We've been hearing Verizon iPhone rumors for years now.

It's to the point that no one really believes the rumors anymore, since analysts and pundits have cried wolf so many times.  But this time looks to be different due to some key dynamics in the semiconductor value chain, and I am going to go on record to say Verizon will be selling an iPhone this coming January. Here's why:

Smartphones like the iPhone are built from a collection of components, which are sourced individually from suppliers—e.g. the iPhone 4's cellular baseband (the core chipset used in mobile phones to handle voice and data communications) comes from Infineon and its GPS chipset from Broadcom.

Component purchases and manufacturing starts don't typically reveal strong links to individual handset OEMs. But in some cases components have a DNA which is traceable through the supply chain. For example, iPad rumors became much more concrete when we knew Apple was procuring large LCD screens.

For typical refreshes of GSM-based iPhones (the model that works on AT&T's network), suppliers and component product families remain fairly consistent between models.  But a Verizon compatible iPhone would be CDMA-based, which would make its DNA distinct from other iPhones and traceable through the supply chain.

The dominant supplier of CDMA chipsets is Qualcomm, the largest fabless chip company in the world. Apple has never procured baseband chipsets from Qualcomm before.

If Qualcomm were to plan for orders from Apple, there would be a ripple effect through the supply chain. It works like this: Apple's iPhone forecast links to Qualcomm's CDMA chipset forecast, which then trickles down to their foundry partner TSMC, who uses the forecast to plan wafer starts.

A CDMA-based iPhone would likely sell 2-3 million units in the first few weeks (modeled after iPhone 4's oversubscribed launch). The lead-time associated with upside in the semiconductor world is huge, sometimes as long as 26 weeks (supply is tight right now so this rule is in effect and Apple had major supply problems with the iPhone 4 and iPad).

Sources with knowledge of this entire situation have assured me that Apple has submitted orders for millions of units of Qualcomm CDMA chipsets for a Verizon iPhone run due in December. This production run would likely be for a January launch, and I'd bet the phone is nearly 100% consistent with the current iPhone 4 (with a fixed internal insulator on the antenna).

I can't say with 100% accuracy that an iPhone will hit Verizon store shelves in January, but all of the signals point that way, and it would give Verizon's CEO some interesting things to talk about in his CES keynote (though he may have to refrain as CES comes before Apple’s typical January keynote). I may be proven wrong, but based on my history dealing with components and selling to Apple, a Verizon-compatible iPhone looks to be a done deal.

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Contributor Steve Cheney is an entrepreneur and formerly an engineer & programmer specializing in web and mobile technologies.

Former Digg biz dev head Bob Buch will as of Monday take on a new role as AOL‘s VP of Business Development. Buch will be joining Digg’s former Chief Strategy Officer Mike Maser, former Marketing Manager Aubrey Sabala, and former Head of Communications Kiersten Hollars, who have all made the switch over to AOL.

Buch will be part of a team helmed by former Google Managing Counsel and current AOL Senior Vice President of Business Development Jared Grusd.

From Buch:

“In addition to working with the usual suspects (Google, Facebook, Twitter, Microsoft, etc.), I’m going to prioritize working closely with a lot of the startups where most of the innovation is happening in this space.”

Since Buch joined Digg in 2007, he’s negotiated key partnerships for the site including the New York Times, Dow Jones, Facebook, Twitter, CBS, CNN and Microsoft. Buch also launched and managed the Digg Ads Platform.

The talent migration (Hollars was the first employee to switch) presents a challenge to the news aggregation site at a critical time, as the impending alpha launch of Digg 4 is rumored to be coming next week, co-founder Jay Adelson has also recently left and the site is currently on the receiving end of allegations of a gaming scandal.

Update: The story has developed. Digg CEO Kevin Rose claimed in a tweet that two out of the four employees who moved to AOL were “let go,” but insists in an email that Buch was not fired, whatever that means. Buch informs TechCrunch that while it was technically true that he was part of a layoff, he had asked to be laid off.

Update 2: Ashton Kutcher has also weighed in on Buch’s departure, from his iPhone.

This guest post is written by Geoff Cook, cofounder and CEO of social networking site myYearbook. It describes the challenges of running a startup from New Hope, PA — a small town whose other notables include Chris Fralic of First Round Capital and members of the indie rock band Ween. Here he offers his perspective on running a venture-backed startup outside of not only the Valley, but also of any tech hub.

