It’s not a given that a leader in search can successfully pivot into other areas like social media — just ask Google — but a new service launching in Russia today, from that country’s search leader Yandex, shows one route a company with a lot of smarts can take to make sure they remain a central player in the social game. Today sees the launch of SocialMart, a social shopping startup financed by Yandex (through its seed-funding program Yandex.Factory), and powered by Yandex (via Yandex.Market), but is not Yandex itself.

Both Yandex and SocialMart are banking on the fact that the rising popularity of ecommerce in Russia is inevitably going to cross over with the equally popular trend of social networking: up to now, those twains have not met, unlike in other markets, where services like Mertado (now part of Groupon), Sneakpeeq, and Fab have been running away with the “social shopping” banner, picking up users and funding in the process.

Yandex says that its Market is already the country’s largest comparison shopping service, containing 33 million offers from 9,500 online shops. Its monthly audience in March 2012 was over 14.2 million, according to market researchers TNS. This launch with SocialMart marks the first time that the Market API has been used by any company — and, Yandex claims, the country’s first social shopping service overall.

There are already some big players in both ecommerce and social media in Russia that may also try to get in on this game: Sites like private buying club KupiVIP and “Russia’s Amazon” Ozon have made big advances in the country, now the biggest Internet market in Europe at 53 million users, with an ecommerce market projected to be worth $30 billion by 2020. Meanwhile, the country’s leading social networking site Vkontakte has around 110 million users, 70 percent in Russia, and is looking to grow beyond those borders.

There does seem to be an appetite for social shopping. Research from Nielsen notes  that in a recent online survey, 86 percent of consumers said they trusted buying recommendations from friends and family — some 31 percent more than those that just relied on consumer reviews.

Under its original name of Social Market, SocialMart in June 2011 got a small round of seed funding (in the tens of thousands of dollars, Yandex tells me), as part of the Yandex.Factory investment program. One year on, SocialMart, underpinned by data from Yandex.Market, is now offering users a variety of social features to customize their shopping experience: for example, users ask for and give opinions on products, run polls and get reputation points for their influence.

SocialMart is currently available as an app on Facebook and the country’s number-one social networking site, Vkontakte, and for now it only focuses on the Russian market.

Investing and partnering in a project like this is not just about Yandex looking for social cred. Yandex will take affiliate commissions on web calls and website click-throughs generated through the service — a Yandex person declined to tell me exactly what the value of that commission will be.

Yandex says that its Factory seed-investment program has had applications from about 2,000 startups since launching last year.

Here we go again: Facebook is apparently trying for the third time to get its phone project off the ground — snatching up iOS design and engineering talent left and right Nick Bilton is hearing.

We’re hearing (and seeing) similar regarding iOS talent, but with one caveat: Word on the street is that few mobile design wizzes actually want to work at Facebook, but everyone has their price, and post-IPO Mark Zuckerberg is willing to pay that price, whatever it is.

Does Facebook need a phone? Whatever the answer to that question is, the more important item is that it THINKS it needs a phone, most likely because it’s still lacking a clear mobile strategy with regards to revenue.

The platform wars have created the following paradox; in order to compete with Facebook, Google attempts to build a social network, In order to compete with Google, Facebook attempts to build a phone — both diverging away from their core competency in their efforts. I’ve never tried to build a phone, so I’m not going to begrudge anyone their ambitions, but a majority of industry insiders I’ve spoken to today have been super skeptical about the viability of a Facebook phone, some even coming right out and saying, “It’ll be a miracle if this doesn’t suck.”

Making phone hardware is hard work, much harder than anything Facebook has ever attempted in the past. The company as we have seen thrives on an iterative culture of hackathons where projects are completed over night. A low margin/high volume business like phone hardware, as Bret Taylor’s mobile and platform team seems to be painfully and publicly learning, takes years to do correctly.

And there is a huge risk that they will fail again.

This kind of project, as others have speculated, requires the kind of execution Facebook isn’t known for, and the company will most likely have to work with a third-party in order to actually ship. Some have suggested that it buy a beleaguered hardware startup like RIM or a stalwart like HTC because the kind of long-term focus required here is just not endemic to Facebook company culture.

Basically, there are a million ways this project will fail, and just one way it will work: Facebook ostensibly could succeed by tapping into the opening in the mobile market where people want an alternative to poorly designed Android phones — targeting people who would buy something other than an iPhone if the price point was $150 less and the design were at least a little bit more ambitious than what is currently available on Android. Picture a Lumia that’s one big Facebook app if you need a visual.

It’ll be a miracle if Facebook manages to come up with a finished product that’s designed and priced for everyone, captures at least 15% of the smart phone market, and becomes a direct competitor to Google. But stranger things have happened.

A Facebook phone seems inevitable. Mobile advancements like Apple’s iMessage, iOS Twitter integration and whatever Google is doing with Google+ mean that its status as the predominant interpersonal communications platform is being threatened. But it won’t introduce a phone until it absolutely thinks it has to, so the question becomes “How soon until it (thinks it) has to?” And “Will it be ready?”

Wherever the Facebook Mobile team is tonight, they should take the Microsoft Kin’s failure as a cautionary tale: Stay away from poor device design and arcane social plugins and focus on your strengths, bringing mainstay apps like Instagram, Messenger, Camera, Events and Facebook Games front and center. And be a great phone first and foremost; the Facebook part should come second.

In the last of our series of posts featuring daily videos from Disrupt NY, Day 3′s highlight was the final round of the Startup Battlefield presentations and the passing of the cup to the new winner UberConference. Wednesday also featured an entertaining hardware panel, an inspirational tech talk from the White House, and new beer that’s caught the interest of tech investors.

Day 3 highlights are below, but you can view Day 1 and Day 2 videos here and here.

Check out these posts from Wednesday to dig deeper:

• ZocDoc CEO Cyrus Massoumi’s Advice To Startups: Stay Lean, Don’t Listen To The Nay-Sayers & Hire The Right People
• Qwiki Launches A Publishing Platform For ABC News And Others
• U.S. Launches Digital Roadmap To Open Up Government Data And Court Developers
• Retro Beer Company Churchkey, A New Tech Investor Darling, Will Expand To San Francisco Next Month
• New York Hardware Buffs Weigh In On China, Embracing Niches, And How To Start Making Things
• The 21st Century Gold Rush Announced At Disrupt: Raw Data
• US CTO Todd Park: Obama Has A Very High Geek Quotient, But It’s All A Means To An End
• Google’s David Lawee: One-Third Of Google’s Acquisitions Are Failures (And Slide Is “Definitely” One Of Them)
• Due To The Apple / Google Deathgrip, Former CEO John Lilly Says For Mozilla, “Mobile Is A Little Scarier”
• Sonar Rolls Out “Here-Now” Mobile Social Network, Adds Status, Messaging, Notifications
• Backstage At Disrupt NYC 2012 With MakerBot’s Bre Pettis
• The Facebook Effect Author David Kirkpatrick Talks Facebook’s Ad Network Potential, Future Acquisition Targets
• Sexism In The Venture Business? Sequoia’s Greg McAdoo Says VC Industry Is A “Meritocracy”
• KPCB’s Chi-Hua Chien: The Next Wave Of Tech Disruption Will Hit Commerce
• UberConference Wins Disrupt Cup

Editor’s note:Somrat Niyogi is the CEO of Miso.

There are advantages and disadvantages of being one of the earlier companies in a very early market. While new companies get to watch, observe, and create their own insights based on product features incumbents develop, we get to constantly introspect on “what has worked” based on real data, real feedback, and being out in the market talking to partners.

The second screen space is going to be a multi-billion dollar market. Just last week, Tim Cook announced that 67M iPads were sold in less than two years. It took more than 24 years to sell that many Macs.  With the growing trend of second screen activity (i.e. using tablets while you watch TV), there is bound to be major disruption in the TV industry.

The second screen affects the entire TV ecosystem

Networks and Advertisers

TV Networks are paying attention to this space because it’s their business that is being affected the most. They buy shows and sell TV advertising against those shows. In the next month’s upfronts, it’s estimated over $9.2B of advertising will be committed to TV.

Of course, TV has been and will continue to be a huge reach play for advertisers, especially given the 300M people who watch TV every day in the US. But with the growing trend of time-shifted TV viewing and two-screen behavior, advertisers need to think differently. People aren’t paying 100% attention to these TV shows in the way that they used to, so brands are starting to pay attention to make sure their ad dollars are more effective.

Now, networks are tasked with finding solutions and advertisers are starting to seek solutions themselves. For example, Chevy built their own app for Super Bowl. Coca-Cola built their own second screen advertising experience with the Polar Bears. Verizon was a major sponsor of The X-Factor app by Fox. Advertisers are even going directly to the production companies with the question: Mr. Production Studio Head, how are you using the second screen for your shows?

Production Companies

And that brings us to production companies, who have built shows in a specific way for decades. Showrunners, executive producers, and writers have only thought about what appears on the TV screen when they create their shows. For the most part, the big 55-inch TV screen will still be the primary medium, and the show structure will still be an episode with a beginning, a middle, and an end.

