Image by Getty Images via Daylife

The Treasury, the Fed, and Warren Buffet have been the only buyers in this meltdown and have been largely focused on financial companies. Meanwhile the rest of the market has gone down 30% year to date and very few, if any, stocks have been spared.

What do we look for next? Does the market just keep going down endlessly? What will bring this to an end? Clearly not government intervention. While possibly necessary (we'll see), the splurge has clearly not put an end to selling in the markets.

We need to see more Warren Buffets stepping up. And my bet is they will eventually. And they will be corporations buying back their own stock, large private equity and buyout firms doing going private transactions with all equity cap structures, and possibly foreign companies seeking bargain acquisitions in the US.

What's interesting, as Howard pointed out repeatedly on twitter yesterday, is that corporations have not yet stepped up to stock buybacks.

Microsoft announced last month that they plan to buy back $40bn in stock over the next five years. They have $25bn in cash and short term investments and are currently earning about $20bn per year in operating cash flow. Microsoft's stock is trading at about 11x operating cash flow.  It's market cap is $227bn and institutions own 60% of it, meaning there is about $130bn of $MSFT stock in the hands of institutions. If Microsoft wanted to, at the current price, it could purchase all $130bn of that stock from institutions with its current cash balance plus operating earnings over the next five years. If Microsoft is confident about its business prospects going forward, it should be an aggressive buyer of its own stock at these levels. And maybe it is. It's stock is only down 3% in the past month while the S&P has been down 15%.

What about Google? $GOOG is down almost 50% year to date and the company is valued at $115bn. Institutions own roughly 60% of its stock, roughly $70bn of it. Google is earning about $7bn of operating cash per year and has $13bn of cash and short term investments on hand. So it would take Google longer to buy back all the stock institutions own, more like eight to ten years. But still, that's a lot of purchasing power and the market is asking the same question Howard did yesterday.

The silence of $goog into this meltdown is just as deafening with all their cash.  I am not going to be run over.

In bad bear markets, like we are in, investors look to corporations to defend their stock and Google has not yet shown an interest in doing that. That's something to look for. When you net out Google's cash, it's trading at $100bn, a mere 12x operating cash flow. That's value territory.

Let's look at News Corp. Rupert Murdoch's company, the best managed media company out there, is down 56% in the past year and is now trading at a mere six times operating cash flow. News Corp is also about 60% institutionally owned. So that means Rupert could buy out his external investors with four years of his cash flow. But we have yet to see him do that.

I could go on and on. Apple is worth $67bn after you back out the $20bn of cash they have on hand. It earns over $5bn a year. That's another value stock right there.

And those are some of the best US companies right there. The list goes on and on. Starbucks trades at 7x cash flow, Walmart trades at 10x cash flow, AT&T trades at 4x cash flow, and Comcast trades at 6x cash flow.

You could buy all of America's best corporations for somewhere around eight to ten times cash flow. Someone is going to start doing this.

Maybe it will be the large private equity and buyout firms who have been stuck on the sidelines while the debt markets have been closed for the past year. If good companies get cheap enough, they can buy them with their cash, without debt, and own them for however long the markets take to work the issues out.

Or foreign companies will come in. I am particularly interested in the asian companies. Will a company like Dell be an attractive acquisition for an asian manufacturer flush with cash? It's only trading at 5x cash flow after you back out the cash on hand.

I read this history of the panic of 1873 yesterday after seeing a twitter post by Mary Hodder that referenced it. It's worth reading. There are two really interesting points in it. The first is that panic was precipitated in some measure by the US' emerging prowess as a player in the global economy and a lower cost one at that:

Wheat exporters from Russia and Central Europe faced a new international competitor who drastically undersold them. The 19th-century version of containers manufactured in China and bound for Wal-Mart consisted of produce from farmers in the American Midwest. They used grain elevators, conveyer belts, and massive steam ships to export trainloads of wheat to abroad. Britain, the biggest importer of wheat, shifted to the cheap stuff quite suddenly around 1871. By 1872 kerosene and manufactured food were rocketing out of America's heartland, undermining rapeseed, flour, and beef prices. The crash came in Central Europe in May 1873, as it became clear that the region's assumptions about continual economic growth were too optimistic. Europeans faced what they came to call the American Commercial Invasion. A new industrial superpower had arrived, one whose low costs threatened European trade and a European way of life.

