When I met legendary rocker Neil Young recently, he was pretty disparaging about iTunes. It’s like all new digital media technologies, he said: great for convenience, but the sound quality sucks (since I have a tin ear when it comes to music, I’ll leave others to judge the validity of that comment. But Peter Gabriel, another musician who’s been working on new ideas for distributing digital music, certainly agrees.)

Young let slip that he is now talking to record companies about licensing an alternative digital platform that he has been working on - something , he claimed, of far higher quality that could provide an alternative to the privacy-prone download world, and perhaps even a new business model for music.

The technology behind this was first shown off last month at Sun’s JavaOne conference (we blogged about it here.) Young, who is something of a techie, has spent 15 years experimenting with different technologies to assemble a complete archive of his career. He is now finally ready to release the first multi-media instalment. It will come out on Blu-ray discs, with the capability of adding extra content in future through downloads.

Bemoaning the fact that he can never keep a secret, Young told me he was now trying to promote this as a broader media platform:

We’re in discussions right now about developing our own media platform based on that. Something record companies can sell their artists’ works on. Something that can’t be downloaded, something that’s got much more depth.

It has every media component you could want, and they’re all married together in a platform. That means other artists could use it, other record companies could use it and gain the knowledge of our 15-year development curve.

This needn’t be limited to music, according to Young.

How about the history of the Civil War? How about the British Empire? If you have a career spanning 40 years, maybe it’s George Washington’s life. It could be a lot of things.

There’s so much to this that we can’t tell, that you can’t see in one sitting. Maybe there’s a structure there that could save the music business - a new thing, where it is creating new products.

When it comes to convenience, speed and low cost, though, iTunes (and piracy) take a lot of beating.

The most financially successful virtual worlds are not 3D and sophisticated, but flat and appealing to younger audiences.

Think Neopets, Webkinz, Club Penguin and Runescape, not Second Life.

Habbo, whose graphics are reminiscent of the Code Monkeys cartoon and 8-bit 80s video games, announced today that its 100-millionth avatar had been created.

That does not translate as 100m active members - the service had 10.3m unique visitors in May, according to comScore - but it is still an impressive indication of the growth of the service since its launch in Finland eight years ago.

Financial comparisons are difficult. Electronic Arts announced in April that it had sold 100m units of the The Sims, the video-game precursor to online virtual worlds. Blizzard Entertainment said in January it had passed 10m paying monthly subscribers for its World of Warcraft online game.

The companies do not break out the hard cash they make from these properties and neither does Sulake, the privately held Finnish company that owns Habbo and dropped the “Hotel” from Habbo Hotel in 2006.

However, it did reveal today it was “on track to reach our projected revenue goal of $85m, which indicates a healthy profit for the company” in 2008.

Teemu Huuhtanen, executive vice president of marketing, ad sales and business development, told me he thought Habbo was the largest independent virtual world, following Disney’s acquisition of Club Penguin for $700m last year, with its more than 20m users.

Monthly visitors are up 51 per cent on a year ago in Habbo’s 32 communities worldwide.

” I think the biggest reason for the growth is the redesign we did in October/November focusing on easy access and play, making sure that anyone without previous knowledge of virtual worlds could come to the web site and create their own character and start exploring,” he said.

Habbo has also partnered with movie studios and brands to help make the site more relevant to its teen target audience.

Around 85 per cent of revenues come from users paying for virtual items in the world, but advertising and sponsorship is expected to take a bigger share this year as the medium matures.

The maturity of its users does create a churn problem for Habbo. While Second Life may lose users because of the level of difficulty they face, Habbo members simply grow up and move on to more adult virtual worlds.

“Every year we need to reach the users in each market that turn 13, so it’s like a constant flow of new customers for us,” said Mr Huuhtanen.

It’s going to be a couple more weeks before the 3G iPhone makes its way to the shelves of Apple stores, but thanks to analysts at iSuppli, we now have a decent idea of how much it costs Apple to make each new handset.

ISuppli’s “virtual teardown”* of the latest iPhone, which landed in my inbox today, puts the cost of an assembled 3G iPhone at $173. That’s 23 per cent lower than the best estimate of what it costs to make the existing 8GB iPhone.

For Apple, a 23 per cent drop in cost could lead to fatter margins, in spite of its decision to abandon the iPhone’s earlier unsubsidised $499 price tag in favour of a subsidised price of $199. As iSuppli writes:

“The size of the subsidy paid by the wireless carriers to Apple will be about $300 per iPhone, iSuppli estimates. That means that with subsidies from carriers, Apple will be selling the 8MB version of the second-generation iPhone to carriers at an effective price of about $499 per unit, the same as the original product.”

Some of Apple’s extra margin will be pared by loss of a share of operators’ subscription revenues, an early concession that Apple has agreed to drop with the 3G iPhone. Some estimates had put Apple’s share of subscription fees at 10 per cent for the first-generation version.

In choosing to revert to a traditional subsidy-based model for the new iPhone, operators seem to be willing to take a short term hit in hopes that service and data fees for the 3G iPhone will be higher than those for iPhone 1.0.  If iSuppli’s analysis is right, Apple stands to make out well regardless.