These shows are meant to capture the hearts and minds of millions of people so they will tune-in week after week, which means greater attention from audiences. But with the second screen becoming a major part of the TV viewing experience and the pressure from the networks and advertisers both to tap into this audience, it is no longer a one-screen world. It’s a two-screen world.

The way television shows have been created for decades will change because advertisers and networks will be collaborating with the creative executives to address the second screen. Can you imagine a world where every show that you watch has a second screen experience to go along with it?  It’s coming.

Operators

Despite all the “cord-cutting” talk that we hear about, there really isn’t a lot of cord-cutting happening anytime soon. Why? It’s the TV Circle of Life.

It works like this: networks collect big checks from the operators, production companies collect big checks from the networks, and operators collect big checks from people like you and me. There is a lot of talk about new direct to consumer experiences (such as HBO GO, where you can watch HBO shows anywhere) and it’s definitely interesting, and it is coming…but it’s going to take a very very long time. Why? Because operators write checks.

HBO gets paid from the operators, and it is too risky to go direct to consumers because HBO has a business to run. They can’t jeopardize the distribution of their content from operators like Comcast, DIRECTV, DISH, Time Warner Cable, etc.

Of course, operators are seeing the same opportunities as networks and production companies. They are also identifying new opportunities to add value to their subscription base, new opportunities for leverage in their network negotiations, and yes, new potential for better and more personalized advertising experiences.

TV Manufacturers

What about Samsung, Sony, LG – the TV manufacturers?  Several new innovative companies are focused on making TVs smarter by embedding automatic content recognition (ACR) in the TV so the TV is no longer a dumb device. What this means is that in the future, we can have Bluetooth-like experiences with our TV.

You come home and turn on your TV, and your phone knows the TV is on and knows what’s playing. This enables a new level of seamless communication and messaging. Profit margins of televisions are getting slimmer and slimmer, so TV manufacturers are trying to create new revenue streams, such as more targeted advertising on TV, content for their TVs, and yes, soon we’ll see TVs powering the second screen experience.

But the biggest question that companies in the TV space are asking is: where is all the value? How can we extract new revenue streams? How can I make sure our existing business continues to grow? After all, this is an industry with a total of $200B in revenue.

So what’s happening now? Everybody, and their mom, is jumping into the second screen space.

It’s too easy to develop a second screen app

Yup, you heard me. It’s too easy. Take three engineers from a top-tier school and after writing some Objective-C and doing some simplistic design…there you go, app is launched. Since we started Miso, there have been more than 100 second screen apps developed (and this doesn’t even include the one-off iPhone apps that have been created by the networks).

This notion of simplicity is not just a problem in the second screen market – it’s a problem in any market. We’ve obviously seen it in photo sharing (we know who has won that game) but in the second screen space the problem is magnified and you know who loses: YOU.

As a viewer, you’re constantly given mixed messages: Download this app, now download this other app, and now go back to the other app, and by the way, this second screen thing is only available for about 10% of the shows you watch.

The experience of downloading an app for every single TV show is poor. Don’t get me wrong, there is a time and place where this could work, such as huge tentpole shows like the Oscars or the Emmys. Even so, look at The Super Bowl. I think I could have downloaded at least 15 apps just to experience that one-time event.

Several second screen startups, including ourselves, are trying to aggregate experiences. But a single app to rule them all is tough. If there is any second screen company out there that thinks they have the answer, talk to me first. Email me at somrat@gomiso.com.

Developing a single second screen app that can deliver value for all types of TV programming is incredibly tough. It’s incredibly tough because every show is different and every genre has its own unique challenges. Dramas are different than reality shows, which are vastly different from news programs. And let’s not even talk about sports – that’s its own beast in itself.

Long story short, it’s hard to get the perfect second screen experience for everybody. Is it social, is it about content, is it loyalty?  Is it all of the above? Even if you were to do all of the above, how do you get people to remember your app exists when people watch TV? How do you sustain audience while someone watches TV?

There is a growing trend of start-ups that are building “white-label” platforms for the networks to build one-off iPhone apps for their TV shows. While I believe there is a place for the top 5-10% of all TV programming, this doesn’t scale for all TV shows. I love Modern Family, Big Bang Theory, and Dexter, but downloading an app for each of those shows seems too heavy. Even if there was an app for every show, users will not adopt all of these apps.

For new shows especially, it’s hard to push a new app for something new and unknown versus shows in their second or later season. Apps for every show would also be a poor choice for the overall larger market. Every app may have its own user authentication, it’s hard to bring your friends on board, and while content may be unique to that one app, as soon as you change the channel…you have to find a new app.

The question ultimately is: which experience is the most meaningful for me, the most personalized for me, and is available consistently every time I watch TV?

Users need aggregation and and utility

Aggregation keeps things simple

The reason why people sign-up for paid subscriptions versus buying TV shows one at a time on Amazon.com is because there is value in aggregation.  With paid subscriptions, you have one place to go to when you want to watch TV.  As my friend Jeremy would say, TV is about escape.  As a paid TV subscriber, I can browse aimlessly, find a show, change the channel, go back to the original channel and so on. While there might be challenges with aspects of the experience, ultimately, aggregation is valuable because it simplifies the way you discover and experience a TV show.

And simplicity is key. Aggregation is not just valuable on the first screen, but also the second screen. One place you tune-in to while you watch TV.

Apps with Utility Have a First Mover Advantage

While companies like ourselves are building interactive platforms, one thing is missing that sets us and any second screen app back: utility. No matter how we look at it – some things won’t change.  You need to turn on the TV, find what to watch, change the channel or access your DVR.

As aggregators of content, paid TV providers and TV manufacturers are in a unique position to add a lot of value to the consumer by building more meaningful utility into their second screen experiences. We’re already seeing this today from a few paid TV providers. There are second screen apps that have basic programming guides, remote control functions, the ability to set your DVR, and the ability to stream and watch shows right from the app itself.

Utility. It’s utility that is the first driver of the second screen – but what’s next? So you use the remote control on your iPad, what happens after that?

This is space rife with opportunity. In the same way I can watch Modern Family on any TV via any operator, can I get a second screen experience for any show via one device?

Imagine that no matter what you watch, you can get complementary experience. Best of all, even if you switch channels, you are still using a single app. Sounds pretty ideal right?

Here is where we are…there is a war for control

Everyone, and I mean everyone, is competing for attention on the second screen. The entire ecosystem is striving to aggregate audience for the second screen to sell new, personalized, and meaningful types of ad units.

Networks are the most aggressive in trying to control the second screen space because they have access to “exclusive” content, talent, and the scripts themselves while startups are trying to crack the code via social and community-driven efforts. Networks are in a tough position because they are ultimately serving the TV viewer, but at the same time they are trying to control their viewership audience. They want everyone to have a great experience for Modern Family no matter where they flock, but they ideally want those viewers to flock to ABC. This is why they develop their own apps and partner with social TV partners.

Operators haven’t made any moves to control the second screen experience in their apps, but over the next 18 months we will see some action from several paid TV providers. Those that don’t implement a second screen solution for their subscribers will be forced to by the ecosystem that feeds it – networks, advertisers, production companies – and miss out on valuable revenue streams.

As for TV manufacturers, if it’s true that broadcasters and programmers (i.e. NBC, ABC) want to go do direct-to-consumer via Smart TVs, why couldn’t TV manufacturers partake in the advertising revenue upside?

So, the question in the long run is: who is going to own the second screen?

In short: it’s unclear. With startups and networks creating their own apps, operators entering the game soon, and TV manufacturers developing new hardware, it’ll be interesting to see who pulls ahead.

The future we need: sharing, learning, and standardization.

If utility is the first key to the second screen experience, then operators and TV manufacturers are in a good place to win. But only if they can deliver more value than the utility itself. Operators, given their competitive nature, may want to pick their own solution. They can develop in-house by taking what is available out there (e.g. hashtagged tweets OR cast photos from IMDb). But there is much more to the second screen than the standard fare.

The networks have the ability to provide richer information such as behind-the-scenes content, commentary, or access to talent. They can even go one-step further for episodic content where the second screen is used to deepen the storyline, and it can be a new format for storytelling. If deeper content delivers the most value to the second screen interactive experience, how will the networks syndicate all this content to the companies that want access to it – namely operators, TV manufacturers, or even startups that are building second screen apps?

There needs to be standardization. There needs to be pipes that power the second screen economy.

Operators can obviously create tools for networks to get the “deeper content”, but if every operator develops their own tools, will the networks use every single one? If you were an executive at NBC or Fox and either DIRECTV, Comcast, Time Warner Cable, or DISH came to you with their own tools, would you use them?  Maybe…if they write a big enough check. But this won’t scale.

It’s possible that there will be a breakthrough startup that will become the “Facebook of the Second Screen” where all companies standardize on that single solution. But this will take time, given the way the TV ecosystem works.

Ultimately, the TV ecosystem needs to come together. People are on Facebook and Twitter and playing Angry Birds while watching TV… and this is detrimental for the entire TV business! TV ad dollars will be migrated unless we, as part of the TV industry, address the larger problem: attention. Attention is being diverted away from the production companies’ shows and networks’ ads, away from the TV, to something else – the second screen.

