TiVo HD XL: I know TiVo’s subscriber numbers are tanking, but I still love my TiVo DVR. My trusty old Series 2 TiVo is incompatible with my new HDTV, so it’s gathering dust.  I’d love to upgrade to the TiVo HD XL. It costs $600, but also needs TiVo service ($13 a month or $300 for a lifetime, though now might not be the time to invest  in the company’s lifetime service). But let’s pretend money is no object. The XL in “HD XL” refers to the DVR’s giant hard drive, which will let you store 150 hours of HD programming; the HD XL also supports CableCards (so you can ditch the cable box if your provider lets you), and allows you to record two channels at once. Plus, you can use the TiVo HD XL to watch the movies and shows from your Netflix Instant Watching queue on your TV. Speaking of Netflix…

Netflix Subscriptions: I want to share the joy of my Netflix subscription with my friends and family, so I’m giving Netflix gift certificates to some of the people on my shopping list. They’re perfect for last-minute shopping; you can pay for the gift certificate online and print it immediately. And if your recipient already has their own Netflix subscription, the gift will let them upgrade their membership to the next level.

SlingCatcher. No, wait, a Slingbox Pro HD. Or maybe both: I’ve spent the last several days testing out the new SlingCatcher set-top box (stay tuned for my review), and I’m really enjoying it. It allows you to play back the video you have stored on your PC on your TV…just like many other devices have promised to do. But the SlingCatcher actually works and setting it up is a snap. (If you end up buying it for someone as a gift, you should consider adding SlingLink TURBO ethernet bridges, which allow you to connect the SlingCatcher to your home network via your power lines.) But the SlingCatcher pairs up nicely with a Slingbox, which lets you view the contents of your TV on a PC. Which one would I want most? It’s a toss-up, but this is a gift guide, so I’ll choose both. And if you buy one of Sling Media’s devices as a gift, you should point the recipient to Sling.com. The site offers a web-based way to watch the content from a Slingbox — come to think of it, even if you don’t purchase a Slingbox or a SlingCatcher, Sling.com is still worth checking out.

Flip MinoHD: YouTube is adding support for HD videos, so now’s the time to upgrade to a pocket-sized camcorder that does the same. Enter the new Flip MinoHD. It’s small, so you can take it with you wherever you go, and at roughly $210, it won’t break the bank. And if you don’t like your gadgets in boring black cases, you can personalize your Flip MinoHD case with one of the many designs available in Flip’s online gallery. So your camcorder can be as pretty as the videos it creates.

Dr. Horrible on DVD: You don’t need access to the web to access this year’s web phenomenon. Dr. Horrible’s Sing-Along Blog is coming to DVD. And it’s only $10. It won’t be released until Dec. 19th, and it’s exclusive to Amazon.com, so you may have to pay extra to have it shipped in time for the holidays. But, really, isn’t it worth it?

Those are a few of the items on my shopping (and wish!) list this year. What’s on your list?

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The lists appear as part of the iTunes Store 2008 year-in-review mini-site, which also features the most popular movies, songs, TV shows, and podcasts. Of course, the items on each list differ according to which region you’re in. The list discussed here is that found in the U.S. version.

Topping the paid list is Koi Pond, which is no surprise, considering that it looked for a while as though it were going to claim a permanent place atop the popular paid apps chart. Also making the cut are launch racers and other games like Moto Chaser, Crash Bandicoot, Cro-Mag Rally, Enigmo and Super Monkey Ball. In fact, Recorder is the sole utility app on the list, suggesting that when it comes to the iPhone and iPod touch, amusement is the primary driving force behind purchases.

By contrast, the list of top free apps contains only two real games, and one game-like time waster (Lightsaber Unleashed). The ever popular Pandora tops the chart, and a number of useful, though very different apps also appear, like Facebook, Remote, and Shazam.

The difference between the two lists is telling. It suggests that people are much more likely to spend money on games than on apps with functional value, but that consumers are glad to grab more useful apps when they’re offered for free. Another possibility is that consumers attach more perceived value to paid games, since, thanks to the console market, a clear precedent of paying for quality development in that area is well established.

