I realize this news is going to traumatize a lot of gadget nerds, especially Gizmodo editor Brian Lam, with whom I've had a running back-and-forth on the Googlephone. I'll save Lam the trouble of writing one of his "Yes, but ..." retorts. Let me nutshell it for you: It's not about the hardware, it's about the operating system and customization and integration with Google's apps. Nonsense.

Here's what it's really about: Fear. Google cofounders Larry Page and Sergey Brin got spooked in early 2006 when they heard that Microsoft was putting its Windows Mobile operating system on 90-plus smartphones that year. So they threw a rumored $100 million in Google shareholders' hard-earned cash on a crash Googlephone project.

Cooler heads have prevailed, though. Yes, it's smart for Google to optimize its services for cell phones. But they don't need hardware or software to do that. Nor do they need exclusive deals with carriers, though those might help a bit with distribution.

The Googlephone, however, has worked like a charm in two ways: First a threat. The Googlephone was a useful fiction, a way to scare carriers and phonemakers into cooperating with Google, and spook Microsoft into cutting its licensing fees for Windows Mobile. To perpetuate that fiction, Google apparently went as far as ordering up some prototypes from HTC — an elaborate Potemkin village of gadgets.

Second, the Googlephone functioned as a fantasy. A very useful fantasy. Like the Apple rumor mill, the cottage industry in Googlephone speculation served as free, crowdsourced market research. Gizmodo, Engadget, and the rest spun countless feature wishlists out of Larry and Sergey's phone folly.

Too bad it was all for naught. There is no Googlephone, folks. Move along.

And for those gadget-heads who were taken in by all of this, and are now disappointed, here's a thought: If you think you feel crushed, how do you think Microsoft and the wireless industry will feel once they figure out that Google has played them for the fool?

Battelle asks Doerr why Kleiner didn't invest in Facebook. "Out of loyalty," says Doerr, citing his firm's investment in Friendster. Oops. Doerr goes on to note that Friendster is big in Malaysia, drawing derisive laughter from the audience. He sounds equally ridiculous when Battelle asks him if Kleiner missed this generation of Web startups. Doerr cites Google and Amazon.com as Web 2.0 startups, and says that his firm has backed 20 new Web startups in the past year. (We should put this on the drinking game next time.)

Doerr and Battelle talk politics a bit. "You can't just fly in there when you have an idea," says Doerr. Sounds like verbatim advice he's given to Larry and Sergey, doesn't it?

Battelle asks Doerr to talk about the environment. Finally, the first drink! Oh, and he also mentions Moore's Law. (No drink, but it should be.) He mentions his daughter. Another drink!

One odd moment: Amazon.com CEO Jeff Bezos's name comes up. "He doesn't pick up the phone for me," says Doerr, who's on Amazon's board. Bezos doesn't take Doerr's phone calls? What does that mean?

The bowl was slightly chaotic, the audio was lousy, and I'm not sure the buzzer system was working properly. The questions were kind of all over the place. One asked about when Pets.com ceased operations (November 6, 2000). Another asked about the technology which runs the iTunes music store (CDDB or Gracenote, which is really just the music-identification system for ripping CDs; Apple's WebObjects software really runs it). One controversial question: How much did Facebook turn down from Yahoo? John Battelle had the answer as $1 billion. Yahoo executive Garlinghouse debated the veracity of that figure. "You weren't in the room!" bellowed Ron Conway, when Battelle relied on his answer.

The most entertaining piece was how enthusiastically Ron Conway would shout "Bullshit!" if he thought a question or answer was incorrect and how insistent he was that the organizers should provide "Chardonnay next year!" He wasn't alone in that regards. After the show, Jay Adelson made the observation that the participants were far too sober.

About fifteen minutes into the bowl, in walked Google cofounder Sergey Brin, along with Google exec Megan Smith and other guests he had been seen with at dinner earlier that evening. Brin declined to say which team he was cheering for.

While I was standing next to Brin, Powerset CEO Barney Pell came up and reintroduced himself to the Googlionaire — they apparently met a while back. When Pell started to tell Brin how his hyped semantic search startup is now in a beta testing phase, I decided to cause a stir, asking Pell "Didn't the New York Times call you guys a 'Google killer'?" Pell's eyes went wide, and he said something about how reporters will write anything. But all of a sudden, Brin seemed more interested in Pell's spiel. (For the record, I was wrong. Last winter's article on Powerset didn't use that phrase, though other publications have.)

Take one drink when Doerr does any of the following:

• Mentions the environment
• Mentions his daughter
• Says the phrase "This is bigger than _______"
• Enters the session on a Segway
• Refers to Al Gore, or mentions the Nobel Prize

If you see tears, take two drinks and offer the man a Kleenex.

