With more people emailing and fewer people sending physical mail in recent years, the U.S. Postal Service is taking steps to move into the digital world–and using a venture-backed company to do so.

Goodmail Systems Inc. has partnered with Epostmarks Inc. to launch a product, Postmarked Email, that has the approval and protection of the U.S. Postal Service.

The deal will essentially make emails handled by this service the legal equivalent of physical mail. That’s important for businesses that are seeking to cut the costs of physical mail while also improving communication with customers and become more environmentally friendly.

Goodmail, which has raised about $45 million from Bessemer Venture Partners, DCM, Emergence Capital Partners, Omidyar Network and Softbank Capital Partners, isn’t the only venture-backed company working with the postal service. Earth Class Mail Corp. covers different terrain–it doesn’t deal with email, but it provides users with access to their physical mail online. Earth Class Mail has raised more than $20 million from Ignition Partners, Alliance of Angels and Keiretsu Forum, according to VentureWire archives.

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With Twitter exploding–and the focus on real time data exploding along with it–there are a number of new companies that are seeking to develop more specific applications of this technology.

Several such companies presented at a conference in San Francisco last week organized by TechCrunch.

Hot Potato organizes real-time content about specific events, which can be big public events such as a conference or sporting event or private events such as a person buying a car. The company is backed by $1 million from First Round Capital and RRE Ventures.

Using the service, people can see a stream of the text updates for the events, as well as photos directly in the stream of news. People can participate in the events whether they are at the event in person or watching remotely.

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Google’s (GOOG) chief executive Eric Schmidt said during a trip to Baghdad this week that Iraq’s stabilization could lead to business opportunities in the country.

Mr. Schmidt was part of a delegation, led by Peter Pace, the former chairman of the Joint Chiefs of Staff, to encourage business development in Iraq.

“After this tremendous investment in Iraq, we see business recovery finally happening,” he said in a video interview provided by the U.S. Army. “The creation of a new Iraqi state ultimately means business opportunities for global firms.”

“Google’s interested in making sure that Iraq ends up being an open and transparent democracy–after all, information makes a big difference in everybody’s lives,” Mr. Schmidt added.

The delegation met with both military and civilian leaders in Baghdad, he said. “It’s clear that the government is reaching out now to business, to try to get us to begin our part in the reconstruction of Iraq.”

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Madison Avenue has joined forces with Internet companies in a last-ditch attempt to stop privacy regulations over the $29 billion online-ad industry.

The industry is finalizing an ad campaign to educate consumers about how digital advertising works, creating an icon that would appear on Web pages or ads alerting consumers if their activity is being tracked and deploying new technologies to police the Web for illegal activities. At issue is the practice of tracking consumers’ Web activities–from the searches they make to the sites they visit and the products they buy–for the purpose of targeting ads.

The efforts follow calls from the FTC earlier this year for Web advertisers and Internet companies to do a better job explaining how they track and use information about consumers’ Web activities and creating a simple way consumers can opt out of being tracked.

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Consumers are generally cautious heading into the critical holiday shopping season, with preseason trends suggesting that electronics sales may be solid while sales of apparel, particularly women’s styles, could get pummeled.

Spurred by the release of a hot videogame and earlier-than-usual promotions on televisions, U.S. shoppers spent 6.1 percent more on electronics in the first half of November the month, through Nov. 14, than a year ago, according to a recent analysis from MasterCard SpendingPulse, a unit of MasterCard Advisors.

The new data, based on MasterCard SpendingPulse data, which reflect estimates on all payment forms, including cash and checks, comes days before Thanksgiving, the traditional kickoff to the holiday selling season, when consumers traditionally spend several hundred billion of dollars. Retailers count on holiday sales for as much as 40 percent of their annual sales and half their annual profits.

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The Web consulting firm Blue State Digital helped the Obama campaign raise some $500 million online, catapulting a relative political novice into the Oval Office.

Its next challenge: Help fashion bible Vogue magazine cash in on its far-reaching influence at a time when advertising dollars are bleeding out of print.

Vogue has hired Blue State Digital to help analyze the Conde Nast publication’s audience as part of a broader, revenue-generating push that ultimately will involve implementing paid subscriptions on Vogue.com, said Tom Florio, publishing director for Vogue and several other Conde Nast magazines.

The collaboration between magazine publisher and Web strategist began several months ago when Diego Scotti, Vogue’s executive director of marketing, emailed Blue State Digital co-founder Joe Rospars. Vogue executives, keenly aware that the monthly magazine is just one of many ways people connect with the publication, had been looking for ways to capitalize on its influence.

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The rise of video streaming is dramatically affecting the Internet, according to a two-year study of Internet traffic trends that Arbor Networks recently presented to the North American Network Operators Group. Two years ago, Internet traffic was distributed evenly among a dozen Tier-1 network providers, but today the majority of traffic flows through direct peering agreements among large content providers, content delivery networks and ISPs.

