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Nick Carr is worried the Internet is making us stupid. It’s not so much our preoccupation with LOLCat photos or videos of fat girls flying off of swings that concerns him as it is the way we read and consume information on the Internet itself. He thinks the Internet is rewiring our brains, perhaps for the worse, and he’s written a book to warn us all about it called The Shallows: What The Internet Is Doing To Our Brains. Carr also finds links to be too distracting.

Carr raises some good points worth contemplating, but his arguments also strike me as incredibly self-serving. After all, he is an author who makes money writing books. Of course he is going to argue that they make you smarter than the Web, with all of its neurological distractions. Carr is the master of technological alarmism. It sells his books and provokes debate, and this time is no exception. Harvard psychology professor Steven Pinker wrote in the New York Times on Friday that “cognitive neuroscientists roll their eyes at such talk,” and NYT Bits blogger Nick Bilton marshaled some other counter-evidence as well. Carr then responded to Pinker’s Op-Ed at length, claiming that Pinker has an “axe to grind here” because Carr’s point that experiences can change the brain on a cellular level “poses a challenge to Pinker’s faith in evolutionary psychology.” Of, course, Carr has his own axe to grind. Remember, he’s the one pushing the new book.

At the core of Carr’s alarmism is that the Web is simply at odds with deep, contemplative thought and reflection. It’s really a defense of book learning in its most basic form—again, not surprising coming from an author of books who values above all else the printed word. In an Op-Ed in the Wall Street Journal last week, Carr summed up his position:

When we’re constantly distracted and interrupted, as we tend to be online, our brains are unable to forge the strong and expansive neural connections that give depth and distinctiveness to our thinking. We become mere signal-processing units, quickly shepherding disjointed bits of information into and then out of short-term memory.

. . . What we seem to be sacrificing in all our surfing and searching is our capacity to engage in the quieter, attentive modes of thought that underpin contemplation, reflection and introspection. The Web never encourages us to slow down. It keeps us in a state of perpetual mental locomotion.

It is revealing, and distressing, to compare the cognitive effects of the Internet with those of an earlier information technology, the printed book. Whereas the Internet scatters our attention, the book focuses it. Unlike the screen, the page promotes contemplativeness.

Is the Internet really rewiring our brains? Sure, everything we do rewires our brains. That’s how our brains work (On Intelligence by Jeff Hawkins is a good primer). That’s how we learn, through experience and repetition, which gets carved into new neuropathways over time. The Internet is no different.

Is this rewiring somehow detrimental? If it is, then all the bookworms like Carr will end up being smarter than the rest of us and evolution will reward them. But something tells me that is not going to happen. The fact of the matter is that the Internet spreads information more broadly than the printed word ever did. It makes it easier to get up to speed on topics that you otherwise would know nothing about, such as the effects of the Internet on the brain. The reason reading online makes me feel smarter than reading a book is the exact same one Carr says makes us dumber: the pesky link. He writes:

Links are wonderful conveniences, as we all know (from clicking on them compulsively day in and day out). But they’re also distractions. Sometimes, they’re big distractions – we click on a link, then another, then another, and pretty soon we’ve forgotten what we’d started out to do or to read. Other times, they’re tiny distractions, little textual gnats buzzing around your head. Even if you don’t click on a link, your eyes notice it, and your frontal cortex has to fire up a bunch of neurons to decide whether to click or not. You may not notice the little extra cognitive load placed on your brain, but it’s there and it matters. People who read hypertext comprehend and learn less, studies show, than those who read the same material in printed form. The more links in a piece of writing, the bigger the hit on comprehension.

Reading on the Internet is not the same experience as reading a book, no doubt about that. And I do agree with Carr that it is easier to lose yourself in a book than when reading on a screen. But to suggest that reading a book is a richer experience, or that we can’t handle the cognitive load of reading words with links is hogwash.

Personally, I find it difficult now to read texts without links. When guest authors send me draft opinion pieces without any links, for example, they feel barren to me. Links are more than just footnotes that show an author has done the research to back up his arguments. They are what make the written words on the Web alive. An article with links is a living text, which exists in relation to other texts and thoughts on the Web. They let you go as deep down the rabbit hole as you care to go. There is no reason why books shouldn’t be the same, filled with links to be read in a browser on your iPad.

Maybe Carr’s neural pathways are set already and this kind of experience is too jarring for him. But I kind of doubt that—he is quite adept at the ways of the Web. I have another theory. Maybe what he really finds objectionable is a world where readers are no longer content to let the full waterfall of an author’s words wash over them, and then sit and contemplate the genius of those words in isolation from any other words, and how fortunate they are to have gotten a glimpse into the author’s mind for only the $18 price of a hardcover from Amazon.

Yesterday, Robert Scoble wrote a post about “Foursquare’s Yelp problem.” It’s an interesting read, with some good thoughts about how Foursquare can withstand feature-copying from a much larger rival. He asked for my thoughts, so I figured I’d jot some down here. Most importantly, his post got me thinking about the next phase of location, which I think we’re just about to enter.