To share insights and learnings is key to the longer term success of the second screen. As an industry we need to put more emphasis on user research – understanding “what do people want as they watch TV?” What kind of experiences scale for different types of TV shows?

The war to capture people’s attention on the second screen is more fragmented than ever, and unless we come together the fragmentation will continue. There seems to be a need for standards on how content gets authored, published and syndicated on the second screen. Otherwise, the casualty in all this is the average TV viewer.

We need to, most importantly, figure out what YOU, the viewer, wants. To succeed, we need to all come together, share our learnings, try new things…or we all lose.

Editor’s note: This guest post is written by Erica Kochi, the co-lead of Tech Innovation at UNICEF. Her team started UNICEF’s open source RapidSMS platform which has been adopted in developing countries worldwide. She co-teaches a class ”Design for Unicef” in NYU’s ITP Program, and has lectured at Harvard, Yale, and Columbia University on leveraging technology and design to improve international development. All these views are her own.

In less than three decades, the mobile phone has gone from being a status symbol to being a ubiquitous technology that facilitates almost every interaction in our daily lives. One month after the world’s population topped 7 billion in October 2011, the GSM Association announced that mobile SIM cards had reached 6 billion. A 2009 study in India illustrated that every 10 percent increase in mobile penetration leads to a 1.2 percent increase in GDP.

Yet patterns of mobile phone use in developing countries are vastly different from what you see on the streets of New York, San Francisco, and Berlin. This is a market underserved by technologists and startups. This is where the majority of future growth lies, and Silicon Valley has yet to realize the huge economic opportunities for network operators, handset developers, and mobile startups. Where are these opportunities?

Developing Countries are Powering the Growth

China and India account for the majority of new mobile connections, and in developing countries mobile saturation hasn’t yet hit and is still experiencing double-digit growth.

This rapid growth most recently driven from the developing world is surprising when you consider that for the average mobile user, procuring the device costs a few months’ salary. Sustaining this connection generates tremendous value and meets many user needs as they continue to invest often over 10 percent of their monthly income in staying connected.

The explosive growth of mobile in developing countries over the past five years is what prompted us at UNICEF to leverage mobile to strengthen our programmes in 190 countries and territories. Many of UNICEF’s programmes now use mobiles for a variety of purposes. One program ensures that infants are tested for HIV and put on treatment if necessary. Another gathers direct feedback from communities on everything from water sanitation to access to essential medication.

Creativity Despite No Data

For those in Silicon Valley, it’s hard to imagine that 70 percent of all handset shipments are feature phones. Most of these phones go to developing countries. The vast majority of the world, especially in low income and rural areas, is still living the mobile revolution through the constraints of voice, SMS and asynchronous connection.

These connectivity constraints fuel tremendous creativity. For many communities, simple voice and text connections have brought about revolutions in access to financial, health, agricultural and education services and opportunities for employment.  For example, many farmers in rural areas in Africa and Asia use SMS services to to find out the daily prices of prices of agricultural commodities. This information allows them to improve their bargaining position when taking their goods to market, and also allows them to switch between end markets.

Another successful example in this space is UNICEF’s RapidSMS initiative: a scalable SMS-based open-source framework for dynamic data collection, logistics coordination and communication. UNICEF currently supports governments across six countries in Sub-Saharan Africa and over 200,000 RapidSMS users in some of the most underserved and rural communities. Frontline health workers who each serve hundreds of women and children make up many of these users. Success in this space is quantified by time, money and lives saved. It is widely used by governments and the international development community, and has also taken off in business communities. For example, in Ghana, a local entrepreneur uses RapidSMS to monitor the sales of cook stoves around the country.

Airtime is Cash

In many countries where the majority of people are unbanked, airtime has become another form of currency. Imagine you need to get a small amount of money to your sister who lives in a village that’s ten hours drive away. The easiest way for you to do that is to buy some airtime, but instead of topping up your own prepaid mobile service you top up hers. For a small fee, she can now go and cash out this airtime with an agent that sells airtime.

M-PESA, a project out of Kenya that was initially set up to distribute micro-loans to and collect payments from the poorest rural communities of Kenya, has now become a large-scale multi-country mobile cash transfer system run by Safaricom in East Africa and Roshan in Afghanistan.

For many governments mobile money is a conundrum. They like that their citizens can access financial services that could significantly improve their lives. On the flip side, it can mean that mobile network operators and other mobile money service providers now operate and benefit from the revenue that normally would go to the central bank?

Challenges remain. The price points of using these services are still out of reach for the poorest communities. There are often too few agents to cash out airtime. People often don’t understand or trust non-traditional forms of financial services.

Yet this creates a huge business opportunity. Even with all the network operators in this space, there are possibilities for a multitude of services that leverage mobile payments. To be able to successfully develop in this space, we need to better examine how people interact with money across the world and build applications that are flexible enough to be customized and be relevant to different cultural patterns.

In San Francisco you might pay your cab driver through his Square reader, but in Nairobi you’ll send him some airtime.

A Phone for the Developing World

iPhones don’t stand a chance due to their inflexibility and high price points. As it stands, the operating system for the developing world smartphone will be Android. However, even the flagship Samsung Galaxy Nexus isn’t the ideal phone. The ideal smartphone will be:

1. Cheap. Last year, Huawei in partnership with Safaricom unveiled an $80 Android phone in Kenya where 40 percent of the population lives on less than $2 a day. At this year’s Mobile World Congress the CEO’s of Bharti Airtel, Telefonica Latin America and VimpelCom came out together and stated that $50 is the magic price point for smartphones to become more widely affordable in emerging economies.

2. Rugged and simple. The Nokia 1100 series is the most popular phone in the world. It is dust proof, water resistant, rugged, has a simple menu system, few separate parts and has a flashlight. Every town across the developing world has a local repair shop with spare parts for simple Nokias. When I travel to the developing world, I rely on my trusty Nokia 1100, not my iPhone. Smartphones are delicate creatures that don’t stand up to the daily wear and tear of people’s lives.

3. Battery life of a week. Recharging your phone every night is not an option if you live in a rural village without electricity. At one of UNICEF’s projects in rural Senegal, I encountered a village entrepreneur who started a business where he would collect everyone’s cell phones and for a small fee, bike to an electrified village a few hours away, then bike back with phones at full charge.

People in these countries spend a lot of money to keep their phones charged. Developing a phone whose battery lasts for a week would unlock smartphones to a large market segment.

Apps Optimized for Data Use

Data is as expensive in developing as in developed countries. Data is unlikely to fall in price as quickly as smartphones, so even when handsets get cheap enough for an average user in a developing country, they still won’t be able to afford run many of the apps that make up the smartphone experience. There will be demand for apps – be it banking, weather, chat, social, and market information – but for them to take off it’s crucial that they use as little bandwidth as possible. One feature to emulate is Android’s Data Usage screen which allows you to set limits for data usage and makes it clear how much data you’ve used.

Call to Arms

The continued double digit growth of mobile in developing countries represents a tremendous business opportunity. While companies in Silicon Valley fight over trying to develop the top app in a certain category, huge untapped potential still remains in the developing world. Working in this space will require businesses to be able to think through the design of their applications from a different viewpoint. Their end users will have different motivations, experiences, needs and constraints. While handset manufacturers will need to build a phone whose battery lasts, app developers will need to build appropriate apps that use little bandwidth.

Photos under creative commons sharealike license by Merrick Schaefer, UNICEF; Jan Chipchase, frog; and Terra Weikel, UNICEF.

Continuing our trio of daily video highlights from Disrupt NY, Day 2 of the conference featured talks with Andreesen Horowitz’s Jeff Jordan, Sequoia’s Roelof Botha, and SV Angel’s Ron Conway. We also asked our Aol CEO Tim Armstrong some tough questions. Tuesday’s Battlefield competition included a startup trying to disrupt the dry cleaning business, a new way for musicians to collaborate and a neat 3D Modeling program in your browser.

Day 2 highlights can be viewed below. You can check out Day 1 highlights here and a Day 3 highlight post is coming soon.

More information about Tuesday’s highlights can be found in this articles:

• Andreessen Horowitz’s Jeff Jordan: Are Companies Building On Top Of Facebook Really Growing Or Just “Spam?”
• Betaworks’ John Borthwick: VC Scene in NYC is “Pretty Busy” Right Now, But Not “Overheated” Like San Francisco
• With A 50% Increase In Applications, The Next Y Combinator Class Will Be 80 Strong
• Sequoia’s Roelof Botha: “Entrepreneurs Don’t Appreciate When They’re Onto A Good Thing”
• reCaptcha Founder’s Language Learning Site Duolingo To Open To The Public On June 19
• Business Insider’s Henry Blodget Defends Linkbait, Slideshows, And Aggregation
• SpotlessCity Just Brought The Dry Cleaning Industry Online
• Mirth Launches To Offer Local Deals Without The Dreaded Groupon Effect
• Forget Those Scraps Of Paper, SnipSnap Lets You Save And Share Coupons From Your iPhone
• Centzy Puts Prices Online To Power Local Business Search By True Quality, Not Reviews
• With Mobile App Cardify, The Founder Of Ad.ly Takes On His Next Challenge: Improving Customer Loyalty
• Tim Armstrong — I Love TechCrunch And It Made AOL Cool Again
• Vinylmint Is A Jammin’ New Way For Pro Musicians To Collaborate
• VisibleGains Launches Postwire At Disrupt, Aims To Be The Flipboard For Client Communication
• CAD Users Rejoice: Sunglass Brings Slick 3D Modeling To The Browser
• Talkdesk Puts Your Company Call Center In The Cloud
• Apptegic Uses Big Data Analysis To Help Companies Retain And Upsell Their Customers
• Startup Alley Day 2 — It’s A Jungle Out There, But The Startups Keep Coming
• SocialStock Wants To Turn Social Networking Into Real-World Rewards
• Ron Conway Will “Never” Run For Mayor Of San Francisco
• About Last Night Wants To Improve Your Nightlife By Making It Even More Social

Did you miss some of our NY Disrupt conference this week? Or want to watch it again? TechCrunch Disrupt and our Hackathon provided more than 30 hours of demos, interviews, panel discussions, and Battlefield competition. Sure, you can spend the holiday weekend watching all of it. But, we’ve also put together daily video highlights that we will be publishing in a trio of posts today.

