Microsoft Targets Adobe in Web-Design Software

As posted by: Wall Street Journal

Adobe Systems Inc. is facing increasing pressure from Microsoft Corp., which is using its deep pockets to challenge Adobe's dominance of Web design software.

Adobe's Flash software, which adds video and animation to Web sites, is at the heart of many popular Internet destinations. Retailers, media outlets and entertainment sites rely on Flash to make their sites interactive and to serve up advertisements.

But Microsoft has recently launched a new version of its competing Silverlight technology and has been aggressively courting the operators of popular Web sites and advertising agencies that are Adobe's core customers.

Netflix Inc. recently said it would use Silverlight to stream movies over the Internet. When CBS Corp.'s college sports group decided to build its Web site using Silverlight earlier this year, Microsoft chipped in free development and support that "reduced our costs tremendously," said Tom Buffolano, the CBS business unit's former chief. A CBS spokesman declined to comment.

Winning the war with Microsoft "is clearly the most important priority," said Adobe Chief Executive Shantanu Narayen.

The economic downturn is adding to Adobe's challenges. The company Tuesday said its net income rose 11% for the quarter ended Nov. 28, but revenue growth stalled. Sales were $915.3 million, little changed from a year ago and below Adobe's original targets. Adobe is forecasting revenue for the current quarter will decline about 5% to 10%. Earlier this month, Adobe said it would cut 600 jobs, or 8% of its work force.

Microsoft sees opportunity in the economic pressures on Adobe. "I'm sure that we will gain ground technologically," said Bob Muglia, senior vice president of the Microsoft unit responsible for Silverlight.

Adobe's Flash player is installed on about 98% of Internet-connected PCs, and Silverlight is only installed on about 25%, according to Adobe and Microsoft. Adobe executives said this gives the smaller company about a two-year head start. But Microsoft is "willing to invest" in order to win certain "trophy sites," said Mr. Muglia.

Earlier this year, for instance, General Electric Co.'s NBC Universal chose Silverlight over Flash to deliver video from Beijing Olympics over the Web. Microsoft was an official sponsor of the Democratic National Convention, which streamed video using Silverlight.

Spokeswomen from Microsoft and Adobe declined to comment on the terms of these deals, as did representatives from the Web sites.

"There's no doubt that Adobe is ahead of Microsoft in terms of features," said Al Hilwa, an analyst at research company IDC. "But winners aren't always picked on merit. Companies strike deals, woo customers, and try to build an ecosystem. Microsoft is very good at that."

Adobe isn't without wins: In November, MLB.com LLC, the Web site for Major League Baseball, switched to Flash from Silverlight for online video of games.

Last year, Web design firm Cynergy Systems Inc. began using Microsoft tools for the first time to build Internet sites. While Cynergy still uses Adobe technology for 80% of the sites it builds, it uses Silverlight for the other 20% and that work is growing more quickly, said Dave Wolf, Cynergy's vice president of sales and marketing.

While millions of software programmers use Microsoft's tools, the company has little traction among Web designers. Adobe said it is counting in part on loyalty from graphic designers to hold Microsoft at bay.

"It's difficult to find designers who know Silverlight," said Scott Stanfield, chief executive of Vertigo Software Inc., which specializes in building sites with Silverlight. "I can't imagine a more hostile community [to Microsoft] than designers," he said, noting his firm's designers still use software from Adobe to sketch plans for sites before building them with Silverlight.

Adobe is also wooing computer programmers, the majority of whom use Microsoft's tools. Navtrak Inc. built the fleet-management software it sells to trucking companies using Adobe's technology after sending some of its programmers to an Adobe-sponsored training session last year, said Todd Hodges, a Navtrak product manager.

In May, Adobe launched the Open Screen Project, a group of 19 companies -- including Nokia Corp., Qualcomm Inc., and Verizon Communications Inc.'s wireless unit -- to attract developers. The project promises developers that they can build software once -- using Adobe's technology -- and have it run on PCs, mobile phones and televisions.

Microsoft issuing emergency fix for browser flaw


REDMOND, Wash. — Microsoft is taking the unusual step of issuing an emergency fix for a security hole in its Internet Explorer software that has exposed millions of users to having their computers taken over by hackers.

The "zero-day" vulnerability, which came to light last week, allows criminals to take over victims' machines simply by steering them to infected Web sites; users don't have to download anything for their computers to get infected, which makes the flaw in Internet Explorer's programming code so dangerous. Internet Explorer is the world's most widely used Web browser.

Microsoft said it plans to ship a security update, rated "critical," for the browser on Wednesday. People with the Windows Update feature activated on their computers will get the patch automatically.

