There are two schools of thought about Twitter’s decision not to sell itself to Facebook, as it did not in the fail-whale of a deal that BoomTown reported on yesterday.

Here’s my favorite quote from an Internet exec who thought the microblogging service’s decision to turn down $500 million in stock (and some cash) in the hot social-networking site was–how can I put this delicately?–stupid:

“If Twitter turned down 500m in stock, they should go see a shrink.”

But, others disagreed, with another big Web player noting: “Why should Twitter hitch itself to Facebook’s horse, when they don’t have to?”

Debate raged, depending on your point of view, with change-averse Twitter users mostly seeming relieved.

I am more toward the middle of the road, not knowing–who really does?–what was the best move. Thus, I would agree with a sentiment in an email sent to me yesterday from yet another digital guru:

“I think strategic buyers are going to be considered as options for all venture backed companies going forward. Additional rounds of financing are not the given they have been in the past few years. Liquidity is at a premium I’ve never seen before.”

Yes, indeed, as in all things, it always comes down to money and means and time.

In other words, Twitter has made the big bet that it has plenty of all of it, to transform itself into a real business and killer app before others catch up to it.

Right now, its business is deadly simple: A registered user logs in via the Internet or a mobile phone and answers the “What are you doing?” question the service asks in only 140 characters or fewer.

But that single feature has allowed the San Francisco-based Twitter to grow to about six million registrations, as reported in October, up 600 percent over the last year.

And that’s why Facebook–for all its powerful online social connections–has watched carefully as Twitter has raced past it in innovating in the “status update” arena.

And that is also why Facebook wanted to acquire it, to be able to check that important feature off its list, so it could move onto other issues (like finding an advertising model that pays off big).

According to many I spoke to about the now-ended discussions between Twitter and Facebook, both sides got along well, felt the fit was a manageable one and the union of the two made sense on many levels–and still does.

But, for Twitter, the chance to make a run for the prize was paramount, with a feeling among its investors and execs that the start-up should still take a shot at building its revenues–there are none right now–as well as it had done at building its growth.

As for Facebook, it apparently plans to keep the pedal to the metal too, in terms of growth and acquisitions–powering through these bad times economically, in order to emerge victorious when the tides turn.

In a prescient piece last week, in fact, BusinessWeek’s Spencer Ante outlined the Facebook do-or-die strategy.

Wrote Ante:

“As gloom descends on Silicon Valley, most startups and giants are growing cautious and cutting back. But not Facebook. The social-networking Web site sees a bleak economy as all the more reason to press ahead with aggressive plans for growth. ‘This is not the time for tech companies to be cutting back; this is the time to be hitting the accelerator,’ says Peter Thiel, a Facebook board member and investor.”

Of course, this was the very same Peter Thiel, who told me in a video interview a year ago that “there was absolutely no bubble in technology.”

Well, with tech valuations now in the basement (as well as Thiel’s own hedge fund returns) from peaks last year, he’s right–that bubble has surely been popped.

As I said before, you just never know, a kind of equivocation that Hamlet spoke about so eloquently in his famous soliloquy in Act Three, Scene One, of William Shakespeare’s classic play.

It’s in text and video below–the Laurence Oliver version, of course!–because we all could use a little more insight than 140 characters or a post on a digital wall gives to any of us these days:

To be, or not to be: that is the question:
Whether ’tis nobler in the mind to suffer
The slings and arrows of outrageous fortune,
Or to take arms against a sea of troubles,
And by opposing end them? To die: to sleep;
No more; and by a sleep to say we end
The heart-ache and the thousand natural shocks
That flesh is heir to, ’tis a consummation
Devoutly to be wish’d. To die, to sleep;
To sleep: perchance to dream: ay, there’s the rub;
For in that sleep of death what dreams may come
When we have shuffled off this mortal coil,
Must give us pause: there’s the respect
That makes calamity of so long life;
For who would bear the whips and scorns of time,
The oppressor’s wrong, the proud man’s contumely,
The pangs of despised love, the law’s delay,
The insolence of office and the spurns
That patient merit of the unworthy takes,
When he himself might his quietus make
With a bare bodkin? who would fardels bear,
To grunt and sweat under a weary life,
But that the dread of something after death,
The undiscover’d country from whose bourn
No traveller returns, puzzles the will
And makes us rather bear those ills we have
Than fly to others that we know not of?
Thus conscience does make cowards of us all;
And thus the native hue of resolution
Is sicklied o’er with the pale cast of thought,
And enterprises of great pith and moment
With this regard their currents turn awry,
And lose the name of action.

