Even by the standards of business school, the lecture belabored the obvious. As the Northern California springtime sun washed over the StanfordUniversity campus, two dozen students were in a classroom learning that people tended to associate with people similar to themselves. According to the professor, this trait brought both risk and rewards to venture capitalists, raising questions for VC firms looking to recruit new talent.

But instead of dozing off, or bolting, the students sat attentively, waiting for the man to exhaust his supply of Power-Point slides. A guest speaker sitting at the front was generating excitement, and little wonder everyone stayed awake long enough for him to take his turn: Less than a decade ago, he had been sitting where these students were now sitting, and today his last name was the third name on the letterhead of a legendary Silicon Valley venture capital firm.

As the beginnings of a boom brightened the world of high technology, Steve Jurvetson was going to explain how one becomes a venture capitalist. The answer is not the same as it was only 10 years ago when Mr. Jurvetson made the jump from B-school to VC.

Venture capital is not the gated community it seems, but for maybe 40 years membership has been largely restricted to the entrepreneurial set: engineers, inventors, and deep-pocketed investors who preferred to sink money in technology rather than real estate or racehorses. That has been changing and so it seems fair to ask, what are the paths one takes to a lucrative career in venture capital—and what do VCs look for when they hire?

Had there been any African-Americans in the classroom when Mr. Jurvetson offered an answer, the news might have been disappointing. Mr. Jurvetson, a lanky man in his early 30s, put it bluntly. Ask a venture capitalist what sort of person makes the best VCs, and the venture capitalist will describe someone remarkably like himself, Mr. Jurvetson said.

But Draper Fisher Jurvetson maintains a hiring philosophy that runs counter to the prevailing wisdom of Silicon Valley. DFJ actively seeks to roil its talent pool with young, risky hires, or so Mr. Jurvetson told the class. The firm looks for people who may have personal and professional histories that differ from the firm’s top partners, he said. But that is rare.

Capital of Venture Capital

DFJ is located on Sand Hill Road in Menlo Park, which abuts Palo Alto, the home of Mr. Jurvetson’s famous alma mater. Sand Hill Road, of course, is to venture capital what Madison Avenue is to advertising, or Savile Row to tailoring, and on Sand Hill Road it is a conceit that venture capital is a meritocracy where ideas and creativity trump pedigree.

A decade ago, most VC partnerships managed anywhere from $50 million to $100 million in assets, a big one perhaps $250 million or more. Then came the bubble: New VC firms and their funds multiplied rapidly, as did the amount of money raised. In 2000, 195 first-time funds showed up at the party. Managed capital mushroomed to $223 billion in 2000 from $142 billion in 1999. To put that last number in perspective, from 1983 to 1998, double-digit billions were the order of the day, with 1999 being the first year the industry had broken into the hundreds of billions.

In 2001, the number of VC funds peaked at 1,892, with 21 of those raising over $1 billion, a figure some saw as one more sign of the excesses of that era. Many funds died off, and some of those billion-dollar babies, including Charles River Ventures, Accel Partners, and Mohr Davidow Ventures, shrank their fund sizes. When Mr. Jurvetson was a freshman at Stanford, billion-dollar funds didn’t exist, and 163 funds controlled $12.1 billion in assets.

Calling venture a cottage industry seems a little quaint now that it is professionalizing, but how about its claim to being a meritocracy? How does one become a VC in 2006? Mr. Jurvetson was unusual in going nearly straight from business school to apprenticing with his mentor, Tim Draper, whose father, Bill Draper, and grandfather, Gen. William Draper, were both VC pioneers.

Today, the paths to employment are more varied, as are the types of people seeking positions with them, but only to a degree.

As Venky Ganesan, a partner at Globespan Capital, says, “Venture capital as an industry seems to have some kind of sex appeal.” Given venture’s paucity of women, you’d probably be right in guessing the appeal is more venal than carnal. Payoffs for VCs can be enormous, and a full partner can become very rich indeed.

Typical salaries for GPs fall in the $200,000 to $500,000 range, with a shot at a chunk of the carried interest on top of that. That’s the carry on a portfolio: while 70 to 80 percent goes to the LPs, there usually remains a multi-million-dollar chunk to be divvied up among general partners. And if you have a Baidu or a Skype in your portfolio, as Mr. Jurvetson does, an initial investment can end up being worth over $1.5 billion.

But it’s a slippery gravy train. There are nail-biting lock-in periods lasting months when promising market exits can suddenly turn dismal—and there are plain duds that end up losing money and bringing the portfolio down. Still, with average starting salaries of up to $175,000, it’s easy to see why venture is attracting younger, more diverse faces.

Discomfited by Differences

As an Indian-born VC, Mr. Ganesan is an exemplar of Silicon Valley’s meritocracy, the son of a man who made car radiators near Chennai for India’s once ubiquitous Ambassador. (“Everything in it makes a noise but the horn,” goes an old Amby saw.) Would an Indian with that background be as welcome joining the ranks of a white-shoe law firm, or a top-drawer investment bank? Probably, if like Mr. Ganesan, he had degrees from Cal Tech and Reed College, plus a couple of years with McKinsey under his belt.

Mr. Ganesan contends that venture capital is “not clubby,” but he has not forgotten the role luck played in building his fortune. Even though he was armed with impressive degrees, and a résumé that included selling a company he helped found to IBM for $200 million, Mr. Ganesan counts himself among the fortunate few allowed to participate in, and profit from, one of the largest creations of wealth the world has witnessed.