First, Scoble’s thought that Foursquare might be in trouble because Yelp copied its check-in badge idea seems a bit premature to me. It was a much bigger deal when they added the whole check-in concept back in January, but the fact that Foursquare has started growing faster than ever since that point shows they have an advantage over Yelp in the realm. That advantage is that they have a social graph built for location, Yelp does not (yet).

As we all know, Yelp was built as a rating and review system for local restaurants. It has a social graph, but most people on it are connected to other people because they’re interested in their food/restaurant reviews. It has nothing to do with wanting to see which of their real friends are nearby (which is what Foursquare is all about). That’s why I think it would have been smarter for Yelp to partner with Foursquare (or Gowalla, or Loopt, etc) in the same way a service like Hot Potato has (using APIs). Yelp + Foursquare would have been a formidable power play in the location space. Instead, Yelp’s check-in offering is still pretty weak, while Foursquare’s is still pretty small.

Scoble also mentions that it might be wise for Foursquare to buy another service to bolster its offering. That’s not a bad idea, especially when they close that round of funding they’re working on. Scoble specifically menions Foodspotting — a service I like a lot — and that makes a lot of sense. But it may be wiser to think beyond that (or buy Foodspotting and extend their services). Foursquare needs a way to upload pictures and make comments on check-ins (and pictures). Basically, they need to copy the functionality Gowalla has right now. There’s always a fine line between keeping a service simple and cluttering it up with feature creep, but Gowalla’s mixture of check-ins, comments, and pictures is pretty damn perfect in my view right now.

Another idea Scoble brings up is a “check-out.” I love this. He talks about it from customer loyalty perspective, which is a good point, but I think it goes beyond that. One problem I have with Foursquare is that it’s too often populated with inaccurate (old) information. That is, I may go somewhere check-in when I get there, but 30 minutes later I’m gone. Someone who shows up 15 minutes after that (after seeing my check-in on Foursquare) will have missed me. This happens quite a bit. Sadly, the only way to “check-out” of a venue is to check-in to another one. That’s no good.

The problem with a check-out is that it’s total feature-creep. And I would bet that only a small percentage of those that check-in would ever explicitly check-out too — it’s simply asking users to do too much. That leads me to my main point. I think we’re on the verge of location services getting even more interesting thanks largely to one thing: iOS 4.

Apple’s new mobile operating system (formerly known as iPhone OS 4), which is launching in about a week, brings with it the ability for third-party applications to run in the background for the first time. One of the allowed functions is background location. Here’s how I see this working with Foursquare: you go to a venue, you load up Foursquare and check-in. The app then stays open in the background for a set period of time, notes when your location changes, and checks you out of the venue when you move far enough away.

Obviously, this would auto check-out would need to be opt-in, but it seems like the perfect initial use of the new iOS with background location. The next step is the auto check-in — but that’s a bit more complicated, and I think users may not be ready for it yet. Still, it would be a cool option to have. The app could track you location in the background and if you stop at some place for long enough, it could ask you if you’d like to check-in there.

By now, you Android fanboys have probably already left several comments along the lines of ”but Android has been able to run location in the background for 2 years.” That’s true, but let’s be honest: it’s the iPhone that’s going to help this type of activity take off (just as it was the iPhone that helped background location take off in the first place). Foursquare, Gowalla, Loopt, etc still see the vast majority of their activity on the iPhone. Android may be able to extend upon these new location ideas, but it will be the iPhone that puts them in the mind of most consumers.

And this is just the most basic functionality made possible by the new iOS. I bet we see a new range of location service pop-up this year thanks to the background location-functionality. And I still bet that a lot of those companies get snatched up by the bigger players looking to compete. And the location turf wars will heat up even more.

There are few people I would get up to meet on a Sunday morning after spending five weeks on the road and mired in China-to-SFO jet lag. There are also few people I would believe when they said they were building a great “Enterprise 2.0” company. Tony Zingale is one of those people.

We’ll get to why in a moment. But first the news: Jive Software—a nine year old company that Zingale became CEO of in February on an interim basis—is launching two new products today and continuing a big press push that’s tantamount to announcing they are a serious, next-generation enterprise software company. (He’s also recently dropped “interim” from his title, the CEO equivalent moving out of beta.)

The company operates fully-featured social networks for businesses that change how people inside the company work and communicate, and how they interact with their external partners and customers. Bolstering the news are some impressive partnerships: Jive will integrate LinkedIn profiles into the site, license the full Twitter firehose of Tweets and offer a free month trial of its service in Google’s App Marketplace. Jive is funded by Sequoia Capital; our previous coverage is here.

Feature-wise the company is launching a App Marketplace (who isn’t?) and a “What Matters” product that’s like a corporate news feed. Data from existing business collaboration tools not to mention LinkedIn and Twitter will be pulled up and the most relevant pieces of data will be abstracted from the what-you-had-for-dinner-last-night noise.

I am incredibly skeptical about the whole “enterprise 2.0” shtick but Zingale isn’t screwing around with some feel-good freemium model. He’s doing sales in the range of $75,000-$150,000 per company, on average, but the dollar amount is increasing. He’s done ten $1 million deals and four of those came in the last two quarters. The company has 3,000 customers, 15 million users, and will end the year on a $100 million run-rate. Considering that a few years ago open source darlings like Jboss were valued at hundreds-of-millions of dollars when they were doing less than $50 million in revenue, that’s a decent software business.

