Quoting from the post:

“…The company has been testing the new sales product with a number of partners, including BlogTalkRadio, BlogCritics, BlogCatalog, BlogTV, Technabob, GPSMagazine, GeekAlerts and NerdApproved. CEO Richard Jalichandra says these blogs reach a combined audience of approximately 17 million unique monthly visitors. Early advertisers on the network include Honda, Acura, Toyota, t-mobile, Adobe, HP, Sandisk, MSFT, Verizon, Sun, Sony, Visa, Nike, Scion, Chevrolet, Paramount, Universal Pictures, 20th Century Fox and Best Buy.

Technorati has explored selling ads for third party sites for some time, but this is the first time they’ve opened the service up to anyone. Unlike Glam and Federated Media, they will take all comers, and say they expect blogs, from the large players on down through the long tail, will find they do a better job monetizing sites than the current options.

Ads are sold on a CPM basis. They will not make revenue guarantees, says Jalichandra, but the split between parties is negotiable. He declined to state what rates have been negotiated with beta partners. This is similar to what Six Apart promises, which is also targeting the long tail of blogs.

Jalichandra also says Technorati is uniquely positioned to sell ads at premium rates, even through small blogs, because they will be able to use descriptive tags/keywords, along with their existing blog indexing technology, to better match ads with content…”

It is heartening to read about the inventory that they are expected to carry, and the higher CPM that they will manage to generate, hopefully.

Microsoft has tried almost everything to get more people to pick its search site over Google, without much luck. So maybe a little cash will do the trick.

A screenshot of the Live Search cashback site.

That is the idea behind a new Microsoft program that will return money to online users who find and buy selected products through its Live Search engine. It’s an unusual move that illustrates the lengths to which the Redmond company is willing to go in its struggle to gain ground on the Internet search king.

Microsoft’s “Live Search cashback” site, set to be unveiled Wednesday, promises to pay back a portion of the purchase price — ranging from about 2 percent to more than 30 percent — to people who use it to find designated products and buy them online from participating retailers.

The company has signed up a long list of merchants to participate in the program - including the online sites of large retailers such as Barnes & Noble, Sears, Home Depot, J&R Electronics, Office Depot and others.

The company is expected to unveil the Live Search cashback program at a conference in Redmond where Bill Gates will be speaking to online advertisers. Microsoft last weekend said there would be a major search announcement but declined to provide specifics. A Microsoft spokesman declined to comment Tuesday evening.

However, the Seattle P-I discovered an informational portion of the Live Search cashback online site — spelling out the new program in detail — that was publicly accessible as of Tuesday.

One snippet on the site also makes reference to moving a user’s “cashback and payment service from Jellyfish to Live Search.” Jellyfish Group is a U.K.-based search advertising firm that specializes in a type of payment model for advertisers that is similar to the one the new Microsoft service will use.

The nature of Jellyfish’s involvement in the initiative wasn’t clear as of Tuesday evening. Microsoft has been making a series of acquisitions in an effort to bolster its online efforts.

A list of frequently asked questions on the Microsoft site includes one that many potential users will no doubt ask: “Why are you paying me cashback?”

Answer: “We want to earn your loyalty and reward it with cashback savings for your everyday online shopping. We are ‘The Search That Pays You Back’!”

Cashback programs have been tried by smaller search engines, with mixed results. Because of Microsoft’s big online presence, its new initiative could get lots of attention in the industry and among consumers.

“Assuming that the rebate amounts are enough to be appealing to people, which it sounds like they are, that definitely could attract a fair number of consumers,” said industry analyst Van Baker, a Gartner Inc. research vice president, when the site was described to him. “But what they may do is just go to that site when they’re thinking about buying something, and use Google the rest of the time.”

It’s not clear how much money Microsoft has allocated to the cashback program, or how long it is scheduled to last.