Still, he allows that the definition of minority in Silicon Valley is an odd one when you consider that it usually means Indian or Chinese males. Leaving women of all colors aside, Hispanics and African-Americans are rarely found in VC circles. “Getting into a partnership is sort of like getting into a family,” Mr. Ganesan concedes. “There is a subtle discomfort with people who are different.”

Mr. Ganesan parcels the history of venture into four chapters, although one could as easily call the last two Parts I and II of the same chapter: pre-1972, 1972-1996, 1996- 2000, and the present. The first saw venture capital rise up in the postwar boom and establish itself as an asset class.

Georges Doriot, considered the founding father of venture capital, created American Research and Development Corp. in 1946; just over 10 years later, it backed Digital Equipment Corporation founder Ken Olsen, turning its original $70,000 investment into $37 million when DEC went public in 1968. A patient man, Mr. Doriot waited until 1972 to exit, when his shares were worth $350 million.

But the idea of a venture-backed startup was already gaining traction long before he could even contemplate the possibilities. By 1959, just two years after Mr. Doriot put his money down on Ken Olsen, Venrock Associates funded Fairchild Semiconductor.

Gentlemen Prefer Gentlemen

The second chapter comprised the age of the “Gentleman VC,” the successful Valley entrepreneur who stood between the halcyon days of his innovation and retirement in his splendorous, wooded redoubt in nearby Woodside or Atherton. Before taking to the links full-time, he worked as a VC. But it was a time marked by rough patches, as Private Equity Analyst Publisher Steven Galante notes in a potted history of the industry.

Adding to the miseries of a market slump in the first half of the 1970s, federal legislation was enacted to curb pension fund mismanagement, turning fund managers away from riskier investments—until the rules were “clarified” in 1978, a year that turned out to be an excellent one for Gentlemen VCs: the federal capital gains tax was rolled back from 49.5 percent to 28 percent. Less than three years later, Apple Computer and Genentech went public, the first of a new breed of venture-backed companies that would become pillars of the information age.

Gary Morgenthaler was a Gentleman VC, before leading his firm into the modern era. A successful CEO of a database company in the 1980s, Mr. Morgenthaler eventually joined the venture capital firm his father founded in 1968. He says today that his profession is one of apprenticeship, and that most of the partners in his firm have been CEOs themselves. “They have been there, and done that,” he says. Investment discipline—the ability to recognize market cycles and stay cool when the pack is chasing The Next Big Thing—only comes with experience and the seasoning of age, Mr. Morgenthaler says.

How can someone with a new MBA pick the right CEO to run a company, stay loyal to that CEO up to the moment it’s clear that the CEO is wrong for the job, and then send the CEO packing as painlessly as possible? “It sounds easy, but it is really hard when you come right down to it,” he says.

Mr. Morgenthaler also thinks he is lucky. After graduating from HarvardUniversity’s Kennedy School of Government, where he learned realpolitik from none other that Henry Kissinger, Mr. Morgenthaler found himself at Stanford in the early 1970s instead of the U.S. State Department, at a time when Washington was as bleak as Silicon Valley was promising. As a student of operating systems at Stanford, and then as the CEO of Ingres Corporation, Mr. Morgenthaler learned the tech trade.

The Tech-VC Switch

Vinod Khosla, of Sand Hill Road firm Kleiner, Perkins, Caufield & Byers, was a classic exponent of the tech-to-VC switch. Before moving into venture, he earned his tech stripes as a co-founder of Sun Microsystems with, among others, Scott McNealy and Bill Joy, who himself left his position as Sun chief scientist in 2003 to join Kleiner Perkins. After nearly 20 years with the VC, Mr. Khosla switched gears and dropped his general partner title last year, freeing him to invest in his own and other funds, in addition to ones managed by Kleiner Perkins.

But in Mr. Morgenthaler’s case, it wasn’t until his father, David Morgenthaler, dragged him “kicking and screaming” into the family business that he made the switch. And it wasn’t until changing careers that he learned the hardest truth about venture capital: Fewer than 10 percent of VC firms walk away with more than 90 percent of the industry’s profits.

Mr. Morgenthaler’s firm is in that club, as it happens, and he counts his hiring policy as a contributing factor. Betraying his Gentleman VC-era roots, and a cautiousness that comes of age, Mr. Morgenthaler allows that his firm maintains only a fraction of the portfolio of companies it should have invested in, but passed on instead. While he won’t mention their names, he says that Morgenthaler Partners might have acted differently if it had younger partners. Still, with $2.5 billion in investments and $450 million in his most current fund, Mr. Morgenthaler’s musings are more speculative than pained.

Like Mr. Morgenthaler, Mr. Ganesan bridged the old and modern eras—watching average deal size soar into the many millions, and deal flow turn into such a torrent that firms recruited new associates faster than what was good for some. It was a time of excess, when VCs were minted who probably should not have been. All was proof that the age of the Gentleman VC was finished, and the modern period of exuberance, calamity, and recovery was phasing in. And in that mix came a move to professionalize the industry, best evidenced by the flood of business school grads.

Money—more specifically, management fees—led indirectly to the need for associates armed with MBAs. As fund sizes soared, venture firms stuck to their traditional 2 to 2.5 percent fees for running the funds. Limited partners putting up the money started to chafe. A $2-million fee for a $100-million fund may have seemed a bit steep. A $20-million charge to manage a $1-billion fund was outrageous, especially when all the money went to a handful of general partners.

To justify their fees—and to vet the growing numbers of deals they needed to invest their vast pools of funds in—VC firms turned to business school grads. Unlike their predecessors, the MBAs often had no operating or investing experience, but they could crunch the numbers and provide the due diligence the LPs wanted.