The other reason I’ll give Jive the benefit of the doubt is Zingale. He is a man who has proven the difference between being lucky and being good. Sure, he benefited from the glory days of the business software boom early his career—when a lot of people looked smarter than they were because the world had billions to spend on Greenfield software opportunities. But he’s also
navigated a lot of unforeseen challenges. He was the no. 2 guy at Cadence Design Systems back when it had its worst quarter in history and some of its employees stole its core software to start Avanti. In 1997 he came into turn around CRM company Clarify and sold it to Nortel for $2 billion. He could have ridden off into retirement after that. Instead, in 2004 Zingale inadvertently took on his most brutal challenge yet.

He’d just become President and COO of Mercury Interactive with the understanding he’d become the CEO in about six months. The company missed the first quarter in 2005. Uh oh. Then it barely made the second quarter. Not great, but could be worse. These were not exactly enterprise software’s glory days. Then, SEC investigators showed up. Oh, shit. Mercury was proven to be one of the egregious abusers of the options backdating scandals that rocked the tech markets in 2005 and was made one of the biggest scapegoats. Zingale had nothing to do with this— he was on the board of the company but not when it went happened. But he didn’t abandon ship. He quickly fired the people who’d hired him, and he took the CEO job over a few months earlier than anticipated.

I called him for an interview when the November 2005 Mercury bombshell hit. I was covering software for BusinessWeek and this was one of the hottest stories of the week. Most CEOs would have said “No comment.” But Zingale—who I’d met just once at an industry dinner— invited me in and we had a frank face-to-face conversation about the situation. He looked me in the eye, told me he had nothing to do with this and how he was going to save this company, and I believed him. He spent much of the rest of the year having the same come-to-Jesus meetings with every shareholder and major Mercury customer. Less than a year later, he sold the company to Hewlett Packard for a $5.1 billion—a 50% premium. Meanwhile a host of hot 1990s software companies who hadn’t had Mercury’s legal troubles were walking dead.

Simply put, Zingale is a bad ass. He is one of those rare old-school software salesmen who also comes across as genuine. And he’s beyond battle-tested, pulling a de-listed, radioactive company back from the dead to be worth $5 billion.

It’ll take someone like that to actually create a company out of all this Enterprise 2.0 hype. And I hope he can pull it off, because Silicon Valley is desperately in need of an enterprise software resurrection.

One thing is certain: Jive will either be raising more money in the future or filing to go public as soon as it can. Zingale has a big vision here and building a real enterprise software company takes cash.

From Bangalore, India, to Sofia, Bulgaria, to Los Angeles, California and back to San Francisco, our network of readers threw an unforgettable, global, TechCrunch birthday bash. As a thank you and tribute to our readers, we’ve put together a brief video to highlight your efforts. Video above.

According to Meetup, the final tally was 360 meetups on Friday, with more than 4,400 attendees.

There was no dominant format. Some featured full-blown agendas complete with panels and startup presentations, others offered TechCrunch Jeopardy and many, simply featured beer. American Fork, Utah, which did not offer beer or Jeopardy, was still home to possibly the largest TechCrunch event with more than 500 attendees, according to organizer Dan Garfield (manager of online marketing for OrangeSoda).  The meetup, which featured musical acts, the consumption of more than 1200 hotdogs and sausages and a dancing man in an orange, full-body spandex suit, was part-barbecue, part-block party, and all held in OrangeSoda’s parking lot. You can find their full video here.

Meanwhile, more than 8,000 miles away, underneath a section of scaffolding in Bangalore, India, nearly 150 people gathered to discuss the latest technologies and listen to presentations from local startups. Further south, in Jakarta, Indonesia, 99 attendees showed up, including representatives from Admob and Yahoo Indonesia, to discuss Yahoo’s recent acquisition of Koprol, the investment climate, and how to do business abroad.

In Brussels, Belgium more than a dozen readers gathered at a bar named Au Soleil, while in Tokyo, attendees celebrated a man (who for one reason or another, that may or may not be related to TechCrunch) dressed as a storm trooper, and finally, in New York, attendees took advantage of a four-foot tall ice luge.  Yes, it was strange, yes, it was wonderful, and yes, this post doesn’t have a lot to do with “technology news,” but we can’t wait to see what you guys come up with next year.

“Can Tim Armstrong make AOL king of content by 2010?” – Blog headline

If it were done when ’tis done, then ’twere well / It were done quickly” – Macbeth

There’s something about the idea of “New York Internet Week” that I’ve always found inherently funny; like “Saudi Arabia Bring Your Daughter To Work Day”, or Greenland being called Greenland.

