All Things Digital

Today comes news that jumping-on-prone California Attorney General Jerry Brown is thinking of climbing onto the federal government bandwagon heading right for the Googleplex in Mountain View, Calif., to stop the search giant’s online advertising deal with Yahoo.

Brown joins big advertisers, newspapers and whatever mudslingers Microsoft (MSFT) can gather (and, let it be said, Microsoft can sling a lot of slimy mud).

They are all are coalescing around the notion that Google cannot have even the slightest possibility of getting its big mitts into the innards of Yahoo (YHOO).

Even though its stock has suffered of late, in part due to the possibility of a tussle with the government, Google (GOOG) has consistently argued that the arrangement does not hinder competition.

Google has also insisted that it will move ahead with the deal–which was struck as a parry to Microsoft’s attempt to buy Yahoo and is set to begin next month–no matter what.

I actually believe Google execs when they say this because they have shown a strong streak of stubbornness on controversial issues–witness the company not backing down from the Viacom lawsuit–about which they believe they are in the right.

Still, while Google would by no means control a lot of Yahoo’s search ads, the fact that the pair together have an 80 percent share of the search market apparently frightens ordinary mortals outside the Google bubble.

Maybe–even though Google exhibits none of the thuggish behavior that so characterized Microsoft’s monopolistic hegemony–it should.

Because added to that, Google just keeps announcing more and more earth-girding moves, such as today’s O3b Networks.

This joint project with Liberty Global aims to deliver cheap Web connectivity to Africa and other emerging markets.

O3b stands for “other 3 billion” and it is an admirable effort, as well as a good idea for making Google even more globally ubiquitous as the way people access the Internet.

And also today, more proof of Google’s dominance, with comScore’s latest stats on video use on the Web in July.

No shock–Google properties, primarily YouTube, accounted for 44 percent of the 11.4 billion videos viewed in the month.

Fox Interactive Media was a distant second with 3.9 percent, while Microsoft sites clocked in at 2.5 percent, Yahoo at 2.4 percent, Hulu at 1 percent and AOL at 0.8 percent.

Users on Google sites watched an average of 54.7 videos each, compared to 11.7 videos for Disney and Viacom, the next closest in videos-watched numbers.

While a lot of the media companies have more ad-rich premium content than Google, it is still a picture of one huge giant and a lot of teeny pygmies in the video space.

You see the pattern here, don’t you? So do regulators.

One has to wonder exactly when Google will see it.

And in that spirit, here’s “Walk Away Renée,” done by a very talented singer (but not The Left Banke, which did it originally).

I found it on–of course!–YouTube:

Please see this disclosure related to me and Google.

BoomTown was all busy trying to think of execs to replace Yahoo CEO Jerry Yang, as pressure mounts on him to right the troubled Internet company.

But now, Yang’s position feels safer than ever and it’s his nemesis–Microsoft– that needs a new leader for its long-stumbling online services business.

Microsoft (MSFT) was already cracking, according to sources, and had a wish list of internal and external candidates that CEO Steve Ballmer is now considering.

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How’s this for a lead-balloon argument to get shareholders to reject activist investor Carl Icahn in his quest to unseat the Yahoo board and senior management that was uttered by its CEO Jerry Yang in today’s Wall Street Journal:

“To trust Mr. Icahn and his board is really a bad choice.”

Oh. Phew. Thanks for warning everyone, Jerry, so that bullet could be dodged!

But, besides the quote begging the question of what makes Yang a good choice, which he must articulate rather than just diss his rivals, it lacks the necessary oomph that Yang needs to make his case more aggressively and definitively.

That’s especially true, if he is to stop Icahn from gaining the momentum he needs to win his proxy fight against Yahoo (YHOO).

As Microsoft (MSFT) should have done in its attempt at the Yahoo takeover, one has to remember to actually hit the target when you shoot.

So here’s a much better one to needle Icahn with, using an famous old ad tag line:

Where’s the beef?

Specifically, who’s going to mind the store if Icahn actually manages to win and makes good on his promise to fire Yang?