The player below shows some of the favorite moments from Monday, Day 1 of the conference, including some surprises from VC Fred Wilson, Fab.com and Tumblr. Monday’s Battlefield presentations included the first public preview from the Disrupt Cup winner and runner-up.

For more context, here are some of the posts from Monday:

• Google Hasn’t Been Interested In Buying Twitter Since They Committed Themselves To Google+” -Fred Wilson
• Fab.com Has 4.5M Members, CEO Wants To Work With Pinterest (But Doesn’t Actually Use It)
• Fab Seeking To Raise $100M At A Super Fab Valuation
• David Karp: Tumblr’s Revenue Model Is All About Telling Stories
• CrunchFund Took A Stake In Tumblr, Buying From Existing Investors
• TechStars’ Tisch: We Will See 2-3 NYC Startups Exit This Year Out Of 20-30 Strong Possibles
• Brad Garlinghouse’s Suggestion For Saving Yahoo? Buy Flipboard And Gravity
• Andrew Keen Weighs In On Privacy: “The Internet Hasn’t Learned How To Forget”
• SpokenLayer Wants To Add Voice To The Web
• Cyfeon Solutions Launches Answer Factory, A Database Tool That Aims To Collate The Web
• A Stroll Down Startup Alley: Bras, Coffee, And Lots Of Photo/Video Sharing
• After Walking Away From Acquisition Talks With Facebook, Ark Opens Its People Search Engine
• Koemei Is Out To Transcribe All Video And Make It Searchable
• Incident Launches The gTar at Disrupt, An iPhone-Powered Electronic Teaching Guitar
• UberConference Aims To Fix Crappy Conference Calls
• K3 Server Is Making Enterprise Application Integrations More Efficient, Reduces Work By Half
• CallApp Uses Social Data To Build A Smarter Smartphone Contact Book
• Open Garden Lets You Crowdsource Your Mobile Connectivity
• KurbKarma: A Social Network, And App, To Find Parking Where And When You Need It
• Punch! Launches A Platform For Building Interactive iPad Apps, Sans Developers
• StyleSaint Wants To Turn Virtual Fashion Tear Sheets Into Custom Apparel
• Stevie Turns Your Social Feeds Into TV Shows
• Tagbrand Gives Fashionistas An App To Check-In Their Brands
• Babelverse Is Out To Democratize Translation

Hackathon

All our Hackathon videos from Sunday can be found here.

Disrupt Music

Can’t get that Disrupt music out of your head? You can listen to and download the tracks below:

Our music was provided by New Zealand-based Smith and Keats.

Disrupt Photos

You can find hundreds of photos from the event at the TechCrunch Flickr Photostream.

Editor’s Note: TechCrunch columnist Semil Shah currently works at Votizen and is based in Palo Alto. You can follow him on Twitter @semil

If you feel there’s been too much hype about “big data” recently, check this out: the Chief Technology Officer of the United States of America — Todd Park — wants developers and entrepreneurs to build new products, services, and companies using free data provided by the federal government. In this brief discussion backstage at Disrupt, Park emphasizes that he, his team, and the President of the United States have all fully endorsed the idea that key datasets be made available to the public, and there have even been examples of entrepreneurs forming companies around free datasets, one that’s even hired over 70 employees. (For entrepreneurs interested in health data specifically, Park’s group is helping organize an entire symposium on the topic in early June in Washington DC; click here for more details.) For developers interested in big data sets, this brief discussion with Park would be quite relevant.

Some significant changes afoot at social and mobile games company Digital Chocolate: founder Trip Hawkins has stepped down as the CEO of the company. And we have also heard a report — yet to be confirmed directly by the company — that president Marc Metis has stepped up as interim CEO; and that Digital Chocolate has laid off up to 180 people across offices in India, San Mateo, Russia and elsewhere.

Hawkins’ news was made public by Trip himself in his company blog, where he notes that he is “transitioning into a consulting and advisory relationship with Digital Chocolate.” Without giving away much about the state of affairs at the company, the move, he writes, is being made as the company  is “narrowing its focus.”

“It made sense to get more streamlined,” he explains. Hawkins founded the company eight years ago.

By coincidence, the news comes at the same time that Hawkins is marking the 30th anniversary of Electronic Arts, another gaming company that he founded: he incorporated that company on May 28, 1982. Before that he worked at Apple, which he joined in 1978, when it only had 25 employees.

Trip’s LinkedIn profile now notes his employment as “computer games professional” with CEO, Digital Chocolate, as a past position.

Meanwhile, Marc Metis, who we have heard is now the interim CEO, still lists president of the company as his most current job on LinkedIn. He has been with Digital Chocolate since 2009 and has held other roles such as head of marketing.

Layoffs. Again, we have yet to get confirmation from Digital Chocolate on the 180-layoff figure — we have reached out and will update with any detail we receive — but our tipster says that the cuts are as follows: half the staffs of both the Bangalore and San Mateo offices; the closure of Digital Chocolate’s Mexicali office, an office in Armenia and Sandlot offices in Bothell, Washington, and St. Petersburg. (Digital Chocolate bought Sandlot in August 2011.)

Digital Chocolate has had nearly $60 million in funding to date, with backers including Kleiner, Perkins, Caufield and Byers; Sequoia; and Intel, among others. And in its eight years, it’s had a number of hits both in social gaming (eg Facebook) and in mobile, on iOS and other platforms.

But lately traffic has fallen. In social games, Zynga, ranked number-one, has 247 million MAUs, according to AppData. In comparison, Digital Chocolate ranks significantly lower, at number-61, with 6.3 million MAUs. Galaxy Life is Digital Chocolate’s most popular social game at the moment, with 1.7 million MAUs and 310k DAUs. Traffic for its games overall is falling, down 470,000 in the last seven days.

Update. Still no word direct from Digital Chocolate, but a bittersweet tweet from the (former?) manager of the company’s Mexico office, Francisco Casanova, who also claims “the doors have closed” for Digital Chocolate Mexico:

Digital Chocolate México cierra sus puertas. #Gameover #Continue? #PressStartToPlay

—
Francisco Casanova (@pakoconk) May 24, 2012

Editor’s Note: This guest post is written by Kwindla Hultman Kramer, who is the CEO of Oblong Industries — the company known for developing the gestural interfaces in the film Minority Report. The company’s current customers and partners include Boeing, SAP, GE, and others. Follow him on Twitter @kwindla.

When I was a boy of 14, my father was so ignorant I could hardly stand to have the old man around. But when I got to be 21, I was astonished at how much the old man had learned in seven years

Mark Twain, ”Old Times on the Mississippi”
Atlantic Monthly, 1874

When I was a graduate student at the MIT Media Lab fifteen years ago, my research group went on a retreat every year with Famous Computer Scientists from Xerox PARC. I greatly admired these people and their work. But I was young and in a hurry to get where I thought I was going. And it sometimes seemed that every time us young folks talked about our research, or showed a demo, someone would say something like, “oh, that’s very nice, when we did that at PARC ….”

Fast forward to the present. For the last few years, every time I see a new piece of small, open, hackable, networked hardware, or a new reputation engine, or a generative art piece, or a product built around location tracking plus real-time information push, or — well, you get the idea — I have to bite my tongue and think of the PARC folks to keep myself from saying, “oh, that’s very nice, when we did that at the Media Lab ….”

All of which just proves that the wheel of history revolves. New work is always new, by definition, even if it’s not entirely new (which nothing can ever be).

That’s a long introduction to a short essay on programming tools. In particular, I’ve been intrigued by the online discussion recently around some very nice work on interactive development environments by Bret Victor and a related Kickstarter project — and now YCombinator company — called Light Table, by Chris Granger.

Bret’s stuff is great. And Light Table is great. If you’re anything like me, you want to use the tools these two people are building. Go contribute to the Kickstarter project right now.

The funny thing is, though, that we had pretty interesting versions of these tools twenty years ago. By the late 1980s, professional LISP and Smalltalk environments were more than a little like Light Table.