For as many companies that receive rounds of venture money and move to the Bay Area, you would think the land of microchips and tweets is the land of milk and honey. As an individual company navigating the competitive landscape of social media, we've found it helpful to buck conventional wisdom, while making monetization a part of our DNA. While I love the Valley and visit almost every month given the thriving ecosystem there, I'll always come back to New Hope.

New Hope is a small town of 2200 people on the Delaware River in Bucks County, Pennyslvania – about 30 minutes from Princeton, NJ and an hour's train ride from New York. There is talent here – the chart below shows revenues up dramatically with 64% growth since the start of the year.  We employ 80+ people – most of them local to New Hope. In each of the last four months, we hit a new monthly revenue record for the company while growing uniques 22% and time spent 50% since the start of the year, and I believe New Hope has something to do with it.

From the beginning, our location has posed certain challenges, initially with fundraising. A few potential Series A investors based on the East Coast could not overcome the location, encouraging the company to move to San Francisco, New York, or Boston – anywhere but Pennsylvania. At the same time, we felt pressured to raise significantly more money than we'd asked for.  Certain people would have jumped at the opportunity to move to a big city and spend a pile of money, but we passed on the deal.

We passed because we felt our location had certain advantages and because we thought it best not to raise more money than we knew what to do with. Our guidance came partly from an early angel investor, Terry Herndon, an MIT Lincoln Labs engineer who invested in my first company as well. We generally agreed that our only goal was to build a good, viable, growing business.

Hoping that West Coast VCs would be less location concerned, we did the Sand Hill Road tour. Suddenly, our location was no longer a factor. Now we had VCs coming to New Hope and even offering to do board meetings out here. Our Series A round came together when I mentioned to Rick Lewis, of USVP, an established early-stage VC firm on Sand Hill Road, that I would be out of pocket for a week moving my brother into college in Boulder, Colorado. He flew to Boulder, put a term sheet on the table over lunch, and we had our lead investor for the amount we initially requested.

For a company outside the Valley, it has also helped to have a local venture capitalist involved in the company. We were fortunate that Chris Fralic, a partner at First Round Capital, happens to be one of the 2,200 people who live in New Hope. He walked in to our offices unannounced four years ago and started asking questions. Soon thereafter, First Round joined the Series A and went on to become among the most prolific investors of the last five years – with offices in West Conshohocken, PA, and now also in San Francisco and New York.  Having two well respected investors in the Series A made our Series B led by Sergio Monsalve of Norwest Venture Partners that much easier. The local Starbucks is treated to three venture capitalists now on a regular basis.

While we didn't realize it at the time, our early decisions to stay put made us natural contrarians on topics we may have viewed differently had we been in the Valley.  We worried from the beginning about revenue exceeding costs and about spending money carefully – which seemed "backwards" at the time – before RIP Good Times made it momentarily trendy to be cost conscious. In particular, we deemed it reckless to press the pedal to the floor and head for a cliff, on the assumption that we'd have built a rocket ship before we went off the cliff.

The hesitation was not that we didn't think we could build a rocket ship, but that we only had one set of astronauts.  To this day, we don't see the outcome as binary, either 0 or $1 billion. Instead, we are always focused on the user – building the best place to meet new people on the web or mobile phone. To get there, we embrace scarcity as the lifeblood of innovation and consider living from round to round of venture money as an all-too-easy addiction for a company unable to find focus, weigh priorities, and make the difficult decisions required of survival. In short, being viable became part of our DNA.

When Facebook opened up its platform, it seemed as if every other social site followed. Meanwhile, we continued to focus on building proprietary applications and games to meet new people, bound together by an integrated virtual currency. We were never interested in having all the same games and applications as you could play elsewhere, and being outside the Valley, were less exposed to the pressures to follow the leader. Instead, we focus on product innovation and differentiation. We built the Chatter stream for meeting new people near you that now does over 1 million posts per day.  We also focus on monetization, with virtual goods now driving more than one-third of our revenues.

That being said, we do recognize the important role the ecosystem of the Valley plays and how important it is to participate in it. Through aggressive business development efforts in the Valley and a business development office in New York, we've established a number of partnerships with companies like Meebo, IMVU, Weeworld, and Arkadium, among others.

