Remember when Bill Gross launched the search engine GoTo.com, later Overture, and shocked the industry by ranking listings by how much advertisers were willing to pay? At the time, his pay-per-click model was ripped apart as cynical and sleazy. But paid search ads, it turns out, were the right idea. The willingness of an advertiser to pay, among other factors, was actually a useful criterion for determining whether an ad might be effective, and it's a practice that's making billions of dollars for Google.

I think there's a similar effect here. There was no downside for TechCrunch40's presenting companies; if they gave a lousy presentation, all they wasted was the audience's time. One of the best-received startups was MusicShake. Note that MusicShake is based in South Korea, which means that its founders flew across the Pacific to make their debut, at considerable expense. They may not have paid Calacanis and Arrington anything, but unlike most of their peers, they actually had skin in the game.

Contrast that to the sloppy demos given by some Bay Area startuppers who only had to roll out of bed to get there — and looked like they just had.

By contrast, every company at Demo had some money at stake. It might not have been a big risk, but it was enough to make them take the event seriously. Shipley told me earlier this week:

Demo is involved in helping companies launch their products, and there are costs associated with that. That doesn't remove the hurdle of qualifying and being selected to participate. The fee is a commitment for a small company. It does signal a seriousness of intent — it is a bit of a bar for a company, and if you're able to clear that hurdle, that means that there's more at stake and the company is perhaps more viable.

The irony is that when I reported that DemoPit, TechCrunch40's for-pay sideshow that required startups to buy a ticket to the event, Calacanis blusteringly defended his event along much the same lines as Shipley, citing the costs of putting it on. Of course. But by making startups share those costs, Shipley is putting the invisible hand of capitalism to work as a useful sorting function. You know her companies won't waste your time. Why? They have money on the line.

I'm drunk. But that's okay, because my editor spiked my TechCrunch piece. "This isn't what we expected at all," he said of the show, having been lured by the big-brain judges and the presumption that Arrington's top-secret reveal would be another iPhone. I suspect the next such blind event will have trouble getting reporters to show up, except the sort such as Wired who make themselves part of the story. These effectively worked for Arrington this week, publishing what he wanted when he wanted. Given the endless EMBARGO EMBARGO EMBARGO rules I couldn't keep straight, it was a relief to have no actual news to break. I forget my point, but see you somewhere else next year.

So, how was the crowd? Michael Arrington was there, of course, holding court and greeting well-wishers. TechCrunch CEO Heather Harde overviewed the event. Lots of TechCrunch40 presenters and DemoPit participants showed up, including Powerset CEO Barney Pell, who declined to take credit for his company's vodka giveaway, though he was a fan of the fun schwag.

I asked Pell about his company's participation in TechCrunch40. Powerset has gotten a fair bit of press in the past year. Wasn't the whole purpose of the conference to show off undiscovered companies? Pell told me that the conference organizers had actually come to him and asked Powerset to present. Interesting.

I, unfortunately, missed MC Hammer, though fellow TechCrunch40 "panel of experts" member Sarah Lacy (pictured above, with Arrington) was there. No Jason Calacanis, though. When asked about his partner's whereabouts, Arrington guessed Calacanis skipped the event. Running a conference does tend to tucker people out. So much for his treadmill workouts.

As the night went on, the over business agendas came out. One startup founder talked to me about his desire to sell for "at least $20 million" and started strategizing about potential buyers to target. Another presenting company was a bit more level-headed about the event. When asked about his reaction to being selected as one of the 40 lucky ones, he demurred. "It's not going to make us or break us, but it's nice," he said. Nice. Oooh. That hurts. Somehow I doubt, of all the words Calacanis and Arrington might be hoping to have carved on their tombstones, "nice" was on the list.

Only the more grizzled members of San Francisco's press corp even remember Comdex. The once-legendary — and infamous — tech expo was hot well into the '90s, but it rapidly fell to pieces as it overexpanded. As desperate gadget hawkers tried to lure attendees to see their wares, they hired comely "booth babes" to staff their exhibits. TechCrunch40, the Web 2.0 startup conference organized by TechCrunch editor Michael Arrington and entrepreneur Jason Calacanis, is infinitely smaller than Comdex ever was. But the comparison is still apt. Bypassing Comdex's successful years, TechCrunch40 is going straight for the seedy, desperate late stage of Comdex, as these two short-shorts-wearing publicity-mongers prove. (Photo by Myles Weissleder)

Subject: TechCrunch40 Conference: Final Details and Embargoed Information Release Schedule

Dear Members of the Press,

Michael, Jason and I look forward to hosting you at the TechCrunch40 Conference this coming Monday-Tuesday, September 17-18 at the Palace Hotel. We're incredibly proud of our line-up of start-up companies to be unveiled over our two day agenda and look forward to your critical eyes.

As you can imagine, our 40 presenting companies and 100 DemoPit participants are incredibly anxious to reach out to you during the conference. Since the format of our agenda is a bit different from other conferences, we wanted to share additional details about logistics and embargos to help make sure we communicate expectations to all clearly.

