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New Yorker writer Malcolm Gladwell’s erudite skewering of various cultural phenomena, something he has become famous (or possibly infamous) for, tends to produce a strong reaction in those who are close to the topics he takes on, and his recent analysis of Twitter and its potential uses as a tool for social activism is no exception. In the several weeks since he wrote the original piece, over half a dozen essays and blog posts from a variety of sources have come out arguing that he is wrong, and today The Atlantic magazine joined the fray with a guest essay by none other than Twitter co-founder Biz Stone.

Gladwell’s article was entitled “Small Change: Why The Revolution Will Not Be Tweeted,” and started with an evocative image: a group of black college students holding a sit-in at a Woolworth’s lunch counter in Greensboro, North Carolina in 1960, to protest racism — an event that triggered subsequent rallies and demonstrations throughout the southern U.S. All of this, Gladwell says, “happened without e-mail, texting, Facebook, or Twitter.” The author then goes on to puncture the conventional wisdom that Twitter had anything much to do with revolutions in Moldova or Iran, and says that there is something wrong with “the outsized enthusiasm for social media. Fifty years after one of the most extraordinary episodes of social upheaval in American history, we seem to have forgotten what activism is.”

The New Yorker writer’s point is clear: real activism involves sit-ins and getting shot at by corrupt governments, not sitting at a keyboard posting things on Twitter or text messaging. And it’s hard to disagree with this — no one would argue that posting a comment to Twitter while sipping a latte at Starbucks is activism, simply because you happen to use the #iran hashtag. But is Gladwell making a fair comparison? I don’t think so. As other critics such as Anil Dash have also argued, setting up a contrast between Twitter and anti-racism demonstrations in the 1960s is effectively a straw-man argument, which allows the author to slam the social network for not doing things that no one has ever really claimed it was trying to do.

One of Gladwell’s central points is that Twitter and other social media tools emphasize and are powered by what sociologists call “weak ties” between individuals (a term coined by Mark Granovetter) — that is, the kind of ties that you have to your co-workers, or friends from high school, or people who belong to the same clubs as you. Gladwell says that real activism only occurs as a result of strong ties, the kind that people have to their churches, their families, and to strong leaders, and that real revolutions require a hierarchy that is antithetical to social media like Twitter. In his Atlantic essay, Biz Stone says: “Gladwell is wrong. Big change can come in small packages too.”

By that, the Twitter founder means that even weak ties can help pull people together around causes in ways that matter. He uses several examples, including the case of Liu Xiaobo, a Chinese dissident who is in prison for writing about human rights, and won the Nobel Peace Prize. Has Twitter led to his release? No. But as Stone argues, it has given Chinese citizens a way of talking about him, something that they would otherwise not have — as described in a blog post by Hu Yong, a professor of Internet studies at Peking University, who said Twitter was “the only place where people can talk freely” about Liu and his ideas, and that it has become “a powerful tool for Chinese citizens.”

In her response to Gladwell’s piece, author Maria Popova describes several cases in which Facebook helped spark “real” social activism, including public protests in Colombia in 2008 that saw close to 5 million people participate in protests against the country’s armed forces, and a campaign in Bulgaria in 2009 that resulted in the largest public protests since the fall of communism, and led to the resignation of several Parliament members. As others have noted in their critcisms, Gladwell seems to see activism as an either-or propostion — either you use social media, in which case it’s ineffective and useless, or you gather in the streets and do real activism. But wouldn’t some of those demonstrators in 1960 have loved to have better ways of getting their message out to as many people as possible? That’s what social media provides.

While I was reading Gladwell’s piece, in my head I replaced any mention of Twitter or Facebook with the words “the telephone” — and then it became a diatribe about how people talking on the telephone has never amounted to anything in terms of social activism. That is probably just as true as his criticisms of Twitter. But would any modern social effort or campaign or demonstration be effective without someone making phone calls? Twitter and Facebook are just tools, and they can be used for social good in the same way any other tool can. And those “weak ties” can eventually grow into strong ones. As Stone notes at the end of his essay: “Rudimentary communication among individuals in real time allows many to move together as one — suddenly uniting everyone in a common goal.” And that is a positive thing for social change, not a negative one.

Facebook has been caught in another privacy-related dust-up, after the Wall Street Journal reported that a number of the social network’s most popular apps and games have been sending “personal information” to third parties, including companies that compile data on users for sale to advertisers and marketers. In the context of Facebook’s ongoing issues with privacy, it seems like a fairly major problem, and the tone of the WSJ piece suggests that it is a major breach of privacy by the social network — but is it really?

The information that the Journal is referring to in its report is the user ID that each member of Facebook gets when they join. According to the newspaper, all of the top 10 apps on the social network — including FarmVille and other popular games — were transmitting user IDs of Facebook members to advertising networks and other third parties, and in some cases those apps were sending the ID numbers of a user’s friends as well (the ad networks and other companies who received this information told the Journal that they did not collect or make use of these numbers, or any user profile info related to them).

