVCA says there were 31 follow-on funds and 11 new funds raised in the first quarter of 2012, a ratio of 2.8-to-1 of follow-on to new funds.

In terms of outside the U.S., Dow Jones reports that European venture funds raised $954 million for 11 funds, an 8% increase in capital raised with the same number of fund closings compared to the first quarter of last year. In Europe, early-stage funds garnered most of the capital, raising $769 million across eight funds, an 8% decline in capital committed from the same period last year. Capital committed to multi-stage funds more than doubled to $105 million for two funds.

The ‘Dogbnb’ Wars Escalate: Rover Raises $3.4M in Round Led By Madrona

Posted: 09 Apr 2012 06:01 AM PDT

Finding a place for your pooch while you’re away should be getting easier. Rover, a Seattle-based startup that is trying to disrupt the kennel market, said it has raised $3.4 million in a round led by Madrona Venture Group. It’s one of several startups that are vying to be the online marketplace for pet owners that need a sitter or a place for their dogs to stay when they’re out of town.

“This addresses a real, concrete problem,” said the company’s chief executive Aaron Easterly. “There are more dog-owning households than households with children in the U.S.”

Easterly said that kennels or pet hotels are often too pricey to be reasonable. It can range from being about $30 a night to upwards of $80 or 90 at higher-end places. Plus, they might charge extra for walks or playing fetch.

“It’s a pretty wild scenario, but you could end up paying $100 per night. The existing commercial solutions fail 90 percent of the market,” Easterly said. “Then there’s this untapped skilled labor force that loves to do this.”

Madrona was an easy pick to lead Rover’s round because of the company’s unusual history. The idea for the startup actually came from a Madrona managing director, Greg Gottesman, during a Seattle Startup Weekend after he had a terrible experience with a commercial kennel. Gottesman later found Easterly, a former general manager of network strategy and monetization at Microsoft, to run the company. CrunchFund is also participating in the round.

With the funding, Rover plans to roll out to more locations. The company already has a presence in 500 cities and has about 10,000 active members. Rover partners closely with dog care professional organizations to find qualified sitters. Rover’s revenue share starts at 15 percent, but it can go lower to about 3 percent.

“We filter and vet base all of the sitters,” Easterly said. “Only a minority of people who want to become sitters actually get displayed and put on the site.”

Rover faces competition from companies like DogVacay out of Los Angeles, but Easterly is mostly concerned about the bigger market out there and getting pet owners to consider more than just using kennels or their neighbors and friends.

With New Monthly Grooming Kits For Men, Birchbox Isn’t Just For The Ladies Anymore

Posted: 09 Apr 2012 05:59 AM PDT

Birchbox, the New York-based startup that racked up more than 100,000 subscribers for its monthly kits of beauty products, is now aiming for a certain well-styled gentleman.

The company is launching Birchbox Man, which will deliver a box of grooming and lifestyle products for $20 per month to a customer’s doorstep. It might include four to five picks per month with samples like high-end shave gel, deodorant and skincare products from brands like Billy Jealousy, Costume National, Kérastase and Kiehl's. Then there are lifestyle products that might include headphones or socks.

“It’s not as obvious the we would go for men,” said Katia Beauchamp, one of the company’s co-founders. “When we launched Birchbox, we would have never guessed that this would be the next vertical.”

But when the Accel-backed company did a test run with a $45 limited edition Birchbox for men last fall, they ended up with thousands of prospective customers on a mailing list. That gave them a sign that they should consider launching a full monthly product geared at men.

“The prestige men’s grooming category is a smaller total market, but it is experiencing some of the fastest growth,” Beauchamp said. “We’re really exploring this idea of discovery retail. Customers love discovering new products or brands, whether they’re men or women. A Birchbox is a surprise and hopefully, it pushes you into things that could be fun.”

Birchbox has rounded up more than 100,000 subscribers who pay $10 a month to receive a box of beauty samples. (That’s an annualized runrate of at least $12 million if you’re doing the math and Birchbox is growing at 20 percent month over month.) But Birchbox also earns revenue from its online store. About 40 percent of the company’s subscribers go on to purchase full-sized products from the company within their first year.

“The e-commerce store is a substantial and growing piece of business,” Beauchamp said.