For Mr. Jurvetson and his partners the difference between old hands and young blood is not just academic, it’s what makes the industry interesting. Like Mr. Morgenthaler, Mr. Jurvetson’s views are shaped by his own experience. He describes countless interviews with stodgy VC firms as a graduating StanfordBusinessSchool student in 1996. But all that was before he interviewed with Tim Draper. During the interview, Mr. Draper took Mr. Jurvetson to a hockey game. Not one to stand on ceremony, the VC slid down one of the arena banisters, a feat that seemed to dazzle his young guest. “That’s when I knew I found the perfect firm,” he says.

Fresh Perspectives

In keeping with that quirky tradition, DFJ hires so-called associates and analysts whose job is to offer fresh perspectives on deals. “In many cases their backgrounds are very different and they push out the matrix,” says Mr. Jurvetson. The analyst positions are meant to be two-year stints to glean some real-world experience before business school. The associate positions at DFJ are, at least in theory, partner track, but in today’s chastened environment, associate positions are harder to come by.

Lucinda Stewart, 36, a partner at OVP Venture Partners of Seattle, knows about being an associate from the distaff side. A partner since 2001, she got her start in 1997, in investment banking at Donaldson, Lufkin & Jenrette in New York City where, she remembers, there were four women and 50 men in the associates’ pool.

Ms. Stewart may be too young to know that she is retracing an earlier VC career path. In the early 1990s, a number of men with backgrounds in traditional Wall Street finance moved into venture capital. One of the best known is Steve Lebow, co-founder of GRP Partners, with offices in Los Angeles and London. Mr. Lebow first made his name at DLJ, which pioneered junk-bond financing and backed Starbucks and Costco.

From DLJ, Ms. Stewart went to Frazier and Associates in Seattle in 1999, and moved to OVP two years later. “There are almost no chicks in this industry,” she says, only half-joking. Yes, there’s a bunch at the associate level, she says, but after they do their two years, they’re gone in all but a few cases. “There are just a handful of women at the partner level.” And that’s the industry’s loss, she reckons, because women bring special skills when it comes to relating to entrepreneurs.

“I think only the most competitive, passionate individuals actually make it to partner, and to make it at a young age—having devoted the key years of your career to this—you think ‘this had better work out,’” she says. “I think that’s making for a new generation of motivated, success-driven VCs, which is good, because I think venture is harder now than it’s ever been.”

When Ren Chin was offered an associate’s spot at Partech Ventures two years ago, the engineer went straight to his mentor and asked him for advice. At 31, with two startups behind him—though at neither one was he CEO—Mr. Chin wanted to know what would make sense for him to do. Mr. Chin was told to take the offer if he wanted to continue being an entrepreneur, but to run the other way if he wanted to be a VC.Mr. Chin took the job. He loved seeing the tech business from the VC perspective, the excitement of Silicon Valley was just as palpable on the money side of the table.

Mr. Chin’s tenure at Partech coincided with getting his MBA at the University of California’s Haas School of Business. The program ended this spring, along with his position at Partech. Again he weighed his options—would he stay in venture capital or return to a startup? He chose the startup realm. Now an entrepreneur-in-residence at Storm Ventures in Palo Alto, he hopes to become a founder of an Internet security firm.

“I never went into it with the intention of making partner,” Mr. Chin says. “It was more to learn the dark arts of venture capital.”

In a statement published late Wednesday, the International Corporation for Assigned Names and Numbers (ICANN) said that the nonprofit organization tasked with assigning Internet domain names voted 9-5 against a request for a .XXX domain name.

Among those who voted against the new domain were Paul Twomey, ICANN’s president and CEO; and Vinton Cerf, Google’s chief Internet evangelist and the person often credited with inventing the Internet Protocol.

The statement acknowledged the heated debate the .XXX proposal sparked between free speech groups, Internet watchdogs opposed to ICANN, individual governments, pornographers, and cultural conservatives of many stripes.

“Reflecting the diversity of views this application has generated, the board discussion at today's meeting focused on the criteria for the [.XXX domain], especially for sponsorship, and the terms of the contract… including compliance issues related to key terms associated with public policy concerns,” it said.

Loss for ICM

The vote against .XXX is a blow to ICM Registry, which sponsored the .XXX web address ending and has been fighting for its approval for several years.

Stuart Lawley, ICM’s chairman and president, has said in applications and various communications with ICANN that ICM has no connection to the adult entertainment industry.

Mr. Lawley said his company is chiefly concerned with bringing safe and sound business practices to an often shadowy corner of the web, as well as protecting children from stumbling on pornography.

As the operator of the .XXX registry, ICM would have stood to reap a substantial profit from providing management and supporting the back-end infrastructure.

The domains were to cost $60 per year. In an interview with an adult entertainment industry magazine in 2005, Mr. Lawley said ICM burned through $3 million a year. ICM did not respond to calls for comment.

Wednesday’s vote followed several months of delays, prompted in part by letters from the United States Department of Commerce, which registered concern with the .XXX domain.

The new Yahoo Telemundo site represents the first instance of cooperation between a national Hispanic network and a Latino-targeted Internet property.

While neither company will make an equity investment in its new partner, the deal signals the rising importance of the Spanish-speaking market to advertisers. Latinos are the fastest-growing segment of the U.S. population.

There will be an estimated 13.5 million Hispanic households in the United States by the end of the decade, controlling $670 billion in personal income.

Latinos will also be connected to the Internet in substantial numbers. According to the research firm eMarketer, there were almost 16 million Hispanic people with access to the web in 2005. That figure will grow to 20 million in 2010.