So ad networks and other companies may have been getting your user ID. Should you care? As Facebook has pointed out in statements to the media and in a blog post on its developer blog, the user ID does not contain any private information, and even if someone plugged that ID into Facebook, all they would get is whatever public information you include in your Facebook profile (you can use the social network’s privacy settings to control what information — if any — gets sent by the apps that you use). In most cases, that’s your name and possibly your date of birth and where you live, as well as a list of your friends.

It’s easy enough to find the ID of a Facebook user, because Facebook provides it to developers through its open graph protocol — just go to http://graph.facebook.com/user-id and replace “user-id” with someone’s Facebook user name. There are also a number of tools that will show you exactly what information the social network is sharing about you, including one that gives you an overall “privacy score”. Even before the latest Journal report, Facebook had already taken steps to reduce the likelihood that a user’s ID number would be passed on via their browser (although it still faces a lawsuit as a result of this issue).

The reality is that passing on user ID numbers and even public profile information isn’t really a “privacy breach,” because the only data that advertisers or anyone else can get through this process is information that users have chosen to make public already. As some Facebook defenders such as new-media guru Jeff Jarvis have noted, many companies — including media outlets such as the Wall Street Journal — sell information about their subscribers to a variety of third parties, who in turn sell it to marketing firms and advertising agencies. Is it fair to hold Facebook accountable for the behavior of third parties when we don’t hold others accountable in the same way? Some would argue it is not.

After all of the negative attention Facebook has gotten over the past year from advocacy groups and governments because of changes to its privacy settings, it’s not surprising that the company — and its critics — would be sensitive to any suggestion that personal information was being misused. But maybe we should save our outrage for cases that involve real breaches of privacy, rather than seeing potential scandals in every dark corner.

A study released today has drawn a lot of attention in media circles for suggesting that stories on “serious topics” such as the Gulf oil spill and the mortgage crisis draw more revenue for online media outlets than stories about celebrities like Lindsay Lohan. “Traffic Bait Doesn’t Bring Ad Clicks,” says a piece in the New York Times, while the Columbia Journalism Review writes that “Celebs Are Loud, But Hard News Pays.” But is that really what the study by Perfect Market shows? While the message is undoubtedly a welcome one for media companies who would rather focus on serious content than celebrity-chasing, the reality is probably a little more complicated than the study suggests.

The study comes from what Perfect Market calls the Vault Index, a new ranking of the most valuable news topics that the company came up with as a way of publicizing its services, which involve helping media sites and other content publishers aggregate and monetize their content (the company is a spin off from Bill Gross’s Idealab). According to a description of the study, Perfect Market looked at over 15 million news articles from 21 U.S. news sites — including The Los Angeles Times, The San Francisco Chronicle and The Chicago Tribune — from June to September of this year, and ranked the most valuable topics on a scale from 1 to 5. It arrived at a definition of value by looking at the RPM or “revenue per thousand” for pages about those topics, based on how much each paper was charging for advertising on those pages.

So, for example, articles on mortgage rates had an average RPM of $93, and immigration reform an average of $26, while pages about Lindsay Lohan’s court appearance averaged RPMs of $2.50, according to Perfect Market. Articles on social security pulled in average revenue of $129 per thousand, the study said. In a blog post, the company’s chief revenue officer said that even when the larger amounts of traffic to stories about celebrities like Lindsay Lohan were factored into the equation, serious news stories about things like immigration still brought in more revenue for the newspapers it studied. “Publishers end up chasing trends to increase raw page views, but that is not necessarily the best revenue strategy,” Tim Ruder said. “And it’s a disservice to their readers who want credible and important news.”

While it’s nice to hear that writing about serious news issues is more valuable than writing about celebrity court cases, the reality isn’t quite as one-sided as the study makes it appear. All the RPM data really shows is that advertisers are more interested in having their ads appear on pages that are about social security and immigration reform than on pages about Lindsay Lohan. This isn’t surprising: not only are readers of articles about social security more likely to have incomes that appeal to advertisers, but advertisers almost always want to be on pages that are about “serious” topics.

That said, however, they mostly want to be on pages that are about serious topics at websites that are racking up millions of pageviews and unique visitors — and one of the ways to boost those numbers is to write about Lindsay Lohan, a topic that almost everyone clicks on, even if they don’t want to admit it. Advertisers aren’t likely to stick around and pay those hefty RPM averages for pages on websites that aren’t getting any traffic. And if you try to run a site that is just about social security or immigration reform, that is pretty much where you will be.