Consequently, Tier-1 networks have shifted their business models from simple packet delivery to richer cloud computing and content hosting services, and new players Google (GOOG) and Comcast (CMCSA) have joined the top 10 list of Internet traffic producers–and the more traffic they put on the Internet, the more control it gives them over your online experience.

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Because it’s my job, I’ve followed pretty much everything Steve Brill has said in public about Journalism Online, the pay-for-news firm he launched in April with Gordon Crovitz and Leo Hindrey. From the start, they’ve been offering infrastructure and consulting for news organizations that want to charge for access to their websites. But as you’d expect with any new venture, the pitch has changed over time.

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I went down to city hall yesterday to participate in a hearing on net neutrality. I realize the NYC city council has no oversight on this issue but the lobbyists were coming out in force so I figured I might as well show up too.

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Demand Media has advertising-driven content down to a science. Instead of creating content for the Web and hoping that it generates revenue, the company works backwards by determining how much revenue each piece will generate before anything is produced.

The company uses a series of algorithms to pick through keywords that people are searching for on the Web and aims to create content unique enough to rank highly in those search results. It also determines how much advertisers would pay to be next to that content.

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You may have heard that Call of Duty: Modern Warfare 2 sold nearly 5 million copies in North America and Britain on its first day of release last week–that’s $310 million in sales, what publisher Activision (ATVI) calls “the biggest launch in history across all forms of entertainment.”

Nevertheless, the game’s more noteworthy achievement is an artistic one: It’s a first-person shooter that plays as a tragedy, not a power fantasy.

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For Kiaya Steele, the men in suits and dark glasses who appeared suddenly through the raindrops of a New Hampshire morning were the first sign that something very unusual was going on.

One of the men stood under an umbrella next to the car Steele and her friend Kellin had been riding in moments earlier and delivered a message. As Kelli’s sister Jenna was brought out of a second car that had pulled up mysteriously behind them, Steele was told that if she couldn’t quickly prove that she was “the real Kiaya,” the bomb planted inside Jenna would explode.

And this was just the tip of the iceberg of a day spent driving all around the countryside, complete with vans, staple guns, cameramen in trees, threats, red phone booths, and a series of hidden clues.

But this wasn’t a situation for the FBI. Rather, it was a very small-scale–and low-tech–version of what is known as an alternate-reality game, an entertainment genre that has grown in popularity in recent years, especially because its traditional use of mixed-media–the Web, cell phones, social media, and others–can allow large numbers of people to play together collaboratively.

Over the years, the games have become a favorite marketing tool of large companies like Microsoft, which has commissioned huge ARGs, as they’re known, for the launches of things like the video game Halo 2 and Windows Vista. Indeed, the first widely known ARG was called The Beast, and was used as a promotion for the release of the Steven Spielberg film “AI: Artificial Intelligence.”

Those versions of ARGs have seven-figure budgets and allow thousands of people to participate. Yet while they get most of the ink written about ARGs, there has long been a steady stream of games built for very small audiences or, as in the case of Steele and the friend with a “bomb” insider her, an audience of one. It turned out that the intrigue was all part of a day-long mystery concocted by Steele’s boyfriend, and involving several of their friends, as part of an elaborate marriage proposal.

“It’s such a cool format, and the people who can make it through a whole one of these get an experience that no other media can provide.”

–Jim Babb, founder of the AGR Awkward Hug

“We use a lot of fictional analogies in our lives–gangsters in an alley (and) later in the quest there was a Soviet scientist, all themes that had played out in our courtship,” Steele recalled. “We would write stories of sorts to one another before we dated. We’d take an image and run with it until it was too tired to move anymore. The whole thing was kind of a collaboration of our lives together.”

Given that the game Steele’s new fiance planned for his proposal had such a small audience, it was, to be sure, at the extreme end of the size and complexity spectrum for ARGs. But at any given moment, there are several ARGs being played that have slightly larger, yet still very small, numbers of participants. And it is these games, usually carried out at minimal expense and with no deep-pocketed sponsor, that may well be the true lifeblood of the increasingly popular world of ARGs.

And while there are practical limits to the kinds of interactions that are possible between the people running the larger games–the so-called puppetmasters–and the players, these smaller adventures offer everyone involved a much greater chance at direct communication.

“There are quite a few people making [small] ARGs, either without profit in mind or marketing [who are] saying, ‘Look at me, I can do this,’” said Michael Andersen, who runs ARGNet, the leading source for news and information about the genre. “The motivations for a lot of these things vary. [One] advantage of doing these grassroots games is working for yourself. [And], it becomes a lot easier to have those one-on-one interactions [and the] feeling that not only can you communicate, but you can change what’s going on” for fans.

Robot love

Earlier this year, a New York duo calling themselves Awkward Hug built and pulled off a small-scale ARG called Must Love Robots, which was centered around the idea of helping make love connections between people and robots.

Through a series of Web sites, social media, YouTube videos and more, Awkward Hug founders Jim Babb and Tanner Ringerud turned a $3,000 budget into a 3-month-long game with at least 300 participants.