IMPORTANT Embargoed Information

9 am PST Monday, September 17

Press may release the names of the 39 companies selected for TechCrunch40 starting at 9 am pst, Monday September 17. We have elected one wildcard presentation slot that will be based on "audience choice voting" from the 100 DemoPit companies pitching in the Gold Ballroom. The 40th company will present during the last demo slot on the agenda, Tuesday afternoon. All 40 companies are eligible to win the TechCrunch40 $50,000 grand prize to be selected by our expert advisors and TechCrunch40 team.

Individual Company Embargoes, Rolling Based on On-Stage Presentations

Press may release coverage about the 39 companies individually starting with their respective on-stage presentations at the conference. Companies will not be launching their sites to the public until they go on stage to present. We reserve the right to pull any presenting company that does not comply with these policies. We will have classroom seating in rows reserved at the front of the Grand Ballroom exclusively for Press, and we will be providing dedicated Internet access to Press vs the general audience to facilitate live blogging at the event, etc.

Press Registration and Press Room

Press will be invited to check-in at the Ralston Room of the Palace Hotel (to the right of the Garden Court) starting at 7 am. The program guide and techcrunch40.com will have complete information about the TechCrunch40 companies.

We have a dedicated Press Room in the Sacramento Room on Mezzanine Level of the Palace Hotel open 7 am - 7 pm each Monday and Tuesday exclusively for your use.

We're really anxious to start the show. See you soon,

—Jason, Michael and Heather

If true, then the organizers — Internet entrepreneur Jason Calacanis and TechCrunch editor Michael Arrington — have figured out a very clever hack on the startup-conference business model. Instead of charging startups directly, charge venture capitalists to let their favored portfolio companies in. And throw in a handful of unfunded startups to make it all look above-board. Surely the sponsors — Sequoia Capital, which has backed Calacanis's Mahalo; Mayfield Fund; Charles River Ventures; and Clearstone Venture Partners — would heartily approve of this scheme. It's brilliant. Ingenious. My hat is off to you, Jason and Michael, if you have indeed pulled this off.

If the winner was determined by online votes rather than the expert panel, it's a virtual lock that the winning startup will have millions in funding. So much for the egalitarian promise of the event. Two-thirds of the startups have some form of funding, mostly series A. Of the known funded companies, the average funding is $5.8 million. The top three are, unsurprisingly, all funded. (I'm discounting Viewdle, because late last night they had a 3.5 rating on 58 votes, but now have a 4.5 rating on 163 votes, the largest overnight jump. I applaud the apparent attempt to game the system, but I'm not going to include its effect here.)

MusicShake, with $3 million in funding, was the far-and-away early favorite. Too much money, however, may have a numbing effect on voters: All three companies with more than $10 million settle into the crowded middle. DocStoc, Cake Financial, and 8020 Publishing haven't disclosed how much funding they have received. Loudtalks, a small, unfunded startup from Russia, didn't fare well with the Valley crowd, taking the caboose with a low rating of 2.2. (Data based on votes as of 8:15 a.m. Pacific Time.)

Why? Well, Calacanis has realized the flaw in his DemoPit plan. No one, of course, is going to stray from the main ballroom to go into the DemoPit. Why would they? The conference is called the TechCrunch40, not the TechCrunch140. So he sweetened the pot by promising a slot in the top 40 to one lucky DemoPit participant.

Does this remind anyone else of Wonka's Golden Ticket? Calacanis sells his overpriced, bad-for-you, junk-food sweet by promising something fun. Suddently the DemoPitters aren't buying a conference ticket — they're buying a lottery ticket. And damn the odds — they're all convinced that they alone deserve the prize.

Of course, none of the startups are actually Charlie Bucket, or even Violet Beauregarde or another of Wonka's less-fortunate guests. They're Oompa Loompas, working to line Calacanis's pocket. It's a brilliant business move for Calacanis, of course, if completely at odds with his promises not to profit from the startups his conference showcases.

As with Wonka, when Calacanis shows up, a magical river of something chocolate-colored begins to flow.

We suspect the company is one of the startups presenting in the DemoPit, or some perv trolling for pictures. (Possibly both!) It's not the conference organizers, that's for sure. We checked with Arrington, who denied placing the ad. "Not us" he remarked, adding that he'd never heard of the ad before we brought it to his attention. The people who posted it, he surmised are "probably looking for a post on Valleywag." Well, we aim to please.

Fortunately, we're not the only ones who want to see Uncov asking tough questions of Arrington, Calacanis, and crew. We hear that a wealthy venture capitalist has already pledged one full ticket. But keep donating, the rumored ticket may not materialize, and we want to send the whole team! The Uncov crew promises not to disappoint:

So here's the deal: if any readers out there just have too much money, send us to TC20. We'll ask real questions, hopefully in front of everybody, and videotape it. We'll put the hilarity on YouTube for all to see. Maybe we can even make people realize what a farce the whole thing is.

Yes, I will make fun of Jason Calacanis for being functionally useless. Yes, I will make fun of MC Hammer for having been around the world from London to the Bay and still not being qualified to judge tech companies. And yes, I will make fun of Michael Arrington for running this whole circus as a profit center and billing it as a charitable service to Web 2.0 companies.