Ironically for a city that’s always been so adept at branding itself, New York has always struggled to articulate its place in the worldwide web, and Internet Week is the clearest manifestation of that identity crisis. Name an industry that the Internet is disrupting: newspapers, publishing, advertising, banking – and you’ll find its heart in Manhattan. Despite the best efforts of Mayor Bloomberg and, uh, Dennis Crowley to paint New York as the place to do business in Web 3.0, the fact is that billions of advertising and investment dollars continue to flood west, never to return. And yet New York, bless it, continues to try to stay relevant – for one week a year at least – to the industry that’s bleeding it dry.

Witness the Webbys – the awards ceremony that congratulates New York based celebrities who have learned to tweet – witness the awkward panels filled with mismatched home-grown personalities (“Julia Alison meets Jeff Jarvis“) and witness (if you can’t avoid it) the week-long parties where thousands of identically unique hipsters cram into lofts to drink booze sponsored by one or all of the east coast’s four successful start-ups.

Even when they invite west coasters to get involved, the effort manages to come off more weird than wired: I was flown to town, on the kind of handsomely subsidised meal ticket only New York can offer, to moderate a panel on “Internet dating in a web 2.0 world” for an audience of feature writers from women’s magazines. This despite the fact that asking me to help navigate the minefield of online dating is like asking Rudolf Hess to give guided tours of Dachau. Nice try, New York.

And yet. While it’s easy for me to mock New York Media’s bewilderment over the Internet (see!), there was a marked change in atmosphere during this year’s Internet Week, compared to last year’s. A definite uptick in confidence, not all of which can be put down to the fact that Dennis made it on to the front cover of UK Wired. No, the change in attitude in New York towards the Internet can more fully be attributed to one word: content.

New York is a content town and, thanks in large part to AOL and Yahoo, content is once again king. Speaking at Disrupt last month, AOL’s Tim Armstrong boasted that AOL “is planning on being the largest high quality content producer for digital media”. Yahoo is taking a similar – if less clearly defined – approach, purchasing Associated Content for somewhere in the region of $100m and now, if rumours are true, eying up the Huffington Post. For the New York media crowd, this is great news – great news for journalists who are being laid off left right and centre, great news for newspapers and publishers who smell lucrative content syndication deals and great news for pro blog networks who might finally see an exit. If content really is king, then New York is its ready-made kingdom.

And yet. And yet.

The way that the likes of Tim Armstrong use the phrase “content is king” conjures up a noble image. An image of professional journalists and highly-skilled writers, possibly wearing crowns, slaving over hot typewriters to produce 1000 words of crisp copy for an eager online audience; or perhaps of sharply-written web video, a la College Humor’s original programming, or the New York Times’ daily video podcasts. For ‘content’, New York media folks read a web 3.0 of professionally produced news, analysis, entertainment – the antithesis of web 2.0′s user generated horse-shit. No wonder they’re salivating.

But that’s a very east coast – with its proud history of newspapers and publishing – interpretation of the word. Over on the west cost (and note: I’m using that term in its laziest sense to cover all Internet companies including those who, by accident of birth, have offices back east), “content” means the precise dictionary definition of the term: “something contained, as in a receptacle”; generic filler to pack inside an empty box to make it attractive to advertisers. Low-paid, illiterate swill, commissioned by the ton to provide SEO ad inventory. Just consider Associated Content and how it describes its goals post- Yahoo acquisition…

“Associated Content is now a part of Yahoo! – the world’s largest online company, with more than 600 million unique visitors a month. Yahoo! plans to leverage our content to extend its leadership and build upon their global properties to deliver personally relevant content in a scalable and efficient manner.

I mean, kudos to the company for not using the words ‘writing’ or ‘journalism’ to describe what their crowd-sourced hacks do, but it’s still hard to imagine a more mercenary way to describe the craft of writing. These are not writers, or journalists; these are self-confessed generators of content in the much the same way that horses are self-confessed generators of glue.

At least the Huffington Post employs real writers – assuming your definition of ‘employs’ doesn’t require there to be payment or any meaningful editorial support and if your definition of ‘writers’ includes the authors of stories like “Sex Tapes Of The Past Decade: A Look At The Noughties’ Naughtiest” and “Indonesia’s First Celebrity Sex Tape Scandal” and “Kendra Wilkinson’s Sex Tape RELEASED, NSFW Preview” – all examples from the past few weeks.

Even the web editions of respected offline brands are going the same way. The editorial focus of Forbes Online – a mish-mash of celebrity slideshows and tacky lists of ‘Americas best paying blue-collar jobs‘ and ‘hottest summer convertibles‘ – couldn’t be more different from its print counterpart which still has ambitions to be a serious news magazine. (Truth is, today’s Forbes Online is a pale shadow of even its own glory days: this is the online publication which saw Adam Penenberg break the Stephen Glass story).

Of course, the relationship between editorial content and advertising has always been strained, in a cant-live-with-it-cant-live-without-it way. But in traditional media – for the most part – the lines were respected: editorial staff did their job, advertising staff did their job and somehow the relationship chugged along.

In new media, however, editorial content exists to serve only one purpose; as a hook on which to hang advertising. When an Internet company commissions content, their measure of success is quantitative not qualitative: does the block of words pack in enough high-buzz keywords to rope in a hundred thousand or so Google searchers? And can it be spread out over enough pages to provide half a dozen ad impressions for each of those users? If so, great: now they just need the users to click on one of those ads and GTFO, which probably explains why so much online content peters out within 30 seconds of the headline.

