A startup coming out of stealth mode is hoping to upend the market for digital products in the same way eBay did for all types of physical products.

Expected to launch in the next week or so, San Francisco-based Zipidee will let companies sell videos, music tracks, ebooks, mobile ringtones, software, games, and podcasts through its online marketplace.

The idea is to allow small to medium sized companies—and individuals—to set up "stores" much like they can already do on eBay, but merchandise on Zipidee will be limited to digital goods.

But unlike eBay's auction system for physical goods, digital download prices on Zipidee will be fixed by the seller, much in the way that Apple's iTunes store set prices for digital music tracks.

Zipidee's sellers will be able to control the price of their goods and the method by which they will be distributed. Zipidee, founded this February, is backed by Individuals' Venture Fund, which invested in Salesforce.com and Netlogic, as well as Novus Ventures, and Khalda Development.

Zipidee's marketplace is initially focused on selling "prosumer" content—especially instructional or educational videos—that are professionally produced and often sold offline as DVDs. Zipidee has signed up gurus such as Marcia Wieder of Dream University and Christine Comaford-Lynch of Mighty Ventures, who bring legions of devoted fans.

But the challenge for Zipidee will be to attract a large enough audience, when few online content companies have been successful charging customers for content, said Greg Sterling of Sterling Market Intelligence. People have often come to expect digital content and goods to be free, unlike the physical products for sale on eBay.

"The theory of (Zipidee's model) is right in the sense of the so-called long tail and all the niche segments would seem to support a subscription model," Mr. Sterling said. "In practice it's hard to get large numbers of subscribers. There are people out there who will pay. The question is how big is the market."

Zipidee will have to offer a high quality product and unique content that isn't available elsewhere, he added.

Zipidee is also targeting offline DVD and educational content distributors, offering to digitize their content. Finally, the company is in talks with some large media companies about finding ways to monetize their content. Zipidee said it is purposely avoiding most entertainment content because heavyweights such as Apple and Amazon already dominate that market.

Sellers can decide whether they want to use Zipidee's proprietary DRM protection, and whether they want to allow users to rent content for 30 days, purchase individual units or an entire collection at one time. Buyers can also opt to download content or receive it as a stream.

The service allows more information for sellers about how their products are selling—for example real time information—than iTunes does with its monthly reports.

These various services will allow small to medium sized sellers to easily get their products to market in a self-serve format, says Zipidee CEO Henry Wong, rather than spending money to distribute it through DVDs or other channels.

Zipidee is seeking to offer an alternative to both existing pay models for content and free ad-supported models. On the pay side, content creators—not to mention media companies—are often unhappy with iTunes, which takes a large cut of revenues. And free video sites such as Revver and Veoh generate substantial ad revenues only if their videos are massive global hits.

"The online ad model is great for entertainment but that requires massive viewing," Mr. Wong said. "For the content we're going after, the smaller niche audience, the price point is much higher."

Zipidee will charge a $1 listing fee and collect roughly 20 percent of the purchase price. Zipidee also has a number of consumer-friendly features like an eBay-style ratings system.

Mr. Wong has a background in digital marketplaces, having invested in AdECN, the online advertising marketplace that was recently acquired by Microsoft.

As Mr. Wong knows from his work with AdECN, he needs to pull in a large amount of inventory from sellers to ramp up his site into an active functioning marketplace. If he can do that then, as with his Microsoft exit, his marketplace could take off.

The Menlo Park, California-based firm recently opened an office in India as part of this push. With good reason: The Indian economy’s fast growth has translated into a large consumer market for new startups.

“In India there’s a rising middle class that’s craving basic services that are just coming online,” said Lightspeed general partner Jake Seid, who is heading up India operations for the firm.

Last week Lightspeed announced its lead in a $10 million Series B for Bengalore-based Four Interactive, which runs Asklaila.com, an Indian version of Yelp. It’s the first India-market startup that Lightspeed has invested in.

Last December Lightspeed announced investments of $22.5 million in  Mercantila and $7 million in TutorVista. Mercantila is a collection of online specialty stores selling to U.S. and Canadian consumers. TutorVista finds highly educated but cheap tutors in countries such as India and connects them with students in developed countries. (See “Lightspeed Enters India.”)

