Windstream Corp., a Little Rock, Ark.-based local phone company focused on rural and smaller markets, said it’s agreed to buy a smaller rival, Iowa Telecom, for $530 million — $261 million in cash and $269 million in stock. In addition, it will take on about $598 million in debt. This is Windstream’s fourth acquisition in the past few months: It also bought D&E Communications ($169 million), Lexcom ($141 million) and NuVox ($463 million). Windstream is trying to become the consolidator of the smaller, rural telecoms, especially after two of its biggest rivals — CenturyTel and Embarq — merged their operations a year ago.

By way of background, in 2005, AllTel, a rural local phone company, spun out its landline business to instead bet its future on the fast-growing wireless industry. It merged the landline business with VALOR Telecom to form a new company called Windstream. AllTel itself ended up becoming part of Verizon, which bought it for $28.1 billion in June 2008.

Windstream is trying to fight the sands of time, which are against most landline companies. A consumer preference for wireless and better offerings from cable providers is only accelerating the loss of landlines for phone companies of all stripes. Verizon, for example, is focusing all its energies on mobile and its fiber-based efforts, and selling off its landline business wherever it can.

One bit of good news for Windstream: The company crossed the 1 million broadband subscribers-mark last quarter, adding 25,000 new subs to take the total to 1.05 million.

It was three years ago – June 17, 2004, I first met with Blinkx, a toddler of a start-up, showing off a tiny little downloadable software that added context to search – be it on your desktop or on the web. To say the least, I was suitably impressed.

It was at the forefront of the desktop search concept that soon gathered momentum leading up to products like Google Desktop and Microsoft Vista’s built-in search features. However, somewhere around this time, Blinkx lost its plot, and started expanding into other categories.

In other words, there wasn’t a hot market the company didn’t try to chase. First blogs, then audio, and then video search. Chasing the hot markets also prompted rumors that it was going to be bought out, with News Corp., as a likely suitor.

A spinout of Autonomy, a British company, Blinkx, which used proprietary technologies developed by Autonomy, never really gained traction in any specific market. Blinkx co-founder Suranga Chandratillake, a nice, thoughtful and intelligent fellow, told the story many times, but somehow Blinkx lost some of its sheen.

So today, when I read the news, that Autonomy was going to spin-in Blinkx and combine it with its mysterious consumer Internet business and take it public on AIM, all the pieces finally fell in place: Blinkx has finally found its purpose. To make Autonomy executives rich. Michael Lynch, the Autonomy CEO who owns 10% of Autonomy.

As Liz points out the company has neither the traffic nor traction to really justify a $150-to-500 million dollar IPO. Still it has two buzz words going for it – video and search. That should be enough for the gullibles.

Who will be the TV Guide of online video, asks CinemaTech. It depends on who you ask: start-ups like Blinkx, MeeVee, Channels and ClipBlast are all trying to carve out a market for themselves. AOL and others are going to be in the game as well. NewTeeVee’s Steve Bryant thinks that TVGuide will be the TVGuide of online video, and gives their new Stingray project his blessings. Who do you think is going to emerge as a winner?

The first DEMO convention of the year starts Tuesday night down in the So Cali desert, where 68 startups will try to get noticed by the 700 or so expected press, VCs, and industry execs. For every Skype or Ironport that have launched products at the show, there’s hundreds of Browsters or Filmloops that make up most of the flock. We’ll try to make some educated guesses, though lively presenters and good business plans often have an inverse relationship.

A quick look at the math: say there’s 600 paying attendees at an average $2,250 per person fee, and 68 demonstrators pay $18,500 a pop, means Chris Shipley’s show could be raking in more than $2.5 million for the event before expenses. Cha-ching in Palm Desert!

According to DEMO rules what the companies will launch at the show is embargoed until tomorrow, but since the presenter list is public, we thought we’d take a quick look at some of the attendees pre-announcement day.

