Facebook will soon be allowing all users to claim a vanity URL pointing to their regular profile page, we’ve heard from a reliable source. The announcement should come sometime later this week. Afterwards, at a certain date and time, the landrush will begin. Users will be able to grab a vanity URL of their choice.

The Landrush rules will prohibit trademark infringement and a lots of words will be blacklisted, such as generic terms. But for the most part, we hear, users will be able to grab a name that they like.

Facebook has been toying with vanity URLs for some time. URLs for user profiles are currently user id numbers – such as facebook.com/profile.php?id=500065899 (that’s me). In March some Facebook pages started rolling out with vanity URLs, although you must have a business relationship with Facebook (or know someone there) to get one. Facebook.com/techcrunch, for example, links to our TechCrunch page.

The reason they need them – vanity URLs have proven to be a powerful tool on MySpace, Twitter and other services. It’s not just that users like them and it makes telling people your profile name easier. People have also long used MySpace URLs as their online identity. Twitter, more recently, has started to become the online identity provider of choice. Even Google is getting in on the vanity URL game. Facebook doesn’t want to give that up.

Facebook has recently polled users to see if they’d pay for a vanity URL. We have no idea if they plan on charging for the landrush at this point.

Stay tuned, and in the meantime start thinking up that perfect Facebook name. I want facebook.com/mike myself. Oh wait, I guess Facebook employees get first pick. So you’re also out of luck if you’re name is Mark.

Google today announced a new Internet-based communications and collaboration platform; Google Wave. While some of the details are still a bit sketchy, Google Wave looks to be an integrated communications platform that brings together email, chat, photo-sharing, and collaborative editing features. Google describes a ‘wave’ as “equal parts conversation and document” and the Wave team basically sees it as a replacement for email and other collaboration tools.

Reinventing Email for the 21st Century

Users will be able to create ‘waves,’ and add documents and collaborators to it. The system will feature concurrent rich-text editing, as well as email and IM-like messaging functions. Lars Rasmussen, one of the co-founders and lead engineers behind this project, especially stressed the real-time nature of Wave, where edits to a wave, be they new messages or edits in a document, appear immediately on the screens of all participants.

From what we have seen, Wave combines aspects of productivity tools, social networks, and micro-blogging. One of the most interesting features is that every change to a wave is captured and users can ‘replay’ how the specific wave developed over time. Wave will allow users to send private and public messages, and Google is heavily relying on HTML5 to make the product work well in modern browsers. We will have a more detailed look at all the features of Wave once we get access to the product itself.

Developers, Developers, Developers

Google is also making a set of APIs available to developers today. These APIs should give developers the ability to enhance Wave by building extensions for the core product, but also to embed Wave’s features on other sites to make them more collaborative. One extension Google offers today, for those lucky enough to have access to Wave already, is a Twitter extension, and Google will also offer the ability to integrate OpenSocial gadgets into Wave.

Interestingly, Google is taking a very open approach with this new product. Not only will it give developers access to Wave’s APIs, but the team also plans to open-source the protocols at the core of Wave, which really points at the greater ambition of the Wave team to see Wave and its protocols replace at least some of today’s standard communications systems.

Venture capitalists can be valuable sources of information about the tech community. Not only do they have quality insider information but they also have a knack for figuring out how to evaluate startups. So it makes sense that their blogs can be compelling reads.

Larry Chang, a partner at Fidelity Ventures, has compiled a list of the 100 top VC blogs, according to the number of Google Reader subscribers for each one. Chang admits that the rankings don’t necessarily equate to the best quality of content and that there is fine content coming from VC blogs with less subscribers. But the list is a good starting point. Chang says he will be highlighting the best VC blog posts from this list on his blog every two weeks and will update the directory to add new VC blogs quarterly.