Read full story

NEW YORK - Microsoft Corp., the software maker that scrapped a $47.5 billion bid for Yahoo! Inc. this month, may forge a partnership with the Internet company in the search-advertising market to challenge Google Inc. Microsoft, which abandoned its takeover attempts May 3, said Sunday that it’s exploring a transaction with Yahoo and may renew attempts to buy the entire company. The two may combine units that sell ads that run next to Internet search results, said Morningstar Inc. analyst Toan Tran. Billionaire investor Carl Icahn is pressuring Yahoo to ally itself with Microsoft to compete with Google, which dominates the Internet search market. Icahn, backed by investors such as hedge-fund manager John Paulson, plans to oust Yahoo’s board if Chief Executive Officer Jerry Yang fails to sell to Microsoft. ‘Carl Icahn is in this to make a quick buck, so whatever helps him make money he’ll be happy with,’ said Tran, who is based in Chicago and doesn’t own shares of either company. ‘What Carl Icahn definitely wants is an outright sale of Yahoo to Microsoft at some price higher than what it is now.’ Microsoft has offered to buy Yahoo’s search unit and take a minority stake in the company after Yahoo gets rid of its holdings in Asia, Reuters reported Monday, citing a person familiar with the talks. Microsoft spokesman Frank Shaw declined to confirm or deny the report, while Yahoo spokeswoman Diana Wong declined to comment. Microsoft, based in Redmond, Washington, fell 53 cents to close at $29.46 in Nasdaq Stock Market trading. Sunnyvale, California-based Yahoo rose 2 cents to $27.68, while Google dropped $2.55 to $577.52. The new talks may bring Microsoft closer to a full acquisition of Yahoo, said Mark May, an analyst at Needham & Co. in New York. On Monday, he changed his recommendation on Yahoo’s stock to buy. He had advised clients to hold on to the shares since April 2007. ‘Microsoft sees an opportunity where their negotiating position has improved,’ May said. ‘They clearly have some very large shareholders on their side now and they realize that they can make some moves.’ Icahn, 72, owns 10 million shares and options to purchase 49 million more. He proposed a slate of board nominees last week including Dallas Mavericks owner Mark Cuban and former Viacom Inc. CEO Frank Biondi Jr. Icahn didn’t return phone messages. Paulson said last week that he would back Icahn’s slate and that he was disappointed Yahoo didn’t reach a deal with Microsoft. Paulson & Co. owned 50 million shares of Yahoo as of March. All 10 of Yahoo’s directors are up for re-election at the annual meeting July 3. Yahoo and Microsoft trail Mountain View, Calif.-based Google in Internet search traffic. Together they account for about a third of total Internet searches in the U.S., or about half of the share Google has, according to research firm ComScore Inc. Google CEO Eric Schmidt and co-founders Larry Page and Sergey Brin are meeting in Britain to discuss Google’s response to the Microsoft talks with Yahoo, according to a British Broadcasting Corp. report. They were traveling to attend an event for the company’s European operations, the BBC said. Google didn’t respond to an e-mail. With reporting by Crayton Harrison in Dallas.

Superpages.com Network and CareerBuilder both jumped eight spots in the ranking to positions 18 and 30, respectively.

Content categories showing gains in April included job search, career resources, and television sites.

The top-gaining categories in April were Pharmacies and Retail-Food, both up 8 per cent from March.

According to comScore, Google’s unique U.S. audience in April was up 18 percent from the same month in 2007, while Yahoo’s audience grew 7 percent.

However, according to the Associated Press, Yahoo still leads in page views, meaning visitors spend more time there or return more often. Many Google users make a simple search request and quickly go elsewhere based on the results. Yahoo had 33.6 billion page views to Google’s 28.7 billion.

Why this flurry of activity in opening up APIs for 3rd party apps? All these initiatives will allow securely sending personal profile data, including friend lists, presence/status information, etc., to third party applications. The primary benefit of these services is to allow users to maintain a single friends list and to coordinate social activities across different sites that perform different services.

“The reason these companies are are rushing to get products out the door is because whoever is a player in this space is likely to control user data over the long run. If users don’t have to put profile and friend information into multiple sites, they will gravitate towards one site that they identify with, and then allow other sites to access that data. The desire to own user identities over the long run is also causing the big Internet companies, in my opinion, to rush to become OpenID issuers (but not relying parties).”

While the motivations are good (I don’t need to sign up everytime I visit a new website), there are bound to be privacy issues. Wait for one 3rd party to mess it up, willingly or unwillingly.

And the biggest gain for Google? They would now be able to target ads on individual profile level. Is that good? I am not too sure how much info I’d like to share with anyone, be it Google, Facebook, Myspace, Yahoo, Twitter…

Let’s wait and see.

Chief Executive Steve Ballmer told employees in a company assembly Thursday that he knows how much he’d spend to buy Yahoo and accelerate his company’s Internet play.

