Forbes Is Planning Web Ad Network

Traditional media companies trying to stem the flow of advertising dollars to Google and other large Internet companies increasingly are building ad networks of their own, anchored by their brands. The latest, Forbes Inc. was set to announce Monday that it will start selling ads this spring for about 400 financial blogs. In recent months, Conde Nast, Viacom Inc., CBS Corp., and other major media companies have unveiled topic-specifi ad networks. But these media networks - some linking fewer than a dozen handpicked Web sites - may have a tough time competing with the networks of thousands assembled by Google, Yahoo Inc., Microsoft Corp., and Time Warners Inc.'s AOL.

-Associated Press

Microsoft Denied Bid To Stop Suit

The U.S. Supreme Court rejected Microsoft Corp.’s bit to stop an antitrust lawsuit brought by Novell Inc. Novell sued Microsoft in 2004 over 1990s practices by the software giant in the word-processing and spreadsheet software markets. The Supreme Court rejected Microsoft’s appeal, allowing the case to proceed in a federal court. Microsoft has already paid almost $5 billion relating to the government’s antitrust case.

CBS TV Stations Start Up An Online Ad Network

Television stations owned by CBS Corp. are launching an online advertising initiative with local bloggers and social media sites, the company announced. The ad network will involve CBS-owned TV stations generating online modules called “widgets” which individuals can easily add to their Web sites. The widgets will contain local news as well as advertising, which the CBS stations will sell. The online partners will receive a share of the revenue, but specific financial details weren’t disclosed.

- Associated Press

Meet Bob the Blogger

Two or three times a month, Elise Martin checks in on a colorful character online who is always meeting up with real celebrities in faraway places and offers tips on hot industry trends.
His name is Bob Archer, and he blogs at www.meetbobarcher. com. But he's not real.
He's the creation of Archer Group, a small Web-marketing agency in Wilmington, Del. The blog helps Archer stay in touch with clients and get them tolhink about ways to use the Weband the firm's services.
Each post puts the mythical Bob in an interesting place, with an interesting person, talking about an online-marketing concept. A recent entry had him schmoozing with Danny DeVito at the actor's restaurant DeVito South Beach in Miami.
Here are edited excerpts from an interview with Archer cofounder Lee Mikles:

WSJ.COM: How did Bob's blog get started?
Mr. Mikles: Bob's story goes back to when we founded the coJv.pany. We wanted a name that sounded like it had been around for a while but wasn't pretentious, so we called it the Archer Group. It was kind of an inside joke that there was this person Bob Archer.
When [Archer decided to do a blog, it wanted] to stand out and offer something [people] were actually going to read. So we decided to bring Bob Archer to life.

WSJ.COM: Why use celebrities?
Mr. Mikles: They're people we can ,connect with, and it also adds to the perceived stature of Bob Archer.

WSJ.COM: What are the biggest challenges?
Mr. Mikles: Coming up with something interesting. I try to dedicate an hour or two a week. Everybody in the office feeds me ideas.

WSJ.COM: What's readership like?
Mr. Mikles: We're getting between 40 and 60 visitors a day. We have an active client list of about 50 firms.

Read more of the interview with Archer's Mr. Mikles online, at WSJ.com/SmallBusinessLink.

Quattrone's Return

Frank Quattrone's new advisory firm, Qatalyst Partners, marked one of the investment-banking world's great comebacks, not the least because ofthe tech-world heavyhitters that have thrown their support behind Mr. Quattrone. The statement about Qatalyst's founding includes supportive quotes from Google CEO Eric Schmidt, who gushed about Mr. Quattrone's experience and "unparalleled industry knowledge."

Other tech mavens who showed up were Bill Campbell, chairmain of Intuit, Jim Breyer of Accel Partners, and Gideon Yu, the chief financial officer of Facebook, former CFO of YouTube and former treasurer of Yahoo. The long list of tech companies that its bankers have advised include: Adobe, Agilent, AOL, Apple, Amazon.com, Applied Materials, and Ascend. And that's just the "A"s.

Such big names go a long way toward confirming Mr. Quattrone's star status in the technology industry. Mr. Quattrone's founding group doesn't (yet) include some of his longtime associates, like star bankers Bill Brady and George Boutros, who are still where he left them at Credit Suisse Group.

The first people to join him are former Credit Suisse vice president of Internet banking Frank Quattrone Jonathan Turner and the former general counsel of the Credit Suisse technology group, Adrien Dollard.

The more junior bankers include former Evercore Partners vice president Neil Chalasani, former Goldman Sachs vice president Brian Slingerland and Vista Partners associate Brian Cayne.

by Heidi Moore
Wall Street Journal

A New Meaning For 'Unbanked'

Microsoft, Yahoo Shun Their Bank Dream Teams As Talks Over Bid Resume

Why hire a team of high-priced investment bankers if you aren't going to use them?

You might pose that question to Microsoft and Yahoo. The two companies met on Monday to discuss Microsoft's vision for its proposed bid. But there were no bankers in attendance.

