All Things Digital

Project Granola?

Apparently, that’s the jokey nickname that’s been given by some in the company to Microsoft’s (MSFT) new online strategy, in the wake of its failed efforts to acquire Yahoo (YHOO) that ended in a big heap of mess this past weekend.

Now, sources tell BoomTown, it is all about “organic”–hence the image of a healthy handful of granola (except for the fact that, in my experience, nobody really likes granola after eating it as much as they think will before).

In any case, it is a word Microsoft folks have been slipping into the conversations with BoomTown over the past few days, so much so that I have started to feel like I was talking to execs from Whole Foods.

Now Microsoft’s greenness has gone public.

Case in point: Brian Hall, Windows Live General Manager, who trotted out the organic word in front of Merrill Lynch analysts yesterday, as reported by CNET’s Ina Fried, saying: “We’ve withdrawn the offer and moved on, and now are focused on how we grow as fast as possible organically.”

But what does organic mean exactly?

Two things, it seems.

First, stepping up spending on marketing, technology and research to try to find ways to differentiate from Google (GOOG) and get into the No. 2 spot now held by Yahoo.

Of course, that plan has not worked out so well as yet for the software giant, with Microsoft spending billions of dollars with no profits and little gain in online search or ad market share, while its archrival Google keeps growing stronger.

Even so, while in Korea today, Microsoft Chairman Bill Gates backed Microsoft CEO Steve Ballmer’s do-it-yourself path and his move to walk away from Yahoo.

“The key decisions on that will be made by Microsoft CEO Steve Ballmer, who took a look at Yahoo and decided that, on our own, he likes the stuff that we’re doing,” said Gates.

Gates also added what amounts to the second option for Microsoft. “I wouldn’t rule out some partnerships, but we don’t have anything imminent there,” he said.

While a return to Yahoo is a possibility, in fact, buying up Web 2.0 stars is likely to be a bigger focus of the company.

“Yahoo can twist,” said one source. “Microsoft has lots and lots of other options.”

According to sources close to the company, for example, Microsoft’s bankers had been putting out subtle signals to Facebook to see if it would be open to a full buyout.

Microsoft already invested $240 million in the hot social-networking site, an investment that gave Facebook its kooky $15 billion valuation.

And its execs have long told Facebook execs they wouldn’t mind a bigger bite–um, like all of it.

“We just wanted to gauge their interest, more than any real effort,” said another source, who expects Facebook to stick to its longish path to an eventual IPO.

But, as is no secret, Microsoft has selections all over Silicon Valley to help it improve its Internet chances.

Those would include buying bigger vertical sites in strong categories like autos or jobs or finance, and also scooping up smaller but fast-growing socially oriented sites like Digg, Meebo, Yelp or focusing on ad plays like Spot Runner (which just got another big dollop of funding).

There might even be some sense in spinning some of these and all Microsoft Web units off into a separate Internet company, which would be another way of integrating even bigger deals for properties like Time Warner’s (TWX) AOL or News Corp.’s (NWS) MySpace (which are longer shots, I think).

In a post I did in February right after Yahoo rebuffed Microsoft for the first time, I suggested such a course for the company.

As I wrote:

Here’s a list: LinkedIn. Digg. Flixster. Slide or RockYou. Veoh. WordPress. Sphere. Sugar. Some international stuff. And more.

Then, some noted, Microsoft would have to give massive financial incentives to those entrepreneurs to stay and thrive. Most importantly, it would have to keep its Redmond hands from interfering.

Now that would send shivers up the spine of Larry and Sergey.”

And that, most of all, would be more like icing on the cake for Microsoft and be much more tasty than a bowl full of granola.

And, as Martha Stewart says: It’s a good thing.

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:

Who’ll get Digg? (Odds-on favorite and sources tell me much sooner than later: Google.)

And who might make a bid for Slide, RockYou, LinkedIn, Meebo or imeem? (It might be smart for News Corp. [NWS] to double down in the social- networking space, if it can’t trade MySpace for a piece of Yahoo.)