The list is well worth a look. Factors like time available in the App Store seem to have had an effect, but latecomers like Line Rider iRide prove that isn’t the only thing at play. Also, the success of some apps like MobileChat raise questions about hype vs. ratings as driving downloads. Check it out and see how your download history matches up.

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Swart is CEO of oDesk, a staffing platform that lets companies hire and manage their global talent virtually. Previously he co-founded Intellibank, which he described as “an ill-fated XRM startup that taught me many lessons, most significantly the importance of focus and product-market fit.” oDesk was seed-funded by its founders and angel Ron Conway. Since Swart joined in 2005, oDesk has raised $29 million in three venture capital rounds.

Stephen Pieraldi is the founder of Iforem, which offers e-escrow services so companies can store their digital assets, in perpetuity. This is his second stint as a founder, and his seventh startup overall. Iforem was seed-funded with $2 million by Gabriel Venture Partners, where Pieraldi is an EIR.

F|R: What are the strengths and weaknesses of angel vs. VC vs. bootstrapping?

Swart: It depends on what kind of a business you want to build. Entrepreneurs must fund appropriately for that outcome. If you want to build an enduring business and expect that the market opportunity is large, then you should take VC, and take enough capital in each round to get you to the next milestone and a higher valuation. But if you are focused on maximizing your own IRR and think that a quick exit to a strategic partner is a more likely outcome, then taking VC money is risky because you may price yourself out of some exit options by taking too much money early in the process. In this instance, bootstrapping is a good option, as long as you can execute and grow quickly.

Pieraldi: Size your opportunity and stage it for any investment. If you don’t need cash, don’t take any funding. That is unless you think your idea is so large no one person can fund it. People need to pick what they want to do and size the funding to that need. In short, if a person takes too much money for a small idea, the value is low; if they take too little for a big idea, then they will be passed up by others who also see the opportunity and get better funding.

F|R: Gary, can you share a mistake you’ve made in a past round or a slip-up in pitch meeting that others founders should avoid?

Swart: There are too many to list! Number one, don’t focus solely on valuation. Selecting the right partner from the right firm is just as important. Number two, don’t do it yourself. Spend money on a competent attorney with experience to look at the terms. We made mistakes on liquidation preferences at Intellibank that came back to haunt us when we were trying to raise our B round. And number three, don’t oversell your opportunity. Double the amount of time you think it will take to accomplish your goal and halve your expected results. Things always take longer than you think, and VCs know this, too.

F|R: Stephen, how has your strategy for raising money changed with your experience?

Pieraldi: It always changes. I close a round based on the needs of the company and that is always different in each market. You have to be able to show that your idea and product or service can reach the market of the day. There are phases when people grow businesses on funding, but never think of revenue. While that may work, the better business models should find a way to be long-lasting and stable. In the end, venture funding is not intended for mom-and-pop business plans. It is meant to produce value for investors at better than market rates.

F|R: Can you identify a term sheet trap that founders should avoid?

Swart: Bad terms in early rounds will always come back to haunt you. Do yourself a favor and avoid certain terms up front, even if it means a lower valuation. Like liquidation preferences. It will pay off down the road.

Pieraldi: Terms that lock in early investors in a structural way, or have, in effect, veto rights, is a death blow to a founder. Anti-dilution clauses are killers, too. Don’t go for money when you’re hungry. VCs will know and take you for a ride.

F|R: Does cloud computing create any special needs or conditions for startup funding?

Pieraldi: The market for cloud computing and “free” services is changing everything, with a new level of speed, development and lower-cost production. That is not a secret, and drives valuation and funding. The upside is the ability to do more for less. Sometimes it is a negative in that you are expected to do more, for a high valuation, on less funding. The risk is undershooting the opportunity against a more nimble or better-funded competitor.

