Guardian eCommerce - Key E-Commerce News & Tips

In her presentation for Webstock 2008, Jill gave the audience a 45 minute tutorial in SEO Basics. Some of the most common SEO myths she exposed included:

PPC Myths:
-PPC ads will help organic rankings
-PPC ads will hurt organic rankings

Tag Myths:
-You must have a keyword-rich domain
-You must have keyword-rich page URLs
-Heading tags are necessary (H1, H2 etc.)
-You need to use keywords in meta keyword tags, in particular you need to use
keywords that are included in your page content.

Jill says that it's actually better to use the keyword tag to include misspellings and other keyword varieties that you don't have in your pages. Using keywords in comment tags will hurt your rankings.

Content Myths:
-Page copy must be a certain # of words. Jill actually made up the 250 word limit a few years ago and it's stuck, but there is really no set limit to please search engines.
-You need to bold/italicize your target keywords.
-You must use a specific keyword density. Jill says that keyword density tools are ridiculous.
-You must optimize a page for a single keyword or phrase per page. Instead, try to optimize each page for 3-5 phrases that are related, so that your copy reads better than repeating one phrase over and over.
-You need to optimize for the long-tail searches. You don't generally need to optimize for these - engines will find them on their own.
-Duplicate content will get your site penalized. There is not a penalty as such, but Engines will filter out duplicates in lieu of the original copy (or what they think is the original).

Design Myths:
-Your HTML code must validate to W3C. Not even Google.com validates!
-Your navigation must be text links not images. Surprisingly, graphical navigation is fine as long as you use ALT tags.
-You can't use Flash. It's fine to use Flash, as long as it is one element of your page, not a complete Flash site. Use a text-based site too if using a Flash site.
-Certain design techniques are black hat. Javascript code is legitimate, not just used by black hats.

Link Building Myths:
-That Google's link: command is accurate. It's not a useful tool. Use Google -Webmaster Tools or the Yahoo link command instead.
-That reciprocal links won't count. From the right site, reciprocal links are fine, even very helpful.
-That pages are ranked in PageRank order in the search results. They're not. Google -Toolbar PageRank is not accurate anyway so ignore it.
-You must be in DMOZ or Yahoo Directory to get good Google rankings. In Jill’s opinion, the Yahoo Directory is not worth the money these days.

Submitting, Crawling and Indexing Myths:
-You need to submit URLs to engines. Provided you have a link to your site, you will be found and indexed.
-You need a Google Sitemap. Not needed for the average site. It won't change your site rank.
-You need to update your site frequently.
frequent spidering helps rankings. Not true.
-You need multiple sites. This won't help in the engines and creates more maintenance work.
-You need doorway pages. Jill says this is so 1995!

SEO Company Myths:
-That a #1 ranking will always lead to more traffic or sales. The good rankings need to be for keywords and phrases that people are actually searching for.
-That the company can place pages in certain positions. Not possible, unless they’re using Pay Per Click or sponsored spots.
-That your rankings will tank if you stop paying the company. Rubbish!
-That they have a "proprietary method" of SEO. They’re lying!
-That they have a "special relationship" with Google. Again, they're lying. Google has no relationships with organic SEO companies that Jill is aware of.
-That they can increase your rankings without doing any on-page work. Run away!

Next, Jill defined what SEO is. Her definition of SEO is "making your site the best it can be for your site visitors AND the search engines". She made the point that search engines need to:
- Find
- Crawl
- Index
- Determine relevancy
- show results
So you should keep these top of mind when designing and SEOing your site.

Jill also made the point that search engines don't know you. So you should disclose what you sell and who you are in plain language that naturally incorporates the keyword phrases. Dumb down your pages for users. What search engines want is good content. If you're not getting good traffic from your pages, they're broken, she says. In a nutshell, make sure your pages speak to your target audience and solve their problems.

Jill then discussed how to choose keywords to target on your site. She recommended brainstorming with friends, family and business colleagues and creating a seed list of keywords. Then take that list and run it through keyword research tools such as WordTracker or Keyword Discovery and even Google AdWords to determine the best keywords and phrases to target.

Jill says there are three types of keyword phrases:
1) General and highly competitive terms - not good choices.
2) Long tail - uncompetitive terms - generally no need to SEO for.
3) Relevant and specific terms, which are the best to choose because they highly searched, yet are targeted enough to bring qualified traffic.