Babb said that the project, which was entirely self-funded, came out of an original desire to create a Web series about a robot. But when the two realized that they could “make it so much more” by adding the various multimedia elements, they set out to build a bona fide ARG, one that would allow them to communicate directly with almost anyone who wanted to talk with them, even to the point of playing online games of Scrabble. And, of course, there were real-world meetings between prospective “dates” and the game’s signature robot (see video below).

Given the huge gap in size between a large-scale ARG and something like Must Love Robots, it might be surprising that many of the ultimate goals are the same. It certainly was to Babb.

“What surprised me the most,” Babb said, was that “players want more and they want to do things with you. It becomes a collaboration. The audience becomes characters.”

And while it’s not always possible for everyone to participate in person–Must Love Robots attracted players from around the world–one of the great things about the ARG genre is how many people who play do participate directly in one way or another. In Babb and Ringerud’s game, for example, 20 people created costumes related to the story line and sent in pictures of themselves wearing the outfits, all of which were intended to be folded into the larger story line.
Kids creators
A different kind of small-scale ARG was Find Chesia, a project put on by the Finksburg, Md., library on behalf of its local schoolchildren and their summer reading program.

The story, said organizer Heather Owings, was centered on the story of Chesia, a 14-year-old girl whose parents have gone missing on an archaeological dig and who sets out to find them. The game was designed by five small teams of 11- to 15-year-olds.

Like with many small-scale ARGs, Find Chesia encountered a series of structural problems, most notably, Owings said, the fact that the kids turned out to be resistant–mainly due to regular conditioning about the dangers of online anonymity–to the idea of posting information in character to the game’s Web site. In addition, there was the unforeseen problem that almost none of the kids were old enough to drive to the game’s real-world locations.

Still, the game was successful enough for Owings to want to run the game again next summer, incorporating some of the lessons they learned this year. And despite the problems, Owings said that she came away with an appreciation for what the ARG genre can offer its organizers and participants.

“I like that ARGs use tools that were set up to do something else, and they’re used to create something new,” Owings said. “It’s the taking of something and changing it and using it for something it wasn’t intended [for] in a new and creative way.”

Plus, she said, Finding Chesia turned out to be a perfect way to get the kids in on the enjoyment of building their own game, even though they lacked many of the skills generally considered necessary for such a task.

“It’s a way for teens to create their own game,” Owings said, “and we really enjoyed that aspect of it…They don’t need to be computer programmer [and] here is a way for them to take ownership for creating a game on a fairly small level. [As well, it] helps them to realize how much the Internet does facilitate networking within the community, as well as outside the community.”

These days, said ARGNet’s Andersen, there are at least as many small, grassroots ARGs being produced as the larger, corporate-backed games. And those numbers could grow as an increasing number of people become versed in the tools for building them. According to Andersen, teachers at the University of Texas at Dallas and the University of Mary Washington are both teaching classes about ARGs.

But the real upside in the genre’s growth will come naturally, as more people in more local communities get exposed to ARGs and discover the joy of playing something truly interactive and truly collaborative.

And while it’s true that most small ARGs quickly peter out as players and organizers discover that they don’t have the time or energy to follow through, there are those who feel that the ultimate payoff of participating is there for anyone with the stamina or commitment to grab it.

“For an independent ARG, the most successful thing you can do is complete it and have your core audience go all the way through,” said Awkward Hug’s Babb. “It’s such a cool format, and the people who can make it through a whole one of these get an experience that no other media can provide.”

Copyright ©1995-2009 CBS Interactive Inc. All rights reserved. Used by permission.

In the furthest reaches of India’s rural heartland, the cellphone is bringing something that television, radio and even newspapers couldn’t deliver: Instant access to music, information, entertainment, news and even worship.

Despite its rapid modernization, many of India’s 750,000 villages remain isolated except for the cellphone reception that now blankets almost the entire country after a decade of rapid expansion by operators. So in villages that don’t receive any FM radio stations, people have begun calling a number that has a recording of Bollywood tunes and listening to it on their headsets.

This primitive cellular “radio” service was used by close to 20 million Indians last year, phone company executives estimate.

“I call it the poor man’s iTunes,” says Mahesh Prasad, president of Reliance Communications Ltd., one of India’s largest cellular companies. “A villager waiting for a bus has nothing to do. When he wants to kill some time, this is the only entertainment media available.”

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International Business Machines (IBM) and a handful of other major marketers, including casino operator Harrah’s Entertainment and software giant Microsoft (MSFT), are experimenting with developing ad campaigns based in part on what consumers are chatting about on the Web.

For decades, advertisers have relied heavily on sometimes-dated consumer surveys and focus groups to provide grist for their ads. Now, some are using new technologies to scan the Web for key words to find out what consumers are–and aren’t–saying about their brands.

Then, they are incorporating those findings into their more-conventional research and using them not only to choose the overall themes of their marketing campaigns, but also specific text and photos for their ads.

Once the campaigns are up and running, the companies and their ad firms are using the same Web-scanning technologies to gauge consumer reaction to their messages, and to fine-tune them to boost performance.

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