Unlike the gripping back and forth of the fight over Yahoogle last year, the approval process for the search and online advertising partnership of Microsoft and Yahoo is chugging along slowly but surely as the Justice Department has deepened its investigation by reaching out to a broad range of publishers, advertisers, public interest groups and rivals for comment recently.

A month ago, the government agency lobbed in a “second request” for information about the deal the pair struck earlier this summer.

This kind of regulatory review is typical in deals of this magnitude.

But so far, there is no significant external challenge to the MicroHoo deal, even–according to many sources BoomTown has interviewed over the last week–from Google, the likeliest company to try to scuttle or, at the very least, slow down the deal.

“Is it worth fighting a big fight over?” asked one person close to the thinking of Google (GOOG). “Not really.”

Said another source, surveying the state of play: “It’s eh, kind of inevitable and not that interesting on a lot of levels.”

While none of the key constituencies wanted to comment or make predictions about the outcome of the regulatory scrutiny, most seem to agree that MicroHoo is more likely to be approved than not.

At the time the partnership was announced in July, execs at both Microsoft (MSFT) and Yahoo (YHOO) said a lot of investigation was likely from Justice, although they said they were also confident that it would be allowed go through by year’s end.

So far, several sources said, the key issue raised by the Justice Department has been whether the argument Microsoft and Yahoo are making–that they need scale to compete with Google–is valid or not.

Currently, Google has just under 70 percent of the search market in the U.S., while Microsoft and Yahoo together have about 28 percent.

Google has been arguing that huge scale is not necessary to be successful in the search ad market, although its execs have often said bigger is better when it comes to natural search and in spurring more clicks on ads.

Meanwhile, Microsoft and Yahoo have said they need all the firepower they can muster together to battle Google’s hegemony.

In a related concern, some regulators are worried–as they were when Google and Yahoo were trying to get approval for a similar deal last year–that any hookup of big players in the market will effectively take Yahoo out of the search business.

“With only three big players, going to two is not desirable to the government,” said one source. “Yahoo has to reassure everyone that it is focused on a sustainable business model beyond search.”

In a blog post yesterday, in fact, Yahoo said it was committed to search innovation.

In any case, most expect another month of investigation at least, although the lack of any loud voice in opposition could shorten that time frame.

And, added some sources, unlike with Yahoogle, there is not likely to be any kind of Congressional hearing on the deal.

Nonetheless, Microsoft, Yahoo and Google remain concerned that deals like this will lead to more focus on privacy issues, specifically around behavioral targeting.

That would be more a matter for legislators or the Federal Trade Commission and would probably come well after the deal is cleared and as part of a bigger topic.

Rep. Rick Boucher (D., Va.), who chairs the Subcommittee on Communications, Technology and the Internet, said he will consider consumer privacy legislation this fall.

Boucher led hearings on the subject this summer, and there might be more, especially as Web companies garner a lot of personal information from consumers with little oversight of what they do with those data.

If Boucher does call for hearings, he might want to replay this particularly boneheaded (but funny!) video from Yahoo’s U.K. ad staff, which classifies various Yahoo customer types–such as “disco-dancing heart surgeons from Nantwich”–as farm animals:

Please see this disclosure related to me and Google.

Yahoo is set to unveil a major marketing campaign to reset advertiser and consumer perception of the long-troubled company during Advertising Week in New York, which starts a week from tomorrow.

According to numerous sources BoomTown has spoken to about the campaign, Yahoo (YHOO) is–at least with advertisers–going to focus on stressing the size and scale of the Internet giant.

The details of the plan will be made public Tuesday, Sept. 22, at a press conference.

It will take place immediately after a keynote speech–titled “Yahoo’s Consumer Revolution…Round II”–that the company’s new CMO, Elisa Steele, is set to deliver on the second day of the Interactive Advertising Bureau’s MIXX conference.

MIXX is a two-day event, run by IAB, focused specifically on online advertising.