Asklaila.com has user reviews of restaurants, shopping, and events in a number of Indian cities. This is much needed because the quality of business information in India is still fairly low, compared to the U.S., where business directories are well established, said Mr. Seid said. The interest Asklaila.com has generated indicates the potential for a leading business directory for India’s 1.1 billion population.

Lightspeed is not just looking at tech investments in India. The firm is  eyeing non-tech companies as well, and it plans to focusing more on growth opportunities rather than early-stage companies. “Certain consumer-facing sectors create a tremendous opportunity for basic goods and services we take for granted here—they’re just being developed (in India),” Mr. Seid said.

The challenge in investing in India is making sure the companies and business models are well-suited for the particular character of the market. “It’s about trying to apply an India lens to India as opposed to taking a U.S. formula and trying to do a cookie cutter thing,” Mr. Seid said.

Some of those challenges include the state of broadband, which is in a much earlier stage than in the U.S. “In the U.S. we’re in year eight of broadband rollout,” Mr. Seid said “In India it hasn’t started to ramp up yet.”

The companies Lightspeed have invested in have been of two types: India-focused and hybrid/global-focused. The India-focused companies, such as Asklaila.com, have operations as well as their target market in India. Meanwhile the hybrid companies such as  Mercantila and TutorVista have substantial operations in India but are serving markets in the United States or globally.

Mr. Seid has been traveling back and forth to India to build up Lightspeed’s portfolio in the region and is soon going for an extended trip. Expect more investments to come.

Munich, Germany-based Proximic hopes to do away with random text ads. The startup has a new form of search technology it calls “pattern proximity” that reads information on web pages and then contextually matches that to appropriate content and advertisements.

What's different about Proximic is that it uses a widget, a piece of embedded software for adding those little windows of features. Proximic’s widget matches a particular web page to other content—from the same web site, from news sites, from Wikipedia, and from the across the web—that is constantly updated. This is particularly useful for news sites, where information is constantly changing.

The company—founded in 2001 and backed by Munich-based Wellington Partners and Holtzbrinck Group, publisher of Scientific American—announced two major publishing partners Monday: London-based The Independent newspaper and Nature Publishing Group.

While there are a number of contextual matching and discovery services—such as Aggregate Knowledge, Inform, Sphere, and Loomia—Proximic CEO Philipp Pieper says the company’s technology is fundamentally different.

Proximic’s matching technology is different from both Google’s keyword system in its Adsense program, as well as other hot areas like semantic search. Instead of matching an ad based on a particular keyword, Proximic’s algorithm essentially processes the characters on the page, parsing out unrelated content on the page, to provide the best match. The widget also provides relevant ads—using the same matching system—together with the content, under the header “infotizements.”

This on-the-fly processing is independent of the language on the page, allowing Proximic to match nonstandard language such as obscure gamer nomenclature or certain types of slang, Mr. Piepper said. This also allows Proximic to store much less data about each web page, allowing quicker searches, Mr. Pieper added.

The benefit for publishers is more page views within that publisher’s site, as well as better capture of revenue because of higher click-throughs on Proximic’s more relevant ads.

A test of the product on The Independent and Nature web sites produced highly specific results on topics such as Burma and ecology, respectively.

Proximic’s technology also beats semantic technology, Piepper said, because it does not need to spend time indexing the entire web—and constantly updating.

The close aligning of ads with content is part of a broader move toward highly targeted marketing that tries to get people to view ads as content. Google has championed this with its AdSense and AdWords programs.

Because there are no keywords, Proximic provides ways to make money from articles or pages that do not fit into neat keywords and may normally have generic Google text ads with them, IDC analyst Sue Feldman said. This could be a “game changer,” Ms. Feldman said.

Jörg Überla, the partner at Wellington who invested in Proximic, has a Ph.D. in speech recognition technology and believes Proximic’s technology is a breakthrough. “I realized it’s not just a marginal improvement to the way search algorithms work but a fundamental difference from anything I’d seen anywhere,” Mr. Uberla said.

Proximic is also part of a wider move toward syndication of content across the web—that compels publishers to find outlets for their content outside of their own destination sites. Proximic syndicates publishers’ content throughout its content network.

