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out the organic word in front of Merrill Lynch analysts yesterday, as reported by CNET’s Ina Fried, saying: “We’ve withdrawn the offer and moved on, and now are focused on how we grow as fast as possible organically.”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

AOL is turning into the Oprah Winfrey of the digital world, it seems, opening up Time Warner’s (TWX) checkbook to as many start-ups as it can.

Last month, it was $850 million in cash for social-networking site Bebo.

And, today, it’s a much smaller slug for Sphere, which started as a blog search engine and morphed into a widely distributed “contextually relevant” content engine, used on news and blog sites across the Web (and which AllThingsD uses on this site, in fact).

While one source said the price was upward of $25 million, sources at other companies to whom the San Francisco-based start-up also talked, including Google (GOOG), said Sphere was looking for more than that.

In any case, the sale is surely a win for CEO and Co-Founder of Sphere Tony Conrad, a longtime entrepreneur who also has been a VC at True Ventures, which also invested in Sphere.

Oh, it’s a mosh pit of jolly interbreeding in the Web 2.0 start-up world!

Sphere raised about $4.25 million from many investors, some of which included Radar Partners, Trident Capital and well-known Web players Scott Kurnit and Will Hearst.

AOL has surely shown a knack for snapping up small and innovative properties with clever technologies–the Truveo video search engine and communications app maker Userplane, for example–and has let them stay relatively intact, as it has promised it will do with Sphere.

But it also has not exactly leveraged any of them in a massive way either and still faces the problem of holding onto talent from those start-ups, as BoomTown reported here.

One hopes that AOL can do more with the more complex and elegant Sphere, which has deep relationships with major publishers all over the Web, including many Time Warner properties like Time.com and CNN.

It would be a shame for Sphere to fall into one of AOL’s deep holes there.

But perhaps not, given all the frenetic multitasking activity at AOL of late, including yesterday, when it also announced a deal in which its Platform-A online ad division would sell ads for Verizon (VZ) on the Web and for its mobile units.

Oh, and its top execs, CEO Randy Falco and President Ron Grant, whom AOL sources tell me have been AWOL of late, have also been ferreting away on a possible deal to be the alternative for Yahoo (YHOO) in its takeover battle with Microsoft (MSFT).

While Yahoo troops are not really happy with such a union, as BoomTown reported here, neither are some top Time Warner execs at the possibility that AOL might simply be being used as a stalking horse by Yahoo, in an effort to get Microsoft to up its bid.

“Do you think they’re using us?” joked one Time Warner exec to me yesterday, given the deal activity seemed to have slowed down this week.

Um, yes, of course!

While that wouldn’t be sporting, if Yahoo does end up going to Microsoft, it just means AOL will need to get a lot more energetic and do a lot more Spheres in the future to keep up.

Now, we’re cooking with some gas over at Yahoo, closing in on the two-thirds point of Jerry Yang’s declared 100-day March to Happiness.

Today, the Internet giant will announce the purchase of a clever Web site called BuzzTracker, which uses a combination of editorial selection and complex algorithms to aggregate content from all over the Web, allowing users to delve deeply into specific topics.

For those techies, it is not unlike the very fine TechMeme, which essentially has its digital thumb on the pulse of tech news and is a big traffic driver in the sector.

While Yahoo did not disclose the price it paid for BuzzTracker, sources close to the company said it bought the site–which is wholly owned by Chicago-based Participate Media–for about $5 million.

Earlier this week, Yahoo’s European head Toby Coppel struck an interesting ad and search deal with social-networking site Bebo. And last week, Yahoo bought behavorial ad-serving network BlueLithium for $300 million.

So it looks likes the lights might be on over there at Yahoo, which has been struggling to reinvigorate itself of late and by necessity under Yang’s leadership.

Back to BuzzTracker: Using its own technology, BuzzTracker creates “custom content feeds” automatically that aggregate news, blogs, reviews, discussions, video and audio. But to add a level of quality, it handpicks the 90,000 online content sources it uses.