Jeff Levick, president of global advertising at AOL, sums up the company’s editorial policy thus: “we have insights into our audience, and can produce content they want, which leads to engagement, which leads to what advertisers want.” Therein we see the critical difference between the old media attitude towards content and the new media alternative.

The old model favoured originality: break a story that no-one else has covered or write a fresh new take on the world and the audience would come, bringing with them advertising and sales. Under the new model, originality and exclusivity are the kiss of death. SEO-driven advertising depends on knowing what people are already looking for, and delivering content that satisfies that desire; nothing more nothing less.  SEO-driven content is the opposite of journalism and creativity, just like New York’s interpretation of the phrase ‘content is king’ is the opposite of Silicon Valley’s.

It’s a depressing truth, but an important one for anyone in New York media – or elsewhere – gets too excited about the idea of a content revival. Before Harry Potter, no-one knew they were looking for books about wizards; before the Washington Post broke their most famous story, no-one knew they were searching for information about a robbery at the Watergate building, or the subsequent money trail to the White House. Put simply: if Ben Bradlee were an editor at one of today’s Internet companies, instead of the Washington Post in the 1970s, he’d almost certainly have spiked the first Watergate exclusive in favour of a slideshow of cats who look like Nixon.

“We know there’s a market for that shit. I’ve seen the numbers!”

Editor’s Note: This post is written by Dave Schappell, Founder and CEO of TeachStreet. In it, he talks about his company’s transition from a free to a paid service, and shares five tips that may help other startups make the leap as well.

Over the course of the last two-plus years, I’ve worked with a team that has lived the web service transition from free to paid, as TeachStreet has evolved from a place to find local classes in Seattle, to a global supplier of online and local classes (I’ve included a high-level timeline of our full 2-year transition, at the bottom of this post).

The discussions around freemium and the like are numerous — I won’t bore you with additional words on those topics.

I’ll assume that:

• you agree that ultimately your revenues need to exceed your expenses
• you’re able to build something that delivers value for your customers, and some of them are willing to pay for that value
• turning on fees won’t destroy your business (in our case, we were a class/course marketplace; we needed to be sure that fees wouldn’t cause our inventory of classes, that we had built up since April 2008, to disappear)

Finally, I’ll assert that there are many reasons to offer a product for free (e.g. it may be an incomplete product in the early days; free is an excellent way to allow customers to try your product and gauge the value delivered; free may help with distribution/spread; and many more totally valid reasons)

The big question is, “how do you transition your free customer base to a paid customer base, without upsetting/losing all of them?“

Here are 5 tips to help you transition customers to a paid service:

1) Give your customers plenty of notice, and give them a (real) chance to comment/contribute feedback.

Remember that many customers are not only willing to pay, but deem for-pay services to be of a higher quality. When we pre-announced our pricing changes, we had our share of negative responses. But, we also received positive public replies, and many private mails telling us that they were excited about the change (because it would reduce the clutter/competition for their classes; they wanted us to be around over the long-term; it would mean we’d have money to advertise for even more customers; etc.)

The response from customers also told us that we had been doing a very poor job of communicating our value to them. Many said that we’d never delivered customers, but when we looked at their teacher dashboards, we saw large volumes of visitors, and leads delivered. We realized that we had forgot to set up and communicate that value with a regular metrics mail! Thus, we prioritized building and delivering that communication before we turned on fees.

Several teachers also asked why they couldn’t ‘earn listings’ by doing things other than paying money. We thought that was a wonderful idea, and built a way to do just that (see #3 below).

A recent example where a fee increase was initially handled poorly was at ZenDesk. Initially, their announcement led to a huge customer backlash; happily, they made changes to the pricing proposal that grandfather’d in existing customers. As a long-time ZenDesk customer, I’m glad they listened and made changes, but I’d bet they could have handled this better with some more open customer discussions.

An example where I think this was handled very poorly was when Ning changed their fees — it seems like they just threw many customers out to the curb, with no input, and no negotiation.

2) Price it ‘fairly’ (probably still at a deep discount)

The price obviously needs to work for your income statement as you look out 6-12 months. But, it really needs to work for your customers. If the alternatives are much more attractive, expect to see customers flee.

In our case, we priced new listings at $3 — those listings last 30 days, or until we deliver 10 customer leads (whichever comes first). Many in the lead-gen industry scoff at this $0.30/lead pricing, but we had to look at free alternatives such as Craigslist and Twitter. Ultimately, we know that we’re a lot more than just a listing tool — we deliver strong SEO benefits, reviews/ratings, payments, UGC tools and more. And, all for less than a cup of (Seattle) coffee. If we can’t make that pricing work, then we’ll just have to deal with the ramifications. It seems fair.

Results to date are very promising – our number of teachers paying for listings, subscriptions and featured fees have grown by 6-7x since before the change – in order to continue their support, we know that we’ll need to deliver them value (i.e. student leads):

Will we have to raise prices in the future, or adjust the # of leads? Of course, that’s a possibility. But, we don’t expect to do so in the next year. We’ll continue to review the service/benefits, and we’ll do our best to be transparent with our customers.