Last week, one of the things that struck me about the coverage of the two main tech conferences devoted to start-ups, DEMOfall and TechCrunch50, was the almost complete lack of discussion–or, more appropriately, worry–about the troubled economy.

This, even though the subprime mortgage crisis remains in full swing, along with the continuing turmoil around the stability of Wall Street financial firms, as well as Fannie Mae and Freddie Mac. Also, let’s not forget those sky-high gas prices.

Still, one entrepreneur after another got up and spun stories of companies built on fancy new ad models to come or the more hidden premise that they would get bought by a bigger fish up the food chain like Google (GOOG) or Microsoft (MSFT).

But as I wrote last week, all those stocks are suffering, and those companies are likely to be retrenching rather than expanding.

In fact, at an interview with Internet entrepreneur and investor Peter Thiel at TC50, he called Web companies undervalued. (See my video interview with Thiel here last November, in which he says a lot of the same stuff.)

As he told me almost a year ago, Thiel repeated his contention that the technology sector was still not in a bubble.

Well, perhaps not, but that’s actually because most companies in Web 2.0–despite their massive valuations over the last few years–aren’t going to have the chance get frothy and light enough to become so poppable.

Instead, most will likely fizzle away quietly, with no exits in sight as the economy weakens and puts a vise grip on companies that cannot survive the very tough financial road ahead.

That means the popular Web 2.0 maxim of “growth before profits” is in for a very bumpy ride.

It’s going to be especially true after this weekend’s latest round of bad news–the bankruptcy of Lehman Brothers, the sale of Merrill Lynch, the impending crisis at banks like Washington Mutual.

And with more to come, I could not help but remember the well-known political phrase used in the 1992 presidential race by the Clinton team: It’s the economy, stupid.

And that’s true even here in Silicon Valley, where the sun always seems to shine, even as the clouds gather.

(Also, here is a very good piece on the topic by CNET’s Larry Dignan on some more details of the impact on tech firms, specifically on selling products to financial firms.)

According to several sources, Facebook has discussed eliminating the observer status slots from its board.

Those positions are currently held by Greylock Partners David Sze (pictured here) and also Paul Madera of Meritech Capital Partners, both of whom are early Facebook investors, and they currently remain on the board as they always have been.

In any case, it’s not clear if Facebook can remove that status from preferred investors.

But the company might be discussing it because–as Facebook grows–it needs a more formal board process, especially as it prepares for a public offering sometime in the future.

In that case, the observer slot might be eliminated as the company moves to add more full-time members to the board. Observers do not attend all parts of the board meetings.

While Madera (pictured here) and Sze, well-regarded and well-liked Silicon Valley investors, could be in line for those slots, Facebook is unlikely to want too many venture capitalists on the board permanently.

The board already includes Accel Partners’ Jim Breyer, whose firm has a large investment in the company; Founders Fund’s Peter Thiel, the original investor in the privately held social-networking site; and, more recently, longtime Silicon Valley entrepreneur Marc Andreessen.

Greylock and Meritech were one of the earlier investors in Facebook, although its stake is smaller than that of Accel and Founders Fund.

A Facebook spokesperson had no information about such a development; I have a call and an email into Sze for comment, which he has not yet returned.

Since I posted an interview with Social Gaming Network’s Shervin Pishevar today on the announcement of his $15 million funding, it seems only sporting to post this lively video interview I also did with his main competitor, Mark Pincus of Zynga, recently too.

Zynga, named after Pincus’s dog, is one of the two main social-gaming networks that are competing for audience by offering highly interactive games of all kinds. Its aim is to be more engaging and create a series of addictive games that users will return to again and again.