The line between what we call a “book” and something that is just a really long chunk of published text — what you might call the “not-quite-a-book” category — continues to blur in the electronic publishing world. In one of the latest examples, Borders has joined forces with a service called Bookbrewer to provide a simple service that allows bloggers or anyone else with an idea to publish what is effectively an e-book, and get it distributed through all the major e-book platforms. In a similar move, Amazon recently launched its Kindle Singles program, which is also designed for publishing less-than-book-length writing online.

The Bookbrewer service allows writers to upload their content — which can be any length — set their own suggested price (within the boundaries set by the various e-book retailers like Amazon, Apple and Borders itself) and then publish an e-book in the open ePub format that can be downloaded for the iPad, the Kindle, the Kobo or any other e-reader. The service has two tiers: one costs $89.99 and gives authors an ISBN, the universal book-tracking number used in the publishing industry, and the $199.99 advanced package also gives the author a master ePub file they can share or upload wherever they wish.

Amazon says that its Kindle Singles, which launched earlier this week, is designed for pieces that are between 10,000 and 30,000 words — or between 30 and 90 printed pages (about twice the length of an article in The New Yorker or several chapters of a book). The company said that it is looking for submissions from outside the traditional publishing industry, including “serious writers, thinkers, scientists, business leaders, historians, politicians and publishers.” It’s not clear what the Singles will cost, or how much of that revenue will make its way to the author.

When the iPad was first rumored to be launching soon, I wrote about how the tablet and others like it, including the Kindle, could become a platform for authors of all kinds to find a larger market for their works — not just authors of traditional books (many of whom love the e-book revolution for a variety of reasons), but bloggers and other thinkers with interesting ideas, academics with interesting research papers, anyone with something they might feel deserves a larger audience (although obviously not all of them will). In some ways, it’s like the early days of the Gutenberg revolution, when authors published short manuscripts and “chapbooks” and everything in between.

The advent of tablets and e-bookstores dramatically lowers the barriers to entry for these kinds of writers, who would previously have had to find an agent and a publisher willing to take them on — and would have had to pay them a handsome share of any revenue as well. Now, through services like Bookbrewer and Kindle Singles, they can reach what is potentially a much larger audience, and maybe even make some money as well. Amazon and other e-book publishers pay authors as much as 70 percent of the revenue their books make. And the e-book market as a whole continues to grow rapidly — the latest figures from the Association of American Publishers show that sales climbed 172 percent in August.

As Om has pointed out before, the book as we know it is undergoing a fundamental transformation, just as so many other forms of content are. People still read traditional printed books and many will likely continue to do so in the future — but even more interesting is how the definition of what a “book” is becomes so fluid online. So is the book dead? Yes. Long live the book.

You probably have a favorite game you like to play on Facebook — which may or may not involve killing virtual mafia kingpins, or tending to your virtual crops on a farm — but what happens when you leave your computer or your browser and start using your mobile device? A startup called Uken Games is trying to solve that problem by creating games that synchronize your player profile and other game-related data across platforms, so that when you shift from PC to phone, you can pick up right where you left off.

I sat down with founder and CEO Chris Ye recently for a short interview about the company. He and partner Mark Lampert started Uken in February of 2009, after seeing the rise of social games on Facebook and elsewhere, such as Mafia Wars and Mob Wars. In March, the company launched its first game, called Superhero Alliance — which can be played on Facebook as well as the iPhone and the Android platform — and it has since launched several other games, including Villains and Forces of War, all of which can be played on multiple platforms.

Uken got some seed funding from Toronto-based Extreme Venture Partners, and raised a second round of $250,000 earlier this year. The company has just four full-time employees and several co-op students, but its games are among the top most-downloaded free games in the iTunes store, says Ye, with 400,000 installs on the iPhone, about 30,000 on Android devices and 300,000 monthly active users on Facebook. Uken’s revenue model is based on selling virtual goods such as weapons and other special items that can be used in its games, an approach similar to that employed by massively multiplayer games like World of Warcraft.

Making its games cross-platform is accomplished by using HTML5 and Ajax, says Ye. “We’ve been able to solve a lot of the problems associated with synchronous play across platforms, and we think that’s a pretty important step.” Because it uses those technologies for its games, the company was also able to port one of its titles to the iPad in less than a day, the Uken founder says, and expects to release the iPad version within the next month. While social-gaming giant Zynga is obviously a competitor, Ye says, “it can only put out so many games,” and the upside of Zynga’s presence in the market is that people have become used to playing social games and paying for virtual goods.”

Can tying two rocks together produce something that will fly with investors? That’s the question that leaps to mind upon reading that AOL is mulling some kind of takeover/merger bid for Yahoo, which may or may not involve a restructuring of Yahoo and backing from private equity firms, according to a somewhat confusing report in the Wall Street Journal late Wednesday. A subsequent report by Bloomberg says that Yahoo has hired an investment bank to handle any overtures from AOL and private equity, which sources told the wire service are in the works. All the sources involved say the talks are preliminary and warn that a deal may never take place, and it’s a good thing that they do, because frankly an AOL-Yahoo merger sounds like the worst idea since… well, since AOL and Time-Warner.