Existing investor Menlo Ventures was joined by Sierra Ventures, bringing the company’s total investment to about $30 million.

Redwood City, California-based NebuAd partners with Internet service providers to track which web sites the ISP’s customers view. This can work via cable, DSL, or satellite Internet service.

This technology, known as deep packet inspection, allows NebuAd to not only see what web sites people visit but also what queries those users enter into search engines, and which web sites they go to from those searches.

The technology is similar to what is used by anti-virus companies to scan a vast amount of web traffic flowing through ISP networks and is also used by some ISPs to limit the overuse of peer-to-peer networks.

The company then has contextual targeting technology that serves specific ads based on user interest. NebuAd also provides ad serving.

NebuAd claims to provide a much deeper level of information—while keeping individuals anonymous—about a user’s interests online, compared to cookies, or search engines. For advertisers, NebuAd says it offers a much more targeted audience, finding “microsegments” for big brand advertisers such as, for example, those interested in iced tea or Mountain Dew rather than Pepsi.

Privacy advocates are not likely to be happy, given that many already have criticized Google’s proposed acquisition of DoubleClick, which could allow Google to compile both a user’s search history and web browsing history.

But NebuAd CEO Bob Dykes said the company does not store individual user’s web browsing history, but rather uses the information to essentially mark check boxes of interest, such as “travel/South of France,” though not storing the precise web site that particular user viewed about the South of France.

In addition, Mr. Dykes said the company does not store information on things about which it does not serve ads—such as pornography or illegal items. NebuAd also doesn’t collect information about a user’s searches on pharmaceuticals, viewing that information as too private, Mr. Dykes added.

Vancouver-based Adzilla, which closed a $10.25 million Series A round in August, also does contextual ad targeting with ISPs.

ISPs are required to inform their customers that they will employ NebuAd’s technology and give them the opportunity to opt out—in which case they will see generic ads instead of targeted ads.

The advantage for telecoms and other ISP companies is that they don’t have to pay to implement NebuAd’s service, but still get a revenue share from the ads. “ISP’s are very excited that they don’t have to make an investment,” said Mr. Dykes, who was previously CFO at Juniper Networks. “We provide all the equipment, deploy the boxes, and start sending them checks.”

Historically, ISPs have not been able to access the Internet ad market in a significant way, said Menlo Ventures managing director Sonja Hoel Perkins.

For Ms. Perkins, NebuAd was compelling because of the rapidly growing online ad market, and the technically complex problem that NebuAd has solved. “To me as a venture investor I’m always trying to invest in the next billion-dollar company,” Ms. Perkins said. “This has a great opportunity to be very large very quickly.”

NebuAd is testing with some ISPs but hasn’t released the names of any partners yet.

NebuAd may not make search engines like Google happy, because NebuAd can grab a user’s search queries and click-through history in the same way that Google does. Google uses that information not only to develop its search engine rankings, but also to determine which ads get placed where, and to personalize search and advertising results.

But according to Mr. Dykes, users can do whatever they want with their search information. “It’s the user’s information, not the search engine’s information.”

What remains to be seen is whether users are willing to give up more of that personal information in return for more relevant and targeted ads.

A growing number of entrepreneurs and investors promise a next-generation Internet that is organized, simple to use and makes it easy for people to find things.

The so-called semantic web will be based on search technology that will enable people to type in their questions using everyday language. Developers of next generation search engines say their technology will “understand” the language within those queries—much more precisely than Internet giant Google’s technology.

The new search engines will then scour databases that have already “read” documents from across the web to find the best matches. Specific answers can be found for queries such as “Which is the best oil company in the world?” or differentiate between “movies by women,” and “movies about women.”

That’s the goal of a handful of semantic search startups that hope to change the way people look for information online. But their greatest challenge will be taking on Google, which vaulted to the forefront of the Internet search market by creating the simple but sophisticated engine that now processes roughly half of all U.S. searches.

The challenge may be great, but the rewards are worth it because search results these days go hand in hand with advertising dollars. Don Dodge, who heads business development for Microsoft's emerging business team, estimates that 1 percent of the U.S. search market is worth more than $100 million in annual revenue and $1 billion in market cap.