When I discovered Visual Age Smalltalk in 1996 I was blown away. Visual Age (and other Smalltalk tools) were built around snippets of code representing objects and methods. There were very few file operations. You could run your code and make live changes to the source, which were reflected in the running process.

There was no distinction between the development environment and the runtime. You could save out your working “image”. There were good tools for managing forks, versioning and merge — not just of source code, but of the full system image.

If you were writing a GUI application in Visual Age Smalltalk, all the elements on screen were interactively inspectable from inside the debugger. And all the system internals, including the virtual environment, the compiler and the debugger, were introspectible and hackable just by writing a little more Smalltalk code.

When I raved about this to my friends, some of whom had old SparcStations sitting in their coat closets running their home networks, they said, “oh yeah, that’s nice, when we built all that stuff into our LISP machines ten years ago at Symbolics ….”

So one question we might ask is why programming tools like this haven’t taken over, if we’ve had them for a long time and they are, indeed, generally better in objective or widely agreed upon ways?

I can think of a few possible reasons.

First, the requirement of a dynamic runtime to build these dynamic environments on top of is actually quite a big deal. Bret’s work is in JavaScript. Light Table targets JavaScript, Clojure, and Python.

These days, we have two classes of languages.

We use heavily engineered languages that are very, very static in their aesthetic and implementation choices. Truly interactive development environments are difficult to build for these C-family languages. And C-family languages have remained dominant until very recently, because they have both real advantages and “worse is better,” inertial advantages.

On the other hand, we have dynamic languages that, relatively speaking, are really just prototypes. Javascript and Ruby and Python are useful and interesting. But much of the work on the dynamic languages side of the fence seems to go into tweaking syntax, reinventing the wheel at the VM level, and community-based library development. All of which I’m actually a big fan of, but goodness, it does sort of make me pine for that 200-person (I’m guessing) crackerjack team working on VisualAge for ten years at IBM.

Maybe Google — in some ways the IBM of 2012 — will get us there again with JavaScript and V8. Then we’ll have a dynamic language stack that is fully engineered in the same sense that IBM Smalltalk and Symbolics LISP were.

Second, I think that the web-enabled explosion of programming and programmers has set back the development of software tooling just as it (temporarily) set back user interface design.

Again, I hasten to make clear that I think what the web hath wrought is wonderful, on balance. But there’s no free lunch, and for ten years most of the tech world turned its attention to building out a new global platform that could not, in its early days, support very much in the way of new user interfaces or sophisticated runtime architecture work.

The web has grown up, though. The capabilities of modern JavaScript frameworks attest to that, as does the low-level work on implementations like V8.

Third, screen real estate matters. The traditional “everything is a file” approach is wonderfully portable. You can build an environment for working with files even for a very small display. Heck, you can work with files if all you have is a line-mode terminal. But flexibly arranged code snippets and fully interactive graphical debuggers require a lot of pixels.

And there aren’t always enough pixels. I’m amazed at how often I visit Big Companies and see full-time programmers working at their desks on single, 15″ monitors. That’s an enormous missed opportunity to enable productivity.

Pixels have gotten really cheap, though, and come in more and more form factors. We actually could build, today, a development environment designed to make use of a laptop screen and a tablet screen, simultaneously. A MacBook Air and an iPad, used together, would give me more pixels than I had on my dual-monitor desktop back when I fired up Visual Age Smalltalk every day.

Finally, if we really want to get away from files and static representations of programs, maybe we want to get away from text altogether. There’s been lots of good academic work on graphical — as in, really, graphical — programming environments over the years. But that’s another entire conversation.

Here are a couple of good pages on LISP Machines, which really were the future before the future was quite possible to build. And, as far as I know, the closest anyone has ever gotten to creating a full dynamic environment for a C-language platform is Alexia Massalin’s Synthesis operating system. If you are a programmer of any kind, I’ll wager that Alexia’s dissertation will blow your mind.

So, let’s make the old tools new again. I want to use Light Table, and whatever Light Table catalyzes that we can’t yet imagine. But I do promise that when that new thing comes along, I’ll tell you we built an early version of it at the Media Lab at the tail end of the last century.

Editor’s note: Bill Ready is CEO of Braintree, an online and mobile payments provider.

Every day there is a new headline about mobile payments focused on using a mobile phone to pay at retail locations. Paypal, Google and other industry giants are racing to provide new in-store mobile payment solutions. Large merchants, such as Wal-mart and Target have contemplated their own mobile payment solutions.  The debate about whether NFC will be the preferred technology to enable mobile payments rages. However, despite all this press and efforts by industry giants, there is stunningly little traction to use a mobile device to pay at retail locations. This is largely because the solutions offered by industry giants thus far don’t solve a meaningful problem in the daily lives of consumers or merchants. Few things in life are easier for consumers than swiping a credit card at checkout and in-store payment systems are as easy and ubiquitous as dial-tone for merchants.

However, There is a massive mobile commerce opportunity that is a severe pain point for both consumers and merchants, but large industry players are failing to meaningfully address it. That opportunity is e-commerce on the mobile device or m-commerce. M-commerce is ramping up, proving that consumers not only like to shop via their mobile device, but also will purchase. However, the numbers also show that there’s significant room for improvement in the mobile device purchasing experience – mainly through optimizing the shopping and payment processes for consumers.

Online holiday shopping in 2011 showed substantial growth in mobile shopping activity, with both traffic and sales on mobile devices more than doubling their volume over the same period a year earlier, according to research from IBM. During the holiday shopping season, 14.6 percent of all online sessions on a retailer’s site were initiated from a mobile device (up from 5.6 percent the year before), and sales from mobile devices reached 11 percent versus 5.5 percent in December 2010. Clearly, more consumers are becoming comfortable shopping and buying from retailer web sites using their smartphones.

But this volume of mobile shopping is far below the potential. Total time online via mobile device already exceeds the amount of time spent online via traditional desktops and laptops according to data from Flurry.  That’s largely because the web browsing capabilities of mobile devices and mobile apps have improved dramatically over the last few years. If consumers spend more time browsing the web on their mobile devices than traditional devices, they’ll ultimately end up shopping and purchasing more on those mobile devices as well. The mobile buying experience just needs to catch-up to where users are already. The opportunity now exists in making the mobile shopping experience as easy as possible for the consumer. This would increase sales and decrease the number of times a consumer gets frustrated with purchasing experiences that haven’t been optimized for mobile and likely abandons the purchase.

Here are four immediately actionable items that e-commerce companies and payment providers can take today to improve mobile purchasing and capture the m-commerce opportunity:

1. One-click checkout: As exemplified by Amazon, nothing beats the one-click checkout experience for online shoppers. The more steps we put between the consumer and the final transaction, the more we risk them dropping off (which, many times means the consumer never returns). This opportunity is amplified on the mobile device where it is significantly more cumbersome to enter your credit card data. E-commerce providers should be using a card vault solution that enables one-click checkout for both online and mobile transactions.

2. Mobile security: Security is an issue whether you’re shopping online using a laptop computer or a mobile phone. However, consumers are more likely to lose a mobile phone than a laptop or desktop and they are less likely to have password protected the phone than the laptop or desktop. Consumers need to know that if they lose their phone or it gets stolen, their credit card information is secure. Taking steps like encrypting credit card data directly on the device as soon as the user enters it or implementing a one-click checkout so that the user never has to enter credit card data on the device help to ensure that if a mobile device is lost or stolen, a fraudster can’t gain access to their credit card data.

3. Speed of transaction: Speed really does matter, particularly in the limited bandwidth environment of the mobile device. If a retailer’s process is not optimized for mobile, they are likely losing sales to a slow and painful experience consumers just don’t have patience for today. Through benchmarking, we have found that just the payment process alone with many payment providers requires multiple round-trips between the mobile device and the payment provider’s servers, some as many as sixteen, just to complete the payment transaction. Look for a payment process that makes a single, efficient round-trip to the server to complete the purchase. Otherwise, the consumer will likely be waiting a very long time for the transaction to complete or may even abandon after clicking purchase.

4. Websites that are fully optimized for the mobile shopping experience: If a consumer has to pan around, pinch and expand things in order to make a purchase, they’re likely not going to do it. Without a site and shopping experience that’s fully optimized for mobile, retailers risk losing the consumers who are shopping on their phones. When a user encounters a site that isn’t mobile optimized, they are increasingly likely to go to other sites that have optimized for mobile since there are a rapidly growing number of sites that are catering to the mobile experience. A good mobile shopping experience is one that is fully optimized for the smaller screen, takes advantage of touch screen technology and also offers a fast checkout in as few steps as possible.

But won’t mobile shopping cannibalize online shopping?

I’ve heard merchants say that optimizing mobile hasn’t been a priority for them in the past because they assume the consumer would just switch devices and fire up the laptop or desktop computer to complete their purchase. While this seems like a perfectly logical assumption, the evidence out there now doesn’t back it up. Mobile browsing didn’t surpass online browsing by cannibalizing online browsing.  Traditional online browsing is still growing, but mobile browsing eclipsed traditional browsing through the addition of significant additional browsing time by the user in spare moments away from their computers (we’ve all seen people walking down the street or in the store looking at their mobile device). Therefore, mobile presents added opportunity to make purchases. If you compared this to offline shopping, the mobile device presents an opportunity equivalent to having your storefront on every street corner that a user walks by, given the always-on, always-available nature of mobile browsing.