One concern we often hear is about hiring: how can you find quality people in Pennsylvania? I would argue that good people are hard to find anywhere, and that the talent pool here is strong, between the Princeton-area of NJ and Bucks County, PA. We recruited our engineering team mostly from nearby schools from Lafayette and Lehigh to Rutgers and Penn State, and we brought in talent from California, Texas, and Florida to supplement the local team. On the sales side, we have a 15-person sales and business development office near Penn Station in Manhattan that is rapidly expanding and easy to take day trips to from New Hope. We believe creating good jobs is one of the many roles of a strong startup, and that transplanting a promising company away from its birthplace is sensible for neither the startup nor its community.

But the best part of New Hope is the impact it has had on our culture. There is a small-town and family-feel to New Hope that fosters the sense that we are all in this together, working to make the best site we can for our users. Our people head downstairs to the brewery after work and take short walks for coffee along the river during the day, creating a nurturing environment for innovation and a good environment for sustaining the long hours required of growth. Our location has helped shape our product and our culture, and I wouldn't have it any other way.

Photo of myYearbook team: Geoff Cook

Back in February, the first glimpses of Glitch, a new massively multiplayer online game created by Tiny Speck, were shown to the world. Stewart Butterfield, the co-creator of Flickr and co-founder of Tiny Speck, gave us a walk-through of the game at that time. Even in its very early stages, it looked pretty damn good. And the potential was very apparent. Now it’s even more apparent, as the game gets ready to enter beta testing.

For the past several weeks, Glitch has been doing extensive alpha testing. Tiny Speck has set up Twitter accounts for the game to allow eager users to cut the invitation queue and try it out right away. We’ve heard from a few of those testers that the game is getting pretty solid — and addicting.

These testing rounds for Glitch have only been open for hours at a time. But they’re progressing to the point where a full-on beta test is getting very close, we’re hearing. A recent tweet from the Glitch Twitter account confirms this:

Good test, good test. Thanks everyone. There won’t be a test next week (company wide offsite meeting, planning beta), but: more asap!

That said, the switch from focusing on the underlying technology of the game to the actual gameplay itself only occurred recently, we hear. And while these tests are running smoothly, data is also being wiped out from time to time as changes are made. Tiny Speck also plans to test (whether it be alpha or beta) Glitch for the next several months before they fully open the game in 2011.

The game itself involves you creating a character and traveling through exotic worlds doing various actions. As you do this, you progress through levels, collect currency (currants), and do things to alter your energy and mood. You can also collect badges and skills along the way. Some actions in the game include harvesting plants, petting pigs, buying houses, raking dirt, drinking butterfly milk, and eatting sammiches.

Update: Butterfield sent us the video below showing off some of the updates they’ve done with the avatars in the game. But he also notes that even these are a bit old, and they’ve since added a bunch of new options. “They are pretty badass -– you can fine tune each facial feature and the expressive states and animations take those into account,” Stewart says. “[This is] definitely the most sophisticated flash-based avatar system we know about,” he continues.

While you wait to test it out, can find some of the latest artwork and music for the game here. Hopefully they still plan to include the Mike Arrington character (below).

Some of the skills you can earn:

In November 2008, Tony Fadell, Apple's senior vice president of the company's iPod and iPhone divisions, stepped down due to “personal reasons.” At the time, this was thought to be a blow to Apple, as Fadell was considered to be one of the execs on the short list to eventually succeed Steve Jobs as CEO. But Apple wasted little time finding a solid replacement: Mark Papermaster. But now, not even two years later, Papermaster is out as well, the New York Times reports today.

While no official reason was given for Papermaster’s departure, the timing is interesting to say the least. Papermaster’s official position was Senior Vice President of Devices Hardware Engineering — you know what that means: he was in charge of the iPhone 4′s hardware. Obviously, that hardware has been under a lot of scrutiny since the device’s launch due to antenna issues.

Bob Mansfield, Apple’s SVP of Apple’s Mac hardware engineering will step in to replace Papermaster, Apple confirmed to NYT. Sure enough, Papermaster’s bio is already gone from Apple’s executives page. This move makes sense as Mansfield was already heavily involved in the iPhone’s hardware architecture.

The Papermaster move is also interesting because Apple fought so hard to get him in the first place. Apple poached Papermaster from IBM where he was a VP in charge of the company’s microprocessors. Shortly after announcing him as their new exec, IBM filed suit to stop him from working at Apple. A judge quickly ruled that Papermaster had to halt work for Apple in November 2008 –just a few days after his hire.