Personal publishing across media: Dublin, Ohio-based Nextumi will be there and one of the cofounders says the company will launch “share2me, a ubiquitous sharing product to permit crossplatform, multimedia sharing.” Redwood City, CA-based Vuvox says it enables its users to publish personal channels with digital content, with the tagline ‘your visual voice.’

Startup product I already use regularly: TeleFlip. Easiest way to send a text message from your PC to a cellphone, just send an email to ‘PHONE-NUMBER’@telefip.com. I have no idea how they’re going to make money, but I love this service.

Online video: With all the online video startups out there, there’s still even more launching or unveiling new products at DEMO, like Magnify.net, Eyejot, Blinkx, SplashCast, ClipSyndicate, Jaman, and Panjea. Details from Liz on NewTeeVee tomorrow.

Mobile: I’ve skipped DEMO the past few times as Web 2.0 washed over the place, but more and more startups are outlining mobile ambitions there. Bling Software says it has the industry’s only AJAX based client for mobile applications, Buz interactive does a mobile personalization service (more details tomorrow), and a launch from Mobio, a company we covered last year.

WiFi Aid: The WiFi at DEMO will probably be too impacted to work, but a few companies are betting on the ubiquitous WiFi trend. We’ve checked out Devicescape’s download, which helps with browserless access to WiFi networks. Spanish startup Whisher, which has the tagline ‘WiFi Reloaded’ opened and then locked its beta site already.

Established companies trying for some DEMO juice: Adobe, Alcatel-Lucent Ventures, Seagate, Symantec, Wyse – hey there old timers.

Worst named DEMO companies: Boorah — boo. Jaman, say it with a rasta accent — now it’s pretty bad right. Buz Interactive and Me.dium — maybe the lack of the domain name of choice (Buzz Interactive? Medium?) means they lose out on the moniker of choice (pure speculation). Oh well, names aren’t the end of the world.

Most of these companies, like the Kleiner Perkins Caulfied & Byers-backed content recommendation site Aggregate Knowledge have raised money in the past 18 months. Many are also using DEMO as a venue to look for another round of funding. Which ones do you think are worth investing in?

By giving anyone and everyone the power to automatically attach advertisements to their web sites, Google AdSense has become ubiquitous over the last three years. What Google hasn’t done is syndicate contextual ads for user-generated rich media on such a large scale, leaving that opportunity up for grabs.

Everyone knows that advertising on non-professional rich media is a big opportunity, but nobody’s making a bundle off it yet. But Google will surely be motivated by spending $1.6 billion on YouTube. Yahoo today (prior to announcing lower-than-expected sales for the quarter) announced two related investments: the purchase (for an undisclosed sum) of self-service interactive ad platform AdInterax, and a $45 million investment led by Yahoo in Right Media’s marketplace for non-premium inventory.

The challenges here are 1) determining context for stuff that isn’t text, and 2) selling lots of ads so there’s always something relevant in the inventory. At this point, startups in the space seem to be more focused on challenge #1, while they will have much more trouble than Google and Yahoo on challenge #2. What we are wondering is, how soon will speech recognition (and perhaps image recognition) take off as a way to serve syndicated contextual ads that are matched to what’s really happening in content rather than what it’s titled or tagged?

AdSense’s power comes from analyzing the words on a page. Keywords tie into Google’s massive list of AdWords advertisers. Last quarter AdSense earned $997 million, 41 percent of Google’s total revenue. The company has explored video advertising to an extent, but not on a wide scale (have any of you ever seen a Google video ad?). Google would not provide additional detail for this piece about what it plans to do to beef up AdSense’s relationship with rich media.

The first step would be improving rich media search (something Sergey Brin mentioned on the YouTube conference call). Google bought Neven Vision, an image recognition company, and new family member YouTube has announced that it is developing video fingerprinting technology to aid copyright protection. On the speech recognition front, Google has been much quieter.