To recap that mind-boggling train wreck for anyone who might not remember it, AOL merged with Time Warner just as the Internet investment bubble was peaking in the late 1990s, and the combined company quickly started to hemorrhage billions of dollars in market value, making it arguably one of the worst business deals since the dawn of recorded history. A combination of AOL and Yahoo may not be quite that bad, but taking two old and faded Internet giants and roping them together sounds more like a desperation move or Hail Mary pass than it does like a coherent strategy for growth or success — for either company.

AOL’s new CEO Tim Armstrong has had some success in laying out his vision for the company, which involves turning the former portal into a media and content producer via ventures such as Patch.com — which is spending $50 million on hyper-local journalism — as well as a blogging strategy that led to the recent acquisition of TechCrunch. And the AOL chief executive has arguably done a better job of selling this vision than Yahoo CEO Carol Bartz has of convincing investors (or users, for that matter) that the company has any kind of over-arching strategy, apart from selling off or outsourcing virtually everything, including search, and trying to build its own blogging/content model.

The reality is that both companies — and Yahoo in particular — have failed to show any compelling evidence that they understand what the real-time web is about, or how they are going to get from where they are to where they need to be in order to take advantage of that fundamental shift in how the web functions. It’s true that both companies still have millions of unique monthly visitors, and advertising-based businesses that cater to those users, but the future of that kind of platform is murky at best. The two former portals are like fish trying to grow legs and run — not an easy transformation to engineer, and it’s not clear how merging into one giant old former mega-portal is going to help them do that.

Of course if such a deal does actually proceed it will probably be fun to watch, in the same way that people often slow down to watch a car accident.

With all the fuss surrounding the recent “AngelGate” meetings and the tension between angels and super-angels and traditional venture funds, it’s instructive to listen to one of the legends of the Silicon Valley VC business — Sequoia Capital founder Don Valentine — talk about the approach and the thinking that led to his investments in companies like Apple, Cisco, Google, Yahoo and Zappos. In the video embedded below, he talks to a group of students at the Stanford University graduate school of business about what matters and what doesn’t.

Valentine says that many people assume that the reason Sequoia has been so successful is that the fund backs “the best and brightest, the greatest managers and all that stuff [but] we do not.” The only thing that really matters, he says, is the market.

We have always focused on the market — the size of the market, the dynamics of the market, the nature of the competition — because our objective always was to build big companies. If you don’t attack a big market, it’s highly unlikely you’re ever going to build a big company

As a result, the Sequoia founder says that the fund isn’t really interested in where an entrepreneur went to school, or whether they have any actual business credentials — all Sequoia is interested in is the size of the potential market they are trying to attack, and the potential value of the problem that they are trying to solve.

“We don’t spend a lot of time wondering about where people went to school, how smart they are and all the rest of that. We’re interested in their idea about the market they’re after, the magnitude of the problem they’re solving, and what can happen if the combination of Sequoia and the individuals are correct.”

In some cases — as with Apple — an idea about the potential market can lead to multiple investments in all of the various players in that ecosystem, Valentine says. Apple “had in mind the idea of you all having your own computer,” he tells the graduate class at Stanford, and the implications of that involved the need for memory makers and disk-drive companies and manufacturers of all of the other parts that were needed for personal computers. So Sequoia wound up investing in more than 15 companies in the PC category, including game-maker Electronic Arts, which was created in the Sequoia office.

The Sequoia founder also says that he had an advantage over some other VCs because he “could see the future” — meaning he understood the transformation that personal computers and microprocessors were going to unleash because he worked at Fairchild Semiconductor and co-founded National Semiconductor. For Valentine’s thoughts on Steve Jobs’ marketing abilities, the failure of Sony and Xerox (which he calls “one of my favorite tragedies”), the importance of storytelling and the launch of Cisco, please see the full video at YouTube.

As website owners try to boost the amount of time their users spend online, the all-in-one site toolbar is becoming more and more popular. Wibiya, which makes a social toolbar that websites can add in order to allow users to chat, share links on Facebook and use other social features, said today it is launching a developers platform and open API to allow third-party applications to integrate with its application marketplace. The two-year-old startup, which is based in Israel and was seed funded by ICQ founder Yossi Vardi, also announced that it is partnering with Yahoo, Bit.ly and AddThis.

Wibiya says that its toolbars, which can be installed on any website and customized with a variety of apps and services, reach more than 175 million unique users a month and appear on over 80,000 websites, even though the company only came out of beta earlier this year. Wibiya CEO and co-founder Dror Ceder says that about 25,000 new websites have been joining the toolbar network every month, and the company has seen 15 to 20 percent growth in activity in just the past two months alone. Wibiya plans to add several additional APIs in the future, Ceder said, including a mobile one and an API that makes it easier for apps to connect to a user’s other social network profiles.