IBM said Papermaster’s contract stated he could not work for a competitor for a least a year after leaving IBM. Apple was arguing that they weren’t a direct competitor. By January, the suit was resolved, but Papermaster wasn’t allowed to start work at Apple until the end of April 2009.

Not only that, but as part of the settlement, Papermaster had to check-in multiple times with the courts to make sure he wasn’t giving confidential IBM information to Apple. Despite all that, Apple clearly felt his 25 years worth of engineering experience was worth it. And now barely a year after his start date, he’s out. Odd.

Again, Apple won’t confirm that this has to do with the iPhone 4 antenna issue (or if Papermaster was fired or left on his own). But it is worth noting that Mansfield, not Papermaster, was present at Apple’s press conference last month to address the iPhone 4 antenna issues. It was also Mansfield, and not Papermaster, that was in the initial videos showing off the iPhone 4′s hardware.

Update: Something else to think about. During a tour of Apple’s device testing facilities (where Mansfield, but not Papermaster, was present), we were told that the iPhone 4 was being tested for a full two years before its launch. That means it was being tested before Papermaster got to Apple. While it’s not clear when the final hardware was approved for production, it’s certainly possible that Papermaster had little to do with that specific device’s hardware creation.

That said, in the time leading up to the iPhone 4′s launch, he clearly had to be heavily involved in every aspect of it — including the antenna. Is Papermaster a fall guy in this situation?

Update 2: Daring Fireball’s John Gruber heard from a source inside Apple a few weeks ago that Papermaster was “the guy responsible for the antenna.” He also heard that Papermaster, was in fact, fired. Going forward, clearly, he will no longer be the guy responsible for the antenna.

Last year, EA Sports brought its hit football franchise Madden to the iPhone and iPod Touch — the game went on to become one of the top-selling iOS games of 2009, and has since racked up a total of nearly 13,000 reviews. Later this week, the gaming powerhouse will be bringing the virtual gridiron to a device that’s even better suited for its touchscreen gameplay: the iPad.

Madden 2011 will be released for the iPad, iPhone, and iPod Touch this Tuesday (pricing details haven’t been announced, but the iPad version will likely go for around $12, and the iPhone version will be less expensive). We sat down with Jeremy Gross, a Producer at EA Mobile, who gave us a walkthrough of the final version of the game.

As you’d expect, Madden 2011 sports a number of new features over last year’s game, and they’re designed to help the game cater to both hardcore Madden fans and novices. The game includes full playbooks, stat tracking and a full season mode, but if you’re just looking for a quick diversion, you can optionally set the AI to call plays for you, giving Madden more of an arcade-style pace.

If  you’re looking to take a hands-on approach, you can create ‘hot routes’, which let you drag your finger to dictate exactly what route you want each of your players to take. These were available on last year’s iPhone version, but the iPad’s larger screen size makes this surprisingly intuitive (and fun), especially compared to the convoluted control schemes you’ll typically find on console football games.

Check out the video above for more details. And for more great iOS games, check out our guide to the top 30 iPhone games so far this year.

Editor’s note: This guest post is written by Alex Ahlund, the former CEO and founder of AppVee and AndroidApps, which were acquired by mobile application directory Appolicious. About this time last year, he gave us his picks of the best iPhone apps of 2009 up until then, so we thought we’d make it an annual tradition.

I’ve been involved in the iPhone app industry since it first began in 2008 and I have to say that it has come a long way. I’ve seen it grow from a meager launch of 500 applications in the App Store to currently over 225,000. In only two years, the industry has matured at hyperspeed. It spawned an entire ecosystem to support it from a multitude of news and editorial resources to developer engines, promotional services and ancillary niches. With over five billion app downloads and a billion dollars at stake, it’s no surprise that the app economy expanded so quickly.

However, the novelty land grab is definitely over. When you run a search on the App Store, most of the gimmicks have already been created—at least twice. Clones still litter the store and it’s becoming even more difficult for quality apps to get noticed. But, if you have a bit of patience and are willing to sift through less exciting apps, there are some fantastic gems just waiting to be discovered.

So without further ado, here are my top 30 picks for applications released this year thus far. Try one or try them all.

Games:

1. Angry Birds (review, iTunes)

Launch birds from a slingshot to topple buildings and crush piggies. There’s a reason this game has been No. 1 on the Paid List for so long. Addictive only starts to explain it.

2. Plants Vs Zombies (review, iTunes)

A defense game by casual game creators PopCap. Protect your home from an invasion of zombies by placing plants that shoot, freeze, blow-up, crush, or generally obliterate your foes.