Tapping a Growing Segment

It is not only the number of Latinos online and off that is growing: a successful Spanish-oriented Internet property would tap into the fastest-growing segment of the U.S. advertising industry.

According to the Association of Hispanic Advertising Agencies, advertising in the Hispanic market is growing four times faster than in the overall U.S. market, and stands now at $4 billion. In 2000, only 3.6 percent of corporate ad budgets went to pitching to Latinos. In 2005, it was 5.2 percent.

Yahoo Telemundo will compete with other Internet properties seeking the U.S. Hispanic audience, such as AOL Latino, which debuted in October 2003.

But Yahoo will have a partner with prominent name recognition in the U.S. Hispanic community. Telemundo, which is wholly owned by NBC Universal, boasts that it reaches 93 percent of Latino households in 142 markets.

The Spanish-language network’s portfolio of sports, news, and entertainment programming could be a powerful lure drawing traffic to Yahoo’s Spanish-language site, which already claims an audience of 11.5 million.

Yahoo shares fell $0.44 to $32.05 in recent trading. NBC Universal is jointly owned by General Electric and Vivendi Universal. Shares of GE dropped $0.23 to $34.77 in recent trading, while Vivendi shares rose $1.12 to $36.90.

A spate of recent headlines tells the story. eBay seeks a common front with Microsoft and Amazon against Google. Amazon drops Google technology from the Alexa search engine. Microsoft debates absorbing Yahoo. Google complains that Microsoft’s new browser is anticompetitive. MSN debuts its adCenter. On Monday, Yahoo unveiled an interactive search advertising engine (see Yahoo Rebuilds Ad Engine).

If there is a common theme, it’s that Google is a threat and it needs to be contained.

On Wednesday, when Google hosts its annual media day in San Francisco, the company will have scores of technology and business reporters ready to broadcast whatever new weapons it may train on its gathering competitors. Google is not going to easily relinquish its share of an Internet advertising market that reached $12.5 billion in 2005.

Some of the speculation has pointed to a new health vertical from the Mountain View, California company, which remained tight-lipped on Monday. “Health has been an area of interest at Google for some time. We have been doing a variety of research in the health area, including how to improve the quality of health-related search results. We have nothing new to announce at this time,” said Google spokeswoman Jennifer Hakes.

Dan Schatt, an analyst at the consultant firm Celent, said he will be looking for more products along the lines of the calendar Google released in April.

As Microsoft bolsters its search offering with an eye on Google’s core business, Google has been assembling an array of online applications that pose a danger to the hegemony of Microsoft Office. In March, it bought Writely, an online word processor.

Google could also threaten eBay, said Mr. Schatt, by combining Google Base, which allows people to post items for sale, with a financial transaction tool along the lines of eBay’s PayPal, which streamlines online commerce for small merchants. “Google could start moving down that path as well,” said Mr. Schatt.

Nothing’s Forever

There are many directions for Google to take, but whatever announcements Google makes, it will not hold on to its dominant position forever, said Rick Summer, an analyst with Morningstar.

Mr. Summer said that competitive search products from Ask, Yahoo, and MSN will encroach on Google’s share of the search market, which stood at 42 percent in March, according to comScore Networks.

Mr. Summer also believes Google will lose its outsized share of the online advertising market as competitors cut more favorable deals with advertisers, and search technology continues to evolve.

Pointing to the software package known as Google Pack, introduced at a trade show in Las Vegas in January, Mr. Summer noted that past Google products announced with fanfare have not been smash hits.

Jeffrey Toback, a lawmaker in Nassau County, New York, sued Google Thursday for “putting Child Pornography profits ahead of the well-being of children and community members,” and asked the world’s largest search engine be compelled to prohibit links or advertising to illegal porn sites, a remedy that Google said it already does.

Filed by the White Plains, New York law firm of Meiselman, Denlea, Packman, Carton & Eberz in the Supreme Court for the state of New York in Nassau County, the suit claims that Google has submitted to the anti-democratic wishes of the Chinese government but “when it comes to the protection and well-being of our nation’s innocent children, [Google] refuses to spend a dime’s worth of resources to block Child Pornography from reaching children or to filter out search terms such as ‘child pornography’ or ‘kiddie porn’ or the content to which such terms lead.”

Mr. Toback, a democrat and the father of three school-age children, did not return calls on Friday.

For its part, Google said it is vigilant about following child pornography laws.

“Child pornography is illegal and Google prohibits it in our products,” the Mountain View, California company said in an email statement. “When we find or are made aware of any child pornography, we remove it from our products, including our search engine. We also report it to the appropriate law enforcement officials and fully cooperate with the law enforcement community to combat child pornography.”

The company offers a product it calls SafeSearch, which filters adult content.

A nonprofit funded by the adult entertainment industry called the Association of Sites Advocating Child Protection, which seeks to eliminate child pornography on the Internet, said that Google and other search engines don’t turn a blind eye to kiddie porn.

“They are very aware of it, and they have no desire to have anyone be able to access child pornography through their search engine,” said Joan Irvine, executive director of the now-10-year-old nonprofit entity.

While the real estate business is regarded as a laggard on the Internet, there are plenty of places to look for a new apartment on the web. Venture-backed MyNewPlace will compete with established companies like Apartments.com and eBay-owned Rent.com. The exact size of the online apartment listing market is hard to peg, but an optimistic estimate places it in the neighborhood of $3 billion.

With an eye on that cash, Trinity Ventures in Menlo Park, California led an $8-million first round of funding for MyNewPlace. In addition to traditional venture capital, several property companies invested in San Francisco-based MyNewPlace, including the Lane Company and ConAm Management Corporation.