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Vogels said that Amazon built AWS for the company’s internal developers, and as such, didn’t feel the need to wrap services such as dashboards and testing offerings around it. And the company typically doesn’t announce new features for the AWS platform until they’re ready for use. But when it came to persistent storage, he pointed out, they started talking about it as soon as they had a beta, putting startups and other firms planning such a service on notice that Amazon would enter that market.

“We wanted to make sure people had a look at our roadmap,” Vogels said. “Our goal is to be very respectful and recognize the value of the ecosystem.”

Vogels didn’t offer any specific glimpses of Amazon’s roadmap, but he did say the firm listens to the demands of its customers when deciding which services to pursue. He said popular requests involve content delivery network services, backup, small file transfer, large file transfer and visual applications.

He also noted that many enterprises have “accidentally wandered” into the cloud for one-off projects and then stayed there. For those customers he points out that business processes using AWS can be compliant with Sarbanes-Oxley, and that Amazon does work with customers facing regulatory or industry mandates, such as Visa’s PCI requirements to protect cardholder data.

So while Vogels didn’t draw a map showing what AWS has in store for the future, startups planning additional services tied to AWS now have at least the outlines of the company’s plans. They can now follow that outline or chart their own course when it comes to navigating the cloud.

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The cloud does not solve the problem of application integration, says Nelson. Things won’t all magically work together. The web is very good for loosely coupled things, and the business world needs very tightly coupled applications.

Just like software before it, there’s a world of hurt for traditional services companies based on cloud computing and the expectations of customers. Accenture, PwC and the like.

But no clear mid-market leader, and few examples of moving down market. When you’re talking about synchronizing data, suites win. (Self-serving check: did I hear a “suite”?)

If you’re building applications, and you’re building on a platform, it behooves you to think of which platform ultimately wins. (Self-serving check: He’s still on topic, but NetSuite is nowhere to be found on his slides illustrating the market.)

The cost of delivery (yes, at NetSuite) is now at 6 percent of revenue, down from 35 to 40 percen in 2003. Still, 99.99 percent availability over the last four quarters. Most SaaS companies will have their own infrastructure going forward. Cost of sales going down too.

Which VC is going to invest in the Accenture of the mid-market?

Coming around to his big point again: Service economics will be fundamentally changed, just like software economics were. What’s happening is service as software. This is where we’re really switching our platform; the cloud makes it possible. One-off services will become reusable, re-sellable software.

(Now he’s just completely in NetSuite territory, talking about their model, but he’s making sense so I’ll give him a break.) You can actually charge more for vertical applications, because it’s actually what the customer wants to buy.

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Going through a little history: Company hoping to make a profit soon. In ’90s you could raise money but turmoil when the bubble burst. Level 3 was funded enough to last and see industry change.

Not long ago, communications was utility — today telecommunication’s function is to provide the standardized connections. View of the future is standardized connections to the cloud. Bandwidth as a commodity — “Oops, I used the ‘C-word’!” But communications services are a technical commodity — successful company must be low-cost provider since demand is unlimited.

Finally we can anticipate that communications’ price performance will begin to compare favorably with processing and storing information. We do three things: process information, store information and move information (communications). Cost of communication has been relatively static, but the difference is the way the technical standards were set. Companies under the auspices of government-set standards — predictable, dependable, but glacially slow.

In the past, video would come to our homes by going to Blockbuster to pick up video discs and bring them home (Note from Liz: There is an awesome video about this on the Onion News Network). IP and optical innovations came from startups; these technologies are market-based, not centrally planned. Now technology and market demand make it possible for communications in this model.

Four predictions:

• Demand for optical IP communications will continue to grow rapidly. It’s price elastic.
• Demand will be increasingly served by optical and wireless technologies.
• The individual is going to be the focus of information, and institutions will support this, so personalization and style will be increasingly important selling points.
• Communications services, devices, applications, and content will increasingly divide into separate markets. Level 3 thinks bundling doesn’t make sense.