And what about a plethora of really useful and interesting small start-ups all over Silicon Valley and elsewhere that are going to have to eventually find safe harbors when this Web 2.0 thing cools off, as it inevitably will. (AOL [TWX], Amazon [AMZN], eBay [EBAY] and, again, Google [GOOG], are natural choices.)

But not Microsoft (MSFT) or Yahoo (YHOO) if they persist in competing in this endless geek cage-match for too long.

Yesterday, more blustering bluster from Microsoft when it said, during its quarterly conference call, that it would not pay more to acquire Yahoo and might very well walk away from the deal.

My advice: Microsoft CEO Steve Ballmer should stop talking and start walking. If not, pay up and finish the deal.

And Yahoo’s CEO Jerry Yang should cooperate and stop its now-tiresome posturing (we get it, it’s worth more!).

Why?

Well, while the pair remained locked in mortal combat, a status that will continue if they actually do manage to unite and have to then conduct a doubtlessly slow-moving merger, their main rival Google and others are the likeliest to benefit every day this drags on.

Right after Microsoft made its unsolicited for Yahoo in February and it was quickly rebuffed, BoomTown suggested in a post that the software giant move on quickly and use its tens of billions to buy up the choicest and most innovative companies in the digital space.

What I wrote then bears repeating:

And what are the other options Microsoft might have that are actually better than scooping up Yahoo, especially to serve its Captain-Ahab obsession with harpooning the Great White Whale of Google?

If that is the actual goal, then many point out that a Yahoo win does not really frighten Google all that much, since the search giant has done just fine competing against both already.

In addition, many noted that a union of the pair, which would distract both Yahoo and Microsoft, might not be the magic bullet needed to fell Google from its high perch. And then what?

One idea I have heard, for example, was that Microsoft take its $44.6 billion in cash and stock it plans on spending on Yahoo and go on a shopping spree of the Web 2.0 companies all around Silicon Valley and all over.

And not just a few–lots and lots of them. And, more than one person suggested, it should start with Facebook, even at that wacky $15 billion valuation that Microsoft itself validated when it invested $240 million in the social-networking site recently.

“So what if it is only worth $10 billion or even less,” said one person. “They could lose a lot more on the risk of buying Yahoo.”

With the $30 billion left over, it could be like Christmas in July for the geeks and venture firms of Silicon Valley. But Microsoft could scoop up a lot of good stuff, even if prices are high.

Here’s a list: LinkedIn. Digg. Flixster. Slide or RockYou. Veoh. WordPress. Sphere. Sugar. Some international stuff. And more.

Then, some noted, Microsoft would have to give massive financial incentives to those entrepreneurs to stay and thrive. Most importantly, it would have to keep its Redmond hands from interfering.

Now that would send shivers up the spine of [Google’s] Larry and Sergey.”

It still would. So maybe, as it has threatened yesterday, Microsoft should run and not walk.

Please see this disclosure related to me and Google.

Ah, nothing like crazy teenagers to ruin a social-networking site’s week!

Of course, a lot of the attention last week was aimed at MySpace, which had only a very peripheral role in the appalling story of a gang of teen harpies from Florida who viciously laid into another and videotaped it.

The unfortunate girl–whom the female wolf pack (to be fair, wolves are a lot more intelligent) was heard accusing incoherently in the video–had apparently posted something on MySpace–owned by News Corp. (NWS), which owns this site–that apparently ignited their rage. Thus, the genius leader of the half-dozen girls planned on posting a video of the beat-down to MySpace and also YouTube (GOOG).

The parents of the beaten girl, who was severely injured in the incident, urged the sites to prevent users from uploading the viral video, even though it was never uploaded by the teens and has been regularly taken off the services when it has been.

(I could not find the video on either service last night, except in snippets as part of news coverage. It is available on Salon here, and can also be embedded, which I decided not to do here.)

Still, the injured girl’s father was quoted in a local newspaper: “As far as I am concerned, MySpace is the anti-Christ for children.”

Actually, the gang of girls get that particular moniker in my estimation. In any case, justice will be meted out, I am sure, and it started with the judge’s order that the defendants not use any social network.