Next, Jill explained where to put your keywords. She recommended putting them in:
- anchor text
- clickable image alt attributes (alt tags)
- headlines
- body text copy
- title tags (Don't make your titles less than 10 words, she says.)
- meta description tags

Jill finished up by teaching the group how to measure SEO success. She said that high rankings are not the best measure of success because you might be ranking for phrases nobody is searching on. Instead you should be looking for increased targeted traffíc to your site and more conversions. Use your web stats to give you the clues as to whether your site and your SEO is working.

As for the future of SEO, well despite the rumors that SEO is dead, Jill doesn't think that the big engines will switch to exclusively paid listings any time soon. In her opinion, there will always be some free ways to get listed so there will always be a need for SEO. In the same vein, a crawler-friendly site will always get good results and off page criteria (e.g. links) will always be important.

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BigThink.com is a venue to exchange ideas online. The Web site provides a twofold approach. It produces interviews with leading thinkers on big-picture topics and their expertise. Hopkins then makes videos of the interviews available for viewing and commentary. The Web site also provides a user format for video and audio contributions on topics affecting people, using them as a linchpin for public discussion.

It could only be a matter of time before someone found a formula for taking the immediacy of YouTube and the entrepreneurship of eBay and wrapping them around an original Internet mainstay -- the conversation of the Bulletin Board System (BBS). That time has arrived with the debut of BigThink.com. BigThink, the brainchild of cofounder Peter Hopkins, started operations in November. The Web site officially went live Jan. 7, and it has quickly developed a varied audience of participants and contributors.

"There are high-quality lecture sites available on the Internet, but there is no real competition for thinkers. So we created a venue to exchange ideas online. Our goal is to help thinking to reach a higher plain," Hopkins said.

Think of BigThink.com as a YouTube of ideas. Hopkins and BigThink's other cofounder, Victoria Brown, set their sights on going beyond the academic and corporate conferences that bring together leading thinkers. Their goal was to put the elite and their ideas in the same place as everybody else. This sometimes volatile mix can push response and participation in directions that they otherwise would never have gone.

BigThink.com is a venue to exchange ideas online. The Web site provides a twofold approach. It produces interviews with leading thinkers on big-picture topics and their expertise. Hopkins then makes videos of the interviews available viewing and commentary. The Web site also provides a user format for video and audio contributions on topics affecting people, using them as a linchpin for public discussion among the site's users.

Ultimately, Hopkins hopes the mixture will produces a nexus between talking heads and everyone else. There is no cost to users, and all content is free.

BigThink categorizes its interviews with experts and contributions from users into divisions called "Meta" and "Physical." Within these two general fields, topics are further filtered. Users can search for either ideas or topics through one of several built-in search engines.

For example, Meta topics include discussions on Faith and Beliefs, Identity, Personal History, Inspiration, Life and Death, Love and Happiness, Outlook and the Future, Truth and Justice, and Wisdom.

Physical topics fall into groups such as Arts and Culture, Architecture and Design, Art, Dance, Literature, Music, Theater & Film, and about a dozen more. They range from Business and Economics to the upcoming national elections, medicine, the environment and the world.

"We're still honing the process and are getting a good stream of daily hits. A large number of users has signed up so far," said Hopkins.

Hopkins faced some of the typical challenges endemic to any startup Web-based operation. Among them were design decisions and the development of a user interface.

However, he also had to deal with challenges that at times seemed unsolvable. For instance, establishing a proof of concept was nearly unsurmountable.

"We met lots of skepticism. It was very difficult to convince investors that providing a forum for high-level thought would be a magnet for users," Hopkins noted. "The case we had to make was that BigThink would be a proper vehicle for upper-level thought and that there is a market for it."

One of the initial decisions was whether to build a platform or use another one. The choice could have a huge impact on the ultimate success of the user interaction.

"We took a real challenge by deciding to build our own," said Hopkins.

He and Brown worked with Code and Theory, a New York-based design and software development company, to build a platform from the ground up.

Now that the Web site has launched, Hopkins and Brown want to build out the social network to create a more captivating experience for users. They also want to add more features to the Web site's offerings.

The idea behind BigThink.com did not stem from a single "ah-ha" moment. Both Hopkins and Brown were producers at PBS. They reached a point where they began to see that the old-world ways used there were too one-sided. Eventually, they saw the concept of a YouTube.com and Facebook.com environment emerge as a new way for nonprofessionals to get into the act.