But possibly even more interesting was who emerged as the winners of the panic of 1873:

The long-term effects of the Panic of 1873 were perverse. For the largest manufacturing companies in the United States — those with guaranteed contracts and the ability to make rebate deals with the railroads — the Panic years were golden. Andrew Carnegie, Cyrus McCormick, and John D. Rockefeller had enough capital reserves to finance their own continuing growth. For smaller industrial firms that relied on seasonal demand and outside capital, the situation was dire. As capital reserves dried up, so did their industries. Carnegie and Rockefeller bought out their competitors at fire-sale prices. The Gilded Age in the United States, as far as industrial concentration was concerned, had begun.

We have yet to see the Carnegies, McCormicks, and Rockefellers of China, India, Russia, and the Middle East emerge as capitalists on a global scale. But with prime assets like I mentioned above on sale at bargain basement prices, it's just a matter of time until we will.

Eventually this market meltdown will be over and stability will return. But things will not be the same. There will be big winners and big losers. We have already seen many of the big losers emerge, but we have not yet seen the big winners emerge. I think we know where to look for them though.

There's a movement afoot by investors to back web services with a real business model instead of the pervasive "give it away for free and hope for the best" approach that's been in favor for the past four years. Don't count me in that camp, but the movement is happening with or without me.

Roger Ehrenberg, another angel investor friend, says in a post about how he's changing his investment approach:

I have added a few criteria to my check-list:

• Initially sells to the enterprise for branding, credibility, awareness and early revenues
• Can get to revenues within 6 months, tops
• Is sold on the basis of ROI, e.g., helps generate revenues or reduce headcount/costs

As I noted in the comments to Roger's post, we've struggled with early stage investments in enterprise oriented web services. Sales to enterprises often require expensive sales teams and it's much harder to know if you've nailed the product/service with feedback from a limited number of enterprise customers.

It's much better, in my opinion, to go with the freemium model, give a version of the service away for free to all comers, get a lot of users, get good market feedback, then develop a premium version of the product/service for sale to enterprise customers. If your free version is popular with a lot of users, your customer base is the target for the upsell and you might be able to live without an expensive sales force initially. And, of course, keep your costs really low until you start to get revenues.

In summary, freemium is far from dead, in fact it may be the business model de rigueur.

Tom gave me a preview of it and I am going to blog some quotes from it that relate to Donors Choose throughout the month of October as a cool way to remind readers of the Donors Choose Bloggers Challenge.

Here's the first one:

"I thought there must be a helluva lot of people who want to improve their public schools but figure if they write a hundred-dollar check to the school system, it just goes into an institutional black hole. So why not let them choose the project, see where their money was going, and hear back from the classroom....that was the genesis." Charles Best, Founder of Donor's Choose

And if you are so inclined and haven't done so already, please pick a project of your own to "write a hundred dollar check" to.

NOTE: We've fully funded nine out of the initial eleven projects on the AVC giving page. Thanks! I've added five new projects we can fund and they'll appear on the giving page shortly. Again, if there are projects you like the sound of, please alert me to them and I'll add them to the AVC giving page.

For those of you with good eyes, that's my avatar on the upper left and that top banner is something that is called TimesPeople. It's a profile based service for sharing stories with friends and colleagues on the New York Times website. TimesPeople also has a facebook app which I installed today.

This is an important step for the Times to take. Back in March 2007, I wrote a post called "All Software Should Be Social" where I said:

I can barely use software that doesn't have other people in it. I want profiles and faces and connections. I want to see what others are doing with the software. I want to connect and be connected.