On the face of it, the exclusion of the bankers seems odd. Since Microsoft announced its unsolicited bid for Yahoo in January, the two companies assembled teams of top investment bankers, including Jill Greenthal of Blackstone Group and Paul Taubman of Morgan Stanley on the Microsoft side and Janine Shelffo of Lehman Brothers working with Goldman Sachs Group and Moelis & Co. on behalf of Yahoo.

So why did Microsoft and Yahoo keep out all the high-priced, presumably well-prepared bankers when the companies had their first talks since Jan. 31?

It could be seen as a sign of a kinder, gentler, less-impetuous Microsoft that is thinking ahead and trying to win over Yahoo management. The absence of bankers from the meeting seems to indicate that Microsoft wants to start a charm offensive and get to know Yahoo without the anvil of the bid hanging over the two parties.

There are good reasons for Microsoft to soften its approach, the biggest one among them being price. Yahoo will resist a deal until there is a higher price. Microsoft won't sweeten its bid until Yahoo opens its books. And Yahoo won't open its books to people it doesn't like. If Microsoft can humanize its approach and look less like the big bad wolf, the software company presumably will get better cooperation from Yahoo and ease the way for a deal. Not incidentally, it also might stop the massacre in the value of Microsoft's shares, which have fallen 20% since December.

Any of those reasons would bode well for a deal to actually materialize. But there is one thing to keep in mind: The bankers get paid even if they aren't in the room.

By: Heidi Moore
Wall Street Journal; March 15, 2008

March 15, 2008; Page B4

Yahoo paid price for coddling Google

McCLATCHY-TRIBUNE
SAN JOSE, Calif. - Almost eight years ago, Yahoo decided to lend a little start-up a helping hand, featuring its search technology on the Yahoo home page and giving it money at a critical juncture.

In cut-throat Silicon Valley, no good deed goes unpunished.

The start-up was Google, and Yahoo's generosity helped launch the most formidable competitor it had ever encountered. Now facing a takeover attempt by Microsoft, Yahoo is coming to terms with the punish¬ing consequences of its complex relationship with Google, including a futile attempt to copy Google's extraordinarily profitable advertising model at sig¬nificant cost to Yahoo's own business.

Long before the world learned that Google had turned the Internet into an amazing money-minting machine, Yahoo knew.

When Google was still a private company, it sent its financial statements to Yahoo's headquarters in Sunnyvale, California, like clockwork. Google had to because Yahoo was one of its earliest investors.

The statements showed the incredible growth of Google's search advertising business, with sales more than doubling from quarter to quarter.

But Yahoo executives didn't focus on the money; they were interested in how much traffic was being driven by search, recalled Ellen Siminoff, an executive who joined Yahoo in 1996.

In 2000, Yahoo agreed to use and promote Google, which it touted as "the best search engine on the Internet." Google co-founder Larry Page described the pact as a "major milestone."

The following year, Yahoo was even more generous, paying Google $7.2 million for its services. (Google in turn paid Yahoo $1.1 million for promotional help.) Google desperately needed the money, which helped push it into the black for the entire year.

Yet Yahoo was hardly flush with cash. After two years of profit, Yahoo reported an annual loss of million in 2001. The value its stock had collapsed fro $118.75 a share in January 2000 to $4.05 in September 2001.

Meanwhile, Yahoo's promotional push was having an effect on Google "When we were turning th business around in 2001, Google was already becoming the ascendant player in Europe, especially in the U.K., which is one of the most important advertising markets," recalled L. Jasmine Kim, a former vice president for global marketing and sales development for Yahoo.

Microsoft Online Executive Resigns

A well-regarded vice president in Microsoft Corp's online group quit to join a small online-ad agency, a sign of continuing turmoil within the software giant's Internet operations.

Joanne Bradford, vice president and chief media officer of Microsoft's MSN online service, will leave the software maker after seven years to join Spot Runner Inc., a privately held Los Angeles firm that uses the Internet to help companies create advertisements for television.

The departure follows Microsoft's bid for rival Yahoo Inc. and comes at a time of widespread management tumult as companies try to figure out their place in the fast-changing online-advertising business. Last week, Google Inc.'s head of online sales and operations left the Internet-search giant to become chief operating officer of Facebook Inc., the fast-growing, four-year-old Internet firm.

At Microsoft, Ms. Bradford spent her career trying to inject advertising-industry expertise into the company's software culture. The company has tried but largely failed to expand its share of the online-ad market against stronger rivals such as Google, prompting the bid for Yahoo, which has so far rejected the offer.

Meanwhile, behind the scenes, Microsoft's online group is grappling with a host of challenges, including a reorganization last month and departure of several key executives, of which Ms. Bradford is the latest.

Microsoft is also in the throes of integrating aQuantive Inc., an online-ad company it bought last year for $6 billion. That merger has elevated executives at aQuantive, a shift that threatens to displace some existing Microsoft employees, say some insiders.

Ms. Bradford, who before Microsoft worked in ad sales at BusinessWeek, was one of the few high-ranking Microsoft executives who joined the company with experience in the advertising industry. That skill set has become increasingly important as Microsoft attempts to turn around its money-losing online business.