"We saw an opportunity for rich content to merge with value-added delivery on the Web. It seemed natural to merge that with an interactive format. Like any idea, it developed in stages," explained Hopkins.

Once the idea took shape, it took Hopkins and his partner a long time to bring their vision into practice. Once they understood their plan, they had to sell the idea to buyers, users and investors.

Love vs. money. Hopkins readily admits that at times he was torn between serving the love of the initial mission and making money to sustain BigThink.com. While those two goals may not always seem capable of surviving together, he believes they can.

"Valuable and engaging and profitable content on the Internet are not mutually exclusive. We think people and advertisers will recognize this," he said, adding that he is convinced that given time and financial support, BigThink.com will be a big success.

Like many startups, BigThink.com started on a wing and a prayer. In fact, Hopkins credits a number of angel investors with getting him this far. As he grows the social network of thinker-users, Hopkins is also looking for a number of sponsors to keep the dream alive. Ultimately, he agreed, commercial ads will form one type of sponsorship.

"We are trying to create a very tailored business model and are willing to work with a variety of options," he said.

Insiders' views are often insightful about new concepts played out on the Internet. In the case of BigThink.com launch, Jimmy Wales, the founder of Wikipedia.com, had nothing but praise for Hopkin's venture following a video presentation that featured him on the main page recently.

"I enjoyed my interview, and I think the Web site concept is interesting," Wales said. "Web video is a good format for thoughtful pieces, as can be seen from the success and popularity of the TED (Technology, Entertainment, Design) talks."

Based on this initial experience with BigThink.com, Wales sees a good business run ahead for the new company. "I think this will do well," Wales said.

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eBay has taken the controversial step of banning sellers from posting negative comments -- or even giving neutral feedback -- about the buyers with whom they do business. The new rule, which will take effect in May, is apparently a reaction to sellers flaming buyers who posted negative information about them. eBay's announcement of the rule change earlier this week prompted a tidal wave of complaints about sellers from buyers -- who, not surprisingly, support the new rule.

It also sparked criticism of buyers by sellers -- some of whom are threatening to boycott the feedback option all together. Members of both groups have expressed ire over eBay's inability or unwillingness to do a better job mediating buyer-seller disputes. Sellers fear they will be held hostage to vindictive buyers who will still be allowed to post negative comments about them. However, "there are new protections being put into place for sellers as well," eBay spokesperson Nichola Sharpe said.

eBay's new policy will include removal of negative feedback from buyers who did not pay for their goods, for starters. It also will require a buyer to wait three days following completion of a transaction before posting a negative comment. This is to guard against impatient buyers who may have unrealistic ideas about shipping speed.

eBay decided to impose the restriction against sellers' negative comments because it found that the transparency made buyers reluctant to provide honest feedback, Sharpe said. That may be an understatement. It is not difficult to find buyers unhappy with their eBay experience precisely for that reason.

Jennifer Goodwin, founder of an online business administrative service, said that she has bought at least two items -- a US$5 bed light for reading and a designer sweat suit -- with which she was unsatisfied. After her first experience of receiving unfair seller feedback, she decided to avoid the entire process altogether.

With respect to her first purchase, the seller never sent the item, "and then acted like a crazy e-mail maniac, complete with harassing threats," Goodwin said, adding that eBay suspended the seller but left the negative feedback associated with her username. She did receive her second purchase -- but said it wasn't the right size and was clearly not a designer brand. "I am too scared to leave negative feedback," Goodwin admitted. "I want to be fair and truthful but not at my own detriment. So the item sits unused and money is wasted." Goodwin, needless to say, was very happy to learn of eBay's new rule.

So was Dan Pritchett, vice president of marketing and business development at Logos Research Systems, a maker of Bible study software -- even though he no longer uses eBay. A few years ago, Pritchett saw a copy of his company's software offered on eBay and bought it, suspecting it was a pirated version. He was right, he said, but playing his hunch proved to be more trouble than it was worth.

When contacted about the legitimacy of the sale, the seller began a calculated campaign of harassment, culminating with mailing gay porn to Pritchett at his workplace. eBay was unsympathetic to his problems, Pritchett said, and even shut down his account because of the seller's accusations.