While I am sure the people who work at the New York Times think of themselves as a content company first and foremost, what goes on at the New York TImes website is as much about software as it is about content. And slowly but surely the Times online is becoming social software. That's a big deal.

TimesPeople has been talked about a bit in the blog world since mid-June but honestly I had not used any of the tools until they magically appeared at the top of the home page this morning. My favorite of the tools is the "Live Feed" shown below:

Talk about the feedization of the web user interface, we've got one now running at the New York Times. I think it's great to see the Times embracing social software concepts like profiles and feeds. I hope they take it a step further and connect all of this to the social web, beyond Facebook, to blogs, comments, tweets, and so on and so forth.

If you want to give it a try, go to the home page of the New York Times, look for the bar a the top, sign up, and connect to me. I am fredwilson.

We've donated almost $3,000 in the first three days of the month. If we keep giving at this rate, we'll beat the $20k we donated last year. But unlike last year, we aren't going to run away with the tech category. We've got serious competition.

Need I say more? If you want to help some teachers and kids in needy schools, and help us win this thing, go visit the AVC giving page and donate.

So today's headline from Marshall Kirkpatrick at Read Write Web, Google Blogsearch Relaunches as Techmeme Killer, immediately made me laugh. I almost hesistate to link to it but that's not right if I mentioned it. I think Jason Kinkaid's post on TechCrunch is more balanced and realistic. And Matt Cutts from Google takes pains to explain why Google Blog Search is not a Techmeme killer.

Here's what I think. Blog post aggregators are great. I use them every day, at least several times a day. I use them instead of a feed reader. And I like to read at least three or four of them, a couple for tech, one for politics, one for music, and so on and so forth.

In the tech sector, I like techmeme, hacker news, and Tim O'Reilly's retweets on twitter. Those three links sources really cover the bases for me. And behind each of them is a voice. In Hacker News' case, it's Paul Graham and the Y Combinator community. In Techmeme's case, it's Gabe. And in Tim's case, it's Tim.

The new Google Blog Search is very nice. It's a big improvement to the old one. But it's like a lot of Google's services. All algorithm and no "voice". It may attract a mainstream audience the way Google News has and that's fine. But for me, it's not close to the value that I get from aggregators with an angle. It's like a mainstream newspaper versus a blog. On one you get the news and on the other you get insight.

Anyway, enough Google bashing for now. I'm off to read my aggregators.

So it's time to defend that victory. I have a feeling the competition is going to be tougher this year. Scoble and Julia Allison have joined the fray according to Fortune. But I am up for the challenge if you are.

I've kicked things off by giving $200 to this great project in Greensboro, NC where we are going to buy a music class 30 Xilopipes. But please do not give directly on that page.

The way we win this is by doing all of our giving via the AVC giving page. I will add some more projects to the giving page and if you have projects you'd like to see on the giving page, send me the links to them and I'll add them. I am emphasizing technology and music learning projects on the giving page but I am happy to feature other great projects for all of us to give to.

IMPORTANT: Donor's Choose, which runs this whole thing, is a great organization. When you give to a classroom project via Donor's Choose, you are not giving your money to anyone. Donor's Choose actually purchases the items the classroom needs and sends it right to the teacher. So those Xilophones will get bought by Donor's Choose and sent to the classroom in Greensboro, NC. There's a ton of technology automation involved. This is a "fraud free" way to give to needy classrooms and I love that.

I am going to add another widget to this blog for the month of October, it will look like this, but it will be a skyscraper instead of a rectangle.

So every time you visit this blog, you'll see the Donor's Choose widget and hopefully will be inspired to give some more.

That's the story. It's up to all of us now to defend the technology blog title and maybe we can even make a run at Sarah Bunting/Tomato Nation which raised over $100,000 last year. Now that's amazing.

I think Jason's email is a great "wakeup call" for everyone in the startup business. Life is going to get tougher for everyone in the US and possibly in all parts of the world that are tightly linked to the US economy. I think startups fall into that description no matter where they are based.