Establishing a soundtrack of a piece of audio or video content and analyzing it is something a lot of companies are working on, including search startups Podscope, PodZinger, blinkx, and Pluggd. This seems like the simplest and easiest way to improve understanding of context in podcasts and user-generated video, then place an ad (could be text, audio, or video) next to it (or before it, after it, what have you).

PodZinger, a funded subsidiary of BBN Technologies, recently broke ground by announcing an advertising program for podcasters. The company is splitting revenue evenly from the short audio and video ads, which are being sold through ad fulfillment houses. However, the effort is made much weaker by PodZinger’s attempts to avoid being invasive by only including advertising when 1) a podcaster has opted-in, and 2) a podcast listener is streaming content direct from the PodZinger site. It’s not even clear that podcasts are a massive market opportunity; this limits the company to what’s bound to be a small slice!

Another early effort comes from rival Podscope, which is working to sign up video-sharing sites to use its own speech-recognition-driven ads. Podscope is going the text ads route, displaying new ads every 30 seconds as a video plays. Podscope CEO David Ives set us up with a demo here. Ives contends that using Google’s (or Yahoo’s or Microsoft’s; whatever’s available) “will always be more cost effective than hiring an advertising sales team” for his company, because of the vast inventory of keywords large sites can offer.

Ives railed against pre-roll ads, something the YouTube founders also did quite actively before their acquisition. However, competitor blinkx, which has hammered out deals to provide AI-juiced video search to companies like Lycos and Microsoft, reports it is injecting pre-roll ads into some of its videos with the help of Lightningcast, Eyeblaster, and ITN. Another competitor, Pluggd, which is currently closing a seed round, says to check back in 2007 about an ad platform. ScanScout, which we believe is funded by Ron Conway and First Round Capital, is also apparently entering this space.

We also talked to a few ad companies that are focused on the user-generated space. They’re a bit more tentative, saying they’ll integrate with such a system but not build one themselves. PostROLLER CEO Tod Sacerdoti, for instance, said that even though he’d always prefer to have more data about a video he’s providing an ad for, “The challenge we’ve had is it’s not clear yet that the context actually drives the best economics.” Sacerdoti reports sometimes general categories are plenty to provide a relevant ad. “We’ve seen that knowing something is an automotive video monetizes better than knowing it’s a Camaro video.” (Disclosure: True Ventures, which is an investor in GigaOM, is also an investor in PostROLLER.)

Well, there we go spending more than 800 words wondering what kind of ads we will be served next! Guess that’s life on the internet.

Other interesting takes on related topic from the last few days include a BusinessWeek story on video search, a CNET piece on Google’s video ads, and Niall Kennedy’s roundups on image search and audio search.

Social bookmarking site Kaboodle is finally adding shopping comparison prices, among a bunch of upgrades for Tuesday. Price comparison will start with products in the Shopping.com API, but could be expanded to travel and healthcare, Kaboodle CEO Manish Chandra said in an interview Monday.

The company will also start offering multiple ways for users to display their collections (especially on other sites like their blogs and MySpace profiles), including a slideshow Flash widget, a drag-and-drop-type collage layout Flash widget, as well as a calendar view for travel planning. Kaboodle is making a big effort to appeal to non-geeks, but mom and pop are far from arriving en masse. The company has seen 50,000 users — that’s registered users — since launching nearly a year ago.

Elsewhere:

• Blinkx has tied up a deal to power video search on Lycos. The startup seems to be regularly making partnerships, but nothing headline-worthy: TotalVid, Trouble Homegrown, the History Channel UK… Interestingly, Blinkx recently partnered with AOL — despite the fact the portal just bought its own video search company, Truveo — for a kid-oriented site called StudyBuddy.com.
• SimpleSeating.com: Web 2.0 for…uh…seating charts. The current site (scheduled to launch by the end of the month) says you’ll have to pay at least $25 for events with more than 50 people.

Rupert Murdoch had planned to spend $2 billion on Internet related acquisitions. With today’s $373 million acquisition of EasyNet, and $1.2 billion buying up properties like IGN and MySpace, he has already spent about $1.57 billion. So what’s next? Chances are that the next strike would be on a VoIP player. Informed sources say that News Corp is talking to pretty much every one in the VoIP space.