Here are the top 20 on the list, with their Google Reader subscriber numbers (you can see all 100 on Chang’s blog):

1. Guy Kawasaki, Garage Technology Ventures, How To Change The World (17,555)
2. Fred Wilson, Union Square Ventures, A VC (11,821)
3. David Hornik, August Capital, VentureBlog (7,060)
4. Brad Feld, Foundry Group, Feld Thoughts (6,434)
5. Marc Andreessen, TBD, Blog.pmarca.com (5,099)
6. Josh Kopelman, First Round Capital, Redeye VC (3,310)
7. Ed Sim, Dawntreader Ventures, Beyond VC (3,239)
8. Jeremy Liew, Lightspeed Ventures Partners, LSVP (2,973)
9. Bill Gurley, Benchmark Capital, Above The Crowd (2,257)
10. Jeff Nolan, SAP Ventures, Venture Chronicles (1,528)
11. David Cowan, Bessemer Venture Partners, Who Has Time For This? (1,261)
12. Christopher Allen, Alacrity Ventures, Life With Alacrity (1,194)
13. Seth Levine, Foundry Group, VC Adventure (1,154)
14. Rick Segal, JLA Ventures, The Post Money Value (795) – Canada
15. Jeff Bussgang, Flybridge Capital Partners, Seeing Both Sides (727)
16. Mike Hirshland, Polaris Venture Partners, VC Mike’s Blog (726)
17. Tim Oren, Pacifica Fund, Due Diligence (661)
18. Jeff Clavier, SoftTech VC, Software Only (656)
19. Mendelson/Feld, Foundry Group, Ask The VC (587)
20. Matt McCall, DFJ Portage Venture Partners, VC Confidential (432)

(Image courtesy PhotoxXpress).

How-to video aggregator HowCast announced today that it has hit 500,000 downloads of its iPhone app and a quick spin of the service shows why – it’s fabulous. Just six months after launching, HowCast is already the second most popular free app in the Lifestyle category – behind the YellowPages and ahead of AAA Discounts. That’s pretty impressive.

HowCast was founded by a team of former Google and YouTube employees and raised $8 million in venture funding before it launched. The iPhone app is a great way to learn new things on the go and it’s a lot of fun.

There’s already an extensive HowCast community of video makers, Facebook Connect integration and an API. As we wrote in our original review of the app, it feels a little limited compared to the full website – but as an iPhone app it’s great.

Last time we wrote about HowCast it was co-hosting the Summit of the Americas with the US State Department. Not bad for a brand new company.

For a How-to experience that’s audio-free and more easily scannable, check out the iPhone app of WikiHow. For a broader view of the How-to world online, check out the ReadWriteWeb How-to Multi-site Custom Search Engine.

During the Google I/O conference this week, one of the presentations from Day 1 was on the subject of Google Chrome’s extension system. The long-awaited feature will finally deliver what Firefox and IE users have had for ages: a way to add more tools, services, and additional features to the browser.

If you’re playing around with one of the developer builds of Google Chrome, you can test drive this feature before it makes its public debut. Already, there are a handful of extensions available including an ad-blocker called AdSweep, a PageRank checker, and Cleeki, an extension that ports IE8 Accelerators to Chrome.

About Extensions in Chrome

According to articles from both Google Operating System and CIO, here’s what we know about how extensions work in Chrome, as described during that I/O presentation:

1. Extensions use HTML, JavaScript, and CSS so they’re easy for developers to write.
2. You don’t need to restart the browser after installing an extension (hurray!)
3. Extensions will work in all future versions of the browser. Developers won’t need to update their extensions with each new release. (No more abandoned extensions!)
4. Extensions will run as separate processes: one per extension.
5. Extensions can appear at the bottom of the browser. During the demo, an add-on that displayed new stories from Google Reader was shown in a bar at the bottom of the browser.
6. Google will control the look of extension buttons to keep Chrome’s UI uncluttered and consistent.
7. Google will build an extension gallery where developers can submit extensions and users can find extensions to install.

Extensions Available Now

There are already some interesting extensions under development, which you can test out now in a developer build of Chrome.

AdSweep

AdSweep is an add-on that hides advertising on web page you visit similar to how AdBlock works. It uses JavaScript to adjust the CSS of a page and is also available as a user script.

Page Rank for Chrome

Page Rank for Chrome (shouldn’t that be “PageRank?”) is a simple extension that shows the Google PageRank for the current web site.

Cleeki

Perhaps the most fascinating of the three, however, is Cleeki, an extension that delivers the functionality of IE8’s Accelerators to other browsers, a list that now includes Chrome. Accelerators are one of the newest (and best) features in the most recent version of Internet Explorer. Available from the right-click menu, they let you quickly perform actions that would have previously required opening a separate web page (e.g. “map this,” “translate this,” “find on Facebook,” “define this,” “email this,” “Digg this,” etc.)

