All Things Digital

Be careful what you wish for, Jerry Yang.

Because after talking to a dozen Yahoo (YHOO) execs over the weekend after the Microsoft (MSFT) takeover deal cratered, most of whom are vice presidents or above, I have to say that your stock drop isn’t the worst thing you will have to deal with this morning when you pull up at work.

The worst? That’ll be the very hairy eyeballs you will be getting from a lot more of your employees, who are scared silly and a lot peeved by the limb many feel you have dragged them and their stock options out onto.

A major decline in the share price today was of prime concern to those I interviewed, with most hoping it would not dip below $20, based on the possibility of signing a long-rumored ad outsourcing deal with Google (GOOG) soon that could potentially keep the stock higher.

Also of concern: making too many sudden moves to placate Wall Street, like a possible alternative merger with AOL (TWX) (which the Yahoo troops still don’t seem to welcome).

But causing particular dismay was the image of Yahoo’s top execs high-fiving after Microsoft CEO Steve Ballmer walked away from the deal, an act reported in the New York Times this weekend after the deal was scotched.

“That was very telling, if it was true,” said one exec, who–like everyone–did not want to be named. “It shows a complete lack of connection to the balance of the company.”

And that was the nice quote!

Last night, Yang tried to placate employees a bit by posting an aptly named communication, “OK, so now what,” on Yahoo’s blog called (not so aptly) Yodel Anecdotal. He also took a slap at, presumably, Microsoft’s PR effort and the press coverage around the takeover attempt.

“By the way, I’m sure you’ve all read or watched the news about this. Frankly, there’s a lot of nonsense and misinformation in what’s being reported. Just so we are all clear, here’s what happened. The board took its mission very seriously. We clearly indicated to Microsoft that we were open to a transaction but only if it were on terms that fully recognized the value of Yahoo and was in the best interests of our stockholders.

“No one is celebrating about the outcome of these past three months… and no one should.”

So no high-fiving anymore, right? And, just so we are all clear, everyone at Yahoo I talked to sure isn’t celebrating.

So, here’s a sampling of the feelings, none of which were positive, even though BoomTown tried mightily to get someone to render a more sanguine spin on the proceedings:

“I am in shock.”

“I don’t know if we won or we lost. I think we lost.”

“I don’t love that it was Microsoft, but I think everyone thought $33 was a pretty good offer from a pretty good tech company.”

“Having to face my staff tomorrow will not be so much fun and I need some Prozac, since I don’t know what I can say to them about how our leadership is going to get our company going again.”

“Where’s the Jelly memo when you need it?”

“I can’t really talk to Jerry, since it is difficult to tell a founder tough things he probably needs to hear.”

And, “Do you think we need to do an intervention with Jerry and the board?”

I am not sure that would work, but most employees I talked to thought a new leader at the top of Yahoo would be a good idea to give employees a fresh start and a new outlook.

Suggestions ranged from former Yahoo COO Dan Rosensweig to former Viacom (VIA) CEO Tom Freston to former eBay (EBAY) CEO Meg Whitman (pictured here).

“Jerry could become chairman, Sue [Decker] could remain president and then someone who can really charge in and make drastic change could be CEO,” suggested one exec. “Do you think Meg Whitman would do it?”

Um, no. But, ironically, Whitman was almost Yahoo CEO in a potential merger between Yahoo and eBay that never happened in the late 1990s.

As they will also say someday about 2008’s stillborn takeover of Yahoo by Microsoft: Could’ve, would’ve, should’ve.

But didn’t.

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.

Slide’s last round–an investment of $20 million–took place in November of 2006 with investors that included Khosla Ventures, BlueRun Ventures, Founders Fund and the Mayfield Fund.

So Slide’s investors, of course, were smart to get in on the ground floor to take advantage of the bubble that is expanding at alarming rates.

The ground-zero of that trend came when Facebook got a $240 million investment from Microsoft that valued the company at $15 billion.

Of course, while garnering revenues, neither Facebook nor Slide has the kind of business yet to deserve being worth this lofty amount, except for the fact that investors are counting in its potential and recent quick growth.

Slide’s business plan includes making money from selling premium versions of its widgets, as well as selling advertisers on its large, although disparate, audience.

The company calls itself the “largest personal media network in the world, reaching more than 134 million unique global viewers each month and 30% of the U.S. Internet audience.”

But the company recently said reports had put that number at 144 million, excluding its 50 million users on Facebook. Its competitors include other widget-makers like RockYou.