Pincus, who also founded the Tribe social-networking site, is a longtime entrepreneur. I met him way back when as a reporter at the Washington Post when he and Sunil Paul launched one of the few start-ups–Freeloader–in the D.C. area.

And I can report that Pincus is as jumpy and energetic today as he was 15 years ago.

He has certainly been busy lining up a spate of fancy investors, garnering $10 million in funding in January, including from: Union Square Ventures, Foundry Group, Avalon Ventures, Pilot Group, along with personal investments from Silicon Valley players Reid Hoffman and Peter Thiel.

Zynga, which is larger than rival SGN, claims 2.3 million total daily active users across Facebook, with its Texas Hold’em game being the largest it offers. Other games include Sea Wars, Blackjack, Attack! and Scramble.

As I said in my SGN post, while BoomTown often makes fun of viral apps, most of which are faddish and juvenile, the better-made gaming apps actually are likely to be a real business over time, as long they remain engaging and fun to play as the classic real-life games are.

Zynga plans on making money through ads, including creating its own ad network for other gamers, as well as via the sale of virtual goods and premium offerings.

Here’s a chat with Pincus at Zynga’s offices (Pincus owns the building, by the way, which also houses a bunch of other Web 2.0 start-ups) in San Francisco:

Silicon Valley luminary Marc Andreessen (pictured here) has been asked to join the board of Facebook, according to several sources with knowledge of the situation.

While the arrangement is not completed yet, sources said the longtime entrepreneur has verbally agreed to accept the post to become the fourth member of the board of the Palo Alto, Calif.-based social-networking site.

Other board members include Accel Partners Jim Breyer, Founders Fund’s Peter Thiel and Facebook CEO and Founder Mark Zuckerberg. Greylock Partners David Sze also has observer status on the board.

Since he co-founded browser pioneer Netscape in the 1990s and helped usher in the Internet age, Andreessen has been an active investor and has created several successful start-ups.

His most current effort has been Ning, also based in Palo Alto, which is a white-label social-networking company that recently raised another $60 million in funding.

If Andreessen joins Facebook’s board, the move is yet another sign that the much-hyped start-up, which has undergone some growing pains over the last year, as well as garnering a $15 billion valuation, is growing up by bringing some major high-profile tech figures into its ranks.

Last night, for example, BoomTown broke the news that Google PR head Elliot Schrage had accepted a similiar job at Facebook.

That comes after Facebook hired another top Google (GOOG) exec, Sheryl Sandberg, as its COO, in March.

A while back, BoomTown suggested that Web 1.0 golden boy Andreessen–pictured here on the iconic Time magazine cover in 1996–would be a good mentor for current golden boy Zuckerberg, in a piece I did about potential execs for Facebook.

As I wrote in February:

But why not go for the man who was Zuckerberg before Zuckerberg was cool. Yes, the shiniest of Golden Geeks himself, Marc Andreessen.

I could go on and on about the similarities I find between the two, if you compared today’s Zuckerberg with the Netscape founder in the mid-1990s.

From their arrogant innocence to their visionary qualities to their enfant-terrible charm, it is almost as if they were separated at birth.

But now Andreessen is all grown up and much, much matured from when I covered him. He has become all calm and sage and he even does a very decent blog.

Plus, he has also started and run a number of start-ups after Netscape, giving him deeper managerial experience over the last dozen years.

And, best of all, Andreessen knows the pressure of being the best-thing-since-sliced-bread in the tech sector, and its inevitable downside too.

Overall, a real mentor and partner for Zuckerberg, making a perfect pair of Golden Geeks.”

One looks at the newfound fervor in India for Lord Balaji (pictured here), an incarnation of the Hindu Lord Vishnu, because of his apparent pull in getting adherents visas to the U.S. and other Western countries. Well, that’s one way to win an H-1B.

Another is a piece about investor Peter Thiel, who made the first significant investment in Facebook, and his maverick theories on how venture capitalism has to change. That includes letting entrepreneurs cash out early–praise the Lord and pass the Porsches!

(If you want to hear Thiel in action, see below the video interview BoomTown did months ago, in which he discusses his approach. And, yes, I know I say “right” too much.)