3) Offer your customers a way to get your product for free

Money is one of many forms of compensation. In our business, high quality content (articles, Q&A, etc) are equally or more valuable, as they help search engines to find our site, and in turn, help people discover great classes/courses, and teachers/schools.

We ended up creating a virtual currency model where a teacher earns a ‘point’ for each article written, or question answered. And five points can be redeemed for a free class listing. A teacher can quickly find five questions to answer, and thus earn a free listing in less than 10 minutes. Within a week of launching our virtual currency, 9% of all our listings that week were paid for with points. This helps us (great keyword-rich content for search engines), but also helps the teacher, as we automatically merchandise their class listings around any articles and answers that they provide. And active teachers have their classes show more highly in search results. We see this as truly a win-win, and we don’t miss the $3 at all!

Many businesses could do a better job with this. I like how Flickr handles it, as I’ve fluctuated often between a Basic and Pro Flickr member. I know that I’ll always return as a Pro, but there are times when it’s less necessary. Thank you to Flickr for making it so easy. I wish Netflix would do a better job of this, giving me continued access to my movie wish list, and recommendations, as I frequently transition from paying to non-paying customer, as my free time fluctuates. But, they lock me out of my movie list when I’m not paying — why?

4) Provide Grandfather’d Pricing for long-time customers, or give them exclusive benefits

If you have a free service, this one is quite difficult, because there are bills that need to be paid. But, if you’re a service that has decided that you need to raise prices, you should seriously consider locking in the old pricing for your existing customers. Or, gradually increase prices. Or, provide them with a generous allotment of credits (you get the idea).

In our case, we created a promotion, offering 6 months of Pro Member benefits for $10 per month (compared to $29.99/month). The weeks prior to this promotion our Pro Member subscribtions were relatively flat; two week after running the promotion our subscriber base increased by 152%. We were psyched to see the level of redemptions on this offer, and hope that we can continue to earn their trust/business over the next 6 months. If we don’t, we didn’t deserve it to begin with.

Some other examples:

• SEOMoz is probably the best source of SEO advice/tools on the internet. They used to be free, but have gradually introduced monthly/annual memberships. The current cost is $799/year (I think), but when I joined in 2006, it was $299/year. What’s cool is that they still honor the $299/year fee. At that price, I’ll never go away — and, I continue to rave about them to my friends! And, while I know it’s a steal at $799, I still may balk at it, because I know what I paid once upon a time. Great job, SEOMoz, for thanking those who helped you get where you are today.
• Airlines do a TERRIBLE job of this — how many of us have been lied to by airlines with their frequent flyer programs? They tell us 20k miles will get us a free flight. Then they limit the seats. Then they have offers for 40k and 60k miles. Then they shut down the programs entirely. I’m OK if they change the rules going forward, but to change the rules for the miles that I earned under their earlier offer is just wrong.

5) Make the transition gradual, if possible — people should only pay if you’re delivering value

In our case, we decided that teachers should only have to pay to re-list a class if we’ve delivered a lead to them in the preceding 30 days. So, if a teachers lists a piano class or a photography lesson and we don’t get them a customer phone call, message, or enrollment in the next month, we simply re-list the class for free. That way, they don’t need to think about re-paying until the point where we’ve delivered value. And, we grandfather’d in our existing listings in a similar fashion. This served a double-benefit — for teachers, they’re guaranteed value (it’s another way of saying ‘thank you’ for being early supporters) and for TeachStreet, it maintained class selection, which is good for search engine traffic. In fact, we’ve grown our overall listings significantly since before the change in fees.

Other businesses will have their own unique characteristics — you could slowly implement fee increases for existing customers (as discussed above), provide transition pricing, or convert past-activity into benefit/tier levels, to name a few. But, you get the idea.

Moving from a free service to a paid service without scaring off customers can be done. With better quality data on TeachStreet we have been able to increase the number of leads to teachers by 25%, students are receiving faster responses from active teachers, and our operational revenue has doubled since launching our paid service.

In closing, remember that making the free-to-paid transition gracefully is just good business. Not only are these your longest-time customers, who have helped you in myriad ways (feedback, patience, content, etc.) but the impact of making this transition poorly can be disastrous and/or long-lasting, with negative PR, ruined relationships, and unpleasant employee morale issues.

I hope the list above is helpful — and, I’m sure that I missed some things. Please contribute ideas in the comments.