And while it got a lot less attention, don’t miss New York magazine’s riveting story of a Facebook scandal at New York’s tony Horace Mann private school.

In the piece, titled “Testing Horace Mann” by Gabriel Sherman, Facebook is used as a vehicle for disgruntled kids to create obnoxious groups attacking teachers they don’t like in verbally appalling ways and without any apparent recriminations.

Laid out in exquisite detail are how petty school politics, overindulged kids and parents who need their heads examined collided to create the digital equivalent of “Lord of the Flies.”

Here’s the money quote:

These Facebook pages, however, were something different. Kids have always ragged on an unpopular teacher or ridiculed an unfortunate classmate. But sites like Facebook and RateMyTeachers.com are changing the power dynamics of the community in an unpredictable way. It is as if students were standing outside the classroom window, taunting the teacher to her face. Should they be punished? There were, as yet, no rules or codes for how a school should address such issues.”

While it is pretty obvious that it is easy to blame the technology in both these cases, there are bigger societal issues at stake here that nothing MySpace or Facebook can fix with a simple tweak.

Everybody remain calm.

While it might have looked like it was the rapture for major Internet players yesterday–what with everyone and his mother getting sucked up into the Yahoo-Microsoft takeover tussle and disappearing into the ether of confusion that now reigns over the situation–it is best to keep moving toward the light of harsh reality for illumination.

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What’s AOL getting for its $850 million in cash to purchase of social-networking site, Bebo?

A very attractive social-networking service and a very experienced exec who has been running it.

But, perhaps more importantly for those who focus on pesky numbers, not a whole lot of revenue and negligible profits, judging financial information I got a gander at, courtesy of sources at several companies that looked at funding or buying Bebo.

And the rest of the overall outlook for Bebo? A small but growing business, with nice user engagement with strong page views and minutes spent per session, but little traction beyond Britain and Ireland, and too small a presence in the critical U.S. market.

(Bebo is also strong in New Zealand, but BoomTown does not have to point out that that country is not exactly the kind of game-changer that AOL CEO Randy Falco mentioned in his email to the troops about the purchase.)

According to the several sources who were privy to Bebo’s financials, for example, Bebo’s revenues for 2006 were only $7 million with $3 million in EBITDA (earnings before interest, taxes, depreciation and amortization). In 2007, the results are still small, with $20 million in revenues and $5 million in EBITDA.

Using 2007 results, that means Time Warner’s (TWZ) AOL paid a handsome 42.5 times revenues and an incredible 160 times EBITDA.

AOL might assert that it makes Bebo a bargain, given that Facebook got valued at 50 times revenue when it got that $15 billion valuation from the $240 million investment from Microsoft (MSFT) last year. Still, Facebook has a huge presence in the U.S. and is growing strongly in Europe, including being just ahead in Bebo’s strongest territory in the U.K.

Projecting outward, the company estimated–remember, these are not actual numbers, but a best guess by Bebo execs–it would have $50 million in revenue and $10 million in EBITDA in 2008; $117 million in revenue and $48 million in revenue in 2009 and $193 million in revenue and $92 million in EBITDA in 2010.

While potential is important, the high price (which was still lower than the $1 billion and above that Bebo might have fetched even six months ago) and its small presence in the U.S. were the reasons several companies passed on acquiring Bebo–including News Corp. (NWS), Google (GOOG), Yahoo (YHOO) and CBS (CBS), said sources close to each of these companies.

On the plus side, users do spend a lot of time on Bebo, engaged by its more robust content offerings, such as its “KateModern” series (which I wrote about here), and its elegant and content-rich offering, which has some of the cleanness of a Facebook and some of the flash of MySpace.

In addition, in Bebo’s president Joanna Shields (pictured here somewhat awkwardly shaking AOL CEO Falco’s hand and with AOL President and COO Ron Grant), AOL gets an experienced and savvy Web exec, which it desperately needs these days, given the flux there.

Shields has worked at RealNetworks and Google and she will continue to run Bebo and report to Grant. In fact, Shields has effectively been running Bebo for a while now, and its founders Michael Birch and Xochi Birch will be leaving the company.

