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Smartphone companies have it pretty rough – they’ve got to sink millions into research and development every year, all in the hope of making their next shiny touchscreen gewgaw the fastest, slimmest, smartest, prettiest one ever. And every year we eat it all up, and take what we’re given.

But Canonical, the folks behind the incredibly popular Ubuntu Linux distro, isn’t your average phone smartphone company. It doesn’t have a huge production budget like Samsung or Apple, so it decided to crowdfund the creation of its first phone. Turns out that’s not the only thing they’re doing differently – Canonical founder Mark Shuttleworth is currently fielding questions on Reddit, and he’s expressed interest in having backers of this current project getting some sort of say over what goes in future models.

And thus, Mark may have just come up with the coolest backer perk ever. Quoth Shuttleworth:

“This first version of the Edge is to prove the concept of crowdsourcing ideas for innovation, backed by crowdfunding. If it gets greenlighted, then I think we’ll have an annual process by which the previous generation backers get to vote on the spec for the next generation of Edge.”

In case you haven’t been following the story, the Edge is an awfully handsome concept for a phone that will run Ubuntu and Android and sport a sapphire glass-covered 4.5-inch 1280 720 display, along with the “fastest available” multi-core mobile processor, 4GB of RAM and 128GB of storage. The internet being what it is, Redditors couldn’t help but throw out bits of hardware for Shuttleworth and the Edge team to consider for the current model anyway. IR blaster? A “cool idea,” he says. Wireless charging? Probably not going to happen.

Shuttleworth was pretty forthcoming when it came to lingering questions about the Edge’s design and proposed rollout. As it happens, the team is still having trouble figuring out what sort of speaker system to throw into the thing (my two cents: the closer to HTC’s Boomsound setup the better), but it Canonical has asked potential carrier partners to agree to take note of a set of conditions that should minimize bloatware if the Edge is ever picked up and sold with long-term contracts.

Now this all hinges on the notion that Canonical was right in thinking that enough people would believe in a company that has never made a smartphone before to basically pre-order one for (at least) $675. In a way, this is a perfect move – if the project hits critical mass, everyone gets a phone. If it doesn’t, well, no harm no foul. The crowdfunding movement has given a software company a shot at really making a mark in an industry dominated by giants, some of which are already feeling the pinch because their pricey flagship devices perhaps aren’t selling in the astronomical numbers they were hoping for.

And so far, things appear to be going rather well. Canonical’s Indiegogo campaign only went live three days ago and Ubuntu fans have already chipped in just a hair under $6 million. Of course, there’s no guarantee that sort of traction will continue for any serious length of time – the company has already had to add some less expensive device pricing tiers to keep the campaign from flaming out too soon, and it’s still got a ways to go before it hits the $32 million goal.

(Oh, and in case you were wondering, Shuttleworth seems to be tackling nearly every question being thrown at him – no Rampart shenanigans here.)

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Zynga’s revenues for the second quarter of 2013 declined 31% year-over-year to $231 million in the midst of a challenging transition that saw former CEO Mark Pincus hand over the reins to Don Mattrick.

The company had a net loss of $16 million compared to last year’s net loss of $22.8 million during the same quarter (which also had $95.5 million of stock-based compensation expenses). If you account for that then, the company’s net loss was $6.1 million compared to last year’s net loss of $4.6 million based on non-generally accepted accounting principles. Zynga said when it laid off nearly 20 percent of its staff last month that it expected to see a net loss of between $39 million to $28.5 million so this is actually a slight earnings beat.

“We need to get back to basics and take a longer term view on our products and business, develop more efficient processes and tighten up execution all across the company,” wrote Mattrick in the release. “We have a lot of hard work in front of us and as we reset, we expect to see more volatility in our business than we would like over the next two to four quarters.”

Last quarter, COO David Ko said the company was in the midst of a “pause” to re-evaluate its entire game slate and that this decision would be financially apparent in this quarter.

This quarter’s revenue is projected to be even lower in the range of $175 million to $200 million, with a net loss of $43 million to $14 million.