Its motto is: “All the News the Buzz Approves.”

As BuzzTracker explains on its site: “Our goal has been to launch a news site that leverages the power of the ‘head of the long tail’ of the blogosphere to automatically generate news pages for a multitude of topics, both broad and narrow.”

To determine relevance of an item, for example, it looks at a range of elements, such as what the most blogged-about story for a particular topic is.

Yahoo had looked at other better-known competitors in the space, said sources, such as the San Francisco-based Sphere (which we use on this site for such content aggregation).

But those trendier (and more popular) start-ups apparently had too lofty valuations.

In an interview, Yahoo Media Group exec Scott Moore said he had connected with Participate’s founder and CEO Alan Warms, in fact, at our D5 conference in late May. (Another coincidence: I covered one of the early start-ups at which Warms was a senior exec called Freeloader, based in D.C., for the Washington Post.)

Moore said he had been looking around for such automated-news and content-discovery functionality, in order to augment the efforts of Yahoo’s 60-person news team.

“We want to connect our users to as much information as possible, anything from Britney Spears to the Santa Monica City Council meeting notes,” he said. “We love BuzzTracker’s usefulness, because if you’re interested enough, you might want related content we might not be publishing and hosting.”

The purchase is clearly part of Yahoo’s renewed efforts to link to more third-party content, rather than pointing at its own owned-and-operated properties.

As part of the deal, Warms will become vice president and general manager of Yahoo News, which Moore said currently has an audience of 36 million unique visitors a month.

Participate has said on its Web site that it will soon include user-review and discussion sites to layer over the aggregation at BuzzTracker, much like what happens on the popular Digg service.

According to sources at Yahoo, the company has already built a Digg competitor, but has not launched it yet. It is not clear if that effort would be integrated into BuzzTracker or not.

I motored on out to Stinson Beach, the lovely coastal community about an hour’s drive north of San Francisco, yesterday for the annual get-together thrown by True Ventures, a venture firm.

I missed the clambake part of the event–my kids need tending, so I can’t be all Elvis-acting!–but had a nice time chatting with its partners on the sand.

True is an interesting and highly eclectic fund, and much less formal than other more stodgy outfits. Hence, a beach party rather than a gathering at some pricey resort.

Some of its better known companies are Automattic (CEO Toni Schneider is also a True partner and its main product is the WordPress open-source blogging software, used here, btw); GigaOm, Om Malik’s blogging empire; IM apps maker Meebo; blog search apps maker Sphere (also used on this site); and scanR, a start-up that allows digital cameras and cellphones to scan, copy and fax.

I chatted with some partners in this video, as well as an interesting new entrepreneur that True is backing from Chesspark. It’s a little long, and there are some unfortunate wind problems caused by the Pacific Ocean, but you also get an exclusive BoomTown tour guide of the scenic trip.

I went down to visit the offices of Sphere on Monday to see new developments at the blog search engine.

Full disclosure, although it is right in front of you throughout this site: AllThingsD.com uses the Sphere widget to point readers to more related articles and blogs based in authority and other algorithmic criteria within the site, recommended by Walt and me and also from around the Web.

It’s a nifty widget–in a Web universe now addled with widgets–and Sphere co-founder and CEO Tony Conrad is adding some interesting new functionality to it, making ever more specific topic widgets that can be embedded on sites.

In the video I did below, he shows, for example, Sphere widgets designed to be loaded with left-wing and right-wing political content, which would be useful for readers sick of wading through so many sources.

Sphere has been growing its market share–especially on big media sites like the Washington Post and CNN–since it launched in 2005. Conrad, who was involved with Webmail and RSS aggregator Oddpost (acquired by Yahoo in 2004), is also on the board of Automattic/WordPress, the blog publishing system this site also uses.

Here’s a video I did with Conrad. While there, I ran into Om Malik, blogger and creator of the terrific GigaOM tech site, who works out of the same office, due to the investment in his effort by True Ventures. In the round-and-round world of Web 2.0, Conrad also is a partner at True.