I have heard very loud whispers that Michael Robertson’s SIPphone is on News Corp’s radar. SIPphone, by the way is the company behind the ultrafine SIP-soft client, Gizmo Project, which has become a favorite with the Mac users. VoIP industry insiders indicate that the two parties have had advanced level conversations. No deal is in place, and no one knows what will be the price.

But what could be the price for a deal like that? Somewhere between $25-$50 million at the very least. SIPphone is said to have 250,000 users and if you used the $200-per-actual-user price EBay paid for Skype, that works out to about $50 million. All this could just be loud whispers, and nothing more than that. No response really from News Corp’s PR department to my queries. I am still waiting to hear back from Michael Robertson. There has been a lot of talk about what News Corp will do next, promptly in part by a fantastic profile of the wily old fox in the latest issue of Fortune magazine. Murdoch wants to “get younger fast and to get audience fast,” the magazine says. And most of its recent purchases are along those lines.

The second prong is to add web features, like video search, instant messaging, and Internet calling—or VOIP—that will theoretically differentiate his sites (though the competition is developing the same stuff). Murdoch has told Wall Street that he’ll spend up to $2 billion on Internet acquisitions, so he’s got about $700 million to go.

Mark Pincus, founder of Tribe.net says that if he was Rupert Murdoch, he would buy Craigslist. Forget everything else. I am not so sure. Murdoch has publicly stated that he is interested in getting search capabilities and having a VoIP play. Fortune says News Corp, might have looked at a tiny search-engine, Clusty. The there were those rumors about Blinkx, and Skype.

Strategically buying SIPphone would make sense, and here is why:

• SIPphone’s Gizmo Project is like Skype, only cheaper and standards based.
• The Gizmo Project soft clients will be a perfect way to marry the IGN Gamer and MySpace audiences to PC-based VoIP.
• At the University of California at San Diego (UCSD) SIPphone did a big pilot project that let all students talk to each other for free.
• Imagine replicating that on many other campuses for free, and Murdoch’s desire to get “younger” could become more real than his “dyed” hair.
• Did I mention it is not going to cost billions to buy SIPphone? Heck its not even going to cost tens of millions.
• Works with Google Talk
• SIPphone and MySpace were working closely to get some sort of Voice-features into the fast growing social network to add more stickiness to the community.

News Corp has plans to announce its VoIP plans soon, and we shall find out! Still, if it happens, then this could be a fantastic outcome for Michael, who is focusing all his energies these days (it seems) on the digital music business. He recently hired DVD Jon for his new MP3Tunes project. The cash from SIPphone transaction could come in handy. Tom Keating says he is hearing about a mega merger in the VoIP space, likely to be announced next week at the Internet Telephony conference in LA. That’s Michael’s backyard.

Additional Reading:

Why Murdoch Bought MySpace Murdoch, WiMax & The Two Way Web Inherent Truths & The Value of Community

First there was the Internet search, then the desktop search, and now it is time for what my Business 2.0 colleague Erick Schonfeld calls, “group search.” Following up on my little scooplet on Grouper-Ask Jeeves alliance, he talked to Grouper president Dave Samuel and got the confirmation.

> This is interesting because it would be one of the first times that desktop search will be extended (albeit in a limited fashion) to multiple PCs.

Erick is exactly right, and I personally feel that we might be onto something big. Grouper embedding Ask Jeeves search in its client is the most obvious example of what is really peer-to-peer search. In many ways, the first generation peer to peer clients were offering these type of search capabilities. I have started to see a grown up version of this search show up in different products. I saw this first in Mercora, which limited its search to music files. Then Grouper-Ask Jeeves product offering. Earlier I reviewed FolderShare, which had a nifty little feature that allowed you to do desktop search amongst P2P connected computers. Today, I had a chance to meet with folks from Imeem, and they showed off their own version of “group search.” I guess, as more and more devices get connected to the Internet via broadband pipes, we will see interesting variations of search evolve.