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• Jeremiah Robison, Slide
• Sandy Jen, Meebo
• Jonathan Heiliger, Facebook
• Akash Garg, hi5 Networks
• Raj Patel, Yahoo!
• James Barrese, eBay

Alistair: How much of scalability is architecture, and how much is throwing servers at the problem?

Heiliger, Facebook: The cheapest way to scale is adding servers, but over time the product is really what drives the infrastructure, so if the product is bad that’s going to cause you to have problems that are hard to engineer your way out of. When we added chat on Facebook we actually built a new backend for that. See a post on the Facebook engineering blog about this.

Alistair: Will Facebook and Meebo integrate chat?

Jen, Meebo: Open to integrating with chat on Facebook

Heiliger, Facebook: Great. We’re open to supporting messaging protocols.

Robison, Slide: We’re moving to a preferred model, with processing in the background on a different thread, helps us out a lot.

Alistair: What about failures?

Barrese, eBay: We had a few catastrophic issues in ’99 2000 time frame. We knew we were broken because the site was down. In that day people were very forgiving, but what we had was a major outage. Now that doesn’t happen. A lot of things automated now, people know how to do retries.

Alistair: What techniques?

Jen, Meebo: Since Meebo is just one page view, the limitation of JavaScript is big for us. The amount of computation we put in a browser is going to limit a user’s experience.

Patel, Yahoo: If you look hard enough there are signs of where applications or infrastructure are going to break. In geography we lost a significant amount of capacity because of architectural inadequacy. In a lot of our applications, we see issues with deploying more users, and you run out of space; you should fix it before the users find out.

Alistair: When you’re running a platform, isn’t it bad to have people writing code on your stuff?

Patel, Yahoo: I think you compartmentalize it, break it up into clusters that are not location contiguous.

Barrese, eBay: You’ve also got to firewall your stuff off. The worst thing you can do is open the floodgates without having a plan.

Heiliger, Facebook: If you let people use their own code, you open yourself to risk. If you provide developers a set of tools, you have more control.

Alistair: When an error on a Facebook app comes up, Facebook cites both outside developer and Facebook having a problem — doesn’t that look bad for you?

Heiliger, Facebook: We’re very concerned, and we’ve been thinking about it a lot.

Alistair: What’s the chain of command for outages?

Robison, Slide: We comb through Facebook stats, we have their ops folks on instant messenger, and early on in the platform there was even more dialog. Through time the platform got better, the apps got better, but still the trust is there.

Alistair: What’s the worst example of an application abusing the Facebook platform?

Heiliger, Facebook: We’ve had to turn off applications because their response time has caused other applications to suffer. We proactively provide information for our partners.

Barrese, eBay: We’ve built logging system. We can flag and identify problems very quickly. It’s not very sexy, but if you don’t have it, you’re shooting in the dark.

Alistair: Yahoo has nearly as many different products as Facebook has applications. Which Yahoo application broke Yahoo?

Patel, Yahoo: Advertising, video — but healthy dialog of best practices, like Facebook and Slide but internally.

Heiliger, Facebook: What Yahoo is saying is very politically correct, but reality is everything (everywhere) is broken. It falls into two buckets — stuff that’s already broken, and stuff we don’t know about yet.

Alistair: Off the shelf or build it yourself?

Jen, Meebo: For us a lot of the stuff that we launched with is open source. At the same time no one knows your system as well as you do, and no one can scale your system as well as you can. If you want something small, light-weight and fast, you’re going to have to strip away a lot.

Robison, Slide: We built our own object-aware caching system, because our core value was delivering photos faster than anyone else. Anything that’s not your core value you can take off the shelf.

Patel, Yahoo: Understand what you’re good at and what you’re not.

Alistair: What else needs to scale as you know? What did you have to scale that wasn’t necessarily technology, but business?

Barrese, eBay: Analogy of going from sailboat to battleship — basically every dimension of your business when you’re experiencing hypergrowth, you have to scale out.

Garg, hi5: Rise of spam and security issues on social networking sites. The black hat tax. It’s important for these social networking services that we bring these anti-spam features right into the core product.