New York-based hakia has already launched its semantic search engine, with positive reviews for its ability to quickly find very specific information. The company also released a browser plug-in that lets users find exact sections of documents that contain the answers to searchers’ queries.

Search engines like Google rank search results mainly based on popularity without much understanding of what is on each page, according to Melek Pulatkonak, hakia president and COO. At hakia, "a lot more analysis has been done offline to extract meaning of what each page is about," she said.

The company is also building a "chat box" that will allow users to ask a question in an instant message format that hakia believes is more in tune with young people. hakia currently uses Ask.com's advertising system, but it is expected to launch its own ad platform next year.

The most hyped of this emerging group is San Francisco-based PowerSet, even though it has not yet launched its search engine yet.

It is backed by prominent investors such as Esther Dyson and the Founders Fund, it has earned a reputation for poaching Google engineers, and it has licensed sophisticated language technology from Xerox. Still, getting a computer to understand natural language—and find the appropriate search result—is a difficult process.

Skeptics say most people are happy with the average search query of about two words. “Generally, users are extremely lazy,” said Jakob Nielsen, a consultant on Web site usability. “The less work they have to do, the more successful Web sites tend to be.”

Barney Pell, CEO of PowerSet, conceded that semantic search engines must convince people to change their search behavior. But web surfers have been trained to use keywords on Google, even though that is not the way people think. So that behavior can change, he argued.

PowerSet this week launched PowerLabs, an invite-only program for users to test a demo built to search online encyclopedia Wikipedia. In one example, the program extracts facts about people and things in Wikipedia, such as Hulk Hogan. It also compares PowerSet’s results side by side with competitors to show the company’s progress.

Some companies are taking a more pragmatic approach by creating semantic products for more specific tasks. Startup Radar Networks—backed by Paul Allen’s Vulcan Capital and Leapfrog Ventures—has developed an information sharing and collaboration service that allows people to find and share web sites, photos, products, and other information with others. It is expected to launch later this year.

And already-launched AdaptiveBlue, backed by Union Square Ventures, has a widget that automatically searches for books, movies or music related to any web page that a person is viewing. (See “Semantic Technology Now.”)

For its part, Google has a number of engineers working on natural language, including noted expert Ramanathan Guha. And Google’s technology is already savvy enough to answer simple questions like “What is the population of Japan?”

However, the company’s philosophy has been: the simpler the better. “For the majority of questions, that's not what people want,” Peter Norvig, Google's director of research, recently told Technology Review. “They don't want the burden of having to express it as a full sentence.”

The startups have one key advantage: Google is rapidly pushing into new markets such as word processing, online payment systems, and mobile devices. These new markets provide higher growth—and more satisfaction for Wall Street—than rebuilding its existing search engine would.

That leaves an opening for upstarts – if they can provide users with a good enough reason to switch from Google’s powerful simplicity, said Greg Sterling of Sterling Market Intelligence.

“These engines need to create incentives to change and reward people for their behavioral change,” he said. “If (semantic search engines) deliver, people will likely respond.”

ABC today announced a deal to distribute television shows through AOL, following NBC, CBS and Fox, which also have such deals.

Separately, NBC Universal said it will allow users to download its television shows and watch them for free for one week after they are broadcast.

The NBC Direct program, to begin testing in October and launch in November, will have shows would have commercials embedded within them and would not be transferable to other computers. Next year, NBC hopes to offer downloadable shows that users could buy and then move to other computers or devices.

The venture is part of NBC’s attempt to find a way to generate new revenues from its television content. NBC recently pulled out of a deal it had with Apple to distribute content via iTunes, because Apple would not change its pricing structure.

The NBC Direct announcement, however, had some observers scratching their heads because NBC already has a deal with News Corp. to aggregate and distribute content on their jointly-owned Hulu website. With Hulu distributing content to AOL, MSN, MySpace, and Yahoo, some wondered why users would need to use NBC Direct. And Hulu has been delayed, while competitors like YouTube, Amazon Unbox, and MySpace TV are building their own programming and distribution.

Walt Disney’s ABC for its part is also feeling out its own strategy. Like other media companies, ABC is no longer content to simply present its content on its own website. It is instead seeking to distribute its material as widely as possible through large Internet partners. 