“We’re willing to pay for that at some level, and beyond that level we’re not willing to pay for it. I know exactly what I think Yahoo is worth to me,” the executive said. “I won’t go a dime above, and I will go to what I think it’s worth if that gets the deal done.”

But he didn’t offer a figure, and he didn’t say whether Microsoft is considering raising its unsolicited bid, worth $44.6 billion at the time it was made in early February.

The offer is currently worth about $42.4 billion, or $29.48 per share, based on Microsoft Corp.’s closing stock price Thursday. Yahoo Inc. has rejected the offer, saying it undervalues the company. Microsoft’s board has been considering whether to raise the bid to as much as $33 per share, according to The Wall Street Journal.

Ballmer didn’t provide any new insight into the company’s efforts to buy the Silicon Valley pioneer during the meeting at Microsoft’s Redmond, Wash., headquarters, but he did indicate that an end to months of speculation was near.

“We ought to announce something in relatively short order,” Ballmer told employees.

His comments were first reported by Silicon Alley Insider, an online technology news site, and confirmed by a Microsoft spokesman.

Ballmer added that buying Yahoo is just one of many moving parts in the software maker’s strategy to compete with Google Inc. in search and Web advertising, and that if neither a friendly nor a hostile deal “look good,” he’s willing to walk away.

Microsoft’s board met Wednesday but reached no decision on a next step, the Journal reported. The software maker had given Yahoo until last weekend to agree to a deal or face the prospect of an ugly proxy fight.

Meanwhile, Yahoo is exploring a possible advertising partnership with Internet search leader Google Inc. or a merger with the online operations of Time Warner Inc.’s AOL as possible defenses if Microsoft tries a hostile takeover.

Impressed by a two-week test completed last month, Yahoo could firm up a long-term deal within a week, according to the Journal. Any alliance between Yahoo and Google would face intense antitrust scrutiny, however, because the two companies control more than 80 percent of the U.S. market for search advertising.

Yahoo and Google hope to allay those concerns by structuring their deal so their rivals, including Microsoft, could participate in an auction-based system, the Journal said.

Most Wall Street analysts believe Microsoft now faces a drawn-out proxy campaign to win its unsolicited takeover of Yahoo!, according to the poll.

By contrast, the general view in February when Microsoft announced its offer was that Yahoo! would agree to a friendly merger if Microsoft only sweetened its bid. By mid-March a Reuters poll showed that Wall Street expected Microsoft to buy Yahoo! without raising its price.

Microsoft last week repeated chief executive Steve Ballmer’s three-week-old threat that his company will go hostile, or even call off its bid, if Yahoo! did not agree to a deal before this weekend. Microsoft executives said they will reveal their next move this week.

“I’m betting that Ballmer is bluffing with his ‘walk away’ comments and that he’s going hostile,” said Jefferies & Co analyst Youssef Squali, who believes Microsoft will stick with its current $31-per-share offer.

Nineteen brokerages now say they expect Microsoft in coming days to move forward with a hostile bid after being frustrated in a three-month effort to entice Yahoo! to reach a negotiated deal, the survey reveals.

Due to a drop in Microsoft stock, it is now worth $42.7 billion.

Another three Wall Street houses see Microsoft walking away rather than raising its offer. Many Microsoft shareholders fear a higher-priced deal would dilute the value of their shares and have an uncertain payback. Were Microsoft to walk away, Garrity estimates Yahoo!’s stock could drop around 14 per cent to $23 a share, while Microsoft’s stock might jump about 17 per cent to $35 a share.

Fourteen brokerages say they expect Microsoft to begin a campaign to unseat Yahoo!’s board and encourage the company’s shareholders to accept its current $31 bid. Another five brokerages expect Microsoft going hostile at a lower price.

To counter Microsoft, Yahoo! has held talks with Time Warner Inc on a deal to merge Yahoo! with Time Warner’s AOL unit in return for Time Warner taking a stake in Yahoo!, several sources familiar with the negotiations said earlier this month.

A Yahoo!-AOL tie-up would be part of a three-way deal in which Yahoo! may partner with rival Google Inc. to use Google’s advertising system to sell ads alongside Web search results Yahoo! serves up to its users, these sources said.

Yahoo! executives told investors on a quarterly conference call last week it was “premature” to discuss whether a trial run of the Google ad partnership will lead to a deal between the two companies, but declined to comment on progress Yahoo! is making on a deal with AOL or other alternatives to Microsoft.