Chasing the real opportunity

So far, the mobile payments debate has revolved around solving a problem that doesn’t really exist. There are few things in the life of a consumer easier than swiping a card at checkout. There are a number of  reasons we’re not seeing major pickup in “use your phone as a credit card” technology, but one of the most significant is that we’re forcing change where it’s not yet needed.

Mobile shopping or m-commerce on the other hand is real and growing rapidly. In a 2011 survey by Pew Research, 25 percent of smartphone users in the U.S. said they do most of their online browsing on their phone. The real opportunity is in converting those browsers – who are growing by the day – into purchasers.

Editor’s Note: Nir Eyal is the founder of two acquired startups and an advisor to several Bay Area companies and incubators. Nir blogs about the intersection of psychology, technology, and business at NirAndFar.com. Follow him on Twitter @nireyal.

If you’re like me, you’ve had enough of the Facebook IPO story. For tech entrepreneurs struggling to build stuff, the cacophony of recent press is just more noise. That’s why when my friend Andrew Chen posted an insightful analysis of Facebook user data, I was happy to get back to learning from what the company did right instead of debating what its bankers did wrong.

Chen calculated Facebook’s historical ratio of daily active users (DAU) to monthly active users (MAU) and the stats are startling. Since March 2009, when the earliest data is available, approximately 50% of Facebook users logged in daily.

As other technology companies struggle to maintain DAU to MAU ratios of 5% or less, Facebook’s numbers appear stratospherically high in comparison. But what is equally surprising is the consistency of that ratio over time. Despite periodic user revolts in reaction to changes in the site, the ratio remained strangely stable. In fact, the number has risen over the past year and is now hovering at 58% as of March of this year.

It’s as if Zuckerberg has steered the company by this golden ratio. Which begs the question: is there some wisdom here regarding this ratio as a predictor of Internet success? Obviously, there are no guarantees and starting cutting edge tech companies will always be risky business. But, assuming you have a solid business model, there are good reasons to believe that if there is one metric to focus on while building your business, it’s the percentage of users who come back daily as expressed by this ratio.

As I’ve written previously, I believe a mastery of the mechanics of habit design is increasingly deciding startup winners and losers. Not only because habits cement user behavior in an increasingly cluttered digital world, but because a high-engagement product is also a high-growth product. The two are one and the same. A high DAU to MAU ratio is a great indicator of the strength of user habits and, ceteris paribus, I’d bet on a business with the higher ratio over a competitor every time. Here’s why:

More is More

When it comes to web and mobile startups, high DAU to MAU is more important than the size or growth rate of an entrenched competitor. Case in point, Facebook defeated much earlier competitors like MySpace and Friendster, both of which had healthy growth rates and millions of users by the time Facebook got started.

This is because of what I call the “more is more principle.” High user engagement has an exponential effect on user growth. As David Skok points out on his blog, “The most important factor to increasing growth is not the Viral Coefficient, but the Viral Cycle Time.” Viral Cycle time is the amount of time it takes to complete a viral loop and it has massive impact on user growth. “For example, after 20 days with a cycle time of two days, you will have 20,470 users,” Skok writes. “But if you halved that cycle time to one day, you would have over 20 million users! It is logical that it would be better to have more cycles occur, but it is less obvious just how much better.”

Having a greater proportion of DAUs dramatically increases Viral Cycle Time for two reasons. First, daily users initiate loops more often – think tagging a photo on Facebook. Second, more daily active users means more people to respond and react to each invitation. The cycle not only perpetuates; with high DAU to MAU, it accelerates.

One Way to Grow

Those who talk tech split into two dogmatic camps. Some prioritize growth and accept low engagement, while others believe a company needs to nail engagement before focusing on growth. I believe this is a false dichotomy. If you have only one or the other, congratulations, you’ve got squat.

Let’s first take a look at user growth. Distribution, of course, is critically important and no company can survive without a sound customer acquisition strategy. Not only is growth essential but it is something engineer-driven companies love to work on. In fact, the title of “Growth Hacker” has recently become a badge of honor among Silicon Valley digerati. Tweaking viral coefficients and instantly seeing the results is intoxicating. It’s startup feedback at its finest.

But optimizing growth without engagement has its pitfalls. As Peter Thiel recently told his class at Stanford, the effectiveness of distribution channels tends to follow a power law. Just as businesses tend to have only one revenue stream, they also have only one good growth strategy – the effectiveness of which is 10x the results of other distribution channels. The problem with having only one real way to grow is that the method becomes obvious to others and is quickly copied. For example, in its early days, Facebook capitalized on users importing their email contact list to drive growth. But soon thereafter, so did everyone else.

But having competitors copy you is a high-class problem. It means something is working. Worse yet is discovering a fantastic viral loop that drives growth only to see engagement crater when users realize there’s little long-term value in the service. Ringtone businesses, sheep-throwing Facebook games circa 2008, and today’s social video sharing apps using questionable growth tactics, are just a few of the “leaky bucket” businesses that occur when distribution outpaces engagement.

When it comes to building a big business, clearly a good acquisition channel is mandatory, but not sufficient. Given the power law of user growth, you will likely only have one major way of acquiring customers and it won’t be much of a secret. You’ll need some other competitive advantage.

Engagement as Advantage

As opposed to distribution channels, the mechanics driving user engagement do not follow a power law. In fact, it is the nuances of user behavior that make the competition irrelevant, just as it did in the case of Facebook’s early rivals.

Discovering non-obvious user needs and creating accompanying habits is accomplished through deep observation grounded in solid behavioral theory, followed by methodical trial and error. It takes time to create new habits and getting the user to act the way you’d hoped is accomplished by uncovering a thousand tiny insights into the user’s psyche. The process of uncovering latent needs is characterized by understanding more about users than they know about themselves.

The distribution strategy will always be obvious, but the behavioral insights are important secrets that can only be discovered through rigorous testing. Zynga had one obvious way to acquire users, namely Facebook ads. But the company has a cadre of behavioral insights it uses to craft addictive games. It collects terabytes of information daily to alter game dynamics to boost user engagement. Quora primarily drives users to its site through Google search traffic. But the conjecture about all the reasons why the service is so sticky spills over a long question thread. Instagram posted images to Twitter and Facebook to drive user acquisition, placing its growth strategy in plain sight. However, the founders, one of whom studied psychology as a Symbolic Systems major at Stanford, acquired a deep understanding of what makes users tick and click.

But why can’t behavioral design be copied like a distribution strategy? Because competitors are not able to recognize and act upon these kinds of insights. You can know the competition’s product feels better to use, but you won’t know why. Engaging products gain their advantages by leveraging tiny improvements, which together create huge advantage. From the outside, you can’t tell what’s working and what isn’t.

For example, the iPhone is objectively a better designed, more user-friendly, and ultimately more engaging product than the Android experience. But why? Nearly everyone, when given the choice between an Android interface and an iPhone, chooses the iPhone. There are plenty of good reasons to own an Android, but intuitive interface ain’t one. Google knows this and yet they can’t replicate Apple because they don’t know the answer to “why?” You can’t make decisions between seemingly identical interface choices unless you’ve walked the path of user behavior. Without this knowledge, copying the competition becomes a game of throwing darts at features.

Habit design requires a fundamentally different, though complementary skill set to growth hacking. Designing high-engagement products is an art which is increasingly becoming a science. The craft crosses the disciplines of psychology and design – both fields which are hard to learn in a short period of time. Unfortunately, designing habits often falls in the organisational abyss between the founders’ vision and what is technically feasible.

But those companies able to habituate users quickly enjoy massive advantages. Not only does engagement drive growth for the reasons stated above, but users tend to shut out other, sometimes superior, solutions. In fact, business history is peppered with technically inferior products beating competitors because of the fierce loyalty of habituated users (I’m looking at you Apple addicts). Users only have time and brain cycles for a limited number of services. If a high proportion of users are using your service daily, they aren’t using the competition’s.

Can’t Have One Without the Other

But focusing on engagement without growth is also a losing proposition. For one, virality is not something that can be bolted on to a product after it is in the wild. Distribution is not an afterthought and it needs to be built into the core of the experience. Either the company has a viral growth mechanic or it doesn’t. So no matter how engaging your service is, it will remain niche unless there is a way to get it in front of new users en masse.

Creating a company with both high engagement and high growth requires a sound distribution engine fueled by active users. Both engagement and growth are essential to a company’s viability and by adhering to the tao of DAU and MAU, founders have an accurate point of focus to increase their odds of success.

Thank you to David King for reading early versions of this essay
Photo credit: Pink Sherbet Photography

Editor’s note: Leonid (“Lenny”) Kravets is a patent attorney at Panitch, Schwarze, Belisario and Nadel, LLP in Philadelphia, PA. Lenny focuses his practice on patent prosecution and intellectual property transactions in computer-related technology areas. He specializes in developing IP strategy for young technology companies and blogs on this topic at StartupsIP. Follow Lenny on Twitter: @lkravets and @startupsIP.