Thousands of Web sites already have been compromised by criminals looking to exploit the flaw. The bad guys have loaded malicious code onto those sites that automatically infect visitors' machines if they're using Internet Explorer and haven't employed a complicated series of workarounds that Microsoft has suggested.

Microsoft said it has seen attacks targeting the flaw only in Internet Explorer 7, the most widely used version, but has cautioned that all other current editions of the browser are vulnerable.

Microsoft rarely issues security fixes for its software outside of its regular monthly updates. The company last did it in October, and a

Here is the full story from Microsoft.

Microsoft has completed the investigation into a public report of this vulnerability. We have issued MS08-078 to address this issue. For more information about this issue, including download links for an available security update, please review MS08-078. The vulnerability addressed is the Pointer Reference Memory Corruption Vulnerability - CVE-2008-4844.

Resources:
You can provide feedback by completing the form by visiting Microsoft Help and Support: Contact Us.

Customers in the United States and Canada can receive technical support from Microsoft Product Support Services. For more information about available support options, see Microsoft Help and Support.

International customers can receive support from their local Microsoft subsidiaries. For more information about how to contact Microsoft for international support issues, visit International Support.

Microsoft TechNet Security provides additional information about security in Microsoft products.

Disclaimer:
The information provided in this advisory is provided "as is" without warranty of any kind. Microsoft disclaims all warranties, either express or implied, including the warranties of merchantability and fitness for a particular purpose. In no event shall Microsoft Corporation or its suppliers be liable for any damages whatsoever including direct, indirect, incidental, consequential, loss of business profits or special damages, even if Microsoft Corporation or its suppliers have been advised of the possibility of such damages. Some states do not allow the exclusion or limitation of liability for consequential or incidental damages so the foregoing limitation may not apply.

Revisions:
December 10, 2008: Advisory published

December 11, 2008: Revised to include Microsoft Internet Explorer 5.01 Service Pack 4, Internet Explorer 6 Service Pack 1, Internet Explorer 6, and Windows Internet Explorer 8 Beta 2 as potentially vulnerable software. Also added more workarounds.

December 12, 2008: Revised to correct operating systems that support Windows Internet Explorer 8 Beta 2. Also added more workarounds and a reference to Microsoft Security Advisory (954462).

December 13, 2008: Revised to add the workaround, Disable XML Island functionality. Also, in a FAQ entry, clarified the list of recommended workarounds and added the blog post URL for recommended workarounds.

December 15, 2008: Updated the workarounds, DisableXMLIsland functionality and Disable Row Position functionality of OLEDB32.dll.

December 17, 2008: Advisory updated to reflect publication of security bulletin.

Seimens to Pay Huge Fine in Bribery Inquiry

As posted by: Wall Street Journal

FRANKFURT -- German engineering company Siemens AG and U.S. authorities are expected to settle a longstanding bribes-for-business investigation Monday with a record $800 million fine -- almost 20 times higher than the largest previous penalty under the U.S. Foreign Corrupt Practices Act.

Documents filed with a U.S. court Friday by the U.S. Justice Department and the Securities and Exchange Commission allege corruption reaching the top echelons of Siemens management. The conglomerate allegedly spent more than $1 billion bribing government officials around the globe -- including former Argentine President Carlos Menem -- to win infrastructure contracts in recent years.

A Siemens building in Munich

The detailed claims of wrongdoing could trigger more fines and arrests in other parts of the world for Munich-based Siemens, people familiar with the matter said. Siemens, which makes everything from wind turbines to high-speed trains, is being investigated for corruption in at least 10 other countries. German authorities could announce a separate fine of several hundred million dollars as early as Monday in a parallel probe, said people familiar with the matter.

At the same time, the U.S. court documents state that Siemens, Europe's largest engineering company by revenue, took aggressive steps to ferret out corruption after the bribery scandal erupted in late 2006. The recent steps, which the Justice Department described as "extraordinary" in a court filing, factored into the Justice Department's decision to not press for a fine as high as $2.7 billion, according to the Justice Department's sentencing memorandum.

U.S. authorities have used a carrot-and-stick approach by rewarding remedial action as they ramp up prosecutions under FCPA, enacted in 1977 to clamp down on overseas bribery. The proposed settlement nonetheless dwarfs the largest previous FCPA fine of $44 million, levied last year against a subsidiary of Houston-based oil-services company Baker Hughes Inc. for $4 million in alleged bribes paid to government officials in Kazakhstan.

Under the accord between Siemens and the Justice Department and SEC, the company will admit inadequate internal controls and doctoring its books. But it won't formally plead guilty to bribery charges. That will allow it to keep bidding for public-sector infrastructure projects in the U.S., according to people familiar with the matter.

A Siemens spokesman confirmed the company is close to a settlement with U.S. authorities.