Sharpe said she could not comment directly on Pritchett's situation for privacy reasons. However, she emphasized that eBay fights aggressively against software piracy through its Verified Right Owners Program. "We don't want pirated information on our site," she said. "It's as simple as that."

Even if a buyer doesn't have a horrific experience with a seller, there is an unspoken assumption of quid pro quo that makes many buyers uncomfortable, Anthony Citrano, who uses eBay to buy and sell photography, said. "Many sellers ... do not leave positive feedback until they have received positive feedback on the transaction," he said.

"When a buyer pays for the item but has not received it, the buyer has completely fulfilled their obligations to the eBay community. Thus, they should receive positive feedback. They bought and paid for the item," Citrano reasoned. "However, sellers play this game of 'feedback hostage,' where they hold out the specter of no feedback or even negative feedback."

That's what happened to Citrano. "I merely left a neutral piece of feedback on a lame seller and was immediately hit with negative feedback -- despite having paid for the item within an hour after buying it."

It's easy to understand the flood of emotions eBay's new rule has unleashed, said Michal Ann Strahilevitz, a professor of marketing at Golden Gate University, who does research on the influence of word of mouth. Its power "is undeniable," she said. "While companies are focusing great efforts to work on spreading positive word of mouth, it turns out negative word of mouth is even more powerful, and more companies are realizing they need to put as much, or more, effort in reducing negative customer feedback."

It is unfair to give buyers this powerful leverage over sellers, Strahilevitz concluded. Indeed, eBay sellers are voicing their own strong opinions about the rule change. "This will have devastating effects on the whole feedback system," Nancy Baughman, founder of eBiz Auctions, said. It is not this change alone, however, that is making sellers so unhappy, she noted. eBay recently instituted a new fee schedule and other rules that sellers feel are detrimental to their operations, if not margins.

The new feedback rule is particularly obnoxious because it gives buyers' absolute power, Baughman said. "Human nature being what it is, people will use the system to take out their frustrations on things that are out of the seller's control." Also, the system now leaves sellers completely vulnerable to buyer fraud. She told of one buyer who purchased a $1,200 camera from her -- then contacted her to say it was broken and needed $250 worth of repairs. If she didn't send the money, he threatened, he would post negative feedback about her.

After tracing this particular buyer's activities on eBay, Baughman realized such demands were part of his MO. "He would buy something, claim it was broken, and then turn around and resell it on eBay," she said. He was also 17 years old, Baughman subsequently discovered. She put a halt to his activities after contacting the boy's mother.

Sellers are likely to boycott the feedback system once the new system is in place, Baughman said. "If we can only leave positive comments, then we won't leave any comments at all." She would have preferred a modified change to the feedback system to give sellers some voice in the process, as well as a more concerted education effort on the part of eBay so that buyers could better appreciate how the system works.

Improving communications between buyers and sellers would also go far in settling disputes when they arise, Cody Goehring, a publicist for Phenix and Phenix Literary Publicists, said. A few years ago, when he was studying for the LSAT, Goehring bought a prep CD pack from an eBay seller. "When I got it in the mail, I realized he had sent me the 2005 version, not the 2006 version as promised. When I contacted him about this, he never got back to me."

Goehring gave him a poor rating, and saw a few days later that the seller had given him a poor rating as well -- presumably in retaliation for his initial feedback.
"However, his bad rating encouraged me to do some research, and in doing so, I discovered that his primary e-mail address wasn't the one that he had registered with eBay/PayPal, which is why he never got back to me. After contacting him, he explained the story to me of why I got the 2005 version," Goehring said. They ended up rescinding their poor ratings of each other.

"Because of my experience, I can see both the bad and the good sides of this new policy," he said. "Sellers will no longer be able to retaliate with poor ratings when buyers rate them poorly, and this will allow buyers to give poor ratings -- if accurate -- without fear of getting a poor rating back."

The disadvantage, though, is that without the poor rating from the person who sold him the LSAT CD, "I would have never realized that the problem wasn't entirely the seller's fault. This allowed us to work together to resolve the problem, instead of both of us being mad at each other."

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In Greek mythology, the Hydra was a creature who could not be defeated, as each time one of its heads was cut off, two more would sprout back in its place. It seems that SEO mythology is no different; every time one SEO myth is debunked, two more SEO myths crop back up in its place, only adding to the confusion about search engine optimization.