Ms. Bradford's departure was announced in an email to employees from her boss, Microsoft Vice President Satya Nadella. For now, Ms. Bradford's position will be filled by Greg Nelson, a Microsoft general manager in charge of MSN's international operations.

Ms. Bradford at times struggled to prove herself to Microsoft's higher-ups but is credited with building tighter ties between Microsoft and large advertisers and ad agencies. She also inspired strong loyalty among Microsoft's online-ad sales team, which she headed before taking her current Microsoft position.

"It's a devastating thing for people on the sales side," said a person familiar with Microsoft's online group.

At Spot Runner, Ms. Bradford will become the company's executive vice president of national marketing services, which will focus on attracting more large, national advertisers to the company's services.

By Robert A. Guth
Wall Street Journal; March 14, 2008

AOL Buys Into Social Networking

Deal for Bebo Aims to Turn Laggard at Time Warner Into Ad-Focused Hot Spot

Time Warner Inc.'s AOL, battling to reinvent itself, is plunging into the hot and pricey world of social networking.

AOL announced plans to fork out $850 million for Bebo, a social-networking site with a strong presence in the United Kingdom, but a distant rival in the U.S. to heavyweights such as MySpace and Facebook.

The acquisition is the single biggest AOL has made in several years, as it attempts to transform itself from an Internet-access subscription business into an advertising-focused one. The deal represents a major bet that online advertising will retain its sparkle and social-networking sites will benefit.

The transaction is rooted in the belief that social networking is becoming a major gateway for how people use media and services on the Web, including email, search and video. "People are using social networks as their prism to the online world," said Bebo President Joanna Shields, a former Google Inc. executive who joined Bebo last year and is expected to remain at the helm.

The two biggest social networking sites are already largely spoken for: News Corp. bought MySpace in 2005 for $580 million, and Microsoft Corp. made a $240 million investment in Facebook Inc. last year. News Corp. also owns The Wall Street Journal.

Still, AOL's move is a risky one. Some hot Web properties, including social networks and video-sharing sites, are finding it harder than they expected to turn their heavy traffic into ad dollars, with some of the biggest sites generating less advertising revenue than hoped.

Like many of its counterparts, Bebo is more about potential than profit -- a factor that had warded off several contenders for the company, including Yahoo Inc. and CBS Corp., according to people familiar with the situation. Indeed, some analysts questioned whether AOL was overpaying.

"The price seems a bit high, and it's hard to know what AOL is getting," said Ryan Jacob of the Jacob Internet Fund, which owns shares in Google and Yahoo, but not Time Warner. Bebo, based in San Francisco, had 22 million visitors world-wide in January, compared with MySpace's 109 million and Facebook's 101 million, according to comScore Inc.

The deal comes as Time Warner Chief Executive Jeff Bewkes is under pressure to kick-start the company's stagnant stock price. AOL has been one of the company's trouble spots in recent years and the focus of a major turnaround. Mr. Bewkes flagged plans last month to separate the Internet-access business from the rest of AOL. At the time, he said he was "open to any strategic moves that make sense."

AOL has recently been in talks with Yahoo over a possible alternative to Microsoft's bid to acquire Yahoo, although it is seen as having little chance of success, according to people familiar with the situation.

The Bebo acquisition raises questions about whether Time Warner is still open to selling AOL, which had been seen as a serious option. Mr. Jacob said: "AOL is clearly bulking up to make itself more attractive, either for a spin-off or a transaction."

AOL plans to twin Bebo with its chat services AOL Instant Messenger and ICQ, creating a platform that it says will reach 80 million unique visitors around the world. "Social networking was really invented here at AOL. We let it get away from us," said AOL Chief Executive Randy Falco.

Bebo, founded in 2005 by a married couple, rapidly expanded to include a range of entertainment including TV shows and music. While it is little known in the U.S., it has a higher profile overseas, and AOL hopes to use the site to boost AOL's international presence.

But the biggest issue may be luring advertisers to Bebo. Ad spending on social-networking sites is still tiny and largely experimental for marketers. Expected to reach $1.6 billion in the U.S. this year, up from $920 million in 2007, the market is dominated primarily by MySpace and Facebook.

During its fourth-quarter earnings call on Jan. 31, Google said it was having a harder time than it expected generating ad revenue from partner social-networking sites. Its partners include MySpace.

Some of advertisers' concerns with social-networking sites stem from a lack of comfort displaying ads next to less-predictable content.

Mr. Falco says AOL can do better than Google by combining an interactive advertising approach that Bebo has developed, with AOL's existing online advertising technologies. AOL plans to use the data that Bebo users enter into the profiles they create about themselves to help better target ads both on that site and on the network of Web sites where it brokers ads.

AOL may face other challenges integrating Bebo. AOL already has stumbled in its efforts to integrate a series of smaller online ad firms acquired in the past few years. Earlier this week, Curt Viebranz was fired as president of AOL's Web ad selling unit, dubbed Platform A. He was succeeded by Lynda Clarizio, formerly president of Advertising.com.