Because if there is one thing that is hurting Icahn’s chances, it is the worry among major Yahoo investors that he simply cannot run Yahoo, even for a short time.

So, of course, he is out beating the bushes for a suitable CEO.

“Carl has to have a management team that he announces soon, so people can see that there will stability if he wins,” said one investor source, in a typical sentiment I encountered. “Taking out a whole board and the top managers of a major public company is drastic.”

Indeed, which is why Icahn has been working feverishly, sources said, to attract someone to run Yahoo in the interim, in the event he wins his proxy battle and he seeks to strike a deal of some sort with Microsoft to buy part or all of Yahoo.

As BoomTown previously reported, Icahn is still attempting to entice former AOL (TWX) head Jon Miller, along former Fox (NWS) Interactive Media exec Ross Levinsohn, to take the job on a temporary basis, sources said.

Neither Miller nor Levinsohn, who now co-run an online-focused investment fund called Velocity Interactive, has agreed to do this yet, a risky move that might tarnish anyone who takes it on.

In addition, most suitable candidates for such a job would likely prefer to do it in a friendly fashion, working with Yang to transition him out of the CEO role.

Yang has acknowledged to several people that some investors, angry about the botched Microsoft takeover deal and the declining stock price, are seeking his ouster, as well as that of Yahoo President Sue Decker.

But Yang is definitely not resigning, as some stock-goosing hedge fund vultures were putting out earlier today.

In any case, Icahn, who has lost money in this activist bid, is working overtime to make that happen by convincing shareholders that he is the better choice to strike a more lucrative deal for Yahoo.

In fact, he underscored it earlier this week when both he and Microsoft released almost exact statements that they were talking and could work with each other. Both also noted that Microsoft did not feel it could work with current Yahoo leadership.

Could Ross Levinsohn and Jon Miller reinvent Yahoo (YHOO)? What about OpenTable’s Jeff Jordan? Or various and sundry Google (GOOG) or Microsoft (MSFT) execs?

It could happen.

That specific scenario of putting someone like the two former Internet execs (they ran Fox Interactive Media and AOL, respectively) in charge of the troubled Web giant is one of the many being bandied about, as Yahoo shares tumble and the company heads toward a potentially ugly annual meeting everyone involved desperately wants to avoid.

In fact, Yahoo’s board and major investors are talking today about various options for the company, including Yahoo’s receptivity to a sweetened deal with Microsoft and also other ways to pull the asset-rich company out of its stock doldrums.

It is not likely to be a very chummy meeting, of course, considering Yahoo’s stock (see this depressing chart to the right) has been drifting inexorably downward with nary a lifesaver in sight.

Yahoo shares sunk ever closer to $20 (it closed today at $20.66, down more than three percent)–a worrisome crossing of the digital Rubicon for the company, given that it makes Yahoo more vulnerable to all sorts of Wall Street machinations.

Besides allowing other large companies like News Corp. (NWS) and Comcast (CMCSA) to consider bids for Yahoo–both have been watching the situation very carefully, sources said–it also opens Yahoo up to attacks from more rapacious private equity investors.

And there is a lot of machinating already, of course, as I have found poking around, with more to come.

Like what?

Like Yahoo back in discussions with AOL once again. Sources close to the situation said that the idea of hooking the pair up have been revived, as Yahoo looks to strengthen itself and Time Warner (TWX) searches for any way to spin off a division it has never been able to juice up.

Of course, Microsoft has also been sniffing around the property too–and almost bought AOL several years ago–and would be unlikely to sit still and let Yahoo grab AOL’s most attractive asset, its Platform A online advertising unit.

(Memo to Time Warner CEO Jeff Bewkes: You’re known as a smooth deal-maker, so paste on that million-dollar smile and get dealing!)

And, more interestingly, are the moves to try to find another CEO and top leadership to come in and run the company instead of Yahoo CEO Jerry Yang and President Sue Decker.

(I had previously posted on possible picks for that job here.)

That could come in either a friendly or non-friendly approach, according to several people close to the situation.