AOL’s Internet media and advertising assets represent the closest thing to Yahoo! and would significantly enhance Microsoft’s Web audience, he said. Microsoft has reportedly talked with News Corp, owners of the MySpace social network, about a joint bid for Yahoo!, but Moran believes MySpace is less promising than Facebook, albeit one that is unlikely to sell at a price Microsoft would be ready to pay.

The Reuters poll drew responses from 17 Microsoft analysts and 15 Yahoo! analysts from 25 different Wall Street brokerages. It was conducted on Friday, a day before Microsoft’s three-week-old deadline expired for Yahoo! to reach a deal.

What will happen if Microsoft adopts a full hostile takeover strategy. There is a superb analysis done at pmrca.

The possible scenarios from here, in roughly decreasing order of probability, include:

• Hostile Takeover: Microsoft moves forward with a full-fledged hostile takeover — trying to replace Yahoo’s board and/or taking its offer directly to Yahoo’s shareholders.
• Higher Offer: Microsoft raises its offer or otherwise modifies its offer terms to make them more attractive — for example, Microsoft could shift to an all-cash offer — in an attempt to make the deal happen without going fully hostile.
• Walk Away: Microsoft drops its offer and walks away; Yahoo’s stock drops to its pre-offer level of $19.18, give or take. Lots of moves and countermoves could follow: Microsoft could come back later with a lower or higher offer; Yahoo could cut a Google advertising deal to boost its revenue and margins and make itself harder to buy; Microsoft could take its $44 billion and go buy virtually every new Internet company of any consequence founded in the last 10 years; etc.
• Yahoo Caves: Yahoo’s board caves and accepts the current Microsoft offer.
• White Knight: Another bidder enters and offers Yahoo a higher price.

Let’s assume the Hostile Takeover scenario, which seems to me to be the most likely given Microsoft’s strategy and explicit public statements. What happens then?

There are two primary hostile takeover tactics:

• A tender offer, which we can equivalently call an exchange offer since the offer includes Microsoft stock that would be exchanged for Yahoo stock. This would be an offer by Microsoft to acquire Yahoo shares from existing Yahoo shareholders directly. Note that this hasn’t happened yet; Microsoft’s offer up until now has been made to Yahoo the company — in a tender offer, the offer would be made directly to Yahoo’s shareholders.
• A proxy fight by Microsoft to take control of Yahoo’s board of directors — to put in place a new Yahoo board that would accept Microsoft’s current offer.

These two tactics could be used alone or in tandem.

In the case of a tender offer: if shareholders owning more than 50% of Yahoo’s shares agree to the offer, Microsoft gains control of Yahoo directly.

(Actually, Microsoft probably wouldn’t need to own a full 50% of Yahoo’s shares — it could own, say, 40% and then have effective control, because only one-sixth of Yahoo’s remaining shareholders would have to vote with Microsoft on any issue in order for Microsoft to exercise control.)

Yahoo’s best defense against a tender offer is its poison pill. The poison pill works like this: if Microsoft acquires more than 15% of Yahoo without Yahoo board approval, the poison pill kicks in and issues a flood of new Yahoo stock into the market in such a way that Yahoo becomes much more difficult and expensive to buy. Poison pills have been used as defensive mechanisms by public companies against hostile takeovers for years, and the dilution they cause is so huge that no poison pill of this type has ever been triggered.

Rather than trigger the poison pill, Microsoft would most likely condition its tender offer on Yahoo’s board cancelling its poison pill. If the Yahoo board refused to cancel the poison pill, Microsoft could sue in a Delaware court to force a cancellation of the pill. (Any and all litigation to force Yahoo to come to terms will be in Delaware, since that is where Yahoo is incorporated.)

Delaware courts give some deference to target boards in resisting hostile takeovers, especially in the early stages of a takeover fight, but in many cases the courts have been unwilling to allow targets to “just say no” in the face of a well-financed offer at a significant premium — which is the situation Yahoo is facing. It’s impossible to predict what a court will do, but Delaware courts are more likely to force a poison pill to be cancelled when a target board has had plenty of time to drum up alternatives to the hostile offer, and where the hostile offer is well-financed and represents a significant premium to the company. This gets even more likely if the bidder has raised its price during the process, which hasn’t happened here — yet.

In the case of a proxy fight, which Microsoft has overtly threatened: Microsoft would nominate an alternate slate of directors for election to the Yahoo board in place of the current directors. If Yahoo shareholders favor the Microsoft bid, they can vote for Microsoft’s alternate directors, who — if elected to Yahoo’s board — would approve the Microsoft bid.