Yahoo CEO Carol Bartz is also going to be attending Advertising Week–during which all the major players in the advertising business gather in Manhattan for a series of events–for a plethora of meetings with big Yahoo clients.

It is likely she and several other senior Yahoo execs will be at the press conference, sources said.

That press event will also include Penny Baldwin, a well-known industry exec Yahoo hired as its SVP of global integrated marketing and brand management in July.

The main message Bartz is set to deliver is that Yahoo is a powerhouse unlike any others on the Web when it comes to online display advertising.

And, in fact, Yahoo–despite all the internal and external turmoil it has undergone in recent years–remains one of the largest sites on the Internet, and is the top player in what is also called graphical advertising, as well as online media and communications.

“The whole push seems to be to remind people of vibrancy of the brand and exactly how huge its reach is,” said one person who has seen parts of the presentation. “It is less Yahoo is back than Yahoo has never left.”

Sources also noted that Yahoo is likely to stick to its plan to push the idea of “your home on the Web” to consumers, which I had previously posted about earlier this summer.

The idea of the Silicon Valley icon being the key hub destination for Internet users does dovetail with pushing its size to advertisers–major marketing messages that will also likely cost a pretty penny.

They will have to–Microsoft (MSFT) has been in the midst of a $100 million campaign for its new Bing search site and will likely spend more when it unveils updates to the service, dubbed Bing 2.0–within the next few weeks.

The company showed the changes it showed to its own employees last week, which was the subject of much tweeting on Twitter.

Yahoo will apparently give more specifics as to the spend for the marketing push at the press conference.

But, many sources said, the company is already out in the advertising market now, buying tens of millions of dollars in advertising online and offline to hawk Yahoo in print, on television and elsewhere.

(Full disclosure: Sources said that campaign will include The Wall Street Journal network, which includes this site.)

“It’s dramatic,” said one source about the marketing outlay.

Since she got to Yahoo, Bartz has continually stressed the need to promote Yahoo products and services more, including in an interview last week on CNBC (you can see that longish video here).

And, in the July earnings call for Yahoo, Bartz said: “In addition, we’re hard at work on plans to reposition our most valuable asset: Yahoo’s brand. Our Q3 plans include an initial wave of incremental marketing spend which will increase substantially into Q4 and next year.”

Also, in a Q&A in the same call, she added more about the long-term nature of the spending on branding:

“The branding and our whole campaign of advertising is just starting; however you have to understand that this is an ongoing campaign so it’s not transient at least for the next year or so. We’re really going to move to reposition the Yahoo brand and Yahoo Company, so right now, consider that as cost that’s in the system.”

What Bartz and other Yahoo execs will likely stress less is search, due to the search deal Yahoo struck in July with Microsoft in which the software giant will take over the back-end technology and Yahoo will sell search ads for both companies.

The company will compete with both Microsoft and Google (GOOG) in garnering the search market still, once the partnership is approved by regulators, with Yahoo focusing on differentiating itself via innovative user interface, design, features and functionality.

If there’s an earnings call at Yahoo, you know BoomTown is going to liveblog it!

Will Yahoo (YHOO) CEO Carol Bartz say something naughty? (Nope!) What is new CFO Tim Morse like? (Nice!) Will they say anything about the talks with Microsoft (MSFT) about a search and online advertising partnership? (No!)

Oh, it might be a corker!

The earnings results for the second quarter certainly were not.

As I wrote in a previous post:

Yahoo reported so-so second-quarter earnings results today, with a decline in revenues, but with a slightly stronger-than-expected improvement in net income.

For the three months ended June 30, the Internet giant said it had revenues of $1.14 billion, excluding traffic acquisition costs, down from $1.35 billion in the same period a year ago.

That profit was up eight percent, due to cost-cutting. Yahoo said it earned $141.4 million, or 10 cents a share, in the quarter, compared to $131.2 million, or nine cents.