“We took seriously the fact that some of the thought leaders in the industry took it seriously,” said Noel Fenton, a general partner at Trinity Ventures, and a MyNewPlace board member.

‘Behind the Curve’

MyNewPlace enters a market in a state of flux, said Kevin Thompson, senior marketing director for AvalonBay Communities in Alexandria, Virginia, which manages 45,000 properties in the U.S. and has signed a contract with MyNewPlace to put its listings on the new company’s site. Mr. Thompson says that real estate is “behind the curve” when it comes to technology.

But in the past three years, AvalonBay has watched the number of leads originating from the Internet climb to 65 percent from 30 percent. Meantime, leads from newspapers have dropped to 5 percent from 15 percent.

Mr. Thompson said his company puts many listings on Craigslist, the free classified service that allows users to advertise everything from casual sexual encounters to vacant apartments. He said that while Craigslist was formerly most useful in dense coastal cities, it is becoming more common away from major metropolises. MyNewPlace hopes its 6 million listings, mapping features, and a clean, banner-ad-free home page that mimics Google’s spartan interface will lure users.

But it’s not just Craigslist that MyNewPlace has to worry about. Companies that arrived on the scene before MyNewPlace have been forging relationships and experimenting with business models. Rent.com, which eBay bought in February 2005, has a business plan similar to MyNewPlace’s. Rather than pay a fee between $200 and $300 for an ad on an apartment listing web site, companies like AvalonBay pay MyNewPlace or Rent.com only when a lease is signed.

Mr. Thompson says he will pay MyNewPlace a fixed sum in the neighborhood of $250 for each signed lease. MyNewPlace pays the renter $100. When the rental market is slow, and Mr. Thompson is eager for business, $250 for a single lease is worth the money, he says. But in a brisk market, when a single $250 advertisement can generate three or four leases, MyNewPlace is less attractive.

“That’s the downside of the business. The more successful they are, the more expensive they are,” said Mr. Thompson.

Unique Feature

MyNewPlace also allows property management companies to “turn off” the service within 24 hours if leases start flowing from other sources, Mr. Thompson said. It’s a feature competitors don’t allow.

One of those competitors is eBay’s Rent.com. While an eBay spokesperson declined to say how much money the company made in 2005, industry insiders put it at about $45 million. It’s a matter of record that the site’s traffic grew 87 percent from 19.7 million to 35.8 million between 2004 and 2005.

John Helm, MyNewPlace’s CEO and founder, who also founded AllApartments/Spring Street in 1997, said he predicts similar growth for his company.

“By the time they are at $100 million, we will be at $45 million.”

The map products of Google and its rivals, Yahoo and Microsoft, are an important part of the burgeoning local search business, which the search engines regard as one of the last untapped reservoirs of ad revenue.

The Kelsey Group predicts that the U.S. local advertising market will hit $124.8 billion in 2010. In 2005, it grossed $96.8 billion. U.S. local search and classifieds revenue is seen jumping 25 percent to $9.9 billion in 2010 from $3.3 billion in 2005.

Matt Booth, an analyst with the Kelsey Group, says that maps are the shock troops in a campaign to win advertising dollars from the local market.

“Mapping is the forefront of a local strategy,” he said.

Google’s improving of its map product in Europe, announced late Wednesday, follows Yahoo’s debut of satellite images on its beta map site on April 11. In October, Google announced the launch of Google Local, which blended mapping data with local information such as restaurant reviews, addresses, and movie times.

The move also came one day after French President Jacques Chirac said his country would spend $2.5 billion on six technology projects including a search engine designed to compete with Google (see France’s $2.5B Tech Foray).

Like Google Maps and Yahoo Maps, the beta version of Google Maps in the four European countries comes with an API (application programming interface) that allows programmers to incorporate Google Maps into web pages not connected with Google.

The API has generated a cottage industry of mashups that combine Google Maps with content that ranges from real estate to fast food finders.

Mr. Booth said that the power of maps and local advertising has not been fully exploited.

“The real revenue opportunity comes when there is rich content underneath all of the pins on the map,” he said.

Dubbed Yahoo Go for TV, the free download is a swift rebranding of the Meedio software that Yahoo announced last week it had bought for an undisclosed sum. The quiet, beta release of the software is one more step toward melding the desktop with the television, as well as piping content traditionally carried over cable and the airwaves through the Internet.

“Putting a brand like Yahoo on top of a service like that is incredibly powerful at this point,” said Kurt Scherf, a principal analyst at Parks Associates in Dallas.

The “point” that Mr. Scherf referred to is the uncertain and shifting ground that the so-called digital home now occupies, as content providers, Internet companies, telephone companies, cable companies, and software companies jostle to profit from the fusing of the computer and the television. While this convergence is deemed inevitable, so far not many desktops reside in the living room next to television sets.

Mr. Scherf estimates that Microsoft has sold only 400,000 units of its digital home desktop with a built-in TV tuner since it debuted in 2003 and the end of 2005.

Yahoo could not be reached for comment.

Van Baker, an analyst with Gartner, said he doubts the new Yahoo product will have much of an impact on the evolution of the digital home.

“There aren’t that many PCs in the living room,” he says. “They are sitting on someone’s desk without a remote.”

Mr. Baker believes that Yahoo is hedging its bets on what direction the union of computer and television takes. “They are saying, ‘Throw it against the wall and see if it sticks,’” he said.

Ask’s parent company, Barry Diller’s InterActiveCorp, moved quickly to appoint Mr. Lanzone to the company’s top post after Mr. Berkowitz said Friday he was leaving Ask to become a senior vice president at MSN’s online business group.