A proxy fight may have special appeal for Microsoft for a couple of reasons.

First, it could work in one fell swoop.

Many public companies have a “staggered” board, where some directors are up for election or reelection each year, but the entire board is never up for reelection in a single year.

Yahoo, however, has its entire board standing for reelection each year.

In retrospect, this was not a good idea — whoever set this up at Yahoo made a serious mistake. In a proxy fight with a staggered board, target management can lose a proxy fight and still control two-thirds of the board. In Yahoo’s case, if Microsoft wins one proxy fight, it takes out the entire Yahoo board.

It would be practically impossible for Yahoo to change to a staggered board now — in fact, trying to do so would immediately give Microsoft its opportunity to nominate its slate of directors.

Second, Yahoo can’t block a proxy fight via a poison pill or any other mechanism. They can delay it — a bit — but they cannot block it.

Microsoft gets control of Yahoo if it puts up a slate of directors for election and they win at Yahoo’s 2008 annual meeting. All that is needed for Microsoft’s slate to win is to get more votes at the meeting than Yahoo’s incumbent directors. Since not all Yahoo shareholders will bother to vote, Microsoft doesn’t need a majority of all shares to win — it just needs more votes.

As it turns out, Microsoft has leaked to the press the fact that it has already assembled a slate of directors who have agreed to run against Yahoo’s board in the event Microsoft moves forward with a proxy fight. The Microsoft slate includes several former CEO’s, COO’s, and CFO’s — individuals certainly qualified to sit on a corporate board.

If Microsoft wins the proxy fight, then its acquisition of Yahoo is probably a foregone conclusion. Microsoft’s slate of directors would be expected to vote to cancel the Yahoo poison pill, allowing Microsoft to make its tender offer for Yahoo’s shares. However, the new Microsoft-installed board would still have to exercise its fiduciary duties and carefully assess whether the Microsoft offer is in the best interests of Yahoo shareholders — if the new board acted rashly to rubber-stamp the Microsoft takeover, it could theoretically be sued by pro-Yahoo shareholders, although that lawsuit would be an uphill battle. Further, Yahoo’s poison pill would throw some procedural hurdles Microsoft’s way: the pill says that for a 180-day period following a successful hostile proxy fight, the new board can only cancel the pill if it follows certain procedures, including getting an independent financial advisor to opine that cancelling the pill is in the shareholder’s best interests. All this would do is slow down Microsoft’s takeover — it would still happen.

Yahoo has taken other steps to respond to Microsoft’s unwanted advances.

In February, Yahoo adopted a takeover-related compensation plan covering every full-time employee. The plan would issue large cash payments and 100% accelerated stock option vesting to Yahoo employees who are terminated “without cause” or who quit “for good reason” in the two years following a takeover. The devil is in the details — if the definitions of “cause” and “good reason” are broad enough, the plan could give Yahoo’s entire employee base easy access to 100% option acceleration and large severance cash payments after a takeover. The plan has the effect of making a takeover of Yahoo more expensive — and Microsoft has responded by saying it might lower its offer price as a result.

Yahoo has also bought time by amending its bylaws to delay the deadline for making board nominations for this year’s board election, and could buy additional time by delaying the date of its 2008 annual shareholder meeting.

Previously, Yahoo board nominations had to be made by March 14. While searching for an alternate bidder, Yahoo did not want to face a proxy fight starting in March, so it amended its bylaws to require board nominations to be made within a 10 day window after Yahoo announces the date for its 2008 annual shareholder meeting.

Yahoo has not yet announced the date for its 2008 annual meeting. However, under Delaware law, Yahoo has to have its annual meeting by July 12 — the 13-month anniversary of its last annual meeting — or Microsoft can sue to force a prompt annual meeting. Microsoft would almost certainly win that lawsuit, and the court would probably force a meeting within 60 to 90 days. So Yahoo can at least delay its annual meeting and therefore the board election process until July, and perhaps as late as October if it is willing to force Microsoft to sue to schedule a meeting.

So this may yet come to remind you of the Democratic presidential primary season — it may last a while.

You should read the full story at pmrca.