As software patent litigation ramped up over the past few years, software patents have come under the microscope within the technical community. Many investors and technologists believe that software patents should be abolished all together, while others take the less extreme position that many software patents are obvious over known prior art (“prior art” being earlier publications that show a patent  is obvious or not new). Courts are increasingly cognizant of these criticisms.

Though it is unlikely that software patents are going away any time soon, as the recent summary judgment in eBay v PartsRiver (PartsRiver is now known as Kelora) demonstrates, courts are beginning to do a more thorough job of applying the obviousness standard to software patents.

Kelora claims to have the patent on faceted (parametric) search. The company is a hybrid between a practicing entity and a “patent troll” in that Kelora offers a search product, but has aggressively pursued a licensing and litigation strategy against a wide range of large and small Internet retailers. Though Kelora has not received as much attention from the press as some non-practicing entities such as Lodsys, the Kelora patents have posed a significant threat to the Internet retailing infrastructure. In Kelora’s largest lawsuit, defendants include Internet giants such as Microsoft, EBay, Target, Amazon and NewEgg.

While the named defendants have chosen to fight Kelora, over the past few years, many others have taken licenses under the Kelora patents. Other smaller targets have decided to turn off their parametric search features to avoid being accused of infringement by Kelora. Many targets of Kelora’s patents believe the patents to be invalid over prior art that goes back to as early as the 1960s.

Over the past few years, the Kelora defendants have mounted a significant effort to invalidate the Kelora patents, which were filed in the early 1990s. First, the patents were re-examined by the United States Patent and Trademark Office (USPTO) over newly found prior art, but Kelora overcame the new rejections by amending the claims to perform the parametric search through a resubmission to a server. When the lawsuit was allowed to continue with the amended claims, the defendants argued that the resubmission component was obvious over the known prior art because client/server architecture was well-known by the early 1990s.

On May 21st, the court granted the defendants’ motion for summary judgment.  The court agreed with the defendants’ position that a server resubmission was obvious in view of other client/server systems of that time. The inventors of the Kelora patent, who still own a stake in the company, argued that when they came up with their parametric search invention in the early 1990s, they did not know of the client/“web” server infrastructure. However, in granting the motion, the judge found that such client/server systems were well-known, and it did not matter that the inventors themselves did not know of such a system.

While Kelora will almost certainly appeal this decision to the Federal Circuit, this result is promising for opponents of software patents. The summary judgment shows that courts are becoming increasingly sophisticated in interpreting the claims of software patents, and in applying prior art under the obviousness standard. While the Kelora defendants already expended significant resources in this case, finding that the patents are obvious at the summary judgment stage of the case saved the defendants the significant cost of a full trial.

Courts (and the USPTO) doing a better job of applying prior art to the claims of software patents is the best news possible for those who hope for a more economical way of dealing with software patents within the current legal system.

The game is over. That game where they get to hire you for 40 years, pay you far less than you create, and then give you a gold watch, and then you get bored, you get depressed, and you die alone.

It wasn’t that fun of a game anyway.

When I had a corporate job I would wake up depressed. I couldn’t move out of bed. The sun would be coming in. A cat on the fire escape staring at me through the window. Even it was more excited to be alive than me. And, by the way, I had the best job in the world. I interviewed prostitutes for a living at three in the morning.

But they were going to kill me in my cubicle.

In 2009 I asked about 10 Fortune 500 CEOs, “did you just use this crisis as an excuse to fire all the people you were afraid to fire before.” Only one said “of course” instantly. The others had to drink more. But then it was admitted: you’re all dead weight and there’s no loyalty.

We’ve entered the “Choose Yourself” era. The era without middlemen. Without The Other telling you your bonus, your salary, your movie can be made, your book published, your company funded, your life validated. The era where you have to always be planning your escape. Where you create your platforms on twitter, facebook, quora, pinterest,  blogging, vlogging, itunes, and wherever else and every day you Create and you Innovate and you Sell for yourself. You Eat what you Kill. And your rewards are commensurate with how sharp your teeth are.

Most people need to begin planning their exit strategy RIGHT NOW:

So here’s the 10 reasons you need to quit your job right now. And below that I have the methods for doing it.

1) Safety. In ancient history you would start as the shoeshine boy, move to the mailroom, impress someone with your go-get-it attitude, become an assistant account executive, move up the ranks, move horizontally to another company, get promoted again, move vertically, horizontally, zig zag across corporate America and eventually retire with your IRA savings. The myth was over in 2008. It never really existed but now we know it’s a myth. You were addicted to the stability. The white picket fence. Getting away from home for ten hours a day. I understand. But it was an addiction. And the fix is gone. Your job was never safe. And it’s less safe now than it was yesterday. A billion people in China need a job and they are gunning for your cubicle.

2) Home. Everyone thinks they need a safe job so they can save up to buy a home and also qualify for a mortgage. Mortgage lenders at the banks like people who are like them – other people locked in cubicle prison.  They want to see an income statement. A tax return. A credit check. A stability check. A note from your therapist. Everything that proves you are a reliable human just like them. Well now you don’t need to worry about that. Here’s why you should never own a home in the first place. Save yourself the stress.

3) College. Everyone thinks they need to save up to send their kids to college. Depending on how many kids you have and where you want them to go to college it could cost millions. Well now you don’t need to send your kids to college. So you don’t need to stress about that money anymore.

4) Your boss. Most people don’t like their boss. Its like any relationship. Most of the time you get into a relationship for the wrong reasons. You were too young. You didn’t know what you wanted. You really loved the other girl but she rejected you. Eventually you’re unhappy. And if you don’t get out, you become miserable and scarred for life. That’s why 1 in 2 marriages end in divorce. That’s why you need to quit your job.

5) Your coworkers. Look around. Are these the people you were meant to spend the rest of your life with. You will spend more time with them then you will spend with your children.

6) Fear. We have such a high unemployment rate, people are afraid if they leave the job they are miserable at, they won’t be able to get a job. This is true if you just walk into your boss’s office and pee on his desk and get fired.  But its not true if you prepare well. note that we’ve just had 26 consecutive months in a row of private sector job growth. Much of that is people working at one or two-person companies (i.e. “startups”).  More on that in a bit.

7) The Work. Most people don’t like the work they do. They spend 4 years going to college, another few years in graduate school, and then they think they have to use that law degree, business degree, architecture degree and then guess what? They hate it. They made a bad decision when they were 18. They chose “LAW”. Or “ECON”. But they don’t want to admit it. They feel guilty. They are in debt. A trillion dollars in debt backed by the US government. No problem. Read on.

8) Bad things happen. You start to get depressed and you don’t know why. You start to feel like your life didn’t add up to what it should’ve. SOMETHING WENT WRONG. You start to physically ache. You get nervous about bonuses, promotions, who gave credit to who? You play politics (an ugly game), you fantasize about selling diet pills (Tim Ferris did it!), adults yell at you for irrational reasons, you have sex with another girl at work. Now work is like one big sexually transmitted disease.  And it gets worse and worse. You don’t want to look back at your life and say, “man, those were the worst 45 years of my life.” That wouldn’t feel good.

9) The economy is about to boom.  I don’t care if you believe this or not. Stop reading the newspaper so much. The newspapers are trying to scare you. Bernanke just printed up a trillion dollars and airlifted it onto the US economy. Who is going to scoop that up. You in your cubicle? Think again. And just what is a “Greece”? Is it that tiny country with the economy the size of Rhode Island that other countries have been supporting since Augustus paid all their bills in 20 BC? Just what are they?

10) Your job has clamped your creativity. You do the same thing every day. You want to be jolted, refreshed, rejuvenated.

Note: I will grant some people love their jobs. This is not for them but the 90% who don’t.

But, you say: you still need to support yourself, you still need to support your family, you can’t just walk into your boss’s office and quit.

Good point. You need to prepare. Its like training for the Olympics if you feel now is the time to move on from your job. You need to be physically ready, emotionally (don’t quit your job and get divorced on the same day for instance), mentally (get your idea muscle in shape) and spirituall all ready.

The posts that will help you quit your job. To quit, at least follow the ideas in the first post:

-          How to be the Luckiest Man Alive in 4 Easy Steps

-          What to do if you were Fired Today

-          The 100 Rules for Being an Entrepreneur

In the above link, it’s not about starting a business. It’s about finding what your frontier is, how to explore it, how to test the waters and move beyond it. I’m not saying I can do this. I’ve hit my boundary so many times and bounced off that I have six broken noses to show for it.

Some notes on this post:

Note #0: Why is this on techcrunch? Because all people want to know that they have a choice. That they can eat what they kill. That in the “Choose Yourself” era it’s ok to make the leap into the unknown, in the abyss, do your startup, save the world, deliver value, invent, create, make money, and have fun. You don’t have to do what is expected of you.

Note #1: I get a lot of criticisms from anonymous people in the message boards. Claudia begs me, “Don’t look at the message boards unless you talk to me first.” Because she knows I’m an addict. I tell her ‘ok’ but I know I’m going to look. Because that’s what addicts do. I’m not selling anything. If you want any of my books and can’t afford then write me and I’ll send for free. I’m not pushing any agenda. I have nothing to gain by you quitting your job.