You can see Shields in action in this video, which I did while visiting London last summer:

Here’s what many people within Yahoo (YHOO), who are not CEO Jerry Yang and the board of directors, are chattering about these days: That the Internet portal will not make a deal, any kind of deal, related to the outstanding unsolicited acquisition offer by Microsoft (MSFT), before it has to report its first quarter in late April.

Given worries about an online ad recession–worries that have, for example, sent industry leader Google’s share price hurtling downward of late–some at the company are concerned about possible weak results and what it might do to the company’s negotiating power.

If Google (GOOG) has a cold, the thinking goes, everyone else might suffer from a more serious flu.

“Yahoo’s core business can’t show signs of weakness the way it has in previous quarters,” said one person close to the company. “And since the landscape is certainly uncertain for everyone, Yahoo has to have a definitive plan of what it is going to do.”

Yahoo will soon be certain of those results, since it closes its first quarter at the end of the month and its earnings call with investors and analysts will be on April 22.

If its results are disappointing, it will have a big impact on the current takeover bid by Microsoft, launched at the beginning of February.

Since then, Yahoo has rejected the Microsoft bid and has been searching for alternatives.

One of these options–a deal with News Corp. (NWS) and its MySpace social-networking site–seems to have dried up, after its CEO and Chairman Rupert Murdoch indicated at the Bear Stearns conference earlier this week that it was unlikely.

Yahoo is still pursuing a possible deal with Time Warner (TWX) and its AOL unit, according to sources at both companies, even as AOL has seen tumult in the executive ranks and especially in its Advertising.com unit recently.

In fact, Time Warner CEO Jeff Bewkes noted yesterday at the same Bear Stearns conference that AOL was open to being combined with another company, “whatever configuration makes it the strongest and the most valuable.”

I am not clear what the benefit of uniting two troubled Internet companies is, but I am sure AOL and Yahoo investment bankers can explain it all away (taking tips, presumably, from the advisers who cooked up the first disastrous AOL merger with Time Warner).

Most think the more likely scenario will be that Yahoo will eventually have to pursue talks with Microsoft.

If so, there are hopes by some shareholders that Yahoo can extract a higher price from the software giant, which has so far seemed unwilling to budge on its initial offer of $31 a share in stock and cash.

But weak quarterly earnings could solidify that position.

The thudding failure of the online-born “quarterlife” original series on network television Tuesday night, garnering some of the worst ratings in NBC’s history (after experiencing a declining Internet audience too), was loudly touted yesterday as a possible impediment to online-to-offline dreams of original-content creation that Hollywood has been nurturing.

Well, it’s not. One show, which just did not work, is in no way representative of a trend, any more than the box-office failure of the movie “Snakes on a Plane” meant online marketing and hype was finished.

The Wall Street Journal’s excellent Jessica Vascellaro wrote a great piece today on the subject of online content creation, focusing on social-networking efforts, such as Bebo’s “KateModern,” an original online show from the creators of “lonelygirl15,” as well as stuff being made by MySpace and others.

The goal is to keep users more engaged. More importantly, it is to fight the continued audience attraction to user-generated videos on YouTube, which is owned by Google (GOOG). It dominates the online video market, as you can see from this chart below (click on it to make it larger).

BoomTown has written about the Bebo hit several times (including a video visit to Bebo’s HQ in London last summer and an interview with a “KateModern” producer in November, both seen below), as it represented the right way to start to develop original online content.

And that would not include pulling some failed television pilot out of a drawer, making it on the cheap, cutting it up into shorter segments and slapping it online.

Instead, true success–besides the material actually being good, which should be a given–requires the content to be interactive, pioneer new filming techniques and be made specifically for the medium, using its tools, rather than being shoehorned into it.

“KateModern,” for example, has been changeable by the second by its audience and the creators have moved the action along with startling speed.

But it still has someone professionally producing it. Set in East London, it follows a “troubled young art student named Kate and her three closest friends: an Australian wild-child named Charlie, a young entrepreneur named Tariq and a mischievous computer whiz-kid named Gavin.”