You may never have heard of the company, but you’ve probably seen the Wibiya toolbar if you go to websites such as TheStreet.com, Philly.com or Playboy.com. Each site has a customized version of the toolbar, with a different look and different services built in, including live chat (or video chat, in the case of Playboy.com), a translation tool, sharing functions for Twitter and Facebook, and links to popular news or features from the site. Wibiya’s toolbar competes against similar bars from companies such as Meebo, the web-based chat provider, and Facebook also offers its own sharing and chat toolbar for websites. Google has a Friend Connect toolbar, but it doesn’t seem to get used much.

I confess that I am not a big fan of website toolbars in general. I find they generally clutter up the screen, and don’t really provide a lot of functionality that I would use most of the time, and even when they do — in the case of sharing on Twitter or Facebook — those functions could be just as easily handled with a button on the site near the content. Its obvious that some users share my lack of enthusiasm, because a number of companies have either killed their toolbars outright (as Digg did when Kevin Rose took over as CEO), or made a point of de-emphasizing them, as both Stumbleupon and GetGlue have done.

That said, Wibiya’s growth stats are impressive, and the fact that the company is trying to open up and become a platform for any third-party service — as well as building in useful features such as Bit.ly support — is a positive sign. Whether it can become the dominant player by becoming more open remains to be seen, however.

The Wibiya network reaches more than 175 million unique users a month
Today there are over 80,000 active websites using the Wibiya web toolbar.
Over 25,000 new websites join the Wibiya network each month.

Over the past year, Groupon has become a rocket-powered social shopping phenomenon — it is one of the fastest-growing startups in decades, is valued at more than $1 billion, and expects to close the year with almost $500 million in revenue. That has gotten the attention of several newspaper chains, since they used to be the primary conduit between local advertisers and deal-hungry consumers: Cox Media Group is the latest to jump on the group-buying train, with the launch of a Groupon clone called DealSwarm. But news publishers may well be too late to this particular game, just as they failed to recognize the competitive threat that Craigslist represented.

Cox is launching its service in Atlanta, Austin, Dayton and Seattle but says it plans to roll out into other major markets nationwide over the next year. The media group claims that it will offer “outrageous online discounts of 50 percent or more on local dining, entertainment and other services from some of the most popular local businesses.” As with Groupon and other group-buying services, users register for alerts and are offered discounts by local retailers that only apply for a certain time period, or are only available if a certain number of users or customers sign up for them.

The media company doesn’t mention Groupon by name, but says that its offering is different from “others in the group-buying space” because its local media properties have already established a relationship between readers, viewers and listeners of its newspapers and radio/TV stations and local retailers, and Cox notes that all of these media outlets will be promoting the deals in question so that advertisers get more exposure. All of which makes a lot of sense — so much sense that it’s a wonder newspapers didn’t think of offering those kinds of services before, given those relationships with local advertisers.

The biggest problem for ventures like Cox’s, of course — and for similar efforts such as the Minneapolis Star-Tribune’s “Steals” offering — is that Groupon is already such a dominant force in a number of major markets, and is becoming the go-to brand name when it comes to group buying, not just in the U.S. but around the world as it has been acquiring competitors in other countries. Meanwhile, some newspaper publishers such as McClatchy have taken what seems like a smarter route and are partnering directly with Groupon for group-buying offers.

This presumably gives Groupon a large cut of the proceeds, but at least it maintains some of the existing relationship between newspapers and their local advertisers, which is one of the few weapons that many publishers have left with which to fight off irrelevance.

As millions more people tweet, blog, comment and update their status every day, the difficulty of finding signal in all that noise increases exponentially. Some services try to filter all of that social-media content by keyword, or location, or use algorithms to determine whether someone shares your interests. Klout, a two-year-old startup based in San Francisco, is trying to build a database of influence that can determine how influential an individual user is on social networks — that is, how much impact the content they create has on others around them. The company today announced that it has expanded beyond its traditional reliance on data from Twitter and is now indexing content from Facebook as well, with a view towards becoming the dominant measure of influence “across the social web.”

Measuring influence isn’t just something that Klout wants to do in order to make users feel good about themselves, or so that it can give them badges for passing certain milestones (although it does that as well). The reality is that as social media and social networks have become a larger and larger phenomenon, marketing agencies and companies have become increasingly interested in using these networks and services to target specific demographics, and to target “influencers” within specific topic areas who can help spread their message. So the Palms Hotel and Casino in Las Vegas is using Klout scores to build a group of influencers it can approach with special offers, and Virgin Airlines offered special rates to Twitter users with high Klout scores.