Could this double Birchbox’s subscriber base? Perhaps not for awhile, as Beauchamp said the overall size of the men’s market is smaller. But the higher price point at $20 could make up for this.

Birchbox has raised $11.9 million to date in two rounds led by Accel Partners and First Round Capital. It’s attracted a whole host of copycats for other target markets like Wittlebee for children and Lollihop for healthy snacks.

Here’s Lenovo’s Latest Android Tablet, The 9.7-inch IdeaTab S2109

Posted: 09 Apr 2012 05:49 AM PDT

Lenovo is keeping the Ice Cream Sandwich social rocking with its upcoming IdeaTab S2109. Inside the sleek 8.9mm thick casing is a 9.7-inch 4:3 IPS LCD with a 1.3MP camera sunk into the bezel. Four speakers reside on the backside, which Lenovo claims will help with bass reproduction, therefore capable of producing a richer sound. There’s also a microUSB port, microHDMI, and a microSD card slot for connectivity options.

Lenovo has yet to reveal the rest of the tablet’s pertinent information: processor type or speed, release date, price point, and target markets. However, when the tablet does hit the market, it will further strengthen Lenovo’s already-strong tablet lineup and likely replace the original IdeaPad Tablet K1.

Out of the major Android tablet market, Lenovo has been the most consistent with its offering. Lenovo’s tablets have always been priced well and featured enough standout features to make them a bit special in the crowded Android market. The S2109 will hopefully follow the same path.

SEC Filing: Chris Sacca Raising $25M For New Fund, Lowercase Spur

Posted: 09 Apr 2012 05:17 AM PDT

Investor Chris Sacca is raising as much as $25 million for his new fund, Lowercase Spur, according to a new SEC filing. He’s been working on it for at least a little while — Bloomberg BusinessWeek heard he was working on it a month ago, with the plan being that Spur would invest in startups over the next ten years. It was unclear how large the fund would be at the time.

Sacca raised nearly $50 million in 2010 for Lowercase Capital, and operates a number of funds. Lowercase I appears to invest early-stage startups, and Sacca operates another $1 billion fund that buys secondary market shares of companies such as Twitter and Facebook.

There are also two funds are jointly run with New York-based investors, and are focused on taking large public companies private in Hollywood, transportation and wireless. A fifth fund buys founder shares of early stage companies under the Lowercase brand

According to the Bloomberg report from March, Sacca’s first fund Lowercase I, is worth 5.3 times its original value and has returned all capital to the limited partners. The newest fund, Lowercase Spur, is being used partly to invest additional dollars in companies which were funded via Lowercase I.

Sacca’s previous investments include Uber, Dotcloud, Gumroad, Liftopia, Milk, SimpleGeo, Fanbridge, DailyBooth, Posterous and Stickybits.

We’ve contacted Sacca and will update if he comments.

Woopra’s New Dashboard Lets Publishers See Exactly Who’s Visiting Their Site

Posted: 09 Apr 2012 05:00 AM PDT

When you hear the phrase “real-time analytics” you probably think of Chartbeat (at least I do), but it’s not the only company in the field. In fact, a Lebanese startup called Woopra has been offering its own real-time services since 2008. And you may be hearing more about it soon — it recently opened an office in San Francisco, and today it’s launching version 5.0 of its service.

Founder and CEO Elie Khoury demonstrated the new version for me about a week ago. The change should be immediately obvious to Woopra users, since the Live Dashboard has been completely redesigned. Beyond looking a bit cooler, the new layout has an additional benefit: The entire dashboard now fits in a single window. That means you can see all of the data that Woopra deems most essential without having to scroll down — a seemingly minor change that could end up making life easier for people who leave Woopra open all the time or check the dashboard many times throughout the day.

One of Khoury’s big goals is to help customers understand not just how many people are visiting their site, but who those visitors are. So Woopra includes the ability to create custom “labels” for different visitor segments — for example, you can create a label for paying members, and another for people visiting from Facebook. The new Dashboard incorporates the Label feature, allowing customers to see the number of visitors from each Label who are on the site. Then they can drill down into a specific category to see basic information (like geographic location, Web browser, and time on site) about each and every visitor.