With Cleeki installed (read how to here), you can do many of those same actions, although its appearance is somewhat different. IE8 accelerators are listed in a small right-click menu, but Cleeki actually opens up a secondary window like a pop-up where you can choose from the available actions and see the results.

The size of that window may turn off some users, so it’s a shame that Google Chrome doesn’t currently allow for a user preference system since Cleeki is actually very customizable (size, skin, behavior, etc.). According to the Cleeki blog, there’s a hacking way to customize it, but they haven’t shared that info yet…perhaps they will in the future.

Developers, Write Your Own Extensions

In the meantime, while we wait for this feature to hit the public build of Chrome, developers can get cracking writing their first Google Chrome extensions. For help getting started, they should check out these sample extensions and this tutorial which demonstrates how to write a simple extension.

If you’re a developer who has built an extension for Chrome, let us know about it in the comments!

This is one post/chapter in a serialized book called Startup 101. For the introduction and table of contents, please click here.

In our 10 Things to Be Clear About Before You Start, we suggested that you decide whether to build a team of partners or fly solo. If you have decided to build a team of partners, even a small team of two, you’ll need to also decide how this partnership will work. Your only currency will be equity in a company that has not been formed and a venture/Web service that is no more than a gleam in the eye.

Create a Small, Balanced Team

Here is the advice of Naval Ravikant, serial entrepreneur and angel investor. His advice is directed at other angel investors, but that is a good context in which to look at this as an entrepreneur:

• “Invest in teams of two to three founders. Five is unstable, one is too hard.
• The best combination is one founder who can sell and one founder who can build.
• The team matters more in enterprise deals, traction matters more in consumer deals”

There is a reason why people talk about “putting the band together” and “rock stars” in this context. Solo artists can do great (think Bob Dylan), and when they get some success, they can bring in session musicians (contractors). But the history of pop music is more about the great combos: Lennon and McCartney, Simon and Garfunkel, Jagger and Richards. Those bands may have had four people in them, and the other two members in each may have been talented and driven, but it was clear who the stars were.

One Leader Might Emerge

But business is different from music. A great band like the Rolling Stones ends up becoming a corporation, but the skill-sets are different. Typically in a business, one founder emerges as the leader and CEO. Think Bill Gates rather than Paul Allen.

There are instances of two partners staying together and really building a big business together. Hewlett and Packard are great examples of this. But this is unusual because it does not fit the need of a company to have a CEO/leader who is recognized as such by employees, customers, and investors.

This is why drawing up some kind of buy/sell agreement is a good idea. You don’t even need a lawyer. Download the terms from the Internet. As long as the terms are mutual, nobody will get screwed. The buy/sell agreement simply acknowledges the fact that people change: their needs and motivations change. You might be the one who wants to get out of the partnership and move on. Or you might be the one who buys your partner out. Either should be possible.

But don’t get too hung up on the buy/sell agreement. Plenty of founding partners cross that bridge when they get to it. It is a bit messier doing it that way, but something can usually be worked out.

Dividing Up Something that Does Not Exist

We’ll cover the basics of creating a legal entity in a later chapter. Most ventures start without being incorporated. You may have heard legendary stories of founders getting a check from an angel first and then having to set up a company and create a bank account.

If the founding team is of two people, it’s pretty simple. If you have three or more, you will need to define the founders’ agreement one way or another. Here are four options:

1. Purely verbal. “We’re all buddies and understand each other, right?”
2. Each of you hires a lawyer and lets them hammer away at each other on your nickel. Hm, now where’s that nickel?
3. Document what you have verbally agreed on via email exchanges, and the next time you’re all together, print it out and sign it.
4. Download a legal template, put in the terms you have agreed on, and sign it, possibly after getting one hour of legal advice from a buddy at law school.

Somewhere between three and four partners is recommended. Even buddies can misunderstand each other. When there is nothing to fight over, there are no fights. But when it looks like the venture might take off, greed sometimes kicks in, and one founder develops a case of “selective amnesia” regarding something that was verbally agreed on. Even an email record prevents that danger.