Hercules was able to defeat the Hydra by cutting off its heads and then burning the stumps before new heads could grow back. What SEO needs is a hero, an SEO Hercules, to come and save us from the Hydra of SEO Mythology. Let's go through some of the more pervasive SEO myths and see if we can put a torch to them.

Myth: All I need to do is figure out the magic bullet, and I will be at the top of the search engines.

Fact: Search engines use over 200 factors to rank sites. No one factor will get you to the top. To get to the top, you must have a balanced search engine strategy encompassing many factors, both on page and off page. There is no magic bullet.

Myth: Search rankings are about link popularity. Get as many links as you can. Join Web rings, "free for all" (FFA) link exchanges, and get as many sites as you can to link to you through reciprocal linking back to them.

Fact: While link popularity is important if done correctly, Google is placing links under increasing scrutiny, and sheer volumes of inbound linking without regard to the source of the link and other factors hasn't worked in years. It is not the raw number of links that matter, but the type of links. Links from trusted sites, relevant to your industry, with proper anchor text and relevant surrounding text and page content, to original content on your site are the ones that will help you.

FFA linking will most likely get you in trouble with the engines as they could interpret that as an attempt to spam the results. In addition to bleeding away all of your page rank to other sites, FFA linking will increase your chances of linking to a "bad neighborhood," another thing which can get you into trouble. Never link to sites you do not know or with which you are not familiar. Remember, Google is smarter than you, you can't fool them with unnatural linking schemes.

Myth: It's all about "keyword density." Be sure to repeat your keyword numerous times on your Web site. Keyword repetition increases keyword density and inflates your search engine ranking.

Fact: Structuring your page around some magic formula for key phrase density does nothing for you. Yes, your target key phrases should be included at least once on the page, as well as in your title and meta description elements, and in an H1 or H2 tag if possible. Other than that, forget about key phrase density. Create your Web content for human readers and write it so it makes sense to them. Whatever you do, avoid key phrase repetition, a known spamming technique sure to get you into trouble.

Myth: Repeated submissions to the search engines increase your rankings. It is a good idea to sign up for an automated submission service, which will regularly resubmit your site to 1,000 or more search engines each week.

Fact: Automated submissions are a violation of major search engines' Terms of Inclusion and can get you into trouble. Search engines don't need you to submit to them, set up a blog and get a few links to your site, and they will find you very quickly. Using Blogger.com, which is owned by Google, usually can get a new site indexed within a week. Just be sure to put a link on the blog to your site.

Myth: The meta keywords tag must include your target keywords. Search engines place heavy weight on this tag and use it to determine which keywords for which to rank your site.

Fact: Search engines that matter, such as Google, place zero weight on the keywords meta element due to historical spam. Yahoo appears to give it some small weight. In any event, use of the keyword meta element is of so little use, many SEO's ignore it altogether.

Myth: Because links are so important to search rankings, I should go out and purchase a large number of paid links and submit to hundreds or thousands of directories in order to get more links to my site.

Fact: Google especially has cracked down hard on paid links in the last few months. To put it succinctly, they don't pass page rank. If you want to buy a link from a site, only do it if you believe the link itself will be a good source of traffic (in other words, only do it for legitimate advertising purposes). Do not do it if your purpose is for that link to transfer page rank or increase your ranking, as it likely will not.

Additionally, hundreds of useless directories have been harshly penalized as well, so that links from within them are either not counted at all or given very little weight. Get links from a few well respected directories such as dmoz.org, Yahoo directory, Business.com, JoeAnt and others which have a manual review process. Automated submission services which submit to hundreds of directories are a waste of money.

Myth: I should write articles and submit them to article directories, because links from article directories have high page rank and are given great weight by the engines.

Fact: Article directory links in and of themselves carry little to no weight. The engines are smart and know that people spam these directories with useless content just to get a link. If you want to get relevant, trusted links to your site that actually mean something, create useful, informative, or educational content that people will want to link to. Articles are one form of such content, but only if they are good enough to get picked up by other sites. Other content which can serve as link bait is video content, tools and widgets, product reviews, top 10 lists, and interesting or entertaining blogs.

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When Apple introduced the iPhone last year, it was the first mass market cell phone to use a touchscreen system of controls. Now the retail and banking industries are pushing a vastly different kind of touch technology. This year's model is all about shopping and using a cell phone like a wand -- touching the end of the phone to a checkout screen when you pay for that Big Mac.