This is also being discussed here: Microsoft Watch, Financial Times, Between the Lines, Scobleizer, TechCrunch, Tech Check with Jim Goldman, TECH.BLORGE.com, Tech Trader Daily, GMSV, Hacking Cough, Valleywag, mathewingram.com/work, rexblog.com, Marc’s Voice, franticindustries, Search Engine Land, Tech Ticker, MediaFile, WebProNews, Digital Daily, WebProBlog, Mashable!

“We are taking open to a whole other place,” Balogh said. “We are rewiring Yahoo from the inside out with a developer platform that will open up the assets of Yahoo in a way never done before, making the consumer experience social throughout and provide hooks to developers.” He noted that Yahoo has 10 billion latent connections across its properties, such as mail, messenger and fantasy sports.

Balogh discussed the technical architecture–known as YOS, or Yahoo Open Strategy–including an application platform that will allow developers to create apps for consumers to keep their data protected and to chose what data to share and with whom. In addition, Yahoo will unify all profiles for users and developers, which will allow the company to leverage the 10 billion relations and 500 million users to create the social graph of relationships and to manage the event stream.

“We are not creating another social network. We will rewire the entire experience to make it social. We don’t think of social as a destination but as a dimension,” Balogh said. Along with Google and MySpace, Yahoo is a member of the OpenSocial Foundation, which is developing a specification for building social applications.

The underpinnings of Yahoo’s effort include development tools, an application platform, a social platform that unifies all profiles throughout Yahoo (again, like Facebook or MySpace, this is a social graph that lets users make connections and view events) and the total rewiring of properties to make all this possible.

Yahoo’s new architecture, called YOS (Yahoo Open Strategy) proves that the Internet is made of tubes (Source: Yahoo)

The heady plans are smart but, quite likely, come too late.

For the last two-plus months, Google, Microsoft, Yahoo, and others have been in a slow dance as everyone tries to get what they want out of the MicroHoo deal. Google wants to keep the two firms apart. Microsoft wants to acquire Yahoo. Poor Yahoo just wants to be left alone, it likes dancing by itself. In the last few days, things have become more interesting, with AOL, and News Corp. joining the dance. Fivesomes rarely work out, though. Someone is going to come away from this dance empty-handed and disappointed.

If Eric Schmidt has anything to do with it, it ain’t gonna be Google.

The New York Times is reporting that Schmidt has turned to his old crony, Quattrone, for help. He has hired Quattrone’s new law firm, the Qatalyst Group, to provide legal counsel and help it strategize the movements of this dance. Schmidt and Quattrone have worked together in the past. Quattrone was one of the first investment bankers to consult with Google when it was but a lowly startup in the late 1990s. Further, Schmidt was party to the creation of Quattrone’s new firm.

Quattrone, of course, was beset by the U.S. legal system for years on obstruction of justice charges. After two trials, Uncle Sam gave up on one of the charges, and he was cleared of another conviction when the presiding judge misinformed the jury about how to interpret the law. Technically, he’s not a criminal. Are his hands clean? Who is to say.

Whatever happened in Quattrone’s past, he’s obviously looking to recapture the former glory of a life lived in the business spotlight. As the impact of this acquisition will reverberate around the Internet for years to come, any role he might play is sure to affect us all.

Yahoo would gain control of AOL, receive an investment from Time Warner, and give up a 20 percent stake in the combined entity, said the person, who asked not to be identified because the talks aren’t public. The investment would let Yahoo buy back billions of dollars of its own stock, the person said.

A linkup may increase pressure on Microsoft to raise its $31-a-share bid, rejected by Yahoo in February as too low. Yahoo said today it will test Google Inc.’s advertising technology, which may boost sales from links that appear next to Web search results. Last week, Microsoft threatened a proxy fight to take control of Yahoo’s board if no agreement is reached.

“They’re delay tactics,” Laura Martin, an analyst at New York-based Soleil Securities Corp., said of Yahoo’s actions. She rates Yahoo shares “hold” and doesn’t own any. “They’re just going to irritate Microsoft and accelerate a proxy fight.”

Diana Wong, a spokeswoman for Sunnyvale, California-based Yahoo, didn’t immediately return a call for comment. Time Warner spokesman Ed Adler declined to comment.

Alternatives

The talks with AOL and Google, owner of the most-used Internet search engine, indicate that Yahoo Chief Executive Officer Jerry Yang is making progress with discussions two months after telling investors that the company is seeking alternatives to Microsoft’s bid. Microsoft’s offer was 62 percent higher than Yahoo’s closing price the previous day.