The reason to be careful about the legal agreement between the founders is that it helps with the next stage of your startup: bringing in external investors.

Get Your Due Diligence Ducks in a Row

The earliest-stage investor will be looking at just the team and the website. That’s it. If your site sucks, sorry. If one of you has a criminal record, whoops. In other words, due diligence (the step after the term sheet and before the contract and cash in bank) is simple.

There is one show-stopper you want to avoid. Anybody who has worked on the website or helped with the venture in any way should sign something that acknowledges the venture’s Intellectual Property (IP). If someone comes out of the woodwork and says, “They stole that from me,” most investors will be scared off.

You can and should do this even before you form a legal entity. You simply want what in the old days was called a “paper trail,” and is now an “email trail,” which records what was agreed on. This trail could include:

• The two to three founders saying that each of them owns X amount of Newco (your to-be-established company) and assigning all of their IP related to this venture to Newco.
• A buddy who writes some super code just because they’re a friend confirms that they have no financial expectation and assigns all of their IP related to this venture to Newco.
• Somebody who provides a service in return for equity and assigns all of their IP related to this venture to Newco.

Paying with Equity

You may not be able to pay in cash for the things you need done. So, you could agree to pay in equity. Don’t do this as a percentage. Use a formula along these lines:

1. What cash rate would this person normally charge? Check that this is normal for the market.
2. Agree to pay twice that amount in equity. The doubling is to cover the risk that they never see anything.
3. Convert the cash into equity at the valuation of the first round.

Don’t treat this person or vendor like an investor or partner. They are not. They do not know how to evaluate the venture, so don’t waste your time trying. They are a vendor whose payment is being deferred. KISS.

Note: a long-term adviser is a special case that we’ll deal with in the next chapter.

Vesting

This comes down to the actual term sheet with the first investor(s), which is covered in a later chapter. But this item is worth considering at the beginning. When somebody invests in a founding team, they invest in the work that the team will do in future. So they want to invest your founding shares over time.

You can haggle about vesting some founding shares from the start if you have already built a lot and gotten some traction. But this is really “at the margin.” Don’t obsess over it.

You also need this protection with your partners. Say you have a team of three founding partners, each with 33% of founders’ stock. You don’t want one of them to leave just after funding comes from another venture, or to go off to play music, or whatever. All three of you need that same protection. Build your own partner vesting schedule, typically four years, and present this to the investor(s). They will appreci
ate that you have thought this through and that your interests are aligned.

Everyone knew today was the day that Microsoft was going to launch their new search engine. Everyone’s been talking about it for months, and the press and marketing efforts were carefully tailored to maximize the impact. Thursday, May 28, 2009 was supposed to be Microsoft Bing Day.

A little after 8 am this morning Microsoft CEO Steve Ballmer himself took the stage at the exclusive All Things Digital conference near San Diego, California and announced to a few hundred elite executives that Microsoft would soon be releasing its new search engine, and that it would be called Bing.

One problem right off the bat: the Bing.com site wasn’t live. And since press didn’t know the name until Ballmer said it, it took a while for the news to spread.

Another problem: A team of Google engineers based in Sydney was simultaneously announcing a stealth project 4+ years in the making called Wave. And it wasn’t being announced to a select few top business executives. Instead, the team that created it was showing it to 4,000 developers at the Google IO conference in San Francisco, California.

You know that scene in the Lord Of The Rings movie where the huge eye of Sauron on top of that mountain swings its view from the alliance troops massed at the Black Gate of Mordor over to the real action, Frodo with the Ring at the Cracks of Doom?

That’s basically what happened today. The eyes of the world, and the press, swung from San Diego to San Francisco as they realized what was happening. And what was happening was this: Google stole Microsoft’s thunder with one of the most ambitious and exciting products the tech world has seen in a long while.

At the end of the Google Wave presentation, 4,000 developers stood up and cheered like nothing we’ve seen outside of a Steve Jobs keynote. That picture above isn’t the crowd of gray haired execs cheering Bing. It’s a mass of engineers going wild over a new open source communications platform from Google. And yes, that guy on the right was literally waving his laptop in the air in excitement.

The fact that everyone in attendance was still glowing from a free Android G2 phone that was handed out the day before didn’t hurt, either.