As The Journal’s Vascellaro correctly writes: “Past efforts by Web companies to turn themselves into online versions of television networks have been hampered by the difficulty in changing ingrained consumer habits–while people are happy to watch short video clips from time to time, few until recently saw the Web as a forum to follow regular episodes of series. For online-only shows, weak advertiser interest, subpar production quality and lack of promotional muscle were added hurdles.”

Indeed. But that will change quickly.

Here is our too-long video of the visit to Bebo and the interview with “KateModern” producer Pete Gibbons:

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.

Could we resist? No, we could not!

Since BoomTown already translated the letter from Microsoft CEO Steve Ballmer to the Yahoo board, as part of its recent effort to buy Yahoo and also Google’s blog post on the issue, we could hardly pass on this latest letter from Yahoo CEO and Co-Founder Jerry Yang to the Internet portal’s employees about its rejection of Microsoft’s $41.6 billion unsolicited offer.

Jerry wrote: Subject: our board’s decision

Translation: Why am I using all lowercase letters for all these memos? Because I am trying to regress back into childhood, where mean bullies like Steve Ballmer did not try to rough me up? Because my fancy image consultants said it would give Microsoft execs a fatal case of the giggles, thereby preventing them from pillaging Sunnyvale? Excessive and pointless cuteness, which goes hand in glove with our dumb exclamation point? And, before I forget: !!!!!

Jerry wrote: yahoos

Translation: Oh, poor beleaguered worker bees whose last nerves I am really working. But isn’t the lowercase really, really adorable?

Jerry wrote: as you’ll see from the news release we issued today, our board of directors has reviewed microsoft’s unsolicited proposal with yahoo!’s management, financial and legal advisers. after a careful evaluation, the board has unanimously concluded that the proposal is not in the best interests of yahoo! and our stockholders. of course, the board of directors is continuously evaluating all of its strategic options in the context of the rapidly evolving industry environment and we remain committed to pursuing initiatives that maximize value for stockholders.

Translation: OK, we whiffed on the peanut-butter rehab. And we didn’t kill any sacred cows. And 100 days passed with nary a significant change. We’ve overseen a rapid decline in our search market share, watched as Google has cleaned our clock and Facebook has recreated our business, presided over serious dips in employee morale, delivered quarter after quarter of disappointing news to investors, driven the stock to historic lows.

But, Microsoft’s at the gates of Sunnyvale, folks! Man the cannons and heat up the boiling oil!

Unless Ballmer forks over $35 to $36 a share, then all is forgiven!

Jerry wrote: we believe microsoft’s proposal substantially undervalues yahoo!–including our highly recognizable global brand, large worldwide audience, significant recent investments in advertising platforms, future growth prospects, our ability to generate free cash flow and our earnings potential as well as substantial unconsolidated investments (like alibaba and yahoo! japan).

Translation: We feel pretty, oh so pretty, we feel pretty and witty and bright. OK, not so much, but we better slap some lipstick on this pig or soon we’ll be forced to serve Starbucks only in the cafeteria and be attending those Ballmer pump-you-up sessions.

Jerry wrote: you deserve the credit for the tremendously valuable business we have built. all of us in management, as well as the members of the board, deeply appreciate and respect what you have done and continue to do in order to maintain and enhance yahoo!’s leadership position in the online world.

Translation: Please, pretty please, give us one more chance. We promise we won’t crash the car into the wall again and again and again. At full speed. With our eyes closed. With you in the seatbelt-free back seat. Also, we’ll get some aspirin for that bump on your head.

Jerry wrote: we have been very deliberate about the steps we are taking to position yahoo!. we are putting in place the pieces we need to accelerate growth by becoming a leading starting point for users and the must buy for advertisers. the global online advertising market is projected to grow from $45 billion in 2007 to $75 billion in 2010, and our more focused strategies position us to capture an even larger share of this market. we are moving to take advantage of this unique window of time in the growth of the online advertising market to build market share and to create value for stockholders.

Translation: Maybe, if we say “starting point” and “must buy” over and over, consumers and advertisers will pay attention. And, maybe we can wrestle some of those projected ad dollars from the greedy little hands of those Googlers without the help of the nuclear warhead Ballmer is going to use. And maybe, if we wish really, really hard, Santa will bring us a business plan to accomplish all this next Christmas.