That’s not really saying much, since Wall Street analysts had such low expectations, estimating Yahoo would earn eight cents. But, with a weak advertising market, it is also not that bad.”

Here’s the conference call, updated as it happened:

2:02 pm PST: Music followed by investor relations lady, who had a very nice voice.

She was quick and to the point, and soon enough Bartz was on.

First, she welcomed Morse as CFO, noting he was strong in “efficiency and process.”

Then she pointed out that the new home page for Yahoo–pictured here and you can read about it here–was “available…starting…today.”

Bartz dragged out the words, with a small dramatic flourish.

Then, it was right to the results, which Bartz was bullish on: “Considering the economy, I am pleased with the results.”

Bartz noted that “overall, we are seeing less fear in the marketplace,” although she added that she had no idea when the econalypse would be over.

“It’s easy to see it bumping along the bottom, but it’s too early to call…so, we’ll leave economic predictions to others,” she said.

She moved onto her being happy about all the new execs she had hired, noting that Yahoo was “closing in” on picking an international head (note to myself, get a Yahoo to leak the news to me asap).

2:07 PST: Morse (pictured here) came on and introduced himself. He looks like a CFO and also sounded like one too–calm, cool and collected, as it should be.

After a short talk about his background, he moved onto all the particulars of the quarter–results that had already been released, but Morse repeated them with verve.

I try to listen carefully in these explanations, but I confess that I actually don’t, unless something new happens. It didn’t.

Then Morse was looking forward, including talking some more about marketing spend coming up, as well as explaining what kind of CFO he was going to be.

2:18 PST: Back to Bartz, who started talking about well the long-troubled Silicon Valley icon was doing, even in the weak economy.

She kept calling Yahoo the “world’s biggest Internet media company,” and then said that Yahoo was an “Internet kingmaker” for other Web sites.

Well, it’s kind of true on both counts, so we’ll overlook the bragging.

Bartz then quickly moved through all the various arenas at Yahoo–from advertising to the home page to mobile–where Yahoo was trying to improve and increase its business.

She apparently is aiming to make online ads less annoying–if successful, I propose that Bartz should be awarded some medal of honor.

“We have a clear simple vision to be the center of people lives online,” said Bartz in conclusion, throwing in “kingmaker” again. “At the end of the day, we know who we are and know what we need to do to win.”

2:33 pm PST: Question time!

The first was about what Bartz thinks about Bing, the new Microsoft search engine, because it might take a while for these Wall Street analysts–reporters don’t get to ask questions–to screw up the courage to ask her outright about any Microsoft deal.

Bartz was unusually cordial, which is how someone about to be hitched needs to be.

“I think Bing is a good product…I think Microsoft should be given kudos for Bing,” she said. Hmmmm….

The next question was about the intent of Yahoo to invest in search, as opposed to display advertising. Another veiled Microsoft search deal question.

Bartz noted that Yahoo was investing in the user. Nice way not to answer the question!

2:38 pm PST: A question about spending and if there was going to be more.

Bartz noted that Yahoo was restructuring costs, rather than cutting and burning. She noted, for example, that more marketing spend was part of the plan.

Morse used a bucket analogy, and talked about draining costs back and forth, which was apt.

The next question was about advertising revenues, and whether they would grow. Also, more questions about costs.

Morse noted good strength in a lot of areas in the premium sector. As to cost structure: “We’re repositioning the business.”

2:48 pm PST:

Another cost question. I am officially ignoring it.

The next question was about how Yahoo was going to keep fixing APT, its newest advertising platform, which some think is too hard to use.

Bartz, who has insulted it in the past, was now kind of nice about it, noting that they were working on making it better.

A question about owned-and-operated search and its relationship with Yahoo’s affiliate search, which had been stronger. Not a trend, said Bartz flatly.

More about search and whether scale matters in search (another sneaky way to ask about Microsoft). “Of course scale matters,” said Bartz, who joked she would be happy to switch share positions with Google (GOOG).