The way I see it, there are two main challenges to this “group search.” The legal aspects of it are worrisome especially in these lawsuit-happy times following the Grokster decision. The second and perhaps the more critical challenge facing the innovators is the speed with which big companies – MSN, Yahoo and Google – will copy this group search. I saw that with desktop search when Blinkx paved the way only to be imitated later. Still, an area to keep an eye out on!

If you are fourth place search engine, behind industry behemoths like Google, Yahoo and MSN the big question is how do you grow your traffic. (Comscore Media Metrix says in July Ask Jeeves‘ had 6.1% share of the search market.) Ask Jeeves faces that dilemma. One way would be to think different, and look for niche market opportunities before your bigger brethren wake up and capitalize on that. Snapping up Bloglines was a good move – it got them new users, more traffic and opened up a new search opportunity – RSS search.

So what’s next? My sources tell me that Ask Jeeves has struck up a deal with P2P social sharing company, Grouper. Apparently, a co-branded Grouper client will be made available by Ask Jeeves. (Here is what I wrote about Grouper back in the day!) This client will embed Ask Jeeves desktop search, and web search. Ask Jeeves will also be able to show text-ads in this client, making it a possible revenue generator. From what I understand, the client will also have the ability to do search local folders not on your desktop, but also on the folders that are shared by those in your network. This would be a nice way to leap-up in the desktop search business for Ask Jeeves, especially if News Corp decides to buy Blinkx and put its resources behind the tiny company. I am yet to hear back from both companies.

This fits in what John Battelle’s idea of search everywhere. Anyway, if this becomes more of a trend, then my suggestion that Google buy Mercora doesn’t seem that ludicrous.

• Sprint EVDO in Bay Area is partially working, perhaps beating out the good ole Verizon which is likely to power it up in the Bay Area in the third week of September 2005.

• Mayor Gavin Newsom is going to shed light on San Francisco’s free wifi plans at a press conference tomorrow. You can get the details over at Business 2.0 Blog.

• Agilent makeover continues. A lot of people think HP is the real HP. Not… its a shame to see Agilent, the old school HP go through so much pain.

• Spotted Blinkx co-founder Suranga Chandratillake hurrying down California Street looking very spiffy. When asked about the rumors about News Corp buying his little start-up, he said, “No Comment.” Body language said otherwise.

Blinkx has audio and video search capablities, so it makes absolute sense.

Blinkx just signed a deal with iFilm which will be added as another content channel that’s searchable on blinkx.tv. At the moment, Blinkx is searching the metadata attached to the video files, But they’ve also kicked off a transcription-based index of all content, which will catch up over the first few weeks of the agreement. So in a month or so, you could jump to the exact moment in the Crossfire show where Jon Stewart takes a swipe at Tucker Carlson’s bowtie. Clearly as video search becomes more important these kind of enhancements are going to come in handy.

Alternatively, how not to do your home page, especially when the world is going all minimalistic. via

Lee Gomes, in his column today in the Wall Street Journal says that the death of the folders is highly exaggerated. Google wants to do away with the whole concept of folders, and subfolders (Gmail for example!). Others believe that the rise of TAGS could be the death knell for folders, since the difference between our desktops and online presence is not very different. Gomes thinks folders are the way to go when looking for information. I agree. Except, I think folders (as we know them) are dead, long live the Smart Folders. If you have been using Apple Mail in Tiger, you know what I am talking about – smart folders that can be created on the fly, and what Apple calls “organically organized.” Do a spotlight search and create a folder that groups all the files that match your search command.

Smart Folders contain files grouped together based on search criteria instead of physical location, so the same file can appear in multiple Smart Folders without moving from its original saved location on your system. No need to duplicate, shift or update files: Spotlight Smart Folders keep everything organized for you.