3. Fruit Ninja (review, iTunes)

So simple, but strangely satisfying. Swipe to slice 3D fruit as it enters your screen. Great visuals and gratifying delivery.

4. Archetype (review, iTunes)

One of the best 3D arena shooters for the iPhone. Smooth multiplayer and easy handling. If you’re going to play a first-person shooter on the go, this is the one.

5. Rhythm Spirit (review, iTunes)

A rhythm-fighting game based on Japanese folklore. Very unique with top-notch production values. Can’t go wrong with ninjas, fighting, and music.

6. Ragdoll Blaster 2 (review, iTunes)

Sequel to the fun and creative physics game. Blast ragdolls out of your canon to hit various targets. Tons of levels and really interesting puzzles.

7. Canabalt (review, iTunes)

The iPhone version of the popular flash game. Original escape game where you run away from impending doom, dodging obstacles and crashing through windows.

8. Chaos Rings (review, iTunes)

One of the few games priced above $10 that sold really well. A deep RPG with fantastic graphics from Square Enix.

9. The Horrible Vikings (review, iTunes)

A trajectory game steeped in style. Launch your vikings to hit enemies and items alike. A full upgrade system and use of power-ups adds nice depth.

10. Trenches (review, iTunes)

Fun side-scrolling strategy game where you employ the use of soldiers, machine guns, rifles and bombs to destroy your enemy.

11. God Finger (review, iTunes)

Keep your followers healthy and working. Create buildings, farms, and taverns for your peasants to enjoy. Control the weather and become the dictator of your own little world.

12. Parachute Ninja (review, iTunes)

Fling your ninja ball through the air in this interesting platformer. Reach higher and higher platforms, while avoiding obstacles and enemies.

13. Pocket Legends (review, iTunes)

This MMORPG deserves attention for an ambitious endeavor. Choose a class and work on leveling up, meeting strangers, and battling enemies.

14. Monkey Island 2 (review, iTunes)

Sequel to one of the best adventure games ever released. More humor, puzzles, and story that we’ve come to expect from this classic series.

15. Zenonia 2 (review, iTunes)

Followup to the hit action RPG Zenonia. With more playable classes, abilities, items, story and artwork, this is a must-have for RPG fans.

Apps:

16. Foursquare (review, iTunes)

The quintessential geo-social app, Foursquare allows users to ‘Check in’ to locations to earn points and broadcast their location. Get more Check-Ins than anyone and you become the mayor.

17. Groupon (review, iTunes)

Groupon is a service that offers an extremely marked down deal every day. From restaurants to spas, users have been excited about Groupon since it came out. All the same convenience on your iPhone.

18. iMovie (review, iTunes)

It made sense for Apple to bring their casual video editing software over to the iPhone when the 4 launched with hi-def recording. Very solid tool for on-the-go editing.

19. Siri Assistant (review, iTunes)

Your own personal assistant. Ask it for directions. Reminders. General information. Nearly anything. Fun and useful for anyone on the go. (Bought by Apple).

20. Twitter (review, iTunes)

While nothing new, with the acquisition of Tweetie, the official Twitter has become the best out of them all. Contains all the features you need.

21. Wolfram (review, iTunes)

After dropping dramatically from the $50 price tag, Wolfram has become a fantastic knowledge searching tool based on Wolfram Alpha.

22. iBooks (review, iTunes)

I know, I know. This is a given. Provided with iOS 4.0, iBooks is the defacto book reader. Even so, it’s worth a mention for how elegant and easy it is to use compared to other readers.

23. Hulu Plus (review, iTunes)

This is something we have been waiting for a while. The downside is that it only offers content for the paid service—not for free as it is on the web. But, if you can pony up the monthly fee, this is a great app.

24. Gowalla (review, iTunes)

Similar to Foursquare, Gowalla allows users to ‘check in’ to a location to earn stamps. Based on GPS, it’s very addictive earning stamps and a great companion while you are out and about.

25. Dragon Dictation (review, iTunes)

Finally, an accurate way to dictate voice to text on the iPhone. Speak naturally to send a text message, email, or anything else that can receive inputted text.

26. Free App A Day (review, iTunes)

FAAD is an interesting service that works with developers to offer up their paid apps for free for a short time period. If you follow the iPhone app, you can snatch up some big name apps, gratis.