That trend has been labeled "mobile payments," and it has just landed in Spokane, Wash., where U.S. Bank is launching its first six-month trial of cell phones that work like a credit card. The nationwide bank, using more than 100 members who have MasterCard accounts, will use the test to decide if the country is eager to embrace the use of a credit card buried inside a cell phone.

Over the past three years, banks across the world have tested "contactless" credit cards that work the same way -- tapping or moving specially equipped cards near a radio-signal-sensitive payment device that records the amount of the transaction.

The technology behind the system carries the acronym of NFC, for near field communications. When two NFC devices come together -- within about 4 centimeters -- they exchange data via radio signals. That data can be anything from credit card numbers to instructions on how to find the nearest public transportation.

The U.S. Bank effort shows how the NFC idea has jumped from credit cards to cell phones, said Jim Salters, a banking industry analyst with California-based consulting company Glenbrook Partners. "That's the question everyone asks: Is this the way all the banks will eventually go, toward contactless phones?" Salters said.

If nothing else, the test is part of U.S. Bank's goal of staying in touch with customers and finding ways to make their lives easier, added Dominic Venturo, a bank vice president helping manage the Spokane test project. "Anytime you can combine the phone, which most of us have in our pockets, with the bank payment card many of us carry in our wallets, into a single system, you've created a simpler and easier way for your customers to manage their lives," Venturo said.

Many earlier versions of contactless cards and tap-and-go phones have been used in Japan. Other countries, including Australia and Korea, also are testing them. U.S. Bank's Spokane test is one of a handful of similar efforts across the country by companies looking for the same answers: Will customers like this system? Will merchants sign on and want those readers in their stores?

The answers, so far, are not clear, said Salters, who graduated from Gonzaga Preparatory School and got a degree at Princeton University. One issue will be how much information the new phones can hold, he Salters. To date, the tests involve inserting just one credit card number inside the test phone. Over time, if banks and wireless phone companies allow customers to load the phone with multiple credit cards, or the numbers of merchant reward cards, that option might be very attractive, Salters said. However, it's uncertain whether the banks and phone companies will give consumers those choices, he said.

About 80,000 contactless readers have been installed across the United States, according to a spokesperson with MasterCard International. Salters said merchants consider the jury still out over the value of introducing a contactless payment system. For one, merchants know a chief goal of such NFC systems is to move customers from paying in cash to paying with a card, a transaction that costs merchants 1.5 percent to 2 percent in fees to the card company.

"Merchants generally will only adopt this kind of system if it can show that it moves customers through a line quicker" or helps customers spend more money over time at that store, Salters said. From the credit card bank perspective, one big value in developing the tap-and-go phone is creating the "top of wallet" position among a consumer's credit cards. Industry analysts say a typical middle-class consumer has between four and six credit cards.

Salters said innovative banks trying to introduce phone payment systems hope the strategy makes their own card the credit card of choice. "People can use any one of their several cards when making payments. This is one effort (by banks) to make their card the primary one inside each person's wallet," he said.

The other major attraction behind the marriage of cards and cell phones, Salters said, is the option of developing two-way communication with the phone user. A credit card is nothing but a card, but phones can receive text messages, tones, even short videos from marketers trying to encourage the customer to buy something.

The first versions of interactive marketing will be simple, Salters predicts. Shoppers will go to a vending machine and swipe their phone to buy something. The vending machine company will activate a message to the phone saying the shopper can get one can free can of pop with three more purchases.

Over time, the likely scenario could be a version of a plugged-in universe in which customers with cell phones are notified, because of their global positioning system location, that if they visit the nearest coffee shop they can get a double mocha on special. "That's not happening yet, but that is something that's possible," Salters said. When U.S. Bank set up the Spokane pilot program, it looked first at Spokane's current list of merchants that use contactless readers and saw that the community had a fair share. The list includes McDonald's, Jack in the Box, Regal Cinemas, Office Depot and 7-Eleven, Venturo said.

The bank also decided to include Gonzaga University in the test. For the six-month trial, the university agreed to equip 10 campus vending machines with new readers that will allow bank customers to try the technology.

Venturo would not say how many U.S. Bank customers are participating. "Our competitors would very much like to know that number," he said. It's a group that is well above dozens, he noted.