If he somehow manages to explain, convincingly, that Kleiner Perkins' recent investment in Chinese shirt factories is really environmentally-friendly, finish your flask.

• Microsoft ad guy Brian McAndrews is singled out
  
• Conference organizer John Battelle's on-the-sly dealmaking
  
• The AP screws up a story about Microsoft's Steve Ballmer

• Today is the last day to head down to the Palace Hotel, the paparazzi-laden headquarter of Valleywag's Nerdspotting Command. Spy on who is chatting with whom, who gets rubbed and who gets snubbed, and who is just taking the night off. The Web 2.0 Summit's final cocktail hour starts at 5:45 p.m. [Web 2.0 Summit]
• Feel like showing off your hacker skills tomorrow? You've got two chances. If you're in Berkeley, head to Yahoo's Hack Day on the University of California campus. Down in the South Bay? Hit up a Facebook Developer's Hackathon at Happy Donuts in Palo Alto. Anyone want to bet Facebook's is better attended?
• Don't be afraid if the lights go out in San Francisco tomorrow around 8 p.m. It's planned — a publicity stunt to raise environmental awareness, organized by snacky former Google flack Nate Tyler. [Upcoming]

• Got a to-do that's a must-do? Send it to calendar@valleywag.com. Check out more events on our Google Calendar:
  

The performance breaks down when Battelle quizzes Stephenson about the company's efforts to compete with cable-TV providers in delivering video to the home. Stephenson complains about local "franchise" regulations about video. Battelle points out that AT&T could simply provide an unregulated, high-speed Internet connection and start its own, separate Internet-video service. It could then compete openly to deliver TV shows and other video down that pipe. Stephenson looks puzzled — and then goes back to his canned talking point that local cable-TV regulations need to go away. He never answers Battelle's question. It's not clear if he even gets it. That's because, at the root, Stephenson is still running the Death Star of yore — the bad old AT&T that craves a monopoly.

Some factoids from his chat with host Tim O'Reilly:

• In 2001, when Venter's team first mapped his complete genome, they presumed that our individual DNA codes would be almost entirely identical. Since then they've found humans vary by a couple of percentage points.
• Venter's current top project is to map the DNA of 10,000 more humans. He thinks the price will come down to under $100,000 per person in three years.
• You have more individual bacteria living in your body than you do human cells.
• A round-the-world survey ship found that in the world's oceans, DNA of the local life varies completely every 200 miles, and probably even more locally than that.
• Soldiers in Iraq eventually acquire a completely different set of bacteria in their mouths than they arrived with.
• Human DNA contains spliced-in codes for pathogens that have crept in over the ages.
• Venter worries that startups like DNA Direct and 23andMe will only check small subsections of their clients' DNA — say, to look for heart disease risk — and miss the big picture.
• Venter's green project: Looking for genetically engineered bacteria that will produce electricity from human waste or from host plants — also engineered — that thrive on currently unfarmable land.

(Photo by AP/Matt Houston)

They [the Associated Press] ran the story on Ballmer this morning, got the facts all turned around. Did you hear his talk? He used an the analogy of MS Search being a 3 yo basically playing basketball with the big kids, the 12 year olds. Great analogy, really worked for him and got big laughs. Rachel Konrad printed it the other way around and ran a photo that made Ballmer look like a cackling demon. OUCH. MS people were fried and demanded a "reprint". Worst part was she demanded video to prove her wrong.

Highlights of the first day of the conference: Having executives from Six Apart actually speak to me in civil tones; catching up with Loic Le Meur; oh, and getting my ear chewed off by former PodTech CEO John Furrier. See them all in the photo gallery.

(Photos by Randal Alan Smith for Valleywag)

• The Web 2.0 Bowl is tonight. Watch as Web celebrities Jay Adelson from Digg, AOL founder Steve Case, angel investor Ron Conway and New York Times reporter John Markoff face off in a brain battle to see who can remember details about the Internet industry and the people who created it. Like Jeopardy, only replace Alex Trebek's bitchin' mustache with host John Battelle's oompa loompa glow. [Web 2.0 Summit]
• 
  
• Frog Design hosts an open studio tonight. [Upcoming]
• 
  
• We hear that website rating service Quantcast is hosting an open-bar first anniversary party tonight at 6 p.m. at Thirsty Bear in SOMA.

Got a to-do that's a must-do? Send it to calendar@valleywag.com. Check out more events on our Google Calendar:

(Photo by Blake Ross)

The first wave of the web was closely tied to the browser. The second wave extends the applications built on the web server and it will enable a new generation of specialized clients and automated web applications. (Emphasis added)