27. JotNot Scanner Pro (review, iTunes)

Make your iPhone into a multi-page scanner. Has a great image enhancing ability and makes saving and sending scans pretty effortless.

28. Text’nDrive (review, iTunes)

For those of us with a habit of checking (or even worse, responding to) email while we drive, this app provides a hands-free solution where new messages are read to you and you can respond by voice.

29. Geodelic (review, iTunes)

An elegant "Around Me" style app showing everything that is near your location. Fun way to discover things you didn’t know existed.

30. Digg (review, iTunes)

Digg finally made an official app and it definitely didn’t disappoint. Users can look forward to all the same functionality as the native site, as well as easy saving and sharing.

Which apps would make your top 30 list?

Photo credit: Flickr/Amit Khanna

Editor’s note: With the growth of local commerce on the Web, the links between online and physical commerce are becoming stronger. In this guest post, Alex Rampell, the CEO and founder of TrialPay, explores the forces behind what he calls “online2offline” commerce.

What do Groupon, OpenTable, Restaurant.com, and SpaFinder all have in common? They grease the wheels of online-to-offline commerce.

Groupon's growth has been nothing short of extraordinary, but it's merely a small subset of an even larger category which I'd like to call online-to-offline commerce, or On2Off (O2O) commerce, in the vein of other commerce terms like B2C, B2B, and C2C.

Bear with me. The key to O2O is that it finds consumers online and brings them into real-world stores. It is a combination of payment model and foot traffic generator for merchants (as well as a "discovery" mechanism for consumers) that creates offline purchases. It is inherently measurable, since every transaction (or reservation, for things like OpenTable) happens online. This is distinctively different from the directory model (think: Yelp, CitySearch, etc) in that the addition of payment helps quantify performance and close the loop—more on that later.

In retrospect, the fact that this is "big," or that Groupon has been able to grow high-margin revenues faster than almost any other company in the history of the Internet, seems pretty obvious. Your average ecommerce shopper spends about $1,000 per year. Let's say your average American earns about $40,000 per year. What happens to the other $39,000? (The delta is higher when you consider that ecommerce shoppers are higher-income Americans than most, but the point is the same).

Answer: most of it (disposable income after taxes) is spent locally. You spend money at coffee shops, bars, gyms, restaurants, gas stations, plumbers, dry-cleaners, and hair salons. Excluding travel, online B2C commerce is largely stuff that you order online and gets shipped to you in a box. It's boring, although the ecommerce industry has figured out an increasing number of items to sell online (witness Zappos's success with shoes: $0->$1B in 10 years, or BlueNile's with jewelry).

FedEx can't deliver social experiences like restaurants, bars, Yoga, sailing, tennis lessons, or pole dancing, but Groupon does. Moreover, for your locally owned and operated Yoga studio, there is little marginal cost to add customers to a partially filled class, meaning that the business model of reselling "local" is often more lucrative than the traditional ecommerce model of buying commodity inventory low, selling it higher, and keeping the difference while managing perishable or depreciating inventory.

The important thing about companies like O2O commerce companies is that performance is readily quantifiable, which is one of the tenets of O2O commerce. Traditional ecommerce tracks conversion using things like cookies and pixels. Zappos can determine their ROI for online marketing because every completed order has "tracking code" on the confirmation page. Offline commerce doesn't have this luxury; the bouncer at the bar isn't examining your iPhone's browsing history. But O2O makes this easy; because the transaction happens online, the same tools are now available to the offline world, and the whole thing is brokered via intermediaries like OpenTable or SpaFinder. This has proven to be a far more profitable and scalable model than selling advertising to local establishments; it's entirely due to the collection of payment by the online intermediary.

Does Groupon deserve a billion-dollar valuation? It's easy to see a world where O2O commerce dwarfs traditional (stuff in a box) e-commerce—simply because offline commerce itself dwarfs online commerce, and O2O is simply shifting the discovery and payment online. If Groupon can grow its leadership position, I predict a multi-billion dollar valuation based on discounted cash flow alone. Groupon is not a gimmick or a game, but a successful example of offline commerce being driven by an online storefront and transaction engine.

Venture capitalists and entrepreneurs would be wise to think beyond cloning the "deal of the day" concept—and instead think about how the discovery, payment, and performance measurement of offline commerce can move online. This will have ripple effects across the whole Internet industry — advertising, payments, and commerce — as trillions of dollars in local consumer spending increasingly begin online.

Photo credit: Flickr/Jeremy Brooks