Clearly, Apple has applied new thinking to folders, but PC users don’t have to wait for them. Sure Microsoft has promised “smarts” in Longhorn, but Blinkx lets you create these smart folders even now. (You can actually share them with others, but I wouldn’t advise that!)

Suranga Chandratillake, the uber smart founder of Blinkx explained to me via email that the top-down hierarchical folder (or directory) system was all right when we did not have many files. A few directories made a lot of sense. Now everyone has a few gigabytes of data. (I personally have a terabyte of data floating around my apartment!) There’s no way the average human brain can accurately deal with a 4000+ folder hierarchy by memory, Suranga argues.

Blinkx’s Smart Folders use a feature of common operating systems – Unix for a long time and Windows/DOS more recently – ’soft-links’ … which really means that a file really exists only in one place, but can ‘exist’ as a ’soft-link’ in other directories. You can use it anywhere, edit it, change it, or even delete and the softlinks are updated on the fly. Blinkx, takes it one step further by look at the very content of the files as well. In other words, what they do with their search online, they do on the desktop as well. “I can do what I want with my email (even just leave all of it in my inbox), it’ll automatically get put in the right folder for me … and, if the email ought to be in more than one place at a time, it’ll automatically go into all the right places,” Suranga writes. Try it out guys – I am not much of a Windows user, but the newest version of blinkx is worth a download, for nothing else then just for creating smart folders.

PS: Given that how quickly others copy Blinkx features – video search, blog search, desktop search, it is only a matter of time before “smart folders” become common place.

As you all well know, my home storage is tipping a terabyte, with nearly 450 gigabytes of music. Which in real world is a nightmare. It takes me about 10 minutes to find the obscure song I fancy listening to, but then the moment is gone. (In case you were wondering, i have the complete works of Frankie Blue Eyes, and always enjoy them with a glass of single malt. Unfortunately, the alcohol evaporates while I look for a rose is just a rose!)

I still have not been able to master the trick of adding three different storage locations to one iTunes library. (Tips anyone – I have two network drives and music on my laptop!) Still, since most of the music I listen to is on a Buffalo LinkStation. So I have made that my default library, and today I have discovered a new software that just is fantastic. Mobster. Fine folks behind MusicMobs have released this brilliant desktop add on to iTunes (comes in both delicious Mac and antibiotic WinXP flavors.) What i does is basically recommends artists/songs that match the one playing in your iTunes. So for instance if I am cranking Panjabi MC, it tells me I might like Usher (which is not in my library but other Music Mob users are saying so!) or Rishi Rich (which is in my library!) This is when I set the software in “hipster” mode. Unfortunately, there is no rapidly-aging former hipster mode. Instead, it is called Mainstream.

To recap – Mobster watches the music you play in iTunes and uses recommendation information from Musicmobs to suggest other bands that you may like. You can use Mobster to control iTunes, make playlists, find new music and browse your library more efficiently. Being the picky sort, I believe that the developers could simply enhance this to become a “home network environment” search -and-recommend tool. In fact, I think folks at Blinkx could marry this with their own technology and create a fantastic “music recommendation and search engine” for the home users. I will actually pay for it.

Blinkx has inked a deal with movie download service Movielink, and will create a channel is being added to www.blinkx.tv.
– when you search Movielink through blinkx for a film title, you will see two windows pop up – one is the trailer for the film (2/3rds of the 1K+ films offered on Movielink have trailers) – the other is the Movielink page that corresponds to that particular film.
– In the future, blinkx will transcribe the content of the trailers, so that users will be able to search for a specific line, or phrase, but that capability isn’t ready yet.
– blinkx is also thinking about transcribing whole films – but obviously they have to navigate the licensing issues there.
- blinkx and movielink still experimenting with revenue generation models on this deal.

“What we’ve been working with until now is one-dimensional content on the Web that is advertiser supported. The next level, which will really change the economics of the Web, is searching and indexing premium content that does not live on the Web,” Allen Weiner, an analyst with research firm Gartner Inc. of Stamford, Conn told the LA Times.