So what happened? Well, the company that will do no evil will certainly engage in a little stealth black ops mission when its required. Google knew full well exactly when Bing was going to launch. And they carefully planned the Wave launch to occur just minutes afterwards. They knew the crowd was ready for something cool. Not only did they have that free phone, but the day before Google VP Engineering Vic Gundotra told the crowd that there would be a big announcement the next day. People were ready and willing to be wowed.

And while Wave certainly deserves every bit of positive attention it got today, the fact that it’s an open source project didn’t hurt, either. San Francisco engineers love open source like east coast liberals love Obama.

Microsoft never stood a chance. As far as the San Francisco developer crowd is concerned, Bing stands for “But It’s Not Google.”

Photo credit: I have no idea. If you know, please tell me in the comments so I can ask forgiveness for using it without permission and give proper credit. Update: Chris Campbell took the photo, per the comments below. Thanks Chris!

Whether you like the name Microsoft picked for its shiny new search engine or not, Bing has got tongues rolling and keyboards rambling.

One of the funniest takes on this we’ve seen today comes from Fortune columnist and author Stanley Bing, who is ‘moderately outraged’ over the new name but is not considering legal action at this point.

Sure, Bing’s doing his best to get some free publicity out of the carefully planned preview of the new search engine, but his sense of humor is spot on, so enjoy the read.

Here’s an excerpt:

BING VS. BING

LONG-TIME FORTUNE COLUMNIST AND BEST-SELLING AUTHOR STANLEY BING CONDEMNS “BRAND INTRUSION” BY NEW MICROSOFT SEARCH ENGINE, ALSO TO BE NAMED “BING”

OFFERS SERVICES TO NEW ENTITY FOR “ANY REASONABLE OFFER”

NEW YORK, MAY 28, 2009 – Stanley Bing, FORTUNE Magazine columnist and best-selling author, today expressed “moderate outrage” at the branding of the new search engine to be offered by Microsoft, also to be called Bing. At the same time, Bing the Author took the unusual step of offering an initial olive branch to Bing the Search Engine, proposing that the two powerful brands merge into one for which Mr. Bing could be the logo, corporate symbol and spokesman, to the extent that it fits in with his other duties.

Read the whole thing here, and make sure you don’t miss the end:

Mr. Bing began his column in FORTUNE in 1995. Prior to that, he was at Esquire Magazine for 11 years, where he built a considerable following. He is also the author of numerous books and is the host of a popular Web destination on CNNMoney.com and writes regularly for Huffingtonpost.com. He has been cultivating the Bing brand since 1983.

Microsoft was founded by Bill Gates and Paul Allen in 1975. It has been establishing the Bing brand for about seventeen minutes.

What are you doing? How about now? Has anything changed since you started reading this blog post? Every story has a who, what, where, when, and why – but the event-driven nature of the social Web may be putting such a premium on broadcasting about what we’re doing, that software designed to help us answer important questions like who and why are at risk of being neglected.

Reflecting on the human condition was once a popular past-time. A lot of people used to read poetry as you may have heard. It may not be the Internet’s fault that we’re becoming less introspective – in fact the huge amount of activity data we’re sharing online offers incredible opportunities for reflection, and for learning more about ourselves. It seems quite likely that we’re going to miss those opportunities because our software is focused entirely on doing (and advertising) instead of on helping us think as much as it could. Of course that’s much harder to do.

The first version of the web was a navigable network of interconnected pages. The next version was based on easy self-publishing through blogs, video, commenting and the like. Still another big shift is believed to be underway; web applications are enabling and taking advantage of all that content to find patterns. Linked data, semantic analysis, analytics and data mining all form a layer on top of the content-web that could serve as the foundation for the next series of applications and other added value.

Burton Group analyst Mike Gotta wrote a blog post two years ago that articulated both the opportunities and some of the challenges to building meaningful value on top of our streams of aggregated data.

Stream processing systems (and associated analytical components) will become a critical underpinning for much of what is talked about in terms of workstreaming, lifestreaming, attention streams, collective intelligence and so on. Discovering patterns across people, interactions, information, activities and social networks and assessing those relationships is difficult enough. It becomes even more challenging when you also want the results to be communicated in a manner that is contextual, relevant and sensitive to attention (and confidentiality) needs.