To appease local ABC affiliates, ABC will use so called contextual targeting information from web surfers to serve locally-based advertisements with the AOL-distributed content.

Many analysts still wonder whether big media companies can generate revenue through online distribution. Web surfers are traditionally thought to be more interested in “video snacking”—watching short video clips such as those found on YouTube—than watching full length television shows.

The Internet giant’s new technology can be used to create a variety of ads that can be distributed across Google’s web sites, as well as a network of Google-affiliated sites.

Google has already signed up a group of large advertisers to create their own “gadgets,” the company’s term for widgets. The gadgets can include video, images, constantly updated data feeds, and mini versions of entire web sites.

Some of the features are similar to the dynamic interactive ads that Google has recently released on YouTube videos. (See YouTube's New Video-Ad Standard.)

Google’s new ads will help the company tap into the increasingly viral manner in which audio, video and data content is being distributed across the Internet. The growing use of RSS feeds and widgets—which enable Internet users to embed small content windows on third-party pages—means that companies no longer exclusively control the content that appears on their websites.

This shift has created problems—and new opportunities—for advertisers and websites. Observers have speculated on how social networks MySpace and Facebook would generate revenues from their widget-cluttered personal profile pages. Photobucket in April got under MySpace’s skin—before MySpace bought it—when the photo-sharing company released a Spiderman ad inside a MySpace widget.

On the other hand, advertising and web services companies like NewsGator, AdMission and ShopLocal have been developing advertising-supported widgets for clients.

Google’s new ad technology could attract deep-pocketed advertisers that favor graphic and rich media ads to text ads, a format for which the Internet giant is best known.
 

“For Google it answers the question of how they are going to create more interest among brand advertisers—the larger spenders who are looking for more display and rich media,” said Andrew Frank, Gartner analyst.
 

While graphical widget ads are not unique in the industry—Microsoft, Yahoo, and Adobe are working on similar ideas—none of those competitors currently have this level of product, Mr. Frank said. The platform, which incorporates the use of YouTube video, iGoogle, and AdSense is impressive on a technology level, Mr. Frank added.

Advertisers can embed PayPal or Google Checkout online payments function into Google’s ad gadgets, which would let customers buy products and service through the widgets.

The only piece that is currently missing is a contextual targeting tool for the personalized serving of graphical ads of the sort that Google would get if and when its deal to acquire DoubleClick closes, Mr. Frank said.

Advertisers that have already tried Google’s new ad gadgets include Honda, Intel, Nissan, Pepsi’s Sierra Mist, and Viacom’s Paramount Vantage. One Intel ad lets users play the game “Pong” using an Intel laptop.

In another example, Google’s interactive ad gadget lets users view various parts of the inside of a Nissan car, as well as enter a zip code to get a real-time traffic map. (See examples here.)

The new Google ads can be placed on iGoogle personalized homepages as well as Google’s network of affiliate sites. This is the kind of viral marketing that advertisers have been salivating over.

The new software, similar to Microsoft’s PowerPoint program, builds on Google’s strategy of building a free web-based office suite.

The presentation program, which doesn’t have a name, can open PowerPoint files up to 10 MB in size. The main benefit of program is the shared viewing and integration with Google Talk. Multiple users can watch a slideshow presentation online and chat alongside it.

One blogger called the new program “pretty average,” because there is no ability to export the files into PowerPoint files, and there are no bells and whistles like the ability to add transitions, audio files, or other content from the web.

Meanwhile IBM today introduced a free desktop software program, Lotus Symphony, that also will compete with Microsoft Office.

Yahoo said Monday it was buying open source email and calendar service Zimbra for $350 million.

The deal will help Yahoo leverage its popular Yahoo Mail service as the company struggles to compete with Internet giant Google and social network sites such as MySpace and Facebook.

Founded in December 2003, Zimbra provides white-label email services to ISPs, universities and small- to medium-sized businesses. In March, the company announced it had 6 million paying customers, many of whom had chosen Zimbra as a cheaper alternative to Microsoft’s Exchange platform.