By Merissa Marr & Emily Steel; Aaron Patrick, Vishesh Kumar & Kevin Delaney contributed to this article.
Wall Street Journal; March 14, 2008

Google, Cleveland Clinic Form Venture

Google Inc. and nonprofit academic medical center Cleveland Clinic formed a partnership and pilot program aimed at giving patients more control over their online medical records.

The venture marks the Mountain View, Calif., Internet search company's first foray into the online health-care space. Since 2006, Google has discussed on its company blog and in executives' speeches the issues around giving consumers more control over their medical data and more relevant health-related information.

While Google hasn't disclosed plans, analysts and technology industry observers have speculated that the company has big ambitions in health care. They say Google could boost its already large user base and search-related advertising business by becoming a destination for health-related information and services.

The effort by Cleveland Clinic and Google is part of a larger push by technology companies, hospitals, insurers and the government to use technology to give patients more control and access to their medical information. That could help lower health-care costs if access to more data helps consumers make better choices. Similar efforts are under way at companies such as Revolution Health Group LLC and Microsoft Corp. Microsoft started its online health-care service, dubbed HealthVault, in October.

Health-care experts say companies such as Google and Microsoft face an uphill battle in trying to improve the nation's health-care system. The industry is highly regulated. People have also been slow to embrace online personal health records amid privacy and security concerns.

Cleveland Clinic's new program will be open to up to 10,000 of its patients by invitation only. Under the pilot, patients who already use Cleveland Clinic's personal health record system can securely share medical information such as prescriptions, conditions and allergies between the Cleveland Clinic system and a Google health-profile online. Users can access their Google profile from any Internet-connected personal computer and would control what information goes into the profile.

Cleveland Clinic and Google officials say the pilot program is intended to free medical data from electronic-medical records so that patients can take their data wherever they go and share it with other doctors or pharmacies. Typically, control over medical data stored in electronic-medical records is in the hands of the health-care profession instead of the patient.

"From a patient perspective, they no longer have to remember all that information, write it down on a piece of paper and keep it with them," says C. Martin Harris, chief information officer for Cleveland Clinic.

Marissa Mayer, vice president of search products and user experience for Google, declined to say how the Cleveland Clinic initiative fits into Google's overall ambitions in the online health market.