The shuffling in the corner office at Ask’s Oakland, California headquarters follows a makeover of Ask’s web site, which involved dumping the company’s butler logo.

Mr. Lanzone, 35, said he would keep the company on the same path charted by his predecessor, which for the No. 5 search engine amounts to luring new users by the thousands rather than Google’s millions.

That strategy is at once modest and daunting. Of the 6.4 billion online searches conducted in the United States last month, Ask fielded only 5.9 percent of them, according to comScore Networks.

While underscoring the point that Ask does not aim to unseat Google as the king of search, it does seek more market share. It has been succeeding. The 376 million queries handled by Ask in March represent a nearly half a percentage point increase over the same month a year ago. Not a big increase, but not bad either when one considers that only Google gained market share during the same period. Yahoo, MSN, and AOL all lost market share.

For years, first as AskJeeves, and more recently as Ask, the search engine has found itself in the frustrating position of having search technology lauded by the industry as first rate, yet stymied when it came to attracting consumers. Ask’s recent gains have been encouraging, said Steve Weinstein, an analyst with Pacific Crest Securities.

“In a market this big, there is always an opportunity,” he said.

Excluding special items, eBay posted 24 percent higher earnings of $342.9 million, or $0.24 per share, vs. $275.5 million, or $0.20 per share in the year-ago quarter. Wall Street had expected earnings of $0.23 per share on average, according to Thomson Financial’s survey of 20 analysts.

First-quarter sales rose to $1.39 billion from $1.03 billion from the same quarter a year ago.

Including special items and one-time charges, eBay reported net income of $248 million, or $0.17 per share, compared with $256 million, or $0.19 per share, in the year-ago quarter.

But eBay said in its statement it sees full year revenue in the $5.7 billion to $5.9 billion range, which is less than Wall Street had hoped.

Its shares fell $1.93, or nearly 5 percent, to $38.42 in after-hours trading.

Meg Whitman, the San Jose, California company’s president and CEO, said that “eBay, PayPal and Skype are successful businesses on their own, and together they create additional opportunities for innovation and expansion.” But it is not yet clear how Skype, the Internet phone company that eBay bought in October 2005 for $2.6 billion, will be integrated into the auction site and the online payment system.

eBay reported Wednesday that Skype had 94.6 million registered users. PayPal had 105 million accounts at the end of the first quarter this year up 47 percent from 71.6 million reported in the first-quarter of 2005.

The number of registered users on eBay’s core auction site rose 31 percent to 192 million from 147 million a year ago.

While Backfence didn’t say how much it paid for Bayosphere, a nearly two-year-old site founded by a former journalist for the San Jose Mercury News, Backfence did allow that the purchase marked its first foray outside the WashingtonD.C. metropolitan region. It also said the move signaled a plan to enter other markets like Seattle, Chicago, and New York City.

Dubbing its strategy “hyperlocal,” venture-backed Backfence seeks to tap a local advertising market pegged at around $3.1 billion in the United States. Before moving into the Bay Area, Backfence offered a forum for so-called citizen journalists in markets of around 60,000 to 75,000 residents in several municipalities in the WashingtonD.C. metropolitan region where the company is based.

Founded in August 2004, Backfence received $3 million in a first round of funding from SAS Investors and the Omidyar Network in October 2005. Backfence moves into the Bay Area at a time when the region’s local newspaper business reflects the upheaval the industry is experiencing nationwide. The Mercury News is for sale, and the San Francisco Chronicle is losing circulation.

But Susan DeFife, Backfence’s co-founder and CEO, said the company does not see itself as offering a product to replace newspapers.

“It’s sometimes the most mundane content,” Ms. DeFife said. “A Little League score, a school board meeting, a good plumber. It’s the information that’s not getting exchanged given our changing lifestyles.

No one argues that newspapers have much to worry about, but citizen journalism may not be cause for concern. Writing in his blog, Dan Gillmor, the journalist who started Bayosphere, said he had been paying for the web site out of his own pocket and was faced with the possibility of shutting it down before Backfence stepped in.

For its part, Backfence’s most popular site covering well-heeled McLean, Virginia, has a modest 600 registered users and 6,000 unique visitors a month.

Filed five years ago with Google co-founder, and having president Sergey Brin listed as one of the inventors, the patent outlines a method for returning search results from a voice-activated question.

Such a service could put Google in competition with startups like Promptu and V-ENABLE for part of a mobile search market that Piper Jaffray pegs at $11 billion by 2008.

Google didn’t say what plans it had for the patented technology. “We file patent applications on a variety of ideas that our employees may come up with. Some of those ideas later mature into real products or services; some don't,” Google spokesperson Barry Schnitt wrote in an email.

While Google played it cool, the small voice-activated mobile search community pounced on the patent application to study it for evidence of infringement or clues to Google’s intentions in the business.

Google Welcomed

Paul Cook, the CEO of AgileTV, which makes voice recognition software to search television, and mobile search on handsets through its sister company PromptU, said he welcomes Google into voice-activated mobile search.

“It validates our business,” Mr. Cook said. He shrugged off the possibility that Google could knock his company out of the business. “We think they are heading in a different direction.”

AgileTV has raised $22 million in two rounds of funding, the last of which closed 11 months ago and included Valence Capital and Lauder Partners.

Craig Hagopian, president and chief operating officer of V-ENABLE in San Diego, said Google’s patent appears complementary to V-ENABLE’s technology, adding somewhat coyly that he could not elaborate on what sort of discussions he was having with Google.