Zimbra recently landed a major deal to provide email service to subscribers of Comcast, the largest U.S. cable operator. Under the agreement, Zimbra could also provide visual voicemail services and calendar function tied to television schedules and on-demand content. Yahoo already has a deal to provide display advertising for Comcast.

Zimbra, backed by Benchmark Partners, Redpoint Ventures, Accel, Sumitomo, and Duff, Ackerman & Goodrich, has raised a total of $30.5 million.

Buying Zimbra will allow Yahoo to build on its strength in email. It has 250 million users on email to rival Google’s approximately 50 million. Yahoo also recently released a well-received new version of Yahoo Mail that lets users send instant messages within the email program and send text messages to mobile phones.

A key weakness for Yahoo is its lack of a cohesive social networking service that rivals MySpace or Facebook. The company is now working on a new service called Yahoo Mash, but Yahoo president Sue Decker in July pointed to Yahoo Mail as a promising social networking opportunity.

Ms. Decker called it “one of the Web’s largest dormant social networks and one that we are aggressively pursuing ways to activate.”

It remains to be seen whether the Yahoo Mail audience will be interested in social networking of the sort that runs wild on MySpace and Facebook.

The Time Warner-owned company launched a new unit called Platform A, which will incorporate behavioral ad firm Tacoda, mobile unit Third Screen Media, and video ad outfit Lightningcast (See "AOL Bets on Good Behavior."), all of which AOL recently acquired.

The integration of these disparate parts together with AOL’s third-party ad network, Advertising.com, will make it easier for advertisers to place ads on third-party Internet sites in addition to AOL’s own web pages.

AOL also said it would move its corporate headquarters from Dulles, Virginia to New York City, home to the U.S. advertising industry. Mike Kelly, formerly head of AOL Media Networks, leaves in the restructuring, with Curtis Viebranz, formerly CEO of Tacoda, taking over as president of Platform A.

The changes emphasize the increasing importance of selling third-party advertising to AOL’s future, which Advertising.com has done with relative success. It is the largest U.S. ad network, reaching 85 percent all U.S. Internet users. Tacoda also has strong relationships with third-party publishers and big brand advertisers.

AOL’s owned and operated portal, meanwhile, has just about 5 percent of the U.S. search market.

AOL, which built itself into a giant portal by charging customers for Internet access, last year turned away from its subscriber-based business in favor of an ad-supported model.

With the growth of the online advertising market, AOL’s competitors have also been going after third-party networks. Yahoo has signed up the likes of eBay, Comcast, and a consortium of newspaper websites, Microsoft recently acquired AOL competitor aQuantive, and Google dominates third-party text ads with its AdWords platform.

AOL has been the focus of rampant spin off speculation in recent days. Some analysts believe that when Time Warner president Jeffrey Bewkes soon takes the CEO chair from Dick Parsons, restructuring is inevitable. Time Warner’s stock is below where it was when Mr. Parsons became CEO in 2002. In August, AOL was rumored to be in talks to merge with Yahoo.

But with AOL being one of Time Warner’s few growth bright spots recently, there’s no guarantee that it will be sold off.

New Kiptronic CEO Bill Loewenthal was formerly vice president at Replay TV. Founder and former CEO Jonathan Cobb becomes CTO in the move.

Mr. Cobb, whose background is in engineering, said the company’s rapid growth and volume of customers made it the right time to bring in an experienced business executive to lead the company.

Mr. Loewenthal said the position was attractive because of Kiptronic’s technology and the current state of the market, where downloadable media in video and podcasts is becoming expected.

“Consumers want their content where they want it and when and how they want it,” Mr. Loewenthal said. “Media companies that recognize that are taking advantage.”

Kiptronic, which provides pre- mid- and post-roll ads in downloadable content, will be announcing some large new clients in the coming weeks, Mr. Loewenthal said.

(RELATED: "The Web-Video Ad Puzzle.")

The deal shows that the hyper-consolidation in online advertising and marketing is not limited to billion-dollar deals for big name companies such as DoubleClick and aQuantive, which were snapped up by Google and Microsoft, respectively.

Online marketing niches, such as behavioral targeting, have drawn interest recently with AOL agreeing to acquire TACODA. And Offermatica’s expertise is not in third party advertising but in helping companies wring the most dollars out of their web sites once users follow ads and finally get to a particular site.