By Christopher Lawton
Wall Street Journal February 21, 2008

Yahoo Sees Blue Skies, but Clouds Brew in China
Yahoo Inc. is pressing its case to shareholders this week on why it's worth more than Microsoft Corp.'s bid for it, even as moves by its Chinese partner underscore investor doubts that Yahoo can stay independent. Alibaba Group, the Chinese Internet company that is 39% owned by Yahoo, is in advanced talks with investors to finance Alibaba's purchase of Yahoo's stake in an effort to expand its management independence should Microsoft's bid prevail, according to people close to the situation. While it's not pushing for a Yahoo sale, Alibaba believes that a change in control at Yahoo would trigger an opportunity for it to buy the stake under the companies' agreements, though that could be subject to interpretation. The talks signal Alibaba's belief that Microsoft could still succeed in its quest to buy Yahoo, which owns stakes in Internet companies in Japan, South Korea and China, where Alibaba is the third largest Internet search company. Alibaba's interest in purchasing the Yahoo stake could also represent a new wrinkle in any negotiations. For Microsoft, gaining Yahoo's Asia stakes was a key attraction when it made the bid Jan. 31, an offer now valued at about $42 billion. Alibaba's move coincided with the kickoff of Yahoo's roughly week-long road show at which company executives will meet with major shareholders to make the case that Yahoo's value exceeds Microsoft's offer, which company directors last month rejected as insufficient. Chief Executive Jerry Yang, Chief Financial Officer Blake Jorgensen and President Susan Decker are among those at the meetings, which began yesterday. As part of road-show documents filed with regulators, Yahoo reaffirmed its financial guidance for 2008 and projected strong revenue and cash-flow growth in 2009 and 2010, releasing financial projections first presented to its board in December. Based on the projections, it is easy to calculate a standalone value for Yahoo close to $40 a share, and any additional strategic value to Microsoft could make a deal worth more than that, says a person close to the situation. Microsoft's cash-and-stock offer, valued at $31 a share when first announced, has a value of about $29.49 a share based on Microsoft's price in 4 p.m. trading on the Nasdaq market yesterday. Some major Yahoo shareholders had previously said they expected Microsoft to raise its price and a deal to happen at about $ 35 a share. But it isn't clear whether Microsoft will increase its bid. The Redmond, Wash., technology company declined to comment. Analysts said Yahoo's reaffirmation of its modest guidance for the first quarter and the year means it's less likely to be vulnerable to a Microsoft takeover because it misses its projections. But they said it would be a stretch for Yahoo to hit its estimates for 2009 and 2010, which are well above current analyst expectations. "Those are not easy numbers," says Mark Mahaney, an analyst with Citi Investment Research, whose parent company has done business with Yahoo and makes a market in its shares. "We think it's the most likely outcome that Microsoft buys Yahoo, and at a higher price than $31," he adds. Imran Khan, an analyst at J.P. Morgan, estimates Yahoo's 2009 revenue at $6.4 billion after commissions paid to marketing partners are factored out. That is below Yahoo's guidance of $7.1 billion, in part because he isn't as optimistic as the company about search-related improvements. People familiar with the matter say that Yahoo's strong prospects in display advertising, such as banner ads, are central to the case the company is making to investors. Yahoo's road-show presentation doesn't include any specific mention of scenarios it has discussed with News Corp. and Time Warner Inc. about folding some of their Internet assets into Yahoo in return for significant Yahoo stakes. Such discussions about possible alternative deals -- considered long shots by people close to the situation -- haven't progressed, although as of earlier this week Yahoo and the possible partners were still talking, according to people familiar with the matter. News Corp. Chairman Rupert Murdoch said at a media conference last week that the company wouldn't get in a fight with Microsoft. ( News Corp. owns Dow Jones & Co., publisher of The Wall Street Journal.) If Microsoft's bid goes through, Alibaba aims to exercise a clause in its 2005 deal with Yahoo that exchanged Yahoo's China operation and $1 billion in cash for a stake in Alibaba. Alibaba believes the "right of first offer" clause in the agreement would be triggered by any Microsoft deal for Yahoo, say the people familiar with the matter. Under Alibaba's interpretation of the agreement, if Yahoo decides to transfer its stake in Alibaba to Microsoft as part of a broader deal, Yahoo would first have to offer that stake to other Alibaba shareholders. The Chinese company's other main shareholders include Alibaba management and Japan's Softbank Corp. Alibaba would finance the purchase of the stake with help from two lead investors and a group of others, including large Chinese institutions, the people say. Alibaba has hired Deutsche Bank and Wachtell, Lipton, Rosen & Katz as advisers, people familiar with the matter say. A Wachtell Lipton spokeswoman confirmed that the law firm has been hired as legal counsel. At the core of Alibaba's move is an effort to keep Chinese management control of Alibaba, say people familiar with the plan. Alibaba's management -- led by founder Jack Ma -- controls the company's operations despite Yahoo's stake and one board seat. Alibaba executives are concerned that Microsoft's size and history of hands-on management could jeopardize Alibaba's autonomy and its image as a Chinese company. China's government restricts Internet content and is suspicious of foreign Internet companies -- which, partly as a result, have fared worse than their domestic rivals in China. After Microsoft's bid for Yahoo surfaced, Chinese regulators contacted Alibaba about how it could be affected by a deal. Such concerns are partly driving Alibaba's search for alternative shareholders, the knowledgeable people say. Spokesmen for Alibaba and Microsoft declined to comment. Alibaba's efforts are bad news for Microsoft. While selling off Yahoo's stake would fetch a chunk of cash, the software maker would lose a foothold in an increasingly important market. Alibaba is one of China's biggest Internet companies, with a broad portfolio of businesses. Its flagship unit is Alibaba.com Ltd., a business-to-business trading platform that listed in Hong Kong in November 2007 after raising $1.7 billion in the biggest initial public offering ever by a Chinese Internet company. That unit reported on Tuesday that its profit more than quadrupled in 2007, while revenue jumped nearly 60%. Alibaba also runs Yahoo China, as well as a consumer-auction site, a payment- processing service, a software company and an advertising-trading platform. In Yahoo's road-show presentations to investors this week the company is valuing a portion of its Asian holdings at $12.6 billion, or $8.97 for each Yahoo share, based on Friday's prices. That includes Yahoo's 28% stake in Alibaba.com, which the company values at $3.2 billion, but not its stake in Alibaba Group's other, unlisted operations. Alibaba.com's share price has fallen sharply this week. But putting a value on Yahoo's entire stake could be difficult. Alibaba's nearly 80% stake in Alibaba.com, its Hong Kong-listed unit, is valued close to $ 8 billion based on its current share price. But the valuation of Alibaba's other businesses is tricky: Its Taobao unit is by far the dominant consumer auction site in China, but it is believed to have relatively little revenue because it offers most of its services free. If Microsoft acquires Yahoo, and Alibaba and Microsoft cannot agree on a price for Yahoo's stake in Alibaba, the shareholder agreement stipulates that the matter would then go to arbitration. By Kevin J. Delaney, Rebecca Blumenstein, and Robert A. Guth; Jason Dean, Jessica E. Vascellaro and Sky Canaves also contributed to this article. The Wall Street JournalMarch 19, 2008

On the Web, Signs of a Click Recession

Google Feels Pinch
As Ad Growth Slows;
Sweeter Deal for Yahoo?


Internet advertising may be showing itself more vulnerable to a consumer slowdown than many in the industry had hoped, according to new search-ad data released this week.