This is a high-level view of TeachStreet’s product/pricing history:

• April 2008 – launched site for classes, courses, teachers, schools (TeachStreet) in Seattle with ~25k classes, courses, schools and teachers – teachers could add unlimited classes, and students could contact teachers. The product had limited functionality, but it let us demonstrate value, work on our user-generated-content tools, and learn from customers (100% free)
• August 2008 – April 2009 – expanded to ~7 additional cities, and significantly expanded tools for teachers (phone tracking via twilio, teacher metrics dashboard, and much more) (still 100% free)
• July 2009 – introduced Student-to-Teacher payments (powered by PayPal), so that enrollments and payments could be processed on the site. Note that it took us 15 months to launch this feature — you could argue that we shouldn’t have launched without this, but we believed that we needed to demonstrate other value-add first. Students paid a small booking fee (to cover payment processing costs) and Teachers paid a commission (still 100% free to create class listings, but some fees coming from enrollments)
• September 2009 – introduced Pro features for teachers at $29.99/month. Gave them extra on-site promotion, additional marketing tools, free payment processing, and more. (still 100% free to create listings, but revenues are building from services)
• September 2009 – April 2010 – tested/optimized/weblabbed the site – implemented additional lead-tracking and lead-measuring improvements – we knew that if we didn’t deliver value (more, new students) to teachers/schools that we’d never earn their business. (still 100% free to create listings, but revenues are building from services)
• April 7, 2010 – we “pre-announced” the introduction of fees for all new class listings
• April 27, 2010 – we “turned on” listing fees for all new listings (100% of new listings are paid; All Listings are Revenue-enabled)
• May 12, 2010 – last day of $10/month promotion to “Go Pro” (6-months at $10/month; compared to regular $29.99/month rate) (100% of new listings are paid; All Listings are Revenue-enabled)
• June 6, 2010 (at present) — Traffic’s been growing, Revenue has ramped sharply, and we’re 100% sure that we’re going to have to keep pivoting. Because that’s what startups do.

We’ve seen how Unvarnished is setting out to create a kind of “Yelp for people” where you get reviewed as a person whether you like it or not. Now a new startup has appreared hoping to do something similar, but this time within a network that will give it significant traction from the word go: LinkedIn.

Here’s how it works: A user of Duedil will be able to submit comments or “reviews,” whilst other users will be able to “reply” to them by deeming them “fair” or “unfair.” In other words it’s a kind of ‘karma reputation’. Since the reviews themselves are subject to the scrutiny of other users, the reputation system itself becomes the focus of the system, rather than the object of the reviews (you).

Russian website Chatroulette, founded by Andrey Ternovskiy, is perhaps most well known as a place to watch men expose their genitals.

But that hasn’t stopped up to a million people a day from visiting the site. And it has been featured on both the Daily Show and South Park.

And wow has Ternovskiy been courted by Silicon Valley and other investors. SGN founder Shervin Pishevar helped bring him to Palo Alto and get set up in an apartment. In May the New Yorker talked about how Russia’s DST was having him followed when he first visited the U.S. And we’ve heard rumors of angel investors and venture capitalists circling Ternovskiy like a hawk.

The problem is the site is quickly losing its appeal as more and more people are turned off by the sheer number of people exposing themselves or worse on the site. The brand is becoming permanently associated (with help from those Daily Show and South Park features) with the more disgusting parts of humanity.

Can Chatroulette become something more? Look for feature changes soon that will try to send all those penises to the background. The service may add software that can quickly scan video to determine if a penis is being shown. And users that are consistently quickly skipped over (presumably because they are exposing themselves or otherwise being disgusting) can be flagged as well. With those and other changes Chatroulette may be able to put people who actually want to talk to each other in touch much more often.

And that’s where real growth might happen. “There just isn’t anywhere on the Internet for you to meet new people anymore,” says one investor that wants in on Chatroulette. “The potential for online dating, which is largely what pushed early Facebook growth, is unlimited.”

But Ternovskiy’s caution may doom the site. He has rebuffed most offers for help, say our sources, and investors and advisors are starting to give up. “If he doesn’t make a dramatic move soon to clean up the service, the brand will be permanently tarnished,” says another interested investor.

One person that Ternovskiy does seem to trust is Napster founder Shawn Fanning, who is currently hard at work on his most recent startup Path. Fanning is an advisor to Chatroulette, he confirms, and has been working closely with Ternovskiy for the last month or so. “I’m fascinated by Chatroulette and Andrey,” he told me yesterday, “and I want to help him any way I can.” Fanning stresses that the advisory role is informal, uncompensated and that he works with a number of other entrepreneurs as well.

It isn’t clear yet what happens next for Chatroulette. Ternovskiy will either push on independently and try to grow and clean up the site on his own, or he’ll embrace the Silicon Valley ecosystem and get other people and investors involved.

It’s clear that people are fascinated by the concept of talking to strangers from the relative safety of their computer screens, and Chatroulette satisfies some basic human need to connect to others. But sadly it also satisfies the basic human need of some people to show the world their penis. And that parade of penises is driving everyone else away. Chatroulette needs to decide what it wants to be when it grows up, and it needs to decide soon. Otherwise it will be nothing more than the punchline of a joke, and even that will grow old quickly.

Watch our interview with Ternovskiy here.

Le Web, in Paris on December 8-9 2010, has announced their initial speaker list. It has clearly emerged as the largest and most important Internet and technology conference in Europe and is becoming a must attend event despite the miserable Paris weather in December. Co-organizers Geraldine and Loic Le Meur continue to ham it up with promotional videos for the event, and this one cracks me up. In the past we’ve partnered with Le Web to do startup launch events and I’ve had one or two controversial moments on stage. I’m looking forward to being there again this year.