*ISuppli analysts arrived at their $173 figure by getting on the phone with suppliers and supply chain analysts to develop an educated guess about what was likely to go into the new iPhone, and how much it was likely to cost. The final estimate did not include other costs, like the cost of software development, shipping, and packaging, iSuppli said.

Twitter, the service that wisely restricts blog posts to 140 characters or less, has completed its much-anticipated third-round VC funding.

That’s 139 characters, so I should stop right there. Except to tell you that Jeff Bezos, Amazon founder, is now an investor, as is Spark Capital, the Boston VC firm, whose Bijan Sabet will take a perch on Twitter’s board.

Existing investors – New York’s Union Square Ventures and Tokyo-based Digital Garage – also took part in the round, but no figures or valuation for the company were revealed.

Twitter has suffered significant downtime of late as its popularity has grown. Biz Stone, co-founder, said in a blog note that the funding would help the company focus on its infrastructure to make Twitter “reliable and robust”.

Revenues and profitability would have to wait until Twitter had achieved its vision of becoming a “global communication utility,” he said.

It looks as though Google is about to hand more ammunition to the critics who claim that it is fast gaining excessive power in the digital advertising industry.

A spokesperson for the company says that on Tuesday it will announce a new Web measurement tool to give advertisers a better idea of the true size of online audiences. This sort of information is badly needed - as we reported before, there are big disagreements over the way companies like comScore and Nielsen assess the size of a particular Website’s audience, and the row that has been raging over this issue has damaged what little credibility they had left.

Google should be in a better position than most to provide an accurate picture. While no details are available yet, one person close to the initiative says the analysis will come from data pulled directly from servers - both Google’s and those of third parties.

The new measurement tool will not be offered separately, our source says, but will be built into Google’s own media planning service. That suggests that only advertisers who run their campaigns on Google will get the extra insight. If so, this is a textbook example of how Google’s superior access to data could help it tighten its grip on digital advertising.

It’s almost too Web 2.0 to be true.

Pierre Omidyar, founder of eBay, has invested in the video comment service Seesmic, announcing the news in what else but a video comment on Seesmic.

Mr Omidyar also made his original offer to the company over the Twitter messaging service.

“He sent a tweet where he said ‘Can I invest in Seesmic?’”, says Loic Le Meur, Seesmic’s founder.

His new investor has become something of a Seesmic addict judging by his page on the site. He made his first of around two dozen comments from Bangladesh more than three months ago and now gives his location as Honolulu.

He has also been contributing ideas for Seesmic’s development. Mr Le Meur says it was his suggestion that a threaded video player, introduced today, should be developed for blogs.

Omidyar Networks, the philanthropic venture capital firm, has co-led a $6m second-round financing for Seesmic with Wellington Partners, bringing the total raised to $12m to date.

Mr Omidyar will take a seat on the Seesmic board.

“Through video conversation, Seesmic enables people to connect and engage with one another across the boundaries of geography and time, opening up entirely new possibilities for social connection,” is his quote in the press release.

But when you watch his 4am video from Bangladesh and today’s Honolulu effort, you know he means what he says.

Mr Le Meur said the new funds would help with internationalisation efforts and extending the platform on social networks and mobile devices.

Free internet speech has a price,  the Supernova networking conference learnt today.

Comment and conversation on specific websites is being liberated by services that allow commenters to make their comments portable and aggregate them elsewhere.

But if comment is not contained and moderated, concerns arise over privacy, ownership of the data, censorship and liability.

Representatives from coComment, FriendFeed and Seesmic, three services that have opened up web conversation, discussed these issues in a debate on “Liquid Conversations”.

Matt Colebourne, chief executive of coComment, said media companies he talked to were realising the ability to censor comment was disappearing.

“As an end user, I have certain rights, I can choose to say what I like, but if I’m saying it on Dave’s blog then he has a right to say ‘I don’t want to see it here’.

“But we have had a situation recently where someone left a comment on a blog and it was disallowed, but because that was a coComment user that comment was captured by coComment and is still there, and we took the view that the end user owned that comment because it was not on the site.”

Loic Le Meur, founder of the video comment company Seesmic,  said its users owned their comments and could choose to share them or not under the same kind of Creative Commons licence that exists on the Flickr photo-sharing service.

“As a user, I should choose whether I want to participate in private or public discourse,” said Bret Taylor, co-founder of FriendFeed.

“We are creating experiences for private discourse about public content - if you went home and had read an article in a newspaper and talked about it with your family, that’s private discourse about public content.

“It’s probably unreasonable to get too up in arms about this, on FriendFeed many of the conversations are private through the privacy controls for users and they drive traffic to sites through their links,” he said.

The session also spent time discussing  how to manage the noise from too much conversation. Matt Colebourne said there was no Dewey Decimal library categorisation system for comment and users would follow individuals who produced high-quality comments.

“We will have the rise of the celebrity commenters,” he said.

Bret Taylor suggested more sophisticated filters would produce the best comments, such as the Best of Day/Week/Month filter on FriendFeed.

Loic Le Meur demonstrated how comment could take many forms - he showed some of the 100s of video comments and conversations posted every day in sign language by hearing-impaired Seesmic users.

Mozilla, the scrappy open-source software company, hoped to set a one-day software download record on Tuesday with the launch of Firefox 3, the latest copy of its popular web browser. The company even went so far as to set up a special web page to promote its Guinness Book of World Records bid.

But Mozilla’s hoped-for PR coup turned into something of a debacle as thousands of eager downloaders rushed the site. The result was an internet equivalent of the Cleveland Indians’ infamous “10 cent beer night ” in 1974, in which an inebriated mob of baseball fans - lured by the promise of all-you-can-drink 10 cent beers - laid waste to portions of Cleveland Municipal Stadium.

In Mozilla’s case, the flood of download requests for Firefox 3 rendered the Mozilla.com site inaccessible to other users for part of the day. The cock-up drew jeers from web commentators. As VentureBeat wrote:

It is both annoying and laughable when a company massively hypes its own launch, only to result in broken links and 404 pages.

Mozilla had to know its servers would get slammed around 10 AM PST (the start time), hell, it begged for it to happen. In the blogosphere, we have a word for this: FAIL.

Hey, at least no one got hurt. The latest word from Mozilla is that the company is on track to break the download record in spite of the earlier problems.

More evidence to suggest that an internet advertising slowdown is taking hold in the US: figures from the IAB today point to overall growth of only 18 per cent in the first quarter of this year, a marked slowdown from 26 per cent in all of 2007 (and more than 30 per cent in each of the previous three years.)

Ever the optimists, the IAB and PwC, which puts the numbers together, expressed their habitual confidence in the secular shift of advertising online. Apparently this was “not so unexpected,” given the seasonally softer first quarter and “an overall economic slowdown.”

However, this was the first time in four years that first quarter revenues were actually lower than they had been in the preceding three months, so the numbers shouldn’t be shrugged off too easily.

The FriendFeeding frenzy currently consuming the Valley seems more like excitement about the possibilities of a new and multi-faceted service than the usual hype about the “next big thing”.

While some have described a service with 300,000 visitors as a challenge to Twitter (1.8m) or Facebook (32m) or even Google (600m+), the overstatements do point to how FriendFeed can be different things to different people.

How do they love thee FriendFeed? Let me count the ways.

Lifestreaming: FriendFeed itself falls into the nascent lifestreaming category. It is the glue that usefully combines all of a person’s social networking and Web 2.0 activity, up to 40 services from Flickr to Netflix, Last.fm to LinkedIn, Yelp to YouTube.
Essentially, this is a parasitic model, except FriendFeed gives something back. It actually helps to sustain the services it aggregates by promoting them and making them more useful as part of an open holistic social networking model. The ability to add comments to imported feeds increases the value of something as simple as a 140-character Tweet from Twitter.

Microblogging: FriendFeed can be a useful substitute for Twitter, which has suffered an inordinate amount of downtime lately. A number of desktop clients make it as easy to share a Friendfeed thought as a Twitter tweet - AlertThingy, BTT, Feedalizr and Twhirl seem to be the most popular. FriendFeed has not suffered any noticeable downtime - a tribute to the team of ex-Google employees who are used to handling far greater demands.

Comment: FriendFeed’s founders created Google’s Gmail, whose most original feature was the way it threaded together emails into conversations. It is not surprising then that conversations are the major original feature of FriendFeed and bring to life what would otherwise be an unappealing list of events. Paul Buchheit, co-founder, talked about FriendFeed’s take on how comment and conversation should work, in this feature on the rise of the Commenter.

New Forms: FriendFeed is only around 100 days old in its public form and is constantly evolving, adding new services and features. Rooms were added last month, enabling a discussion forum around a particular topic. While there is nothing startlingly original about this, adding features such as feeds from services will allow new media models to develop. As blogs have begat micro-blogging, Rooms could develop into a new form of destination for news and discussion. This blog is already experimenting at FT Techfeed.

Search: I find myself increasingly using FriendFeed for search on current topics. It is not only a source of sources, but of opinions of those sources as well, adding the value of friends. Again, as you might expect from the Google background, the search works really well.

Thomas Hawk, the photographer and blogger tells me he uses FriendFeed for search the way he used to use Digg, the news recommendation site.

“If somebody bookmarks or shares or Twitters something on FriendFeed, they are making an effort, they are screening things so interesting articles come up through this social filter, compared to Google where it’s going to come up with all kinds of stuff,” he said.

Paul Buchheit told me: “We’re trying to use social mechanisms to help organise information, Google is very focused on the technology, whenever a problem arises people at Google think ‘Well, how can I apply 10,000 computers to solve this?’”

FriendFeed does not need Google’s horsepower when its users are acting as that social filter for results. It may need to copy Google’s ad technology to monetise them though.

Steve Rubel on his blog argues that Friendfeed, Facebook and perhaps Google will all build businesses around “social contextual search advertising”.

For me, FriendFeed, although a couple of thousand times smaller than Google and featuring no ads at present, has built the perfect prototype to exploit this.