To encourage them, the bank provided each with a new Nokia (NYSE: NOK) Web-enabled phone and agreed to give each participant a monthly cash credit to be applied toward the data plan cost of their phone service. To take part, the bank member has to use either T-Mobile or AT&T (NYSE: T) wireless for their service.

Security Is Critical
Another incentive: At times the company will send text messages to the phones reading "if you use the card two times over the next several days, the bank will credit your account a certain amount," explained Venturo.

Security is a critical part of the system, Venturo said. First, when a phone taps a reader screen to make a payment, the transfer of data only sends encrypted credit card numbers, not the name or other personal information, he said.

If the phone is lost, the owner is subject only to the US$50 maximum amount any credit card company regards as a customer's liability; in fact, most banks don't even ask customers to pay back that amount.

"We've also made clear that if the phone is lost, that person should immediately contact U.S. Bank. We'll have the option of disabling the secure card (inside the phone) right away," Venturo said.

The cards containing the information are also wired into the phone and can't be easily removed. Even if removed, the information inside is indecipherable, Venturo said.

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FOR decades, Silicon Valley has been the land of eternal optimism and high anxiety, traits that pitch into overdrive anytime a seismic business event washes across the corporate and entrepreneurial landscape here — like, for example, Microsoft’s blockbuster $45 billion bid for Yahoo on Friday. Max Levchin, a PayPal founder who now runs Slide, says he expects that investors in start-ups will rein in spending.
The legions of high-tech entrepreneurs who have set up camp here with clever ideas, a willingness to scramble for financing and the energy to weather round-the-clock days have typically tethered their dreams to a singular outcome: getting fabulously rich by selling to one of the three Internet giants, Microsoft, Google or Yahoo.

But if Microsoft’s takeover bid for Yahoo succeeds, that calculus becomes more harrowing because of a simple reality: the field of large, lushly endowed suitors will narrow by one. And that is a fact sure to jangle nerves already strained by growing fears of an economic recession. “From a start-up and investor perspective, if there are more companies trying to vie for the same businesses, there are more exits,” said Bismarck Lepe, a former Google employee and now chief executive of Ooyala, a year-old video host and advertising company. “It’s not great for competition if there are only two acquisition targets instead of three.”

To be sure, a Microsoft-Yahoo deal could be good for Silicon Valley, funneling money into the economy and triggering a round of copycat deals as other players like Google and the News Corporation look to keep up. But Microsoft is buying Yahoo because it has steadily fallen behind Google in the lucrative online search market and because the future of computing may not be forever linked to the desktop market that Microsoft now dominates. Apparently unable to keep up with Google through internal efforts, the legendary software giant in Redmond, Wash., has gone outside to solve its problems by trying to buy Yahoo.

So the rationale for Friday’s proposed mega-deal is based on Microsoft’s own particular corporate needs and may not be a harbinger of rampant deal-making in the Valley. Moreover, with an economic recession looming nationally, the unsolicited bid for Yahoo comes at a difficult time for the normally cocksure world of high tech. Visibly, much of the region maintains an almost obstinate belief that it can weather any economic storm that emerges. Consumers are still flocking online, advertising is following, and the current generation of start-ups has been built frugally — with lessons from the dot-com bust of several years ago still very much in mind.

Venture capitalists also raised nearly $35 billion last year, more than at any other time since before the dot-com crash, according to the National Venture Capital Association. Those financiers are ready to make bets on countless entrepreneurs who hope to build the next Google, Facebook or YouTube. But as the stock market lolls and an outsider, Microsoft, bids to gobble up a company that once was one of Silicon Valley’s crown jewels, the region’s innovators and corporate stewards appear to be growing ever more anxious. That trait is most visible in the top executives at public companies whose eyes are trained on parallel declines in consumer confidence and public equities.

Shares of Google had dropped nearly 20 percent since the beginning of the year — and then they fell an additional 8.6 percent on Friday after Microsoft made the play for Yahoo. Apple has dropped 33 percent since the start of the year. That was enough to prompt Steven P. Jobs, Apple’s chief executive, to send a reassuring memo to options-sick employees last week that concluded: “Hang in there.” Many in the typically overconfident venture capital world say it is foolish to believe the technology sector is somehow sheltered from the storm.

“All markets are linked,” says Peter Rip, a general partner at Crosslink Capital, adding that the pain might trickle down from the public markets to large private companies and eventually to smaller start-ups. “We just asked every one of our companies to take a sharp pencil to their hiring plan this year. It is going to be a bumpy ride for a while.”