Under the friendly scenario, Yang would voluntarily step aside–and even be upped to non-executive chairman status–while a new CEO and team would be put in place.

A less dulcet approach, which would require an aggressive move by Yahoo’s board–who make head-in-the-sand ostriches seem active–against Yang directly is less likely.

Still, many investors, increasing numbers of employees and even some Yahoo board members have lost confidence in Yang and Decker, who have been trying to set a new course for the company.

But does a new course require new leaders?

Levinsohn and Miller (pictured here, left to right), who now run an online-focused investment fund called Velocity Interactive, are two high-profile former Web execs mentioned most frequently by major Yahoo investors as candidates for that idea.

Sources said could either come in as board members or actually run the company for a time period, while searching for a new CEO, like OpenTable’s Jeff Jordan, Google’s Tim Armstrong or even Microsoft’s Kevin Johnson.

Such as plan could include additional investments by new investors and critical buy-in by current investors–including billionaire activist Carl Icahn, who is waging a proxy fight against Yahoo that is set to come to a head at the Aug. 1 annual meeting.

Most important would likely be cooperation from Microsoft too, which could offer to also buy some of Yahoo and also sweeten its search-ad deal.

It would also require a new plan for Yahoo, which will likely include job cuts and a more drastic refocusing of its business that perhaps only outsiders can do.

As its founder, not surprisingly, Yang has been slow to make the kinds of deep changes many think Yahoo requires to reinvent itself, and Decker has been part of the team that has gotten the company mired in its current state.

While this all sounds incredibly complex, all scenarios point in one inevitable direction: Massive change is coming to Yahoo in the next 30 days, one way or another.

BoomTown gets a lot of emails from Web players, big and small, commenting or, more typically, griping on whatever tech topic is hot that day.

And yesterday, after Microsoft (MSFT) abandoned its takeover bid for Yahoo (YHOO), it was like Christmas in July–our mailbox was packed.

But one stood out above all, from a person who shall remain nameless. This person has been around the block so much, he/she could be an Internet beat cop.

Like some Web 2.0 haiku combined with David Mamet-like dialogue, it encapsulates the situation going forward better than I ever could.

(By the way, for those needing a key: YHOO and Y is Yahoo; NWS is News Corp.; FIM is Fox Interactive Media, a division of News Corp.; GOOG is Google; MSFT is Microsoft; Jerry is Yahoo CEO Jerry Yang.)

Here’s the note:

Big drop in stock Monday (yhoo)
Simultaneous negotiations between y+nws, y+aol, y+goog
NWS+MSFT (nws trying to punt FIM to someone)
MSFT+Facebook

Then:
Y gets deal w/someone and msft comes back with an alternative.
That’s if Jerry survives the onslaught.”

Who in the Internet sector hasn’t enjoyed the always amusing stylings of Mr. Ross Levinsohn, the high-profile former head of Fox Interactive Media a.k.a. “The Guy Who Bought MySpace for News Corp.”?

Today, he added another song to his silky smooth repertoire as the “Internet guy who dissed Yahoo.”

In a nice scoop, TechCrunch reported that Levinsohn was going to be a nominee to the board that Microsoft (MSFT) has been forming as part its potential proxy fight to take over Yahoo (YHOO).

That’s true, several sources have told me. Levinsohn, who was recruited by Microsoft’s Yusuf Mehdi, has even filled out paperwork as part of the process.

And once the i’s are dotted and the t’s crossed, that makes him the highest profile Internet figure on the board, which is made up of–let’s just say it, shall we?–pretty unimpressive former execs, none of whom has had any substantial Internet experience.

While many well-known Web figures were approached by Microsoft, few in Silicon Valley have been willing to be part of an effort to snuff out an independent Yahoo, one of its most important and iconic brands.

Not so the entrepreneurially inclined Levinsohn, apparently, who has a maverick nature.

He left FIM in 2006, for example, after deciding he wanted to be more than an overpaid employee of Rupert Murdoch and Peter Chernin.

Now, the Los Angeles-based Levinsohn runs an investment fund called Velocity Interactive Group with former AOL (TWX) head Jon Miller. Armed with $1.5 billion, the investment focus of the new enterprise will be on digital media and communications.