Slide makes a wide range of software, called widgets, that have been attracting many millions of users each. They include everything from slide shows to a program called SuperPoke that allows a user to, well, poke another in a super way.

A lot of Slide’s current growth has been through taking advantage of the huge spike in users first at MySpace and now at Facebook, which is promising, but also not certain.

To say that we have seen this story of fast growth, insane valuations and then the inevitable drop-off would be an understatement.

But Slide Founder and CEO Max Levchin and his team consider the company to be a new kind of distributed content and application company that is not dependent on large platforms like Facebook and MySpace and has huge potential.

Minor blogging annoyance: Of course, in a fit of pique since we revealed the funding without their help, Slide hand-fed the details of the deal to the New York Times and BusinessWeek, both of which somehow forgot to link to our post that said Slide was landing the deal. (Brad, Sarah: Please, please don’t tell us you figured it all out on your own this morning over eggs.)

UPDATE: A New York Times deputy tech editor just wrote an email to tell me its reporter already had a “previously scheduled” meeting with Slide about the deal–like I said, hand-fed!–this morning, which “inspired” its post and did not know of BoomTown’s news of the funding (even though it was up since 12:06 a.m. and noticed by everyone else, including Slide). Also, they had the hand-fed details! They did! I admit it! I went hungry, since I did not agree to an embargo! “In light of this we didn’t feel that a link was warranted,” he wrote me.

But we’re not bizarrely ungenerous like that, so here is the link to the New York Times story, in which Slide’s Levchin said his company makes Facebook and MySpace worth using. (And here is the BusinessWeek link too.)

“It’s impossible for social networks focused on scaling the network itself to build all the niche applications that bring people and keep people on these sites,” Levchin said, noting Slide widgets “add the bulk of perceived value to the consumers of these Web platforms.”

He also said he would use the money to expand its repertoire, but said Slide would try to develop in-house.

But others close to Slide said this was not exactly so, and that the company would also look around for good acquisition targets, using stakes in the newly valued Slide as currency.

BoomTown is usually never in sync with Wall Street analysts, given that their job is too often to sell people on companies and mine is to, well, tell on companies to people.

But I seem to be in violent agreement with Sanford Bernstein analyst Jeff Lindsay of late–at least with a recent report he just did calling for Yahoo to abandon its slower-moving strategies and get much, much bolder much, much quicker.

Suggestions by Lindsay included outsourcing its search business, making deep cuts in staff and also doubling down on its bets in its ad network businesses like Right Media.

(Frankly, I’d just like to see the company immediately-if-not-sooner roll out innovative email features like CEO and Co-Founder Jerry Yang showed at the Consumer Electronics Show last week.)

If you recall, Lindsay penned a previous report last October on the worth of Yahoo by parsing out its various assets. It was instructive in its focus on the value of Yahoo’s somewhat liquid holdings like investments compared to its core business.

The message at the time: Yahoo had some valuable assets–such as its stake in China’s Alibaba.com–and its stock did not reflect these gems. It even suggested the company be split into parts to unlock value.

But his most recent piece is less sanguine–a kind of flip side to the first, noting that the operations side of the business was not up to snuff, causing the valuation of Yahoo to fall. Bernstein blames Yahoo’s too-careful management, as well as its declining share of the search market.

Whatever you think about Yahoo, its still lackluster stock price–it hovers in the low $20-range–make reports like Lindsay’s interesting reading. See also this Motley Fool report yesterday, naming Yahoo the “Worst Stock for 2008.”

Nonetheless, all this bearishness could foretell some bullishness on Yahoo, which appears to simply refuse to move faster than it wants to.

Consider a largely positive piece on Yahoo’s fine-tuning of its business in the New York Times yesterday, which chronicled Yang’s turtle-versus-hare approach to the company’s future.

The article quoted Yang’s I’m-still-here intro to the CES speech (pictured here in this AP shot by Paul Sakuma), which kind of says all you need to know: “I’m guessing that a lot of you are here today to see what the new look and new face of Yahoo is all about…well, I’m sorry to disappoint you. It’s still the same old face. I’ve been around since the beginning.”

And, I have no doubt, until the bitter, sweet or even bittersweet end.

Please see this disclosure related to me and Google.

They say that only the grass gets trampled when elephants fight. And that grass might actually turn out to be Yahoo in the epic battle between Microsoft and Google.