Jerry wrote: several key assets form a solid foundation as we execute this strategy.

third, we have made important investments in our core computing infrastructure that provides us greater scalability and increases the rate of iteration on core technologies like algorithmic search as much as tenfold. and of course, you’re familiar with our investments in enhanced search technology through panama.

Translation: First, we are more famous than MSN, although that’s not so hard. Of course, no one Yahoos, as in a verb like they Google (damn you, Larry and Sergey) and never ever will. But our yodel is also as cute as lowercase and exclamation points and cute is our secret weapon!

Second, cash flow is a good thing as long as it keeps flowing. Good Lord, let’s pray for rain and not recession!

Third, of course, it took longer to build Panama than the real canal and now we have to keep building since everyone else has moved forward. A man, a plan, a canal, Panama! It’s a palindrome! Fun! (Try not to pay attention to the leaden stock!)

Jerry wrote: these assets—the brand, the audience, the financial strength, and the technology–position us to capitalize on this pivotal moment for yahoo! and the online marketplace. of course, our most important resource is you: the thousands of creative, passionate and committed yahoos who are executing our strategies to deliver value for users, advertisers, publishers–and stockholders.

Translation: Hey, you look great. Did you lose weight? That outfit is really flattering! (Please don’t pay attention to the anchor around the neck of our stock.)

Jerry wrote: as you know, we have taken significant steps to refocus our business on our starting point–must buy strategies. and we’re making headway.

finally, beyond our core strategies, there’s the added benefit of our substantial, unconsolidated investments in china and japan: we have major positions in yahoo! japan, the leader in its market and alibaba, which is strongly positioned in china, a market with enormous growth potential.

Translation: This is the part where we really put on the dog to impress our shareholders, who could revolt at any moment; the press, which will like this likely pointless but dramatic show of corporate braggadocio; and Microsoft, which is probably not very impressed at all. So, let’s break it down, shall we?

Starting points=we’re big, so we can probably stay big for a while. It’s a miracle AOL has not fallen down dead yet, so there is lots of time for us. Let’s try to take focus off the fact that Facebook and MySpace have been growing at quantum levels in comparison and everyone is already sick of them!

Mobile=Marco Boerries is an acquired taste, but he cleans up good for presentations of cool apps we will never fully launch. Also, mobile is still a nascent ad arena, so it’s not going to matter much at all for a long time, but it is sexy. Like Marco’s cars!

Must buy=Anybody But Google. Microsoft is pushing that pitch hard in trying to buy us with advertisers and regulators and it’s a good one, so we’re going to steal it.

Newspapers=dead trees=dead end. But they are desperate and we know from desperation!

Third-party developers=Damn that Mark Zuckerberg! But, we’ll steal that idea too!

Asian investments=we made one smart decision to invest in China. OK, those dissidents being arrested was appalling and it was a PR disaster and I looked really bad in my congressional appearance. But, glass half full!

Jerry wrote: we have accomplished a great deal in a very short time. yahoo! is a faster-moving, better organized, more nimble company well on its way to transforming the experiences of its users, advertisers, publishers and developers.

i hope you are as proud as i am of the yahoo! we have built and we continue to build. thanks for your hard work.

Translation: Let’s review! Lower-case letters cute! $36 a share! More of the same ideas, but repeated over and over! Patience is a virtue!

Jerry wrote: jerry

Translation: There’s no need for name-calling yet. So please continue to call me, Jerry!

Last night, BoomTown checked out the new space MySpace is renovating for its soon-to-open San Francisco office. The occasion was a party the social-networking site held for developers as part of its recent platform launch.

In other words, the night MySpace started kissing up to the widget makers with tasty burgers and big techie hugs.

And those widgeteers showed up in full force for the sandbox-themed event (I even brought my kids, who played in the actual sandboxes set up and made quite a mess!), including Slide’s Max Levchin, RockYou’s Jia Shen, Google’s OpenSocial guru Joe Kraus (who apparently did not get to go to Disneyland with the rest of the company) and many others.