I particularly like Jason's "10 specific things you can do" section. In that section he urges entrepreneurs to get focused, get better, get leaner, and ultimately to get profitable. That's spot on.

But I do think Jason's missing one important point in his email. It's not the venture backed startups that are going to struggle the most. Jason wrote:

It’s my believe that the economic downturn will be much worse than it is today, and that 50-80% of the venture-backed startups currently operating will shut down or go on life-support (i.e. 3-4 folks workingon them) within the next 18 months.

Make a list of every Web 2.0 startup to raise an A or B round and cross 80% of them off the list, because they will not make it to their next round of funding or profitability.

All startups are going to have to batten down the hatches, get leaner, and work to get profitable, but the venture backed startups are going to get more time to get through this process than those that are not venture backed. Here's why.

Venture capital firms are largely flush with capital from sources that are mostly rock solid. If you look back at the last market downturn, most venture capital firms did not lose their funding sources (we did at Flatiron but that's a different story). If you are an entrepreneur that is backed by a well established venture capital firm, or ideally a syndicate of well established venture capital firms, then you have investors who have the capacity to support your business for at least 3-5 years (for most companies).

Venture capital firms will get more conservative and they will urge their portfolio companies to do everything Jason suggests (and more), but they will also be there with additional capital infusions when and if the companies are making good progress toward a growing profitable business.

If you go back and look at the 2000-2003 period (the nuclear winter in startup speak), you'll see that venture firms continued to support most of their companies that were supportable. The companies that were clearly not working, or were burning too much money to be supportable in a down market, got shut down. But my observation of that time tells me that at least half and possibly as much as two/thirds of all venture backed companies that were funded pre-market bust got additional funding rounds done post bust.

So if you run or work in a startup company that is backed by well established venture capital firms, take a brief sigh of relief and then immediately get working on the "leaner, focused, profitable" mantra and drive toward those goals relentlessly.

If, on the other hand, you are just starting a company, or have angels backing you, or are backed by first time venture firms that are not funded by traditional sources, then I think you've got a bigger problem on your hands. It's not an impossible problem to solve, but you have to start thinking about how you are going to get where you want to go without venture funding.

I say that because in down market cycles, it's the seed and startup stage investing that dries up first. It happens every time. Seed/startup investing is most profitable early in a venture cycle and late stage investing is most profitable late in a venture cycle. It makes sense if you think of venture capital as a cyclical business and it is very cyclical. Early in a cycle you want to back young companies at bargain prices and enjoy the demand for those companies as the cycle takes hold. Late in a cycle you want to back established companies that need a "last round" to get to breakeven and you can get that at a bargain price compared to what others paid before you. I've been in the venture capital business since 1986 (that was a down cycle) and I've seen this happen at least three times, probably four times now.

There's another important reason why seed and startup investing dries up in down cycles. Venture firms don't need to spend as much time on their existing portfolio companies when things are going well. A rising market hides a lot of problems. But when things go south, they tend to become inwardly focused. I believe we are headed into a period where venture firms will spend more time on their existing portfolio and less time adding new names to it.

This has gone on longer than I generally like in a post. So I'll end by saying that I don't think we are in a "depression" in startup land. We are in a down cycle driven by a bad global economy. I think the web and information technology is one of the few bright spots in an overall gloomy economic outlook. So if you are working on a web technology company, be happy that you aren't working for a bank, a brokerage firm, an automobile company, or in many other industries. The tools and services that are made in the web technology business are only going to increase in demand over the next five years. But we are going to have to service that growing demand with leaner and more focused businesses and it's time to start thinking more about profitability and how you are going to get there.

Startonomics is all about instrumenting your startup business and using measurable metrics to determine how you are doing. It's about using numbers to improve your marketing, your product, and your business.

It's happening this Thursday, Oct 2nd, in San Francisco. I'd encourage anyone who is based in the bay area and doing a startup to attend. It's affordable (students for $195, entrepreneurs for $295). Register here.