Given possible News Corp. (NWS) involvement as a possible partner in the Microsoft deal (more on that later), including a desire by Murdoch to spin MySpace into Yahoo, it’ll be interesting that Levinsohn might now have some power over his former bosses.

Or not. Most expect the board to be a rubber stamp for Microsoft, although several sources say those asked have been told that they can vote in the way they think is best for Yahoo.

Kind of like superdelegates! Except geekier!

Here is a video interview I did with Levinsohn in December of 2007, where he talks about the future of digital media on the Web, as the tech and entertainment industries and its many players seek to figure out how to make the painful digital shift and find new monetization plans that will replace crumbling old-media businesses.

At the end, months before Microsoft’s unsolicited bid for Yahoo was launched, after I asked him what will be coming, the psychic Levinsohn eerily predicted: “Something happening with Yahoo, I think, this year.”

Something indeed.

Here is the video:

BoomTown is suffering from Rupert Murdoch déjà vu.

Back in July, I actually wrote a post about the head of News Corp. (owner of Dow Jones and this site) in which the first sentence was: “MySpace and Yahoo should merge.”

I was referencing a very interesting comment that Murdoch (pictured here) made in an interview in June of 2007 with Time’s Eric Pooley.

In it, he floated the idea of trading a 25% stake of Yahoo for MySpace.

As the Time article noted:

MySpace’s much smaller archrival, Facebook, is surging: what started as a narrower college site is broadening and accelerating. … But as MySpace showed signs of reaching saturation, Murdoch began very preliminary, exploratory talks about trading the site for 25% or more of Yahoo. ‘Terry Semel was enthusiastic about it,’ he says of the then Yahoo CEO. ‘We were looking to see if it was a good idea. I wasn’t sure.’ Now Semel is gone, and Murdoch needs to see what Yahoo will become under its new boss, co-founder Jerry Yang.”

And as I noted in my post:

In one fell swoop, Murdoch had confirmed the talks, but made it seem as if it was Yahoo’s execs who were desperate to do a deal (and you know Semel and Yang would never talk about how they felt about it), while also giving MySpace an instant valuation of $8 billion at today’s nearly $32 billion Yahoo valuation…

It is no small leap to imagine the sly Murdoch calculating that he should be thinking right about now about getting while the getting is good and the hype is at an all-time high.”

Well, nothing much seems to have changed with the news yesterday that News Corp. was interested in grabbing just under 20% stake in Yahoo in exchange for MySpace and News Corp.’s other online properties in its Fox Interactive Media group.

(The discussions were first reported on the blogs Silicon Alley Insider and TechCrunch.)

This is an unusual switcheroo, since, on Feb. 4, Murdoch had publicly said it was unlikely News Corp. would vie for Yahoo. “We are definitely not going to make a bid on Yahoo,” said Murdoch on a conference call with analysts.

It depends on your definition of “definitely” and “a bid for Yahoo,” I guess. Classic rope-a-dope that even Muhammad Ali would admire!

This time the idea is reportedly to value MySpace at $10 billion (which is actually $5 billion less than the $15 billion that Microsoft’s recent $240 million investment gave smaller MySpace rival Facebook).

Of course, such a Yahoo mash-up with News Corp. would likely be a hopelessly complex deal, especially compared to the cleaner and simpler giant-pile-of-cash-and-stock that Microsoft is offering that big shareholders are likely to prefer.

“The only one who would understand such a complicated News Corp./Yahoo tie-up is Murdoch,” said one large Yahoo investor. “It is too much to figure out and not enough clarity compared to Microsoft’s bid.”

In any case, according to The Wall Street Journal, Yahoo CEO Yang supped with Murdoch and News Corp.’s President Peter Chernin last week to talk about the idea.

Presumably, the thinking is the same as I noted more than six months ago:

To merge his massively popular social network with Yahoo’s still-powerful-despite-struggles ad and search empire would create a powerful media and technology giant that would have a lot of key elements for the next generation of Web interaction.