The federal U.S. District Court for the District of Columbia is scheduled to rule on the plea bargain at a Monday hearing. If the court approves the settlement, Siemens would pay a criminal fine of $450 million to the Justice Department and $350 million in civil damages to the SEC. The company also would have a U.S.-approved external compliance monitor for as many as four years.

The SEC claims Siemens made at least 4,283 bribe payments totaling $1.4 billion alone between March 2001 and September 2007. Misconduct was "systematic" and involved "employees at all levels of the company, including former senior management," the SEC said in a court filing.

The filing details alleged bribes to government officials in 10 countries, including payments to supply transit systems in Venezuela; medical equipment in China, Vietnam and Russia; power equipment in Iraq and Israel; refineries in Mexico; and telecommunications equipment in Nigeria and Bangladesh.

It accuses Siemens of paying more than $40 million in bribes to senior government officials in Argentina between 1998 and 2004 to try to secure a contract to make national identification cards. Illicit payments included "at least $2.6 million" in 1998 and 1999 to Mr. Menem, who was Argentina's president at the time, and two other senior government officials, according to the SEC filing. Mr. Menem has in the past denied illegal payments from Siemens.

U.S. prosecutors claim Siemens employed several methods to conceal bribes, including sham consulting contracts. The Justice Department also claims that Siemens used "removable Post-It notes" with affixed signatures to obscure audit trails and "cash desks" where employees could fill "empty suitcases" with as much as €1 million ($1.3 million) to pay bribes.

The SEC filing alleges that Siemens's management board ignored and suppressed frequent "red flags." It accuses the company's former chief financial officer, Heinz-Joachim Neubürger, of taking insufficient action in 2003 after auditors flagged suspicious payments in Nigeria and of misleading the company's nonexecutive supervisory board on other compliance matters.

Mr. Neubürger left Siemens in 2006 and has denied any wrongdoing. He and at least two other former management-board members remain criminal suspects in a continuing bribes-for-business probe by German prosecutors, according to people familiar with the matter. Prosecutors are working through a list of about 300 suspects and more indictments are expected after German courts recently handed out suspended prison terms to three former managers.

Siemens paid a €201 million fine to German authorities last year and didn't contest the charges after a court ruled the company had paid €12 million in bribes to government officials in Nigeria, Russia and Libya to win telecom-equipment contracts. A follow-up settlement with German authorities, expected to be announced in the coming days, involves alleged bribes at other business units.

U.S. prosecutors will argue for some leniency at Monday's court hearing in Washington. They will highlight how Siemens has replaced all but one management-board member and hired hundreds of compliance officers after a dawn raid by German police in November 2006.

The Justice Department said Siemens also took "aggressive steps" to preserve evidence after the raid and has shared more than 100,000 pages of documents with U.S. authorities. "The reorganization and remediation efforts have been extraordinary," the Justice Department added in a court filing.

Amid the scandal, Siemens has paid more than €850 million to external consultants since late 2006 -- including more than €200 million to the U.S. law firm Debevoise & Plimpton LLP, which investigated corruption allegations and regularly reported its findings to the Justice Department and SEC.

The German company also said earlier this year it would launch civil proceedings that seek financial damages from 11 former management-board members for failed oversight earlier this decade. The targeted individuals under investigation for negligence and failed oversight include former chief executives Heinrich von Pierer and Klaus Kleinfeld, both of whom have denied any wrongdoing.

Innocents Die in the Drug War

Of all the casualties claimed by the U.S. "war on drugs" in Latin America, perhaps none so fully captures its senselessness and injustice as the 2001 CIA-directed killing of Christian missionary Veronica Bowers and her daughter Charity in Peru.

No one is suggesting that the CIA intentionally killed Mrs. Bowers and her baby. It was an accident. But according to Rep. Pete Hoekstra (R., Mich.), it was an accident waiting to happen because of the way in which the CIA operated the drug interdiction plan in Peru known as the Airbridge Denial Program. Mr. Hoekstra says the goods to prove his charge are in a classified report from the CIA Inspector General that he received in October.

Under the program, initiated by President Clinton, the CIA was charged with identifying small civilian aircraft suspected of carrying cocaine over Peru on a path to Colombia, and directing the Peruvian military to force them down.

Mary Anastasia O'Grady talks to Kelsey Hubbard about the collateral damage caused by the CIA's fight against drug trafficking.

Strict procedures were put in place to minimize the risks to innocents. But after viewing the IG report, Mr. Hoekstra -- the ranking member of the House Intelligence Committee -- says that it is clear that those procedures had gone out the window long before the April 20, 2001 tragedy.