Dave has graciously offered 2 free passes to AVC community members. I'll give one each to the two best comments with a quick (twitter size) comment about how you use startonomics to run your business. Comments have to be in by 5pm eastern today.

For those readers who are in NYC and wish they could attend one of these, Dave has promised us he's going to try real hard to do one here next year. I can't wait.

UPDATE: Chachra and Khawk are the two winners. It wasn't easy but I liked the brevity with which each of them outlined their approach to startonomics. Chachra said "Use startonomics to build what people need, measure what they want and and deliver what they don't know they need! Iterate & $profit :)".  I love iterate and profit. It's right on. And Khawk introduced a new c-level position, the CBO - Chief Burnrate Officer. Very nice!  I also think both of them are in SF (a guess) and hope they'll actually use the free passes. Thanks again to Dave for providing them.

In the old days, electrical engineers focused on getting computers to work not on getting people to engage with the systems built on top of those computers. The folks that built enterprise software were vaguely aware that their systems had to be accessible to the humans that used them but they had a huge advantage. The people who used them did so as part of their job, they were trained to use them and fired if they could not figure them out.

Today, no one tells you to use Facebook. There are no employer sponsored training sessions on the use of del.icio.us. The burden is on the designer of the system to meet a need, entertain, or inform their users. They also have to seduce those users, hiding complexity, revealing one layer at time, always enticing, never intimidating, until the user one day finds they are intimately familiar with power and the pleasures of the service.

There's more and if you want to read the whole post, click here.

Etsy is well known as a place to find handmade, one of a kind, artistic and "crafty" items. It has great appeal to a certain sensibility but has not really caught on yet with the mainstream user. Etsy's CEO, Maria Thomas, mentioned in her web 2.0 talk that Etsy is doing about $100mm in annual sales right now. It's a big business, but not yet a mainstream business. That might change when people find out that you can get lovingly made, beautful, one of a kind gift items for way less than you'll pay for something equivalent (if that's even possible) at Wal-Mart.

Here are some examples:

A wood train set for $89.95 that includes six cars. Handmade in the seller's wood shop.

A cute pinafore dress for a little girl that costs $24.

A plush dog toy for $16.

A necklace for $34

These are just four items I found in about ten minutes of poking around Etsy.

They are one of a kind and if someone buys them between now and when I post this on Monday morning, they might be sold out.

But my point is not to try to sell these four items, it's to point out that there are wonderful gift items for really great prices on Etsy. I hope that more people learn about Etsy this holiday season because it will help people save some money and put some great gifts under the christmas tree or hanukkah bush at the same time.

I do have an active social net on Facebook (317 friends all of whom I know, and there are another 719 friend requests pending) and lately I've been getting a fair number of emails from Facebook that look like this.

Tom commented on your status:

Yeah man, the Mets - what a killer ride - does it crash?

To see the comment thread, follow the link below:
Thanks,The Facebook Team

Tom was replying to my twitter post yesterday about the Mets. He saw it in Facebook and replied to it in Facebook. I got it in an email from Facebook.

Contrast how this works on friendfeed. If Tom had seen the Mets post on friendfeed, his interaction would look like this:

He could have replied directly in friendfeed and had it also posted to twitter, where I could see it along with all of my other replies.

When I visit the status update page on Facebook these days, it's filled with twitter updates. Here's what mine looks like this morning.

Four of my first six status updates in Facebook come from Twitter and 30 of the 50 status updates on the page come from Twitter. It's no wonder that my kids, who use Facebook exclusively and have never even tried twitter, call status updating "twittering".

So I think it would be great if Facebook copied friendfeed's implementation of replying back to a twitter post via Facebook. That would help me out a lot.

Of course, they could take this even farther if they integrated completely with twitter by letting me reply back to Tom via twitter into his Facebook feed.

Some people will want to twitter on twitter, some will want to do it on Facebook, some will want to do it on friendfeed. What we need to do is make sure all these services talk to each other so we, the users, can talk to each other.