Through the company’s pivot onto iOS and Android, Zynga has had to compete against older and historically smaller rivals from the Facebook platform like King and Kabam. Both of those companies have fared well with King’s Candy Crush Saga bringing it the top grossing spot and numerous Kabam titles in the top 25.

In contrast, Zynga just has its longstanding Poker franchise in the U.S. top grossing 25. Even today, nearly 70 percent of the company’s monthly active users remain on the web.

The losses in Zynga’s user base from not being able to hold onto its core Facebook customers are staggering. The company’s level of daily active users is not much higher than half of where it was a year ago at 39 million this quarter compared to 72 million in 2012. It also saw 187 million monthly active users, down from 306 million users in the same time period a year before.

The company’s launches like Draw Something 2 have also underperformed without any slots in any of the top 100 charts and Zynga’s other big mobile launch, Running With Friends, remains in 45th place in the U.S. top grossing chart. Zynga had six major releases this quarter including War of the Fallen, Draw Something 2, Battlestone, Solstice Arena and Running With Friends.

But older franchises like FarmVille and FarmVille 2 continue to do well as both games have grown combined bookings by 29 percent year-over-year.

Zynga’s struggles in diversifying away from Facebook and missing the pivot to mobile ultimately convinced Pincus to give up the CEO role, although he remains chairman of the board and serves as chief product officer. It’s now Mattrick’s 15th day on the job.

zynga poker

Zynga is giving up what many investors had hoped might be its trump card: a real-money gaming business in the U.S. The company, which has been testing out real-money casino games in the U.K., said it won’t be pursuing a U.S. license after all in its second quarter earnings report today.

Sources tell us this is a decision to focus and not spread the company too thinly between real-money gaming, diversifying onto mobile and maintaining a core on Facebook. If it weren’t for the political and legal complexities of opening up real-money gaming in state after state, the business could have been interesting for Zynga, especially considering how long Zynga Poker has dominated both on the Facebook platform and on iOS and Android. None of Zynga’s social casino games, which use virtual currency, are affected by this. Shares declined 13 percent in after-hours to $3.02.

In the release today, Zynga said:

Zynga believes its biggest opportunity is to focus on free to play social games. While the Company continues to evaluate its real money gaming products in the United Kingdom test, Zynga is making the focused choice not to pursue a license for real money gaming in the United States. Zynga will continue to evaluate all of its priorities against the growing market opportunity in free, social gaming, including social casino offerings.

Zynga has long been exploring real-money gaming. It partnered with operator Bwin.Party to offer titles in the U.K. Then last November, the company took its first steps toward real-money gaming in the U.S. by applying for a “preliminary finding of suitability” from the Nevada Gaming Control Board.

It’s not that this option is forever off the table. It’s just that the company is in the middle of a significant platform transition now, and real-money games – which would probably only be available to players in Nevada at first anyways – could be distracting.

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Drawbridge, an ad targeting startup backed by Kleiner Perkins Caufield & Byers and Sequoia Capital, is expanding its offerings today with a new feature allowing mobile advertisers to reach consumers with retargeted ads, regardless of whether they’re using an app or on the mobile web.

Founder and CEO Kamakshi Sivaramakrishnan said that while ad retargeting (i.e., ads targeted based on your past visits and activity) is possible within apps, things get trickier when you try to cross the boundary between apps and websites: “It’s literally two devices on the same device, separated by an iron wire.” (I question her question use of “literally”, but I think you get the point.) App developers can also try to reengage their users through alerts and notifications, but users can always turn those off.

In order to solve that problem, Drawbridge is “piggybacking” on its core technology. That technology examines user activity to help advertisers identify when multiple devices are likely being used by the same person. That allows advertisers to use data collected on the desktop to target ads on mobile. The company’s two products launched last fall include PC-to-mobile retargeting and mobile app marketing. The mobile-to-mobile retargeting is intended to fill out the mobile marketing product, Sivaramakrishnan said.

Drawbridge has already run test campaigns with e-commerce companies, who were either trying to bring old customers back to the site or to convince current customers to buy more. Sivaramakrishnan said that in a campaign targeting lapsed users, the client reached 100 percent return on ad spend within three weeks. Another campaign targeted active users and reached 100 percent ROAS within a single day.