Today, Daryl Lang of PDNPulse, a blog from Photo District News, reported that it contacted more photographers whose pictures were used in the popular Web 2.0-mocking video by the San Francisco-based singing group, the Richter Scales.

Four of them responded that they also did not like the use of their work one bit, some objecting to the credit given, others to the non-payment and still others to not being asked for permission to use their photos.

Some objected to all three issues, all of which have to do with “fair use” under copyright law.

“I’m totally against the unauthorized use of my image,” said Ramona Rosales, whose picture of TechCrunch blogger Michael Arrington was used in the video and who said she was going to ask that the photo be removed, to PDNPulse. “I was never asked permission nor have I received any compensation for its use; furthermore I don’t feel it is justified simply because they gave me credit.”

As BoomTown reported last night here, the Richter Scales posted a new version of its “Bubble” video after photographer Lane Hartwell had the first one taken down from YouTube, because they used a picture she took of Valleywag’s Owen Thomas without her permission or payment.

In Version 1.1, the singing group added a full list of credits, which were also on the video. They also replaced the Thomas picture with one of me.

(At its start, the video also uses a quote from BoomTown’s video interview with investor Peter Thiel, which you can watch in its entirety here, which BoomTown has since approved of.)

After the second one went up last night, Hartwell said she was still sending the Richter Scales an invoice for the first version of their video, which uses Billy Joel’s “We Didn’t Start the Fire” as the tune in its parody and has been a viral hit on the Web.

I emailed Rosales for further comment, and will update this post when I hear from her.

About the new comments from other photographers quoted by PDNPulse, the Richter Scales’ Tom Shields said: “We have not heard from any other copyright owners regarding our video. If we do, we will attempt to reach resolution with them, hopefully in a civil, private conversation and not in the blogosphere. We are not trying to make a point, or looking for a fight, we’re just a bunch of hobbyists who like to entertain people.”

Ironically, Arrington–in a series of not-so-entertaining exchanges with another commenter, blogger Shelley Powers, in the Globe and Mail’s Mathew Ingram’s blog–felt Hartwell was wrong.

So, until this video also gets the copyright hook, here’s the new version of “Bubble”:

[Updated with Richter Scales comment.]

They have a full list of credits here and also on the video, and have a blog post on the problems related to the music video here.

Here’s the new version of “Bubble”:

The popular and viral video was removed from YouTube after photographer Lane Hartwell filed a DMCA take-down request with YouTube over copyright issues related to a photograph she took of Valleywag’s Owen Thomas that was used in the first video without her permission or credit.

Now, the Thomas picture has been replaced by one of, um, me. (At its start, the video also uses a quote from BoomTown’s interview with investor Peter Thiel, which you can watch in its entirety here.)

Hartwell has responded to the new video here, saying she was sending the Richter Scales an invoice for the first version of their video (apparently, it got a million plays on YouTube).

She said she would use the money to pay for her lawyer and donate the rest to Kids With Cameras, a nonprofit organization that teaches the art of photography to marginalized children in communities around the world. Hartwell said this was the offer “I proposed to the Richter Scales that they chose to disregard.”

Hartwell also noted, in part: “In the end, the band opted not to work with me toward a fair resolution of the issue. I have to say that I’m very disappointed with the members of the band I negotiated with in good faith. I question whether they would have acted differently if they’d been contacted by Billy Joel’s management or the stock photo agency Getty Images.”

The video is indeed using Joel’s “We Didn’t Start the Fire” as the tune in its parody.

In this case, that’s too bad, since the video-sharing service just took down the very popular music video parody called “Here Comes Another Bubble,” by San Francisco’s Richter Scales, which we first posted here and which has taken off like wildfire around the Web.

The video opens, in fact, with a BoomTown video of an interview with Facebook investor Peter Thiel, who talks about there not being a bubble (of course there is, Pete!).

But we did not mind the use of a snippet of it without permission, since it seemed like fair use in a parody.

So what’s the problem? Well, someone sent YouTube a take-down request and the company honored it without contacting the Richter Scales first.