Two years later activity streams are far, far more widespread than they were when Gotta envisioned analytics built on top of them. The analytics remain almost nowhere, though. That side of things just hasn’t been meaningfully developed. Millions of people are farming for Facebook game makers, who are raking in millions of dollars, but all the social interaction that goes on in this increasingly social web remains otherwise under-utilized.

I want software that will tell me: “On Wednesdays you tend to post messages a lot in the morning, despite the fact that you have a lot of meetings. You post a lot about your health, too. Is work making you feel unhealthy?” Instead we get software like LuckyCal; it’s cool but, instead it says to users “I see you’re going to Denver next week, can I give you an affiliate link to buy tickets to a concert by one of the artists in your iTunes library?” That’s a limited view of life and the world.

When ground-breaking service FriendFeed redesigned its site recently, it didn’t build out more analytics than it initially offered each user about who connected most with their content, where their content was coming from, etc. Instead, FriendFeed shut that feature down. The API is still open and so little startups launch projects like FeedStats, but really – that’s so limited it’s nothing to get too excited about.

Twitter is a great, wide open platform of social data. Content, connections, time and user biographies can all be cross referenced there. The company hasn’t allowed for really monster big data extraction for analysis, though.

Facebook is the most closed of all the social eco-systems, but they claim they are opening up. Firefox creator and now Facebook employee Blake Ross recently called our critique of Facebook’s lack of openness dishonest but did offer this worthwhile explanation:

I believe it is disingenuous to summarize Facebook as ‘fundamentally closed’ because we have yet to build an API that would primarily be of interest to researchers and marketing companies. We’ve opened all of the information that users have granted permission to open, and that most developers have asked for.

Those are telling words. Marketers (and maybe a handful of researchers, though I’d argue that those are pretty important) are the only people who want Facebook activity stream data. Users don’t want it. Developers don’t, Ross claims. That’s sad.

The patterns of activity in that data offer a unique opportunity to learn about ourselves – individually, in groups and as a society. Unfortunately, that opportunity may not be taken advantage of. A better title of this post might be If Web 3.0 Is Poetry, Will Anyone But Marketers Read It? The gleam of contextual advertising has shined so bright that targeted advertising is thought of as gold spun out of the straw of context. Context is being treated as otherwise worthless fodder for the creation of advertising. But the stuff of our lives isn’t just a pathway to market to us.

Chris Messina is one of the leaders in the movement to create standards for Activity Stream data, so it can flow from site to site and be processed in interesting ways. It’s the processing part that is most “3.0-like.” Messina is optimistic. “I’ve made an assumption that somewhat richer feeds of what people are doing will lead to more aggregate analysis,” he says.

“Blake may have a point, but I think the problem is that no one has access to the kind of data we’re talking about at scale yet besides folks like Facebook or Twitter. Even FriendFeed is somewhat hamstrung with whatever comes out of these services and they have to try to pick out what’s going on, in a somewhat arbitrary manner. Meanwhile, Myspace is trying to be as open as possible to maintain their position in the marketplace, and no one seems to want their data.

“I think there’s a Facebook-sized opportunity to address the areas that you mentioned… to do something more subtle and intuitive based on these streams. We’re really far off from it happening because the technology is so primitive still – but i do think that connecting the what that someone did with the why that motivated them will become a huge area of academic research. And yes, marketers will lead the way, and probably get a lot of it wrong
. But then someone else (like Apple) will come along and synthesize all this data, and help people make better decisions by looking at everything that everyone else has done in the same situation before them…and then we’ll start to see it pay off.”

It may “pay off” – but if that just means in commercial terms we’ll all be the poorer for it. Cool commercial apps sound great, but if that’s all the further this goes that will be a real tragedy. There are technical challenges for sure, but hopefully developers will aim for the sky.

Odd “Fail” pic at top by Flickr user Nimbu.

Post from NewsGator.com:

When 1.3 Billion People Are Too Many

There’s one big Web 2.0 question we’ll never know the answer to: Could YouTube have survived on its own?