The service doesn’t just hose customers with data — as they’re looking at the numbers, customers can interact with their visitors directly. If they spot a promising customer on the site, they can start a live chat right away. They can also create automated actions that target a specific visitor segment, say delivering a special message or offer to everyone visiting from San Francisco, or for everyone visiting the site for the 10th time. Khoury says this is one of the biggest requests from customers — features that “turn the data into action.”

AOL Sells 800 Patents For $1.1 Billion To Microsoft [Memo To Staff]

Posted: 09 Apr 2012 04:06 AM PDT

This just in: one chapter of AOL’s patent journey is coming to an end. The company is selling 800 patents to Microsoft for just north of $1 billion: $1.056 billion in cash to be exact.

Tim Armstrong, the CEO of AOL (which owns TechCrunch), says that the company will continue to hold on to about 300 patents and patent applications after the sale. These span “core and strategic technologies” around advertising, search and content generation, he noted in a memo to employees. [Full memo below the break.]

The sale to Microsoft came after a “competitive auction process” the company noted in a statement. It also includes the sale of the stock of an AOL subsidiary (unspecified which in the statement) “upon which AOL expects to record a capital loss for tax purposes and as a result, cash taxes in connection with the sale should be immaterial.”

AOL also said it “expects to utilize approximately $40 million of its existing deferred tax assets, representing approximately 20 percent of its total deferred tax assets, to offset any ordinary income taxes resulting from the license of its remaining patent portfolio.” We have reached out to try to get more specifics on the subsidiary and so licensee information for the remaining patents.

The sale is expected to be completed by the end of 2012.

The patent sale marks the end to a lot of speculation around what AOL would do with its patent trove. There had been pressure from shareholders, led by Starboard Value, to realize some of the value from those patents, starting last year, when investors began to grumble that the company was not focused enough on what it could be doing to make more money, and not monetizing fast enough on its growing media portfolio (of which TC is a part…).

The patents also came into question in March with the news that Yahoo was suing Facebook over several patent infringements.

Given that AOL’s portfolio also stretches into similar areas of social media and information organization, there were questions of whether AOL would also follow suit in a march to the courts — another route to realizing value from those patents.

The portfolio sold today patents related to advertising, search, content generation/management, social networking, mapping, multimedia/streaming and security, among other things. AOL has also received a perpetual license for all the patents as part of the deal, Armstrong said in his memo.

The sale not only neutralizes the possibility of AOL using those patents in a litigious way against Facebook (or others as the case may be), but it may also mean that Facebook is out of infringement hot water, as far as those patents are concerned: Microsoft became a shareholder in the company when it bought a 1.6 percent stake of Facebook back in 2007 for $240 million.

The question of what Microsoft intends to do with these patents is the next big question. Among the patents are several related to mobile and internet messaging (via AOL’s acquisition of ICQ). Others cover areas like location-based services and personalized content delivery. The most patents of all, however, come in the generic category of “online communications”, according to analysis from Envision IP.

The full memo:

As we continue to execute on our strategy of building premium brands, services, and advertising into world-class businesses, we also continue to unlock value in our assets that make the company stronger and show meaningful gains for AOL employees and shareholders. Today, I'm excited to share that we achieved another critical milestone in our growth trajectory.

This morning, we announced that we've agreed to sell 800 of our patents and their related applications to Microsoft for $1.056 billion in cash. Most importantly, for the future growth trajectory and innovation for our business, we will continue to hold a significant patent portfolio of over 300 patents and patent applications spanning core and strategic technologies, including advertising, search, content generation/management, social networking, mapping, multimedia/streaming and security among others. AOL also received a perpetual license to the patents being sold to Microsoft, which allows us to continue to innovate and drive strategic growth across all areas of our business.

This process of unlocking the value of our patent portfolio, that we began last fall, is a significant example of focusing our time and energy around strengthening our company’s balance sheet and unlocking value for our shareholders. Most importantly, this is another step forward for the comeback of AOL and allows us to remain laser-focused on our strategy and future growth. As always, we know that our growth will be driven by the successful execution against our strategy and we will continue to take aggressive steps to move the company forward.

Huge thanks to the teams that worked tirelessly during this intense process – their world-class effort resulted in a big win for our company. The AOL Board of Directors, Legal, Finance and Tax teams, and our outside advisors were super-stars. We are a partnership company and our team stayed together every step of the way and performed at the top of their game.