[inline-pro-content] Twitter is obviously only part of the social web, however, and until now Klout has been restricted to measuring influence solely on the basis of tweets and re-tweets. Data from potentially hundreds of millions of Facebook users could change that dramatically (provided they want to connect their Facebook accounts to the service, that is). In a blog post, Ash Rust — the company’s “director of ranking” and a former “relevance engineer” at OneRiot — says Klout has been working for several months to analyze Facebook accounts and determine how influence functions on the social network, which sees more than 30 billion pieces of content shared every month.

Unlike some services that simply look at the number of Twitter followers or Facebook friends a person has, Rust says Klout looks at a user’s “ability to drive action,” or their ability to influence others to click and say they “like” something or share a piece of content, post a comment, etc. On Twitter, the service looks at statistics such as the number of followers a user has, or how often their messages are re-tweeted, but also looks at several different levels of influence — for example, how often a user’s messages are re-tweeted by other users who have a high level of influence. The company then ranks a user on metrics such as “reach” and “amplification,” as well as the size and influence of their larger social graph.

Rust admits in his post that Facebook allows users to “interact with their friends in more complex ways than we’ve previously seen,” and that it will take some work to come up with an accurate picture of what that means. But the payoff for coming up with an authoritative ranking of influence across two of the largest and fastest-growing social networks could be substantial — and Klout is already partway down that road, since its data is already integrated into a number of leading Twitter tools and services such as HootSuite and Seesmic. Other companies in the same space include PeerIndex and TwitterGrader.

In the race to attract attention from startups and entrepreneurs, angel investors appear to be winning, and that is accelerating an ongoing shift in the venture capital market — what some would argue is a maturation of the startup-funding model. A new survey shows that startups are increasingly turning to angels not just for their initial rounds of funding but for subsequent rounds as well, and the most recent data on the VC industry shows that traditional venture funds have only raised $9 billion so far this year, a significant drop from the amount raised in previous years. Insiders have been arguing for some time that the VC business needed to get smaller, and it appears to be doing that in more ways than one.

The latest figures from the National Venture Capital Association show that the amount raised by traditional funds in 2010 is just a little over half the $16 billion they accumulated in 2009, and dramatically lower than the $28 billion that was raised in 2008, or the $35 billion that traditional funds managed to pull in during 2007. The NVCA report also notes that the amount raised to date in 2010 was boosted by the closing of a $750-million fund at Menlo Park, California-based Institutional Venture Partners. President Mark Heesen said the industry was “experiencing a period of time in which venture capital investment is consistently outpacing fundraising, creating an industry that will be considerably smaller in the next decade.”

Meanwhile, as startups require smaller rounds in order to get moving — and are more likely to get acquired than building up to a giant IPO — angels are coming to the forefront, according to a new survey from Dorsey & Whitney, a Silicon Valley law firm that specializes in advising startups. The survey showed that angels accounted for 59 percent of the funding for startups in the past 12 months, and almost 70 percent of startups said they would be looking for funding from angels for their next round.

Startups who were surveyed said that they turned to angels in part because of a perception that angels understand the needs of startups better, that they have operating experience, and that they can get a deal done quickly. “The two factors that stood out in the survey were that the investor understood the funding needs of the startup — they didn’t push them to take more or less than they needed — and the speed of the deal,” said Dorsey & Whitney partner Ted Hollifield. “Those are parameters that angels tend to do very well on.”

Startups also said they preferred to get financial backing from someone who was a specialist in the space they were hoping to operate in, as well as someone who had operating experience, and were “not particularly interested in brand names.” And the survey also suggested that there may not be a lot of truth to the axiom that startups seek initial funding from angels and then move to traditional VCs for subsequent rounds. “The jump in VC funding was not particularly significant in terms of people taking a second round,” said Hollifield.

It’s hard not to feel sorry for new Digg CEO Matt Williams. The poor guy has only been on the job for a little over a month, after replacing founder Kevin Rose as chief executive in August, and his first major appearance is on a blog post in which he apologizes for all the flaws and missteps in the recent Digg redesign — none of which he was responsible for — and promises to roll back the changes, and restore almost all of the various features that die-hard Digg fans complained about losing. But can all of this apologizing bring back those frustrated users, or have they moved on for good?

Just to recap, Digg launched the new version of the site in late August, after more than a year worth of planning and design. In addition to some stability problems that kept the site down for most of the first day of the launch, and made it unreliable for some time afterward, almost immediately there was a backlash from long-time Digg users about many of the changes. Many were concerned that too much content from mainstream media outlets was making its way to the site’s front page, instead of the quirky or off-beat content that Digg became famous for, and they also criticized the removal of the so-called “bury” button, which users could click in order to vote a story off the site.

While he was still CEO, Rose wrote a blog post in which he agreed that some of the criticisms from users were well placed, and said the site would bring back certain features such as the “Upcoming” page, as well as allowing users to change the default view of the site to a list of most-voted for stories, rather than the new “My News” view, which featured links posted by a user’s friends and accounts they had chosen to subscribe to or “follow.” But the Digg founder remained adamant about some changes, including the removal of the bury button, which he said was necessary to “put a stop to the bury brigades” who would target content and try to get it removed by working as a group.