V-ENABLE, formed in 2001, and having 35 employees, has raised $12 million in three rounds of funding. In February, SoftBank Capital and Palisades Ventures led the most recent round.

Mr. Hagopian said the notion of voice-activated search on cell phones has become popular in the past 18 months. “The technology and the content have finally caught up with the idea,” he said.

Based in the British Virgin Islands, but with roots and a tech team in the Baltic nation of Estonia, seven-year-old Playtech began trading at $4.50 per share, raising $55.6 million. Brisk trading reflects investor confidence in the rapidly growing online casino market and marks Estonia as one of the few countries to emerge from the old Soviet bloc with a vibrant IT economy.

Online gambling is estimated to be a $700-billion market worldwide, according to Terrie C Walker Consulting in Atlanta, and Playtech has enjoyed its share of the profits. In 2001, the company had only two licensees for its software. That figure has grown to 39 licensees serving 94 online casinos, 15 online poker sites, and 15 online bingo sites.

Playtech’s profits have grown to $35.6 million in 2005 from $8.3 million in 2003.

Internet gambling sites like PartyGaming, which debuted on the LSE last June at a value of $8.46 billion, have watched profits soar as broadband access grows in Europe, Asia, and the United States (see Poker Site’s IPO Is Huge Hit).

In 2004, PartyGaming had an average daily revenue of $1.7 million. That number rose to almost $3 million in 2005: And this despite a murky regulatory environment that makes online gambling officially illegal in some countries including in the United States.

With a population of 1.3 million and a per capita gross domestic product of $17,672—the highest of the Baltic states—Estonia is building a name for itself as an island of IT in an otherwise depressed region. Although it is owned by eBay and headquartered in Luxembourg, Internet phone company Skype also has its origins in Estonia.

While Playtech has joined the rest of the online gambling community and incorporated on a balmy island with favorable tax laws and no prohibitions against online wagering, the company got its start in Estonia. Playtech now counts Bet365, SportsInterAction, and land-based Intercontinental Casinos as customers.

The IPO was also good news for AIM. Startups raised $4.02 billion on AIM in 2004, up from $1.83 billion in 2003.

They are out there in cyberspace. Flush with a newfound sense of power, they propagate their radical ideas. On millions of blogs and in countless chat rooms, they plot and scheme. They publish screeds. Every day, they muster new recruits.

Just as the world’s governments have slowly learned to turn their electronic ears toward Internet chatter in hopes of detecting early signs of a conspiracy, companies are listening to the growing online din of consumers offering their views on everything from trans-fat to Trans-Ams. In marketing lingo, it’s known as consumer-generated media (CGM).

Chat room postings come from passionate Apple freaks who watch for every software or hardware release from Cupertino; vegan mothers critique every new organic offering for babies on their blogs. Mining these hotbeds of buzz—call it the buzzosphere—is the newest front in the ongoing tug-of-war between the corporation and the consumer.

New cadres of mercenaries on the side of the corporation—high-tech companies that mine the buzzosphere, such as Cymfony in Boston and New York City-based BuzzMetrics—are generating buzz themselves and attracting venture capital. “There is no marketing department that is not thinking about what is happening in the blogosphere,” says Jonathan Carson, the CEO of BuzzMetrics.

Observing Online Habitats

In the United States, a republic where the only king is the customer, eavesdropping on the static of CGM is all about finding ways to serve the mass, the niche, and every market in between. It’s a way to detect false rumors before they explode in the mainstream press. It’s a way to gauge the potency of a marketing push, or the popularity of a new product.

A lot of companies value this information. Sony, Target, and Toyota are among the scores of companies that have signed up for this type of service. And it’s a field that an estimated 50 companies are moving into.

Proponents of the new marketing tool say it is a better way to take the temper-ature of consumer opinion because it measures a discussion that would happen anyway. That’s in contrast to the standard focus group, which is skewed by the artificiality of the event itself. Cymfony and BuzzMetrics listen to real people having real discussions about real products. It’s the difference between watching chimps in the zoo and watching them in the wild.

But unlike Africa’s chimpanzees, the creators of CGM are hardly an endangered species. The proliferation of outlets for people to voice their opinions on consumer culture is what has given birth to this new industry, says Mr. Carson. “The idea that consumers influence other consumers is taking hold among marketers,” he says. So-called buzz marketing, attempting to influence the buzzosphere with savvy and well-placed marketing ploys rather than the carpet-bombing approach of a media blitz, is not new.

Listening in is, however. The realization that the content created in the buzzosphere can be culled, sifted, and repackaged as handy—and pricey—market intelligence is creating a flurry of acquisitions and venture investment in the nascent industry. It’s so new, the market for this kind of marketing data is hard to peg. Mr. Carson says that his company’s services start at around $100,000 and rise to prices “in the seven figures.” BuzzMetrics, which closed a deal to acquire Intelliseek last month, has witnessed “well over 100 percent growth for the past three years,” according to Mr. Carson. The marketing industry in the U.S. is reckoned to be $50 billion.

Those types of numbers are attracting venture capitalists. Cymfony, for example, recently closed a $7-million second round led by Boston-based Ascent Venture Partners, which has $400 million under management. Although Cymfony has been around for several years, it only recently entered the business of aggregating data from the buzzosphere.

“Not that long ago, all this data wasn’t available online. People are now starting to understand this data is available, it’s understandable, and it has value,” says Matt Fates, a principal at Ascent Venture Partners, and a non-voting observer on Cymfony’s board of directors. Mr. Fates thinks the kind of business Cymfony performs could rapidly become a $500-million-a-year market. “The potential here is enormous,” he says. “We see this as a huge opportunity.”