Image by rcarver via Flickr

First, and most importantly, you don't have to be a twitter member or user to use election.twitter.com. For many people, it will simply be a way to quickly check in on the zeitgeist of the election. If you are a twitter user, you can join the conversation by posting directly from election.twitter.com and your update will go to everyone who follows you and into the election timeline.

Twitter launched this new service in time for tonight's debate (or town hall meeting depending if McCain shows). I plan to watch in our living room with the debate on the big screen and election.twitter.com on the coffee table on a laptop. It will be like the stock price feed that flies across the bottom CNBC when the market is open. I expect it will add a new dimension to the debate watching experience and I am excited about it.

Any blogger who wants their content captured, geo-tagged, and presented in Radar, can go here and add your feed to outside.in.  It works even if you are an occasional placeblogger like I am.

Outside.in launched a nice new service for placebloggers (full-time or occasional) last week called Blog Maps. I've just put one on this blog in the right sidebar right below my flickr photos. It looks like the image on the right top of this post. Or you can scroll down and see it live. If you hover over any of the icons, you'll see the location I blogged about and if you click, you'll see the post(s) I wrote about that location.

If you want to see a blog map for a real placeblogger, click on over to Gotham Gal and see her blog map which is on the top right of her blog. And you can click on the bottom of any blog map to get one for yourself.

As I am writing this, I am listening to music of my choice on streamed to me via MySpace. That's progress. I agree with Mike Arrington who wrote last night:

MySpace Music goes a long way towards music’s inevitable future where all recorded music will be free.  They, along with services like iMeem, are now giving on demand streaming music at a zero price point to users, which was inconceivable even a couple of years ago.

But there's a lot that they need to do to get me to listen to music on MySpace instead of dozens of other locations on the web where I can get a similar experience.

The first thing about MySpace Music that turns me off is the start page. It's not really about music, it's like an entertainment website or something.

Compare that to my favorite free streaming music website, the Hype Machine:

The music is front and center at the Hype Machine. At MySpace Music, you have to search or click or browse to get to the music, unless you want to listen to the Jonas Brother's playlist, which I do not want to do. It would be so much better to land me on the "my music" page once I have one.

Creating a playlist is more difficult than it needs to be. They should take a look at some of the other playlist services out there to see how it's generally done on the web. To add a song to a playlist at MySpace Music, you need to search, then browse, then select, then click add, then pick a playlist, then save. They could cut three or four steps out of that process with a better user interface (copied from the competition no less).

The player is ok. I don't mind the advertising on the page. The player pops out and you can minimize and listen, which is what most players let you do. Here's a screen shot of the player with my Arthur Russell playlist in it.

If they had more data on Arthur Russell (it's remarkable they have anything on him actually), the artist update window would include all new activity on that artist's myspace page.

I wish MySpace Music were more social and this service comes from a social net. There's not a single social interaction on the music player that I could find. I should be able to share, add to my profile, send to a friend, etc, etc. I am sure that's coming but it's shocking that it's not there day one.

And for the life of me I could not figure out how to link to my Arthur Russell/Jens Lekman and Kings Of Leon playlists. Although they are public for anyone to listen to, I have no idea how anyone would ever find them. I could not even figure out how to add them to my MySpace profile. I spent about ten minutes this morning creating them and I'd like to share them with all of you. I guess not.

The bottom line for me is having all the music someone would want to listen to on demand is important, and MySpace Music has that. But the user interface and the social interactions are equally important, possibly more important. And in that regard they have a long way to go. I'm headed back to the Hype Machine, Last.fm, Tumblr and the other places on the web that allow me to listen to streamed music the way I want to. But I'll be back from time to time to see how MySpace Music improves as I am sure it will.

The Disqus founders, Daniel and Jason, did the work for me and the next day this blog had a new comment system. It took a while for me to get used to it and it took even longer for the readers of this blog to get used to it. But in time I came to realize that using a different web service to host my comments made a lot of sense.