Heiliger, Facebook: When expanding internationally we applied technology to a problem that otherwise would have been very expensive proposition. Facebook now translated into several languages by harnessing the power of our community.

Jen, Meebo: We leveraged our community as well. We asked for Spanish to start out with — in the next 48 hours we had 20 languages completely translated. For spam, it’s similar, you can hire thousands and thousands of people, or you can leverage the community. If they feel they’re part of the product, and they own Meebo as much as you do, you can have a really great experience for everyone.

Robison, Slide: When we introduced user moderation for photos, every photo gets marked. We’ve had a really hard time asking our community what is porn and not porn, so we’ve had to screen our user community.

Alistair: If you were in Twitter’s shoes, what would you have done in the last month?

Barrese, eBay: You’ve gotta be transparent, you’ve got to tell people what’s going on, and set people’s expectations as to when it will get fixed.

Jen, Meebo: The more honest you are, the more forgiving your user base is going to be.

Alistair: What have you built on clouds?

Jen, Meebo: We’ve chosen not to put anything critical on EC2, but we’ve put added features like file transfer on it. It’s scary to scale something you can’t completely control.

Robison, Slide: In the broad sense our CDNs springing up new services because of cloud computing. Akamai just launched video transcoding in the cloud. Panther is doing edge caching for bandwidth crisis.

Heiliger, Facebook: EC2, Joyent tremendous partners for us.

Alistair: Fix the protocol, or keep building?

Jen, Meebo: It doesn’t really matter if the user’s happy.

Robison, Slide: Sometimes you have to jump through some complex hoops to get what you want, so I think it’s changing. It’s the backend systems that are causing the scalability problems. When moving stuff to the edge it’s to keep architecture on server side. The real problem is if you have a single user you can scale that out, but when you have users sharing between each other.

Patel, Yahoo: The time will come, it requires the alignment of an entire ecosystem. Doesn’t mean you don’t experiment, but adoption requires people to line up.

Jen, Meebo: Users used to real-time, dynamic standard, so when you don’t give them that, they notice.

Heiliger, Facebook: Servers we use are PCs, have lots of things we don’t use. Challenge is dealing with how to get those technologies to be more optimal, even intaking changes from vendors and building them into our architectures. The truth is that the number of servers going into data centers is growing at the fastest rate ever, whereas enterprise servers and desktop PC systems are pretty flat.

Garg, hi5: Vendors needs to focus more on heat control and power efficiency.

Audience: Effect of Firefox 3?

Robison, Slide: It broke all our applications.

Alistair: Do you spend as much time on scaling as Vogels said (70 percent of engineering resources)?

Robison, Slide (I think): No.

Patel, Yahoo: I think that was right on.

Heiliger, Facebook: I wish I had 70 percent of our company’s resources to spend on those challenges.

Note from Liz: This might be a good panel to watch on video, because the panelists did a lot of talking back and forth to each other that I had trouble capturing. We’ll post the archive footage from Mogulus when we have it.

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What’s driving the growth? Video. “Video traffic is clearly the biggest consumer on the Internet,” and the addition of video traffic swamps all other traffic. “Video will completely swamp the network,” and there will be exponentially increasing bandwidth demand as video applications grow.

Conventional technology won’t be able to handle the demand, said Perkins, so Infinera is looking to use photon-integrated circuitry to help solve this problem.

Here’s a follow-up interview Om conducted with Perkins in the hallway:

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That allows Google to charge users based not just on compute cycles but on their actual costs of moving the data around the world. Gill talked about establishing an auction model for pricing that will reflect that actual costs of moving data. The importance of bandwidth was also highlighted by Lane Patterson, chief technologist from Equinix, who said that a cloud provider that owns its own bandwidth might achieve a competitive advantage.

As cloud computing unfolds it won’t do so only in the U.S., said Dr. Jay Subrahmonia, director of advanced customer solutions for IBM, who points out that developing countries are adopting it because of the speed and flexibility cloud computing offers. Figuring out how to price and value that speed and flexibility is the next big step.

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