Just a handful of the 30+ Geeks On A Plane (GOAP) who started their Asian field trip in Shanghai, and then moved on to Beijing, Seoul, and Singapore, made it to Japan, the final stop of the tour. The highlight of the Japan leg was the Infinity Ventures Summit (IVS) in Sapporo [this and many of the following links are in Japanese], a two-day, invitation-only event that takes place twice a year. Organized by VC firm Infinity Venture Partners, the IVS attracted over 400 people from the domestic web industry and a number of international attendees this time.

The agenda was filled with panel discussions and presentations on the hot topic in Japan’s web industry today, social gaming. The other current hot topic, the launch of the iPad in this country late last month, was reflected in the launchpad, which gave a total of 11 Japanese startups the chance to demo their products.

In the end, V-Sido For Smartphones, a piece of real-time control system software for humanoid robots, won the title of best demo.

But here are short profiles of all the 11 products that were shown on-stage. (Please note some of the companies have yet to launch homepages in English.)

The winner and runners-up of the IVS launchpad

V-Sido For Smartphones by Wataru Yoshizaki
Best of show went to robot fanatic Wataru Yoshizaki who already made it to second at the last IVS launchpad. V-Sido For Smartphones is a real-time control system for humanoids that turns smartphones into multi-touch remote controls for those robots. For example, if the user draws the shape of a star on the phone’s screen, the humanoid in question does the same in the real world (and in real-time). Move your fingers faster, and the robot will move its arms faster, too. Yamazaki said his future plans include developing a solution of life-sized robots and commercializing V-Sido by year-end.

Skip to 3.08 in this (Japanese) clip for a short demo:

AQUSH by Exchange Corporation (first runner-up)
Much like Zopa in the UK, AQUSH is a peer-to-peer lending service that connects people with extra money with those who want to borrow money. Launched in December last year, the site allows lenders to set their desired investment amount and interest rates from 4% to 15% for 5 classes of borrower credit risk, as denoted by AQUSH itself. Loan applicants are screened by AQUSH based on their credit histories, financial situation and FICO scores. AQUSH says borrowers borrow at 11.6% on average (6.5% cheaper than traditional lenders), while lenders can expect a return on investment of 7.8% on loans (compared to 3 year time deposits that pay 0.15%). The goal is to unlock some of the more than $7 trillion of retail cash and bank deposits by offering individual investors access to the $300 billion Japanese consumer loan market.

iogous by Fringe81 (second runner-up)
iogous is a patent-pending display ad optimization solution. The tool breaks down each display ad into six components: main visual (for example, a picture), catch phrase, logo, “action button” (for example, “Click here”), format, and background color. iougous can then create thousands of “optimized” banner ads by combining these elements (see some examples in the image below). Fringe81, the startup behind the service, claims customers can expect up to 80% increase in CTR when compared to using traditional, static banner ads (more info in English here).

PartyGames by KLab (third runner-up)
PartyGames is a series of multi-player games developed for the iPad and iPhone. The main idea is to use an iPad as the main screen and then have a group of players use their iPhones as individual game screens, for example to play poker in the real world (the devices are linked via Bluetooth). KLab has so far brought PartyPoker to the Japanese AppStore. “PartyCoupleMatching” (game for group dates) and others (PartyDarts, PartyBowling etc.) are on the way.

Here’s a video showing how PartyPoker works (here‘s the PartyCoupleMatching video):

Lifelog system L+ by Ryo Koshino (fourth runner-up)
L+ is a lifelog tool for Android that makes use of four hardware elements: GPS, Bluetooth, accelerometer, and microphone. The tool aims at answering the question what you did at which location, at which time and possibly together with whom. L+ helps you to keep track of how many steps you took at a given day (via the accelerometer), how you moved around the city (via GPS and Wi-Fi), and whom of your friends you met or who’s around (via Bluetooth connection). Activity is recorded for future reference through Google Maps, calendars, and various stats L+ creates while in use.

The best of the rest of the IVS launchpad

Here’s a list of the six other products that didn’t make the cut:

• Zeptopad Planner Note, a note and whiteboard app for the iPad that lets you easily create vector images and comes with a ton of features (iTunes)
  
• Cerevo Cam Live!, a 9MP “social camera” that uploads pictures to the web (via Wi-Fi or 3G) and livestreams video over Ustream directly from the device
• GQ iPad version, an app that focuses on monetization through digital ads from luxury brands and features in-app movie clips (for example, movie trailers)
• Fastweet Live HD, a Twitter client for the iPad that helps users keep track of “hot” hash tags and displays relevant tweets in matrix format (not yet released/iPhone versions in iTunes)
• Motion Dive .Cast, a feature-rich application that lets users remix and create videos with their iPad
• TweetBubbles, an Adobe AIR Twitter app that allows participants of presentations to overlay comments or questions (as tweets) in bubbles on top of the presentation

Japanese tech blog Tech Wave offers video recordings of all 11 demos on its Ustream channel (all presentations were held in Japanese).