The new CEO, however, says in his blog post that the bury button is being restored, and that user profiles are also returning, along with better navigation for videos and images, a tool for users to report comment violations and an update to the front-page algorithm. Williams also admits that the launch “didn’t go smoothly” and that the company is “deeply sorry that we disappointed our Digg community in the process,” and thanks the site’s users for “your patience and your extremely candid feedback.” And he notes in passing that Digg still has 23 million unique visitors a month, a comment that appears aimed at reports of plummeting traffic at the site since the redesign.

On the one hand, responding to criticisms from users is clearly a good thing for a site like Digg to do, since — as the new CEO points out — without that community the site is nothing, and without a loyal user base it isn’t going to be able to compete with other social tools such as Twitter and Facebook that have stolen a lot of its thunder. But what about the reasoning behind those changes? Rose argued that the disappearance of the bury button and other changes were necessary because “power” users of the site had too much influence, a view supported by some prominent Digg users such as former Engadget editor Ryan Block, who said that the redesign “realigns interests and does a lot to remove the incentives to game the system.”

As I argued in a GigaOM Pro piece after the backlash (subscription required), the upheaval at Digg shows just how difficult it is for a social network to change the way it functions on a fundamental level. Many of the changes were clearly designed to blunt the power of hard-core users and make the service more appealing to a broader range of users, but the revolt made it obvious that the changes had seriously alienated some of the site’s loyal fan base. This kind of strategy only works, however, if enough new users arrive to justify the loss of that traditional fan base.

By apologizing for and unwinding most of its recent changes, Digg appears to be admitting that it backed the wrong horse. But will simply restoring the site to the way it worked before be enough to pacify those irritated users — and more importantly, will backtracking so publicly make it even harder for Digg to change and evolve in the future?

Real-time data is becoming a fundamental part of the web, and social gaming is at the forefront of that wave. Market leader Zynga, for example, is famous for tracking hundreds of different metrics about its games in real-time, down to the smallest detail — where its users come from, what they do, when they leave — and making changes to them on a daily or even hourly basis. As the need for real-time data accelerates, so does the need for analytical tools to make sense of it all, a hole that services like Kontagent are hoping to fill. The two-year-old startup just announced a new version of its dashboard that it says gives app and game developers even more real-time tools to work with.

The principle behind Kontagent — which raised a funding round of $1 million earlier this year from a series of angels, including James Hong of HotorNot and Mike Sego of Gaia Online — is that real-time social activity like social games on Facebook require a different kind of analytics than the traditional pageview-centric and click-focused model associated with Google Analytics and Omniture. There are a couple of reasons for that, says Kontagent founder Albert Lai, and one is the fact that traditional analytical tools tend to use data sampling rather than providing true real-time data.

Data sampling — which involves looking at 10 percent or so of the traffic and then extrapolating from that to overall trends — is a bad thing, Lai says, because it fails to capture important info that social-game makers and others need to track the virality of their apps and services. “That 10 percent may not capture the ‘whales’ or power users,” he said. “And that can be really important in terms of tracking your growth.” Traditional pageview-based analytics also doesn’t provide the kind of detail that developers need, Lai argues. “You might know that people came to you through a search for a specific keyword, and at best you might have a cookie, which you assume is the same user — but you don’t have a unique user ID and a demographic profile and the other detail that we have,” he says.

The Kontagent founder also argues that traditional analytics tools like Omniture are a lot more expensive for developers and app-makers because they charge on a per-click or per-action basis. “For some of our customers, like PopCap Games, they have 10 million monthly users,” says Lai. “If they tracked every action with something like Omniture they would bankrupt the company.” Kontagent tracks hundreds of different real-time actions related to more than 70 million monthly unique users across a number of leading game platforms, Lai says.

Other providers of real-time analytics aimed at social apps and games include Mixpanel, which tracks not just games and apps on Facebook but other web-based social apps as well, and just recently launched mobile app tracking for the iPhone. The company, which was founded by former employees of the social-game company Slide (recently acquired by Google), says it is tracking more than a billion user actions per month. Database company Vertica is also making a play for the social-gaming market, offering companies like Zynga the ability to crunch massive amounts of data in order to track what content is the most appealing in real-time.

Google is apparently testing the integration of Twitter within Google News, according to a report from Search Engine Land, which in turn was based on a tip from a reader who apparently saw the experiment in action and posted a snapshot of what it looked like on Twitter. The feature adds a small box to the right-hand side of the page that allows users to login with their Twitter credentials and then “see when people you follow are talking about the news.” Search Engine Land even found a help page about the experiment.