Additionally, we worked with a great Microsoft team on this deal – they were organized, professional and smart. When I spoke to Steve Ballmer over the weekend I commended him on his team and how great they were to work with in this process.

We will be holding a global employee call on Wednesday at 11am ET to talk about the news we have announced today in detail, as well as discuss our company goals for Q2, top box priorities and hear updates from our leadership team on progress we are already making in Q2. We're already seeing strong momentum this quarter on our focus areas. Details for the call will be posted to the Inside, and please bring your questions as we’ll have time for Q&A.

Time to get back to the core business – delighting consumers and customers. We are starting Q2 off with a major win. Let's keep it going and nail all of our Q2 goals – looking forward to reviewing with all of you on Wednesday on our global call.

Go AOL – TA

Study: CIOs May Like To Talk The Social Media Talk, But Only 10% Walk The Walk

Posted: 09 Apr 2012 03:25 AM PDT

The use of social media in the enterprise has been a path well-trod by companies using mass market tools like Twitter, Facebook and LinkedIn to communicate with peers, customers, investors and anyone else who might be interested in what they're up to. But when it comes to the most senior information executives, they're actually a little antisocial.

According to data compiled by social software provider harmon.ie, only about 10 percent of CIOs in the top companies — Fortune 250 and and Global 250 — actively use public social networks. Within that group, only four CIOs write blogs, and more than one-third either do not have LinkedIn profiles, or have profiles with fewer than 100 connections.

Among the top-25 most social CIOs are a number of tech names such as SAP (whose CIO Oliver Bussmann topped the list), Google, Microsoft and IBM. The CIOs of media giant Omnicom, Royal Bank of Scotland and Office Depot also made the list.

Harmon.ie says that its analysis is based on a combination of the strength of the CIOs' LinkedIn network, CIO’s retweet frequency, socialmention scores, blog reach, citations by other influential bloggers, Google+ Circle inclusion and other "related factors."

What to make of these conclusions? Although you can argue that major businesses will have specialists employed to watch over how a company uses social media, on another level this is kind of surprising. It indicates that people tasked with helming the leading companies in their information technology, and deciding on how to invest in social media specifically, may not know all that much about it, specifically in a first-hand way but possibly more generally, too.

"These 250 CIOs are charged with transforming the world's largest enterprises, yet our analysis shows that most have relatively little experience using the kinds of tools that are needed to drive that change," says Mark Fidelman, harmon.ie's chief social strategist and lead author of the analysis.

But on the other hand, conclusions like this also seem to imply that even if social media has become huge among consumers, most enterprises are not actually putting it front and center in their own IT road maps.

Even with the most social of CIOs, you get a sense that this is all still about laying groundwork for the future rather than staking something out for today. Bussmann at SAP says that his company has found that SAP's investments in blogs, Twitter and the rest have resulted in only a 3 percent-5 percent positive impact on the SAP brand.

And that’s saying nothing for the times when social media gets used and the result is a big fail.

So how does the world's "most social CIO" use social media?

SAP's CIO Oliver Bussmann tells me he got started with his social media use in 2006, with an internal blog covering corporate IT issues such as enterprise mobility — the first foray that many made at that time into user-generated content and getting more social. That blog eventually was made public and Bussmann says it is now one of the most-visited blogs in SAP's blog network.

Today, he says he uses Twitter (4,218 followers) most of all in his social communication, with Facebook and LinkedIn having secondary roles. He gets the most traffic, he says, from people on Twitter, while LinkedIn is more for people reaching out to him to work at SAP. And on Facebook, "People comment but not so much on business topics."

One site that seems just as overtly consumer as Facebook but has caught Bussmann's attention is Pinterest, for its different approach to sharing and organizing information.

"Pinterest is something that is out there working from a visual point of view," he says. "I can see a great opportunity there, especially when you think of how you can quickly scan 200 or 300 headlines and get a sense of the bigger market environment. I think Pinterest might be the place for sharing in the future."

[photo: timbu, Flickr]

“The Hacker Company”: Facebookers Snag A Vintage Sign For New HQ

Posted: 09 Apr 2012 02:07 AM PDT

It all started last April when former Facebook engineer Chris Putnam (of fame) was visiting his girlfriend’s mom in Lake City, FL and saw the striking sign — ‘The Hacker Company.”