Advertisers will have a chance to test this out for themselves, Sivaramakrishnan said, because the new capabilities include an A/B testing framework. So advertisers can run part of their campaign with Drawbridge’s retargeting and part of their campaign without it and see which ads perform better.

Earlier this year, Drawbridge announced that it was partnering with TRUSTe to allow mobile consumers to opt out of its targeting. Since then, Sivaramakrishnan said that some users have indeed opt out, but that the rates haven’t been “heavy”.

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More proof, if proof were needed, that Apple needs a low cost iPhone to get its smartphone momentum mojo back: Cupertino’s share of the global smartphone market fell to its lowest for three years in Q2, according to Strategy Analytics, with just 31.2 million iPhones shipped in the quarter and Apple’s second place ranking declining to a 14% market share – this despite the overall smartphone market growing 47% annually to reach a record 230 million units shipped.

“The current iPhone portfolio is under-performing and Apple is at risk of being trapped in a pincer movement between rival 3-inch Android models at the low-end and 5-inch Android models at the high-end,” said Neil Mawston, Executive Director at Strategy Analytics, in a statement.

Mawston told TechCrunch it’s not just a low cost iPhone that Apple needs to return to growth, although he agrees that is a requirement for Apple to drive extra volume. Cupertino’s top priority should be a new type of flagship to compete with Samsung’s phablets, he said.

“Apple’s first priority should be a premium-tier phablet with a 5-inch screen because that is where the largest new revenue pool is located,” he said via email. “Apple is losing profit share to Samsung partly because of a lack of presence in the phablet segment. Apple’s second priority should be a lower-cost iPhone to win back some of the customers it is losing to cheaper Android models in Asia, Africa and Latin America.”

“A 5-inch iPhone would generate extra value for Apple, while a cheaper iPhone would deliver extra volume,” he added.

Overall, the analyst said smartphone market growth is being driven by demand for 4G handsets in developed markets such as the U.S. and 3G devices in emerging markets such as India. Asian mobile makers, who predominately use Google’s Android OS, are now clearly dominating the surging smartphone market, with Samsung still in kingpin position – shipping 76 million devices in Q2 to capture one-third of all smartphone volumes worldwide in the quarter – and LG, ZTE and Huawei in third, fourth and fifth place respectively.

The analyst described LG as a “star performer”, with its global shipments doubling year-over-year to hit 12.1 million units in Q2 to take a 5% share. “The popular Optimus and Nexus models have been the main drivers of LG’s success. If LG can expand its retail presence and marketing in major countries such as the US or China, LG could quietly start to challenge Apple for second position,” Analyst Linda Sui added in a statement.

Chinese mobile maker ZTE also took a 5% share in the quarter, shipping a record 11.5 million smartphones to take fourth place for the first time, while Huawei shipped 11.1 million handsets to also grab 5% and take fifth.

app ops

As expected, Google officially confirmed Android 4.3 at its event on Wednesday with Android chief Sundar Pichai. Among the new features/improvements in the update are a redesigned camera interface, Bluetooth Low Energy support, performance improvements such as smoother animations, and multi-user restricted profiles. But there’s apparently something else that Google didn’t talk about. Android Police has unearthed a hidden app permissions manager that allows users to selectively disable certain permissions for apps.

The feature is apparently called App Ops, and lets users toggle app permissions – such as location and the ability to post notifications – on and off for individual apps. Android Police notes that a developer has already created an app (available here on Google Play if you have Android 4.3 installed) that foregrounds App Ops, and has been having a play around with it.

The basic idea of the feature is apparently to give Android users more flexibility over what apps can and can’t do, allowing them to choke off battery draining features, say, or rein in irritating notification behaviour. If Google does decide to fully implement App Ops as a user-facing feature, there are potential big benefits here, from a security and privacy point of view, being as it could give users fine-grained control over what each app can do.

Apps they might otherwise have been tentative about installing could presumably be fine-tuned to fit their tastes now – which may also have some developer benefits, if it helps drive overall installs.