On that day the Bowers family was flying in a single-engine plane over the Amazon toward their home in Iquitos. Mrs. Bowers was holding the infant on her lap when a bullet fired by the Peruvian Air Force, under direction of the CIA, hit the aircraft, traveled through her back and into Charity's skull. The plane crash-landed on the Amazon River. Mr. Bowers, his young son and the pilot survived. Neither the plane nor its passengers were found to be involved in any way in the drug business and initial reports said that the mistaken attack was a tragic one-time error.

Get the latest information in Spanish from The Wall Street Journal's Americas page.

The IG report looked at the Airbridge Denial Program from its inception in 1995 until its termination in 2001 and took seven years to complete. In statements to the press last month Mr. Hoekstra said it demonstrates every one of the 15 "shootdowns" that the CIA participated in over the life of the program had "violations of required procedures." He also said that the report "found that CIA officers knew of and condoned the violations, fostering an environment of negligence and disregard for the procedures."

Equally troubling, the congressman says, is the IG finding that after the tragedy there was an attempt to cover up what had been going on in Peru. He has also said that the IG report finds that there were "unauthorized modifications" made to "the presidentially mandated intercept procedures by people who had no authority to do so" and that "there was effectively no legal oversight of the program." He further charges that "there is evidence that CIA officials made false or misleading statements to Congress," and that "the CIA denied Congress, the NSC [National Security Council] and the Department of Justice access to key findings of internal reviews that established and documented the sustained and significant violations of the required procedures."

"It was a rogue operation," he told me by telephone on Tuesday. "They knew they weren't following the rules, and they never did anything about it. They were callous about it." When I asked him to explain further, he said: "My take on this is that they became obsessed with the mission."

The CIA says that director Michael Hayden has "recognized the seriousness of [the report's] findings" and "is absolutely committed to a process looking at systemic issues and accountability that is as thorough and fair as possible." The office of House Intelligence Committee Chairman Silvestre Reyes (D., Texas) won't comment on the report. But Mr. Hoekstra is calling for more of it to be declassified and for the Justice Department to review "whether further criminal investigation is warranted."

Yet to honor the memory of Mrs. Bowers and her daughter and spare innocent lives in the future, a broader discussion in Congress about U.S. drug policy in the region is needed.

Consider the fact that Mr. Clinton's justification for the Airbridge Denial Program was that drug trafficking was a threat to Peruvian national security. Of course it was: Prohibition naturally produces powerful criminal networks that undermine the rule of law. But as a 2001 Senate Intelligence Committee report found, the drug runners learned to avoid detection by altering their routes via Brazil. It also found that while Peru's coca business shrank, Colombia's took off.

Since then, U.S. interdiction has put the pressure on Colombia and the problem is now resurging in Peru. The latest reports are that Mexican cartels are teaming up with remnants of the Shining Path terror network to rebuild the business, proving once again the futility of the supply-side attack as a way of minimizing drug use in the U.S.

Does it matter if Google's search results are fixed?

The fools, usually, are us.

We, the people, switch off our critical faculties and happily barter our trust for the joy of convenience.

So will we ever make the effort to even raise an eyebrow when we read "Google this week admitted that its staff pick and choose what appears in its search results"?

These words, from The Register's Andrew Orlovski, ought surely to give one or two people pause for a small grunt of concern.

As Orlovski points out, Google News expressly declares that the "selection and placement of stories on this page were determined automatically by a computer program." Except that, it appears, maybe they weren't.

He quotes Michael Arrington of TechCrunch, who suggested that Google will "make obvious changes - An example is if "thousands of people" were to knock a search result off a search page, they'd be likely to make a change..."

"Now what, you may be thinking, is an 'obvious change'?" writes Orlovski. "Is it one that is frivolous? (Thereby introducing a Google Frivolitimeter? [Beta]). Or is it one that goes against the grain of the consensus? If so, then who decides what the consensus must be?"

Notice the considerable idealism in Google's DNA.

Orlovski concludes by questioning Google's "unique democracy" in the way search results are presented. He cites Google's current explanation of Page Rank:

"PageRank also considers the importance of each page that casts a vote, as votes from some pages are considered to have greater value, thus giving the linked page greater value. We have always taken a pragmatic approach to help improve search quality and create useful products, and our technology uses the collective intelligence of the Web to determine a page's importance."

The important words here, surely, aren't "value" or "useful" or "collective" or "intelligence." They are "pragmatic" and "approach."

Many who reside in Inner Accolyteville cling fondly to the belief that the Web, with Google as its artificial heart, symbolizes a new democracy, a new honesty, a new pulsating, life-affirming form of justice.

But Google's is surely a "pragmatic approach." It's an advertising agency. It makes its money out of advertising. Mundane classified advertising at that. There is nothing idealistic about it.