For Yahoo, which is in need of a dramatic move, this would deliver a smack to Google (which still has reportedly not completely closed its $900 million ad deal with MySpace), solve its inability to enter the social-networking space and boost its distribution network dramatically.

For MySpace, Murdoch gets to unload a service that is increasingly going to need a major dose of technology expertise and own a big chunk of what could be a drastically undervalued property.”

The more things change…

Please see this disclosure related to me and Google.

On our recent trip to sunny Southern California, we had a lively lunch in Brentwood with the ever-sassy Ross Levinsohn.

In the dullish panoply of Internet moguls, Levinsohn stands out as one of the more colorful characters, no small thing since he comes from a big company, News Corp. (owner of this site), where he played a big part in its on-the-cheap MySpace acquisition in 2005.

But big company no longer for Levinsohn!

Just before the holidays and four months after launching their digital media roll-up firm Velocity Investment Group with private equity firm General Atlantic, the former Fox Interactive Media president and his partner, former AOL head Jon Miller, announced a new and improved deal.

This time, it was a merger with ComVentures with its $1.5 billion in assets (with more fund raising to come) and a new name, Velocity Interactive Group. The investment focus of the new enterprise will be on digital media and communications.

Here’s Levinsohn talking about all that and more (excuse the noisy ladies about three minutes in):

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So, I am back in Los Angeles today, part of my ongoing quest to make sense of the wrenching changes facing the entertainment industry in the face of the continuing pummeling by the digital tidal wave.

I just had a bracing lunch with Ross Levinsohn, former Fox Interactive Media head and newly minted investor, where we talked about his recent efforts to invest in digital media and communications with his partner, former AOL head Jon Miller.

More on that chat next week, including a video with the voluble Levinsohn about his new venture, in which he is seeking to bridge the gap between the Silicon Valley and Hollywood (good luck with figuring out that old Gordian Knot).

But–all mythical legends aside–someone has to, and anyone interested in the tech business in the years ahead has to understand the stakes and challenges ahead for Hollywood.

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Exactly how many online advertising networks can dance on the head of a pin?

One more, I guess!

At the Reuters Media Summit in New York yesterday, Fox Interactive Media President Peter Levinsohn revealed plans to take its MySpace online ad network out for a walk across the whole of its own group of sites and also outside it, including handling ad serving.

The network, which will be called “FIM Serve,” will focus on display ads, which will not presumably conflict with its Google deal that covers search ads.

Of course, with Google’s purchase of DoubleClick, that puts FIM Serve in direct competition with the search giant, as well as with biggies like Microsoft, Yahoo and AOL, all of which have been snapping up all kinds of smaller ad networks for hundreds of millions of dollars of late to grow their businesses. Oh, yes, and also social-networking rival Facebook, which will also try to extend its new fledging network outward.

With all the big players jumping into a still-developing market, it will be interesting to see exactly how many can co-exist peacefully.

Please see this disclosure related to me and Google.

Things have quieted down at Yahoo of late–thankfully for new CEO and co-founder Jerry Yang, who seems to be doing a good job at calming the waters at the company that has been in turmoil over the last year, due to management upheaval and lackluster financial results.

“We have our heads down and we’re focusing,” said one executive there, echoing a common sentiment these days, as Yang and his second-in-command, new President Sue Decker, look over the company as part of the 100-day review he promised during a recent quarterly conference call with investors.

In mid-July, Yang said he would be busy making a long-term strategic plan, which would include major changes if need be. “There will be no sacred cows and we need to move quickly,” he said.

No sacred cows, indeed. According to rumors circulating around the company, Yang and other executives at Yahoo are even considering something as massive as offloading some of its search monetization business to rival Google.

I have suggested this option here in this column many times. Such a move, even if done in part, could instantly add a whole lot of dollars to its bottom line, drastically cut tech costs and remove the focus on its constantly losing fight with Google as a tech leader.

Better still, it would put Yahoo in a position to focus on its more competitive assets, such as outstanding media properties like Answers, Flickr and a range of tools and features that Yahoo does better than Google and many others.

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