Here’s the video:

By way of background, the hysterical video is sung to the tune of Billy Joel’s “We Didn’t Start the Fire” and perfectly nails the Web 2.0 mania better than pretty much everyone in Silicon Valley.

The music video parody by the San Francisco singing group has wowed the Web.

I posted about the removal here.

Shields defends the use of all material in the very funny video, noting it is a satire and they are not making any money it, pointing to the Electronic Frontier Foundation’s explanation of fair use rules in place:

A Wide Berth for Transformative, Creative Uses: Copyright owners are within their rights to pursue nontransformative verbatim copying of their copyrighted materials online. However, where copyrighted materials are employed for purposes of comment, criticism, reporting, parody, satire, or scholarship, or as the raw material for other kinds of creative and transformative works, the resulting work will likely fall within the bounds of fair use.”

Here’s an interview with Shields that BoomTown did today (and posted on YouTube!):

And so, as the song asks, we sure will blog about it (plus it uses our interview with Facebook investor Peter Thiel, also below, at the start).

In fact, it’s an honor to, as these guys get the Web 2.0 mania better than pretty much everyone in Silicon Valley.

And a warning to all: The video was so hysterical, it apparently made Robert Scoble spew Diet Coke through his nose. That’s, of course, not such a funny image.

And here is our original Thiel interview:

Actually, after reading it, with all the silly sniping among some of them (now all apparently resolved), it sounded to me more like the infighting of a particularly catty sorority than the back room of the Bada Bing.

But it is an interesting example of how insular Silicon Valley operates, creating new companies out of the carcasses of old ones and how important the roundelay of interconnections can be–in this case, stretching from PayPal to Yelp to Digg to YouTube to Facebook.

But the photos of the former PayPal group (pictured here at San Francisco’s famed Tosca) playing dress-up as nerdy gangsters was a nice touch, as was the shot of investor Peter Thiel as capo di tutti capi and Max Levchin, now running hot widget maker Slide, as his consigliere.

But if you want to see them both in more normal action, here’s a video interview I did recently with Thiel and a three-part one I did with Levchin.

Peter Thiel:

Max Levchin, Part 1:

Max Levchin, Part 2:

Max Levchin, Part 3:

Kara Visits VC Peter Thiel: A video interview with the first investor in Facebook (pictured here), who also sold PayPal to eBay for $1.5 billion.

Thiel’s take: Web 2.0 is underhyped!

Writers’ Strike!: The battle is on in Hollywood, as writers and studios fight over DVD fees split, but there is also wrangling over potential profits from new media efforts.

While that income is still pretty small, it’s a canard that producers are trying to insist that they can’t fork over better percentages because the market needs room to grow. Writers deserve their fair share as the online business gets bigger over the next decade.

Maka-Maka Melee?: Google took a solid shot at Facebook with its new OpenSocial offering, which lets anyone become a Facebook! The signing of MySpace at the end of the week was another slap, of course.

But this week Facebook fires back with its SocialAds offering to compete in the online ad game, where Google rules.

Hulu Doesn’t Stink: I and many others were surprised how good an experience the new online video joint venture from NBC Universal and News Corp. is so far.

While it is certainly not perfect (no downloading, limits on hit shows), it is a clean, easy-to-use service that gives users a lot of ability to control content and a quantum leap in attitude from Hollywood pooh-bahs.

Maybe they could become that enlightened when it comes to ending the writers’ strike.

Here’s a longish video I made at Thiel’s office on San Francisco’s Presidio (no Sand Hill Road mundanity for Peter!) yesterday with the man who has become Silicon Valley’s most interesting venture capitalist and all-around great character of late.

Now running the VC firm called the Founders Fund, as well as a hedge fund called Clarium Capital Management, Thiel has a lot to say about everything from the painfully slow decline of old media (likening them to train companies in a plane world!) to the underhyping of Web 2.0 companies like Facebook (a 10-times-10 valuation from its current $15 billion if the hot social network, in which he was the first investor, keeps up its torrid pace of growth!) to the state of venture capital (needs a shake-up!).

My favorite quote from the interview comes from Thiel right at the end: “There’s absolutely no bubble in technology.”