There are a handful of industry-changing Web 2.0 names including MySpace, Facebook, YouTube, Twitter, and LinkedIn. But unlike those other Web 2.0 behemoths who have the luxury of waiting out revenue challenges as their user base surges and the economy recovers, YouTube’s runaway success meant extremely high bandwidth costs and legal worries early on. It’s one of the only companies in that list that should have sold early while the momentum was high.

Evidence: Nearly three years after the acquisition, the mighty Google still hasn’t figured out exactly how to monetize all those eyeballs either. Industry estimates say YouTube spends half a billion or more a year in bandwidth costs. That’s not to say it was a bad acquisition, particularly considering Google’s stock currency was tantamount to monopoly money back then. But you have to wonder, if YouTube were alive today, how much more would it have been forced to raise and at what terms?

You can get an inkling by looking at the fortunes of a handful of Chinese equivalents: YouKu, Tudou, and 56.com. The three tell a lot about the Web in China. YouKu is based in Beijing, Tudou is based in Shanghai and 56.com is based in Guangzhou – and each is representative of the strengths of the region, according to several dozen interviews I did in China over the last two weeks. Situated at the nexus of Chinese startup culture and government influence, YouKu is widely credited as being the best at playing the startup game. Drawing off the Shanghai’s strength as a media hub, Tudou prizes self-expression as you can see by its Facebook-esque employee-graffiti-ed walls (right). And like a lot of emerging Chinese tech powerhouses to come out of the Guangdong province, some say 56.com has the best sheer technology of the bunch.

YouKu and Tudou both claim to be the largest, while 56.com suffered from a several week government closure last June.

The three are also emblematic of the flood of US money trying to get a piece of China: Among others, General Catalyst and Granite Global Ventures invested in Tudou, Sutter Hill Ventures invested in YouKu and Sequoia Capital, Disney and Adobe backed 56.com.

The three are also examples of the Chinese habit of taking something popular in the US and doing the China version. The temptation is to think ideas that worked in the U.S. plus the world’s largest Internet market equals closest thing you can get to a sure thing. But the so-called “China Factor” has been a mixed blessing for these sites. 56.com’s closure is emblematic of the challenges these companies face sitting at the crossroads of a closed China and a (more) open China, as user generated video blurs the lines of media and information and video is a powerful way of telling a story.

But that’s not the only unique “China Factor” challenge. The sheer size of the world’s largest Internet audience is sucking these companies’ coffers dry, as they work to do what YouTube couldn’t in the less developed Chinese online advertising market. The companies are literally growing too fast for their own good. As a result the number of players in the market have shrunk from 200 pure-play video sites in 2007 to about ten in 2008 and only a handful today.

Those numbers are according to Gary Wang, CEO of Tudou. (Pictured above.) It was the first to launch back in 2005 and in the first six months of business the site did half the video traffic in China. That terrified Wang and his co-founder Marc van der Chijs. Today, the site has to proactively throttle back the size of its pipeline, knowing full well it’s giving a lot of users a bad experience. But Wang doesn’t have much of a choice. He’s raised a whopping $85 million and doesn’t want to tap the markets again until his revenues are break even, and while growing, they’re not close now.

It’s a catch-22: More traffic could bring in more ad revenues, but the bandwidth costs would also be too crippling to prove out the model. “We could be five to ten times bigger if we wanted to,” he says. “It’s purely a financial decision.”

All the Chinese sites have some advantages over YouTube. Chinese Web surfers tolerate a lot of ads and bling online and, with more limited media options, they tend to watch clips for longer. That means they won’t necessarily balk at pre-rolls. Tudou has five-second pre-rolls, and YouKu has 15-second pre-rolls. And while a lot of haters like to call the sites nothing more than havens for pirated content, that’s not exactly verboten in China the way it is in the U.S., so there’s not the same legal threat for now.

The battle may be going on half-way around the world, but it has all the makings of a Valley-LA grudge match. Most of the people I met in Shanghai argued why Tudou was stronger, while those in Beijing argued YouKu had the edge. A few even said that 56.com’s tech advantage and content partners like Disney could make it a compelling dark horse.

But all three should probably worry less about each other and more about someone winning. Because that’s the big fear of most people who live in China and love the sites: That the fire hose of traffic kills them before online ads catch up. And then it’s back to those pirated DVD shops for everyone.