IN a blog posting this week titled “Downturn, Now What?,” Will Price, a partner at the San Francisco venture capital firm Hummer Winblad, said the recession could punish technology investors for succumbing yet again to investment fads and high valuations for companies without proven business models.

He calls these companies “Field of Dreams” start-ups, because their entrepreneurs believed that if they built popular online services, advertisers would inevitably come. Now that might not necessarily be the case. “There’s been a suspension of belief” at Internet companies without a proven way to earn money “that the market is going to let you off the hook,” Mr. Price said. “These companies are going to have a hard time getting past experimental interest from advertisers when they want to start attracting really big spending.”

MOST Valley residents, including even the most pessimistic venture capitalists, are quick to say that the Internet economy would be in an enviable position if there were a recession. Mutual funds, media companies and private equity firms are all trying to get in on the Internet action. The online advertising market is booming.

This is where true believers are likely to ward off recessionary fear with two numbers: 21 and 7. Twenty-one percent of the average American’s media-consumption time is spent online, analysts say, yet only 7 percent of all advertising is online. The hope is that advertising will inevitably shift online and close this gap, whatever the economic outlook.

For that reason, many Internet executives say that traditional media companies — not Web properties — are likely to be the first victims of any advertising pullback. “If our advertisers cut their marketing budget by 15 or 20 percent, that will hurt,” said John Battelle, who ran the Industry Standard magazine during the first dot-com boom and now runs the online ad network Federated Media. (The New York Times Company has invested in Federated.) “But my guess is that they will cut it first in print or TV and not online.”

Still, the dot-com bust — and its destructive reverberations — continues to cast a shadow over even the most optimistic Internet evangelist. In 2000, as the stock market cratered and fear spread, venture capitalists pulled the plug on hundreds of start-ups and wrote off millions of dollars in losses.

Frank Addante’s online advertising company at that time, L90, went public and reached a tantalizing market capitalization of $500 million before the dot-com bubble popped and L90 was forced to sell its technology to a rival and file for bankruptcy protection.

Not surprisingly, Mr. Addante is keeping one eye on the economy. Now the chief executive of another online advertising company, the Rubicon Project, Mr. Addante, like other entrepreneurs, is confident that the tech sector would survive an economic downturn. But he is also hedging his bets. Earlier this month, the company raised $21 million in venture capital before it needed a cash infusion, in part, Mr. Addante said, because such capital may not be available in the coming year.

“When money is on the table and it’s a decent deal, sometimes you have to go and take it,” he said. “You never know what’s going to happen in the markets.” LIKE Mr. Addante, Max Levchin, the chief executive of Slide, says that the United States is on the road to recession and that Silicon Valley start-ups could be headed for a venture capital-mandated round of belt tightening. So Mr. Levchin, who co-founded PayPal, a company that successfully weathered the dot-com crash, decided to take the money while the going was good: He recently raised $55 million in additional financing for Slide, a company that makes video- and photo-sharing tools.

“We determined that if we were going to raise money, we would have a much easier time of it at the end of 2007 than at any time during 2008,” he said. “I don’t think I was the only guy in town who thought that.” Mr. Lepe of Ooyala recalls his drives to Mountain View, Calif., in 2001, when he would see a new empty billboard off Highway 101 each week as pessimism spread through the community.

The lesson: Economic downturns have a way of fostering panic and transforming a community’s collective consciousness. “So much in the Valley — whether a company gets funded or not — happens on gut instinct,” Mr. Lepe said. “If someone’s house isn’t being sold and they can’t go out and buy their yacht, it does have an impact on their psychology.”

And what psychological impact could a potential Microsoft-Yahoo deal have on Silicon Valley’s heady business environment? While he worries about the reduced number of potential acquirers, Mr. Lepe also speculates it could have a positive outcome, if it stimulates a flurry of deal-making in the industry.

But not many entrepreneurs are holding their breath — for a new round of deals or for a sea change in the current business climate — because of a possible megamerger of Microsoft and Yahoo. Mr. Sternberg of Meebo said a marriage of the two Internet titans could benefit start-ups like his if Yahoo and Microsoft were able to deliver on the promise of a more efficient online advertising system. But that could be years off.

“Does this impact our world overnight? Definitely not,” he said, “at least as far as I can see.”

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