Indeed, the idealism of Web 2.0 as a whole is, these days, rushing down the Turbulent River to be replaced by an endearing rush toward pragmatic approaches.

Google wants its search results to become more pragmatic, not for any political, social or even intellectual reason. The company simply thinks it's better for business. Advertising business.

Most of us won't notice or care and will continue to depend on Google because it's so dominant, so fast, so very much our rolling dictionary of the world.

This leave Google to approach its business in as pragmatic a way as it chooses. It will makes changes, and we will continue to believe in them.

The folks at Google are no fools. As for us, well, the slapping of our foreheads always comes a little too late.

Yahoo brings its Glue to the U.S.

Yahoo rolled out a U.S. beta version of its Glue Pages, giving a visual boost to users' search results, according to a posting on its Yahoo blog site.

The beta is designed to allow users to enter a search and have not only text links appear on the site, but also related pictures, videos and blogs.

The company is taking a page from its Yahoo India Glue Pages site, which it unveiled in May.

With this effort, Yahoo is seeking to put related content all on one page, while its competitor Google currently offers up text links, with additional links to related photos, videos, blogs, books and news.

Microsoft's Live Search takes a similar approach to Google's.

Yahoo offers severance with a soft landing

A pink slip for corporate America's newly laid off typically means a severance package and a "see ya."

But when Yahoo issued its layoff notices to 10 percent of its workforce on Wednesday, it came with a twist, according to several sources.

Yahoo's 1,520 pink-slipped employees will remain on the payroll through February 13, retaining the ability to continue vesting any options that may come available through that separation date. Vacation accrual, however, will not apply, noted one source.

By the same token, those laid off employees will be "on call" to answer any questions that those who will be taking up the slack may have, to a certain extent anyway.

For those folks who have not landed a job by February 13--which in this recessionary climate may be many--nor bad-mouthed the company, will be entitled to an additional lump sum payment of two, three, or even four more months of severance, sources say.

And on top of that, an additional one month of severance will be awarded for every five years of service at Yahoo, sources note.

Banks drop, tech firms rise in privacy trust rankings

When it comes to protecting consumer privacy, Americans in general trust financial institutions less than they did a year ago and tech firms more, according to a new survey that lists American Express as No. 1 for the third year in a row.

Auction site eBay rose from eighth place to No. 2, IBM remained in third, Amazon rose from fifth to fourth and HP jumped from 16th place to 6th. Apple (No. 8), Yahoo (No. 14) and Microsoft rose and Facebook broke into the top 20 for the first time. However, Google fell from 10th place. (The survey doesn't provide any specific rankings below the top 20 so it is unclear where Microsoft and Google rank now, however they are in the top 50, according to Larry Ponemon, chairman of the Ponemon Institute, which conducted the survey.)

Meanwhile, Charles Schwab, Countrywide, and Bank of America fell out of the top 20.

"It's a matter of perception versus reality. There should be a correlation," Ponemon said in an interview. Asked if perception and reality are indeed correlated in the survey results, he responded, "I hope so."

Regarding American Express topping the list, Ponemon said, "People believe that because of AmEx's customer service orientation that they're going to be good at protecting their privacy."

Meanwhile, IBM is "viewed as one of these old-line IT companies, as dependable," he said.

Respondents also said they are worried about identity theft and losing control of their personal data. Sixty-two percent of the respondents said they believe that identity theft most affects their perceptions about a company's privacy, while 53 percent said data breach notification did. Only 45 percent said they feel they have control over their personal information, while 73 percent said the protection of their privacy is important or very important.

For the survey, 6,486 U.S. adults were asked which companies they thought were most trustworthy and which did the best job safeguarding personal information. The survey has been conducted since 2004 on behalf of consumer privacy watchdog Truste.

Start-up OpenX touts burgeoning ad traffic

It may be that the technology and advertising industries are curtailing spending in the current painful economic environment, but one start-up, OpenX, is happy to report progress in establishing its new business.

OpenX sells support and consulting services around an open-source software package geared toward publishers that need to serve ads on their online properties. The Pasadena, Calif.-based company also has been expanding online, first by hosting the software on its own site, free to lower-traffic customers, and second through a pilot test of a marketplace that lets advertisers buy ads across a larger group of publishers.

Among the milestones the company is announcing Monday: The OpenX software, installed by customers or hosted by OpenX, currently delivers 300 billion ads per month. About 2,500 customers are using the hosted version now, with a growth rate that sees customers double each week.

"This is some pretty phenomenal growth," crowed Chief Executive Tim Cadogan, a former Yahoo search and advertising executive.

Next comes the more difficult process of converting the free products and services into revenue-generating operations. The vast majority of the ads served by the installed software were from freely downloaded versions, and few of those using the hosted service are premium customers.