Note #2: Sometimes people criticize the “list” format in these posts. “10 reasons” for this. “10 reasons” for that. About 20% of my posts are lists. Not so much. Read “Happiness this Second”  for a recent non-list post. And Charlton Heston clearly didn’t mind lists when he came down from Mt. Sinai with “The 10 Commandments”, the very first blog post. 3500 years later and still getting clicks.

I don’t mind when people critique me when they’ve lost, quit, or have been fired from as many jobs as I have. Or lost a home. Tried to raise two kids with almost nothing. Been as desperately unhappy as sometimes I’ve been. This doesn’t qualify me for anything, of course. Maybe it disqualifies me. Who cares?  A lot of people have had much worse than me. And I’ve been very blessed as well. I’ve been able to come back.

Sometimes  you can build back up. And sometimes you just think, “How the hell did this happen to me again”.  My goal in these posts is to help people maybe think for a split second they can reduce some stress in their lives, they don’t have to go through what I went through, they can throw themselves into experience and still come back alive, and at the end of the day, they can use some of these ideas to live a better and more fulfilling life. I’ve had that experience and I like to write about it.

Later tonight I’m going to give my two daughters, ten and thirteen years old, two choices and ONLY two choices. Either they watch “Star Wars” with me or they watch “Schindler’s List”. And if they don’t like either choice then maybe I’ll just sit by the TV with some ice cream and watch all by myself.

The legend goes something like this: as a child, Twitter co-founder Jack Dorsey’s father would relentlessly hound him to “Get better”, so Jack eventually banned the phrase from being tweeted. Go ahead and try it, the tweet won’t go through. But the legend? It’s a hoax.

See, way back when, Twitter wasn’t a popular smart phone app, it was a way to publish up to 140 characters to the Internet via text message. To let people follow and unfollow each other, change their bio, and more straight from SMS, Twitter created a list of commands that when sent wouldn’t be tweeted, but would trigger actions instead.

So now when you tweet  ”get better”, “get [any single word]“, and several other phrases Twitter interprets them as SMS commands.

If you want more to try, there’s “Fav [username]” to favorite someone’s last tweet, and “Suggest” to receive recommendations of who to follow. Some of the commands still work from the web interface and smartphone apps. You can follow someone by tweeting “follow joshconstine” or just “f [username without the @]“. Others like the mysterious “get” command that spawned the rumor on StackExchange Skeptics which was busted by user DMI, don’t work outside of SMS.

There’s also no evidence Dorsey’s father ever told him to “get better” or aggressively pushed him to succeed. In fact, Mr. Dorsey senior sounds like a very cool dad who ran a pizza restaurant that inspired Jack’s entrepreneurship, and helped Jack ”build a model of a mass spectrometer out of Legos, ball bearings, and magnets when he was 11″ according to Fast Company.

That doesn’t mean the Twitter co-founder and Square CEO doesn’t want you to “get better”, though. When Jack won an award for encouraging others to start their own business, he told the crowd “Don’t just expect the unexpected—BE the unexpected.”

[Illustration by Wes Duvall for Fast Company]

California-based watch maker Devon made a name for themselves a few years ago when they released the Tread 1. The modern looking electro-mechanical timepiece dazzled people with its tread-based system to indicate the time. It was large, highly unorthodox for a high-end timepieces, and a little crazy. A full review of the Devon Tread 1 is here.

Now Devon has released images of an upcoming Steampunk version of the Tread 1. It started as a concept but due to customer demand they will build them. The Steampunk Tread 1 is the retro-futuristic rethink of the standard Tread 1. The case will likely be made with pieces of bronze and oxidized steel. Rivets and lots of exposed screws complete the steampunk look.

No word on price but expect to pay over $20,000 for this bauble.

The Gillmor Gang — Robert Scoble, Keith Teare, Kevin Marks, John Taschek, and Steve Gillmor — explodes in opinions about Facebook IPO, Facebook privacy or lack of it, Facebook acquisition frenzy-to-be, and more Facebook, Facebook, Facebook. Surprisingly, this one goes on for a record-breaking hour and thirty-nine minutes, proving once again that size doesn’t matter. Except in electronic condoms.

Also discussed; Why G-Tar didn’t win the Techcrunch Disrupt grand prize, why Kevin Marks’ Target knockoff doesn’t come close, and why Keith Teare is a venture communist. No animals or Wall Street traders were harmed in the making of this film. As John Taschek implied, you ain’t seen nothin’ yet. Did I mention we talked about Facebook.

@stevegillmor, @scobleizer, @kteare, @kevinmarks, @jtaschek

Produced and directed by Tina Chase Gillmor @tinagillmor

Editor’s Note: TechCrunch columnist Semil Shah currently works at Votizen and is based in Palo Alto. You can follow him on Twitter @semil

If you’re building apps for phones or tablets, here’s a must-see discussion for you. We were able to corral Greylock’s John Lilly (who recently helped lead an investment in Instagram, right before it was acquired) backstage at Disrupt NYC earlier this week for a more casual conversation about the mobile app ecosystem and hardware. In this short talk, Lilly shared his views about the similarities and differences of building applications for mobile devices, taking care to point out that he sees many great entrepreneurs approaching the phone in a similar manner to how they approach the tablet. While the operating systems are similar on iPhone and other iOS devices (like iPad), for instance, the use cases, usage by time of day, and monetization opportunities are entirely different. Lilly encourages entrepreneurs to ask how to get their ideas on the homescreens of users’ phones and tablets.

The government of Syria uses made-in-California technology from BlueCoat Systems to censor the Internet and spy on its pro-democracy activists (who are regularly arrested and tortured, not to mention slaughtered wholesale.) Amesys of France and FinFisher of the UK aided brutal dictators in Egypt and Libya. Sweden’s Teliasonera allegedly took up the same cudgel in Belarus, Uzbekistan, Azerbaijan, Tajikistan, Georgia and Kazakhstan. McAfee and Nokia Siemens have done the same in Bahrain, Saudi Arabia and Kuwait.

Meanwhile, back in the USSA, Bain Capital recently bought a Chinese video-surveillance company reportedly “used to intimidate and monitor political and religious dissidents,” and Cisco “has marketed its routers to China specifically as a tool of repression.” You can’t help but be impressed by how globalized the oppression-technology industry has become.

So what privacy/surveillance story caused an eruption of outrage this week? Yes, you guessed it: SceneTap, a startup that uses facial-recognition software to (anonymously) track demographics at bars and clubs in major American cities in real time. Forget the dissidents risking their lives for democracy: what matters is that the hipsters are creeped out!

Needless to say, the companies in question tend to dodge responsibility with bland buck-passing PR patter that knowingly turns a blind eye to oppression and brutality: “Obviously what an individual customer would do with a product once they acquire it is beyond our control.” (Apparently it never crossed their minds that it’s eminently possible to build technical controls into their product, to filter the filters.) “It’s a legal business [...] Ultimately people who use this technology to infringe human rights are responsible for their actions.”

This is of course complete bullshit. Whether you’re a company or a person, there’s really no excuse for helping repressive regimes to track and hunt down their dissidents, and “What? Me? Responsible? All I did was give the AK-47 to the psychotic serial killer, how was I supposed to know how he was going to use it?” is almost worse than no defense at all.

The EFF has proposed a “know your customer” process similar to that used for the Foreign Corrupt Practices act and export regulations. It has largely been ignored. Not a good sign. The oppression industry is bad enough now … but if nothing happens, it’s going to get a whole lot worse.

There’s a desperate information war going on in Syria right now, between pro-democracy dissidents and their international allies on one side, and a shadowy and remarkably sophisticated group of pro-government hackers on the other. Right now that war’s being fought mostly on the desktop. But wait until Android phones become ubiquitous in oppressed nations. (Not iPhones; too expensive.) Unlike desktops, unless they’re rooted, Androids typically are — or at least can be — essentially controlled from birth by their manufacturers and their national carriers … who will naturally be incredibly susceptible to government pressures to install hidden spyware and malware.

Imagine an authoritarian nation where everyone has a phone running a government-customized version of Android — indeed, is required to have one, because every phone is an eye and ear of the national surveillance network. (Meanwhile, SceneTap-like software ensures that dissident groups can’t meet in person.) It’s an Evgeny Morozov dystopia, and a disconcertingly plausible one. Right now, carrier bloatware and device control is just an irritation, but look just a little ways into the future, and it’s worryingly easy to envision it actually becoming a serious human rights problem … especially if Western companies keep on selling their oppression technology to all comers.

The auction house Sotheby’s is selling an official memo from Steve Jobs to Atari about improving the World Cup Football game. The pages – stamped and signed by Jobs himself – describe circuit diagrams and paddle layouts. Delightfully, the stamp says “All-One Farm Design” and features a Buddhist mantra, “gate gate paragate parasangate bodhi svahdl.” As you do.

If you’re thinking of picking this up you’d best have about $10,000 to $15,000 handy – although bidding could get fierce. Quoth MacWorld:

If you’re really feeling spendy, you can plop down $180,000 on an original Apple I circuit board, presumably in mint condition. Get cracking and don’t forget: Sabbe satta sukhi hontu.