And in March of last year, our firm made an investment in Disqus, about 7 months after they launched at YC demo day and after they'd convinced thousands of bloggers to make the switch. As I explained in that post last March announcing our investment:

Disqus “abstracts” both the comments and the commenters from the blog hosting system. This allows the comments to go anywhere and everywhere where there is an audience for them. Abstracting comments from the blog hosting platform does for comments what RSS has done for content; it allows the comments to flow freely to whatever place it should most logically be consumed.

I should have said "third party comment systems abstract the comments and the commenters from the blog hosting system."  Because by the time we made the investment in disqus, there were a number of third party comment systems in the market; disqus, intense debate, js-kit, and sezwho are the ones I've heard most about. You can see the development of the third party comment system market on this compete graph.

I would venture to guess that between 50,000 and 100,000 blogs are using third party comment systems now and they are concentrated in the top end of the market. Clearly third party comment systems are creating value for bloggers and commenters alike.

Yesterday was a big day for the third party comment system market as WordPress, the top blogging service, announced they had acquired Intense Debate, the number two player in the market according to the compete graph above.

This is great news for everyone in the market. WordPress will invest in and improve Intense Debate, which will remain a third party service that can be used on all the popular blogging services (Six Apart, Blogger, etc). And WordPress will incorporate some of the most popular features of Intense Debate into the default WordPress comment service. The feature that wordpress bloggers who have not converted to a third party service will enjoy the most is the email reply to comments service. I asked Daniel and Jason to build that the first day I met them. It's a huge part of the value of the Disqus service and most of the competitors have added it as well. Being able to read and reply to comments via email is a "quantum leap" improvement in comment services and now this feature will be a standard in the market. That's huge.

There's been some discussion in the tech blogs that this acquisition is bad news for Disqus. I don't think so and neither does Disqus. They posted the following on their blog yesterday.

So what does this mean for us? The Disqus comment system is still the largest third-party comment system on WordPress, yet those blogs represent under 5% of all websites using Disqus. We pride ourselves on being an independent cross-platform service. Disqus will continue to innovate and provide the best discussion experience on blogs. Our company’s entire focus is on increasing the number and quality of your comments and that will never change.

I firmly believe that most innovation comes from companies that are fighting for their survival and new customers without a safety net. And that certainly describes Disqus. With many of the benefits of Intense Debate and Disqus coming to WordPress' proprietary comment system, it may be harder to attract bloggers on WordPress to a third party comment service and that's unfortunate for the entire market. But there are a lot of blogs out there that aren't on WordPress and new innovative blogging platforms like Tumblr, Posterous, and Soup.io keep coming to market.

So this is not a game over moment in my opinion. But it is very much a game changing moment. Third party comment services have been validated and some of the features they offer are going to become "must haves". And that's a very good thing for everyone.

The majority of bloggers we surveyed currently have advertising on their blogs. Among those with advertising, the mean annual investment in their blog is $1,800, but it’s paying off. The mean annual revenue is $6,000 with $75K+ in revenue for those with 100,000 or more unique visitors per month.

Erick Schonfeld of TechCrunch was a bit mystified at that $75k number:

The $6,000 a year I can believe. The $75,000 figure is harder to swallow, especially with only 100,000 visitors a month. But directionally there is no doubt that blogs are bringing in more cash.

I'm a bit mystified at that number too. I've had about 150k visitors per month for several years now. My audience is stable but flat. I get about 100k visitors per month on my website and another 50k via my feed. At best, this blog brings in about $30k per year, all of which I give to charity.

And I use two of the better monetization services out there for bloggers, Federated Media and FeedBurner. I used to use adsense but I took it off this blog (except for default).

I don't doubt that there are bloggers with similar sized audiences who do make $75k per year because they work it a lot harder than I do, but I also think that Technorati's survey results are wrong.

The reason I am writing about this is that there's a big difference between $30k per year which is very hard to make a living on no matter where you live and $75k per year which could replace a full-time job in many parts of the country.