Also in attendance were MySpace’s top brass, including Chris DeWolfe and Tom Anderson, as well as its new COO Amit Kapur and lots of other MySpace minions, coming up from Los Angeles.

MySpace –which is owned by News Corp., which also owns Dow Jones, which owns this site–is still the largest social network both in terms of users and page views. But its growth has been slowing and, worse, its thunder has been stolen by the faster-growing and more-hyped Facebook, based in Silicon Valley.

Last year, that competition was in sharp relief when Facebook Founder and CEO Mark Zuckberberg opened its platform up to third-party developers. The crafty move sent widget makers into near ecstasy. (”He likes us, he really likes us!”)

And while widgets were actually on its site for a while, MySpace had not formalized those relationships with programmers and even battled with them, which has been the source of consternation in the development community.

Now, the company is trying to mend those broken links and has built more organized systems for letting software developers build a range of new services for its users. It also partnered with Google in the search giant’s efforts to open up the development process with its OpenSocial initiative.

Time will tell if the make-nice efforts by MySpace will work, but here’s a video of the party (and in the following post here features longer interviews with DeWolfe and Kapur):

Last night, MySpace threw a party for third-party developers at their soon-to-be-opened office in San Francisco’s trendy SoMa neighborhood.

BoomTown went and did a video of the event here, where the trendy, Beverly Hills-based social-networking site made nice with the geeky widget makers of Silicon Valley.

And we also talked to MySpace Co-Founder and CEO Chris DeWolfe and new COO Amit Kapur:

With all the noise about Microsoft’s $41 billion offer to buy Yahoo, I dropped the ball on posting about a chat I had about a week ago with Slide’s Max Levchin (pictured here) about the recent $50 million investment that valued the widget maker at an astonishing $500 million.

To say I was dumbstruck by the market value, given that the profitless start-up has only about $10 million to $12 million in annual revenue and a still unproven business plan, would be wrong.

Incredulous, yes. Gobsmacked, indeed. Feeling like I was back in 1999, most definitely. But not dumbstruck!

Thus, I queried the always voluble Levchin, who agreed to talk to me readily (no Jerry-Yang-cave-dwelling behavior for this 32-year-old Web 2.0 serial entrepreneur!) about the investment by two old-line institutional investors–Fidelity and T. Rowe Price–and its implications for Slide.

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While at the Sundance Film Festival, I took a little tour of Park City, Utah, visiting with Chris DeWolfe and Dani Dudeck of MySpace and Sundance’s digital guru Ian Calderon and trudging up Main Street with my celebrity tour guide, Jane Lynch (who is about as hysterical as you get in “Best in Show” and “The 40-Year-Old Virgin”).

This is my third year at Sundance, where I moderate tech panels for the independent film festival.

Obviously, issues related to technology are becoming ever larger for the film community and most especially for the independent filmmakers, as they seek to get their material wider distribution than Hollywood’s current chokehold system provides.

The Sundance Film Festival is held annually in Park City and focuses on screenings of new indie films. Still, Sundance has been expanding additional offerings in the digital arena with panels throughout the festival.

The panel I moderated (see video here) was about online video, called “Webolution!–Hollywood Adapts to the Web.”

Here’s the video:

It’s Bubble Time!

As BoomTown broke the news in its post earlier today, Slide grabbed a big pile of cash from new investors–$50 million from Fidelity and T. Rowe Price–which puts the value of the company at $550 million.

In our post, we said the San Francisco start-up, whose widgets are among the most popular on Facebook and MySpace, was completing a round of funding that could value it at many times a multiple of its most recent $60 million to $80 million valuation.

The investment from the pair of private equity funds gives them a 9% stake in the maker of widgets and other social-networking applications.

Allen & Co., the media-connected New York-based investment firm, helped Slide execs in raising the latest round.

Don’t think we did not notice that the venture investors already in Slide did not pony up more funds at this–let’s just say it, shall we?–crazy valuation.

But it is noticeable that such mainstream investors are jumping into the giant pool of Kool-Aid that the social-networking industry has been swimming in over the last year.