San Francisco-based Offermatica is best known for products that allow marketers to test new elements and structures on their web sites. Companies testing the performance of their sites used to have to implement manual processes. Offermatica has developed software that allows companies to quickly test different features of large data-driven sites. The company has more than 100 clients, including Circuit City, ELOAN, Monster.com, and Williams Sonoma.

Orem, Utah-based Omniture provides web analytics and web site optimization services. It acquired behavioral targeting company Touch Clarity in February for about $51.5 million. Touch Clarity’s technology customizes content on a web site so that it is targeted to individual web surfers.

Like many other digital marketing companies, NASDAQ-listed Omniture has broadened its scope in recent years. While often known for helping ecommerce companies increase the number of purchases users make on web sites, Omniture also provides search marketing and optimization services aimed at increasing clicks to company web sites.

Omniture went public in June, 2006, with a disappointing IPO price of $6.50 a share, versus an expected $8 to $9 a share. Still, the company has been reeling in large clients while also targeting mid-sized companies

Omniture in July released quarterly earnings showing GAAP net loss of $4.1 million or 8 cents a share, compared with 2.3 million or 16 cents per share in the year-ago period. Revenue was up 78 percent over the year-ago period, at $33.5 million, as the company has some big name clients such as eBay, AOL, Wal-Mart, Sony, and HP.

The acquisition was expected to help boost Yahoo’s effort to develop a third-party advertising network, helping the Internet company better compete with rivals such as Google and Microsoft.

San Jose, California-based BlueLithium is the fifth-largest U.S. ad network, reaching 66 percent of Internet users, according to comScore. Founded in January 2004 and backed by Walden Venture Capital and 3i, BlueLithium’s bread and butter is aggregating and reselling banner ad inventory to marketers.

The BlueLithium is also known for its behavioral targeting, which has become the must-have for online marketers. Behavioral targeting allows marketers to target users based on the sites they’ve visited, as well as demographic and geographic characteristics. Yahoo recently launched SmartAds, a nascent effort in this area.

The acquisition also gives Yahoo a leg up in performance-based marketing, which allows advertisers to pay only when a user takes a certain action, such as clicking an ad, filling out a form, or buying something.

Up until now, Yahoo’s banner advertising efforts—as on the Yahoo portal homepage, for example—have focused on brand advertising from large companies that pay based on the number of views by users. The acquisition could give Yahoo access to a new market, since performance-based advertising tends to be done more by small- to mid-sized companies.

The agreement to buy BlueLithium follows Yahoo’s $680 acquisition of Right Media, which runs the most well-known advertising exchange. Right Media helps match buyers and sellers of remnant or non-premium banner advertising in an automated auction format.

BlueLithium will operate as a wholly owned subsidiary of Yahoo.

The prototype site is a move that critics have long suggested is critical for Yahoo if it is to compete with arch rival Google and a growing number of upstart social networking sites.

Yahoo has had some success in social media with Yahoo Answers, photo site Flickr and bookmarking site Del.icio.us. But it has failed to create a larger general social network that can compete with the likes of Facebook and MySpace, both of which have eaten into Yahoo’s pageviews.

Yahoo’s main social networking offering, Yahoo 360!, has not gained significant traction and the Internet giant reportedly fell short in s bid to buy Facebook for as much as $1 billion.

The new Yahoo site in private testing, known as Yahoo Kickstart, features corporate group pages in which students can link up with employees from a variety of firms. This feature, according to News.com, can be used by students looking for job opportunities or to meet alumni who now work at those corporations.

This career twist on the typical youth-oriented social network site would place Yahoo in direct competition with LinkedIn, another site that helps Internet users expand their networks. However, the user base would presumably be much younger since the audience is geared toward college students.

A potential plus for Yahoo is that it would avoid directly competing with MySpace and Facebook, which have grown to popularity more as social vehicles, rather than career sites. You’d just as likely see frat party pictures as a resume on MySpace or Facebook.

In addition to the company pages on Yahoo Kickstart, the site has personal pages for individual users to post their resumes. The site also contains a group for each university, presumably to aid in the job-search process, while also providing a hub for social networking on campus.