The description of the feature says that it will allow users to “find news articles that your friends are sharing on Twitter,” but notes that the new Friends section will only show articles that can be found in Google News. “If someone you follow has shared an article or a link that cannot be found in Google News, then you will not see that update in the Friends section,” it states. It’s not clear from the description whether the links that Google parses for the feature will include blogs or only traditional mainstream news sources. When you do a search on Google News, the “blogs” category is one of the filters you can choose from the left-hand column, but those articles aren’t included in the typical Google News home-page layout.

In comments last month about Google’s plans to become more social, CEO Eric Schmidt said that the company was not planning to launch any kind of massive Facebook competitor, as some had speculated, but intended to add “a social layer” to its existing services by pulling in data from places like Facebook and Twitter. The experiment with Google News appears to be part of that plan, although whether it will make it to prime time or not — and whether people will actually use it — remains to be seen

Google has made a number of enhancements to try and make its news offering more social, including a redesign earlier this year that added a section called “News For You,” and also allows users to give news sources a thumbs up vote, from which the Google algorithm is supposed to learn what they like. The initial response from readers was not positive, however, so it will be interesting to see what the reaction is to Twitter integration. Among the other ways of reading news links that are recommended by your followers on Twitter are the Paper.li service (which I wrote about here), as well as Twitter Times and a new service called Tumbl.in.

When Wired launched its magazine app for the iPad in May, it got a wave of publicity — in part because it was the first, and also because it released a gee-whiz video pointing out how the ads actually moved, and so on. But now there are more and more iPad magazine apps every day, with Esquire’s only the latest example from the Hearst empire, and one thing is becoming clear: publishers just want you to look at their content, and are hoping you will forget about the Internet and social media and all of those irritating things that get in between you and the consumption of their wonderful content.

Everyone talks about how what publishers love about apps is the ability to charge readers for their content again (especially now that Apple says it will allow them to charge subscriptions). But I think a close second in the motivation sweepstakes is the fact that the app economy marks — for now at least — a return to the good old days when the walled-garden approach to publishing was the norm, and the Internet was just some pesky chat room for nerds. Wired’s app provides a really slick interface to the magazine, but no way of actually sharing any of that content, or of linking it to related content somewhere else — not even to the company’s own website. It’s like an interactive CD-ROM from the 1990s.

The new Esquire app also has plenty of “interactivity,” if you mean the ability to click and watch an ad for a new Lexus, or listen to cover boy Javier Bardem recite a Spanish poem, or swipe your finger and watch a timeline of the construction of the new World Trade Center. All of those are very cool — but if you are looking for the kind of interactivity that allows you to post a comment on a story, or to share a link via Twitter, or to post anything to a blog and then link back to the magazine, you are out of luck. In fact, if you like the app or any of the stories within it, your only option is to close the app and email someone to let them know.

Esquire editor David Granger admits in his editor’s letter for the inaugural iPad issue that magazine apps are “a mixed bag” so far. “They’re convenient, I guess, but boy, some of the added features are either stupid or annoying,” he says — while assuring the reader that the Esquire app is “pretty good [and] it’s certainly not annoying.” I’m going to have to take issue with him there, however; I found it quite annoying in a number of ways.

To take just a few examples, it isn’t clear that you need to tap on the screen once in order to remove the table of contents, which obscures the text and can’t be moved. And whenever you click on the cover image, you have to watch a Lexus ad, or click the “close” button, even if you have seen the ad already. Also, when you click on the Bardem story that is the cover, it’s not obvious that you have to swipe down to see the rest of the story rather than swiping to the right (which moves to the next story). If you swipe right and then go back, of course, you get the ad again and have to watch or close it again. And the ad itself, which is a movie clip, first appears as a tiny square, so you have to tap on it and then use the pinch-expand motion to enlarge it.

But even those are mostly just design irritations — the biggest flaw for me is the total lack of acknowledgement that the device this content appears on is connected to the Internet, and therefore it is possible to connect the content to other places with more information about a topic, or related material of any kind, let alone any kind of social features that allow readers to share the content with their friends. Some magazines have made some tentative steps in this direction, but so far they are few and far between. Meanwhile, Flipboard and Pulse have taken Twitter and Facebook and RSS and turned them into magazines — and much more appealing ones in lots of ways.

About the only magazine that has taken any kind of creative steps in this direction with its iPad app is Gourmet magazine, which used the services of Anil Dash’s Activate design consultancy to come up with an interesting experiment: the Gourmet Live magazine app is what Dash calls a “massively multiplayer magazine.” As you read the contents — and share them via Twitter and Facebook — you gain points and thereby “unlock” new content, in the same way a player would in World of Warcraft. The content that is unlocked in some cases is a profile of a specific person or a set of related recipes.

I’m not convinced that the Gourmet Live approach is going to appeal to the majority of readers, but at least they are trying something different — and they are taking advantage of being connected to social media and the Internet, instead of trying to pretend it doesn’t exist.