This is Thiel’s Web 2.0 version of the infamous quote from Web 1.0 uber-VC John Doerr, who said at the height of the last bubble that the Internet was then “underhyped” (which turned out to be pretty accurate overall, except to investors who lost their shirts in the bust).

The Stanford undergraduate and law school grad is in many ways a breath of fresh air for Silicon Valley–an entrepreneur (he was co-founder and CEO of PayPal, which he flipped to eBay in 2002 for $1.5 billion and personally pocketed $55 million in the transaction), a center square of a new kind of VC keiretsu (ex-PayPalers have their mitts in everything from Facebook to YouTube to Slide and more) and, best of all, someone willing to say deliciously wild things (he’s essentially John Doerr unplugged).

Such as this year when, in a widely read interview with the Deal in July, Thiel floated a massive figure for the valuation of Facebook, on whose three-person board he serves with founder Mark Zuckerberg and Accel Partners’ Jim Breyer.

“If we got an offer from someone for $10 billion, we probably would listen to them,” said Thiel to the Deal’s David Shabelman. “I don’t think we’re going to get that offer, and we’re not going to solicit it.”

It was a stunningly brash statement at the time, given that Thiel had initially invested $500,000 in 2004 in the company, which was followed by two more rounds, for a total of about $32 million overall by Founders Fund, Accel and others.

The last one was more than a year ago for $25 million, giving Facebook a $525 million pre-money valuation.

Except that changed last week when software giant Microsoft forked over an investment that put Facebook’s number at $15 billion and made Founders Fund’s 5% stake worth $750 million, at least on paper. (One has to wonder, of course, how Thiel is now hedging his bet to lock in that obscene gain.)

In any case, that deal is just the kind of capitalist development a political libertarian like Thiel would savor. And he clearly does.

And surly, given that we always have a lot to say about Facebook. (OK, OK, one tidbit: Its execs and investors have been disagreeing over how big a new investment to take–the operations folks want more cash and the VCs less dilution.)

That does not mean I do not hope to break news of what Facebook finally manages to decide to do, both with regard to partners and its funding, but that I will bow out of parsing this particular set of deals in excessive detail.

But our ennui got us thinking to back in mid-August, when we did a post making our own Facebook of the top execs there using your basic corporate shots.

So now, before they become all rich and start flying private, we compiled from less corporate pictures we found right on Facebook and the Web–we were going for a more fun Facebook of the players here.

We used all the execs from the last one, but we also added one woman, PR maven Brandee Barker, as well as the three principal VCs.

Co-founder and CEO Mark Zuckerberg in a picture presumably taken at Harvard. He looks so young and naive. Kind of like now.

Zuckerberg best buddy and tech genius Adam D’Angelo (VP and CTO) on a thrilling night at Foo Camp! What could be more fun than an overhead projector and a room full of geeky guys!

Who knew co-founder and VP of Engineering Dustin Moskovitz was such a fox? His future is so bright, he needs those rad shades!

What deft bit of performance art is wacky Owen Van Natta, VP of Operations and Chief Revenue Officer, performing here? A meditation on life as an underling of various and sundry Web moguls–all Silly String and sorrows?

We have no idea what Chamath Palihapitiya, VP of Product Marketing and Operations, is doing, but it looks cool, and he’s dressed natty as always.

Hey, who also knew that VP of Strategy and Operations Matt Cohler was in a 1990s techno-rock duo? (Oh, he’s the one without the shades.)

VP and CFO Gideon “Death Cat” Yu used to have to drink from public fountains, but soon he’ll have his own, spewing only the finest champagne!

It is hard to know where to begin with this picture of PR head Brandee Barker (is she headed for the Castro Street Fair?). But I say: Own it, sister!

There are exactly zero interesting pictures of doubtlessly interesting Founders Fund VC Peter Thiel online (and we looked hard). That’s him on the right, looking the most normal of this PayPal crew.

Again, it is hard to know exactly what Accel Partners VC Jim Breyer is up to here, but we think the hat might be a new and exciting look for him.

Greylock Partners VC David Sze is thinking really hard about how he can say Facebook is worth $15 billion and still keep a straight face and refrain from cackling in front of all the other VCs at Il Fornaio.