The report from research firm comScore Inc. showing a decline in the number of consumer clicks on Google Inc. search ads in January amplified existing concerns about the effect of a broader economic slowdown on the Internet. Many online-ad experts have played down such worries, predicting any economic weakening will be offset by a continued shift in ad spending from traditional media to the Internet. Google Chief Executive Eric Schmidt said the company hadn't seen any impact from macroeconomic softening when the Internet company reported earnings Jan. 31. But some investors and analysts have grown anxious in recent months that any pullbacks in consumer spending would hurt online ads.

ComScore released data to clients Monday showing a 7% decline in the number of times U.S. consumers clicked on ads appearing alongside Google's search results in January compared with December; clicks were 0.3% lower compared with January 2007. That follows a 7% decline from November to December. Google charges an advertiser only when a user clicks on one of the small text ads for, say, digital cameras, that appear when a user searches for "digital camera."

ComScore also reported a 1% decrease in U.S. search-ad clicks for Yahoo Inc. for January from December, with clicks increasing 4% for Microsoft Corp. over the same period.

Google shares were down 4.6%, or $22.25 on the news, falling to $464.19 in 4 p.m. Nasdaq trading yesterday, having dipped more than 8% lower earlier in the day. Google is trading 38% lower than its 52-week intraday high. (Please see Options Report.)

Some analysts say comScore's latest numbers may exaggerate any slowdown in clicks. J.P. Morgan Internet analyst Imran Khan in a research note pointed to divergences in the comScore click data and Google's reported results in the past.

RBC Capital Markets Internet analyst Jordan Rohan called investor reaction to the data "overblown," saying that it fails to take into account any increases from revenue per search because of factors such as higher pricing. Mr. Rohan said RBC checks with search advertisers indicated a pickup in spending in February after weakness in January. "It may not be a great first quarter, but it's not going to be as bad as the numbers from comScore suggest," Mr. Rohan said in an interview.

The concerns about the online-ad outlook come amid indications that Internet advertising hit record levels in 2007. The Interactive Advertising Bureau trade group and PricewaterhouseCoopers Monday estimated that U.S. online-ad revenue hit $21.1 billion last year, a 25% increase from 2006.

Google declined to comment. When it reported fourth-quarter revenue and profit that fell short of Wall Street expectations last month, Google said clicks on ads increased 30% in the fourth quarter from a year earlier, compared with a roughly 50% average increase during the previous four quarters. At the time, executives cited Google changes that lowered the click growth rate, such as a modification to site design that makes it harder for users to click on ads accidentally.

But some analysts say new data suggest the trends in ad clicks indicate Google is feeling an impact from a consumer slowdown in the first quarter, so far at least. The risk is that if consumers are spending less overall, they are less prone to click on search ads. Google has said it could benefit from comparison shopping by price-sensitive consumers who conduct more searches and click on more ads to find the best deal. But, over time, such behavior could lead advertisers to rein in online-ad spending if they're notching fewer sales for each ad click.

John Aiken, managing director of Majestic Research in New York, says his analysis suggests that's exactly what's happening, with small- to medium-size advertisers pulling back on search advertising as the return on their ad-spend investment drops. When that occurs, Google has fewer ads to display, generally reducing the likelihood a consumer sees one to click on. "It's been a trend that's been getting worse over the last four to five months," Mr. Aiken says.

Tepid electronic-commerce data have added to concerns, given a link between online sales and advertising. U.S. e-commerce spending in January fell 17% from December, and was up a modest 11% compared to January 2007, according to comScore. It had fallen 14% in January 2007 from December 2006, and risen 19% in January 2007 compared with a year earlier.

Some others say they aren't seeing a consumer pullback in online data. Consumer visits to retail sites from Google.com have increased 11% so far this year compared with the same period a year earlier, according to research firm Hitwise, a unit of Experian. "I'm not seeing necessarily any signs of recession in terms of consumers' curtailing their visits to retail from search," said Bill Tancer, general manager of global research at Hitwise.

The anxiety about online advertising comes as Microsoft is pursuing Yahoo with an unsolicited cash-and-stock offer valued at $41.7 billion based on Microsoft's share price in Nasdaq trading yesterday. It's unclear whether the concerns could affect the outcome of that takeover standoff, though a bleaker Internet-ad outlook could potentially increase pressure from shareholders on Yahoo to accept the offer, and decrease Microsoft's willingness to raise its bid. Yahoo has rejected the bid

Ask.com To Focus Strictly On Women

In an abrupt about-face, Ask.com is abandoning its poor efforts to compete with Google and in a move of sheer desperation will instead focus strictly on a singular demographic consisting only of married women looking for help managing their lives. After spending millions in TV advertising Ask continues to lose market share and has been unable to reach 1% of the keyword search marketplace.

The incredibly small and rapidly declining Ask.com is a money draining part of IAC/InterActive which also owns real estate site LendingTree, dating site Match.com, Ticketmaster.com and the Home Shopping Network and is led by Barry Diller.

Mr. Diller has consistently missed any mark in keyword search blowing millions of dollars in advertising and has backed up his ineffective advertising campaigns with critically poor decision making that has led to the rapid demise of the Ask brand.