Jim Nail, Cymfony’s chief marketing officer, says the opportunity identified by Mr. Fates and his colleagues arose when corporations started to see a new kind of consumer activism take place on the Internet. “They were worried about very influential bloggers, [and] they were interested in what consumers were saying about their products,” he says.

The Trans-Fat Saga

It’s possible that the beginnings of measuring the buzzosphere as a kind of corporate science can be traced to the Great Oreo Trans-Fat discussion of 2003.

In 2003, a consumer advocacy group, Ban Trans Fat, sued Kraft for making Oreos, a product the plaintiffs claimed Kraft knew was harmful to consumers. BuzzMetrics analyzed the buzzosphere and found that the lawsuit took the issue of trans-fat out of specialized chat rooms and brought it to a wider audience. It also found that while consumers were negative about the lawsuit, bloggers and chat room denizens accurately predicted an uprising against trans-fat that had its germ on the Internet.

Teasing out this sort of nuance is part of the appeal of monitoring word-of-mouth and consumer-generated media, says BuzzMetrics’ Mr. Carson. Monitoring these online conversations provides a more subtle portrait of the citizen shopper. Rather than simply measure impressions—how many times a family watched a TV commercial, say—BuzzMetrics can measure the response to that commercial.

Both BuzzMetrics and Cymfony read the buzzosphere with the same sort of tools that the U.S. government uses to trawl the Internet for open-source intelligence. In fact, Cymfony’s technology was originally designed for the federal government, although the portion of its business that took government contracts has since been spun off into a separate company.

BuzzMetrics’ search engine sends spiders and bots out across the Internet to gather relevant information. The data is retrieved and packaged in such a way that marketers can make sense of it. The BuzzMetrics technology can also identify influential bloggers or chat room nabobs.

Sifting through the chatter, it can distinguish online groups and communities that cluster around particular products or topics. They act as unwitting focus groups that can reliably deliver market intelligence on a particular subject.

Mr. Carson says that one half of his business comes from customers who pay him to serve as a sentinel on the front lines of customer opinion, keeping an ear open for the first hints of a public relations crisis or a dip in customer satisfaction. The other half uses his company’s research to make a decision on a single product or marketing campaign. For example, BuzzMetrics is now being paid by a large packaged consumer goods company that is trying to decide what sort of oil it should use in its new edible product.

Gate-Crashers

Do these online communities mind the intrusion? It’s easy to imagine the host of a UseNet group devoted to organic wines being a prickly customer, less likely to open the door to marketing types. But Cymfony’s Mr. Nail points out that the whole culture of blogging and expressing views online is often very public, and one that wants to wield influence. But it is a savvy culture, too. “The makers of consumer-generated media are very sensitive to the accuracy of the conversation,” he says.

Mr. Carson says that people have largely accepted the fact that a lot of information, once private, is now public and available online. “We know that we are going to be googled before a first date or a job interview,” he says.

But don’t get carried away, cautions Walter Carl, a business professor at NortheasternUniversity, and a board member of the Word of Mouth Marketing Association. Mr. Carl’s research finds that only 20 percent of word-of-mouth marketing happens online. The great majority still happens at PTA meetings and in the break room at the office. And companies like BuzzMetrics are not tracking what happens in private online correspondence like emails.

Mr. Nail allows that a company like Cymfony tracks only part of the conversation, but it is an important conversation and one that often portends a move to the broader media. When that happens, it’s not usually in a way that companies like. He also says that there is not an impermeable wall between online conversations and offline conversations: discussions drift from chat rooms to break rooms, and both sides influence each other.

While the U.S. Department of Justice originally asked Google in August for two months’ worth of search queries, government and Google lawyers recently agreed to a diminished request in private negotiations after Google fought the first DoJ subpoena, according to Bloomberg. A Google spokeswoman told CNBC that the company is “very pleased” by the curtailed DoJ request, which seeks the information to bolster a bid to revive an Internet pornography law.

Judge James Ware in the U.S. District Court for the Northern District of California in San Jose ended Tuesday’s courtroom showdown by saying that he would issue a written ruling very shortly.

Google stock gained $14.10 to $351.16 on the Nasdaq.

Reuters reported that government lawyer Joel L. McElvie told Judge Ware that the government can make its case without the data from Google, but that the government study would be “substantially improved,” if Google provided what the DoJ wanted.

Judge Ware’s decision could have broad ramifications beyond DoJ research. A decision in favor of Google has law enforcement worried that it will be harder to obtain search records to solve future crimes. But privacy advocates fear that a ruling on the side of the Bush administration would weaken laws protecting personal information.

Google has said that the requested information would be far more useful to competitors in the form of trade secrets and proprietary systems than it would be to government lawyers. The feds have been seeking the information to bolster a legal theory arguing that banning Internet porn does a better job of protecting minors than technology filters.

In late February, the DoJ sought to assuage the worries of privacy advocates and said in a brief filed Friday, “The government seeks this information only to perform a study, in the aggregate, of trends in the Internet. No individual user of Google, or of any other search engine, need fear that his or her personal identifying information will be disclosed.”

Google’s rivals, Yahoo, MSN, and AOL, all apparently agreed with the DoJ, and complied with similar requests for information. The Bush administration is seeking to revive the 1998 Child Online Protection Act, which the Supreme Court struck down two years ago as a violation of free speech.

Meantime, Google continued with its stealthy acquisition of small companies. The Google blog Tuesday had a post from Jeff Martin, the product marketing manager for SketchUp, a small, six-year-old Boulder, Colorado company that makes 3D design software, announcing that Google bought the company. The terms of the deal were not disclosed.