Yahoo, owner of the most-visited U.S. Web site, rose 7 cents to $27.77 at 4 p.m. New York time on the Nasdaq Stock Market. After jumping 48 percent on Feb. 1, the day after Microsoft’s bid, the stock has declined 2.1 percent.

Time Warner, the world’s largest media company, fell 30 cents to $14.43 in New York Stock Exchange composite trading. Shares of the New York-based have declined 13 percent this year.

Separately, the New York Times reported that News Corp. is in talks to join Microsoft’s bid for Yahoo, citing people involved in the discussions. The deal would combine Yahoo, Microsoft’s MSN and News Corp.’s MySpace, the newspaper said.

Microsoft spokesman Frank Shaw didn’t immediately return a call seeking comment. Teri Everett, a spokeswoman for New York- based News Corp., said the company doesn’t comment on “speculation.”

Challenging Google

Microsoft, the world’s largest software maker, is pursuing Yahoo to challenge Google’s dominance of the $41 billion online ad market. Yahoo responded to Microsoft’s threat of a proxy fight by insisting on a higher price before an acquisition can take place.

A combination with AOL would bring together the second and fourth most-used Internet search engines in the U.S. Google is the most-popular, attracting 59.2 percent of queries in February, according to Reston, Virginia-based researcher ComScore Inc. Yahoo had 21.6 percent, followed by Microsoft with 9.6 percent and AOL with 4.9 percent.

Unable to catch Google in search, Yahoo said today that it’s starting a two-week trial in the U.S. to run its rival’s ads alongside no more than 3 percent of search queries.

Yahoo and Google have been here before. In 2000, Yahoo chose Google as its default search engine, an agreement that lasted until 2003. Yahoo’s then-CEO Terry Semel orchestrated the acquisitions of Inktomi Corp. and Overture Services Inc. to build a new search service.

Yahoo’s Panama

Last year, Yahoo introduced an ad platform, called Panama, designed to make search ads more relevant and more likely to be clicked. In a presentation to investors last month, Yahoo said it had reduced the gap in revenue per search between its own engine and Google’s in the U.S. by 30 percent in the first nine months of 2007. At the end of last year, a difference of 60 percent to 70 percent still exists, the company said.

While a partnership with Google may cut Yahoo’s costs, a deal would face stiff regulatory scrutiny. Senator Herb Kohl, a Wisconsin Democrat, said today that the Senate Judiciary Committee, which he chairs, would examine any formal agreement to “ensure that it does not harm competition.” Microsoft echoed that possibility after the announcement.

“Any definitive agreement between Yahoo and Google would consolidate over 90 percent of the search advertising market in Google’s hands,” Microsoft General Counsel Brad Smith said in a statement. “This would make the market far less competitive, in sharp contrast to our own proposal.”

Source: Bloomberg

Facebook is close to putting an uncomfortable and embarrassing legal episode behind it.

ConnectU founders Tyler Winklevoss, left, and Cameron Winklevoss, right, and Divya Narendra. (Photo: Charles Krupa/Associated Press)

A person briefed on the status of dueling lawsuits between Facebook and the competing site ConnectU said on Sunday that Facebook was finalizing a settlement with the founders of ConnectU — brothers Cameron and Tyler Winklevoss and their colleague, Divya Narendra.

The ConnectU founders were accusing Mark Zuckerberg and the original crew behind Facebook of pilfering their profitable idea back in 2003, when they were all Harvard students. Facebook had filed a countersuit, accusing ConnectU of unfair business practices.

Terms of the settlement were not disclosed. In the meantime, all motions in the case against ConnectU have been terminated.

ConnectU did not immediately respond to an e-mail message requesting comment. A California federal judge had ordered the parties into mediation last year.

The ConnectU founders asserted that they hired Mr. Zuckerberg, then a sophomore at Harvard, in 2003 to help create a campus-wide dating site called Harvard Connection. They say that he stalled on the project for months while nurturing his own idea and ultimately starting TheFacebook.com. The case cast doubts on Mr. Zuckerberg’s ingenuity, and discovery efforts turned up some embarrassing material — like his diary. Facebook clearly needed to make the suit go away before a widely expected initial public offering that could come as early as next year.

A Facebook spokeswoman said the company would not comment on legal matters. But the person briefed on the status of the negotiations said motions to dismiss the cases were expected to be filed “within weeks.”

Source: NYT