Putnam, who had left Facebook in August 2010 to do his own thing, felt an immediate affinity for the sign, after all, he actually had been hired by Facebook after hacking the site so hard it got co-founder Dustin Moskovitz’ attention. “I’ll always feel pretty close with the culture and all my friends there, so I immediately thought ‘Man, this should be on FB’s campus,’” Putnam said. So he posted a picture of it to Facebook with the caption, “Facebook NEEDS this sign.”

Current Facebook Engineer Serkan Piantino saw this update and took Putnam’s request super duper seriously, starting negotiations with the sign’s owner, a one Mr. Tony Hacker, in order to bring the sign to Facebook's new Menlo Park HQ at, fittingly enough, 1 Hacker Way.

While Putnam has no idea how much money Facebook paid for the sign, he does tell me that Tony Hacker was considering getting a new sign anyways. And it shouldn’t be too hard to make a new one, as “The Hacker Company” is actually a sign manufacturer.

“This was like a seven month project,” writes Facebook Facilities Manager Scott Oligher, ”Negotiating with Mr Hack for his beloved sign, shipping this huge thing, permitting it and finally getting it installed. We have had the install scheduled 6 different times. Glad it is finally in, it will be lit up on Monday.”

While it might have the sweetest backstory, the sign isn’t the first piece of HQ hacking to come out of Facebook. Two weeks ago during a “Space Hackathon,” six engineers initiated a project that ended up in a giant QR code painted on the company’s roof. Yeah.

Image via.

Sephora Doubles Down On Tech: In-Store iPads, Revamped Website, Pinterest Tie-In

Posted: 08 Apr 2012 11:05 PM PDT

Sephora, the cosmetics retailer, is still best known for its brick-and-mortar shops that let customers test out high-end makeup, skincare and fragrance products with less pressure than typically comes with department store beauty counters. But that doesn’t mean the company, which has its US headquarters in San Francisco, isn’t focused on the increasingly important world of virtual shopping.

To that end, Sephora today rolled out what it’s calling a “social and mobile makeover.” The updates include a newly overhauled website with ultra specific search functionality, spruced up mobile web and iOS app, and a commitment to install iPads in more than 100 of its physical stores this year. The company has also developed an official integration with Pinterest, having added “Pin It” buttons to all of its brand and product pages. In all, it’s pretty big news: Julie Bornstein, the senior vice president of Sephora’s digital operations, tells me that this is the most comprehensive change to the company’s consumer tech side since it launched its first website way back in 1999.

The new updates are obviously pretty visual, so last week we swung by Sephora’s San Francisco flagship store to talk with Bornstein about the company’s strategy. Watch the video above to see why Sephora is embracing the constant comparison-shopping element that the web has brought, how the company’s San Francisco headquarters influences its tech focus, and more.

Strategy For Startups: The Innovator’s Dilemma

Posted: 08 Apr 2012 10:00 PM PDT

Editor’s Note: A guest post by Uzi Shmilovici, CEO and founder of Future Simple, the company behind Base CRM.

Strategy. Unfortunately, it suffers from a bad reputation among startups. It is associated with consultants who are paid millions of dollars only to come back with a two-by-two matrix of animals. Not that there is anything wrong with it. Some of my best friends are consultants.

However, strategy is crucial for startup success. Startups usually operate in an environment of constrained resources while competing with strong incumbents. Hence, the right strategy can be a matter of life and death. This post is the first in a series of posts that will explore concepts in strategy and how they apply to startups.

The first concept we’ll look at is the “Innovator’s dilemma”, a term coined by Clayton Christensen from the Harvard Business School. The innovator’s dilemma discusses a situation in which there are established incumbents in a specific market who are investing in sustainable innovations — these are incremental improvements to an existing product. Usually, they are doing that to support the incremental needs of their customers.

They are then faced with a new entrant to the market that introduces a disruptive innovation. The new entrant attacks only a small part of the incumbents’ business, usually the one in which the margins are very low. At this point, the incumbent decides not to compete in this business anymore because they don’t want to invest in defending their least profitable business and/or are afraid of cannibalizing their main business. As a result, the new entrant is then able to capture a significant market share in that specific segment.

What happens next is funny. After it captures the low end of the market, the entrant moves upstream to the next part of the business. Again, the incumbent is reluctant to compete in that segment which is now its newest least profitable segment. The entrant then captures a significant market share in this second segment.

What happens next is funny. OK, you got the point…

Before we continue, it is important to understand the types of disruptive innovation that exist. There are four: a new product, a new technology to produce a product, a new way to distribute a product and a new way to provide services. The entrant can introduce a disruptive innovation along one or more of these dimensions.

Why would anyone buy books on the internet?

1995. The commercial internet is in its early days. Jeff Bezos decides to start selling books online. At that time, the biggest booksellers in the United States are Barnes and Noble and Borders.

Bezos understands that he can disrupt the book industry by taking advantage of the internet as a new distribution channel. Amazon launches and grows exponentially. It takes B&N two years to open its own website. What took them so long? Well, not too many people buy on the internet and they are far better investing their resources in their major business — the retail stores.

It takes Borders three years to launch their website. At this point, Amazon is far down the road. In 2001, Borders decides let Amazon run their website for them. After all, the internet is just a small percentage of their sales anyway.

On February 16th, 2011 Borders files for bankruptcy.

If you'll look around, you'll find many industries that experienced or are experiencing a similar type of disruption. A small sample from internet startups — Zynga : Gaming Companies, AirBnB : Hotel Chains, Box : Sharepoint.

The Innovator’s dilemma and your startup

There’s a reason why so many internet startups were able to use the concepts from the innovator’s dilemma. The internet provides an amazing platform to build disruptive products, and more importantly, create and leverage new distribution channels.

So, how should you think about the innovator’s dilemma? Here are four key takeaways:

Understand what is the source of your disruption. Is it a new product or a new way to distribute an existing product? This will help you understand whether you are really disrupting the market or just building an incremental product.
Pay attention to opportunities in new distribution channels. Zynga’s biggest innovation was taking advantage of Facebook as its distribution channel before the traditional gaming companies could say “Mark Zuckerberg”.
Start by marketing to the group of customers for which the incumbent in your industry has the lowest margin or the lowest interest to defend. Don’t go head to head on their most important customers. They will crush you.
Remember these lessons when you are at the top.

Figuring out how to compete in your market will take a lot of time and effort. Remember that these frameworks are just tools to help you think through the problem and will not provide you with a magic answer. You'll have to discover it yourself.

Image credit: isdky — Brian Barnett, Flickr

Hooking Users In 3 Steps

Posted: 08 Apr 2012 08:00 PM PDT

Editor's Note: Nir Eyal is the founder of two acquired tech startups and an advisor to several Bay Area companies and incubators. Nir blogs at NirAndFar.com.

The truly great consumer technology companies of the past 25 years have all had one thing in common: They created habits. This is what separates world-changing businesses from the rest. Apple, Facebook, Amazon, Google, Microsoft, and Twitter are used daily by a high proportion of their users and their products are so compelling that many of us struggle to imagine life before they existed.

But creating habits is easier said than done. Though I’ve written extensively about behavior engineering and the importance of habits to the future of the web, few resources give entrepreneurs the tools they need to design and measure user habits. It's not that these techniques don't exist — in fact, they're quite familiar to people in all the companies named above. However, to the new entrepreneur, they largely remain a mystery.

I've learned these methods from some of the best in the business and put together an amalgamation of them that I call "Habit Testing." It can be used by consumer web companies to build products that users not only love, but are hooked to.

Habit Testing

Habit Testing fits hand-in-glove with the build, measure, learn methodology espoused by the lean startup movement and offers a new way to make data actionable. Habit Testing helps clarify three things: 1) who your devotees are; 2) what part of your product is habit forming, if any; and 3) why those aspects of your product are habit forming.

A prerequisite to Habit Testing is having some kind of product up and running. Of course, before launching even a minimal viable product, it's a good idea to take a stab at your business model hypotheses and how your product will create user desire.

Once you have a site or app live, you can begin collecting data. Habit Testing does not necessitate collecting data about everything — just the right things — so setting up the appropriate analytics is critical. In order for Habit Testing to be successful, you need to date stamp the path users take while using your site.

Step 1 — Identity

Now that you have the requisite site and stats, you need to answer the first question of Habit Testing: "Who are the habitual users?" First, define what it means to be a devoted user. Ask yourself how often a user "should" use the site. That is to say, assuming that some day all the bugs are worked out and the product is perfectly "lickable," how often would you expect a habitual user to be on the site?