Now after endless chaos and self destruction ask.com has decided that married women are their exclusive and sole ticket to financial rewards. As Google, Yahoo, and Microsoft battle for billions Ask has decided to leave the big leagues to target only married women?

First we will list the fuzzy details on this most mysterious business decision and then we will provide a few of the critical details on Barry Diller, a once proud broadcasting executive that has no idea how to manage a search engine and truly compete in today's keyword search marketplace.

Let's meet a doomed and confused Ask.com: As part of the new direction ask.com outlined, Ask also announced that they will lay off about 40 employees, or 8 percent of its work force.

With the shift, the Oakland, Calif.-based company will return to its roots by concentrating on finding answers to basic questions about recipes, hobbies, children’s homework, entertainment and health.

The decision to cater to married women primarily living in the southern and midwestern United States and comes after Ask spent years trying to build a better all-purpose search engine than Google.

The quest intensified after Internet conglomerate InterActiveCorp bought Ask and its affiliated Web sites for $2.3 billion in 2005. But Ask.com remained an also-ran, despite spending tens of millions of dollars on an advertising blitz about dozens of new products that impressed many industry analysts.

Through January of 2008, Ask ran the Internet’s fifth-largest search engine in the United States with a 4.5% market share, according to comScore Media Metrix. Google dominates the industry with a 58.5% share.

Jim Safka, who only became Ask’s chief executive in Jnauary 2008 predicted the retooling of the Ask brand will breathe new life into the search engine.

“Everyone at Ask is excited about our clear focus and the trajectory-changing results it will deliver,” he said in a statement.

Forrester Research analyst Charlene Li said Ask’s new strategy could help boost the company’s profits because married women — particularly mothers — dictate many household spending decisions, making them a prime advertising target. “It’s a smart move,” she said. “I still think Ask has great technology, but it’s just really hard to fight against Google.” (*** especially when you demonstrate absolutely no clue concerning keyword search as Ask has since Barry Diller took control. ***).

With Ask scaling back (*** big-time), the online search market could winnow to two dominant players, Google and Microsoft Corp. Now third in the market, Microsoft is trying to buy Yahoo Inc., which runs the second largest search engine, for about $40 billion.

Ask’s inability to increase its market share had spurred widespread speculation that Barry Diller, InterActiveCorp’s chief executive, might (*** sell out) and hire Google to run the search engine’s results to save money. Google already posts text-based ads on Ask and InterActiveCorp’s other Web sites in a five-year deal that Diller expects to generate about $3.5 billion.

New York-based InterActiveCorp plans to break itself into five separate companies later this year. Ask will remain under Diller’s control at InterActiveCorp.

When it started out in 1996, Ask positioned itself as a search engine that could spit out answers to requests that were posed as natural-language questions instead of being entered as a string of loosely related words.

But the search engine, then known as AskJeeves, frequently misinterpreted requests and produced nonsensical answers that triggered widespread ridicule.

After investing in more sophisticated technology, Ask tried to reposition itself as a cutting-edge alternative to Google and even dropped its cartoonish mascot — a genteel butler named Jeeves — in an effort to be taken more seriously.

Even after adding more bells and whistles, Ask still primarily appealed to women who used the search engine primarily to get simple answers including many related to Home Warranty. Women are also a familiar demographic for Safka, who was chief executive of InterActiveCorp’s online dating site, Match.com, before taking the reins at Ask.

Li predicted many married women and mothers will be thrilled to have a search engine focusing on their interests. “It’s not so much that these women have simple questions,” she said. “It’s just that they are so busy that they need fast answers.”

Let's examine Barry Diller and his mounting problems. John Malone Attempts to Oust Diller and Reward Shareholders. Liberty Media Corp. Interactive, the stock that tracks the performance of John Malone's QVC home- shopping unit, may gain as much as 15 percent from the Colorado billionaire's faceoff against Barry Diller in a Delaware court.

Malone heads to trial in early March 2008 to stop Diller's plan to break up IAC/InteractiveCorp. Some analysts expect a settlement that would let Malone swap his 30 percent stake in IAC for its Ticketmaster or HSN home-shopping units. Such a deal would be tax-free and could benefit Liberty Interactive, whose shares have fallen 22 percent this year.

Englewood, Colorado-based Liberty Interactive has been reviewing Barry Diller's performance for months. Recently Diller predicted last month he would succeed in court and split IAC into five parts by midyear. The breakup plan would stick Liberty Interactive shareholders with an estimated tax obligation of up to $450 million, payable as Diller unwinds his holdings in the spun-off companies.

Delaware Chancery Judge Stephen Lamb isn't likely to let the Diller breakup plan stand if Diller is found to have consciously added to John Malone's tax burden, said Charles Elson, who heads the University of Delaware's Center for Corporate Governance.

Barry Diller, 66, is chairman and chief executive officer of IAC. He controls 62 percent voting stake in IAC through a proxy agreement and has said he would exercise those rights in favor of the breakup. John Malone is trying to unseat Barry Diller at IAC and gain voting control of his stock.