But Cadogan said the company has just launched the support products and online services, and that revenue generation is a priority. "We are all over the revenue side and pushing that really hard. I expect more news on that in the next one to three months," he said.

More than 10,000 customers installed version 2.6 of the OpenX software since its July release. The company plans to release 2.7 into beta testing soon, a version that will add a plug-in system that will enable customers to customize the software with specific modules for tasks such as specific targeting, video ads, or mobile ads, Cadogan said.

Holiday ornaments decorate Google search results


While some are decorating Christmas trees, Google has ornamented its search results with holiday-theme graphics.

Google spruced up a search for "Christmas tree" with a column of holly leaves to separate the search results on the left with the search ads on the right. A search for "Christmas" gets candy canes, and Santa gets the holly treatment.

Christmas might be the largest-scale trigger for the seasonal economic frenzy, but other holidays get fancy dividers, too, including candles for Kwanzaa, and dreidels and menorahs for Hanukkah.

And, in what's probably inappropriate to call an Easter egg, Google also added a Festivus pole for fans of the TV show Seinfeld.

It's not the first time Google has noted occasions by changing the advertising divider. On Gay Pride Day in 2008, the company added a rainbow divider.

Google slips from list of top companies on privacy

Google has stepped off the top 20 list of the most trusted U.S. companies for privacy, according to a report in theSan Francisco Chronicle on Monday.

The Internet search giant was ranked No. 10 last year, but slipped off into the ether this year as the 6,500 people surveyed by the Ponemon Institute may have associated Google with "big company syndrome," the Chronicle story reported. TRUSTe co-sponsored the survey.

The report, citing the Ponemon Institute, said:

"Google (and Microsoft) suffer from big company syndrome," Dr. Larry Ponemon said. "People figure that if you're big and collecting data, there must be an issue."

Yahoo puts meat on Open Strategy bones

SAN FRANCISCO--Yahoo on Monday began launching some of the serious aspects of its Yahoo Open Strategy, including a new version of Yahoo Mail that sorts the in-box according to your social connections and that can be expanded with mail-specific applications.

The first big change in Yahoo Mail is with its welcome page, which now spotlights messages from people in your Yahoo social network and invitations from others to join their social networks. Next, the in-box page now includes a new "from connections" button that shows messages only from those social connections.

Second is the arrival of online applications tied to Yahoo Mail. One inaugural program from Xoopit lets you view all the photos in your e-mail archive, even expanding links to online galleries. Another lets you convert an e-mail message into a WordPress blog post in two clicks.

"The opening of the mail platform is a huge benefit to users in terms of the additional forms of sharing and communication we can build in and to the dev who can build applications," said John Kremer, vice president of Yahoo Mail, speaking to reporters at a launch event here.

The Yahoo Open Strategy seeks to increase the number of users on Yahoo's Internet properties and the magnitude of their activity. If successful, both those goals would increase the number of pages on which Yahoo can show advertisements. However, Yahoo has lagged competitors such as Facebook with the addition of applications and a social dimension.

The Yahoo Mail change is one of a host announced Monday. Among others:

• Yahoo also announced changes to its customizable home page, My Yahoo, that lets you add applications and customize the page's appearance.

• A new toolbar for Web browsers also gets drop-down interactivity that can show what your contacts are doing, what e-mail you've received, and other information.

• Yahoo's media properties can spotlight your contacts' activities, such as when they assign a five-star ranking to a particular song.

"We wanted to establish a social dimension to a product," said Ash Patel, executive vice president of Yahoo's audience products division of the Yahoo Open Strategy goals. "We wanted to engage with the developer community and to open up the power of Yahoo's products and platforms."

Microsoft's Latest Yahoo Snub Leaves Some Traders Uncertain

There's that old saw about if you look around the table at a poker game and can't recognize the sucker, it's you. Yahoo's Jerry Yang might have some experience in this matter, as he's now broached the possibility of a merger with Microsoft -- something he rejected earlier in the year.

Options traders can be forgiven, then, if they're taking a wait-and-see approach.

Shares of Yahoo fell 13% to $12.20 Friday, one day after the dissolution of a revenue-sharing deal with its larger competitor Google, and, after Microsoft Chief Executive Steve Ballmer pointedly dismissed the idea of a merger with Yahoo.

The current back-and-forth centers on the idea that Microsoft doesn't plan to buy Yahoo, but that it may put together some sort of search-partnership deal, which Mr. Ballmer endorsed as a possibility. While a number of analysts are convinced this will happen, those in the options market on Friday weren't.

Activity was high in the November $13 calls, where more than 17,000 contracts changed hands, which suggests that people are saying "the stock is being massively oversold and people are looking for it to rebound in short order," says Jocelynn Drake, analyst at Schaeffer's Investment Research. However, more than 16,000 $12 put contracts, or options to sell the stock at $12 at a later date, also changed hands.