However Android Police notes that while App Ops does work, the feature is clearly not ready for the prime time yet – while testing it with the Facebook app they found certain app permissions only appeared in the permissions list once the app had made use of them, for example. Such messiness likely explains why Google has hidden App Ops and wasn’t ready to talk about it on Wednesday. We’ve reached out to Mountain View to ask for its plans for the feature and will update this story with any response.

Another possible complication attached to the feature is user confusion if a user doesn’t realise that the reason a particular in-app feature isn’t working is because it has been toggled off at source. A similar problem can occur on some Android devices with the quick settings in the notification tray overriding the main setting for things like silencing sounds/ringtones. Add in per app permissions and the potential user confusion is enormous. Android Police notes that one way for Google to get round could be to include some kind of system notifications warning users when App Ops is limiting app permissions. Although that would get old pretty quick if users get nagged every time they open an app with restricted permissions.

It is also possible that the App Ops feature has been created by Google to power the multi-user restricted profiles feature it did announced on Wednesday, which allows for parental controls to be implemented on Android devices.

The Android platform also has the most malware activity associated with it of all the mobile platforms, so the App Ops feature could be something Google is lining up to help bolster security concerns attached to Android. For instance, the feature could allow users to block apps from making calls – to kill off premium rate phone call/SMS malware – or trace which apps have been making calls to identify rogue software.

PetziConnect

Connected gizmos for dogs are having a moment, thanks to the likes of FitBark and other canine activity trackers. But here’s a connected gadget designed for dog owners to interact with their pet, rather than keep tabs on its health. Indeed, overuse of the PetziConnect’s treat dispenser feature may require some kind of health monitoring tech so push the treat button with caution.

Fortunately PetizConnect has other functions, that do not rely on treats to make pet and pet owner happy. Specifically it includes a wireless HD camera and a microphone so that pet owners can remotely summon Fido from his afternoon snooze and then watch as he cocks his head quizzically, wondering why his master’s voice is coming out of a box plugged in the wall.

As well as letting pet owners remotely view and coo at their dogs, and reward interest in a disembodied voice with the occasional tangible treat – dispensed via a button in the Android or iOS app or via a web client – the PetziConnect lets them take photos and record video. Which does, incidentally, beg the question how secure are Petzila’s systems – since once the device is up and running you will have a wireless, Internet-connected eye peeking into your home. Still, it’s designed to be plugged in at dog height so its view of any larger home occupants is probably going to be pretty partial. (Uhh, unless they happen to be rolling around on the floor nearby…)

Petzila was seeking $30,000 via Indiegogo to get the first batch of its connected dog-treating gizmo manufactured but has already passed that goal, with 40 days still left to run on its crowdfunding campaign. PetziConnects – which it says are rugged enough to deal with being mauled by a frenzied Fido hoping to get more treats/liberate its owner from inside the box – are due to ship to backers in December. The current lowest price-tag for crowdbackers wanting to bag a device is $99.

Update: Here’s what a Petzila spokesman had to say on the security point: “PetziConnect is built upon a 128-/256-bit encrypted, proprietary transport layer that blanket secures our three Petzila modules – Portal (mobile or web), Cloud, PetziConnect. In layman’s terms, we built the system bottoms-up to be end-to-end bullet proof secure.”

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At an internal meeting, Microsoft CEO Steve Ballmer admitted that the company overproduced the Surface RT tablet, leading to its recent $150 per unit price cut. As quoted by The Verge’s Tom Warren, Ballmer plainly explained that the company “built a few more devices than [it] could sell.”

But we already knew that.

In its most recent quarterly earnings release, Microsoft took a $900 million charge relating to the Surface RT tablet line, essentially admitting that the inventory that it has on hand was not worth its previous internal valuation; you can’t cut the market price of a product that you have in a warehouse and not lower its value on your books. The write down cost Microsoft $0.07 per share. It missed expectations for the quarter.

Microsoft has been on a mission to clear Surface RT inventory for some time. As I wrote earlier this year, through a combination of giveaways and discounts, Microsoft was moving to liquidate what appeared to be mountainous superfluous unit volume of its ARM-based Windows tablet hybrid.