While the New York Times spilled a lot of ink earlier this week in a very long piece about that massive mano-a-mano, the true fallout in the online ad space, at least, could be more painful for the No. 2 player–Yahoo–which sits smack in between No. 1 Google and No. 3 Microsoft.

Yesterday, that was clearly in evidence in a kind of round-tripping ad deal Microsoft struck with Viacom, a five-year strategic partnership that was valued at $500 million by the two parties.

It’s pretty simple, really. Microsoft dips into its massive cash coffers and buys ads on Viacom’s many online and offline media outlets and it also licenses Viacom content–from places like MTV and Comedy Central–for its online MSN and Xbox 360 services.

Viacom scores!

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Earlier this week, I ranted on about a rant made by New York Times Executive Editor Bill Keller.

Readers had a lot of thoughtful reactions.

To recap: Keller (pictured here) had taken wobbly aim at the Web and its bloggers, calling the Internet a “media tsunami” and too much of its fare “unreliable,” such as sites like Wikipedia and Google News.

“Most of the blog world does not even attempt to report. It recycles. It riffs on the news,” he said in a speech he recently gave in London, in that tiresome tsk-tsk way that must be in the mainstream media mandarin handbook. “That’s not bad. It’s just not enough. Not nearly enough.”

BoomTown, of course, disagreed. I wrote: “This is simply not true going forward, and he should have done some reporting on the subject to find out. There is an ever-increasing number of online outlets who are doing most excellent online reporting.”

Readers weighed in.

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Speaking in London last week, New York Times Executive Editor Bill Keller delivered a speech that sounded suspiciously like the grumpy rants of Hollywood moguls of late, who don’t like this digital thing one little bit.

To his credit, Keller (pictured here) spent the start of the speech in honor of the late legendary Guardian columnist Hugo Young expertly dissecting the appalling attitude of the Bush administration toward the free press.

Kudos to that. But then he could not resist that tiresome tendency of many mainstream journalists to blame the explosion in the popularity of the Internet for the woes of the newspaper industry.

Dubbing the Internet a “media tsunami” and calling much of what is out there “unreliable,” Keller pilloried sites like Wikipedia and Google News for not having things like foreign bureaus in war zones and because they don’t create content and do aggregate it from other media.

It’s a little odd, though, to insult such Web products for doing exactly what they do–neither Google News nor Wikipedia has ever claimed to perform the function of a news organization like the Times.

Actually, I think Keller’s real problem is the audience, especially young people, who are increasingly using those sites and others.

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In a really fine review of the New York Times’ new headquarters building, which appeared in that paper yesterday, the critic Nicolai Ouroussoff made some interesting observations about the interplay of the design with current digital trends.

The 52-story skyscraper, only part of which is used by the famed newspaper, was designed by Italian architect Renzo Piano and is located between 40th and 41st Streets in midtown Manhattan.

He wrote:

Journalism, too, has moved on. Reality television, anonymous bloggers, the threat of ideologically driven global media enterprises–such forces have undermined newspapers’ traditional mission. Even as journalists at the Times adjust to their new home, they worry about the future. As advertising inches decline, the paper is literally shrinking; its page width was reduced in August. And some doubt that newspapers will even exist in print form a generation from now.

“Depending on your point of view, the Times Building can thus be read as a poignant expression of nostalgia or a reassertion of the paper’s highest values as it faces an uncertain future. Or, more likely, a bit of both.”

It’s an interesting insight about the changing nature of traditional journalism, whose very architecture might be shifting (more open and transparent) as its business does.

(There is also a really terrific multimedia look at the new offices here, which shows how you can take a story to new levels with not too much effort.)

Please see this disclosure related to me and Google.

I stopped on by Google’s Zeitgeist yesterday to say hello to Washington Post CEO and Chairman Don Graham, who was attending the search giant’s annual confab of powermongers, where they talk about big issues and mostly engage in Olympic schmoozing.

I had used my old boss Graham to make a point about the immature nature of Facebook apps in a post Tuesday. (He had sent me a digital “Hot Potato” that prompted my diatribe, so I wanted to make sure he knew it was not personal that I was not tossing it back or wherever one was supposed to toss one.)

Zeitgeist sessions are off the record, although it was crawling with press, including bigwigs like Graham and New York Times head Arthur Sulzberger Jr., as well as a spate of other movers and shakers like (Google favorite) former Vice President Al Gore.