Getting to 150k visitors per month and keeping them is not easy, but there are hundreds and possibly thousands of bloggers who do that these days. It would be wonderful if blogging could cover their nut and make them self sufficient.

I just don't think we are there yet. We should be and we will be. But not yet.

The partners said they planned to look at how Web services might transform sectors not yet touched in a big way, like education and the environment.

"We have only begun to investigate the impact of information technology on behaviors, habits, needs. We believe it can be profound", Mr. Burnham said.

Coincidentally, my partner Albert posted on that exact subject today on the Union Square Ventures blog, in a post called "Power To The People". It's a great follow-on to the New York Times piece.

A couple weeks ago, the reporter, Claire Cain Miller, sent us an email saying she'd recently joined the Times (from Forbes) and had the VC/startup beat and that she was in NYC for a while before heading to the west coast. She wanted to come by and meet us. We thought that was a good idea and invited her in.

By the time we had gotten around to finding a time, Claire had decided a "profile" of our firm would be interesting. That made me and Brad a bit nervous. The last thing we needed was a puff piece saying we were the best VC out there or something. I've had that story written before and when it turned out not to be true, I've had it rubbed in my face.

So we talked to Claire and emphasized that we wanted to talk about how we do our work rather than our place in the VC pecking order. She agreed. We invited her to attend our monday meeting (everything we said was off the record) and she spent an hour or more one on one with each of the three of us (me, Brad, and Albert). She apparently talked to Rob Kalin who gives me more credit for Etsy's tagline than I deserve. And I saw Claire at the web 2.0 conference where I delivered a keynote last week.

I like the result very much. I think she got what we are trying to do and it's clearly very complimentary. Since there doesn't appear to be a comment thread on the NYT article, please feel free to tell us what you thought here.

I ended that post with the following:

So feeds are a powerful way for users to navigate the web and get to the information they need. I expect them to get more powerful over time as more users adopt them...

But think about the Facebook generation. My kids are growing up with the news feed as their start page. Not Yahoo's portal approach and NOT google's search box approach. In time, its entirely possible that feeds will be more powerful than search.

So to all the people that say social nets can't be monetized, just look hard at the feed and think of the possibilities. There's money in them thar hills.

So it's time to start allowing marketers into these feeds on a highly targeted/highly relevant basis. FeedBurner did that with this blog's feed and many other feeds with ok results a few years back. But honestly, the ads were not targeted enough or relevant enough to work really well. Facebook has probably done the most of anyone to allow marketers entry into the feed. Here's a screenshot of facebook news feed this morning. You can see the sponsored feed entry for the vista business network in there at the bottom.

But I've got a ton of other feeds I read. I could see a local dry cleaner wanting to be in this radar neighborhood feed from outside.in

And I could see the McCain or Obama campaign wanting to solicit contributions in this twitter search feed

But I don't think the vista business network, the local plumber, or the McCain campaign wants to buy feed-based advertising from hundreds of web services. They want to be able to buy these campaigns the way they buy search, either via a large search agency, a web service like Clickable, or directly in a self serve interface like adwords.

So what we need to happen is the web services that render these feeds for us; google reader, netvibes, friendfeed, twitter, outside.in, facebook, etc, etc need to provide api accesss to these feeds to services that will serve marketers who want to get their messages targeted into them.

The targeting is the key and I am not entirely clear how this should work. In the case of search driven feeds, it should clearly be keyword based. In the case of geo feeds like outside.in, it should be zip code or neighborhood based. In the case of things like facebook or google reader, I think the targeting is more likely to be behavioral.

I hope (and pray) that this time around we don't end up with one dominant provider of ad inventory (like adwords has become in keyword based cpc text ads). I hope that the services that provide the feeds to the audience will be able to work with a host of services that provide the feed targeting and execution to the marketers. In effect, an open exchange based on apis and data sharing.

My firm Union Square Ventures thinks that this is one of the big emerging opportunities in online advertising and we are looking for a company to back in this area. If you are working on it, please email me and we'll have a conversation (click on the contact link on the upper right).