At that time, Microsoft released a bland statement, saying that the offers and handouts were in “response” to the “positive reaction” Surface had enjoyed since launch. That felt a bit backwards: If response had been so strong, why give away a single device or discount? Wouldn’t organic demand be sufficient? Well, as it turns out, reaction hasn’t been overly positive, so the entire argument was logically moot.

Ballmer said something else during the meeting that is a non-surprise: Microsoft is not selling as many Windows devices as it would like. We knew that, too. The figures released quarterly that describe the PC market are brutal – and dropping. Even Apple is suffering from declining Mac sales in the face of nearly insurmountable headwinds that it helped to create with its leadership of post-PC product categories.

Next-generation Surface devices are being designed and tested. I suspect that Microsoft learned its lesson regarding production volume: Prove product-market fit first, and then kick the afterburners.

Top Image Credit: BUILDWindows

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Only a few months after closing a Series B round of $60 million that valued the ephemeral messaging company at $800 million, Snapchat has been in talks for another funding that values it at up to $3.6 billion, according to sources close to the situation.

Sources also added that the funding itself would be in the hundreds of millions of dollars and that the lead investor might be a strategic party from Asia.

Such a deal could still fall apart, of course, but the effort has become well known among several Silicon Valley venture firms, who have considered investing.

A spokeswoman for Snapchat declined to comment.

The investor is neither China’s Alibaba Group nor Japan’s Rakuten, which has put a lot of money in Silicon Valley startups of late, said sources. One interesting possibility would be China’s Internet giant Tencent, which makes money from in-app transactions.

The move by the Los Angeles-based company comes on the heels of another massive funding round raised by social scrapbooking company Pinterest, which announced earlier this week that it just raised $225 million at a $3.8 billion valuation.

Besides the huge piles of investment dough being poured into them, here’s what else the pair have in common: Little to no revenue.

That does not seem to have stopped a panoply of venture and other investors from jumping in and ponying up with huge amounts of cash for the privilege of investing in several fast-growing startups, hoping to grab ahold of the next Twitter or Facebook early.

Launched in 2011, Snapchat has grown wildly popular in a relatively short span of time, effectively creating an entirely new genre of messaging category with its “ephemeral” pictures and videos that last for only a matter of seconds.

Snapchat’s last round – which it called a “scaling round” for infrastructure improvements – was announced in late June, led by Institutional Venture Partners, with participation from General Catalyst Partners and SV Angel. Previous investors Benchmark Capital and Lightspeed Venture Partners also participated. With that round, the company had raised around $75 million in total.

Snapchat's Evan Spiegel

Snapchat’s Evan Spiegel

All the fervor has been due to Snapchat’s fast growth and younger demographic. Only a few months ago, co-founder and CEO Evan Spiegel boasted that the service had more than 200 million snapped pictures and video taken by its users on a daily basis, up from 150 million just months before. Then in September at the TechCrunch Disrupt conference, he said that the number had grown to 350 million self-destructing messages daily.

At the time, there was also an additional $20 million in a secondary offering just four months ago.

At the time of the June funding, in an interview with AllThingsD, Spiegel noted: “We’re excited about in-app transactions because of what we’ve seen in the Asian markets.”

A clue!

Snapchat has clearly been a phenom of late.

Indeed, the app has proved so popular – and potentially worrisome to established social players – that sources said when Spiegel continually rebuffed Facebook CEO Mark Zuckerberg’s acquisition offers, Zuckerberg cloned the app outright with a service called Poke. Zuckerberg’s offering famously flopped, while Snapchat continues to grow.

Most recently, Snapchat has begun to experiment with features outside of its core ephemeral messaging service. The company launched its Stories product last month, essentially a long-form play on Facebook’s status update in the form of a picture or video. And recently, Spiegel has grown more keen on the idea of monetization, experimenting with bands and listening to music inside the app.

The company, however, has not been without its problems. Early on in its history, Snapchat had to fight the perception that it was a “sexting service” for tweens, a fly-by-night app used to easily spread lewd photos. And it is still involved in ongoing litigation with Frank Brown, a collaborator from the service’s early days, who is suing the company he was pushed out of.

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