So, given the restrictions, I decided to use my visit to further my ongoing quest to ask Web players about what’s new and what’s hyped. While there, I put the screws to longtime Internet serial entrepreneur Yossi Vardi (ICQ among others) and also Dow Jones Online President Gordon McLeod in what is a very short video.

Here it is:

As we have predicted (and advocated) many times in BoomTown, including in this post titled “Free to Be, Rupe and We,” News Corp. head Rupert Murdoch indicated yesterday that he is strongly considering taking down the paid wall at The Wall Street Journal’s online site.

Murdoch, the new owner of Dow Jones (and, by extension, this site too), told a crowd at the Goldman Sachs Communacopia conference in New York that he had not pulled the free-switch yet, but argued for the move and said he was not worried about it impacting revenue.

His argument in a nutshell: more audience=more ad dollars.

“Will you lose $50 million to $100 million in revenue?” Murdoch asked and then answered his own question. “I don’t think so. If the site is good, you’ll get much more.”

The site is good and you will get much more. I have long thought so, as I wrote in May: “I vote–and I know Murdoch definitely does not preside over a democracy–yes, ma’am, um, sir, for a free WSJ.com.”

Because, while a paid model might have been right in the past, having a larger, powerful and global owner changes the stakes considerably and allows the tremendous site to make bolder moves than ever before.

And such a move would also make the Journal more relevant on the Internet, because a paid wall has kept its content too much apart from the online conversation that is only growing exponentially.

The hit the site might take–potentially lowered ad revenue in the short term and lower ad prices in general–is a necessary one, I think, on a road to much greater prominence the site deserves. It is a risk well worth taking.

And that is not to say there are not many opportunities for premium content offerings.

Why not a paid site aimed at users seeking highly specialized news, data and information on a variety of topics? Why not offer supercharged stock-charting tools? Why not a Walt Mossberg fan club, complete with a free T-shirt (pictured below) upon becoming a member?

While Murdoch declined to drop the hammer on the subscription WSJ.com site, that move seems inevitable now, especially after the New York Times ended its dopey and irksome TimesSelect (even the name is ickily elite-sounding), which gated the best stuff behind a paid wall, effective today.

In the email I just got from them, the Times said: “Since we launched TimesSelect, the Web has evolved into an increasingly open environment. Readers find more news in a greater number of places and interact with it in more meaningful ways. This decision enhances the free flow of New York Times reporting and analysis around the world. It will enable everyone, everywhere to read our news and opinion–as well as to share it, link to it and comment on it.”

They finally got that right. News flash: Free at last.

AOL=Ads Online Loser?

What can we say about AOL’s ad miss, reported in the New York Times today by Miguel Helft, except to quote an email I got from a former AOL executive today: “Ad sales and no surprises were the reason these guys were supposedly brought in.”

Oops. Indeed, more analysis of this issue tomorrow, but it’s not a very good sign for AOL head Randy Falco, the television guy brought in to inject a dose of ad savvy to the service.

AOL has had by necessity to move its business from a subscription model to one supported by ad sales, hoping to take advantage of the 90 million visitors to its sites every month.

Not quite yet, it seems. AOL execs are calling a recent decline in growth of its ad revenue, which was 40% in the previous quarter and is 16% in the most recent (compared to overall online ads in the U.S. that are expected to increase close to 29% this year), temporary and due to vast changes being made in its offerings.

Well, renovation must hurt, because AOL also lost ad market share year over year.

Another big destination, Yahoo, is suffering from the same problem, with a falloff in ad growth and also market share (only Google, which is a horse of a different color from a portal perspective, is gaining). The culprits are small sites gaining ads, as well as savvier marketers looking for better results.

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Are we masochistic to love the Google move to allow subjects in articles to comment right next to the news stories?

As anyone who knows newspaper folks knows, we have been dragged kicking and screaming into the highly interactive social-media space. No matter what they say, in the past at least, few journalists welcomed the idea of dealing with letters to the editor about their work and fewer still liked it when the whole thing went digital and comments flourished.

While we have a strict comment policy on this site (yes, we will kick off cretins with gusto), it’s an interesting idea to solicit reaction from those we write about.

“We’re hoping that by adding this feature, we can help enhance the news experience for readers, testing the hypothesis that–whether they’re penguin researchers or presidential candidates–a personal view can sometimes add a whole new dimension to the story,” said the Google News folks.

Here at BoomTown, we say, bring it on and look forward to the first comment from Facebook’s Mark Zuckerberg about our flip-flop and business-plan fixation.