However, the action in the December and January options don't suggest an undercurrent of optimism that some sort of deal between Microsoft and Yahoo will happen, even a search-partnership deal. There was more activity in puts than calls in December options, which reflects expectations for weakness in Yahoo's share price. Activity in January options slanted more to the call side, with more than 20,000 out-of-the-money calls changing hands, compared with about 7,000 put contracts.

"There is the hope that eventually they will do something, but the time frame is questionable," says William Lefkowitz, chief options strategist at vFinance Investments. "They could say they're not making a bid and then make a bid."

Indeed, Youssef Squali, analyst at Jefferies & Co., predicted that Microsoft would make an offer by the end of the year. Mr. Squali says a search deal with similar terms as the offer in July would guarantee annual cash flow of $2.3 billion to Yahoo, and such an offer would result in a net present value of about $11 billion, or about $8 a share. (Mr. Squali does not own Yahoo shares and has a $20 price target on them.) "At the end of the day, a search deal is very much in the cards," he says.

For now, traders don't agree. But things can always change.

Facebook Tries to Woo Marketers

Despite its surging Internet audience, Facebook Inc. has yet to prove it can wring steady revenue out of advertisers. Now it's trying a new tactic to woo Madison Avenue.

The Palo Alto, Calif., company is rolling out a new ad format called "engagement ads" that further blurs the line between marketing and social networking.

The new ads appear on the main screen when a person first logs in to Facebook. They prompt a user to do something within the ad, such as comment on a movie trailer or RSVP for the season finale of a TV show.

If the user completes the action, such as adding Bravo TV's "Project Runway" show to a personal list of events, Facebook tries to get Bravo's ad in front of more eyeballs by sharing a notice about what the user has done with their friends.

Facebook has a lot to prove with the new ad format, which it began quietly testing in August and started making available to all advertisers this month. The company says 70 of the U.S.'s 100 largest advertisers have advertised on its site since 2007. But its share of total number of U.S. online display ad views was just 1.1%, according to market research firm comScore Inc., in its most recent report in June.

News Corp.'s Fox Interactive Media Unit, which includes rival MySpace.com, is the market leader with 15.9% of display-ad spending, according to comScore. News Corp. also owns Dow Jones & Co., publisher of The Wall Street Journal.

"I haven't heard of anyone purchasing something off an ad on Facebook," says Angie Tulgetske, vice president of RE/MAX Preferred Choice Properties, which resells timeshares and spends thousands of dollars a month on search ads but avoids social-networking sites. "I wouldn't think any of my marketing dollars would be spent advantageously there."

Facebook's new push also comes as economic turbulence hits the online ad market. U.S. online advertising growth is expected to decelerate from 17% in 2008 to 14.5% next year, according to the Interactive Advertising Bureau, an internet-advertiser trade group.

Advertising on social-networking sites appears particularly vulnerable, analysts say, because advertisers are still searching for the right ways to measure the effectiveness of ads on those sites.

Advertisers say that buying ads on Facebook and MySpace generally costs far less than buying premium ads on media properties such as Yahoo Inc. or Time Warner Inc.'s AOL, although prices vary widely based on the type of ads and the target audience. Facebook charges more for the engagement ads than other display ads on its site.

The new ads won't appeal to all Facebook users. Heather Watson, 32, who lives in Nashville, Tenn., recently saw the engagement ad for "Project Runway." Ms. Watson says such ads "detract from the [Facebook] experience," and she clicked the "not attending" option to wipe the Bravo ad from her view.

In public appearances, Facebook's 24-year-old Chief Executive Mark Zuckerberg insists that his company remains more focused on expanding its user base than its revenues. The right business model for the site will emerge over time, he has said.

This year, Facebook's revenue is expected to more than double to between $300 million and $350 million, say people familiar with the matter. But the company has mounting costs. At an industry conference last week, Mr. Zuckerberg said the company didn't need to raise more money and wasn't planning on going public for a few years.

Still, Facebook has intensified its campaign to curry favor with Madison Avenue. It has hired top ad sales executives from companies including Yahoo and periodically hosts teams of senior ad executives at its graffiti-clad offices. It has also sent squads into online-ad agencies, such as Starcom MediaVest Group, to pitch products and generate awareness about its free research tools.

Ads systems are built over time through continual tweaking, says Facebook's Chief Operating Officer Sheryl Sandberg. She says Facebook's existing ad offerings are working well but "undersell Facebook's broader opportunity."