As part of the arrangement, Diller who had headed four Liberty Media owned companies and held 48 percent voting stake in IAC. In that capacity, Barry Diller has an obligation to serve Liberty Media's best interests. ``For Barry Diller to vote those shares in a way that screws Liberty Media, and John Malone would be bad for all parties'' said a professor of corporate law at the University of Maryland.

Barry Diller's plan, announced in late 2007 is to split IAC into five companies. HSN and Ticketmaster, the world's largest ticket broker, would become independent, as would online-mortgage service LendingTree and time-share manager Interval International. Search engine Ask.com would remain with IAC.

The propsed deal violates many agreements between Liberty, IAC and Diller by eliminating John Malone's super-voting Class B stock at the spinoff companies, his lawyers have said in court papers. Liberty Media also contends that IAC directors violated duties to protect Liberty's financial interests.

John Malone, who recently turned 67 has declined to comment.

IAC in court papers denies any obligation to give Liberty Media extra voting rights at the spinoffs and says John Malone, who is on its board, initially backed the plan before learning that Liberty wouldn't get enhanced voting rights at the new companies. IAC spokeswoman Stacy Simpson declined to comment.

By pressing his case against Barry Diller, John Malone at a minimum may delay IAC's breakup plans. Malone still holds a slim chance to win control of IAC. Barry Diller acknowledged at a panel this week that he could lose.

HSN, QVC

Most likely there will be a settlement, with John Malone taking HSN in a tax-free swap for his stake in IAC. Talks over such an agreement broke down months ago as Barry Diller stopped participating.

Liberty Interactive is a tracking stock that reflects TV and online-shopping investments including QVC owned by Liberty Media Corp., John Malone's private holding company. Liberty Interactive has lost nearly 30% of its value in the last year. John Malone would like to merge HSN into his larger QVC. That would give Liberty Media a chance at increasing HSN's profit margins. Sales were little changed over the past year at $2.99 billion.

HSN Turnaround

``We'd want a few more quarters of improvement before we bought into that,'' said Lindsay, who predicts IAC shares will track peers and doesn't own them. He thinks the main reason Malone would accept HSN is to unload his IAC stake tax-free.

Malone's real target is Ticketmaster, though Diller doesn't want to sell, said analyst Matt Harrigan, an analyst at Ferris Baker Watts Inc. in Denver. Harrigan, who recommends Liberty Interactive and doesn't own the shares, said the case could lead to talks about Liberty's $1.55 billion stake in Bellevue, Washington-based Expedia Inc., the world's largest consumer travel agency. Diller is chairman of Expedia, which once was part of IAC.

``Malone is the master chess player,'' said Jordan Rohan, an analyst at RBC Capital Markets analyst in New York, who doesn't own IAC and has a market-perform recommendation. ``His real goal may be to get something else than HSN.''

Say Goodbye to Ask.com

EU hands Microsoft a record fine of $1.3 billion



SEATTLE — Microsoft on Wednesday bore the brunt of Europe's desire to send out a message that it expects big corporations to respond to antitrust sanctions in a timely, contrite manner.

The European Commission fined Microsoft a record $1.3 billion, adding to a $357 million fine handed down in July 2006.

Both fines stem from Microsoft's slow compliance with sanctions in an antitrust case that originated in 2004. Microsoft for years had used delaying tactics and vigorously pursued appeals. But last fall the software giant reversed strategies, saying it wanted to put the case to rest.

It has since taken several steps to address a lingering dispute over an order to make it easier for rival software applications to tie into its Windows operating system, which runs 90% of the world's PCs and many corporate servers.

But the record fine underscores the commission's skepticism. "Talk is cheap," said Competition Commissioner Neelie Kroes. "Flouting the rules is expensive."

Microsoft's actions have stifled innovation and affected millions of people around the world, Kroes said. She called the latest fine "a reasonable response to a series of quite unreasonable actions."

Microsoft issued a statement saying the issues for which it was fined have been resolved. It could appeal the fine. But doing so would mean reverting to the confrontational legal strategy it is trying to make a break from, says Ted Henneberry, a London-based antitrust attorney at Heller Ehrman. "Both parties are trying to put this behind them and move on," he says.

The sticking issue: Regulators say the adjustments the company made in 2006 and 2007 in the royalty rates and terms set forth for tying rival programs into Windows fell short.

Last week, in a move Microsoft says was not related to the antitrust tussle, the company announced another round of adjustments to royalties and usage terms for tying into Windows as well as Office, its suite of clerical software. But the commission followed through and levied the record fine anyway.

Henneberry says the commissioners wished to let it be known that they "take offense because Microsoft didn't come up with these rates soon enough to please us." He called the fine "grossly disproportionate."

Separately, the commission must approve Microsoft's proposed takeover of Yahoo. Henneberry says the merger should be reviewed as a completely separate matter. "The merger does not involve conduct in the marketplace," he says. "The commission will have to look at the merger on the merits. It won't be, 'We don't like what you've done in the past, Microsoft.' "

By Byron Acohido, USA TODAY
Contributing: The Associated Press