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IF I WERE A RICH GEEK…

In a front page article Sunday, New York Times writer Gary Rivlin drags out that old Silicon Valley chestnut about how hard it to is be just a plain old millionaire when everyone else around you has all those hundreds of millions and–worse!–billions.

I always enjoy Rivlin’s work and even spent a lovely few weeks with him and also Po Bronson on a lecture/debate scheme hatched by our Random House editor called the “Bleeding Edge” book tour in the summer 1999. (Here’s a quick recap: I thought the Internet was underhyped at the time and Rivlin did not, while Bronson dreamily sold more books than both of us combined.)

But it’s a bit of a stretch to imagine anyone–even in the gold rush days of the Web–not being happy with several million in the bank.

Notes Rivlin: “…Those with a few million dollars often see their accumulated wealth as puny, a reflection of their modest status in the new Gilded Age, when hundreds of thousands of people have accumulated much vaster fortunes…”

Oh, good heavens.

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Was it only a week ago that we wrote a post about the sale prospects of Business.com and did a video interview with its CEO Jake Winebaum at its Santa Monica, Calif., offices?

As it turned out–and I cannot say I was surprised–the deal was finally struck this past week for the highly targeted search-and-directory site to be sold to R.H. Donnelley (RHD) for $345 million.

“Donnelley has 2,000 sales people on the street and more than 600,000 advertisers and people come to them, so they make a great fit for us,” said Winebaum to me in an interview last night. “And we have a pay-for-performance platform that is hard to build, so we make a great fit for them, too.”

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I paid a visit to the Santa Monica, Calif., offices of Business.com recently to check in with its CEO, Jake Winebaum.

Back in the day, I covered Winebaum closely, first during his stint as the go-to Internet guy at Disney and after he left there to strike out on his own with serial entrepreneur Sky Dayton. It was all very glamorous then.

But some of what they attempted, especially an “incubator” to build Internet start-ups from the ground up called eCompanies, did not work out as the hype swirling around it then promised.

Nonetheless, you only need a few hits to cover up all the misses, and it looks like Winebaum might have one soon, after toiling in relative obscurity since then in the less-exciting business-to-business space.

Business.com, which is essentially a highly targeted search-and-directory site, is being looked at by several companies, including Dow Jones (owner of this site, too), as well as News Corp. (likely for its new business cable channel) and the New York Times Company.

The price? A cool $300 million to $400 million.

That’s a lot, of course, and a sweet price being bandied about, especially since both Winebaum and Dayton were widely mocked–including by me–for paying $7.5 million for the domain name in 1999.

Now that it looks like News Corp. might be buying Dow Jones, it is not clear where the deal to sell will land, but here’s a video of Winebaum talking about the site:

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With the mania around the iPhone subsiding a bit (and just a bit, until the memory of this David Pogue–let’s just say it plain, shall we?–Broadway music video, called “iPhone: The Musical,” for the New York Times about the Apple device also subsides), BoomTown has almost no shame in picking up on the Harry Potter phenom that is about to grip the world when books are officially for sale just after the stroke of midnight Saturday morning.

The Web has played an increasingly big role in the hubbub, as the books have been released over the last decade, with all sorts of online sites related to the young wizard’s exploits getting massive traffic.

On the downside, of course, has been the release of what look to be actual pages from JK Rowling’s seventh and last in her series: “Harry Potter and the Deathly Hallows,” which is quite a naughty thing to do.

I still read all the spoilers, of course, and am dying to tell Walt, a big fan of the Potter oeuvre (don’t hate me, but me, not so much). I will not, of course, as he can wait until the book is out to enjoy it.

It seems he will, given the review published today by the enterprising New York Times book critic Michiko Kakutani, who managed to buy a copy from a bookstore and post here.

She liked the book overall, writing that: “It is Ms. Rowling’s achievement in this series that she manages to make Harry both a familiar adolescent–coping with the banal frustrations of school and dating–and an epic hero, kin to everyone from the young King Arthur to Spider-Man and Luke Skywalker.”

But where would we be without videos about it all? Here are two on YouTube, of course.

One is a strangely satisfying puppet show (who knew Voldemort’s name could be sung to the Chordettes’ catchy “Lollipop” tune?).

The other a perfect takeoff of the 1970s sitcom “Welcome Back, Kotter” called, of course, “Welcome Back, Potter” and complete with a dumb laugh track–I never knew I could miss Arnold Horshack’s bray so much.