A question about the new home page and its monetization and why it was announced today, as opposed to the fall, as planned.

Bartz did not really explain why or about revenue, but she sounded good.

The last question was about improvements in search share and monetization (translation: I want to ask about Microsoft, but I am too much of a wimp).

Bartz talked about better targeting, improved experience, driving relevancy and the prominent position of search on the front page. That will lead to more money, she noted.

Again, it’s not exactly an answer, but it sounded good.

Then it was over, although Bartz ended by urging everyone to “go look at the new home page.”

In BoomTown’s bold quest to annoyingly stick a Flip digital video camera in the face of every Yahoo senior exec, this week I worked the last nerve of its CTO and EVP of Products, Aristotle “Ari” Balogh.

Actually, the 45-year-old Balogh is a very calm and pleasant man, especially considering the huge responsibility that has been foisted on him by CEO Carol Bartz to rejigger how Yahoo (YHOO) makes its products and services and deploy its technology in a more efficient, centralized and most of all, innovative manner.

It is actually a process that was started under the previous leadership, especially President Sue Decker.

But now, after a number of reorgs, a wide swath of Yahoo is under Balogh’s purview–from search to open initiatives to product development to trying to fix Yahoo’s big problem of never quite getting its innovations out the door.

To explain all this, Balogh sat down with me twice–he is clearly a glutton for punishment–to talk about where Yahoo stood as it sought to dig itself out of its long slump and reemerge as the potent Internet force it once was.

While he successfully avoided the questions about Yahoo’s talks to do a search and advertising partnership with Microsoft (MSFT), he did talk about his view of its new Bing search service (well done, but can it scale?–which is an engineer’s favorite schoolyard taunt).

He also addressed the bigger question of how Yahoo can stay relevant in the fast-changing Web 2.0 world.

To Balogh, copying trendsetters like Facebook is not the answer. For example, he noted that Yahoo is more a place where consumers do “one-way” follows of things important in their lives rather than wanting another social-network service (which Yahoo has tried and failed at, actually).

“We’re not going to be another social network,” said Balogh flatly, agreeing that that boat has already long sailed without Yahoo on it with a significant product–Yahoo famously failed to buy Facebook, well before Balogh arrived in early 2008 from VeriSign (VRSN). “But we can be a place where people make and manage the important connections they have.”

How this will all play out is one of the most interesting questions in Silicon Valley because–even after all the turmoil–Yahoo remains one of the largest sites on the Web.

About 500 million monthly unique visitors enter its homepage and course through its vast site constantly, from its search pages to its massive email and instant-messaging services and its popular suite of content sites.

No one says Yahoo is not big–what everyone says is that it has missed many major and critical Internet trends as it has become mired in a management morass and external battles.

Now, with new leadership in place, observers are waiting to see what’s next.

In this regard, it is important what Balogh thinks since he is perhaps Yahoo’s only person who even closely resembles a Web product visionary now that former CEO and co-founder Jerry Yang has stepped aside and Bartz has taken up command.

While he typically shies away from the spotlight, he is not bashful about talking about Yahoo’s infamous lugubrious development process.

“We have pockets of great technology that we have to really put back together into a coherent infrastructure,” said Balogh. “We have to get the basics right and focus on those core daily experiences that make Yahoo extraordinary.”

That is easier said than done, especially when changes impact so many consumers and, of course, the bottom line. Choosing what key trends to attack is harder for a large public company like Yahoo, which has a lot to protect in its current businesses.

“There will always be a battle between new ideas and monetization,” said Balogh. “The question is how much do you push that line back and forth?”

That fine line will surely be tested with the rollout of its new homepage in the fall, a long project that has been codenamed “Metro.”

“It is not a radical departure, but we have given users more power to do what they want and also serve as the best of Web versus that is already inside of Yahoo,” said Balogh of the new homepage. “With technology, it is always a push-pull.”

Here’s my video interview with him, talking about all this and more: