If you don’t count the ol’ iPod Classic, Apple completely revamped the iPod line yesterday at its annual music event. The Shuffle saw the return of buttons. The Nano is now a miniature multi-touch marvel that can apparently double as a fancy watch in a pinch. Then there’s the iPod touch, which is now the most popular iPod model of all, thanks to support for apps and web browsing. On the surface, it looks like the new touch is everything one would want in a contract-free iPhone 4 without cellular voice support. I would say that it’s close, but not quite.

I will give Apple credit, as it found a way to cram more iPhone 4 features into the new touch, even as it kept price points the same. The new touch enjoys the 960 x 640 “retina display,” an Apple A4 chip and two cameras, both of which support Apple’s FaceTime video calling feature. That said, however, there are still three missing features that make the new touch close to, but not on par with, a contract-free iPhone 4.

Location, location, location! There’s still no GPS chip in the iPod touch. Instead, the device will use available Wi-Fi networks to triangulate a location, just as it does on the iPad Wi-Fi model I own. That method actually works reasonably well, but of course, requires the touch to be connected to a hotspot. So much for check-ins on Foursquare or finding local points-of-interest if there’s no Wi-Fi to be found.

Just give me data. Unlike the iPad, Apple chose not to offer a 3G radio option in the touch, likely to keep the device thin. To be as mobile as the iPhone, features such a radio and a microSIM slot would have been a nice offer. Data plans could have been month-to-month for those that want them, although an option like this would surely boost the price of the device; it’s a $130 option in the iPad, for example. The touch has always been limited to Wi-Fi, so this is nothing new, but again, it’s a key difference between the touch and the iPhone.

2003 called and wants its camera back. Yes, the new touch has a front-facing VGA camera and a sensor on the back too. That rear camera even shoots high-definition, 720p video, just like the iPhone, but don’t even think to compare the rear shooter to that of the 5 megapixel camera on the iPhone 4. Stills from the iPod touch are a lowly 960 x 720, which works out to just under 0.7 megapixels. A solid shot like the one to the right taken by my son with his iPhone 4 isn’t happening on the new touch. Pics will look fine from the touch for posting on social networking sites and such, but blowing them up is going to be a painful experience, as details will lose definition faster than you can say “one more thing.”

I raised these kinds of points prior to Apple’s new product announcement, saying that the touch will never have all of the same features as an iPhone because the phone bits allow Apple to enjoy a $600 average selling price per handset. The phone costs less than half that to manufacture and consumers in the U.S. pay $199 or $299 for the device. Apple receives a carrier subsidy to make up the difference between the ASP and the price a customer pays.  What incentive then, does Apple have to make an iPod touch equal to an iPhone — minus cellular voice, that is — when it will earn less profit per device? As long as we’re on a subsidy model for handsets, Apple has no incentive to do so.

Having said that, the new iPod touch is close enough to an iPhone 4 for me personally, and probably many others who already have a smartphone. I’ve pre-ordered a 32 GB model that I’ll carry with my Google Android phone. My phone has a 5 megapixel camera for better stills and I’ll use the free Wi-Fi hotspot feature to get my iPod touch online during my travels. Looks like Apple is making money from me, even though it still doesn’t offer a contract-free iPhone 4 in the touch!

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Updated: You know things are bad when AOL’s search business looks better than yours. That’s the position in which Yahoo finds itself. The company said in a securities filing yesterday that it has lost a lucrative search-advertising deal with South Korea’s largest search engine, which some analysts say could carve as much as 10 percent off Yahoo’s gross revenue. Meanwhile, AOL today signed a deal with Google to extend its existing search partnership for five years, and the new arrangement will also expand the services — and potentially the revenue — that it gets from the search giant.

In addition to search and keyword-related advertising, the new AOL-Google deal includes a mobile partnership for the first time, and AOL has agreed to distribute its video content through YouTube, as Ryan noted in a post at NewTeeVee. There was some speculation that AOL might look elsewhere for a search partner after its arrangement with Google expired, which it was scheduled to do in December. AOL originally signed the deal with Google in 2002, after the search company agreed to invest $1 billion in the former Time Warner entity in return for a 5-percent stake. The extension involves no further investment by Google (which wrote off most of the previous investment).

The fact that AOL’s chief executive, Tim Armstrong, helped negotiate the previous deal while he was at Google (he’s the former head of U.S. sales at the company) probably helped cement the new partnership. Armstrong told PaidContent in an interview that the new deal should make the portal’s search traffic more lucrative — something the company desperately needs, since the volume of that traffic is declining as the service continues to lose subscribers, and AOL’s overall revenue declines along with it.

Yahoo — which recently signed a partnership deal with Microsoft to use its Bing search as the default for Yahoo’s properties — may be doing better than AOL when it comes to overall revenues, but its search-advertising business will take a hit with the loss of the contract with South Korea’s NHN, which has 65 percent of the search market in that country. According to UBS Securities analyst Brian Pitz, the loss of the South Korean search-ad deal could cut Yahoo’s gross revenue by about 8 percent, while another securities analyst estimated gross revenues could be chopped by as much as 10 percent (Update: A Yahoo representative emailed to point out that the deal with NHN represented “less than 1 percent of Yahoo!’s gross profit in the first half of 2010″).

The Yahoo-Microsoft partnership took another hit earlier this year when Yahoo Japan — which is partially owned by the U.S. web portal — dropped Microsoft and signed a search deal with Google. While it may not be strictly apples and oranges to compare Yahoo’s loss of the South Korean arrangement with AOL’s partnership with Google, one thing seems fairly obvious: at least in the short term, search revenue at Yahoo looks to be going down, while AOL’s search business looks to be getting better — or at least to be slowing its gradual decline.

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Post and thumbnail photos courtesy of Flickr user Graham Hills

Apple’s iOS platform has paid out more than a billion dollars to third-party developers through the iTunes App Store, but Google’s Android Market has yet to experience the same kind of success. Developers of Android apps aren’t throwing in the towel just yet, however; in a recent Bloomberg article, programmers said they have “high hopes” for the future. Why not, given how Android phones are outselling those running either the iOS or BlackBerry platforms in the U.S.?

The sentiment of waiting for Android’s popularity to spawn profits is summed up nicely by Andrew Stein, the director of mobile business development for PopCap, maker of Peggle, Bejeweled and other popular games. He expects revenues from Android apps to catch up to those of the iPhone by the end of next year, as the company will launch titles for iOS and Android simultaneously by the middle of 2011.

“Even though we are not making any money on Android right now, we have pretty high hopes for it,”  Stein told Bloomberg, adding “There’s really no reason why users shouldn’t consume and buy content to the same extent on an Android phone as they are on an iPhone.”

More phones aren’t yet equating to more sales, however. David Zhao, CEO of Zecter, said that 30 percent more iPhone customers of his ZumoDrive product upgrade to a paid version compared to Android users. Perhaps Google has fostered too much of a free mentality with products, which is now carrying over to the Android Market? After years of unpaid services like Gmail, Google Voice and Google Talk, consumers may be conditioned to — and expect — unpaid services or software on a Google-powered phone.

The Bloomberg piece reiterates several of the challenges faced by developers and consumers in Google’s own Android Market that we’ve mentioned earlier. The Market isn’t available in every country where Android phones are sold, which quickly limits the potential user base and sales revenue for a developer. Android tablet devices traditionally don’t have Market access either. Apps can be difficult to find — ironically, since Google is a leader when it comes to searching for information — although in the latest version of Android, the Market experience has slightly improved.

The Android Market experience will be getting better, however. In May, Vic Gundotra showed off upcoming features such as a web-based Market and the ability to send app installations to a handset from the browser. The question is: How much patience do developers have left for Android when mobile apps for iOS are paying larger dividends?

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Free? Forever? Hmm.... Credit: Malthe Sigurdsson

Skype is apparently up for sale, with Cisco the likely buyer. True or false, Cisco makes a great deal of sense as a buyer, because it can monetize Skype’s user base in a way that Skype never could. With 560 million registered users (124 million of which are active), but only 8.1 million paying customers, Skype could use some help.

This may sound like heresy to acolytes of Silicon Valley economics. After all, the new economics of software go something like this: Give great stuff away, then charge for advanced features for the few who need them.  In open source we call it “Open Core.” For Silicon Valley Web entrepreneurs, it’s “freemium.”

In both cases, it’s sub-optimal.

No, it’s not because of skewed ideas of user freedom, but because it ends up being difficult talking out of both sides of one’s mouth. A marketing message that reads “This is a great product! (Just not for you…)” is tough to articulate and maintain.

Yes, it can be done. However, it’s very hard.

Now consider Cisco and Skype. Cisco doesn’t have any problems getting paid for its software, hardware, and services. It sold $40 billion worth of both last year. What Cisco doesn’t have is a low-cost/free option to drive adoption of its technologies.

Enter Skype.

Skype, as stated, has lots of user adoption. While Skype is no chump at $406 million in annual sales — and it seems to be getting better at up-selling its user base– it will be easier for Cisco to negotiate an “upgrade to x” deal than it will for Skype with its new Connect services.

At Alfresco, my previous employer, the company was highly distributed, and we used Skype extensively to connect our home workers and remote offices. While I paid to use SkypeOut when I needed to call home while in London, I may have been the only one in the company to pay Skype any money.

Net income to Skype for our company of 100 employees, all of whom were active users of Skype? Maybe $2.00 per month.

Skype was good enough for 99 percent of the employees, so why would we pay?

Cisco can offer plenty of reasons. Companies like Alfresco grow up. When they do, they need more sophisticated video and phone conferencing solutions than Skype can provide. Cisco has them covered. Start with Skype, then move to Cisco gear.

It becomes even more interesting if Cisco finds a way to integrate Skype calls with its more expensive hardware and software solutions: something like Vidyo, which does just that. (Another possible acquisition, Cisco?)

This blending of free services, both open- and proprietary, with separate, paid offerings is the winning business model going forward. Google does it. Facebook does it. Red Hat does it.

Cisco looks likely to do it, too, with a Skype acquisition. Cisco-plus-Skype appears to be the perfect example of how to accelerate a business using a free complement. “Free” can mean a great deal of cash, done right.

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Speedy LTE mobile broadband networks are on tap to unite the world, based on a map showing current and planned LTE coverage by country. A total of 132 operators in 56 countries are currently investing in LTE for next-generation networks, says the Global Mobile Suppliers Association, indicating a 71-percent increase in the number of carrier commitments from six months ago. Given that nearly 90 percent — or 4.45 billion — of the world’s mobile handsets already use the GSM standard on which LTE is based, the GSA map paints a bleak picture for alternative futures, involving WiMAX and other standards.

Even before I saw the map, however, I’d already noticed signs that the WiMAX wave may have crested. Intel is one of the largest proponents of WiMAX, mainly because it produces wireless chips that can be embedded into notebooks for mobile broadband service. The company has invested several billion dollars in the technology since 2006, but just dropped another $1.4 billion to purchase Infineon this week. The Infineon acquisition is, at the very least, an expensive hedge bet against Intel’s WiMAX investments, which aren’t generating a postive return.

Clearwire, the largest WiMAX provider here in the U.S., is showing signs that it too could join the map of LTE participants. Sure, the company just introduced relatively affordable and unlimited prepaid plans yesterday, but that strategy is to get customers on the network before competitors roll out their own next-gen networks over the coming months. Indeed, Clearwire has already opened the door to transition some or all of its vast spectrum to LTE in the future, as the company modified the terms of an agreement with Intel that requires the usage of WiMAX through November of 2011. Factor in Clearwire’s TD-LTE trials in Phoenix, and you can see that the WiMAX tide is slowly moving out to sea, both locally and in global terms.

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Chat with an exec at one of the dozens of green car startups that have applied for loans from the Department of Energy’s Advanced Technology Vehicles program, and 9 times out of 10 they’ll give you the impression that hundreds of millions of dollars in loans are just about to fill up their corporate bank accounts. For some, it could be true. For others, not so much.

Last week, execs at Coda Automotive told me that the DOE had notified them that their loan application for ATVM funds had recently passed a crucial stage in the approval process. If awarded, Coda would use the loan — and an incentive package from the state of Ohio — to build a battery factory at one of several sites in Ohio. The factory would provide batteries for its Coda all-electric sedan. Coda plans to start delivering cars to customers in December, is looking to sell 14,000 vehicles by the end of 2011, and has raised hundreds of millions in its own private capital. Overall, it seems like a pretty solid candidate for the loan.

Last week, ZAP CEO Steve Schneider also told me that he’s confident ZAP will be awarded its DOE loans shortly. Given ZAP’s reputation of repeatedly missing its targets and under-delivering on its promises, I’m not sure I’m as confident as Schneider that those loans are imminent.

While startup V-Vehicle was already denied a bid for ATVM loans, Senator Mary Landrieu (D-La.) told the press earlier this month that “the latest signs point to V-Vehicle Co. eventually securing the $320 million in federal loans the company needs to kick-start its vehicle-manufacturing project,” according to the local News-Star. V-Vehicle has reportedly strengthened its distribution model and raised more private equity.

It’s hard to predict which companies will get one of the coveted ATVM loans. While Ford and Nissan secured loans for their green car projects, Tesla and Fisker also scored loans in 2009. Tesla has sold some 1,200 Roadsters, but Fisker has yet to launch — or even let the media test drive — its flagship extended-range, plug-in vehicle, the Karma.

The Chief of the ATVM program, Jonathan Silver, told us in an interview that the DOE has a half a dozen or so loan applications “in active and deep due diligence now. I would expect that you would see one or more awards in the ATVM space early or mid summer.”

Created under Section 136 of the Energy Independence and Security Act of 2007, the ATVM program holds authority to award up to $25 billion in direct loans. Projects can include re-equipping or expanding existing manufacturing facilities, establishing new plants in the U.S., or dealing with the engineering integration associated with these types of projects.

Under the program rules, ATVM-funded vehicle projects from new companies have to deliver fuel economy improvements of at least 25 percent compared to the average for that vehicle class in 2005 (for a manufacturer that already had cars on the market five years ago, its own 2005 fleet average serves as the base). According to the final rule-making for the program, the DOE considers “the extent to which an advanced technology vehicle exceeds” the minimum 25 percent improvement when it’s “prioritizing projects.”

Silver also explained:

Part of our objective in the ATVM program is to increase national fuel CAFE standards. At the same time, we’re interested in reduction of greenhouse gas emissions through reduction of tailpipe emissions and the like. Similarly we’re interested in creating jobs in the green economy. We’re also interested in moving forward important new technologies, which will enable the United States to take leadership positions in these rapidly growing new industrial sectors.

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