Be realistic and honest. If your company builds a mobile social networking app like Foursquare or Instagram, you'd expect habitual users to be on the app several times per day. However, if you're building a movie recommendation site, a la Flixster, you wouldn't expect users to be on the site more than once or twice a week. Don't come up with an overly aggressive prediction that only accounts for uber-addicts; you're just looking for a realistic guess to calibrate how often users will interact with your site.

A good short-cut might be to take an average of how often you and the people in your office use your own product. Of course, more is better. Twitter was born within Odeo, the company Biz Stone and Jack Dorsey originally founded, because the engineers couldn't stop playing with it.

One thing to note: the more frequently your product is used, the more likely it is to form a user habit. That's not to say that web products that are used rarely can't be good business, they just aren't habit forming and thus have different characteristics. Viable, though non-habit forming businesses tend to be more transactional and require constant outreach to customers to stay top-of mind.

For example, think of the travel industry's relentless war to convince us to use one site over another. Expedia, Travelocity, and the rest, are used too infrequently by their average customers to form a habit, so they constantly compete for attention. These are viable, even profitable companies, but since they are non-habit forming products they are open to greater competitive threat. Products used daily naturally create barriers to entry in their markets.

Who’s Got The Habit?

Now that you know how often a user "should" be using the site, it's time to crunch through the numbers and identify how many of your users actually meet that bar. This is where hiring a stats wiz can prove exceedingly helpful. Instead of pulling your engineers away from their crucial jobs building the product or even worse, getting your business people to do it, consider hiring a grad student fluent in statistics to help you quantify how many of your users are hooked. The best practice here is to get create a cohort analysis to provide a baseline by which to measure future product iterations.

Step 2 — Codify

Hopefully, you'll have at least a few users who interact frequently enough for you to call them devotees. But how many devotees is enough? My rule of thumb is 5%. Though your rate of active users will need to be much higher to sustain your business, 5% is a good benchmark to begin Habit Testing.

However, if at least 5% of your users don't find your product valuable enough to use as much as you predicted they should, you have a problem. It may be time to go back to the drawing board and rework your vision. But assuming you've exceeded that bar and you've identified your habitual users, the next step is to codify the steps they took using your product so you can understand what hooked them.

Each user interacts with your product in a slightly different way. Even if you have a standard user flow, how users engage with your site creates a unique data fingerprint which can be analyzed to find patterns. Sift through the data to determine if there are similar behaviors that emerge. What you'll hopefully discover is a "Habit Path", a series of similar behaviors shared by your most loyal users.

For example, in its early days, Twitter discovered that once new users followed enough other members, they hit a tipping point which dramatically increased the odds they would keep using the site. Every company has a different set of actions that devoted users take; the goal of finding the Habit Path is to determine which of those steps were critical for creating devoted users.

Get In Their Heads

Now that you know the Habit Path, the next step is to create hypotheses about what it was along that path that tipped users from passers-bye to devotees. Granted, this step can look a little like assuming causation from correlation; but in the murky fog of launching a new product, it's often the best thing we've got.

This phase is also a good time to talk to users in person to learn more about why and how they use the product. Habit Testing is meant to illuminate what is unique about these "earlyvangelists" and find insights that can be generalized to the rest of your users.

Step 3 — Modify

With new hypotheses in mind, it's time to get back inside the build, measure, learn loop and take new users down the same Habit Path the devotees took. For example, leveraging their Habit Path, Twitter's onboarding process now guides new users to start following others immediately.

Habit Testing is a continual process companies can implement with every new feature and product iteration. Tracking users by cohort and comparing their activity to habitual users should guide how products evolve, improve, and foster habit formation.

Too often tech entrepreneurs find themselves alone with their vision because they fail to realize the importance of creating user habits. And unfortunately, when it comes to consumer web and the ever-increasing distractions we all face daily, if the product doesn’t create a habit, it may as well not exist. By using Habit Testing to determine what is most valuable and habit-forming about a product, entrepreneurs can better serve their users and increase the odds of creating world-changing companies.

Josh Elman, Max Ogles, and Mark Williamson collaborated on this essay.

Photo credits: Robby Mueller and NirAndFar.com