Facebook has tried many ad efforts in the past, starting with basic "fliers," the low-budget graphical ads users could buy to promote things like events. The company began building its own internal sales force in 2005, and in 2006 struck a deal to display banner ads sold by Microsoft Corp. It also added products like "social ads" in which Facebook shared a user's action with others on the site.

But many marketers stayed away, concerned advertising alongside user-generated content might tarnish their brands and that the site appealed only to college students. As Facebook has widened its audience, it has run into another problem: users weren't clicking on ads when they browsed each other's profiles. Jeremiah Owyang, an analyst with Forrester Research, estimates the rate at which users click on Facebook's display ads is less than 1%. Mr. Owyang also describes Facebook's array of ad offerings as "confusing."

More recently, Facebook has seen some traction with an ad service for smaller advertisers that generally spend the bulk of their budgets on search-engine ads. The service allows users to buy targeted banner ads through a Web site. Facebook says tens of thousands of advertisers are using the system every month.

Online advertising agency G5 Search Marketing Inc. has used the system to buy ads for clients such as a California-based local storage company. The storage company in May found it ended up getting more visitors per dollar spent on Facebook than Google, says Dan Hobin, CEO of G5.

But he adds that only a handful of clients have tried Facebook, in part because Facebook offers to reach specific groups that are far smaller than the size of the audience his clients want to reach.

U.S. online advertising growth is expected to decelerate from 17% in 2008 to 14.5% next year, according to eMarketer. This article incorrectly cited the data as coming from the Interactive Advertising Bureau, whose historical data eMarketer used as a benchmark for its projections. Also, Fox Interactive Media in June had a 15.9% share of display ad views, according to comScore. The figure is incorrectly described as Fox's share of display ad spending.

Free Web Plan Being Pushed By FCC Head

Outgoing Federal Communications Commission Chairman Kevin Martin is pushing for action in December on a plan to offer free, pornography-free wireless Internet service to all Americans, despite objections from the wireless industry and some consumer groups.

At its December meeting, the FCC could also consider new rules designed to speed up consideration of disputes between independent cable programmers and cable providers such as Time Warner Cable Inc. and Comcast Corp., which either refuse to carry some channels or put them on specialty tiers of service that cost subscribers more.

The agency also will ask for more feedback on its proposal to require programmers to sell their channels to cable operators individually instead of in bundles.

The free Internet plan is the most controversial issue the agency will tackle in December. Mr. Martin shelved plans to consider a wider variety of sticky issues pending at the agency, including a request by the Hollywood studios to hobble TVs and set-top boxes so studios can offer copy-protected theatrical releases sooner.

The proposal to allow a no-smut, free wireless Internet service is part of a proposal to auction off a chunk of airwaves. The winning bidder would be required to set aside a quarter of the airwaves for a free Internet service. The winner could establish a paid service that would have a fast wireless Internet connection. The free service could be slower and would be required to filter out pornography and other material not suitable for children. The FCC's proposal mirrors a plan offered by M2Z Networks Inc., a start-up backed by Kleiner Perkins Caufield & Byers partner John Doerr.

Consumer advocates have objected to the FCC's proposed pornography filter, while the wireless industry has objected to the entire free Internet plan. To address concerns about the filter, the FCC is proposing that adults could opt out and access all Internet sites.

T-Mobile USA, in particular, has raised concerns. The Deutsche Telekom AG unit paid about $4 billion a few years ago for nearby airwaves and has complained that the free wireless Internet plan will likely result in interference for consumers of its new 3G wireless network. The FCC dismissed the company's interference concerns this fall, although T-Mobile disagreed with that finding.

Yahoo and MSN 2008 Marriage?

Rumor Mills Have Microsoft Making a Play For Yahoo Search by The Close of 2008

ADOTAS — As Google continues to distance itself from ineptly managed rivals in search, Yahoo looks for new a leader and tries to find scale. Of course, if Jerry Yang had handled Microsoft a little better, Yahoo and MSN would be ready to be betrothed.

But all is not lost, says Breakingviews, which makes some helpful suggestions. Yahoo should offer to buy the MSN unit. With Yahoo’s stock in the tank, trading at a third of Microsoft’s February bid of $31 a share, what does it have to lose? Its dignity? Oops, too late.

While worker bees at Yahoo, arguably, made the better mousetrap, Yang fiddled. Google has more than 60 percent share of the market share in search. With a larger base, Yahoo’s search algorithm becomes more effective and brings in more activity, which then makes it more effective…etc.

But how much would the deal be? Breakingviews says MSN is worth about $8 billion. Yahoo could offer stock, and Microsoft shareholders could reap any of the expanded benefit. Sounds like a shotgun marriage waiting happen. This wedding could reach the altar only if Steven Ballmer is serious about rejecting another Yahoo bid. That is an answer still in doubt.